2.4.4.40 Determination of Adjusted Taxable Income

Introduction

In some situations, the Registrar may determine an appropriate amount to be a parent's adjusted taxable income. This topic explains when and how determinations may be made.

Description

If a parent's ATO issued income for the last relevant year of income is not available, the Registrar may determine an appropriate amount to be the parent's adjusted taxable income for the year of income. However, once an ATO issued income has been received the Registrar cannot make a new determination of the parent's income for that year.

Note: Changes to the rules to be used to identify an appropriate income for child support periods commencing after 1 July 2011 were introduced by the Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Further Election Commitments and Other Measures) Act 2011. For information about the rules before 1 July 2011 see 2.4.4.50.

Determination where income information is provided or available

If there is no ATO assessment for a parent for the last relevant year of income and the Registrar or the ATO has been given information (either orally or in writing) or a document that specifies or allows the Registrar to work out the parent's adjusted taxable income, the Registrar may use that income information to determine the parent's adjusted taxable income. For example, the parent may have informed the Registrar of their income for the year, the ATO may have full year payment summary information recorded for a parent or the Registrar may have information about the Centrelink payments made to the parent for the year or the Registrar may have information from an overseas authority about the income earned by a parent who was resident in a reciprocating jurisdiction.

The Registrar must be satisfied that the amount specified or worked out is a reasonable approximation of the parent's adjusted taxable income for the year. In making that decision the Registrar will have regard to ATO assessments for previous years or information available from the ATO or other sources about the year in question.

Example 1: An application for an assessment is accepted in July 2011, with the first child support period being 22 July 2011 to 21 September 2012. A parent, M, has not yet lodged their 2010-11 tax return. M advises that their adjusted taxable income for 2010-11 is $49,000. As this information is consistent with M's previous tax assessments the Registrar is satisfied of the accuracy of the information. The Registrar uses the adjusted taxable income of $49,000 to calculate the child support assessment.

Example 2: An application for an assessment is accepted in July 2011, with the first child support period being 22 July 2011 to 21 September 2012. A parent, M, has not yet lodged their 2010-11 tax return. M advises that their adjusted taxable income for 2010-11 is $19,000. As there is no ATO income information available for M, the Registrar requests additional information in order to be satisfied with the accuracy of the information. M does not provide any additional information. As the Registrar is not satisfied with the accuracy of the information M's oral advice is not used to determine an adjusted taxable income.

Example 3: The Registrar is required to make an assessment in July 2011 for a new child support period from 1 August 2011 as the assessment for the child support period 1 May 2010 to 31 July 2011 is about to end. The last relevant year of income for the new assessment is 2010-11. A 2010-11 tax assessment has not yet issued for either M or F. As the Registrar has income information from Centrelink for M, that income will be used as M's adjusted taxable income in the assessment.

Act reference: CSA Act section 58 Determination by the Registrar of a parent's adjusted taxable income

Determination where ATO income available for the year before the last relevant year of income

If there is no ATO assessment for a parent for the last relevant year of income but there is an ATO assessment for the previous year of income, the Registrar may determine that the parent's adjusted taxable income for the last relevant year of income is the amount worked out by multiplying the parent's adjusted taxable income for the previous year by the adjusted taxable income indexation factor.

Act reference: CSA Act section 58(3) Determination by the Registrar of a parent's adjusted taxable income, section 58AA ATI indexation factor for determinations under section 58

Adjusted taxable income indexation factor

The formula for calculating the adjusted taxable income indexation factor for child support periods starting on or after 1 July 2013, is:
Average weekly earnings (AWE) amount for the December quarter of the last relevant year of income ÷ AWE amount for the December quarter of the tax return year

For child support periods prior to 1 July 2013 (but starting on or after 1 July 2011) the AWE amount for the September quarter was used. See the tables in 2.4.2 for the AWE values to be used in the formula.

When a tax assessment has been made for the year before the last relevant year of income, the 'tax year' used in the indexation factor calculation is that previous year.

Example 1: The Registrar is required to make an assessment for a new child support period from 1 August 2011. The last relevant year of income for the new assessment is 2010-11. The AWE amount for the September quarter of the last relevant year of income (2010-11) is the August 2010 amount of $982.90. An ATO assessment is available for the previous year 2009-10. The AWE amount for the September quarter of the tax year (2009-10) is the August 2009 amount of $934.70.

The adjusted taxable income indexation factor is therefore $982.90 ÷ $934.70 = 1.052.

The adjusted taxable income indexation factor is calculated to 3 decimal places.

When an ATO assessment is available for the year before the last relevant year of income the adjusted taxable income indexation factor is used to calculate the adjusted taxable income to be used in the assessment.

Example 2: The Registrar is required to make an assessment for a new child support period from 1 August 2011. The last relevant year of income for the new assessment is 2010-11. A 2010-11 tax assessment has not yet issued for either M or F. There were ATO assessments for both parents for the previous year. M's adjusted taxable income for 2009-10 was $25,000. F's adjusted taxable income for 2009-10 was $60,000. The adjusted taxable income indexation factor to be used is 1.052 (see previous example).

M's 2010-11 adjusted taxable income is $25,000 × 1.052 = $26,300

F's 2010-11 adjusted taxable income is $60,000 × 1.052 = $63,120

Act reference: CSA Act section 58(3) Determination by the Registrar of a parent's adjusted taxable income, section 58AA ATI indexation factor for determinations under section 58

Policy reference: CS Guide 2.4.2 Formula Tables & Values

Determination where ATO income is available for an earlier year of income

If there is no ATO assessment for a parent for the last relevant year of income, or the previous year, but there is an ATO assessment for an earlier year of income, the Registrar may determine that the parent's adjusted taxable income for the last relevant year of income is the greater of the following amounts:

  • the amount worked out by multiplying the parent's adjusted taxable income for the most recent income year by the adjusted taxable income indexation factor,
  • two-thirds of the annualised Male Total Average Weekly Earnings (MTAWE) figure for the child support period. The ⅔ MTAWE figure for each year is included in the table of basic values.

When the most recent ATO assessment has been located, the 'tax year' used in the indexation factor calculation (as described above) is that year.

Example 1: The Registrar is required to make an assessment for a new child support period from 1 August 2011. The last relevant year of income for the new assessment is 2010-11. The AWE amount for the September quarter of the last relevant year of income (2010-11) is the August 2010 amount of $982.90.

M's most recent ATI is for the 2006-07 year. The AWE amount for the September quarter of the tax year (2006-07) is the August 2006 amount of $839.50. The adjusted taxable income indexation factor is therefore $982.90 ÷ $839.50 = 1.171

F's most recent adjusted taxable income is for the 2008-09 year. The AWE amount for the September quarter of the tax year (2008-09) is the August 2008 amount of $897.90. The adjusted taxable income indexation factor is therefore $982.90 ÷ $897.90 = 1.094.

In determining the ATI to use, the Registrar must compare the indexed ATI with the ⅔ MTAWE figure for the child support period. The ⅔ MTAWE figure for each year is included in the table of basic values.

Example 2: The Registrar is required to make an assessment for a new child support period from 1 August 2011. The last relevant year of income for the new assessment is 2010-11. A 2010-11 tax assessment has not yet issued for either M or F, there are no ATO assessments for either parent for the previous year. M's most recent ATO assessment is for the 2006-07 year, an adjusted taxable income of $25,000. F's most recent ATO assessment is for the 2008-09 year, an ATI of $60,000. The adjusted taxable income indexation factors to be used are 1.171 and 1.094 respectively (see previous example). The ⅔ MTAWE figure for a child support period starting 1 August 2011 is $41,187.

M's 2010-11 adjusted taxable income is $25,000 × 1.171 = $29,275 or ⅔ MTAWE; as ⅔ MTAWE is greater the adjusted taxable income is $41,187.

F's 2010-11 adjusted taxable income is $60,000 × 1.094 = $65,640 or ⅔ MTAWE; as the indexed value is greater the adjusted taxable income is $65,640

Act reference: CSA Act section 5A Definition of annualised MTAWE figure, section 58 Determination by the Registrar of a parent's adjusted taxable income, section 58AA ATI indexation factor for determinations under section 58

Social Security and Other Legislation Amendment (Disability Support Pension Participation Reforms) Act 2012

Policy reference: CS Guide 2.4.2 Formula Tables & Values

Determination where no ATO assessment available

If the Registrar has not been able to determine an adjusted taxable income for a parent using CSA Act sections 58(2), 58(3), or 58(4), or if the Registrar has decided not to make a determination for a parent under one of those provisions, the Registrar may determine that the parent's adjusted taxable income is an amount that is at least two-thirds of the annualised MTAWE figure. This is intended to cover circumstances such as where a parent has never lodged a tax return, or where the Registrar is unable to ascertain a person's tax file number.

Example: An application for an assessment is accepted in July 2011, with the first child support period being 22 July 2011 to 21 September 2012. Parent M is not able to be contacted, nor is any ATO income information able to be located for M. The Registrar determines that M's adjusted taxable income is $41,187, the ⅔ MTAWE figure for child support periods commencing in 2011.

If the adjusted taxable income determined under section 58 results in the parent being assessed based on an income that is higher than their actual income, the parent may choose to lodge their tax return so their assessment would be amended to reflect their actual adjusted taxable income. However, the new assessment can only take effect with retrospective effect in a limited range of situations, as described below.

Act reference: CSA Act section 58 Determination by the Registrar of a parent's adjusted taxable income

Determination of overseas income where parent is a resident of a reciprocating jurisdiction

If the Registrar has sufficient information and documents, the Registrar may use that information to determine an amount of overseas income for the purpose of working out the adjusted taxable income of a resident of a reciprocating jurisdiction. For example, the Registrar may have received evidence of income in a reciprocating jurisdiction in which the parent resides, or recently resided. This may include information from the most recent financial year in that jurisdiction.

If the Registrar does not have sufficient information to determine a parent's overseas income, despite requesting income information from the parent or an overseas authority, the Registrar may determine that the parent's overseas income is an amount that the Registrar considers appropriate of at least ⅔ of the annualised MTAWE figure for the child support period.

If the Registrar does not have sufficient information or documents to determine an amount of overseas income for the last relevant year of income, but a determination has been made for a previous year of income, the Registrar will generally determine that the parent's adjusted taxable income for the last relevant year of income is the greater of the following amounts:

  • the amount worked out by multiplying the parent's adjusted taxable income for the most recent income year by the adjusted taxable income indexation factor, or
  • two-thirds of the annualised MTAWE figure for the child support period. The ⅔ MTAWE figure for each year is included in the table of basic values.

If the Registrar does not have sufficient information to determine an overseas income and is unable to serve a notice on either the parent or the relevant overseas authority, then the Registrar is unable to determine an overseas income for that parent for inclusion in their taxable income.

Act reference: CSA Act section 5A Definition of annualised MTAWE figure, section 162A Obtaining information in relation to residents of reciprocating jurisdictions, section 58C Determination of overseas income if information and documents in Registrar's possession are sufficient, section 58D Determination of overseas income if information and documents in Registrar's possession are insufficient

Policy reference: CS Guide 2.4.2 Formula Tables & Values

Last reviewed: 4 January 2016