Tax Updates: 3 July 2023

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

Child support changes special report

It was a fairly quiet week in the world of tax, the only release of note being Inland Revenue’s (IR) special report on the recent legislative amendments contained within the Child Support (Pass On) Acts Amendment Act 2023.

The special report is titled “Child Support (Pass On) Acts Amendment Act 2023” and is a 42-page document. The primary change brought about due to the passing of the legislation is how child support collected by IR on behalf of sole parent beneficiaries is dealt with.

Under the previous rules, the government first used child support collected by IR on behalf of sole-parent beneficiaries to offset the cost of the benefits paid to the sole-parent beneficiary, with only any excess amount then passed on to the beneficiary. Equally, however, any excess payment was not treated as income by MSD, for the purpose of determining benefits or other assistance entitlements.

Effective July 1st, IR will now pass the full amount of the child support payments received from the liable parent onto the sole parent beneficiary. MSD will now include the child support amounts as income when determining benefit entitlements.

Accompanying this legislative amendment is a change to how child support payable by liable parents will be treated in the formula assessment process when they are applying for Temporary Additional Support and Special Benefits. Also effective from July 1st, the child support payments can now be treated as a cost for assessment purposes.

Finally, parents receiving a sole parent rate of the main benefit are no longer required to apply for formula-assessed child support through IR. This legislative change will enable carers to enter the type of child support arrangement that best meets their needs – whether a formula assessment, a voluntary agreement, a private arrangement, or no child support arrangement.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.