Child Support Scheme Reforms – Questions and Answers

These Questions & Answers cover a series of questions raised since the announcement of the Child Support Scheme Reforms.

1. Why is the new formula being introduced in July 2008?

The introduction of the new Child Support Scheme will be staged over two years, commencing in July 2006. The new formula will commence from 1 July 2008. An earlier starting date was not feasible given the need to cater for:

• the process of drafting the legislative change,
• its passage through Parliament,
• the need to redevelop delivery systems; and
• the need to train large numbers of staff.

An approach of recalculating all child support assessments from 1 July 2008 will ensure fairness.

2. What is the relationship between the proposed legislation and the 2004 Bill?

The 2004 Child Support Bill predates, and stands entirely alone from the Taskforce's proposed new scheme. The Bill may be amended where its provisions are inconsistent with the proposals. The progress of Bills once introduced into Parliament is a matter for Parliament.

3. Will the full family income (ie including income of new partners) of parents be used in setting child support assessments?

The principles adopted by the Taskforce in proposing the new Scheme are covered extensively in their report "In the Best Interests of the Children". Amongst those retained from the existing Scheme is the principle that the biological (or adoptive) parents are responsible for the support of their children. The income of later partners will not be taken into account in setting the child support assessment of the parents. (The report is by no means silent on blended families - A number of recommendations will be adopted in relation to parents' support of their stepchildren).

4. Will the extended moratorium on the Maintenance Action Test be applied from separation or from application to Centrelink?

The new Scheme extends the period before reasonable maintenance action is required from 28 days to 13 weeks after separation (or after date of child's birth if no partner, or after date child came into care). This will allow parents time to resolve parenting issues before an application for child support is required.

5. Can parents apply for child support prior to the 13 week expiry of the moratorium on the Maintenance Action Test?

Parents may apply for child support at any time after separation, including prior to the expiry of the 13 week moratorium. Child support assessments will continue to commence from the date of application.

6. How will the new formula assess child support where there are court orders for the care of children and how will contravention be treated?

The Taskforce recommended that child support assessments be based upon regular contact or shared care where a court order has been made setting the care of a child at the requisite level. The present legislation provides for the assessment to be based on the actual care, but if there is contravention of the order without agreement, other provisions set the assessment on the lesser of the ordered care and the actual care if there is no reasonable ground for contravention. The policy as to how these provisions will interact in the new Scheme is still being developed.

7. How will the new treatment of "capacity to earn" decisions be fairer?

The Taskforce recommended that the legislation be changed to set a clearer statutory definition of the circumstances in which decisions about whether a parent has a greater capacity to earn than they are currently exercising may be made. The proposals require the decision maker to evaluate a prescribed set of factors to determine whether a capacity to earn decision can and should be made. The factors to be considered include the willingness of the parent to participate in their occupation or industry, the opportunity to do so, their caring responsibilities, their health and the reasons for their decisions in relation to their employment and child support.

The capacity to earn Change of Assessment ground will be available to both parents. However, under the Taskforce proposal, parents' necessary caring responsibilities are a justification for their decision not to exercise their full capacity to earn. The detail of criteria to be applied by Senior Case Officers making such decisions will be published to assist applicants.

The Taskforce also recommended clearer guidelines to Senior Case Officers to avoid regional differences in the application of policy.

8. Will the reason allowing income to be excluded to cover re-establishment costs be available to both parents?

The measure to allow the exclusion of additional income earned to cover re﷓establishment costs will be available to both parents. It will only cover income that the parent started to earn following separation.

9. How will the new provisions for lump sum agreements differ from the existing Scheme?

The new Scheme will provide more comprehensive recognition of lump sum child support agreements and remove impediments to their use. Parents will be able to make lump sum agreements through binding financial agreements or consent orders and these will be credited against child support in future years. If the treatment of the lump sum is not set by the agreement or order, default rules will determine how the lump sum will be treated where the value exceeds the annual value of the assessment. FTB Part A will be assessed on the basis of the amount of child support that would have been transferred if the agreement or order had not been made. Section 128 of the Child Support (Assessment) Act will be repealed to remove the right of a payee to apply for periodic cash payment of up to 75% of the assessment despite the existence of an agreement or consent order that provides for the non-resident parent's liability to be met through a lump sum payment. Other changes deal with the detail of the use of estimates, residual balances, and additional in-kind payments.

10. How will Prescribed Payments already accepted, but not yet allowed as credit, be treated from 1 July 2006?

The changes to apply from 1 July 2006 include increasing the credit allowed for Prescribed Payments from 25 per cent to 30 per cent from that date. Prescribed payments accepted prior to 1 July 2006 but which have not yet been allocated to the credit of a payer's account at that date will be applied to the account at 30 per cent in subsequent months if the payer pays the 70 per cent balance of each month's liability to the Child Support Agency (CSA) as cash.

11. Will the Australian Taxation Office (ATO) enforce lodgement compliance for CSA clients and continue collection through tax refund intercepts?

The CSA and ATO will continue to operate administrative arrangements to enforce the lodgement of tax returns needed for accurate child support assessments, to share financial information and to enable collection through tax refund intercepts.

12. What assistance will be provided to payees seeking to take private enforcement action?

Private enforcement action is not necessary for any payee, because CSA collection is available for all payees at no cost. CSA will act upon information provided by the payee. Private enforcement action by a payee is an additional option a payee may choose at the payee's private expense, with private legal assistance. The difference under the new arrangements will be that payees will be able to continue to have the CSA take collection action for ongoing liabilities on their behalf while taking the private legal action. Any moneys recovered through the payee's court action would be payable to CSA for disbursement to the payee.

13. Will there be CSA staff presence in the Family Relationship Centres (FRCs)?

The Taskforce recommended that the FRCs be planned and established in close collaboration with the CSA, Centrelink and other service providers, particularly in serving the needs of regional and rural Australia. It was not expected that the FRCs would themselves have available expertise in all relevant areas, but would liaise with CSA and Centrelink to receive specialist advice accessible to parents using their services. CSA will provide such services. CSA may also deliver community information sessions from time to time in the FRC premises.

14. How will the Social Security Appeals Tribunal (SSAT) operate in Child Support Matters?

The operation of the SSAT in relation to child support matters is still under development. The SSAT will provide an avenue of appeal in addition to the CSA's objection process.

All decisions of CSA that may be objected to may then be appealed to the SSAT:

a) to accept or not accept an application for assessment (unless the ground of objection relates to the parentage of the child)
b) a decision as to the particulars of the assessment, including
i. the child support income of each parent (as adjusted for self-support and the care of new children)
ii. the cost of the child or children
iii. the care provided by each parent
iv. the particulars of other children in either parent's household
v. the annual rate of child support
c) to make or refuse to make a change of assessment under the departure provisions
d) to accept or refuse to accept a child support agreement
e) A decision to register or refuse to register a maintenance liability.
f) A decision about the particulars of a registered maintenance liability.
g) A decision to vary or refuse to vary the particulars in the Register, including deletion.
h) A decision to credit or refuse to credit all or part of a non-agency payment including a prescribed non-agency payment.
i) A decision to refuse an election that employer deductions not be made.
j) A decision to refuse to grant an application for collection of arrears for more than 3 months.
k) A decision to refuse to end collection of arrears.
l) A decision to start or refuse to start a low-income non-enforcement period.
m) CSA's failure to make a decision on an objection within 60 days.
n) A decision not to take enforcement action for money that is unpaid for 6 months or longer (except where CSA has commenced action to recover the amount in a court or proceedings have commenced but 3 months have elapsed since that time).
o) A refusal to remit late payment penalties imposed on payers and employers.

There is no intention to change the involvement of the AAT in the appeal process for a Departure Prohibition Order (DPO). DPOs are modelled closely on equivalent provisions in tax legislation, and remain relatively unique as a debt recovery method. It is appropriate that the review remain with the AAT, which has expertise in this area.

After SSAT decision, the role of the Courts remains available, in two categories:

a) Primary determination of departure applications which are brought in conjunction with other proceedings, and in cases where the CSA decides that the matter is too complex for administrative determination, and
b) Review of SSAT decisions on questions of law.

The court retains primary jurisdiction in relation to:

a) applications to set aside a child support agreement;
b) non-periodic (lump sum) maintenance orders;
c) urgent child support orders;
d) declarations that a person is or is not entitled to a child support assessment on the basis of parentage;
e) stay orders pending finalisation of a court application; and
f) orders for recovery of wrongly paid child support