6. Taking account of regular contact and shared care
6.1 Thresholds for recognition in the formula
The current formula does not take adequate account of the costs of contact. A parent has the same child support liability whether he or she has no contact with the children or has the children to stay overnight for 29 per cent of nights per year. The Scheme therefore does not take proper account of the costs incurred when children are staying with the non-resident parent.
In order to recognise that non-resident parents who have regular contact with their children incur significant costs in providing that contact, and relieve the other parent of expenditure on food and entertainment costs at least, the Taskforce considers that regular face-to-face contact should be recognised in the formula.
If a parent has the care of the children once a week on average, or 14 per cent of nights per year, it is likely that he or she will need accommodation that is appropriate for a child to stay regularly overnight. This and other infrastructure costs do not vary much depending on how much contact the parent has. For this reason, the Taskforce considers that recognition of contact arrangements in the formula should begin when a non-resident parent has at least 14 per cent care. If the parents agree that daytime-only contact, or a combination of days and nights, is the equivalent of the expenditure involved for 14 per cent or more nights per year, then the same reduction in child support will be applicable. Otherwise the matter will need to be determined by the Child Support Registrar on application by a parent.
Where care is being shared between the two parents to the extent that each parent has the children for at least five nights per fortnight or 35 per cent of nights per year, the applicable child support should be based upon a shared care formula, with the higher-income parent making a contribution to the lower-income parent after taking account of the proportion of time the children are in each parent’s care.
Care of the child for between 14 and 34 per cent of nights per year is termed ‘regular contact’ in this Report. When parents have the care of the child between 35 and 65 per cent of nights per year each, this is termed ‘shared care’.
6.2 The interface with FTB
Currently, the way in which contact and shared care arrangements affect entitlement to FTB is quite different from the position under the Child Support Scheme. In the Child Support Scheme, the child support obligation is not affected unless a parent has the child staying with him or her for 30 per cent or more nights per year. In contrast, FTB can be split where a non-resident parent has 10 per cent or more of the care. Although the care is normally based upon nights, it may be calculated by reference to hours of care. The FTB split is in direct proportion to the level of care, so that a parent with 20 per cent of the time with the child will be eligible for 20 per cent of both FTB A and B.
The Taskforce proposes that the child support and FTB systems be coordinated, so that rather than having two different systems for taking into account regular contact and shared care, there is a consistent approach.
6.3 Minimising conflict over care arrangements for children
One of the most significant problems with the way in which contact arrangements affect child support and FTB eligibility is that concerns about money can get in the way of agreements about parenting arrangements that are best for children. This is particularly the case in relation to FTB, as entitlement to FTB is based on the number of nights above 10 per cent of the nights per year that each parent is caring for the child. Thus arguments about whether the children will stay with the non-resident parent for two nights per weekend or three, or have time with him or her in the middle of the week, may have financial implications. Monetary concerns can motivate a non-resident parent to seek increased contact or make the primary caregiver unwilling to agree to increased contact.
The Taskforce considers, on the basis of strong advice emerging from its consultations, that it is in the best interests of children that agreements about parenting arrangements not be affected by financial concerns. While different financial arrangements need to be made for parents with shared care, the Taskforce considers that the level of conflict over money can be minimised if:
- the recognised costs of contact in the formula do not vary depending on the amount of contact between 14 per cent and 34 per cent of nights per year;
- resident parents are entitled to 100 per cent of the FTB where the care of the child is not being shared; and
- FTB splitting is confined to those who have shared care—that is, where each parent has the children for at least 35 per cent of nights, or five nights per fortnight.
Consequently, recognition of the costs of regular contact should be dealt with through the Child Support Scheme rather than through FTB splitting, and the level of child support payable should be calculated on the assumption that the resident parent has the benefit of all the FTB A where the care is not being shared.
Where the non-resident parent is caring for the child between 14 per cent and 34 per cent of nights per year, child support should be calculated on the basis that he or she is credited with a contribution of 24 per cent of the costs of supporting the child through the provision of that care. This figure has been informed by research on the costs of children in separated families. The research demonstrates that, when children are being cared for in two households, the combined costs are much higher than when the children are being cared for in only one household. While the costs of providing for the children do not diminish much for the resident parent (because so many of those costs are related to infrastructure), the costs are, to a significant extent, duplicated in the other parent’s household. The proposed formula makes an allowance for this in a way that reflects the findings of research on families with a modest but adequate standard of living after separation about the proportions of the increased cost of children in two households that are incurred in each household.
Where the parent is caring for the child for 35 per cent of the year, child support should be calculated on the basis that the non-resident parent is bearing 25 per cent of the costs, rising by 0.5 per cent for every night above this until each parent is sharing 50 per cent of the costs for approximately equal care.
Where there is a parenting plan or a court order specifying that the liable parent should have the care of the children for at least 14 per cent of nights per year, this will be assumed to be occurring. The payee may challenge this if the level of actual contact occurring in the current child support year was significantly less than 14 per cent of nights per year, despite the payee’s willingness to make the children available for that contact.
6.4 Recognition of costs of contact for low-income parents
There are a number of non-resident parents who would not be as well off under these proposals as under FTB splitting. These are non-resident parents who would receive a lower reduction under the proposed arrangements for taking account of regular contact in the Child Support Scheme than they gain as a result of FTB splitting.
The research of the Taskforce has demonstrated that a significant effect of not splitting FTB A for non-resident parents would be the loss of entitlements to ancillary benefits that flow from eligibility for FTB A, including Rent Assistance and other valuable benefits. To ensure that these benefits remain for those exercising regular contact, it is proposed that non-resident parents who have contact between 14 and 34 per cent of nights per annum will continue to have access to Rent Assistance, the Health Care Card, and the Medicare Safety Net if the other eligibility criteria for FTB A are met. As a consequence, the people who currently have regular contact and are splitting FTB will continue to access significant benefits of splitting, while having a reduction in their child support liability on account of that regular contact.
It is also proposed that non-resident parents who are in receipt of Newstart be paid the ‘with child’ rate of the Newstart Allowance where they have the care of a child for at least 14 per cent of the nights per year. Currently the award of the ‘with child’ rate of Newstart does not appear to be administered uniformly. The proposal in relation to Newstart would ensure consistency across the country and align Newstart with the recognition of regular contact under the Child Support Scheme. The Government may also wish to consider treating both parents in a shared care arrangement (35 to 65 per cent of nights each) more equally in terms of eligibility for income support. At present, where the parents are sharing the care of the child equally, and both would be eligible for Parenting Payment, only one parent can receive it, and the choice between the parents does not have a rational basis.
6.5 The formula in operation
Under the proposed new approach, the basic formula will have up to five steps.
- Ascertain the parents’ ‘adjusted taxable incomes’ (meaning, taxable incomes with adjustments made to take account of negative gearing and other such factors) based upon the most recently available tax assessment or such other information as is available. This step is similar to the current calculation of adjusted taxable income for child support purposes.
- Calculate the Child Support Income of each parent. This is equal to their adjusted taxable incomes less their self-support amount. If either parent has a new biological or adopted child, the self-support amount will be increased by the amount that the parent would have to pay in child support based upon his or her income if the child were living elsewhere.
Calculate the cost of the child or children using the combined Child Support Income of the two parents and applying the relevant amounts in Table A: Costs of Children, in this report. The resulting cost represents the amount that the parents would be likely to spend on the children from their private incomes if they were living together. The cost of the child can be expressed legislatively as a percentage of the parents’ combined Child Support Income within each of the relevant income bands, with each band of additional income attracting a lower percentage. The amounts and income bands are contained in Table A.
This step is fundamentally different from the existing Scheme because it is the cost of the child that is worked out as a percentage of the parents’ combined income above the self-support amount for each parent, whereas in the existing Scheme the payer’s child support obligation is expressed as a percentage of his or her income above the self-support component.
- Apportion the costs of the child in accordance with the parents’ respective capacities to pay—that is, in proportion to their respective shares of combined Child Support Income.
- Where there is regular contact with the non-resident parent (between 14 per cent and 34 per cent of the year), 24 per cent of the costs of the child will be treated as incurred in the non-resident parent’s household. The non-resident parent’s liability is any balance of their share of the costs of the child, after deduction of the amount they are assumed to be expending by providing contact. For amounts of care equal to or above 35 per cent (that is, shared care), a percentage of the costs of the child, as found in Table B, will be treated as having been incurred by the parent with lesser care. When care is equal or near equal, the share will be 50 per cent of the costs. In all cases of shared care, a parent whose share of the combined Child Support Income is greater than his or her share of care will have a liability to the other parent.
Chapter 16 of the main Report contains detailed information about how this formula translates into child support payments for a variety of cameo families. It also provides information on how the formula translates into averages of a paying parent’s income before and after tax in different scenarios. The examples also provide estimates of the disposable incomes of each parent after paying and receiving child support, taking account of the number of people being supported in each household.
6.6 Simplicity for the public
Although the formula will be legislatively more complex than the current formula, it will be no more complex administratively, nor will there be any greater complexity for members of the general public. At the present time, people can use a calculator available on the Child Support Agency website to obtain an estimate of a child support liability if they know the father’s income, the mother’s income, and the number of children. With the addition of the requirement to enter the ages of the children, it will be as simple for a member of the public to obtain an estimate of the new child support liability as at present.