2.5.3 Application to Have the Fixed Annual Rate of Child Support Not Used

Context

Where the liable parent has a low income but does not receive income support payments a fixed annual rate assessment will be made. The parent can make an application for the fixed annual rate not to be used.

Act references

CSA Act section 5, section 60, section 65A, section 65B, section 66, section 66A, section 66B, section 66C, section 67A

CSA Regs regulation 7D

National Disability Insurance Scheme Act 2013

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What is the fixed annual rate of child support?

The fixed annual rate is a set rate of child support payable per child. It is payable by low income parents who did not receive an income support payment in the last relevant year of income (section 65A). It is intended to address the situation where parents minimise their taxable income in a way that does not fairly represent their true income, or real capacity to pay child support, and thereby reduces or avoids the contribution they should make towards meeting the costs of their children. See 2.4.11 for more information on the fixed annual rate of child support.

If parents are genuinely on a low income they would usually access social security, or other income support payments. Some parents may genuinely be on a low income and either choose not to access income support payments, or are not eligible to receive such payments. These parents are not regarded as minimising their income to reduce or avoid their contribution towards the payment of child support.

For these parents, it would be unfair to impose this fixed annual rate. Therefore, they may apply for the fixed annual rate not to be used. This topic discusses how that application is made and how the Registrar makes a decision on the application.

Application for section 65A (the fixed annual rate) not to be used

If the Registrar makes an assessment using section 65A the liable parent can make an application for the fixed annual rate not to be used (section 65B(1)(a)).

If immediately before the end of the previous child support period a determination had been made (under section 65B(4)) that section 65A not be used for that assessment, then the parent is deemed to have made an application that the fixed annual rate not be used in the new child support period (section 65B(1)(b)).

The parent making the application must provide evidence about their financial circumstances to the Registrar to show that their current income is no more than the relevant parenting payment (single) maximum basic amount (2.4.2) (section 65B(2)(a)). The relevant parenting payment (single) maximum basic amount is the value of the amount in the calendar year that the child support period begins. An income tax assessment for the last relevant year of income will not be sufficient evidence of the parent's income. The parent must also show that it would be unjust and inequitable to expect them to pay the assessed amount (section 65B(2)(b)).

Decision on application

The Registrar must first be satisfied that the parent's current income is no more than the relevant parenting payment (single) maximum basic amount (2.4.2), before granting the application. A parent's current income is generally their income for the 12 month period from the date of the application.

If the parent's current income is more than the relevant amount the application must be refused (section 65B(4)).

If the parent's current income is no more than the relevant amount, the Registrar must then be satisfied that it would be unjust and inequitable to expect the parent to pay the fixed annual rate (section 65B(4)).

In making this decision, the Registrar will consider whether the parent's income accurately reflects their real capacity to pay child support, including whether the parent receives goods, services or benefits which mean that their current income is not an accurate representation of their financial position. The Registrar may decide that it would not be unjust and inequitable to require the parent to pay the fixed annual rate despite their income being low.

If an application is granted, the Registrar will specify the day on which the fixed annual rate ceases to apply to the parent (section 65B(5)). In most cases, the Registrar will specify that the determination will apply from the first day in the child support period on which the fixed annual rate was payable. However, if making a determination that the fixed annual rate will not apply from the beginning of the child support period would create an overpayment for the payee, generally the Registrar will specify that the determination will apply from a date after the start of the child support period, for example, the date the application was made. In making this decision, the Registrar will consider the reasons for any delay in making the application.

If the fixed annual rate applies to only part of the child support period (e.g. where the parent lodged an estimate of income after the beginning of the child support period), the determination not to apply a fixed annual rate will not apply to the earlier part of the child support period.

When the Registrar refuses to grant the application, the unsuccessful applicant must be notified in writing (section 66C). That person can then object (4.1.2) to the particulars of the assessment.

If an application is refused because the parent's current income is greater than the relevant amount, and the parent believes that their assessment is unfair for other reasons, they may wish to consider making a change of assessment application (2.6.1).

Meaning of income

In considering an application under 65B for the fixed annual rate not to be used, the Registrar must use the definition of income in section 66A(4) to determine if the parent's current income is no more than the relevant parenting payment (single) maximum basic amount (2.4.2). In that section, 'income' is not restricted to taxable income. A taxation assessment is not sufficient evidence of the income of the parent for the purposes of this section (section 65B(3)). In section 66A(4) income is defined as:

  • any money received, earned or derived for personal use or benefit, or
  • any periodic payment by way of gift or allowance.

The only exclusions to this definition are prescribed in the regulations (regulation 7D). They are:

  • amenity allowances or gratuities (incidental payments for personal items or other minor expenses, but not payments for work, study or participation in approved programs) paid to prisoners,
  • disability support pensions, pensions paid to veterans who are totally and permanently incapacitated and Special Rate Disability Pension for veterans, where at least 85% of the pension is paid to another person for the provision of ongoing care to the pension recipient, and
  • a National Disability Insurance Scheme (NDIS) amount (as defined in the National Disability Insurance Scheme Act 2013).

In considering a parent's financial circumstances 'money':

  • includes coins and bank notes, cheques and deposits into bank accounts (but not goods, services, or some other benefit, even if the payment is capable of being valued in money terms)
  • is 'earned' when it is received in return for labour or service, in compensation or as profit
  • is taken to be 'derived' in accordance with ordinary business and commercial principles. It includes capital payments, trust distributions and royalties
  • is taken to be 'received' when it comes into a person's possession. This covers most money which comes into a person's hands including capital payments, e.g. a tax refund, Lotto wins, lump sum compensation, profit from the sale of an asset, deposits into a joint bank account
  • must be received for the person's own use or benefit. Income received by a person in another capacity is not included.

Example: A trustee does not receive trust funds for their own use or benefit.

A partner only receives money for their own use or benefit when the person receives their individual share of the partnership profit.

Only net income is considered. The Registrar will deduct the person's expenses (that would be recognised for taxation purposes) that directly relate to them earning the particular type of income from their gross income. However, 'paper expenses' (such as depreciation of property or assets or carried forward losses) should not be deducted, as they are not considered to relate directly to earning the income and do not reduce cash flow.

If expenses claimed are discretionary (e.g. repairs to a rental property) the Registrar must be satisfied that they were necessary before they will be deducted from income.

Example: The landlord of a rental property should be able to show that the property would not have been let if the repairs claimed were not carried out.

Although taxable income is calculated by taking the total amount of deductions away from the total amount of assessable income, the Registrar will consider each individual source to determine if the amounts in total are no more than the relevant pension parenting payment (single) maximum basic amount. Losses from one source will not be deducted from income from another source.

Example: A liable parent has made an application for the fixed annual rate not to be used for a child support period starting 1 August 2008. The liable parent has an adjusted taxable income of $6,300. For section 66A(4) purposes, the parent's separate types of income are identified as:

Employment Income $10,300

Superannuation pension $5,000 (not taxable)

Lotto win $1,700

Loss from share investments $4,000

The loss from the share investments is not taken into account in calculating the liable parent's income. Only net income from each source is considered and losses are not offset against other income. The liable parent's income is $17,000 ($10,300 + $5,000 + $1,700).

Note: The superannuation pension and the lotto win (both non-taxable income) have been included in calculating the income for section 66A(4) purposes. The liable parent's application for the fixed annual rate not to be used will not be granted as the total income exceeds the relevant parenting payment (single) maximum basic amount.

Example: F is assessed to pay child support to M for their children A and B. F has regular care of A and B. F did not receive an income support payment in the last relevant year of income and had an adjusted taxable income of less than the relevant parenting payment (single) maximum basic amount. The assessment has been made using the fixed annual rate.

F makes an application for the fixed annual rate not to apply. F does not receive any income support payments due to the income of their current partner. F has no other sources of income, and does not receive any non-monetary benefits that are relevant to the assessment.

The Registrar is satisfied that F's current income is no more than the relevant parenting payment (single) maximum basic amount. The Registrar is also satisfied that it would be unjust and inequitable to expect F to pay the fixed annual rate. A determination is made under section 65B(4) that the fixed annual rate not apply.

As F has regular care of the children, and is therefore contributing to the cost of the children, the minimum rate of child support (section 66) does not apply. F is not required to pay child support for A and B.

Example: M is assessed to pay child support to F for their children A and B. M has regular care of A and B. M did not receive an income support payment in the last relevant year of income and had an adjusted taxable income of less than the relevant parenting payment (single) maximum basic amount. The assessment has been made applying the fixed annual rate.

M makes an application for the fixed annual rate not to be used. M has an adjusted taxable income of $10,000 and is a director of a family business which operates through a trust. M provides financial records regarding the business. The Registrar determines that M receives goods, services or benefits with a significant annual value through the business.

M's current income of $10,000 is less than the relevant parenting payment (single) maximum amount. However, the Registrar decides that M's income does not fairly represent M's real capacity to pay child support, and that it is not unjust and inequitable to require M to pay the fixed annual rate. M's application is, therefore, refused.

Example: F is assessed to pay child support to M for their children A and B. F has regular care of A and B. F did not receive an income support payment in the last relevant year of income and had an adjusted taxable income of less than the relevant parenting payment (single) maximum basic amount. The assessment has been made applying the fixed annual rate.

F makes an application for the fixed annual rate not to be used. F has an adjusted taxable income of $10,000 and receives a superannuation pension (not taxable) of $10,000.

As F's current income of $20,000 is more than the relevant parenting payment (single) maximum basic amount the application must be refused.

Amending an assessment if section 65B conditions no longer satisfied

The Registrar may become aware that the liable parent no longer satisfies the requirements of section 65B after a determination for the fixed annual rate not to be used has been made. If the Registrar is satisfied that the parent no longer meets the conditions for the determination that the fixed rate not apply then the assessment may be amended to have the fixed annual rate again apply (section 66B(b)).

The Registrar will amend the assessment from:

  • the date of the change in circumstances that meant section 65B is no longer satisfied, if that date can be ascertained, or
  • the date the fixed annual rate was first not applied, if section 65B was in fact never satisfied, or
  • the date the Registrar became aware of the change in circumstances that meant section 65B is no longer satisfied.

Example: F was assessed to pay the fixed annual rate to M for their children A and B. F made an application for the fixed rate not to be used. The Registrar was satisfied that F's current income was no more than the relevant parenting payment (single) maximum basic amount (2.4.2) and that it would be unjust and inequitable for F to pay the fixed annual rate. A determination was made under section 65B(4) that the fixed annual rate not be used from the start of the child support period.

Three months later, the Registrar became aware that F had always been working and the information provided with the application for the fixed annual rate not to apply was inaccurate and incomplete. As F's current income is in fact more than the relevant parenting payment (single) maximum basic amount they do not satisfy the requirements of section 65B. The Registrar amends the assessment under section 66B to reinstate the fixed annual rate from the start of the child support period.

The Registrar must notify the liable parent in writing that the fixed annual rate will again apply and that the assessment has been amended (section 66C). That person can then object (4.1.2) to the particulars of the assessment.

Last reviewed: 16 May 2016