Senator CHRIS EVANS (12:44 PM) —I concur with a lot of what Senator Woodley said about the Child Support Legislation Amendment Bill 1998 , particularly in relation to training for parents. I found that parenthood was the most demanding job I ever took on and the one that I was least prepared for, so I think his comments are very apposite.

In 1994 the Joint Select Committee on Certain Family Law Issues handed down its recommendations on reform of the Child Support Agency system. The committee had received some 6,000 submissions, a record number for any Australian parliamentary inquiry. The committee made 163 recommendations for reform of child support, particularly to what was felt to be an inflexible and unsympathetic treatment of non-custodial parents. Some of the committee's recommendations were incorporated into the Child Support Legislation Amendment Act (No. 1) 1997.

The bill we are considering today takes the reform of child support a step further, guided by the general intent of the committee's recommendations. As we are about to debate significant changes to the child support system, I would like to put on record the joint committee's interpretation of the objectives of child support policies, because I think sometimes those initial objectives do get lost. These are that non-custodial parents share in the cost of supporting their children according to their capacity to pay, that adequate support is available to all children not living with both parents, that Commonwealth expenditure is limited to the minimum necessary for ensuring those needs are met, that work incentives to participate in the labour force are not impaired, and that the overall arrangements are not intrusive to personal privacy and are simple, flexible and efficient.

The opposition believe that child support policy must be designed primarily to assist children and alleviate their poverty. While we believe that the operation of the CSA requires further reform, some criticism of it has been unbalanced and we recognise its achievements in producing a very high compliance rate. I do not have the comparative international figures to hand, but I think it is widely accepted that Australia's compliance rate and system are seen as being fairly impressive. It is often said that the success of the CSA is partly because the agency derived its authority from its location in the Australian Taxation Office.

While I recognise that there is some potential for policy integration benefits as a result of the CSA relocating to within the Department of Family and Community Services, it will be interesting to monitor whether or not that benefit is actually realised and whether or not the CSA suffers from the break in the link with the Taxation Office. That is the background to the matter before us today. The opposition generally support this bill to the extent that it follows the sound principles set out in the joint committee's recommendations. I will discuss our amendments later, but we support many of the key features of the bill.

We support the move to repair the income base by adding negative gearing and exempt income but think the government should go further. If we are serious about providing adequate child support, we must look at all forms of tax minimisation strategies that impact on it. There is a case for trying to bring the abuse of trusts and income splitting within the scope of child support assessment. These issues cannot all be taken up today, but I intend pursuing them at a later time.

We support the attempt to boost the living standard of the families of subsequent relationships by taking greater consideration of child support liability in calculating family allowance entitlement. The child's welfare must be our major concern. The opposition support those measures in the bill which are designed to allow the agency to be more prompt, sympathetic and flexible when reassessing child support liability in response to changing circumstances. The committee did find evidence that the agency needed to be better at doing this.

We support making it easier for parents to enter into private payment arrangements as it is best to minimise bureaucracy wherever possible. The opposition support—and I think originally proposed—that liable parents be able to choose independently to make non-agency payments to a maximum of 25 per cent, but we do feel that greater control is needed over this than is currently provided in the bill before the Senate.

We will be moving several amendments, which I will discuss in the committee stage, but I will make some comments now. The bill proposes several alterations to the formula used to calculate the child support liability of non-custodial parents which are designed to produce more realistic and up-to-date assessments of liability. The opposition support the government's proposal to reduce liability by 10 per cent so as to ease the financial burden on liable parents, particularly those with dependent children from subsequent relationships, but we are convinced that the proposed compensation for custodial parents is inadequate.

Under the current act, an amount based on the pension is exempted from liable income. The bill, as it stands, increases the liable parent's exempt income by 10 per cent. This means that the payers will pay less child support, other things being equal. For custodial parents receiving more than the minimum family allowance, some but not all of this reduction will be made up by an increase in family allowance. The compensation will be only partial because, under the family allowance maintenance income test, 50c of family allowance is lost for each dollar of child support which exceeds the threshold. So custodial parents are only compensated for half of their reduced child support. The bill also reduces the custodial parent's disregarded income. Currently this is based on average full-time adult weekly earnings. The bill substitutes it with all-employees' average weekly earnings. Therefore disregarded income would fall from around $39,000 to around $30,000.

These effects are partially alleviated by the proposal to reduce the taper rate for payees earning above the disregarded income amount from one dollar for each dollar earned above that mount to 50c in the dollar, but this will compensate payees who are earning significantly more than the old disregarded income amount. Payees who earn between the new figure and slightly above the old amount will receive less child support. The opposition will seek to redress that problem by moving an amendment to increase the maintenance income test threshold so that low income custodial parents are adequately compensated in family allowance for losses in child support.

The bill modifies the calculation of liability by adding rental property losses—negative gearing—and foreign income. This is essential not only to provide much needed resources that are hidden by income minimisation schemes but to reinforce the principle that parents must continue to provide for their children, according to their means. We support these measures and propose to include fringe benefits. It is my understanding that the government intends to address this issue in one of its tax package bills, but we believe that the income base needs to be repaired as soon as possible and that it is appropriate to do it in this bill. Consistent with our position on fringe benefits and liability, the opposition will move to include fringe benefits in the calculation of the custodial parent's child support entitlement.

We believe that more needs to be known about the interaction of fringe benefits and child support. We will move an amendment to establish an inquiry into the effect of social security fringe benefits on the relative disposable income of liable and custodial parents and the minimisation of liability through salary sacrifice arrangements. But certainly from my own electoral experience and the number of constituents I see, an emerging area of concern is where non-custodial parents have an income that does not reflect the reality of the situation.

Senator Newman —Custodial parents can have that problem too.

Senator CHRIS EVANS —I accept, Minister, it can work both ways, but I have had serious concerns raised with me about how this is operating. I think it is a problem generally throughout the taxation system, but it has had a real impact in the child support area in recent times with the spread of these sorts of arrangements through the community—some of which are, I might add, supported and encouraged by state governments which then come and complain to the Commonwealth that they do not get enough Commonwealth funding.

The bill proposes a number of measures designed to make child support more responsive to changes in parents' income and other circumstances. Presently, the registrar assesses the liable parent's income as it was two years before the date of assessment. The bill would instead make the assessment based on the year preceding the date of assessment, and contains other provisions designed to allow the registrar to revise assessments more promptly.

We seek to strengthen these reforms by amending the bill so as to allow a liable parent who expects that his or her income will be at least 15 per cent lower than the previous year to elect to have child support liability based on an estimate of current income. The liable parent would be obliged to notify the registrar if it later transpired that their income had differed from this estimate by more than 15 per cent. Given the importance of flexibility, we will move an amendment to require the registrar to adjust an assessment if notified that the liable parent's income has increased or decreased by 15 per cent.

Accurate disclosure of income is essential to the fair operation of the child support system. We will endeavour to amend the bill to increase the responsibility of both parents to report conscientiously any changes in income and other circumstances. At present, there is a penalty for deliberately providing false information. It is the opposition's belief that false information provided recklessly—that is, without reasonable care or with wilful disregard—should also be an offence.

The bill would allow 25 per cent of payments to be made in `non-agency' form. For example, a liable parent might opt to pay school fees. This measure originates in an opposition amendment moved in the House earlier this year. Our aim is to give non-custodial parents some discretion in how child support payments are used. But we also believe that there is a need for some checks and balances as there is a potential for inappropriate non-agency payments. The bill allows the registrar to disallow such payments in special circumstances.

I have received advice that the established meaning of `special' in this area of law is unusual. The opposition will seek to remove the word `special' so that the registrar can disallow payments held to be inappropriate for a particular family without having to be satisfied that such payments are uncommon. Our amendment is intended to provide the registrar with greater flexibility in making determinations when called upon to do so.

Child support is one of the most emotive issues that we as parliamentarians have to deal with. There are administrative complexities, but what makes the issue difficult is the need to balance the rights and needs of custodial and non-custodial parents and those of the children of first and, increasingly, subsequent families of liable parents. Most people would agree with the principles that child support policy should reinforce, where necessary, the obligation of parents to provide for their children, while avoiding excessive bureaucracy and extending a safety net of income support where needed. But simply stating these principles is enough to remind one of how in reality they tend to conflict. Child support is an area which requires ongoing reform in the light of our experience.

As I have said, the opposition believes the bill deserves support, subject to amendment. It contains some creditable measures designed to reduce the inflexibility which has caused hardship for liable parents, to allow non-custodial parents some control over the spending of child support resources and to provide for the needs of the subsequent families of liable parents. But substantial changes will need to be made to the bill, particularly to compensate custodial parents for the proposed reduction in child support liability, to enhance the registrar's capacity to intervene when non-agency payments become objectionable and to improve the income base by including fringe benefits.

I am hopeful that in the committee stage we can work collectively to improve the bill.