2.1
This chapter provides background information on Australia's Child Support Scheme (the CSS). The CSS facilitates the assessment, collection, and transfer of child support payments between separated parents to ensure that children are adequately financially supported.
2.2
This chapter draws extensively from evidence in the committee's first interim report and, consistent with that report, utilises the term 'parent' broadly to include any person who provides ongoing care for a child—such as a legal guardian, grandparent, or other family member.
Child support statistics
2.3
The total number of child support cases increased each year from 1991 (103 106 cases) to 2014 (795 000 cases). Recent figures from the Department of Social Services (DSS), shown in Table 2.1 below, illustrate that the number of child support cases has remained relatively stable over the past six years.
Table 2.1: Number of child support cases
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|
|
|
|
|
|
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789 500
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783 078
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778 687
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777 884
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767 247
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759 931
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Source: Department of Social Services, Annual Report 2015–16, p. 34; Department of Social Services, Annual Report 2018–19, p. 42; Department of Social Services, Annual Report 2019–20, p. 42.
2.4
Approximately 60 per cent of payees and 25 per cent of payers receive some form of income support payment, such as a 'Parenting Payment, Newstart Allowance, Carer Payment or Disability Support Pension'. Parents involved with the CSS generally receive lower incomes compared to parents who have not separated. According to DSS, the 'median adjusted taxable income of child support payees at June 2019 was $23 953', whereas the 'median adjusted taxable income of payers was $47 985'.
2.5
The committee was also advised that, as at the end of March 2021, around 30 per cent of cases had amounts payable of $500 or less per annum, and 61 per cent involved payments of less than $5000. Further, the median child support payable under the formula was $3354 per annum; or approximately $65 per week.
2.6
Not all separated parents utilise the CSS; some come to arrangements privately that they manage between themselves with no involvement from Services Australia. Of those parents that utilise the CSS, they can either elect to have the payment transferred to them privately by the other parent (Private Collect) or have Services Australia collect the payment on their behalf (Child Support Collect).
2.7
As shown in Figure 2.1 below, in 2019–20, Services Australia worked with separated parents to facilitate the transfer of $3.774 billion to support approximately 1.2 million children.
2.8
The Services Australia Annual Report 2019–20 states that 51.3 per cent of cases were Private Collect.
General commentary on the CSS
2.9
Over the years, the CSS has received a discordant mix of praise and criticism. In its favour, the former Chief Justice of the Family Court of Australia (Family Court), the Hon. Diana Bryant AO QC, described the CSS as 'one of the most progressive child support systems in the world'.
2.10
Similarly, the Law Council of Australia noted that, although no system is perfect or immune from complaint, the low number of appeals indicates that the system is working for most participants. Specifically, the council said:
Whilst no system of a [Child Support Scheme (CSS)] is perfect, nor will any CSS ever be immune from complaint, and recognising that the child support formula has been in place since 2008, it is the experience of members of the [family law system] that the CSS works for most families. That experience accords with the evidence of the low number of appeals to the [Administrative Appeals Tribunal (AAT)] and from the AAT to the [Federal Circuit Court of Australia (Federal Circuit Court)].
2.11
The Deputy Secretary of the Social Security Stream within DSS, Mr Matt Flavel, stated that:
… there are around 1.2 million parents who have some involvement in the child support system, so it's a relatively large number. I think it's taken as read that there will always be a small proportion who may have concerns. The formula and the way it's been applied has been quite robust. It's a model that's looked upon internationally as providing speedy resolution compared to court based arrangements and, compared to the arrangements prior to 1988–89, it's seen as far better in terms of outcomes, by which I mean the standard figure that we use is that 94 per cent of all liabilities are transferred or paid. In other words, it is a system that's capable of generating the right outcomes in the interests of the children involved.
2.12
Notwithstanding the above commentary, many submitters wrote to the committee about the CSS's issues, and its perceived inequality and unfairness. These issues are discussed in detail in chapter 3 of this report.
Legislative framework
2.13
The Child Support (Assessment) Act 1989 (CSA Act), the Child Support (Registration and Collection) Act 1988 (CSRC Act), and their subsequent regulations provide the legislative framework for the CSS. The legislation delegates decision-making powers to the Child Support Registrar (the Registrar), and aims to administer child support outside of the family courts where possible.
2.14
The objects of the CSA Act are to ensure:
that children receive a proper level of financial support from their parents;
that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support;
that the level of financial support to be provided by parents for their children should be determined in accordance with the costs of the children;
that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings;
that children share in changes in the standard of living of both of their parents, whether or not they are living with both or either of them; and
that Australia is in a position to give effect to its obligations under international agreements or arrangements relating to maintenance obligations arising from family relationship, parentage, or marriage.
2.15
The objects of the CSRC Act are to ensure:
that children receive from their parents the financial support that the parents are liable to provide;
that periodic amounts payable by parents towards the maintenance of their children are paid on a regular and timely basis; and
that Australia is in a position to give effect to its obligations under international agreements or arrangements relating to maintenance obligations arising from family relationship, parentage or marriage.
2.16
Hence, the CSS has two main functions: firstly, to assess the appropriate amount of child support to be paid for a child following the separation of his or her parents; and secondly, to collect and transfer child support from one parent to the other.
2.17
Since the CSS was first introduced, the Government has consistently been of the view that assessments for child support should be facilitated by an administrative agency. This approach is aimed at relieving pressure on the courts, and assisting parents so they are not 'faced with the costs, delays and emotional stress of court proceedings' in the first instance.
2.18
While the legislation is administered by DSS, the CSS itself is delivered by Services Australia, which manages applications for child support assessments and facilitates the collection and transfer of child support payments.
2.19
According to section 5 of the CSA Act, a 'child support case, in relation to a child, is the administrative assessments for child support for all children who are children of both of the parents of the child'. DSS commented that:
It is not uncommon for parents who have more than one child support case to be a payer in one case and a payee in another, although the majority (89 per cent) of payees are female and the majority (also 89 per cent) of payers are male.
Interaction between the Scheme and court orders
2.20
In relation to the interaction of Family Court orders and the CSS, DSS advised the committee that the:
… main interaction between the family law system and the child support system happens where separated parents have formalised their care arrangements for their children through family law processes, such as in a court order or parenting plan.
In some cases, the actual care arrangements may differ from those determined in the parents’ court order, parenting plan or written agreement. This may happen for a range of reasons, including where parents agree to a different arrangement, where one parent fails to provide their court-ordered level of care, or where one parent denies the other parent access to their court-ordered level of care.
2.21
While the level of care used to assess child support is usually based on the actual care of the children, in certain circumstances where care is disputed, a person's care percentage may be calculated according to the existing court order or parenting plan for an interim period. These arrangements are discussed in more detail in chapters 3 and 4.
2.22
Of those that do utilise the CSS for assessment and collection of child support, approximately 1.66 per cent of parent combinations are using court ordered care arrangements.
Child support assessments
The initial assessment
2.23
Following separation, a parent can apply to Services Australia for a child support assessment 'if they are not living with the other parent ... on a genuine domestic basis' regardless of the level of care that they provide for the child.
2.24
To be eligible, the child must meet all of the following requirements:
the child must be under 18 years of age;
the child must not be a member of a couple;
the child must not be cared for under a child welfare law of Western Australia or South Australia; and
the child must be a citizen or resident of Australia or a reciprocating jurisdiction at the time of the assessment.
The assessment formula
2.25
The assessment formula bases its calculations for the amount of child support payable on both parents' combined adjusted taxable income and the level of care that they provide for the child.
2.26
The basic formula for calculating the amount of child support to be paid consists of eight steps, which determine:
step 1—each parent's child support income;
step 2—each parents' combined child support income;
step 3—each parent's income percentage;
step 4—each parent's percentage of care (see Table 2.3);
step 5—each parent's cost percentage (see Table 2.2);
step 6—each parent's child support percentage;
step 7—the costs of the children (see Appendix 4); and
step 8—the child support amount.
2.27
DSS explained how the child support amount is applied:
The parent who has a positive child support percentage under step six will be the payer. The annual rate of child support payable is worked out by multiplying the payer's child support percentage from step six by the costs of the child from step seven.
2.28
The assessment also accounts for the amount needed to cover a parent's living expenses, any relevant dependent child expenses, and if a parent has multiple child support cases.
2.29
Services Australia uses information from the Australian Taxation Office (ATO) to assess the income status of both parents. If a parent has not lodged a tax return for the previous financial year, Services Australia can calculate a provisional income amount and undertake a new assessment once the tax return has been lodged.
2.30
Each parent's cost percentage is calculated according to their percentage of care:
Table 2.2: Each parent's cost percentage for the child
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0 to less than 14%
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Nil
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14% to less than 35%
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24%
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35% to less than 48%
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25% plus 2% for each percentage point over 35%
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48% to 52%
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50%
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More than 52% to 65%
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51% plus 2% for each percentage point over 53%
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More than 65% to 86%
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76%
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More than 86% to 100%
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100%
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Source: Department of Social Services, Submission 95, p. 12.
2.31
The costs of the child are generally calculated in accordance with the parents' combined total income for the most recent financial year. Services Australia adjusts the costs of the child each year to reflect current costs and incomes. The costs of the child set for the year 2021 is available at Appendix 4.
2.32
Level of care is defined into five categories, as shown in Table 2.3 below.
Table 2.3: Level of care
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Below regular
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0 to less than 14%
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0 to 51
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Regular
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14% to less than 35%
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52 to 127
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Shared
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35% to 65%
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128 to 231
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Primary
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More than 65% to 86%
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232 to 313
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Above primary
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More than 86% to 100%
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314 to 365
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Source: Department of Social Services, Submission 95, p. 14.
2.33
A parent assessed as providing below regular care is assessed as not contributing to the costs of the child, and, therefore, the level of care will not affect the child support assessment. A parent assessed as providing regular care or more is recognised to be contributing to the costs of the child and will be assessed as either a payee or payer according to their income. A parent who has more than 65 per cent care of the child will not be assessed to pay child support 'even if the formula would otherwise have this result'.
2.34
In its submission, DSS stated that disputes concerning care arrangements were 'best dealt with through mediation or dispute resolution, or pursued through the family law system'. The Attorney-General's Department (AGD) noted that for care disputes, Services Australia may determine the level of actual care according to an existing arrangement (such as a court order, parenting plan, or written agreement formalised by the family courts) until a new assessment has been completed.
Changing an assessment
2.35
Services Australia can change a child support assessment if they are 'satisfied there are special circumstances and the change would be fair to both parents and the child'.
2.36
In its submission, DSS told the committee:
The formula, as it works, is based on adjustable taxable income, where it then is expected to add back a number of benefits to represent the true financial circumstances of … the payer. If there is a circumstance where someone believes that someone is arranging affairs to be beneficial, they can apply for what is known as a change of assessment.
2.37
A parent can apply for a change of assessment if there is evidence of changes to at least one of ten conditions:
costs of visiting or communicating with the child;
special needs of the child;
costs of education or training;
additional payments or transfers of money, good or property;
necessary commitments of self-support;
income, assets and earning capacity;
duty to maintain another child or person; and
responsibility to maintain a resident child.
2.38
Most change of assessment applications are managed and decided by Services Australia. Applications that are unable to be managed administratively are directed to the relevant court for a decision. For example, section 118 of the CSA Act provides that a parent can apply to a court for a change of assessment decision in relation to a case that has ended or if a 'child support agreement has been set aside by the court under section 136'.
Change of assessment statistics
2.39
In 2019–20, over 15 000 change of assessment in special circumstances applications were received. The majority (59.50 per cent) of these related to a change to parental income; property; financial resources; or earning capacity, and 45.74 per cent of the finalised applications resulted in a change to the rate of child support to better reflect the circumstances of the parents and children. This figure was a significant reduction on the prior two years, with Services Australia receiving 19 022 applications in 2017–18 and 17 168 in 2018–19.
2.40
Where a person disagrees with the decision of Services Australia they can seek merits review in the Administrative Appeals Tribunal (AAT). The AAT can independently review these objections to child support decisions.
2.41
In 2019–20, the AAT received 2594 applications for review. Of the matters it finalised in 2019–20, the AAT amended 880 decisions made by Services Australia and left 1430 decisions unchanged. The two most prevalent decisions for which parents sought review were in relation to a change of assessment, and disputed care arrangements for children.
2.42
Services Australia also provided the committee with information on the number of applications received for the last 5 years for review of child support decisions, as well as the outcomes for change of assessment applications finalised in 2019–20. These statistics are shown in Figure 2.2 and Table 2.4 below.
Table 2.4: Child Support Change of Assessment applications finalised in the 2019-20 financial year, broken down by outcome
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Varied- Increase
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Varied - Decrease
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Refusal
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Withdrawn
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Ineligible
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Agreement Accepted
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9440
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8693
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627
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4759
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4988
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23
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Source: Services Australia, response to question on notice, received 11 December 2020. Note: Total applications finalised in a financial year can include ones received in the previous financial year.
Reviewing and appealing an assessment
2.43
If a parent does not agree with the decision for child support made by Services Australia, they can formally object to the decision in writing, within 28 days of receiving the Registrar's notice of decision (or 90 days for a parent living in an overseas reciprocating jurisdiction).
2.44
Services Australia can consider objections if the parent believes that Services Australia has used incorrect information, has not considered all related matters, missed important details or not applied the law correctly. A party cannot object to parentage, the collection of payments, changing a Departure Prohibition Order or refusing a Departure Authorisation Certificate.
2.45
For matters unable to be reviewed as part of the objection process by Services Australia, a parent can appeal the decision to the Social Services and Child Support Division of the AAT. In 2018–19, only 14 per cent of applications to this Division related to child support matters (noting that 85 per cent of applications sought to appeal Centrelink decisions).
2.46
The AAT's annual report recorded the following figures for decisions relating to child support matters finalised in 2018–19:
Table 2.5: Decisions finalised by the AAT for child support matters in 2019–20
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Care percentage decision
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912
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Change of assessment
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854
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Non-agency payment
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173
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Particulars of the assessment
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282
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Refusal of extension of time to object
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131
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Other
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217
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Total decisions
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2569
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Source: Administrative Appeals Tribunal, Annual Report 2019–20, p. 50.
2.47
If a parent is dissatisfied with the decision made by the Social Services and Child Support Division of the AAT to affirm, vary or set aside the application, they can apply for a second review with the AAT's General Review Division.
2.48
Where a parent is still not satisfied with the AAT's decision, they can appeal the decision with the Family Court or the Federal Circuit Court (now merged and known as the Federal Circuit and Family Court of Australia) on a question of law. In 2018–19, only 22 of the 85 234 filings in the Federal Circuit Court were a result of child support appeals from the AAT.
2.49
The Law Council and the Hon. Diana Bryant were of the view that the low number of appeals to the Federal Circuit Court indicated that the application process to the AAT worked well.
Collecting child support payments
2.50
There are three methods through which child support can be paid or received:
Self-management—parents agree upon and manage the amount, method and frequency of child support payments;
Private Collect—arranged following a child support assessment, agreement or court order specifying the amount of child support to be paid; or
Child Support Collect—Services Australia coordinate the frequency and method of child support payments and facilitate collection and transfer between the receiving and paying parent.
2.51
Mr Bruce Young, the Acting General Manager of the Child Support, Indigenous and Tailored Services Division of Services Australia, noted that child support payments are often made voluntarily via deductions from wages, or direct payments—including where payments are collected by Services Australia.
2.52
In relation to the collection and transfer of child support payments, where a maintenance liability has been registered in Australia and either parent lives overseas, DSS reported that Australia has established arrangements with 97 reciprocating jurisdictions.
Remedies for non-compliance
Recovery outside of the courts
2.53
Services Australia can employ a number of strategies to attempt to recover unpaid child support before the matter needs to be dealt with by the courts.
2.54
In situations where payers are not forthcoming, Services Australia can negotiate arrangements with the parent in the first instance, and if unsuccessful, can seek information from third parties, or garnishee bank accounts or wages. When required, Services Australia can also pursue Departure Prohibition Orders and litigation action through the courts.
2.55
To manage serious instances of non-compliance, Services Australia uses a number of techniques to identify instances of 'fraud, serious child support avoidance or income minimisation'—including optical surveillance and lodgement enforcement action through the ATO for parents who have not submitted annual tax returns.
2.56
Services Australia noted that it cannot collect overdue amounts under self‑managed child support arrangements; however, it can collect overdue payments at any time for Child Support Collect arrangements, and for up to three months (or nine months in exceptional circumstances) for Private Collect arrangements.
2.57
A witness told the committee about her experience trying to recover outstanding child support:
He currently owes over $12,000. Every time an assessment is done he puts in an objection and then that takes quite some time ... [I]t took … six months of being called, giving evidence and sending this and that in for them to make that decision … When I ring Child Support, they go: 'Well, there's not much we can do. You can't get blood out of a stone.' That's all they will do, yet I've had to access my super to keep the family running.
…
He's supposed to pay $400 a fortnight … Intermittently he might pay—for the last financial year he's paid a total of $3,900 for four children. When we were married we used to live off $2,800 a week … Everyone I've had in Child Support has been lovely … but at the end of the day nothing is done to get me that money. They just say: 'You'll get it eventually. When he retires you'll get it out of his super.' It's not going to be much use to me when I'm 70!
2.58
In 2019–20, Services Australia issued 13 996 'nudge letters' to parents who had missed their child support payments. These letters resulted in the full payment of approximately $18.1 million in outstanding payments, and a further $12.2 million where parents entered into payment arrangements.
2.59
In addition, through its work with the ATO, Services Australia can arrange for any available tax refund to be used to reduce an outstanding child support amount. Employer withholding can also be initiated and deductions from Centrelink or Department of Veteran's Affairs payments can be arranged to recover a current liability or debt.
2.60
Services Australia can enforce the payment of child support liabilities by stopping debtors from leaving Australia, issuing them with a Departure Prohibition Order (DPO). In 2019–20, Services Australia issued 741 DPOs, which resulted in the collection of just over $25 million in outstanding child support payments.
2.61
If the various collection methods used by Services Australia fail, a parent can pursue unpaid child support through the courts.
Recovery through the courts
2.62
A number of matters relating to aspects of the CSS can be pursued through the family law system. This includes change of assessments, reviews and appeals of child support decisions, court orders and child maintenance, as well as issues with proving parenting.
2.63
In cases where child support matters cannot be dealt with administratively by Services Australia, legislation provides for a parent to pursue action through the courts. DSS told the committee:
The main interaction between the family law system and the child support system happens where separated parents have formalised their care arrangements for their children through family law processes, such as in a court order or parenting plan.
2.64
The AGD further explained:
The CSA Act and CSRC Act, and the relevant rules of court, provide the family courts with certain powers in relation to child support matters, including the power to enforce a child support liability or recover a child support debt … [T]he CSRC Act provides that a child support liability may be recovered in a family court by a child support Registrar or payee of a liability … [T]he CSA Act [also] provides that the majority of provisions of the Family Law Act apply to proceedings under the CSA Act.
2.65
Although unable to take legal action in more than one court at the same time for the same debt, the Registrar may take successive actions using different enforcement processes. With this considered, DSS told the committee:
… the child support system recognises a parent's obligation to provide support for their child is not tied to the other parent's compliance with a court order or care agreement.
Enforcement hearings and orders
2.66
If a paying parent owes child support under a Family Court or Federal Circuit Court order, agreement or child support liability, the payee can apply for an enforcement hearing to recover the outstanding child support by filing an application and an affidavit.
2.67
At least 14 days prior to an enforcement hearing, the payee must personally serve the payer with the following:
a copy of the application;
a list of documents to be produced (and written notice demanding the production of those documents); and
a copy of the Family Court and Federal Circuit Court's Enforcement Hearings brochure.
2.68
At the hearing, the court will identify the amount of child support that is owed by the paying parent. It can then make an order for the amount be paid, either in full or by instalments. The payer may also be examined about their financial affairs and be asked to provide evidence in support of their failure to fulfil their obligation to pay child support. The court is unable to assess an order, agreement or child support liability at the enforcement hearing.
2.69
In some circumstances the payer is not required to attend the enforcement hearing:
A payer may, with the agreement of the payee, produce the documents to the payee at a time and place agreed before the day of the enforcement hearing. If the payee is satisfied with the information provided, the payee may give written notice to the payer and the Court, discontinuing the application. In this situation, the payer is no longer required to attend the enforcement hearing.
2.70
The courts can impose a penalty for a parent who does not provide the required documentation, does not attend the hearing, or if the parent fails to provide an answer to the court's satisfaction.