Updated modelling on child support reforms

The Australian Government today released updated analysis of the third stage of the child support reforms introduced by the previous government, which includes the new child support formula.

The new analysis details changes over the first six months’ operation of the new child support formula.

It compares a parent’s assessment on 30 June 2008, immediately before the new child support formula was implemented, with their assessment on 31 December 2008 after the new formula was introduced.

Based on the updated analysis, around 45 per cent of receiving parents had net increases in household income due to the changes, and 45 per cent had net decreases, while 10 per cent had no change.

For paying parents, around 49 per cent had net increases due to the changes, 32 per cent had net reductions, and 19 per cent had no change to their household income.

The updated analysis shows that most parents continue to see a change of less than $20 per week as a result of the reforms.

In a large proportion of cases, the changes are less than $10 per week.

Recognising that Australian society has changed remarkably since the original child support formula was developed 20 years ago, the changes aim for a more balanced approach by taking into account both parents’ income and the actual cost of raising children.

The changes respond to the trend towards increased shared parenting and recognise that when care of a child is shared, the costs are also shared.

The new scheme 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 final implementation of the new child support formula from 1 July 2008.

The analysis takes into account actual changes in child support assessments and modelled changes to Family Tax Benefit.

Compared to the first analysis, released last year, the most notable difference is that more receiving parents showed a net gain and slightly fewer showed a net loss in December 2008 compared to June 2008.

This is largely due to parents’ circumstances changing over the six month period and the recognition, under the new formula, that costs increase as children grow older.

The figures used in the analysis are based on obligations under the new formula, and may not represent what is actually paid or received.

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

As part of the reform package, the Government has also introduced a range of measures to improve compliance which has led to an extra $235 million in child support being paid over the past three years.

A copy of the full analysis is available on the FaHCSIA website.