Bills Digest 30 1996-97
Child Support Legislation Amendment Bill (No. 1) 1996
WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments.
This Digest was available from 17 September 1996.
CONTENTS
Child Support Legislation Amendment Bill (No. 1) 1996
Date Introduced: 27 June 1996
House: The Senate
Portfolio: Treasury
Commencement: 28th day after Royal Assent - except for items 21
to 25 of Schedule 1. They commence on a day to be fixed by Proclamation,
or, if no date is fixed, six months after the Act receives Royal Assent.
To change some aspects of the Child Support Scheme, so that:
- custodial parent will not have to refund overpayments, but, instead,
will have future payments for the year reduced commensurately;
- non custodial parents will be able to make their payments direct to
the Child Support Agency, rather than through their employer;
- when making property or maintenance decisions, the Family Court will
be able to take into account future liabilities under the Child Support
(Assessment) Act 1989 even if an assessment has not been made.
The Child Support Scheme was established after a long period of community
consultation. The object of the scheme is to ensure that both custodial
and non-custodial parents pay for their children's upkeep, rather than
the tax payer. Stage 1 came into effect on 1 June 1988, stage 2, on 1
October 1989. Different rules apply to parents covered by the two stages.
Stage 1 covers parents who separated before 1 October 1989, and have
no children born after that date. In these cases, the Child Support Agency
has the power to enforce court orders or court registered agreements on
behalf of the custodial parents.
Stage 2 goes a step further. The Child Support Agency can:
- assess and collect child support;
- assess child support but leave the parents to make their own arrangements;
- collect child support where State 2 parents have made a private child
support agreement;
- register a child support agreement(1) (without making an assessment
or playing a role in collection);
- enforce child support obligations.
In assessing child support, the Child Support Agency makes an administrative
assessment using a formula. Where the agency collects child support it
may do so through an arrangement with the paying parent's employer (via
deductions from the parent's pay packet - called withholding) or directly
from the paying parent.
Where parents agree privately as to the amount and method of payment,
the agency won't interfere unless the custodial parent is seeking a means-tested
social security payment. Then, the agency must assess the amount to be
paid. The money may then be paid directly to the custodial parent, or
to the agency.
According to evidence given to the 1994 Joint Select Committee on Certain
Family Law Issues, about one-third of separated parents are clients of
the Child Support Agency. The rest collect child support through informal
agreements.(2)
The scheme has had significant teething problems. The select committee
was very critical of some aspects, and made one hundred and sixty-three
recommendations.
Adjusting payments
Under the Child Support (Assessment) Act 1989 child support assessments
are calculated by reference to income tax returns from the previous two
years. If a person believes their income for the current year will be
more than 15 per cent less than anticipated he or she may elect to have
their position reassessed. Any decision would be based on an estimate
of current annual income. The estimate amends the child support assessment
from the beginning of the financial year. A parent receiving payments
may have to refund money. The explanatory memorandum puts it this way.
Both a paying parent and a parent receiving child support may make an
election as to their income estimate for the year. The majority of income
estimate elections are made by parents who pay child support and often
result in overpayments. Where the parent paying child support has made
the election, the person receiving child support is often put in the difficult
position of having to repay money which they have spent to support the
child. Frequently, some of this money is returned to them as child support
payments over the remaining period.(3)
Items 21 - 25 repeal sections 60(3)(b), 61, 61A, 62(1), 62(1A),
63, 63A, and substitute new ones so as to ensure that a parent
will not be required to refund money already paid. Instead, any overpayment
will reduce the non custodial parent's remaining liability for the year,
with the regular payments reduced accordingly (new section 61).
Similarly, any underpayment will also be made up over the remaining year.
According to the explanatory memorandum, the new payments will normally
be calculated from the date on which the application for variation was
lodged(4). However, new section 61(b) says the date from which
the new rate will be calculated will be determined in accordance with
the regulations, and may be earlier than the day on which the person made
the election.
The parent will still pay the correct amount for the year. The new sections
do not prevent a court from altering payments or the parties from privately
changing the agreement (new section 61(5)(a) and (b)).
Under new section 60(3)(b) a person may not apply for another
alteration within two months of a the effect of a previous one.
The amendments are line with recommendation 124 by the Joint Select
Committee, with one significant difference. The committee recommended
the new rate take effect one month after lodgement. Under the amendments,
the new rate would take effect from the date the application was lodged.
Cutting the employer out
As the Child Support (Assessment) Act 1989 stands now, payments
being channelled through the Child Support Agency are, in many cases,
deducted from a parent's pay packet by his or her employer who forwards
it on to the agency for payment to the custodial parent. Direct payment
from the non-custodial parent to the registrar only takes place:
if the liability arose prior to 1 June 1988;
- if a court has ordered it because of special circumstances relating
to privacy;
- if a court has ordered it pending outcome of proceedings before a
court; or
- if the registrar is satisfied that withholding by the employer is
not an efficient method of collection.
Items 31 to 39 would allow the parent to elect paying child support
to pay the agency directly - in line with recommendations by the Joint
Select Committee.(5)
The Joint Committee considers it important that the intrusiveness of
the Scheme be minimised and that parents should be given a choice in deciding
the means by which they pay their child support liabilities. While child
support continues to be paid on a regular basis, non custodial parents
should be able to pay the CSA (Child Support Agency) through the mechanism
of their choice. If a non custodial parent defaults on child support payments,
the Child Support Registrar could immediately contact the non custodial
parent's employer to commence autowithholding of child support. This would
avoid the necessity of unnecessary disclosure of personal information
to non custodial parents' employers and offer an incentive to non custodial
parents to comply voluntarily with their child support obligations.'(6)
Item 32 repeals sections 44(1), (1A), (2), (3)
and (4) of the Child Support (Registration and Collection) Act
1988 and substitutes three new ones. New section 44(1) allows
a parent currently making payments, to elect to send the money directly
to the registrar. If the registrar is satisfied the parent is likely to
pay on time, the registrar must within 28 days after receiving the request,
alter the Child Support Register to reflect the new arrangement.
New section 44(2) makes similar provision for parents whose maintenance
liabilities will be registered in the future.
New section 44(5) empowers the registrar to reverse the decision
and require the employer to deduct the payments from the pay packet if
the parent defaults and does not make timely payments.
New section 44(5A): the registrar may decide not to re-institute
employer withholding if satisfied that: direct deduction from the parent's
pay packet would not be an efficient method of collection; or the parent
is likely to recommence timely payments in the near future.
New section 44(7) applies to parents who are not subject to employer
withholding due to special circumstances. The registrar must take that
exemption away if timely payments are not made unless: employer withholding
is not an efficient method of collection; or the parent is likely to recommence
timely payments in the near future.
New section 44(7B) provides that if the registrar has decided
to re-institute employer withholding, a paying parent must wait another
six months before again electing to make direct payments.
New section 44(7C) provides that if a request to switch to direct
payment has been refused by the registrar, the parent must wait another
two months before making another election for direct payment.
Item 39 amends section 59(1)(b) to reduce the number
of years employers are required to keep records of direct payments from
seven to five.
Family Court and child support
The Joint Select Committee was concerned that some non custodial parents
were disadvantaged in Family Court decisions over property, because, in
some circumstances, they were not able to obtain an assessment of any
future obligations under the Child Support (Assessment) Act 1989
for the court to take into account. This was one of a number of concerns
the committee had about the relationship between property settlements
and child support.
A submission to the committee by the Law Council of Australia put the
problem this way.
Where there are property proceedings before the Family Court, and there
is no child support assessment, the NCP (non custodial parent) has no
way of obtaining an assessment so that the Family Court can take his/her
liability for child support into account in determining what is a just
and equitable property settlement under Section 79 of the Family Law Act.
This situation arises quite frequently where the NCP is making voluntary
payments for the benefit of the child and the CP (custodial parent) is
not therefore motivated to obtain an assessment. After the property proceedings
have been determined, the CP can apply for an assessment which could include
substantial arrears which the Court did not take into account in the property
proceedings.(7)
To rectify this, the committee recommended that non custodial parents
be given the right to apply to the agency for a child support formula
assessment.(8)
However, the Minister has chosen not to adopt this recommendation, but
to try a different approach amending section 75 of the Family
Law Act 1975.
Under section 75(1)(na), the Family Court, when making
decisions on maintenance, may take into account any child support under
the Child Support (Assessment) Act 1989 that a party has provided,
or is to provide, for a child. New section 75(1)(na) substitutes
the words 'is to provide, or might be liable to provide in the future'.
Section 79(4)(g) is altered in the same way, so that when deciding
property issues, the court may also take into account potential liabilities
under the Child Support (Assessment) Act 1989.
The second reading speech says these amendments will mean that parents
with private arrangements for child support will be treated in the same
way as those already paying child support under the Child Support (Assessment)
Act 1989. The loose of the amendments may have that effect, however,
it may have been possible to draft the provisions more tightly so they
more clearly expressed the Government's intention.
- Registration enables a child support agreement to be enforced.
- Joint Select Committee on Certain Family Law Issues, The Operation
and Effectiveness of the Child Support Scheme, November 1994, p38.
- Explanatory memorandum, Child Support Legislation Amendment Bill
(No. 1) 1996, p10
- ibid, p10.
- The Join Select Committee report, Op cit, recommendations 55,
56, 57. pp 169-170.
- ibid, p169.
- ibid, submission quoted p 510
- Recommendation 156 and pages 510-511
Bronwyn Young Ph. 06 277 2699
16 September 1996
Bills Digest Service
Parliamentary Research Service
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ISSN 1323-9032
© Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library, 1996.
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Last updated: 13 September 1996
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