Proposed New Formula for Child Support

A new child support formula for Australia: the “Extra Care” formula

The proposed Extra Care formula restructures child support around care rather than income sharing between adults.

• Parents who pay child support contribute only for the extra care provided by the other parent above a 50% care baseline. Payments do not increase simply because the other parent has a low income.
• Parents receive child support only when they provide more than 50% care. Their own income does not reduce entitlement, and they are not required to report it.

Not radical: similar structure to the UK model

This approach is not radical by international standards. In the UK, child maintenance is calculated from the paying parent’s gross income using percentage rates that vary by number of children, and payments are reduced where the child stays overnight with the paying parent (shared care). The Extra Care formula applies the same underlying idea in a simpler way, by explicitly compensating for care above 50%.

Why change the current income-sharing approach

This model removes many of the structural problems created by the current income-sharing approach, which relies on complex assumptions and often creates incentives that work against shared parenting.

Under the Extra Care model, child support can be calculated in a simple, transparent way that aligns with real care arrangements, while still encouraging both parents to earn income and remain economically active.

The Pay for Extra Care formula is calculated in three steps.

To calculate child support, all that is required is the taxable income of the paying parent, the number and ages of the children, and the percentage of care provided by the main carer.

• There is no need to refer to large, opaque cost tables.
• The calculation can be performed using straightforward arithmetic.

Child support is calculated by (1) estimating the annual cost to the payer of raising a child, (2) adjusting that cost for the number and ages of children, and (3) compensating the other parent for care provided above 50%.

1. Cost of a Child

Example. John is the payer (has <50% care) and had $90,000 in taxable income last year. The annual cost of care for a child is 15% of $75,000 plus 5% of $15,000. This equals $11,250 + $750 = $12,000.

The cost of a child is based solely on the payer’s income. In this way, child support reflects ability to pay without transferring income between adults.

The initial rate (15% of income up to $75k) means payers on low-to-middle incomes contribute at broadly similar levels to the current scheme.

The higher-income rate (5% of income between $75k and $180k) is substantially lower in after-tax terms. This reduced marginal rate recognises that higher-income parents already contribute more in absolute terms, and avoids excessive effective taxation.

Key benefits

1. Contributions scale with measured capacity, reducing the risk that child support exceeds what is financially sustainable.
2. Because entitlement depends on care rather than recipient income, the main carer is not penalised for earning income.
3. Payers face weaker disincentives to increase earnings, addressing a major distortion in the current system.
4. The calculation is simple and transparent, replacing complex tables with a clear formula.

Trade-offs

This approach places greater responsibility on parents themselves to provide for their children, rather than relying on income transfers between adults. Critics may view this as a weakness. The alternative, however, is a highly intrusive system that encourages income minimisation, fuels disputes over care, and distorts parenting decisions in ways that ultimately harm children.

2. Cost of the Children

Example. For John, the cost of a child is $12,000. Because his assessment covers two teenagers, the adjusted cost is $12,000 × (100% + 50% + 15% + 15%) = $21,600.

The loadings account for the additional costs associated with multiple children and older children.

The parameters broadly approximate the implied settings under the current scheme, which were derived from extensive cost research. In this respect, the new model relies on the same underlying assumptions, but applies them more transparently.

Key benefits

The cost factors are simple and visible, allowing complex tables to be replaced with explicit parameters.

Trade-offs

The simplified structure sacrifices some granularity, but removes unnecessary complexity that contributes little to accuracy while increasing disputes.

3. Pay for Extra Care

Example. For John, the adjusted cost of the children is $21,600. Kate provides care for 11 nights per fortnight, or 78.57% of the time. The care provided above 50% is therefore 28.6%. John pays 28.6% of $21,600, or $6,178 per year.

Under the Extra Care model, child support compensates the parent who provides additional care. The payer contributes the amount they save by providing less than 50% care.

Key benefits

1. The formula closely matches everyday intuitions about fairness and responsibility.
2. Neither parent is financially advantaged or disadvantaged relative to a 50:50 care arrangement.
3. Children benefit indirectly through higher combined parental resources and reduced conflict.

Trade-offs

The current income-sharing formula requires the payer to fund the full cost of care where the other parent has low income and full-time care. That income-based concession is removed under the Extra Care model.

Comments

The current child support scheme is increasingly misaligned with modern parenting patterns and economic realities. A care-based model such as the Extra Care formula offers a coherent alternative that reduces distortion, discourages conflict, and better aligns incentives with children’s long-term interests.

A mathematically sensible formula

The Extra Care formula has no hidden agenda. It applies a straightforward economic principle: costs should be allocated transparently, using consistent assumptions and simple arithmetic.

The formula uses the same underlying cost assumptions as the current scheme, but applies them in a way that is internally consistent and easier to understand.

Changing family realities

Much of the dissatisfaction with Australia’s child support system reflects outdated assumptions about work, care, and gender roles.

Parents today increasingly expect to share both work and caregiving responsibilities. A child support system that discourages employment or rewards control over care is poorly suited to these realities.

Treating parents fairly and neutrally creates better conditions for cooperation. In the long run, that is what most benefits children.