THE ORIGIN OF THE PERCENTAGE RATES (THIS IS A PARTIAL ANSWER TO A QUESTION ASKED OF PROFESSOR JONATHAN BRADSHAW)

  1.  The CSA Green Paper and the CSA White Paper each use different research to attempt to justify the proposed percentage rates. None of this research appears to lead to these percentages.

  2.  The Green Paper quotes two papers:

"Small Fortunes: spending on children, childhood poverty and parental sacrifice". Middleton, Ashworth and Braithwaite, 1997.

The Green Paper uses this to identify an average expenditure: "[Middleton et al] found that on average parents spend about £3,000 per year on one child. This is equivalent to almost £60 per week."

Middleton does not say this. These are indeed the expenditures on children, but 10 per cent comes from people other than the parents, and some of the rest comes from Child Benefit. On average, parents spend more like £40 to £50 per week out of their earnings.

"The Costs of Children and the Welfare State". Dickens, Fry and Pashardes, 1996.

The Green Paper uses this to identify a range of percentages: "Overall, there are indications [Dickens et al] that the cost of a child represents between 20 per cent and 30 per cent of the budget of a family with one child."

My understanding is that Dickens says that a child under 11 years in an intact family costs 20 per cent of the cost of either adult, hence 9 per cent of the cost of the three of them. Similarly a child of 11 to 18 years costs 30 per cent of the cost of either adult, hence 13 per cent of the cost of the three of them.

If my understanding is correct, even if all the parents' net income is spent on the three of them, only 9 per cent to 13 per cent of their combined net income is spent on the child.

  3.  The White Paper quotes just one paper (Middleton et al - why?):

"Small Fortunes: spending on children, childhood poverty and parental sacrifice". Middleton, Ashworth and Braithwaite, 1997.

The White Paper uses this to identify a suitable percentage: "The proposed base rate of 15 per cent of their income is roughly half the average that an intact two-parent family spends on a child [Middleton et al]".

There is no hint in Middleton that expenditure is a percentage of this form. In fact, Middleton shows that much of the cost is relatively independent of income (for example, a disposable nappy is a significant cost for a young child, yet has a fairly standard cost). So it appears that Middleton refutes the idea of using a simple percentage of income.

  4.  Some research, not for quotation, suggests that high-skill couples spend about twice as much on a child, including childcare, as low-skill couples. This is not in proportion to the net incomes of high-skill versus low-skill couples. The researchers are:

Hugh Davies, Department of Economics, Birkbeck College, London.

Heather Joshi, Centre for Longitudinal Studies, Institute of Education, University of London.

  5.  Children in an intact family do indeed benefit greatly from their parents' wealth. But much of this involves taking advantage of their environment, rather than in consumables. For example, they ride in a Jaguar, swim in a pool, and have more space available to them.

  6.  The only ways they can have similar benefits after separation of their parents is either by raising the standard of living of the poorer parent to that of the richer parent, or by having the children spend part of their time in the environment of the richer parent. In other words, shared-care is an effective way for children to benefit from the wealth of their parents.

THE AUSTRALIAN SCHEME (THIS IS A PARTIAL ANSWER TO A QUESTION ASKED OF PROFESSOR JONATHAN BRADSHAW, AND OTHERS)

History Source: Taxation Statistics 1995-96; Child Support, Chapter 13, page 87

  7.  The Child Support Scheme (CSS) was introduced in 1988. Prior to this, child support could only be obtained by the parents reaching an agreement, or by seeking an order from a court.

  8.  The aims of the CSS are to ensure that:

parents share in the cost of supporting their children, according to their capacity;

adequate support is available for all children not living with both parents;

Commonwealth involvement and expenditure is limited to the minimum necessary to ensure children's needs are met;

incentives for both parents to participate in the labour force are not impaired; and

the overall arrangements are simple, flexible and efficient.

Definitions

  9.   Stage 1: The first stage of the Child Support Scheme was introduced by the Child Support (Registration and Collection) Act 1988. This Act gave the Commissioner of Taxation the further responsibility, as Child Support Registrar, for collecting child support payments in respect of court orders and court-registered agreements. This collection is only undertaken on application from the parent entitled to receive child support, that is the parent who has primary care of the child/ren. Stage 1 applies to all cases where parental separation occurred prior to 1 October 1989, and no children were born on or after that date.

  10.   Stage 2: The second stage of the Child Support Scheme was introduced by the Child Support (Assessment) Act 1989. This Act established a further responsibility on the Registrar to administratively assess child support using a formula based upon the income of both parents. Stage 2 applies only to parents who separated on or after 1 October 1989, or who have a child born on or after that date.

  11.   Shared Care: Source: Child Support Assessment Handbook Effective for assessments starting on or after 1 July 1999 NAT 1909-3.1999.

"Shared care occurs where the parents share care of the child/ren for approximately the same amount of time. For example, if Sara lives with Mum four days a week and lives with Dad three days a week, this may be considered shared care.

"CSA calculates what each parent should pay the other for the time Sara is in the other parent's care. Each parent's exempted income is based on the unpartnered rate of Social Security pension plus an allowance for each shared child in their care.

"The percentage is also reduced to recognise the time the child lives with that parent. For example for one child in shared care, the percentage is 12 per cent."

CSA'S VISION

Source: Australian Tax Office CSA Annual Report 1997-98 chapter 4

  12.  CSA's vision is that all Australian parents meet their child support responsibilities. This is continuously refined in line with Government's reforms to the scheme, the maturing of the CSA and a better understanding of clients' needs.

  13.  The main features of the vision are:

parents should have the opportunity to pay or receive child support by means that best suit their needs. These include CSA assessment and collection, CSA assessment and private payment, reaching a child support agreement, or self administration;

those parents who regularly pay or receive child support through CSA assessment and collection should be encouraged to move into private payment or self-administration categories so that, over time, the bulk of child support within the community is transferred without CSA intervention; and

CSA will continue to provide a safety net for people whose private arrangements or self-administration arrangements break down.

  14.  CSA's strategic direction recognises the growing trend for parents to opt for private payment arrangements and seeks to facilitate this through the provision of appropriate services.

  15.  Research findings indicate that a co-operative relationship between parents after separation is a good indicator of future child support compliance. Reducing government intervention by actively supporting choice and continuity of private collection arrangements is expected to maintain co-operative relationships.

19 September 1999