Making Sure Your Income Is Correct In Your Child Support Assessment
How do I make sure Child Support use my correct income when assessing how much child support, I need to pay?
One of the main components used to calculate your child support assessment is your and the other parents’ incomes. Normally, your income information will be obtained by child support from the Australian Tax Office.
Each time you lodge your tax return a new child support period will start using the information supplied to the ATO. As such generally speaking your assessment will be based on your last relevant year of income.
If you are finding it difficult to meet your child support payments or you have a large child support debt that you can’t explain, it may be because the income information child support is using for you is incorrect or needs to be updated. In the first instance you should contact the Child Support Agency (“CSA”). If this does not help, our lawyers can help assist you to understand why you might have unexplained child support arrears and what options you may have to correct this.
What happens if I haven’t lodged my tax return?
After a child support period has been going on for 15 months and neither parent has updated their income information, the CSA are required to calculate a new assessment. Where they do not have a party’s income information, they have a number of options to work out a default income:
- They can use data about your income, provided by your employer(s) or other organizations to the Australian Tax Office;
- They can use your last available tax return and apply an indexation factor for subsequent years;
- If they have no way of calculating a fair income, then they will apply a default income to the case, which is worked out as two thirds of the male total average weekly earnings (“MTAWE”).
What if I don’t need to lodge a tax return?
Even if your income is below the tax-free threshold. You still need to declare your income for child support purposes. Fail to do so and you risk having a default income being used to calculate your child support payments.
Do not assume that CSA will know you are on Centrelink benefits. You need to notify them and declare your income. You can phone CSA on 131 272 to complete an income declaration or use one of the income declarations forms available on the Services Australia website.
Can I update my income during the year, what happens if I lose my job?
If your income drops by more than 15% from the last year, including when you become unemployed, you can provide an income estimate so that the amount of child support you pay reduces to reflect your current income. You can phone CSA on 131 272 to do an income estimate over the phone.
When you are asked to give an income estimate you not only need to be careful to declare your income for the remainder of the year, but also provide an accurate figure of what you have earned in the current financial year from 1 July to the date you make your income estimate.
If you have salary sacrificing arrangements or are about to receive a large sum of money, you also need to report this as part of your adjusted taxable income. Do not assume any money you earn is excluded from your child support income. If you are unsure about what your adjusted taxable income will be, speak to an accountant before providing a child support income estimate.
What happens if my income estimate is wrong?
The CSA will compare a parent’s estimated income with their actual income for the year. If the income estimate you provided is less than or equal to the estimated income there will be no update to the assessments. If the income estimate is lower than the actual income earned then CSA will go back and increase the amount required to be paid under an assessment.
That is why it is very important to review and update income estimates as your circumstances change.
The Child Support Agency are saying I can’t update my income, what can I do?
When you are late in providing your income information, you must understand that legally you do not have an entitlement for the correct income information to be substituted. The later you are the harder it becomes to update.
Where a default or provisional income is used you need to establish that due to special circumstances you were unable to provide your income information at the time and you then provided the information as soon as possible, once you were able to do.
If the period you want to update is less than 18 months old you can also consider applying to the CSA for a change of assessment in special circumstances. If the period you want to update is more than 18 months old. You may need to consider applying to court to ask to change these assessments. You must get leave from the court first before they will consider your application. You cannot use the change of assessment process to vary assessments that are more than 7 years old.
Our experienced lawyers can advise you on your options and where appropriate advise on the best means to assist you to change past assessments where these are not based on your actual incomes.