Nash Stuart: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeNash Stuart: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In Committee[Sitting date: 03 November 2015. Volume:709;Page:7655. Text is incorporated into the Bound Volume.]STUART NASH (Labour—Napier): This bill is quite a wide-ranging bill. The thing around child support did not actually receive much attention in the Finance and Expenditure Committee but I actually think it is a very important part of the legislation and will take a few calls on this. Part of the reason for this is to put things into perspective. As of 31 March 2014 there are actually over 203000 New Zealand children receiving child support. There are 134000 receiving care and 36000 liable parents. But as has been mentioned we have got to a stage at the moment where child support debt exceeds $3 billion. It is excessive and it gets to the point where it is just not payable.I remember one of the first cases I ever had when I became a list MP in Napier in 2008. There was a gentlemen who came in who wanted to pay child support for his son but what had happened was that his penalties had got to such an extent that he could not see a way through. What he asked me to do was advocate and say that he was prepared to pay what the Inland Revenue Department was asking him to pay in support if he could get away from paying the penalties. We tried but the Inland Revenue Department would not budge on this. In the end this gentleman went to Australia because he said he could not get a job—whenever he put his IRD number in then a good chunk of his salary was whacked out by the Inland Revenue Department in support payments. That is not the sort of system that is fair. It does not help parents it does not help children and it certainly does not help the system in any way shape or form. But the thing about this—and I will get on to the bill in a quick second—The CHAIRPERSON (Hon Chester Borrows): I hope so.STUART NASH: —yes—is that Minister Dunne as the last speaker Clayton Cosgrove alluded to started a review of this system in around 2008. I remember—I was the revenue spokesperson for Labour at the time—the Minister said it would be over in 12 months. It has taken a long long time to do this. Part of the reason is it is fraught with difficulty because it affects so many people and the law is quite complex even though it says in the regulatory impact statement that it is not. It is quite complex. But it took so long to the point where 6 years later we are still going through this whole process.The Act that set this up was the 1991 Act. The world has moved on since 1991 but the legislation has not reflected that until now. Let me talk about a couple of points. There is a new section 13A. I would say that part of child support—a good chunk of child support—is about perception. It has got to be perceived to be fair by caring parents and also by liable parents. There was a case actually of a high-ranking National Minister at this point in time—and I remember talking to this Minister and she told me about her father who actually managed to put a whole lot of his income through a trust and therefore avoided paying child support. He was living the life of Riley and this Minister and her family were living close to poverty because this man her father was managing to avoid his responsibilities let alone his liabilities. And this is the sort of stuff we have got to change.There are some things that were perceived to be unfair that have been changed. For example there is a new section 13A which introduces the rule that the Commissioner of Inland Revenue must refuse to make a formula assessment if the applicant is a non-parent carer of the child and the commissioner determines that the applicant is the non-receiving carer. Let me give you an example of where this was happening before. Again I dealt with a couple of these. There was a case where for example a gentleman married a lady and that lady had a couple of kids from a previous marriage. He was perceived—in his mind and also in the law—to be the non-receiving carer. However because his income was of a substantial amount he was forced to pay child support for his wife’s children as well as for his own children. That was perceived in his mind and also in mine to be unfair. But let us get a definition of this. A non-parent carer of a child is the receiving carer—so with the non-parent carer we are talking about the stepfather or stepmother usually—for the purposes of a formula assessment in respect of a child if he or she provides at least 35 percent of ongoing daily care for the child. These definitions are actually quite important because what they do is clarify the increasing role of step-parents in managing the financial relationships between their new wife or husband.Sections 13 14 17 and 22 of the new Act basically relate to the calculation of a parent’s income for the child support year. There are a number of changes here that again just make it a little bit fairer. If we have a look at clause 14 in Part 1 a person’s adjusted taxable income is the person’s income from the year immediately preceding the start of the child support year if that is the most recent tax year. I am dealing with a case at the moment where the Inland Revenue Department has assessed a gentleman’s income for about 4 years previous. This guy has brought in all his tax slips—actually I should talk to the Inland Revenue Department about this—saying that it is assessing him on an income of $120000 but for the last 3 years he has earned $50000. He is not hiding it in trusts in any way shape or form. He loves his kids dearly but he says he just cannot pay this. He said that at the end of the day he takes good care of his kids but he simply cannot pay it.So what this bill is doing is saying the tax year immediately preceding the year child support is calculated will be the one upon which his or her payments are assessed but if it does not apply the person’s taxable income—we are going to amended section 35(1)(b) here—is from the year immediately preceding the most recent inflated by inflation percentage for this child support year. It just clarifies a lot of this stuff.Another thing that I am very happy that we put in here is that the commissioner may take overseas income into account. Again what was happening in my experience is that men—and let us be honest it was usually men but I suppose there were cases where women were avoiding responsibilities—were hiding income through trusts or not counting overseas income etc. etc. and were therefore not living up to their responsibilities.The one thing also that has been mentioned by Grant Robertson which I think is actually fantastic and something that we mooted going into the 2011 election is almost having an amnesty. I remember when I asked the officials in the Finance and Expenditure Committee whether this in fact amounted to an amnesty—i.e. if a liable parent starts coming in and paying their dues will they be able to wipe penalties off? They said in essence that this is what it is. Because what we want is for liable parents to start paying their penalties.I remember and I do not think the statistics will have changed that in 2011 there were about 97 percent of parents who were operating under the scheme administered by the Inland Revenue Department—as opposed to a private scheme negotiated between parents—who had suffered some form of penalty at some point in time. In the end it is actually not in the best interests of the child if a liable parent is paying let us say $100 a week and they are paying $75 of that to child support and also paying 25 percent of that or whatever the fee is to pay off penalties on support. I think we all acknowledge that the ideal situation is that all the money that a liable parent is paying goes to the support of the child. If there is a scheme that can be put in place where penalties can in fact be written off if a parent comes in and comes to an arrangement and starts paying their fair share then everyone wins including the Inland Revenue Department.The bottom line is that it is $3 billion we are talking about and that actually is unworkable. I remember having a look at the fees and even in Hawke’s Bay itself there was around about $49 million in penalties and interest that was owing due to child support. As mentioned no one wins in that case. That is all I have got to say on this at this point but I am going to take a couple of calls soon after a couple of my colleagues have decided to have their say. Thank you.