Bills Digest 30 1996-97 Child Support Legislation Amendment Bill (No. 1) 1996


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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

Passage History

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.

Purpose

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.

Background

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.

Main Provisions

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.

Endnotes

  1. Registration enables a child support agreement to be enforced.
  2. Joint Select Committee on Certain Family Law Issues, The Operation and Effectiveness of the Child Support Scheme, November 1994, p38.
  3. Explanatory memorandum, Child Support Legislation Amendment Bill (No. 1) 1996, p10
  4. ibid, p10.
  5. The Join Select Committee report, Op cit, recommendations 55, 56, 57. pp 169-170.
  6. ibid, p169.
  7. ibid, submission quoted p 510
  8. Recommendation 156 and pages 510-511

Contact Officer and Copyright Details

Bronwyn Young Ph. 06 277 2699
16 September 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 13 September 1996

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