Explanatory Memorandum
(Circulated by authority of the Minister for Community Services, the Hon Larry Anthony MP)Schedule 3 - Income earned for the benefit of resident children
Summary of proposed changes
This measure will create a new ground for departure from the child support formula assessment for a parent who has income from a second job, regular overtime, or some similar source, that is earned for the benefit of a child (natural, adoptive or step-child) or children in the parents current family. For this to apply, the additional income must not be earned as part of the normal earning pattern established by the parent before the current family was established, and must not come from normally expected improvements in the parents earning pattern (eg, mandatory overtime or normal incremental increases). The amount of income to be excluded will be limited to a maximum of 30% of the parents total income.
Explanation of the changes
Part 6A of the Assessment Act allows the Registrar to determine that the normal administrative assessment provisions of the Act are to be departed from in individual cases. A departure determination may be made to vary the liable parents, or the entitled carers, income.
This measure provides a new ground for such a departure determination to be made. The ground would be that a liable parent, or an entitled carer, earned, derived or received income for the benefit of a child (natural, adoptive or step-child) or children in the liable parents, or entitled carers, current family. The result of the departure determination would be to reduce or increase the child support liability of the liable parent to the entitled carer.
Paragraphs 98S(1)(b) and (d) currently allow the Registrar to vary the liable parents, or entitled carers, child support income amount in a departure determination. However, before doing so in response to an application, section 98C provides that the Registrar must be satisfied as to certain matters, including that one or more of the prescribed grounds for departure exists. Paragraph 98C(2)(a) provides that the grounds for departure are the same as apply to a court under subsection 117(2).
Items 2 to 5 modify subsection 117(2) to provide the new ground in the form of new subparagraphs 117(2)(c)(iii) and (iv). The child that is the subject of the new ground is referred to as the resident child of the liable parent or entitled carer.
Item 6 inserts new section 117A to elaborate on the new ground. In particular, the new section provides that a child is a resident child only if:
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- the child normally lives with the liable parent;
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- the child is under 18;
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- the child is not a member of a couple;
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- the liable parent or entitled carer (respectively) is either a parent of the child, or is or was a member of a couple of which the other member is or was a parent of the child (ie, a step-parent of the child); and
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- the child is not a child of whom both the liable parent and the entitled carer are the parents.
An example of the last point is when a couple with two children separate and each parent has one of the children living with him or her. Each of these children may not be a subject for the income earning behaviour targeted by this measure in so far as the other parent is concerned. For example, the liable parent will not get a reduction in his or her child support income amount (in relation to the child support payable to the entitled carer) for extra income earned for the child who is living with the liable parent.
New section 117A also prevents the new ground from applying if the additional amount of the liable parents, or entitled carers, child support income amount was earned, derived or received in certain circumstances. The amount must not have been earned, derived or received in accordance with a pattern established before the child became a resident child of the liable parent or entitled carer. Nor, if the child has been a resident child from birth, must the pattern have been established before the liable parent or entitled carer could reasonably have been aware of the pregnancy that resulted in the childs birth. (This is to establish that the motivation in earning the extra income was to benefit a child who, if not already born, was at least clearly expected.)
Lastly, even if the amount passes that test of when the pattern was established, it must not have been earned, derived or received through alterations to the pattern that could reasonably be expected to occur in the ordinary course of events. For example, income earned from regular or seasonal overtime, seasonal employment, mandatory overtime, shift work conditions, normal increases in pay and normal career advancements would be excluded.
The new ground having been provided, item 1 inserts new subsection 98S(3A) to provide that, in making a departure determination under the new ground, the Registrar must not reduce the child support income amount by more than 30%, to the extent that the reduction is attributable to the new ground (more than one ground may apply).
Item 7 makes a similar provision in section 118 for when a court makes a departure determination.
This measure commences on 1 January 2001, or (should Royal Assent not be given on or before that date) on proclamation.