Chris Evans (WA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Hansard source

It is clear that I should be earning overtime today, but under the government’s Work Choices legislation there is no opportunity for that. The Child Support Legislation Amendment (Reform of the Child Support Scheme—New Formula and Other Measures) Bill 2006 seeks to implement the second and third stages of the child support reform package. It follows on from the first stage of the reforms enacted in June this year through the Child Support Legislation Amendment (Reform of the Child Support Scheme—Initial Measures) Act 2006. I would like to acknowledge that a lot of work has gone into bringing forward the package of reforms sought by this bill and the earlier bill passed a few months ago. I particularly acknowledge the work of the ministerial task force on child support headed by Professor Patrick Parkinson, which developed the reform package.

The second stage of the package as contained in this bill comes into effect on 1 January next year and will in part introduce independent review of all Child Support Agency decisions by the Social Security Appeals Tribunal, broaden the powers of the courts to ensure that child support obligations are met, strengthen the relationship between the courts and the Child Support Scheme and allow separating parents more time to work out parenting arrangements before their family payments are affected.

The third stage of the reform package as sought by this bill comes into effect on 1 July 2008 and will introduce a new child support formula that will change the way that child support payments are calculated. That is the heart of the reforms. It will also change the treatment of income from second jobs and overtime, change the treatment of parents with dependent stepchildren when calculating their child support liability, simplify the change of assessment rules for altering the amount of child support that is payable and change the arrangements for parents who wish to make agreements for ongoing child support or lump sum payments.

Fundamentally, Labor accepts the need to reform the Child Support Scheme. The scheme, which was set up by the Hawke Labor government in 1988, has been a model for child support arrangements in other parts of the world. People seek to copy our scheme and to build on our model. But we also acknowledge significant ongoing concerns have developed about fairness, the assessment formula and compliance. While we are regarded as having one of the best schemes, there is still much more work to be done. There are divergent views about what the impact of this package will be, but Labor believes that there is a strong community acceptance for the broad need for change.

The belief that the interests and wellbeing of the children must always come first guides Labor’s approach to child support reform. The legislation before us today is the culmination of a process which commenced with the House of Representatives Standing Committee on Family and Community Affairs inquiry into family separation issues which led to the Every picture tells a story report. It is encouraging that a House of Representatives inquiry produced such good work. Normally, they rely on the Senate. That inquiry led to the establishment of a ministerial task force and reference group to examine the Child Support Scheme, including an examination of the costs of raising children in postseparation households.

The ministerial task force reported in June 2005 and its 30 recommendations form the basis of the reform package now before the parliament. Labor believes that in undertaking the first systemic evaluation of the scheme the task force has done the work that provides a very strong basis for reform. It found that changes in society and the circumstances of many families since 1988 necessitated change. The package of reforms developed by the task force is the result of expert research and analysis and uses sound intellectual principles to balance competing factors in an attempt to produce a balanced package of measures. We think that this intellectual rigour has been important in trying to build community acceptance of a new system, given the highly contested nature of child support.

The centrepiece of the reforms is the new child support formula, but the reforms also include increased compliance activity, use of courts for debt recovery, a new approach to parents understating income and administrative review access through the SSAT. The new formula for assessing child support payments has been developed by the task force based on evidence of the actual costs of raising children. To me, that is the key change: the fact that we have sought to base the new formula on the actual costs of raising children rather than on the disputed claims about those costs. Shared parental responsibility for those costs is now recognised, as is each parent’s level of care.

The task force identified several problems with the current formula. Firstly, the current formula uses fixed percentages of income, assuming people spend the same proportion of their income on children regardless of their level of income. This assumption is incorrect. Research shows that people with higher incomes spend more on their children in strict dollar terms than people with lower incomes. However, they spend less as a percentage of their income. None of that is counterintuitive. The current formula also fails to distinguish between the ages of the children and therefore fails to recognise the higher expense incurred in caring for older children—something I am just beginning to experience. The current formula treats the income of resident parents more generously than it does the income of non-resident parents and does not take account of contact by the non-resident parent with the children for up to 29 per cent of the time. Second families are also unfairly and inconsistently taken into account under the current formula. That has been a big bugbear and one which I have a great deal of sympathy for.

However, the new formula is explicitly based on the costs of children, varying according to their age and the income of the parents. A fairer income shares approach is used so both parents will have the same amount deducted as self-support and both parents’ incomes will be taken into account in establishing the costs of the children. The resulting costs of children will be apportioned between the parents according to their share of the combined income. In the new formula, parents who care for their children for 14 per cent of the time or more will be recognised as contributing to the costs of the children through that care. This will, we hope, encourage more non-resident parents to stay more actively involved with their children, which is a very worthwhile social objective. There will also be equal treatment between first and second families by using the actual costs of the children from the second family, rather than a flat amount, in working out child support payable for the first family. Where a non-resident parent has care of their child for less than 35 per cent of nights in a year, the resident parent will keep all of their family tax benefit—a balancing measure, if you like.

With its basis in research into the actual costs of raising children in separated families and with it taking into account levels and costs of care by both parents, Labor believes that the new formula has a stronger intellectual and evidence base than the current formula. Labor considers that on balance the new scheme will be fairer for both parents and more focused on the needs and costs of children, but we have to take that largely on trust at the moment, and I will come back to that later.

Labor has previously made it clear that our principal concern with the bill relates to the potential financial impact on low-income households. This package will have winners and losers. Some people will benefit financially from the changes; others will have their income reduced.

Single-parent households are among the most financially disadvantaged group in our society. Single-mother groups have noted that 46 per cent of sole parents with dependent children live on very low incomes and that, of all family types, these families are at the highest risk of poverty. Labor is concerned that single parents who were disadvantaged by the recent welfare changes may now face the prospect of further cuts in income. Some of these people will get a double whammy. They will have their welfare entitlement reduced as a result of the so-called welfare reform and they may be losers out of the child support changes. There is responsibility on the government to ensure that the wellbeing of children does not suffer due to the combined impact of those policy changes.

Labor acknowledges the concerns of single-mother groups that many resident parents will receive lower child support payments under the new formula. We particularly note that the task force chair, Professor Parkinson, does not disagree that a significant proportion of single parents will receive lower payments as a result of the bill. In evidence to the Senate Standing Committee on Community Affairs inquiry he noted that around 55 per cent of assessments will decrease under the new formula.

Labor does, however, accept that reduced income due to the formula itself will be offset in part by other aspects of the reform package, including the revised family tax benefit arrangements, the introduction of minimum payments for parents who seek to deliberately minimise their income and the strengthened compliance regime. I will be particularly keen to ensure that the compliance regime is effectively strengthened; it has been a major weakness of the current system.

Witnesses to the Senate inquiry noted the real increase in family payments since the current formula commenced in 1989. Professor Parkinson sought to make this point in evidence to the Senate committee inquiry when he claimed that family payments now meet most or all of the cost of children in low-income families. We also note Professor Parkinson’s view that, under the existing formula many child support payments across the spectrum were too high, while others were too low. The fixed income approach used in the current formula and the failure of the scheme to take account of the fact that the cost of children differs substantially according to their age were reasons for that inconsistency.

The problem was a significant concern for non-resident parents in particular, many of whom felt that they were paying too much to support their children. The concerns of these parents were even more acute when there were children involved from second and third families. A more equitable and consistent formula was required, and Labor considers that the new formula contained in the bill is a useful start and, hopefully, will deliver better outcomes.

Labor accepts that there is an integrity of the package as recommended by the task force in its attempt to provide a balanced range of measures. We have looked at this very closely and decided that trying to unpick the package is not possible. In part, that is driven by the fact that the government has the numbers in both houses of parliament, so we thought that activity in that area would not be successful. But, equally, the task force did the work; they came up with a package. To try to unpick it—to change one bit, to make an amendment in one area—would have implications for the whole package. A lot of our thinking was driven by the fact that we thought it was unwise to try to unpick the package.

We recognise that in establishing a new formula, based on fairer principles, some payments will go up and others will go down. Child support payers and payees will be affected in different ways according to their income, the number of children involved, who cares for the kids and how often they do so, the age of the children and whether or not second, third or even fourth families are involved. Labor accepts that there are significant difficulties in assessing the true impact of the change in the formula, and acknowledges the workload that the Child Support Agency, Centrelink and others now face in implementing new systems and undertaking new assessments. The best of British luck to them. It is our understanding that around 760,000 child support assessments will have to be reviewed. New information will need to be collected from families before assessments can be issued; obviously this is a time-consuming and extensive task.

However, Labor believes that these difficulties do not excuse the government from making provision to protect low-income single-parent families should they suffer financial disadvantage as a result of the changes sought in the bill. In fact, they probably strengthen the need for such protections and assurances, given the uncertainty that exists. This was something that was clearly contemplated by the report of the ministerial task force when it noted:

... the Government may wish to give consideration to the position of those whose liability or entitlement will vary to a large extent as a result of the recommendations, to avoid causing hardship in the short term.

That essentially encapsulates the concerns of me and the Labor Party. These concerns formed the basis of recommendation 25 of the report, which said that the government needed to comprehensively consider the management of transitional issues regarding the implementation of the new formula. I am very unconvinced that the government has taken that seriously. The government has provided no evidence that it has seriously addressed that recommendation, that serious concern.

While additional resources have been provided to the Child Support Agency to help manage the process, the bill makes no provision to protect families, particularly families on low incomes, who may suffer a large loss of payment or financial hardship as a result of the changes to the scheme. In that context, Labor will continue to press the government to ensure that families are protected.

However, we are caught in a catch-22 situation. The bill is being debated in October 2006 in order to be implemented in July 2008. The government says that it needs that time to put the administrative arrangements in place, change the systems and do the assessments. I accept that; it is a huge task. But we are being asked, in a sense, to take it on trust, because the government cannot provide specific information on outcomes—how people will be affected. We have a broad understanding, but we have no clear analysis of the impact of what we do today.

That concerns me. I find it very worrying that we do not know the full extent of the impact. That is why Labor is raising these concerns very seriously. In a sense, we are doing a lot of this sight unseen. We accept the argument for the change in formula. We accept the intellectual proposition. But without knowing the impact I cannot make a proper assessment. Until those assessments are issued in the first half of 2008, we will not know for sure what the impact will be. We think the government has to take seriously the task force’s call for transitional arrangements.

While Labor is concerned about the government’s failure to make any attempt to quantify the impact of the bill and to make provision to protect low income families, we do note that work is in progress to establish robust monitoring and evaluation systems once the new formula is introduced. Ongoing monitoring and evaluation is critical to the successful implementation of the new scheme. If the changes do lead to significant income reductions for low-income families, it could undermine public confidence and reaction to the other aspects of the bill. It will certainly affect the attitude of many in this chamber. Labor will move to establish a Senate inquiry in 2007 to properly examine the impact of the bill on existing child support recipients. We have to try to get ahead of the game rather than just deal with a crisis, if it occurs, after 1 July 2008.

The enhancement of the Child Support Agency’s compliance capabilities is long overdue and is welcomed by Labor. The changes will better enable the agency to pursue non-resident parents who fail to provide any support for their children. That is at the heart of the Child Support Agency construct—both parents should contribute to the support of the children. Up to now, there has been no mechanism for external administrative review of child support decisions except through the courts, which is expensive and time consuming for parents and has been at the core of the concern of parents in the system. The new arrangements will improve the consistency and transparency of child support decisions and will provide a review mechanism that is inexpensive, fair, informal and quick. The fact that only half of all non-resident parents meet their child support obligations in full and on time is a problem that has needed to be addressed for some time. I reiterate: only half of all nonresidents meet their child support obligations in full and on time.

Compliance is a huge issue. The introduction of a minimum payment for parents who deliberately minimise their income to avoid paying child support is also welcome, but we have to deal with the real issue and make sure that those parents pay according to their capacity to pay. They should not get away with falsely minimising their income. Labor recognises the concern raised by Professor Parkinson in his submission to the Senate inquiry, and the provisions of the bill that go to these compliance issues may need to be strengthened. Again, we are keen to monitor these issues.

In conclusion, subject to the concerns I have raised today, Labor will be supporting the bill. We are trying to be constructive. We are trying to contribute to positive change, but we do express serious concern about issues of monitoring and about the need for transitional arrangements, to which the government has not made a commitment. I will be moving a second reading amendment which goes to those concerns. Nevertheless, we believe that the implementation of arrangements which are more firmly grounded in the evidence of the costs of raising children is sound and should be supported. We recognise the complexity of reforming Australia’s child support arrangements; the sound intellectual principles on which the reform package is based and that the opportunity for genuine public policy reform on this scale does not come along everyday. Labor recognises the work that the committee and the task force have put into this and the positive contribution that has made to the whole process. In large part, we are taking the government on trust in terms of the impact of these changes, particularly on low-income families. It will be a constant focus for Labor. I hope it is our problem in July 2008. I move the following second reading amendment to the bill:

At the end of the motion, add “but while welcoming the many positive measures in the bill, the Senate expresses its serious concern about:

        (a)    The Government’s decision to proceed with the bill without providing any protection for low income families who may lose income as a result of changes to the child support scheme.

        (b)    The failure of the Government to properly manage transitional issues in circumstances where parents are worse off under the bill, as recommended by the Ministerial Taskforce on Child Support.

        (c)    The failure of the Government to make any attempt to quantify the financial impact of the bill on existing child support customers.

        (d)    The failure of the Government to provide up to date demographic information about existing child support customers.

        (e)    The unreasonably short timeframe imposed by the Government on the Senate Inquiry into the bill, particularly given the extent of the changes to the child support scheme and the potential financial impact on low income families.

         (f)    The overly-complex nature of the changes in the bill”.