Child Support Assessments and Earning Capacity

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Table of Contents

• The Legislative Framework
• Criteria for Assessing Earning Criteria
• Social Security Review Tribunal Decisions
• Key Takeaways

When parents cannot reach an agreement as to the arrangements for children during separation or divorce proceedings, a legislative scheme allows parents to make an application for a child support assessment. The Child Support Agency (“CSA”) makes assessments based on a number of factors, taking into consideration adjusted taxable income of both parents and the percentage of care given by each parent. The Child Support (Assessment) Act 1989 (Cth) (Act) prescribes a formula to allow for the determination to be made. Often, in family dispute situations, the child support assessment is challenged with claims that one parent has a greater earning capacity. This article will run through some of the considerations relating to earning capacity in child support assessments. 

The Legislative Framework

The legislative framework for child support assessments is included in the Child Support (Assessment) Act 1989 (Cth). This includes details about the review and appeal procedure. When it comes to appealing a child support assessment, a court can issue a departure order based on a parent’s earning capacity. Section 117(2)(c) of the Act provides that a departure from a child support assessment by the CSA can be made on the basis that either:

1. the income, property and financial resources of either parent; or
2. the earning capacity of either parent 

would result in an “unjust and inequitable determination” on the liable parent.

Criteria for Assessing Earning Criteria

A parent can request a review to change an initial child support assessment on the basis that the earning capacity of one parent is greater than the other. There are certain criteria that need to be met before the reviewer can be satisfied that a change to the decision can be made. Depending on what stage of the review, the assessment can be reviewed by either be the child support registrar, the Social Security Review Tribunal (“Tribunal”) or the court. All elements of the criteria outlined in section 117(7B) of the Act need to be met, which in summary, states that one or more of the following applies:

• the parent does not work (despite the opportunity being available);
• the parent has reduced the number of hours of work;
• the parent has changed their occupation, industry or working pattern;

and

• the parent’s decision not to work is not justified based on the parent’s health or the parent’s caring responsibilities; and
• the parent has not shown that their decision was made because of the possible effect it may have on the child support assessment.

In most cases, the applicant who wishes for a child support assessment to be reviewed needs to provide evidence to support their claim. When it comes to final point above, the parent who is under will need to provide evidence that their decision was not made to affect their child support assessment.

Social Security Review Tribunal Decisions

The Social Security Review Tribunal’s decisions provide insight into the interpretation of section 117(7B) of the Act. As noted above, all elements need to be satisfied in order for the reviewer to determine that one parent’s earning capacity is greater than the other. Some points to keep in mind, particularly in regards to a parent showing that their decision not to work was not made because of the effect it would have on the child support assessment, include:

• A parent’s prior work history will be taken into consideration. For example, a parent who has not been working since having children is likely to not have made this decision because of the effect this may have on child support;
• If a reduction in a parent’s work hours was involuntary and was not an active decision, this will be likely to be viewed as a decision that was not made on the basis of affecting child support payments; and
• A parent’s efforts at seeking full-time employment (according to their profession and industry) will be analysed in light of the criteria determining whether the child support assessment was a factor in their decision to not work or reduce work.

Key Takeaways

Earning capacity, along with taxable income, property and financial resources are all factors that are taken into consideration when parents seek a review to change a child support assessment. Clearly understanding the criteria used in reviewing child support assessments is an important step in saving the costs of pursuing litigation in a family matter.