WARNING:
This Digest was prepared for debate. It reflects the legislation as
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Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details
Child Support Legislation Amendment Bill
1998
Date Introduced: 11 November 1998
House: House of Representatives
Portfolio: Family and Community Services
Commencement: The Bill implements a range of matters that have
various commencement and application dates. These are described in
the Main Provisions section of this Digest.
The Bill
implements a wide range of changes to the Child Support Scheme, a
number of which while important to those involved, do not implement
substantial new policy. Matters dealt with in the Bill include:
-
- a marginal increase in exempt income for payers of child
support
-
- changes to the amount of a carer's income that is to be
disregarded
-
- the introduction of a minimum income of $260 in calculating the
amount of child care payable in respect of a day
-
- allowing payers and payees greater flexibility to reach
agreements relating to child care payments
-
- addressing the situation where child care arrangements have
changed from that specified in various orders
-
- allowing child support to continue until the end of a school
year where a relevant child turns 18 during that year
-
- introduce new rules regarding the treatment of payments to
third parties to offset child support payments in certain
circumstances
-
- the introduction of an internal review mechanism as the first
step in a review process
-
- enabling the Registrar to initiate a departure from an
administrative assessment of child support
-
- the inclusion of exempt foreign income and rental property
losses in the calculation of income
-
- allowing determinations to be based on more recent years of
income
-
- enabling a relevant payer to seek an administrative assessment
of child support, and
-
- allowing 50 per cent of child care expenditure to be excluded
from a person's income for the purpose of the family
allowance.
This Bill is substantially the same as one
introduced in March 1998 which did not pass both Houses before
Parliament was prorogued prior to the 1998 general election. Except
for commencement dates, the major difference being the amendments
contained in Schedule 12 of this Bill which did not appear in the
previous Bill.
The Child Support Scheme aims to ensure that
parents capable of doing so contribute to the financial support of
their children after a couple has separated. The Scheme was
introduced in two stages; the first commenced in June 1988 and
enables the Child Support Agency (CSA) to collect maintenance
payable under court orders or registered court agreements. The
second stage commenced on 1 October 1989 and enables CSA to assess
child support payments according to the formula contained in the
Child Support (Assessment) Act 1989 (the Principal Act).
Prior to October 1998, CSA was part of the Australian Taxation
Office (ATO) but since the introduction of a new Administrative
Arrangements Order on 21 October 1998 CSA is now the responsibility
of the Department of Family and Community Services. As the
principal means of non-voluntary collection is through deductions
from a person's assessable income and as it is necessary to know a
person's assessable income to calculate both voluntary and
involuntary liability, it may be argued that CSA is more
appropriately located in the ATO rather than allowing a further
agency to have access to individuals tax information.
While the Scheme is based on the power to
compulsorily deduct amounts from a person's assessable income, CSA
encourages voluntary agreements between parents rather than
compulsory collection.
The proportion of child support collected
privately has risen from less than 10 per cent in 1991 to
approximately 41 per cent in 1997(1), and the number of cases dealt
with by CSA in 1996-97 increased to 447 729 (note that this
includes cases where CSA is not involved in collection due to
private arrangements). The amount collected and distributed by CSA
in 1996-97 was approximately $418 million and when private payments
are included a total of $991.5 million was transferred. There was a
consequential reduction of $318.3 million in social security
payments in 1996-97-an increase of 12 per cent compared with
1995-96.(2)
CSA has completed a number of surveys on the
attitudes of its clients. As examples of the results of the
surveys, it states:
Payees focus on the Agency's power to collect
support and they feel CSA is too soft on payers. Their perceptions
are that we do not chase arrears, or payers who hide income or play
the system. Payees feel that payers have little understanding of
how much it costs to raise children. They have great uncertainty
about the future.
Payers focus on issues of equity and sympathy. They
perceive they are discriminated against as well as having many
things, for example, how they look after their children taken out
of their control. This in turn causes them to feel powerless and
angry. They are often struggling financially and have to live in
much reduced circumstances. Payers do not understand how payees
spend money on their children.(3)
The operation of the Scheme was reviewed by the
Joint Select Committee on Certain Family Law Issues which reported
in November 1994. The Committee made 163 recommendations addressing
most aspects of the Scheme, including the formula used to assess
payments under stage 2 of the Scheme. A number of the accepted
recommendations were implemented by the Child Support
Legislation Amendment Act (No. 1) 1997. A further response to
the recommendations was contained in the Government Response to the
report dated November 1997. This Bill will implement a number of
the recommendations accepted in the Government Response to the
Report. The amendments cover a wide range of areas and there is no
central policy implemented by the Bill.
Currently section 39 of the Principal Act
provides that an amount equal to the relevant social security
pension will be exempt income for a person contributing to child
support The exempt amount is adjusted according to the whether the
payer also has a dependant child. Items 2 and 3 of Schedule
1 will increase the exempt amount to 110 per cent of the
relevant pension where the payer has no dependant children and to
220 per cent where there is a dependant child.
Section 44 of the Principal Act provides for a
reduction in the amount of child support payments where the income
of the recipient exceeds a certain amount (their adjusted income).
Where an adjustment is made, section 44 currently provides for the
amount of payment to be reduced by the amount of the access.
Item 4 of Schedule 1 provides that the rate of the
adjustment is to be reduced to 50 per cent, rather than 100 per
cent, of the excess.
Section 46 of the Principal Act contains the
definition of the amount of the carer's income that is to be
disregarded for the calculation of the amount of child support
payable. Currently this is based on the rate of average weekly
earnings (AWE) with an additional proportion of AWE added for
children depending on their age (eg 11.5 per cent for a first child
under the age of 6). This will be changed by item
5 which provides that the disregarded amount will be the
estimate of the all employees average weekly total earnings for the
last period in which the Australian Statistician made such an
estimate. As the new definition does not contain an additional
amount depending on the number and age of dependant children, it
may result in a lower amount of the carer's income being
disregarded.
Current paragraph 48(d) provides that when
determining the exempt amount any child who is a 'shared child'
(ie. the parents have substantially equal care of the child) is to
be disregarded. Item 6 of Schedule 1 proposes that
in regard to a shared child the exempt income of each parent is to
be increased by an amount equal to the additional amount allowed as
exempt income where the person has care of the child (this amount
is calculated under section 39 of the Principal Act which refers to
additional amounts payable under social security benefits).
Division 4 of the Principal Act provides for
orders to be made to depart from administrative assessment (ie use
of the formula) of child support payments where there are special
circumstances. Items 10 and 11 of Schedule 1 will
allow high child care costs to be taken into account where the
child is under 12 at the start of the year, the liable parent is
not a carer for any of the children of the relationship and child
care costs are more than 5 per cent of the carer's child support
income for the year.
Application: From the 1999 - 2000 child
support year.
Section 66 of the Principal Act provides that
if, in relation to a day in which child support is payable, the
amount payable assessed per year would be less than $260 then the
amount payable for that day, or days, will be nil. Item 4
of Schedule 3 provides, subject to certain conditions to
be discussed below, that if such an assessment is made the amount
of payment will be based on the annual amount being $260 rather
than nil. The Registrar will have power to reduce the assessment to
nil under proposed section 66A if a payer makes an application for
such a decision. The conditions where the minimum rate of $260 will
not apply are contained in proposed section 66B
and are:
-
- both parents are eligible carers in respect of one or more of
the children of the relationship, or
-
- an order, or voluntary agreement to the same effect, has been
made to depart from an administrative assessment of the amount of
child support payable.
The Child Support (Registration and
Collection) Act 1988 (CSRCA) provides, as its name implies,
for methods of collection of amounts due under the Principal Act.
Methods of collection include direct deductions from the wages or
salary of the person liable to pay the amount and the recovery of
an amount due as a debt to the Commonwealth. In the latter case
this also includes recovery from a third person who owes a debt to
the person liable to make the payment.
Item 10 of Schedule 3 will
introduce proposed section 72AA into SCRCA, which
will allow amounts to be recovered from social security pensions
and benefits. This will not apply where the amount is due under a
maintenance order or agreement and so applies only where a child
support assessment has been made.
Application: From the 1999 - 2000 child
support year.
A liability under the CSRCA will not be
enforceable under that Act where an election is made under
proposed section 38A, which will be inserted by
item 4 of Schedule 4. The proposed section allows
a payer and payee to elect that the order is not enforceable.
Proposed section 39B will allow the Registrar to
determine that an order is not enforceable where the payer has a
satisfactory payment record, as determined according to the
regulations, for the previous 6 months and the Registrar is of the
opinion that the payment record is likely to continue to be
satisfactory and that such a determination is appropriate. A payee
may apply to have an election/determination under proposed
section 38A or 38B repealed and the Registrar will have to
make such a decision within 28 days. The application must be
granted if the payer has an unsatisfactory payment record under the
regulations or the Registrar is satisfied that there are special
circumstances to warrant granting the application.
Commencement: On
Proclamation.
Item 1 of Schedule 5 will alter
the definition of a 'relevant dependent child' contained in the
Principal Act to include step-children were the child is a
step-child under a Family Court order. Schedule 5
also contains provisions that will apply where parents have varied
a child care arrangement contained in a court order or a registered
parenting plan. Proposed section 8A of the
Principal Act applies where a couple has altered the arrangements
and the Registrar is satisfied that there is not a reasonable
excuse for the changed arrangements. If a parent has greater care
than that provided for under the order/registered plan they will be
deemed to have care for only the time specified in the
order/registered plan and if they have less time caring than
specified, they will be deemed to be a carer only for their actual
time spent caring. If the carer of the child has care of a child
for between 40 per cent and 60 per cent of the nights in a year
they will be taken to have shared care of the child; for 30 per
cent to 40 per cent they will be deemed to have control for 35 per
cent and have substantial contact with the child; and for between
60 per cent and 70 per cent they will be deemed to have 65 per cent
control and have major contact with the child (the determination of
the amount of contact is important for determining if a person is
eligible to apply for child support and the rate of payment).
Amendments to section 8 of the Principal Act contained in
item 6 provide that where one person has care for
less than 30 per cent of the time, an agreement may be reached with
the principal provider of care that the person has substantial
contact, and so be eligible for child support.
Proposed subdivision H will apply where one
parent is, because of proposed section 8A, taken
not to be an eligible carer as defined in the Principal Act (and so
not eligible for child support), while the other parent is taken to
be a shared carer (or to have substantial or major contact with the
child). If the parents are shared carers under proposed section 8A,
the exempt income of the payer is to be increased by an amount
calculated by reference to additional payments under the Social
Security Act 1991. In determining the exempt amount, a child
with whom the parent has substantial contact is to be disregarded
and the relevant percentage is to be used to determine the amount
of child support payable. The relevant percentages are contained in
the Table contained in proposed section 54B and provide for the
amount payable to reflect the amount of actual care where this is
less than under the court order or parenting agreement. There is no
provision for an increase in the amount payable to the parent who
has increased care, but the decrease in the amount of child support
they have to pay will mean the parent with greater care should have
a higher disposable income.
Application: From the 1999 - 2000 child
support year.
Current subsection 151(4) of the Principal Act
provides that a person may not elect not to receive child support
if they are in receipt of an income-tested pension, allowance or
benefit. Schedule 7 will substitute a new
subsection that provides that if a person is in receipt of family
allowance at higher than the basic rate, they may make such an
election but it will have to be approved by the Secretary. The
provision will allow such an election to be approved where the
recipient is at risk and reflects provisions of the Social
Security Act 1991.
Commencement: On a day fixed by Proclamation or, if such
a day is not Proclaimed within 12 months of the Bill receiving the
Royal Assent, at the end of that period.
Child support now ceases when a child turns 18.
Schedule 8 provides that an application may be
made to the Registrar for child support to continue to the end of
the school year in which the child turns 18. The Registrar must
accept the application if an administrative assessment is in force
or there is a child support agreement; the child is likely to be in
full-time secondary education on their 18th birthday;
the child's birthday will occur before the end of the secondary
school year; and either the application is made before the child's
18th birthday or the Registrar is satisfied that there
are exceptional circumstances justifying the extension of child
support.
Application: From the 1999 - 2000 child
support year.
Where an amount of payment is due to the CSA,
which will then forward it to the payee, it is a debt due to the
Commonwealth. In cases where both parents of a child have
sufficient care of the child, it is possible for both to have a
debt due. Proposed section 71AA of CSRCA will allow the Registrar
to offset the debts against each other, so that only the larger
debt, reduced by the amount of the smaller debt, will be
recoverable. (Schedule 11).
Commencement: On a day fixed by
Proclamation or, if such a day is not Proclaimed within 12 months
of the Bill receiving the Royal Assent, at the end of that
period.
Schedule 12: Part V of CSRCA
deals with the collection and payment of child support debts.
Currently, section 71A provides that the Registrar may accept a
payment to a third party to be offset against child support
liability where the registrar is satisfied that there are special
circumstances. Item 4 of Schedule 12 provides that
such the Registrar may accept such a payment to reduce a child
support liability where satisfied that the payment was made and
intended by both the parties (ie. the payer and receiver of child
support) to be in full or partial satisfaction of a child care
liability (item 4 of Schedule 12).
Proposed section 71B provides
that if payment is made in terms other than money, the Registrar is
to reduce the amount of child support payable for the relevant
period by either the amount agreed between the parties or that
determined by the Registrar.
The amount to be credited is to be limited to
25% of the due amount and any excess will be able to be credited to
future liability (proposed section 71C).
Schedule 13 will insert an
internal review mechanism whereby a person may request the
Registrar to review a decision of the Registrar. The mechanism is
fairly common in decisions made by government agencies, with the
normal review procedure being: internal review (as proposed by
Schedule 12); review by the Administrative Appeals
Tribunal (AAT); and final review on questions of law by the Federal
or High Courts. Proposed section 98X deals with
the decisions subject to internal review, which are:
-
- whether to accept an application for the administrative
assessment of child support
-
- whether to refuse to accept such an application
-
- the particulars of an assessment
-
- whether or not to change an assessment, and
-
- whether to remit a penalty payable for underestimating
assessable income.
An objection against such a decision must be
made within 28 days of the service of notice of the decision and
must fully state the grounds for the objection (proposed
sections 98Z and 98ZA).
The other party to the objection must be served
with a copy of the objection and may lodge grounds opposing the
objection, and the Register must consider such a reply
(proposed sections 98ZB and 98ZC).
Decisions of the internal review may be appealed
to the AAT under current provisions.
Application: From the 1999 - 2000 child
support year.
Part 6A of the Principal Act, which deals with
departure from administrative assessment of the amount of child
support payable, will be repealed and a new Part 6A, dealing with
the same matter, substituted by Schedule 14. The
main differences between the current and proposed Parts are:
-
- proposed section 98E will allow the Registrar
to refuse to make a determination when satisfied that the matter is
too complex to be dealt with under Part 6A. In such a case, the
Registrar is to recommend that the matter be referred to a court;
and
-
- proposed Division 3 will allow the Registrar to initiate a
departure from an administrative assessment. Such a departure may
be made where the Registrar is satisfied that due to special
circumstances an administrative assessment would result in an
unjust or inequitable determination due to the income, earning
capacity, property and financial resources of either parent and
that it would be equitable and just as regards the child and the
parents and otherwise proper. The parties to the case must be
notified that the Registrar is considering making such a departure
and will have the opportunity to reply. The parties may jointly
elect that such a departure not be made so long as the carer is not
in receipt of an income-tested pension, benefit or allowance. The
Registrar may, but is not required to, conduct an inquiry or
investigation into the matter, and may refuse to make a departure
if the matter is too complex.
Application: From the 1999 - 2000 child
support year.
One of the more contentious matters in the Child
Support Scheme is that assessment is based on assessable income
determined under income tax legislation. Carers and payers complain
that the other parent uses a number of methods to reduce assessable
income, for example, salary packaging, negative gearing and the use
of an interposed entity. Schedule 15 will adjust
the calculation of the income of the relevant people to include a
supplementary amount. This will be the person's exempt foreign
income and rental property loss. These terms are defined by
reference to the income tax legislation.
Application: From the 1999-2000 child
support year.
Under the current definition of last relevant
year of income, which is used to ascertain the income of a parent
for assessment, the year used is that which occurred two years
before the time of assessment. Schedule 16 will
alter the definition to the year of income before the start of the
child support period. Child support period is defined in
proposed section 7A. Basically, the period will
start when an application for child support is made, the
commencement of a child care agreement or immediately after the end
of a previous period. The period will end at the sooner of 15
months after it commenced, the end of the month where the Registrar
makes an assessment under proposed section 34A
(see below), immediately before the commencement of a child care
agreement, or where a new assessment is made under proposed
section 34B (see below).
Proposed section 34A provides
that the Registrar must generally make a new assessment as soon as
practicable after a new assessable income for the liable parent is
made (this will generally be at the end of the relevant taxpayer's
year of income). This will not apply where the Registrar calculates
that a change in the carer's assessable income would not effect
amounts payable or if the amount payable is not assessed using the
administrative formula.
Section 95 of the Principal Act provides that
amounts payable under an administrative assessment are to be
reduced by amounts payable under a child care agreement.
Proposed section 34B provides that a new
administrative assessment must be made by the Registrar when a new
child care agreement is made.
There will also be amendments to the provisions
of the Principal Act that relate to a person being able to apply to
have an estimated income used for the remainder of a year when
their estimated income falls by at least 15 per cent
(proposed section 60). These amendments reflect
the change of assessment from a year to period basis.
Proposed section 60A provides that the Registrar
may refuse to accept such an estimate if satisfied that the actual
income will be higher than the estimated amount.
The amendments will enable child care liability
to be based on more recent assessments of income than currently
prevail.
Application: From the 1999-2000 child
support year.
Under section 25 of the Principal Act an
eligible carer of a child may apply for a child support assessment
(basically a sole or principal care provider, a person who has
major or substantive contact with the child or who has ongoing
daily care substantially equal with another. This excludes people
who have no or little contact with the child from applying for an
assessment). Proposed section 25A, which will be
inserted into the Principal Act by Schedule 19,
will allow a parent seeking to pay child support to an eligible
carer of their child to also seek an administrative assessment of
their child support liability. Proposed section 106A provides that
if the Registrar refuses to accept such an application, the
unsuccessful applicant may appeal against the decision to an
appropriate court.
Application: To applications or
assessments made on or after the prescribed day.
Schedule 20 will amend the
Social Security Act 1991 to allow 50 per cent of a
person's child support expenditure to be disregarded when
calculating the amount of family allowance payable to the person
(if family allowance is payable to the person). The amount of child
maintenance expenditure will be that estimated by the person and if
at any stage this estimate is more than 110 per cent of the actual
amount paid, the amount of family allowance payable is to be
recalculated (proposed section 886A).
The method statement for calculating family
allowance will be amended to provide that when calculating a
person's family payment income the person's 'deductible child
maintenance expenditure' for the year is to be deducted. Deductible
child maintenance expenditure is 50 per cent of the person's
expenditure on child support for the year. The definition of this
term includes one-off payments, periodic payments and other
benefits provided by one parent for the maintenance of the relevant
child. The value of any benefit provided will be that assessed
under the Social Security Act 1991 where that Act applies;
the value under a child support assessment under the Principal Act
if such an assessment has been made; or in other cases, the cost of
the benefit to the person who provided it.
Application: On a day fixed by
Proclamation.
-
- Commissioner of Taxation, 1996-97 Annual Report, p.
53.
- Ibid., p. 51.
- Ibid., p. 58.
Chris Field
20 November 1998
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1998
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