History of the Child Support Scheme

Introduction of the Child Support Scheme

The Child Support Scheme was introduced in 1988 in response to concerns about the adequacy of court-ordered child maintenance and the difficulties that existed in the collection of maintenance in Australia. There were also concerns about the poverty of women and children following separation and divorce and the increasing government expenditure for maintaining children where their absent parents did not contribute towards their upbringing.

The Child Support Scheme is based on the principles of parental responsibility for the financial well being of children when parents separate or divorce, and limiting the Government's involvement by allocating the costs of raising children in separated families between parents and the Government.

Through the Child Support Scheme, the parent who does not live with their children because of separation or divorce (the payer) is required to make a financial contribution towards their upbringing. This contribution is based on:

• the payer's income and the percentage of that income assessed on the basis of the amount that parent would contribute in an intact family;
• the exempt amount of the payer's income for his/her own support when calculating income for child support; and
• the amount of the payee's disregarded income, that is, the amount the payee can earn until it affects the calculation of the child support payment.

The Child Support Agency (CSA) was established to administer the scheme under two Commonwealth Acts.

• The Child Support (Registration and Collection) Act 1988 moved the collection and enforcement of child support from the courts to the CSA.
• The Child Support (Assessment) Act 1989 transferred the method for the calculation of child support from the courts to the CSA.

Reforms to the Child Support Scheme

In 2006, an independent Ministerial Taskforce on Child Support found that the Child Support Scheme needed to be updated to reflect the substantial changes in Australian society since the Scheme was established in 1988. It highlighted the need for a much greater emphasis on shared parental responsibility and a growing recognition of the importance of both parents remaining actively involved in their children's lives after separation.

This review was in response to the House of Representatives Committee on Family and Community Affairs report on child custody arrangements in the event of family separation, Every Picture Tells a Story, December 2003.

The Taskforce recommended reforms to recognise changes in the way separated parents support and care for their children. The previous Government announced the changes in 2006, and these were legislated by Parliament during that year. The new Child Support Scheme provides a more balanced approach for parents, recognises changing family circumstances and takes account of the increases in financial assistance that the Government provides to Australian families.

These changes built on the reform of the family law system to support shared parenting, reduce conflict and ensure child support is paid in full and on time. They complement the network of Family Relationship Centres and existing family relationship services.

Key elements of the reforms

The new Scheme:

• calculates child support payments based on the costs of raising children;
• uses the combined income of both parents to calculate child support payments, treating both parents' incomes in the same way;
• recognises both parents' contributions to the cost of their children through care and contact; and
• treats children of first and second familiesmore equally.

The changes were significant and required extensive changes to the law. The new Scheme was introduced in three stages over a two-year period.

• Stage One Reforms - 1 July 2006
• Stage Two Reforms - 1 January 2007
• Stage Three Reforms - 1 July 2008

Stage One – 1 July 2006

Recognising non-resident parents on income support who have contact with their children

Previously, parents with care of their children for at least 30 per cent of the time (110 nights per year) received a higher 'with child' rate of Newstart and related payments (Newstart Mature Age, Sickness Allowance and Youth Allowance). To support contact between low income parents and their children, parents with at least 14 per cent care or more (one night per week) now receive a higher 'with child' rate of Newstart and related payments.

Letting parents who pay child support spend a greater percentage of their payment directly on their children

Previously, a paying parent could direct up to 25 per cent of their child support payment towards specific items essential for their children such as school fees or medical costs. Increasing this to 30 per cent improved the balance between resident parents having enough money available for living expenses and the wishes of the parent who pays child support to have their say on how payments are spent.

Increasing activity to ensure that child support is paid in full and on time

Previously, only around half of all parents who paid child support made their payment in full and on time. The CSA increased its activities aimed at 'serious avoiders' and debtors. The CSA also increased its use of court action to recover outstanding amounts. The number of parents investigated for deliberately understating their income also increased and action was undertaken to make sure that parents lodge a tax return if they are required to do so.

Introducing a more balanced assessment of the capacity of parents to earn income

Parents can be required to pay additional child support (or be entitled to receive less) if the CSA determines they have a higher capacity to earn. Previously, this could happen even when there were legitimate changes to their circumstances. For example, a payer may have needed to work less because of new caring responsibilities or they may have lost their job - however, they may still have been required to pay child support based on their previous level of income.

This change limits the circumstances under which a parent's income can be decreased for child support assessment purposes. Decision makers now have extra guidance to improve the consistency and clarity of their decisions.

Reducing maximum payments

Australian research shows that under the previous formula, parents on higher incomes paid child support in excess of the cost of their children. The current child support formula (since 1 July 2008) brings payments in line with research into the costs of raising children.

As an interim measure, from July 2006 to June 2008, the amount of income above which no additional child support was payable was reduced from $139,347 to $104,702 - this amount was indexed. During this time, higher income earners still paid substantial amounts of child support. For example, a paying parent with earnings greater than the new cap, whose child support payments started in 2006, and who had little contact with his or her two children (both under 12 years), still paid around $24,600 per year in child support.

Improving support for separating families

A range of new and expanded services to help parents agree on arrangements for their children after separation, including child support matters, was introduced. Parents can access information, professional advice and support through services such as the new Family Relationship Centres, the Family Relationship Advice Line and other expanded services.

For more information visit Family Relationships Online.

Improving service delivery by the CSA

The CSA has improved the way it does business through a more customer-focused approach, which includes improved training, more staff and more intensive case management for complex cases.

Increasing minimum payments

The previous $5 per week minimum payment is indexed yearly to the Consumer Price Index (CPI) so that it keeps pace with inflation. For child support periods beginning in 2008, the minimum payment is $6.50 per week.

Stage Two – 1 January 2007

Independent review of Child Support Agency decisions

Previously, parents who were unhappy with a CSA decision could only appeal to the courts. This was expensive and time consuming. The Social Security Appeals Tribunal (SSAT) has expanded its role to include reviews of CSA decisions. This aims to improve the consistency and transparency of decisions and provide a mechanism of review that is economical, fair, informal and quick.

Improving the relationship between the Child Support Scheme and the courts

The changes simplified the relationship between the courts and the new Scheme, making the process easier and more responsive to parents' needs. The changes included:

• improved access to court enforcement by parents. Previously, a parent receiving child support could not enforce the payment of arrears through the courts while the CSA was collecting the ongoing payments. Since 1 January 2007, parents can pursue court enforcement of the debt while the CSA continues collection.
• increased court powers. The courts used to have limited powers when seeking information available to the CSA. Since 1 January 2007, a court hearing an application for enforcement of child support has the same powers as the CSA to obtain information in relation to either parent.
• increased case management powers. Previously, the courts had limited powers when making temporary child support arrangements (stay orders). This meant debts and penalties could build up even when a court, the CSA or the SSAT was examining the case. Since 1 January 2007, the courts have increased powers to make temporary arrangements about child support. For example, stay orders can be made to suspend payments, to reduce the amount payable under the assessment or to prevent the CSA taking certain collection actions such as intercepting a tax refund.
• limits on departure orders and change of assessment decisions. Although the ability to make a change to an assessment for a past period can provide flexibility, it can also create unexpected hardship when they relate to the distant past.Since 1 January 2007, change of assessment decisions and departure orders made by a court are generally limited to the previous 18 months, providing a balance between flexibility and certainty for parents.

Giving separating parents more time to work out their parenting arrangements before their family payments are affected

Previously, a separated parent was allowed 28 days in which to take action to obtain child support payments from their former partner before their Family Tax Benefit Part A payments were affected. This limited period of time caused conflict between separating parents, undermining their ability to reach agreement on their parenting arrangements or even to reconcile.

On 1 January 2007, this time limit was extended from 28 days to 13 weeks. However, parents do not need to wait the whole 13 weeks before taking action. It can be done at any time before the 13-week deadline.

Better management of parentage issues

Child support is payable by a biological or adoptive parent of the child. The CSA cannot accept an application for child support unless it is satisfied that the liable parent named in the application is a parent of the child. Changes introduced since 1 January 2007 improve and simplify the process where a person believes they should not be required to pay child support because they are not the biological or adoptive parent of a child.

Stage Three – 1 July 2008

A new formula for calculating child support

The new formula is based on Australian research into the costs of raising children, which better reflects community values about shared parenting and better balances the interests of parents and children. The formula treats both parents' incomes and living costs in a similar way, takes account of the additional costs of older children and improves the recognition of care. It also makes sure children from first and second families are treated more equally.

A minimum payment for all children

Parents who pay child support to two or more families have to pay the minimum payment to each family, rather than dividing it between the families. For child support periods starting in 2008, the minimum payment is $6.50 per week.

A fixed payment for parents who appear to be deliberately minimising their income

Parents who appear to deliberately minimise their income to avoid paying child support (that is, payers who claim to have very low incomes, but actually have higher incomes or resources) have to pay a fixed payment per child per week (indexed annually), unless they can prove their incomes are in fact very low. For child support periods starting in 2008, the fixed payment is $20.50 per week.

Changes to Family Tax Benefit (FTB)d

Parents who have care of a child for more than 65 per cent of the time (238 nights or more) receive all the FTB for the child. Under the previous Scheme, the ability to split FTB could be a source of conflict over every percentage point of care. Under the new Scheme, parents who have regular care of a child for 14 per cent to less than 35 per cent of the time (52 to 127 nights per year) have the costs of care recognised through the new formula.

New treatment of extra income earned after separation

For the first three years after separation, in certain circumstances, parents can apply to have extra income earned after separation excluded from child support calculations.

Changes to agreements for child support and lump sum paymentsf

The current Scheme improves the process for parents wishing to make agreements. There is more flexibility for parents who wish to agree on their own child support arrangements, including lump sum payments. In addition, there is better legal protection for parents who want to make long-term agreements and it is easier to make shorter-term agreements.

Simplified processes for parents who want to reconcile

Previously, if parents reconciled and then separated again, the processes for managing a child support liability were complex. This may have been an obstacle to separated parents who wished to attempt reconciliation. The current Scheme allows reconciling parents to put their child support assessment on 'hold' for up to six months. This means that no child support is payable and no debts accumulate during this time.

Recognition of step-children without other support

Parents who have financial responsibility for a step-child (because no other person can provide support for them) can have the child treated as a dependant when their child support liability is being calculated.

Closer alignment of income definitions for child support and Family Tax Benefit (FTB)

The new income definitions for child support and Family Tax Benefit more closely align the treatment of certain tax-free amounts and foreign income.

Ministerial Taskforce research

The Ministerial Taskforce on Child Support was established to provide advice on whether particular changes to the Child Support Scheme were required. The membership of the Taskforce was announced on 16 August 2004.

The main role of the Taskforce was to examine the formula used to calculate payments for child support. It also considered other issues raised by the Government's response to the House of Representatives Standing Committee on Family and Community Affairs' report 'Every Picture Tells A Story'.

• Government's response to 'Every Picture Tells a Story' - the House of Representatives Standing Committee on Family and Community Affairs' report
• Every Picture Tells A Story: Inquiry into child custody arrangements in the event of family separation
• Child Support Review - Taskforce membership

The Ministerial Taskforce's report In the Best Interests of Children - Reforming the Child Support Scheme, was publicly released on 14 June 2005. These reports are available at Publications and Articles on this website.

Major policy changes

The courts, the Child Support Scheme and the Child Support Agency (1 January 2007)

Previously, the relationship between the courts and the Child Support Scheme was seen as too complex and discretionary. Courts had insufficient powers to manage cases, and parents' choices about taking enforcement action privately through a court were limited by their decision to have the Child Support Agency (CSA) collect payments.

Since 1 January 2007, changes to the Child Support Scheme have simplified the relationship between the courts and the CSA, making processes easier and more responsive to parents' needs. This has happened in a number of ways which are explained below.

Improved access to court enforcement by parents

Previously, if parents receiving child support asked the CSA to collect child support, they were unable to undertake their own court action to recover any outstanding debt. Even if they had other matters in court that would allow them an opportunity to recover a child support debt (such as a property settlement), the CSA had to be involved. This caused some delays.

If a parent wanted to take their own action in court regarding the debt, they had to assume all responsibility for collection, including for ongoing child support.

With the new arrangements, parents can take their own court enforcement action while the CSA continues to collect child support on their behalf. Parents must give notice to the CSA of the enforcement action. They must also give notice to the CSA of any money collected through the enforcement action.

Increased court powers

Since 1 January 2007, where a parent has made an application for court enforcement of child support, the court has the same powers as the CSA to obtain information in relation to either parent.

Greater discretion when making temporary child support arrangements (stay orders)

Previously, courts had limited powers when making temporary child support arrangements (stay orders). This meant debts and penalties could build up even when a court, the CSA or the Social Security Appeals Tribunal (SSAT) was examining the case.

Since 1 January 2007, courts have increased powers to make temporary arrangements about child support to ensure more balanced outcomes for parents and children when child support assessments are disputed. For example, stay orders can be made to suspend payments, to reduce the amount payable under the assessment or to prevent the CSA taking certain collection action such as intercepting a tax refund.

Limits on change of assessment decisions and departure orders

The CSA normally uses the child support formula to make a child support assessment. However, the formula may not provide a fair level of child support if parents or children have special circumstances. In these circumstances, the CSA can change the assessment of child support. Similarly, courts can also make an order which depart from the formula, known as a departure order.

In some circumstances, the ability to make a change of assessment or departure order for a past period can provide flexibility. However, these changes can create unexpected hardship and uncertainty when they relate to assessments in the distant past.

Since 1 January 2007, change of assessment decisions and departure orders are generally limited to the previous 18 months, providing a balance between flexibility and certainty for parents. If a parent wants to apply for a further period, they must apply to the court which may grant leave to apply for a change of assessment or departure order for up to seven years.

Where do I find more information?

For more information about these changes call the Family Law Courts' National Inquiry Centre on 1300 352 000.

Extension of time to apply for child support

Since 1 January 2007, changes to family assistance have given separating parents more time to work out the best arrangements for their family, including child support payments - the time limit was extended to 13 weeks before their Family Tax Benefit (FTB) Part A payments are affected.

What are the changes?

Previously, a parent had 28 days in which to apply for child support from their former partner or to make other appropriate arrangements before their FTB Part A payments were affected. This time limit has been extended to 13 weeks.

Why the change?

28 days did not allow time for parents to seek information, advice, counselling or support on family relationship matters to work out the best arrangements for the family following separation. This could cause conflict between the parents, undermining their ability to reach agreement on parenting arrangements or even to reconcile. Now parents have more time after separation to seek appropriate information or support and work out parenting arrangements for their children. A range of support services is available to help and support separating parents to work together to resolve issues. These include the Family Relationship Advice Line and Family Relationship Centres.

When was the change implemented?

The extension to 13 weeks applied from 1 January 2007.

Do parents have to wait 13 weeks before they can make a claim for child support payment?

No. Parents can apply for child support any time after separation. However, child support assessments will still start from the date of application and FTB Part A payments will generally be affected from that date.

How will the extra time affect my Family Tax Benefit payments?

Separated parents will continue to receive FTB Part A payments throughout the extended 13-week period. However, where parents have not applied for child support or made appropriate arrangements within this period, FTB Part A payments will be reduced to the base rate of payment.

Where do I find more information?

For information on the Family Relationship Advice Line and Family Relationship Centres visit Family Relationships Online or call 1800 050 321 Monday to Friday 8am to 8pm, and Saturday from 10am to 4pm. For information on Family Tax Benefit, shared care and child support, visit the Family Assistance Office website.

Parentage issues and child support payments

Child support is payable by a biological or adoptive parent of the child. The Child Support Agency (CSA) cannot accept an application for a child support assessment unless it is satisfied that the liable parent named in the application is a parent of the child. Changes were introduced from 1 January 2007 to improve and simplify the processes where a person believes they should not be required to pay child support because they are not the biological or adoptive parent of a child.

How is proof of parentage determined?

The CSA will be satisfied someone is a child's parent in certain circumstances which include, among others, that:

• they are named on the child's birth certificate;
• the parents were married when the child was born;
• the parents were living together before the birth of the child, beginning 44 weeks and ending 20 weeks before the child was born, but they were not married at any time during that period.

What should parents do if they think they are not liable to pay?

If parents believe that they are not liable to pay child support, they can apply directly to a court for a declaration under Section 107 of the Child Support (Assessment) Act 1989. The court can order DNA testing of both parents and the child and then determine if either parent should pay child support.

Do parents still have to pay child support while the court is deciding?

If a parent has applied to the court for an order about child support, they must continue to pay child support to the CSA, but the CSA will suspend payments to the other parent until the application is finalised. Parents must tell the CSA they have made an application. This minimises the risk of payments being made to the other parent which may have to be repaid if a parents court action is successful. Previously, the CSA could decide whether it would suspend payment to the other parent depending on the individual circumstances of the case.

Do parents still have to pay child support if the application is successful?

If the court makes a declaration that a parent is not liable to pay, the assessment for that child is cancelled (i.e. as if the assessment for that child had never been made). No ongoing child support will be payable. If the application is successful, the CSA will return any money it is holding to the parent. If the application is unsuccessful, the payments will be made to the other parent.

What happens about money CSA had already paid to the other parent?

Previously, parents had to apply to the court separately for an order for repayment. Since 1 January 2007, the court is able to make an order about repayments at the same time as making the order about parentage. The court will not automatically order child support to be repaid. If the court orders repayment, it can be registered as a maintenance liability with the CSA for collection from the person who received the child support. Previously, the CSA was not able to recover these payments and the person had to make their own arrangements to recover the payments privately or through a court.

Where do parents find more information?

For more information parents should call the CSA on 131 272 or visit www.csa.gov.au.

Appealing child support decisions to the Social Security Appeals Tribunal (SSAT)

What are the changes?

On 1 January 2007, the jurisdiction of the Social Security Appeals Tribunal (SSAT) was expanded to include the independent review of child support decisions. Before applying to the SSAT, parents must first seek an internal review (objection) through the Child Support Agency (CSA). If they are dissatisfied with the CSA's decision (the 'objection decision') they can then apply to the SSAT for review of that objection decision.

Why the change?

Previously, parents who disagreed with a CSA objection decision could only appeal the decision through the courts, which was expensive and time consuming. The new arrangements improve the consistency and transparency of child support decisions and provide a review mechanism that is economical, fair, informal and quick.

How do parents seek a review?

Parents must apply to the SSAT for a review within 28 days of receiving the CSA's objection decision. They may wish to seek legal advice before they do. If parents do not apply within 28 days, they may ask the SSAT for an extension of time. To apply to the SSAT:

• contact the SSAT on 1800 011 140
• send or fax an appeal form or letter to the SSAT. Details are available on the Social Security Appeals Tribunal website; or
• complete an appeal form at the local CSA or Centrelink offices.

How will it work?

The SSAT usually consists of a panel of two members who take a fresh look at the matter. The other parent is notified that the SSAT review is to take place, and both parents and the SSAT are provided with any documents held by the CSA that are relevant to the decision. The SSAT panel hold s a hearing with both parents face-to-face, on the phone or by video conference. The CSA may be represented at some hearings. Parents do not need a lawyer to appeal to the SSAT. The SSAT can affirm the original decision (i.e. agree with it), alter it or set it aside and substitute a new decision. The SSAT can also send the matter back to the CSA for reconsideration in accordance with any directions or recommendations of the SSAT. If parents do not agree with the SSAT decision they may appeal to a court but only on a question of law. A question of law is how the law or legal principle was interpreted and how it was applied to the facts of the case.

Decisions the SSAT cannot review

The SSAT cannot review an objection decision about a change of assessment where the CSA has refused to make a change because the matters are too complex. Similarly, the SSAT cannot consider appeals about parentage. In these cases, parents must apply to the court for a decision. For more information contact the CSA on 131 272. The CSA has a detailed brochure which outlines customer's rights when they are dissatisfied about a CSA decision. A copy of the brochure is available on the Child Support Agency website.

Where do parents find more information?

For more information call the SSAT on 1800 011 140 or visit www.ssat.gov.au.

The current Child Support Scheme

Since July 2008, there has been a new formula for calculating the amount of child support paid between separated parents.

What was wrong with the previous formula?

The previous formula:

• used fixed percentages of income. It assumed people spend the same proportion of their income on children regardless of their level of income. However, Australian research shows that, while people with higher household incomes spend more on their children than people with lower incomes, they spend less as a percentage of their total income.
• did not differentiate by age. Research shows teenagers are much more expensive than younger children. Previously, child support payments were the same for children of all ages.
• treated parents' incomes differently. Resident parents had the first $45,505 of their income disregarded, while non-resident parents had as little as $15,378 exempted.
• did not effectively take into account regular contact. Previously, a payer paid the same child support regardless of whether they had no contact or up to 29 per cent contact (up to 106 nights per year).
• dealt unfairly with the issues of second families. Parents who paid child support with second families received a flat-rate increase in the self-support amount. For some, especially those with higher incomes, their new family missed out, because of the amount they were paying to their first family. But in other families, usually those with lower incomes, their first family received very little.

The current formula:

• bases the costs of children on Australian research. The research shows that as income rises, spending on children rises in dollar terms, but falls as a percentage of income, and that expenditure on children rises with age. For more information see: The current child support formula and the costs of children.
• uses an 'income shares' approach to calculate and share the costs of children. This means the cost of children is based on the parents' combined incomes, the cost is distributed between the parents by their capacity to pay and the cost of regular or shared care by the non-resident parent is considered.
• allows both parents the same self-support amount. The self-support amount for 2010 is $19,618. This amount is indexed annually.
• takes the cost of the children from the combined incomes of both parents. For more information see: The current child support formula and the costs of children.
• recognises costs of contact as a contribution to the costs of children. For more information see: Recognising the costs of care.
• treats the children of first and second families as equally as possible by using the cost of the children from the second family in determining the child support payable (rather than a flat increase to the self-support amount). For more information see: Second families - current arrangements.

For more detail on the development and operation of the formula refer to -In the Best Interest of Children - Reforming the Child Support Scheme - Report of the Ministerial Taskforce on Child Support (chapters 6, 7, 8 and 9). Examples of how the formula works in different family circumstances can be found in Appendix 1 of the Summary Report.

The current child support formula and the costs of children

From 1 July 2008, the Child Support Scheme has used a new formula to calculate child support payments. The new formula aims to ensure that both parents share the costs and responsibilities of raising children.

Background

A longstanding concern about the Child Support Scheme was that child support liabilities calculated on a fixed percentage of income did not reflect what it costs to raise children. This concern was a key driver for the establishment of an expert and independent Taskforce to review child support policy and develop a formula that could better reflect the costs of children. In 2004, the Government formed an independent Ministerial Taskforce to review the Child Support Scheme and, aided by a Reference Group, to determine the costs of raising children. Members of the Taskforce included experts on topics such as social and economic policy, family law, family policy, and the costs of children. Members of the Reference Group were from advocacy groups representing both receiving and paying parents, and also included professionals who had experience in parenting issues after separation, relationship mediation, counselling and social policy.

Taskforce findings

The Taskforce's report recommended replacing the current fixed percentage of income used to work out child support payments with a new way of calculating payments based on findings about the costs of raising children. In February 2006, following the Taskforce's review, reforms to the Child Support Scheme were announced. The costs of children On the basis that there is no 'true cost' of children and that it is largely a matter for informed judgment, the Taskforce used three different accepted methodologies to review the costs of children:

• expenditure survey: used records from the Australian Bureau of Statistics household expenditure survey that show what families spent on their children
• budget standards: estimated what families would need to spend on their children to maintain a certain standard of living
• comparison of other research findings: identified the most reliable and consistent findings from all other studies on the costs of children from Australia and around the world.

The Taskforce found that:

• the costs of raising children increase with age - younger children cost less than teenagers;
• in families with more than one child, each additional child costs less than the last e.g. the cost of two children is not double the cost of the first child;
• while the costs of children tend to increase with household income, these costs generally decline as a proportion of household income - on the whole, children from higher income families cost more than children from lower income families, but this cost represents a smaller proportion of household income.

The current child support formula closely links child support payments to these findings.

The cost of children table

The cost of children tables, which were developed for the current formula and are based on the Taskforce's findings, represent the net costs of raising children in Australia after Family Tax Benefit is taken into account. The cost proportions gradually decline as the combined taxable income of both parents increases, and costs vary according to the age and the number of children in each child support case. The costs of children are capped. This means that once a parent earns a certain amount, the costs of the children remain the same. The 2010 income cap is $147,135.

Child Support and Family Tax Benefit (FTB)

The Taskforce also recognised the increased government contribution to the cost of raising children through Family Tax Benefit (FTB). This contribution is much higher now than in 1989 when the child support formula was first introduced.

Given that parents are receiving a contribution towards the costs of their children through FTB, not just earned income, it is reasonable for child support payments to be based on what parents contribute out of their own earnings, after taking into account the government contribution through FTB payments.

More information is available

Detailed information about the Child Support Scheme and the costs of children, including the costs of children tables, is available on the Child Support Agency website. The three research papers on the costs of children commissioned by the Taskforce, are available - Occasional Paper No. 18 - Costs of Children, along with the Every Picture Tells a Story and In the Best Interests of Children.

Cost of children 2010 tables

The costs of children are indexed each year. The 2010 figures below apply to parents whose child support period starts during 2010.

Please note this fact sheet is for general guidance only. It should not be treated as a complete or authoritative legal statement.

More details about these changes can be found in other fact sheets and on the Child Support Agency website.

More information on the Taskforce and how the reforms started is available on this website.

Recognising the costs of care

From 1 July 2008, the child care support scheme changed the way costs of care are recognised, aiming to be as fair as possible to both parents, and assisted them to maintain significant and meaningful contact with their children.

One of the concerns about the previous Child Support Scheme was that the child support formula was the same whether a non-resident parent cared for their children 29 per cent of nights per year or did not see them at all. This meant that, unless a non-resident parent cared for the children 30 per cent of nights or more, it made no difference to how much child support they paid.

Current approach

Since 1 July 2008, the Scheme recognises the costs of care, and helps both parents to maintain significant and meaningful contact with their children.

However, recognising the costs of care is not straightforward. The independent Ministerial Taskforce found that caring for children in two separated households is significantly more expensive than caring for them in one household.Many fixed costs, in particular, housing, are duplicated in the two households. In addition, the more care the non-resident parent has, the more likely it is that there will be clothes, toys and other belongings in both households.

Another difficulty in giving recognition to care arrangements in the Child Support Scheme is that it may increase conflict between parents about money. This was one of the key considerations of the Taskforce in recommending how care should be recognised under the Scheme.

Regular care

The Taskforce found that when a parent has regular care of a child, that is between 14 to 34 per cent of the time (52 to 127 nights per year), they incur about 24 per cent of the total costs of their child. For more information on the costs of children see: The current child support formula and the costs of children.

Therefore, under the current formula, non-resident parents who have regular care of their children have their child support liability reduced by 24 per cent in recognition of costs incurred in providing care. In addition, parents on income support with regular care do not have to pay the minimum rate of child support. For information about other changes to minimum payments see: Minimum payments.

Under the current Scheme, non-resident parents who have regular care of their children are no longer eligible for the child related components of Family Tax Benefit (FTB). This reflects the fact that the costs of care are recognised through the child support formula.

The Taskforce recognised that low income parents who have regular care of their children and, in the past, have received a substantial proportion of FTB, would be affected by the changes to FTB. Because of their lower incomes, these parents generally pay lower amounts of child support. Therefore a 24 per cent reduction in child support in recognition of the regular care these parents provide may not offset their reduction in FTB.

For this reason, lower income paying parents with regular care continue to be eligible for the Rent Assistance component of FTB Part A and other government benefits, such as Child Care Benefit, a Health Care Card and the lower threshold for the Medicare Safety Net.

In July 2006, parents on Newstart or other related payments also became eligible for the 'with child' rate of the income support payment if they have 14 per cent or more care of their child (52 nights or more per year). For more information about changes to FTB see: Changes to Family Tax Benefit (FTB).

Shared care

If a parent has 35 to 47 per cent care (128 to 175 nights per year) they are recognised as meeting 25 per cent of the costs of care, plus two per cent for every percentage point over 35 per cent care.

If a parent has 48 to 52 per cent care (176 to 189 nights per year) they are recognised as meeting 50 per cent of the costs of care.

If a parent has 53 to 65 per cent care (190 to 237 nights per year) they are recognised as meeting 51 per cent of the costs of care, plus two per cent for every percentage point over 53 per cent care.

Primary care

If a parent has 66 to 86 per cent care (238 to 313 nights per year) they are recognised as incurring 76 per cent of the costs of care.

Sole care

If a parent has 87 per cent care or more (314 to 365 nights per year) they are recognised as incurring 100 per cent of the costs of the child.

Please note this fact sheet is for general guidance only. It should not be treated as a complete or authoritative legal statement. More details about these changes can be found in other fact sheets and on the Child Support Agency website.

Minimum payments

The Child Support Scheme is intended to reflect broad community values, and one of those values is that both parents should contribute to the cost of raising their children. From 1 July 2008, minimum payment changes were implemented to make the payment system fairer.

In its review of the Scheme, an independent Ministerial Taskforce on child support found that there was community support for non-resident parents on low incomes to pay some child support like all other non-resident parents.

Minimum payment for each family

Previously, if a parent paid child support to more than one family, the minimum payment of a flat $5 per week was split between the families.

As part of Stage One of the Child Support Scheme Reforms, annual indexing of the minimum payment was introduced. For child support periods beginning in 2008, the minimum payment was $6.50 per week.

Since 1 July 2008, the parent has been required to pay the minimum payment to each family. This guarantees that each family receives at least the minimum payment in child support. However, if the parent cares for the children at least 14 per cent of the time (at least 52 nights per year), they do not have to pay the minimum payment in recognition of the costs they incur in providing care. For more information see: Recognising the costs of care.

Parents returning to work

Previously, parents who paid the minimum rate in child support were required to increase their child support payment as soon as they stopped receiving income support, or increased their income to a level that justified a child support payment above the minimum rate. For some paying parents, this may have acted as a financial disincentive to improve workforce participation.

Under the current Scheme, paying parents moving from income support to paid employment continue to pay the minimum rate for 28 days after becoming liable for a higher rate of child support. This helps parents transition into employment, including managing the costs of resuming employment.

Fixed assessments

One of the principles of the Child Support Scheme is that a parent's financial contribution to their children should be based on their total income and fixed assessment changes are intended to support this principle.

The Child Support Agency (CSA) uses taxable income as the basis of child support assessments. This means that parents who minimise their taxable income pay unrealistically low levels of child support.

Previously, the CSA substituted an income that better represented a parent's capacity to pay through the change of assessment process. However, this was a slow and resource intensive process.

Generally, an accurate indication of a parent's total income is whether or not they are on income support. The independent Ministerial Taskforce that reviewed child support found that around 40 per cent of paying parents assessed to pay the minimum payment were not receiving income support, giving rise to the suspicion that many of these parents were reporting incomes that did not reflect their true capacity to pay. For more information about minimum payments see: Minimum payments.

A new approach

Under the current Scheme, paying parents who report a low taxable income to the CSA (that is, below the maximum level of Parenting Payment Single which is currently around $15,000 per year), but do not receive income support, are required to pay a fixed amount per child per week (capped at three children). The amount is indexed annually. For child support periods starting in 2010, the fixed annual amount is $1,193.

The CSA can reduce a fixed payment to a minimum payment if the parent can show that they genuinely have a low income. Also, a parent is not required to pay the fixed rate if they have shared care of the child, that is if they care for the child 48 to 52 per cent of the time (176 to 189 nights per year) because in this situation, both parents are making a substantial contribution to the care of the child.

The fixed assessment discourages paying parents from reducing their child support liability by manipulating their taxable income and supports the principle that parents' contribution to their children's financial support should be based on their total income.

Second families - current arrangements

Since 1 July 2008, the current Child Support Scheme treats children of first, second and subsequent families more equally. All children receive similar amounts of support regardless of whether they are from a first or subsequent family.

Tensions regularly arise when separated parents have re-partnered and have a new family with their new partner. Paying parents feel the conflicting pressures of having to support children in two families and, depending on parents' incomes, the children in each family may receive significantly different amounts of support.

Natural or adopted children from a second or subsequent family

Previously, a parent's responsibility towards natural or adopted children from a subsequent family was taken into account by increasing the amount of their income which is exempt from the child support assessment and, in this way, reducing the paying parent's child support liability.

As the amount allowed for the support of the new children could be much higher or lower than the likely costs of the children, this approach often resulted in the unequal treatment of the children from first and subsequent families.

Current approach

Under the current Scheme, parents who have either natural or adopted children from a second or subsequent family living with them continue to have an amount deducted from their income before their child support is calculated. The amount called the relevant dependent child amount is based on the cost of the children, using the same cost of children table which is used for child support.

This means that all children receive similar amounts of support regardless of whether they are from a first or subsequent family. The amount is worked out using only the child support parent's income. For more information about the costs of children see: The current child support formula and the costs of children.

Because parents' incomes are treated the same under the formula, either parent can have children from a new family recognised in this way.

Step-children

Second or subsequent families often include children who are not biologically related to the parent of the child support children. The principle of the Child Support Scheme is that step-children should receive financial support from their absent biological parent, offsetting the contribution of the child support parent.

However, not all biological parents are in a position to contribute to the support of their child. The child's absent parent may be deceased, unknown, not locatable or unable to earn an income. In these cases, the child support parent is actually supporting their step-child. Previously, a child support parent could only have their child support payment reduced if a court ordered that they have a responsibility to support their step-child.

However, in practice, the courts rarely made such orders where the parent was living with their step-child. Alternatively, a child support parent was able to apply for a change of assessment on the basis that they were earning additional income to benefit a biological or step-child living in their household.

Current approach

Since 1 July 2008, the Scheme allows either the receiving or paying parent to apply for a change of assessment on the basis that they are responsible for financially supporting a step-child. To have the responsibility taken into account, the parent must be able to demonstrate, amongst other things, that the biological parents of the step-child cannot support the child because of death, ill-health that prevents the parent from working or their caring responsibilities for example, caring for a young child or an older child with disabilities.

Extra income earned after separation

Changes to the child support scheme allow parents to apply to have extra income earned after separation excluded from their child support assessment.

After separation both resident and non-resident parents may have extra costs to re-establish themselves. Depending on the circumstances, one or both of the parents may need to find a new house to live in, or buy furniture, a car or other items to support their children during care. As a result of these extra costs, a parent may take on overtime or a second job. To help parents manage the additional financial pressures during the first few years after separation, the Scheme allows parents to apply to have extra income earned after separation excluded from their child support assessment. The process for having this extra income excluded is easier than the previous process where parents had to apply formally for a change to their assessment. The extra income can be excluded from the child support assessment if it was not being earned prior to separation. There are two limits:

• Extra income can only be excluded for up to three years after separation. This recognises that a parent's costs to re-establish themselves diminish over time.
• Excluded income can be no more than 30 per cent of the parent's total adjusted taxable income. This ensures that children receive an adequate amount of child support. The 30 per cent limit is consistent with the limit on how much income parents could previously exclude from their child support assessment on the grounds that they were earning the income for the benefit of a resident child (previous change of assessment reason 10).

Simpler child support processes when parents get back together

Since 1 July 2008 changes were implemented to create simpler child support processes when parents get back together but separate again within six months.

Prior to 1 July 2008, if parents reconciled, the receiving parent had to ask the Child Support Agency (CSA) to end their child support assessment. If the couple separated again, the receiving parent had to apply for a new assessment.

Current approach

Under the current Scheme, when parents get back together they can choose to put their child support assessment on 'hold'. This means that no child support is payable and no debts accumulate. If the parents are still together after six months, the CSA automatically ends the child support assessment. The receiving parent can choose to end the assessment earlier in the reconciliation if they wish. If the parents separate again:

• within six months - either parent can reinstate the assessment without needing to make a new application;
• after the six months - either parent needs to make a new application for assessment within 13 weeks of the new date of separation.

In either case, the paying parent will only start paying child support again from the new date of separation.

If parents would like help with managing family relationships, they can call the Family Relationship Advice Line on 1800 050 321. This is a national telephone service that provides information and referral to services that can help strengthen relationships, overcome relationship differences and deal with separation.

They can also visit Family Relationships Online, which is a central source of information on family law and family relationship issues.

Changes to Family Tax Benefit (FTB)

Changes were made to Family Tax Benefit (FTB) arrangements under the Child Support Scheme from 1 July 2008, to limit the impact of small changes to care arrangements on parents' finances.

Sharing Family Tax Benefit (FTB)

Prior to 1 July 2008, parents could share Family Tax Benefit (FTB) if each parent provided care of their children at least 10 per cent of the time. This meant that small changes to care arrangements had financial implications for parents. The independent Ministerial Taskforce that reviewed child support considered that it was in the best interest of children that care arrangements were not affected by financial concerns as much as possible.

Regular care

Since 1 July 2008, a parent who has care of a child for less than 35 per cent of the time (less than 128 nights per year) is not eligible for the child related components of FTB. This aims to minimise possible conflict between parents about care arrangements because minor changes to care will not impact on how much FTB each parent receives.

In addition, a parent who has care of their child for more than 65 per cent of the time (238 nights or more per year) has the guarantee of on time FTB payments as they will be eligible for 100 per cent of FTB for the child.

Instead of receiving FTB, a parent who has care of their child for 14 to less than 35 per cent of the time (52 to less than 127 nights per year) has the costs of the child taken into account in working out how much child support the parent pays. This level of care is called regular care and is counted as meeting 24 per cent of the costs of raising the child for child support purposes. For more information see: Recognising the costs of care.

In addition, parents on income support with regular care do not have to pay the minimum rate of child support. For information about other changes to minimum payments see: Minimum payments.

The Taskforce recognised that low income parents who have regular care of their children and, in the past, have received a substantial proportion of FTB, would be affected by the changes to FTB. Because of their lower incomes, these parents generally pay lower amounts of child support. Therefore a 24 per cent reduction in child support in recognition of the regular care these parents provide may not offset their reduction in FTB.

For this reason, lower income paying parents with regular care continue to be eligible for the Rent Assistance component of FTB Part A and other government benefits, such as Child Care Benefit, a Health Care Card and the lower threshold for the Medicare Safety Net.

In July 2006, parents on Newstart or other related payments also became eligible for the 'with child' rate of the income support payment if they have 14 per cent or more care (52 nights or more per year).

Shared care

If parents have shared care for 35 to 65 per cent of the time (128 to 237 nights per year) FTB continues to be shared between both parents as follows:

• If a parent has 35 to less than 48 per cent care (128 to less than 175 nights per year) the FTB shared care percentage will be 25 per cent plus two per cent for each percentage point over 35 per cent. Example: A parent has care of their child for 40 per cent of the time, so their FTB shared care percentage is 35 per cent.
• If a parent has 48 to 52 per cent care (176 to 189 nights per year) the FTB shared care percentage will be 50 per cent.
• If a parent has more than 52 to 65 per cent care (190 to 237 nights per year) the FTB shared care percentage will be 51 per cent plus two per cent for each percentage point over 53 per cent. Example: A parent has care of their child for 60 per cent of the time, so their FTB shared care percentage is 65 per cent.

For more information see: Recognising the costs of care.

Maintenance Income Test (MIT)

The amount of FTB a parent receives is affected by the amount of child support they receive. The rate of FTB Part A is reduced by 50 cents for every dollar above a certain exempt amount until the base rate of FTB Part A is reached. This is called the Maintenance Income Test (MIT).

Since 1 July 2008, in a blended family, child support received only affects the FTB received for that child. Prior to 1 July 2008, it was possible for the reduction in FTB due to child support for a child to exceed the amount of FTB paid for that child.

Also, since 1 July 2008, in working out the rate of FTB, the additional amount of child support that is disregarded for extra children in a parent's care is limited to the children for whom the parent or their current partner is entitled to apply for child support.

Maintenance Action Test (MAT)

Parents applying for FTB must take reasonable action to obtain child support for children from a previous relationship. If they do not take reasonable action, they can only receive the base rate of FTB Part A for those children. This is called the Maintenance Action Test (MAT).

Since January 2007, the period in which a parent must begin taking action to obtain child support was extended from 28 days to 13 weeks. This provides a more reasonable period to enable contact with a Family Relationship Centre or other support service in order to agree to post separation arrangements (including the negotiation of cooperative parenting arrangements through a parenting plan).

Child support agreements and lump sum payments

Child support scheme changes that took place on 1 July 2008 increased flexibility for parents who want to agree to their own child support arrangements, while providing additional safeguards for both parents and children. Binding child support agreements can include lump sum payments.

When relationships break down, parents need to work out a range of issues, in particular, child support arrangements. The best arrangements are those that parents negotiate between themselves. These arrangements are more likely to last because parents feel responsible for the choices they have made. Child support agreements allow parents to work out their own child support arrangements after separation. The current Scheme which commenced on 1 July 2008 increases flexibility for parents who want to agree to their own child support arrangements, while providing additional safeguards for both parents and children.

Child support agreements and Family Tax Benefit (FTB)

Under the previous Scheme, parents who received more than the base rate of Family Tax Benefit (FTB) Part A, generally could not make agreements to receive less child support than what would have been payable under the child support formula. This is because, if a parent agreed to less child support, it could result in them receiving more FTB Part A as a result of the application of the Maintenance Income Test (MIT). For more information see: Changes to Family Tax Benefit (FTB).

The previous approach provided limited protection to both parents and taxpayers because it did not adequately take into account any changes to circumstances after a child support agreement had been made. This meant that over time, with changing circumstances, child support could be less than what would have been payable if the agreement had not been in place. In addition, this approach restricted parents who wanted to enter an agreement for an amount less than the child support formula would have provided.

Current approach

Under the current Scheme, the Maintenance Income Test (MIT) which is applied on the basis of child support that would have been payable under the formula if the child support agreement was not in place - this is called a 'notional' assessment and is worked out by the Child Support Agency (CSA). This continues to ensure an appropriate balance is met between parents supporting their children and the government supporting their children. However, parents can still enter into child support agreements which depart from the child support formula.

Increased protection for parents entering child support agreements

The current Scheme also introduced increased safeguards to ensure that child support agreements that have long-term financial consequences for parents and children are freely and fairly made. There are two types of child support agreements:

• Binding child support agreements allow parents to agree to child support which is less or more than what would have been payable under the current formula. Parents can only end a binding child support agreement by making a binding termination agreement, or new binding agreement, or through a court order. However, to enter into or end a binding child support agreement, a parent is required to obtain independent legal advice. This is consistent with the rules relating to binding financial agreements under Family Law (e.g. agreements relating to property division and spousal maintenance). The amount of FTB Part A a parent receives is based on the CSA's notional assessment, which is updated every three years or if the agreement amount changes by more than 15 per cent.
• Limited child support agreements allow parents to agree on child support which is equal to or more than the CSA's notional assessment. To enter into a limited child support agreement, parents are not required to seek legal advice. Either parent can request an updated notional assessment from CSA so that they can monitor the currency of the agreement. Parents can also end limited child support agreements more easily. For example, a parent can end a limited agreement if a notional assessment varies by more than 15 per cent from the previous one. A parent may also end a limited agreement after three years.

Lump sum payments

Under the current Scheme, binding child support agreements can include lump sum payments (including transfer of property) to be credited as child support instead of monthly cash or electronic payments. Lump sum payments give parents more flexibility to decide how they want to receive or pay child support.

Parents do not have to agree on the amount of child support to be paid. The CSA makes child support assessments as usual. The lump sum must be equal to or greater than the annual child support liability as assessed by the CSA. If the lump sum payment is greater than the annual child support liability, the difference is used as a credit for future child support payments.

Parents can nominate whether they want all of the upcoming child support payments to be met using the lump sum or only some of them. The lump sum amount is reduced at the end of each financial year by how much was used to meet child support payments during the year. Any remaining amount is indexed annually.

For child support agreements for a lump sum payment only, the Maintenance Income Test (MIT) for the FTB Part A uses the amount credited against the child support liability as a result of the lump sum payment, plus any remaining cash child support that is received.

Alignment of income definitions for child support and Family Tax Benefit (FTB)

On 1 July 2008, the income definitions for child support and Family Tax Benefit (FTB) were more closely aligned. To calculate child support, the previous Child Support Scheme used a parent's taxable income with net rental property losses and exempt foreign income added back in, plus the gross value of reportable fringe benefits. This was similar to the income definition for FTB, except that the FTB income definition included many tax free pensions and benefits and used the net value of reportable fringe benefits. The treatment of foreign income was also different. The income definition used to calculate:

• child support now includes many tax free pensions and benefits, such as disability support pension, wife pension and carer payment. It also includes the following payments from the Department of Veterans' Affairs (DVA):
  • invalidity service pension
  • partner service pension
  • income support supplement
  • Defence Force income support allowance.

Disability pensions paid by DVA will not be included as income for child support but will continue to be included as income for FTB. It is important to note that only income above the self-support amount impacts on how much child support a parent receives or pays. For more information on how child support is calculated under the current Scheme see: The current child support formula.

• FTB now includes foreign employment income exempt from tax if the income is from a source inside Australia. Foreign income exempt from tax is any foreign income received that is not taxable income or a fringe benefit.
  Child Care Benefit (CCB) uses the same definition of income as FTB, so the changes to income for FTB since July 2008 also affect CCB.