What is child support?
In Australia, child support exists to provide financial support to children under 18 who have separated parents.
Child support includes payments or payment arrangements made between parents to assist in the costs of raising children.
This means that in some situations child support may be paid by one parent to the parent with sole custody, or it can be paid by both parents to another person is looking after their child and/or children.
Child support in Australia is run predominantly under the Australian Government's Support scheme by Services Australia.
However, there is an option for parents to make their own arrangements to handle their own child support payments through a binding child support agreement.
The main aim of child support in Australia is to ensure that children get an appropriate level of financial support and that both parents are responsible for providing this financial support.
Within this, it is also important that child support payments are paid on time and made regularly and that parents provide an amount of financial support that they can afford.
In Australia, there are no set rules or regulations explicitly stating what the child support payments can and cannot be used for, though they are ordinarily used for directed expenses related to raising a child such as; housing, food, clothing, medical and school costs and any other related-costs attributed to raising a child.
This article will explain everything you need to know about child support in Australia.
How does child support in Australia work?
There are two types of child support in Australia:
- A child support assessment
- Self managed child support
Each child support case is assessed by Services Australia (DHS) and once the assessment is made they will send a letter that states the outcome of the assessment and the amount of money that is to be directly paid to the primary caregiver.
The recipient should allocate this amount based off of the needs of the child and/or children.
In any circumstance, if the paying parent makes any additional payments alongside their child support these payments can then be credited by DHS towards the amount payable and will then be referred to as either a 'prescribed' or 'non-agency' payment.
Under sections 71C of the Child Support (Registration and Collection) Act 1988, up to 30% of the child support payments can be credited even if the receiving parent disagrees.
Prescribed payments can only be applied in circumstances where the paying parent maintains less than 14% of the childcare responsibility. This basically means that
Prescribed expenses include:
- School/Work uniform
- Text books
- Medical expenses
- Dental expenses
- School fees
- Housing expenses; including mortgage repayments and rent
- Vehicle usage and any maintenance costs
- Childcare costs
Who pays child support?
Child support is paid from one parent to the other in a separation.
The payments are calculated through a formula known as the "basic formula" however the grounds in which to assess the amount of child support to be paid is simple.
Each parent is responsible for meeting the costs of the child and/or children and costs will vary depending on the number and ages of children.
If a parent has a higher income than the other then they will be required to contribute more, however, a parent who has sole care of the child will get credit for covering expenses.
During the evaluation to determine costs, child support is calculated as the costs of the children multiplied by the difference of income shared between both parents, and the cost of credit for time spent with the children. The information used to calculate the support is as follows:
- The taxable income of both parents
- The percentage of nights each has the child and/or children
- The number of children aged under 13 and the number aged 13-18
- Information on any other dependents
How do you calculate child support payments?
There is a plethora of things that need to be considered when calculating child support payments.
These calculations predominantly run through Services Australia.
Before applying for child support it's important to understand how it will work, and to seek legal advice at any point of confusion.
The first thing to understand is the varying components of income that will be assessed.
The parental income is key in calculating child support payments, however, there are two things to consider;
- The taxable income
- The self-support amount
The formula used to calculate child support will use the taxable income, this is the income that is reported to the ATO when you submit a tax return.
It is your gross (before tax) income rather than your net income.
The formula will typically use the last reported taxable income from your most recent tax return.
The self-supported amount assumes that each parent needs a specific amount of income to maintain themselves and their own lifestyle.
This is calculated on the base of an average of weekly earnings and is then deducted from the taxable income.
Once these have both been assessed each parent will then have a Child Support Income which is the total of your taxable income minus the self-support amount and any costs from any dependents.
This income heightens your capacity to maintain any financial responsibility for the child and/or children.
The financial responsibility of raising children is recorded by the Costs of The Children Measure. This can be calculated by the Australian Government's Costs of The Children Table.
The formula also allows for any extra costs if there is more than one child.
To break it down, a 2nd child adds 50% to any costs compared to a single child, and again a 3rd child will add the same amount.
So 3 children will ultimately cost twice as much as 1.
During the process of determining payments there is also a small allowance to be considered for the child's age.
Any children aged above 13 cost 20% more in the Costs of the Children table in comparison to children aged under 12.
Child support will stop when a child reaches 18, however continuation rules are applicable for children who are 18 while finishing their secondary education.
During the calculation process, assessing income shares is an important step.
For each parent a percentage of income is calculated as their Child Support Income, however this will then be divided by the Parents' Combined Child Support Income.
This is because the income percentage will vary for each parent depending on how their taxable income is interpreted under the formula alongside the percentage of the costs of the child and/or children which must be covered by the other parent.
An in depth breakdown of the costs of the child formula can be found here.
How do I pay my child support?
There are different ways to pay your child support, however most payments will need to be made through Services Australia.
The only time you will not need to make payments through Services Australia is if you use a self management or Private Collect service.
This means that both parents will need to understand and agree on the process. Throughout this process it is important that you keep records that show that the payments are for child support and include the following:
- Who received the payment
- When the payment was made
- Who the payment was for (i.e. the child, if more than one child, which child)
- How much the payment was
The receiving parent should choose a payment method for self management or private collection and should check with their bank or credit union for any extra fee details. I
f you are the paying parent you can choose how you would like to make your payment. If you decide to make your payments in cash it is important that you keep all receipts and maintain a record of payment. Similarly if you choose to pay via bank transfer you should include 'Child Support' in the description field so that it appears on a bank statement as 'Child Support.' You can also set up a direct transfer from your pay to the receiving parent's bank through your employer, they will just need to title the transfer as child support.
Through Services Australia you can also set up something called Child Support Collect. This means that Services Australia will collect and transfer payments on your behalf. This process means that Services Australia can enforce any outstanding child support payments and manage repayments if you accidentally pay too much or if you make an overpayment. If you are the paying parent there are a multitude of payment methods to choose from, you can browse your options here.
How can a lawyer assist me with child support payments?
If applicable, you can reach a private agreement with the other parent without making an application for assessment to Services Australia.
This can be done informally between parents or through more formal means with a lawyer present. If you wish for to document the agreement you can do this through a Binding or Child Support Agreement.
Binding Child Support Agreements can be confusing and must comply with specific requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
