Explanatory Memorandum
(Circulated by the authority of the Treasurer,the Hon John Dawkins MP)CHAPTER 11
THE CHILD SUPPORT REGISTRATION AND COLLECTION ACT 1988
PAYMENT AND RECOVERY OF CHILD SUPPORT DEBTS.
Introduce two new garnishment powers and a power to have a court set aside and restrain the making of transactions designed to limit the ability to pay child support.
THE CHILD SUPPORT (REGISTRATION AND COLLECTION ) ACT 1988
PART V
PAYMENT AND RECOVERY OF CHILD SUPPORT DEBTS
Summary of proposed amendments
11.1. This Bill proposes to:
- (i)
- insert a general power to enable the Registrar to collect child support related debts from a third person;
- (ii)
- insert a general power to enable the Registrar to collect from a person receiving or controlling money of a child support debtor who is not physically present in Australia; and,
- (iii)
- insert a power to enable the Registrar to seek from a court an order to set aside an instrument or disposition, or to restrain the making of an instrument or disposition by, or on behalf of, the payer of an enforceable maintenance liability, the effect of which is to reduce or defeat the payer's liability to an existing or anticipated child support debt or to meet payments under the enforceable maintenance liability.
11.2. The child support legislation provides 4 methods for a payer to meet amounts due under a registered maintenance liability. These are payment to the Registrar direct, by withholding from salary and wages of employees, by interception of a tax refund that is about to issue or by enforcement action in the court.
11.3. There is also the availability to have amounts paid directly to the payee (or to a third party under an another amendment proposed by this Bill [Clause 17.71A]) but these arise only in special circumstances.
11.4. The success of the child support scheme will ultimately be judged on the ability of the Registrar, through the operation of the child support legislation, to collect amounts due in a timely and regular fashion as the existing legislation sets out.
11.5. With more than three and one half years collection experience of child support debts to date, some aspects of the collection powers need to be streamlined and other dimensions need to be added to ensure the objects of the legislation are met.
11.6. The amendments proposed by this Bill seek to achieve this.
Explanation of the proposed amendments
Collections from a third person
11.7. The first of the proposed amendments, a power to collect amounts from a third person, both adds a new method of collection and streamlines existing methods. It will avoid the time consuming process of obtaining orders from the court against a third person who holds money for the child support debtor. Court action often gives the debtor the chance to move funds and avoid payment.
11.8. The proposed amendment will insert a power which will enable the Registrar to give written notice to a person to whom money is due or accruing on behalf of a child support debtor, a person who actually holds money for the child support debtor, or a person who holds money on account of another person for payment to the child support debtor and require that person to pay t the Registrar an amount up to that held by the person and limited to the actual amount owed to the Registrar. In addition a notice may issue to a person to have amounts the person is liable to pay to the debtor from time to time forwarded to the Registrar [Clause 18.72A(1)].
11.9. A person who fails to comply with a notice will be guilty of an offence [Clause 18.72A(2)]. Section 4K(1) of the Crimes Act 1914 does not apply to an offence under subsection (1) [Clause 18.72A(4)]. The notice must specify a day the money is to be paid by [Clause 18.72A(3)(a)]and the notice may be varied at any time [Clause 18.72A(3)(b)]. If a person is found guilty of an offence the court may order that the amount that should have been paid under the notice is to be paid [Clause 18.72A(8)].
11.10. A copy of the notice is to be sent to the debtor at the last known address [Clause 18.72A(5) and (6)]. A notice may also be served on the Commonwealth, State or Territory [Clause 18.72A(7)].
11.11. The person who receives a notice is indemnified by law in respect of any payment made as they are taken to have acted on the authority of the debtor [Clause 18.72A(9)].
11.12. Building society withdrawable shares in the capital of the society are deemed to be money either due to the debtor or which may become due to the debtor [Clause 18.72A(11)].
11.13. Terms used in this new section are defined for the purposes of the section [Clause 17.72A(13)].
Examples of the exercise of the proposed Clause72A power.
11.14. Debtors who are not employees for the purposes of the child support legislation do not come within the scope of collection by withholding amounts from salary and wages, the cornerstone of the collection system set up in the original legislation. However many debtors receive regular payments from a single or a few main sources which in other circumstances would be salary and wages. It will be possible with the proposed amendment to issue a notice to a person who is liable to pay the debtor money, requiring that person to pay out of each payment the person is liable to pay to the debtor, an amount to satisfy the child support debt the debtor has to the Registrar.
11.15. This could be considered to be an extension of the withholding at source deduction method for employees.
11.16. The proposed amendment will also allow a notice to issue to a financial institution holding money for a debtor, to an estate agent or legal representative who may be holding or who is expecting to receive amounts for payment to the debtor or to any other person in a similar situation.
11.17. The power will enable the Registrar to act in his own right with speed when, to not do so, would see an opportunity lost to collect an amount for the benefit of the children. It is not proposed to use the power as a first up option in all cases but normally selectively where the debtor has a poor payment history. If however, in the judgment of the Registrar it should be used early and quickly the amendment allows this.
Debtor not physically present in Australia
11.18. The second of the proposed amendments, collection from a person receiving or controlling money of a debtor who is outside Australia, is also both a new method of collection and a streamlining of existing methods.
11.19. There are numbers of child support payers who leave Australia making no provision to pay child support to the custodian for the children remaining in Australia. It becomes a very difficult task to recover amounts if the payer is not being paid from Australia whilst out of the country. The liability continues to mount with little or no prospect of the Registrar being able to collect.
11.20 The proposed amendment will insert a power which, in the case of a debtor who derives income or capital gains from a source in Australia or is a shareholder, debenture holder or depositor in a company deriving income or capital gains from a source in Australia, and a person in Australia receives controls or disposes of any of the debtors money, then that person, if notified by the Registrar, is required to pay the debtor's child support debt or retain amounts from time to time to pay the debtor's child support debt [Clause 18.72B(1)(a) to (e)].
11.21. The person notified is personally liable for the child support debt of the debtor to the extent of any amount retained or that should have been retained and is taken to be authorised by the debtor to make any payments notified under this clause [Clause 18.72B(1)(f) and (g)].
11.22. The requirement for a written notice and what the notice must contain are specified in the Bill [Clause 18.72B(2)].
11.23. If the person who receives, controls or disposes of a debtor's money is the Commonwealth, a State or a Territory or an authority of any, they are not personally liable for the child support debt in respect of any amount withheld or that should have been withheld [Clause 18.72B(3)].
11.24. Money that is a natural resource payment or a royalty payment within the meaning of Division 3B of Part VI of the Income Tax Assessment Act 1936 is not money for the purposes of this clause, but all other money due by the person to the debtor is taken to be money that comes to the person on behalf of the debtor [Clause 18.72B(4)].
11.25. Words and expressions used in this clause have the same meaning given by the Income Tax Assessment Act 1936 or in clause 72A for the purposes of this clause [Clause 18.72B(5)].
Example of the use of the proposed Clause 72B power
11.26. The child support debtor is not physically present in Australia and has a child support debt which has accrued and remains outstanding and the child support liability is to continue for another two years. The Registrar establishes that one of the debtor's brothers is holding money for the debtor and a sister is receiving income on behalf of the debtor under a contract which requires amounts to be paid to her for work previously performed by the debtor whilst the debtor is now working and being paid overseas. The Registrar will issue a notice to the brother to pay as much of or all of the accrued debt as he is able from the money he holds [Clause 18.72B(1)(d) and 18.72B(2)]. The sister will also receive a notice to retain from time to time amounts, as notified, out of money that comes to her on behalf of the debtor, in satisfaction of the debtor's on going child support debt [Clause 18.72B(e) and 18.72B(2))].
Transactions to defeat payment of a child support debt or a maintenance liability
11.27. The third of the proposed amendments is aimed at those payers who artificially contrive to construct their affairs in order to minimise or eliminate either their capacity to pay child support for their children or to minimise or eliminate their liability to pay child support for their children.
11.28. There are payers who set out purposely to deny their children support by entering into financial arrangements, the effect of which, is to leave themselves without assets or identifiable income and so can easily demonstrate to a court their inability to pay. So often the income and assets continue to be enjoyed as if they were the payer's and this arrangement has been set up with that precise aim in mind. There is clearly a need to be able to call into question transactions that are entered into for this purpose and which have the effect of reducing or defeating a payer's liability or capacity to pay.
11.29. The amendment proposed will insert a power which will enable the Registrar to apply to a court for an order or to seek an order of the court in any proceeding that has been instituted under the child support legislation, to set aside an instrument or disposition that has been made, or to restrain an instrument or disposition that is proposed to be made by a payer of an enforceable liability, if the court is satisfied that the intention and purpose is to reduce or defeat the payer's ability to pay an existing or anticipated child support debt or to meet a liability [Clause 18.72C(1) and (2)].
11.30. It will also allow the court to order that any money or any real or personal property which is the subject of the instrument or disposition to be taken in execution or applied to such amounts of child support and costs as the court orders and that any proceeds of a court ordered sale be paid to the court, at the same time protecting the interests of a bona fide purchaser [Clause 18.72C(3) and (4)].
11.31. The court may also order the payment of costs incurred by the payee, a purchaser or the Registrar to be paid by the payer or a person with whom the payer has colluded [Clause 18.72C(5)].
Examples of the exercise of the proposed Clause 72C power
11.32. During an enforcement proceeding the court learned the child support payer either sold a motor vehicle for a nominal sum or transferred the ownership to another person yet the payer continues to use the motor vehicle for work and garages it at home at night. The registration papers show the vehicle is registered in the name of the other person.
11.33. After examination of the payer in court it becomes apparent that the ownership arrangements are suspect because the payer feared the court would order that it be sold and the proceeds applied to the child support debt owed to the Agency. The court hears evidence about 3 possible scenarios. The car was either purchased by the payer but registered in another name, sold for a nominal sum or gifted to the other person. The person representing the Agency in the proceeding, on the basis of the evidence provided, asks the court to accept that the vehicle transaction was undertaken to reduce or defeat the payer's ability to meet the outstanding debt to the Agency and order that the "transfer" should be set aside, a further order made to sell the vehicle as if it was still the property of the payer and the proceeds applied to the outstanding child support debt.
11.34 The proposed amendment will also enable the Registrar to ask the court to set aside dubious dispositions which the court finds, after examination, to have been undertaken to reduce or defeat a liability or a capacity to pay. For example, some clients claim to have to repay loans to family members out of the sale of assets but there is no supporting documentation to substantiate the loan was actually made in the first place.
11.35. Another type of suspect transaction occurs where the child support debtor is in business on one day and the next day a "new" business is set up in another name or it is transferred to another person and the child support debtor continues to be "employed" by the business but claims to receive little or no payment for services rendered. Not only does this shield assets in the business it also has the effect of reducing, even eliminating, the basic liability under any assessment that may issue. Whilst there are other remedies available to a custodian, it will also allow the Registrar to have the matters scrutinised by a court in any other action taken under the child support legislation.
11.36. In the above examples it is not the Registrar but the Court that must be satisfied that the arrangements have had the effect of reducing or defeating a liability or capacity to pay child support under an existing or anticipated liability.
Commencement date
11.37 The amendment will apply from the date the Royal Assent is given to the Child Support Legislation Amendment Bill 1992 [Clause 2].
Clauses involved in the proposed amendments
Clause 2: provides the Act proposed by the Bill will commence on the date it is given the Royal Assent.
Clause 16:provides for the inclusion of new section 71A and contains the references to clauses referred to in the body of this Explanatory Memorandum.
Clause 17:provides for the inclusion of new sections 72B and 72C and contains the references to clauses referred to in the body of this Explanatory Memorandum.