Introduction
STAGE ONE: THE SCHEME OUTLINED
Legislation
Coverage
Role of the Courts
Role of the Child Support Agency
Role of the Department of Social Security
STAGE ONE: EVALUATION
Child Support Consultative Group
National Liaison Committee on the Child Support Scheme
Australian Institute of Family Studies
Maintenance Income Test
STAGE TWO: FORMULA BASED MAINTENANCE
Legislation
Coverage
Formula
Appeals and the Courts
Pensioners and Beneficiaries
PROGRESS TO MID 1990
Indicators of Progress
Evaluation
Issues Arising from the Implementation of Stage Two
Conclusion
Introduction
On 19 August 1986 the then Minister for Social Security, Brian Howe, announced the Government's intention to undertake a major reform of the child support and maintenance system in Australia. This announcement marked the culmination of a debate in Australia, which had been going on since the early eighties, concerning the faults of the existing system and the urgent need for reform. In 1980 a Parliamentary Joint Select Committee on the Family Law Act
recommended the creation of a maintenance collection and enforcement
agency. This recommendation was
endorsed by the report of the National Maintenance Inquiry in 1984
which made detailed recommendations for the creation of a national maintenance
agency. In 1985 a ministerial committee was set up to develop
government policy in this area. The August 1986 announcement set out
the basic direction for reform. The
Government proposed to introduce a system of formula-based assessment
of maintenance administered by a
child support agency attached to the Taxation Department. Collection
of maintenance was to be through the
withholding of payments at point of payment of wages or salary wherever
possible. Current Issues Brief No. 4, from the Parliamentary Research Service
entitled Child Maintenance Reform issued in 1986, examines the reform debate
to late 1986 in more detail.
On 8 October 1986 a discussion paper on the Government's proposals for reform was released and submissions from interested parties invited. The community consultation which followed revealed considerable support for the reform proposals. On 24 March 1987 a firm policy in the area was announced. The Government's objectives were:
1. That non-custodial parents should share the cost of their children according to their capacity to pay;
2. That adequate support be available for all children of separated parents;
3. That Commonwealth expenditure be limited to what is necessary to ensure that those needs be met;
4. To ensure that neither parent is discouraged from participating in the work force; and
5. That the overall arrangements should be simple, flexible, efficient and respect personal privacy.
A two stage implementation was announced. Stage 1 involved the establishment of the Child Support Agency to collect maintenance as prescribed in court orders or court registered agreements. Amendments were also made to the Family Law Act and the Social Security Act concerning the determination of maintenance levels and the income testing of maintenance payments. Stage 2 involved the introduction of a legislative formula for the calculation of maintenance by the Agency.
STAGE ONE: AN OUTLINE OF THE SCHEME
Legislation
The Child Support Scheme commenced operation on 1 June 1988. Three Acts of Parliament set the legislative framework for the Scheme's operation. They were passed by the Parliament during late 1987 and early 1988. The Family Law Amendment Act 1987 gave effect to the reference of powers over ex-nuptial children from New South Wales, Victoria, South Australia and Tasmania to the Commonwealth. The Act also changed the Family Law Act with regard to child maintenance. It provided:
that the duty of parents to maintain a child takes priority over all commitments save only self support,
that the court must disregard the eligibility for an income tested pension, benefit or allowance of an applicant for maintenance and
that the court should specify which portion of a lump sum payment or property transfer has been ordered as maintenance.
These changes were intended to increase the adequacy of maintenance orders and identify clearly all maintenance related payments to assist income testing by the Department of Social Security.
The Child Support (Registration and Collection) Act 1988 established the position of Child Support Registrar (to be held by the Commissioner for Taxation) within the Australian Taxation Office. The Registrar maintains a register of maintenance liabilities, collects periodic maintenance by means of automatic deductions from the wages or salaries of liable parents where possible, and passes on the moneys collected to the Department of Social Security for payment to custodial parents.
The Social Security and Veterans' Entitlements (Maintenance Income Test) Amendment Act 1988 changed the manner in which maintenance is treated under the income test for pensions and benefits.
Coverage
Initially stage one of the Scheme covered a limited group of custodial parents. This group was prescribed by regulation so that, as resources permitted, the Scheme's coverage could be extended without recourse to amendment of the legislation. A custodial parent needed a court order or a court registered agreement concerning maintenance to register with the Agency. Of those who fulfilled this requirement, the following groups were covered from the Scheme's beginning:
Pensioners and beneficiaries who already had a maintenance order, that was less than three years old when the Scheme started, were required to apply to have the order enforced where it was not being complied with, if the amount of support would affect their pension. Those obtaining maintenance orders after the Scheme commenced are required to use the Scheme, and new applicants for pension or benefit are required to take action to obtain maintenance.
Other pensioners and beneficiaries with orders or agreements may use the Scheme if they so desire.
Custodial parents who have maintenance collected by State agencies were to come into the Scheme as it takes over the functions of those agencies.
Custodial parents who were not in receipt of pensions or benefits could use the Scheme if they separated or had ex nuptial children after the Scheme commenced.
On 15 April 1989 the regulations were changed to make the Scheme universal in its coverage. Of those with maintenance orders or agreements only those able to opt out after registration or those who do not apply for registration are not included in the Scheme. There was a delay in extending coverage to maintenance for ex-nuptial children from Queensland and Western Australia. All other States referred their powers relating to ex-nuptial children to the Commonwealth prior to the commencement of the Scheme (as noted on p.3), but these two did not. The Child Support Amendment Act 1988 allowed the Agency to collect maintenance where orders or agreements were made under State law. Queensland has since adopted the Commonwealth law and negotiations are continuing with Western Australia. Spousal maintenance is collected under the Scheme for those who also receive child maintenance, are over 45 years of age and are in receipt of a pension or benefit and those who were previously covered by a State agency.
Role of the Courts
Under Stage One the Family Court and the magistrates courts continue to award new maintenance orders and to vary existing orders having regard to the changes introduced by the Family Law Amendment Act 1987 (see p.3). New orders made for pensioners and beneficiaries are required to be forwarded to the Child Support Agency by the courts.
Role of the Child Support Agency
The Agency maintains the Child Support Register which records details of maintenance liabilities payable on a periodic basis under a court order or a registered maintenance agreement. Custodial parents who do not want to have their maintenance collected by the Agency can opt out at this point, with the option of applying for collection by the Agency in the future if they wish to. However some custodial parents can not opt out as mentioned above (see p.4).
Custodial parents who apply for their maintenance to be collected by the Agency face an initial delay of about eight or nine weeks between the lodgement of their application and the receipt of their first payment of maintenance. This delay is the result of the use by the Scheme, of the same collection method as that used for the collection of pay-as-you-earn taxes, that is, a calender monthly collection in arrears system.
The Child Support (Registration and Collection) Act specifies a calender monthly collection system and a payment cycle (see chart 1) with payment to the custodial parent no later than the first Wednesday of the month after the payment was due from the non-custodial parent to the Registrar. The Act therefore sets a clear time frame between the due date for the first payment and the date of receipt by the payee of that payment. Thereafter the legislation envisages regular and timely payment of maintenance, calender monthly, provided payment is received by the Agency.
This initial delay may temporarily adversely affect custodial parents who regularly received their maintenance before registering with the Agency. Once registered, however, custodial parents are relieved of the expense and trouble of pursuing debts in the case of default in payment by the non-custodial parent.
The Agency arranges collection of maintenance, either by payroll deductions by employers or direct remittance by the payer to the Agency. Non-custodial parents do not have the option of remaining outside the Scheme, but it is possible for them to apply to pay maintenance directly to the Agency. Any late payments may result in the imposition of payroll deductions. The Family Court has the power to order that automatic witholding by payroll deductions not apply in certain circumstances.
Where the earnings of a non-custodial parent fall below a weekly 'protected earnings amount' (equivalent to one and a half times the married rate of unemployment benefit at 13 December the previous year, $167.03 per week during 1990) no payroll deductions are made but a debt is incurred. Permanent or long term reductions in income will make it necessary for the non-custodial parent to seek a variation to the maintenance order or agreement from the Court.
The Agency has the task of locating non-custodial parents whose whereabouts are unknown and may draw on the resources of the Taxation Office to do so. Debt recovery is also the Agency's responsibility. Once a liability is registered any debt becomes a debt to the commonwealth. Court action by the Registrar and the interception of tax refunds (if any) can be used for this purpose where other methods of collecting arrears fail.
Remittances are to be paid to the Agency by the seventh of every month and the Department of Social Security is advised of amounts received on the last Thursday of every month.
Chart 1. CHILD SUPPORT SCHEME PAYMENT CYCLE
1ST WEDNESDAY OF FOLLOWING
MONTH
PENSION/BENEFIT
PAYDAY
7TH OF EACH MONTH
LAST THURSDAY
OF THE MONTH
EMPLOYER MAKES
DEDUCTION
CSA send advice of
payments collected
to DSS
DSS distributes payments to
custodial parents
Employers and self employed
must remit payments to CSA on
this date each month
This pension/benefits payment
will reflect effect of maintenance
income tests
Role of the Department of Social Security
The Department is advised of maintenance collected by the Agency on the last Thursday of each month and distributes payments of maintenance to custodial parents on the first Wednesday of the following month.
The remainder of the Department's role involves only pensioners and beneficiaries. Reasonable action to obtain maintenance is required of most pensioners and beneficiaries eligible for coverage by the Scheme. The requirement that applicants for Sole Parent Pension (formerly class A widow's pension or supporting parent's benefit) take reasonable action to obtain maintenance has been part of the Social Security Act for many years. Due to the deficiencies of the maintenance enforcement and collection system the requirement could not usefully be enforced (prior to the Scheme's introduction). In addition to sole parent pensioners, all other pensioners and beneficiaries who have custody of children of a previous relationship and seek additional pension/benefit for those children must seek child support under the coverage rules of either stage one or stage two from 20 September 1990.
Reasonable action is considered to have taken place, under stage one, where:
maintenance is being received in accordance with a court order or registered agreement,
voluntary maintenance is being paid
an application has been made for collection by the agency,
the matter is before the court,
the court has refused to make an award or the award is small,
Exemptions apply if it is not reasonable to expect such action to be taken because:
fear of violence or concern for safety exists,
maintenance action would disrupt the domestic affairs of either parent (for example where paternity is not acknowledged or the child is the result of rape or incest),
the court would be unlikely to make an award or
the identity of the father of the child is unknown.
Temporary exemptions, from the requirement, apply where:
the income of the non-custodial parent is too low to allow payment of maintenance,
the whereabouts of the non custodial parent is not known to the custodial parent,
the non custodial parent is in prison or overseas.
On the pension pay-day after the payment of maintenance the amount of pension/benefit will reflect the application of the maintenance income test as follows:
1. A separate income test applies in respect of all maintenance. (The regular income test which applies to the pension or benefit received is applied in respect of non-maintenance income). The full amount of maintenance is sent to the custodial parent, but the pension or benefit is reduced in accordance with the application of the test.
2. Under the maintenance income test a free area of $15 per week for the first child and $5 per week for each additional child exists, after which entitlement is reduced by 50 cents in the dollar.
3. Maintenance in the form of non-cash assistance (for example food), payments to third parties (for example rent) or the transfer of capital (for example property settlements or lump sums) are included in the test.
4. Maintenance does not reduce pension or benefit by more than 25 per cent of the maximum rate:
for in-kind or imputed capital maintenance during the first 6 months following separation,
where in-kind maintenance is paid in respect of the ex-marital home or alternative housing or
where any maintenance is paid in respect of the special needs of a child relating to illness, disability, or learning difficulty.
Savings provisions applied at the time of the introduction of the separate income test. They ensured that no pensioner or beneficiary, who had advised the Department of the receipt of maintenance prior to the introduction of the Scheme, suffered a reduction in their payment level. These provisions apply until rises in the pension or benefit level due to indexation allowed full application of the new income testing arrangements, without reducing the recipient's payment level in nominal terms.
STAGE ONE: EVALUATION
Stage one of the Scheme began on 1 June 1988 with widespread public support and the expectation on the part of the Government that it would benefit about 40,000 sole parent families and about 90,000 children in its first year. A survey commissioned by the Government suggested that the Scheme had the support of 92 per cent of those surveyed.
Child Support Consultative Group
The Government appointed the Child Support Consultative Group on 22 May 1987 to, advise on a formula for administrative assessment of child support and to monitor the introduction of stage one. This group was initially chaired by Justice Fogarty of the Family Court and after 16 February 1989 by Ms Diana Bryant, a family lawyer. A report on evaluation of stage one by the Group was completed in August 1989. To illustrate the impact of stage one a summary of the report's findings is given below.
Over 22,000 liabilities were registered with the Agency in the first fourteen months of operation relating to the maintenance of over 48,500 children. The number of custodial parents involved in the Scheme was less than expected due to a slower than expected take up rate and delays in the transfer of court and State based collection cases. About 50,000 of these court and State based collection cases existed at the commencement of stage one and only those cases where individual custodial parents applied for Agency collection were transferred.
Between 50 per cent and 60 per cent of non custodial parents registered with the Agency were paying maintenance on time and over 70 per cent were paying after some further period. This compares to less than 30 per cent paying before the Scheme started.
The number of sole parent pensioners receiving maintenance rose from 62,096 (25.83 per cent) on 1 April 1988 to 81,015 (33.83 per cent) on 23 June 1989.
At the end of July 1989 approximately 91.8 per cent of liable payers had been traced while a further 7 per cent were being traced and only about 1 per cent were untraceable at that time. About one third of liable payers were not paying. These were mainly those untraced and those who could not pay but had not yet sought variations to their court orders.
Levels of maintenance orders made by courts had increased by about 20-25 per cent since 1 April 1988.
Considerable delays were being experienced between the making of a court order and the registration of the liability with the Agency (averaging 86 days) and between registration and first payment (averaging 64 days).
The major problem identified by the report was the time that elapsed before receipt of the first payment. This resulted from delays before liabilities were registered with the Agency and the arrears method of collection and distribution of maintenance.
The first of these delays was due to a lack of awareness, on the part of the parties to a court order or registered agreement, of their obligations under the Act. Measures to spread information about the Scheme had not been successful and required attention.
The second of these delays was due to the payment cycle set out in the legislation (see p.5). These delays were a problem because they caused hardship to those who had been receiving regular maintenance before registration and had their payments interrupted. They also adversely affected public perception of the effectiveness of the Scheme.
National Liaison Committee on the Child Support Scheme
During the first year of the Scheme the National Liaison Committee on
the Child Support Scheme also acted as an independent monitoring body.
It was set up by the Australian Council of Social Service with the support
of the Department of Social Security to provide analysis and information
from the community and welfare sector to the Child Support Consultative
Group. Committees at national and state levels were established by the
Committee to assist in this task. The Report of the Committee, released
in
December 1988, raised the following issues:
The initial delay, between the time when the non-custodial parent applied for registration and the first payment of maintenance was made, was considered by the Committee. The Report included a recommendation that an advance payment should be made to reduce this delay. The last payment, due to the custodial parent when the child turns 18, could be retained by the Department of Social Security as repayment.
A number of technical problems with the maintenance income test were raised in the Report. These concerned the savings provisions, the treatment of housing, the treatment of arrears and the treatment of parents who had formed new relationships.
Starting up difficulties in the area of service delivery and information for and counselling of clients drew the attention of the Committee. Section 2 of their Report deals largely with these issues. (Some of these difficulties were also raised in the Senate).
Some of the non-custodial parents who were not paying maintenance were
unable to pay due to a change in their circumstances which resulted in
a reduction in their income (for example, unemployment). The only way their
maintenance liability could be reduced, to bring it into line with their
income, was to apply for a variation to the court order setting out that
liability. The delays involved in this process result in the accumulation
of a considerable arrears debt. The Committee has recommended that applications
to vary orders be heard as a matter of urgency and that the Court exercise
its capacity to expunge such debts where
the non-custodial parent does not have the capacity to pay.
Where violence or the threat of violence against custodial parents has occurred, after they have registered with the Agency, problems arise. The exemptions under the requirement to seek maintenance provisions were not available because the order was already registered and deregistration was not readily achieved under the existing legislation. Recourse to the courts was considered the best avenue for redress, but concern was expressed that this was often too slow to adequately protect custodial parents.
Australian Institute of Family Studies
Further evaluation of stage one of the Scheme is being undertaken by
the Australian Institute of Family Studies. This project is a long term
undertaking involving "not only a monitoring of those affected by the Scheme
and their complaints/ difficulties/ positive reactions about it, but also
the longer-term effects on the living standards of sole-parent families,
on female work force participation and remarriage patterns, on matrimonial
property settlements and on parenting arrangements and relationships".
A longitudinal study forms the basis of this evaluation and a final report
will not be completed until February 1991. However an
interim report was released on 30 August 1990.
Maintenance Income Test
The most criticised aspect of the Scheme has been the maintenance income
test. The treatment of maintenance under the test is somewhat more severe
in many cases than prior to its introduction. Where the Scheme has significantly
improved levels of maintenance, this is not a great problem. Where both
maintenance and other income from employment are received, the separate
maintenance income test has allowed pensioners to take advantage of two
separate income test free amounts. However, where
maintenance has remained much the same and no other income is received,
the new test has reduced pension or benefit in real terms significantly
in spite of the savings provisions. This is a result of the small amount
of income allowed before the pension is reduced by fifty cents for every
additional dollar of maintenance income. Before the Scheme began a pensioner
receiving only maintenance in addition to the pension could receive $40pw
plus $12pw for each child before pension was reduced. These levels
under the separate maintenance income test are now $15 and $5 (indexed
annually from 1 July 1991).
The size of this free area and the lack of regular adjustment to maintain its value has been consistently criticised by the Australian Council of Social Service (ACOSS) and they have proposed an alternative free area of $25 per week for the first child, an additional $15 per week for the second child and $10 per week for each additional child. Six-monthly indexation of the free area was also suggested.
The Australian Council has consistently called for a maintenance guarantee ever since the Scheme was first outlined by the Government. A maintenance guarantee is a minimum maintenance payment for all custodial parents or at least all those on pensions. It would be paid where little or no maintenance is paid by the non-custodial parent. The non-custodial parent may be dead, too poor to pay much, unknown or untraceable. In late 1987 ACOSS proposed a guarantee of $15
STAGE TWO: FORMULA BASED MAINTENANCE
Legislation
The Child Support (Assessment) Act 1989 was passed by Parliament on 5 September 1989. It provides the legislative basis for stage two of the Scheme which came into operation on 1 October 1989. Stage two basically provides for administrative assessment of maintenance by the Agency using a legislative formula. The courts are not required under stage two to set levels of maintenance, but are involved where the actions of the Agency in administering the assessment process are disputed.
Coverage
A custodian can apply for assessment under the formula for a child whose parents separated on or after 1 October 1989, who was born after 1 October 1989 (or who has a sibling born after 1 October 1989) and whose parents have separated or never lived together. Parents are able to make private agreements about how much child support should be paid. They may also register the agreement with the Agency for collection.
Formula
The formula used was developed by the Child Support Consultative Group who presented their preferred formula in a report entitled Child Support: Formula for Australia in May 1988. The legislation largely followed the recommendations of this report.
Briefly the formula operates in the following manner:
The non custodial parent's taxable income (before tax and Medicare levy are taken out) for the financial year before last (as stated on the tax assessment) is determined. This amount is adjusted for inflation by increasing it by 5.75 per cent for 1989-90. The resulting amount is used to calculate child support for the current financial year. The annual reassessment of taxable income effectively keeps child support levels up to date.
A self support amount, to provide for the essential costs of the non
custodial parent in caring for themselves and any natural or adopted children
in his or her care, called an exemption, is deducted. This amount is equivalent
to the single rate of the pension for that year ($6,461 for 1989-90) if
the non custodial parent has no children in his or her care. If he or she
have children to care for, the amount is twice the married rate of the
pension ($10,769 for 1989-90) plus an amount equivalent to additional pension
for children ($1,248 for under 13 year olds and $1,612 for 13 to 15 year
olds in 1989-90). For children 16 or over the amount is
25 per cent of twice the married rate pension ($2,692 in 1989-90).
Where the non custodial parents income is less than the self support amount
no child support is payable.
The resulting amount is multiplied by a child support percentagewhich varies with the number of children supported by the custodial parent, for whom the non custodial parent is liable to give support. The percentages are:
for one child 18 per cent
for two children 27 per cent
for three children 32 per cent
for four children 34 per cent
for five or more 36 per cent
A number of modifications to the basic formula are made to take account of more complicated situations:
Where the custodial parent's income is above average weekly earnings(AWE $26,125 for 1989-90), the part above AWE, less an amount for the costs of caring for the children, is considered in assessing child support due. It is deducted from the non custodial parent's taxable income, in addition to deducting the self support amount, before the child support percentage is applied. The amount deducted for the costs of caring for the children is 11.5 per cent of AWE for the first under six year old ($3,004 for 1989-90), 2.5 per cent of AWE for each other under six year old and 5 per cent of AWE for each over six year old.
Where the liable parent's income is more than 2.5 times AWE($65,312 for 1989-90) child support is calculated as if his or her income was at that level.
Where there is split and/or shared custody, both parents taxable income is considered. A self support amount is calculated for each parent and any children each has sole custody of. This is deducted from their taxable incomes. Each parents adjusted income is multiplied by the child support percentage (a special set of percentages apply for shared custody situations). The two resulting amounts are compared and the parent who owes the most child support pays the difference to the other parent.
Where both parents are liable to pay a custodian who is not a parent (for example a grandparent) the custodian's income is never considered. Both parents are assessed in the normal way as non custodial parents in order to determine how much each must pay the custodian.
Where a liable parent must pay more than one custodian, his or her total liability is calculated in the normal way and divided between the custodians according to the number of the liable parent's children each has custody of.
An excellent, accessible treatment of the intricacies of the formula is provided in The Child Support Assessment Scheme: A User's Guide.
Appeals and the Courts
The Family Court or magistrates courts are involved in the appeal and review arrangements under stage two. A court may have jurisdiction in the following situations;
Disagreement may arise about whether any liability exists because the eligibility of the child, the entitlement of the applicant or the liability of the person from whom child support is sought (for example on the grounds of paternity of the child) are disputed. Parties to disagreements apply for a declaration from the court, which must be lodged within 28 days of notification of the Agencies decision.
The amount assessed by the Agency may be disputed. The wrong taxable income or the wrong number of children may have been used in the assessment. Again 28 days are allowed after notification of the assessment for application to be made to a court.
The Agency must apply the formula as set out in the legislation, but the Family Court can hear appeals against the use of the standard formula.Special grounds on which the Court can act include;
that a parent cannot provide proper support for a child because of necessary commitments to other children or other people,
that the costs of maintaining the child are affected by the high cost of access, special needs of the child or the costs of education or
that the assessment is unjust because of the financial circumstances of a parent or of a child, or because of a payment or transfer of property previously made.
The court can order that;
the annual rate of child support be varied,
that the child support percentage be varied,
that other calculations involved in the assessment be varied,
that part of the child support be paid by lump sum, transfer of property or some other special way,
that more than the maximum be paid and/or
that child support be paid where parents' income is less than the exempt amount.
Where the Agency accepts or refuses to accept an agreement about child support appeal to the courts may be made within 28 days of notification.
Pensioners and Beneficiaries
For sole parent pensioners and (from 20 September 1990) other pensioners and beneficiaries, who meet the general eligibility criteria, the Department of Social Security requires them to either, apply for assessment and have the Agency collect child support payments, or make an agreement which provides for payments which the Department considers adequate. To be adequate the amount of the payments agreed upon must be at least 90 per cent of the amount that would be assessed under the formula. If it is not the Department may require agency assessment and collection.
Exemptions from the requirement to take reasonable action to obtain maintenance, under stage two, are different in some respects to those under stage one (see p.7). Under stage two only the following exemptions apply:
there is a fear of violence from the liable parent or other concern for the safety or health of the custodial parent or child,
the father's identity is uknown or
action for maintenance would be an unreasonable or harmful imposition upon the person (for example where the child was born as a result of rape or incest or where paternity is not acknowledged).
PROGRESS TO MID 1990
Indicators of Progress
Some indication of the Scheme's progress to the middle of 1990 can be gained from information available from the Department of Social Security.
On 31 August 1990 41,552 cases were registered under stage one arrangements and a further 16,750 under stage two. The target of 40,000 registrations under stage one in the first 12 months of the Scheme was thereby achieved in two years. Transfer of existing State collection agency cases has not yet occurred due to delays in commonwealth-state negotiations. By the end of 1990 the Government is expecting 90,000 registered cases.
On 31 August 1990 about 80 per cent of liable parents, whose child support was subject to collection by the Agency, were paying after enforcement action by the Agency. 9.18 per cent were being actively sought by the Agency, while a further 0.85 per cent were, at that time, unable to be traced. The remainder were mainly those unable to pay.
The amounts of child support being awarded by the courts under stage one have changed from an average of about $25 per child per week in January 1988 to an average of about $39 per child per week in February 1990. A projection of pre-Scheme trends in award amounts suggests that an average of about $29 per child per week would have been likely by February 1990 in the absence of the Scheme. Under stage two the average amount under the formula per child per week was about $44 between 1 October 1989 and 30 June 1990 and about $49 so far in 1990/91.
The average amounts of child support declared by sole parent pensioners Show the effects of the Scheme. Those granted pension prior to 1 June 1988 receive on average of $42 child support per week. Those granted pension during stage one receive on average $55 child support per week and those granted pension since 1 October 1989 receive on average $69 child support per week. However, these figures do not show average amounts of child support awarded under the different stages of the Scheme. Many new grants of pension made at these times were for those with child support awarded much earlier than the time of that grant. Approximately 95 per cent of custodial parents receiving payments are pensioners or beneficiaries.
Savings to the taxpayer from the scheme were expected to be in the order of $120m in 1988-89 and $190m in 1989-90. Savings were $19m in 1988-89 and approximately $37m in 1989-90. Savings for 1990-91 are now expected to be $74m, for 1991-92 $96m and for 1992-93 $106m. Slower than expected take-up rates, modifications to the Scheme as originally planned and legislative and administrative delays are the major reasons for this shortfall, but over optimistic initial predictions are also a factor.
Evaluation
Evaluation of stage two is being coordinated and administered by the Department of Social Security. A body of external specialists called the Child Support Evaluation Advisory Group is monitoring the evaluation. Administrative data, submissions from interested community groups and a field survey of custodial and non custodial parents will be used as the basis for the evaluation.
A report by the Advisory Group, on two of its terms of reference, is expected to be tabled in Parliament during mid October 1990. It will compare the adequacy of child support under stage one and stage two, to see if stage one participants are disadvantaged compared to stage two participants and assess the adequacy of coverage of the sole parent population.
Issues Arising from the Implementation of Stage Two
Processing delays of up to five months were acknowledged by the Minister for Social Security, Senator Richardson on 29 May 1990. These delays have been overcome since then. The allocation of 347 extra staff to allow the Agency to cope with expected demand was announced on 1 June 1990. The 1990-91 Budget increased funding by $27.1m as a result.
The fairness of the formula in some situations is being examined. A study of the potential impact on non custodial parents, with moderate incomes, who form new relationships and parent more children. Issues to be examined include, the equity of treatment of the children of the two relationships under formula assessment and work disincentives for non custodial parents as a result of child support liabilities.
The accessability of the appeals process is potentially an area of difficulty. Those on moderate incomes, who do not qualify for legal aid, may not be able to afford to take appeals to the courts.
The use of taxable income as the measure of a non custodial parent's ability to pay has been the subject of much discussion ever since formula assessment was proposed. The report Child Support: Formula for Australia devoted considerable space to this issue. The potential for income minimisation by self employed and certain other groups of non custodial parents is the main problem. Equity of treatment for all non custodial parents is important if the Scheme is to be considered fair and just by the community. Taxable income as defined for income tax purposes is not particularly good as an indicator of capacity to pay. A broadly defined child support income designed to include certain income not presently included in a non custodial parents taxable income (for example fringe benefits) may overcome this problem.
Conclusion
The Scheme is still in the implementation phase. Full assessment of its effectiveness must wait until the Scheme has settled into place and spread its coverage much further than at present. Approximately 200-240,000 out of a total of approximately 600,000 custodial parents in Australia have court orders or approved agreements. The potential client group for the Scheme is therefore considerably wider than those presently registered. It will take time for the full take up rate to emerge. Many eligible to participate in the Scheme will not use it until private arrangements breakdown.
Public awareness of the full implications of the new approach to maintenance will take time. Information and education measures directed at both the public and the relevant professional groups have been essential elements of the implementation of the Scheme. Further efforts in this area will be needed before the new approach to the child support responsibilities of parents is fully understood and entrenched.
ISSN 1034-8107
Copyright Commonwealth of Australia 1991
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means including information storage and retrieval system, without the prior written consent of the Department of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1990