The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

2.5.2 Exclusion of additional income earned post-separation

Context

A parent can apply to have additional post-separation income (additional income) that was earned, derived or received after separation excluded from their ATI (2.4.4) for child support purposes in certain circumstances. A parent may apply to have additional income excluded, regardless of whether they pay or receive child support.

The exclusion of additional income post-separation is limited to the first 3 years after the parents last separated.

Act reference

CSA Act section 44

On this page

What are the requirements for excluding additional income?

The Registrar may exclude additional income from the parent's ATI if the following requirements are met:

  • the parents must have lived together (2.1.1) on a genuine domestic basis for at least 6 months (section 44(1)(a))
  • the last separation of the parents occurred before the application for administrative assessment was made (section 44(1)(b)(ii))
  • the application is made within 3 years after the last separation of the parents (section 44(1)(b)(i))
  • at the time of the application, the parents remain separated (section 44(1)(c))
  • the income must have been earned, derived or received in accordance with a pattern of earnings that was established after separation with the other parent (section 44(1)(d)(i)), and
  • the income must be of a kind it is reasonable to expect would not have been earned, derived, or received by the parent in the ordinary course of events (section 44(1)(d)(ii)).

Additional income

Any additional income to be excluded must have been earned, derived or received in a pattern established after separation.

Parents may earn additional income from a variety of sources, including from overtime, a second job, a career change to a higher paying job, or from investment income.

For a self-employed parent, additional income may be earned, derived or received through extending the opening hours of their business, increasing production or developing new markets or new products (to a greater extent than before separation). The parent must be able to show that the change which resulted in the additional income being earned happened after separation (section 44(1)(d)(i)).

The ordinary course of events

Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent's ATI. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events (section 44(1)(d)(ii)).

Additional income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their ATI. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income, or moving from an unemployment benefit to employment.

Additional, income that parents earn outside the ordinary course of events is able to be excluded from their ATI. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job.

30% limit for reduction of ATI

The exclusion of additional income cannot reduce a parent's ATI by more than 30% (section 44(3)(a)). If excluding all the additional income earned post separation would reduce the ATI by more than 30%, the Registrar can only reduce the ATI by 30%.

Example: Lesley has an income of $30,000 at the date of separation from Irena in May 2021. From June 2021, Lesley's income increases to $60,000 as Lesley takes on a second job.

In August 2022, Lesley lodges her tax return for 2021-22 and her child support liability is assessed on an ATI of $60,000, as that was Lesley's income for the last relevant year of income (2021-22 financial year). Lesley applies to have additional income earned post separation excluded from their ATI of $60,000.

If Lesley's application is successful, Lesley's current income used in the assessment, $60,000, can only be reduced by a maximum of 30%, or $18,000. Therefore, Lesley's ATI would be set at $42,000.

Lesley could not have the full additional income of $30,000 excluded from their ATI as this would be more than 30% of ATI.

In certain circumstances, the parent's new ATI, after excluding the additional income, will be lower than their income at the date of separation.

Example: Abdul has an income of $50,000 at the date of separation from Neela in December 2021. From January 2022, Abdul takes on a new role which increases his annual income by $10,000, as stated by his employer.

In August 2022, Abdul lodges his tax return for the 2021-22 financial year, which includes $1,000 of work-related deductions for his new role (for example, vehicle and travel expenses and home office expenses). Abdul's resulting ATI is $59,000 and this is applied to his child support assessment.

Abdul applies to have the additional income of $10,000 earned post separation excluded from his ATI. Abdul's application is successful and the extra $10,000 is excluded from the assessment. The $10,000 is less than a 30% reduction in Abdul's ATI of $59,000. As a result, Abdul's ATI is now assessed at $49,000, which is less than Abdul's income of $50,000 at separation.

Three year limit on excluding additional income

Additional income cannot be excluded for more than 3 years from the date of separation (section 44(3)(b)).

When does a determination to exclude additional income apply?

If the Registrar accepts an application to exclude additional income this will ordinarily apply from the date the application was made. However, it can apply from the start of the child support period in which the application is made if there are special circumstances.

Special circumstances

Whether there are special circumstances to justify backdating the exclusion of additional income will depend on the facts in each particular case. Generally the Registrar will be satisfied special circumstances exist where the parent was prevented from applying earlier but did apply in a timely way once they were able to, generally within 28 days.

The following are the circumstances in which a parent will be considered to have been prevented from applying earlier:

  • The income was not yet used in the assessment.
  • The parent was not aware of the existence of the
    • child support assessment.
    • provision because it was not discussed in their initial contact with Services Australia after the application for administrative assessment was accepted.
  • The parent was a victim of family violence.
  • The parent (or a family member) was ill or had an accident that stopped the parent from applying.
  • The parent suffered a personal trauma such as a death in the family, or a natural disaster that caused damage to their property.
  • The parent had communication difficulties because of, or including, isolation, illiteracy or poor English-language skills.
  • The parents were involved in negotiations over child support and/or other matters and applying may have compromised those negotiations.
  • There are other exceptional circumstances.

The exclusion will remain in place until the end of the child support period in which the application is lodged. However, it will end sooner if the 3 year time limit (since separation) expires within that child support period.

A new application can be lodged for the next child support period if the other requirements are met and the 3 year time limit has not expired.

Estimates of income

Parents who have lodged estimates of income (2.5.1) may also apply for additional income to be excluded (section 44(1)(d)). Where an estimate of income has been made, the Registrar will consider excluding additional income earned, derived or received in the remaining income estimate period, rather than additional income earned in the last relevant year of income.

Example: Ashley had an income of $30,000 at the date of separation from Maxima. Two months after separation Ashley's hours of work fall and Ashley lodges an estimate of income of $20,000. Four months later Ashley starts in a new job paying $38,000. Ashley lodges a new estimate for that amount and the assessment is amended accordingly.

Ashley may also make an application to have the additional income earned post separation excluded from the new assessment. If the Registrar is satisfied that the section 44 requirements are met, the Registrar may make a determination that Ashley's ATI for the remaining income estimate period will be reduced by the additional income Ashley earned post separation up to a maximum of 30%.

A new application can be lodged for the next income estimate period, if the other requirements are met and the 3 year time limit has not expired.

Income or annual rate set

Where a parent's annual rate or income for child support purposes is set by a court order, child support agreement, or change of assessment decision, the parent is able to apply for additional income to be excluded from their ATI. However, the income exclusion cannot start until after the court order, child support agreement, or change of assessment decision ceases to have effect. If the court order, child support agreement, or change of assessment decision covers the entire child support period, the application will be refused.

Non-ATO incomes (provisional incomes)

When a parent's child support assessment is based on a non-ATO income (provisional income), the parent may still be able to make an application to have additional income excluded from that income, provided that the Registrar is able to clearly identify the income that has been earned post separation.

Where the income is provided by the parent or derived from information provided by the ATO, Centrelink or employers, it may be possible for the Registrar to identify additional income that has been earned post separation. In those cases, the Registrar will check the income that is being used and make a decision as to whether the components of the income can be identified.

Where the components of the income cannot be ascertained, or where the income being used is a default income of at least two-thirds of the annualised MTAWE, additional income will not be able to be identified and so cannot be excluded.

Parents with more than one child support case

A parent's additional income is only excluded for the child support case for which the conditions in section 44 are met, and not any other case the parent may have. Where the conditions in section 44 are met for more than one of a parent's child support cases (occurring at the same point in time) the parent must make separate applications for each case.

Parents who reconcile & re-separate

Reconciling and re-separating allows a new application for additional income to be excluded only if during the last reconciliation the parents lived together in a genuine domestic relationship for at least 6 months (section 44(1)(a) and section 44(1)(b)). The additional income must have been earned, derived or received after the last separation.

Non-parent carers

Parents with a child support case involving a non-parent carer are able to apply to exclude additional income earned, derived or received after separation. The separation must have been between the parents of the child, not a parent and the non-parent carer.

Revoking election to exclude additional income

Once an election to exclude additional income has been accepted, it cannot be revoked.

If a parent no longer wants the exclusion to apply, they may consider making a child support agreement setting the relevant parent's income at a higher level or specifying an annual rate of child support.

See 2.7.1 for more information on child support agreements.

Review rights

Services Australia's internal review (objection) process allows parents to ask the Registrar to formally reconsider particular decisions made under child support legislation.

If the Registrar refuses an application for exclusion of additional income, the Registrar will give the parent written notice of the decision (section 44(5)). If a parent is dissatisfied with this decision, they may object to the particulars of the unchanged assessment.

If the Registrar accepts an application for exclusion of additional income the Registrar will give effect to the determination by amending any administrative assessment that has been made in relation to the child support period or income estimate period. A parent who is dissatisfied with that decision may object to the particulars of the amended assessment. See 4.1 for more information on objecting to the Registrar's decisions.

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