3.2.7 Deductible child maintenance expenditure
Summary
This topic explains the assessment of DCME as a reduction in ATI (1.1.A.20) for the FTB, CCS, ACCS and SBP income tests. This topic covers the following:
- what is child maintenance expenditure?
- assessing DCME, and
- assessing the value of child maintenance expenditure.
What is child maintenance expenditure?
Child maintenance expenditure is a payment or benefit (e.g. child support (1.1.C.20)) provided by an individual (1.1.I.90) and/or their partner (1.1.P.30) to the other parent or carer for their natural, adoptive or relationship children (1.1.R.22). It does not include spousal maintenance.
Act reference: FAAct Schedule 3 clause 8(2) Child maintenance expenditure, section 3(1)-'child support'
Assessing DCME
Where an individual has child maintenance expenditure for a particular income year, 100% of the amount is deducted from their income when calculating their ATI for that year. For the purposes of the SBP income test, 100% of the amount is deducted from their income when calculating their estimated ATI for the relevant 6-month income test period. For further details on how the income test period is defined for SBP see 4.15.1.
If the claim is for FTB, CCS or ACCS and is for the current income year, the individual must estimate the amount of child maintenance expenditure they and/or their partner expect to incur for that year. For a claim for SBP, the individual must estimate what will be the amount of maintenance they and/or their partner expect to incur over the relevant 6-month income test period, including where this period crosses into the next financial year.
If the claim is for a past period in a previous income year, the child maintenance expenditure for FTB purposes is the actual amount the individual and/or their partner incurred for that year. For SBP, where a past period claim relates to an SBP income test period that falls entirely in a previous income year, the child maintenance expenditure is the amount incurred by the individual and/or their partner for the relevant 6-month period in that year. If the past period claim for SBP relates to a 6 month income test period that crosses 2 income years, the child maintenance expenditure is the amount incurred by the individual and/or their partner for the relevant 6-month period across those 2 years.
The deduction for maintenance expenditure is first applied against the income (1.1.I.20) of the individual who incurred the expense. If the expense exceeds the income of that individual, the remaining expense can be applied against the combined family income. The combined family income cannot be offset to an amount less than nil.
Example: Mary has estimated that she will have income of $36,500 for the income year. She estimates that she will pay $4,500 to her ex-partner as child maintenance. Mary's current partner Bruce estimates that he will earn $45,000 for the year and pay $9,500 maintenance to his ex-partner. Mary's ATI is $32,000 ($36,500 - $4,500) and Bruce's ATI is $35,500 ($45,000 - $9,500). Their combined estimate of ATI is $67,500 ($32,000 + $35,500).
Example: Anne has estimated that she will have income of $18,000 for the 6-month period following her child's stillbirth. This 6-month period crosses the 2013-14 and 2014-15 income years. She estimates that she will pay $1,500 to her ex-partner as child maintenance in the first income year and $500 to her ex-partner in the second income year (total of $2,000). Anne's current partner, John, estimates that he will earn $50,000 for the same 6-month period and pay $8,000 maintenance to his ex-partner in the first income year and $3,000 to this ex-partner in the second income year (total of $11,000). Anne's ATI for the 6-month period is $16,000 ($18,000 - $2,000) and John's ATI for the 6-month period is $39,000 ($50,000 - $11,000). Their combined estimate of ATI for the 6-month period is $55,000 ($16,000 + $39,000).
Example: Josh has estimated that he will have an income of $3,000 for the income year. He estimates that he will pay $9,000 to his ex-partner as child maintenance. Josh’s current partner Emma estimates that she will earn $80,000 for the year. Josh’s ATI is –$6,000 ($3,000 - $9,000) and Emma’s ATI is $80,000. Their combined estimate of ATI is $74,000 (–$6,000 + $80,000).
Act reference: FAAct Schedule 3 clause 8(1) Deductible child maintenance expenditure
Policy reference: FA Guide 4.15.1 Claims for SBP
Assessing the value of the child maintenance expenditure
The following table explains the different ways maintenance is paid and the amount that is assessed as expenditure.
| For maintenance that is paid … | the assessed value is the … |
|---|---|
|
periodically in cash, or through Child Support |
amount paid. |
|
through a child support agreement under the Child Support Assessment Act as:
|
amount specified in the agreement, or the cost to the individual if the amount is different.
Example for FTB/CCS/ACCS: If an individual pays a lump sum amount to their ex-partner as child support for the next 4 years, the cost to the individual for the year of the lump sum payment is the whole lump sum. In the proceeding 3 years there is no cost to the individual.
Example for SBP: If an individual pays this type of lump sum amount to their ex-partner, for the purposes of the SBP income test, the lump sum payment must be made in the relevant 6 month income test period following the delivery of the child or the date the child was entrusted to care, to be included in the income test. If the payment relates to a period that is longer than 6 months, less than the full amount will be included. This is similar to the treatment of lump income for the purpose of the SBP income test (3.2.8.10).
|
| as non-cash maintenance, but not through a child support agreement | cost to the individual.
Example: If an individual can obtain health insurance for their children at a discounted rate, the discounted rate is what is assessed.
|
| as capitalised maintenance, but not through a child support agreement | amount nominated by the individual and for which the individual is able to provide documentary evidence.
Example: Documentary evidence may be a court order or a letter from the maintenance individual.
|
| for both the children and the parent receiving spousal support | amount paid for the children only. If this is not apparent from the child support agreement or other documents, the individual must nominate an amount or proportion. |
| in accordance with a child maintenance order under the Family Law Act 1975 | amount paid for the child/ren under the child maintenance order.
Example: Documentary evidence would include the court order and receipts or bank statements.
|
Act reference: FAAct Schedule 3 clause 8(4) Value of a benefit provided, Schedule 3 clause 8(5) Value of benefit where provider is a party to a child support agreement, Schedule 3 clause 8(6) Value of a benefit where provider is not a party to a child support agreement
Family Law Act 1975 section 66L Children who are 18 or over