The views expressed in this paper are those of the author, not those of the Department or the Government.
In this paper, I will outline how family law and Social Security provisions are at odds with one another in relation to the treatment of separated parents who share care of their children. I'll then discuss the implications of this for Social Security policy on shared care. I'll briefly examine the implications of the Government's proposed tax and Social Security reforms for parents sharing care of children and conclude by suggesting some principles on which a new approach could be based.
The family law reforms introduced in June 1996 reinforce the rights of children to have regular contact with both parents and emphasise joint parental responsibility for children following separation. The terms custody and access, with their connotations of ownership and winner/consolation prize winner, have vanished from the Family Law Act. Residence and contact are now the terms used to describe arrangements for children of separated parents. The Act makes it clear that upon separation, each parent exercises the full range of parental responsibilities unless the parents agree to vary this or a court orders a variation in these responsibilities.1
In March 1998, an important reform was made to the Social Security provisions for parents. Parenting Payment replaced two other payments for parents caring for children - Sole Parent Pension for lone parents and Parenting Allowance for partnered parents. However, Parenting Payment, like Sole Parent Pension, does not accommodate separated parents who share equally the care of their children. Only one parent can receive the payment and if the other parent also needs income support, they must claim another payment, such as Newstart Allowance. So, although parents may share responsibility and each provides a home and cares for their children in the spirit of the Family Law Act, they are treated
differently by the Social Security system.There are several dimensions to this different treatment. The first is recognition or denial of the parenting role played by each parent. Even when care of children is shared 50/50, for example, children live with each parent for alternate weeks, one parent has their role recognised by being granted Parenting Payment and the other has their role as parent denied. Where both parents need income support, under the Social Security legislation and the way in which it is administered, one parent is a parent foremost and the other is unemployed and their role as a parent is secondary. This makes a difference in terms of the financial benefits conferred upon each parent and their obligations and choices relating to parenting and labour force related activities.
The second dimension to this different treatment is financial. The parent who receives Parenting Payment is financially advantaged compared with the parent receiving Newstart Allowance. If both are entirely dependent on Social Security assistance, parent one receives almost $52 more cash assistance than parent two each fortnight.2
The current policy fails to recognise that parents sharing care of children will both have higher costs than if the children lived only with one of them. The costs of establishing and maintaining two households suitable for children are clearly greater than the costs of establishing and maintaining one. For example, both parents sharing care of children need to provide adequate housing for the children, including bedrooms separate from their own, and both may need a car. Such costs are constant and do not decrease for one parent while the other parent has the children. American studies estimate these costs at between one quarter to one third of the total costs of a child.3
Other costs of children may be shared between parents, such as food, energy and recreational activities. That is, these costs are proportionate to the amount of time that children spend in each parent's household. The same American studies I mentioned earlier estimate these costs at between 40-50% of the costs of a child.4
There are also costs of children that don't increase when parents share care but they are not necessarily borne equally by both parents, for example, school excursions, medical expenses and clothing.
There is some recognition in the Social Security Act of the shared costs of shared parenting in that Family Allowance can be split between parents. However, recognition of the additional costs is restricted to recognition for one parent. Social Security recognises the costs of sole parenthood or the absence of economies of scale, through the provision of Guardian Allowance, but like Parenting Payment, where parents are sharing care of children, this can only be paid to one parent (the one who receives the Parenting Payment).5
The third dimension revolves around expectations of, and support for, workforce-related activities of each parent. The parent who receives Parenting Payment is not obliged to seek work to qualify for the payment. If this parent chooses to look for work or participate in education or training, they may be assisted through the voluntary Jobs, Education and Training (JET) program. They may receive a Pensioner Education Supplement of $60 a fortnight if they undertake an education course, and if they find a job their income is treated more generously than the other parent's.
On the other hand, the other parent is essentially treated as any other unemployed person unless they qualify for another payment, for example, on the basis of disability. They must satisfy an activity test to continue to qualify for payment of Newstart Allowance. Although the activity test does not specify that every unemployed person must be seeking full-time work, they are expected to seek a range of work which includes full-time work.6 The Newstart Allowance activity test currently does not take child care responsibilities into account unless the child happens to be ill.
The presence of children in a household for even part of the time imposes a constraint on parents' availability to participate in the labour force that is different from that of an unemployed person without child care responsibilities. The issue is whether it imposes the same degree of constraint experienced by a parent with sole responsibility for children. Any parent who is seeking work and who has responsibility for the care of children would need to find work that fits in with these responsibilities and/or find suitable child care.
The nature of the shared parenting arrangements is obviously a crucial factor in determining labour force capacity. Some shared care arrangements would impose significant constraints on a parent's capacity to work. For example, a parent who has two pre-school age children for 4 days a week may be able to find work on the other 3 days a week - eg. Nursing, casual teaching, hospitality work, etc. but a parent who has these children for one week in every two may find it harder to obtain work that fits with these times. The labour force capacity of parents sharing care will also be affected by the same factors that affect it for parents with sole care of children. That is, the age and number of children, the parents' skills, qualifications and experience, and the availability of suitable child care.
Where both parents sharing care of children do combine parenting with paid work, they receive differential financial rewards from earning the same level of income and the Parenting Payment recipient can receive part-payment at a significantly higher level of income than the Newstart Allowance recipient.
For example, say a separated couple sharing care of one child each earned $200 a fortnight from part-time work, one would receive $327.10 in Parenting Payment while the other would receive only $267.90 in Newstart Allowance - $59.20 less. The Parenting Payment recipient could continue to receive part-payment until their income exceeds $22,084.40 a year ($849.40 pf) while the Newstart Allowance parent can continue to receive some Allowance only if their income does not exceed $15,150.46 a year ($582.71 pf).7
The differential treatment of separated parents sharing care of children needs to be understood within the broader context of the Social Security system. The system is categorical, ie. it puts people into boxes, such as unemployed, disabled, parent, retiree and so on. Historically, there have been significant policy differences between pensioners and allowees or beneficiaries, with pensioners being treated more generously. These differences embody a presumption that pensions were long term payments and allowances or benefits were short-term. These differences are manifest in the more generous income test and concessions that pensioners receive compared with allowees/beneficiaries. Parents sharing care of their children straddle this pensioner/allowee divide, with one parent being subject to pension conditions on Parenting Payment and the other being subject to more stringent allowance conditions.
The second important thing to understand about the broader context is that couples in intact families are also treated by Social Security as if one is the primary carer of the children and the other is the unemployed 'breadwinner'. This means that only one parent can receive Parenting Payment and the other can receive Newstart Allowance. Although this affects each partner's respective labour force related obligations and support, it does not result in a financial disparity between each member of the couple in the way it does for separated parents.8
However, I believe there are a number of reasons for re-examining current policy.
First, it is desirable that separated parents be sent consistent signals, rather than family law signalling that shared care is to be encouraged and Social Security provisions sending a contrary signal.
Second, Social Security arrangements should ideally be more responsive to changing needs and patterns of family life. Available statistics indicate that the incidence of shared care is still relatively small, however, I would expect this to rise over time as parents make arrangements for children under the new family law regime.
Third, underpinning the family law reforms is the notion that it is generally in children's best interests to have ongoing contact with both parents. The Family Law Act does not prescribe shared residence as the model for parenting after separation as it is not always the best arrangement for children. However, where parents or the court decides that shared residence is in children's best interests, it should be financially possible for both parents at all income levels, rather than the preserve of those who can afford it without any Government support.
It is pertinent to mention here, the growing body of research on the effects of separation or divorce on children. Paul Amato considers the question, 'Under what conditions is divorce more or less harmful to children?' 12His review of the research indicates that children are better adjusted when both parents display 'authoritative parenting', ie. warmth, responsiveness and discipline or rules. Where children reside in the households of both parents, this kind of parenting is facilitated more than it could be under the traditional sole residence and week-end contact arrangement. Amato says that several studies '... suggest that children with joint residential arrangements are better adjusted, overall, than children with sole-custody arrangements.'13 However, he also states that 'joint custody is not a panacea, and the presumption that joint custody is always in the best interest of the child is incorrect.'14
Fourth, both equity and adequacy are commonly used values in social policy-making.15
Adequacy is about ensuring '...that people have enough income to maintain a basic acceptable standard of living'.16 In terms of adequacy, as I mentioned earlier the current policy does not recognise that parents sharing care of children will both have higher costs than if the children lived only with one of them.
'Equity is achieved if people with similar needs are treated equally.'17
Parents sharing equally the care of their children clearly have similar needs. In trying to treat more fairly parents who do share care of their children within the existing Social Security structure, a critical issue is the basis for determining shared care. There are three particularly important questions here.It is hard to justify treating parents very differently if they arrange for the children to live with one for four days each week and the other for three days. It is also hard to justify treating parents in the same way if they arrange for the children to reside for five days with one parent and two with the other. The argument for treating parents equally obviously diminishes the further away they move from equal care.
The fifth important policy consideration is that shared care may
provide greater opportunities for both parents to combine parenting with
paid work or study or training for future workforce re-entry. In other
words, shared care of children may be in parents' interests. There is
ample evidence that the presence of children is a barrier to being in
the workforce, and this is particularly so where a parent has sole
responsibility for children:
Current policy does not recognise the constraints to one parent's
labour force participation (ie. the parent on Newstart Allowance) nor
the capacity of the other parent to participate in the labour force (ie.
the parent receiving Parenting Payment).
Shared care of children could be both in the interests of parents wishing to combine working and parenting, and also in the interests of Government, in terms of minimising Social Security outlays in the longer term.
Finally, administration of policy by Centrelink would be easier if staff were not required to make difficult decisions about which parent should be paid Parenting Payment and Guardian Allowance when they are sharing equally the care of their children.23
The tax reforms announced by the Government earlier this year have implications for parents sharing care of their children. The restructuring of Social Security assistance for families is an integral part of this package, and it is proposed to replace a raft of six forms of assistance, including those for sole parents, with one form for single income families - whether there is one parent or two in the household.24 This new form of assistance is to be called Family Tax Benefit Part B.
As the new Family Tax Benefit Part B will incorporate assistance that can currently be split between parents sharing care25 as well as assistance that is payable to one parent or the other,26 it will be necessary to consider how the new Family Tax Benefit will treat parents sharing care. The new payment could be split between parents sharing care, paid only to one of them, or paid to both. As the payment rate proposed is higher than the existing rates of Guardian Allowance and the Sole Parent Rebate, the financial stakes are higher for each parent.27
For parents sharing care where both are on income support payments (for example, one is on Parenting Payment and the other on Newstart Allowance), the gap in financial rewards from working will be further widened through the change in the income test (specifically, the introduction of a lower (40%) taper rate) for pensioners. This change was also announced as part of the Government's tax reform package. For the same separated couple I mentioned earlier who are sharing care of one child and each earning $200 a fortnight from part-time work, one would receive $350.23 in Parenting Payment, while the other would receive $283.35 in Newstart Allowance - $66.88 a fortnight less. The parent on Parenting Payment could continue to receive part-payment until their income exceeds $27,458.08 a year ($1,056.08 pf), while the Newstart Allowance parent can continue to receive some Allowance only if their income does not exceed $15,724.28 a year ($604.78 pf)28.
I will conclude by suggesting seven 'ideal world' principles on which policy for parents sharing care of their children could be based.
Principle 1. Policy should, to the extent possible, be consistent across portfolios/departments - income support, tax, family law and child support - and should enable and support shared parenting.
Principle 2. Both parents should have their parenting role
recognised.
Principle 3. Parents sharing care equally should be treated equally. That is, they should both be eligible for the same financial support through the Tax and Social Security systems.
Principle 4. Arrangements for the financial support of families should seek to minimise, if not avoid conflict between parents or a tug of war over children and should enable some flexibility in parenting arrangements for the benefit of the children.
This principle is consistent with Amato's point that greater cooperation and less conflict between divorced parents are conducive to facilitating children's adjustment after divorce.
Principle 5. Each parent should have adequate recognition of their costs, particularly with the overheads of establishing and maintaining two households with children residing in each on a part-time basis.
However, adequate recognition of costs is important in ensuring that children's standard of living is not too deleteriously affected by divorce; another factor that Amato cites as influencing children's adjustment.
Principle 6. Any expectations of, or support for, participation in any labour force related activities attached to payments should be the same - ie. paid work, training, education - where parents' needs are the same.
Principle 7. The income test arrangements for financial support should encourage a combination of paid work with parenting, ensuring that it is financially worthwhile to take up paid work and that both parents receive equal financial gain from the same earnings.
1 Sections 61C and 61D
2 $51.90 to be exact, at Oct. '98 maximum rates. There is also an unquantified financial difference stemming from the different concession cards that PP (Single) and NSA recipients receive - the value of these depends on usage by the individual. See Attachment 1 for a case study that explains what the $51.90 difference is comprised of.
3 M. Melli & PR Brown, The Economics of Shared Custody: Developing an Equitable Formula for Dual Residence. Institute for Research on Poverty, University of Wisconsin-Madison, 1994
4 M. Melli & PR Brown , 1994. ibid.
5 The tax system also recognises the costs of lone parenthood through the provision of the Sole Parent Rebate. This rebate was set at $1243 a year for 1997-98. Like Guardian Allowance, ($954.20 pa) this cannot be shared. GA can also be paid to one parent where neither receives Parenting Payment but income is low enough to qualify for Family Allowance Supplement (of which GA is one component).
6 The range of work includes full-time, part-time, permanent and casual.
7 Oct. '98 rates.
8 This is because a partnered PP recipient is subject to the same income test (except for that which applies to the non-benefit component of PP) and ancillary benefits as their NSA partner, ie. both receive payment under allowance conditions rather than one being paid under pension conditions. A partnered PP recipient is eligible for the Jobs, Education and
Training program and is not required to satisfy an activity test, whereas the Newstart Allowance recipient is not eligible for JET and must satisfy an activity test.
9 Child Support Agency, July 1997.
10 ABS Family Characteristics Survey, April 1997
11 This survey was the first phase of the evaluation of these reforms. It is intended to provide a benchmark of attitudes, with two follow-up surveys planned - one in the short term and the other in the longer term.
12 P. Amato, "Children and Divorce: What Hurts? What Helps?", Dep't of Sociology, University of Nebraska-Lincoln, paper delivered at 'Family Separation: Addressing the Needs and Interests of Children' Conference, 9 June 1998, Canberra.
13 P. Amato, 1998. ibid. p.12-13.
14 P. Amato, 1998. ibid, p.13
15 J. Perry, 1995, A Common Payment? Simplifying Income Support for People of Workforce Age. Department of Social Security Policy Discussion Paper No. 7, July. Canberra: AGPS .p. 7
16 J.Perry, 1995, ibid. p. 7
17 J.Perry, 1995, ibid. p.8.
18 Where parents agree that care is shared equally, the CSA does not require accounting of nights.
19 ABS Labour Force Survey, June 1998
20 ABS Labour Force Survey, June 1998.
21 ABS estimate (unpublished), June 1997.
22 DSS administrative data, June 1998.
23 The current guidelines for staff in dealing with shared care cases for Parenting Payment are at Attachment 2.
24 Family Tax Benefit Part B would replace the Dependent Spouse Rebate, Basic Parenting Payment, Family Tax Payment/Assistance Part B, the Sole Parent Rebate and Guardian Allowance.
25 Family Tax Assistance/Benefit Part B - the part payable to those with children under 5.
26 GA and the Sole Parent Rebate.
27 the proposed rate for FTB (B) is $2,640 a year for those with a child under the age of 5 and $1,851 a year for those with a child aged 5-16 years.
28 the discrepancy is higher where there is more than one child, because the pensions income test includes an additional 'free area' for each child. All figures in this scenario have been deflated to October '98 dollars for comparative purposes.
29 For eg., the child support formula defines shared care as within a 40-60% band, and substantial care as at least 30% and less than 40%.
BIBLIOGRAPHY
Amato, Paul R. 1998. Children and Divorce: What Hurts? What Helps? (Paper presented at 'Family Separation: Addressing the Needs and Interests of Children' Conference, Canberra, 9 June 1998)
Amato, Paul R. 1993. Contact with Non-Custodial Fathers and Children's Wellbeing. Family Matters. No.36. Dec. 32-34.
Arditti, Joyce A, and Madden-Derdich, Debra. 1997. Joint and Sole Custody Mothers: Implications for Research and Practice. Families in Society. Jan/Feb. 36-45.
Cancian, Maria and Meyer, Daniel R. 1998. Who gets Custody?. Demography. Vol. 35, No.2, May, 147-157.
Funder, Kathleen and Smyth, Bruce. 1996. Evaluation of the Impact of Part VII of the Family Law Reform Act 1995. Public Attitudes to Parental Responsibilities and Children's Rights after Parental Separation. Commonwealth of Australia.
Hayes, Heather and Hunt, Graham. 1995. Are Shared Custody Arrangements made in the Best Interests of the Child? (paper presented at Family Court of Australia Second National Conference, Enhancing Access to Justice, Sydney NSW. 20-23 September 1995, 31-42).
Magnusson, Roger S. 1992. Joint Custody, Shared Access and the Sole Parent's Pension: Winner Takes All? Australian Journal of Family Law. 6(2), 161-175.
Melli, Marygold S. and Brown, Patricia R. 1994. The Economics of Shared Custody: Developing an Equitable Formula for Dual Residence. Institute for Research on Poverty (IRP), University of Wisconsin-Madison.
Morgan, Laura W. Child Support Guidelines: Time-Share Adjustments for Visitation and Other Developments and Trends Relating to Support and Access. A Survey of the Current State of the Law.
Perry, Julia. 1995. A Common Payment? Simplifying Income Support for People of Workforce Age. Department of Social Security Policy Discussion Paper No. 7, July. Canberra: AGPS.
Saunders, Daniel G. 1994. Child Custody Decisions in Families Experiencing Woman Abuse. Social Work. Jan. Vol.39. No.1, 51-59.
Tax Reform: not a new tax, a new tax system. The Howard Government's Plan for a New Tax System.
Circulated by the Hon.Peter Costello, MP, Treasurer of the Commonwealth of Australia. AGPS. Aug. 1998.Vogel, Peter. 1998. Petrol on the Fire. (paper presented at the National Forum on Men and Family Relationships, Canberra, June 1998)
Wilcox, Kathryn L., Wolchik, Sharlene A., and Braver, Sanford L. 1998. Predictors of Maternal Preference for Joint or Sole Legal Custody. Family Relations. Jan. Minneapolis.
CASE STUDY ILLUSTRATING FINANCIAL DISPARITY BETWEEN PARENTS SHARING CARE OF A CHILD
Lisa and Dan are separated and share the care of their four year old son John. He lives with each parent for alternate weeks. Lisa was receiving Parenting Payment for caring for John for a year prior to her separation from Dan. In accordance with the guidelines for making decisions in such cases, Centrelink decides to continue paying Parenting Payment to Lisa and Dan is granted Newstart Allowance.
|
Lisa receives: |
|
|
Parenting Payment (Single rate) |
$357.30 pf |
|
Telephone Allowance (paid quarterly) |
$2.40 pf |
|
Pharmaceutical Allowance |
$5.40 pf |
|
Guardian Allowance |
$36.70 pf |
|
50% of Family Payments (Family Allowance and Family Tax Payment Parts A & B) |
$61.67 pf |
|
Pensioner Concession Card |
unquantified value |
|
TOTAL |
$463.47 pf |
|
Dan receives: |
|
|
Newstart Allowance (Single with child rate) |
$349.90 pf |
|
50% of Family Payments (Family Allowance and Family Tax Payment Parts A & B) |
$61.67 pf |
|
Health Care Card |
unquantified value |
|
TOTAL |
$411.57 pf |
|
DIFFERENCE BETWEEN LISA AND DAN'S INCOMES |
$51.90 PF |
| 200 pf earnings | PP parent | NSA parent | Difference |
| rate pf | $327.10 | $267.90 | $59.20 |
| cut-out point | $849.40 pf $22,084.40 pa |
$582.71 pf $15,150.46 pa | $266.69 $6,933.94 |
| 200 pf earnings | PP parent | NSA parent | Difference |
| rate pf | $350.23 | $283.35 | $66.88 |
| cut-out point | $1,056.08 pf $27,458.08 pa |
$604.78 pf $15,724.28 pa | $451.30 $11.733.80 |