Wednesday, 10 May 2023
Social Services Legislation Amendment (Child Support Measures) Bill 2023; Second Reading
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
Labor has a proud history of improving the lives of Australian children and their families. It was a Labor government that introduced Paid Parental Leave, it was a Labor government that launched the first National Plan to Reduce Violence against Women and their Children, and it was a Labor government that legislated child support in 1988.
The Hawke Government introduced the child support scheme to protect the economic security and wellbeing of children affected by family breakdown. Then Social Services Minister, the Honourable Brian Howe MP, said in parliament at the time, This Bill will make the legal right of children to be supported by both their parents a real right. We will turn what for most children is an empty promise into solid, regular financial support.
The Albanese Government is continuing this proud legacy. We are committed to ensuring children of separated parents have financial security. Government has an obligation to make sure the child support scheme is working for parents and children—many depend on it for economic security and stability.
Last financial year, $3.7 billion in child support payments were transferred between 1.3 million parents for 1.1 million children. The median income of parents who receive child support is around $33,000. That is less than half of the annual average weekly total earnings of all employees. The majority of parents who receive child support receive a social security payment. These are low-income parents, most of them single mothers, who need and rely on the government supporting them.
I am keenly aware of the difficult financial circumstances facing many single parents and I am committed to ensuring these parents receive the financial support that they, and their children, are entitled to.
Most parents do the right thing and fulfil their child support obligations. Since its introduction in 1988, the government scheme has transferred over $33 billion in child support payments.
But when parents don't pay their child support on time, it has a real and material impact on the financial security of single parents and their children. As a government, we are deeply concerned about the $1.69 billion in child support debt that has accrued over the last 35 years.
It is critical that our system is effective at assessing and collecting child support. The Bill I introduce today, the Social Services Legislation Amendment (Child Support Measures) Bill 2023, will improve debt recovery and help prevent future debts for low-income parents.
This Bill is a first step to make the scheme better for parents and children. It implements our commitment, outlined in our response to parliament's family law inquiry, to legislate the child support measures first announced in the 2021-22 MYEFO.
From 1 July 2023, the Bill makes three changes to help reduce child support debt. These changes are expected to recover up to $164 million in debt owed to parents and their children.
First, the Bill expands the circumstances where Services Australia can deduct child support debts directly from a parent's wages. Known as employer withholding, this is the default method of paying child support.
The Government's obvious preference is that child support is paid on time to ensure parents have the financial resources they need to meet the cost of their children on an everyday basis.
Employer withholding is an effective and efficient way for the Government to collect child support and administer it to parents. Last financial year, Services Australia used employer withholding to collect $743 million in child support from around 91,000 parents.
Currently, Services Australia can only initiate employer withholding in active child support cases—as in, cases where there is an ongoing child support obligation. This Bill will fix that. It will allow Services Australia to use employer withholding to collect child support debts in any case, including those that have ended. For example, the child may have turned 18 and therefore the case ended, but a debt is still owed to the receiving parent.
Over two years, this change alone is expected to recover up to $164 million in unpaid child support from around 18,000 parents, with an average debt of nearly $11,000 owing to the receiving parent.
A second change will tighten the rules around departure prohibition orders for parents who deliberately and repeatedly avoid their child support obligations.
When parents do not pay child support on time, Services Australia has a range of options to enforce payment, including deducting it directly from wages and intercepting tax refunds. Reserved for extreme cases, after other avenues have failed, Services Australia can prevent a parent from leaving Australia by making a departure prohibition order. However, under current rules, Services Australia must issue an exemption if the owing parent provides financial security—like a bond—for their return to Australia by a specified date. Their bond must be returned to them if they return to Australia by the specified date—regardless of whether or not they repay their child support debt.
The current rules mean a parent who has the financial resources to provide a bond is able to travel overseas despite actively avoiding their legal obligations to provide financial support to their children.
The Bill will stop these parents from exploiting this loophole. It will allow Services Australia to refuse an exemption, even when they offer financial security—unless Services Australia is satisfied the parent has made arrangements to repay their child support debt.
While this measure will only impact around 110 parents, this group is responsible for a large debt pool, at an average of $43,500 each. The number of cases may be small, but the detrimental impact on children and single parents is significant.
A third change will improve income accuracy for around 150,000 low- income parents each year who are not required to lodge a tax return.
While most parents are required to lodge a tax return, for some of the most low-income parents, the Australian Taxation Office does not require a tax assessment. A parent with child support obligations is not required to lodge a tax return if they receive an income support payment and their adjusted taxable income is less than the child support self-support amount, which is $27,508 in 2023. The self-support amount recognises parents not only need to support their children, they need to meet their own living expenses—the self-support amount quarantines part of their income before child support is assessed.
If these parents do not lodge a tax return, they must lodge a Return Not Necessary with the ATO and separately advise Services Australia of their actual income for the relevant financial year, so this can be factored into their child support assessment.
However, for those who don't provide any income information, Services Australia must use an alternative provisional income in the child support assessment. Currently, Services Australia may apply a provisional income that is two-thirds of the annual male total average weekly earnings—$55,016 in 2023.
This default provisional income is twice as high as the self-support amount—the upper income limit that applies if a parent is not required to lodge a tax return. Therefore, it can significantly overestimate the parent's income.
An inaccurate estimate can put low-income parents into financial hardship in two ways—it can result in a parent receiving less child support than they should, or it can result in a parent being liable to pay more child support than they are able.
The Bill fixes this problem—from 1 July 2023, for a parent who lodges a Return Not Necessary and does not provide Services Australia with income information, Services Australia will create a provisional income that is equal to the self-support amount. This will ensure Services Australia reflects the parent's low income in their child support assessment.
This change is expected to benefit up to 150,000 parents each year, with parents who receive child support making up around 70 per cent of this group. The change will prevent future debts by ensuring that for both receiving and paying parents, the rate of child support reflects their financial capacity.
This change will work in conjunction with existing provisions in the scheme to ensure child support assessments reflect accurate and contemporary earnings information—parents can advise Services Australia of their actual income at any time and Services Australia access information from the ATO.
The changes in this Bill will make a real difference to the lives of single parents and their children. But we also knows there is more work to do to improve the child support scheme to better support families.
In the Government's response to the family law inquiry, tabled in January 2023, we agreed to a range of recommendations to improve the operation of the child support scheme over the longer-term. This includes reviewing compliance, with a particular focus on improved collection and enforcement. While most people do the right thing, some people deliberately avoid paying child support to inflict financial control and abuse on their former partners. We also know that in some circumstances the child support system is used as a means of continued financial control and abuse after people have left abusive partners, which results in sustained trauma for victim-survivors.
All forms of family and domestic violence are unacceptable. The Albanese Government is committed to ensuring single parents and their children receive the financial support they are entitled to, and that government systems don't exacerbate any abuse, including financial.
The Government will also consider interactions between the child support scheme and government payments, like Family Tax Benefit.
In 2023, we will establish a Child Support Consultation Group to provide a strong voice to Government on issues impacting families, and commission an evaluation of separated families to understand what can be done to support parents where private collect arrangements have broken down.
The Government will also commission new research into the costs facing separated parents, and establish a Child Support Expert Panel to ensure the child support formula reflects the current costs of raising children in Australia.
In summary, we in this place have a responsibility to improve the lives of Australian families, and we must work together to strengthen the child support scheme and deliver on its promise that children are financially supported by their parents.
The best interests of children will always be paramount to any changes the Albanese Labor Government makes to the child support scheme.
I commend the Bill.