The new formula for assessing child support is based on recommendations of the Ministerial Taskforce on Child Support which conducted a comprehensive review of Australia’s child support system in 2004-05. The Taskforce found that the child support scheme needed to re-balance the share of responsibilities between resident parents, non-resident parents and the taxpayer in light of current economic and social conditions as well as community attitudes. The changes were also closely connected to a broader set of changes in the family law system for separated families. These changes recognised the significance for children’s wellbeing of factors such as the frequency and quality of their relationships with both their parents and their parents’ ability to successfully co-parent.
New Principles
On this basis, the new Scheme is underpinned by a new set of principles that the Taskforce considered were more consistent with contemporary conditions and attitudes. They argued that a child support system should:
- continue to be based on the ‘continuity of expenditure’ principle - that wherever possible, children should enjoy the benefit of a similar proportion of the income of each parent to that which they would have enjoyed if their parents had lived together;
- be based, as much as possible, on what it costs to raise children;
- enable parents to share the cost of supporting their children according to their capacity to pay;
- recognise that provision of care is a contribution to the cost of children;
- minimise the extent to which financial concerns influence agreements about parenting arrangements and care;
- treat children in first and subsequent families as equally as possible; and
- take account of the contribution made by Government to the costs of raising children.
This new set of principles has driven the following key differences between the old and new formula:
- Costs of children:
- The old formula was not based on the costs of children. It used a fixed percentage of the payer’s income regardless of his or her income level, and didn’t differentiate between the costs of older and younger children.
- The new formula is based on evidence about the costs of children. It recognises that parents spend more money on their children as their income rises, but less as a proportion of their overall income. It also recognises that older children cost more than younger children, and takes account of the contribution Government makes to the cost of children through FTB.
- Recognising care:
- The old formula recognised the costs of care when a parent had care for more than 30 per cent of nights.
- The new formula recognises care above 14 per cent of nights (one night per week).
- Under the old system, parents who had more than 10 per cent of care were entitled to a pro-rata amount of FTB.
- Under the new system, parents are only entitled to a share of FTB if they have 35 per cent of care or more, because the costs of providing care at lower levels are now recognised in the child support formula.
- Equal treatment of parents’ incomes:
- The old formula treated parents’ incomes very differently. It disregarded a significant proportion of a resident parent’s income (around $45,500) compared to a lower amount for the non-resident parent (around $14,500).
- The new formula treats both parents’ incomes in the same way, allowing the same self-support amount for each parent. It then combines both parents’ remaining incomes to establish the level of resources available to raise their children and the corresponding costs of children. Each parent’s percentage share of the combined income represents their capacity to pay.
- Similar treatment of children from second families:
- Under the old formula, payers with new biological (or adopted) children were given a fixed increase in the amount of income that was exempted for calculating child support liabilities. For payers with higher incomes, the amount allowed for the support of new children was too low compared to the amount paid for their child support children; for payers with lower incomes, the amount allowed for the support of new child was too high compared to the amount paid for their child support children. In the latter case, many resident parents received little or no child support.
- Under the new formula the costs of all children are calculated according to the same ‘cost of children’ table, regardless of whether they are in a first or new family. The cost of new children is deducted from the parent’s child support income prior to calculating the amount payable for the children of the first family.
- Flexibility for changing care arrangements:
- Under the old system, FTB was shared in direct proportion to the amount of care provided, from 10 per cent of nights. This meant that very small changes in care could result in a change in FTB payable. This could cause significant conflict between parents.
- The new system better aligns care percentages between child support and FTB, and creates broader bands within which changes in care do not affect payments.
- Recognise the contribution of Government to the costs of raising children:
- Since the formula was established, the contribution of government to the costs of children has increased substantially. For example, the Taskforce noted that in the 10 years between 1993-4 and 2003-4, expenditure on family payments increased in real terms by about 115 per cent. The old formula did not take any account of the fact that the family benefits which formed part of the total household income of the intact family are paid mainly to the primary caregiver following separation.
- The new formula recognises that while child support payments are private transfers, family benefits need to be taken into account in working out how much needs to be transferred from the non-resident parent’s household to the resident parent’s household. As a result, the costs of children table on which the new formula is based uses ‘net’ costs of children – which are the gross costs minus the contribution of Government through FTB Part A.
In addition to these major differences, there are some changes not directly related to the operation of the new formula that will drive losses and gains for parents:
- ‘Fixed assessment’ ($21.50 per week, per child) This measure is directed towards paying parents who report very low incomes but do not receive an income support payment, raising suspicions that these parents may be artificially reducing their income in a way that does not represent their real capacity to pay child support. Under the old scheme, many payers were assessed at the minimum rate on the basis of a low taxable income, but did not receive an income support payment. Under the new scheme, around 70,000 paying parents have been assessed to pay $21.50 per week per child.
- More than one child support family (‘multiple cases’) Under the old scheme, where payers assessed to pay the minimum assessment had more than one child support family (‘multiple cases’), their payment was divided evenly between parents to whom they had child support liabilities. This meant that the minimum payment of around $6.50 per week would be shared between two or more payees. In the new scheme, each ‘case’ (up to a maximum of three) will receive the full amount of child support, ensuring that children get the full amount of child support payable and do not miss out because of a parent’s other child support cases. This may result in a doubling or tripling of payments from $2 or $3 to $6.50 a week.
The relative influence of different new formula components
It is not possible to isolate the effect of any one feature of the new formula independently. The outcome for any particular individual or family will depend on the ‘mix’ of formula components that are relevant to their circumstances – some may be heavily influenced by one driver, while others may be the result of a number of drivers operating together. Different components may operate to reinforce, or offset the effects on ‘losses’ or ‘gains’ depending on the ‘mix’ in any particular case. Scenarios illustrating the effects of each driver can be found at
Attachment B.