Child Support Formula Unfairness

Child support is very important. Estranged parents should definitely be liable for their share of parenting costs incurred by the parent who bares the cost and time of care giving. Parents with less custody should contribute to the other parent who does the majority of the caring. However, many parents form quite equitable care arrangements, where each parent shares care fairly equitably. This arrangement is known as shared parenting, but is subject to an IRD formula that can allow some really unfair situations.

Scenerio A

First we take a common 50/50 arrangement. There are 2 families. Each with a new baby. 1 parent from each family shares 50/50 custody of a school aged child from a previous relationship. In both new familes, each of the mothers are staying home with their new babies. Each of the fathers are working and earning exactly the same wage. Sounds like a perfectly fair and equitable arrangement. However, In this scenerio, the working father from family A will pay the mother from family B, 12% of his wages. So family B ends up having 24% more disposible income each month, even though they have each have the same circumstances. That's not fair.

Family A Family B

Mother earns $0
Father earns $75000
Father has 50% custody of 5 year old
1 new 6 month old
Father of 1st child pays 12% over $14000

Mother earns $0
Father earns $75000
Mother has 50% Custody of 5 year old
1 new 6 month old
Mother of 1st child receives child support

 

Scenerio B

We now exagerate scenerio A, just to show how unfair it can be. Family A has 60% custody, and a new baby to look after. Family B has 40% custody, but no new child. Given the following income circumstances, it creates another very unfair situation, where the poorer family, with the majority of child care costs, is also subsidising the richer family. That's not fair.

Family A Family B

Mother earns $0
Father earns $75000
Father has 60% custody of 5 year old child
1 new 6 month old
Father of 1st child pays 12% over $14000

Mother earns $14000
Father earns $250000
Mother has 40% custody of 5 year old child
No new child
Mother of 1st child receives child support

Considerations

It is neither parents fault, this just shows how the IRD child support formula can calculate unfair results. The formula basically assumes that both parents following a divorce will either get a job, in which case they cross subsidise each other, or alternatively, it assumes the non working parent will maintain majority care of the child, in both of these cases the current formula does work out ok. However, these 2 situations are not desireable to all families. Especially with school aged children, both parents would like to have equal custody, but we can't guarantee equitable outcomes given the current formula.

In both scenerio A and B, we include the value of the new partners incomes. And really this is unfair, as really that should be irrelevant. It does help illustrate the ludicracy of the formula, but really what we see is that the formula should take into account the number of nights a parent cares. If a parent cares for 50% or more of the nights, then they should not be obligated to contribute anything to the other parent. The other parent has ample opportunity to either find work, or enjoy the care of their new partner.

Current Formula

The parent with less than 40% custody pays 18% over $14000 of their income for the first child. Each parent in shared care arrangement pays 12% over $14000 of their income for the first child.

Suggested New Formula

A parent with no nights custody pays 20% for first child
A parent with 1 night custody per week pays 15% for first child
A parent with 2 nights custody per week pays 10% for first child
A parent with 3 nights custody per week pays 5% for first child
A parent with 50% or more nights custody per week pays 0%

Benefits of Current Formula

It is fairy simple to calculate and does not require changes to payments should care arrangements change only a little.

The current formula enables the government to claw back more from liable parents for the cost of DPB.

The current formula preferences parents who have 4 or 5 nights custody. 

Benefits of New Formula

Payments are made based on the number of nights of custody, not a 2 step formula. This means that payments reflect that the liable parent already incurs caring costs directly, and that the recipient parent has the opportunity to seek employment on those other days.

This formula will stop a fight in the family courts where 1 parent fights for a 9/5 night arrangement over a fortnight, which will secure a greater child support payout, where as a 8/6 night arrangement would secure a lower payment. 

The new formula does not take into account the new partner incomes.

The new formula acknowledges that estranged parents who provide no direct care, should contribute more towards their childrens costs.

Problems With New Formula

Any change will cause distortions in current payment arrangements, this might be good or bad, but will cause many to resent the change.

It would likely cause new arguments over custody.

Posted: Thursday 15 July 2010

Comments

  • about time the system stopped alienating the fathers from their children. Now they will be able to afford to have time with their kids instead of paying additional tax (disguised as child support) our situation at the moment is we have the kids 32% of the time and have to pay $1200 a month in child support (that the kids don't see b/c mum is on the DPB) Mum refuses to work (has been "studying" for 9 years (and still has no degree) So, yes - about time!
    Posted: 2013-04-30 15:12 by hopeful    
  • Finally. This will give the ex incentive to work, rather than me having to work harder so that she does not have to!. It will also set a good example to our Child. ie: We work to improve ourselves and get ahead in life. The current system is unjust.
    Posted: 2012-05-14 21:34 by Velcro    

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