Welcome back to our series of free online webinars to assist clients and people going through the family law process. Today's webinar is a parent's guide to Child Support.
My name is Katherine Leach, I am the managing director of Leach Legal, we are a family law firm located in the central business district, and we've been going for 16 years, we are Perth’s largest leading family law firm and we cover all aspects of family law, including divorce, arrangements for children, property and finance and, of course, child support.
Being a lawyer, we have a disclaimer, the information I'm going to give you is general information, so please don't rely upon it and do anything until you've gone and got some legal advice.
Child Support: A Short History
So moving on to child support now, I started law in 1999, and shortly after I started law, the Child Support Assessment Act came out, which was designed to set up a process for parents who were separated to be able to obtain financial support for their children prior to 1999. The way that you could obtain child support was to apply to the family court, make that application and have a magistrate or judge hear the matter and receive an amount of child support. They were usually very low amounts. The orders that I saw were commonly for, such as five dollars per week per child, sometimes twenty dollars. And they were collected by the collector of maintenance who was attached to the family court. Unfortunately, less than 30 per cent of those people who were ordered to pay actually paid. It became very apparent to the government that they were paying large amounts of support for children that should have been supported by their parents.
The Child Support (Assessment) Act 1989
So, in 1989, the Child Support Agency was established as part of the Australian Tax Office to administer the child support scheme, and the child support scheme was set up under the legislation, which was the Child Support Assessment Act.
What the Act tried to do is set a clear method of calculating how much money a parent who was working and didn't have the full-time care of the children would pay to the other parent. Bearing in mind it was nineteen eighty-nine, and so it was fairly early on after the family law came in, they were working on the traditional families, which was generally a father who worked full time and a mother who was at home full time and children who were primarily living with the mother and the father, having the children stay with them every second weekend and half the school holidays. The formula was fairly simple. There was a consideration of the taxable income of the father, and they generally looked at the last tax return that had been filed. They then took off an amount for living expenses and they multiplied the balance of it by a percentage, depending on how many children there were. So, one child was 18%, two children 23% and so on. There wasn't really a consideration for shared care because it didn't really exist in those times very much; and, it was common that the child support agency would simply assess the child support amount. They would access people's tax returns because they were part of the ATO, and then if the father got any tax refunds and they were any child support amounts outstanding, the child support agency would cease those amounts and pay it to the other parent. In 2006, there were some fundamental changes to family law.
If you've seen my other webinar, you would say that the parenting laws changed quite substantially. Around that time, they also changed the child support formula to reflect that position of being a changed society where there was more equal care of children. The other important change was that it allowed parents to rebuild financially for up to three years. That's for the paying parents, which I will go into a little bit later. So, they were fairly substantial changes. Those changes were phased in over a couple of years to where we now have the position today.
What child support agency do you deal with now?
The child support agency was actually abolished in 2011. We always have talked about the child support agency and we still use that terminology when we hear it quite commonly. But in fact, it's now administered by Services Australia Child Support, and the decisions are made by the Department of Human Services or DHS. A very useful starting point for you is on the link in the PowerPoint presentation.
Before you do anything else
Before you do anything else, if you've just recently separated, work out what each of you earn per year - so that's a taxable income.
If you don't know it exactly, you might want to estimate it, bearing in mind that there is a cap on how much is taken into account. The top cap rate is about one hundred ninety-one thousand, so anything over that, whether it's one hundred ninety-seven thousand or a million and ninety-seven thousand won’t markedly affect the formula. So, you can do an estimate if you know that one party is over two hundred thousand dollars. You need to work out how many nights per year the paying parent has the children, and, then you can go to the child support estimator and have a look at that, which I'll go through in a minute. And once you get the calculation from the child support estimator, you can then consider those outcomes based on what you know from the estimator.
The Child Support Estimator
Please use the Estimator link on the PowerPoint presentation.
There are several others on the website that are attempts at being an estimator, they may be accurate and may not be, but in my view, you should use the one that is the official child support estimator. The child support estimator doesn't provide an estimate if a parent pays or receives child support in more than one case. Now, what that means is if you are a mother and you have two children and there are two fathers, or if you are a father and you have two children to two mothers, then you can't use this estimator, it becomes a bit more complex from that situation. And you can't estimate child support if you're not the parent of the child. So, for example, grandparents. So here's the estimator. Work your way through it and fill in the details so we fill this out here. We've got John Jones, who's me, and I've got two children and my other the other parent is Jane Jones and we don't neither of us have any other dependent children or any other child support assistance. Fairly straightforward.
I've put in our income. So, Jon Jones has one hundred and twenty thousand dollars taxable income and Jane has sixty two thousand taxable income and no other income support payments.
I have then put in the children's details, you don't need to put their full names in, it's only for your benefit, but the dates of birth are important because the child support will vary depending on whether they are over 13 or under 13. The nights of care is relevant. That's the nights of care that you have. So I am in this instance, I am John Jones and I have the children six nights per fortnight. It allows you to talk about nights per week, nights per year, so if you have an arrangement that's different in school holidays, you might want to calculate those nights and put them in as an annual amount. Press the little green button and the results will show up. Now, what the results will show you is per year what you'll be paying per month, per fortnight, per week. And underneath that, it'll give you an idea about how the estimate was calculated. If you click on any of those arrows, it will give you the numbers and you may or may not be interested. But just to show you what information there is you can look at. So the calculation of income, you'll see that the adjusted taxable income is going in. John Jones, it's me, has one hundred and twenty thousand. There's an amount for self-support, which is about twenty five thousand. And then it gives you a child support income and it does the same for Jane. If you combine the child support income, it then has an income percentage that comes up. You then look at the care percentage that's based on the number of nights, and that will give you a care percentage for each child. And you can then go three steps, six, seven after that, which would give me the breakdown of the how that sentence is calculated and so on, ultimately the results that are shown are the results of the calculation and how it came to that point.
What’s next? The Child Support Assessment
Once you've got your estimation, you've got three ways to go. Really, you can apply for a formal assessment and you can use the link in the PowerPoint to apply for it. You can do that online. There are certainly ways to do it if you're not able to do it online, but the online way is the easiest and quickest way to do it. You may take the amounts, so whatever the estimator says, you may be able to sit down with the other parent and say “look, this is what the estimator says. Are you happy to pay that?” “Yes, I am. OK, here is my bank account details” and off you go… probably great if you have an amicable relationship, if you trust each other. If you don't think it's ever, ever going to go badly, that's completely fine. Unfortunately for me, I see the people who don't have an amicable relationship, and so we really generally recommend that they be some sort of formalization of those sorts of agreements so that if one person decides that they don't want to abide by it anymore, you've got some back up. The third way you can do, it is you can agree to the amount like you did in step two. But you can formalize that by way of a limited or binding child support agreement. And that's an option for you. If you want to agree something that's slightly outside the formal assessment or includes other things.
And I'll go into those agreements shortly and explain those.
How do you get the money? Private Collect vs Child Support Collect
So, private collectors is when the paying parent pays directly to the other parent, generally paying into their bank account, although some people prefer cash right now, but I believe it still does happen. I would really recommend that you keep a record of all deposits. So if you're paying into a bank account mark it as child support so it's very clear. The difficulty with private collect is that if the receiving parent then decides to apply for an assessment, they can tell the child support agency, although that can tell child support, that they haven't received any child support and seek a back payment of child support. As long as you have a record of those payments and you've noted them, at least you have an ability to show that to DHS and get a credit for what's already been paid. The second way of collecting is through child support collect and the receiving parent can collect for that to be done. So that can't be elected by the paying parent, only the receiving parent. You need to note, though, if you are the receiving parent, that it'll only be transferred after the eighth day of each month and only the money they've received. So, if the money is paid by the paying parent on the night of each month, you won't get it until the following month and the payments are for the month just ended, not in advance.
If you elect for child support collect, they can collect up to three months of arrears, in some exceptional circumstances they will collect up to nine months but that's fairly rare.
Who else can you talk to?
In the presentation, you can find some numbers if you want to speak to somebody. They’ve been fairly helpful in my experience, give them a call if you have any questions, and they should be able to hopefully work through that. But let's start with the online stuff, because I think it's a pretty comprehensive outline of how it all works.
Other options: the Child Support Agreement
If you have decided that you don't want to go with the child support assessment or you want to go with the child support assessment, but there needs to be some additional things to that. You can do a child support agreement.
One is limited and one is binding. And there's a big difference between the two of them. the limited child support agreement. Now, you must have at least thirty-five per cent care of the child if you are the receiving parent and the payment must be equal or more than the assessment. So you can't agree if the assessment says 100 dollars, which you can't agree with the other parent to receive twenty dollars a week, you can't do that in a limited child support agreement. If the assessment is one hundred dollars a week and you agree that you receive a hundred dollars a week plus payment of health insurance, for example, you can do that in a limited child support agreement. It must be in writing and it must be signed by both parties. You can end it by agreement at any time so you can do up an agreement that says it's ended and after three years, either parent can elect to end it in writing. So even if the other parent doesn't agree, you can agree to end after the three-year period. And you need to note that DHS will end the agreement if the receiving parent has less than thirty five percent care. If there's a change in care arrangements, even if, even if one parent wants to abide by the agreement, DHS will end the agreement and you can register that limited child support agreement with DHS and asked for child support collect. The bonding child support agreement is of a more serious nature because it is binding, it is binding for as long as you elect it to be so it could be until the children are 18 and could be for a year. It depends what you want, but it is binding for that period. And the only way you can end it is with a signed termination agreement or an order of the court. So, it's a very, very serious agreement. You can agree in this binding child support agreement to receive less than the amount of assessment. If you are on Centrelink, you need to be very conscious of how that will affect your Centrelink benefits because they may still deem you to be receiving the amount that you assessed, even if you opt out of receiving it. It can provide for a lump sum payment and it can provide for other things like school fees, health insurance, medical costs, etc. Just be aware with third party payment, so a third-party payment is a school fee paying to the school, health insurance paying to the health insurance fund or paying for braces or some medical dental costs. If the paying parent doesn't pay those things, child support will not enforce it, they won't enforce third party payments. What commonly is done is that an amount is fixed for those things and the receiving parent is then responsible for payment of them. So, for example, if the school fees are fifteen thousand dollars a year, the Bonding Child Support Agreement may well say that child support is paid as assessed, and on top of that, the paying parent pays fifteen thousand dollars per year in monthly instalments, for example.
It is then up to the receiving parent to make payment of those school fees. You can include that the paying parent does pay the third party directly and some parents prefer that, but just be aware that is very hard to enforce if you don't have it as a sum of money because they are such a very important document. A binding document is only going to be binding if both parents receive independent legal advice and both parents must receive a legal certificate. So, both of you must go to separate lawyers who will review the document, give you advice and sign a certificate on the agreement. So, the agreement has got to be in writing. It's got to be signed by both parties and the receiving parent must have at least thirty five percent care of the child, as I said, can only be ended by a signed termination agreement or order of the court.
The 2006 Financial Rebuilding Allowance
The 2006 financial rebuilding allowance I talked about a bit earlier, what this means is that after a paying parent separates, they have three years in which they can earn extra income. That's not taken into account in the assessment. So, for example, if they decide to some uber driving on weekends as a second job or stack shelves or clean houses or whatever it is, that amount of money can be excluded from the assessment. It doesn't count if it's in the ordinary course of events. So, if you get a pay rise or if you're doing overtime, that's seasonally, generally always done, you can't exclude that… But you might get a higher paying job, or you might cash out some annual leave and those are things that can be excluded.
There's a limit on the amount that can be excluded and it's up to 30 percent of total income.
Changing A Child Support Assessment
One of the most common questions we get is what if we don't like the assessment and there can be lots of reasons why it's not appropriate that that assessment stands. One of the factors that is commonly talked about is when the paying parent has their own business and they're able to manipulate the income that they put on their tax return. The other thing they talk about is if one party sends the children to a private school, does the other party have to pay? And that comes down to whether it was agreed by both of them that that would occur. So, there are 10 reasons why you can change an assessment and find the link in the presentation so that you can see what the circumstances are. If you fall under one of those 10 or more than one of those ten, you can then apply to change the assessment in which you lodge the form online. What you do need to bear in mind is that the other parent gets a copy of all your documents. So, if you're sending bank statements and all sorts of other documents, the other parent will get a copy of all of those documents. The other parent then responds to the application and you get a written notice of decision and advise whether the decision has been changed. In the circumstances where you're seeking payment of child support to include school fees, as I explained earlier, it will be an additional lump sum amount or periodic amount rather than some sort of order that requires them to pay the school fees.
Still unhappy with the decision? You can lodge an objection with the DHS
If you don't like the decision, you have an ability to lodge an objection with DHS, but you have to fall under one of these particular circumstances: the DHS have used the wrong or old information; they haven't considered all the facts; they have missed important details or they have not applied the law correctly.
Once you've lodged that objection and you've received it, if you're still unhappy with the decision, you can then apply to the Administrative Appeals Tribunal, the AAT, but only if you have legal grounds of appeal. So this is not an opportunity to say, look, it's too high, I'm very unhappy with the amount. It's only on the basis of there being legal grounds of appeal. And you can involve lawyers with the AAT but the AAT must approve having lawyers at the hearing at least 14 days before the hearing. So, don't contact a lawyer two days before and hope that you can turn up with then.
The other possible avenues in relation to child support, if you have a family law matter presently in the court, say property settlement, you can apply for child support through the family court.
There's an ability to apply as a receiving parent if you need urgent maintenance. And there is also the issues of parentage. So, for instance, the father says he's not the parent of the child, you can apply for DNA testing to get evidence of that, lump sum payment and also dependent children over the age of 18 years. So the person who's going to university and still living at home, you can apply for maintenance for them through the family court.
A Few more things to remember
If a parent receives a pension or benefit from Centrelink, they must take reasonable steps to get child support within 13 weeks of separation or their payment may stop, so speak to child support about that, because you've got to go through the process to make sure that you don't get a big surprise and find out that they cut you off. As I've talked about before, child support cannot enforce payments to third parties such as health insurance or school fees.
There is an ability if you have a child who is turning 18, but they're in year 12, so they turn 18 in May, but they've still got the rest of the year, you can apply to extend the child support until the end of the school year. And noting child support ceases when a child turns 18, generally with if they marry or live in a de facto relationship, or if the paying parent of the child dies.
So where to from here?
Go back to your child support estimator and review the numbers that have come out of it.
Think about the needs of your child or children, whether they have any special needs. Get some legal advice about the options. So how does it work? Is it appropriate to go through the family court? Do you have the option to do that? Should you go through the child support process? What evidence are you going to need? What are the likely outcomes… get legal advice about all of that. And before anything else, try to negotiate a favourable outcome with the other parent before you take any action and if appropriate, use mediation. Just bear in mind, because you are parents together, you have to work together for a long time and you need to be able to try and negotiate matters through so that you can have a reasonable relationship for the children.
Questions from the public
How does the income of my partner affect the amount of child support I pay or receive?
So, income is based on your taxable income and the other parents’ taxable income. It doesn't take into account any new partners, new spouses. It's simply the two paying parents. What does happen from time to time is that a parent who's a paying parent may cease work to be at home full time and rely on their spouse to support them financially and therefore they won't be paying any child support. There's nothing you can do about that. You can't apply to use the new spouse's income for the purposes of child support, it is not possible. So, you can look at whether you apply through child support because they may have some resources and they may be able to apply for a lump sum. There are some different options you could look at if you're stuck at that position.
What if my ex-partner took a voluntary redundancy?
The second question is in relation to an ex-partner who took a voluntary redundancy and then has now taken a low paying job. He's telling everybody that he didn't have any choice and he was made redundant.
So, again, the option here is that you can apply to have the assessment reviewed by child support on the basis that his earning capacity is greater than what he's actually exercising. So there's certainly been instances of people who have chosen to leave paying jobs, well-paying jobs, and take lesser paying jobs for no real reason. And the child support decision has been that they had to pay a higher amount because they weren't exercising the earning capacity to the best of their ability.
If a child is attending university or some sort of further education and they've already turned 18, there is an ability to apply to the family court for an order that the paying parents contribute to that adult child?
It doesn't happen very often. What often happens is that the paying parent will negotiate an allowance directly with the child. But if they refuse to pay anything, there is that ability to do that. The money is then, of course, paid to the receiving parent and not to the child, and it's collected for those purposes.
The paying parent had agreed to for the child to go to private school and they had signed the documents for that to occur
Ok, so this is a question in relation to school fees, and this is a really common issue the paying parent had agreed to for the child to go to private school and they had signed the documents for that to occur and. It's part of the property settlement, the family court ordered him to pay all outstanding amounts to the school, so ongoing orders weren't made.
So the avenue that you would have from there is to apply that through child support to review the assessment. So on the basis that both of you agreed that they would attend private schools, and when you're doing that, you should provide to them copies of the enrolment forms and any other information you had to show that the other parent had agreed to pay those amounts and that was now refusing to do so.
You can contact us or book a 15-minute call for further information
We've now reached the end of our webinar today. I hope you've got some valuable information out of that. It's quite a complex area and I think a lot of people really overlook how difficult it can be. But there's lots of avenues available if, if you're not able to get a satisfactory outcome through the child support agency.
If you need any further information or any further questions, then you are welcome to contact us and book a 15-minute call with me to discuss any issues, questions that you have.
Thank you very much. Appreciate you checking in. And we'll see you next time. Thanks.