In 2014-15, about $3.5 billion was transferred between separated parents to support about 1.2 million children.

In the same year, the ATO and Department of Human Services were behind 65,678 enforcement actions on parents' tax returns to collect an extra $27.4 million in child support payments.

Child support

Another 105,202 tax refunds were intercepted to garnishee $121.5 million in child support.

But fathers' rights groups and One Nation say the child support system must be overhauled and the formula that dictates the amount of child support payments should be reviewed.

The audit will focus on the effectives of the agencies' enforcement activities, including intercepting tax refunds and reviewing the accuracy of parents' tax returns.

One Nation leader Senator Pauline Hanson said in her maiden speech this month that some parents were left caring and providing for children without any financial help from the other parent, while others refuse to work altogether to avoid the payments.

"The system needs to be balanced, taking in the age of the child on a sliding scale and both parents' incomes should be taken into account," Senator Hanson said.


"Non-custodial parents find it hard to restart their lives, with excessive child support payments that see their former partners live a very comfortable life."

Interim audit

An interim audit by the Auditor-General of 21 government departments and agencies – including Education, Communication, Defence, Employment and Defence – for the year to June 30 this year found childcare compliance was the significant adverse problem facing government bookkeepers.

Thanks to a 2013 change to the monitoring of childcare operators, compliance moved from inspections of childcare centres and family daycare operators to asking parents to confirm their child's attendance in child care.

As a result the potential incorrect payments blew out to an estimated $693 million by June 2015, before being reined in to $587 million this year.

Education minister Simon Birmingham, who now has responsibility for the problem which has switched between the Education department and Social Services since 2014, said recent measures to close loopholes allowing "child swapping" by carers claiming payments has helped stop more than $400 million in suspect claims from being paid.

A $27 million crackdown introduced to Parliament last week explicitly ruled out people claiming childcare subsidies where the care was provided by the child's own parents in their own homes "or even in the back of the car".

"These new measures will ensure there are much tighter controls on who cares for our children – it is not good enough that existing rules have been able to be 'worked around' and these measures will put a stop to it in the interests of child safety and the protection of taxpayers," Mr Birmingham said.