Child Support Assessments and Taxable Income

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Table of Contents

• The Legislative Framework
• Adjusted Taxable Income
• Calculation
• Length of a Child Support Assessment
• Key Takeaways

Separating from a partner can be a painful time, and when it comes to the legal side of things, it can be even harder to reach an agreement, especially when children are involved. If separating parents cannot agree on the custody and financial care of the child, the Child Support (Assessment) Act 1989 (Cth) (“Act”) provides a formula for determining a fair division of child support. If you apply for a child support assessment with the Child Support Agency (“CSA”), it’s prudent to know beforehand the criteria the CSA use to determine a child support assessment, especially when it comes to your taxable income. This article will run through the legislative criteria the CSA uses to determine estimates based on each parent’s taxable income.

The Legislative Framework

Firstly, it is important to be aware of the legislative framework that allows for a child support assessment. The Act sets out various criteria and formulas that are used by the CSA to reach a fair and reasonable child support assessment. Any application for a child support assessment is made through the CSA.

Adjusted Taxable Income

The income used to calculate child support payments is called the “adjusted taxable income”. Section 43(1) of the Act outlines exactly what components are factored into in the adjusted taxable income, including:

1. Taxable income;
2. Reportable fringe benefits;
3. Target foreign income;
4. Net financial investment loss;
5. Tax-free pensions or benefits; and
6. Reportable superannuation contributions.

The above components are taken into consideration for the last completed financial year so it is important to lodge a tax return or submit the relevant forms disclosing your income.

Calculation

The CSA calculation is not based solely on your adjusted taxable income. Firstly, the CSA determines a total amount through both parents’ combined adjusted taxable income. The parents’ proportion of the total amount is determined in light of the parents’ percentage of care and the costs of caring for the child or children.

Length of a Child Support Assessment

The child support assessment can be valid for up to 15 months. A party can lodge new information with the CSA relating to a change in their circumstances (e.g. redundancy) to request a change in child support assessment. The reason, however, for the 15 month period of validity is to allow the CSA to consider any changes in both parents’ financial situation at frequent and incremental times. If you are unhappy with a child support assessment, there is a review process available to you.

Key Takeaways

When applying to the CSA for a child support assessment, your taxable income and the taxable income of your partner is taken into account in reaching a final determination. If you are thinking of allowing the CSA to make a determination on your child support assessment, it would be useful to contact LegalVision’s taxation lawyers on 1300 544 755 or fill out the form on this page.