Page created 3 June '98

Child Support Legislation Amendment Bill '1998

NEWS * BACKGROUND *  NWJC LETTER TO SENATOR NEWMAN * NWJC SUBMISSION ON THE BILL* NWJC WORKING GROUP CONTACTS * ENDORSEMENT FORM * LIST OF ENDORSEMENTS

NEWS

Update: The NWJC is interested to encourage research on the impact of this legislation and will facilitate projects to document and analyse the effect of the changes. :The Bill was reintroduced the Government and was passed by the House of Representatives on 11 November '98. The Bill was subsequently passed by the Senate. Take this link to the Senate Hansard for 23 November (free Acrobat Reader required). The First and Second Reading Speeches are at pp. 355-366 and the Bill in Committee at pp. 419-456. * You may wish to register to receive free press releases by the Minister for Family and Community Services by using the Australian Government Media Releases subscription service * In addition updates will be posted to this site and you can register this page for free email updates with NetMind

Background

On 30 September 1997 the federal government announced proposals for significant reforms to the Child Support  Scheme. Among other things the proposals would:
 

 · make changes to the calculation of child support liability payments ‘recognising that after separation, some payers do not have sufficient means to support themselves and their second families’ (ministerial press release)

· introduce a minimum payment of child support

· introduce arrangements whereby parents will be able to move from Child Support Agency collection to private collection, by agreement, at any time

· support programs encouraging parents to make private collection arrangements

The changes are outlined in a press release which is on the Department of Social Security web site

The Child Support Legislation Amendment Bill 1998 was introduced in the House of Representatives on 12  March 1998. Take this link to the First Reading Speech [Acrobat Reader required]

 

The Bill has passed the House of Representatives and was before the Senate when the election was called. The Bill lapsed due to the election but was reintroduced by the Government and was passed by the House of Representatives on 11 November 1998.

The NWJC is extremely concerned about the impact of this Bill on women and children. The NWJC's position is set out in the letter and submission which follows. The letter and submission has been sent to the Minister for Social Security and about 15 other federal Parliamentarians in relevant portfolio areas and party positions.

Download Acrobat Reader [free]


---

Senator the Hon. Jocelyn Newman
Minister for Social Security
Parliament House Canberra
19 May 1998
 

Dear Minister,
 

Child Support Legislation Amendment Bill 1998

The National Women’s Justice Coalition Inc, is a coalition of organisations and individuals, which aims to promote women’s equality before the law. The membership of the NWJC includes almost 30 national women’s peak organisations and about 80 state or regional groups, services and networks. The NWJC’s focus on women’s legal equality results from the need to address a range of factors  which tend to cause women’s interests to be subordinated.

The NWJC does not argue for the subordination of the interests of others to women’s interests. The NWJC aims to ensure sensitivity to the position of women as an aspect of the right of all members of the community to equality before the law.  Consequently, the NWJC endeavors to take into account the range of rights, responsibilities and interests in developing its positions.

In this context, the NWJC has a number of serious concerns about the Child Support Legislation Amendment Bill 1998. The Bill contains provisions  which will work to the disadvantage of thousands of children by reducing the amount of support contributed by their non-residential parent.

This will occur as a result of provisions which:
 

· increase the paying parent’s exempt income amount by 10%;

· reduce the carer-parent’s exempt income amount;

· emphasise private arrangements;

· de-register a the liability from collection where there is some history of steady payment,

·  de-register during periods of low income, and

· entitle liable parents with a second family to claim 50% of any child support paid as a deduction from the household income used to determine entitlement to family payment and child care assistance with no equivalent measures for carer parent.

We do not believe that the proposals are balanced or that they are the only or preferable way of addressing concerns in relation to the child support formula and related matters.

In our view there is a very high onus on the proponents of this Bill to demonstrate that the provisions are necessary, that they are to the benefit of children, and that they are fair having regard to the responsibility of both parents to maintain their children.

We are concerned that the proposals appear to reflect lobbying by some liable parent interest groups rather than a strong research base. The thrust of the Bill is to reduce the financial responsibility of the liable parent and to reduce the client base of the Child Support Agency. These measures will disadvantage children and their carer parents.

The proposals do not seem to take into account that there is already an established process under the Assessment Act for formula assessments to be adjusted, where necessary,  to the circumstances of a particular case with an ultimate right of review by the Court.

In our assessment the Bill will place an unrealistic and unfair burden on many thousands of carer parents.  The consequences will include increased reliance by carer parents and their children on low  income allowances and supports from State/Territory sources and community based relief services.

The Bill will also effect the balance of contributions between parents where both have the capacity to contribute, such that the greater financial responsibility is borne by the carer parent.

The majority of carer parents are women. Whether as a result of the imposition of an unrealistic burden for the financial support of their children or as a result of an unfair distribution of financial responsibilities between the parents, this Bill will directly disadvantage many thousands of women and their children. The Bill will fall hardest on single parent households, the majority of which consist of women caring for dependant children.

We are particularly concerned by the backsliding on child support at a time when poverty among single female headed families is worsening . The highest poverty rates are among single parents and their children and 21% now live in poverty . The current Bill will operate against other government measures aimed at reducing and relieving poverty and policy aimed at encouraging both parents to meet their responsibilities as parents.

There are many constructive measures which could be implemented to improve child support compliance and collection and we consider that this is the area where government reform attention is required.

We are simply astounded that the Bill does not include a substantial focus on debt enforcement and that no measures have been announced to overcome the financial restrictions on the CSA’s enforcement work. As you are aware, the CSA’s performance on enforcement of child support liabilities has been a major source of complaint since the commencement of the scheme.

The NWJC is also concerned that the proposals do little to address the plight of a significant and unknown proportion of carer parents who receive no child support at all. Provisions in the Bill aimed at bringing additional forms of liable parent income into account, are narrow and we consider that much more can be done to address income minimisation by payers.

Given the concerns about the implications and deficiencies of the Bill, we strongly recommend that the Bill be deferred for further consideration at a policy level.

Finally, it is understood that a number of background papers have been prepared in relation to the reform proposals and some economic modeling has been undertaken. This material has not been released.  We do seek your assistance to ensure that the modeling of the impact of the proposed changes is placed on the public record for consideration and comment. We consider that economic modeling is required regarding the consequences of reduced levels of children support for children, the carer parent, and the taxpayer.

All modeling on proposed changes should always take into account all those affected ie. those who are registered with the Child Support Scheme as well as those who are not because adjustments to the formula have ramifications for child support levels even where there is no formula assessment in place.

We would request that any specific modeling undertaken regarding the effect of the Bill on single parent and child poverty and also on women carer parents, be released. In the event that this modeling has not been undertaken, we strongly recommend that it be commissioned and released before the Bill proceeds further.

Attached is a paper  which outlines the NWJC’s recommendations in relation to key formula and administrative issues.
 
 

Yours sincerely,

(signed)

Judy Harrison
for the NWJC (please direct inquiries to the Chair of the Working Group)

NWJC Child Support Working Group Contacts:

Chair: Dr Linda Hancock
ph: 03 93449472; Fax: 03 93494442

Lucille Hughes
ph: 02 9601 7777 fax: 02 96017400

Michelle England
ph: 02 46281342 fax: 02 46280771

Bronwyn Richards
ph: 02 42 761939 fax: 02 42761978

Catherine Carney
ph: 02 96375012 fax: 02 96823844

 
  National Women’s Justice Coalition Inc.

Position on the Child Support Legislation Amendment Bill 1998
 

For the reasons set out in the covering letter to this submission, the NWJC considers that the Child Support Legislation Amendment Bill 1998  should be deferred and remitted for further consideration at a policy level.

This paper outlines the specific recommendations of the NWJC in relation to proposed formula adjustments and proposed adjustments relating to the administration of the scheme.

1. Formula

1.1 Minimum child support payment
1.2 Broadening the income base
1.3 Reduction in carer disregarded income level
1.4 Increase in the liable parent's excluded income
1.5 Subsequent family formula

2. Administrative recommendations

2.1 Start date of the liability
2.2 Private collection of child support
2.3 Domestic violence including case management guidelines

3. NWJC Child Support Working Group Contacts

1. Formula

1.1 Minimum child support payment

Currently, section 66 of the Child Support (Assessment) Act 1989 provides that parents whose child support liability is assessed under the formula at less than $260 a year ($5 per week) are not required to pay child support. The Bill would adjust this provision to impose a minimum child support liability for all payers of $5 week. This includes liable parents on social security benefits. Under these changes, the Assessment Act will be amended to provide for a $260 minimum annual rate of child support payable by all liable parents registered with the Child Support Agency regardless of their income level or source of their income support.
 
 

NWJC Position

The NWJC would support this provision with adjustment.

The NWJC supports the principle that parents ‘share’ in the cost of supporting their children according to their capacity but considers that a scheme for mandatory minimums without exemption will inevitably cause unintended hardship in some cases.

Notwithstanding the amount involved, the NWJC considers that any mandatory minimum scheme should include criteria and processes for exemption.

In addition, the carer parent should be given the option of how they wish to receive the payment eg. fortnightly, monthly or otherwise.

1.2  Broadening the income base

Taxable income is currently used as the basis for the child support assessment. This creates difficulty where the taxable income is manipulated. The Bill provides for the broadening of the income base to include net rental property losses and exempt foreign income.
 

NWJC Position

The NWJC supports the amendments but does not consider they go far enough to address the major issue of income minimisation, mainly by self employed parents, to reduce their child support liability. The NWJC considers that  further categories of income should be included. The NWJC supports the recommendations of the 1992 Child Support Evaluation Advisory Group that the following be addressed in calculating income for child support assessment purposes:

· income splitting,
· the use of trusts,
· the use of private companies,
· capital investment expenditures,
· expenditures of an incentive or private nature,
· voluntary superannuation contributions ie. those exceeding 9% of the parent’s taxable income to be added back into the income base for child support purposes,
· depreciation expenses of leases and interest payments,
· prior year losses,
· capital losses,
· losses generated by business or investments,
· partnerships and assignments of income.

The NWJC recommends that government give high priority to arriving at a more accurate assessment of the child support income base and that arguments about the cost of instituting these measures be weighed against the benefits to payees and eventual savings to government.

Austudy eligibility is now based on a model which more accurately assess a person’s "actual means", as opposed to their taxable income base. This and similar models should be investigated for the purposes of assessing child support and applied if suitable to determine income for child support assessment purposes.

1.3 Reduction in carer disregarded income level

The Bill will bring about a significant reduction in carer disregarded income levels with the effect of reducing the liable parent’s child support liability.

The disregarded income amount for carer parents is currently pegged to ‘full time adult average weekly earnings ($37,424 for 1997-8) plus additional amounts for child care costs ($4,304 for the first child under 6, $936 for each other child under 6 and $1,871 for each child aged 6-11). The amounts for child care costs are allowed whether or not child care is paid for.

The child support formula presently reduces the amount of income which is used to calculate a liable parent’s child support liability by $1 for every $1 by which the carer parent’s income exceeds the relevant disregarded income amount.

The Bill would reduce the carer disregarded income level by using a different AWE figure. The new figure would be based on ‘all employees average total weekly earnings’ For 1997-8 this would give a basic disregarded income amount of $29,598 compared with $37, 424 under current legislation. In addition, child care costs would cease to be an automatic component of the child support formula but carer parents may seek reassessment if they incur child care costs exceeding 5% of their income.

Finally, the rate at which child support is reduced by carer parent income above the new disregarded level will be reduced from dollar for dollar to 50 cents for each dollar.
 
 

NWJC Position

This change will especially affect women carer parents earning between $29,598 (the proposed cut off point) and $37,424 (the present level), as family allowance cut-offs operate within this range.  In other words, what is lost from the liable parent’s child support payments will not be made up from other sources.  It will also act as a serious disincentive to paid work for carer parents.

The carer disregarded income level was included as an equity consideration when the Scheme began.  Lowering it to $29, 589 AND taking away the allowance for number of children will result in a substantial loss of child support for most payee parents. NWJC considers inclusion of the carer’s income is in principle, unfair. It is not included in the New Zealand scheme and has been criticised in Australia, by expert commentators.

The child support formula is designed to calculate the contribution of the non resident parent.  Therefore, this should be its primary focus.

The NWJC recommends that the inclusion of carers income in the formula be reviewed.

Pending such review, current carer disregarded income levels should be retained with a fifty cents in the dollar taper.

As a matter of principle, allowances for dependents should be retained in formula determinations.

In her dissenting report to the JSC’s formula recommendations, which are strongly echoed in the Bill before the Parliament, Senator Belinda Neal criticised arguments linking the payer  parent’s excluded income with the payee parent’s present disregard level.  She said (at paras 27-30):

 ‘The temptation to compare the two figures is obvious. But the fact is that these two figures do not in fact measure the same values. The excluded income component provided to the non custodial parent is in essence a living allowance which is deducted from their taxable income before the percentage payable for child support is calculated.

 By contrast the disregarded income amount applied to the custodial parent is an amount which recognises the contribution of the custodial parent to the financial support of their children. This disregarded income amount takes into account the cost of the parenting to the parent with whom the child lives, including child care costs, and at the lost opportunities in employment which the parents with the day to day care of children often suffer.’

It should be noted that paragraph 5.37 of the JSC Report P. 77 sees "symptomatic ...bias of the Scheme against non-custodial parents" as the justification for reducing the disregarded income level.  Both the report and the proposed amendments have taken this assumption for granted but have failed to present evidence of its validity.

1.4  Increase in the liable parent’s excluded income

Currently the liable parent’s exempt income amount (commonly referred to as the self support component) for the majority of payers is $9,006, a figure which is pegged to the single pension rate at 1 January each year. Payers with a dependent child have an exempt income amount equal to twice the married rate of pension (currently $15.023 pa) plus additional amounts for each dependent child. The Bill would increase the payer exempt income amount by 10%. In 1997-8 the new amount would be $9,907 for single payers and $16, 525 (plus additional amounts for each child) for payers with natural or adopted children in their care. The government states that the proposal goes some way to addressing concerns that the current exempt income does not recognise the costs of employment faced by payers nor the fringe benefits available to pensioners but not to most payers.
 
 

NWJC Position

The NWJC does not support this adjustment or the Joint Select Committee arguments that the payer exempt amount acts as a work disincentive to the payer parent, and that the liable parent’s excluded income should be increased to balance out payees’ receipt of fringe benefits.

The reason carers receive fringe benefits is because they shoulder the major costs of caring for the children. Arguments about equity in relation to such payments are therefore irrelevant.  Furthermore, no evidence of work disincentives is given and the proposed adjustment runs contrary to the purposes of the legislation.

Review procedures are already available to payers whereby an adjustment can be made to the assessed amount if it is warranted.

The impact of the proposed adjustment, particularly when taken with the proposed increase in the carers disregarded income level, will significantly reduce the amount contributed in child support, with flow-on consequences for the child, and increased call on government income support.

1.5 Subsequent family formula

The Bill would allow payers with second families to claim 50% of child support paid as a deduction from the household income which is used for determining the family’s entitlement to Family Payment and Child Care Assistance.
 
 

NWJC Position

This adjustment would improve the disposable income to struggling payer households. Equity considerations require that such an adjustment be accompanied by a similar benefit to the carer household eg. a tax deductability for child care or child education costs. The cost of providing the necessary balance should be determined and fed into consideration of the proposed adjustment.  As it stands, this is a one sided recommendation that does nothing to address continuing poverty of single parent households where the carer parent has not re-partnered or where irrespective of any new relationship, still bears the costs of caring for the child / children of the marriage.

Given the need for the proposal to be balanced in the way indicated, the NWJC considers that the subsequent family formula changes are premature. Research must be undertaken at a macro level on the relative economic impact of the subsequent family formula on liable and carer parents with attention to the gap between disposable income of both parties.

We do not disagree with the income deduction for Family Payment as this is paid to the mother and should be of benefit to the children of a subsequent family.  However, on equity grounds, we argue that these changes should be balanced with similar deductions for payees re: child-care, education, as part of a broader poverty alleviation strategy.


2. Administrative recommendations

2.1 Start date of the liability

The Bill would adjust the start date of the liability so that it is the date the relevant assessment application is lodged with the Child Support Agency or Centrelink. At present there is provision for backdating of child support of up to 28 days if the payee has received no support from the date of separation.
 

NWJC Position

The NWJC is concerned that there be a clear message to both parents that both continue to share the responsibility to maintain their children. This obligation is not one which only exists where there is a child support assessment in place.

Consequently, the NWJC urges that if the start date of the liability is adjusted as proposed that there be an active campaign to inform the community sector working with separated families of the importance of the date of lodgment in setting the date for the commencement of child support payments.  Such information could be included into community education and self help program materials.

2.2 Private collection of child support

Currently the carer or liable parent can look to the Child Support Agency to assess and collect their child support. This system is flexible, allowing movement to and from the Child Support Agency for collection of payments, allowing child support agreements to be entered into and providing a financial safety net for children. According to the CSA, about 40% of parents currently collect child support privately, but there is little or no data which analyses the quality of these arrangements or the amount of child support actually paid.

Under the Bill, the private collection of child support will become compulsory if there has been a period of at least 6 months where the payer has made regular and timely payments through the Child Support Agency.
 
 

NWJC Position

The NWJC considers that the reform proposals will undermine an aspect of the Scheme which is working well. The present arrangements provide sufficient flexibility and are favored by carer parents. (‘The Scheme as an effective mechanism for obtaining child support’ was the second most frequently mentioned issue in custodial parents’ submissions to the JSC report (p. 589).)

Prior to the introduction of the Child Support Scheme,  the level of ongoing maintenance paid to families was extremely low; with estimates of only 10 percent of liable parents paying maintenance and of evidence of unsustained payments.  Carer parents found it extremely difficult to collect child support, which resulted in an increased reliance on government support.

The underlying motive of these amendments is to achieve savings for the CSA by reducing its operational costs.

The proposed change is strongly opposed.

Some of the numerous difficulties with the proposed changes are:

· enforcement of child support arrears which accrue when the liability is not registered for collection with the CSA will become a matter for the carer parent. The burden of the change will fall on the carer parent and on the children to pursue debt collection, when at present the CSA performs this task

· a carer parent will usually need legal assistance to enforce arrears (as does the CSA itself when it commences enforcement proceedings). Many carer parents will look to Legal Aid or Community Legal Centres for assistance - neither are funded to undertake more work of this kind and the work is not covered by the Commonwealth Legal Aid Guidelines applicable to the provision of assistance by Legal Aid Commissions in ‘Commonwealth matters’.  Therefore, this change will directly disadvantage carer parents in respect of debt recovery

· in many instances child support arrears will not be collected resulting in children missing out and increased reliance by carer parents on government income support and other subsidies

· an increase in the number of applications in relation to the enforcement of child support - and particularly applications by unrepresented litigants - will have an impact on Court resources and will undoubtedly have an impact on court waiting lists and consequently impact on all Court users.  Many carer parents will lack both the skills and resources to pursue debts through the courts

· we are concerned that an increase in private payment may correlate with an escalation in child contact difficulties particularly where the liable parent insists on paying child support at the contact changeover or seeks to withhold child support for their own reasons.  Payment through the CSA separates payment from contact episodes; which is in the childrens’ best interests

· the circumstances in which carer or liable parent can reapply for CSA collection are not specified. In the majority of cases the carer parent will be the one seeking to reapply and the carer parent and the children will be the ones disadvantaged if restrictive criteria are applied.

 Under the Bill 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 as defined under the regulations or the Registrar is satisfied ‘that there are special circumstances to warrant granting the application’.  The proposed s. 39 states that’  if the Registrar grants the application the Registrar must vary the particulars relating to the liability in the child Support Register by specifying a day (not later than 60 days after the day on which the Registrar received the application) as the day on which the liability again becomes enforceable under this Act’.

This could mean up to 60 days after the application is received - if there are one month’s arrears when the application is received - that would be four months of arrears which may be lost.  Inequities will undoubtedly result due to arrears being lost and unrecoverable by the carer parent. Legal Aid is not currently available for child support enforcement and there are no announcements accompanying this Bill to indicate that any changes are proposed.

The increase in the Deputy Child Support’s discretion (which will be applied to many more decisions, including the right to come back on or even to be taken off collection) will only be spelt out in guidelines.  Clearly, the potential problems with increasing the discretionary powers of administrative decision makers, need to be addressed.

• 
   

  2.3 Domestic Violence including Case Management Guidelines

  At present social security recipients are required to pursue child support if they are to continue to receive their maximum social security entitlement.  Centrelink social workers have had the discretion to grant a blanket exemption from obtaining child support on the grounds of domestic balance.  In January this year, Centrelink changed its guidelines in these matters so that exemptions would be reviewed every 12 months.
   
   
   

  NWJC Position

  It is the view of the NWJC that 12 monthly reviews of domestic violence exemptions by Centrelink are unnecessarily intrusive.

   We are concerned that this measure will place undue pressure on victims of domestic violence.  The person best able to assess the risk of violence  is the target of that violence.  We are concerned by the apparent emphasis, whether intended or not, to move victims of violence off the exemption list and we are concerned that the apparent emphasis on savings will lead to criteria  such as the continuing existence of a restraining order, recent violence and similar occurrences.  Carer parents should not regularly have to establish that they continue to be at risk.   Parents have always had the opportunity to approach the Child Support Agency for assessment and collection of child support at any time.  Sole parent families’ experience the highest level of poverty in Australia today.  Making a decision NOT to pursue child support is not taken lightly but because there is a genuine risk to safety.  The NWJC recommends that a child Support Working Group consisting of appropriate representation, and including representation of the NWJC, be established to monitor the impact of these guidelines.

  The Bill would amend the Child Support Assessment Act 1989 to enable the Child Support Registrar to end the assessment and collection of child support while the carer parent is considered to be at risk. The NWJC supports this amendment.

  The NWJC does not support the outlined changes to the case management arrangements. We are concerned that the measure will place undue pressure on victims of domestic violence. The person who is best able to assess the risk of violence is the target of the violence. We are concerned by the apparent emphasis, whether intended or not, to move victims of violence off the exemption list and concerned that the apparent emphasis on savings will lead to criteria such as the continuing existence of a restraining order, recent violence and the like.

  Although the Child Support Agency has issued policy guidelines which states that:

   " The Agency will not automatically cease collection action (of child support) where there is a risk of family violence. It does not want to offer a way to avoid child support obligations"

  The NWJC considers that safety and respect for the views of the target of violence or threat of violence, must be the threshold consideration.

  ---

  NWJC Contacts:

  National Women’s Justice Coalition Inc.
  GPO Box 3148 Canberra ACT 2601
  Ph: 02 62472075 fax: 02 62573070
  Email: nwjc@ozemail.com.au

  Convenor: Judy Harrison
  Direct contacts: ph: 02 62479319 fax: 02 62480221

  ---

  NWJC Child Support Working Group Contacts:

  Chair: Dr Linda Hancock
  ph: 03 93449472; Fax: 03 93494442

  Lucille Hughes
  ph: 02 9601 7777 fax: 02 96017400

  Michelle England
  ph: 02 46281342 fax: 02 46280771

  Bronwyn Richards
  ph: 02 42 761939 fax: 02 42761978

  Catherine Carney
  ph: 02 96375012 fax: 02 96823844

   

NATIONAL WOMEN'S JUSTICE COALITION
email: nwjc@nwjc.org.au
HOME   CURRENT ISSUES  TOP