Radhakrishnan Priyanca; Salesa JennyCHILD SUPPORT AMENDMENT BILLSecond ReadingHon PRIYANCA RADHAKRISHNAN (Minister for Youth) on behalf of the Minister of Revenue: I present a legislative statement on the Child Support Amendment Bill.SPEAKER: That legislative statement is published under the authority of the House and it can be found on the Parliament website.Hon PRIYANCA RADHAKRISHNAN: I move That the Child Support Amendment Bill be now read a second time.This bill was introduced in March 2020 and was considered by the Social Services and Community Committee who I thank for their work on this bill a committee that I was fortunate to be part of in the previous term. In the course of their consideration of the bill the committee heard and read the submissions of a number of New Zealanders who either have personal firsthand experience of the child support scheme or who work with people in that scheme. I thank all those people who took the time and the effort to make a submission. I want to assure all those people who made a submission that we are making the scheme as fair and as simple as possible and that is what this bill aims to do but I also want to make it clear that this is not a bill that looks at the child support scheme in its entirety. Such an undertaking would take a great deal of time which would delay the benefits that this bill provides.The main purpose of the measures in this bill is to help prepare for child support to transition to Inland Revenue's new technology platform. Members who have been keeping up with Inland Revenue's Business Transformation will be aware that the Inland Revenue has been progressively shifting all its operations in a managed sequence over to its new technology platform. The final major area of the department's responsibilities to shift to the new tech is child support and this will complete the IRD's transformation programme. The main measures in this bill aim to introduce fairer and more effective penalty rules compulsory deductions of financial support from source deduction payments made by an employer for newly liable persons a fairer definition of income used for child support purposes and a four-year time bar on the reassessment of child support. I will provide a quick overview of some of the main features of the bill to refresh members' memories.Penalties: we want to encourage greater compliance and greater engagement from liable parents. One way to achieve this is by imposing penalties on parents who fail to meet their obligations. If a parent fails to pay their child support on time penalties are imposed and the bill contains improvements to when and how these are applied. The theory is that penalties provide an incentive for parents to meet their child support obligations but it's become clear that overly punitive penalties can cause liable parents to disengage from the scheme meaning that child support remains unpaid. Imposing penalties becomes a delicate balancing act: too strict and parents walk away from the debt and their obligations; too lenient and they're not incentivised to meet their obligations. We want to be smarter with how and when we apply penalties. At the moment if a parent fails to pay their child support on time an initial late payment penalty is imposed. This is applied in two stages: immediately after the default at a rate of 2 percent and then a follow-up penalty seven days later. The objective is not to penalise but to get the parent to pay. If Inland Revenue has time to work with that parent to get them back on track before a subsequent penalty is imposed compliance improves. So we're proposing to shift that second stage of the initial late payment penalty to 28 days after the due date rather than the current seven days after the due date.A further measure relating to the balancing act of penalties was added to this bill last year by a Supplementary Order Paper. The scheme currently imposes penalties when a parent fails to pay on time. There are further penalties known as incremental penalties which are also added each month the payment remains outstanding. The net effect of the mounting debt is for parents to simply abdicate their responsibilities so we propose to eliminate these incremental penalties. One other new addition to the bill are proposals to simplify the child support penalty write-off rules. Currently there are a large number of write-off rules which govern when the IRD can write a penalty off. With the repeal of incremental penalties we have the opportunity to make these rules simpler. We also feel that it's important for new participants in the scheme to start off on the right foot. To that end we're proposing that newly liable parents have compulsory deductions made from their pay by way of employer. Many people already do have such arrangements with their employers.The bill also proposes widening the definition of income to include interest and dividends for salary and wage earners. When calculating how much child support is payable the incomes of both parents are used but income from interest or dividends is not currently included in the calculation simply because the amount of that income earned in a year is not known until the end of the tax year. The bill proposes introducing a four-year time bar for income reassessments as currently exists for income tax. This would provide certainty for parents. The bill also includes a number of technical amendments which will contribute to a better more efficient child support scheme. These include proposals such as improvements to the estimation provisions to make them fairer.In conclusion this bill will improve the administration of the child support scheme and make it easier for parents to comply with the scheme. I recommend this bill to the House for its consideration. Thank you.ASSISTANT SPEAKER (Hon Jenny Salesa): That legislative statement is published under the authority of the House and can be found on the Parliament website. The question is that the motion be agreed to.