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

I rise today to speak on the Child Support Legislation Amendment (Reform of the Child Support Scheme—New Formula and Other Measures) Bill 2006. This bill follows up on the first stage of the reforms that were enacted in June through the Child Support Legislation Amendment (Reform of the Child Support Scheme—Initial Measures) Bill 2006. The bill implements the second and third stages of the child support reform package. Under the second stage of the reform package, due to commence on 1 January 2007, the bill will, firstly, introduce independent review of all Child Support Agency decisions by the Social Security Appeals Tribunal; secondly, broaden the power of the court to ensure that child support obligations are met and strengthen the relationship between the courts and the child support scheme; and, thirdly, allow separating parents more time to work out parenting arrangements before their family payments are affected.

Under the third stage of the reform package, due to commence on 1 July 2008, the bill will introduce a new child support formula that will change the way child support payments are calculated, 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, lastly, change the arrangements for parents who wish to make agreements for ongoing child support or lump sum payments.

Labor accepts the need for reform of the Child Support Scheme. The regime that was set up by the Hawke government in 1988 has become an international model for child support arrangements, yet we acknowledge significant ongoing concerns about fairness, the assessment formula and compliance. While there are divergent views about the impact of this package, Labor believes that there is strong community acceptance of the need for change. Labor’s approach to child support reform is always guided by a set of core principles, central to which is a belief that the interests and wellbeing of the children must always come first.

The legislation before us today is the culmination of a process which included the House of Representatives Standing Committee on Family and Community Affairs inquiry into family separation issues which led to the report Every picture tells a story. The inquiry recommended the establishment of a ministerial task force to examine the Child Support Scheme, including an examination of the costs of raising children in post-separation households.

The Ministerial Taskforce on Child Support reported in May 2005, and its recommendations form the basis of the government’s reform package. Labor recognises the work of the task force and acknowledges that in undertaking the first systematic evaluation of the scheme it has provided a strong basis for reform. The task force found that the scheme needed to be updated in light of changes in society and the circumstances of many families since 1988. The package of reforms developed by the task force is the result of expert research and analysis and looks for sound intellectual principles on which to balance competing factors and attempt to produce a balanced package of measures. The centrepiece of the reforms is the new child support formula, but it also includes increased compliance activity, use of courts for debt recovery, a new approach to parents who are understating income and access to administrative review through the Social Security Appeals Tribunal.

The task force has developed a new formula for child support liability 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 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, as people with higher incomes spend more on their children in a dollar value than people on lower incomes, even though they spend less as a percentage of their income. Nor does the current formula distinguish between the ages of the children, so the higher expense in dollar terms that comes with older children goes unrecognised. 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.

The new formula, on the other hand, is explicitly based on the costs of children and varies according to their age and the income of the parents. An 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 or more of the time will be recognised as contributing to the costs of the children through their care.

It is also worth noting that these measures soften the link between the family tax benefit and the number of nights of contact with the non-resident parent. This has long been problematic for some parents who have more flexible contact arrangements, and when they do agree to more contact in one week they find themselves losing money as a result. This bill will allow resident parents to keep all of the family tax benefit where a non-resident has care of their child for less than 35 per cent of nights in a year—that is, fewer than five nights in a fortnight. 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. As I said, resident parents will keep all of their family tax benefit if the non-resident parent has care of their child for less than 35 per cent of nights in the year.

Given that the new formula has its basis in research into the actual costs of raising children in separated families and takes into account levels and costs of care by both parents, Labor believes that the new formula has a strong intellectual basis. It is worth noting, however, that many people have criticised the fact that the new formula does not take into account the value of unpaid work. For example, the National Council of Single Mothers and their Children said that the argument that costs are lower for younger children only holds true as long as the costs of non-cash inputs of unpaid care work are ignored. The higher expenditure on teenagers is accompanied by a reduced direct load of unpaid care, enabling parents to more easily increase hours of paid work. They further said that because women undertake the majority of unpaid care work the failure to acknowledge the costs of unpaid care inputs embeds a structural gender bias against women within the formula, and the provision of unpaid care work is further socially devalued. The Australian Institute of Family Studies has also commented that the task force did not engage with the issue of forgone earnings.

However, on balance, Labor have decided that the new scheme is likely to be fairer and more focused on the needs and costs of children. Labor have previously expressed our principal concern about the financial impact of the reform package, and obviously our principal concern is the effect it will have on low-income households. Single parent households are among the most financially disadvantaged group in our society. Single mothers’ groups have noted that 46 per cent of sole parents with dependent children live on very low incomes, and these families are at the highest risk of poverty of all family types. Labor are also concerned that those single parents who were disadvantaged by the recent welfare changes may now face the prospect of further cuts in their family incomes.

Labor believes that there is a responsibility on the government to ensure that the wellbeing of children is not compromised by the combined impact of these two policy changes. Labor acknowledges the concerns of many resident parents that they will receive lower child support payments under the new formula for calculating these payments. We also 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, noting in evidence to the Senate inquiry that around 55 per cent of assessments will decrease under the new formula. There has been some concern that we have not been able to get a straight answer from the government about who will lose and by how much. The upside of the new formula for some parents is that those parents with older children may see an increase in their payments. Unfortunately, people with children under the age of 12 may see their payments reduced.

At the request of the task force, NATSEM modelled some of the impact of this new formula. It seems from NATSEM modelling that resident parents on low annual incomes of $26,000 or under will incur the biggest reductions in child support payments. For example, according to this modelling, where the non-resident parent earns $78,000, a resident parent with an income of $26,000 will be $50 a week worse off. Obviously, that sort of money is a big deal for families who are struggling on $26,000 a year.

These families are already amongst the most economically marginalised in the country. Ninety-one per cent of these families, according to the Child Support Agency’s own data, are headed by mothers. Only four per cent of these families have incomes over $50,000 per annum and 75 per cent raise their children on incomes below $20,000. We know that supporting parents who are getting by without paid work or who are managing on part-time wages are frequently surviving on incomes well below the poverty line.

The Parkinson report said that in order to fix the anomalies in the current system some payments will go up and some will go down and that we should not compare the outcomes under the current system with the outcomes under the new formula. Professor Parkinson tells us that there will be some winners and some losers.

Labor’s view is that there has been a failure to make adequate transitional arrangements, for a start, for the people who may lose out under these new arrangements. We do understand that the reduced income due to the formula is likely to be offset in part by other aspects of the reform package, such as the new family tax benefit arrangements, the introduction of minimum payments for parents who deliberately minimise their assessable income and a strengthened compliance regime.

Witnesses to the Senate inquiry also noted the real increase in family payments since the current formula commenced in 1989. Professor Parkinson sought to make that point in evidence to the Senate inquiry when he claimed that family payments now meet most or all of the cost of the care 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 are too high while others are too low. The reason for the inconsistency was 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.

A more equitable and consistent formula is required, and Labor considers that the new formula is on the way to doing that. Labor’s social security spokesperson, Senator Chris Evans, has said in the past that the underlying intellectual integrity of the package recommended by the task force attempts to provide a balanced range of measures. Labor has decided that to attempt to unpick the task force’s recommendations by seeking to amend certain elements would undermine the integrity of the package as a whole. The ALP has also recognised that establishing a new formula based on fairer and sounder principles means that some payments will go up and others will go down and that child support payers and payees will be affected in different ways according to their income, the number of children involved, who cares for the children, how often they care for the children, the age of the children and whether or not second, third or even fourth families are involved.

We accept that there are significant difficulties in assessing the true impact of the change in formula and that the workload that the Child Support Agency and other government agencies now face in undertaking the new assessments is substantial. We understand that around 760,000 child support assessments will have to be reviewed if this bill passes into law. A whole range of new information will need to be collected from families before any new child support assessments can be issued, and obviously that will be a time-consuming process.

We do not, however, accept that these difficulties excuse the government from making provision to protect low-income single parent families should they suffer financial disadvantage because of the changes in this bill. In fact, we would have to say that there is an increased need for protections and assurances for low-income families given the level of uncertainty that these new arrangements bring. Such provisions were clearly contemplated by the report of the ministerial task force when it noted on page 261:

... 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.

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.

Unfortunately, this does not seem to have happened. I can see no provision made in the bill to protect those families, particularly families on very low incomes, who may suffer financial hardship as a result of the changes to the scheme. My Labor colleagues and I will continue to press the government to ensure that these families are protected. These are the same families, of course, that may be affected by the Welfare to Work changes. The interaction of these two areas of government policy, although not considered by Professor Parkinson or by the government, is of significant concern to Labor.

Currently, sole parents are getting $244 a week if they are on the parenting payment. For their youngest child’s eighth birthday, a sole parent pensioner will get that pension cut by $29. Labor’s concerns in this area were not allayed when government witnesses to the Senate inquiry admitted that no work had been done on the combined impact of the child support changes and the welfare cuts on single parent families. Added to that is the fact that when these parents move on to Newstart the amount out of every dollar earned that the government will claw back will also be much higher. For every dollar sole parents earn from working, they will lose up to 75c of their Newstart benefit. We have vigorously opposed these Welfare to Work changes because they punish sole parents and many of the other most vulnerable members of our community. We need to be very vigilant to ensure that these changes do not lead to increased poverty and to increased child poverty in particular.

The other area that I wanted to discuss was monitoring and evaluation. While Labor are concerned about the failure of the government to make any attempt to quantify the impact of the bill and to make provision to protect low-income families, we note that work is in progress to establish monitoring and evaluation systems once the new formula is introduced. Ongoing monitoring and evaluation will clearly be critical to the successful implementation of the new scheme. If the changes lead to income reductions for low-income families, they could undermine any other improvements that may occur in the overall child support scheme. Labor will move to establish a Senate inquiry in 2007 to properly examine the impact of the bill on existing child support recipients and in particular whether any of these families will be worse off as a result of the changes.

Strengthened compliance and the new minimum payments provisions are something that we are very supportive of. Labor welcomes the long overdue enhancement of the Child Support Agency’s compliance capabilities, which will better enable the agency to pursue non-resident parents who fail to provide any support for their children. Until 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. 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. Labor also welcomes the introduction of a minimum payment for parents who deliberately minimise their income to avoid paying child support. However, Labor recognises the concerns of Professor Parkinson that these provisions of the bill may need to be strengthened.

In conclusion, Labor will be supporting the bill overall, subject to the concerns that I have raised today. I am going to move a second reading amendment that relates to these concerns. We support the move to make arrangements that are based more firmly on the evidence about the costs of raising children. We are concerned about the potential for some of the most vulnerable people in the community to be worse off under this and consequently we urge the government to commit to very careful monitoring and to making any necessary transitional arrangements. We recognise the work of the House committee and its report and the work of Professor Parkinson and the ministerial task force. 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 expresses its serious concern about:

(1)

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;

(2)

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;

(3)

the failure of the Government to make any attempt to quantify the financial impact of the bill on existing child support customers;

(4)

the failure of the Government to provide up to date demographic information about existing child support customers;

(5)

the unreasonably short time frame 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; and

(6)

the overly-complex nature of the changes in the bill”.

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