For most couples with children separating will mean the Federal Department of Human Services undertakes a child support assessment and later orders for money to be paid.
The amount of child support that needs to be paid is calculated using the formula we have set out below.
The basic formula is:
- The self-support amount – the amount the government says people need to live off- is subtracted from both parent’s incomes for the most recent financial year.
- Those adjusted incomes are added together and the percentage of the income pool each parent earns is then calculated.
- The amount of time the children spend with each parent is calculated as a percentage.
- If one parent earns more but has the children for less time, the percentage of the time they have the children for is subtracted from the percentage share they have of the income pool. This is because they are viewed as paying for the children’s needs when they’re in their care but owing their share of the children’s upkeep when they’re not.
- We then take the government assigned figure for the cost of raising children and multiply it by the percentage calculated in step four to get the amount of child support payable.
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STEP 1: For example, let’s assume we have a couple that has one child who is two years old and one half of the relationship earned $50,000 over the course of the past financial year and the other $100,000.
We then need to subtract the amount the government says they need to live-off – which for 2018 is $24,535. For the first parent this makes their adjusted income $25,465 and for the second $75,465.
STEP 2: This means the total assessable income pool of the former couple is $100,930 a year and the person whose assessable income is $25,465 brought-in 25.3% of that income pool, while the other person brought-in 74.7%.
STEP 3: The next part to work out is how much time the children spend with each person.
For example, a relatively common parenting arrangement for separated couples may be that one half has the children for three nights every fortnight and half of the school holidays (in Queensland half of the school holidays is about 38 nights a year).
This is equal to 166 nights a year. To work out the percentage of the year that is equal to we simply divide 166 by 365 (the number of days in a year) and multiply by 100.
This means the children spend 31.78% of the time with one parent and 68.22% with the other.
STEP 4: Essentially what child support does is equalise any gap between how much one person earns and how much of the time they spend caring for the kid/s.
Let’s assume the parent who earns $100,000 is the parent who has the children for 31.78% of the time.
In that case we would subtract the amount of time that parent has the child for (31.68%) from their share of the income (74.7%) – which gives us a figure of 43.02%.
So, that parent would have to compensate the other parent for 43.02% of the cost of raising the children.
STEP 5: The dollar value the Department assigns to the cost of raising children is worked out using the following table – which you can view here:
So, in our scenario we would go to the Cost of the Children Table for 2018.
We then use the assessable income we worked out in Step 1 to look up the relevant category.
Our couple falls into the category of $73,606-$110,409 of assessable income per year, which means the cost of looking after the child is calculated at $11,777 plus 12 cents for every dollar earned over $73,606.
In this case this is equal to: ($75,465 – $73,607) x 0.12 = $222.96.
So, the Department would assess the cost of raising this child to be $11,999.96 for 2018.
We then use the percentage we calculated above – for the parent earning $100,000 a year – to calculate the fraction of the cost of raising the child that is outstanding.
In this case that is $11,999.96 divided by 100 x 43.02 = $5,162.38
This means the person earning $100,000 a year, who has their two year-old child for 166 nights a year would pay $5,162.38 a year in child support.