7. Ensuring parents meet their obligations to their children

7.1 Minimum payments

More than 40 per cent of all payers in the Child Support Scheme are paying $260 per year ($5 per week) or less. Only about half of these are on Newstart, Disability Support Pension or other income support. It is likely that the reported taxable incomes of many of the remainder do not reflect their real capacity to pay a reasonable amount towards the support of their children.

The use of taxable income as the basis of child support means that those people who legally or illegally manage to minimise their tax also pay unrealistically low levels of child support.

To give effect to the principle that both parents should contribute at least something towards the costs of supporting their children, the required child support payment should be $20 per week per child for those who were not on income support during the tax year on which the current child support amount is calculated, and who report taxable incomes below the level of maximum Parenting Payment (Single). This fixed payment should not be reduced on account of regular contact because it is designed to ensure that those whose reported taxable income does not reflect their real capacity to pay child support make at least a modest contribution towards their children’s upbringing. Those who were on income support for a period during the relevant tax year but have taxable incomes above the self-support amount on the basis of the tax assessment for the relevant year should be assessed on the basis of the formula.

While a parent is on Newstart or another income support payment with income below the self-support amount, the operation of the formula will be suspended and a minimum rate will apply. The minimum is currently $5 per week. The payment should be increased in line with the increase in the CPI since the minimum payment was first introduced in 1999. The payment should become a minimum for each child support case, so that a payer with a liability to children in more than one household would pay the minimum to each household.

The minimum rate and the fixed payment should be increased annually in line with changes in the CPI and rounded to the nearest 10 cents.

7.2 Registrar-initiated changes of assessment

Another strategy for ensuring that parents who have the capacity to pay reasonable levels of child support do so is the greater use of Registrar-initiated changes of assessment.

At present, the Child Support Agency has a range of methods by which it can assess the real capacity to pay of a self-employed person who has structured his or her financial affairs so as to minimise taxable income. It also has methods of estimating the real income of those who fraudulently conceal income derived from cash transactions. However, it normally relies on the payee to initiate a change of assessment process on the basis that the parent has a higher capacity to pay than is reflected in his or her taxable income.

Since 1999, the Agency has had the power to initiate changes of assessment of its own motion. This can be very useful in enabling the Agency to look at categories of child support cases that have shared characteristics and where a closer examination of the payer’s finances is warranted. The Taskforce recommends increased resources for this work.

7.3 Enforcement

The Taskforce considers that the proper enforcement of child support obligations in relation to all child support payers is essential for popular acceptance of the Scheme. As has been recognised for many years, self-employed non-resident parents who do not meet their obligations to their children represent a particular challenge for the Agency, both in assessment and enforcement. The Taskforce recommends that any enhancement of the Agency’s enforcement powers should be focussed on increasing its enforcement options in relation to self-employed parents who are defaulting on their obligations.