IRD’s Own Household Expenditure Guide Makes Mockery of Child Support Living Allowance

AD164 Guide

To have people believe in you as an organisation you need to do two things:

First, you should be consistent in your approach across different areas. People feel unfairly treated if they can’t understand how things that affect them, are worked out.

Second, own up to your mistakes. If something is clearly wrong you will get a lot more respect by admitting it rather than trying to explain it away with gobbledygook.

Here’s what we are talking about:

When determining the living expenses for a child support paying parent, one has to wonder where IRD got their figures from?

The general living expense allowed is $17,687 a year (gross before tax) for a paying parent, no matter where they live or whether or not they are supporting a partner.

What we stumbled across:

A member of our community directed us to a current guide, published by IRD that points towards a massive disparity between a) what IRD state are general living costs, and b) what IRD allow for living costs.

What is the purpose of the household expenditure guide?:

This guide provides information on some of the categories of living costs that are generally incurred by New Zealand households. It provides a base to use as a first step in determining whether household expenses have been reported correctly and therefore determine any ability to repay debt.

Our understanding is that the costs in this guide, published by IRD, are indicative of the living costs generally incurred by NZ households.

This guide is part of the Government’s responsible lending code.

It gets worse:

Lets do a quick comparison of the living allowance for child support paying parents, as calculated by IRD, and what IRD state are the living costs generally incurred by NZ households, broken down by region.

Living costs, according to the IRD guide, for a single person household (in yearly $$):

Rural: $29,593.20
Auckland: $39,936
Waikato & BOP: $31,304
Wellington: $36,738
Rest of NI: $32,728.8
SI Urban: $29,827.20

Compare this to the living allowance given to parents that pay child support: $17,687.00 (Gross)

What? Less than half in some cases?

It is no wonder people are complaining! The living allowance given for a paying parent in Auckland is just over $17k a year, and IRD’s own study of general living costs (nothing fancy) is almost 40K a year.
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How then, have IRD worked out the child support formula living allowance?

When we asked this question recently on our Facebook page, IRD themselves advised us how it was calculated:

Thanks for your questions. We do appreciate that every families’ costs and circumstances are different.

Under the new rules, the living allowance recognises the living cost parents have to financially support themselves. It is what the government considers is the minimum level of income necessary to cover a parent’s own living costs, before child support is assessed.

It is income that is not considered when making a child support assessment.

If the parent also has other dependent children of their own living with them, they will be entitled to a separate dependent child allowance. Dependent child allowances are also taken off the parent’s income before child support is assessed.

For a parent who earns more than the living allowance and dependent child allowance, they will still have income over and above their child support payment available to support themselves.

The living allowance for a parent is the same amount as either the sole parent support or supported living payment benefit.

As with the benefit, it is not broken down into amounts for different types of expenses.

They also state that it is the same as the sole parent support benefit. However this is not correct as on a sole parent benefit you can also apply for an accommodation supplement that varies depending on where you live. There is also additional assistance available for childcare expenses.

IRD also made the following statement in answer to a similar question:

The living allowance recognises the cost a parent has to support themselves.

How exactly does it recognize the cost when IRD’s own guide states the cost is far, far more?
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Why are IRD not accountable for providing a detailed breakdown of the living allowance?

How can they just say it is the same as the sole parent support benefit when it is clearly not?

Recently we were told that IRD are trying to “align” with Australia.

Did you ever wonder what the living allowance is over the ditch?

Another eye opener:

The living allowance in Australia is $23,610 a year in Australian dollars, which today is $26,563.82 New Zealand Dollars.

Child support paying parents in Australia, the system that IRD is trying to align us with, get a 50.85 % higher living allowance.
.

Not 2%, not 5% but more than 50%!

australian living allowance

IRD need to decide which of the following statements are correct:

1./ The current living allowance of $17,687 a year is a ridiculously low amount and by no means reflective of today’s high living costs (in which case some paying parents, that are not on high incomes are being forced into critical financial situations where they simply can not make ends meet).

2./ The IRD Guide AD164 is grossly over inflated, not an accurate reflection of actual average living costs and should therefore not be used as part of the responsible lending code.

Do you think the living allowance is fair?

Could you, as an adult (who more than likely has to look after kids for a portion of the week as well as yourself), live on 17k a year regardless of where in NZ you lived? We realize of course that some may earn enough above and beyond the living allowance and will have extra money available, however a lot of us do not, and are therefore really struggling.

We will continue to highlight obvious flaws in the new child support formula as and when we find them.

Please join us on our Facebook page and share this article with your friends and family.

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Comments

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6 Comments

  1. The “living allowance” needs some very serious attention before it can be even close to being called fair. At least in the old way, financially dependent partners weren’t treated like they simply did not exist.

    Now for a general rant..

    We too are the modern Brady bunch blended family. 3 his, 3 hers, 1 bio. Happy as Larry together for 7years now – barring the CS monster.

    We have 4 children in our household and pay for 3more in their mothers household and whom visit with us -but not over 28% of the nights.

    With the way CS is now setup, we can earn 45K or 60K and still have almost the same amount left over each week! We can work harder to attempt to get ahead but CS will jump with it. WFF will fall and at best we’ll have an extra 80 in our pocket per week. (Yes it is still extra, but when you look at it as work versus gain, 1 is 48hours per week the other is 65hours per week. That’s 17 extra hours for only 80bucks gain!!)

    Now the part I think is being overlooked by IRD in a huge way are the situations where there is a partner but only one person working, so only the one income. You can’t tell me there’s a significant other there literally surviving on a $0! Obviously that home has a JOINT HOUSEHOLD INCOME that they operate under.

    That should be factored in on both sides of the fence.

    So:

    *Paying parent supporting partner = use household income – living cost for two.

    *Receiving parent supported by partner = use household income – living cost for two = does not actually have an income of $0 to support their children with, so the calculation should not be based on $0!!

    On the flip side:

    *Paying parent supported by a partner = use household income -living cost for two

    *Receiving parent supporting a partner = use household income – living cost for two.

    We’ve tried negotiating a reasonable private arrangement so as to avoid IRDs bizarre calculations, even offered to pay directly to the childrens accounts, but once greedy guts got a whiff of what she could receive with the new CS, while not working and being supported by her new ( and well off) partner, bye bye any chance of a fair agreement.

    Child support in NZ is a crippling punishment for the change in a persons life direction, rather than the reasonable financial aid it is meant to be.

  2. No surprises here – child support is all just a sham just to extort more money. That is why they don’t use the market rental stats for Auckland.

    A fairer system is just to say kids cost this amount on average from
    baby to 5 years
    5-13 years primary school
    13-19 years high school
    based on reasonable costs excluding private school, private tuition etc that really are luxuries most families would not afford.

    Then if income is
    below 30k you pay 40%
    30-40k you pay 50%
    40-60k you pay 60% of this rate
    60k to 80k you pay 70% of this rate
    80k to 100k you pay 80% of this rate
    100k up you pay 100% of this rate

    Most entire households run on $40-50k so it is a wrought to say kids cost so much more money than an average cost. Reality is most houses are run on a very tight budget

    1. Thanks Ken great points. Yes we are definitely advocates for a flat rate or something similar. We would like to do away with the wild extremes we see now of one child being worth $14 a week, and another $400! Even better a starting point of 50/50 shared care and the parents can sort out the expenses between themselves. When that doesn’t work then look at IRD child support, and not have it as the default go to as it is becoming today.

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