Select Committee on Social Security Minutes of Evidence

Annex A.2



  Nicholas Mostyn, one of her Majesty's Counsel, has invited my comments on aspects of the Green Paper on child support. I am honoured by the opportunity to share my experiences and observations in this area.

  I am a Judge of the Appeal Division of the Family Court of Australia and I have been given responsibility for child support cases in the Southern Region of the Court (the ACT, Victoria, South Australia and Tasmania) since the introduction of the child support legislation in 1987. Most of the reported first instance judgments are mine, although other members of the Full Court have not been slack in telling me about the occasional error of my ways.

  I learnt from reading of the Green Paper that your government is considering radically altering your current child support system and bringing it much more in line with the system that was introduced here in the late 1980s. I thought it might be useful for me to make observations about what I see to be the strengths and weaknesses of our present system.

  There is no doubt that child support payments have increased dramatically in quantum since the system was introduced. There is no doubt that collection rates are way up. There remains, however, major opposition to both the concept and co-operation with it. Voluntary payment rates remain comparatively low and there are very vocal opponents to the whole scheme. In the recent Federal election Senate candidates were fielded in all States for on an "Abolish Child Support and the Family Court" platform. They attracted some 12,000 votes. (How many of those votes were from Family Court judges who thought that the abolition of the Court would give them a perpetual holiday is unknown). The vocal minority has, however, had the ear of government and recent proposed amendments have reflected the politicians' concern with the hue and cry raised by such groups (See "Fathers' Rights Groups in Australia", Miranda Kaye and Julia Tolmie, 12 Australian Journal of Family Law 19 (March 1988)).

  I assume it will be known to readers of this memorandum that the Australian system is based upon an assessment of child support being made by the Registrar of Child Support (the Child Support Agency) which is situated within the Australian Taxation Office. The assessment is made by reference to tax records available to the Agency. Normally the most recent tax record available is two years old. The net taxable income is extracted from that record, increased for inflation and then used as a base for the calculation of child support. The matter is recalculated each financial year.

  If a liable parent is of the view that current taxable income is 15 per cent less than the estimate arrived at by the Agency then that parent can merely make an election to pay on his or her own estimate of taxable income for the year and an adjustment, if necessary, is made when the tax return is filed.

  The assessment is based entirely upon taxable income. The legislation, however, provides that child support responsibilities are to be shared between parties having regard to their respective financial capacity. If either a payer or payee is aggrieved by the assessment then they may make application to the Registrar for a departure from the assessment.

  To date the process of examining the departure application has been dealt with by a person known as a Review Officer. These are qualified lawyers who are on contract to the Agency. They hold a quasi judicial investigation (occupying ultimately not more than three hours and frequently hearing from the parties independently of each other) and then make a determination as to whether or not there should be a change in the assessment applying to any of the grounds set out in the legislation which enable changes to be made, and which are peculiar to the special circumstances of the case before the reviewing officer.

  In very broad summary, those ground are:

    1.  the payer can not afford to pay because of other obligations;

    2.  the costs of maintaining the child are different from the norm because of high costs of access or special needs of the child; or

    3.  That because of the whole of the financial circumstances of the parties, including transfer of capital between them, the result is inequitable.

  If a party is dissatisfied with the result achieved through the administrative review process, or if there are other proceedings pending in the Family Court between the same parties in any event, then the parties can have the Court make the final determination about the appropriate quantum of child support.

  The Review Officers have been a great success. In recent debates in parliament over the Child Support Legislation Amendment Bill 1998 it was said that as 30 June 1997 the Agency had over 439,000 active cases. Whilst I stand to be corrected on my figure. I understand that some 10 per cent or about 40,000 of such cases are the subject matter of internal review and that the leakage from those assessments into the court system is comparatively negligible, say no more than 1,000 cases a year Australia-wide.

  The process in the court system is to start from where the Review Officer left off and determine whether or not there are grounds for changing the assessment that the Review Officer made. It is not a process of examining the reasons of how the Review Officer got to the final result. Frequently when the matter comes to Court there is much more evidence available than the Review Officer had and this can lead to a different result to that which the Review Officer gave without in anyway reflecting on the competence of the Review Officer.

  Whilst there are no further legal hurdles to applications being made to examine the Review Officers' findings, either battle fatigue or general acceptance of the outcome has led to only a tiny fraction of cases filtering through the Court. For reasons which are not immediately apparent to me, our new legislation places yet another level of review between the initial assessment and the Courts, namely that anybody dissatisfied with the Review Officer's decision can ask for a further internal review within the Agency before coming to Court.

  The major limitations with the current review system is that the Review Officers have only limited jurisdiction to deal with departure applications. They do not have jurisdiction to deal with the variation of child support agreements nor several other areas where there are fact-based disputes that are traditionally dealt with by the Courts such as clear changes in circumstances since the Court last examined the case.

  Looking through your Green Paper I observe and applaud a move to a simpler formula. But a simple formula needs to be tied to an inexpensive method of adjusting the application of a simple formula to fit a complex set of facts. Income based formulas reflect only one aspect of the parties' finances. This day Australia's richest man had a victory against the Taxation Commissioner in the Federal Court. His tax bill for some three year was less than $50. His child support obligations on an income based formula would be laughable.

  Consider two separated fathers who occupy adjoining duplexes. They are both in the same employment, earning exactly the same income. One owns his apartment outright. The other is a tenant. One can clearly afford to pay more child support than the other. Is it fair that they be assessed merely upon their identical income without regard to other aspects of their financial positions?

  Apart from relating to the quantum of child support payable, about which I do not think it is appropriate that I comment, the most glaring inefficiency even with our scheme is its inability to ensure collection of all money falling due under it. The self-employed and those who work in the cash economy have little difficulty in avoiding responsibilities. Much of the community even in this sunny land are only as rich as their next pay packet.

  Payers miss making payments due for child support. By the time the bureaucracy has moved to take steps to enforce payments that are due, the money which was available to make the payments has long since been spent. (Our American cousins recognise this syndrome as "uncollectable arrearages".) There is no real chance that arrears can be extracted from future earnings of non-existent capital. Vigilance and rapid action seem to me to be the keys to ensuring that arrears are never allowed to accumulate to a point where they cannot be managed. This means frequent and urgent action should be taken once a default occurs. I have seen little evidence in our system of an enthusiasm in government to adopt such an approach.

  The cost/benefits of such a scheme are a little bit difficult for economic rationalist governments to come to grips with. In order to deal with a default of say $100 per week by way of child support it may cost the bureaucracy about $1,000 or more to seek to remedy the fault. Government departments on tight budgets will naturally become a little less than enthusiastic in endeavouring to spend their money in such circumstances.

  The very nature of the issues involved in child support make it impossible to please all of the particpants all of the time or many of the participants any of the time. Most families struggle to survive economically in one household. All the greater is the struggle when two households have to be created. The State puts no impediment upon people having children in intact relationships when they can not afford to have them, yet appears to place severe economic restraints upon people taking responsibility for children in second or subsequent relationships by refusing to make any signifcant adjustment downwards upon the responsibilities arising out of the first relationship. There is an internal inconsistency in such an approach.

  For all of the problems associated with child support, in my view the Child Support scheme has made a marked difference to the community's awareness of the responsibilies for post-separation support. It may be that the application of the formula creates individual injustices and it is no doubt that many families find significant hardship in meeting the demands of the formula. For all of that however the positives far outweigh the negatives.

  The strength of the system is the ease of inital assessment and the comparative ease of adapting the system to the needs of the individual family. Its weakenesses remain the lack of ability to rapidly enforce arrears as and when they accrue and its inability to entirely get across to some sections of the community, especially politicians, the positive aspects of this significant piece of social justice engineering.

  I have been specifically asked to comment on your proposed formula only insofar as it seems to have no maximum limit, and insofar as it makes no allowance for adjustment by reason of the carer's income. Both of these aspects have been the subject of close scrutiny in Australia.

  That scrutiny has resulted in the current Bill which actually strengthens the significance of both of these apsects by lowering the maximum amount payable and lowering the carers's exempt income.

  Placing a cap on administrative assessment of child support and factoring in some income of the carer are seen as being entirely consistent with two underlying essential bases of the scheme namely:

    (a)  that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resource of both of their parents; and

    (b)  that parents share equitably in the support of their children.

  The success of the scheme may well depend on the extent to which the public perceive it to be fair. Assessments which throw up $500 per week for a baby or ignore the fact that the carer is earning $100,000 per annum whilst the payer is struggling to make ends meet do little to bolster public enthusiasm for the scheme.

  For those who have embarked upon the rocky road of reform in the United Kingdom, I wish them well. If I can constructively add more to the reform debate I shall be pleased to do so.

Justice J V Kay


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