2.3.5 Fixed annual rate

Context

The FAR (1.1.F.10) is a set rate that addresses situations where a parent (1.1.P.10) minimises their taxable income (1.1.T.20) in a way that does not fairly represent their real capacity to pay child support (1.1.C.60), and thereby reduce or avoid the contribution they should make towards meeting the costs of their children. If a parent is genuinely on a low income, they will 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 may not be eligible to receive such payments (for example, due to their current partner's (1.1.P.20) income). A parent is able to apply for the FAR not to apply.

If an application for the FAR not to apply is refused and the parent believes their assessment is unfair for other reasons, they may wish to consider applying for a change of assessment (1.1.C.50) (Part 5).

On this page

• What is the FAR?
• A parent is liable to pay the FAR for more than 3 children
• Paying the FAR to more than one person
• Parent assessed to pay the FAR is also entitled to receive child support in a case
• Applying for the FAR not to apply
• Meaning of income
• Making a decision to accept or refuse a FAR not to apply application
• Amending an assessment if the FAR not to apply conditions are no longer met

What is the FAR?

The FAR is a prescribed amount paid per child, for up to 3 children in an assessment if (CSA Act section 65A):

• the parent did not receive an income support payment (SS Guide 1.1.I.80) in the last relevant year of income (1.1.L.10)
• that parent's ATI (1.1.A.20) (actual or estimated) for the last relevant year of income is less than the pension PP (single) maximum basic amount (2.3.2) (1.1.P.60) as at 1 January of that year, and
• that parent has less than shared care (1.1.S.40) of the child (less than 35% care).

Note: If a parent's ATI has been set at a particular amount by an income amount order (1.1.I.10) (for example, as part of a change of assessment process (CSA Act section 98S(1)(g))), the FAR will not apply. This is because their ATI has not been calculated under CSA Act section 43 (CSA Act section 65A(1)(b)(i)).

A parent is liable to pay the FAR for more than 3 children

If the FAR assessment is payable for more than 3 children, then the amount payable is capped at 3 times the FAR (CSA Act section 65A(3)). The amount payable for each child is calculated according to the following formula (CSA Act section 65A(4)):

• Amount for each child = 3 × FAR ÷ total number of children for whom child support is payable by the parent (CSA Act subsection 65A(1)).

Paying the FAR to more than one person

If the care (1.1.C.10) of a child is shared between a parent and a non-parent carer, or between 2 non-parent carers, then the FAR payment is shared between the carers in accordance with the formula in CSA Act section 40A (CSA Act section 65A(5)):

• Total rate the parent and non-parent carers are entitled to be paid for the day × (parent's or non-parent carer's cost percentage (1.1.C.200) for the child ÷ total of parent's and non-parent carer's cost percentage for the child).

A non-parent carer is not entitled to be paid child support unless they have at least 35% care of the child and they have applied under CSA Act section 25A in relation to the child (CSA Act section 40B).

Parent assessed to pay the FAR is also entitled to receive child support in a case

The FAR amount payable by a parent in relation to the child is subject to any offsetting of amounts calculated as payable by the other parent before the final amount payable by the first parent is determined (CSA Act section 67A).

Applying for the FAR not to apply

If a parent is assessed to pay the FAR, they can apply for the FAR not to apply (CSA Act section 65B(1)(a)). If a determination had been made immediately before the end of the previous CSP that the FAR should not apply (under CSA Act section 65B(4)), then the parent is deemed to have made an application that the FAR not apply in the new CSP (CSA Act section 65B(1)(b)).

The parent making the application must provide evidence that:

• their current income (not ATI) is no more than the relevant pension PP (single) maximum basic amount (CSA Act section 65B(2)(a)), and
• it would be unjust and inequitable to expect them to pay the FAR (CSA Act section 65B(2)(b)).

An application for the FAR not to apply will only be accepted if the Registrar is satisfied that the parent's current income is no more than the pension PP (single) maximum basic amount (2.3.2). If the parent's current income is more than the relevant pension PP (single) maximum basic amount, the application must be refused (CSA Act section 65B(4)).

The Registrar must also be satisfied that it would be unjust and inequitable to expect the parent to pay the FAR (CSA Act section 65B(4)). The Registrar may decide that it would not be unjust and inequitable to require the parent to pay the FAR despite their income being low.

Meaning of income

Income is defined as (CSA Act section 66A(4)):

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

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.

A parent's current income is generally their income for the 12-month period from the date of the application.

The Registrar must use the definition of income to determine if the parent's current income is no more than the pension PP (single) maximum basic amount. An income tax assessment for the last relevant year of income will not be sufficient evidence of the parent's income.

The exclusions to income are prescribed in the regulations (CSA Regs section 13):

• 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
• a National Disability Insurance Scheme (NDIS) amount (as defined in the National Disability Insurance Scheme Act 2013), and
• payments of 'redress' within the meaning of the National Redress Scheme for Institutional Child Sexual Abuse Act 2018.

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 including 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, for example, 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).

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 (for example, repairs to a rental property), the Registrar must be satisfied that they were necessary before they will be deducted from the parent’s income.

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 pension PP (single) maximum basic amount. Losses from one source will not be deducted from income from another source.

Note: The superannuation pension and the lotto win (both non-taxable income) have been included in calculating the income for CSA Act section 66A(4) purposes. The parent's application for the FAR to not be used will not be granted as the total income exceeds the relevant parenting payment (single) maximum basic amount ($23,800 in 2023).

Making a decision to accept or refuse a FAR not to apply application

When making a decision to accept an application for the FAR not to apply the Registrar must consider, and be satisfied of the following:

• the parent’s current income is not more than the relevant pension PP (single) maximum basic amount (CSA Act section 65B(4))
• it would be unjust and inequitable for the parent to pay the FAR (CSA Act section 65B(4))
• if the parent’s income accurately reflects their real capacity to pay child support, for example are they in receipt of goods, services or benefits which mean their income is not an accurate representation of their true financial position.

If an application is granted, the Registrar will specify the day the FAR ceases to apply to the parent (CSA Act section 65B(5)). In most cases, the Registrar will specify that the determination will apply from the first day in the CSP on which the FAR was payable. However, if making a determination that the FAR will not apply from the beginning of the CSP would create an overpayment for the payee (1.1.P.30), generally the Registrar will specify that the determination will apply from a date after the start of the CSP, 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 FAR applies to only part of the CSP (for example, where the parent lodged an estimate of income after the beginning of the CSP), the determination not to apply a FAR will not apply to the earlier part of the CSP.

When the Registrar refuses to grant the application, the unsuccessful applicant must be notified in writing (CSA Act section 66C). That person can then object (10.2.2) to the particulars of the assessment.

Amending an assessment if the FAR not to apply conditions are no longer met

The Registrar may amend the assessment to reapply the FAR if the parent no longer meets the required conditions (CSA Act section 66B(b)) from the date:

• a change in circumstances occurred, if that date can be determined
• the FAR was first not applied, if the conditions are later found to have never been satisfied, or
• the Registrar became aware a change in circumstances has occurred that mean the conditions are no longer met.

The Registrar must notify the liable parent in writing that the FAR will again apply and that the assessment has been amended (CSA Act section 66C). That person can then object (10.2.2) to the particulars of the assessment.