Bills Digest no. 142 2005–06
Child Support Legislation Amendment (Reform of the Child Support
Scheme — Initial 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
Endnotes
Contact Officer & Copyright Details
Passage History
Child Support
Legislation Amendment (Reform of the Child Support Scheme — Initial Measures)
Bill 2006
Date introduced: 10 May 2006
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 1 July 2006.
A detailed table of commencement information is provided in clause 2 of
the Bill.
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 29
December 2003 entitled, Every picture tells a story: Inquiry
into child custody arrangements in the event of family separation.(3)
Amongst other things the report recommended that a comprehensive re-evaluation
of the Scheme should be set in train.
On 16 August 2004,
the then Minister for Children and Youth Affairs, Larry
Anthony announced the establishment of a ministerial
taskforce headed by Professor Patrick Parkinson,
of the Faculty of Law, University
of Sydney, and Chairperson
of the Family Law Council. The taskforce was to examine Australia's
Child Support Scheme and recommend reforms.
The Parkinson Report was released on 14 June 2005
and recommended fundamental reforms to the Child Support Scheme. On 28 February 2006,
the Minister for Families, Community Services and Indigenous Affairs,
Mal Brough, announced the Australian
Government would reform the Child Support Scheme and aspects of family
assistance in order to implement many of the recommendations of the Parkinson
Report.(4)
The changes proposed were to be implemented in stages from July 2006
to July 2008. They were summarised in the Minister’s announcement as follows;
‘From July 2006,
the Australian Government will:
- increase the minimum payment to ensure that child support payments
keep pace with inflation;
- strengthen the Child Support Agency’s capacity to ensure non-resident
parents pay their child support payments in full and on time;
- recognise non-resident parents on Newstart and related payments (Newstart
Mature Age, Sickness Allowance and Youth Allowance) who have contact
with their children by paying them a higher rate of payment;
- reduce the maximum amount of child support payable by high income
earners to ensure these payments are better aligned with the actual
costs of children;
- introduce fairer arrangements for assessing the capacity of parents
to earn income;
- enable non-resident parents to spend a greater proportion of their
payments directly on their children; and
- help separating parents agree on arrangements for their children,
including Child Support, by providing access to Family Relationship
Centres, the Family Relationship Advice Line and other expanded services.
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:
- introduce independent review of all Child Support Agency decisions
by the Social Security Appeals Tribunal to improve accountability and
transparency;
- broaden the powers of the courts to ensure that child support obligations
are met, and strengthen the relationship between the courts and the
Child Support Scheme, making the process easier and more responsive
to parents’ needs; and
- allow separating parents more time to work out parenting arrangements
before their Family Tax Benefit is affected.’……
‘From July 2008, the Australian Government will:
- introduce a new Child Support formula that will change the way Child
Support payments are calculated, to ensure fairer assessments, encourage
shared parenting, and recognise the costs of contact;
- ensure a minimum payment is made for each Child Support family;
- treat more fairly income from second jobs and overtime that assists
with re-establishment after separation;
- ensure fairer treatment of parents with dependent step-children when
calculating their child support liability;
- simplify the ‘Change of Assessment’ rules for altering the amount
of Child Support that is payable;
- improve the arrangements for parents who wish to make agreements
for ongoing Child Support or lump sum payments; and
- make the Child Support rules easier for those parents who are trying
to get back together.’
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 2006.
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
2006 levels for these average weekly
earnings measures indicate that this change will lower the cap to about
75% of its present level.(10)
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 2005-06.(11)
That is about $30,000 higher than the present cap, but its effect is not
directly comparable due to the changed formula proposed by the Parkinson
Report. The present change to the cap may well be an interim measure that
is superseded by the new formula to be introduced in 2008.
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 Western
Australia are covered by the Child Support Scheme.
The Explanatory Memorandum gives a good explanation of this technical
legal issue.
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 Western Australia.
- In the Best Interests of Children - Reforming the Child Support
Scheme - Report of the Ministerial Taskforce on Child Support, 14 June 2005. Full text
available at: http://www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm
- Joint Standing Committee on Certain Family Law Issues, Child
Support Scheme: An Examination of the Operation and Effectiveness of
the Scheme, November 1994.
- House of Representatives Committee on Family and Community Affairs,
Every picture tells a story: Inquiry into child custody arrangements
in the event of family separation, 29 December 2003. For the full text see: http://www.aph.gov.au/house/committee/fca/childcustody/report.htm
- The Hon. Mal Brough,
‘Child Support Reforms To Deliver Fairer System’, Media Release,
28 February 2006.
Full text at: http://www.facs.gov.au/internet/Minister3.nsf/content/child_support_reform_28feb06.htm
- For full text see: http://www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm
- Recommendation 122
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.
- 1.25 A minimum payment should not be required if the payer has regular
contact or shared care.
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 $20 per child per week should not apply
if the Child Support Registrar is satisfied that the total financial
resources available to support the parent are lower than the Parenting
Payment (Single) maximum annual rate. In those cases, the minimum
rate per child support case should apply.
- See Fact sheet Five: Stage Three - Changes to the Child Support
Scheme from July 2008 at: http://www.facs.gov.au/internet/facsinternet.nsf/via/child_support_scheme/$file/fact_5_child_support_stage3_2008.pdf
- Child Support Consultative Group, Child Support:
Formula for Australia,
May 1988.
- Australian Bureau of Statistics, Average Weekly Earnings: Australia,
February 2006,
No. 6302.0.
- In the Best Interests of Children - Reforming the Child Support
Scheme - Report of the Ministerial Taskforce on Child Support, 14 June 2005, p. 151–2.
- ibid., p. 14.
- ibid., p. 186–7.
Dale Daniels
Social Policy Section
23 May 2006
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 2006
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