House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, the Hon Mal Brough MP)

Schedule 2 - Consequential amendments and application and saving provisions relating to the formulas

Summary

The amendments made by Schedule 1 relating to the new child support formulas provide for many new and amended concepts, and generally affect numerous other provisions in the child support legislation, family assistance law and Family Law Act. This Schedule ensures that the necessary consequential amendments are made and provides for how the new formula provisions will apply on implementation.

Background

These amendments ensure that existing provisions in the various Acts affected by the new formulas are either repealed where no longer appropriate, or revised to preserve the intended effect of the provisions in light of the new arrangements. In particular, various new definitions are inserted into section 5 of the Child Support Assessment Act so that the new concepts apply accurately throughout that Act as appropriate. Further amendments reflect the new application arrangements for administrative assessment, in which there is no longer a distinction between eligible carer and liable parent applicants - now, applications may be made simply by parents or non-parent carers. Other provisions are being amended to reflect the fact that applications are now generally made on the basis of both parents being assessed for the costs of the child (thereby, giving effect to the shared-cost approach to child support recommended in the Taskforce Report).

Explanation of the changes

Part 1 - Consequential amendments

Family Assistance Act

The family tax benefit income tests use the concept of adjusted taxable income (ATI), which is defined in Schedule 3 to the Family Assistance Act. The concept is also relevant for the purposes of child care benefit.

The components of ATI are set out in subclause 2(1) of Schedule 3. These include the individual's adjusted fringe benefits total for the relevant income year and the individual's target foreign income for the year. The relevant definitions are in clauses 4 and 5 of Schedule 3 respectively.

The amendments made by items 1 and 2 modify these two components of ATI so that the concept of ATI for the purposes of the family assistance law is the same as that applicable under the new child support laws.

Item 2 repeals existing clauses 4 and 5.

New clause 4 uses the concept of reportable fringe benefits total and aligns the new definition for family assistance purposes with the definition of reportable fringe benefits total as it applies in the child support context. The change for family assistance purposes is that the new definition uses the gross value of reportable fringe benefits whereas the existing definition uses the net value.

The re-naming of this concept is then reflected in the amendment made by item 1 to paragraph 2(1)(b) of Schedule 3 to the Family Assistance Act.

New clause 5 inserts a new definition of target foreign income that is, in substance, the same as the new definition inserted into the Child Support Assessment Act. For family assistance purposes, the main difference is the inclusion of new paragraph 5(1)(b) which brings within the definition any amount of income not covered by (a) that is exempt from tax under section 23AF or 23AG of the Income Tax Assessment Act 1936 , reduced (not below nil) by the total amount of losses and outgoings that are not of a capital nature incurred by the individual in deriving the exempt income. This will ensure that certain foreign income that is exempt from tax but currently included as income for child support purposes will also be included as income for family assistance purposes.

These amendments apply in relation to the 2008-09 income year and later income years. The relevant application provision is in item 116 .

Child Support Assessment Act

Items 3 to 98 are amendments of the Child Support Assessment Act.

Item 3 amends paragraph 4(2)(b) to reflect, in relation to the objects of the Act, the fact that the Child Support Scheme is now based on the costs of children.

Item 4 changes existing section 5 to subsection 5(1), given new subsections are being added to section 5 by item 59 and 60 .

Items 5 to 59 amend section 5 to add new definitions that are relevant to the operation of the new formulas, repeal redundant definitions and amend further definitions as necessary.

Item 5 repeals the definition of adjusted income amount , which is no longer needed in the Act.

Item 6 provides that the term adjusted taxable income has the meaning given by section 43.

Item 7 provides that the term annualised MTAWE figure has the meaning given by section 5A.

Item 8 inserts a new definition of care period , as having the meaning given by section 48.

Item 9 repeals the definition of carer application , which is no longer needed in the Act.

Item 10 repeals and substitutes the definition of carer entitled to child support to recognise the more complex workings of the new Child Support Scheme, in which a parent or non-parent carer becomes entitled to child support because of the assessment and allocation of costs under the new administrative assessment provisions, rather than simply on acceptance of an application for administrative assessment.

Item 11 inserts a new definition of child support case , which means, in relation to a child, all the assessments for child support for all children who are children of both the parents of the child. The child support case includes all the children of the parental relationship, so if the parents have more than one child from their relationship, all their children belong to the same child support case. So, for example, if two parents have an administrative assessment for each of their two children, there is one child support case in relation to those two children. If one of those parents also has an administrative assessment for a third child with a different parent, the third child would be covered by a different child support case to the case containing the first two children.

Item 12 provides that the new term child support income has the meaning given by section 41.

Item 13 repeals the no longer necessary current definition of child support income amount .

Item 14 repeals and substitutes the definition of child support percentage , to have the meaning given by section 55D.

Item 15 provides that the new term combined child support income has the meaning given by section 42.

Item 16 provides a new definition of cost percentage , with the meaning given by section 55C.

Item 17 provides that the new term costs of a child has the meaning given by section 55H.

Item 18 provides that the new term Costs of the Children Table means the table in Schedule 1 to the Child Support Assessment Act.

Item 19 inserts a new definition of court order for the purposes of Part 5 of the Child Support Assessment Act and provides that it has the meaning given by section 47B.

Items 20 and 22 repeal two redundant definitions, disregarded income amount and exempted income amount .

Item 21 repeals the definition of EAWE amount , which is not needed for the new Scheme.

Item 23 inserts a new definition of income amount order .

Item 24 provides that the new term income percentage has the meaning given by section 55B.

Item 25 inserts a new definition of income support payment and states it is to have the meaning given by subsection 66(9).

Item 26 inserts a new definition of Income Tax Assessment Act , as meaning either the 1936 or the 1997 Act of that name.

Item 27 makes a minor consequential amendment to the definition of index number .

Item 28 repeals and substitutes the definition of last day , in relation to a child's secondary school year. This is being changed to clarify that the last day is the day determined by the child's school as the last day of classes for the school year, and, if a child has to sit an examination and the last day of examinations falls after the last day of classes, then the last day is the end of the examination period.

Item 29 repeals and substitutes the definition of last relevant year of income . Although the definition itself has not changed, the example has been updated to make it more useful.

Item 30 repeals and substitutes the definition of liable parent , to recognise the more complex workings of the new Child Support Scheme, in which a parent becomes a liable parent as a result of the assessment and allocation of costs under the new administrative assessment provisions, rather than simply on acceptance of an application for administrative assessment.

Items 31 and 32 repeal the redundant definitions of liable parent application and major care .

Item 33 amends the definition of minimum annual rate of child support to pick up the relocated substantive meaning, which will now be in subsection 66(5), rather than subsection 66(4).

Item 34 provides that the new term multi-case allowance has the meaning given by section 47.

Item 35 provides that the new term multi-case cap has the meaning given by section 55E.

Item 36 inserts a new definition of multi-case child costs , with a meaning drawn from step 4 of the method statement in section 47.

Item 37 inserts a new definition of net rental property loss to establish an income component that equals the amount by which a parent's gross expenses exceed gross income from rental property for a particular year, or, if those expenses do not exceed that income, equals nil.

Item 38 provides that the term non-parent carer means a person who is an eligible carer of a child, but who is not the parent of the child, such as, for example a grandparent. Eligible carer is defined in section 7B.

Item 39 provides that the term parenting plan has the meaning given by section 63C of the Family Law Act.

Item 40 inserts a new definition of a parent's pension PP (single) maximum basic amount . This is the sum of the amounts that would have been payable to the parent as the maximum basic rate and pension supplement if they were receiving parenting payment (single) under the social security law.

Item 41 provides that the new term percentage of care has the meaning given by section 48.

Item 42 provides that the new term regular care has the meaning given by subsection 5(2).

Item 43 repeals and substitutes the definition of relevant dependent child . The revised definition achieves several things. Firstly, it recognises that a relevant dependent child is a child who is not the subject of an assessment in respect of the costs of a child. That is, the child is not a child in a child support case (even though they may be taken into account in determining a relevant dependent child amount under section 46). Secondly, it reflects the repeal from the Scheme of the concept of major care , replacing it with a reference to 'at least shared care'. Thirdly, it recognises that a child may remain a relevant dependent child until the last day of the secondary school year in which the child turns 18. Lastly, it prevents double dipping by excluding a child for whom the parent is assessed under the new costs of children arrangements.

Item 44 provides that the new term relevant dependent child amount has the meaning given by section 46.

Items 45 and 47 repeal the now redundant definitions of relevant partnered rate of Social Security pension and relevant unpartnered rate of Social Security pension . The new definition of pension PP (Single) maximum basic amount will now be sufficient.

Item 46 provides that the new term relevant September quarter has the meaning given by subsection 5A(2).

Item 48 inserts a new definition of remaining period in relation to a parent who has made an election under section 60. This definition supplements the new rules under section 60.

Item 49 provides that the new term self-support amount has the meaning given by section 45.

Item 50 provides that the new term shared care has the meaning given by subsection 5(3).

Items 51 to 54 repeal the now redundant definitions of shared care child, shared ongoing daily care, substantial care and supplementary amount .

Item 55 inserts a new definition of target foreign income , with meaning drawn from section 5B.

Item 56 inserts a new definition of taxable income , with meaning drawn from sections 56 and 57.

Item 57 inserts a new definition of tax free pension or benefit . This means one of several stipulated income support payments to the extent that any of those payments is tax-exempt and is not a payment by way of bereavement payment, pharmaceutical allowance, rent assistance, language, literacy and numeracy supplement or remote area allowance. This new definition will align the child support income arrangements in this respect with the current arrangements for family tax benefit.

Item 58 repeals the definition of yearly equivalent of EAWE amount , which is not needed for the new Scheme.

Item 59 inserts new subsections 5(2) and (3). Subsection 5(2) inserts a definition of regular care , which provides that a person has regular care of a child if they have at least 14%, but less than 35%, care of the child during a care period (see section 48). Subsection 5(3) inserts a definition of shared care , which provides that a person has shared care of a child if they have at least 35%, but no more than 65%, care of the child during a care period.

Item 60 inserts new sections 5A and 5B. New section 5A contains the definition of annualised MTAWE figure . This figure, for a relevant September quarter, is 52 times the published male total average weekly earnings figure for all employees (however from time to time described) for the reference period in the quarter. The relevant September quarter is the quarter ending 30 September of the last calendar year ending before the child support period in question begins and the reference period in the quarter is the pay period officially stipulated for the purpose.

New section 5B contains the definition of target foreign income . This definition will take the place of the exempt foreign income definition in the current formula provisions. This is to ensure that, as much as possible, consistent terminology is used both for family assistance law and child support law. The definition of target foreign income is also being aligned with the definition of target foreign income in the family assistance law. Otherwise, there is no substantial difference.

Item 61 repeals and substitutes subsections 7A(2) and (3), relating to the meaning of a child support period . This is to redraft the subsections into plainer English. No substantive change is made, although a new note is added after paragraph (2)(d). The note points out that, despite paragraph (2)(a) (which provides that a child support period generally starts at the beginning of the day when an application for administrative assessment is properly made under Part 4), a child support period might not start if a non-parent carer applies for administrative assessment during a child support period - section 40B refers.

Item 62 repeals and substitutes subsection 7B(1) to remove redundant concepts from the current subsection and reflect instead the new criterion that an eligible carer must have at least shared care of the child.

Item 63 repeals the now redundant sections 8 and 8A.

Items 64 and 65 amend section 23 to reflect the new application arrangements for administrative assessment, in which there is no longer a distinction between eligible carer and liable parent applicants - now, applications may be made simply by parents or non-parent carers.

Item 66 follows through on the last point by repealing and substituting sections 25 to 26A. Section 25 will allow a parent of a child to apply for administrative assessment of child support for the child as long as the application is for both parents to be assessed for the costs of the child (thereby giving effect to the income shares approach to child support recommended in the Taskforce Report), the two parents are not in a domestic relationship with each other, and the specified requirements about joint care situations and child welfare laws are met. A note points out that a parent by whom child support is payable must be a resident of Australia on the day the application is made (see new section 29A).

Section 25A allows a non-parent carer to apply for administrative assessment. The basic rule in this case is that the non-parent carer must apply for both parents to be assessed for the costs of the child. However, this rule will not apply if one of several situations exists that means that one parent should not, or cannot, be assessed for the costs of the child, as long as the non-parent carer applies for the other parent to be assessed. The allowable situations include when the first parent is not a resident of Australia, cannot be located, or is deceased. The other rules about a non-parent carer application are that the carer must not be in a domestic relationship with either parent and the specified requirements about joint care situations and child welfare laws are met. A note highlights that a parent by whom child support is payable must be resident of Australia on the day the application is made (see new section 29A).

Sections 26 and 26A are essentially reiterations of current sections 26 and 26A, but reflecting the changed arrangements for applying for administrative assessment.

Items 67 to 69 amend section 28 to reflect the changed arrangements for applying for administrative assessment and the fact that the two or more children described in the section who may be included in the same application form may be in different child support cases, given that the concept of a child support case is now specifically recognised in the legislation (see discussion above of the new definition of that term).

Item 70 amends subsection 29(2) to remove reference to the redundant concept of a carer application.

Item 71 inserts new section 29A, which has the effect that an application for administrative assessment under either section 25 or 25A may not be made if a parent to be assessed under the application for the costs of the child is not a resident of Australia when the application is made and the Registrar is reasonably satisfied that child support is likely to be payable by the parent. This is because an assessment cannot be made for a parent to pay child support unless they are a resident of Australia.

Item 72 repeals and substitutes section 31 to reflect the changed arrangements for applying for administrative assessment. The section will have a more limited effect than currently, being simply a requirement for the Registrar to assess one or both parents, as the application requires, for the costs of the child and to assess the annual rate of child support payable under Part 5 for the days in the child support period starting when the application is made.

Item 73 repeals subsections 33(2) and (3), relating to notices to be given if the Registrar refuses to accept an application for administrative assessment, and substitutes them with subsection (3). The new subsection (3) provides for the situation where the Registrar refused to accept the application for reasons that include that the Registrar was not satisfied that one of the people who was to have been assessed for the costs of the child was a parent of the child. In this situation, the notice must include, or be accompanied by, a statement to that effect that the applicant may apply to a court having jurisdiction under the Child Support Assessment Act for a declaration under section 106Athat the applicant is entitled to an administrative assessment of child support for a child because the other party is a parent of the child.

Item 74 repeals and substitutes section 34, relating to notices to be given if the Registrar accepts an application for administrative assessment. The new section merely reflects the changed arrangements for applying for administrative assessment and for review by the Social Security Appeals Tribunal. There is no substantive change.

Item 75 repeals and substitutes section 34A, relating to the Registrar's obligation to make an assessment when a new taxable income figure is available, to re-draft the provision in plain English, without making any substantive change.

Item 76 repeals and substitutes section 34C, relating to the fact that administrative assessments for child support periods are not started by an application or a new agreement. The new section reflects changed arrangements for applying for administrative assessment, focusing not on by or to whom the child support is payable, but simply on the child support payable for the child.

Item 77 repeals and substitutes paragraphs 83(1)(a) and (b), relating to people who may be parties to child support agreements. In making this specification, the current provisions refer back to the parties involved in an application for a child support assessment. The new provisions preserve this link, and are revised simply to reflect the changed arrangements for applying for administrative assessment.

Item 78 repeals and substitutes subsection 98S(1) to reflect new concepts and terminology introduced by this bill.

Item 79 repeals and substitutes section 98SA. It states that the Registrar must not make a determination under Part 6A that varies, or that has the effect of varying, the annual rate of child support payable by a liable parent for all of the children in the child support case that relates to the child in respect of whom the determination is made to a rate below the minimum annual rate of child support for the child support period, unless the liable parent has at least regular care of at least one of the children in the child support case that relates to the child.

Item 80 makes consequential amendments to section 106A.

Items 81 and 83 amend section 107 to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Item 84 amends paragraph 117(3B)(a) to reflect the changed terminology from child support income amount to adjusted taxable income , aligning with family tax benefit.

Item 85 repeals and substitutes subsection 118(1) to reflect new concepts and terminology introduced by this bill.

Items 86 to 89 amend section 139 to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Item 90 repeals paragraphs 150B(1)(b) and (c) and substitutes a new paragraph (b) to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Item 91 amends the note to subsection 150C(1) to reflect the changed terminology from child support income amount to adjusted taxable income , aligning with family tax benefit.

Item 92 inserts new subsection 151B(1A). A child is generally no longer an eligible child (a child for whom child support may be paid) or a relevant dependent child (a child for whom a parent may have a relevant dependent child amount, which decreases a parent's child support income when assessing the costs of the child support children) from the day they turn 18. Although section 151B currently allows a carer to apply for an administrative assessment for an eligible child to continue in force until the last day of the secondary school year in which they turn 18, there is no equivalent application allowed for a relevant dependent child. Therefore, the treatment between eligible children (a parent's first family) and relevant dependent children (the parent's second family) is inequitable, which would be contrary to the general thrust of the reforms. The amendment in this item corrects this inequity.

New subsection 151B(1A) provides the desired equivalent rule for relevant dependent children, so the parent may apply for an administrative assessment that takes into account the parent's relevant dependent child to continue in force until the last day of the secondary school year in which the child turns 18.

Item 93 repeals and substitutes paragraph 151B(2)(b) to reflect the changed arrangements for administrative assessment.

Item 94 complements the new rule, by repealing and substituting paragraph 151C(2)(b). The extra element in new paragraph (b) effectively requires the Registrar to accept an application under new subsection 151B(1A) if satisfied that an administrative assessment, or child support agreement, that takes the relevant dependent child into account is in force, or is likely to be, on the day before the child turns 18.

Item 95 makes consequential amendments to section 151D (about the consequences of acceptance of a continued administrative assessment application under section 151B) to restrict its operation to an application under the current subsection 151B(1) for in relation to an eligible child. Item 96 then inserts new section 151E to provide equivalent consequences on acceptance of a continued administrative assessment application under new subsection 151B(1A) in relation to a relevant dependent child.

Item 97 inserts new section 153A, providing one indexation mechanism for the purposes of subsection 65A(2) (relating to the annual rate of child support payable by low income parents not on income support), and subsection 66(5) (relating to the minimum annual rate of child support) rather than including the indexation provision within each of these subsections separately.

Item 98 repeals and substitutes sections 154 and 155, which currently requires the Registrar to publish certain figures relevant to the child support formula in the Gazette. The new section updates this requirement in light of new concepts and provisions introduced by this bill. Some of the Gazettal requirements now fall on the Secretary, rather than the Registrar, since they relate to core policy elements, rather than more administrative matters. Subsection 155(3) provides that the instruments published under this section are not legislative instruments. This provision is included to assist readers, as the instrument is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 .

Child Support Registration and Collection Act

Items 99 to 110 are amendments of the Child Support Registration and Collection Act.

Item 99 inserts a definition of non-parent carer and provides that it has the same meaning as in section 5 of the Child Support Assessment Act.

Item 100 makes a consequential amendment to subparagraphs 17(1)(a)(i) and (ii).

Item 101 repeals and substitutes paragraph 24A(2)(c), which currently relieves the Registrar of the obligation to register a liability arising from a child support assessment if the assessment was made because of a liable parent application. The new paragraph reflects the removal of the liable parent application concept, referring instead to an application by the parent by whom child support is payable.

Item 102 makes a minor consequential amendment to section 79B.

Item 103 repeals and substitutes subsection 80(5) to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Item 104 amends table item 4 in section 85 to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Items 105 to 107 amend sections 101, 102 and 103H to reflect the new concept of a non-parent carer.

Item 108 inserts new section 103VA, which provides that a party aggrieved by a decision of the SSAT under Part VIIA of the Child Support Registration and Collection Act, relating to a party's percentage of care for a child to the review, may apply to the AAT for a review of the decision. Subsection 103VA(2) provides that the term decision has the same meaning as in the Administrative Appeals Tribunal Act 1975 .

Item 109 inserts new subparagraph 103X(1)(a)(ii) to provide that if the SSAT makes a decision on review that relates to a person's percentage of care for a child, the party may, subject to the Administrative Appeals Tribunal Act 1975 , apply to the AAT for review of the decision, and request a statement under section 28 of that Act (except where subsection 28(4) of that Act applies).

Item 110 makes a minor technical amendment to subsection 103X(2).

Family Law Act

Items 111 to 114 amend the Family Law Act.

Item 111 amends subsection 63G(5) to reflect the changed arrangements for administrative assessment.

Item 112 repeals and substitutes subsection 66E(1) to reflect the changed arrangements for administrative assessment, including the requirement to assess a parent for the costs of the child.

Items 113 and 114 amend subsections 66SA(1), 86(3B) and 87(4D) to reflect the changed arrangements for administrative assessment of child support, including the requirement to assess a parent for the costs of the child.

Part 2 - Application and saving provisions

Subitem 115(1 ) is an application provision that provides that amendments made by Schedule 1, and this Schedule, apply in relation to a day in a child support period that is a day that is on, or after, the day on which this Schedule commences. Essentially, all child support assessments will be reviewed prior to the commencement of the new Scheme and new assessments will be made according to new Part 5 and take effect from the commencement of new Part 5. However, this will not affect child support periods, which will continue to run.

Subitem 115(2 ) provides that the amounts referred to in new subsections 65A(2) (annual rate of child support payable by low income parents not on income support) and 66(5) (minimum annual rate of child support) of the Child Support Assessment Act are to be indexed in accordance with section 153A of the Child Support Assessment Act after 30 December 2006 as if item 1 of Schedule 1 had commenced on that day.

Item 116 is an application provision that provides that the amendments made by items 1 and 2 of this Schedule apply in relation to the 2008-2009 income year and later income years.

Item 117 deals with savings assessments in force prior to the commencement of the new child support scheme.

Subitem 117(1 ) provides that the amendments made by Schedule 1 do not affect the continuity of:

(a)

any administrative assessment, in force immediately before this item commences, of the annual rate of child support that is payable by a parent; or

(b)

any reduction, that is in force immediately before this item commences, of an annual rate of child support payable to nil under section 66A of the Child Support Assessment Act; or

(c)

any liability that arose under section 77 of the Child Support Assessment Act before this item commences.

Subitem 117(2 ) provides that for the purposes of the Child Support Assessment Act, if an election made by a person under section 60 of that Act is in force immediately before this item commences:

(a)

the election continues in force for the remaining days in the child support period, despite the amendments made by Schedule 1; and

(b)

the person is taken to have made the election for the purposes of assessing the person in respect of the costs of the child; and

(c)

the amount specified in the relevant notice as the amount the person elects to be his or her child support income amount is taken to be specified in the notice as his or her adjusted taxable income; and

(d)

the amounts specified as amounts estimated under steps 2 and 3 of the method statement in subsection 60(5) of that Act, as in force immediately before this item commences, is taken to be specified in the notice as the amount estimated under step 2 of the method statement in subsection 60(5) of that Act, as in force immediately after this item commences.

Subitem 117(3 ) provides that if a Registrar determination under section 58 of the Child Support Assessment Act is in force immediately before this item commences, the determination continues in force despite the amendments made by Schedule 1.

Subitem 118(1 ) requires the Registrar to publish in the Gazette the annual rate of child support specified in subsection 65A(2) of the Child Support Assessment Act for all child support periods that started in that calendar year or the previous calendar year.

Subitem 118(1 ) requires the Registrar to publish in the Gazette for all child support periods that started in that calendar year or the previous calendar year:

•

the annualised MTAWE figure for the relevant September quarter;

•

the Costs of the Children Table, incorporating the annualised MTAWE figure for the relevant September quarter and any other amounts in the items in the table that can be worked out using the annualised MTAWE figure.

Subitem 118(3 ) notes that the instruments published under subitems (1) and (2) are not legislative instruments under the Legislative Instruments Act 2003 , as the instrument is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 .