Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share this | Hansard source

Before I talk about the substantive issues that I want to raise in relation to the Child Support Legislation Amendment (Reform of the Child Support Scheme—New Formula and Other Measures) Bill 2006, let me respond to the comments made by the member for Herbert. The member for Herbert was trying to imply that our amendment was not based on genuine issues of concern. I think he said, ‘If you want to find out the impacts, everyone can; I know the impacts in my own electorate.’

Just for the record, we were briefed by the department just 48 hours ago and in great detail. In that briefing, the department made it very clear that no-one in the department was able to estimate the degree of disadvantage that some people will face in the new system. They have undertaken to examine 700,000-plus cases between the carriage of the bill and the implementation date of 1 July. If the department, the Minister for Families, Community Services and Indigenous Affairs and Professor Parkinson cannot tell us with any degree of certainty what the actual impacts on a range of people in the child support system are, I find it amazing that the member for Herbert can get up and mislead this parliament by suggesting that somehow people are failing in their duties if they are not able to know the exact impact of this legislation on the people that they represent.

I think that the amendment moved by our shadow minister points, in a very objective and rational way, to the limitations of the debate on this bill. I am concerned that I am debating a bill not knowing precisely what the outcomes are going to be, particularly for sole parents—who are predominantly women—and low-income families. We do know that, despite the best endeavours of the formula to bring into being a more objective basis for setting the costs of raising children, statements made by Professor Parkinson indicate that there will be losers in the system—that is, people who are going to end up with less child support by way of child support payments than they are currently receiving. We hope that they will be compensated by an increase in family tax benefit payments, but no-one has any degree of certainty about what that outcome might be—save, it seems, the member for Herbert, who must have some crystal ball whereby he can predict the actual outcomes for the people that he represents. It is important to make that point, and I think the member for Herbert displayed quite a remarkable degree of ignorance about the outcomes of this legislation.

I want to speak in support of the bill—notwithstanding some of the limitations that are so properly picked up in our amendment—as a member of the House of Representatives Standing Committee on Family and Community Affairs that worked very hard on the bipartisan report Every picture tells a story. This led to a major overhaul of the family law system in this country and is gradually leading to an overhaul of the child support formula, which we as members of parliament all know causes enormous grief to people we represent.

I want to place on record my congratulations to Professor Parkinson and members of his task force, who have done a very solid task in reviewing all of the empirical research both in Australia and overseas to try and arrive at a far more objective setting for the implementation of the child support formula. In so doing, I think it is going to relieve a lot of the concerns that we constantly hear from people whom we represent.

The intention of the change is to improve the fairness of the Child Support Scheme and to encourage active involvement of both parents in their children’s lives after separation. The legislation before us is highly complex and highly technical. You only have to read the Law Council’s submissions to the hearing of Senate Standing Committee on Community Affairs, brief though it was, to understand that even lawyers see complexity in the system. It seems that everyone, except the member for Herbert, acknowledges that it is complex, although he did later concede that point.

Cut to its core, the bill will usher in a new system for assessment of child support payments. It is based on far more objective criteria than we have had in the past. As we know, a lot of constituents come to us with concerns about a formula that has been based on percentages. Those percentages often do not specifically relate to the actual costs of raising children. It is not unreasonable for people to want to know what the actual cost is of raising children at different income levels, at different ages and in different family formations. We have finally got to the stage where we can, with a greater degree of certainty, say to the people whom we represent that the new formula will be based on an income shares approach, whereby the cost of caring for and raising children has been based on Australian research and objective data. I want to acknowledge NATSEM’s very valuable input of the modelling that has been done to arrive at this formula.

In future, the costs of raising children will be based on the combined incomes of both parents. I think that is a very important principle. Those costs are going to be distributed between the parents in accordance with their capacity to meet the costs of raising children. Another very important element is that it treats first and second families more equally, thereby more fairly. As we know, a constant concern that is raised with members of parliament by people who repartner is that the children of the second relationship are not currently treated on an equal basis by the application of the formula. I think we overcome that problem in the new formula. The costs incurred by parents who provide regular or shared care of their children—the non-resident parent’s costs—are better reflected and recognised in the new formula.

I want to talk about the positives before I come to what I think are the limitations of the bill. The present formula does not take account of or compensate a non-resident parent who looks after children for up to 29 per cent of the time, and that has been a source of concern. Non-resident parents often say to me that there are costs incurred that are not properly compensated. In the new formula, parents who care for their children for 14 per cent or more of the time, which probably equates to a night a week, will be recognised and compensated for the costs they incur.

Under the new scheme, all biological and adoptive children are to be treated as equally and as fairly as possible. The costs to a parent of caring for resident dependent children outside of the child support case are also acknowledged. This corrects a cause of constant concern expressed by constituents who say that currently second families and the children of second families are unfairly and inconsistently taken into account.

I think the changes address what we know are the conflict points between parents over the splitting of family tax benefit by allowing resident parents, who are predominantly female, to keep all of their family tax benefit, except where there is shared care, which is defined as 35 per cent or more of the time. Very importantly, minimum child support payments will now be indexed to the CPI and will apply to each support case up to a maximum of three cases, rather than being divided among children in different family situations, as is the case at present. Parents who deliberately minimise their income to avoid paying child support—and we know there are a lot of people in the system who do that and who have done it in a regime where compliance has not been as effective as it could be—will have to pay $20 per child per week up to a maximum of three children, unless they can prove the basis for their low-income status.

Also very importantly, for the first three years after separation parents will be able to have income from second jobs and overtime excluded from child support calculations when the extra money they earn is being used to help with re-establishment costs. A maximum of 30 per cent of total income will be able to be excluded, to ensure adequate support for children. I think that is an important issue. It is constantly raised with me that when relationships break down the costs of repartnering, establishing new households and establishing new care provisions are not properly compensated in the current formula. I think all of those positives in this legislation will go a long way to addressing the longstanding grievances that are expressed both by payers and by payees in the system.

But I have to talk about some of the inadequacies in the legislation. The inadequacies are not necessarily the fault of anyone in particular, but nevertheless it places us in a position where we are voting for a piece of legislation while not knowing the actual outcomes and the impacts. I am particularly concerned about the impacts on the most vulnerable, the low-paid and the sole parents in our community.

If the member for Herbert does not think this piece of legislation before us is complex and technical, let me quote the Family Law Section of the Law Council of Australia:

We as lawyers … have the greatest difficulty working out a great number of the clauses … It is also fair to say, from the clients we see across our desks day by day, that the present scheme is almost impenetrable to the average person. The new scheme is going to be no less transparent and possibly even more complicated. It may achieve better outcomes, but in being able to understand and follow how it gets to those outcomes it is going to be a considerable challenge, not only for the payers and payees but also for those who are advising them at each level, including their legal advisers.

I say to the Law Council: it is interesting that you make this comment about the complexities of the bill and yet we have a member in this House who seems to think it is all readily understood.

I am pleased that it is the department’s intention, as I understand it, to undertake a plain English rewrite of this legislation as soon as possible. I do accept that the implementation period between the carriage of the bill and the actual day of operation will hopefully give the department and the minister’s staff the opportunity and the time to explain the changes in a way that is more readily understood not just by the people administering the new system but also by the people who are both payers and payees in the system. I think one of the justifications for the early carriage of the legislation has been that it will require that implementation phase to explain the complexities to the community.

With the implementation of the formula changes scheduled for 1 July 2008, we should have the opportunity in that 18-month implementation period to explain to our constituents and the families we represent how the changes will affect them. It is important that all members of parliament are in a position to gain access to the plain English rewrite of the legislation, because they will often be the first port of call for people in the community wanting to know how this legislation will affect them. We need to understand that the complexity of the changes coming into being, while very worth while, is very daunting.

Now I want to say something about my substantive concerns—concerns that have been picked up in the amendment moved by our shadow minister. The child support formula should—and does in this proposal—reflect to the best of our ability our knowledge about the true costs of raising children. That being the case, we need to understand that one of the consequences of the proposal is that there will be some reductions in the amount of child support paid to resident parents, particularly where the non-resident parent has a higher income. There is no publicly available modelling to estimate the impact of the new system on existing child support recipients and payers. The lack of analysis is very concerning, given that we know from Professor Parkinson’s comments that a significant proportion of single parents will receive lower child support payments under the new formula—how many we do not know, and how much they will lose is also unknown. We have been told—and I take this at face value—that the Child Support Agency will reassess all client payments once the bill is passed and before the operative date. That evidence will then give us a much clearer idea of the impact on people.

There will be households, no doubt, that will find themselves worse off under these changes, as confirmed by Professor Parkinson. While conceding that it was difficult to give a reliable estimate of that impact, Professor Parkinson said:

My best guess is that the majority of assessments will go down … my estimate of 55 per cent is probably much closer to the mark than the 60 per cent that was reported in the media. It is nonetheless just a very general estimate.

The National Council of Single Mothers and their Children have argued:

Most single parent households will be financially worse off as a result of the formula changes. An estimated 60 per cent of primary carer households will be worse off as a result of the formula changes.

So I am genuinely concerned that we are debating a bill whose impacts and consequences are not known to us other than we know that the potential impacts could hurt the most vulnerable in our community. Professor Parkinson told the Senate committee:

We did model—and very carefully—the impact of all these changes on those who are currently on welfare. What we found was that the trade-off between family tax benefit not being split and the child support changes was going to be either neutral for them or advantageous—that is, it would make a dollar difference here and there with that group because they are not typically receiving much child support. When they get all the FTB, it is actually more valuable for them. Obviously some are going to be worse off as a result of the child support changes, but they will still be getting a lot of child support. Where their former partner is a high-income earner there will still be significant amounts being transferred. We did model all of that very carefully and we are comfortable that the trade-off between the payee getting all the FTB and the child support changes did create a fairly equitable balance.

That is the hope that I have too—that any reductions the resident parent faces as a result of the changes in the formula will be compensated by the changes to the rules about the splitting of the family tax benefit. I think we all hope that is the case, because we all know that the sole resident parent with children is among those who suffer the highest degrees of financial hardship and those who could find themselves in poverty without adequate income support.

I am not sure, and nor can anyone be sure, that Professor Parkinson’s wish for the equitable balance that he talks about will eventuate. And I guess we will not know until the Child Support Agency does all the detailed calculations that need to be done. I am concerned, however, that the National Council of Single Mothers and their Children took into account the drop in income due to reduced child support at some levels and the expected increase in family payments, and they argue that it still results in an overall drop in income of between $10 and $20 per child per week—and this is without the impact of the Welfare to Work changes factored in.

Witnesses from the Institute of Family Studies told the Senate that no work had been done on modelling the combined impact of the welfare changes and the prospect of reduced child support payments on single parents. This is of significant concern to me given that I represent a lot of sole parents, and I am appreciative of the already dire financial circumstances faced by these families. We know that 46 per cent of sole parents with dependent children live on very low incomes and that these families are at the highest risk of poverty of all family types. So I think it is quite proper for the shadow minister to have moved the amendment in her speech on the second reading, because when the new formula comes into being those people who are going to be affected adversely by it need to know that there were people in this parliament who appreciated they were voting for a bill without exactly knowing the ramifications at all levels of family formation. So we are flagging that that is a potential problem that both sides of this chamber need to keep in mind and may have to address. That is why I support the calls for both a Senate inquiry and an independent inquiry to properly examine the impact of the bill on existing child support recipients.

It is a great pity the positive reforms in this bill are diminished by the government’s decision to proceed without any guarantees of protection for low-income families who may lose income as a result of these changes. While I support the bill and am pleased that I was able to be part of the process, I end my comments by yet again highlighting my serious concern about the potential negative financial impacts of these new arrangements on low-income families and particularly on female sole parents. (Time expired)

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