21 October 2012

Single parents with part-care of children

Last week was anti-poverty week, and amid all the stories about reductions in the entitlements of single parents and the paucity of the Newstart allowance rate this one caught my eye. Although it didn't deal directly with the issue, the case seems to involve, among other things, a single parent who has part-care of his children.  The comments that follow the article express various levels of support and/or sympathy mixed with the usual "get a job" sentiments.  There are also some questioning the amount of assistance he received, which appears to be just single Newstart allowance - no payments in respect of his children.

Part-care of children brings with it some complicated rules around how much, if any, family assistance can be paid, with similar provisions around child support entitlements or liabilities.  At the extremes, a parent with no care of their child won't receive any child-related assistance, and will generally have to pay child support, whereas a parent with 100% of the care gets all the child-related assistance and will generally receive child support.  As care increases from zero there is a kind-of graduated sharing of family assistance entitlements.  I say "kind-of" because it's not a smooth transition - the family assistance amounts change in a lumpy way over some percentage ranges, not at all over others, and disproportionately in the rest.

A further complication is that adult income support also undergoes changes related to the level of care of the child.

There are many possible combinations of care and payment types but I'll just focus on three as they will illustrate most of the points.  I'll use a two-child family with a 10 year old and the youngest child aged 8 for two examples, and the youngest aged 7 for the other.  The three are:
  • a single Newstart allowance recipient (youngest is 8)
  • a single Austudy payment recipient (youngest is 8)
  • a single Newstart allowance or parenting payment recipient (youngest is 7).
For all these cases both of the (estranged) parents are assumed to also be on income support of some kind and have no private income.

First up, let's put the three together on the same chart so you can see the disposable income for each, including the effect of child support payments or liabilities.

Chart 1

Two quick points: the scale does not start at $0 (to help make the differences more easily visible), and the Newstart/parenting payment line (red) starts out as Newstart and then becomes parenting payment as the percentage of care crosses the 50% mark.   All three traces show the lumpy way in which the entitlement package changes as the person goes from no care to full care of the child.

This comparison chart doesn't show what parts of the package are changing, so let's do that for each in turn, starting with the single Newstart case.

Chart 2

At zero care the parent is getting the single Newstart allowance (NSA) and the associated clean energy payment.  They also are paying a minimum rate of child support, so their total income is actually less than the Newstart rate as a result.  (The formula used to calculate child support liability actually produces a zero amount in this case, but a separate provision imposes a minimum rate, which is reflected here).

At 14% care there is a change in entitlements.  This level of care triggers a provision in the rate calculation for Newstart, giving the person a higher single NSA rate.  In addition, the minimum rate rule for child support no longer applies, allowing the formula result to take precedence - in this case the person no longer has a liability.

At 35% care the Family Tax Benefit system begins to provide child-related assistance in a somewhat lumpy fashion.  This increases as care rises but goes into a holding pattern from 48 to 52%, where the payment is held at half for each parent.  From 52% the Family Tax Benefit increases again until care exceeds 65%.  From there on the person receives 100% of the rate.

The person begins to receive child support when care exceeds 86% (the other parent's care level is now less than 14% and so becomes subject to the minimum payment rule).

If you look hard there's a tiny increase in the NSA rate at about 50% care.  That's because from this point on the parent is considered to be the principal carer of the children, giving them access to the pharmaceutical allowance component of the NSA rate.  Principal carer status also triggers access to telephone allowance (barely visible as the purple component in the chart) and the pensioner concession card instead of the less valuable health care card.

Now for Austudy payment...

Chart 3

The family assistance and child support aspects of this case are the same as in the NSA example.  It's the income support (Austudy payment) that is the source of the differences.

Austudy payment does not have an equivalent of the 14% rule that triggered a higher NSA rate, but a similar effect occurs at around 30% care, when the payment increases to the single-with-child Austudy rate.  The extra assistance that applied to the NSA single parent when they became the principal carer also doesn't feature - Austudy doesn't have the concept.  So, no pharmaceutical allowance, no telephone allowance, and more significantly, no pension concession card.

Nonethless, in this case the total "cash" package is greater than provided to the NSA case, simply by virtue of the student startup scholarship.  However, this is nothing to do with the presence of a dependent child, it 's just a general entitlement that most tertiary students getting Austudy payment can pick up.  However, in some cases the scholarship is not available (it depends on the course of study), in which case the Austudy person would have less assistance than their NSA equivalent.  And no pension card.

For the final example let's assume the youngest child is aged 7, rather than 8.  This means that parenting payment for single people (PPS) is in play.

Chart 4

Again, the family tax benefit and child support elements are unchanged.  It's the income support that is different.

Where the person has less than 50% care they will generally not qualify for parenting payment (only one parent in an estranged couple can get parenting payment in respect of a particular child).  This means that the results shown here up to the 50% care point are the same as for the NSA example in Chart 2.  However, once the person has sufficient care to trigger PPS entitlement there is a noticeable increase in the income support rate (PPS is a higher rate than NSA).  As with the NSA example, from this point the parent also gets access to a pensioner concession card and telephone allowance.

With all three of the examples I've used it's clear that there are particular levels of care that, if crossed, result in significant changes in the financial resources of the household.  These points will almost always apply in the other household too, but in the opposite direction.  Little wonder then, that negotiations between estranged parents around sharing the care of children can be so fraught!

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