 Changes to the Child Support System.
John Flanagan
Fatherhood Foundation Newsletter - July 2008
There are various changes to the Australian Child Support Scheme. Most of these changes are effective from 1 July 2008.
Almost no one is happy with the changes.
For example, neither the custodial parents nor the non-custodial parents are certainly happy with the changes.
The only ones who are happy with the changes are the 4,000 odd (1) employees of the Child Support Agency. This is because these bureaucrats will have more resources and more power.
One billion Australian dollars is "owed" in outstanding child support as at 30 June 2008 (2).
The changes have been sold to the Australian Government. This is on the basis that it will save the Government money and that the current child support debt will be somehow reduced.
However this is an illusion.
This is because the punitive action that has been legislated for, will no doubt, result in more and more non-custodial parents being forced out of work (currently about 45 per cent (3) ). This will result in even less child support being paid.
The current child support changes were originally proposed in the Parkinson Report. The Child Support Secretariat drafted the Parkinson Report. The Child Support Policy Branch of the Department of Families, Community Services and Indigenous Affairs (FACSIA) formed a large part of the Secretariat.
Patrick Parkinson then signed off on the report.
The Australian Child Support Scheme is fully funded by deductions from the custodial parents' family tax benefit payments (4).
Patrick Parkinson said in a Senate public hearing in 2006 (5) that there were going to be reductions in child support payments. However he added that this would be counter-balanced by an increase in family tax benefits paid to the custodial parents (that most non-custodial parents lose from 1 July 2008).
Parkinson did not highlight that the custodial parents themselves pay for the running of the Child Support Scheme. This is through deductions of 50 cents in the dollar to family tax benefit payments to the custodial parents.
Parkinson also did not highlight that the definition of income was being changed in the same amendments. This is so that a child support payer child support income may be actually higher than the payer's taxable income.
The main reason for the apparent decrease in child support, that Parkinson referred to, is that there is a 24 per cent reduction in child support. This is when the contact is above 14 per cent (1 day per week).
This theoretical reduction in child support payments is illusionary.
The custodial parent can also increase child support payments by 24 per cent. This is by reducing contact to below 14 per cent (i.e. below 52 days per year).
As from 1 July 2007, as noted above, the CSA changed the definition of income. For example, fringe benefits will multiplied by a tax factor to gross up the income (6). This change will result in some child support assessments being increased from 1 July 2008.
As from 1 July 2009, the CSA will calculate "grossed up" salary sacrifice and investment losses back into the new formula (7). These will not only increase child support amounts to be paid by the child support payer, it will also decrease the amount of family tax benefit payments to the custodial parent.
 As a result of the recent legislative changes, the CSA will also have more legislative power.
For example, the CSA will have a greater ability to make a registrar-initiated assessments. As a result, more and more child support payers will find themselves in greater debt.
These non-custodial parents will simply dig themselves in deeper.
No one wins (other than the CSA as noted above)
The Government has not solved the problem. The solution is with both parents being involved in the decision-making process. This is without the involvement of the Government.
Our Government has not realised this yet.
John Flanagan
Deputy Registered Officer
Non-Custodial Parents Party (Equal Parenting)
NOTES
1) There were 3,452 CSA employees in June 2006.
2) The Net Child Support debt was $801,200,000 in June 2006.
3) There were 333,610 child support payers (43.2 pre cent) effectively unemployed in June 2006 and increasing at the rate of approximately 2 per cent per annum.
4) The funds clawed back from family tax benefits were $539,000,000 in June 2006.
5) Senate Community Affairs Committee inquiry into the Child Support Legislation Amendment (Reform of the Child Support Scheme -New Formula and Other Measures) Bill 2006. The Public Hearing was held on Wednesday 4 October 2006 in Canberra. Both Patrick Parkinson and representatives of the Child Support Policy Branch were before the Senate Committee
6) As a result of changes made by the Child Support Legislation Amendment (Reform of the Child Support Scheme -New Formula and Other Measures) Bill 2006. Net fringe benefits are grossed up by a multiple of either 1.9417 or 2.1292. This is before fringe benefits are added back into the child support income.
7) As from 1 July 2008, the following applies for both payers and payees of child support, with respect to salary sacrifice: -
(a) Salary = $35,000 per annum.
If the salary sacrifice component = $14,500, then the income for child support purposes is grossed up to $47,603 per annum.
(b) Salary = $40,000 per annum
If the salary sacrifice component = $14,500, then the income for child support purposes is grossed up to $52,603 per annum.
(c) Salary = $45,000 per annum
If the salary sacrifice component = $14,500, then the income for child support purposes is grossed up to $57,603 per annum.
(Ref. Based on the Uniting Care Submission to the Senate Inquiry into Families, Housing, Community Services and Indigenous Affairs and Other Legislation (2008 Budget and Other Measures) Bill 2008)
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