In New Zealand, the Inland Revenue Department (IRD) handles child support assessments, and understanding how to challenge IRD’s decisions is crucial for parents who feel that the assessment does not accurately reflect their situation. This insight provides an overview of the options available, to challenge IRD’s child support assessment including lodging an objection or applying for a departure order, with real-life case examples.
How to challenge IRD’s child support decisions
When you disagree with the IRD’s child support assessment, there are two primary options available: lodging an objection or applying for a departure order. Let’s explore both options in detail.
OPTION 1: LODGING AN OBJECTION
What is an objection?
An objection is a formal process for disputing a decision or calculation made by the IRD under the Child Support Act. If you believe the IRD has made a specific error in calculating or assessing child support, lodging an objection allows you to formally request a review and seek correction of that error.
By filing an objection, you ask the IRD to reconsider the error you’ve identified. If the error is confirmed, the child support assessment amount will be adjusted accordingly. This process is suitable when you generally agree with the use of the formula assessment but believe the IRD has made a mistake in how it has been applied.
An objection ensures that any errors are properly addressed and that the child support amount reflects accurate decisions and calculations.
What grounds can I use to lodge an objection?
The IRD calculates child support based on several of their decisions, and with reference to a specific formula, as detailed in the Child Support Act.
After the IRD makes certain decisions and applies the formula assessment in the Child Support Act, the IRD will send you a letter explaining how they arrived at their final child support assessment amount. If you believe there has been an error in the IRD’s calculation or decision-making, you have the right to lodge an objection.
According to Sections 90 and 91 of the Child Support Act, objections can only be made on specific grounds, where the applicant can show that IRD has made a decision in error, or that IRD has miscalculated child support in some way.
Common grounds for lodging an objection include:
- Formula assessment error: If the IRD has incorrectly applied the child support formula assessment, an objection can be lodged by showing how the formula was misapplied, and by seeking for a correction.
- Care Proportion: In order to assess child support, IRD must determine the proportion of care each parent or non-parent carer provides to a qualifying child. The IRD uses court orders or agreements to determine care proportions. If a care order or agreement specifies the proportion of nights a child spends with a carer or parent, that is used by IRD as their care proportion. However, in some scenarios, a court order or agreement may no longer accurately reflect the child’s current care arrangements. In such circumstances, an objection may be lodged with the objector providing evidence of the child’s actual current care arrangements. This could lead to the IRD reassessing the proportion of care provided by each parent or non-parent carer, which in turn may affect the outcome of the formula assessment.
- Child Status: If the IRD decides a child over the age of 16 is financially independent (i.e. employed full-time), they may exclude that child from the child support calculation. If you disagree with this decision, you can object by providing evidence that the child is not financially independent and should still be included in the assessment.
There are also other grounds listed in the Child Support Act for lodging an objection, which all relate to an incorrect decision or miscalculation in the circumstances of the case.
How long do I have to lodge an objection?
You must lodge an objection within 28 days of receiving the IRD’s initial assessment or decision. This means you have a relatively short window of time to respond after receiving the IRD’s letter outlining the child support assessment amount.
What happens after I lodge an objection?
Once the IRD receives your objection, they will review it and provide the other parties concerned with an opportunity to respond before advising their decision. If your objection is accepted, the child support calculation will be adjusted to take into account the correction, potentially leading to a different child support assessment amount. However, if the objection is rejected, no changes will be made. If you still feel the decision is incorrect, you can appeal to the Family Court within two months.
OPTION 2: APPLYING FOR A DEPARTURE ORDER
A departure order allows the IRD (Inland Revenue Department) to modify the usual formula used for assessing child support, unlike an objection, which addresses errors in the formula calculation. If granted, a departure order can alter specific parts of the standard formula assessment, resulting in a higher or lower child support amount.
In essence, this process enables the IRD to adjust the formula-based calculation to reflect a customised annual child support amount for the liable parent. The IRD decides which aspects of the usual formula to modify to better accommodate the unique circumstances of the case.
How does the Child Support Act allow for modifications to the formula assessment?
An application for a departure order can be made when special circumstances justify a deviation from the standard formula assessment. However, section 105 of the Child Support Act specifies a limited range of grounds on which a departure order can be sought.
A departure order will only be granted if:
- One of the established grounds under section 105 is met, and
- The order is deemed just, equitable, and in the best interests of both the parents and the child.
These legal criteria are explored further below.
What grounds are specified under section 105 of the Child Support Act for seeking a departure order?
The Child Support Act outlines specific grounds under section 105 that may justify a departure order:
- Reduced financial capacity due to special circumstances – section 105(2)(a): that, due to special circumstances and a parent’s obligation to maintain another child or person, a parent’s ability to provide financial support to the child by way of child support is significantly reduced.
- Significantly affected costs in special circumstances – section 105(2)(b): That, in the special circumstances of the case, the costs of maintaining the child are significantly affected by high contact costs, by the child’s special needs, or the child’s care/education as expected by the parents.
- Application of formula assessment would be unjust and inequitable in special circumstances – section 105(2)(c): That the income, earning capacity, property and financial resources of either parent, or the terms of any relationship property agreement between them, makes it unjust or inequitable to apply the formula assessment to determine child support in the special circumstances of the case.
- Application of formula assessment would be unjust and inequitable due to additional work and re-establishment costs post-separation – section 105(2)(d): That a parent has undertaken additional work after separation different to that undertaken during the relationship, and that it would be unjust or inequitable to take this additional income into account when assessing child support if the some or all of the income was used to re-establish themselves post-separation.
What will be considered to decide what is just, equitable and in the best interests of both the parents and the child?
When determining whether a departure order meets the criteria of being just, equitable, and in the best interests of the parents and the child, the following factors are carefully evaluated:
- Duty of parents: Parents have the primary responsibility to financially support their child.
- Child’s needs: Consideration is given to how the child is cared for, educated, or trained, including any special needs.
- Financial resources: The income, earning capacity, property, and financial resources of both the child and each parent involved are evaluated.
- Parental commitments: Each parent’s commitments, including supporting themselves or any other dependents, are factored in.
- Costs of care: The direct and indirect costs incurred by the receiving carer, including any income foregone in providing care, are considered.
- Hardship: The potential hardship resulting from granting or refusing the order is assessed, considering the child, the receiving carer, or the liable parent.
After evaluating all these factors, the court will only grant a departure order if it is satisfied that doing so is just, equitable, and in the best interests of the child and both parents. This ensures a fair outcome that balances the needs and responsibilities of everyone involved.
How can I start the departure order process?
To begin the departure order process, you must submit an application to the IRD, clearly outlining the reasons why a departure order should be granted. The IRD will review your request and provide the other parties with a chance to respond before notifying you of their decision. If either party disagrees with IRD’s outcome, they have the right to appeal to the Family Court within two months.
Given the complexity of departure orders and the various legal factors involved, it is strongly recommended to seek legal advice before submitting your application. A lawyer can help you navigate the process and ensure that your application meets all necessary legal requirements.
Departure order case study – LG v LG
In the case of LG v LG, the wife requested a departure order to increase the husband’s child support payments due to rising costs from extracurricular activities and private schooling. The court determined that expenses for common extracurricular activities are not unusual enough to warrant a departure order on their own.
However, in this case, there were three children who had all been enrolled in private schools in Auckland during the relationship. After the separation, the husband decided they should switch to cheaper public schools. The court concluded that the costs of having three children in private schools at the same time constituted an out-of-the-ordinary circumstance. This justified an increase in the child support amount paid by the father.
Importantly, the court found that the qualifying factor of section 105(2)(b) was satisfied in this case, as the children were being educated in a manner expected by one or both parents. The expectation to send all children to private schools had been established during the relationship, and the mother had anticipated that this level of education would continue. Additionally, the children expressed a desire to keep attending their private schools. This meant that a qualifying factor for a departure order was established.
Ultimately, the court modified the father’s child support amount so that he would effectively be covering his usual formula assessment amount plus two-thirds of the private school costs. The increase was also seen as just and equitable, considering the father’s high income compared to the mother’s lower income.
Departure order case study – D v C
In the case of D v C, the court granted a departure order due to significant income differences between the parents, despite them sharing equal care of their children. The father, a surgeon, earned $260,000 annually, while the mother earned only $41,000.
At the time of the case in the early 2000s, child support calculations used a simpler formula that capped income for child support purposes at $68,000. This cap significantly reduced the father’s child support obligation, as all of his income above $68,000 was not considered by operation of the income cap.
The court determined that the children needed $27,000 per year to meet their financial needs. However, under the standard formula, which limited the father’s income for support to $68,000 due to the cap, he was assessed to pay only around $9,000. This amount was clearly insufficient for the children’s needs. The court found that applying the standard formula led to an unjust outcome, as the father’s actual income far exceeded the cap. They noted that he could comfortably meet the children’s needs but wasn’t doing so due to the income cap.
The court relied on section 105(2)(c) of the Child Support Act, which allows for a departure from the formula assessment when special circumstances create an unjust result. The court recognised that the automatic income cap was producing an unfair outcome in this case given the father’s high income. As a result, the court ruled that special circumstances justified a modification of his child support amount. They decided the father should contribute 80% of the children’s costs, ordering him to pay $21,600 annually (80% of the $27,000 needed), with the mother responsible for the remaining 20% or $5,400.
It’s important to note that this case was decided under the old formula, which has since been replaced by a new calculation method under the Child Support Amendment Act 2013. It is no longer the case that such a low income cap applies in modern cases. However, this case still serves as a significant example of when a departure from the standard formula may be warranted, particularly when the strict application of the formula leads to an obviously unjust outcome.
Conclusion
Challenging child support decisions can be complicated, so it’s important to understand your rights and options. If you need help with child support issues, Fixed Dispute Resolution is here to assist you. Our team offers clear guidance tailored to your situation, ensuring your child support matters are handled effectively. Contact us for personalised support with your child support questions.