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Child Support Legislation Amendment (Reform of the Child Support
Scheme — Initial Measures) Bill
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Child Support
Legislation Amendment (Reform of the Child Support Scheme — Initial Measures)
Bill
House: House of Representatives
Portfolio: Families, Community Services and Indigenous Affairs
Commencement: Most of the Bill commences on the later of the day after
Royal Assent or
The Bill contains the first stage of the child support reforms to be implemented by the Government in response to the report of the Ministerial Taskforce on Child Support (the Parkinson Report).(1)
The Child Support Scheme has been in place since 1988. The introduction of the Scheme was a major, controversial reform. It was expected that it would take many years to refine and become accepted. The CSS represented the government intervening in one of the most sensitive and traumatic points in the family life cycle. Given the acrimony and emotions associated with family breakdown, the proposal for a government administered maintenance collection process could not avoid being the focus for dissatisfaction and also grief and anger for individuals caught up in the turmoil of loss of family life and children.
The Scheme was examined by the Joint Standing Committee on Certain Family
Law Issues in the early 1990’s. The Committee’s report (usually referred
to as the Price Report) was the basis for considerable refinement of the
scheme over the last twelve years.(2) The Scheme was again
examined more recently by the House of Representatives Committee on Family
and Community Affairs. A report was released on
On
The Parkinson Report was released on
The changes proposed were to be implemented in stages from July
‘From July
To support the introduction of the new Scheme, the Government will also be investing more resources to improve the service delivery of the Child Support Agency. Changes will include wider availability of intensive assistance to parents with difficult or complex circumstances, better training and improved quality control. For example, introducing call recording will ensure that individual Child Support Agency staff are accountable for information and advice they provide to parents.’…..
‘From January 2007, the Australian Government will:
‘From July 2008, the Australian Government will:
Further details of the changes are provided in fact sheets released at the time.(5)
This Bill contains some of the first set of changes to be implemented
in July
Schedule 1 of the Bill provides for an increase in the minimum rate of child support from $5 per week to $6 per week. The minimum rate was introduced in 1999 and was one of the first changes to the operation of the Child Support Formula since its introduction by the passage of the Child Support (Assessment) Act 1989. Before 1999 any payer in receipt of a government income support payment such as a pension or an allowance such as Newstart Allowance was not required to pay maintenance. The introduction of a minimum child support liability implemented recommendation No 122 in the 1994 Price.(6)
The minimum payment has not been indexed since its introduction. The rate increase restores its value and the new indexation provisions ensure that it will be increased in line with movements in the CPI. These changes are in line with recommendations 1.24 and 1.29 of the Parkinson Report.
‘1.24 All payers should pay at least a minimum rate equivalent to $5 per week per child support case, indexed to changes in the CPI since 1999. The increased amount should be rounded to the nearest 10 cents.
1.29 The minimum rate and the fixed payment should be indexed to the CPI from the end of the 2004–05 financial year. The increased payment should be rounded to the nearest 10 cents.’
The report had further recommendations on the minimum rate.(7) They included the waiver of the minimum rate where the payer had regular contact or shared care (1.25). Also an increased minimum payment of $20 per child was recommended for parents not in receipt of income support who report an income below the Parenting Payment Single maximum rate (1.27).
These recommendations appear to be on the agenda for the third stage of the Government legislative program to be implemented in July 2008.(8)
Schedule 2 of the Bill reduces the cap on
the income to be assessed for child support purposes under the child support
formula. The original report that the formula was based on, Child Support:
Formula for Australia suggested that the cap be set at twice average
weekly earnings (AWE).(9) However, the cap was set at two and
a half times AWE in the original legislation. The 1994 Price Report recommended
that the cap be reduced to twice AWE. In the Child Support Legislation
Amendment Bill 2001 the Government attempted to lower the cap by substituting
the lower All Employees Average Weekly Earnings (AEWE) for the Full-time
Adult Average Weekly Total Earnings (AWE), but was blocked in the Senate.
This Bill includes the same amendment for a second time. The February
The Parkinson Report recommends a new formula
for assessing child support. The cap as it presently exists will have
no place if that formula is introduced. Under the Parkinson formula child
support is assessed on the basis of the combined income of both parents.
A cap is involved but it is a cap on the level of combined income above
the self support components of the parents. Recommendation 1.8 provides
for a cap of 2.5 times Male Total Average Weekly Earnings. This translates
to $160,386 in
Under the Child Support Assessment Act 1989 a grounds for departing from a formula assessment under the Act, is that a parent has a capacity to earn that is greater than they are exercising. The amendments in schedule 3 of this Bill closely follow the recommendations of the Parkinson Report (Recommendations 15.1 and 15.2). The present provisions were considered to be too broad and should be specified in more detail to ensure that:
Parents should only be deemed to be earning more than they are in fact earning, based on unutilised earning capacity, where, on the balance of probabilities, a major motivation for reduced workforce participation is to affect the level of child support payments.(12)
At present up to 25% of a payer’s child support liability can be provided through the payment of such things as child care costs, school fees and medical costs amongst others, even where the payee does not agree. The Parkinson Report recommended that the limit be increased to 30% (Recommendation 20.1). Schedule 4 of the Bill implements this recommendation. The reasoning behind this change was as follows:
Such payments allow the paying parent to be confident that the children are benefiting and to have some sense of control over how his or her child support is used, without impinging upon the payee’s discretion about how most of the payment is applied...... The limit on credit is a balance between ensuring that the carer has sufficient ongoing cash-flow to cover the everyday requirements of the children and adequately maintaining the paying parent’s sense that he or she has an involvement in how his or her child support payments are expended. Given the generous nature of the government contribution to children through FTB, there is less need now for a substantial majority of child support to be paid in cash(13)…..
Schedule 5 of the Bill includes amendments
to ensure that there is no legal doubt that ex-nuptial children in
The financial impact of these changes is negligible with saving to the Government of $2.3 million over 4 years.
Item 7 of Schedule 1 inserts new subsections 66(4), (5) and (6) into the Child Support (Assessment) Act 1989. They provide for an increase in the rate of the minimum payment to $320 per annum and for the annual indexation of that rate according to movements in the CPI.
Schedule 2 removes references to ‘AWE’ from the Child Support (Assessment) Act 1989 in respect of the cap on child support income and substitutes ‘AEWE’. This ensures that the cap will be calculated using All Employees Average Weekly Earnings (AEWE) rather than Full-time Adult Average Weekly Total Earnings (AWE). The resulting cap will be only about 75% of the existing cap.
Item 8 of Schedule 3 inserts new subsections 117(7A) and (7B) into the Child Support (Assessment) Act 1989. They specify the situations where the earning capacity of a parent can be used as a reason to depart from the assessment formula.
Item 1 of Schedule 4 omits ‘25%’ from Subsection 71C (1) of the Child Support (Registration and Collection) Act 1988 and substitutes ‘30%’. This change increases the proportion of a child support assessment that can be paid as prescribed non-agency payments such as school fees, child care costs or medical fees.
Schedule 5 addresses a technical legal issue with regard to the
coverage under Child Support (Assessment) Act 1989 and the Child
Support (Registration and Collection) Act 1988 of ex-nuptial children
in
the child support legislation be amended to:
(a) introduce a minimum child support payment of $260 per annum where the formula results in an assessment less than this amount; and
(b) allow the Child Support Registrar to waive the minimum payment of $260 in special circumstances.
1.26 Payers on the minimum rate should be allowed to remain on that rate for one month after ceasing to be on income support payments or otherwise increasing their income to a level that justifies a child support payment above the minimum rate.
1.27 Parents who are not in receipt of income support payments but report an income lower than the Parenting Payment (Single) maximum annual rate should pay a fixed child support payment of $20 per child per week and this should not be reduced by regular contact.
1.28 The fixed payment of $20 per child per week should not apply if the Child Support Registrar is satisfied that the total financial resources available to support the parent are lower than the Parenting Payment (Single) maximum annual rate. In those cases, the minimum rate per child support case should apply.
This paper has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Information and Research Service, nor do they constitute professional legal opinion.
ISSN 1328-8091
© Commonwealth of Australia 2006
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Published by the Parliamentary Library, 2006.