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Are private child support arrangements with beneficiaries possible?

Child Support: Is it possible to enter into a private child support arrangement with a beneficiary?

Quite often, clients come to NZ Accounting and complain that they are paying out large amounts of child support for a child where their ex-partner is on a benefit. In these cases, the money the paying parent pays goes directly to the crown and does not benefit the child/ren of the paying parent.

So can a paying parent form a private arrangement with a custodial parent who is on a benefit, which ensures their children benefit financially from their contributions?

When a Custodial Parent of a child applies for a sole parent benefit they have a legal obligation to apply for Child Support under the Child Support Act 1991. They must;

• apply for Child Support for each dependent child and

• identify all paying parents and

• attend a departure or appeal hearing and give evidence against paying parent(s) in accordance with section 122 Child Support Act 1991 if required.

If the Custodial Parent fails to do so they will have their benefit reduced, unless an exemption to a reduction applies, where;

• there is not enough evidence to establish the paying parent in law

• the client is taking active steps to legally identify the paying parent

• the client or their child(ren) would be at risk of violence if carried out or took steps to meet their Child Support obligations

• there are compelling circumstances for not meeting their Child Support obligations and there is no real likelihood of Child Support being collected

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• the child is conceived as a result of incest or sexual violation

(Note the exemptions apply to the reduction, not to a client's Child Support obligations.)

If the Custodial Parent hasn't legally identified the paying parent or refuses to apply for child support for any other reason, they will be encouraged to do so. WINZ will discuss the advantages of identifying other parent in law. Examples of advantages raised;

• they will receive the full rate of benefit

• the other parents will be financially contributing to the care of the child

• they can receive the Child Support payments directly if they don't receive a benefit and

• the child's rights to know the identity of, and have contact with, both parents

Nonetheless, where the Custodial Parent;

• fails or refuses to apply for Child Support for each dependent child

• fails or refuses to identify the paying parent(s) in law of each dependent child or

• fails or refuses to attend a departure or appeal hearing and give evidence against paying parent in accordance with section 122 Child Support Act 1991 or

• refuses to apply for Child Support as they have a private arrangement with the paying parent

WINZ will:

• impose a section 70A reduction

• charge the private arrangement as income

(Note: Be aware that Inland Revenue - Child Support will contact The Custodial Parent to discuss their failure to apply for Child Support.)

The Custodial Parent's benefit is reduced by $22.00 for each dependent child for whom the custodian refuses or fails to meet their Child Support obligations.

Example
Tom is the custodian of four dependent children and refuses to apply for Child Support for only one of his children. Tom's benefit is reduced by $22.00 per week.

When a client has had a section 70A reduction imposed for at least 13 weeks (and during this time they have been given a reasonable opportunity to reconsider their decision that led to the section 70A reduction being imposed) they will have their benefit further reduced by an additional $6 per week. This further $6 reduction can only be applied once per client regardless of how many children they have.

Example
Nicole has had 2 section 70A reductions imposed on her benefit for more than 13 weeks as she refused to apply for Child Support for both her children. She was given a reasonable opportunity to reconsider her decision not to apply.

Nicole's benefit is now reduced by the 2 section 70A reductions ($22 x 2 children = $44 per week) and the additional reduction ($6 per week). The total amount her benefit is reduced by is $50 per week.

(Note that a reminder letter is automatically sent to client's 4 weeks before an additional reduction is imposed.)

Although this is all very good in theory, custodial parents want to know: what if the paying parent fails to meet their private child support arrangements with the custodial parent? In these cases, the custodial parent can remove the reduction for a particular child and increase their benefit from the date they:

• meet all their Child Support obligations or

• qualify for an exemption

To meet all their Child Support obligations for a particular child they must:

• apply for Child Support for that dependent child and

• identify all paying parents and

• attend a hearing under section 122 of the Child Support Act 1991 if required

All of the above is outlined in legislation in section 70A Social Security Act 1964.

NZ Accounting writes agreements between parties where the paying parent and the custodial parent enter into a private arrangement. This can benefit both the paying parent, the custodial parent and the child/ren. NZ Accounting also assists in the negotiation process. Find out more.

ENDS

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