Julia Irwin (Fowler, Australian Labor Party) Share this | Hansard source

Of all the issues that stir the emotions of people living in the electorate of Fowler—whom I have the pleasure and honour of representing in this House, and I am sure the same could be said by every member of this House—the issue of child support payments or, you could add, their nonpayment ranks No. 1. It is not hard to understand why. On the one hand, nonresident parents, mostly men, pay, in many cases, a large proportion of their income to their former partner as a child support payment. This leads to disputes over the amount paid in child support and very often over the use to which the payment is put. On the other hand, resident parents face the full cost of caring for children in circumstances where, generally, the costs remain the same but the level of household income is lower. The issue of child support in the context of child custody arrangements was examined by the House of Representatives Standing Committee on Family and Community Affairs, of which I was deputy chair. It was reported under the title, Every picture tells a story, in December 2003.

The issue of child support was an area of the inquiry which deserved close attention and the committee should have spent more time on the issue of child support. I think all members of the committee would agree that, while its findings in general terms have in many ways been incorporated in this Child Support Legislation Amendment (Reform of the Child Support Scheme—Initial Measures) Bill 2006, the fine detail work as seen in the Parkinson report provides a sounder base for the detail of this legislation. Professor Parkinson did give evidence to the committee and later briefed committee members on his report. In fairness to Professor Parkinson, I should point out that this legislation owes more to his detailed study than to the report of the committee.

The terms of reference for the family and community affairs committee required an inquiry into whether the existing child support formula worked fairly for both parents in relation to their care of and contact with the children after separation. The committee’s conclusion was:

... it is imperative that independent modelling of the cost of children in separated families should be undertaken and published to establish what the impact would be if child support payments were based upon those results. In any event, the results of the study should be used to determine the basis of future child support payments.

In effect, the Parkinson review provided that independent modelling and other principles on which this legislation is based. It has to be said, however, that this legislation is just one small step. There is still a great deal of work to be done before we even get close to a fair system of child support arrangements. The minister acknowledged this in his second reading speech when he stated that the reform package would be introduced in three stages, with the more extensive complex elements included in the formula being the third stage. I can accept that there may be some wisdom in leaving the hard bits of the package until later but we need to keep in mind that the reforms will bring greater fairness to 1.4 million parents and they should not be delayed indefinitely.

In looking at the measures contained in this bill, it is clear that it really only scratches the surface of this problem. The increase in the minimum child support payment from $5 per week set in 1999 to the indexed figure of $6.15 week is hardly an earth-shattering reform. The issue of the $5 minimum payment was of great interest to the family and community affairs committee. When the original child support formula was introduced, the Child Support Consultative Group believed that such a payment would force some nonresident parents into poverty, that the amount would be so low as to be of little help to the child, that it may lead to further demands on the social security system to avoid poverty by the nonresident parent and that it would not be cost-effective to collect. Welfare groups and nonresident parents opposed the minimum at the time of the introduction of child support payments.

The 1994 Joint Select Committee on Certain Family Law Issues recommended a $5 per week minimum, and this was introduced in the 1999 legislation. The principle that there is an obligation on a parent to share income with their child, however low that income may be, can be seen as the overriding justification for imposing a minimum payment. When you look at the number of nonresident parents paying the minimum $5 a week, you can see why some members of the Standing Committee on Family and Community Affairs were alarmed. According to the June 2003 figures from the Department of Family and Community Services, 39.7 per cent of child support payers paid only the minimum $5 per week. To put it another way, that represents 268,000 out of a total of 684,000 child support payers who are paying just $5 a week. I know that many people in this country are doing it very tough, but I just cannot accept that all of those 268,000 nonresident parents are doing it so tough that they can barely afford to pay $5 a week to support their children.

By comparison, in overseas countries minimum payment figures were $NZ677 in New Zealand and £260 in the UK. I will not convert those figures because you also need to take into account cost-of-living figures for those countries, but it should be obvious that at least a doubling of the Australian minimum payment from $5 to $10 would be appropriate. That was the recommendation of the Standing Committee on Family and Community Affairs. It is indeed a very small amount but, as the committee saw it, that extra $5 a week would make a difference to the 217,000 children who would benefit from such an increase. The increase in this legislation from $5 to $6.15 is laughable. It would not even buy a loaf of bread. Although the indexation is commendable, because it is starting from such a low base it will never really be worth while.

You might think I am mean-spirited asking nonresident parents to pay a reasonable minimum. I do not think that even $10 is reasonable in some cases. When you look at the proportion of Child Support Agency payers, you see that 43 per cent pay more than $40 a week and 21.5 per cent pay more than $100 a week. Of course, there are thousands of cases where the amount is several hundred dollars a week. If you consider the fairness of the child support payment system, it is reasonable to ask how those nonresident parents who pay their full share of child support feel about those who pay just $5 a week or, from July this year, will pay the grand sum of $6.15 a week.

Finally, on the issue of minimum payment, I would repeat the stand of the Standing Committee on Family and Community Affairs, which expressed its strong support for section 3 of the Child Support (Assessment) Act, which states that a parent’s responsibility to support his or her child or children takes priority over all other financial obligations other than that necessary to support themselves and any other legally dependent children and that this obligation is not affected by any other person’s responsibility for the child.

This legislation also deals with the level of maximum payment. Changing the basis for assessing the cap from 2.5 times the yearly value of full-time average weekly earnings to 2.5 times all employees’ average weekly earnings has the effect of reducing the maximum income cap from $139,347 to $104,702. This represents a 25 per cent reduction in the cap and has the potential to save high-income non-residential parents up to $180 per week. This of course will be at the expense of resident parents. The Standing Committee on Family and Community Affairs looked at the income cap and reducing the cap by changing it to either two times full-time average weekly earnings or, as is proposed in the legislation, 2.5 times average weekly total earnings for all employees. The change proposed does give a slightly lower cap than the alternative 2.5 times full-time average weekly earnings, which will benefit some nonresident parents. However, time will tell which of the two figures is more volatile over the years. Given we are dealing with a maximum payment and not a minimum payment, I would have thought that the full-time average would be more appropriate. Given that the figure is $104,000 a year, I do not think many people working part time get anything like that amount. It seems to me that, since we are talking about incomes of over $100,000, we are really talking about full-time employees and it would be fairer in the long run to use full-time earnings as the base rather than total earnings for all employees.

The bill also makes changes which will limit the circumstances under which a parent’s income for child support assessment purposes can be increased, and additional guidance will also be provided for decision makers to improve consistency and clarity of decisions. These determinations have generated a large number of grievances when nonresident parents have been assessed on their capacity to earn rather than on their actual earnings. These changes will give some immediate relief in this area but will be seen to greater effect when changes are made to the child support formula.

The bill also increases the percentage that a nonresident parent can offset against payments, from 25 per cent to 30 per cent. These offsets can be used to pay for items such as school fees and medical expenses. As I said at the beginning of this speech, for many nonresident parents, how the child support payment is spent is often as contentious as the amount of the payment. But I do have some reservations about the discretion that this gives nonresident parents over what will become 30 per cent of child support payments.

Going back to the Standing Committee on Family and Community Affairs report Every picture tells a story, its main recommendation, which has since been included in the legislation, involved the concept of shared parental responsibility. The concept requires that both resident and nonresident parents share in the major decisions which affect the care of their children. I am concerned, however, that having discretion over 30 per cent of child support payments may impact on some low-income resident parents. I know just how much private school fees and treatments such as orthodontistry can cost and I am concerned that, by increasing this discretionary amount to 30 per cent, it may begin to eat into the everyday costs of caring for the child.

There is also the matter of second families. While we look at child support in terms of the responsibilities of the child’s parents, we should acknowledge that many resident and nonresident parents are part of second families, with dependent children of the second relationship. With the changes to the nonresident parent offset, I will be closely following the experience of families and problems which may arise from the change.

Another matter which needs consideration, and which the family and community affairs committee found to be a barrier to shared parental responsibility and to the desirable outcome of shared parenting was the issue of the 109 nights—the number of nights that a child may stay with a nonresident parent before the amount of child support is reduced. There are two sides to this issue: the nonresident parent receives no concession if their child stays with them for fewer than 109 nights and the resident parent can have their child support payment reduced if the child stays with the nonresident parent for more than 109 nights per year. The Family Court, in full knowledge of this, shows a clear preference for contact arrangements of below 110 nights. This was identified by the committee as a major barrier to shared parenting; however, changing this figure would have consequences for resident parents. This will need to be closely considered in the next phase, when the payments system is reviewed. I raise this matter at this time because it is a barrier to expanding shared parenting and should be looked at with greater urgency.

Another matter which we will need to follow closely is the issue of the use of taxable income or after-tax income as the basis for calculating child support payments. This is a longstanding complaint, with reviews dating back to the Child Support Evaluation Group in 1991, the Joint Select Committee on Certain Family Law Issues in 1994 and, more recently, the Every picture tells a story report, which concluded that after-tax income gives a more accurate indication of the income available to non-resident parents to pay child support.

It is recognised that such a change would also require a change to the formula for calculating child support. It would also require a further change to the income cap, which has been changed in this legislation. As with all these issues, because they affect people day by day, any further delay in carrying out reform extends the unfairness and disadvantage that result from the faults in the present system. I know that the task in coming up with a formula that will be fair to the greatest number of parents of separated families is definitely not an easy one. The data from the Parkinson report can provide the starting point for reform. What we need now is the political will—we definitely need the political will—to frame and fund the complete reform of Australia’s child support system.

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