The essential guide to Child Support for newly separated parents …
So, you’ve recently separated and there are lots of questions to consider.
One of those might be ‘How am I am going to support myself and the kids?’.
In Australia, child maintenance or child support is based on the Child Support (Assessment) Act, not the Family Law Act. It is administered by the Department of Human Services (Child Support Agency), not the Family Court.
The Basics of Child Support
The first step for your guide to Child Support is understanding how much Child Support you might receive, or pay. To do this, visit the Child Support Estimator on the Department of Human Services website. This calculator estimates the amount of child support you will pay or receive based on the formula in the Child Support (Assessment) Act.
How does the Child Support formula work?
Well, as with most things in life after you separate, it is complicated … however, breaking it down, it’s generally based on the following:
- Your income;
- The other parent’s income;
- How much care each of you have of the children;
- The ages of your children;
- Whether either of you have any other dependent children.
How do I get child support from the other parent?
There are two ways that you can do this. Either, you approach the other parent and ask them to pay privately or, you can make an application to the Child Support Agency.
Many parents have private arrangements for child support which might be completely different from what an assessment would be.
How does child support get paid?
There are two options
- Private collection by Bank transfer (do not use cash as it cannot be traced); or
- The Child Support Agency can collect money.
You can change from private collection to Agency collection at any time. You don’t need the other parent to agree.
What if the other parent does not pay the child support when it is due?
If you are registered with the Child Support Agency they can collect your child support.
BUT they will only backdate payments for 3 months. So, if the other parent stops paying, you need to quickly register for Agency collection or you miss out.
What if I don’t think the income used by the Child Support Agency is my ex’s real income?
Assessments are based on your most recent tax returns.
If there is a business involved, you might have been income splitting so your ex’s income needs to be increased and yours decreased.
You may have taken a pay cut or one of you might have a new job making more money.
If your tax returns aren’t based on current, real incomes, you can apply for a Change of Assessment.
If your ex has a creative accountant, considering lodging a Change of Assessment form if you think the real income of the business is higher than what is being declared to the ATO.
I had a client where the payer was declaring an income of about $40,000 a year but when the Child Support Agency looked into it, they said that his true income was over $100,000 and that was the amount that was used for the child support assessment.
In another case, the husband was on a very low income but was driving a Mercedes Benz and holidaying overseas, supposedly gifts from his parents. The Agency was satisfied he was running the business and was not being paid an appropriate amount and was instead receiving benefits from the business which gave him a lifestyle far in excess of his actual income.
What about school fees and Child Support?
This question is a very common one.
If children are attending private school then you can apply for a Change of Assessment to contribute to private school fees on top of the assessment. Things considered include whether the children are already at a private school or whether there has always been an agreement that the children attend private school and whether both parents signed the enrolment forms.
State school fees are usually considered to be covered in the formula assessment.
What about extracurricular fees?
Child support is intended to cover each parent’s costs of raising the children, including extracurricular activities, medical costs and uniforms. Each parent is expected to contribute to the cost of the children for those things when the children are in their care.
However, sometimes kids have expensive activities or expenses such as orthodontic work. The Child Support Agency might increase an assessment for those items, under a change of assessment.
Other reasons for a change of assessment?
If you are unhappy with your child support assessment, you can lodge an application with the Agency for a Change of Assessment (to increase or decrease it).
Reasons for a change of assessment can include:
- private school fees;
- orthodontic treatment;
- incomes of one or more parties do not reflect their true situation;
- the parent has a lifestyle which is in excess of their declared income;
- that a child has special needs;
- that there are significant costs of a parent spending time (access) with a child.
A Change of Assessment goes through the Agency and they consider submissions and can require documents to be produced by both parents.
What if I’m not happy with a Change of Assessment?
You can lodge an objection with the Agency. This goes through a similar process but a new officer looks at it.
If you are unhappy with the result of the objection then you can lodge an appeal.
This all sounds very complicated, is there another way?
There is no denying the Australian Child Support system is complex, time-consuming and often frustrating. Not too many people like the Agency!
There is another option and a way to have the Agency out of your life.
Parents can make a private agreement about child support. You can lodge the agreement with the Agency. With some restrictions, if one of you is receiving Centrelink, it can be completely different from the formula.
Wouldn’t I be better off relaxing on a beach rather than earning money just to pay child support?
Parents in Australia have an obligation to support their children. Some parents have a belief that the other parent is not using the money for the children and is instead spending it on themselves. They then take the attitude that maybe should chuck in their job and go and sit on a beach.
This kind of strategy can backfire.
The Child Support Agency can assess based on earning capacity, rather than actual income. If you or your ex chuck your job in to avoid paying child support, the Agency can still assess based on what they were previously earning.
I had a client where the other parent decided after separation to start their own business and had a much lower income from what they had when they were an employee. However, the Agency considered the parent had a primary duty to support their children and assessed child support payable based on the amount that the parent was previously receiving as an employee.
What if child support isn’t paid despite an assessment?
The Child Support Agency has very long arms that can reach into many pockets. Think Mr Squiggle. They can take tax refunds, money from bank accounts, make you bankrupt and block you travelling overseas. Meanwhile, penalties and interest are racking up.
In 2018, the Agency had a crackdown on people who had large child support debts and collected millions of dollars in arrears, penalties and interest. Famously, one payer who owed over $300,000 in child support was pulled off an international flight was not allowed to leave Australia until he paid his debt.
I am receiving Centrelink benefits but my ex is not paying the amount they are supposed to. What happens?
If you are receiving Centrelink payments, the expectation is the other parent must pay at least the formula amount. If you don’t actually receive that, the government will still reduce your payments as if you were.
Again, this is to make sure that parents are supporting their children, rather than the taxpayer.
Child Support Agreements for a lower amount than the formula will not usually be approved if you are on Centrelink.
If my ex is late paying child support, do they have to pay interest?
If the Child Support Agency is collecting your payments then interest and penalties are imposed. However, these do not go to you! These all go to the Agency.
With the child support debtor who was dragged off the plane, the payee only received about a third of the amount recovered, because the debt was so old that interest and penalties had racked up over the years and they went to the Agency.
What does all this mean and where should I start?
The best place to start is with the online Child Support Estimator.
If you have good communication with you ex and are able to make an agreement, that is often the best way as you will avoid the drama of annual child support reviews, especially if one of you is self-employed.
However, if this is not an option, you can do a self-service set-up online here, and follow the prompts to make your application.