2.6.12 Reason 6 - High Costs of Child Care

Context

A parent or non-parent carer can apply for a change of assessment in special circumstances if the costs of maintaining a child are significantly affected by the high child care costs for the child (and the child is under 12 years of age). While this mostly applies to payments made to registered child care providers, it may also apply to payments made to a person (such as a grandparent) that provides care for the child.

Act references

CSA Act section 5, section 8, section 98C, section 98S, section 117(2)(b)(ib), section 117(3A), section 117(3B), sections 117(4) to 117(9)

Families, Housing, Community Services and Indigenous Affairs and Other Legislation Amendment (Further 2008 Budget and Other Measures) Act 2008 Part 3, Schedule 3

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Grounds for departure under Reason 6

An assessment can be changed if in the special circumstances of the case, the costs of maintaining the child are significantly affected because of high child care costs in relation to the child (section 117(2)(b)(ib)).

The phrase 'special circumstances of the case' is not defined in the CSA Act. The Family Court has held that 'it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary' (Gyselman and Gyselman (1992) FLC 92-279).

A parent or non-parent carer can apply to change their child support assessment if they consider that the costs of caring for the child are significantly affected by the high costs of child care.

Before an assessment can be changed, the Registrar must be satisfied that all of the following elements exist:

  • in relation to costs incurred by a parent the child care costs are only high if they total more than 5% of the parent's adjusted taxable income for the child support period (2.3) (section 117(3B))
  • in relation to costs incurred by a non-parent carer the child care costs are only high if they total at least 25% of the costs of the child for the child support period (section 117(3C))
  • the costs of the child are significantly affected because of high child care costs (section 117(2)(b)(ib))
  • the costs must be incurred by a parent or non-parent carer (section 117(3A)(a))
  • the child must be younger than 12 years of age at the start of the child support period (section 117(3A)(b)).

Are the child care costs high? Costs incurred by a parent

Child care costs incurred by a parent are not high unless they are more than 5% of the parent's adjusted taxable income for the child support period (section 117(3B)).

In relation to costs incurred by a parent, the Registrar will use the parent's adjusted taxable income amount for the child support period in which the child care costs are, or will be incurred. This will be the income for the last financial year that ended before the start of the child support period, unless:

  • the parent has elected to have their child support based on their current income (in which case, the Registrar will calculate the threshold using the parent's estimated income),
  • the parent has made an application under section 44 of the CSA Act to have post-separation income (2.5.2) disregarded (in which case the Registrar will calculate the threshold using the adjusted taxable income determined for the parent under section 44), or
  • the parent's adjusted taxable income has been varied by
    • a child support agreement (2.7),
    • a court order (2.8), or
    • a prior change of assessment decision (2.6.4)

(in which case the Registrar will calculate the threshold using the parent's adjusted taxable income as amended by that agreement, court order or prior change of assessment decision).

This income amount is divided by 365 and then multiplied by the number of days in the period to give an adjusted taxable income for the period.

Example: A parent, M, has child care costs of $3,000 over a 15 month child support period (457 days).

M's adjusted taxable income for the child support period is $40,000.

($40,000 ÷ 365 days) × 457 days = $50,082 i.e. parent's notional adjusted taxable income.

5% × $50,082 = $2,504

As $3,000 is more than $2,504 it is established that M's child care costs are high.

The Registrar will use the following method to calculate whether the parent's child care costs are high in a case where the parent's adjusted taxable income changes within the child support period (for example, because the parent lodged an estimate of his or her income within the child support period).

  1. Work out the parent's child care costs for the whole child support period.
  2. Divide the child support period up into separate sub-periods according to the dates to which the different adjusted taxable incomes apply.
  3. Calculate the number of days in each sub-period.
  4. For each sub-period, divide the adjusted taxable income amount by 365 then multiply the result by the number of days in the sub-period to calculate the sub-period adjusted taxable income figure.
  5. Work out the sum of all the sub-period adjusted taxable income figures.
  6. Are the child care costs at step 1 more than 5% of the total amount at step 5?
  7. If yes, the parent's child care costs are high.

Only net child care expenses are taken into account (i.e. less any child care benefit that is deducted by the child care centre from the fees or refundable to the parent by Centrelink, and less any child care rebate payable to the parent or paid to the child care centre and deducted from the fees).

Are the child care costs high? Costs incurred by a non-parent carer

Child care costs incurred by a non-parent carer are not high unless they are more than 25% of the costs of the child for the child support period (section 117(3C)).

In relation to costs incurred by a non-parent carer, the Registrar will look at the costs of the child for the child support period in which the child care costs are, or will be incurred.

Example: A non-parent carer, J, has child care costs of $3,000 over a 15 month child support period (457 days) relating to child P who is 8 years old.

The combined child support income of P's parents for the child support period is $40,000. The cost of the child figure for P is therefore $6,547 per annum.

($6,547 ÷ 365 days) × 457 days = $8,197

25% × $8,197 = $2,049

As $3,000 is more than $2,049, J's child care costs are high.

The Registrar will use the following method to calculate whether the non-parent carer's child care costs are high in a case where the costs of the child change within the child support period (for example, because one of the child's parents lodged an estimate of his or her income within the child support period).

  1. Work out the non-parent carer's child care costs for the whole child support period.
  2. Divide the child support period up into separate sub-periods according to the dates to which the different costs of the child amounts apply.
  3. Calculate the number of days in each sub-period.
  4. For each sub-period, divide the cost of the child amount by 365 then multiply the result by the number of days in the 'sub-period' to calculate the 'sub-period cost of the child figure'.
  5. Work out the sum of all the sub-period cost of the child figures.
  6. Are the child care costs at step 1 more than 25% of the total amount at step 5?
  7. If yes, the non-parent carer's child care costs are high.

Only net child care expenses are taken into account (i.e. less any child care benefit that is deducted by the child care centre from the fees or refundable to the non-parent carer by Centrelink and less any child care rebate payable to the non-parent carer or paid to the child care centre and deducted from the fees).

Have the costs been incurred?

A parent or non-parent carer should substantiate the costs incurred when making an application for a change to the assessment. Evidence can include enrolment forms for child care, holding fees and similar documentation. Costs are incurred if there is a definite commitment to the expenditure even if an actual payment has not been made. However, there must be a reasonable expectation that the cost will be incurred.

Are the costs reasonable & necessary?

There should be an element of necessity in incurring the child care costs e.g. work-related purposes. This extends to parents or non-parent carers attempting to join the workforce, including those who are undertaking study, training or education. It may also extend to non-work related purposes such as a need for respite, particularly in relation to a non-parent carer.

The Registrar has to determine the reasonableness of the costs claimed. Examples of reasonable child care costs include:

  • day care centre costs
  • before and after school care costs.

Payments to a private care provider, such as a nanny or grandparent, may be reasonable. If the costs are significantly higher than other available care, the Registrar will consider whether the higher costs are necessary in the particular circumstances.

Do the costs significantly affect the costs of the child?

A parent or non-parent carer must be able to show that the total costs of maintaining the child are high because the cost of child care for that child is high. If the cost of child care is high but the total cost of maintaining the child is no greater than usual there may not be a reason to change the assessment. The costs of maintaining the child are considered in the context of the financial circumstances of the parents.

The kinds of decisions that reflect high costs of child care

If the Registrar decides that the child support assessment should be changed because of high costs of child care, the costs of the child may be increased by the total net child care costs, for distribution between the parents according to their share of the combined income. Adjusting that component of the formula assessment allows the parents to use other administrative processes such as an estimate of income, if necessary.

Other kinds of decisions (e.g. adjusting the annual rate or other components of the formula) may be appropriate in some circumstances.

Example: Increasing costs of the child for a parent

F works full time and has 100% care of 1 child, aged 7. F pays $6,000 in child care costs for the 15 month child support period commencing on 1 November 2008. F receives $2,500 in Child Care Benefit and Rebate for that period. F's net child care costs for the child support period are $3,500. F's adjusted taxable income for the 15 month child support period is $50,082. As 5% of $50,082 = $2,504, the costs are considered to be high.

The adjusted taxable income of each parent is $40,000 for the last relevant year of income. The combined child support income of the parents is $43,496 and the assessed costs of the child are $7,072. M has 50% of the child support income, so needs to meet 50% of the assessed costs or $3,536. M also needs to meet 50% of the net child care costs. M doesn't meet any of the assessed costs or the additional costs directly. The annualised net child care costs are $2,795 (($3,500 ÷ 457) × 365). As 50% of $2,795 is $1,398 this is added to the existing liability of $3,536. M transfers $4,934 to F.

Example: Increasing costs of the child for a non-parent carer

L, a non-parent carer has 100% care of child J, aged 4. L pays $6,000 in child care costs for the 15 month child support period commencing 1 November 2008. L receives $2,500 in Child Care Rebate and Benefit for that period. L's net child care costs for the child support period are $3,500.

The combined child support income of J's parents is $33,000. The assessed costs of J are $5,497 per year or $6,883 over the 15 month child support period. L's net child care costs for J ($3,500) are more than 25% of the assessed costs for J ($1,720 i.e. 25% × $6,883) so the costs are considered to be high.

As a non-parent carer, L is not required to meet any of the costs of J. J's parents are required to contribute $5,497 per year. The parents are also required to meet the net child care costs. The parents do not meet any of J's net costs directly.

The annualised net child care costs are $2,795 (($3,500 ÷ 457) × 365). This amount is added to the costs of the child, giving a liability of $8,292. That liability needs to be transferred from the parents to L according to their respective shares of the combined child support income.

When an application for a change to the assessment includes more than one reason, the Registrar will consider the impact that increasing the costs of the child or the self-support amount will have on the overall change to the assessment. The decision made will depend on the individual facts of the case.

If a reason to change the assessment is established the Registrar is required to consider whether it would be just and equitable (2.6.17), or fair, and otherwise proper (2.6.18) to make a particular decision.

WA ex-nuptial cases after 6 January 2009

The Families, Housing, Community Services and Other Legislation Amendment (Further 2008 Budget and other Measures) Act 2008 amended sections 117(3A) and 117(3B) from 6 January 2009.

Those amendments do not apply to an application for a change to the assessment for a period prior to 6 January 2009 (or 3 March 2011 for WA ex-nuptial cases) or any application for a change to assessment that is made prior to 6 January 2009 (or 3 March 2011 for WA ex-nuptial cases). In relation to those applications the rules are:

  • only a payee can apply to change an assessment on the basis of high child care costs
  • the payee's costs are considered to be high if they are more than 5% of the payee's adjusted taxable income for the child support period. There are no different provisions relating to costs incurred by non-parent carers
  • a payee may only apply for a change of assessment in relation to high child care costs if the payer is not an eligible carer (2.1.1) of any of the children in the assessment (i.e. if the payer does not have at least shared care (35%) of any of the children).

See 1.4.3 for more details of the date from which various provisions had effect for WA ex-nuptial cases.

Last reviewed: 16 May 2016