2.4.7 The Basic Formula - a Single Case Assessment (Formula 1)
The basic formula, formula 1, is used to calculate the annual rate of child support payable when only the parents have care of the child/ren and neither parent has another child support case.
CSA Act section 5, Part 5
The Registrar must follow the 8 steps of the basic formula (section 35) in making an assessment when neither parent has another child support assessment and only the parents provide care for the children. This is referred to as a single case assessment.
- Step 1 - Child support income
- Step 2 - Combined child support income
- Step 3 - Income percentage
- Step 4 - Percentage of Care
- Step 5 - Cost percentage
- Step 6 - Child support percentage
- Step 7 - Costs of the child
- Step 8 - Annual rate of child support for the child
The formula adopts an 'income shares' approach, which includes calculating the costs of raising children. These costs depend upon the income of the parents and the number and the age of the children. The costs are then shared between parents based on each parent's share of their combined income. The first step of the formula is to identify each parent's child support income.
Step 1 - Child support income
2.4.4 explains how income information is used to calculate a parent's child support income. If a parent has another child living with them who is a relevant dependent child then a relevant dependent child amount is also deducted from their adjusted taxable income when working out their child support income.
Relevant dependent child
A parent's relevant dependent child can be their child (biological, adopted or the person's child pursuant to section 60H or section 60HB of the FL Act if the child was born as the result of an artificial conception procedure or as a result of a surrogacy arrangement) or, in certain limited circumstances, their step-child (section 5). The parent must have at least shared care of the child during the relevant care period. See 2.9.5 for information about adding a relevant dependent child to an assessment.
The child must:
- be either under 18 years of age; or
- have turned 18 and still be in secondary school and the last day of secondary school year has not yet occurred; and
- not be a member of a couple (2.1.2).
The parent must not be assessed in respect of the costs of the child. If the parent is assessed in respect of the costs of the child, then that child is included in the calculations as a multi-case child (section 47).
In the case of a step-child, the parent has a duty to maintain that child by order of a court under FL Act section 66M or section 124 of the WA Family Court Act 1997 (see 4.3.4 on orders in relation to step-children).
If the parent does not have such an order, they may be able to apply for a change of assessment in special circumstances if his or her capacity to provide financial support for the child/ren of the assessment is significantly reduced because of the responsibility of the child support parent to maintain the step-child. See 2.6.16 for information about requirements for such an application.
Child support income determined in some other way
Other provisions of the Act may also be used to determine a parent's child support income. The income to be used for a parent may be set by a change of assessment decision (2.6.4) under Part 6A of the Act. There may be a child support agreement (2.7) that specifies the income to be used. A court order made under Division 4 of Part 7 of the Act (a departure order (4.3.2)) may set the income amount to be used. A determination made under section 44 (post separation costs (2.5.2)) of the Act will identify the figure to be used as a parent's adjusted taxable income (2.4.4) in the calculation of the child support income.
Step 2 - Combined child support income
The combined child support income is calculated by adding together each parent's child support income (section 42).
Step 3 - Income percentage
Each parent's income percentage is calculated by dividing the parent's child support income by the combined child support income and is rounded to 2 decimal places (section 55B). The income percentage indicates the share of the costs of a child a parent is responsible for meeting.
Step 4 - Percentage of Care
A parent or non-parent carer's percentage of care for a child is used to determine the percentage of the cost of the child that the parent or carer is meeting directly through the care they are providing for that child. 2.2.1 describes the basic principles regarding care for child support purposes. 2.2.2 has information about determining child support percentages.
Step 5 - Cost percentage
A parent's or non-parent carer's cost percentage represents the percentage of a child's costs that the person meets directly through care. The cost percentage is determined according to the person's percentage of care, using the cost percentages table (section 55C). 2.4.6 describes how cost percentages are calculated.
Step 6 - Child support percentage
Each parent's child support percentage is worked out by subtracting the parent's cost percentage from their income percentage (section 55D(1)). A parent's child support percentage is taken to be nil if the amount worked out is negative (section 55D(2)). 2.4.6 describes how cost percentages are calculated.
Step 7 - Costs of the child
The costs of the child are determined by the parents' incomes, the number of children and the age of the children. The costs are calculated using the costs of children table. The costs of children table is updated annually and used for child support periods starting within each calendar year. The tables are included at 2.4.2. An explanation of how the tables are used to calculate the costs of children is in 2.4.6.
Step 8 - Annual rate of child support for the child
If a parent has a positive child support percentage under step 6, the annual rate of child support payable by the parent for the child is worked out using the formula:
Child support percentage × Costs of the child
The following example demonstrates how the formula operates.
M and F have 3 children, A aged 9, B aged 7, and C aged 5, who live mostly with M. The children spend 75 nights a year with F, who has regular care of the children. M has an adjusted taxable income of $35,000 and F has an adjusted taxable income of $55,000.
Step 1: Work out each parent's child support income by deducting the self-support amount of $22,379 from their adjusted taxable income.
M has a child support income of $12,621 ($35,000 less $22,379)
F has a child support income of $32,621 ($55,000 less $22,379)
Step 2: Work out the parents' combined child support income.
$12,621 + $32,621 = $45,242
Step 3: Work out each parent's income percentage.
M = $12,621 ÷ $45,242 × 100 = 27.90%
F = $32,621 ÷ $45,242 × 100 = 72.10%
Step 4: Work out each parent's percentage of care for each child.
M has care of all the children for 290 nights, 79.45% of the nights, rounded to a care percentage (2.4.5) of 80%.
F has care of all the children for 75 nights, 20.55% of the nights, rounded to a care percentage of 20%.
Step 5: Work out each parent's cost percentage for each child by looking up the table in section 55C.
M has a cost percentage of 76%
F has a cost percentage of 24%
(Note: a percentage of care is calculated for each child. As the care arrangements for these children are the same, the percentage is the same for all the children. If there are different care arrangements for different children, then they will have different percentages of care).
Step 6: Work out each parent's child support percentage for each child by subtracting their cost percentage for that child from their income percentage. As the care arrangements are the same for all the children we will show the 1 percentage that is used for all the children.
M = 27.90% − 76% = −48.10%
F = 72.10% − 24% = 48.10%
(This means that F is responsible for 72.10% of the children's costs because they have 72.10% of the combined child support income. As F meets only 24% of the costs through care they need to transfer 48.10% of the costs to M through child support.)
Step 7: Work out the costs of each child.
The combined child support income is $45,242.
From the 2013 costs of children table the total costs of the children (3 children 12 or under) =
$9,064 + ($0.26 for every $ over $33,569)
$9,064 + ($45,242 − $33,569 = $11,673 × $0.26 = $3,035)
Therefore: $9,064 + $3,035 = $12,099
The cost of each child = $12,099 ÷ 3 = $4,033
Step 8: Work out the annual rate of child support payable by the parent with a positive child support percentage.
48.10% × $4,033 = $1,940
$1,940 × 3 (children) = $5,820
F is liable to pay M child support of $5,820 (annual rate).
If there is an annual rate payable by each parent (because they each care for a child) these rates are offset against each other to arrive at 1 overall rate of child support (section 67A).