An Assessment of Proposed Changes to the Child Support Formula

Abstract:     
The current New Zealand child support formula has been in place for nearly twenty years. Despite recognised problems and ongoing dissatisfaction, only minor changes have been made in that time. The current Government has opened consultation on proposed changes which address some of the major issues, in particular the assessment of costs of children, consideration of the income of both payer and payee, and allocation when care is shared. IRD analysis replicates an Australian approach to derive a proposed alternative formula. This paper assesses the analysis. It finds that results are highly sensitive to the assumptions, that the formulation is based on questionable concepts, and that there are hidden assumptions which may be a cause of current dissatisfaction and harmful to children. A simplified alternative is suggested which recognises the limitations in analysis and implementation and may be more acceptable.

Number of Pages in PDF File: 8

Keywords: Child Support, New Zealand

JEL Classification: C53, D19, D63, D78, K00

Accepted Paper Series