How is the Dependent Child Allowance Calculated? – Does it have a Problem?

The dependent child allowance appears to value one child differently to another. Until the relationship splits up.

What exactly is the Dependent Child Allowance?

On top of the living allowance that a paying parent receives, there is also an allowance given for any biological children that live with you.

We are told that the Child Expenditure Table is used to work this out.

How is it worked out?

In one of the examples on the IRD website there is a father earning $45092. He has two children to his ex and also has a new child with his new partner. By having a dependent child he gets a raise to his living allowance of $4,642.53 a year. This is around 10.3% of his total income.

For the original two kids the calculation of how much they cost is different:

The annual cost of raising Thomas and Ben based on Cameron and Holly’s combined child support income and using the child expenditure table is $16,505.26.

According to the Child Support formula the two original kids have an annual cost of around $8250 a year each. That is almost double what the new kids cost of living was estimated at.

Our own formula based example

In this example we have a man earning 65k a year. His ex and him have 1 child together and she earns 45k a year. She has the majority of the care so he doesn’t reach any of the thresholds to trigger shared care.

This results in him paying $592.80 a month for his first child.

Lets say he then has new kid with his new partner. Now he can add a dependent child into the formula.

He will get a living allowance for the new kid. The formula changes a bit to $508.30 a month. Basically out of his income he has $84.50 extra per month to spend on his second child.

What if he split from the new partner as well, and the new partner went on a sole parent benefit with full care of the baby?

If that happened he would then need to pay $464.40 to the first ex, and $464.40 to the second ex.

By the relationship splitting the children suddenly become worth the same amount of money.

This is wrong in so many ways it is hard to know where to begin but think about this:

The first child/ex get a substantial reduction in child support if our guy here splits with his new partner. One could argue that a flat rate from the beginning here would be the best way to go based on actual costs of a child that was unaffected by what life choices either partner made.

The second child is seen as not needing to be supported as much as the first child if the relationship stays intact, as soon as the split occurs then they suddenly become worth exactly the same amount.

A logical, fact based, and realistic flat rate of child support would seem to be fairer for all parties.

The Child Support formula in NZ, in it’s current state, is inconsistent when it comes to the cost of raising a child.

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