Explanatory Memorandum
(Circulated by authority of the Minister for Community Services, the Hon Larry Anthony MP)Schedule 2 - Lower cap on income subject to child support formula assessment
Summary of proposed changes
Under this measure, the Average Weekly Earnings (AWE) figure that sets the cap on payer taxable income that is subject to child support formula assessment will be aligned with that used for the payees disregarded income figure (the all employees average weekly total earnings figure instead of the full-time adult average weekly total earnings figure). This will result in a lower cap.
Explanation of the changes
One of the cases in which Division 2 of Part 5 of the Assessment Act modifies the basic child support formula, provided by Division 1, is when a liable parent has high child support income.
Under section 42, if a liable parents child support income amount is more than 2.5 times the yearly equivalent of the relevant AWE amount (ie, the full-time adult average weekly total earnings figure), then the liable parents adjusted income amount is calculated using a formula that effectively imposes a cap based on that relevant AWE amount.
A different income measure is applied in section 46 in relation to the entitled carers disregarded income amount. In that case, the measure is the EAWE amount (ie, the all employees average weekly total earnings figure).
Item 1 amends section 42 to change the income measure to the one used in section 46. This is a more realistic measure of income, is consistent with the treatment of the entitled carers income and effectively lowers the cap on liable parent income used in the child support assessment.
The cap on the child support income amounts of two liable parents, in relation to a child or children under section 52 is also to be lowered in the same way. Item 2 achieves this.
This measure commences on 1 January 2001, or (should Royal Assent not be given on or before that date) on proclamation.