If you're new to child support or want to gain insight into how it works, here are the top 3 things that you should know.
1. It's About Sharing Income
The child support formula redistributes income to assist parents meet the costs of children. How the money is actually spent is not part of the equation. The formula just shifts money towards whichever parent appears to need it most to cover care expenses.
- A parent contributes more the higher is their income compared to the other parent.
- The assumed cost of children goes up with the total income of parents (since richer parents normally spend more).
- Child support is allocated to cover care costs. The % of costs credited to a parent depends on the % of nights the children spend in his or her care.
Income sharing vs time sharing
Australia's income-sharing scheme makes child support a form of spousal maintenance. How much a parent pays or receives heavily depends on how their income compares with the other parent's income. The system rewards a parent for earning less than they could. Typically, the higher earning parent pays too much, or receives less support, than they should based on actual costs.
Child Support Australia has an alternative approach based on time sharing. Under time sharing, child support is compensation for extra care time above 50%. The parent with less than 50% care passes on his or her estimated cost savings to the other parent. The time sharing method produces fairer, more realistic assessments and encourages parents to be aspirational.
2. Some Parents Do It Tough
The child support system often leaves parents in difficult financial and personal circumstances.
- The main carer of a child may receive little support or even pay support.
- Payers can be required to contribute such a large share of income that working gives little personal reward.
- Payers are routinely required to fund care that they'd prefer to provide themselves.
Inevitable vs avoidable unfairness
An unfair child support outcome may be due to circumstances and not the system. For example, it is difficult to help a parent where:
- a court order severely limits how much time the parent spends with their children
- the other parent has an ingrained inability or unwillingness to earn an income.
Unfairness can, however, also be attributed to the current system. Here's a non-exhaustive list of fixable problems:
- Child support payments are inflated by unsound methods for estimating costs.
- Parents with equal or majority care can be required to pay large amounts of support.
- The amount of support depends heavily on how much work the recipient chooses to do.
- Effective marginal tax rates for child support participants commonly exceed 50%, discouraging work effort from everyone.
- Certain changes in care arrangements produce disproportionate changes in child support.
- Recipients generally profit out of child support, which heightens disputes over care.
- Child support officers can manually change assessments in ways that drive payers into poverty.
- Parents are forced to pay for care that's been illegally appropriated by the other parent.
3. It's War Against Payers
The job of child support officers is to collect money from payers and give it to carers. Over time, and backed by the law, they have become good at it.
If you have been through a Change of Assessment, you might have first-hard experience of how they unfairly target payers. For example, case and review officers:
- interpret the law selectively
- often believe the word of recipients but not payers
- use creative accounting to increase payments (and they're not even accountants)
- keep extracting money even when it drives payers to poverty and worse.
Advice for payers
In dealing with any complex support matters as a payer, you need to be aware that the system is geared towards extracting maximum payments from you. That means you need to be careful and, if things aren't going well, stay calm, don't take it personally and be strategic. You can at least use some sensible legal methods to avoid overpaying.