CHILD SUPPORT LEGISLATION AMENDMENT BILL 1998 Explanatory Memorandum

CHILD SUPPORT LEGISLATION AMENDMENT BILL 1998

1997-98





THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA







HOUSE OF REPRESENTATIVES







CHILD SUPPORT LEGISLATION AMENDMENT BILL 1998









SUPPLEMENTARY EXPLANATORY MEMORANDUM









Amendments and new clause to be moved on behalf of the Government







(Circulated by authority of the

Assistant Treasurer, Senator the Hon Rod Kemp)

General outline and financial impact.................................................... 1

Chapter

1. Credit for Certain Non Agency Payments.............................................. 3

Credit for certain non agency payments

The supplementary amendment amends the Bill to insert new provisions amending the Child Support (Registration and Collection ) Act 1988 to modify the way in which non agency payments may be credited against a child support liability.

Date of effect: The amendments contained in Part 1 of Schedule 11A will commence on 1 July 1998. The amendments contained in Part 2 of Schedule 11A will commence on 1 July 1999.

Proposal announced: 1998-99 Budget, 12 May 1998

Financial impact: Nil

Compliance cost impact: Nil

Overview

1.1 Schedule 11A of the supplementary amendment amends the Bill to insert new provisions amending the Child Support (Registration and Collection ) Act 1988 (the Registration and Collection Act).



1.2 Part 1 of Schedule 11A of the supplementary amendments will amend the Registration and Collection Act to allow the Registrar to:

· accept payments made to the payee or a third party where the payer and payee intended these payments to be maintenance without the need for special circumstances

· accept non cash maintenance as an acceptable substitute for maintenance where the payer and payee intended this to be maintenance

· refuse to credit an amount as maintenance where there are special circumstances.

1.3 Part 2 of Schedule 11A of the supplementary amendments will amend the Registration and Collection Act to allow the Registrar to:

· credit up to 25% of the payer's monthly child support liability where certain approved payments are made by the payer.

Purpose of the amendments

1.4 The purpose of the amendments is to allow:



l the Registrar greater flexibility in crediting payments, including non cash maintenance, intended by both the payer and payee as maintenance



l the paying parent the discretion to pay up to 25% of their monthly child support liability in certain approved payments.

Background to the legislation

1.5 Sections 71 and 71A of the Registration and Collection Act currently operate so that amounts paid directly by the payer to the payee or a third party can only be credited against an enforceable maintenance liability in limited circumstances. These are referred to as Non Agency Payments.



1.6 The Registrar can only credit an amount paid directly to the payee if:



l at the time the payment was made both the payer and payee intended it to be payment towards the enforceable maintenance liability (either partially or completely) and



l the Registrar is satisfied that, in the special circumstances of the particular case, the amount received by the payee should be treated as having been made to the Registrar.



1.7 Under section 71A the Registrar can only credit a payment made to a third party to discharge a debt owed by the payee, the payer or both the payer and the payee if the Registrar is satisfied that:



l at the time the payment was made both the payer and payee intended it to be payment towards the enforceable maintenance liability; and



l in the special circumstances of the particular case, the payment should be treated as having been made to the Registrar.



1.8 Currently, these payments are limited to cash payments.



1.9 Sections 71 and 71A were introduced to allow people registered for collection to bypass the CSA collection mechanism in exceptional circumstances. The occurrence of payment by this method has been higher than was originally envisaged and has become an important means for parties to deal with situations where the payee requires immediate, direct payment.



1.10 Under the existing legislation, a payer and payee may agree that a payment direct to the payee or a third party was intended as a payment towards an enforceable maintenance liability but the Registrar is unable to credit the payment against the liability unless satisfied special circumstances apply.





This means that this method of payment can not be used as a way of paying ongoing maintenance, including child support. Currently if a payer wants to pay child support in other ways, such as by paying school fees or the payees mortgage, the payer and payee would be required to make a child support agreement.

Explanation of the amendments

1.11 This measure forms part of the Governments response to concerns raised by the Joint Select Committee on Certain Family Issues and goes some of the way to addressing Recommendations 67 and 68. It is part of a package that supports the greater use of these types of payments without undermining the requirement that paying parents contribute to the costs of children. The proposed amendment will give payers more choice in the form in which child support is paid.



1.12 The proposed amendments will remove the need for special circumstances to exist where the payer pays an amount direct to the payee which both intend to be paid in complete or partial satisfaction of an enforceable maintenance liability. [Item 2 - repeal paragraph 71(b) and insert new paragraph 71(b)]



1.13 The proposed amendments will also remove the need for special circumstances to exist where the payer pays an amount to a third party that partially or completely satisfies a debt owed by the payer, the payee or both, where that payment was intended by both the payer and the payee to be paid in complete or partial satisfaction of an enforceable maintenance liability. [Item 4 - repeal paragraph 71A(b) and insert new paragraph 71A(b)]



1.14 Non cash transactions such as payment in a form other than with money, or by the transfer of property will be an acceptable substitute for a cash payment where both the payer and payee of an enforceable maintenance liability intend it to be treated as satisfying an amount payable under that liability. [Item 5 - Insert new subsection 71B(1)]



1.15 The value attributed to the non cash maintenance will be as agreed by the payer and the payee, or in the absence of agreement as determined by the Registrar. [Item 5 - Insert new subsection 71B(2)]



1.16 The Registrar may refuse to credit an amount under the amended sections 71 and 71A if satisfied that in the special circumstances of the particular case the amount ought not to be credited. Special circumstances would include harassment or coercion of the payee in order to obtain the payees agreement to payments of this type. [Item 6 - insert new section 71D; Items 1 and 3 - omit "Where" and substitute "Subject to section 71D, if" in sections 71 and 71A; Item 9 - omit "or 71A" and substitute "71A or 71C" in new section 71D]



1.17 The payer of an enforceable maintenance liability will be entitled to a credit of up to 25% of their monthly child support liability for certain prescribed payments. A payer will not be able to claim a credit for these types of approved payments in relation to a liability to pay spousal maintenance under section 18 of the Registration and Collection Act. [Item 8 - Insert new subsections 71C(1), (2) and (5)]



1.18 To qualify for the credit the payer must have made one or more payments of the type set out in the Regulations and must also have paid the remainder of their monthly child support liability by the due date. If the payer satisfies these conditions and the amount of the payment (or sum of payments) is more than 25% of the enforceable maintenance liability in a given month the payer will be said to have an "uncredited amount". This uncredited amount will be able to be applied as a credit against the payer's enforceable maintenance liability in a later month (provided the conditions for crediting the payment are again met). [Item 8 - Insert new subsections 71C(1), (2), (3) and (5)]



1.19 If the payer does not pay the remainder of the enforceable maintenance liability by the due date but later pays the amount and still has an uncredited amount arising from having made a prescribed payment, the Registrar may then credit that amount. [Item 8 - Insert subsection 71C(4)]



1.20 The payment options arising from this amendment will also be available to payers and payees with a child support liability that is not registered for collection by the Registrar. Where the payee applies for registration of a registrable maintenance liability, unpaid amounts taken into account in calculating an entitlement to arrears will not include amounts that would have been credited against the liability under the new section 71C if the liability had been an enforceable maintenance liability at all relevant times. [Items 6 and 7 - insert new subsections 28A(7) and 39A(8)]



1.21 The amendments made by this Schedule require a consequential amendment to Schedule 9 of the Bill which amends section 71A(b). [Amendment 3 - omit Item 60 of Schedule 9]



1.22 Amendments are also required to other items of the Bill to include a reference to the proposed Schedule 11A. Clauses involved in the proposed amendments are :



§ Clause 2 (line 2)- after "other than" insert of Part 2 of Schedule 11A or"; [Amendment 1]

§ Clause 2 (after line 3) - insert a new provision subclause (2A) to provide that Part 2 of Schedule 11A commences on 1 July 1999. [Amendment 2]