To learn how child support is calculated in Australia (how it works), check out the infographic and read the discussion.
To estimate your child support payments, use the calculator / estimator (it's cleaner than the CSA version).
How Child Support is Calculated
Child support payments are calculated using a complex formula (though the CSA call it the "basic formula").
Concept and method: how it works
While the calculations are complex, the principles are straightforward.
- Each parent is responsible for meeting the costs of children.
- Costs depend on the number and ages of children.
- Higher income parents are required to contribute more.
- A parent gets credit for covering expenses while caring for the child(ren).
- You pay support when your Income % > your Cost %.
In the final calculation, your child support is calculated as the Costs of the Children multiplied by the difference between your Income % (share of combined income) and your Cost % (credit for time with the child(ren)).
You pay child support if the result is positive and receive support if it is negative. However, you never have to pay if you have at least 65% care.
Information used to calculate support
Child support is normally worked out using just this information:
- taxable incomes of parents
- percentage of nights each parent has the child(ren)
- number of children aged < 13 and number aged 13-17.
1. Parent Incomes
The incomes of parents are an essential part of calculating child support in Australia.
The formula uses taxable income, which is the income you report to the ATO when you submit your tax return. It is your gross, before-tax income rather than net income. You will have a smaller amount of income left to spend after paying income and other taxes.
Typically, the formula uses the taxable income reported in your most recent tax return.
The formula assumes each parent needs a certain amount of income just to maintain themselves. This is calculated as one-third of annualised Male Total Average Weekly Earnings (MTAWE). The 2016 Self-Support Amount was $23,752.
Child support income
For the purposes of calculating child support, each parent has a Child Support Income. It is your taxable income minus the Self-Support Amount. Child Support Income quantifies your capacity to maintain your children financially. As detailed below:
- the Parents' Combined Child Support Income is used to calculate Costs of the Children
- the Income % for a parent determines the share of costs he or she must meet (via payments or care).
2. Costs of the Children
The financial costs of raising children are captured by the Costs of the Children measure. To calculate it, you need to use the Australian Government's Costs of the Children Table.
Number of children
The formula allows for the extra cost of more children. In approximate terms, a 2nd child adds 50% to costs compared to a single child. A 3rd child adds the same amount again (so 3 children cost twice as much as 1). Any more children make no difference to the Costs of the Children.
Ages of children
In working out child support payments, there's a small allowance for a child's age. Children aged 13+ cost about 20% more in the Costs of the Children table compared to children aged 12 and under.
Child support normally stops when a child reaches 18, though continuation rules exist for children still in secondary education.
The Costs of the Children measure increases with the incomes of the parents.
- If both parents have a taxable income below the Self-Support Amount, the Costs of the Children measure is nil.
- A cap on the Costs of the Children applies when the Parents' Combined Child Support Income reaches 2.5 times MTAWE. The cap normally corresponds with a combined taxable income of 3.167 times MTAWE (or $226,000 using the 2016 MTAWE).
- The highest Costs of the Children possible in 2016 was $50,592 – for high-income parents with 3 or more children aged 13+.
The treatment of income in calculating the Costs of the Children is a controversial aspect of the Child Support Scheme. Cost inflation may be excessive at medium to high income levels.
3. Income Shares
The calculation of income shares is a simple but important step in determining child support.
For each parent, an Income % is calculated as his or her Child Support Income divided by the Parents' Combined Child Support Income.
The Income % is interpreted under the formula as the % of the Costs of the Children which must be covered by the parent. You can meet costs either by providing care for the children or by paying child support.
- For example, if you make 60% of the combined income amount – your Income % is 60% – you must meet 60% of the Costs of the Children.
- If, based on how many nights you have the child(ren), your Cost % is greater than this, you have excess cost credits and will receive child support.
- If, on the other hand, your Cost % is < 60%, your required financial contribution exceeds your care costs and you must pay child support.
4. Cost Shares
When a parent has care of the child(ren), he or she gets credit meeting for child-rearing expenses. The percentage of the Costs of the Children for which you are credited is your Cost %.
Your Cost % is determined from your Care % using the Care and Cost Table (here).
- The Care % is the proportion of nights in a year for which you have custody of the child(ren).
- Typically, it is calculated by dividing the number of nights you have the child(ren) each fortnight by 14.
The Care and Cost Table produces differences between the Cost % and the Care %. The purpose of these distortions is unclear but, for many parents, the Cost % is quite close to the Care %.
- While the Cost % usually approximates the Care %, it can be higher or lower due to a number of bends in the cost function.
- The Care and Cost Table most disadvantages parents with 5 or 12 nights care per fortnight and, conversely, most advantages parents with 9 or 2 nights of care.
5. Calculation of Child Support
To calculate child support, the final step is to multiply the Costs of the Children value by the difference between your Cost % and Income %.
- You receive child support if your Care % is > 35% and your Cost % > your Income %.
- You pay child support when your Care % < 65% and your Income % > your Cost %.
The Child Support Agency (CSA) is responsible for determining child support and notifying parties of how exactly much they must pay or are entitled to receive.
An assessment contains an annual figure, an amount which must be paid each month, and the current balance. Assessments can be altered to account for special circumstances through a Change of Assessment review (e.g. Reason 8 COA).
Child Support Formula
The current formula was introduced to calculate the amount of child support paid between separated parents. The formula:
- bases the costs of children on Australian research. The research shows that as income rises, spending on children rises in $ terms, but falls as a % of income, and that expenditure on children rises with age;
- uses an ‘income shares’ approach to calculate and share the costs of children. This means the cost of children is based on the parents’ combined incomes, the cost is distributed between the parents by their capacity to pay and the cost of regular or shared care by the non-resident parent is considered; and
- allows both parents the same self-support amount.