Yesterday’s Australian revealed that Federal Cabinet is to take submissions on proposed changes to the Child Support regime. I don’t have time to send them a paper-based submission, so here are my random digitally produced thoughts.
First thing is that I don’t see how anyone living below the average wage with an ex-wife who does not work can afford to survive. Take a non-residential parent earning $40,000 per annum. According to the tax office calculator they will pay 8,172 in tax and say they have three children, 8,492 in child support, leaving them $23,336 to live on.
The legislation tends to look at the amount of money required to raise children, which is fair enough. But what if contributing to that leaves either or both parents unable to live decently? For many separated parents the solution is to set-up house with a new partner to at least defray residency costs. Statistics show that those who are divorced once are more likely to divorce again. No wonder, if these sorts of pressure lead to them prematurely forming live-in relationships.
While it might actually marginally encourage more divorce, it could well be cheaper for the government to provide more financial support to children in situations of parental separation. By relieving financial pressure now it it might reduce the likelihood of them making further and more costly mistakes down the track.
They might also look at calculating payments on an afer-tax basis. Take a payer at the other end of the earning spectrum from my first hypothetical at say, $130,000 per annum – the approximate point where child support is capped. They would pay child support for their three of $37,292 and tax of $46,812, leaving them $45,896 to live on.
Their net position is therefore only twice that of the first person’s, even though their gross earnings are three-and-a-bit times more and net earnings three times. On top of that they pay child support which is four times higher. The problem is the intersection of child support and the income tax system, where someone on the top tax rate and paying support for three children will only earn an additional $1,800 for every $10,000 of gross. That probably leads to a lot of potential high-earners deciding to scale back their activities in favour of a more relaxed life style – another loss to government coffers, if nothing else.
While they’re at it, the government might also give some thought to whether it makes any difference what they decide. Over the years since my separation and divorce I’ve swapped notes with a lot of men and women in similar positions. One thing that comes through quite clearly is that, despite the law, the Child Support Agency, and to a lesser extent the lower extremities of the judiciary, do what they like, irrespective of the legislation. They are dealing for the most with people in financially straightened positions who do not have the money to appeal their decisions, so they set-up mutually reinforcing and incorrect precedents which are rarely challenged.
In some cases their lack of attention to the law could well amount to malfeasance.
I know of a numebr of cases in which people are paying, or have been paying, well in excess of the statutory amount. The legislation allows the CSA, and the courts, to decide to increase payments where children have “special needs”, it also allows them to look at the “financial resources” and “earning capacities” of the parties. “Special needs” could be cosmetic dentistry, and “earning capacity” can be well in excess of what they have ever earned. This can lead to awards which are punitive and unsustainable – no wonder the agency has so many bad debts.
In the worst case I know of a man actually earning $50,000 was deemed to have the capacity to earn $85,000 and retrospectively and prospectively assessed on this basis. Assume three children and the wife earning no income and the maths go like this: tax – 11,172; CSA – $22,892; net income – $15,936.
The Brisbane Institute recently produced a paper on taxation which showed that it didn’t appear to matter whether a country was high taxing or low taxing it could still have high rates of economic growth. That might be so, but in higher taxing countries we allow governments to purchase more of our needs for us, and frequently this occurs in ways which we don’t need.
Child support is a good example of a bureaucratic cure which is possibly worse than the disease. In separate incidents involving Queensland Health – Bundaberg Hospital (and more to come) – and the Department of Immigration and Multi-cultural Affairs – Rau or Alvarez, take your pick – we can see again how government “provides” for our needs. If either of these bureaucracies had to find real clients they would have gone broke long ago.
That the likelihood of a decision from Cabinet of long-lasting good effect on child support is unlikely is demonstrated by the failure of the Howard government over the last 9 years to cut back on government. While it continues to seek bureaucratic solutions, the economy may continue to grow, but the people will start to shrivel.