Child Support Amendments – December 1998

Since the long-awaited, disappointing changes to child support were accepted by the Senate (December 1998) we have been inundated with queries, especially for the start dates.

Here they are, together with a brief summary of the changes.

CSA expects most of the items to come into affect on 1st July 1999, providing legislative procedures are completed on time.

The exceptions are changes for second families needing additional family payments and the adding-in of fringe benefits to income used to assess child support. The start date allowing you to reduce your  “family income’ by 50% of child support paid was 1st January, 1999. So if you now qualify, reapply to Centrelink.

The fringe benefits addition will not start until 1/7/2000

Hopefully this will explain some of the intricacies of CSA changes. It won’t be long before it’s as complicated as the ATO legislation. Foolish to expect anything less I suppose!

In Summary – Child Support Legislative Amendments

Changes to child support payable

1. Increase paying parents exempt income by 10% – effective 1/7/99

  • Exempt income is the amount of the payers taxable income not included in the calculation of child support
  • Increase from $9,043 to $9,947

[note JSC report recommended at least a 20% increase in the disregarded income level of the paying parent. This is only 10%!]

2. Including an amount for  a ‘shared care’ child in the exempt income amount – effective 1/7/99

  • The exempt income amount for each parent with shared care of a child will be increased by the following amounts for each shared care child
  • $1,888 for each child under 13; $2,639 for each child 13-15; and $3,756 for each child 16 and over.
  • For example parents with shared care of two children under 13 who currently have an exempt income of $9042 would each have an exempt income of $12,818

3. Reduce the amount of the payees disregarded income – effective 1/7/99

  • This is the amount of the payees taxable income that is not included in the calculation of child support· Decreases from $38,787 to $30,347

4. Remove the automatic inclusion of child care in payees disregarded income – effective 1/7/99

  • Additional child care costs of $4,304 for the first child under 6; $936 for each other child under 6 and $1,871 for each child aged 6-11 years will no longer be automatically added onto the disregarded income for the payee parent.

5. Allow high child care costs to be a ground for departure from assessment – effective 1/7/99

  • Where child care costs exceed 5% of their income the payee parent can apply for a departure from assessment to take account of the high child care costs for children under 12 years of age

6. Reduce the effect of the payees disregarded income – effective 1/7/99

  • · Payees disregarded income now reduced from $37,424 to $30,347 pa [note this was going to be reduced to $29,598 in the original proposal!]
  • · payer’s income will be reduced by 50 cents for every $1 by which payee’s income exceeds disregarded income [note this reduction is now 50% less than previously. It used to be $1 for $1 reduction!]

7. Introduce a minimum payment of $260 a year – effective 1/7/99

  • This change applies to all those with a now  ‘nil’ assessment, even the unemployed or other pensioners

8. Child support to be payable for secondary student until the end of the school year in which they turn 18 – effective 1/7/99

  • This lets a payee receive child support until the last day of the school year in which a child who is a full time student turns 18 years

9. Include rental property losses and foreign exempt income to calculate child support – effective 1/7/99

  • Child support is currently calculated using parent’s taxable income
  • This measure adds back rental property losses and exempt foreign income to stop parents minimising their income

Late Amendment —-Fringe benefits will also be added into income used for the assessment of child support – effective 1/7/2000

10. Base child support assessments on the most up to date income of parents. Only use an ‘uplift factor’ when the parent has not lodged the most recent tax return – effective 1/7/99

  • Child support amounts are currently calculated with a formula that uses taxable income figure of 2 years prior (An uplift factor is used.)
  • This measure will reduce the need for parents to repeatedly seek changes to the amount of child support as the income figure will be more up to date

11. No longer backdating child support liability – effective 1/7/99

  • · It changes the start date of the liability to the date the application is made instead of 28 days prior

Changes to Second Family

12. Allow credit for child support – Effective 1/1/99

  • Currently the amount of child support paid out is not taken into account when determining their entitlement to Family Payment
  • Families can now claim 50% of any child support paid as a deduction from household income for Family Payment purposes

Changes to Improve Administration

13. Provide greater flexibility for parents in making Non-Agency Payments and allow the payer to make certain payments that can be credited towards child support – Effective 1/7/99

  • Non Agency Payments are other payments made for the purpose of child support. eg school fees, mortgage payments. Either to a third party or direct to the payee, bypassing CSA. Validating NAPs required the agreement of the other party. Without this agreement NAPs were often declined
  • The CSA claims the new legislation will allow the Agency to accept payments made directly to the payee or a third party where the payer and payee intend the payments to be for child support even if there are no special circumstances. Further non-cash payments will be accepted as maintenance payments where the payer and payee agree this is the case. Also up to 25% of the payer’s monthly child support liability may be credited in relation to certain payments such as school fees, essential medical and dental fees and payee rent without requiring the agreement of the payee

There is some confusion regarding this change and we are seeking further clarification of the CSA intentions.[Remember this was the late ‘sweetener’ added in response to the disappointment registered by paying parents when the long awaited changes were announced.]

14. Introduce a formal process to enable parents to object to CSA decisions – Effective 1/7/99

  • For the first time, this measure gives parents objection rights to decisions made by CSA
  • It is an internal review mechanism conducted by staff who are not involved in the original decision.
  • Appeals to an internal review decision can be made to the Administrative Appeals Tribunal, then if necessary to the Federal or High Courts.

24. Allow estimates of income to be rejected where they do not reflect the actual income – Effective 1/7/99

  • This will allow CSA, for the first time, to reject an estimate where it doesn’t reflect the person’s income

Changes or proposed changes 15 to 23 have not yet been released. It’ll be interesting to see if the next round of changes will be more successful in bringing in a fairer system.