Bills Digest no. 43 2006–07
Child Support Legislation Amendment (Reform of the Child
Support Scheme - New Formula and Other 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
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage
History
Child
Support Legislation Amendment (Reform of the Child Support Scheme -
New Formula and Other Measures) Bill 2006
Date introduced: 14 September 2006
House: House of
Representatives
Portfolio: Families,
Community Services and Indigenous Affairs
Commencement: The
various provisions in the Bill commence at different times as set
out in the table under clause 2 of the Bill.
To provide for the legislation necessary to
change the Child Support Scheme (CSS) maintenance formula and other
necessary consequential legislative changes. The Bill also contains
provisions to allow appeal access to the Social Security Appeals
Tribunal (SSAT) for persons affected by decisions made under the
Child Support (Assessment) Act 1989 (CSAA). There are also
measures to modify the Family Tax Benefit (FTB) income test for
maintenance income (MIT). There is a summary of the measures
presented in this Bill in the Outline at the beginning of the
Explanatory Memorandum.(1)
The government announced major changes to the CSS child support
maintenance formula on 28 February 2006.(2) The changes
are the Government s response to the Ministerial taskforce report
on Child Support. The former Minister for Children and Youth
Affairs, the Hon. Larry Anthony, MP announced on 16 August 2004 the
terms of reference and the membership of the
Ministerial Taskforce and
Reference Group to examine Australia's Child Support Scheme.
Membership of the Taskforce can be found in Appendix 2 of the
Taskforce s report released on 14 June 2005.(3) The
Taskforce s terms of reference were spelt out in the Minister s
press release.(4)
The origins of the Government convening the Ministerial
Taskforce into the CSS were in the report of the House of
Representatives Standing Committee on Family and Community Affairs
and its inquiry into child custody arrangements in the event of
family separation. This report was called Every picture tells a
story: Inquiry into child custody arrangements in the event of
family separation.(5) Recommendation 26 of the
Committee s report was for the government to examine the
CSS.(6)
The Outline in the Explanatory Memorandum details that the
proposed reforms to the CSS and other measures presented in this
Bill will cost $9.5 million in 2006-07, $36.4 million in 2007-08,
$143.1 million in 2008-09 and $131.3 million in
2009-10.(7)
The original impetus for the creation of the CSS arose from the
same social pressures that produced the Family Law Act
1975; the support of children after family breakdown and the
conflicts around this issue. The CSS was introduced in June 1988,
and while partially based on overseas models, it was then unique in
terms of the Child Support Agency (CSA) being originally located
within the taxation arm of the central government. Since October
1998, the CSA has been within the Families, Community Services and
Indigenous Affairs portfolio.
The Australian CSS become a
model for other schemes developed since 1989, in particular those
in New Zealand and in the United Kingdom.
The introduction of the CSS in Australia had a long gestation.
At the time of implementation, the CSS was seen as a major and
controversial reform, which might take up to ten 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 strength of feelings and emotion that can often be
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. Notwithstanding these concerns about the issues, by the
late 1970s the impetus for a child maintenance scheme had become
substantial. These pressures were evidenced by:
- the high cost, and delays, in applying to court for a child
maintenance order, or to register an agreement,
- the low success rate and unsatisfactory nature of enforcement
of child support orders,
- inadequate levels of court-ordered or privately agreed
maintenance (payments averaged $10 to $30 per week per child),
- little or no indexation of court-ordered payments to maintain
their value,
- difficulties in enforcing maintenance orders and agreements by
the late 1970s only 30 per cent of non-custodial parents (payers)
were making regular payments and only 26 per cent of sole parents
were receiving maintenance,
- the lack of integration of the social security and child
maintenance systems, and
- the extra cost to the taxpayer in providing welfare payments to
custodial parents (payees), to make up for inadequate maintenance
provision by payers.(8)
The other main impetus for the CSS and a maintenance formula was
the increasing numbers of sole parent households, increasing
numbers of children living in poverty and increasing numbers of
divorces/separations.(9)
Prior to the introduction of the CSS in 1988, there were
concerns expressed about the introduction of a national and
compulsory government-imposed maintenance collection and payment
scheme. Some of these concerns claimed such a scheme would result
in increased levels of violence and confrontation between separated
couples forced to seek maintenance and to pay maintenance. A scheme
would worsen the problems of fear of violence, fear of harassment,
access disputes etc. In regards to these concerns, most observers
now agree that the CSS has not seen these fears realised and the
CSS has given payees (resident carer parents) the flexibility to
seek/obtain maintenance, without the necessity to maintain some
sort of contact/relationship with the payer (non-resident
parent).
The first major examination of the CSS and also the CSA was
undertaken by the Price Committee Report which was released in
November 1994.(10) It is called the Price Report after
the Committee chairperson the Hon. Mr Roger Price, MP and it was
certainly the most definitive and significant public document on
the CSS and the CSA since the CSS started in 1988 and up until the
recently released report In the Best Interests of
Children.(11) The Price Report was such an
important document for several reasons:
- it was the most comprehensive public examination of the CSS and
the CSA since the inception the arrangements in 1988;
- it was the most recent large-scale review of the CSS and CSA
arrangements; and
- being a Parliamentary Joint Select Committee Report, it has had
significant status within Parliamentary considerations of the CSS,
the CSA and maintenance issues.
The fact that there were as many as 163 recommendations in the
Price Report reflected several elements:
- The track record of the CSA and the then Department of Social
Security (DSS) being the two main arms of Government required to
administer/deliver the CSS had been the subject of much criticism
in terms of administration, efficient delivery and client service.
This is evident by the fact that recommendations 7 to 115 of the
163 recommendations generally refer to administrative and client
service issues. A few of these recommendations referred to
legislative amendments but the vast majority referred to improving
the administration and service delivery of the CSS.
- The legislative rules and administrative practices that apply
under the CSS reflect the inherent difficulties of any scheme in
collecting and paying maintenance, that is, there is probably no
perfect child maintenance scheme that will please all parties and
stakeholders.
Even though governments have since implemented many of the Price
Committee Report recommendations, there are still ongoing issues
and matters of contention about the CSS legislation and the
administration of the CSA, the main ones being:
- the administrative arrangements of collecting and paying
maintenance,
- the real cost of raising children,
- the construction of and perceived imbalances in the maintenance
formula, and
- the capacity of some payers to avoid maintenance by legally
minimising taxable income.
These problems and issues are still current, and this is
manifest in the impetus for the recent Child Support Taskforce s
report In the Best Interests of Children. The issues are
probably inherent in any scheme to enforce the compliance of
maintenance payments and to collect and redistribute these payments
between separated parents. These issues will always be
contentious.
As stated above, many of the 163 recommendations in the Price
Committee Report generally referred to administrative and business
arrangements in delivery of the CSS and the operation of the CSA.
The previous Labor government, while not agreeing to all of the
recommendations, responded to many. However, many of those
responses only addressed the administrative issues, rather than
what were seen as the outstanding core issues, being the
maintenance formula and related issues. In all fairness, the
previous government was still in the process of responding to the
Price Committee Report when the March 1996 election overtook
events.
The main impetus for the Price Committee Report in 1993-94 was
the then considerable problems and concerns surrounding the
performance of the CSA. Notwithstanding that there were many
service delivery problems and issues, the then government
considered the Price Committee Report s recommendations on the
maintenance formula too premature and insufficiently supported by
research. This is the main reason the government responded to many
of the administrative issues, but not to many of the maintenance
formula issues.
Prior to the March 1996 election, the then Opposition promised
to examine and respond to the residual issues and recommendations
in the Price Committee Report.(12) Initially no
timetable was set, and in 1997 the government convened a backbench
committee to examine and recommend reforms. The backbench committee
s report was never made public, so it is difficult to guess its
impact on government policy and actions since 1996. The current
government has made a series of changes to the maintenance formula
since 1996 which are discussed below.
The current CSS maintenance formula was introduced with the CSS
in 1988 and was substantially unchanged until the first amendments
were made with the passage of the Child Support Legislation
Amendment Act 1998,(13) which took effect from 1
July 1999.
The original formula was arrived at after community consultation
and research into the cost of supporting children. The Price
Committee Report referred to the consultations that occurred in the
development of the maintenance formula.(14) There were
also several papers written on a potential maintenance formula,
culminating in the Child Support Consultative Group Report
chaired by Justice Fogarty, released in May 1988.(15)
There is also a good summary of the reports and consultations for
the original maintenance formula on page 44 of the In the Best
Interests of Children report.
The percentage rates in the maintenance formula are not set to
arrive at an exact cost of caring for a child or the costs of
raising a child, or even half of any such costs. Rather the formula
was constructed to take into regard a range of issues and aims:
- the additional costs of raising a child where parents do not
live together,
- the extra indirect costs of children for
payees,(16)
- access costs incurred by payers,(17)
- retention of appropriate incentives for payers to earn income
from employment,(18)
- the views of the community on what would be considered a fair
level of child support,(19)
- achievement of a reasonable contribution amount, recognising
there will be range of payer and payee income
levels,(20)
- by setting higher exempt income levels for payees,
acknowledgment that payees bear the main financial and daily burden
of child raising as the primary care givers,(21)
and
- by using percentages, an attempt to accommodate changes, as the
costs of children rise.(22)
The percentages that have been applied to the payer s gross
taxable income (after the self-support amount is deducted) to
determine the amount of child maintenance payable by a payer have
been unchanged since the CSS was introduced in 1988 and are:
|
1 child
|
18%
|
|
2 children
|
27%
|
|
3 children
|
32%
|
|
4 children
|
34%
|
|
5 or more children
|
36%
|
For example, where a payer s is liable to pay for one child,
they are required to provide 18 per cent of their residual child
support income. Residual child support income is adjusted taxable
income with the payer s self-support amount deducted.
Payees say the current formula does not arrive at a sufficient
level of maintenance to reflect the real costs of children,
especially hidden and/or unappreciated costs.(23) Hidden
costs refer to the costs associated with having the child reside
with you every day and being the primary care giver, for example,
larger accommodation, extra travel and transport costs, health
costs, heating, water and power, care of the child when sick etc.
Unappreciated costs refer to the stress and social and work
restrictions and isolation associated with being the daily primary
carer/parent.(24)
Payers say the current formula is too harsh on them, leaving
them with little spare money to support themselves, or their new
family.(25) Payers are concerned that the formula does
not recognise children of de-facto relationships unless the
children are formally adopted or are a natural children of the
payer. Payers say this is inconsistent with other government rules
where these children can be regarded as dependent and can attract
financial assistance.
The only changes to the original child maintenance formula since
1988 have been made by the current government. The In the Best
Interests of Children report provides a useful description of
the major changes to the maintenance formula that have been made by
the current government since 1996.(26)
In the changes made by the government to the CSS and the
maintenance formula since 1996, the influence of the Price
Committee Report s recommendations is clear, and many changes are
sourced to particular recommendations of the report. When the
changes to the CSS and the maintenance formula made since 1999 are
examined several themes emerge. These are:
- The CSS arrangements have been made more flexible and
responsive to particular situations,
- The balance between the needs of payees and payers has shifted.
Measures which assist second families of payers and adjustments to
various parts of the formula, like the payer self-support amount,
are features which favour payers and appear repeatedly, and
- Private arrangements have been encouraged and facilitated. This
is partly due to the growth in workload for the CSS. Greater use of
private arrangements makes sense where it works and reduces
intrusiveness and cost.
The Government announced its response to the report of the
Ministerial Taskforce on Child Support on 28 February
2006.(27) Some of the major changes proposed to the
formula and other CSS arrangements presented in this Bill are
discussed below.
Originally, any payer in receipt of a government income support
payment was not required to pay maintenance under the CSAA. Income
support includes pensions and the main allowance payments like
sickness allowance, newstart allowance, mature age allowance,
partner allowance etc. This was changed with the Child Support
legislation Amendment Act 1998.(28) This Act
introduced a mandatory requirement that a payer on an income
support payment had to provide a minimum of $5 a week (or $260 a
year) in maintenance. The proposal to introduce a minimum child
support liability of $260 a year accorded with recommendation 122
in the Price Report.(29)
Support and justification for this initiative mainly stemmed
from the symbolism it represented, that is, payers are not seen to
be able to avoid some maintenance obligation when they are
receiving a government income support payment. While there was some
anecdotal evidence and comment that payers either became
unemployed, or remained unemployed, to avoid maintenance
liabilities, there is no empirical evidence available to identify
or to quantify this as a fact.(30)
Paying a minimum child support amount mirrored the United
Kingdom (UK) child maintenance arrangements, under which payers on
income support payment are required to pay a minimum fee. In the
UK, where the payer is getting income support, is aged 18 or more,
is fit for work and has no dependent children living with them,
then they may be required to make a contribution to the maintenance
of their child. The amount currently payable is 5.00 a
week(31)
The change presented in this Bill is the one-off raising of the
$5 a week amount to $6 a week from 1 July 2006 and the on-going
indexation of this amount to movements in the Consumer Price Index
(CPI) thereafter.(32) This accords with recommendation
1.24 in the In the Best Interests of Children
report.(33)
The current maintenance formula has a self-support amount for
the payer and an indirect self-support amount for the payee. The
indirect self-support amount for the payee takes the form of an
income limit above which excess income reduces the amount of child
support payable by the payer.
For the payer, the self-support amount (with no relevant
dependent children) is 110 per cent of the annual amount of the
unpartnered rate of social security pension. For the 2006 year this
amount is $13 983. Where the payer has a relevant dependant child,
the self-support amount is 220 per cent of the annual amount of the
unpartnered rate of social security pension. For the 2006 year this
amount is $23 349. There are additional amounts added to this for
relevant dependant children aged up to 13, aged 13 to 15 and aged
16 or more. The appropriate self-support amount is deducted from
the payer s adjusted taxable income to arrive at the level of child
support income, against which a percentage is set to determine
child support payable.
For the payee, where income exceeds their income-disregarded
amount, the excess income can reduce child support payable by the
payer. For 2006 the disregarded income amount for payees is $41
881.
The reason the current formula has a higher self-support amount
for the resident parent (payee) than the non-resident parent
(payer) is to recognise the extra costs of providing care on a
daily basis, the economic sacrifice the carer parent makes in
providing care and the extra costs of childcare if the payee is in
the workforce.(34)
The proposed new formula provides for an equal self-support
amount for both payers and payees. This amount is to be one third
of Male Total Average Weekly Earnings (MTAWE). The In the Best
Interests of Children report recommended the same self-support
amount for the payer and payee along with removal of the
income-disregard amount for the payee.(35)
The payee representative groups will not be in favour of the
self-support amounts being the same for payees and payers, as this
does not recognise the extra costs for the primary carer in having
to be the daily carer of children.(36)
The proposed new maintenance formula proposes to have a
three-year post-separation extra income exemption period. During
the three years immediately post-separation, extra income earned
over and above the normal earned income received is not to be taken
into account in the maintenance assessment. The purpose of this
income exemption period is to recognise the extra costs of
re-establishment for separated parents.
The In the Best Interests of Children report
recommended extra income earned in the five year period
post-separation should be disregarded if it could be proved it was
earned to prove for re-establishment costs.(37) The
National Council of Single Mothers and their Children have
criticised this three-year extra income exemption as they claim it
will favour non-resident parents who will have a greater capacity
to earn extra income.(38)
Currently, where there is shared care of a child by both
parents, FTB for that child can be split between the two parents.
The splitting of the FTB rate can recognise up to a 90 per cent -
10 per cent shared care arrangement. For example, where shared care
is assessed as 70 percent with one parent and 30 percent with the
other, the FTB payment rate for that child can be split 70/30
accordingly between the two parents.
The recommendation of the In the Best Interests of
Children report is to only recognise shared care of 35 per
cent or more in the split payment of FTB.(39) The main
argument for this is recognition of costs and the claim that those
parents with lesser amounts of care time (that is, less than 35 per
cent) probably do not have the proportionally same level of costs
as the main carer parent.(40) The costs of the child
should be recognised in the CSS maintenance formula and not by FTB
payments, unless the proportion of shared care by the lesser carer
is substantial; that is for 35 per cent or more.(41)
Principle resident carer parents will probably support this
proposal.(42) Equally, non-resident carer parents will
probably not support this proposal as it doesn t provide any
financial support for non-resident parents unless they have the
care of the child for a substantial period of time.
The linking of child support payments to the costs of children
has been a long-standing issue of interest and priority in the
debate about appropriate levels of child support. For the original
formula, the Child Support Consultative Group arrived at its
recommended percentages of income based on several
costs-of-children reports.(43) Likewise, the Price
Committee Report recommended that an evaluation be undertaken into
the costs of children to enable a critical evaluation of the child
support formula percentages.(44) The In the Best
Interests of Children report devoted a whole chapter to
investigating the literature and studies that have tried to
identify the costs of children in the past.(45)
One of the In the Best Interests of Children report s
major claimed innovations is that it has recommended a formula that
recognises the cost of children.(46)
There probably isn t a definitive answer to the quest for the
costs of raising/supporting children. The costs will vary with each
parent or expert who has a view. The cost of raising a 12 year old
girl in Kalgoorlie will be different for the same child in a family
with the same income living in Sydney. Also, what are the essential
or non-discretionary costs of a child as opposed to the
non-essential or discretionary costs of raising/supporting a child?
Again, the views on this will vary with each parent and expert. For
example, not many would dispute that the costs of food, clothing
and accommodation are essential non-discretionary costs in
supporting/raising a child. However, should the costs of paying for
the girl to attend the cinema once every four weeks with her
friends, so that the child can share leisure time with her friends,
be regarded as discretionary costs and therefore not included as
reasonable non-discretionary costs?
The essential problems with determining the costs of raising a
child are what costs should be in, what costs should be out, how to
adjust for different costs in different locations and how and when
to update these costs as they rise.
The In the Best Interests of Children report
recommended that the chills support maintenance formula be based on
the costs of children.(47) In the proposed formula, it
doesn t arrive at an actual figure/s for the costs of children, for
example, that it costs $8 000 a year for a 13 year old child.
Rather it allocates a proportion of each parent s income (aside
from equal self-support amounts for both parents) then allocates a
percentage of this residual income as an amount to be paid as child
support. This is set out in Table A in the report.(48)
The percentage of residual income to be regarded as the level of
child support payable then varies with the number of children, the
age of the child, the amount of residual income and the level of
contact the non-resident parent has with the child. This will
realise different child support amounts payable for each family
situation. So for any one child aged 13, the amount of child
support payable will vary with the different incomes of the payer
and the payee and the number and age of other child support
eligible children and the degree of any shared care.
This proposed formula is not that much different to the current
formula, which apportions percentages of income (aside from
different self-support amounts for the non-resident parent and
deductions for excess payee income) for the number of children
involved. Where this proposed formula is more detailed is that it
provides for different percentages of income for different aged
children and for different levels of parental income.
In many ways this proposed formula is very similar to the
current formula, except that the percentages to be applied to
residual income (income after the self-support component is
deducted) vary with each case and its make-up is based on
costs-of-children research.
The Bill presents amendments to the CSAA to allow for the review
of CSA child support decisions by the SSAT.
For most decisions made by the CSA under the CSS there is no
separate appeal body that an individual can approach to seek a
review of a decision. Essentially, in most instances, the
individual has to seek redress through the courts, which can be a
very time consuming and expensive process.
When the Price Report considered decision-making under the CSS
in 1994, there was a group then called the Child Support Review
Office (CSRO). The CSRO function was to review (on appeal) child
support decisions made by the CSA. In 2000 the CSRO was renamed the
Change of Assessment process and the CSRO officers were renamed
Senior Case Officers (SCO). Around 90 per cent of these SCO were
contracted family law practitioners and quasi-external to the CSA.
Notwithstanding that any appeal goes off to a SCO, the case
decision still comes back to the CSA for final approval.
Generally, there is no
power under the CSAA for the AAT to hear applications. Essentially,
under the CSAA, the AAT can only hear cases referring to:
- decisions to grant or refuse extensions of time to pay
maintenance,
- the remission of late payment penalties, and
- the imposition of Departure Prohibition Orders preventing
payers with child support debts from leaving
Australia.(49)
These categories constitute a very small number of the decisions
made by the CSA.
The Price Committee Report of 1994 recommended that appeals
about CSA decisions should be able to be referred to a separate
proposed Child Support Appeals Office (CSAO).(50) The
CSAO would be a new independent statutory office, with the power to
decide on CSA decisions and also the power to refer a case to the
Family Court or the Administrative Appeals Tribunal (AAT), that is
a person/body independent of the CSA.
The Price Committee Report was of the view that many of the
decisions about the level of maintenance to be made under the
formula by the CSA were administrative decisions and were not law
decisions , and these decisions did not need to be dealt with by
the Family Court. The Price Committee Report felt that the SSAT
model for the review of Social Security Act 1991 (SSA)
decisions was a good model and the CSAO could mirror the SSAT
structure and function.(51)
This process is spelt out in a paper by Tammy
Wolffs.(52) In her paper, comment was made that,
notwithstanding that any appeal about a CSA decision goes off to a
SCO, the case and decision still comes back to the CSA for final
approval. Wolffs considered this a little strange, given that the
decision has gone externally for review but still needs approval
internally.(53) Wolffs came to a very similar conclusion
to the Price Committee Report: many of the CSA decisions are
administrative decisions , not law decisions , which would be
better dealt with administratively and need not go to a legal body
like the Family Court. Wolffs also examined the possibility of
having the existing SSAT deal with CSA
decisions.(54)
Sandra Henderson-Kelly also examined the issue of the limited
access to external review of CSA decisions for payers and
payees.(55) Henderson-Kelly examined the CSA
decision-making and the appeal process from a slightly different
angle, taking into consideration more of the angst and grievances
being expressed by payees and payers when they want to dispute a
CSA decision. Henderson-Kelly comes to a similar position as the
Price Committee Report and Wolffs, namely the administrative side
of the decisions is not being adequately dealt with. Kelly
advocated an external administrative tribunal(56) but
also concluded there is still considerable scope for the current
legal review process (Family Court) to deal with the issues, with
some adjustment and modification.
The In the Best Interests of Children report
recommended that the government should consider the introduction of
an external review mechanism for CSA decisions.(57)
Generally, submissions to the Senate Standing Committee on
Community Affairs inquiry into this Bill were supportive of the
move to give the SSAT jurisdictional powers over CSA
decisions.(58) There were some concerns that the SSAT
was not being supplied with subpoena of evidence powers. The Law
Council of Australia expressed concerns that the SSAT was not an
appropriate form for the settlement of disputes between parties as
opposed to settling disputes between citizens and
government.(59)
The provisions presented in this Bill do not provide for an
appeal of a SSAT CSS decision to the AAT, as currently applies to
SSAT decisions made under the SSA.
Likewise, appeals of SSAT decisions can only be made to a court
on a matter of law, which again is different to SSAT decisions
under the SSA, which allows appeals on matters of judgement by the
SSAT. This proposal to only allow appeals of SSAT decisions on a
matter of law is very similar to the appeal regime that was
presented in the Administrative Review Tribunal Bill
2000.(60) That Bill was not passed by the Senate,
being defeated at the second reading on 26 February
2001.(61)
The Bill proposes amendments to the MIT applied to child support
payments received for determining the rate of FTB payable to a
payee. These changes were recommended by the In the Best
Interest of Children report.(62)
At present, income received in the form of maintenance is not
lumped in with other sources of income, rather it is only counted
against the more-than-minimum rate of FTB-A, with a special free
area and taper rate. Maintenance received is not regarded as income
for pensions or allowance income support payments and therefore has
no effect on the rate of these payments. There are a few minor
exceptions to this; maintenance received is regarded as income for
youth allowance, ABSTUDY and Assistance for Isolated Children
purposes.
The origins of the special test that applies to maintenance
income lie in the significant reductions in assistance that some
payees used to suffer, when receiving large amounts of maintenance,
especially non-cash maintenance. Prior to January 1993, maintenance
income was lumped in with all other income and applied under the
general income test for pensions and allowances. This meant that in
those cases where a large amount of maintenance income was received
(commonly non-cash maintenance), the payee could have their income
support payment significantly reduced or even precluded. This was
an undesirable result, with the maintenance recipient left with no
on-going means of support, having received a large amount of
in-kind maintenance and little or no cash. Originally there were
ceilings or caps allowed on the provision of non-cash maintenance,
but later there were changes to the treatment of maintenance, in
terms of the payments affected and the income test applied. A
common example of non-cash maintenance received that precluded
access to income support for the payee was expensive boarding
school fees paid for several children.
From January 1993, maintenance received had a special income
test (MIT) and only affected more-than-minimum rate of Family
Allowance (FA), now more-than-minimum rate FTB-A. The partial or
total loss of more-than-minimum rate FTB, being income supplement
not income support, is less of a problem than the loss of income
support. The MIT applies if a person is eligible to more than the
base rate of FTB.
The current MIT has a free area of $1 150 (plus $383 for each
extra child after the first) and thereafter income reduces the FTB
rate by 50 cents in each dollar.
The proposed change to the MIT is to only have the maintenance
received affect the FTB rate for the child in respect of whom the
maintenance is paid for. This is a beneficial change for payees as
it will not see the rate of FTB paid for other children
reduced.
Item 1 inserts the new child support
maintenance formula into the CSAA. There are six separate formulas
to be used in prescribed circumstances.
Proposed Section 40C in Subdivision E general
provisions provides that a parent with care of a child for
65 per cent of the time or more is not liable for any child support
maintenance for that child.
Subdivision B Child support income and combined child
support income.
Proposed section 41 sets out how the amount of
child support income is calculated. Basically this is the level of
adjusted taxable income minus the self-support amount, which is the
same for the payee and the payer.
Section 42 provides for the combining of both
parents child support income from which a percentage is applied to
determine the child support payable for the child. Once the level
of child support income is calculated, the costs-of-children
percentages can then be applied to determine the amount of child
support payable.
Subdivision C Working out the components of child
support income
Proposed section 43 sets out the steps to
arrive at adjusted taxable income for parents. Proposed
section 44 allows for the deduction of post-separation
costs.
Proposed section 45 sets out that the
self-support amount is to be one third of MTAWE.
Proposed section 46 sets out how to calculate a
parent s dependent child amount.
Proposed sections 47A, 47B and 48 set out how
to set a percentage of care.
Division 6 inserts new sections into the CSAA
to calculate the costs of the child based on the Table in the new
Schedule 1 to be attached to the CSAA. This Table is provided on
page 69 of the Bill.
Division 7 inserts new sections to set the
amount of adjusted taxable income. These sections are largely a
rewrite of the existing sections in the CSAA.
Division 8 inserts new sections for assessing
adjusted taxable income.
Section 66 provides for the proposed new
minimum rate of child support payable of $320 a year to be
thereafter indexed to the CPI by section 153A.
Section 66A allows the Secretary to provide a
lower rate of child support payable than this minimum, even a nil
rate of child support. It can be set lower on application on a
case-by-case basis where the Registrar is satisfied that the income
of the applicant is less than the single rate of pension.
Item 2 of Schedule 1 inserts a new
Schedule 1 to be attached at the end of the CSAA
to contain the Costs of the Children Table.
Items 1 and 2 amend the A New Tax System
(Family Assistance) Act 1999 (FAA). The items provide for a
new definition of reportable fringe benefits and a new definition
of target foreign income. This will align these definitions in the
FAA with the same definitions in the CSAA.
Item 29 amends the CSAA to set out the
definition of last relevant year of income , being the last
completed tax year preceding the current calendar year.
Item 37 provides for a new definition of net
rental property loss in the CSAA.
Item 43 provides a new definition of relevant
dependent child.
Item 59 inserts definitions of regular care and
shared care. Regular care means care from 14 per cent to 34 per
cent and shared care means care from 35 per cent to 64 per cent.
The effect of this is that where care is 65 per cent or more, the
parent is regarded as the principle carer parent.
Item 60 inserts a definition of annualised
MTAWE. Item 60 also inserts a description as of
how to work out the annualised value of target foreign income.
Item 66 inserts provisions describing who may
apply for a child support assessment. This includes parents and
also some non-parent carers of a child in prescribed
circumstances.
Item 73 inserts provisions that require the
Registrar to make a new child support assessment once a new tax
assessment is available. These provisions do not make any allowance
for payers deliberately lodging a late tax assessment with the
Australian Taxation Office, in the knowledge that the new
assessment will result in a higher child support liability.
Item 97 provides for the annual indexation of
the minimum child support rate (to be set at $320 a year by new
section 66 in this Bill). Item 97 also provides
for the annual indexation of child support amounts payable by
low-income payers not on a government income support payment.
Item 117 provides savings provisions, basically
saving the child support assessments made prior to the date
Schedule 1 comes into force (1 July 2008).
Part 1 of Schedule 3 inserts new provisions
into the CSAA to allow for the review of CSA decisions by the SSAT.
The SSAT will also take over the limited types of CSA cases that
can be currently referred to the AAT.(63)
Item 22 allows a person to appeal to a court
where the Registrar has declined to make a child support assessment
because of uncertainty about a child s percentage.
Item 69 allows for internal re-consideration of
a decision prior to the matter being considered by the SSAT.
Proposed section 80 sets out the range of
decisions that an objection may be lodged. Proposed section
81 allows for 28 days in which to lodge an appeal against
a decision. This is the same time limit that current applies to
appeals against decisions under the SSA.
Item 71 sets out provisions for the appeal of a
SSAT decision to a court. Essentially appeals can only be made on a
matter of law, not on a matter of judgement. This is more
restrictive than currently applies to the review of SSAT decisions
to the AAT under the SSA, which are not restricted to a matter of
law.
Likewise there is no provision for an appeal to the AAT, as
currently applies to SSAT decisions made under the SSA. What this
Bill provides for is SSAT decisions to be appealable only to an
appropriate jurisdictional court.
Item 4 inserts into the CSAA an outline of the
backdating provisions for child support assessments by the
Registrar proposed in this Schedule of the Bill. Item
14 inserts provisions into the CSAA for the amendment of
an administrative assessment that is more than 18 months old.
Items 16 to 23 inserts provisions for departure
from an administrative assessment in special circumstances.
Item 36 inserts provisions describing the powers
of courts in relation to assessments.
Items in this Part insert provisions applying to applications
for departure from administrative assessments that are more than 18
months old.
Item 5 inserts into the CSAA an outline of the
new provisions for child support agreements proposed between
parents. Item 28 amends the powers of a court to
set aside or terminate an agreement. Item 38
amends the provisions that set out what may be included in a child
support agreement. Item 71 inserts provisions
describing notional assessments of child support.
Items 1 and 2 insert provisions into the CSAA
to allow for the suspension of child support payments on
application where the parents are reconciling. Items 8 to
10 insert provisions to provide for deductions of child
support owed by a payer from his/her payments provided under the
Veterans Entitlements Act 1986.
Items 11 to 15 deal with the suspension of
child support, when the parents are in the process of
reconciling.
Item 8 inserts a new definition of a regular
care child into the FAA for a carer who has a child for at least 14
per cent of the time but less than 34 per cent of the time. This
new definition of a regular care child is required so that while
the carer may not qualify for FTB, they may still be able to
attract Rent Assistance (RA) in respect of the child. This is
required as there is the potential to qualify for RA even though
the carer is not on a government income support payment. RA can be
paid to persons on low income who otherwise qualify for FTB.
Government income support payments refers to the main pension and
allowance payments like parenting payment single, newstart
allowance etc.
Item 16 inserts a new provision into the FAA to
define a shared carer of a child as a carer providing care for at
least 35 per cent of the time. Item 25 inserts a
provision detailing that where care provided is for less than 35
per cent of the time, the child is not an FTB child. Item
77 inserts a provision detailing that the rate of FTB
payable in a shared care situation is linked to the assessed level
of shared care.
Item 155 inserts new provisions into the FAA to
modify the maintenance income test so that maintenance received is
only counted against the rate of FTB payable for the child for whom
the maintenance is received.
Concluding comments
This Bill provides for the legislative amendments and new
legislation to encompass the government s response to the Child
Support Task Force report In the Best Interests of
Children. The main feature of the legislative amendments is a
new formula for calculating child support payable based on the
estimated costs of a child. The Bill also provides access to
persons to appeal to the SSAT in connection with decisions made
about child support under the CSAA. There are also provisions
altering the effect of child support on the rate of and
qualification for FTB.
This Bill provides for the most substantive changes to the CSS
since it was introduced in 1988. Concerns have been expressed by
many of the submissions to the Senate Community Affairs Committee
that the time that has been allowed for consideration of the
provisions in this Bill has been too short. The Bill was tabled on
14 September 2006 and debate commenced in the Parliament on 12
October 2006. The Committee itself expressed concerns that the time
allowed for consideration of the Bill has been too short.
The moves to allow appeal to the SSAT and the beneficial changes
to the FTB maintenance income test will be welcomed. The new
formula based on the estimated costs of a child will be seen a step
forward by most parties. As to whether these estimated costs
accurately reflect child caring and raising costs for separated
parents will be matter for future debate.
- Explanatory Memorandum,
Outline.
- The Hon. Mr Mal Brough, MP, Minister for Families, Community
Services and Indigenous Affairs, Child Support Reforms To Deliver
Fairer System , Media Release, Canberra, 28 February 2006.
http://www.facs.gov.au/internet/Minister3.nsf/content/child_support_reform_28feb06.htm
- Ministerial Taskforce on Child Support, In the Best
Interests of Children , Report of the Ministerial Taskforce on
Child Support, Canberra, 14 June 2005.
http://www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm
- The Hon. Larry Anthony, MP, Minister for Children and Youth
Affairs, Taskforce to examine child support scheme , Media
Release, Canberra, 16 August 2004.
Terms of Reference - Review of Child Support
Scheme
Following the Report from the House of Representatives Committee
on Family and Community Affairs' Inquiry into Child Custody
Arrangements in the Event of Family Separation, the Minister for
Children and Youth Affairs has adopted the Report's recommendation
to establish a Taskforce to provide advice on whether particular
changes to the Child Support Scheme are warranted. The objectives
of the scheme are to ensure that:
- parents share in the cost of supporting their children,
according to their capacity;
- adequate support is available for all children not living with
both parents;
- Commonwealth involvement and expenditure is limited to the
minimum necessary to ensure children's needs are met;
- incentives for both parents to participate in the work force
are not impaired; and
- the overall arrangements are simple, flexible and
efficient.
The government continues to support these objectives and the
current broad balance between private and public contributions to
the support of children in separated families. In its work, the
Taskforce (with the support of the Reference Group) is to have
regard to contemporary work, parenting and family structures as
well as the income profiles of child support payers and payees, and
pay particular attention to the Government intention to support the
active involvement of both parents in parenting after separation,
where feasible. The Taskforce will:
- Provide advice around the short-term recommendations of the
Committee along the lines of those set out in the Report
(Recommendation 25) that relate to:
- increasing the minimum child support liability;
- lowering the maximum 'cap' on the assessed income of
parents;
- changing the link between the child support payments and the
time children spend with each parent; and l the treatment of any
overtime income and income from a second job.
2. Evaluate the existing formula percentages and associated
exempt and disregarded incomes, having regard to the findings of
the Report and the available or commissioned research
including:
- data on the costs of children in separated households at
different income levels, including the costs for both parents to
maintain significant and meaningful contact with their
children;
- the costs for both parents of re-establishing homes for their
children and themselves after separation.
- Advise on what research program is necessary to provide an
ongoing basis for monitoring the child support formula.
3. Consider how the Child Support Scheme can play a role in
encouraging couples to reach agreement about parenting
arrangements.
4. Consider how Family Relationship Centres may contribute to
the understanding of and compliance with the Child Support
Scheme.
- House of Representatives Standing Committee on Family and
Community Affairs, Every picture tells a story , Report into
the inquiry into child custody arrangements in the event of family
separation, Canberra, 23 December 2003.
http://www.aph.gov.au/house/committee/fca/childcustody/report.htm
- ibid.
Recommendation 26
- The committee recommends that a detailed re-evaluation of the
Child Support Scheme be undertaken by a dedicated Ministerial
Taskforce. The objectives of the re-evaluation should include:
- establishing the costs of raising children in separated
households at different income levels that adequately reflect the
costs for both parents having significant and meaningful contact
with their children;
- adequately reflecting the costs for both parents of
re-establishing homes for their children and themselves after
separation;
- ensuring that the Child Support Scheme and the social security
system work consistently to support and encourage both parents to
continue to be involved in parenting their children after
separation and does not act as a disincentive for workforce
participation for each parent;
- ensuring the Child Support Scheme appropriately reflects
significant developments in the taxation system since 1988
including company tax, trusts etc; and
- ensuring as a matter of principle that exempt and disregarded
income are adjusted to bring them closer together to reflect the
changing work and parenting patterns now evident in the
community.
- The re-evaluation should be completed by 30 June 2004. (para
6.214)
- Explanatory Memorandum,
Outline, Financial impact statement.
- Joint Select Committee on Certain Family Law Issues, The
Operation and Effectiveness of the Child Support Scheme ,
Canberra, November 1994, pp. 12 13.
- Ministerial Taskforce on Child Support, In the Best
Interests of Children , Report of the Ministerial
Taskforce on Child Support, op. cit., p. 43.
- Joint Select Committee on Certain Family Law Issues, The
Operation and Effectiveness of the Child Support Scheme, op.
cit.
- Ministerial Taskforce on Child Support, op. cit.
- Liberal and National Parties of Australia, Child Support
Policy, - the Child Support Agency , Canberra, 22 February
1996.
- Chris Field, Child Support Legislation Amendment Bill 1998,
Bills Digest No. 174 1997-98, Parliamentary
Library, Canberra, 7 April 1998. http://www.aph.gov.au/library/pubs/bd/1997-98/98bd174.htm
- Joint Select Committee on Certain Family Law Issues, op. cit.,
p. 14.
- Child Support Consultative Group, Child Support
Formula for Australia, AGPS,
Canberra, 6 May 1988.
- Child Support Consultative Group, Chairperson Justice Fogarty,
Child Support Formula for Australia , op. cit.,
p. 71.
- ibid., p. 72.
- ibid.
- ibid.
- ibid., p. 68.
- ibid., pp. 81 82.
- ibid., p. 70.
- National Council for Single Mothers and Their Children Inc,
Child Support Overhaul Leaves Most Children With Less Support ,
Media Release, Adelaide, 28 February 2006.
http://www.ncsmc.org.au/docs/child%20support%20MR%2028%20feb%2006.doc
- National Council of Single Mothers and their Children,
Submission to the Senate Community Affairs Committee Child
Support Legislation Amendment (Reform of the Child Support Scheme
New Formula and Other Measures) Bill 2006 ,
point 8, pp. 5 7.
http://www.aph.gov.au/Senate/committee/clac_ctte/child_support/submissions/sublist.htm
- Lone Fathers Association Inc - South Australian Branch, Policy
Advice to Governments, Media Release, 18 September 1999.
http://www.lonefathers.org.au/
Steven Wardill, Parental support no child
play , Courier Mail, 18 June 2005.
- Ministerial Taskforce on Child Support, op. cit., p. 50
55.
- The Hon. Mr Mal Brough, MP, Minister for Families, Community
Services and Indigenous Affairs, Child Support Reforms To Deliver
Fairer System , Media Release, op. cit.
- Chris Field, Child Support Legislation Amendment Bill 1998,
Bills Digest No. 174 1997-98, Parliamentary Library,
Canberra, 7 April 1998. http://www.aph.gov.au/library/pubs/bd/1997-98/98bd174.htm
- Joint Select Committee on Certain Family Law Issues, op. cit.,
Recommendation 122, p. 341.
- Jerry Silvey and Bob Birrell, Financial outcomes for parents
after separation , People and Place, Vol 12 No. 1, 2004,
p. 54.
http://elecpress.monash.edu.au/pnp/view/issue/?volume=12&issue=1
- Child Support Agency, Department of Work and Pensions,
Calculation of Child Maintenance. http://www.csa.gov.uk/new/calculate/#S03
- The Hon. Mr Mal Brough, MP, Minister for Families, Community
Services and Indigenous Affairs, Child Support Reforms To Deliver
Fairer System , op. cit.
- Ministerial Taskforce on Child Support, In the Best Interests
of Children , op. cit., p. 24.
- Child Support Consultative Group, Child Support
Formula for Australia, op. cit., pp. 78 80.
- Ministerial Taskforce on Child Support, op. cit., p. 146.
- National Council of Single Mothers and their Children,
Submission, op. cit., pp. 5 7.
- Ministerial Taskforce on Child Support, op. cit., p.
200.
- National Council of Single Mothers and their Children,
Submission, op. cit., p. 6.
- Ministerial Taskforce on Child Support, op. cit., p.
160.
- ibid., p. 159.
- ibid., p. 160.
- National Council of Single Mothers and their Children,
Submission, op. cit., p. 7.
- Child Support Consultative Group, op. cit., Chapter 11 Formula
percentages, pp. 67 72.
- Joint Select Committee on Certain Family Law Issues, op. cit.,
Recommendation 116, p. 303.
- Ministerial Taskforce on Child Support, op. cit., Chapter 8 -
The Cost of Children,
pp. 121 140.
- ibid., p. 142.
- ibid., p. 144.
- ibid., p. 150.
- Ministerial Taskforce on Child Support, op. cit., p. 258.
- Joint Select Committee on Certain Family Law Issues, op. cit.,
Recommendation No. 84,
pp. 232 233.
- Joint Select Committee on Certain Family Law Issues, op. cit.,
Chapter 12, pp. 253 270.
- Tammy Wolffs, External Review of Child Support Agency
Decisions: The Case For a Tribunal , Australian Institute of
Administrative Law, Forum No. 43, October 2004,
pp. 55 72.
http://law.anu.edu.au/aial/Publications/webdocuments/Forums/Forum43.pdf
- ibid.
- ibid., pp. 68 69.
- Sandra Henderson-Kelly, Does The Child Support Sacred Cow Milk
Parents Of Administrative Justice? Australian Institute of
Administrative Law, Forum No. 44, January 2005, pp. 26 43.
http://law.anu.edu.au/aial/Publications/PubQuartForum.html
- ibid., p. 38.
- Ministerial Taskforce on Child Support, op. cit., p. 260.
- Senate Community Affairs Committee, Report to the Senate on
the Child Support Legislation Amendment (Reform of the Child
Support Scheme New Formula and Other Measures) Bill
2006 [Provisions], Canberra, October 2006
, pp. 28-30.
http://www.aph.gov.au/Senate/committee/clac_ctte/child_support/index.htm
- ibid., p. 28.
- Katrine Del Villar, Administrative Review Tribunal Bill 2000,
Bills Digest No. 40 2000-01, Parliamentary Library,
Canberra, 7 September 2000.
http://www.aph.gov.au/library/pubs/bd/2000-01/01BD040.htm#Contact
- Second Reading Debate , The
Administrative Review Tribunal Bill 2000, Senate Debates,
26 February 2001, p. 21928. http://www.aph.gov.au/hansard/senate/dailys/ds260201.pdf
- Ministerial Taskforce on Child Support, op. cit., p. 191.
- Explanatory Memorandum, p. 89.
Peter Yeend
18 October 2006
Bills Digest Service
Parliamentary Library
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