Blog

Income used in calculating child support payments

Income used in calculating child support payments

Parental income is considered equally when the Department of Human Services make a child support assessment. The parent’s income is used to determine the costs they should meet.

Each parent’s income is considered in the same way and then combined to work out the costs of raising their children. Each parent’s share of the total income shows how much of the children’s costs they should meet.

A broad range of income amounts for both parents is taken into account to work out child support payments. These amounts  are added up to get your adjusted taxable income, which is based on your last completed financial year of income.

It is important to tell the Department about changes to your income as soon as they happen because as they may not be able to backdate the change.

When a parent or child lives overseas and the Department is making a child support assessment, they use the income from the last completed financial year of the country in which they live.

If the income the Department has for you is wrong

The best way to make sure your child support assessment is correct is to lodge your tax return on time every year. The Department use your adjusted taxable income from a previous year when they complete the assessment.

Parents need to lodge a tax return or tell the Department their income. If you are not required to lodge a tax return, you can submit your income information by:

If you haven’t lodged a tax return and are unaware of your adjusted taxable income, you can provide the Department with an estimate for the current year if:

  • they are already using an adjusted taxable income from a previous tax return, or you have previously provided them an adjusted taxable income for your current assessment, and
  • your estimate for the current year is at least 15% less than the income used in the assessment

You may not be able to lodge an estimate if you may already have:

  • an agreement
  • a determination made under the Child Support Guide’s change of assessment process
  • a court order
  • an assessment which was made overseas

You must lodge an estimate for the new amount if your circumstances change; for example, if your income increases or decreases. It is important that your estimate stays accurate throughout the year to be sure you are paying or receiving the correct amount. At the end of the financial year, your estimate will be matched against your actual income for that year. If the estimate is not accurate, you will incur a debt or overpayment.

If you have not lodged a tax return for 2 years and the Department cannot calculate your income from other information they have, they will use a default income of at least two-thirds of an average weekly earnings figure published by the Australian Bureau of Statistics each year.

If you lodge your tax return late, unless there are exceptional circumstances, they will not be able to backdate a reduction to the default income.

If you live overseas and have lodged a tax return in the country where you live, the Department will not be automatically informed about your tax lodgment. It is very important that overseas parents inform the Department of their income for the previous financial year at the start of each child support period. You will also be asked to provide evidence of your income. This is only applicable for an Australian child support assessment.

Earning extra income after separation

If you earn extra money after separation, you may be able to apply for some of that extra income to be excluded from your child support assessment. You do not need to go through a formal change of assessment process.

In some cases, extra income you earn after separation can be excluded from your child support assessment for up to 3 years. Examples of extra income that can be excluded are overtime or income from a second job.

In order to have extra income excluded from the assessment, you need to show that you did not earn that income before separation and that the income would not have been earned in the ordinary course of events. Additional income earned through a promotion or through a usual pattern of overtime cannot be excluded from your income assessment.

Both parents can apply to have additional post-separation income excluded from the child support assessment. Fill out the application for post separation income to be excluded.

However:

  • income can only be exempt for 3 years after separation
  • excluded income can be no more than 30% of your adjusted taxable income

Having this extra money excluded from the assessment can help you with many post separation costs such as buying a new car, setting up a new home or buying items to support your children during care.

Categories

Related articles

Your passionate team of family lawyers

Let’s work out your next steps together. Book your free consultation to start the process.