Child support payments will no longer be scooped up by the state, with welfare advocates applauding the removal of a “tax on the poor” announced in the budget.

An investigation last year revealed around $150m in child support each year was being intercepted by the Government, instead of going to sole parents and their children. This has been dubbed “parent tax”.

That was because of a decades-old rule that says if the primary caregiver is on the sole parent benefit, the state is entitled to take child support to recoup the cost of welfare.

Social welfare and family law experts say the law is “illogical and unfair,” penalizing poor families, mostly mothers, and children.

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In Thursday’s Budget, Prime Minister Jacinda Ardern and Social Development Minister Carmel Sepuloni announced that child support would now be passed on to caregivers instead of retained by the state.

Sungmi Kim/Stuff

Welfare advocates are cautiously optimistic, but say there should be no delay in implementing child support pass-on.

“It’s incredibly unfair, and something that we’re proud to be able to fix now,” said Sepuloni. ‘The work can get underway. The soonest that we can get it into place as mid-year next year, but now we’ve made the decision. Now we can move ahead.”

It had granted $354m over five years for the change, with most of this kicking in from mid-2023 when it is implemented. It would require new legislation to amend the Child Support Act 1991 and IT and operational reform within the Ministry of Social Development and Inland Revenue.

It was estimated to lift 6000 to 14,000 children out of poverty, with 41,550 sole-parent families better off by $24 per week.

Children’s Commissioner, Judge Frances Eivers said she “welcomed it hugely,” and that passing on child support would help to reduce poverty and improve some of society’s most vulnerable.

“The research shows it can improve relationships, prevent neglect and abuse, and reduce poverty. We need to support our most vulnerable, and solo parents do a great job.”

Beneficiary advocate Kay Brereton was part of the Welfare Expert Advisory Group (WEAG) that recommended child support pass-on in 2019.

““It will make a lot of families better off and improve relationships, which is an amazing and important thing,” she said.

“A lot of fathers don’t mind paying child support, but they want to know the child benefits from it. It’s a positive move which will actually increase compliance, because non-custodial parents will see that money going to the children.”

Others, like Child Poverty Action Group Executive Director Laura Bond, wanted to see the detail. Child support was being treated as income for the purpose of benefit abatement, meaning other forms of assistance could be impacted, leaving families worse off, she said.

Asked about this, Sepuloni said there would always be a “pocket of people” who would lose slightly, but this was projected to be around 50. “What MSD will do is work with the ones that they come across, and they anticipate about 50 , to check whether or not they are getting access to everything else they may be eligible for.” Around 5000 more were expected to see no change, her office said.

Victoria University economist Dr Michael Fletcher said it was a “great and long overdue move.

“It’s by no means an answer to child poverty, but for the people – mostly mothers – who are caring for the children it will help and for the payers, instead of paying essentially a tax the money will go to your children.”

“I really don’t see the reason for any delay.”

Birthright chief executive Leanne Inder said child support should not be treated as income, as in the United Kingdom and Australia, and also called for more urgency.

“These families need support now, these low to middle income families are struggling. We’ve seen the government move quickly on other legislation, and we want this same urgency applied.”