Rotorua parents owe $21.8m child support

Rotorua parents owe over $21 million in child support debt.

Rotorua parents owed more than $21 million in child support debt at the end of this financial year - the majority of which was from penalty fees.

The total debt owed by parents in Rotorua was $21,825,869 in the year ended June 30, which included $15,730,252 in penalties.

Parents who fail to pay in full and on time incur an initial penalty of 10 per cent. A further penalty of two per cent of the unpaid amount is compounded each month the amount remains outstanding. These penalties are retained by the Government and are not passed on to a receiving parent.

A significant portion was owed by men - $20,902,117, compared to $923,752 owed by women.

Rotorua MP Todd McClay said the current legislation was "not fair" and overly punitive.

"We need to get parents to start paying so that children, many of whom are in hardship, are better off. Liable parents are facing paralysing levels of debt from penalties, and as a result are not attempting to pay their outstanding amount, nor are they meeting their current obligations."

Mr McClay had a bill before parliament which he said would help parents meet their payments.

The bill would replace the penalty rates from 10 per cent for late payment with a two-stage penalty - 2 per cent if a payment was not made by the due date, and a further 8 per cent if the amount remained unpaid after seven days - and by reducing monthly incremental penalties from 2 per cent to 1 per cent.

Mr McClay said a lot of the money owed was from parents who had left the country.

"Some $827 million of the total debt, of which most is penalties, is owed by people living in Australia."

Mr McClay said he expected his bill to be passed before the end of the year.

Rotorua Salvation Army's community ministries manager and budget adviser Shelly Fischer said child support was a "really difficult area". "If someone's on the benefit, the money is always taken directly out of the benefit so if everything goes well, you're not going to fall behind in arrears but if your benefit stops, because you don't fulfil your work obligations or go to jail or something like that, then you can fall in to arrears," she said.

Ms Fischer said more than $20 million seemed like "a heck of a lot" for Rotorua parents to owe. She believed there were loopholes for people not paying, which were taken advantage of. "I know people whose partners have set up their own businesses so they could hide income they were getting and didn't have to pay child support."

An Inland Revenue spokesman said there were some who structured their affairs in an effort to avoid child support.

He said the measures used to recover outstanding child support debt varied from case-to-case, depending on the individual situation, and legal proceedings were a last resort.Additional reporting Bridie Witton