Bills Digest no. 142 2005–06
Child Support Legislation Amendment (Reform of the Child
Support Scheme Initial Measures) Bill
2006
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Passage
History
Child Support Legislation Amendment
(Reform of the Child Support Scheme Initial Measures)
Bill 2006
Date introduced: 10 May
2006
House: House of
Representatives
Portfolio: Families,
Community Services and Indigenous Affairs
Commencement: Most of
the Bill commences on the later of the day after Royal Assent
or 1 July 2006. A detailed table of commencement information is
provided in clause 2 of the Bill.
The
Bill contains the first stage of the child support reforms to be
implemented by the Government in response to the report of the
Ministerial Taskforce on Child Support (the Parkinson
Report).(1)
The Child Support Scheme has been in place since 1988. The
introduction of the Scheme was a major, controversial reform. It
was expected that it would take many years to refine and become
accepted. The CSS represented the government intervening in one of
the most sensitive and traumatic points in the family life cycle.
Given the acrimony and emotions associated with family breakdown,
the proposal for a government administered maintenance collection
process could not avoid being the focus for dissatisfaction and
also grief and anger for individuals caught up in the turmoil of
loss of family life and children.
The Scheme was examined by the Joint Standing Committee on
Certain Family Law Issues in the early 1990 s. The Committee s
report (usually referred to as the Price Report) was the basis for
considerable refinement of the scheme over the last twelve
years.(2) The Scheme was again examined more recently by
the House of Representatives Committee on Family and Community
Affairs. A report was released on 29 December 2003 entitled,
Every picture tells a story: Inquiry into child custody
arrangements in the event of family separation.(3)
Amongst other things the report recommended that a comprehensive
re-evaluation of the Scheme should be set in train.
On 16 August 2004, the then Minister for Children and Youth
Affairs, Larry Anthony announced the establishment of a ministerial
taskforce headed by Professor Patrick Parkinson, of the Faculty of
Law, University of Sydney, and Chairperson of the Family Law
Council. The taskforce was to examine Australia's Child Support
Scheme and recommend reforms.
The Parkinson Report was released on 14 June 2005 and
recommended fundamental reforms to the Child Support Scheme. On 28
February 2006, the Minister for Families, Community Services and
Indigenous Affairs, Mal Brough, announced the Australian Government
would reform the Child Support Scheme and aspects of family
assistance in order to implement many of the recommendations of the
Parkinson Report.(4)
The changes proposed were to be implemented in stages from July
2006 to July 2008. They were summarised in the Minister s
announcement as follows;
From July
2006, the Australian Government will:
- increase the minimum payment to ensure that child support
payments keep pace with inflation;
- strengthen the Child Support Agency s capacity to ensure
non-resident parents pay their child support payments in full and
on time;
- recognise non-resident parents on Newstart and related payments
(Newstart Mature Age, Sickness Allowance and Youth Allowance) who
have contact with their children by paying them a higher rate of
payment;
- reduce the maximum amount of child support payable by high
income earners to ensure these payments are better aligned with the
actual costs of children;
- introduce fairer arrangements for assessing the capacity of
parents to earn income;
- enable non-resident parents to spend a greater proportion of
their payments directly on their children; and
- help separating parents agree on arrangements for their
children, including Child Support, by providing access to Family
Relationship Centres, the Family Relationship Advice Line and other
expanded services.
To support the introduction of the new Scheme, the Government
will also be investing more resources to improve the service
delivery of the Child Support Agency. Changes will include wider
availability of intensive assistance to parents with difficult or
complex circumstances, better training and improved quality
control. For example, introducing call recording will ensure that
individual Child Support Agency staff are accountable for
information and advice they provide to parents. ..
From January 2007, the Australian Government
will:
- introduce independent review of all Child Support Agency
decisions by the Social Security Appeals Tribunal to improve
accountability and transparency;
- broaden the powers of the courts to ensure that child support
obligations are met, and strengthen the relationship between the
courts and the Child Support Scheme, making the process easier and
more responsive to parents needs; and
- allow separating parents more time to work out parenting
arrangements before their Family Tax Benefit is affected.
From July 2008, the Australian Government
will:
- introduce a new Child Support formula that will change the way
Child Support payments are calculated, to ensure fairer
assessments, encourage shared parenting, and recognise the costs of
contact;
- ensure a minimum payment is made for each Child Support
family;
- treat more fairly income from second jobs and overtime that
assists with re-establishment after separation;
- ensure fairer treatment of parents with dependent step-children
when calculating their child support liability;
- simplify the Change of Assessment rules for altering the amount
of Child Support that is payable;
- improve the arrangements for parents who wish to make
agreements for ongoing Child Support or lump sum payments; and
- make the Child Support rules easier for those parents who are
trying to get back together.
Further details of the changes are provided in fact sheets
released at the time.(5)
This Bill contains some of the first set of changes to be
implemented in July 2006.
Schedule 1 of the Bill provides for an increase in the minimum
rate of child support from $5 per week to $6 per week. The minimum
rate was introduced in 1999 and was one of the first changes to the
operation of the Child Support Formula since its introduction by
the passage of the Child Support (Assessment) Act 1989.
Before 1999 any payer in receipt of a government income support
payment such as a pension or an allowance such as Newstart
Allowance was not required to pay maintenance. The introduction of
a minimum child support liability implemented recommendation No 122
in the 1994 Price.(6)
The minimum payment has not been indexed since its introduction.
The rate increase restores its value and the new indexation
provisions ensure that it will be increased in line with movements
in the CPI. These changes are in line with recommendations 1.24 and
1.29 of the Parkinson Report.
1.24 All payers should pay at least a minimum rate
equivalent to $5 per week per child support case, indexed to
changes in the CPI since 1999. The increased amount should be
rounded to the nearest 10 cents.
1.29 The minimum rate and the fixed payment should
be indexed to the CPI from the end of the 2004 05 financial year.
The increased payment should be rounded to the nearest 10
cents.
The report had further recommendations on the minimum
rate.(7) They included the waiver of the minimum rate
where the payer had regular contact or shared care (1.25). Also an
increased minimum payment of $20 per child was recommended for
parents not in receipt of income support who report an income below
the Parenting Payment Single maximum rate (1.27).
These recommendations appear to be on the agenda for the third
stage of the Government legislative program to be implemented in
July 2008.(8)
Schedule 2 of the Bill reduces the
cap on the income to be assessed for child support purposes under
the child support formula. The original report that the formula was
based on, Child Support: Formula for Australia suggested
that the cap be set at twice average weekly earnings
(AWE).(9) However, the cap was set at two and a half
times AWE in the original legislation. The 1994 Price Report
recommended that the cap be reduced to twice AWE. In the Child
Support Legislation Amendment Bill 2001 the Government attempted to
lower the cap by substituting the lower All Employees Average
Weekly Earnings (AEWE) for the Full-time Adult Average Weekly Total
Earnings (AWE), but was blocked in the Senate. This Bill includes
the same amendment for a second time. The February 2006 levels for
these average weekly earnings measures indicate that this change
will lower the cap to about 75% of its present
level.(10)
The Parkinson Report recommends a new
formula for assessing child support. The cap as it presently exists
will have no place if that formula is introduced. Under the
Parkinson formula child support is assessed on the basis of the
combined income of both parents. A cap is involved but it is a cap
on the level of combined income above the self support components
of the parents. Recommendation 1.8 provides for a cap of 2.5 times
Male Total Average Weekly Earnings. This translates to $160,386 in
2005-06.(11) That is about $30,000 higher than the
present cap, but its effect is not directly comparable due to the
changed formula proposed by the Parkinson Report. The present
change to the cap may well be an interim measure that is superseded
by the new formula to be introduced in 2008.
Under the Child Support Assessment Act 1989 a grounds
for departing from a formula assessment under the Act, is that a
parent has a capacity to earn that is greater than they are
exercising. The amendments in schedule 3 of this Bill closely
follow the recommendations of the Parkinson Report (Recommendations
15.1 and 15.2). The present provisions were considered to be too
broad and should be specified in more detail to ensure that:
Parents should only be deemed to be earning more
than they are in fact earning, based on unutilised earning
capacity, where, on the balance of probabilities, a major
motivation for reduced workforce participation is to affect the
level of child support payments.(12)
At present up to 25% of a payer s child support liability can be
provided through the payment of such things as child care costs,
school fees and medical costs amongst others, even where the payee
does not agree. The Parkinson Report recommended that the limit be
increased to 30% (Recommendation 20.1). Schedule 4 of the Bill
implements this recommendation. The reasoning behind this change
was as follows:
Such payments allow the paying parent to be
confident that the children are benefiting and to have some sense
of control over how his or her child support is used, without
impinging upon the payee s discretion about how most of the payment
is applied...... The limit on credit is a balance between ensuring
that the carer has sufficient ongoing cash-flow to cover the
everyday requirements of the children and adequately maintaining
the paying parent s sense that he or she has an involvement in how
his or her child support payments are expended. Given the generous
nature of the government contribution to children through FTB,
there is less need now for a substantial majority of child support
to be paid in cash(13) ..
Schedule 5 of the Bill includes amendments to ensure that there is
no legal doubt that ex-nuptial children in Western Australia are
covered by the Child Support Scheme. The Explanatory Memorandum
gives a good explanation of this technical legal issue.
The financial impact of these changes is negligible with saving
to the Government of $2.3 million over 4 years.
Item 7 of Schedule 1 inserts new
subsections 66(4), (5) and (6) into the Child Support
(Assessment) Act 1989. They provide for an increase in the
rate of the minimum payment to $320 per annum and for the annual
indexation of that rate according to movements in the CPI.
Schedule 2 removes references to AWE from the
Child Support (Assessment) Act 1989 in respect of the cap
on child support income and substitutes AEWE . This ensures that
the cap will be calculated using All Employees Average Weekly
Earnings (AEWE) rather than Full-time Adult Average Weekly Total
Earnings (AWE). The resulting cap will be only about 75% of the
existing cap.
Item 8 of Schedule 3 inserts new
subsections 117(7A) and (7B) into the Child Support
(Assessment) Act 1989. They specify the situations where the
earning capacity of a parent can be used as a reason to depart from
the assessment formula.
Item 1 of Schedule 4 omits 25% from Subsection
71C (1) of the Child Support (Registration and Collection) Act
1988 and substitutes 30% . This change increases the
proportion of a child support assessment that can be paid as
prescribed non-agency payments such as school fees, child care
costs or medical fees.
Schedule 5 addresses a technical legal issue
with regard to the coverage under Child Support (Assessment)
Act 1989 and the Child Support (Registration and
Collection) Act 1988 of ex-nuptial children in Western
Australia.
- In the Best Interests of Children - Reforming the Child
Support Scheme - Report of the Ministerial Taskforce on Child
Support, 14 June 2005. Full text available at:
http://www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm
- Joint Standing Committee on Certain Family Law Issues,
Child Support Scheme: An Examination of the Operation
and Effectiveness of the Scheme, November 1994.
- House of Representatives Committee on Family and Community
Affairs, Every picture tells a story: Inquiry into child
custody arrangements in the event of family separation, 29
December 2003. For the full text see:
http://www.aph.gov.au/house/committee/fca/childcustody/report.htm
- The Hon. Mal Brough, Child Support Reforms To Deliver Fairer
System , Media Release, 28 February 2006. Full text
at:
http://www.facs.gov.au/internet/Minister3.nsf/content/child_support_reform_28feb06.htm
- For full text see:
http://www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm
- Recommendation 122
the child support legislation be amended to:
(a) introduce a minimum child support payment of $260 per annum
where the formula results in an assessment less than this amount;
and
(b) allow the Child Support Registrar to waive the minimum
payment of $260 in special circumstances.
- 1.25 A minimum payment should not be required if the payer has
regular contact or shared care.
1.26 Payers on the minimum rate should be allowed to remain on
that rate for one month after ceasing to be on income support
payments or otherwise increasing their income to a level that
justifies a child support payment above the minimum rate.
1.27 Parents who are not in receipt of income support payments
but report an income lower than the Parenting Payment (Single)
maximum annual rate should pay a fixed child support payment of $20
per child per week and this should not be reduced by regular
contact.
1.28 The fixed payment of $20 per child per week should not
apply if the Child Support Registrar is satisfied that the total
financial resources available to support the parent are lower than
the Parenting Payment (Single) maximum annual rate. In those cases,
the minimum rate per child support case should apply.
- See Fact sheet Five: Stage Three - Changes to the Child
Support Scheme from July 2008 at:
http://www.facs.gov.au/internet/facsinternet.nsf/via/child_support_scheme/$file/fact_5_child_support_stage3_2008.pdf
- Child Support Consultative Group, Child
Support: Formula for Australia, May 1988.
- Australian Bureau of Statistics, Average Weekly
Earnings: Australia, February
2006,
No. 6302.0.
- In the Best Interests of Children - Reforming the Child
Support Scheme - Report of the Ministerial Taskforce on Child
Support, 14 June 2005, p. 151 2.
- ibid., p. 14.
- ibid., p. 186 7.
Dale Daniels
Social Policy Section
23 May 2006
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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