Explanatory Memorandum
Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MpSchedule 3 - Child support
Summary
This Schedule will make minor amendments to the child support legislation, notably to address anomalies in relation to the child support formula reforms that commenced on 1 July 2008.
Background
This Schedule is set out in seven Parts, which deal with amendments in the general subject areas outlined below. Each Part has its own commencement date, set out at the end of each of the descriptions of the content of the Part. The commencement of some Parts is delayed to the day 28 days after Royal Assent for service delivery reasons, to allow for necessary implementation changes to computer systems and forms, and for staff training to take place.
In this Schedule, the Child Support (Assessment) Act 1989 is referred to as 'the Assessment Act', and the Child Support (Registration and Collection) Act 1988 as 'the Registration and Collection Act'.
Part 1 - Percentage of care
A number of changes will be made to provisions of the Assessment Act in existence from 1 July 2008 that enable the Registrar to determine a new care period for the purpose of calculating a percentage of care.
Amendments will mean that a change in percentage of care of less than 7.1 per cent which is brought about by a new or varied agreement, plan or order as to care, will be able to be reflected in the child support assessment. This allows for the recognition of a change in care where it arises by one of these mechanisms in which the parents have agreed to the change in care. This amendment ensures that, where parents come to a new agreement or obtain a new order about the care of a child, that care can be reflected in the child support assessment.
A new care period will commence and a new percentage of care will be able to be calculated where a person's percentage of care has increased to, or risen above 35 per cent or fallen below 35 per cent.
In instances where there is a change in care greater than 7.1 per cent but where there may not be a change in the annual rate of child support payable for the child, no new cost percentage may currently be reflected in the assessment. This situation may arise, for example, in situations where the child support payable is set by a change of assessment decision, by agreement, by court order, or because the person's assessment is set at the fixed annual rate or minimum annual rate. In these situations, a change in care may not give rise to a change in the annual rate payable. Amendments will allow for a change of at least 7.1 per cent in the percentage of care for a child to be reflected in the assessment if the change alters the person's cost percentage for the child, rather than requiring that the change in care alters the child support payable. This will mean that, where there is a later amendment to the assessment, child support assessments may more accurately reflect the percentage of care of each parent.
Amendments will change the date of effect of a change in a person's percentage of care, so that, in circumstances in which the Registrar becomes aware of a change in a reasonable timeframe, care arrangements can be reflected from the date the care changed. Where the Registrar is notified, or otherwise becomes aware, of a change in care within 28 days, the Registrar will be able to reflect the change on the assessment with a date of effect from the date the event occurred. Where the Registrar is not notified or does not become aware of the change within 28 days, the change will take effect from the date that the Registrar is notified or otherwise becomes aware of the event. In circumstances in which there is no clear date from which care changed, the Registrar will continue to be able to reflect the change from the date of notification of, or becoming aware of, the change.
Ongoing determinations of care by the Registrar
Section 52 of the Assessment Act allows the Registrar to make a determination of a parent's percentage of care in some circumstances where care is not occurring as ordered by a court or agreed by the parents. The Registrar must review, and may remake, such a determination every six months, during which time the parents and any non-parent carer are expected to take reasonable action to attempt to resolve the care situation. In some circumstances, such as domestic violence, where one parent is unable to be located or where one parent has undertaken a long-term, long-distance relocation, it is unlikely reasonable action can be taken which will allow care to be calculated on a different basis. Amendments are made which will allow the Registrar not to review a determination if satisfied there are special circumstances which justify the Registrar in not doing so.
This Part commences on the 28th day after Royal Assent.
Part 2 - Publication of reasons for decisions of the Social Security Appeals Tribunal
Since 1 January 2007, internal review decisions of the Registrar have been reviewable by the Social Security Appeals Tribunal ('the SSAT'). The SSAT is required to provide the reasons for its decision to the parties to the review, which include the Registrar. It was anticipated that de-identified decisions of the SSAT would be published, and provision was made for such publication not to be a breach of the restriction on the publication of review proceedings imposed by section 110X of the Registration and Collection Act. However, additional amendment of the secrecy provisions is required to allow this to occur.
The secrecy provisions will be amended to provide that the SSAT will not be prevented from communicating the reasons for its decision to the Secretary, or a person authorised by the Secretary. Similarly, the Secretary will not be prevented from communicating the reasons for a decision to a person authorised to undertake publication. The authorised person will not be prevented from publishing such reasons in de-identified form. The Secretary is likely to authorise the publication of SSAT child support decisions by particular bodies, such as universities, which already undertake publication and analysis of Tribunal decisions in other related fields, including social security and family assistance, or other interested legal publishers.
De-identification of the published reasons will be sufficient to ensure the privacy of a party or witness to the proceedings.
This Part commences on the day after Royal Assent.
Part 3 - Departure from assessments
High child care costs
The Assessment Act provides a mechanism for a parent to apply to the Registrar or a court for a child support assessment to be amended. There are specific grounds for departure from an assessment set out in subsection 117(2). One of these grounds is that the costs of maintaining the child are significantly affected because of high child care costs in relation to the child. Currently, this ground may only apply to a carer parent. Amendments will allow this ground of departure to apply to either parent.
Further changes will also allow a non-parent carer to seek departure on the basis of high child care costs. For non-parent carers, costs of child care will be considered high where the cost of child care is at least 25 per cent of the costs of the child for that period. This new test, specific to non-parent carers, is necessary because the existing test determines whether a parent's child care costs are high by reference to a percentage of a parent's adjusted taxable income. A non-parent carer, unlike a parent, is not required to provide income details for child support purposes. The existing test in subsection 117(3B) will remain, but will only apply to parents who apply for this ground of departure.
Reaching agreement during a change of assessment
Part 6A of the Assessment Act allows for administrative departure from formula assessment of child support upon application to the Registrar by a party to the assessment. This process is known as a change of assessment. Prior to 1 July 2008, parents could finalise their change of assessment by reaching an agreement, and seeking that the Registrar accept the agreement. The capacity for the Registrar to accept such an agreement was unintentionally removed from 1 July 2008, and amendments are now being made to restore this capacity.
An agreement made during the change of assessment process without legal advice will be required to meet all requirements for a limited child support agreement, save the requirement that the agreement represent a rate of child support which is at least that of the formula assessment. The Registrar will accept such an agreement where he or she considers it is just and equitable as regards the child, the liable parent and the carer entitled to child support to do so. The requirement that the agreement also be otherwise proper will be repealed because, under the scheme reforms, the Registrar will make a notional assessment of the child support payable as though no agreement had been accepted as the basis for the payment of family tax benefit to the parties. Once accepted, an agreement made without legal advice will otherwise be regarded as meeting the definition of a limited child support agreement for the purposes of the Assessment Act.
Setting aside an agreement
A party to a child support agreement may apply to a court to set aside the agreement in some circumstances. A party to an agreement accepted during the change of assessment process will similarly be able to apply to a court for the agreement to be set aside.
Varying a provisional notional assessment
A parent may currently seek to vary a provisional notional assessment made because of the acceptance of an agreement by seeking an administrative departure from the provisional notional assessment. Where the agreement in question is accepted by the Registrar during the change of assessment process, the initial application for a change of assessment will then be treated as though it were an application for departure in relation to the provisional notional assessment.
This Part commences on the 28th day after Royal Assent.
Part 4 - Terminating events
In conflict with the new child support formula, which provides for the assessment of child support regardless of with whom the children live from time to time, the legislation still provides for an administrative assessment to end where the person who is the carer entitled to child support for a child ceases to be an eligible carer of that child. Amendments will remove this terminating event, and continue the assessment where the child's care continues to be provided by either of the parents or any non-parent carer who is a party to the assessment and entitled to child support. However, where both parents cease to provide care for the child, and the child is not cared for by a non-parent carer who is a party to the assessment, the administrative assessment of child support for the child will end.
This Part commences on the 28th day after Royal Assent.
Part 5 - Reducing rate of child support under minimum annual rate assessments
In circumstances in which a parent is paying the minimum annual rate under section 66 of the Assessment Act, section 66A allows the Registrar to reduce an assessment to nil. The parent's application must satisfy the Registrar that the parent's income for the 12-month period starting on the day on which the parent applies is less than the total of the number of the parent's child support cases multiplied by the minimum annual rate of child support for the child support period, before the Registrar may grant the reduction application.
Amendments to section 66A will mean that, instead of the Registrar considering a parent's income for a 12-month period, a parent may nominate either the whole, or a part, of a child support period and apply to have the assessment varied to nil for the nominated period, providing the person nominates a minimum period of two months. The applicant will need to provide income details for the period for which the person is applying. The person will need to demonstrate that their income for the nominated period is lower than the total number of the parent's child support cases multiplied by the minimum annual rate of child support for the child support period, for the nominated period.
This Part commences on the 28th day after Royal Assent.
Part 6 - Overseas liabilities
Reflecting overseas liabilities in Australian child support assessments
The new child support formula provisions do not in all cases reflect the fact parents may have additional liabilities under an administrative assessment in a reciprocating jurisdiction. Amendments are being made to ensure that, for the purposes of formula calculation of child support, parents with such overseas liabilities are generally treated as 'multi-case' parents, and their overseas children for whom they are liable are included amongst the total of the children for whom they pay child support.
Currently, only New Zealand administrative child support assessments will be affected, but the provisions will cover any other reciprocating jurisdiction which commences an administrative scheme of assessing child support.
Departure prohibition orders to enforce payment of overseas maintenance liabilities
Recent amendments during the child support scheme reform process moved into the primary child support legislation provisions previously contained in regulations relating to overseas maintenance arrangements, including allowing various means for the Registrar to enforce administratively payment of such liabilities. However, provision was not made for the Registrar to undertake enforcement of such liabilities by issuing a departure prohibition order ('DPO') against the payer of the liability.
Amendments will include most overseas maintenance liabilities amongst the liabilities which the Registrar may enforce by issuing a DPO. As for domestic cases, the enforcement of overseas spousal maintenance liabilities or penalties will not be included.
This Part commences on the day after Royal Assent.
Part 7 - Crediting prescribed payments
Provision currently exists for payments by a parent liable to pay child support to the payee directly, or to a third party, to be credited as child support under the Registration and Collection Act. Where the payment is of a type prescribed in the regulations, the consent of the payee of the child support assessment to the credit in substitution for payment to the Registrar is not required. Examples of prescribed payments include payments of school fees or necessary medical expenses for the child.
From 1 July 2008, credit of a prescribed payment as child support is prohibited where, at the time the credit is to occur, the paying parent has at least regular care of the child or children. Similarly, from 1 July 2008, credit of a prescribed payment is prohibited where the payer and payee have a lump sum arrangement, where the payer has provided child support to the payee of the liability in the form of a lump sum payment, and such a payment is being credited against the amount payable under the liability. These amendments extend these restrictions so that credit of a prescribed payment is not available where, at the time the prescribed payment was made by the payer, the payer either had a lump sum arrangement with the payee, or had at least regular care of the child or children.
This Part commences on the 28th day after Royal Assent.
Explanation of the changes
Part 1 - Percentage of care
Item 1 repeals and replaces existing paragraph 48(1)(b) of the Assessment Act. New subparagraphs 48(1)(b)(i) to 48(1)(b)(viii) will be inserted, which will make a number of changes to the criteria that give rise to a new care period commencing and a new percentage of care for a day in a child support period being calculated. New subparagraph 48(1)(b)(i) will allow a new care period to commence, and a new percentage of care to be calculated, when there is a change in care of less than 7.1 per cent in the percentage of the care for the child that the person has because of a new or varied agreement, plan or order mentioned in paragraph 49(a) or (b).
Item 3 is a consequential amendment that amends paragraph 74A(b) by inserting new subparagraph 74A(b)(ia). This new subparagraph provides that the date of effect of a decision by the Registrar to change a percentage of care brought about by new subparagraph 48(1)(b)(i) will be consistent with the date of effect of changes to the percentage of care brought about by the other events described in section 48.
Item 8 is a consequential amendment, inserting new subparagraph 75(2)(aa) that will allow the Registrar to amend an assessment where there is a change in a person's percentage of care of less than 7.1 per cent, which is brought about by an agreement, plan, or order mentioned in paragraph 49(a) or (b).
New paragraph 48(1)(b)(ii) inserted by item 1 will allow a change in the care level to be reflected in a person's assessment where there is a change of at least 7.1 per cent and the change in care impacts on the person's cost percentage for the child (worked out under section 55C), rather than requiring that such a change have an impact on the child support payable in relation to the child.
Item 4 is consequential upon the insertion of new paragraph 48(1)(b)(ii) by item 1 . Item 4 amends subparagraph 74(b)(i) that allows the Registrar to give effect to a change in care of at least 7.1 per cent, which impacts on a person's cost percentage for a child. This change will make the date of effect of changes brought about by events described in new paragraph 48(1)(b)(ii) consistent with the date of effect of changes to the percentage of care brought about by the other events described in section 48.
Item 9 is consequential upon new subparagraph 48(1)(b)(ii) and will amend paragraph 75(2)(a) so that the Registrar may amend an administrative assessment in circumstances in which a change in the percentage of care alters a person's cost percentage for the child.
New subparagraphs 48(1)(b)(v) and (vi) (inserted by item 1) will allow a new care period to commence and a new percentage of care to be calculated where a person's percentage of care has increased to, or risen above, or fallen below, 35 per cent. Consequential amendments have also been made, which insert new subparagraphs 48(1)(b)(iii) and (iv). Subparagraph 48(1)(b)(iii) has the same effect as previous subparagraph 48(1)(b)(ii) and subparagraph 48(1)(b)(iv) has the same effect as previous subparagraph 48(1)(b)(iii).
Items 5 and 6 make a consequential amendment to subparagraph 74A(b)(iii) and insert new subparagraphs 74A(b)(iv) and (v), which will make the date of effect of changes in care brought about by a change of the kind described in new subparagraphs 48(1)(b)(iv), (v) and (vi) consistent with changes brought about by the other events in subsection 48(1).
Item 10 is consequential to the insertion of new subparagraphs 48(1)(b)(v) and (vi) and will allow the Registrar to amend an assessment when a person's percentage of care falls below 35 per cent, or rises above 35 per cent.
New paragraph 48(b)(vii) (inserted by item 1) will mean that, where the Registrar is advised or otherwise becomes aware of a change in the level of care ('an event') within 28 days of the event occurring, the change in care can be reflected in the assessment from the date the event occurred. Subparagraph 48(b)(viii) provides that, where the Registrar does not become aware of a change in care within 28 days of the change, the change in care will be reflected in the assessment from the date that the Registrar is notified.
Item 7 is a consequential amendment that will amend section 74A to allow the Registrar to change an administrative assessment with a date of effect consistent with new subparagraph 48(b)(vii).
Item 11 provides that the changes in this Part (except item 2) apply in relation to changes in percentages of care that occur on or after 1 July 2008, although, where an amendment is made as the result of a change occurring before commencement, the amendment cannot take effect earlier than commencement.
Item 2 inserts additional subsection 52(5), providing a discretion for the Registrar not to review a determination described above at 'Ongoing determinations of care by the Registrar'. Item 11 provides that item 2 applies to determinations made on or after commencement
Part 2 - Publication of reasons for decisions of the Social Security Appeals Tribunal
Items 12 and 13 make the amendments described above at 'Publication of reasons for decisions of the Social Security Appeals Tribunal'. Item 12 inserts new subsections 16(2AA), (2AB) and (2AC). Subsection 16(2AA) provides for the exception from subsection 16(2) for communication of the reasons for a decision of the SSAT by the SSAT to the Secretary or a person authorised by the Secretary, and by the Secretary to a person authorised. Subsection 16(2AB) authorises publication. Subsection 16(2AC) details the circumstances in which a publication is taken to identify a person. Item 13 provides for the amendments to apply to decisions of the SSAT, regardless of when the decision was made. Given the de-identified nature of the information for this purpose, there will be no adverse effect.
Part 3 - Departure from assessments
Items 14, 16 and 17 make the amendments described above at 'Reaching agreement during a change of assessment'. Item 14 repeals and replaces paragraph 80E(1)(d) to extend the definition of limited agreement to agreements accepted by the Registrar under section 98U. Item 16 inserts new subsection 98(1A), directing the Registrar to disregard the rate comparison provisions of section 80E when deciding whether an agreement is a limited child support agreement for the purposes of subsection 98(1). Item 17 repeals and replaces subsection 98U(2) to substitute a just and equitable test for whether the Registrar should accept a limited child support agreement in these cases.
Item 24 inserts into paragraph 136(1)(a) reference to an agreement accepted under section 98U, as described at 'Setting aside an agreement' above.
Item 25 adds subsection 146D(3), giving effect to the amendment described at 'Varying a provisional notional assessment' above.
Item 26 provides that the above amendments in this Part apply to requests to the Registrar for acceptance of agreements made after commencement, regardless of the date upon which the agreement was made. The amendments relating to 'Setting aside an agreement' will apply to agreements, whether accepted before or after commencement, thus reinstating the position in existence before 1 July 2008, as described above.
Items 15 and 18 to 24 make the amendments described above at 'High child care costs'. Paragraph 117(2)(b) of the Assessment Act provides that the court may consider as a ground for departure from the administrative assessment for child support, that, in the special circumstances of the case, the costs of maintaining the child are significantly affected because of one of the factors listed under paragraph 117(2)(b). Subparagraph 117(2)(b)(ib) provides that one of these circumstances is high child care costs in relation to the child.
Item 18 removes the phrase 'the carer entitled to child support' and substitutes the phrase 'a parent or non-parent carer' in paragraph 117(3A)(a) in order to allow either parent to apply for a change of assessment on this ground. Items 19, 20 and 22 are consequential to item 18 .
Item 21 inserts the phrase 'for a parent' after 'care costs' in subsection 117(3B) so that this test for what the court may consider to be high child care costs is restricted to parents.
Item 23 inserts a new subsection 117(3C), which will provide that costs of child care for a non-parent carer can only be high for the purpose of applying for a change of assessment if the costs equate to 25 per cent of the costs of the child for that period. Item 15 is consequential to this amendment.
Item 26 provides that the amendments made by items 18 to 23 apply in relation to applications to a court made on or after the commencement of those items. The amendments apply to applications to the Registrar for departure made on or after commencement.
Part 4 - Terminating events
Items 27 and 28 make the amendments described above at 'Terminating events'. Item 27 repeals and replaces subsection 12(2) of the Assessment Act to remove the existing terminating event relating to ceasing care. Item 28 inserts new subsection 12(2AA), creating the new terminating event.
Item 29 provides that the amendments apply in relation to child support terminating events which happen on or after commencement.
Part 5 - Reducing rate of child support under minimum annual rate assessments
Item 30 repeals subsections 66A(1), (2) and (3) and substitutes new subsections 66A(1), (2), (3), (3A), (3B) and (3C).
New subsection 66A(1) provides that, where the Registrar has made an assessment under section 66 (minimum annual rate), a parent may apply for an assessment to be varied to nil for the whole, or a portion, of a child support period (provided that this nominated period is for a minimum of two months). Subsection 66A(2) provides for the income comparison the Registrar must undertake in deciding whether to grant the application. The test is met if the figure resulting from subsection 66A(3) is less than the figure resulting from subsection 66A(3A).
The parent's annualised income for the period must be less than the total of the number of the parent's child support cases multiplied by the minimum annual rate of child support for the nominated part of the child support period.
Subsection 16(3B) is inserted as a result of the amendments in Part 6 , to ensure that the earlier commencement date of the Part 6 amendments is not overridden by the later commencement date of Part 5 .
Subsection 66A(3C) provides that a reduction under subsection 66A(1) has no effect in relation to a day to which the assessment under section 66 does not apply.
Item 31 provides that the amendment in item 30 applies in relation to applications made on or after the commencement of that item, and in relation to a part of a child support period that begins on or after the day of commencement. It ensures that, where a reduction under subsection 66A(1) has already taken place for a child support period which continues beyond commencement, new subsection 66A(1) does not apply to that child support period.
Item 31(4) makes amendments relating to Part 6 - Overseas liabilities , because Part 6 makes amendments to section 66A, and commences prior to this Part, and the amendment would otherwise be reversed by this Part.
Part 6 - Overseas liabilities
Items 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48 and 49 make the amendments described above at 'Reflecting overseas liabilities in Australian child support assessments'.
Items 33 and 41 insert new subsection 35D(2) and subsection 41(6), providing that section 35D and subsections 41(1) or (2) do not apply where a parent is liable to pay child support for a child under an administrative assessment under the law of a reciprocating jurisdiction.
Items 35, 37, 39, 41, 43, 44 and 46 amend various provisions to provide for circumstances in which a parent is to be taken to be assessed for the day in respect of the costs of a child in another child support case if they are liable to pay child support for one or more children for a day under an administrative assessment under the law of a reciprocating jurisdiction.
Items 47 and 48 provide for circumstances in which a parent is to be taken to have a child support case if the parent is liable to pay child support for one or more children under an administrative assessment under the law of a reciprocating jurisdiction.
Items 32, 34, 36, 38 and 40 are consequential amendments.
Item 54 provides for the application of these amendments, covering registrable overseas maintenance liabilities, regardless of when made, and allowing the Registrar to amend assessments to reflect the changes made by this Part from commencement of the Part.
Items 50, 51, 52 and 53 make the amendments described above at 'Departure Prohibition Orders to enforce payment of overseas maintenance liabilities'.
Items 50 and 51 include registrable overseas maintenance liabilities within the coverage of section 72D. Item 53 extends the definition of 'child support liability' in section 72E.
Item 54 provides that the amendments apply to registrable maintenance liabilities, regardless of the date they arise.
Part 7 - Crediting prescribed payments
Items 55, 56 and 57 make the amendments described above at 'Circumstances in which payments otherwise than to the Registrar may be credited as child support'.
Item 55 inserts new paragraph 71C(1)(ba), relating to the payer's care of the children, such that subsection 71C(1) only applies to affect the crediting of those payments made while the payer does not have at least regular care of any of the children to whom the relevant administrative assessment relates. Item 56 inserts subsection 71C(2), providing that subsection 71C(1) does not apply where a lump sum payment arrangement exists before the prescribed payment is made, and the lump sum payment has or will be credited in relation to the day the prescribed payment is made.
Item 57 applies the amendments to payments made on or after commencement.