Explanatory Memorandum
(Circulated by authority of the Minister for Family and Community Services, Senator the Hon Jocelyn Newman)Chapter 3 - Minimum Liability ($260)
Overview
3.1 Items 1 to 9 of Schedule 3 of the Bill will amend the Child Support (Assessment) Act 1989 (the Assessment Act) to provide for a $260 minimum annual rate of child support.
3.2 Item 10 of Schedule 3 of the Bill will amend the Child Support (Registration and Collection) Act1988 (the Registration and Collection Act) to allow the Registrar to request the Secretary to the Department of Social Security (the Secretary) to make deductions from social security pensions or benefits to be applied towards child support liabilities.
3.3 Item 11 of Schedule 3 of the Bill will amend the Social Security Act 1991 to enable deductions to be made from social security pensions and benefits where requested by written notice from the Registrar.
Summary of the amendments
3.4 The purpose of the amendments is to strengthen the objective of the Child Support Scheme that parents share in the cost of supporting their children according to their capacity. The amendments will:
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- ensure that paying parents subject to an administrative assessment have a total minimum annual rate of child support payable of $260
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- ensure where there is more than one carer entitled to receive child support from the paying parent the minimum total amount of $260 will be apportioned amongst the carers according to the number of children in their care
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- discourage parents from avoiding their child support responsibilities through voluntary unemployment
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- provide a method to readily collect the minimum liability (or arrears) by making deductions from social security pensions or benefits.
3.5 The proposed amendments will also enable the Secretary to:
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- comply with a notice from the Registrar instructing deductions be made from a person's social security pension or benefit
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- forward the amounts deducted to the Commissioner of Taxation (who receives the amounts in the capacity of the Registrar).
3.6 Items 1 to 9 of Schedule 3 will commence on the day on which the Act receives Royal Assent and will not apply in relation to the part of the 1998-99 child support year that occurs before the 1998-99 commencing date.
3.7 Item 10 of Schedule 3 will commence on a day to be fixed by Proclamation, not more than 12 months after the day on which the Act receives Royal Assent.
3.8 Item 11 of Schedule 3 will commence on a day to be fixed by Proclamation, not more than 12 months after the day on which the Act receives Royal Assent.
Background to the legislation
3.9 The amount of child support payable under an administrative assessment is based on an annual rate calculated by applying the child support formula (the formula) under the Assessment Act. Currently, the formula may result in either:
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- the paying parent having a liability of $260 or more, or
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- a liability of nil.
3.10 In situations where the amount of the child support liability is less than $260 but not nil, section 66 of the Assessment Act operates so that it is deemed to be nil.
3.11 Using the formula a liability may initially be for less than $260 where:
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- a paying parent has a low child support income
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- the carer's income reduces the amount the paying parent is required to pay
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- parents share care of a child covered by an administrative assessment and the annual rate of one parent is reduced by the annual rate of the other parent.
3.12 Some paying parents with low child support liabilities receive social security pensions or benefits. Where a paying parent has a child support liability or arrears, deductions cannot be made from any social security pensions or benefits made to the paying parent under the Social Security Act 1991 .
3.13 The Joint Committee received submissions from the community suggesting that parents pay a minimum amount of child support irrespective of their financial circumstances. The Joint Committee agreed with the submissions and proposed in Recommendation 122 that paying parents be required to pay a minimum of $260 which the Registrar could waive in special circumstances.
Explanation of the amendments
3.14 The proposed amendments will give effect to the recommendation of the Joint Committee to require a minimum child support payment of $260 per annum.
3.15 The Registrar will not be able to waive the minimum liability of $260. Instead paying parents will be able to apply to the Registrar to have the minimum amount reduced to nil where they have income less than $260.
3.16 The proposed amendment will allow the Registrar to collect child support liabilities from paying parents social security pensions or benefits.
Minimum annual rate of child support of $260
3.17 Where parents have low taxable income a liability to pay child support may not arise under the child support formula.
3.18 The proposed amendments will modify the formula so that where an administrative assessment results in an annual rate of nil to $259 then the annual rate will be increased to $260. The minimum liability will be a minimum total amount payable by the liable parent and not a minimum amount for each child. Any liabilities arising from any type of shared care arrangements, agreements or court ordered departures will not be taken into account in working out whether a person's total annual rate is more than $260. This will mean that in these situations a paying parent may pay a total of more than the minimum of $260. [Item 4 - Repeal section 66 and insert new subsection 66(1) and (2)]
3.19 A paying parent subject to the minimum $260 liability will have a total annual rate of $260. Where there is more than one carer entitled to receive child support from the paying parent the minimum amount of $260 will be apportioned amongst the carers according to the number of children in their care. Regulations will prescribe the method of apportionment in different circumstances. [Item 4 - insert new subsection 66(3)]
3.20 Subdivision B provides for paying parents with low child support income to not pay child support. This subdivision must be repealed as a consequence of the introduction of a minimum liability of $260. [Item 1 - repeal Subdivision B of Division 2 of Part5]
3.21 References to section 41 will need to be removed from the Assessment Act. [Item 3 - amend section 59 (sub-subparagraph (b)(i)(C) of the definition of "income amount order"); Item 7 - repeal subparagraph 98D(1)(f)(i); Item 9 - repeal subparagraph 118(1)(f)(i)]
3.22 References to Subdivision B in other sections of the Assessment Act need to be removed. [Item 2 - amend paragraph 48(a) and section 51]
Minimum liability not to apply in certain cases
3.23 Where parents share in the care of a child or children then, for the purposes of the child support formula, they are both taken to have a liability in respect of those children. The child support liability of one parent is offset against that of the other so that in most cases only one parent has a net liability.
3.24 The proposed amendments will not apply to increase the amount of the child support liability of either parent whether before or after the offset of liabilities to a minimum liability of $260. This is because parents who share in the care of their children are already considered to be contributing to the financial support of those children. This may mean that parents in this situation may pay less than the minimum liability of $260. [Item 4 - insert new subsection 66B(1)]
Agreements and court ordered departures
3.25 Where the paying parent has a child support liability under a court ordered departure or an agreement then the minimum annual amount of $260 will not apply to that liability. This may mean that parents in this situation may pay less than the minimum liability of $260. [Item 4 - insert new subsection 66B(2)]
Reducing the minimum annual rate of $260 to nil
3.26 The proposed amendments will allow a paying parent to apply to the Registrar to have the minimum annual rate of $260 reduced to nil. [Item 4 - insert new subsection 66A(1)]
3.27 The only basis on which the Registrar will be able to reduce a minimum liability to nil is where the paying parent's income will be less than $260 for the child support year to which the application relates. Regulations will outline the formal requirements of the application. [Item4 - insert new subsection 66A(2)]
3.28 The proposed amendments prescribe a definition of "income" for the purposes of an application to the Registrar. This will include any money earned, derived or received by the person for their own use or benefit. [Item 4 - insert new subsection 66A(4)]
3.29 Where the Registrar reduces the minimum liability to nil, that nil rate applies for that child support year only. [Item 4 - insert new subsection66A(3)]
Challenging a minimum liability
3.30 The Registrar's power under the Assessment Act to reduce the liability will be limited to circumstances where an application is made under the proposed subsection 66A(1). When making a departure determination under Part 6A of the Assessment Act, the Registrar will not be able to reduce a minimum liability to a rate less than $260. However, where a parent applies to the Registrar for a determination seeking to increase the minimum liability the current departure provisions will apply. [Item 5 - insert new subsection 98A(3); Item 6 - amend subsection 98D(1)]
3.31 The paying parent will have the right to apply to a court having jurisdiction under the Assessment Act to have the minimum liability varied. The court will take into account the special circumstances of the paying parent, the carer and the children. [Item 8 - insert new paragraph 115(d)]
Collection from social security pensions and benefits
3.32 The proposed amendment to the Registration and Collection Act will allow deductions to be made from social security pensions and benefits.
3.33 Where a person is receiving a social security pension or benefit and has a child support liability (or arrears of child support), the Registrar will be able to give a notice to the Secretary instructing that periodic deductions be made from a paying parent's pension or benefit.
3.34 The notice will allow collection where the person paying child support has an ongoing liability to pay child support under the Assessment Act. [Item 10 - insert new subsection 72AA(1)]
3.35 The notice will also allow collection where the person paying child support has an unpaid debt under the Registration and Collection Act but does not extend to collection of unpaid partner maintenance. [Item 10 - insert new subsections 72AA(2) and (4)]
3.36 The notice is to be in writing and contain sufficient information to identify the person with the arrears or liability. It may be given by electronic transmission or any other means. [Item 10 - insert new subsection 72AA (3)]
3.37 The Secretary will be required to make the deductions and forward the amounts to the Commissioner of Taxation. Any amounts paid to the Commissioner under this provision will be taken to be received in his or her capacity as the Registrar. [Item 10 - insert new subsection 72AA(5)]
3.38 References to social security pensions and benefits have the same meaning as in the Social Security Act 1991 . [Item 10 - insert subsection 72AA(6)]
3.39 The amount which can be deducted will be prescribed in the Child Support (Registration and Collection) Regulations.
Secretary to comply with notice to make deductions from social security pension or benefit and forward the amounts
3.40 The proposed amendments to the Registration and Collection Act require consequential amendments to the Social Security Act 1991 to enable the Secretary to comply with such a notice. [Item 11 - insert new subsection 1359(2) and replace heading to section 1359]