2.4.4.10 Adjusted taxable income

Introduction

A parent's ATI is a component used to calculate child support income.

On this page

• Frequently asked questions
• ATI
• Taxable income for the last relevant year of income
• Reportable fringe benefits
• Target foreign income
• Total net investment loss
• Tax free pensions or benefits
• Reportable superannuation contributions
• Amounts not included in ATI

Frequently asked questions

Why is ATI used in child support assessments?

Child support assessments are generally based on both parents’ ATI for the last relevant financial year because this is generally the most up-to-date and accurate income information available to Services Australia. The inclusion of supplementary amounts in the income base ensures that child support assessments are calculated according to each parent’s financial capacity to provide for their children, regardless of how their income is structured.

The Australian Government supports families to make financial and investment decisions through the taxation system, and while these arrangements are legitimate for taxation purposes, they should not diminish a parent’s fundamental responsibility to support their children in line with their financial capacity to do so. Such financial options are generally the result of discretionary expenditure and often not available to other families, particularly those with low incomes.

Do I pay child support on tax I have paid?

Parents are not expected to pay child support on income that is subject to taxation. The child support liability generated by the child support formula is based on costs of children research which identified the expenditure patterns of families with children at different levels of income. These patterns are derived from parents making expenditure decisions based on their post-tax income.

ATI

A parent's ATI is the total of the following components:

• taxable income for the last relevant year of income (including overseas income if the parent is a resident of a reciprocating jurisdiction)
• reportable fringe benefits total for that year of income
• target foreign income for that year of income
• the parent's total net investment loss for that year of income
• the total of the specified tax free pensions or benefits received in that year of income, and
• the parent's reportable superannuation contributions.

The last relevant year of income is the last year of income under Australian taxation law that ended before the start of the child support period.

Where the parent is resident in a reciprocating jurisdiction (1.5.1), the Registrar can use information about the parent's income in that jurisdiction to determine the parent's overseas income.

If an application for post separation income (2.5.2) to be excluded from a parent's ATI has been accepted then the parent's ATI will be the amount determined by the Registrar.

Where a parent has not lodged their tax return for the last relevant financial year (even if they have lodged a RNN advice with the ATO), the Registrar may calculate a provisional income based on the income information available (make a determination of the parent's ATI). The parent's ATI will be the total of their taxable income and other income components. See 2.4.4.40 for more detailed information about provisional incomes (determination of ATI).

A child support assessment with a provisional income must be amended where the Registrar receives the parent’s tax assessment (ascertains the amount of the parent's ATI). More information is provided at 2.4.4.60.

Taxable income for the last relevant year of income

Generally, a parent's taxable income is the amount assessed by the ATO under income tax legislation for the relevant year of income. An amended taxable income is taken into account in certain circumstances only - see 2.4.4.30.

For the purposes of child support, any assessable First Home Super Saver released amounts (within the meaning of the Income Tax Assessment Act 1997) for that year of income will be disregarded when working out a parent's taxable income (CSA Act section 43(1)(a)).

Reportable fringe benefits

A parent's reportable fringe benefits total is the amount of reportable fringe benefits as defined in the Fringe Benefits Tax Assessment Act 1986 for the year of income. See 2.6.14 for more information about reportable fringe benefits, including examples of common fringe benefits provided from employment.

Target foreign income

Target foreign income is the total of:

• the amount of the parent's foreign income as defined in section 10A of the SSAct that is neither taxable income nor received as a fringe benefit as defined by the Fringe Benefits Tax Assessment Act, and
• any other amount of the parent's income that is exempt from tax under section 23AF and section 23AG of the Income Tax Assessment Act 1936, less the amount of losses and outgoings incurred.

Total net investment loss

Total net investment loss of an individual for an income year means the sum of:

1. the amount (if any) by which the individual's deductions for the income year that are attributable to financial investments exceed the individual's gross income for that year from those investments, and
2. the amount (if any) by which the individual's deductions for the income year that are attributable to rental property exceed the individual's gross income for that year from rental property.

Financial investments include shares, managed investment schemes, forestry managed investment schemes, and a right or option in respect of any such investment.

In calculating the loss amount relevant to financial investments the gross income and related deductions are considered to determine if there is a net financial investment loss. A similar exercise is undertaken to identify if there is a net rental property loss. Both loss amounts (if any) are then added together to identify the total net investment loss.

Note: Prior to the 2009-10 financial year only net losses incurred in relation to rental property investments were included when calculating an ATI.

Tax free pensions or benefits

The following tax free pensions or benefits are included in the ATI:

• a disability support pension under SSAct Part 2.3 (including any youth disability supplement, if applicable)
• a carer payment under SSAct Part 2.5
• an invalidity service pension under the Veterans' Entitlements Act 1986 Part III Division 4
• a partner service pension under the Veterans' Entitlements Act Part III Division 5
• income support supplement under the Veterans' Entitlements Act Part IIIA

but only the amount that is:

• exempt from income tax, and
• not a bereavement payment, pharmaceutical allowance, RA, language, literacy and numeracy supplement, remote area allowance or tax-exempt pension supplement.

Note: Pensions and benefits are included as income for child support purposes if they are classified as taxable income or if they are specifically listed in the tax free pensions or benefits section above.

Note: From 1 January 2022, the Defence Force Income Support Allowance under Part VIIAB of the Veterans' Entitlements Act ceased as a result of amendments made by the Veterans’ Affairs Legislation Amendment (Exempting Disability Payments from Income Testing and Other Measures) Act 2021 and is therefore not included in the definition of tax free pension or benefit in section 5 of the CSA Act. However, any payment of Defence Force Income Support Allowance under Part VIIAB of the Veterans' Entitlements Act made before, on or after 1 January 2022 remains part of ATI for child support purposes.

Reportable superannuation contributions

A parent's reportable superannuation contributions are included in the calculation of their ATI.

The amount included is the total of reportable superannuation contributions as defined in the Income Tax Assessment Act 1997 for the year of income. This includes:

• superannuation contributions that reduce the parent's taxable income (for example, salary sacrificed superannuation contributions)
• other contributions the employer makes to a super fund on behalf of the parent, (that are in addition to the minimum contributions the employer must make)
• any personal deductible contributions made to a super fund which are claimed as an income tax deduction on the parent's tax return under Subdivision 290-C.

Compulsory superannuation contributions from after-tax income are not reportable.

Amounts not included in ATI

The following amounts are not considered when calculating a parent's ATI:

National Disability Insurance Scheme (NDIS) amounts

A NDIS amount (as defined under the National Disability Insurance Scheme Act 2013) is for the purpose of reasonable and necessary supports funded under a participant's plan.

An NDIS amount is exempt from income tax. Accordingly, the amounts are not taxable income and are not included in ATI.

When the Registrar is considering a parent's application for the minimum annual rate to be reduced to nil (CSA Act section 66A) (2.4.12), or the fixed annual rate to not be used (CSA Act section 65B) (2.4.11), any income earned, derived or received by the parent must be considered, except certain prescribed payments within CSA Regs section 13. An NDIS amount is a prescribed payment under section 13 of the CSA Regs, and therefore, NDIS amounts are excluded from the definition of 'income' for these child support decisions.

National Redress Scheme payments

Payments of redress include a redress payment made to a person under section 48 or section 60 of the National Redress Scheme for Institutional Child Sexual Abuse Act 2018 (National Redress Act) and may include a counselling and psychological services payment under section 51 of the National Redress Act.

Payments received under the National Redress Scheme are non-assessable for income tax purposes (Taxation Determination TD 2018/16). Accordingly, the amounts are not taxable income and are not included in ATI.

When the Registrar is considering a parent's application for the minimum annual rate to be reduced to nil (CSA Act section 66A) (2.4.12), or the fixed annual rate to not be used (CSA Act section 65B) (2.4.11), any income earned, derived or received by the parent must be considered, except certain prescribed payments within CSA Regs section 13. A redress payment under the National Redress Scheme is a prescribed payment under section 13 of the CSA Regs, and therefore, redress payments under the National Redress Scheme are excluded from the definition of 'income' for these child support decisions.

Territories Stolen Generations Redress Scheme payments

Payments of redress under the scheme known as the Territories Stolen Generations Redress Scheme are exempt from income tax. Accordingly, Territories Stolen Generations Redress Scheme payments are not 'taxable income' and are not part of a person's ATI for general child support purposes.