Working out how much child support each parent is responsible for is often a flashpoint between couples with children who then separate. In Australia, calculating the right amount of child support you either pay or receive is determined by the Federal Human Services department, who use an eight-step formula to calculate the amount.
Generally speaking, the assessment formula will decide whether you:
- have to pay child support, because your percentage of care of a child is assessed to be less than your share of the combined income; or
- receive child support, because your percentage of care of a child is assessed to be more than your share of the combined income.
Each parent’s income is equally assessed in making a child support assessment, and excludes any income from non-parent carers.
The details of calculating child support
In determining the child support you either pay or receive the department takes into account the parents’ individual and combined income, how much time each parent spends caring for the child, and the child’s age.
The costs of caring for a child are based on research about how much Australian parents spend on children, and are adjusted each year to reflect changes in costs and incomes.
An eight-step formula is used which comprises:
- Calculating each parent’s child support income, that is, a parent’s adjusted taxable income minus a self-support amount (the amount each parent needs to maintain themselves, calculated as one-third of annualised Male Total Average Weekly Earnings) and any relevant dependant allowance.
- Adding both parents’ incomes to work out a combined child support income.
- Determining each parent’s income percentage by dividing each income by the combined total.
- Calculating each parent’s percentage of care.
- Working out each parent’s cost percentage using the department’s ‘care and cost’ table. Your cost percentage is your share of the child’s costs that you meet directly through care, and is measured through things such as the number of nights a year the child spends with you.
- The cost percentage is subtracted from the income percentage for each parent to arrive at a child support percentage. This figure determines whether a parent pays or receives child support. A negative percentage means that parent should receive child support because their share of costs for the child is more than met by the amount of care they provide, while a a positive percentage means that parent will pay child support. Where there are different care arrangements for different children, there might be different child support percentages for each child.
- The costs for each child, based on the parents’ combined total income, are calculated using the department’s ‘costs of children’ table.
- The total amount of child support payable is calculated by multiplying the positive child support percentage by the costs of the child. In cases where both parents are assessed to pay each other (as is possible where both parents are in fulltime work), these amounts are offset before arriving at the final figure.
Costs of children
The department utilises a costs of children table that reflects the fact the cost of raising children can total different amounts for different people, particularly the extra cost of more children. For Example, a second child adds approximately 50 percent to costs compared to a single child. A third child adds the same amount again, but further children make no difference.
In each case, the figure is reached by assessing the parents’ combined child support income, the number of children and the children’s ages. It should be noted the costs of children table also represents net costs after Family Tax Benefit.
Once calculated, Human Services will notify each party as to how much child support they must pay, or are entitled to receive. The assessment notice includes an annual figure, an amount which must be paid each month, and the current balance. Special circumstances can be raised in support of a review of a child support assessment.
At Harris Lieberman, we have more than 30 years of experience in family law matters such as child support. While the process and formula for calculating child support can appear complex and confusing at first, we can help simplify and explain it to you in the event that you are unsure about whether you need to pay child support, or should be receiving it. Contact our solicitors on (02) 6051 5100 for more information today.