Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Childcare) Share this | Hansard source

The Child Support Scheme was set up in 1988 by the Hawke Labor government and has become an international model and the basis of a similar scheme established in the United Kingdom. However there are genuine concerns about the scheme, including the fairness of the scheme, the assessment formula and, in particular, compliance.

Let me begin my speech on the Child Support Legislation Amendment (Reform of the Child Support Scheme—Initial Measures) Bill 2006 by saying that Labor acknowledge the need for reform. We believe that the interests and wellbeing of children must always come first and that, as far as possible, child support policies should serve to support the child in security and in economically acceptable conditions.

When it comes to child support, the reform process has been lengthy. The House of Representatives Standing Committee on Family and Community Affairs report Every picture tells a story dealt with child support and other family separation issues and made 29 bipartisan recommendations. Among its recommendations was the establishment of a ministerial task force to evaluate the Child Support Scheme, including establishing the costs of children’s upbringing after parental separation, recognising different income levels of households and reflecting the costs for both parents of maintaining meaningful contact with their children.

The May 2005 report of the Ministerial Taskforce on Child Support, the Parkinson report, was the first systematic evaluation of the child support arrangements. It recommended a new formula for child support assessment, based on evidence of the actual costs of raising children, shared parental responsibility for those costs and recognition of each parent’s level of care.

The proposed changes also included increased compliance activity, more use of courts to recover debts, a new approach to parents understating income to avoid liability, and access to administrative review through the Social Security Appeals Tribunal. The 2006-07 budget measures show an allocation of $165.1 million over five years for transitional and ongoing compliance and $146.6 million to improve service standards and carry out organisational change in the Child Support Agency. We note that income minimisation investigations over the last six months have seen an increase in child support of more than $2.3 million. Of course, that is welcome.

The report examined the scheme using sound principles and was generally well received. Labor believes that the report provides a constructive basis for moving forward. The principal concern raised about the recommendations—the heart of Labor concern—is the effect the new assessment formula will have on low-income resident parents with children under the age of 12.

The government supported the report and has picked up most of the recommendations, which it now seeks to implement. Labor wish to take a constructive approach to the reforms. This is not an issue we want to politicise. We seek to support positive improvements to the scheme. We have endeavoured to work with the government on this to achieve a better system, and there has been some constructive engagement between Labor and Minister Brough’s office.

The changes the government is seeking to implement cover various areas. The government plans to introduce them with three sets of legislation coming into effect between July this year and July 2008. We recognise that the package has been carefully crafted by the Parkinson task force in an attempt to provide a balanced approach based on the research of the task force.

In coming to a new payments formula, the task force has based its calculation on research into the actual costs of raising children. It found that the costs of care for older children are greater than those for younger children. It noted that regular contact between children and non-resident parents increases the costs of care considerably due to the duplication of infrastructure and that the costs of children change according to parent income levels. The formula attempts to divide these costs fairly between both parents in a way which recognises the level of care that each provides. This contrasts with the current formula, which is not based on research into the actual costs of raising children and therefore lacks some of the intellectual rigour of the new formula. The resulting package presents a trade-off in costs between resident and non-resident parents. The Parkinson report stated that the new arrangements do not alter the amount of resources available for raising children in total; rather, they alter the allocation between households.

The task force states that the new formula is grounded in evidence about the costs of raising children and the most defensible principles for allocating those costs. It notes the presence of anomalies in the current system and that the correction of these means that obligations ‘must go up or down’. It also says that its recommendations ‘can best be assessed by reference not to a comparison between the outcomes of the current and proposed formulae, but by reference to the principles and evidence upon which these recommendations are based’.

The task force package is the result of expert examination and analysis and seeks to balance competing factors in an intellectually sound manner. This is reflected in the package of measures. The new formula is balanced by increased compliance measures and attempts to make it harder for parties to hide their incomes and so reduce their child support liabilities.

The House of Representatives standing committee noted that the CSS—the Child Support Scheme—‘has a number of complex interrelated components’ and that changing one aspect impacts on other aspects of the scheme. I believe that this is also the case with the reform package. After some consideration, the government has picked up the package largely in its entirety. Labor feels that to unpick the package by amending certain measures would undermine the integrity of the package and could lead to further inequities.

Labor will support this bill to implement the first stage of the package, although we are concerned about the effect on some families of the reduction of the income cap, a subject I will return to later. However, Labor has made clear that its support for the entire child support reform package is conditional upon being satisfied that the government has put in place satisfactory protections against income reductions for low-income families. To that end, I would like to indicate that I will be moving a second reading amendment to this bill on behalf of the opposition.

Labor has serious concerns about the impact the new formula will have on low-income single parents of children up to the age of 12. In general, these households are headed by women. The House of Representatives report noted that 91 per cent of child support payees were female and only nine per cent were male. Many single parent families are among the poorest in the country and among the most likely to fall into poverty. Labor accepts that the new formula is based on a fair estimation and division of costs, but, in implementing it, the parliament cannot be blind to the practical consequences. The aim behind the reforms is to share the costs fairly between parents, recognising the level of care they provide. The reforms impose very little financial cost on the Commonwealth, but the Commonwealth does bear a responsibility and should bear a broader responsibility in ensuring that there is some protection against loss of income for low-income resident parents.

The reforms attempt to encourage contact with the nonresident parent by reducing their support liability in line with their level of care. Currently, the liability for the nonresident parent is the same whether they have no contact or care for 29 per cent of nights. This does not take into account the costs of care for that parent. The task force report recommends that, where the nonresident parent has care of a child for between 14 and 34 per cent of nights of the year, their liability should be reduced by 24 per cent. This attempts to recognise the cost of providing domestic infrastructure such as a second bedroom. Clearly, the rent on a two-bedroom unit as opposed to a one-bedroom unit does not change depending on how many nights the parent has care of the child.

This attempt to recognise costs for nonresident parents and therefore encourage contact is sound and should be supported. We have to note, however, the possibility that a nonresident parent might have their liability reduced by saying that they will care for their children for a higher number of nights per year and then not carrying through with that commitment. We also have to recognise that resident parents face fixed infrastructure costs, such as rent, which do not decrease at a rate commensurate with the other parent’s level of care, yet under the proposed changes she or he faces a 24 per cent cut in their child support payments. Fairness has to work both ways. It is fine to be fair to the nonresident parent and recognise the fixed costs they face, but we must apply that same fairness to resident parents. This is the area where real concern exists. This is the measure which most starkly calls into question the fairness of this package.

We should also acknowledge that many who face cuts in their child support payments will also be hit at the same time by the government’s Welfare to Work changes. I do not want to make this a debate about the Welfare to Work changes, because Labor’s opposition to those changes is well known. However, we have to acknowledge that some of the poorest families in the country face the prospect of increased work obligations, reduced welfare payments, more punitive taper rates and a reduction in child support payments all hitting at the same time.

If we put the interests of children first and respect the original intent of the Child Support Scheme—to reduce child poverty—then we cannot ignore the impact of these changes on families and, in particular, the cumulative effect that these changes will have by hitting at the same time. Thus, while Labor are signalling our broad support for the government’s package, we are also indicating that we have serious reservations about the impact on low-income families that will need to be addressed before the final legislation is agreed to.

Labor argues that there is a clear responsibility for government in ameliorating the negative effects the changes may have on children in some of the poorest families in the country. We call on the government to examine ways of ensuring that carer families are not penalised and how greater protection can be provided for them if they are disadvantaged by the application of the new formula.

This first set of reforms included in the legislation before us today, however, does not include the detail of the new formula. It refers to changing capacity to earn provisions, increasing the minimum payment and its indexation to the consumer price index, increasing the amount of the child support payment that the nonresident parent can direct to specific purposes and reducing the cap on the income of nonresident parents which is assessable for child support purposes from just under $140,000 to just under $105,000.

This final measure is also of concern. It means a reduction in payments by nonresident parents on incomes of over $104,702 of up to $180 a week and, of course, the commensurate loss of that income for the resident parent. This is a substantial income decrease and will take effect from 1 July this year. Of course concerns have been raised by the people affected, and this is certainly Labor’s main concern with the measures in the first tranche of the legislation before us today. Given that the first stage reforms are minimal, Labor encourages the government to consider phasing in this measure to ease this sudden substantial decrease in income faced by residential parents.

In summary, Labor will support the legislation before us today. We have serious concerns about the effect of the new assessment formula on low-income resident families, and we see a responsibility for government in ameliorating any disadvantage resulting from the new formula. But, as I said, the formula is not before us today. We also encourage the government to consider a phase-in of the new income cap for high-income earners. Consequently, I move:

That all words after “That” be omitted with a view to substituting the following words:“whilst not declining to give the bill a second reading, the House calls on the Government to provide protection against income reductions for low income households raising children”.

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