What this is
You need to keep a close watch on your bank accounts if you owe IRD money for overpayment of Working for Families credits or for overdue Child Support payments.
Inland Revenue can go to your bank and serve them with an order – a “deduction notice” – that allows the IRD to take money from your account without you knowing. They have to inform your bank of course and your bank is obliged to let you know what’s happening but by that time the money will be gone.
So be alert.
Overpaid Working for Families tax credits
Inland Revenue may issue a deduction notice on a joint account where there has been an overpayment of a Working for Families tax credit.
Where this has occurred the person who received the overpayment (the recipient) and their partner or spouse (if they were the partner or spouse throughout the income year to which the overpayment relates) are jointly and severally liable for the overpayment under section MF 5(2) of the Income Tax Act 2007.
Child support debts
Another situation where Inland Revenue may issue a deduction notice is in relation to child support debt is in Section 128 of the CS Act which provides that any amount of financial support payable under the CS Act is a debt due to the Crown.
Similar the Act allows the Commissioner of Inland Revenue to issue a deduction notice to a third party requiring them to make deductions from money payable to liable parents for a child support debt. Any amount deducted under a deduction notice is deemed by the CS Act to be held in trust for the Crown.
The CS Act extends this to money held in joint accounts in the name of the liable parent and one or more other persons, where the liable parent can draw from that account without the signature of the other person.