The Australian child support system has recently come under scrutiny as many people notice major flaws. This has led a number of experts to develop a new proposed child support formula that they hope the Australian government will implement.
Child benefit, by definition refers to the ongoing payment made by one of the parents to financially benefit the children and the other parent once the marriage is broken. Many parents depend on child benefit income to give their children the best possible life.
However, as mentioned above, there are some problems with the Australian child benefit system† First, the formula creates the wrong incentives. It encourages the mothers not to work and stay at home, while also increasing the likelihood that the father will try to hide his income or not earn as much as they could.
Usually the mother remains the main caregiver and the current formula essentially penalizes them if they work more and thus earn extra income. The higher their income, the less child benefit they usually receive. This severely demotivates the primary carer to return to work or work more hours.
The children of broken marriages are certainly hurt financially by this system as it puts the main caregivers at a disadvantage when they start working. It is a double-edged sword: either the children receive less financial support or the primary caregiver chooses to work fewer hours.
In terms of the parent actually paying child support, the figure becomes much too high when this parent’s income is considered to be medium to high. This heavy burden on the payer’s income provides no real benefit to the child.
Forcing the high-income parent to fund and maintain the ex-spouse’s lifestyle can create friction and demotivate the paying parent to continue their career because when they start earning more, they will have to pay more in child support.
The current problems with child support in Australia stem straight from the roots – the formula lacks a good mathematical foundation. The formula is designed as if the spending habits of married and divorced couples are the same.
Therefore, the formula doesn’t make sense mathematically because the spending habits are completely different. Divorced couples certainly won’t spend money the same way they did when they were married.
This formula should not be intended to punish the mothers who want to work extra hours and should not punish the fathers for earning extra income and being solid suppliers. The formula should aim to simply compensate the primary caregiver for any additional costs incurred in raising the children alone.
In order to ensure a fairer child support system, a new method of sharing time must be introduced. This formula is very simple and certainly a lot fairer than the current system.
Here, both parents are responsible for 50% of the care for the children. However, it is rare for divorced parents to split the time 50/50. So when one parent takes care of more than 50% of the total care for the children, the other parent has to compensate for the extra time that his ex-partner spends.
This model can be modified to guarantee a system that Australia now has, like many examples have shown. So instead of keeping this outdated and complicated formula, it can simply be replaced with a transparent and easy-to-follow formula that works the same way as the old one.
Therefore, in theory it will not be difficult to revise the old formula and start the steps to ensure a smooth transition. The Australian government should employ economists, accountants, mathematicians and analysts to test all feasible formula options and find the best one with the help of the appropriate government agencies.
It is certainly strongly recommended by some experts to throw away the old formula for child support. It is outdated and essentially demotivates both parents to work less, which in turn creates a less ideal situation for all the children involved.
And if you think about it, all this formula was supposed to do was make sure the kids of a broken relationship wouldn’t be worse off. With the help of professional mathematicians, etc., a new formula should be developed to provide these children with a better living situation.
Executive Editor at Best in Australia. Mike has spent over a decade covering news related to business leaders and entrepreneurs in Australia and around the world. You can contact Mike here.
