Child support in Australia: Important factors parents need to know
When a separation involves children there are important decisions to be made. The Family Court in Australia will always put the best interests of the child first. However, the responsibility to pay child support is usually not determined by the Family Court. Members of the DCH Legal team, Toni and Daniel discuss misconceptions about child support in Australia and answer some common questions.
How are child support payments in Australia determined?
Toni: In circumstances where parents have not entered into an agreement about child support payments, then it will be managed by the Commonwealth Department of Human Services Child Support (formerly it was referred to as the Child Support Agency).
A child support assessment determines the amount you will pay or receive if you meet the eligibility criteria. Payments are determined by a formula. The Formula and information about the assessment process are available on the Department of Human Services website. Essentially, the assessment of what you pay (or are to receive) is based on:
- the combined income of each parent (their adjusted taxable income), minus a self-support amount and any relevant allowances for dependents; and,
- the percentage of care each parent has for the child (or children) and the child’s age.
Basically, if your percentage of care is less than your share of the combined income you will pay child support. It’s worth noting that the adjustable taxable income amount is capped at $187,785.00, although there are circumstances where that cap won’t be applied.
If circumstances change; for example, one parent takes on a new job or gets a raise; would there be an adjustment to child support payments?
Toni: Probably, but it depends on the amount by which incomes change. The Department receives information about income from the ATO. However, not everyone lodges tax returns in a timely way. The Department has a number of options to receive, or obtain, information about income, and it can make an assessment based on a provisional estimate of income from time to time. It’s best to tell the Department about changes to your income as soon as it happens. Comprehensive information about assessments and income including changes to income and the effect of that is available from the Department Website.
What’s the number one thing that many parents misunderstand about child support in Australia?
Daniel: I think that a lot of parents think that they can agree not to pay child support just between themselves and somehow, it’ll be binding. That’s not the position at all.
Someone may think they have a certain agreement, leading them to arrange their lives and their finances to meet it. When the other parent becomes aware that their arrangement is non-binding, it may lead them to apply for an assessment of child support, and a bigger child support amount may become payable.
So, if circumstances change substantially, but go undeclared, they could be forced to effectively give “back pay”?
Daniel: Generally the liability to pay only starts from the date that you put your application in. There are exceptions, but for most people, it’s from the day that the person seeking child support puts their paperwork in, or the person who wants to pay child support puts their registration in.
Usually, it takes a few weeks for an application to be processed because the Department needs input from both parties to work out the assessment. So, there could be a delay and, for that reason, a payment backdated to the day that application was lodged may be applicable.
Do parents need to keep receipts for what's been purchased on behalf of their child?
Toni: You should maintain a habit of keeping receipts for payments made on behalf of children, particularly if the expense is not covered by the child support payment or is an extraordinary payment (such as a health-related or unforeseen expense). For many separated parents, child support is administered by the Department, so if an extraordinary payment is disputed, you may need to apply to the Department to change or review the assessment.
The Department’s administrative process to sort child support payments must be followed in most cases. There are circumstances where a dispute about child support can be determined by the Family Court, but it’s not the ordinary course for the Family Court to get involved. In short though, whatever process you use, keep receipts, because the Department or the Family Court will need them in the case of a dispute.
What happens if the costs of raising a child change, such as changing schools?
Toni: We see disagreements about education and schooling arise when parents separate. The economics of separation means the affordability of schooling decisions or options made when parents were together is under stress.
The communication around expenses relating to school fees, uniforms, books, excursions, after-school care, and activities can break down and cause disputes.
Child support assessments issued by the Department don’t ordinarily cover the cost of private schooling.
Some parents enter into binding or limited child support agreements to cover additional costs such as education and health. Often, but not always, private agreements are entered into where one parent earns a high income above the capped amount, and the children are already attending or enrolled to start private school at separation, and parents have agreed to maintain private school education.
For someone who is, say, an investment banker receiving bonuses, commissions or income from passive assets is that also taken into account?
Toni: You can find out what constitutes income by firstly going to the Department’s website. Most commissions, bonuses, dividends, rental income and forms of income are captured in tax returns, meaning it’s income for the purposes of the assessment. There can be problems on a case by case basis capturing income from some sources, however, the best starting place is to call the Department’s helpline as they do have mechanisms to investigate income.
The child support system has not really been designed with high net worth assets or complicated finances in mind. If you need more help than the Department can provide, you will need advice from a family lawyer.
The issue with parents who receive commissions, bonuses and such like is that it often puts them over the income cap – the highest amount of assessable income in the Department’s formula. There are options to deal with child support by way of a binding child support agreement, or limited child support agreement. Otherwise, where a dispute remains between parents about the appropriate child support payment, it might be a case where specific family law advice about options is required, including whether or not there is a remedy available in the Family Court.
What documentation should a parent have to hand when visiting the Family Court or the Child Support Agency.
Toni: The family court doesn’t deal with child support for the majority of cases. Its an exception for the Family Court to become involved. You have to go through the Department’s processes first. The best place to start is with the application online on the Department website. You answer a series of questions, and you might have to provide copies of documents such as parenting plans or Court Orders, proof of income where tax returns are not available, birth certificates and so on.
Daniel: If there are other kids and other child support payments in the picture, information about them also needs to be provided. There’s a whole range of different formulas and different things to take into account with multi-child families, with different parents. The Department needs all relevant information so they can take into account the whole family situation.
Documents you might want to bring include school enrolments, any sort of mortgage payments that might be made to house the children, or travel receipts if the parent has to travel or spend money for accommodation to exercise time with the children.
The child support amount is calculated on the basis of a statutory formula. The assessment is reviewed every year by the Department. The Department calculates what it costs to raise a typical child, or children when there is more than one child, and these costs are set out in tables on the Departments website.
The average member of the public isn’t expected to know any of the formulas. Once your information is submitted the Department produces an assessment. It’s useful to know some elements of the process and to know what is taken into account in determining an assessment. The tables setting out the self-support amounts, costs of care calculations for children at different ages are available on the Department’s website. It is a comprehensive source of information. That is your starting point.
When it comes to child support, there’s no such thing as a typical person or situation.
Toni: That’s right. Some people are really good at understanding the components of the assessment and formula process, and finding out information that is relevant to their situation. They typically use the Department’s enquiry line and will be vigilant in ensuring the assessment process takes account of everything relevant to them. It’s the same with tax; some people are really good at managing their tax affairs and understand the legitimate ways to reduce tax because they use all the resources available to them. There’s a lot of information about child support on the Department’s website and that’s the best place to start.
What else is worth knowing about child support payments in Australia?
Toni: You can’t avoid child support in Australia as easily as you might think. Some people think they can, if they go and live in the middle of nowhere in a country that isn’t a reciprocating jurisdiction under the convention. But as soon as they step foot back in Australia, they can be hit with the outstanding child support bill, and they routinely are.
This article is general in nature and is not to be taken as legal advice. You should consider seeking independent legal, financial, taxation or other advice to check how information relates to your unique circumstances. DCH Legal Group is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly.