9. Other issues
9.1 Capacity to earn
Determinations that a parent’s capacity to earn is higher than his or her actual income are amongst the most contentious of all Child Support Agency decisions. Either parent could, in principle, be caught by this provision, but in practice non-resident parents, mainly fathers, are affected. Fathers have complained that this discretion is used unfairly in such situations as where their earnings have been reduced as a result of poor health experienced after separation and divorce, where they have reduced their working hours to allow for contact with their children, or where they have undertaken study to improve their longer-term financial prospects.
The Taskforce recommends that ‘capacity to earn’ should be given clear legislative definition. Parents should only be deemed to be earning more than they are in fact earning, based on unutilised earning capacity, where, on the balance of probabilities, a major motivation for reduced workforce participation is to affect the level of child support payments.
9.2 Step-parents
The grounds for change of assessment should be amended to include the recognition of a parent’s obligation to support step-children if neither of the biological parents is able to support the children.
9.3 Maintenance Income Test
The Maintenance Income Test (MIT), which dictates how much child support is taken by the Government to recoup some of its expenditure on FTB for the resident parent, is poorly aligned with government policy on support for families. The consequence of the MIT is that many separated parents receive less FTB A than they would if they were living together. There are also other serious anomalies in the current operation of the policy that need to be rectified.
The reform of the MIT needs to be considered by the Government as part of the process of reform when budgetary circumstances allow. In particular, consideration should be given to an increase in the free area before child support payments affect FTB A entitlements.
The MIT should only operate in relation to FTB payable for the child support children and should exclude other children living in the household.
The percentages recommended by the Taskforce in Table A: Costs of Children have been adopted after taking into account the present operation of the MIT.
9.4 Revision of the legislation
The child support legislation should be rewritten, as far as possible, in plain English. It is highly complex and difficult to understand, due to an excessive reliance on technical language and complex phraseology. Legislation of this kind must be usable beyond the Agency entrusted with its implementation. Lawyers and other advisers, as well as courts, are significant users of the legislation and it is important to its utility that the legislation should be written without undue complexity.
9.5 Other issues related to the Terms of Reference
The recommendations of the Taskforce also deal with a range of other matters of detail concerning the administration of the child support formula or the grounds for change of assessment. The recommendations also address certain legislative matters related to the application of the formula that have emerged from consultations. A number of the recommendations propose changes to promote consistency between the Child Support Scheme and other aspects of government policy in relation to separated parents. A full explanation of the rationale for all the recommendations is contained in the main Report.
9.6 The recommendations
The recommendations explain in detail how legislation should be drafted and the Scheme put into operation to give effect to the intentions of the Taskforce. For this reason, many of the recommendations are technical in nature. Recommendation 1, which describes the detail of the proposed new child support formula, is divided into 31 subsections to emphasise that these recommendations constitute a package of interdependent recommendations to be taken together.