Rationale
The new formula is designed to treat children from current and previous relationships in a more equal way.
Under the old scheme, a parent with a new dependent biological or adopted child had their ‘exempt income amount’ increased by a substantial flat sum, plus additional amounts for each child. However, the increase often bore little relationship to the amount being paid to child support children. The increase overstated the costs of children in low-income families, but was not adequate to cover children’s costs in higher income families.
To address this, the new formula is based on the principle that, regardless of whether children are from a first or subsequent family, their costs are calculated on a similar basis – that is, according to the estimated costs of children for families at particular income levels.
In general, this will mean that payees with payers who have new children and lower incomes will receive more and payees with payers who have new children and higher incomes will receive less.
It is worth explaining in some detail exactly how the formula works to treat the children of first and subsequent families in a similar way. The formula does not, and should not, use exactly the same method of calculating the costs of children in both families. This is because, when calculating the costs of children in the child support family, both parents’ incomes must be used to reach the ‘combined child support income’. However, when calculating the costs of the children in the payer’s new family, only the payer’s income is used – not the income of the children’s other parent. This is because in calculating child support liabilities, only the resources of the biological or legally responsible parents should be included. The formula deducts this parent’s share of costs for the new children from their income before calculating the child support payable for the first family. The amount deducted is known as the ‘relevant dependant child amount’.
This amount is then subtracted from the parent’s adjusted taxable income to calculate the costs of the child support children. The remaining income of the non-resident parent is then combined with the income of the resident parent. The costs of the child support children are then calculated according to this combined income, as this represents the income these parents have available to raise these children.
Findings
Table 8. Receiving parents whose payer has a new family
| $ Per Week Net Change |
Net gain |
Net loss |
No change |
Total |
|
No. |
No. |
No. |
No. |
| $0.01 ‐$10.00 |
12,600 |
6,400 |
|
19,000 |
| $10.01 ‐$20.00 |
12,700 |
2,900 |
‐ |
15,600 |
| $20.01 ‐$30.00 |
7,000 |
1,500 |
‐ |
8,500 |
| $30.01‐$40.00 |
5,600 |
850 |
‐ |
6,400 |
| $40.01 ‐$60.00 |
4,100 |
950 |
‐ |
5,100 |
| More than $60.00 |
1,800 |
850 |
‐ |
2,700 |
| Total |
43,800 |
13,500 |
8,700 |
65,900 |
| Overall percentage |
66% |
20% |
13% |
100% |
|
Numbers and percentages may not add due to rounding
Results are actual child support and modelled FTB
The full list of caveats should be considered when interpreting this data |
Table 9. Paying parents who have a new family
| $ Per Week Net Change |
Net gain |
Net loss |
No change |
Total |
|
No. |
No. |
No. |
No. |
| $0.01 ‐$10.00 |
4,100 |
8,400 |
|
12,500 |
| $10.01 ‐$20.00 |
2,200 |
10,800 |
‐ |
13,000 |
| $20.01 ‐$30.00 |
1,600 |
6,700 |
‐ |
8,300 |
| $30.01‐$40.00 |
1,000 |
8,400 |
‐ |
9,500 |
| $40.01 ‐$60.00 |
1,400 |
5,400 |
‐ |
6,800 |
| More than $60.00 |
1,400 |
1,500 |
‐ |
2,900 |
| Total |
11,700 |
41,400 |
9,800 |
62,900 |
| Overall percentage |
19% |
66% |
16% |
100% |
|
Numbers and percentages may not add due to rounding
Results are actual child support and modelled FTB
The full list of caveats should be considered when interpreting this data |
Discussion
This result has clearly re-balanced payments towards the first families of a payer who has new children. The result largely reflects the skew in the child support population towards the lower-middle income brackets, especially for payers who have new families. Around 71 per cent of payers with second families in the child support system have taxable incomes of $45,000 or less, and around 53 per cent have incomes of $30,000 or less.
What this means is that many children of paying parents who have new families will now start receiving a more equal share of the parent’s available resources compared to the children in the new family.