Further updated modelling on child support reforms

The Australian Government today released two reports that provide further analysis of the child support reforms introduced by the previous government.

The child support reforms began in 2006 and the final stage of the reforms, including the new child support formula, came into effect on 1 July 2008.

These reports provide further analysis of the impact of the reforms, and their findings are broadly consistent with the two previous reports released in August 2008 and August 2009.

The first report – Distributional Impact Modelling – compares a parent’s child support assessment on 30 June 2008, immediately before the new child support formula was implemented, with their assessment on 1 July 2009, 12 months after the new formula was introduced.

The analysis also includes how much Family Tax Benefit is paid to each parent under the new rules for sharing of family payments introduced as part of the child support reforms.

The figures used in the first report are based on obligations under the new formula – what parents should pay or receive – they do not show what is actually paid or received.

After the first year of the new formula, the analysis shows that around 47 per cent of receiving parents should have had net increases in household income due to the changes, and 44 per cent net decreases, while there should be no change for 8 per cent.

For paying parents, around half should have had a net gain due to the changes, around a third net decreases, and 18 per cent no change to their household income.

For a large proportion of cases the change was less than $10 per week.

For the first time, Actual Transfers Modelling was also undertaken which compares all child support actually transferred in 2008-09 with the amount transferred in the 12 months to May 2008.

Unlike the Distributional Impact Modelling outlined above, this analysis shows actual changes in amounts of child support paid or received over the two twelve month periods, before and after the new child support formula came into effect.

To allow a direct comparison between the two amounts, the amount of child support from the 12 months to May 2008 was adjusted by CPI and the FTB amount was reflected on 30 June 2009 circumstances.

The key findings show that after a year of the new child support formula:

• For receiving parents, around 59 per cent received more child support and FTB, and approximately 36 per cent received less.
• For paying parents, around 61 per cent contributed more child support, and around a third contributed less.
• Around 6 per cent of receiving and paying parents experienced no net change.
• In most cases, the changes were under $20 per week, and for a large proportion the change was less than $10 per week.

The new child support formula was a key recommendation of a 2005 independent Howard Government Ministerial Taskforce on child support, established as a result of the House of Representatives inquiry, Every Picture Tells a Story.

The reforms were made by the Parliament in 2006, and implemented in three stages, with the final implementation of the new child support formula from 1 July 2008.

The changes recognise that since the original child support formula was developed over 20 years ago, there has been a trend towards increased shared parenting.

The child support reforms aim for a more balanced approach by taking into account both parents’ income and the actual cost of raising children.

The Government will continue to monitor the ongoing impact of the reforms to ensure the best interests of children are protected.

A copy of the full analysis is available at FaHCSIA’s website.