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The new Formula and Formula Fun

Grant Reithmuller, Federal Magistrate, looks at Stage 3 of the planned amendments arising from the Child Support Legislation Amendment (Reform of the Child Support Scheme — New Formula and Other Measures) Act 2006 expected to commence on 1 July 2008

In this two-part paper, Grant Reithmuller, Federal Magistrate, looks at Stage 3 of the planned amendments arising from the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 expected to commence on 1 July 2008.

The relevant part of the departmental fact sheet described these amendments as:

Stage Three – Changes to the Scheme from July 2008

In Stage Three commencing July 2008 the Government will introduce:

A new formula for calculating child support
The new formula is based on new Australian research on the costs of children, better reflects community values around shared parenting, and better balances the best interests of parents and children. The formula will treat both parents' incomes and living costs more equally and take account of the fact that older children cost more. It will also ensure that children from first and second families will be treated more equally.

Ensuring a minimum payment for all children
Non-resident parents who pay child support to two or more families will have to pay the minimum payment of around $6 per week to each family, rather than dividing it between them. Parents who deliberately minimise their income to avoid paying child support (payers who claim to have very low incomes, but actually have higher real incomes or resources) will have to pay $20 per child per week, unless they can prove their incomes are in fact very low.

New treatment of second jobs and overtime to help with re-establishment

For the first three years after separation parents will be able to have income from second jobs and overtime excluded from child support calculations, when the extra money that they are earning is used to help with re-establishment costs.

Step-children without other support

Parents who have financial responsibility for a step-child (because no other person can provide support for them) will now be able to have the child treated as a dependant when their child support liability is being calculated for their first family.

New 'Change of Assessment' rules

The current 'change of assessment' processes and rules for parents are confusing and are not widely understood. Under the changes being introduced the rules under which a parent can apply to have a 'change of assessment' of their child support liability will be made simpler and clearer to all parents.

Changes to agreements for Child Support and lump sums payments

The new Child Support Scheme will improve the process for parents wishing to make agreements. There will be better legal protection for parents who want to make long-term agreements and it will be easier to make shorter term agreements.

In addition, there will be increased flexibility for parents wishing to make an agreement for a lump sum amount (for instance, parents who wish to transfer ownership of the family home instead of making regular cash payments).

Parents who want to reconcile

Currently, if parents reconcile and then separate again the processes for child support liability are overly complex and may be an obstacle to parents who wish to reconcile.

The new Child Support Scheme will simplify the process and parents will be able to suspend child support payments for a period of six months when they get back together. If the reconciliation fails, the resident parent can reinstate the assessment without having to make a new application, further reducing conflict between parents.

The third stage of changes were introduced by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006. In the second reading speech the minister said:

The centrepiece of the reforms is the new child support formula, based on new Australian research on the costs of caring for children and reflecting community values on shared parenting. The Taskforce identified several problems with the current formula for assessing the child support payable by one parent to the other. Firstly, the current formula uses fixed percentages of income, assuming people spend the same pro portion of their income on children regardless of their level of income, whereas we now know that, while people with higher incomes spend more on their children than people with lower incomes, they spend less as a percentage of their income. Nor does the current formula distinguish between the ages of the children, so the significantly higher expense that comes with teenagers goes unrecognised. The current formula treats the income of resident parents more generously than it does the income of non-resident parents, and does not take account of contact by the non-resident parent with the children for up to 29 per cent of the time. Second families are also unfairly and inconsistently taken into account under the current formula.

The new formula, on the other hand, will explicitly be based on the costs of children, as drawn from Australian research showing the real costs of children for the level of the parents' income and the children's ages. An 'income shares' approach will be used so both parents will have the same amount deducted as self-support, both parents' incomes will be taken into account in establishing the costs of the children, and the resulting costs will be apportioned between the parents according to their share of the combined income. In the new formula, parents who care for their children for 14 per cent or more of the time will be recognised as contributing to the costs of the children through their care. This will encourage nonresident parents to stay involved with their children. And there will be equal treatment between first and second families by using the actual costs of the children from the second family, rather than a flat amount, in working out child support payable for the first family. Resident parents will keep all of their family tax benefit if a nonresident parent has care of their child for less than 35 per cent of nights in a year.



Also, the income definitions used to calculate child support and family tax benefit will be aligned. The respective income definitions currently lead to different treatment for certain taxfree amounts, foreign income and fringe benefits. The child support income definition will be broadened to include certain tax-free pensions and benefits that already apply for family tax benefit. The foreign income definitions for child support and family tax benefit will be broadened and aligned. The gross value of reportable fringe benefits, rather than the net value, will apply for family tax benefit, as it already does for child support. The changes to income for family tax benefit will also apply for child care benefit. The minimum payment rules will be made fairer. Non-resident parents who pay child support in more than one case will have to pay the minimum payment of about $6.15 per week per case, up to a maximum of three cases. Those parents who deliberately minimise their income to avoid paying child support will have to pay $20 per child per week, up to a maximum of three children, unless they can prove their incomes are in fact very low. During the first three years after separation, parents who are using income from second jobs and overtime to help re-establish themselves will be able to apply to have their child support calculated taking into account their re-establishment costs.

The current Scheme is overly complex for parents who reconcile and then separate again and may serve as an obstacle to parents wanting to try a reconciliation. Under the new Scheme, a simplified process will allow parents to suspend child support payments for a period of six months when they get back together. If they break up again, the resident parent will be able to reinstate the child support assessment without applying again, reducing any further conflict between the parents. Parents who have financial responsibility for stepchildren will now be able to apply to have the step-child treated as a dependant under the child support formula for the parent's first family.


The New Formula
The new formula adopts a more complex form of calculations than the existing formula. Rather than looking primarily to a fixed proportion of the payer's income the new formula proceeds on the basis that the parents should share rateably in the actual costs of the child from their overall resources. This requires a number of changes:

  • There is now a 'costs of children' table said to be based upon available research.- Parents share costs rateably on the basis of their income (less a more generous self support component).- Proportions of care must be ascertained for rateable apportionment of expenditure.
There is not room in this paper, nor time at the plenary to consider the detail of the various formulas. However, a brief review of the simplest case scenarios will be attempted to provide an overview of the concept of the formulas.

Formula elements
The Adjusted Taxable Income

Under the reforms this amount will continue to include reportable fringe benefits, certain foreign income, and rental property losses. In addition it will now include the tax free pensions and benefits that are used in calculating entitlement to family tax benefits. These are listed in s 5 as:

tax free pension or benefit means any of the following pensions or benefits:

  • (a) a disability support pension under
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    Part 2.3 of the Social Security Act 1991;(b) a wife pension under
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    Part 2.4 of the Social Security Act 1991;© a carer payment under
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    Part 2.5 of the Social Security Act 1991;(d) an invalidity service pension under
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    Division 4 of Part III of the Veterans' Entitlements Act 1986;(e) a partner service pension under Division 5 of Part III of the Veterans' Entitlements Act 1986;(f) income support supplement under Part IIIA of the Veterans' Entitlements Act 1986;(g) Defence Force Income Support Allowance under Part VIIAB of the Veterans' Entitlements Act 1986;
to the extent to which the payment:

  • (h) is exempt from income tax; and(i) is not a payment by way of bereavement payment, pharmaceutical allowance, rent assistance, language, literacy and numeracy supplement or remote area allowance.
Self Support Amount
The self support amount (currently 110% of unemployment benefits) is being increased to 1/3 of the MTAWE. The EM says:

As with the current scheme, the self-support amount recognises the costs to the parents of supporting themselves. However, the self-support amount under the current scheme is considered too low, arguably creating a disincentive for paid work. Consequently, the self-support amount is being increased to an amount equal to 1/3rd of Male Total Average Weekly Earnings (MTAWE). In September 2005 MTAWE was $50,378, which would have made the self-support amount for 2006 $16,793. This self-support amount is defined in section 45, which also provides that the MTAWE figure to use in the calculation is the annualised MTAWE figure for the relevant September quarter.

As a result the self support component would be $16,793 in 2006.

The changes do not actually commence until 2008.

This is a more intellectually satisfying figure as it represents a pre-tax figure large enough to still leave the equivalent of a single pension after tax and some notional allowance for the expenses of working that are not tax deductible (such as train fares etc).

The "Proportions of Care" Table

The waypoints for changes to the formula for different care levels have been dramatically altered. The 2 strictly placed points have been removed, in favour of a system with waypoints and a sliding scale as care approaches equal time. The new table is in s 55C:

55C Working out cost percentages A parent's or non-parent carer's cost percentage for a child for a day in a child support period is the percentage worked out using the table based on the parent's or non-parent carer's (as the case requires) percentage of care for the child for the day.

Cost percentagesItem Column 1Column 2 Percentage of careCost percentage 10 to less than 14%Nil214% to less than 35%24%335% to less than 48%25% plus 2% for each percentage point over 35%448% to 52%50%5more than 52% to 65%51% plus 2% for each percentage point over 53%6more than 65% to 86%76%7more than 86% to 100%100%

The method for determining this is complex and is set out in s 48 to 55. In simple terms it is the likely proportion of care in the 12 months from the date of the assessment. It can be altered if there is a change of at least 7.1% (1 day per fortnight) or the level falls below 14% (2 days per fortnight during term and 10 days of holidays): s 48. The reality is that for those nearing 35% (less than 5 days per fortnight and half school holidays) every day counts.

The "Costs of Children" Table

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The costs of children are not expressed as a fixed sum, but ascertained form a complex table in Schedule 1. The table distinguishes between children under and over 13. The table gives a percentage of the parent's combined income that is said to be the costs of children. The proportion of total parental income varies depending upon the proportion of that income to 'Male Total Average Weekly Earnings' (MTAWE). The 2006 figure for this amount is around $50,387. The table provides as follows (the combined income is the upper end of the range in excess of a combined income of around $33,586):

"Costs of the Children" Table Parents' combined child support income or parent's child support income Fraction of MTAWE 0 to 0.50.5 to 11 to 1.51.5 to 22 to 2.5Over 2.5Child support children Costs of the children All children aged 0-12 years 1 child 17%15%12%10%7% 2 children 24%23%20%18%10% 3 children 27%26%25%24%18%

All children aged 13+ years

1 child 23%22%12%10%9% 2 children 29%28%25%20%13% 3 children 32%31%30%29%20%

At least one child aged 0-12 years and one child aged 13+ years

2 children 26.5%25.5%22.5%19%11.5% 3 children 29.5%28.5%27.5%26.5%19%

The table is used like tax tables: the rate for each column to the left is calculated and only the excess income in the column to the right is the subject of that percentage. The CSA is likely to issue computer and internet calculators for the various items in the formula and tables.

If the table is redrawn using the approximate values of the elements converted to monetary amounts, it provides for the following weekly rates:

"Costs of the Children" Table      Parents' combined child support income or parent's child support income [total income over $33586.00]0 to $25,194$25,194 to $50,387$50,387 to $75,581$75,581 to $100,774$100,774 to $125,968Over 2.5Child support Children       Costs of the children [per week at the upper end of the range] All children aged 0-12 years 1 child $82.08 $154.50 $212.44 $260.73 $294.53 2 children $115.88 $226.93 $323.50 $410.41 $458.69 3 children $130.36 $255.89 $376.60 $492.48 $579.39

All children aged 13+ years

1 child $111.05 $217.27 $275.21$323.49 $366.95 2 children $140.02 $275.21 $395.92 $492.49 $555.25 3 children $154.51$304.19 $449.04 $589.06 $685.62

At least one child aged 0-12 years and one child aged 13+ years

2 children $127.95 $251.07 $359.71 $451.45 $506.97 3 children $142.44 $280.04 $412.83 $540.77 $632.51

New Calculator

It would seem you guys are closer to having the new CSA calculator up and running.

Any ideas of the ETA of this?

Many thanks

We have had a prototype up on the site for a short while in Pilot testing but have been advised of a formula inconsistency (Which we have not yet been able to either find or reproduce), a lack of calculation for low income earners on minimum payments per week $6.00 which was not included and a change required to the way combined income of top earning parent calculations is made.

On top of that we need to accommodate multiple Payees (One dad two different families) and we need to add significant commentary around the background. We are meeting with FaCSIA next week to see what we can do to expedite the finalisation of the calculator and also include weekly/fortnightl;y and Monthly options.

Also the new regulations just passed in the senate recently so we need to factor anything there into the formula. To say this has not been a simple matter is an understatement. At this stage we will not factor in FTB (Family Tax Benefit) losses but will put some summary about this. I do not have a time frame for this to be back up but we are hoping it will be weeks not months or years… :(

Site Director

New Calculator

I appreciate (as I am sure so many others do) your efforts with the calculator.

Let's just hope the CSA put in as much effort into getting things "right" as you all are.

Many thanks.
The table in this posted article will be re created over the next few days to make sense so you can calculate the amounts payable

Executive Secretary - Shared Parenting Council of Australia
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LifeInsight said
I've had a brief look at the info on here and yes the new formula looks complicated. Would be good to have some feedback on it as to me it looks as if not a lot will change.

The situation for payers who do not have the choice of caring for their kids could get worse if the ex decides to get a job to push the combined income into a higher bracket so the payer would have to pay more to the ex who will then spend less time with the kids.

Is this correct??

The new formula still looks like a spousal maintenence calculator and not child support with a bonus for those payees that want to have a career. I guess they will need $$$ pay for the extra child care? Then it will also become a way of controlling the non-custodial parent and continue the ongoing abuse.

Can someone please tell me that I am wrong?
You are wrong… Take a look at this link Under the new formula, parents can also request that any additional income they start earning after separation to allow them to re-establish themselves be excluded from their child support assessment. This does not require an application for a change of assessment. Second and third incomes can be protected for up to three years after application. (We wanted this indefinitely but did not get that. and somehow the drafters snuck in a definitive time frame when it went to the Senate…. It is an issue we still under review at the Shared Parenting Council)

This was to ensure that a payer who wants to increase earnings to get into a better financial situation, does not end up paying more than they were earning at the time of separation and initial assesment. It is designed to do exactly the opposite of what you are suggesting and to encourage you to set up again and get on your feet.

We have asked the development group to integrate MikeT's calculator into Comcode and deploy on the site because it is pretty well done and covers quite a bit more than we have been able to deliver through time constraints. This should be available in a few days and takes second and third families into account, the new combined income ceilings / maximums and Mtawe chnages made for 2008 which were reported on the site in news.

I will also take a look over the area of Spousal Maintenance in relation to any changes in the new Act and see if I can get the great guys and girls in the SRL-Resources moderators group to put up a definition of Spousal Maintenace vs Child Support payment. Similar to what they did for Parenting Plans and Orders.   :)


Executive Secretary - Shared Parenting Council of Australia
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Secretary_SPCA said
I will also take a look over the area of Spousal Maintenance in relation to any changes in the new Act and see if I can get the great guys and girls in the SRL-Resources moderators group to put up a definition of Spousal Maintenace vs Child Support payment. Similar to what they did for Parenting Plans and Orders.   :)
Hang on - this smells like more work coming our way! Spousal maintenance is the financial support of the coffee shops, gyms, hairdressers and tennis courts, by you, for the benefit of the ex.




Executive Member of SRL-Resources, the Family Law People on the site (Look for the Avatars).   Be mindful what you post in the public areas. 
Spousal maintenance is an antiquated concept from the days when women with children would not be hired. That is no longer the case. The explosion of daycare centres means there is no longer the problem of who will care for the children.

Junior Executive of SRL-Resources

Executive Member of SRL-Resources, the Family Law People on this site (Look for the Avatars). Be mindful what you post in public areas. 
I'm also working on a more comprehensive calculator, although I'm currently giving the old grey a matter a rest as I have my son down for the weekend.

I spent many hours over the weekend getting around problems related to my lack of knowledge of things online in trying to work out a dynamic/progressive information collecting thinggy for inputting data.

Uhhm in more simple termes it starts of with two adults requesting a name (for clarity of the generated output) and the taxable income. Others can then be added, or when the names and ATI are given, hey presto you can add children (at least one), but many you also input the relationship to the adults including the care amount. This is all working relatively well.

The next stage is determining who is who from the input data. Which is the bit I'm working on. Then it will go through stages of calculation. I'm making no promises with this, it really is a bit of a mind bender but perhaps better than having separate calculators for the various formulas.

I'll also be asking questions. one I have is "there are four children 3 teens and one under 13" is this 3 mixed or 3 teens? Can't say I've seen anything that defines this (I'd assume worst case scenario and say teens).

Anyway if anyone wishes to have a peek it's here I know it's not the most aesthetically pleasing thing on earth, that's not my type of area.

Lastly I'm making no promises, with this but I'm trying.
Is spousal maintenance still enforced?

When you are swimming down a creek and an eel bites your cheek, that's a Moray.

Spousal

Yes it is - it all depends on income, children, education, work history etc etc. Normally you need to apply for it with in a year of obtaining a divorce; however you can defeat this with a really good claim!

Going for spousal can back fire on you. I know of one case where nearly $40,000 was spent trying to obtain it, and because of how all the Family Laws interrelate to each other, meant the other side had to attack on all the other issues as well!
 

Executive Member of SRL-Resources, the Family Law People on the site (Look for the Avatars).   Be mindful what you post in the public areas. 
LifeinSight.
 
Have you tried various scenarios with the calculator? All that I have tried show that with an increase in the custodial parents income, above the Self Support Income (below this there is no change), the non-custodial parent's CS liability reduces.

With regard to FTB here's what the task force said in their report "Every Picture Tells a story, the entire document can be found here Every Picture tells a Story
The Task force said
6.199 Family Tax Benefit Part A (FTBA) also has a number of complex interactions with child support. First the maintenance income test for FTBA takes account of child support as income in the hands of the payee. The test does not apply to Parenting Payment. FTBA reduces by 50 cents for every dollar of child support received over $1,127.85.169 This is aproblem commonly complained about.

6.200 In addition, to receive FTBA at an amount above the base rate a separated parent is required to take 'reasonable maintenance action'.170 This is the maintenance action test. An applicant has 28 days in which to take this action. 171 This raises a very different issue about the dynamics of the relationship between the two schemes and the flow on effect to relationships between parents.

6.201 The committee heard evidence from people who had amicable arrangements for sharing care of their children and agreed child support without the involvement of the CSA. They related how, when circumstances changed, one or other parent needed income support and applied to Centrelink. They then had to make their child support arrangements consistent with the formula.
… Everything is straight down the middle, yet we have the Child Support Agency now interfering in our lives. I have recently been required to resign from my job. You can call that what you like. I have had to go to Centrelink and apply for Newstart, because I cannot get parenting allowance. Previously, I was wanting some assistance with my rent. … They required that I go and apply for child support. In circumstances where I had 50 per cent shared parenting, I had to apply for child support just to get some rent assistance.172

6.202 For some parents this kind of outcome impacted on their previously amicable arrangements.

6.203 When child support becomes irregular those amicable arrangements can become even more complicated. The implications for the rate of FTBA are complicated in practice. When child support received is less than the usual rate, FTBA will be paid at a higher rate. When arrears come in those arrears become relevant to the maintenance income test and the FTBA payment is not only reduced accordingly but Centrelink may find there has been an overpayment and take recovery action. This is explained with some examples in documents provided by FaCS.173

Conclusion

6.204 The interaction between child support and social security is complex and confusing. The Pathways Report identified inconsistencies in the legislation for these two areas as requiring review to identify amendments for consistency.174 The committee believes that this review is essential and it should also consider whether there are rigidities in both social security and child support law and administration which act as disincentives to shared parenting as recommended in Chapter 2.
I'm not sure what you mean by scaled down, as far as I'm aware if you have a child for the night it is a night and 35% is 35% (yep rounded down so 34.99999 will equate to 34) and this figure is reached at 128 nights (127 is rounded down to 34%). Those under this will not get FTB and some may lose out because of this, however I only know my situation. I come in at 18% for care and will lose out on FTB, however the gains I make far outweigh the FTB, which until last year I was not claiming anyway as I was scared of upsetting the applecart. I got back just over $1000 for a couple of years. So I'd guess $500 per year, whilst it looks as though I will be very close to $3000 better of ($2500 ish if considering the lost FTB).
Yes it is certainly going to encourage parents to resist sharing the children if they are going to lose money, especially those who are reliant on benefits to survive.

When you are swimming down a creek and an eel bites your cheek, that's a Moray.
LifeinSight I think there is and it wouldn't surprise me at all if the 70%(I think thats the numbers quoted) who supposedly gain, includes those who gain from CS but who actually lose because of the FTB reduction.

P.S. I know that I've seen something about being able to claim % care based upon hours/time rather than nights. I can't find it though. Perhaps those more fluent with running through the legislation and stuff could post it. If I recall correctly it's not that easy to do and it wouldn't surprise me if you had to go to SSAT (Social Security Appeals Tribunal) and perhaps even to court to get the legislation applied.
The treasurer was on tv recently getting quizzed about FTB part b. It is currently not means tested and there was talk about making it "generously" means tested in the future. Everything is up for grabs apparently.

I would watch this space when it comes to having a baby, I think they'll lose the bonus. It was just a vote catcher for the libs anyway.

Junior Executive of SRL-Resources

Executive Member of SRL-Resources, the Family Law People on this site (Look for the Avatars). Be mindful what you post in public areas. 
I hope they do remove the bonus and put it to better use - ie better antenatal care, education or increased ftb for all parents etc, something, anything other than paying women to breed!!!

When you are swimming down a creek and an eel bites your cheek, that's a Moray.
Posts from this topic have been moved by members. 6 posts have been transferred to topicview.

Executive Secretary - Shared Parenting Council of Australia
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Lifeinsight said
However just got new orders and my night count is now 146 for the year give or take a night, so now not worried about losing FTB, but wondering if I get to move up an increment to shared care for CS purposes.
Yes you will be impacted by every extra night, at 127 nights the 24% care reduction goes to 25% + 0.5% for each night above 127. At 146 nights you get 40% care reduction. It is also my understanding that as this has been aligned with FTB, then the FTB will also have changed.

You may wish to file the orders with the CSA, I think then, they have to go by those orders.
Every picture tells a story says said
9.7.5 Shared care

Where care is being shared between the two parents to the extent that each parent has the children for at least fi ve nights per fortnight or 35% of nights per year, the applicable child support should be based upon a 'shared care' formula. For this group, it is proposed that the parent with the minority of the care should be treated as incurring 25% of the cost of the child at the 35% care level, rising to an equal sharing of costs at near equal provision of care, with every percentage point of care recognised in the assessment.

It is often the case that even where the care of a child is substantially shared, the parent with the care of the child the majority of the time incurs proportionately greater expenditure than the other parent on non-recurrent items, such as school uniforms and shoes. The Taskforce took the view that a tapered approach was better than treating the costs of the child as being provided pro rata by each parent.

The proportion of the costs of the child incurred by the parent with the fewer number of nights of care would be established by reference to Table B: Shared Care. The other parent incurs the remaining proportion of the costs of the child.
Lifeinsight said said
I also have other C$A issues like when they don't acknowledge changes in care in assessments from when the care actually changes.
You may wish to remind the CSA of their obligation under Section 13(2) of the Public Service Act 1999 to act with care and diligence and perhaps also their obligation under Section 13(3) of the Public Service Act 1999 to treat you with respect and courtesy.

Certainly my reminder to them, directly to Matt Miller and cc'd to a couple of MP's, got them to respond saying that my care details had now been updated. I can be a bit of a lose cannon when something stirs me :)

Unfortunately, they do appear to find it very easy to not do things when it comes to not collecting or when checking the data they input, until they amend it so that checks have to be done, then the General Managers and those higher up will have to get involved.

I am also very concerned that for 3 years or so they have maintained incorrect data on myself and likely for many others. I would like to see a database search for every person with 0 care, the default that is used and also whether those people have actually been contacted with regard to share. I am quite confident that I have never been asked for care levels. My understanding is they hide behind terminology (shared care, regular care) that obfuscates the actual figures. Another suggestion I'd like to see put before them is that in every letter of assessment they include the actual number of nights recorded in Cuba.
I'd also like to see them NOT put in details of the ex partners income in letters of assessment. I think that an invasion of privacy.

When you are swimming down a creek and an eel bites your cheek, that's a Moray.
Jadzi.

Then they'd also have to not tell the ex what the payments were, because knowing all the other details, as you would, you can work it out from the payments (certainly in the simpler cases anyway).

Personally I like to know, as it then means that I can work out my CS an plan in advance. However what cannot be ascertained is how that adjusted taxable income was calculated.
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