One of the more complicated aspects of going through a separation or divorce is the discussions (and consequent confusion) surrounding child support in Australia.
Common questions — like the below — are probably bouncing around your head (and search engine history) daily:
And to top it all off, you’re trying to figure all of this out while going through one of the most stressful times of your life — navigating your separation while balancing the wellbeing of your family and keeping things as ‘normal’ as possible.
Firstly, kudos to you.
And secondly, before we can answer those questions, we’ll need to break down what your options are when it comes to child support in Australia.
As we’ve detailed in a previous blog, parents have two options when it comes to working out child support payments.
Both have their pros and cons, but ultimately, which route you choose will depend on how amicable your relationship with your Ex is and how you negotiate child support.
A private child support agreement can incorporate:
A private child support agreement is a negotiation that happens between you and your Ex, usually as part of your family law property settlement. The biggest advantage is that it can take into account the actual costs for your child, whereas an assessment through the Department is based on a formula that is not specific to your child or their needs.
But that doesn’t mean all rules are thrown out the window and anything goes. There are still rules in place for these private agreements, should you decide to go down this route, with the most important one being that it has to be formally recorded in an agreement that requires the assistance of a lawyer.
We’ve helped many families navigate this often complex situation, so should you need help putting together an agreement based on what works best for your child, you can contact us for a chat.
If your situation doesn’t allow for private negotiation or you and your Ex are unable to agree on a child support arrangement, you’ll have to apply for an assessment through the Department.
So, how does the Department determine what the appropriate amount for child support is?
Their approach is based on research into the average costs of raising children in Australia and will be dependent on:
There is no ‘one-size-fits-all’ approach to child support — the amount is determined by a complex formula used by the Department that takes into consideration all of the above.
The big takeaway is that there is no consideration of the actual costs relevant for your child. This can be really challenging if your child goes to a private school, or has additional healthcare costs because what it means is that the liable parent is making a contribution based on the average costs of raising a child which doesn’t translate to the actual costs you’re paying.
If you’d like to discuss your situation further, you can book a free clarity call with our friendly team.
You can jump on the child support estimator to get a better understanding of what your child support assessment might look like.
In the eyes of the law, a new partner has no obligation financially to your children so this doesn’t affect your child support.
And similarly, if a new partner becomes a step-parent down the line, they still don’t have a legal obligation to financially support a step-child — unless there’s a court order in place that states they have a duty to do so.
In terms of having new children from a second family — yes, this absolutely affects your child support. This is a change in circumstances and DHS should be notified so they can take this into consideration.
Long answer short — no, child support isn’t taxed.
Your taxable income is made up of the income earned from your wages, investments, a business (if you have one) and any taxable government payments received by you. Child support payments are not tax-deductible because they’re not connected to you gaining or producing tax assessable income. The ATO treats these payments as private or domestic in nature as they relate to household or family expenses, and are not associated with your business or other income-related expense that you could deduct.
Armed with more knowledge, you might be starting to sift through your options. In times like these, we’d always recommend legal advice so you know where you stand.
You can book in a FREE 30 minute Clarity Call to discuss your situation and get answers to the issues causing you the most stress right now.
You can download our How to Survive the First 90 Days After Separation Guide which is jam-packed with easy, actionable steps you can take in the early days of your separation as you start to uncover and plan how you want to move forward.
You can connect with us on Instagram and Facebook where we share heaps of tips, tools and strategies to support you on your separation journey.
***Disclaimer***
This article is for general information purposes only and does not constitute legal advice or any other professional advice.
We are here to guide you out of the uncertainty of separation to financial certainty and freedom, to clear arrangements for your children and to the power and confidence you need to rebuild your life.
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