Community-Wise - 2004
Issue April 2004
Child support
- changes to child support assessments
- bulk mailing tells customers about new year's payments and entitlements
- when child support is no longer payable
- frequently asked questions
- collecting Child Support debt
- changes coming to statements
- mobile officers provide helpful service
- Child Support text messaging pilot
Personal tax
- the 2004 Income Tax timetable
- tax returns - who, what, when?
- charitable donations, childcare and housekeeper rebates
Family assistance
- increase in income thresholds for family assistance
- family assistance - have your circumstances changed?
- family assistance information at www.ird.govt.nz/family assistance
Student loans
- new service for student loan borrowers
- online calculators
- need help understanding student loan statements
- student loan interest rates and thresholds
- student loan tax codes
General
Flooding results in law change
The government has legislated to give Inland Revenue greater flexibility in dealing with business taxpayers who were badly affected by the recent floods in the central and lower North Island.
The law has been changed to allow us to remit useof-money interest on tax payments that are late as a result of the flooding.
The law has also changed to allow us to accept estimates of provisional tax that are late because of the floods.
Strict criteria will apply: the taxpayers involved must be significantly affected by the flooding and they will have to apply for the relief.
Details on how to apply for relief are on our website.
There are three reasons why a taxpayer may be unable to meet their tax obligations due to the floods. Each taxpayer's situation will be considered on a case by case basis.
- Their records have been destroyed and therefore can't file returns. Under these circumstances it will be necessary to reconstruct records using whatever information is available, e.g. bank statements.
- They can't access their records. For example, the taxpayer has been evacuated from their home or business.
- Higher priorities created by the flood meant they haven't had time. Many in this situation could be volunteers, relations, neighbours and contractors who have gone to assist others and in doing so, have not met their own tax obligations.
Extension of time for re-estimates of provisional tax for flood victims
In general, flood victims who are not able to determine the tax impacts until after 7 March will have until 31 March 2004 to re-estimate their 2004 provisional tax without any penalty. This means we will process the late re-estimations with an effective date of 7 March.
Late payments of third instalment of provisional tax for flood victims
Where third instalment provisional tax payments are paid on or before 31 March 2004 and the reason the payment is late is due to flood impacts, the payments will be treated as received in time.
Answering the Call During Floods
Inland Revenue staff showed outstanding commitment and dedication during the peak of the floods.
Wellington Service Centre Manager Mike Hewetson was responsible for coordinating our flood relief response and he applauds the efforts of staff during the emergency.
"Our staff actively reached out to the local community to help where possible."
A leaflet urging affected people to contact us as soon as possible was developed in less than 24 hours for distribution to taxpayers and child support customers in the affected areas.
The Ministry of Social Development's Work and Income have set up a government phone line and one-stop-shops in the flooded regions with information on government services.
"We actively supported these initiatives, supplying child support and other staff to provide advice on child support and tax matters. Some staff gave up their weekends to help out," says Mr Hewetson.
"We've also been in contact with key representative groups including Federated Farmers, The Institute of Chartered Accountants, and local District and Regional Councils throughout the affected area."
Changes to child support assessments
As of 1 April, the new minimum child support rate payable was increased from $56.40 per month (or $677 per year) to $57.35 per month (or $688 per year).
Changes have also been made to the maximum assessable income, and to the living allowances used in the standard formula to assess the amount of child support payable in the coming year.
All customers were advised in February and March about their new assessments.
David Udy, National Manager Child Support, says the new assessments reflect changes to the minimum amount payable and the maximum assessable income provided for in Child Support legislation to ensure child support payments stay in line with inflation.
"The amount a paying parent must pay is worked out based on their income. The highest taxable income we use is based on 2.5 times the average New Zealand income. This has been increased from $90,823 to $93,522," says Mr Udy.
"Our objective is to ensure that children receive financial support from parents who no longer live with them, so even if the paying parent does not receive an income they are still required to pay a minimum amount to financially assist with raising their child".
The first payment based on the new assessments is due by 20 May 2004. Paying parents who pay their child support by automatic payment have been sent a reminder to alter the amount payable.
Bulk mailing tells customers about new year's payments and entitlements
Approximately 250,000 child support customers were sent information about their new child support assessment and entitlement amounts in February and March.
These Notices of Assessment advise paying parents of what they need to pay in the new child support year (1 April 2004 to 31 March 2005). The Notices of Entitlement tell custodians what they can expect to receive for the coming year.
In addition, around 130,000 Employer Deduction Notices were sent in March. These were sent to inform businesses of the new child support amounts they need to deduct from the salary or wages of their employees, and to paying parents letting them know about the deduction amount.
A similar mail out occurs each year because of the changes to formula assessments and the need to let customers know what to pay.
To help customers understand the assessment process, a flyer was included with the mailings to relevant parents. It contained information explaining that an assessment can change during the year.
"For most salary and wage earners, we use their previous year's income to calculate their assessment. As the income for the full year is not known at the stage the assessment is completed, we base it on the ten month's income that is confirmed, and an estimate for the final two months," says Child Support National Advisor, Prema Waghorn.
"We recognise that income can change. So every year around July we carry out a reconciliation to compare the amount of income used in the assessment and the income actually earned over the 12 month period," says Prema.
A new assessment is issued if the paying parent's income changes by more than $500. The assessment is backdated to 1 April - the start of the new child support year. Child Support will send a new notice if there is a change to their assessment. If there is a credit or extra to pay, this will be notified on the statement.
When child support is no longer payable
Customers are liable to pay child support until their child turns 19. However, there are other situations where child support may not be payable before this time. These include:
- if the child marries or lives in a de facto relationship;
- if the child starts living with the paying parent; or
- when the child is no longer financially dependent - for example, when they get a full-time job (30 hours or more a week), a student allowance, or a benefit.
Following the end of the school year and the start of the university year, a number of children under the age of 19 will have left school and started full time jobs, or started receiving a student allowance or benefit. This means they may no longer be eligible for child support.
Remember that Inland Revenue Child Support needs to know immediately when any of the circumstances listed above occur so that the child support is stopped at the correct time. If a custodian receives child support when there is no longer an eligibility to receive it, a debt to Inland Revenue will be generated.
Parents should call 0800 221 221 as soon as circumstances change. An online change of circumstances form is also available.
Frequently Asked Questions
How are my child support payments worked out?
A standard formula is generally used to work out how much a paying parent needs to pay.
The four steps in the child support formula are:
- work out the paying parent's taxable income
- take away a living allowance from that income
- multiply the result by a percentage based on the number of children the paying parent pays child support for
- divide the final amount into 12 equal monthly payments.
To work out the taxable income, we use the previous year's income if it was solely sourced from salary, wages, a benefit, interest or dividends. The taxable income is taken from two years before the current year if the income includes sources other than those listed (such as rent or self-employment).
A notice is sent out each year in February or March to let paying parents know how much they need to pay in the coming year. The amount required each month to meet the annual figure is given.
The assessment amount generally changes each year because of changes in the customer's income or living allowances - either due to alterations to living circumstances, or because of the annual adjustment for inflation.
Note that the income of the custodian is not taken into account with a formula assessment.
If a customer has no income, they are assessed at the minimum rate. For the year starting 1 April 2004, the minimum is $688 per annum.
There is also a maximum assessable income. This means that if a paying parent earns more than the maximum it is not taken into account in the formula assessment. The maximum income for the year starting 1 April 2004 is $93,522.
If a customer disagrees with the amount they are assessed to pay there are two actions they may be able to take:
- Make an objection
- Apply for an administrative review.
Customers are advised to phone 0800 221 221 to discuss their options based on their situation before taking these actions.
A calculator is available to help customers work out their assessment. There is also a fact sheet Calculating Child Support (IR150), and this is available from the website or through INFOexpress on 0800 257 773.
Collecting Child Support debt
Child Support's basic role is to assess, collect, and disburse child support payments. When a payment is made by a paying parent, it is passed on to the custodian or to the government if the custodian receives a sole parent benefit. When a paying parent misses making a payment, the amount due cannot be passed on to help support their child and debt is generated for the paying parent.
Child Support has a focus on reducing the overall level of debt, as well as encouraging ongoing compliance. Since mid-2003, a major effort has been put into collecting high-value and long-term debt.
David Udy, National Manager Child Support, says: "We understand that there are many reasons why paying parents go into debt, including not letting us know when their circumstances change. But there is also a small minority of parents who consistently do not pay. These parents have generally built up a large child support debt."
Education and communication activities are used to help encourage paying parents in debt to pay what they owe. Child Support works with as many of these parents as possible to put in place payment arrangements. But if this does not achieve results, legal action may then commence.
Under our legislation, the sorts of legal action Child Support can take include:
- Examinations - where a court determines the parent's ability to pay the debt or find a new way to pay. Following an examination, a court's options include ordering payment, community work, or surrender of passport.
- Court orders to seize a parent's goods (such as a car) which can then be sold.
- Arrest - such as when a parent may be about to leave the country to avoid paying their child support.
- An order over property so that when it is sold, the money can be used to pay the debt.
- Bankruptcy - so the sale of assets (as a result of the bankruptcy) can be put towards the child support debt.
"We have had a number of successes in collecting debts this year," says Mr Udy. "As an example, an order was sought on a customer's vehicle. But before we took the final action, the customer voluntarily paid a $7000 lump sum, and is now also meeting their ongoing obligations.
The ultimate goal is to pass on what is owed to the custodian. "This can sometimes be very emotional for our staff and the customers," notes David. "Recently, when we phoned a custodian to say we had collected overdue money from the paying parent, who had been in debt for nearly the whole of the child's life, they started crying. We were told the family could now afford glasses for the child and could go to the dentist."
Changes coming to statements
New look statements are currently being tested by Child Support staff before being put into production.
The information on the statement tells the parent how much and when they should pay. This is particularly important for parents with a child support debt. The statements are not an "invoice" and payments must be paid by due date even if the statement does not arrive, or arrives late.
Feedback from customers indicated that many do not easily understand the statements. The information can sometimes be complex, depending on the payment history of the customer. Customers have also told us that the way the information is set out can be confusing and is not very attractive.
Child Support has therefore designed new statements as part of an overall Inland Revenue customer noticing project. The project aims to improve the quality and consistency of customer correspondence, provide more ability to customise letters with personalised information, and develop letters that are easy to read, specific and meaningful. New technology to support the more flexible system is being introduced for Inland Revenue staff.
The look, feel, and usability of the new child support statements have been customer tested. Once staff testing has been completed, the statements will be well on the way towards providing more useful information to customers.
Mobile officers provide helpful service
Child Support mobile officers offer a face to face service for customers who genuinely cannot contact us or visit our offices. We can arrange a visit to these customers at a time and place that is convenient to them.
Child Support first used mobile officers about three years ago. The service was established to support customers who have a difficulty understanding their child support obligations.
Mobile officer services are used when:
- customers have extreme transport difficulties or a disability, and cannot come to Child Support;
- health problems make travel or communication difficult;
- English as a second language makes phone use a barrier; or
- cultural issues, fear and phobias, or literacy and numeracy problems pose a barrier for the customer.
Because travelling to meet customers is very resource intensive for Child Support, the service is generally not available when customers could reasonably be expected to phone or attend a counter appointment to clarify their child support obligations.
However, each case is considered on its merits.
Community liaison officers (CLOs) often double as mobile officers when they are out in the community. CLO Paul Smith recounts a recent successful resolution to a customer's compliance issues following a mobile officer visit:
"This customer was referred to us by their employer, who told us the employee has difficulty dealing with 'officials' from government departments. The customer works long hours, and requested an appointment at 7.30pm at his home to discuss his child support payment options, but he didn't arrive home to keep this appointment," says Paul.
"A few days later the customer rang one of our service centres, and a second appointment was set up for 7:30pm that evening, but again the customer didn't arrive home. I went to his work address, where his employer confirmed that he was still there because he didn't want to go home for the appointment. I established a rapport with the customer, which enabled us to then move on and deal with his child support issues," says Paul.
"Despite the two late nights, the extra effort was well worth it. The customer is now feeling very positive about child support and Inland Revenue in general." To arrange to meet with a mobile officer, please call Child Support on 0800 221 221.
Child Support text messaging pilot
Inland Revenue Child Support is running a text messaging pilot to help remind customers when their monthly payment is due.
Child Support National Manager David Udy says: "We are always looking at ways to improve our service and to help customers meet their obligations. This includes thinking about new ways of communicating with them. We'll be running a pilot to test whether a text messaging service meets everyone's needs. Text messaging looks to be a good way to keep in contact with people on the move."
Customers are being reminded of the due date for payments to help avoid a late payment penalty. Payments can then be passed on to custodians and their children at the time they are expected.
An offer of this service will initially be made to paying parents who pay manually each month (that is, they do not pay through an automatic payment or by deduction from salary, wages, or benefit). It will be a free service and will complement the other communications with those customers.
The service will consist of a text message that will be sent to their phone a few days before the monthly payment is due.
This new way of communicating for Inland Revenue is being trialled now because around 66% of people over 16 own a mobile phone. The growth in text messaging is reaching saturation in some demographic segments, with 80% of 18-24 year olds using mobile phones and over 90% of this group using text messaging.
Mobile phones, particularly prepaid phones, are popular with groups in the community because they allow a higher degree of cost control. Often they are the only reliable contact method for people who move regularly or are in flatting situations. For people who are selfemployed or in jobs where they are 'on the go', mobile phones are often the only means of contact.
More information about the pilot service will be available from the Child Support website.
The 2004 Income Tax Timetable
| APRIL | REBATE CLAIM FORMS SENT OUT.
|
|---|---|
| MAY | SUMMARY OF EARNINGS SENT OUT.
|
| JUNE | PERSONAL TAX SUMMARIES SENT OUT.
|
| JULY | YOU CAN REQUEST A PERSONAL TAX SUMMARY
|
Tax returns - who, what, when?
Most people pay the correct amount of tax and don't need an end of year tax square-up. However, depending on how a person earns their income and their situation during the tax year, they may be required to receive a Personal Tax Summary (PTS) or file an Individual Tax Return (IR3).
Personal Tax Summaries
Those people who we know need an end of year tax square-up will automatically receive a PTS. Some people are required to request one while others may want to request one as they may be eligible for a refund.
The following outlines the three different groups.
People automatically receive a Personal Tax Summary in June and July if:
- They and/or their partner received family assistance from Inland Revenue.
- They and/or their partner received family support from Work and Income and their total family income was over $20,000 for the tax year.
- They qualified for a student loan interest write-off other than the full interest write-off for students who are studying full-time.
- They have used a special tax code during the year, or we contacted them because they appeared to be using an incorrect tax code.
- They used a CAE (Casual Agricultural Employee) or EDW (Election Day Worker) tax code, and earned more than $200 from that source.
People need to request a Personal Tax Summary if:
- Their total income was between $38,000 and $60,000 with more than $200 of interest taxed at less than 33%.
- Their total income was over $60,000 with more than $200 of interest or dividends taxed at less than 39%.
- They paid child support through Inland Revenue and received more than $200 in interest or dividends.
- They have a student loan, earned over $15,964 and received more than $200 in interest or dividends.
Those who are required to request a Personal Tax Summary can call us on 0800 227 775 or request one through our website.
People should request a Personal Tax Summary if:
- They are able to get a low income rebate, for example the Child Rebate and/or earned salary and wages less than $9,880.
- They earned less than $38,000 and received income from dividends.
- They did not work a full tax year (1 April 2003 to 31 March 2004).
- They had more than one job during the year.
- They are able to deduct expenses from their income.
If a person thinks they may be entitled to a refund we recommend that they work it out on our personal tax calculator or worksheet before they get a PTS. If they request a PTS and there is a tax bill they will have to pay it.
People can use our Personal Tax Summary Calculator or call INFOexpress, our automated phone service on 0800 257 773 to request a Personal Tax Worksheet.
Anyone not included in these lists and who have not been contacted by us can relax - there is no need to get in touch with us.
IR 3 Individual Tax Returns
Anyone who receives income from selfemployment, a rental property, a partnership, or withholding payments must file an Individual Tax Return (IR3).
A Summary of Earnings showing income information for the tax year will automatically be sent in May to those people who file an IR3 income tax return and also receive income through salary, wages or withholding payments.
IR3 returns are due to be filed by 7 July 2004 for those taxpayers who do not have a tax agent or an extension of time. Anyone who cannot file their return by 7 July 2004 and does not have a tax agent or an extension of time will need to call us.
If a person's circumstances have changed and they no longer need to file an IR3 they should call us on0800 227 774 so we can update their records.
Anyone who has not automatically received an IR3 tax pack, or is not sure if they need one, should visit Inland Revenue's website for more information, or call us on 0800 377 774.
Charitable donations, childcare and house keeper rebates
Rebate claim forms will automatically be sent to people who claimed for charitable donations, childcare and housekeeper rebates last year. These should arrive by the end of April.
People who haven't received their form by then, or didn't claim last year but believe they are entitled to this year, can obtain the Rebate Claim Form (IR526) by visiting our website or calling our automated phone service on 0800 257 773 with their IRD number.
People may apply for a rebate if they earn a taxable income (eg, salary, wages, benefit, self-employed income) and:
- have donated money to a charitable organisation; or
- have paid school fees (please note, tertiary education related costs such as university or polytechnic fees cannot be claimed); or
- have paid for childcare as a working parent; or
- have paid for a housekeeper, where they (or their partner) were disabled or physically unable to do housework.
An individual can claim back one third of the amount of their receipts for charitable donations up to a maximum of $630 (for receipts totalling $1890 or more), while a family can claim up to $310 for childcare/housekeeper rebates (for receipts totalling $940 or more).
The relevant receipts must be included with all claims.
Increase in income thresholds for family assistance
The amount a family can earn and still be eligible for family assistance has increased.
The following tables show the maximum income a family can earn and still be eligible for that payment. For example, a family with three children can earn up to $42,446 beforetax each year and still be eligible for family support.
| Family support | Number of children 1 2 3 4 5 6 |
Max. family income $31,352 $36,899 $42,446 $47,992 $53,539 $59,086 |
| Child tax credit | Number of children 1 2 3 4 5 6 |
Max. family income $33,952 $42,099 $50,246 $58,392 $66,539 $74,686 |
| Parental tax credit | Number of children 1 2 3 4 5 6 |
Max. family income $60,024 $68,170 $76,317 $84,464 $92,610 $100,757 |
These new rates were effective from 1 April 2004.
Family assistance - have your circumstances changed?
Inland Revenue has issued letters to customers who received family assistance during the previous tax year. These letters are used to confirm the income and family details we currently have recorded in our system.
If their circumstances have changed, it is vital customers contact us as soon as possible so we can amend our information. If they don't call to update their details, these customers may be underpaid, or receive too much family assistance and have to pay it back.
To amend their income or family details, customers should contact us on 0800 227 774.
Family assistance information
Our website provides a lot of information and material on family assistance entitlements. By browsing through the site customers can find answers to most of their questions.
Easily readable charts are also available so people can see if their family is entitled to any family assistance payments. It's even possible to download and print off the application forms and guides so customers don't have to contact our call centres to register.
New services for student loan borrowers
We have a range of electronic options available to make managing and paying off student loans so much easier. Borrowers can now:
- e-mail us with general enquiries;
- send and receive information about their own specific loan account through our secure online e-mail service; and
- view their loan account and transaction details online.
Asking us a general student loan question is easy - all people need to do is visit the above address and click on "general enquiry form". From there they can type their question and submit an e-mail address for our reply.
Borrowers must register to send and receive specific account information and view transaction details online. The registration process asks them to provide a word or phrase as verification of identity and a user ID will be produced for them automatically. We'll then send out a letter with a user password within five working days. Once it arrives, the borrower can log on with their new password and access these services.
The secure e-mail and account view service is totally secure. As long as users keep their password and user ID confidential, no-one can access their account without their permission.
Online calculators
Our student loan repayment calculators are a great tool to help customers manage their student loans. Whether they're in New Zealand or overseas they can see what a difference even small additional repayments can make. Not only will they pay their loans off faster, but they'll save themselves money in interest.
Check out our calculators for more details.
Need help understanding student loan statements?
We now have a new section on our website specifically designed to help people with student loans understand their statements. To view this information, including an example of a statement complete with definitions and explanations, go to:
Reading your statement
Student loan interest rates and thresholds
The student loan repayment threshold has now increased to $16,172. Anyone living in New Zealand and earning more than the new threshold for the tax year ending 31 March 2005, must make repayments to their student loan.
The interest write off threshold has also increased. Part-time or part-year students can now earn up to $26,140 and still be eligible to have all their interest written off after the end of the tax year.
Both changes were effective from 1 April 2004.
Student loan tax codes
Some people have a student loan repayment bill at the end of the year because they didn't repay enough during the year. The best way for people to avoid this situation and ensure they make the right repayments is to use the correct tax code. If an individual earns more than the repayment threshold ($16,172 as of 1 April 2004) from their main job, they must use the M SL tax code.
To ensure they are on the correct tax code and avoid an end of year bill, people with a student loan should see their employer and complete an IR 330 tax code declaration form. For more information on tax codes and other frequently asked questions check out our information at: Student loans frequently asked questions
Key dates and events
| Date | Event |
|---|---|
| 19 - 30 March (Student Loans) |
Borrowers whose loan was transferred to Inland Revenue from StudyLink will receive a letter notifying them of their balance details. |
| 24 - 27 March (Family Assistance) |
Certificate of entitlement sent to Family Assistance customers informing them of their entitlement and confirming what they will receive for the period 1 April 2004 - 31 March 2005. |
| 1 April (Student Loans) |
Student loan repayment thresholds have increased. |
| 1 April (Family Assistance) |
Family Assistance abatement levels have increased. |
| 1 April (Child Support) |
New child support year begins, and the new minimum and maximum assessments come into effect. |
| April (Personal Tax Season) |
Rebate claim forms sent to those people who claimed a donation, childcare or housekeeper rebate last year. |
| 14 April (Family Assistance) |
End-of-year statements issued to businesses and self-employed customers. The statements list family and income details that we have on record. |
| 14 April (Family Assistance) |
Business adjustment forms sent to business customers receiving Family Assistance to confirm if details held by us are correct. |
| April/May (Personal Tax Season) |
IR 3 income tax returns sent out. |
| 30 April - 15 May (Student Loans) |
Borrowers in New Zealand and overseas are sent their April statement. |
| May (Personal Tax Season) |
Summary of earnings sent to people who are required to file an IR 3 income tax return. |
| May (Child Support) |
Annual statement run for paying parents. Statements show their current balance. |
| June (Personal Tax Season) |
Personal tax summaries sent to taxpayers who need an end of year "square-up". |
| July (Personal Tax Season) |
Those taxpayers who did not receive a personal tax summary can request one. |
| July (Child Support) |
Salary and wage income finalisation run. New notices are sent to paying parents if there is a change of more than $500 between the income we used for the notice sent in February/March, and the income actually earned for the year 1 April 2003 - 31 March 2004. |
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Date published: 07 Dec 2004
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