Child Support (NZ)

Overview

Inland Revenue Child Support can send you a notice telling you to deduct, amend or stop child support payments from your employee’s next pay.

The notice shows:

Your employee’s name and IRD number.
The pay date that you must start, amend or stop child support deductions.
The amount to deduct from each pay.
Whether the employee is 'liable' or 'custodial' parent as this impacts what's reported via Payday Filing.

Child support deductions have priority over any other deductions from an employee's pay. After deducting PAYE, child support is to be deducted before anything else including ACC, student loan repayments, insurance, superannuation or union fees. When child support is being deducted from an employee's pay, the maximum amount of child support you can deduct is 40% of their net pay (taxable gross less PAYE). This is because 60% of the employee's pay is "protected net earnings" for Child Support purposes.

For further information on Employer's Responsibilities in relation to Child Support, refer to the IRD website http://www.ird.govt.nz/payroll-employers/make-deductions/deductions/cs-deductions/

Deduction setup

It is recommended that Child Support deduction record be configured as follows:

Type: D. Standard Deduction (mandatory)
Taxable: No (mandatory)
Rank deduction and Rank: Use ranking to ensure that the statutory Child Support transaction is created before other deductions are made. Ranked deductions are made before unranked deductions. We recommend setting Rank to '01'.
Minimum nett pay: To comply with IRD instructions, set this to 60.00. This will ensure that the 60% of the employee's earning are protected from being used for the Child Support payment.
Direct credit: No
Full amount only: No
Calculation method: F. Fixed amount (mandatory)
Deduction class:
You must use C. Child support.
Sub-class:
For "Liable" parents you must use Liable parent. This ensures the deduction is reported to IRD via Payday Filing.

For "Custodial" parents you must use Custodial parent as these deductions are not to be reported to be IRD via Payday Filing.

Permanent Transaction

For each employee that IRD has provided a Child Support Employer Deduction (CS 503) Notice create a permanent deduction transaction record. Enter the Begin date on the Effective Dates tab, to ensure the Child Support is deducted only when instructed on the CS 503

Processing pays with Child Support transactions

When you deduct child support in an employee's pay, PayGlobal will cap the the deduction if it would leave the employee with less than 60% of their nett pay (taxable gross less PAYE), before any other deductions have been made. This portion is called the employee's "protected earnings" for child support purposes.

If the child support deduction has been capped due to protected earnings, PayGlobal will automatically default the Child Support Variation Code on the transaction to "P" (Protected Earnings), except where you have already set it to "C" (Ceased employment) or "A" (Advanced payment).

If the transaction is not affected by protected earnings but is different from the normal amount you must supply the Child Support Variation Code to explain the difference.

Reporting Child Support deductions to IRD - Payday Filing

Each time you send your Employee Information (EI) data via FileUpload or as a Return via the Gateway Service, if the employee's reported pay included a child support deduction for a "liable" parent, then the deduction amount and (if applicable) the variation code will be reported.

Reporting Child Support deductions to IRD - Before Payday Filing

Prior to Payday Filing, the following reports were used for reporting Child Support data of "liable" parents to IRD.

PGPRTAXA100 - Employer Monthly Schedule (IR348 v0004), this included an amount per "Liable" parent employee along with the variation code if applicable.

PGPRTAXA021A - Employer Deductions (IR345 – v0003), this provided a sum total of all "Liable" parent child support deductions for the reported period.