Separation within the family unit requires consideration of complex emotional, legal and financial issues concerning both parenting and property. While facing the emotional challenges concerning a relationship breakdown, parents make decisions in relation to the care of the children involved. In doing so, the law requires these decisions ensure the best interests of the children are the paramount consideration. Parents may not realise however, that these important decisions can affect the Assessment of Child Support payable. The intention of this article is to briefly explain how child support operates, outline some issues that commonly arise in child support matters, and suggest how these issues may be addressed to assist parents with ensuring their children are financially supported.
WHAT IS CHILD SUPPORT?
Child Support is essentially the periodic payments made by one parent, of an assessed or agreed amount to financially support the child/children of a previous marriage or relationship.
HOW IS CHILD SUPPORT CALCULATED?
The Child Support Agency (CSA) is a Government body attached to the Department of Human Services, and regulates the assessment and collection of child support on behalf of parents in accordance with the relevant legislation and guidelines.
The calculation of child support is referred to as the Child Support Assessment, and is based on the care of the children involved and the financial circumstances of each parent. The CSA use a formula containing 8 steps to arrive at the child support amount payable using the taxable income of each parent, the amount of care each parent has of each child (e.g. 2 nights per week) and the costs of each child. One parent is deemed the ‘paying parent’, and the other is the ‘receiving parent’. Specific details regarding the formula and examples of how it is applied are available in the Child Support Guide. Additionally, an online Child Support Estimator is useful for parents as it applies the formula automatically, producing an estimate of child support payable.
WHO COLLECTS CHILD SUPPORT?
Child support may be collected by the parents themselves, or as is more often the case, by the CSA.
The CSA manages the payment of child support based on the Assessment made, by collecting payments from the paying parent and transferring this money on to the receiving parent. Collection by an independent government body such as the CSA can assist to ensure both parents are meeting their child support obligations, particularly where the parenting relationship is not amicable.
A disadvantage for parents who choose to self-manage child support without obtaining a Child Support Assessment from the CSA is that the receiving parent will only be entitled to the base rate of Family Tax Benefit A.
ISSUES FACED BY PARENTS REGARDING THE ASSESSMENT OF CHILD SUPPORT
The legislation has been drafted in a way that attempts to ascertain an accurate and fair amount of child support payable. However, there will be various issues and circumstances that produce an unjust or inequitable assessment. Parents in this position can request a change to the child support assessment, by submitting an Application to Change Your Assessment (Special Circumstances), with any relevant supporting evidence. The Registrar is required to review the application and evidence provided, contact the other party and invite a written response, and may request further information from either parent or a third party e.g. a bank. Ultimately, the Registrar determines whether a change of assessment should be made in reference to one of 10 Reasons outlined by the legislation. If a reason is established, the Registrar will then consider whether a change in the assessment is considered “just and equitable” and “otherwise proper”.
Some examples are outlined below, followed by general information that may assist parents to resolve their issue with the assistance of the CSA directly.
- The other parent’s income or financial circumstances are not accurately reflected in the assessment (Reason 8A/8B).
To assess each parent’s financial capacity, the CSA uses each parent’s taxable income. This information is provided by each parent and they are not generally required to provide evidence of their earnings at initial assessment. However, there are a number of reasons as to why the reported earnings of a parent may not accurately reflect their financial circumstances. This issue may arise where one parent, for example;
- Has under-reported or under-estimated their taxable income to the CSA
- Conducts their own business, and receives “cash in hand” for the majority of their work, which is not reflected in the income tax assessment used by the CSA.
- Is not working despite having the capacity to do so.
- Has nil or minimal income though has significant wealth in the form of assets
- Is a beneficiary of a Trust
- One parent is paying significantly high costs for child care/school fees for a child under 12, that exceed 5% of their taxable income (Reason 6).
In this situation, the parent paying these fees may apply for an additional amount in child support from the other parent to assist in meeting these costs. Relevant evidence may include a statement of child care/school fees, and copies of tax assessments.
- One parent has relocated and now lives a fair distance away from the child, resulting in “high” travel and accommodation costs (exceeding 5% of the parent’s taxable income) being paid to enable that parent to see the child. (Reason 1)
Several factors will be considered by the Registrar here including discounting the costs necessary for that parent’s self-support (e.g. the difference between paying accommodation for one vs three bedrooms). Other considerations include each parent’s contribution to those costs, whether any allowances are provided by an employer, if the costs are incurred for a dual purpose (e.g. a wedding/special event), etc.
The above information is general only. Further details regarding the specific criteria required to establish a change of assessment is available in the Child Support Guide.
OTHER GENERAL ISSUES
- The paying parent refuses to pay and/or refuses to respond to requests for information
The legislation has provided the CSA with the authority with information gathering powers to pursue information from third parties. In some situations, the CSA may also seek payments directly from the paying parent’s employer, whereby the employer pays the amount to the CSA as a deduction from that employee’s wages. This may not always be possible, for example if the paying parent is self-employed. In this situation, the CSA has the authority in conjunction with the Australian Taxation Office, to withhold a paying parent’s tax refund once they have submitted their tax return, to satisfy a child support debt owed.
- Parents at risk of family and domestic violence claiming child support
If the CSA identifies such a risk for either parent involved in a Child Support claim, their case will be transferred to an authorised Restricted Access Customer Service (RACS) Coordinator, providing increased security and restricted access to personal records held by the Department.
- Parents who are not confident with speaking directly with the CSA
A parent may elect a representative to speak to the CSA on their behalf, and provide/receive information accordingly. This person may be a trusted friend or family member, or a legal representative. For privacy reasons, parents are required to provide a signed Authority Form advising the CSA of the representative’s details.
This article has provided an indication of some of the various issues that arise regarding Child Support within the much broader context of Family Law. The information provided will not apply equally to every parent’s circumstances. Rather, the application of the law and possible legal solutions to these issues will largely depend on the facts of each case.
If you or someone you know has concerns about their Child Support payments or other Family Law matters, please contact our offices and one of our friendly and experienced staff members would be happy to assist you.