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Standing Committee on Social Policy and Legal Affairs - 27/06/2014 - Child support program
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DALY, Mr Glenn, Representative, Non-Custodial Parents Party (Equal Parenting)

FLANAGAN, Mr John, Deputy Registered Officer, Non-Custodial Parents Party (Equal Parenting)

CHAIR: We will recommence our proceedings. I would like to welcome the witnesses representing the Non-Custodial Parents Party (Equal Parenting). Before I do, just so that you are aware of the legalities of what we are doing here today, please note that these meetings are formal proceedings of the parliament. Everything said should be factual and honest. It can be considered a serious matter to attempt to mislead the committee. The hearing is open to the public, which is being broadcast live. A transcript of what is said will be placed on the committee's website. I invite you to make an opening statement.

Mr Flanagan : As you are probably aware, our submission is numbered 7. Just by way of introduction, our party was formed in 1998 by Andrew Thompson and some concerned citizens. We were first registered on 12 January 1999 by the Australian Electoral» Commission. I have been the deputy registered officer since 2003.

Andrew Thompson has made a private submission, numbered 28. One point to note from his submission is that he refers to his previous submission to the then House of Representatives Standing Committee on Family and Community Affairs, dated 6 August 2003. Andrew concludes by saying that nothing has changed. We believe that is the issue. Nothing has changed since that previous inquiry and we need things to be fixed.

The sad fact is that 43 per cent of child support payers are effectively out of work. That has to be fixed. In our submission we have listed several ways that this can be fixed. I refer you to page 4 of our submission, which is the last page. We believe that we need a 'rebuttable presumption of equal time shared parenting'. I appreciate that that is outside the terms of reference of this inquiry, but we believe it is one of the key issues of the child support issue.

The next thing is that we believe that child support should be based on net income, not gross income. If I can refer you to Professor Patrick Parkinson, who appeared earlier. In May 2005 he compiled a report titled In the best interests of children: reforming the Child Support Scheme.

In the initial part of his formula, he says: 'Child support income equals gross taxable income less self-support amount.' The self-support amount is one-third of the male total average weekly earnings, which is currently $23,523. That is a fixed amount that is applied to every income. What we would like to see is not the fixed amount applied to every income but the increased taxed figure applied to that particular income so that the income is no longer gross but net. In other words, we want the child support amount to be a net figure rather than a gross figure. We believe that can be accommodated in the existing formula by simply having the self-support amount changed to the taxed amount for that particular tax bracket.

Next, we believe that overtime pay should be excluded from child support calculations. Alternatively, there should be a fairer cap on minimum income. Again, if I can refer you to Professor Parkinson's formula, there are a series of information regarding the 'Costs of children' table. There are six columns. Columns 1 and 2 provide the combined child support income above the self-support amounts. The maximum is $70,569. We believe that we can put a cap on that maximum income by simply deleting columns 3 to 6 in that 'Costs of children' table so that you are left with columns 1 and 2. And that, I believe, will provide an incentive for people to work. As I have said earlier, 43 per cent of people that are unemployed is not good for anyone: it is not good for the country; it is not good for the person themselves.

The next issue we have raised is that a payer should not be penalised if a payee chooses not to work when that payee has the ability to do so. This is covered by section 117(7B) of the Child Support (Assessment) Act, and there are currently three factors that must be taken into account to determine an increased earning capacity. I could go through the three of them but, rather than bore you with the details, I would just say that it does not happen. The payee does not get the same consideration as the payer.

The next item is that 'court-ordered custody arrangements should determine child-support payments'. From 1 July 2010, under the Child Support and Family Assistance Legislation Amendment (Budget and Other Measures) Act 2010, care is determined by the actual care and not by court orders or agreements. You can have a delay of 14 weeks in that action, it is called reasonable action. But to have that reasonable action take place, the payer has to prove that they have initiated court action, or that they have initiated mediation through a family relationship centre, or that they have entered or started the negotiations. If they can't prove that, the child support care percentage is changed. It is very hard to get into a family relationship centre because they are quite booked out, so what happens is, effectively, that we end up with more court actions. And that is one thing that does not help anyone. It just creates a conflict, and the problem just gets worse. Therefore, we believe that we should go back to what happened before 1 July 2010: we maintain that court orders should be implemented.

I would like to raise another issue, which is probably a personal issue, so I won't mention any names. But I would like to hand up to the committee some documents from the Child Support Agency relating to a personal issue, where someone's child's date of birth has been increased by 10 years so that they could be put into the child support system. There is an internal procedure by the Child Support Agency—procedure 3.4—which I have got a copy of here. That is titled 'adjustment for arrears-only registrations'. Now if I can go through the internal procedure, it says: 'to do this, when creating the child, add a number of years onto their birth date so that Cuba'—which is their computer system—'will recognise an eligible child who is under 19. E.g. if child Julia was born 10 October 1988, we would key her birthdate as 10 October 1998'—which is an addition of 10 years.

I would also refer you to submission No. 42, which is by the Lone Fathers Association (Australia) dated 12 June 2014. At the top of page 19 of their submission, under the title 'falsification of birthdates', it says: 'The CSA has not been able to provide an adequate reason for this act of falsification, which should not be permitted.' I have given that as an example of the culture of the Child Support Agency, and an example of how much they disregard what the legislation really says. Now that, I believe, is a clear contravention of the Privacy Act—to change a child's date of birth by 10 years—simply to fit into their system.

I would also refer the committee to pages two and three of our submission, which refer to section 98H of the Child Support (Assessment) Act and section 103 of the Child Support (Registration And Collection) Act 1988. I would like to point out that people who go for a review by a child support senior case officer, and then seek an appeal to Social Security Appeals Tribunal, should expect fairness. Where evidence is totally disregarded, there can be no fairness. We need fairness in the system. I know of one case where the senior case officer said, 'I consider this person's income to be such-and-such an amount'—without any evidence whatsoever. That went to court and it was upheld by the court that that was the correct decision because it was in accordance with section 98H. So I believe there needs to be changes to the legislation so that people can have a fair go.

CHAIR: Thank you very much for your submission, Mr Flanagan. Did you want to add anything, Mr Daly?

Mr Daly : No, I will just confirm that that procedure for registering is common practice. I have written to several ministers about it and have had responses from them. If it is common practice there is no fairness at all. That is about the only thing I can say. With everything John has said—and as you can see in the submission—how does anyone defend themselves? They can't, which makes it very impossible. I have a letter from a solicitor which says 'if there is a problem with administrative law'; who do you take it to?'

CHAIR: Could I ask you a question, Mr Flanagan, about overtime? You say that overtime payments should be excluded, and I suppose the immediate question is: why do you believe they be excluded?

Mr Flanagan : I think overtime should be excluded so that a person's second family can be supported. That is one big reason. Also it provides an incentive for that person to increase their income if the overtime is excluded.

CHAIR: You have obviously gone into the detail in your submission and, from what you have said here about the culture of those involved in the child support program, you think it is a poor culture. Why and how do you think it should be changed? Do you think there needs to be greater accountability?

Mr Flanagan : I think so, because what happens is that there is not enough delineation of responsibilities between members of the Child Support Agency. I can quote one example where a complaint was made to the case officer, and the case officer said, 'You've got to go to the complaints officer.' When that person went to the complaints officer, it was a previous case officer so there was no point. That person had already dealt with that person previously, so there was no point. There is not enough delineation. And also, there is a problem in that one department actually makes an assessment and then also has the responsibility for enforcing that assessment. The situation is too close. They are too close together.

CHAIR: So you think that the solution is that there should be some greater separation between the reviewers and the initial case officers?

Mr Flanagan : Exactly. And also maybe even a different department. One department might make an assessment and the other department might carry out the enforcement or collection.

Ms CLAYDON: You have raised a number of concerns, and I am just trying to understand the extent of some of the issues that you have raised. You might just talk me through this allegation of the falsification of birth dates and what the practical consequences of that are.

Mr Flanagan : I can go into details. What we have is the Australia-New Zealand agreement, which means that if a child support case is in New Zealand it can be transferred to Australia. New Zealand have different legislation to what we have in Australia. In New Zealand they have what they call the Child Support Act 1990. There is retrospectivity with the New Zealand legislation, so you can go back as far as you want to. In Australia there is retrospectivity and the fact is that children born prior to 1 October 1989 are not covered by the Child Support (Assessment) Act. They are covered by other provisions in the Family Law Act. To get around that problem, the Child Support Agency changed the date of birth by 10 years so that it appears as though the child is born after 1 October 1989 when in fact they were born beforehand.

Our parliament has made it quite clear that there is to be no retrospectivity. Brian Howe, the then Minister for Social Security, when he was the minister who brought in the child-support legislation into parliament back in 1989 clearly said that there was to be no retrospectivity. Just one more point. Similarly, we had an inquiry in 1995 and there was one dissenting report from that inquiry. It was by Senator Belinda Neal. Senator Neal wanted to have retrospectivity put into the child-support legislation. That was refused. So there is clearly no retrospectivity in the child-support legislation.

Ms CLAYDON: So this applies to those New Zealand citizens caught up in this.

Mr Flanagan : It can also apply to Australian citizens.

Ms CLAYDON: What is the extent?

Mr Flanagan : I am not aware of that.

Ms CLAYDON: I will go to your claims about the reviews of the Social Security Appeals Tribunal. You are saying that in most of the cases you are aware of there is just one person hearing the case and not the usual panel of three. How many of those cases are you aware of and how does that compare with the SSAT practices for other «matters» ?

Mr Flanagan : Normally if you have a Centrelink issue they will have three people. For a child-support issue you normally have one. But, more importantly—

Ms CLAYDON: Sorry, what is the basis for you saying that? Have you been collecting data on this?

Mr Flanagan : No, only from personal experience: you go along to the Social Security Appeals Tribunal and there is one person there and they hear the matter. But, more importantly—and it was raised by a previous witness in this hearing, and I fully agree with it—very often the people who are on the Social Security Appeals Tribunal are ex Child Support Agency personnel. So there is not enough distance.

Ms CLAYDON: Again, is there data linked to that?

Mr Flanagan : No, just personal experience.

Ms CLAYDON: Just anecdotal evidence and hearsay—okay. Thank you.

Ms BUTLER: The document that you handed up, in explaining the difficulty with the computer system, says that:

This action does not affect the way in which your child-support arrears is calculated and is in line with CSA's procedural instructions on registering New Zealand child-support cases.

Do you say, then, that, in this case you have told us about where birthdate was altered so it could get onto the computer system, that had a material change to the amount of money that the payer was required to pay?

Mr Flanagan : No, the opportunity for that person to be able to present the matter to a court of law was lost. You have two cases in child-support: you have got what they call a stage 1 case, which is prior to 1 October 1989; and a stage 2 case, which is after that date. This case should have been a stage 1 case, which meant that they would have had to go to a court of law. There were some problems in New Zealand in having the matter determined. Those issues could have been raised and given that person the opportunity in a court of law to raise those issues.

Ms BUTLER: Do you mean in a New Zealand court or in an Australian court?

Mr Flanagan : In an Australian court, because it would have had to have been registered in an Australia court of law. That is how it should have been done and it wasn't done. The Child Support Agency took the easy way out. Rather than having it registered in Australia and in an Australian court, they said: 'Don't worry about it. We'll increase the date of the birth so it falls within the stage 2 case and therefore we can automatically register the case.'

Ms BUTLER: Did I hear you correctly say that court action leads to more conflict and doesn't help anyone? If I did hear you correctly, given what you just said to me that you actually want things to go to court more often, and given paragraph (f) of subheading 2 of your submission, page 4, where you say:

Court-ordered custody arrangements should determine child-support payments not word-of-mouth claims by the payee, as it is now.

Are you actually arguing for more recourse to the court systems?

Mr Fl anagan : No, I'm not. I am saying that the action taken by the Child Support Agency is because of the culture of the Child Support Agency. They are not worried about following the legislation. All I am saying is that the legislation should be followed, not what the Child Support Agency decide.

Ms BUTLER: But you expressly refer to court-ordered custody arrangements and you said that had this not been put onto the system through that administrative change that there would have been an opportunity to go to a court of law.

Mr Flanagan : That is right.

Ms BUTLER: My concern with what you are saying there is that it is very expensive for parties to go to court. Being a lawyer myself I happen to know that oftentimes it is just not cost efficient and you end up in a situation where the only winner is the lawyer. So I am very interested in alternatives to court action, alternatives to parties having to pay for private lawyers or, even worse, to be a self-represented litigant, which is a strong and heavy burden on the court system and, therefore, on the taxpayer. Why wouldn't we want to see strong, robust, fair administrative decision making, subject to your I think very valid concern about not having the same people making the decision engaging in the reviews?

Mr Flanagan : This problem originated in New Zealand. If the system would have been fair it would have been more difficult for the Inland Revenue in New Zealand to make the assessment in the first place. If they had made a proper assessment we would not have needed to have had court action in the first place. It became too easy for Inland Revenue to simply make an assessment and then say, 'Transfer it to Australia and get them to collect it.' If they had looked at the ramifications of having to go to court in Australia to actually get it registered, they may have looked twice at getting the assessment done better than they did.

Ms BUTLER: But why would we want to make it more difficult for the New Zealand government to collect debts against payers?

M r Flanagan : No, we would not want to make it more difficult; we would want to make the system the way it should be in legislation. We want the legislation to be followed; not just something they have decided to do.

CHAIR: Under what head of power did the CSA or the Department of Human Services actually change that date of birth? They must have had some—

Mr Flanagan : They did not have any power at all. I have given you a copy of item 3.4, which is their internal office procedures. That is not a normal public document but the CSA provide that document to show how they have done it. That document is not normally available to the public. That is their own internal document, which is not normally publicly available. In this case it was publicly available. They have got their own procedures inside their own department which people do not know about. That is my main concern—the overall culture. This case did not have the opportunity to be fully looked at because the Child Support Agency has told the person in question that they do not want to speak to him, they are not going to look at the issue: 'You pay the child-support. We are not going to whether it is right or wrong; you just pay it.'

Ms BUTLER: If the Australian computer system had been set up to deal with New Zealand circumstances as well as Australian circumstances, the change would not have been made, would it?

Mr Flanagan : No, that is not correct. Our legislation is not retrospective whereas New Zealand legislation is.

Ms BUTLER: No, I am sorry; I am talking about the software, not the legislation.

Mr Flanagan : The software should follow the legislation.

Ms BUTLER: But we are talking about a system in New Zealand to collect debts that are being determined under New Zealand law.

Mr Flanagan : Yes, but it has to be registered in Australia as an Australian child-support case. What I am saying is that it should not have been registered in the way it was—

Ms BUTLER: To assist in collecting child support owing under New Zealand law.

Mr Flanagan : No, it is not to assist; it is the fact that it should not be registered in Australia as a child-support case. It is fine in New Zealand because it is covered by the legislation, but once it comes to Australian law, if you go to the Australia-New Zealand agreement, it says that you have got to follow the law in the country that is being applied. The law the country that is being applied is Australia and in Australia it is not a stage 2 child support case.

Ms BUTLER: To go to a different question. I am not going to ask questions about things that you have identified as being outside the terms of reference, but I am interested in this point about courts versus tribunals. You make the point that the SSAT, like almost every lay tribunal I have certainly never heard of, is not bound by the rules of evidence and can inform itself in the manner it considers appropriate. That is common in tribunals as opposed to courts and the reason for that, obviously, is to keep down the cost, to avoid everyone having to have expensive lawyers having technical arguments about the rules of hearsay and the exceptions to the rule. Why would you raise concerns about those provisions of the SSAT? Wouldn't that just lead to people that you represent having to spend more money on lawyers, having more difficult disputes, having less assistance in sorting out disputes, and having a much more inefficient system than presently exists?

Mr Flanagan : No, because any decision should be based on what evidence is before them. If the evidence is not there, they should not make the decision in the first place. In the case of the Child Support Agency, there was no evidence in this particular case, but they still made a decision based on what they wanted.

Ms BUTLER: You are talking about the SSAT provisions, as you point out?

Mr Flanagan : Yes. And the CSA decision was then reviewed by the Social Security Appeals Tribunal, so what that says is: 'We don't have to follow the evidence that's been provided to the CSA senior case officer; we can just decide on how we feel.' Now that, to me, is not good enough.

Ms BUTLER: That is not what it says, with respect.

Mr Flanagan : It says they do not have to follow the rules of evidence. They did not say they do not follow; they say they do not have to, which is a slight difference. But the Child Support Agency do not have to follow the rules of evidence or, even more precisely, are not governed by the rules of evidence.

Ms BUTLER: Because it is not a court.

Mr Flanagan : It is not a court, but surely they must have some reason for making a decision. We are dealing with ordinary people in the community.

Ms BUTLER: I am sorry to interrupt you, but it does not say that you can make a decision without having any basis for making the decision. It is an exemption from having to apply the strict legal rules of evidence such as the rule against hearsay, which, if you had to apply that, leads to very complicated and detailed argument about very technical legal issues.

Mr Flanagan : That is how it happens with the child support system. They make decisions without evidence, without looking at the facts. They make them on what they feel.

Ms BUTLER: You say 'without evidence' and 'on what they feel'. For example, take a change-of-assessment application. I have seen the application form. It is quite detailed. It requires substantial amounts of information. Do you say that is not sufficient information on which a decision can be made?

Mr Flanagan : It depends on what is in that information. In this particular case, the application was made by the other party. This person had filled his form in. He was semi-illiterate. He did not do a very good job of his form. He did not put much information there at all, actually. And he was given a change of assessment based on how the senior case officer felt—or appeared to feel.

Ms BUTLER: Not based on the information that he provided?

Mr Flanagan : There was not any information.

Ms BUTLER: There was no information on the form?

Mr Flanagan : Nothing on the form. He put in—

Ms BUTLER: He put in a blank form?

Mr Flanagan : No, not a blank form, but the details there were not—I have not got the form in front of me, but there was not much on the information.

Ms BUTLER: You are saying it is insufficient. You are not saying there was no information; you are saying there was insufficient information.

Mr Flanagan : I do not know about insufficient; it was just the information he got. And then he was not given the opportunity to present information to the senior case officer. They made one phone call to him and he was not there at the time, and they said, 'Well, we'll make a decision.'

Ms BUTLER: Did they write to him as well?

Mr Flanagan : No.

Ms BUTLER: From what you have just said to me, for me what seems very concerning is the department's ability to accommodate people with low literacy and the attempts that are made to provide people with opportunities to provide their information.

Mr Flanagan : That is right, yes. This was clearly lacking in that case. This person was given an assessment based on how the senior case officer felt.

CHAIR: Professor Parkinson, earlier today, spoke on something similar to what you are saying—that, particularly when it is income deeming, a change of assessment that is related to income, there does not seem to be natural justice, where they get a fair hearing. Would that be what you are contending?

Mr Flanagan : That is exactly what I am saying. There was a complete lack of natural justice.

CHAIR: From what I read in your submission, you are not necessarily saying, 'Do away with the Social Security Appeals Tribunal.'

Mr Flanagan : No.

CHAIR: You just want there to be an ability to proceed on from that to an evidentiary based judicial process that can actually look at the matter and determine it based on evidence rather than just what the Administrative Appeals Tribunal does.

Mr Flanagan : That is correct, because, prior to 2006, the assessment was heard before a court. There was no Social Security Appeals Tribunal for child support cases. It went to a court and the matter was heard anew, or de novo. There was the evidence presented at court. In 2006, the legislation was changed so that the actual decision was reviewed, made by the senior case officer, rather than being heard de novo. But, in the meantime, they made a difficult system worse, because, rather than allow that review to be done on the basis of what was before the senior case officer, they said, 'We're happy to accept whatever the senior case officer says, and we'll agree with his assessment,' because they are not governed by the rules of evidence.

Ms CLAYDON: I am just thinking about the example you raised earlier about somebody with low levels of literacy and an incapacity to navigate some of the complexities of the system. Would you not advocate for improvements to the appeals tribunal system rather than forcing that same person, who I would suggest would find it equally very difficult to navigate a judicial system, into the courts? And there is a supplementary question about whether you have recommendations as to how you might improve that Social Security Appeals Tribunal experience.

Mr Flanagan : That is very hard to do—to try and assess whether a person is capable of going before the Social Security Appeals Tribunal or not. I think the real issue is that you have to get back to the fundamentals and fix the problem at the heart. You have to fix the legislation. You have to fix the system. If you have a fair system and proper legislation, you will find that you do not have the same issues that we have now. So you need to fix the legislation, as I have suggested on page 4 of our submission. Fix those items, and therefore I think you will find that there will be less of a problem when it comes to reviews and before a tribunal.

Ms CL AYDON: Can I just clarify. You are not advocating the abolition of the Social Security Appeals Tribunal?

Mr Flanagan : No.

Ms CLAYDON: So again I am asking where you would aim at improving that experience.

Mr Flanagan : As previously said, I believe the legislation should be changed so that they are governed by the rules of evidence.

Ms CLAYDON: Okay.

Ms BUTLER: I am sorry to keep going with this, but you understand that there is substantial case law that says that, even if a tribunal is not governed by the rules of evidence and can inform itself in any manner it thinks fit, it still must act judicially and it still must have information before it upon which it can make decisions, and that a failure to do so would be an error of law? It would be a jurisdictional error that would be able to be taken to a court. The difference is just that, instead of having to have lawyers taking objections when direct quotes were not given, or when someone is not complying with the strict rule against hearsay, or when something might not be considered to be strictly relevant—instead of having lawyers arguing about technical points—it is allowing the tribunal to get to the facts, get to the bottom of the issue and listen to the people who are involved, without having to have that expensive legal argument. But that does not relieve that tribunal of the obligation to act judicially and appropriately.

Mr Flanagan : Well, I am afraid that is not the case.

Ms BUTLER: I am telling you that it is. That is the law.

Mr Flanagan : Well, I am telling you that it is not.

Ms BUTLER: How is it not?

Mr Flanagan : It is not, because they do not follow the rules of evidence.

Ms BUTLER: In your view, it would be preferable to have two lawyers standing there representing the parties—

Mr Flanagan : Definitely not.

Ms BUTLER: arguing about the rule against hearsay?

Mr Flanagan : No, definitely not, but the culture of both the Child Support Agency and the senior case—sorry—

Ms BUTLER: I am talking about the SSAT, just to be clear.

Mr Flanagan : The SSAT, rather, because they are reviewing a Child Support Agency issue. They have to follow whatever the evidence is now. If there is no evidence before a senior case officer, they should ask for that to be looked at again, but that is not the case, because the senior case officer is not governed by the rules of evidence. And that is exemplified by the quotations I have given of the particular case I have quoted there. That particular case is that the senior case officer did not follow the rules of evidence. The Social Security Appeals Tribunal says, 'Well, they don't have to; therefore, it's okay.' And it went to a court of law and the judge said, 'That's okay,' as well. So everyone agreed that they did not have to follow the rules of evidence. To an ordinary person in the street, that is not fair. They should follow the evidence before them. In this particular case, they did not.

Ms BUTLER: So you are saying to me that the finding was not fair, based on the information that was before the person?

Mr Flanagan : What I am saying is that, if they had looked at the evidence properly, they would have found a different answer to the one they came up with.

Ms BUTLER: So your concern is not about the procedural manner in which the information was obtained but about what the evidence showed the decision ought to have been?

Mr Flanagan : Or the lack of evidence, because the evidence was not before the senior case officer. The senior case officer should have been a little bit stricter to try and make more evidence available so they could come to a reasonable decision. If that senior case officer did not have the evidence, they should not have made the decision that they did. They could only make it on the evidence they had. If there is no evidence, they should not make the decision.

Ms BUTLER: You were saying before that there was some information in the form concerned.

Mr Flanagan : Yes. I have not seen the form, I must admit, so it is very hard for me to judge that.

Ms BUTLER: The reason I am asking these questions is to really understand the heart of the problem.

Mr Flanagan : I have seen the determination that was made by the senior case officer, but the form the person used is not available, apparently—if that form existed. I am not sure.

Ms BUTLER: Would your concerns be allayed to a substantial degree if there were a separate administrative unit that ensured that you could not have someone who had been involved in the original decision making involved in the review?

Mr Flanagan : No, because I think that the real problem is the culture of the system. You have people who are ex Child Support Agency people working for the Social Security Appeals Tribunal. The problem is actually in the culture, and it is also in the legislation. We need to fix the legislation. The existing legislation is not good.

Ms BUTLER: When you say 'fix the legislation', you mean «matters (a) through to (f) on page 4 of your submission?

Mr Flanagan : That is correct.

Ms BUTLER: Those are the things that you think should be fixed?

Mr Flanagan : They are some of the things. There are a lot of other issues that I have not raised—privacy, for example, as well—

Ms BUTLER: But presumably those are your key issues that you—

Mr Flanagan : They are the key issues for this particular inquiry, but there are a lot of issues for the Child Support Agency which I have not raised because they are outside the terms of this inquiry.

CHAIR: Can I just ask about two other points. You have talked about the taxation treatment of child support payments. How would you see that working if you could reverse the onus or simply have the payments based on net rather than gross from the payer? How would it work? Do you have a system?

Mr Flanagan : I will give you an example of how I think the existing formula could be adapted. The net income would be used, rather than gross income, by applying the tax to the formula. I believe it is in the formula itself.

CHAIR: We will have to ask the Department of Social Services, I suspect, about that and talk to them further about how that currently is worked out and how tax is taken into consideration. The other issue is one you have mentioned in your written submission, and it is one of the terms of reference—that is, linkages between the family law and Family Court system, particularly court-ordered custody arrangements, and the child support system itself. You talked about it even in your opening submission. You obviously think that there needs to be a change made here, but what change explicitly would you like to see?

Mr Flanagan : In what respect, Mr Christensen?

CHAIR: You outlined it earlier: where someone has breached a court-ordered custody arrangement and the paying parent then is penalised because they do not take any legal action, because their child support payments increase. How would you like to see that system resolved?

Mr Flanagan : What do you mean—if there are court orders in place and the contact is not provided?

CHAIR: That is right. That is what I am talking about.

Mr Flanagan : I believe that the child support should be paid in accordance with the court orders rather than having the care percentage changed merely by the fact that the payee rings up and says that the contact has been reduced, and therefore the child support is increased. Court orders need to be followed rather than there being a word-of-mouth position where the child support is increased—and that means that there is less incentive to reduce contact.

CHAIR: The only thing I would ask about is in relation to something that was brought up before during the submission stage. Where a relocating parent, as a result of that relocation, for whatever purposes, loses their job or has to seek other employment and have a downgraded income, they are deemed to have a higher income. I also have the opposite scenario where, we heard earlier today, somebody who may have had the capacity to earn a certain amount was deemed not to have any capacity to earn. Do you see a problem here?

Mr Flanagan : Yes I do see problem because, as I mentioned in my presentation, there are three factors that must be taken into account to increase earning capacity. The problem is that at the present time it is not treated equally to both the payer and the payee. We find that the payer's income is increased, whereas the payee's income is not increased under the same guidelines. So there is a difference in the treatment between the payer and the payee and it has got to be the same. The legislation is quite clear as to what is supposed to happen but it does not work. It is too vague to try and make work.

CHAIR: Thank you, Mr Flanagan, and, Mr Daly, for your appearance today.