Cunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeCunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In Committee[Sitting date: 03 November 2015. Volume:709;Page:7660. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn): This is the first opportunity that I have had to make a contribution to the Committee stage of the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill and in particular to Part 1 which deals with child support. This is a very important part of the bill because it goes to real life for real Kiwis which is not always what people expect it to be.The law as they say is an ass. The law is never able to fit itself to each individual’s personal particulars. So today we are here in the Committee stage to try to tweak mould and update this very complex piece of legislation about child support to ensure that it is fit for purpose and that it meets the needs of New Zealand families which come in all shapes and sizes.I propose to structure my remarks for the Committee as follows: a couple of general comments about the tax context of this bill as set out more broadly with the confirmation of annual rates—a very passing comment there; a recap on the objectives of child support policy diving briefly into some of the core implementation issues; and then there are some specific clauses in Part 1 that I wish to draw the attention of the Committee to and seek the Minister’s clarification on. Her officials are busy and ready to brief her and we will be looking for some comment from the Minister.Firstly I will just briefly reprise the context. This is the annual rates tax bill. For people out there in New Zealand this is the annual instrument that is brought to the House to confirm the tax rate. This one of course comes after what the Government called the tax switch and it was essentially a switch of the burden from the top to the middle. So middle-income New Zealand has been squeezed as 40 percent of the tax remission in the Government’s first term went to the top 10 percent of earners. That has laid the foundation for a period of relative hardship for middle New Zealand families some of which of course are not in their original nuclear structure. People are having to make do even though they have separated or they are divorced or they are in blended families or they are having to take care of child support. But it is against that background of the widening gap between rich and poor which this Government has overseen because of the annual rates reconfirmation.It is a longstanding objective of child support policy that children come first. The law is written around the primacy of the interests of the child and tries to get an equitable formula for the contribution to the upkeep of the children from both parents. Whether one is the primary custodial parent and another one is not principally living with the child or whether they are both sharing parenting the formula has to be flexible enough to cope with a wide wide range of situations and it is never easy when you are writing legislation to take account of the multiplicity of people’s personal situations.It is well known I think in this House and it is part of the context of Part 1 of this bill that there have been major issues with child support over the years. When the current Government took office the debt mountain of unpaid child support and penalties was from memory in the order of something like $500 million or $600 million. It is now around $2 billion.Hon David Parker: $3 billion.Hon DAVID CUNLIFFE: It is $3 billion. Well is not that a calamitous rise in debt. Part of that debt is payments that should have gone to the children in their new family situations and part of it is of course the penalty regime.A quick word on child support penalties. It has been well known that they have been too onerous and that has unfortunately locked a lot of non-custodial parents usually dads out of a situation where they are having ongoing contact because they are so far behind in their debt relative to their earning ability that sometimes they are forced offshore or essentially into hiding. That is bad for the children and it is bad for them and it is an ongoing human tragedy that is going to cost New Zealand for generations to come. So it is really essential when we look at Part 1 of this bill that we have this as a lens on it: are we doing enough to ensure that all parents whether they are the primary custodial parent or the more remote parent are able to contribute and that when they do get behind they can catch up again without a penalty regime that are so onerous that it locks them out of the system? Just imagine the guilt and the grief that that leads to.I wish to turn if I could to several of the clauses that are embedded in Part 1 that I think it would be very helpful to get some clarification from the Minister on. Firstly in clauses 4 5 6 and 8 the bill is updating the definitional language in the Child Support Act. It redefines the benefit types—in terms of the reference to jobseeker support—in subsection (1A) in clause 4(4). It is updating language around transitional applications etc. in clause 5. It is reaffirming in clause 7 that any parent or carer of a qualifying child can apply to the commissioner for a formula assessment. The restating of that in clause 7 which replaces the old section 8(1) I think is very very important. Circumstances change and oftentimes separating parents will be able to enter into an agreement not necessarily foreseeing all future changes and of course the law provides the ability for either parent to return to the court return to the law and to request a formula assessment.The nature of that assessment therefore becomes as important as the process by which it is conducted. So the bill goes on and in clause 9 it inserts new section 13A which states that the commissioner must refuse to make a formula assessment in respect of a qualifying child old enough to demand in their own right an assessment if subsection (2) or (4) applies. That means if they are already covered I think by a receiving carer. But the Minister might wish to comment on the application of subsections (2) and (4) because it is a very confusing reverse link and we would like clarification of how that impacts and the precise grounds in summary on which the commissioner must refuse an application from a qualifying child. The qualifying child definition in itself is a complex one.New section 13A goes on to say in subsection (3) that subsection (2) does not apply if the applicant is a parent and the child has “a parent with whom the applicant is not living in a marriage civil union or de facto relationship; or (ii) a non-parent carer with whom the applicant is not living in a marriage civil union or de facto relationship.” So if the application is made by a parent and the child has a parent or a non-parent caregiver who is not living with them then the subsection applies.It is a complex piece of law because you have got several tiebacks if you like to earlier sections and I would really appreciate it if the Minister would take a call and just clarify in summary what the criteria are for the very strong language in section 13A(1)—“The Commissioner must refuse to make a formula assessment”—because prima facie it seems to lean against the principle that either parent or a qualifying child can request one. So it is rather important to be clear about when and why the commissioner must refuse—because it is a “must”.Clause 10 of the bill amends the original section 25 and notes when liability to pay child support ceases. That is important again because it is impossible to foresee every particular circumstance but we need to have general rules. It is possible under new section 27 in clause 11 for the receiving carer to elect to end a formula assessment. The law is I guess attempting to provide for a basis where a child support agreement can be updated by either party both to bring in a formula assessment or if circumstances change to end it.So for example a custodial parent—often the mother—may re-partner or may enter into a relationship where there is sufficient material support for all of the children of that blended family and the previous formula assessment no longer applies because it either does not fairly reflect the balance of income of the two originally separated parents or it is not needed at all because frankly the new blended family is materially well enough resourced and the non-custodial parent’s contribution becomes unnecessary. These are difficult and complex matters and it is well known that there have been multiple iterations of tax law.