Financial outcomes for parents after separation.

This article examines the financial circumstances of separated parents who were registrants of the Australian Child Support Agency (CSA) at the time of separation (in 1997) and who remained registrants until at least 2001. The data facilitate a unique longitudinal analysis of matched separated couples over the crucial early years of their separation. The men in question were predominantly on low incomes some one to two years prior to registering with 45 per cent earning less than $15,600 per annum. Their situation did not change much between 1997 and 2001. Over these four years slightly more men moved out of this low income category than moved into it. Conversely movements in income for those men earning more than $15,600 appear to be in line with working age men in the general population. These findings do not confirm the supositions of those who believe significant numbers of CSA registrants seek to evade their obligations by reducing their engagement in the labour market after separation. Indeed this evidence supports other research suggesting that poverty or ongoing financial pressures are driving separation. This issue of a high percentage of men remaining on low incomes after separation has been recently responded to by government in a new initiative targeting newly separated and unemployed non-resident parents. Most mothers of their children are low income recipients at the time of the separation and remain so four years later. Their average incomes are under $15,600 per annum irrespective of the income of the fathers. Because of the predominantly low income of the paying fathers, their CSA liabilities are low and as a result do not add significantly to the mother's income.

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INTRODUCTION

Separation is usually an unhappy event. When it involves children the hurt increases. So too do the financial complications. Since the establishment of the Child Support Agency (CSA) separation normally engages the involvement of the Commonwealth Government via the Agency. The CSA's task is to ensure that the non-resident parent makes a financial contribution to the resident parent (in 90 per cent of cases the mother) based on the income of the non-resident parent (generally the father). Depending on the number of eligible children, payers contribute 18 to 36 per cent from their taxable income above an exempt amount (minima $9,006 in 1997; $11,271 in 2001) up to a cap (ca. $100,000). The child support dollars transferred are not taxed again in the hands of payees.

The CSA becomes involved soon after separation. This involvement mainly occurs because most recently separated mothers who wish to claim parenting payment single (formerly the sole parent pension) in conjunction with the family tax benefit co-register with the Agency. Nearly 90 per cent of all separated parents are estimated to register with the CSA. (1) Not surprisingly, given the high incidence of relationship breakdown, the number of former couples affected by CSA arrangements is now very large. As at 30 June 2001 it was 612,332, having grown from 448,045 just four years earlier as of 30 June 1997. (2)