2.5.1.20 Calculating an income estimate
Context
Child support legislation provides a method statement setting out how a parent is to calculate their ATI when electing that it be based on an estimated amount. The method depends on whether the parent is estimating their ATI for a full or part year.
On this page
- Full year income estimate
- Part-year income estimate
- Part-year income estimate - year to date income amount
- Part-year income estimate - start date
- Part-year income estimate - remaining period
- Part-year income estimate - partial year income amount
- Part-year income estimate - annualised partial year income amount
Full year income estimate
A parent may estimate their ATI for a year of income before that year starts, or on the first day of the year. The estimate must be the total of all income component amounts of the parent's ATI for the year of income (CSA Act section 60(2)).
The estimate will commence on 1 July and cease on 30 June of that income year. From 1 July of the next year of income, the assessment will revert to the most recently available ATI (provided an estimate does not apply in relation to the next financial year) (CSA Act subsection 61(1A)).
The parent’s income estimate is reconciled against their actual income after the financial year ends.
Example: Anders and Olga have a child support assessment for the period 1 May 2018 to 31 July 2019, based on their incomes for the last relevant year of income which is the 2016-17 financial year. Anders’ ATI in the assessment is $60,000. On 1 July 2018, Anders contacts Services Australia advising that his income has changed.
Anders estimates that his ATI for the 2018-19 year will be $38,000, which includes taxable income of $24,000, an $8,000 net investment loss and a $6,000 reportable fringe benefit. He does not have any other income components.
As there is no income amount order in force and the income estimate is less than 85% of the ATI used in the assessment, Anders is able to elect to use his income estimate of $38,000 to calculate the assessment for the year.
Part-year income estimate
If a parent wishes to make an estimate of their income after the first day of the financial year, they can elect to have an income estimate in place for part of the year. When a part-year income estimate election is in place, it will apply to the child support assessment from the date they make the election and cannot be retrospectively applied.
The parent must inform the Registrar of their estimated income for each income component amount for the year to date income and for the partial year income amount (CSA Act section 60(3)(a)). The year to date amount is the total of the income component amounts they have received from the beginning of the year of income to the day before the start day of their income estimate election (CSA Act section 60(3)(b)). The partial year income amount is the total of the income component amounts for the remaining period which is the period starting on the day they make the election to 30 June of the year of income.
The parent’s income estimate is reconciled with their actual income after the financial year.
To apply the part-year income estimate to the child support assessment during the remaining period, the Registrar must annualise the partial year income amount.
Part-year income estimate - year to date income amount
The year to date income for a part year income estimate is the total of the income component amounts the parent has received from 1 July of the year of income to the day before the start day of the income estimate election (CSA Act section 60(3)(b)). All income received must be included, even if there was not a child support assessment for all of that period.
Example: Sahand contacts Services Australia on 26 August to advise that he lost his job on 15 August. Sahand wants to estimate his income for the remainder of the year. Sahand advises that he was employed for 6 weeks and received payment of his leave entitlements, equal to 3 weeks' pay, on termination. Sahand advises he does not have any other income components. Sahand estimates his year to date income amount for the period between 1 July and 25 August to be $9,000.
The year to date income amount is taken into account when the parent’s income estimate is reconciled after the end of the year of income (2.5.1.40). It is therefore important that the parent notifies the Registrar if they identify that the year to date income they provided is inaccurate.
A parent may later update their year to date income amount, if they become aware that the year to date income amount previously advised is incorrect (CSA Act section 63AC). If required, a parent may make multiple elections to provide a more accurate year to date income (CSA Act section 63AC(1)).
If the Registrar becomes aware that the year to date income amount is incorrect, the Registrar may determine a new year to date income amount to be used in the assessment (CSA Act section 63AE). That amount then replaces the previously advised year to date income amount. If the Registrar determines a new year to date income amount, written notice must be provided to the parent (CSA Act section 63AE(2)). A parent may object to the determination of the year to date income amount (4.1.2) (CSRC Act section 80(1) item 11B).
If one or more year to date income amount elections have been made by a parent, and/or one or more determinations of the year to date income amount have been made by the Registrar, then the year to date income amount used is the last year to date income amount election or determination made (CSA Act section 63AF(2)). A parent cannot elect to use a new year to date income amount if the estimate has been reconciled under CSA Act sections 64, 64A, 64AC or 64AD (CSA Act section 63AC(1)(c)).
Example: Richard contacted Services Australia on 24 February and made an income estimate election. Richard estimated his year to date income amount for the period 1 July to 23 February to be $49,000. On 15 May, Richard contacts Services Australia to advise that he realised that he had not included an interest payment in his year to date income. Richard advises that he received an interest payment of $8,400 on 31 October. Richard elects to replace the year to date income amount with the new amount of $57,400.
Example: Mariette contacted Services Australia on 24 February 2020 and made an income estimate election. Mariette estimated her year to date income amount to be $49,000. On 15 May 2020, Mariette elected a new year to date income amount of $57,400. The Registrar subsequently received information indicating the amount that Mariette estimated her year to date income amount to be was more than what her year to date income amount was actually likely to be. On 20 August 2020, the Registrar determined Mariette's year to date income amount to be $42,000. The determination made 20 August 2020 is therefore the applicable year to date income amount.
Part-year income estimate - start date
The start date for a part year income estimate must be either:
- the day on which the parent makes the election (CSA Act section 60(5)(a)), or
- the first day of a child support period, so long as that day is not before the day the parent makes the election (CSA Act section 60(5)(b)).
Example: Sarah contacts Services Australia on 26 August to advise that she lost her job on 15 August. Sarah wants to estimate her income for the remainder of the year of income. The start date of her income estimate election is 26 August, the day she made her election.
Example: Justine received a new assessment for a child support period beginning 1 October. Justine calls Services Australia on 26 September to advise that her current income is less than that used in the new assessment. As Justine expects to continue earning at her current income, she elects to make an income estimate for the new child support period. The start date of the election is the first day of the new child support period, 1 October, as that day is not before the day on which Justine makes the election.
Part-year income estimate - remaining period
The remaining period for a part year income estimate starts on the start date of the election and ends on 30 June of the year of income (CSA Act section 60(4)). A parent must estimate each income component amount for that remaining period to calculate the partial year income amount.
Example: Ly contacts Services Australia on 22 March to advise that she is now working part time. Ly wants to make an income estimate election. The start date of the election is 22 March. The remaining period is 22 March to 30 June.
Example: David received a new assessment for a child support period beginning 1 October. David calls Services Australia on 26 September to advise that his current income is less than that used in the new assessment. David elects to make an income estimate for the new child support period. The start date of his election is 1 October. The remaining period is 1 October to 30 June.
Part-year income estimate - partial year income amount
The partial year income amount for a part year income estimate is the total of the estimated income component amounts for the remaining period (CSA Act section 60(4)).
Example: Megan contacts Services Australia on 26 August to advise that she lost her job on 15 August and wants to estimate her income for the remainder of the year. The start date of her income estimate election is 26 August, the day she made her election. The remaining period is from 26 August to 30 June. Megan advises that she will receive Centrelink income benefits of $12,000 during the remaining period. Megan advises that she doesn't have any other income components. Megan's partial year income amount is $12,000.
Example: Frank is self-employed and contacts Services Australia on 26 August to advise his income has reduced due to the loss of a contract. Frank wants to estimate his income for the remainder of the year. The start date of his income estimate election is 26 August, the day he made the election. The remaining period is from 26 August to 30 June. Frank estimates his taxable income for the remaining period will be $36,000; he expects to have $6,000 in reportable fringe benefits and reportable superannuation contributions of $9,200 for the remaining period. Frank doesn't have any other income components. Frank's partial year income amount is $51,200.
Part-year income estimate - annualised partial year income amount
In order to calculate the income amount to be used in the assessment during the remaining period, the partial year income amount must be annualised. (CSA Act sections 60(3)(a) and 60(4)).
The annualised partial year income amount is the amount which will be used as the parent's ATI when the assessment is amended using the estimated income (CSA Act section 61). The annualised partial-year income amount is not used when reconciling a parent’s income estimate after the year of income.
The table below shows the method statement to calculate the income amount to be used.
Method statement | |
---|---|
Step 1 | Estimate each income component amount for the remaining period. |
Step 2 | Add each income component amount to calculate the partial year income amount. |
Step 3 | Divide the partial year income amount by the number of days in the remaining period. |
Step 4 | Multiple the quotient by 365. |
Example: Joanne has estimated her partial year income amount for the period 1 November to 30 June is $26,500. There are 242 days in the remaining period.
Joanne’s annualised partial year income estimate is ($26,500 ÷ 242 days) × 365 = $39,969.