House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Community Services, the Hon Larry Anthony MP)

Schedule 1 - Lower child support percentages for children with whom liable parent has 10% to 30% contact

Summary of proposed changes

There is currently no allowance in the child support formula for the costs of caring for a child for less than 30% of the time. Under this measure, if a non-resident parent has contact with his or her child or children for between 10% and 30% of the time, the child support formula percentages will be reduced. This is to recognise the additional costs of contact faced by non-resident parents and to encourage parents to maintain contact with their children. Contact of at least 10%, but less than 20%, will generally lead to a reduction in the child support percentage by two percentage points (eg, from 18% to 16% for one child). Contact of at least 20%, but less than 30%, will generally lead to a reduction by three percentage points (eg, from 18% to 15% for one child). The amendments are consistent with the treatment of shared care for family tax benefit under the A New Tax System (Family Assistance) Act 1999 .

Explanation of the changes

The definition of eligible carer in section 5 of the Assessment Act covers a person who is the sole or principal provider of ongoing daily care for the particular child. It also covers a person who either shares care of the child substantially equally with another person or who has major contact or substantial contact with the child (the meanings of all of these terms are provided by section 8).

As provided by subsection 8(3), in a shared care arrangement in which one person is the principal provider of care and a second person provides care for at least 30%, but less than 40%, of the time, the second person is categorised as having substantial contact (for 35% of the time), and the first person is categorised as having major contact (for 65% of the time). Thus, each is an eligible carer. Accordingly:

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under section 25, each may apply for child support; and

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under Subdivision E of Division 2 of Part 5, each (as a liable parent in relation to the other person) will have a modified child support percentage to recognise the care given by the other person.

A liable parent who has contact with the child for less than 30% of the time is not, therefore, an eligible carer, nor is there any modification made to the persons child support percentage to recognise the care. This measure does not make eligible carers out of liable parents who are providing the newly recognised lower levels of care. Therefore, these liable parents will not be able to apply for child support in their own right. However, they may have their child support liability adjusted to recognise the costs of contact.

Item 1 inserts new section 8AA to provide definitions of the two newly recognised lower levels of care. A parent providing care for at least 10%, but less than 20%, of the time is categorised as having moderate contact with the child (for 15% of the time). A parent providing care for at least 20%, but less than 30%, of the time is categorised as having intermediate contact with the child (for 25% of the time). Alternatively, if the parent and each eligible carer of the child agree that the parent should be taken to have moderate or intermediate contact, then the parent is so categorised.

These two new terms will form the basis of subsequent amendments to reduce the parents child support percentage in the various circumstances that may apply.

Item 7 inserts into Division 2 of Part 5 of the Assessment Act new Subdivision DA to provide how a liable parents child support percentage for a child is to be reduced if he or she has moderate or intermediate contact with the child.

Through new section 46A, the new Subdivision will apply if:

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the entitled carer to whom child support is payable by the liable parent for a child or children is the sole or principal provider of ongoing daily care for the child or children;

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the liable parent is not an eligible carer of any child eligible for administrative assessment under the Assessment Act of whom the liable parent and the entitled carer are the parents; and

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the liable parent has moderate or intermediate contact with the child or any of the children.

New section 46B provides a table under which the liable parents child support percentage is ascertained. The table generally provides that moderate contact will lead to a reduction in the child support percentage by two percentage points (eg, from the usual 18% to 16% for one child), and that intermediate contact will lead to a reduction by three percentage points (eg, from 18% to 15% for one child).

Subdivision E of Division 2 of Part 5 provides for the child support percentages of parents in shared care arrangements. For the Subdivision to apply, both parents must basically be eligible carers of the child or children (and each is essentially a liable parent in relation to the other). Item 8 repeals paragraph 48(1)(e) in Subdivision E and substitutes a new paragraph (including a new table of child support percentages) to recognise the effects on the percentages of moderate or intermediate care provided by one of the parents as a liable parent.

For example, if two children are currently divided between two parents, a daughter with the mother and a son with the father, then the child support percentage for each parent is worked out under the Subdivision. These amendments now recognise, for example, that the father may also provide care of at least 10%, but less than 30%, to the daughter.

Subdivision F of Division 2 of Part 5 deals with children with two liable parents, the carer entitled to child support being someone other than either of the parents. In that case, the obligation to pay child support of each of the parents is calculated by applying the basic formula to each liable parent in turn, and then subjecting the sum of the figures calculated to a cap. The amendment made under this measure by item 9 to Subdivision F merely adds the new Subdivision DA (inserted by item 7 ) to the existing list of elements of the child support formula that need to be treated in that way.

Subdivision G of Division 2 of Part 5 deals with the case of a liable parent in relation to two or more carers entitled to child support. Again, the child support percentage needs to be modified to recognise moderate or intermediate contact by the liable parent with the child or children concerned. Section 54 currently operates by splitting the total available child support between the entitled carers on the basis of the number of children in carers care as a proportion of the total number of children. Accordingly, the reduced available child support (reduced because of the moderate or intermediate contact) must be split between the entitled carers. This is achieved by the amendments made by items 10 to 13 .

Item 10 amends the definition of number of children in carers care in paragraph 54(1)(b) to recognise moderate or intermediate contact. Item 11 makes a minor correction to the definition in that paragraph of total number of children (it has always been intended to mean the sum of the number of children in carers care for each entitled carer in relation to whom the liable parent is a liable parent). Item 12 provides a new table of child support percentages that allows for moderate or intermediate contact. Item 13 omits an existing rule in subsection 54(2) to round the second decimal place of a child support percentage to either 0 or 5 because, under this measure, more precise calculations of the percentage are necessary (as can be seen from the new table).

Item 14 adds a new example to the existing examples that appear at the end of section 54. The new example illustrates the way the provision will work with regard to moderate or intermediate care.

As mentioned above, it is section 8 that generally allocates a level of care to a liable parent or entitled carer for the purposes of the Assessment Act. This will now be supplemented by new section 8AA (inserted by item 1 ) to recognise moderate or intermediate care.

However, if care levels have been allocated under a court order or registered parenting plan and the order or plan is being contravened without reasonable excuse, then section 8A, rather than section 8, applies. Under section 8A, if a person has more care of the child than is provided for in the order or plan, then that person is taken to have care of the child only to the extent permitted by the order or plan. Similarly, if a person has less care of the child than is provided for in the order or plan, then the amount of care that person has of the child is to be worked out on the basis of the level of care (if any) that that person actually has of the child.

Section 8A exists to prevent a person from obtaining a higher level of child support, on the basis of the contravention of the order or plan, than would have been payable if he or she were exercising the level of care provided for by the order or plan. Similarly, section 8A prevents child support being payable for a higher level of care than is actually being provided by a carer.

As a result of section 8A, it may be the case that something less than the full amount of available child support is payable. This may happen if one parent ceases to be an eligible carer because he or she actually has care of the child for less than 30% of the time, but the other parent still has only shared care or substantial or major contact as provided for by the court order or parenting plan. In this case, Subdivision H of Division 2 of Part 5 sets the child support percentage.

This measure is accommodated within section 8A and Subdivision H in a way that avoids the following anomalous situations occurring:

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A carer who was receiving a reduced level of child support because the order or plan allocates moderate or intermediate care to a liable parent should not be able, by contravening the order or plan so that he or she actually has sole care, to obtain the full amount of the available child support.

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However, in a case in which less than the full amount of available child support is payable (as described above in relation to Subdivision H), section 8A will already have had the effect of reducing the child support payable and it is not appropriate that it be reduced further because a liable parent actually has moderate or intermediate contact with the child.

The amendments made by items 2 to 6 to section 8A, and by items 15 and 16 to Subdivision H, are consistent with the amendments made to section 8 and the rest of Division 2, but prevent these anomalous situations occurring. Firstly, the care levels provided by the court order or parenting plan are compared with actual care levels. If the order or plan allocates to a parent moderate or intermediate care, then, regardless of actual care levels, the parent is taken to have the allocated level of care. Secondly, however, a moderate or intermediate care level (after the application of section 8A) is compared with the total care levels of the child provided by the carer or carers. If less than the full available amount of care is allocated, then the parent is taken to have not moderate or intermediate care, but zero care.

Section 74A in the Assessment Act is the provision that sets down the date of effect on an annual rate of child support of a change in care. This general rule is to apply equally to the newly recognised lower levels of care. Accordingly, item 17 adds reference to moderate and intermediate care to that section.

This measure commences on 1 July 2001, or (should Royal Assent not be given on or before that date) on proclamation.