Up to $70 million in child support debt in the Bay of Plenty could be written off by Inland Revenue in a bid to increase payments.

Budget 2015 saw Revenue Minister Todd McClay announce an overhaul of the penalty regime where nationwide up to $1.7 billion will be forgiven to encourage more support to reach children.

Rotorua MP and Revenue Minister Todd McClay. Photo: File.

The programme sees a two-stage penalty replacing the 10 per cent for late payment; two per cent if a payment is not made by the due date, and a further eight per cent if the amount remains unpaid after seven days.

Monthly incremental penalties will be cut from two per cent to one per cent.

Todd believes the move is not a "soft option" and was designed to get those who otherwise wouldn't pay to do so.

"We remain focused on liable parents meeting the obligations to their children and will have no tolerance for parents who deliberately avoid responsibility.

New Zealand's child support debt is $3.2b, however, only $700 million of this is what was originally child support.

"The rest is debt from penalties. This is the legacy of a penalty system that was overly punitive and which is now being changed.

"We want liable parents to pay what they owe. To make that happen, Inland Revenue will adopt a 'fair and reasonable' test to consider applying penalty relief where it makes sense to do so."

Nationally, 78 per cent of the debt owed is penalty debt.

Figures released to SunLive show in the Bay of Plenty $90m is owed – a mixture of core debt and penalties.

A spokesperson for Todd McClay says about $70 million of the Bay of Plenty debt could be potentially wiped as a result of the announcement.

Nationwide much of the debt is owed by those on low incomes; according to Todd almost 54,000 of the 120,000 people with child support debt earn less than $30,000 annually. Collectively, this group owes more than $700m.

"This is in no one's interests. We want child support paid so it goes directly to the children who need it, or back to the taxpayers who are paying it by default in the form of a benefit to that child's family."

About $827m of the total debt is owed by those living in Australia, mostly in the form of penalties. A further $778m, 84 per cent of which is penalties, is owed by those living elsewhere.

"We need to get parents to start paying so that children, many of whom are in hardship, are better off. Liable parents are facing paralysing levels of debt from penalties, and as a result are not attempting to pay their outstanding amount, nor are they meeting their current obligations."

The write-off will not create a huge hole in the government's books, with $1.6b of the debt already reflected as an impairment on the books. According to Todd, the move will decrease Crown operating revenue by $47.1m over four years.

The changes will take affect from April 2016.