Hiding income in a trust to avoid paying child support

Q: My ex-husband and I separated four years ago. We have two daughters from our marriage, now aged nine and 11. My ex-husband has limited contact with them; they only stay with him on Fridays every second weekend.

After we separated my ex-husband set up a commercial cleaning business that appears to be very profitable. Last July he transferred the business, along with some other personal investments to a trust. This has reduced his personal income to next to nothing.

Since then, I have only received the minimum amount of child support payable from him (just over $1000 per year). I work as a primary school teacher and have not re-partnered. I am struggling to make ends meet. What can I do?

A: I presume you and the children’s father have had an informal child support arrangement until last July. It is common post-separation for parents to base their child support payments on the Inland Revenue online child support calculator.

Now that the children’s father has hidden his income in the trust, you must go through Inland Revenue.

As a first step, you need to apply for a formula assessment. This is an assessment of what child support is to be paid. It is calculated using your respective taxable incomes and how many nights you each care for the children. It is easy to apply for this on the Inland Revenue website.

You need to do this right away as the formula assessment of child support only starts from the date you apply.

The formula assessment may say that only a small amount of child support is payable if it uses the minimal income of the children’s father and your income. If so, you then need to apply for a Child Support Administrative Review. This is a request for the Commissioner of Inland Revenue to review the outcome of the formula assessment.

There are 11 review grounds. The relevant ground is the ground that says the assessment does not consider the real income, earning capacity, property and financial resources of the parents.

In your request for the administrative review, you should supply as much information about your ex-husband’s financial situation as you can. You should explain what has happened so that the review officer who has access to Inland Revenue records can decide the real position.

The amount of child support you received up until July may be relevant evidence.

This article was first published with the NZ Herald

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