About the assessment calculator / estimator
The child support calculator estimates the amount of child support payable/receivable by Australian parents. It applies the basic formula, as defined by the Department of Human Services.
- The calculator / estimator is not designed for cases involving parents with multiple child support arrangements.
- Parents who have additional children living at home will have a lower liability or higher entitlement than indicated.
- Small variations between the estimates and actual assessments may arise due to differences in the timing of updating ABS data.
The calculator offers a reliable estimate of child support for the vast majority of parents, with the caveats above, and noting:
- Child support assessments normally just use the variables identified in the calculator form: taxable incomes, number and ages of children, and percentages of nights spent with each parent.
- The formula has been applied exactly as defined by the Australian Government (see: how it's calculated).
For anyone entering into an arrangement involving an administrative assessment, the Child Support Agency (CSA) will ultimately determine the exact amounts payable or receivable. The CSA bases its assessments on the information supplied by parents and any other relevant information available.
CSA versus private collect
Separated parents will be registered with the CSA if either parent makes an application to the CSA for a child support assessment. Parents can choose whether to have child support paid via private arrangement between parents ("private collect agreement"), or have it collected from the non-resident parent by the CSA and paid to the resident parent ("CSA collect agreement"). According to the CSA's administrative data, [47%] of child support cases registered with the CSA were CSA collect cases; the remaining [53%] were private collect.
Child Support Formula Issues
The child support formula is designed to produce fair assessments. But it doesn't always achieve that.
- There's a couple of obvious and readily fixed biases in the formula.
- The calculator corrects for these in the "Fairness Test" section above.
Let's have a closer look to see where the child support formula performs badly and what can be done to improve it.
1. Distortionary Cost % function
A vital part of the formula is the calculation of each parent's child support cost percentage. A parent's cost percentage determines how much of the costs of children they are assumed to cover automatically (and how much the other parent is covering).
- We know that a parent who never sees their children should have a 0% cost percentage and the other parent, who has the children all the time, should have 100%.
- If care is 50:50 (the children spend 7 nights with each parent per fortnight), the costs can be assumed to be spread evenly (50% cost percentages).
What happens for the in-between levels? It would seem logical to connect the anchor points with a straight line. That would mean the cost % rises steadily with the care %, from 0% to 50% to 100%. For individual parents, such a linear relationship may be unrealistic. But, across a large population, it's probably a good approximation. A direct correlation is used in other jurisdictions, such as California.
The child support formula doesn't use a straight line however. It twists and turns this way and that. You can see that from the chart. For example:
- A parent who has children for 2 nights per fortnight has a 24% child support cost share. A parent who has children for 4 nights has the same cost share: 24%. So doubling the care % is assumed to make no difference to costs.
- Parents with 5 nights per fortnight care are especially disadvantaged. There is a 9 point gap between their care amount (36%) and the credit they receive for costs (27%). Effectively, they pay child support for a significant amount of time when the children are with them.
Solution: drop the table
The solution here is relatively simple. You could just stop using the distortionary and unnecessary Care and Cost Table. Instead, the child support cost percentage could be set to match the care percentage.
Care amount vs credit for spending on children
A common complaint from people paying child support is that they struggle to get ahead financially. If they manage to get a pay increase, much of it disappears in taxes and increased child support payments.
It makes sense to spend more on children when you have higher income. However, the way the formula tries to force this is crude, ineffectual and may often be counterproductive.
Child support cost inflation
Cost inflation in child support is where, as the incomes of parents rise, the formula's Costs of the Children measure grows beyond real child-rearing costs.
- It happens because the Costs of the Children measure rises almost in lock step with the incomes of parents (see chart).
- Cost inflation continues until an income cap is reached at a combined income level of 3.167 times annualised MTAWE (over $225,000).
- The Costs of the Children measure is around double for high-income parents compared to those on average incomes.
Cost inflation causes the child support system to capture funds which are not needed for children. When this happens, child support can cause more problems than it solves. You want payers to earn as much as possible and be directly generous with their offspring. But cost inflation destroys incentives for this to happen.
- If a payer achieves an earnings increase, the formula assumes the other parent spends a good proportion of the pay increase on the children (even though the recipient's base income is unchanged).
- Support levels that were adequate before are, according to the formula, no longer so.
- The payer parent is required to pay extra for 2 reasons (i) their Income % has gone up and (ii) cost inflation.
Disincentive effects are especially great because support income is calculated using pre-tax dollars. The benefit to a high-income payer from increased earnings is already suppressed by high marginal tax rates, before child support effects kick in as well.
Where does extra money go?
When child support is already at a high level, increasing it may not benefit children and could actually do harm.
- Both parents of a child are capable of spending money on that child in one form or another.
- The act of forcing a payer to make large child support payments to an ex partner discourages the payer from being personally generous.
- At the same time, the recipient parent can spend extra support on whatever they like. His or her spending choices may not be child-focused.
Solution: cap costs
Lessening cost inflation would improve work incentives for parents and encourage payer parents to be more directly generous with children. It requires stronger taper rates in the Costs of the Children table. A simple way to achieve this is to cap costs in the Costs of the Children Table at lower amounts – at, say, the levels for average income earners.
- Costs have been capped like this in the Fairness Test section of the calculator / estimator.
- Capping costs would limit the cost of 2 children of mixed ages to around $19,000 a year.
Lower caps on the Costs of the Children measure would remove disincentives to parents earning more. High income payer parents would retain a larger share of earnings. Recipients would need to increase their own earnings in order to make a good living. With both parents encouraged to be aspirational, children may ultimately be better off.
How child support rises with income
Maximum child support
The maximum child support payable is also known as the “cap”. The maximum child support is applied to the combined income of both parents up to 2.5 times the annual equivalent of all Male Total Average Weekly Earnings (MTAWE) and calculated using the Costs of Children Table.
Purpose of child support
The Child Support Scheme was designed to ensure that both parents contribute to the cost of their children, according to their capacity. There are approximately 1.3 million parents and 1.1 million children involved in the Scheme, and more than 40 per cent of Australian families who receive Family Tax Benefit include a child support parent.
The Child Support Program was introduced in Australia in 1988 to strike a fairer balance between public and private forms of support for children [and] to alleviate the poverty of sole parent families. The Program has undergone a range of changes since its original introduction in the late 1980s, including the substantial changes on 1 July 2008 to the child support formula and the introduction of the Costs of the Children Table.
Fair or Unfair Assessment?
Here is an income and care scenario which highlights issues with the child support formula.
- The parents have shared care of 3 children, who spend 9 nights out of 14 with their mother.
- Basic child-raising costs were estimated based on formula costs for parents on average incomes.
- Both parents are on good incomes, with the father earning $25,000 more.
- Child support payments leave the mother in a significantly stronger financial position.
Child support was estimated using the calculator on this page. The calculator was also used to estimate child-raising costs - as the Costs of the Children for parents with a combined taxable income of 5/3 x annualised MTAWE (and cost % = care %). Taxes were estimated using personal income tax tables and the Medicare Levy.