Four step calculation
Here you can find out the details of these four steps in the child support formula:
- determine the paying parent's taxable income
- deduct a living allowance from the income amount
- multiply the result by a percentage rate
- divide the final amount into 12 equal monthly amounts, which must be paid by the 20th of each month.
If you'd like to work through the child support formula for your own circumstances, see Calculating child support (IR150) for the relevant year under "Work it out".
We use one of three methods to assess the income of paying parents, depending on how they earn this income.
- If you're a paying parent with an income solely from salary, wages and/or a benefit and you're not required to file an income tax return, we base our assessment on the taxable income from your employer's wage records from the previous year. For example, your child support assessment for the year 1 April 2014 to 31 March 2015 will be based on your taxable income earned in the year 1 April 2013 to 31 March 2014. Paying parents in this category are assessed annually in March. The full income earned over the year won't be known at this stage and so the assessment will be based on ten months of income earned from April to January, and two months approximated earnings (1/5 of the ten months actual earnings).
In July we compare the income amount used in the initial assessment with the income actually earned over 12 months. A new assessment will be issued in July if the income has changed by more than $500. The new assessment will be backdated to 1 April.
- If you're a paying parent earning other income (for example, rental or self-employed) and/or you must file an income tax return, we base our assessment on your income from the two years prior to the current year. For example, for the year 1 April 2014 to 31 March 2015 your assessment will be based on your income tax return filed for the year 1 April 2012 to 31 March 2013.
We then adjust this figure to account for inflation. The inflation factor for the 2015 assessment year is 1.6%. The inflation factor is calculated each year in December using the consumer price index (CPI). Child support assessments for paying parents in this category are assessed each year in March.
- If you're a paying parent living outside New Zealand, we base our assessment on your overseas income plus any income earned in New Zealand. We ask you to provide the total overseas income amount earned for the same period as the equivalent New Zealand income year. This means, the child support assessment for the year 1 April 2014 to 31 March 2015 will be based on income earned overseas for the year ended 31 March 2013.
For example, if you earned income in Australia where the tax year ends 30 June, your child support assessment would be based on your Australian income to 30 June 2013. If you earned income in the United Kingdom where the tax year ends 5 April, your child support assessment would be based on your UK income to 5 April 2013.
Find out more about assessments for paying parents not living in New Zealand. Child support assessments for paying parents in this category are assessed each year in February.
Important: If your taxable income was greater than $134,081 you should use $134,081 as your taxable income (maximum income).
If your income has fallen by 15% or more from the income you’ll be assessed on, you can choose to estimate your current income and we then use a slightly different formula for your assessment.
The amount we deduct as the living allowance depends on the personal circumstances of the paying parent.
The living allowance is based mainly on gross benefits from Work and Income.
The percentage rate we use depends on the number of children for whom the paying parent must pay child support. The list below shows the percentages where the paying parent is not in a shared care arrangement for child support purposes:
- one child 18%
- two children 24%
- three children 27%
- four or more children 30%.
If a shared care arrangement exists for child support purposes, we use the following percentage rates:
- 0.5 child 12%
- 1.0 children 18%
- 1.5 children 21%
- 2.0 children 24%
- 2.5 children 25.5%
- 3.0 children 27%
- 3.5 children 28.5%
- 4.0 children 30%.
For the purposes of the child support percentage, we count each child in a shared care arrangement as 0.5 of a child. You can find out more about shared care in our booklet Helping you understand shared care (IR156).
The paying parent must pay each monthly amount by the 20th of each month after receiving the assessment notice. The child support year runs from 1 April to 31 March.
Other factors may change the way the child support assessment is calculated, such as:
- Court orders
- administrative reviews
- shared care.
For more information about these other factors, please phone us on 0800 221 221.
There is a minimum amount to pay. Even if you have no income, you’ll need to pay the minimum. In the 1 April 2014 to 31 March 2015 year, if your child support liability calculates to less than $885, your assessment will be $885 for that year.
Date published: 19 Feb 2014