Appendix 5: Examples of contributions under the new formula
Duncan and Helen
Duncan and Helen have three children, all under 12. They separate. All of the children live with Helen. They stay with Duncan for 25 percent of the nights per year (generally alternate weekends and half of the school holidays).
Step 1: Find Duncan and Helen’s child support incomes
Duncan has a taxable income of $51,500 and Helen has a taxable income of $27,000. Deducting the self-support component ($16,054) from each gives Duncan a child support income of $35,446 and Helen a child support income of $10,946.
Step 2: Calculate the expenditure for raising the children
Duncan and Helen’s combined child support income is $46,392. The expenditure for raising the children is calculated by taking 27 percent of the first $24,081 and 26 percent of $22,311 (the remainder of the combined child support income).
27 percent of $24,081 is $6,502, and 26 percent of $22,311 is $5,801, giving a total of $12,303. (In the Expenditure for Raising Children Table,[45] this is shown as $6,502 plus 26 cents for each dollar over $24,081.) This is the expenditure for raising the children.
Step 3: Apportion this cost between the parents
This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the combined child support income. Duncan has 76.41 percent of the combined child support income, so Duncan is responsible for 76.41 percent of the cost and Helen is responsible for 23.59 percent of the cost.
If the compromise table for shared care (noted in Table 9) was used, Duncan would be considered to incur 14 percent of the expenditure for raising the children. Duncan’s share of the $12,303 would be 76.41 percent less the amount (14 percent) he is assumed to have already paid out by caring for the children, a net amount of 62.41 percent, meaning that Duncan must pay $7,678 to help support the children. Helen would have no liability as her share of care (86 percent) would be more than her proportion of total child support income (23.59 percent).
Alternatively, if shared care was limited to a minimum of 33 percent of nights, there would be no shared care adjustment and Duncan would pay $9,401 (representing 76.41 percent of the total cost).
Comparison with current formula
Duncan would have to pay $10,082 under the current formula (based on not living with a partner and no other dependent children living with Duncan).
Simon and Kiri
Simon and Kiri have one child, aged 15. They separate. The child stays with Simon for 153 (42 percent) of the nights per year (generally three nights a week) and the remaining time with Kiri.
Step 1: Find Simon and Kiri’s child support incomes
Simon has a taxable income of $82,000 and Kiri has a taxable income of $47,000. Deducting the self-support component ($16,054) from each gives Simon a child support income of $65,946 and Kiri a child support income of $30,946.
Step 2: Calculate the expenditure for raising the child
Simon and Kiri’s combined child support income is $96,892. The expenditure for raising the child is calculated by taking 23 percent of the first $24,081 of this, 22 percent of the next $24,081, 12 percent of the next $24,081, 10 percent of the next $24,081, and 9 percent of $568 (the remainder of the combined child support income).
23 percent of $24,081 is $5,539, 22 percent of $24,081 is $5,298, 12 percent of $24,081 is $2,890, 10 percent of $24,081 is $2,408, and 9 percent of $568 is $51, giving a total of $16,185. (In the Expenditure for Raising Children Table, this is shown as $16,134 plus 9 cents for each dollar over $96,234.) This is the expenditure for raising the child.
Step 3: Apportion this cost between the parents
This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the combined child support income. Simon has 68.06 percent of the combined child support income, so Simon is responsible for 68.06 percent of the cost and Kiri is responsible for 31.94 percent of the cost.
If the compromise table for shared care (noted in Table 9) was used, Simon would be considered to incur 39 percent of the expenditure for raising the children. Simon’s share of the $16,185 would be 68.06 percent less the amount (39 percent) he is assumed to have already paid out by caring for the children, a net amount of 29.06 percent, meaning that Simon must pay $4,703 to help support the children. Kiri would have no liability as her share of care (61 percent) would be more than her proportion of total child support income (31.94 percent).
Comparison with current formula
Simon would have to pay $4,200 under the current formula (based on having shared care and hence one dependant child, and cross-applying for child support from Kiri).
Kahu and Vanessa
Kahu and Vanessa have two children, one is 14 and one is 16. They separate. They share care of the children equally.
Step 1: Find Kahu and Vanessa’s child support incomes
Kahu has a taxable income of $54,000 and Vanessa has a taxable income of $67,000. Deducting the self-support component ($16,054) from each gives Kahu a child support income of $37,946 and Vanessa a child support income of $50,946.
Step 2: Calculate the expenditure for raising the children
Kahu and Vanessa’s combined child support income is $88,892. The expenditure for raising the children is calculated by taking 29 percent of the first $24,081 of this, 28 percent of the next $24,081, 25 percent of the next $24,081, and 20 percent of $16,649 (the remainder of the combined child support income).
29 percent of $24,081 is $6,983, 28 percent of $24,081 is $6,743, 25 percent of $24,081 is $6,020, and 20 percent of $16,649 is $3,330, giving a total of $23,076. (In the Expenditure for Raising Children Table, this is shown as $19,746 plus 20 cents for each dollar over $72,243.) This is the expenditure for raising the children.
Step 3: Apportion this cost between the parents
This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that each has of the combined child support income. Vanessa has 57.31 percent of the combined child support income, so she is responsible for 57.31 percent of the expenditure for the children and Kahu is responsible for 42.69 percent.
If the compromise table for shared care (noted in Table 9) was used, Vanessa is given credit for incurring 50 percent of the children’s costs by caring for the children. The balance of Vanessa’s obligation must be contributed through her child support payment. Vanessa’s payment is her total obligation (57.31 percent of the children’s costs) less credit due to care (50 percent). Her payment is 7.31 percent of the expenditure for the children. 7.31 percent of $23,076 is $1,687. Vanessa is required to pay $1,687 to help support the children.
Comparison with current formula
Vanessa would have to pay $2,340 under the current formula (based on having shared care, and cross-applying for child support from Kahu).
Jim and Phillipa
Jim and Phillipa have two children, one is 8 and one is 15. They separate. Both the children live with Phillipa 100 percent of the time.
Step 1: Find Jim and Phillipa’s child support incomes
Jim has a taxable income of $50,000 and Phillipa has a taxable income of $24,000. Deducting the self-support component ($16,054) from each gives Jim a child support income of $33,946 and Phillipa a child support income of $7,946.
Step 2: Calculate the expenditure for raising the children
Jim and Phillipa’s combined child support income is $41,892. Since the children are of mixed age, the expenditure for raising the children is calculated by taking 26.5 percent of the first $24,081, and 25.5 percent of $17,811 (the remainder of the combined child support income).
26.5 percent of $24,081 is $6,381, and 25.5 percent of $17,811 is $4,542, giving a total of $10,923. (In the Expenditure for Raising Children Table, this is shown as $6,381 plus 25.5 cents for each dollar over $24,081.) This is the expenditure for raising the children.
Step 3: Apportion this cost between the parents
This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that each has of the combined child support income. Jim has 81.03 percent of the combined child support income, so Jim is responsible for 81.03 percent of the cost, and Phillipa is responsible for 18.97 percent of the cost. Phillipa spends her share of the cost in paying for day-to-day expenses from her money and Jim pays Phillipa his share to meet the remaining expenses of the children.
81.03 percent of $10,923 is $8,851. Jim must pay $8,851 to help support the children.
Comparison with current formula
Jim would have to pay $8,602 under the current formula (based on not living with a partner and no other dependent children with Jim).
Callum and Phoebe
Callum and Phoebe have one child aged 9 years. They separate. The child lives with Phoebe 100 percent of the time.
Step 1: Find Callum and Phoebe’s child support incomes
Callum has a taxable income of $26,000 a year. Phoebe has no income of her own and is paid the maximum rate of the DPB, giving her an estimated adjusted taxable income of $16,794. Deducting the self-support component ($16,054) from each gives Callum a child support income of $9,946 and Phoebe a child support income of $740.
Step 2: Calculate the expenditure for raising the children
Callum and Phoebe’s combined child support income is $10,686. 17 percent of $10,686 is $1,817. (In the Expenditure for Raising Children Table, this is shown as 17 cents for each dollar.) This is the expenditure for raising the child.
Step 3: Apportion this cost between the parents
This cost is apportioned according to each parent’s capacity to pay. A parent’s capacity to pay is determined by the proportion that they have of the combined child support income. Callum has 93.08 percent of the combined child support income, so he is responsible for 93.08 percent of the expenditure for the child. As Phoebe receives the DPB from the Government to help raise their child, Callum pays child support to the Crown to help offset some of this expense.
93.08 percent of $1,817 is $1,691. Callum must therefore pay $1,691 to the Crown.
Comparison with current formula
Callum must pay $2,132 to the Crown.
Andy and Ali
Andy and Ali have two children aged 6 and 4. They separate. The children spend some time in the school holidays with Andy, so that Ali’s share of care is 90 percent.
Step 1: Find Andy and Ali’s child support incomes
Andy and Ali both have adjusted taxable income below the level of the self-support component ($16,054). They therefore have a net child support income of zero.
Step 2: Calculate the expenditure for raising the children
Andy and Ali’s combined child support income is zero. There is therefore no cost to be apportioned between them.
Step 3: Calculating the child support obligation
As Andy has less than 14 percent care of the children and no net child support income, he pays the minimum payment of $815 a year in child support. As Ali is in receipt of a social security benefit, Andy must pay this $815 to the Crown to help offset some of this expense. Ali has no liability given her share of care.
Comparison with current formula
No change, the same minimum payment of $815 to the Crown would apply.