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Child Support Reforms
Over the past few years, the Commonwealth Government has reviewed a number of issues related to the circumstances of children on the breakdown of families, including shared parenting and child support.
In autumn 2006 the Commonwealth Government passed the Family Law Amendment (Shared Parental Responsibility) Act 2006. That legislation was intended to ensure that parents share responsibility for their children in the event of separation. Many of those changes came into effect on 1 July 2006.
On 6 December 2006, the Commonwealth Government passed the Child Support Legislation Amendment (Reform of the Child Support Scheme New Formula and other Measures) Act 2006 (Cth) (the "Act").The legislative amendments to the Child Support Scheme take last year's changes one step further.The Commonwealth Government intended the new changes to ensure that parents share the cost of raising children in addition to sharing parental responsibility.
The Current Maintenance Formula
At present, child support maintenance is determined by calculating a percentage of the payer's gross taxable income after a self support amount is deducted. For example, a payer must pay 18 percent of their adjusted taxable income where they are required to support one child, 27 percent where they are required to support to children, 32 percent where they are required to support three children, and so on. These percentages have remained unchanged since 1988.
The percentage rates in the child support maintenance formula do not reflect the exact cost of caring for a child, or even half of such costs. Instead the formula was based on a number of other factors and objectives, such as:
Changes to the child support formula will come into effect on 1 July 2008.The purpose of the changes is to promote shared parenting. As a result, the new formula takes into account the time that is spent caring for children.The new, more complex formula adopts an income shares approach to calculating the costs of raising children. It seeks to ensure that these costs are shared fairly between parents and any non-parent carers of children. It will take into account a number of factors including:
The new child support scheme has six different formulae which will apply to a different set of circumstances.The formulae involve a series of mathematical equations which change dependent upon each parent's circumstances, including whether they have other dependent children in their care and whether they have multiple child support obligations.
For example, formulae one and two will apply where both parents' incomes are considered when determining each parent's capacity to pay for the costs of their children. Formulae three and four apply where both parents' incomes are taken into account to determine their capacity to pay support, but these formulae apply where at least one parent has multiple child support obligations. Formulae five and six address circumstance where only one parent's income is taken into account in determining child support.
Conclusion
The changes to the child support system are very complex and are closely related to the Commonwealth Government's objective of promoting shared parenting. The changes will likely result in greater fairness with respect to child support assessments. The new child support system will also provide financial incentives for parents to engage in shared parenting arrangements, as this will minimise their liability to pay child support.
In autumn 2006 the Commonwealth Government passed the Family Law Amendment (Shared Parental Responsibility) Act 2006. That legislation was intended to ensure that parents share responsibility for their children in the event of separation. Many of those changes came into effect on 1 July 2006.
On 6 December 2006, the Commonwealth Government passed the Child Support Legislation Amendment (Reform of the Child Support Scheme New Formula and other Measures) Act 2006 (Cth) (the "Act").The legislative amendments to the Child Support Scheme take last year's changes one step further.The Commonwealth Government intended the new changes to ensure that parents share the cost of raising children in addition to sharing parental responsibility.
The Current Maintenance Formula
At present, child support maintenance is determined by calculating a percentage of the payer's gross taxable income after a self support amount is deducted. For example, a payer must pay 18 percent of their adjusted taxable income where they are required to support one child, 27 percent where they are required to support to children, 32 percent where they are required to support three children, and so on. These percentages have remained unchanged since 1988.
The percentage rates in the child support maintenance formula do not reflect the exact cost of caring for a child, or even half of such costs. Instead the formula was based on a number of other factors and objectives, such as:
- the additional costs of raising children in circumstances where parents do not live together;
- access costs incurred by payers;
- additional indirect costs of children for payees; and
- maintaining incentives for payers to earn income from employment.
Changes to the child support formula will come into effect on 1 July 2008.The purpose of the changes is to promote shared parenting. As a result, the new formula takes into account the time that is spent caring for children.The new, more complex formula adopts an income shares approach to calculating the costs of raising children. It seeks to ensure that these costs are shared fairly between parents and any non-parent carers of children. It will take into account a number of factors including:
- the combined incomes of the parents;
- a determination of the costs of caring for children, based upon the combined incomes of the parents;
- the distribution of the costs between the parents in proportions equal to their share of the combined income; and
- the contributions to the costs of children the parents make through providing care for their children.
The new child support scheme has six different formulae which will apply to a different set of circumstances.The formulae involve a series of mathematical equations which change dependent upon each parent's circumstances, including whether they have other dependent children in their care and whether they have multiple child support obligations.
For example, formulae one and two will apply where both parents' incomes are considered when determining each parent's capacity to pay for the costs of their children. Formulae three and four apply where both parents' incomes are taken into account to determine their capacity to pay support, but these formulae apply where at least one parent has multiple child support obligations. Formulae five and six address circumstance where only one parent's income is taken into account in determining child support.
Conclusion
The changes to the child support system are very complex and are closely related to the Commonwealth Government's objective of promoting shared parenting. The changes will likely result in greater fairness with respect to child support assessments. The new child support system will also provide financial incentives for parents to engage in shared parenting arrangements, as this will minimise their liability to pay child support.