Shared care, shared income?

The first overhaul of Australia’s child support system in two decades has been two years in the making for 4000 agency staff, so when it is implemented from July 1, 2008, there are likely to be a few sighs of relief.

At least that’s what the Child Support Agency is hoping the new system will bring to not just its employees, but to the 1.5 million parents on its books.

Hopefully, says the agency’s deputy general manager, Trevor Sutton, they will be happier with what he believes is a fairer system for all who pay a share of the $2.7 billion collected each year, and for those who receive it.

Fair or not, child support calculation and payment is confusing – and Mr Sutton concedes that in some ways the overhaul has made it even more so. But it’s hard to keep simple something that is inherently so complicated, he says, considering he is dealing with one of the most emotional issues families face.

“It’s probably one of the most dynamic areas in social policy for that reason,’’ he says. “The new system is more complicated because it takes into account more circumstances … it’s the old classic, the more equal, the more complicated it is. “I believe we have struck a better balance and why I think is because it better reflects the cost of raising children today.’’

The former Howard government put the wheels of change in motion as far back as four years ago, with a special taskforce charged with pulling the system apart and seeing if it could be put back together better.

For years, parents have complained the system is complicated, too confusing and too unfair. A father who has his child up to 40 per cent of the time would still have to pay the child’s mother as though she cared for him in full. His wage would be docked 18 per cent – save for the first 10 or so thousand dollars of his income, deemed exempt for his own living expenses. And if he had other children who were in his care full time, a further amount would be added to his disregarded level.

But what about the care he provided to the child from the estranged relationship? And what about other situations where men somehow manage to “play down’’ their earnings, reducing the amount they have to pay?

There were lots of holes in the system, Mr Sutton acknowledges. It was time for change. And change is never easy, he says. He also accepts that there is no way everyone will be happy with the new system, because some people will now be paid less than before thanks to the new system.

And besides, he says, you can’t please everyone all the time. But the CSA has tried its best. So why will some parents be paid less if the new system is designed to be fairer? Mr Sutton summarises the changes to keep it simple:

• The CSA has added together the respective incomes of each parent to come up with the “combined child support income”.
• It then estimates the cost of raising the child (or children) based on outside data which suggests different amounts for different income brackets.
• But it has also taken into account the child’s age, with research showing teenagers cost more than younger children to raise.
• The new system also acknowledges a child with separated parents costs more than one with parents who live together, based on things such as two mortgages etc.
• Then the agency takes into account any other children in the care of either parent, but from outside the relationship.
• It also, for the first time, considers the percentage of care each parent has of their child or children.

Complicated? Very. But using an example simplifies it a little.

If the non-primary caregiver, say the father, earns around $75,000 and has two other children in his care, then the CSA will first deduct about $18,000 from his income as a disregarded “self support’’ amount.

It will then take off about another $13,000 to account for the cost of the other two children, based on earnings. This leaves the father with an amount of $42,000 or just over, from which the CSA will eventually deduct child support.

First though, it uses a similar method to calculate the mother’s income. If she earnt about $40,000 and has no other dependents, then she also has about $18,000 disregarded from her income as her self support amount. This leaves her with a “child support income’’ of about $22,000.

The combined child support income of both parents is about $62,000. The CSA would then estimate the cost of rasing the child – aged nine - based on this income, to be about $10,000 a year.

The CSA calculates the father has the child for 10 per cent of the year and the mother 90 per cent, leaving her with responsibility for about 35 per cent of the child’s costs, and the father 65 per cent. The father then must pay the mother just over $6000 a year, collected monthly.

These figures would obviously change if the number of other dependents was different, if the incomes were different and if the care percentage was different. So basically, it would be rare to find two sets of parents who had the same assessment.

It’s becoming clear why it’s so complicated. But Mr Sutton believes spelling it out this way has also made the system more transparent.

Now, a father (or indeed a non-custodial mother) has to have a child for just 14 per cent of the year before it affects the child support he/she pays, whereas before they could have their child up to 30 per cent of the year and not pay any less.

There is also an increased minimum payment of $20 a week – brought in to account for paying parents who somehow managed to pay the minimum amount despite earning more than the figure required to allow them to do so. Mr Sutton says this targeted parents who were not receiving Centrelink benefits, yet still claimed they earned barely any income.

Those parents who can show they indeed to earn the minimum amount will have to pay less. “It’s always about trying to strike that balance,” Mr Sutton says.

The agency has been contacting parents since March last year to inform them of the changes and how they may be affected. In November, it received communication from 170,000 parents, after writing to all 1.5 million clients to check care arrangements.

From this March, the CSA began posting in batches the new estimates, preparing 450 specialist staff - just over 10 per cent of its employees - to take the thousands of subsequent phone calls.

Parents can also hop online to the CSA’s website and use its calculator estimate the likely child support amount before getting official notification of the actual details. “We have really just tried to make it as easy as we can for parents,” Mr Sutton says.

The proof, as they say, will be in the pudding, cooked and ready from July 1.

By Rebecca Tucker

More information

Australian Government: Child Support Agency - includes a family assistance calculator, FAQ  and other useful links.

This article was first published in Australian Family Magazine, May 2008. Updated July 2009.