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Further updated modelling on child support reforms

Further updated modelling on child support reforms
30/04/2010

Joint Media Release with  The Hon Chris Bowen MP, Minister for Human Services

The Australian Government today released two reports that provide further analysis of the child support reforms introduced by the previous government.

The child support reforms began in 2006 and the final stage of the reforms, including the new child support formula, came into effect on 1 July 2008.

These reports provide further analysis of the impact of the reforms, and their findings are broadly consistent with the two previous reports released in August 2008 and August 2009.

The first report - Distributional Impact Modelling - compares a parent's child support assessment on 30 June 2008, immediately before the new child support formula was implemented, with their assessment on 1 July 2009, 12 months after the new formula was introduced.

The analysis also includes how much Family Tax Benefit is paid to each parent under the new rules for sharing of family payments introduced as part of the child support reforms.

The figures used in the first report are based on obligations under the new formula - what parents should pay or receive - they do not show what is actually paid or received.

After the first year of the new formula, the analysis shows that around 47 per cent of receiving parents should have had net increases in household income due to the changes, and 44 per cent net decreases, while there should be no change for 8 per cent.

For paying parents, around half should have had a net gain due to the changes, around a third net decreases, and 18 per cent no change to their household income.

For a large proportion of cases the change was less than $10 per week.

For the first time, Actual Transfers Modelling was also undertaken which compares all child support actually transferred in 2008-09 with the amount transferred in the 12 months to May 2008.

Unlike the Distributional Impact Modelling outlined above, this analysis shows actual changes in amounts of child support paid or received over the two twelve month periods, before and after the new child support formula came into effect.

To allow a direct comparison between the two amounts, the amount of child support from the 12 months to May 2008 was adjusted by CPI and the FTB amount was reflected on 30 June 2009 circumstances.

The key findings show that after a year of the new child support formula:

   * For receiving parents, around 59 per cent received more child support and FTB, and approximately 36 per cent received less.
    * For paying parents, around 61 per cent contributed more child support, and around a third contributed less.
    * Around 6 per cent of receiving and paying parents experienced no net change.
    * In most cases, the changes were under $20 per week, and for a large proportion the change was less than $10 per week.


The new child support formula was a key recommendation of a 2005 independent Howard Government Ministerial Taskforce on child support, established as a result of the House of Representatives inquiry, Every Picture Tells a Story.

The reforms were made by the Parliament in 2006, and implemented in three stages, with the final implementation of the new child support formula from 1 July 2008.

The changes recognise that since the original child support formula was developed over 20 years ago, there has been a trend towards increased shared parenting.

The child support reforms aim for a more balanced approach by taking into account both parents' income and the actual cost of raising children.

The Government will continue to monitor the ongoing impact of the reforms to ensure the best interests of children are protected.

A copy of the full analysis is available on the links below.
Secretary of the Shared Parenting Council said
There have been a number of important changes since the reforms were introduced. Of particular importance is that BOTH parents incomes now need to contribute toward the payment formula, there is a credit for care and we are seeing a definite swing to more fathers as payees than previously, indicating that fathers are playing a larger role in seperated families. We have been seeking further details of the demographic around parenting time. The statistics do not indicate the day to day outcomes or results for those families who did see a reduction in payments although the report does indicate the reductions were minimal.
Changes to the child support population: Actual Transfers Modelling

1. Introduction

In order to measure outcomes experienced by paying and receiving parents during the first 12 months following the 1 July 2008 changes to the Child Support Scheme, the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) have undertaken new analysis. It differs from previous analysis in that it is based on actual transfers between paying and receiving parents, rather than assessed liabilities.

The sample contains only Child Support Agency (CSA) collect paying and receiving parents. There is no administrative data on the actual amount of child support parents privately transferred before and after the change. For this reason, parents who privately transfer child support have been excluded from this analysis. The analysis on CSA collect contains around 198,000 receiving and 207,300 paying parents.
Changes to the child support population: Distributional Impact Modelling

1. Introduction

This report compliments previously published reports, which detailed the population-level impact of changes to the Child Support Scheme that took effect on 1 July 2008, based on the combined outcome of the child support and Family Tax Benefit (FTB) changes. Financial outcomes of the child support changes cannot be viewed in isolation from FTB. This is partly because changes in the amount of child support received may alter the amount of FTB payable, and partly because the reforms to the child support system included important changes to FTB eligibility rules.

This first report examines actual child support assessments effective at 30 June 2008, and modelled the FTB that would be payable on the basis of these assessments. It compared this to actual child support assessments generated under the new formula and effective on 1 July 2009, the FTB was modelled on the basis of these assessments.

This analysis examines the circumstances of individuals 12 months after Stage 3 of the reforms was implemented. It examines actual new child support assessments effective at 30 June 2008, and modelled the FTB that would be payable on the basis of these assessments. It compares this to actual child support assessments effective on 30 June 2009 and modelled the FTB that would be payable on the basis of these assessments.

The analysis does not reflect the amount of child support that was transferred or the FTB that was paid. It is limited to child support liabilities under the new formula and the FTB payable based on these liabilities. In practice, many paying parents are not compliant with their child support obligations.
Edited

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