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Ombudsman targets CSA Capacity to Pay clients

Ombudsman targets CSA Capacity to Pay clients

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The even-handedness of Child Support Agency (CSA) investigations into whether parents are paying and receiving the right amount, must target both the paying and receiving parents in a fair and evenhanded manner, according to the most recent report released by the Acting Commonwealth Ombudsman Mr Ron Brent.

The attached report looks into the CSAs power to go beyond a parents taxable income to assess child support obligations.

The CSA does this through its Capacity to pay (CTP) investigations which typically target parents who are self-employed or run a business through a corporate structure. A CSA capacity to pay investigation may look into such things as property holdings, tax minimisation arrangements, income which is not taxable or lump sum payments received.
The Acting Commonwealth Ombudsman Mr Ron Brent said
We examined 34 cases where child support had been reassessed and in almost every case the amount that had to be paid increased. The CSA has prioritised cases that increase child support liabilities, whereas their advertising suggested targeting both payer and payee parents  that is, that they would investigate both those parents suspected of understating their incomes in order to pay less and those understating their incomes to receive more

In practice, the majority of investigations targeted only those suspected of paying too little.
He suggested that the CSA change its case selection procedures, to be more even-handed in its approach to the two parties.
Mr Brent said
It is also important that investigations are carried out with sensitivity and without implying that all investigated parents are trying to avoid child support obligations.

While the Ombudsman recognised the need for the CSA to look more broadly at a persons total financial situation, the majority of cases examined were in fact people with legitimate taxation arrangements.

On the other hand it is important that the CSA deals appropriately with cases of deliberate fraud or evasion when it finds them.
The report also calls attention to the intrusive nature of Capacity to pay investigations  and that they have the potential to damage the relationship between parents, for example, when financial information about a new partner is requested unnecessarily.

Other recommendations were directed at ensuring:
  • adequate information is provided to parents  about the investigation process itself, what information is required or what factors are taken into account
  • the accuracy of the CSAs decisions, and that they are based on complete information
  • training and support for the CSAs investigation officers is of a high standard
  • quality assurance, data collection, record keeping and procedural matters are appropriately rigorous
The CSA responded positively to the reports 14 recommendations when it considered them in draft form, and indeed have already moved to address many of the issues raised. Mr Brent praised CSAs responsiveness and commitment to fair and accountable administration.

The Ombudsmans report is entitled Child Support Agency, Department of Human Services; Investigation of a Parents Capacity to pay, August 2010 / 11, is available from here or from the Ombudsman web site
Media contact: Shaun Rohrlach, Director of Public Affairs 0408 861 803

Extracts from the report include:

However, the CSAs publicity of the Income Minimisers program suggested that it would target both payer and payee parents for investigation.

It also created the impression that parents under CTP investigation are those who deliberately attempted to avoid their child support responsibilities. This was not borne out by the cases that we examined in our sample.

The CSAs CTP investigations include many where parents had perfectly legitimate business arrangements for taxation purposes, and the question of their motivation was usually irrelevant.

While the Income Minimisers program has now ended, the CSA continues to conduct CTP investigations. In future, we believe the CSA must be balanced in the way that it presents the results of its CTP investigations and in its communication with the parents involved in cases under investigation (Recommendations 4 and 13).


Recommendation 7
That the CSA develop more detailed guidelines, for the purpose of CoA reason 8, about the appropriate treatment of: financial resources, capital amounts and sums not presently realisable corporate entities in which a parent has an interest.

Secretary of the Shared Parenting Council said
The number of complaints we receive from Self Employed participants in the scheme is significant and the acting Ombudsman Mr Ron Brent might have taken this opportunity to go much further in his investigation with more cases and findings. In particular things like non compliance and breeches of privacy by the CSA in some cases, garnishee orders on the wrong organisation which has materially affected a self employed persons relationship with suppliers in other cases.

The bottom line is that deductions, legitimate for taxation reasons are not legitimate for the CSA assessment. The Ombudsman has quite correctly  highlighted in Recommendation 7 key elements that will go someway to assisting Self Employed payers. This is a recommendation we stronly support and the CSA need to go much further in the list of items that have to be considered.

A number of Self Employed payers we are aware of, get locked into years of protracted investigations with the CSA because they do not have clear rules when they start up. Running a small business and being in the child support scheme is no small undertaking and where a new relationship is entered into and that partner is assisting in operating a cash poor start up company or business, the recipe for incorrect handling of transactions is high.

One of the answers, in our view is to produce a detailed FACT sheet of what can and cannot be deducted, detailed guide lines as to how income is to be treated, how pay book and tax payments are to be made, how payments to a new partner are made, impacts on new partner incomes, impacts around deductibility and very clear and precises rules as to how depreciation is to be treated is one option.

The other option is view the ATO rules as paramount and use the ATO tax return as the declared income. Self Employed payers have a range of unique issues that have to be dealt with as well as trying to re set up their lives after separation. The existing rules are confusing and do not align to the tax return.
The Ombudsman's office say:

This is an abridged version of a detailed report of this offices investigation into the Child Support Agencys (CSA) investigations of a parents capacity to pay under Part 6A, Division 3 of the Child Support (Assessment) Act 1989. Our investigation commenced in May 2009. A draft of the full report with detailed analysis, conclusions and recommendations to improve the CSAs administration was provided to the Department of Human Services (DHS)1 on 31 May 2010.

Ombudsman Office Media Release

Investigation of a Parents Capacity to pay, August 201011

Additional articles
Fathers 'stereotyped' by Child Support Agency
August 26, 2010

THE government watchdog responsible for overseeing child support payments has been unfairly focusing on parents who do not pay enough while ignoring those who are getting too much, the Commonwealth Ombudsman says.

In a report that might not be well received by some single mothers, the acting Ombudsman, Ron Brent, found that the Child Support Agency had at times been unduly influenced by stereotypes about fathers not meeting their obligations.

He found that, as a result of this and other factors, the agency had ''not been even-handed'' in its role as an investigator.

Those required to make payments - usually fathers - were made the subject of rigorous investigations including their property holdings, tax minimisation arrangements and involvement in complex corporate structures.

The review found that on some occasions these investigations were intrusive and insensitive - assuming that fathers deliberately rather than accidentally mis-represented their ability to pay child support.

In a number of cases the financial records of a father's new partner were demanded without sufficient explanation as to why they were needed and what they would be used for.

At the same time there were ''very few investigations'' into those who received payments - usually mothers - to see whether they were getting too much.

''The CSA needs to change its case selection procedures, to be more even-handed in its approach to the two parties,'' Mr Brent said. ''It is also important that investigations are carried out with sensitivity and without implying that all investigated parents are trying to avoid child support obligations.

''I do not think that fathers have been victimised, but I can understand why they might have that impression.''

While greater balance was needed, Mr Brent said it was right that more attention be paid to fathers because they were more likely to have complex financial arrangements where errors were more common.

He also said that up until recently, government policy had in fact encouraged the agency to focus on fathers rather than mothers.

Elspeth McInnes, a policy adviser to the National Council for Single Mothers and Their Children, said she did not believe the Child Support Agency applied a gender filter to its investigations.

''I think the filter is the law,'' Dr McInnes said.

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