More on the Domestic Purposes Benefit
The Domestic Purpose Benefit was reformed in 2002. Before it was reformed the number of parents on the DPB had been slowly falling. They continued to fall after the 2002 reforms, from 100,652 in 2002, to 93,348 in 2006 (down 7.3%).
The Ministry of Social Development’s Statistical Report notes:
Since 2002, almost all working aged recipients of Domestic Purposes Benefits - Sole Parents or Emergency Maintenance Allowances have had a youngest dependent child aged 14 years or under. This included around 47% of these recipients who were caring for a child aged under five years (see table 3.13). By law, children aged less than 14 years require supervision at all times.
About 60% of those benefits went to sole parents whose children were under 5 years of age. The number of people on carers’ benefits (which includes the DPB) who cancelled those benefits because they found work increased steadily each year from 11,055 during 2001/2002 to 14,525 during 2005/06, while the number who transferred to another benefit fell from 8,364 to 6,011.
So here’s what we have;
- Parents, mostly mothers, who are trying to care for their young children on their own.
- A societal expectation that they should be at home to look after those children.
- A competing expectation that they should go out and find work and get off the benefit.
- The occasional attempt to demonise this group by suggesting that years of broken sleep and nappies is a lifestyle done for the purpose of living on a benefit. Personally if I wanted to ‘mooch off the state’ I think it might be a better lifestyle as an advisor at Treasury.
- And a group of hard working mothers who are trying to meet all these expectations and the needs of their child or children, by working hard to use they benefit while they need it to support their children then working hard to find employment once they no longer need it.
February 25th, 2008 at 4:22 pm
“Personally if I wanted to ‘mooch off the state’ I think it might be a better lifestyle as an advisor at Treasury”
LOL
February 25th, 2008 at 4:30 pm
I have a family member who works at Treasury, (admittedly not as a consultant) and you should see the piles of work he brings home with him.
February 25th, 2008 at 5:09 pm
Frog
93000!….does this not strike you as ridiculously high given the low levels of unemployment?
The fact that 93000 people chose not to look for work in todays tough Labour market is scandalous.
February 25th, 2008 at 5:51 pm
BB - Anyone who has children knows that it is totally unnecessary to ‘look’ for work to do. Do you actually believe that caring for a child is not work? Get real man! Borrow some children for a day! To suggest that people who care for children are not working their ass off is the real scandal!
February 25th, 2008 at 10:48 pm
Because being a full-time parent, which people insist is better for children, and being a paid professional are generally mutually exclusive, no, it doesn’t strike me as scandalous.
Scandalous is when people treat parenthood like a hobby, for instance.
February 25th, 2008 at 10:51 pm
“Personally if I wanted to ‘mooch off the state’ I think it might be a better lifestyle as an advisor at Treasury.” or the Parliamentary wing of the Green Party, if you are going to accept one group of bureaucrats “mooch off the state” then they all do surely!
Of course the real problem with the DPB is that there is another person responsible for the child who isn’t paying for it, whereas there are hundreds of thousands who DO pay for their own kids, sacrifice time and money to do so and then are expected to surrender a third of their income, in part to pay to raise somebody else’s - with little to no gratitude for this. Amazingly working people have children and have jobs without expecting other people to pay for them.
February 25th, 2008 at 11:20 pm
libertyscott
1. Have you heard of Working for Families - tax credits for parents raising up children - whether couples or single parents working? Obviously not. Most parents receive these tax credits.
2. You are also generally referring to the same people. Most women on the DPB bore their children while living with their children’s father, their partner.
3. I know of no evidence suggesting that children born to single parents are less supported by child support than those born to those in relationships. Do you?
February 26th, 2008 at 1:35 am
SPC. said Most parents Working for Families receive tax credits. There are two notable exceptions. Parents who work regular overtime and parents who receive a reducndancy payout. Yet another example of a good idea badly implemeted.
February 26th, 2008 at 8:27 am
Frog
BB - Anyone who has children knows that it is totally unnecessary to ‘look’ for work to do. Do you actually believe that caring for a child is not work? Get real man! Borrow some children for a day! To suggest that people who care for children are not working their ass off is the real scandal!”
First of all I do not need to borrow any kids thanks, I am well catered for in that department.
I am interested in your comment that it is unnecessary to look for work if you have kids, you seem to be suggesting that the parent has no obligation to her child as the bill will be picked up by the tax payer.
Caring for kids is NOT work, it is an obligation that you make when you decide to bring a child into the world, that obligation is yours and yours alone, nobody should be able to make a lifestyle choice and expect me to pay for it.
I do not care how you put it, 93000 people bludging off the tax payer is scandalous.
February 26th, 2008 at 9:52 am
libertyscott said: Of course the real problem with the DPB is that there is another person responsible for the child who isn’t paying for it…
Not often I agree with you, libertyscott, but I do agree with you on this one. The child support laws are totally inadequate to make absentee parents (usually fathers) take financial responsibility for their children.
Funny thing is that it seems many of those who avoid or evade child support also tend to be among the stronger critics of the DPB.
February 26th, 2008 at 12:11 pm
BB. I guess your real job is posting on Frog Blog. Nice work if you can get it. Could I also suggest that your partner must be doing most of the child raising so you are not aware of what it is like to be a solo on a low income?
Kick the parents out the door to get a real job and then wonder why their kids are in the courts in 10-15 years time and then kick the parents again for bring up such delinquents. Which scenario do you really want? ( I am expecting you to answer both ways
)
February 26th, 2008 at 12:48 pm
Seven Lessons In Child Support Avoidance
Lesson 1:
Become self-employed, charge heaps of expenses that would otherwise be your personal expenses against your business, so you nominal income is about $15K or $20K. That way you pay hardly any Child Support. You also pay hardly any tax.
Lesson 2:
Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support. You also pay no tax, but make a nice tidy capital gain when you flick off a property.
Lesson 3:
Repartner with someone who already has a few children. That way you can significantly reduce the Child Support you pay for your own children. Not as effective as Lessons 1 and 2 above, but still worth doing if you can’t handle running a business.
Lesson 4:
Refuse to pay anything and threaten to give the custodial parent the bash if she makes a Child Support Formula Assessment application to Inland Revenue.
Lesson 5:
Refuse to pay anything and threaten a lengthy custody dispute if the custodial parent makes a Child Support Formula Assessment application to Inland Revenue.
Lesson 6:
Refuse to pay anything and threaten to report the custodial parent to Work and Income alleging she is in a relationship with someone else if she makes a Child Support Formula Assessment application to Inland Revenue. (This one applies only if the custodial parent is on the DPB.)
Lesson 7:
Refuse to pay anything and go overseas. You will still accrue Child Support debt, but unless you return to New Zealand there is no way IRD can collect it.
Funny how the right wingers make such a fuss about the DPB, but we don’t hear so much about the non-custodial parents who avoid paying Child Support.
Could it be because many of them have learned one or more of the above lessons?
February 26th, 2008 at 1:43 pm
Scott
First of all the kids are all now young adults, secondly you could not be more wrong about not ever knowing what it is like to be a low income.
You second paragraph illustrates the (and do not take this personally) pathetic level of argument this issue generates, we have massive problems in NZ with youth crime, you cannot seriously suggest that making parents work would see a rise in youth crime.
I believe it would actually teach kids the right things, it would teach them that it is normal for mum or dad to go out and work for a living.
February 26th, 2008 at 1:47 pm
toad
Where is lesson 8?
The one that mentions personal responsibility or the one that mentions the huge numbers of woman who see the DPB as a lifestyle choice?
The same mums who get pregnant while on the DPB.
February 26th, 2008 at 2:01 pm
Lesson 8:
Refuse to pay anything and threaten to report the custodial parent to the Police or social welfare for smacking the child if s/he makes a Child Support Formula Assessment application to Inland Revenue.
February 26th, 2008 at 2:11 pm
Actually, Kevyn, Lesson 8 could have occurred (and did occur in one instance I became involved in - not as either parent, I might add) under the old s59 - the Police were still bound to investigate the allegation to determine the extent of the force used and whether it was for the purpose of correction.
But one that I missed, I’ll admit.
February 26th, 2008 at 3:39 pm
toad
Are you sure it’s wise to link the DPB to parents not paying child suipport.
Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child?
As to circumstance (and thus a good guess at what might be occuring) - of course when the government is paying DPB they collect the child support payments - so this gives the absent parent no reason to think their payments will actually provide any extra assistance to their children.
If there is any basis of the link between non supportive absent parents and recepit of the DPB, it’s because the DPB system does not allow the child support to provide extra help to the children of the couple (perhaps if half went to the family and half to the government, this might change - perhaps the amount to the family could be allocated for such things as heat pumps/home insulation/etc - which add value for the family and wider society both).
February 26th, 2008 at 5:12 pm
SPC said: Do you have any evidence to suggest that single parents who are working are any more or any less supported by the other parent of the child?
No, I don’t. I just put Lesson 6 up as one way that non-custodial parents can avoid paying child support. I’m not in any way suggesting that there is any correlation between the Child Support payments of the non-custodial parent and the and the employment status of the custodial parent. Just that it opens up one more possibility through threatening to make malicious allegations to Work and Income to coerce the custodial parent into not applying for Child Support when the custodial parent is on the DPB.
I totally agree with your second point re the State grabbing all the child support and the custodial parent getting none. That doesn’t provide an incentive to pay, even to non-custodial parents who genuinely want to financially support their children.
February 29th, 2008 at 3:42 pm
toad:
perhaps you folk really do know something about this laqc lark which has escaped me. could you toad possibly explain how a paper loss is possible, i.e. how to reduce ones taxable (& child support levyable) income without reducing ones actual income?
February 29th, 2008 at 3:55 pm
Briefly it comes about as a result of the benefits that come along with that reduced income and the ultimately untaxed cap-gain.
If your primary purpose is to gain rental income you don’t have to pay cap-gains on the appreciation of the property. The key is balancing your paper losses and the interest paid with against your “excess” of income over the thresholds. What happens is that you gain in a variety of State subsidies and taxes you don’t pay, enough to offset any real losses and the cap gain is all profit… or you let it stay in negative gearing and you expect the cap gain to more than make up the difference at the end of your run.
I went to an accountant. He didn’t have to spend any time on it at all. So many people come in with the same questions that he had a brochure all printed out and ready with worked out examples. Free. I can probably find it in my stack overflow if I look for it.
The only thing to worry on is that Cullen has given the IRD more money to try to crack down on this. I don’t think it is a big worry.
respectfully
BJ
February 29th, 2008 at 4:01 pm
I should have said that if your “advertised” primary purpose is to gain rental income. Basically this is the key to avoiding the cap-gains. So you have to rent the property… even if it is rented at a small loss…. to avoid the tax.
February 29th, 2008 at 5:56 pm
thanks although i’m still keen to see an explanation from toad.
in particular i’d like an explanation which avoids vagueries like “it comes about as…”
something a bit more concrete, like: “if you buy a property, earning x in rental income & paying y in interest, your taxable (& child-support levyable) income will increase/decrease by z while your actual income will increase/decrease by w”, showing the maths.
please note i’m not looking for an explanation of tax-free capital gains - i already know about that. it’s this other thing, exemplified in toad’s quote: “Purchase a property or two and get into the Loss Attributing Qualifying Company lark. That way you can make a paper loss, so pay the minimum Child Support.”
March 2nd, 2008 at 10:42 am
Here goes… I am a woman on the DPB (are any of the above?) and it has been instrumental in helping me get through the past couple of years. When I got married, I thought I had an egalitarian partner, a Green supporter, blah, blah, blah. When we chose to have children, we thought it ‘good’ that I would stay at home to do the major job of raising them. At the same time, my husband would be supported in going out to work to provide the income for that. At this time, I had a university degree, but chose to put outside work on hold while I did the job of raising our children and supporting my husbands career. It was mutually beneficial at the beginning. I liked being a parent and his income increased to support our little unit. I also did a small amount of outside work in my friend’s business (taking my children with me!) and later, within my home and providing child care for other friends. I had very little time away from my children, unlike my husband who was free to be away for work and personal reasons. It was only after I had been away to attend my father’s funeral that I decided that the children could handle me not being available 24/7 (they were all in full time school) and I wanted to go back to university to get a new career direction going. My husband didn’t support this (didn’t agree with my career choice!) and our marriage quickly deteriorated. I add here that it was tough going before this, but my focus was to support the children and the family base. I was in my third year of study when I realised that I could save the student loan money that I was entitled to and work toward leaving my marriage. I started my forth year as a single mother of three children on the DPB.
After two years, I am now about to start a part time job and with my spare days working to develop my studied profession. I am still the full care parent of my two youngest children (14 and 16). I will add that my ex provides child support which goes to inland revenue to offset the DPB. My ex has a high paying job and very little responsibility for the day to day care of our children. I have a large student loan, full care of the two youngest children, and now a part time job and I need to continue to work independently to further my ‘career’. I have been a hard worker over the years and have raised (with the financial support of my husband) 3 great children who will be great citizens for this planet. I believe I deserved the DPB support that I have received over the past two years and would hate to think of what life would have been like if it wasn’t available. I would probably have ‘cracked’ and my great children would have been the victims. This was not the egalitarian family life that I envisioned at the beginning. I am grateful for the government support that I receive now and don’t think that I should be shamed for accepting it. Cheers
March 4th, 2008 at 2:38 pm
hey toad, while you’re up & about, perhaps you could have a crack at this?
March 4th, 2008 at 2:58 pm
Yep, in a year you earn $70K from your job, but pay $70K in excess of what you collect from rent in interest and expenses on your property investments. So these effectively cancel each other out. As long as you can make a $70K capital gain on those property investments, you’ve got the same amount net as you earned gross from your job, and pay minimum child support and no tax.
March 4th, 2008 at 3:22 pm
o.k. it’s as i expected - there’s no way to reduce your taxable/levyable income without reducing your actual income, & this laqc thing is a red herring.
the deadbeat dad will still need to somehow pay for his own food & board while waiting for that capital gain to mature!
in the original discussion i had with bjchip (here http://blog.greens.org.nz/index.php/2008/01/24/how-to-deal-with-a-rece ssion/ and here http://blog.greens.org.nz/index.php/2008/02/07/tv3-poll-3/) about this i predicted that in the end we’d be left with the conclusion that the lack of a capital gains tax would be the only part of the tax code we could point to as unfairly advantageous to the property investor, & i think we’re all pretty much ready to concede this point? certainly in bjchip’s post on this thread he seems to be focussing on the capital gain issue & de-emphasizing the other thing.