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Community Affairs Legislation Committee
14/06/2012

EDWARDS, Ms Terese, Chief Executive Officer, National Council of Single Mothers and their Children

Evidence was taken via teleconference—

Committee met at 0 9:21

CHAIR ( Senator Moore ): Welcome. I declare open this public hearing and welcome everyone who is present here today. On the phone we have Senator Sue Boyce and Senator Bridget McKenzie. Our Senate Community Affairs Legislation Committee is inquiring into the Social Security and Other Legislation Amendment (2012 Budget and Other Measures) Bill 2012. Today is the committee's only public hearing for this inquiry.

These are public proceedings, although the committee may agree to a request to hear evidence heard in camera or may determine that certain evidence should be heard in camera. I remind the witnesses that, in giving evidence to the committee, they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to the committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee.

If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may be made at any time.

Welcome and thank you very much, Ms Edwards, as always for the information and evidence you provide to our committee. We know we can rely on your engagement when we have issues around this area. We have your submission—thank you very much. Information on parliamentary privilege and protection of witnesses you have. Would you like to make an opening statement before we go to questions.

Ms Edwards : I would like to make three very quick points in an opening statement. First of all, I want to remind the committee that the national council remains deeply concerned about the disproportional financial hardship experienced by single mothers, and this statement is made in the context of some recent federal budget announcements. Therefore any type of policy, change or interaction that may produce financial hardship is very sharply felt at the moment.

My second point is how absolutely delighted we are to see some matters of child support before the committee and we are most keen to respond and discuss them fuller as they sit in the submission. The third point that I would like the committee to be aware of—and I am sure that you already are—is some very strong interactions between child support and family assistance, which goes beyond policy but is embedded in legislation. So at some points it is impossible to look at one part without understanding the impact in the other arena.

CHAIR: Thank you very much, Ms Edwards. What I intend to do is start with Senator Siewert, as deputy chair, and then go to the two senators who are on the phone, because it is very difficult to be on a phone in a phone hook-up, and then to Senator Smith. That is my plan and we will see how it goes.

Senator SIEWERT: Ms Edwards, thanks for your submission and coming today. I refer to the two key areas in fact that you seem to be making the most comment on. The main one is child support. Then I want to also talk to you about the family tax benefit measures, if that is okay.

Ms Edwards : Yes, indeed.

Senator SIEWERT: In terms of child support, I must admit I am not exactly following your recommendations so could you take us through them and explain them in a bit more detail for me, please?

Ms Edwards : Certainly. Child support is complex and there are only a couple of recommendations in the bill, as I saw it, around child support but one sits with private collect and child support and there was one recommendation but what I was trying to get across in the submission is that private collect remains a real concern for NCSMC and it keeps coming up as an issue, particularly where there are not cooperative parenting arrangements. Private collect allows partners to reach their own agreement regarding the transferring, but when I say that I know Child Support actually do determine the amount. So Child Support determine the amount and then they leave the collection and transfer of payments between the two individuals. It is based on the assumption that it is occurring and that child support is paid on time and in full. What happens with the family tax payments is that a family tax benefit is reduced to take into consideration the child support received and that is known as the maintenance income test, which is one of our issues. I will get to that as well. So, if you are looking at it at the one-dimensional level, family tax benefit is reduced based upon the amount of child support. However, what we are seeing happen is that the child support is not paid on time or in full, so the payees, which are predominantly women—predominantly women who are struggling with financial matters—then suffer from two elements. They immediately incur the outcome of reduced child support payments and then they also incur the impact of a reduced family tax benefit because family tax payments are assumed of a level of child support. So that can have a significant impact. The measures in the bill before you try to take the sharper edge off that to some degree, so we actually see that that is overall a good measure because it can be very challenging. In the child support system there is a great reliance upon one partner to be able to collect from the paying parent and the parent who is in the position of collecting is the one who I suppose gets that double element of reduction in family tax benefit and reduction in child support. In the child support system it is particularly heightened by that maintenance income test. The maintenance income test is the reaction between child support and family tax payments. So with the maintenance income test you get a reduction in the family tax payment for very low thresholds. Once you start to receive just above the $1,300 per year, family tax payment starts to reduce at 50c in the dollar. You can see that it is a really sharp reduction. The child support received has a significant impact upon the family tax payment. If it is assumed that there is a level of child support coming in and the family tax payment has gone through that really sharp decline, you can start to see how that has a financial impact on families.

We are saying that the maintenance income test is a longstanding issue. It was identified in the task force back in 2005 as a really harsh element that needed addressing. I will try to give some context as to how harsh it is. A low-income two-parent family under the family tax benefit can have additional income of up to $45,000 per year; then it starts to reduce at 20c in the dollar. If you just compare that to the $1,300 per year and how that reduces at 50c in the dollar you can see that it is a really harsh clawback. That is why—and I am really pleased to be able to raise this—in the land of single mothers some of the government's initiatives around the increase in family payments are not realised for those lower income single mothers. Has that answered your question?

Senator SIEWERT: It has. I will ask the department about the reason for the difference between the examples you just gave.

Ms Edwards : It is readily available. I have also asked the department, 'Has there been any decision to take up that recommendation?' It was quite a strong recommendation. It was a recommendation by Patrick Parkinson and it did go back to that 2005 report. It is hard to understand. At the tax summit I was talking to some specialists in the tax arena and they were quite amazed at the 50c clawback for such low levels. It is a really concerning element. The sentiment of this measure around child support is that we understand it can be really hard on some women, we understand that they are actually not at fault if they do not collect, we are concerned about the really harsh impacts that then flow on to the family tax benefit and we are trying to soften some of that. That is the sentiment behind the bill; we really support that. We just want a deeper analysis and to say, 'This may take some of the sharp edges off, but those concerns are still there.'

Senator SIEWERT: Can I ask you about the changes to the family tax benefit. If I understand your submission correctly, you do not have any difficulties with those changes.

Ms Edwards : There are swings and roundabouts. We are most concerned about the low-income single mother families. Middle-income families would probably feel the impact much more than single mothers. That is, again, because of that maintenance income test. The youth allowance, for example, is not taken into consideration for that maintenance income test. I suppose that is the one element that flows through. What we are concerned about is that there are going to be a lot of young people that will not meet the learning eligibility, and therefore we are concerned about what options they will have. I think that then brings into play the inadequacies of the youth allowance, whether it is a dependent person or an independent young person.

Senator BOYCE: Ms Edwards, I want to ask you about the actual care versus court order—the 14 weeks going to an immediate change in family tax benefit et cetera in what is mentioned here as 'special circumstances'. I take it from your submission that you agree with what is in the legislation as far as it goes. Is that correct?

Ms Edwards : Yes, we do.

Senator BOYCE: But you are seeing this as another area of the child support situation that needs an overall review?

Ms Edwards : Absolutely.

Senator BOYCE: In terms of what is in the actual legislation, are you able to give me examples? You have used some here of the broader shared care start of it but, in regard to the actual situation in special circumstances, would you have any members who would benefit from that?

Ms Edwards : We would have a lot of members that would benefit from it. What we have found, and this has been borne out by evidence and research that looked into the shared care, is that there can be—and I am sure that you share this concern—situations where, with time around the child, a strong motivation is the financial impact, so reducing the liability. That can happen when there is a really high incentive.

Senator BOYCE: But you would think that that would not fall within the special circumstances and unusual behaviour area?

Ms Edwards : I think it would, because in the special circumstances a recurring theme that I hear from women as to why they do not go back is that there is a court order in place, the court order is not upheld and they are financially disadvantaged by that court order because the court order more than often has a high percentage of care with the ex-partner that has not been fulfilled. That then impacts upon the level of child support and then upon the family tax benefit because, as you may be aware, there are a couple of agitation points. If an ex-partner has 35 per cent of care, they then receive some of the family tax benefit. So there are a couple of real points in play with those two areas in place. There is some negotiation, there is some bartering, there are some outcomes, and then the court order is in place. What I hear, which has been recurring since these changes came into play, is that the court order has been upheld for a little while—it may be three months, it may be six months; it does not seem to have a duration of more than 12 months—and then it changes and the primary care reverts back to the mother. She does not go back to court to have that court order updated because she now has safety and the conflict has been reduced. She is financially disadvantaged, but it is her decision that she is left—

Senator BOYCE: Perhaps to go back to court might mean that the original arrangement would be resumed or something.

Ms Edwards : It could indeed, but also it might mean that the post-separation conflict escalates. Where there are really clear examples, and there is often third-party evidence where the pick-up from child care or school does not happen and the mother is unsafe—

Senator BOYCE: How does this legislation change any of that?

Ms Edwards : My reading of it is that it identifies that there are some special circumstances that need to be considered such as high conflict and violence. That is an excellent thing because Child Support has been completely silent on that matter. After many years of explaining that violence and conflict is part of child support and processes and avenues are used to further that, this gives at least some legislative weight to say, 'Actually, we need to consider this.' The court order says one thing, but this payee is saying another thing and there is a safety consideration. It will put a spotlight on the issue and embed it in legislation.

Senator BOYCE: You may not be able to answer this question, but I will be asking the department this as well: would you see that this part of the legislation might also be used by grandparents who are in a situation of looking after children because their own children have problems?

Ms Edwards : Yes, indeed. In South Australia I attend a local child support meeting and sit with grandparents for grandchildren. I think it would be most helpful for them where there is a breakdown with both the child's parents or where they are trying to protect against one particularly violent person. I think it will have the same impact and possibly the same result.

Senator McKENZIE: A lot of my questions have been answered, but I would like a little more detail around the 24 per cent discount, which is your recommendation 10.

Ms Edwards : We think that this discount adds great impetus for having a child over for one night, because for some payers it can make their child support liability quite negligible and for others it can make a significant difference. Along the lines of what I have said before, it is often known in the negotiation process that, if you have your child for one night per week, you get a 24 per cent discount off your child support liability. It is taken up and the voice, the needs and the continuity of the child become of less consideration. The question that could be answered by the department is: is there more take-up of one night per week because of that 24 per cent discount and is that the right motivation to have? We would say that it comes from a flawed basis. We would also say that it is one of the reasons why care plans break down after a little while and that the weekly stays tend to fall out to once a fortnight or once a month or a visit till just after tea but the arrangement is not revoked or changed because it is such an inflated discount.

Senator McKENZIE: When you say one night, that is in addition to every second weekend?

Ms Edwards : No. For one night per week, under the tables, that is when the 24 per cent discount comes in. That is why we are saying that it is particularly harsh.

Senator McKENZIE: I am struggling here. Is that one night per week on average?

Ms Edwards : Yes.

Senator McKENZIE: So 52 nights a year?

Ms Edwards : Yes. What we are trying to do by calling it one night per week is demonstrating that one night per week should not equate to a 24 per cent reduction.

Senator McKENZIE: Given that you have dealt with all my other questions, are there any amendments that you would like added to the legislation as it stands?

Ms Edwards : I would like a review of the legislation, please. I trust that I have been able to give some information. In the private collect area there is one thing raised and we could list a whole lot of legitimate concerns that have been borne out by research in the area. Information is not clearly given to women. Information on partial exemptions, which fit into the area of private collect, is just not known and to access that information you almost need to know that it exists and you need to know where to go. But you do not go to the Child Support Agency for a child support partial exemption; under the current system you go to Centrelink for it. You really need to have quite a sophisticated level of the legislation and know what is available to actually access it. I really hope that I have been able to convey that the child support reforms that came into play have not been particularly friendly to the households that we are mostly concerned about and certainly not to the households where most of the children live.

Any further scrutiny or reviews that you could undertake would be so welcome, because the submission only gave minor scope. I have broadened that out to what is exactly in the legislation, but we have so many concerns with the child support, how it was brought in and we certainly challenge the assertion that it was in the child's best interest.

Senator SMITH: I want to focus on a previous comment that you made with regard to deeper analysis. Are you able to quantify or do you have any intuitive sense of what numbers of private collect arrangements are not being honoured. I think you made a comment in the earlier part of your commentary.

Ms Edwards : I cannot answer that at the moment, but I was aware of some preliminary research that has gone in from the ANU. Professor Bruce Smythe is part of that. He undertook some initial analysis. It did not talk about the debt, because often the debt is not known. So the time that a Child Support Agency becomes aware of a debt in a private collect arrangement is when they take over the collection. Once Child Support take over the collection, the debt that can be collected is mostly the last three months of the transfer. If someone has struggled for two or three years and they are in a private collect arrangement, any arrears that they have built up over that time is not collectable. One element we have raised with the department through the national child support meeting is a full disclosure of what private collect means. If you are an individual heading down that path and you feel that it would be best for you and it would work well for your family's circumstances, there is such limited information you do not know that debt collection is only three months unless there is some significant circumstances and then that only extends to nine months. You often do not know that you can transfer into a child support collect. There is an absolute vacuum of information.

The one part I found really interesting in the research that I mentioned was that parents who were in the private collect were no more satisfied than compared to those in the child support collect. That really struck me as quite a significant bit of evidence. You would think that, if it were an agreement made by both parties, there would be an increased level of satisfaction. I am working on that as an indication that the private collect is not working.

Experts in the area of domestic violence and in particular post-separation violence and coercion talk about the coercion around, 'Look, just accept this money or you won't get anything or we'll make it really difficult.' For me private collect, unless there is a real equality in power and is free of conflict, is really problematic in nature. I would welcome that research when it is completed in its entirety. Private collect concerns me. It does probably take into consideration a fair amount of the issues raised by women when they contact NCSMC for some support and guidance.

Senator SMITH: Your recommendation No. 6 talks about private collect information needing to be more readily available et cetera. So what you have just shared with us then is effectively a justification for your recommendation No. 6?

Ms Edwards : Yes, because it is not available.

Senator SMITH: Great. Thank you.

CHAIR: Thank you very much. Ms Edwards, is there anything you think that we have not asked about that you want to share with us?

Ms Edwards : No, I think you have asked me lots of questions. I really thank you for your interest in the child support area.

CHAIR: If you think of anything after this hearing, please get back to us by early next week. Thank you so much.

Ms Edwards : Thank you for inviting us.

Proceedings suspended from 09:53 to 10:15