My dearest children

If you are male, working long hours to support the family but facing a shaky marriage, watch out. In the event of a marriage breakdown, you would find that dedication to work would leave you thoroughly the loser in divorce negotiations.

For a start, your busy working life would mean you would be likely to miss out in battles over custody (residence) of children and be hard pressed to gain significant access (contact). And then, under the rules of the Child Support Scheme which determines how much financial support divorced men are required to pay for their children, you’d be locked into continuing to work to your maximum capacity, even if that meant you saw less of your children.

In a recent case decided by the full bench of the Family Court, a divorced management consultant with five children had cut back his average 60-70 working hours per week to care for two children then living with him, halving his $200,000 income. His wife had received 80 per cent of the $500,000 property settlement.

The court was unsympathetic to his request for a reduction in child support. Robert Benjamin, the Sydney family lawyer who handled the case summed up the verdict: “The Full court’s reaction was `Tough luck, Charlie’.” The man was required to keep paying the maximum child support based on his former income of $200,000 plus he was told to pay spousal maintenance – direct financial support for his wife.

The ruling that the man must continue to earn at his maximum capacity flies in the face of 1996 changes to Family Law legislation designed to encourage more involvement of divorced parents with their children.

Equally the order for spousal maintenance seems at odds with the assumptions underlying the 1988 Child support Scheme, requiring payments which include a loading to compensate wives for lost earnings due to child care responsibilities. The Scheme was assumed to do away with direct spousal support but according to family lawyers, additional spousal maintenance has remained popular in the Family Court.

Robert Benjamin: “Spousal maintenance is very much the flavour of the month with Family Court judges. In the last four or five years such maintenance orders have become very common.”

It’s very clear that every effort is being made to compensate women for financial losses suffered through their nurturing role – through compensation for lost earnings built into the formula for child support, through the ten to twenty per cent extra hunk that wives normally receive of the property settlement and in those rare cases that reach the Family Court, through additional spousal maintenance. But many lobby groups concerned with family law issues are now questioning why men’s role as providers should prove so disadvantageous in divorce.

There is currently an inter-departmental committee established by the Howard Government examining questions concerning child support and related welfare issues. The new government is clearly keen to address some of the problems, with new legislation addressing certain flaws in the current passing through Parliament in the first two weeks of sittings.

But these changes may be just the start: the government committee is considering new research on the cost of children, a critical factor in the formula used to calculate child support. Plus there are signs the government is acknowledging clashes between the scheme and the 1996 legislation promoting joint parental responsibility after divorce.

There was a significant paper given at last month’s Australian Institute of Family Studies (AIFS) Conference by Fiona Carberry from the Parenting Branch of the Department of Family and Community Services (FaCS). Carberry suggested current welfare provisions are working against the shared care of children promoted in the 1996 reforms.

At present divorced parents with joint care of children must designate one parent as the “residential” parent attracting substantially higher welfare payments, whilst the other parent receives the lower single rate of benefits and is subject to work related activity tests and other constraints. Carberry argued the government would benefit by treating both parents equally, since this would give both parents opportunity to combine parenting with paid work, minimising social security payments in the longer term.

Yet, as Carberrry acknowledged, this would also mean increased welfare costs if the shared child-care responsibilities meant both parents were unable to earn sufficient to be self-supporting.

The bad news for the government is increasing evidence suggesting major flaws to the original idea underpinning the child support scheme the notion that the escalating divorce related welfare costs could be offset by sending the bill to the dads.

There is a significant group of low-income men who simply can’t afford to support their ex-wives and children after divorce – leaving them largely dependent on sole parent pensions. The Child Support Agency’s (CSA) own research shows that over 50 per cent of potential payers under the scheme earn less than $18,000 per year and half of all payers experiencing bouts of unemployment.

For this group in particular, the levels of payment required under the current formula are onerous. Research conducted by Trevor Sutton at the Research School of Social Sciences at the ANU shows men earning less than $15,000 per year with two dependent children are required to pay over half of their disposable income in child support, excluding a minimal self support component.

One of the changes included in new legislation is a 10 per cent rise in this self support component excluded from child support calculations from $9006 to $9907 a year. The 1994 Joint Select Committee (JSC) inquiry into child support had recommended a twenty percent rise having concluded the previous level was causing significant hardship to low income payers.

The legislation also gave relief to payers supporting second families who will now be able to deduct 50 per cent of child support payments from income used to calculate family allowances. Some payers will also be helped by a reduction- from $37,424 to $29,598 – in the level of payee’s income at which the payer’s liabilities for child support payment are reduced. But here too, the JSC had recommended a greater change – an addition $10,000 drop. the drop recommended by the JSC.

But with this low-income population, real questions remain as to the appropriateness of assumptions underlying the formula for child support. The percentage of payer’s income required for child support under the current formula (18 per cent for one child, 27 for two, and 32 for three) well exceeds the 16 per cent recommended to cover the costs of children in evidence given to the Fogerty committee, which produced the 1988 report leading to the scheme.

The hike in percentages was designed to compensate custodial parents for lost earnings. Plus the committee was heavily influenced by AIFS research showing payers usually quickly recover financial losses after divorce whilst most payees suffer significant financial decline. Yet, as the JSC discovered, many divorced low income males fail to bounce back they experience many bouts of unemployment, are often crippled by debt and, particularly when supporting second families, remain locked into poverty.

It would be difficult for many of these men to even cover the basic costs of children let alone the top up spousal support component built into the current formula which brings us to another interesting development currently occupying the minds of bureaucrats concerned with child support policy.

In 1996, the newly elected Howard government came under pressure to make good their election promise to implement more of the JSC recommendations, the bulk of which had been ignored by Labor. It responded by making administrative reforms and setting up an investigation of costs of children as suggested by the JSC stating that only when the results were known would the government consider changing the formula.

A Budget Standards Unit (BSU) was established at the Social Policy Research Centre at the University of NSW and commissioned to investigate costs of children. The results of the BSU has been available since April this year and the official response of government has been a deafening silence.

The implications are hardly welcome to the government.

For a start the BSU data shows welfare payments to be considerably below the basic living costs for single mothers. For instance a single mother with a child aged 6 receives approximately $291 combined welfare payments. The BSU data estimated the mother’s basic living costs at $372 per week.

But the BSU data also shows that men paying the higher levels of child support are paying more than the total cost of their children. So a man earning $70,000 is required to pay $317 child support for two children. The BSU data finds the costs of providing for these children at a moderate living standard would be $304.

The BSU data can also be used to calculate the costs to the non resident parent of caring for children during contact visits and that’s just what some of the divorced Dads are now doing in applications to the Family Court regarding child support.

Bruce Hogan, a Cairns engineer calling himself the “divorce doctor” runs Enalysis, a consultancy advising on family law and child support matters. The consultancy has a number of cases in the Family Court which use detailed BSU calculations to divvy up child costs on between residential and contact parents, splitting expenses according to days of contact.

Hogan is using previous Family Court judgements to argue that child support should be based solely on these basic costs of children. But this ignores the other principle which shapes the formula namely that, where possible, children’s pre divorce lifestyle should be maintained. There is widespread community support for the sensible notion that high income men should give more indeed many affluent divorced men want their children to live comfortably and accept that the formula should be graded according to income.

But even the more generous men run into problems with the way the system is currently operating – particularly when child support comes on top of inequitable property settlements and sometimes spousal maintenance. And then there’s the fact that men earning over $50,000 are in the highest bracket for child support but also in the highest tax bracket an expensive combination. A non resident dad in this income bracket with two children is currently left with less than twenty cents in every dollar earned over $50,000,after paying tax, child support and employees superannuation of three per cent.

Some relief is possible if the Coalition pushes through the high income tax breaks included in its tax package. But the Democrats have already announced their intention of reducing the tax cut for high income earners from $86 to $26 to fund the exclusion of food from the GST and Senator Brian Harradine may well move in a similar direction. this set of election promises.

The government child support committee will be watching these developments closely but without the promised tax relief, work disincentives for this group of payers will remain. In the end, it all comes down to money public money. Indeed the Family Court and the CSA are required under law to protect the public purse hence absolute priority is given to minimising welfare costs by, for instance, forcing men to pay according to their earning capacity irrespective of the impact on their fathering.

There’s no doubt continuing problems with the scheme are acknowledged by the government which is coming under pressure to improve the transparency of the formula. Even so, the implications for the welfare budget of any relief for low income payers remain a major impediment to further progress.

MRA Commentary