Articles

20th Nov, 2007

Child Support Scheme Update
by Alexis Vaughan

In February 2006 the Federal Government announced reforms to be made to the Child Support scheme. These reforms follow two Government reports on the subject, and largely accept most recommendations made in the reports.

The changes to the scheme that relate to the Child Support Agency (CSA) are being introduced in 3 stages:

Stage 1 reforms – this stage of the reforms is contained in the Child Support Legislation Amendment Act 2006 (effective 1 July 2006). This stage involved four fairly minor changes:

Reduction in the amount payable by high income earners between July 2006 and 1 July 2008 – the income cap which is applied to a paying parent’s income has been reduced, which therefore has the effect of reducing the maximum amount payable under the child support formula.
Increase in the minimum payment amount – the minimum annual assessment amount has been increased from $260 per annum to $320 per annum. The minimum amount will be indexed each January to the Consumer Price Index, ensuring inflation is taken into account when payments are calculated.
Increase in percentage of a child support liability that can be credited for certain non - CSA payments – to give paying parents more control over how the child support is spent, the amount of credit that can be allowed for certain prescribed payments made to third parties to cover essential items such as school fees or medical bills has been increased from 25% to 30%.
Changes to the way the capacity of parents to earn income is assessed – The reforms provide that assessment of a parent’s capacity to earn is based on the level of normal full time work for the occupation or industry in which he or she is involved. Any responsibility of a paying parent to care for another person, and/or their state of health will also be taken into account. This new method is intended to allow parents to make choices in their work life (such as pursuing a new career) in the same way a parent in an intact would. However, it is vital that a parent does not make changes to their work life where a major purpose of the change would be to affect their child support liability or entitlement. A change to an assessment can be made if the parent cannot show that he or she has sufficient reason for their change in work status.

Stage 2 reforms – these changes commenced in January 2007. There are 3 main changes:

Review of child support decisions by the Social Security Appeals Tribunal – most CSA objection decisions will now be able to be reviewed by the Social Security Appeals Tribunal. The Tribunal’s functions will be expanded and will provide an efficient, cost effective path of review for child support decisions.
Improved processes for courts dealing with child support matters – the powers of a court hearing an application for enforcement of child support will be altered to give the court the same powers as that of the CSA in relation to obtaining information about parents. The courts will also have increased powers to make temporary arrangements with regard to child support payments.
Extended timeframe to make child support arrangements without affecting family tax benefit payments – for resident parents receiving family tax benefit payments, the period of time in which they are required to take action to obtain child support payments from their former partner is extended from 28 days to 13 weeks, providing more opportunity for parents to reach an agreement or reconcile.

Stage 3 reforms – these reforms will be effective from July 2008, and contain the most significant changes. These changes are:

A new formula for calculating child support – it will treat both parents’ income and living costs more equally, and take into account that older children tend to cost more. It will also ensure that children from first and second families be treated more equally
A minimum payment for all children – non-resident parents paying child support to more than one family must pay the minimum payment to each family, rather than it being divided between the families. Parents who intentionally minimise their taxable incomes to avoid paying child support will be forced to contribute a minimum of $20 per week per child.
New treatment of second jobs and overtime – to help with re-establishment costs after separation, for the first 3 years parents will be permitted to have income from a second job or overtime excluded from their child support calculations.
Recognition of a duty to support a step-child in some circumstances – parents with the sole financial responsibility of a step-child will be able to have the child treated as a dependant for the purposes of child support calculations.
Agreements and lump sum payments – it will be simpler for parents to make long and short term agreements, and there will be increased flexibility for parents wanting to make an agreement for a lump sum amount.
Simplifying the process of reconciliation – the CSA will be able to suspend child support payments for a 6 month period when parents reconcile. If reconciliation fails, the resident parent will be able to reinstate the payment without having to reapply.

This article is a general summary of the key reforms to the child support scheme and is not intended to be a comprehensive piece of advice. To find out more about the reforms visit the website of the Department of Family and Community Services and Indigenous Affairs at www.facs.gov.au/internet/facsinternet.nsf/family/childsupport.htm