Flawed formula
The child support system is unloved by parents on either side of it, by experts, and even by one of the ministers responsible for it. Can it be fixed? Michelle Duff reports.
At home with her toddler, Sarah checked her bank account. Her weekly budget for food was $40, but she had just started her period.
Should she buy tampons, or nappies?
‘‘That’s what it came down to, and I needed both,’’ she says, now. ‘‘I’d buy the cheapest nappies, a $5 pack, and then I would ration the tampons I had – like I would know exactly how often I could change them – and hope there would be some in a food parcel. Or that family might drop some off.’’
Sarah had broken up with an abusive partner, and inflexible work and a health scare had pushed her on to a sole parent benefit. At that time, her baby’s father paid about $200 a month in child support. But she didn’t receive any of it; it was intercepted by the government, to offset the cost of her welfare.
That’s because of a decades-old rule that says the state is entitled to recoup the cost of the benefit from the working parent when a couple have split.
For Wellington mum Sarah, this exacerbated an already volatile situation. She got a protection order, which her abuser breached more than a dozen times.
When her son grew older, she found paid work. She was allowed her child support. But now her ex ran his own business, so her entitlement – based on the income he declared to Inland Revenue (IRD) – went down to $76 a month. He mostly stopped paying.
When he owed around $5500, Sarah found out he was planning a tropical island holiday. She rang the tax department, which has the power to stop child support defaulters at the border. ‘‘They said unless you can provide the date and time he’s flying out, there’s nothing we can do,’’ she says.
‘‘But then other times they’d ask me ‘Do you know where he lives? Can you give us his mum’s address?’ I mean, I have a protection order against him and you want me to dig around in his business? It’s not safe for me, and you [IR] can see more than I can see.’’
Now, he barely pays, or sometimes as little as $6 a month. She no longer expects to get it. But even when he doesn’t pay, IRD still counts unpaid child support in her taxable income, which means she receives less in family tax credits. Instead of receiving $152 a week in Working for Families, the system meant to support struggling whā nau, she gets $95.
‘‘I don’t understand it, I’ve asked
them so many times to explain it to me, and I don’t think they understand it either,’’ she says. ‘‘None of it makes sense for people who are living in poverty, and it’s the kids who suffer. They get put in the middle, and they miss out.’’
Dr Moeata Keil, a sociologist specialising in child support at the University of Auckland, says while there is plenty of discussion about child poverty, there’s none about the feminisation of poverty.
‘‘Poverty tends to be experienced more often by women than men, and separation adds to that. You can’t disconnect the best interest of the child from the mother.’’
In a 2017 doctoral thesis, Victoria University economist Dr Michael Fletcher found being separated triples the likelihood of women being thrown into poverty.
Who pays?
Single mothers interviewed for this story described the powerlessness and frustration of living in financial uncertainty, scrabbling to feed their children, work, and pay for the increasing costs of power, housing, and daycare.
Of the $449m collected in child support in the year to June 2020, almost a third – $152m – was redirected into paying the cost of welfare. Most sole-parent beneficiaries are women.
There are no official statistics on the overlap between kids living in poverty and child support. But data suggests there are at least 75,000 beneficiaries who have child support intercepted, most are women, and nearly half are Mā ori.
Pasifika kids are also more likely to be living in poor, oneparent families.
The result? A scheme that punishes women and children, instead of supporting them.
‘‘If you don’t put the children’s wellbeing as the highest goal, it’s a major weakness, and it’s been there since the [Child Support] act has been in place,’’ says family law expert and Auckland University Professor Mark Henaghan.
‘‘It’s more about revenuegathering for the government than supporting children, and there’s a gender issue here.’’
The Child Support Act 1991 replaced the Liable Parent Contribution scheme, which was clunky and clogged up the courts. The act made the government directly responsible for chasing up payment, and a standard formula for calculating liability aimed to make things fairer. Responsibility was given to the tax department.
Experts say the legislation was flawed from the beginning, a sentiment echoed as early as 1994 in the Trapski Report and since in reports from the Expert Advisory group on Child Poverty, the Welfare Expert Advisory Group, and the Law Commission.
The IRD system is mostly for parents who can’t agree on finances, or beneficiaries who don’t have a choice. Some others go through the tax department because it makes exchanging money simpler.
Henaghan says it is more effective than involving the courts in every case. But over time it has worked to hurt low-income parents, pushing them and their dependent children further into hardship, he says. ‘‘It’s ridiculous, these are poor people. It’s farcical, and it’s sad.’’
If the philosophy of the scheme is widely criticised, its administration is even more maligned.
More than 57,457 parents are currently either not paying their child support or have missed payments, with about $598m in core child support payments – cash owed directly to primary caregivers – unpaid over time. When penalties are added, it balloons to $2.2 billion. More than 85 per cent of this money is owed to women.
IRD says two-thirds of payments are made on time, and the total amount of debt and penalties owed is falling.
A fraught battleground
Since its inception, there have been criticisms about the system’s fairness.
The level of child support a parent has to pay is based on a formula which takes into account both parents’ incomes and how often they care for the child, minus an allowance for their basic living costs.
Those who disagree with the formula assessment can apply to IRD for a review, and if that fails, appeal to the Family Court.
The most common gripe from paying parents is that they pay too much, there is no accountability for where the money is spent, and that they are paying for children they don’t have access to.
Receiving parents say the sum doesn’t meet the real-life costs of raising children, it doesn’t get paid or gets paid erratically, that it is too easy for income to be hidden and that the onus is on them to try to chase it up.
Child support advocate and father Rob St George has been both a paying and a receiving parent, and runs a Facebook group for each. He says the ‘‘aged and draconian’’ system has many issues, and is tearing families apart.
‘‘We are dealing with frictions on both sides’’ – the receiving parents feeling like they’re getting the raw end of the stick, and then payers who feel they don’t get enough time with their children.
‘‘The receiving carer often thinks the other parent is trying to get more custody, while the paying parent thinks they’re trying to get more child support.’’
A sticking point for him is the ‘‘wild extremes’’ of the formula, which make some parents pay huge sums while others pay little.
‘‘I just can’t understand why there are different values put on kids. I’ve always thought they should work out the basic needs of the child and base it around that, rather than one child being put into poverty and another getting more than it really needs to survive.’’
Parents are often annoyed when money they pay for their children goes towards their ex-partner’s benefit, he says. ‘‘In a roundabout way it’s going to the child, but from their perspective they feel like they’re paying the government for the other parent’s lifestyle.’’
In her research, Keil found that whether women were entitled to $16 a week or $220 a week, attitudes from fathers were often the same.
‘‘I remember thinking, it’s not only about the amounts, it’s the giving of the money to the mother. There’s a power play that has way more to do with it than money,’’ she says.
‘‘It was kind of like ‘I definitely should contribute towards my child, but I tell you how much and what it should be used on.’ They wanted to maintain power over what they saw as their money – ‘I worked hard for this money’ – as if to say women don’t work hard to care for their children.’’
Fathers consistently undervalue the cost of raising children, and when they do pay for things it’s often performative, Keil says.
‘‘There would be these grand displays of responsible fatherhood, like paying for birthdays and taking the kids to Rainbow’s End, and the mothers are like ‘Doesn’t he realise our weekly budget for food is $40?’.’’
Men often consider household costs the woman’s responsibility, but these are the hardest to meet, she says. ‘‘It’s just heartbreaking. If you’re unwilling to contribute to rent and power your child will be living in a smaller space. It won’t be living in a warm home.
‘‘But it’s really important for fathers that there is recognition. Paying for power bills does not give the same level of recognition as school fees.’’
A ‘‘fairer’’ system – but for whom?
Under pressure from fathers’ rights groups, the system has been reformed once in its 20-year history. The 2013 changes were led by then-revenue minister Peter Dunne, who said a quarter of the letters he received were from parents complaining about it.
‘‘It’s an inherently complex system, and my naive hope was that we would make it as fair as it possibly could be and encourage people not to use it,’’ Dunne says.
‘‘This is always a no-win situation. I sort of tried to get people to focus on the children because they were the innocent parties but unfortunately in so much of their tangled web they become the pawns.’’
According to documents, changes were made to improve the ‘‘perception of fairness’’, and ‘‘ensure that payments more accurately reflect the cost of raising children in New Zealand’’.
Based on the assumption that mothers were now more likely to work and fathers to share care, the formula changed to take both parents’ incomes into account (instead of just the paying parent).
Previously, for care to be considered ‘‘shared’’, the paying parent had to have a child more than 40 per cent of nights. This fell to 28 per cent, or two nights a week.
Penalties for late payments were reduced, and the government given more powers to write these off with the aim of reducing Crown debt and incentivising people to pay. (Penalties are around 75 per cent of all child support debt.)
‘‘I think the general perception had been that it was men ripping off the system, but it was actually much more evenly spread. If you were in a situation where you had the money, whether you were male or female, you had the power,’’ Dunne says.
‘‘There was a fear at the outset that taking both partners’ incomes into account might be disadvantageous to custodial parents, or women. But the impact didn’t seem to be as bad.’’
In fact, we can only guess. The only IRD research conducted and provided under the Official Information Act examined parents’ perceptions of the changes, not financial repercussions. It found the scheme was viewed as negatively as before.
But, in his analysis of the reforms, economist Michael Fletcher found the changes favoured men as paying parents. One in three men gained by the changes, compared with fewer than one in five women.
And they hurt low-income women the most; more than half of those who lost money were living on under $20,000 a year. Some of those women had their child support cut by more than $40 a week.
The new formula, borrowed from Australia, did not take into account the costs of daycare, afterschool care, unpaid caring work, and the opportunity costs for women of raising children.
‘‘ ‘Fairer’ in this case has layers of gender politics,’’ Fletcher says. ‘‘To the extent that the changes in the new-ish act were designed to help paying parents, it was the receiving parents who tended to lose out, and they were 4-1 women.
‘‘There’s major inconsistencies – if both parents are working and you have a formula that takes both parents’ incomes into account, why would you not include the costs of childcare? The objectives of the act, its relationship with other aspects of family law and the welfare system were not addressed. This means many women will be effectively stuck on the sole parent benefit until the kid is older.’’
Can it be fixed?
This year, as part of Inland Revenue’s business transformation, more amendments to the Child Support Act were led by Revenue Minister David Parker. This included a further relaxing of penalties, a time limit on backdated child support, and deducting payments from employers earlier.
In 2019, Inland Revenue interviewed 21 paying and seven receiving parents about the effects of decreasing penalties.
Fletcher and Henaghan both describe the changes as tweaks. ‘‘There’s not a lot in there,’’ says Henaghan. ‘‘It’s still all about the government getting their money back, and doesn’t say anything about helping the children.’’
In a statement, Parker said the amendments were to support IRD’s business transformation and simplify processes. Fundamental changes had not been considered.
In an interview, Social Development Minister Carmel Sepuloni says she understands how difficult life can be for single parents.
She agrees the child support pass-on policy is discriminatory, and says she’s working to have it changed. It’s complex, she says, because it crosses two departments – IRD and Work and Income – with competing IT systems and policies.
She’s unwilling to put a timeframe on the legislative change required to end the policy.
‘‘I can say hand on heart that this is something I’m committed to doing,’’ she says. ‘‘It is because it’s so complicated, but that doesn’t mean we’ve been stagnant on effecting change for sole parents.’’
A Working for Families review is under way, and Sepuloni says she will raise the issue of unpaid child support being automatically counted as income.
Other Government initiatives to help single parents and children include reinstating the training incentive allowance and repealing benefit sanctions like the subsequent-child policy and the Section 70a sanction for solo mums who do not name a child’s father.
‘‘You can’t disconnect the best interest of the child from the mother.’’ Dr Moeata Keil
‘‘It’s more about revenue-gathering for the government than supporting children.’’ Professor Mark Henaghan
‘‘I just can’t understand why there are different values put on kids.’’ Rob St George
‘‘Many women will be effectively stuck on the sole parent benefit until the kid is older.’’ Dr Michael Fletcher