Appendix 1: Illustrations of the operation of the formula

Tom and Meng

Tom and Meng have three children, all under 12. They separate. All of the children live with Meng. They stay with Tom for 25 per cent of the nights per year (generally alternate weekends and half of school holidays).

Step 1 Find Tom and Meng’s Child Support Incomes

Tom has an Adjusted Taxable Income of $51 500 and Meng has an Adjusted Taxable Income of $27 000. Deducting the self-support component ($16 883) from each gives Tom a Child Support Income of $34 617 and Meng a Child Support Income of $10 117.

Step 2 Calculate the costs of the children

Tom and Meng’s Combined Child Support Income is $44 734. The cost of the children is calculated by taking 27 per cent of the first $25 324 of this and 26 per cent of $19 410 (the remainder of the Combined Child Support Income).

27 per cent of $25 324 is $6837, and 26 per cent of $19 410 is $5047, giving a total of $11 884. (In Table A: Costs of Children, this is shown as $6837 plus 26 cents for each dollar over $25 324.) This is the cost of the children.

Step 3 Apportion this cost between the parents

This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the Combined Child Support Income. Tom has 77.38 per cent of the Combined Child Support Income, so Tom is responsible for 77.38 per cent of the cost and Meng is responsible for 22.62 per cent of the cost.

Under the formula, Tom is given credit for incurring 24 per cent of the children’s costs by caring for the children. Therefore only the balance of Tom’s obligation must be contributed through his child support payment. Tom’s payment is his total obligation (77.38 per cent of the children’s cost) less his credit due to care (24 per cent). His payment is 53.38 per cent of the costs of the children.

53.38 per cent of $11 884 is $6344. Tom must pay this to Meng.

Ali and Leila

Ali and Leila have two children, one is 14 and one is 16. They separate. They share care of the children equally.

Step 1 Find Ali and Leila’s Child Support Incomes

Ali has an Adjusted Taxable Income of $54 000 and Leila has an Adjusted Taxable Income of $67 000. Deducting the self-support component ($16 883) from each gives Ali a Child Support Income of $37 117 and Leila a Child Support Income of $50 117.

Step 2 Calculate the cost of the children

Ali and Leila’s Combined Child Support Income is $87 234. The cost of the children is calculated by taking 29 per cent of the first $25 324 of this, 28 per cent of the next $25 324, 25 per cent of the next $25 324, and 20 per cent of $11 262 (the remainder of the Combined Child Support Income).

29 per cent of $25 324 is $7344, 28 per cent of $25 324 is $7091, 25 per cent of $25 324 is $6331, and 20 per cent of $11 262 is $2252, giving a total of $23 018. (In Table A: Costs of Children, this is shown as $20 766 plus 20 cents for each dollar over $75 972.) This is the cost of the children.

Step 3 Apportion this cost between the parents

This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the Combined Child Support Income. Leila has 57.45 per cent of the Combined Child Support Income, so she is responsible for 57.45 per cent of the cost of the children and Ali is responsible for 42.55 per cent.

Under the formula, Leila is given credit for incurring 50 per cent of the children’s costs by caring for the children. Therefore only the balance of Leila’s obligation must be contributed through her child support payment. Leila’s payment is her total obligation (57.45 per cent of the children’s cost) less credit due to care (50 per cent). Her payment is 7.45 per cent of the costs of the children.

7.45 per cent of $23 018 is $1715. This is the amount that Leila is required to pay to Ali.

Peter and Kate

Peter and Kate have two children, one is eight and one is 15. They separate. Both the children live with Kate 100 per cent of the time.

Step 1 Find Peter and Kate’s Child Support Incomes

Peter has an Adjusted Taxable Income of $50 000 and Kate has an Adjusted Taxable Income of $24 000. Deducting the self-support component ($16 883) from each gives Peter a Child Support Income of $33 117 and Kate a Child Support Income of $7117.

Step 2 Calculate the costs of the children

Peter and Kate’s Combined Child Support Income is $40 234. The cost of the children is calculated by taking 26.5 per cent of the first $25 324 of this and 25.5 per cent of $14 910 (the remainder of the Combined Child Support Income).

26.5 per cent of $25 324 is $6711, and 25.5 per cent of $14 910 is $3802, giving a total of $10 513. (In Table A: Costs of Children, this is shown as $6711 plus 25.5 cents for each dollar over $25 324.) This is the cost of the children.

Step 3 Apportion this cost between the parents

This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the Combined Child Support Income. Peter has 82.31 per cent of the Combined Child Support Income, so Peter is responsible for 82.31 per cent of the cost, and Kate is responsible for 17.69 per cent of the cost. Kate spends her share of the cost in paying for day-to-day expenses from her money and Peter pays Kate his share to meet the remaining expenses of the children.

82.31 per cent of $10 513 is $8653. Peter must pay this to Kate.

Jack and Sharon

Jack and Sharon have one child aged nine years. They separate. The child lives with Sharon 100 per cent of the time.

Step 1 Find Jack and Sharon’s Child Support Incomes

Jack has an Adjusted Taxable Income of $26 000 a year. Sharon has no private income of her own and is paid the maximum rate of Parenting Payment (Single), giving her an estimated Adjusted Taxable Income in 2005–06 of $12 979. Deducting the self-support component ($16 883) from each gives Jack a Child Support Income of $9117 and Sharon a Child Support Income of zero.

Step 2 Calculate the costs of the children

Jack and Sharon’s Combined Child Support Income is $9117. 17 per cent of $9117 is $1550. (In Table A: Costs of Children, this is shown as 17 cents for each dollar.) This is the cost of the child.

Step 3 Apportion this cost between the parents

This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the Combined Child Support Income. Jack has 100 per cent of the Combined Child Support Income, so he is responsible for all of the cost of the child. Jack pays Sharon $1550.

Stephen and Vimia

Stephen and Vimia have two children aged six and four. They separate. The children spend some school holidays with Stephen, so that Vimia’s share of care is 90 per cent.

Step 1 Find Stephen and Vimia’s Child Support Incomes
 

Stephen has no private income of his own and is receiving Newstart Allowance, giving him an estimated Adjusted Taxable Income of $10 462 a year. Vimia has no private income of her own and is paid the maximum rate of Parenting Payment (Single), giving her an estimated Adjusted Taxable Income in 2005–06 of $12 979. Deducting the self-support component ($16 883) from each gives both Stephen and Vimia a Child Support Income of zero.

Step 2 Calculate the costs of the children

Stephen and Vimia’s Combined Child Support Income is zero. There is, therefore, no cost to be apportioned between the parents.

Step 3 Calculating the child support obligation

As Stephen is receiving income support and has less than 14 per cent care of the children, he pays Vimia $6 a week in child support.