Family Assistance and Child Support Legislation Amendment (Protecting Children) Bill 2017 - Commentary on Ministerial Responses [2017] AUSStaCSBSD 414 (6 December 2017)

• Family Assistance and Child Support Legislation Amendment (Protecting Children) Bill 2017
• Retrospective effect63

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Family Assistance and Child Support Legislation Amendment (Protecting Children) Bill 2017

Purpose	This bill seeks to amend various Acts relating to family assistance and child support Schedule 1 amends the child support scheme to: • extend the interim period that applies for recently-established court-ordered care arrangements and provide incentives for the person with increased care to take reasonable action to participate in family dispute resolution; • allow tax assessment to be taken into account for child support purposes in a broader range of circumstances; • allow for courts to set aside child support agreements made before 1 July 2008, as well as allowing all child support agreements to be set aside without having to go to court if certain circumstances change; and • amend methods in relation to recovering child support debts and make consequential amendments Schedule 2 replaces the current FTB Part A immunisation requirement arrangements with new compliance arrangements
Portfolio	Social Services
Introduced	House of Representatives on 14 September 2017
Bill status	Before House of Representatives
Scrutiny principles	Standing Order 24(1)(a)(i) and (iii)

2.147 The committee dealt with this bill in Scrutiny Digest No. 12 of 2017. The Minister responded to the committee's comments in a letter dated 7 November 2017. The committee sought further information and the Minister responded in a letter dated 30 November 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is available on the committee's website.^[62]

Retrospective effect^[63]

Initial scrutiny – extract

2.148 A number of provisions^[64] in the bill appear to operate on past events, for example, agreements which exist, or assessments which were made, prior to commencement. In addition, item 174 refers to matters for ascertaining or determining components of certain income for periods before 1 July 2008. The explanatory memorandum provides no explanation as to whether any of these provisions, which operate on past events, would have a retrospective effect on any individual. The committee has a long-standing scrutiny concern about provisions that have the effect of applying retrospectively, as it challenges a basic value of the rule of law that, in general, laws should only operate prospectively (not retrospectively). The committee has a particular concern if the legislation will, or might, have a detrimental effect on individuals.

2.149 Generally, where proposed legislation will have a retrospective effect the committee expects the explanatory materials should set out the reasons why retrospectivity is sought, and whether any persons are likely to be adversely affected and the extent to which their interests are likely to be affected.

2.150 It is unclear from the bill or the explanatory materials as to whether these provisions would have a retrospective effect, and if so, if any individual would suffer any detriment as a result.

2.151 The committee therefore requests the Minister's advice as to whether any of the provisions listed above would have a retrospective effect, and if so, whether any person would suffer any detriment as a result.

Minister's first response

2.152 The Minister advised:

Amended tax assessments: Part 2, Schedule 1 of the Bill
Items 40 and 43 make amendments to sections 56 and 58A of the Child Support (Assessment) Act 1989 (CSA Act), by providing for an amended tax assessment that is issued on or after 1 January 2018 to apply to a child support assessment retrospectively in certain circumstances.
Where the Australian Taxation Office (ATO) issues an amended tax assessment that is higher than the previous tax assessment (for the same financial year) on or after 1 January 2018, it will always be applied retrospectively to the relevant child support period, regardless of the financial year for which the amendment is made. This may result in a child support overpayment or underpayment debt being raised against the person with the higher amended tax assessment. This outcome supports the principle that parents take financial responsibility for the costs of raising their children in line with their financial capacity to do so, and aligns with existing rules governing the retrospective application of taxable income (see subsections 58A(2) and 58A(3) of the CSA Act, which are being retained).
Where the ATO issues a lower amended tax assessment on or after 1 January 2018, the lower income will only be applied retrospectively to a child support assessment if the person took action to amend the assessment:

• within the lodgement timeframe for the original assessment; or

• within 28 days of being notified of the original assessment; or

• within 28 days of becoming aware of the error in the previous assessment (if the reason for not applying for an amendment earlier was due to reasons beyond the person's knowledge or control), or where special circumstances apply.

This will result in a retrospective adjustment to the child support assessment, and may create an overpayment or underpayment debt being raised against the other party in the child support case. Where the parent with the lower amended taxable income has taken timely action to amend their tax assessment, any debt raised against the other parent will be minimal. This outcome supports the fairer treatment of child support parents who take timely action to correct any errors made in their tax assessment, particularly where the error was made by another party, such as a tax agent or the ATO. These provisions also provide fairer outcomes for parents who, due to circumstances beyond their knowledge or control, or special circumstances such as serious ill health or natural disaster, are unable to amend their tax assessment earlier.
Backdating of a lower amended taxable income is also limited by the timeliness of the lodgement of the person's original tax assessment. Under current provisions, where a parent has not lodged their tax return when a new child support period starts, a provisional income is used. If the parent's original tax assessment is lodged late and is lower than the provisional income, the taxable income will only apply prospectively. If the parent then meets the relevant criteria under Item 43 (proposed new subsections 58A(3C) or 58A(3D) of the CSA Act) for retrospectively applying a lower amended tax assessment, the lower amended tax assessment would only retrospectively replace the original tax assessment, and would not replace the higher provisional income.

Child support agreements: Part 3, Schedule 1 of the Bill
Item 51
Items 46 and 47 make amendments to sections 35C and 95 of the Child Support (Assessment) Act 1989 (the CSA Act) to ensure that where a child support agreement contains provisions that are taken to be an order made by consent by a court under Division 4 of Part 7 of the CSA Act, section 142 of the CSA Act (which provides for when such an order would cease to be in force) would also have effect.
These amendments are consistent with current policy that certain provisions in child support agreements would cease to have effect when a child support terminating event occurs due to section 142, for example where a child leaves their parents' care to live independently or becomes a member of a couple. However, the Government has put forward amendments to place the current policy beyond doubt given differing judicial opinions in a recent case.^[65]
The application provision for these amendments at item 51 provides that items 46 and 47 would apply to days in a child support period that occurs on or after commencement of item 51, but would apply regardless of whether the child support agreement was made before or after commencement of item 51. This is because the amendments affirm how the current policy has always been intended to operate and would therefore not result in detriment to any person.
Subitems 74(3) and (6)
Division 2 of Part 3, Schedule 1 of the Bill inserts new provisions which enable the termination or suspension of a child support agreement for a child where the payee under the agreement ceases to be an eligible carer for the child. It is contrary to the objectives of the CSA Act for a person who does not have care of a child to be receiving child support payments.
Subitem 74(3) provides that where a payee under the agreement ceased to be an eligible carer of a child before commencement of item 74, continues not to be an eligible carer immediately before commencement of item 74 and the agreement would have otherwise been terminated under the new provisions, the child support agreement would be terminated from commencement of item 74. This provision ensures the preservation of entitlements before commencement, while all child support assessment from commencement would reflect the new policy, regardless of when the child support agreement was entered into. This is important as it would remove the unfair outcome under the current policy where a parent may be required to continue paying child support to a parent who has ceased to be an eligible carer for a child. Subitem 74(4) provides that item 74 does not affect the operation of a child support agreement for any other purpose and therefore, for example, a parent who has ceased to be an eligible carer for a child may still have the option to privately enforce contractual obligations.
Subitem 74(6) ensures an outcome similar to subitem 74(3) for the suspension of child support agreements in cases of temporary care changes.
Overpayments: Part 4, Schedule 1 of the Bill
Subitems 172(2) and (4)
Division 1 of Part 4, Schedule 1 of the Bill inserts new provisions which extend existing administrative and court recovery mechanisms for child support debts to carer liabilities, which occur where a parent has been overpaid child support. This is to ensure equitable and consistent treatment in the .collection of payer and payee debts.
Subitem 172(2) allows the expanded recovery mechanisms to be used where a payee was overpaid an amount before commencement of item 172. To enable this, subitem 172(4) provides that a debt raised under section 79 of the Child Support (Registration and Collection) Act 1988 before commencement is taken to be a carer debt for the purpose of the expanded recovery mechanism provisions under Part 4. In these cases, the Department of Human Services would first consider whether recovery of the overpayment could occur through a reduction in future child support entitlements or through cash repayment arrangements (that is, through mechanisms currently available to them). The expanded recovery mechanisms would only be used where recovery from future child support entitlements is not possible or where negotiation with the payee on cash repayment arrangements has not been successful. Currently, the only alternative for the payer is to pursue recovery through the courts, in contrast with the range of options available for the recovery of payer debts.
Item 174
This amendment aligns the tax return rules for pre-1 July 2008 periods with those that apply for post-1 July 2008 periods where a tax return was lodged outside the Australian Tax Office lodgement timeframe and a provisional income had been applied in the child support assessment. These amendments are necessary to ensure that child support arrears or overpayments are not raised against parents, where it is through no fault of their own and is due to the other parent not complying with their legal obligations.
Currently, where a parent lodges a tax return for a period before 1 July 2008, there is no limitation to retrospectively applying a taxable income to a child support assessment. For tax returns lodged in respect of periods from 1 July 2008, a lower taxable income would not be applied where that tax return was lodged outside the Australian Tax Office lodgement timeframe. This change was enacted so that a parent could not be disadvantaged in their child support assessment by the other parent not lodging a tax return in line with legal requirements.
The continuation of the pre-1 July 2008 rules has been raised by the Commonwealth Ombudsman as they have resulted in large overpayments being raised against payees who had received and spent the child support received in good faith (based on a provisional income).^[66] Generally where a taxable income has been applied retrospectively and was not reflective of the other parent's earning capacity, a parent could seek a review under departure provisions. However parents can no longer access the departure provisions in these cases given the time elapsed and the seven year limitation on backdating departure orders.
Items 176 and 183
At present, a new care percentage would only have effect from the date of notification where notification of the care change is delayed (more than 28 days after the care change). Item 176 amends the current rules so that a decreased care percentage would be reflected in the child support assessment from the date of event (an increased care percentage would continue to be reflected from the date of notification).
Item 183 provides that these new rules would apply in general for care changes that occur after item 183 commences. However, where a care change occurs before item 183 commences but notification is received more than 26 weeks after item 183 commences, the new care percentage date of effect rules would also apply to those care changes. This provides parents who have delayed in notifying of a care change with a transitional 'grace' period of 26 weeks from commencement to notify of the care change before they become subject to the new care percentage date of effect rules.
As a result, a parent who had reduced their care of a child before commencement but failed to notify of the change until more than 26 weeks later, would have that reduced care percentage reflected in their child support assessment from the date of the care change. This could lead to a child support overpayment or arrears debt being raised against that parent in some cases. However, this is appropriate given the reduced care percentage is an accurate measure of the lower care costs incurred by that parent since the date of the care change and the ability to notify within a timely manner was within the parent's control.

Committee's first comment – extract

2.153 The committee thanks the Minister for this detailed response. In relation to items 40 and 43, the committee notes the Minister's advice that these provisions provide for an amended tax assessment that is either issued on or after 1 January 2018 to apply a child support assessment retrospectively. The committee also notes the Minister's advice that when the ATO issues an amended tax assessment that is higher than the previous tax assessment (for the same financial year) it will always be applied retrospectively to the relevant child support period as it aligns with existing rules governing the retrospective application of taxable income, but that this supports the principle that parents take financial responsibility for the costs of raising their children in line with their financial capacity to do so.

2.154 In relation to item 51 the committee notes the Minister's advice that the amendments provide for items 46 and 47 to apply to the days in a child support period that occur on or after commencement of this provision, but would apply regardless of whether the child support agreement was made before or after commencement of item 51. The committee notes the Minister's advice that these amendments affirm how the current policy has always been intended to operate and would therefore not result in detriment to any person. However, the committee notes that the Minister has also advised that the government has put forward amendments because of differing judicial opinions in a recent case. The committee considers that although the justification provided is sufficient to justify amending the law with prospective application, the fact that a court has interpreted a law contrary to the executive government’s understanding of the original provisions ‘intended meaning’ may not be a sufficient justification to apply the law retrospectively. It is unclear whether the proposed changes would apply to any cases currently before the courts involving the interpretation of the existing provisions.

2.155 In relation to subitems 74(3) and (6) the committee notes the Minister's advice that these provisions ensures that all child support assessments from commencement would reflect the new policy, regardless of when the agreement was entered into, as this removes the unfair outcome under the current policy where a parent may be required to continue paying child support to a parent who has ceased to be an eligible carer for a child.

2.156 In relation to subitems 172(2) and (4) the committee notes the Minister's advice that these new provisions extend existing administrative and court recovery mechanisms for child support debts to carer liabilities and the provisions allow the expanded recovery mechanisms to be used where a payee was overpaid an amount before commencement. The committee also notes the Minister advice that the expanded recovery mechanisms would only be used where recovery from future child support entitlements is not possible or where negotiation with the payee on cash repayment arrangements has not be successful.

2.157 In relation to item 174 the committee notes the Minister's advice that this provision aligns the tax return rules for pre-1 July 2008 periods with those that apply for post-1 July 2008 periods where a tax return was lodged outside the ATO lodgement timeframe and a provisional income had been applied in the child support assessment, and that these amendment are necessary to ensure that child support arrears or overpayment are not raised against parents, where it is through no fault of their own and is due to the other parent not complying with their legal obligations.

2.158 In relation to items 176 and 183 the committee notes the Minister's advice that generally the new rules apply for care changes that occur after item 183 commences, but where notification is delayed the new care percentage date of effect rules would also apply to those care changes. The committee notes the Minister's advice that this provides parents who have delayed notifying of a change of care with a grace period of 26 weeks from commencement to notify of the change before they become subject to the new rules. The committee notes the Minister's advice that as a result, a parent would have that reduced care percentage reflected in their child support assessment from the date of the care change, but this is appropriate given the reduced care percentage is an accurate measure of the lower care costs incurred by that parent since the date of the care change and the ability to notify within a timely manner.

2.159 The committee requests that the key information provided by the Minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.160 In light of the detailed information provided in relation to items 40, 43, 176 and 183 and subitems 74(3) and (6), 172(2) and (4), the committee makes no further comment on these matters.

2.161 In relation to item 51, the committee seeks the Minister's further advice as to whether the retrospective application of the provision would have any effect on cases currently before the courts involving an interpretation of existing sections 35C and 95 of the Child Support (Assessment) Act 1989.

Minister's response

2.162 The Minister advised:

I note the request at paragraph 2.102 of Scrutiny Digest 13 of 2017 (15 November 2017) to update the explanatory memorandum to include the information provided in my earlier letter of 7 November 2017 to you, regarding the retrospectivity of provisions contained in the Bill. I intend to table an addendum to the explanatory memorandum that will include this information.
I provide the following information in response to the Committee's comments at paragraph 2.104 of Scrutiny Digest 13 in relation to item 51 of Part 3, Schedule 1 of the Bill. The application provision at item 51 enables the amendments made by items 46 and 47 of the Bill to apply to terminating events that occur on or after commencement. The amendments will not have retrospective effect, however, they may apply to any agreement taken to be a consent order, regardless of whether the agreement was made before or after commencement of the amendments.
In relation to whether the proposed changes would apply to any cases currently before the courts. Any decision made by the courts involving an interpretation of existing sections 35C and 95 of the Child Support (Assessment) Act 1989 before the commencement of item 51 would be upheld, and decisions made after the commencement of item 51 would be made in line with the amended sections 35C and 95.

Committee comment

2.163 The committee thanks the Minister for this response and welcomes the Minister's undertaking to amend the explanatory memorandum to include the key information requested by the committee.

2.164 The committee notes the Minister's advice that the amendments will not have retrospective effect but may apply to an agreement taken to be a consent order that was made before commencement of the amendments, and that any decision of the courts involving an interpretation of the existing sections made after the commencement of item 51 would be made in line with the amended provisions.

2.165 The committee notes that it appears that this could mean that proceedings brought under the existing arrangements, but where the court's decision is handed down after item 51 commences, would need to apply the new law, which could retrospectively subject such cases to the new law, although it is not clear to the committee whether any person could suffer detriment as a result.

2.166 The committee requests that the further information provided by the Minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.167 In light of the information provided, the committee makes no further comment on this matter.

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[62] See correspondence relating to Scrutiny Digest No. 12 of 2017 available at: www.aph.gov.au/senate_scrutiny_digest

[63] Schedule 1, item 43, new paragraph 58A(3B)(b)(iv) and 58A(3d)(c)(iii); and items 51; 74(3) and (6); 172(2) and (4); 174; 176; and 183. The committee draws Senators' attention to these provisions pursuant to principle 1(a)(i) of the committee's terms of reference.

[64] See Schedule 1, item 43, new paragraph 58A(3B)(b)(iv) and 58A(3d)(c)(iii); and items 51; 74(3) and (6); 172(2) and (4); 174; 176; and 183.

[65] In the judgement of Masters & Cheyne [2016] FamCAFC 225, one of the judges (Murphy J) expressed a view consistent with the current policy while one of the other judges (Alridge J) expressed a view inconsistent with the current policy.

[66] Commonwealth Ombudsman's Annual Report 2012-13.