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.

On this page

• What is the fixed annual rate of child support?
• Application for CSA Act section 65A (the fixed annual rate) not to be used
• Decision on application
• Meaning of income
• Amending an assessment if CSA Act section 65B conditions no longer satisfied

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 (CSA Act 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 CSA Act 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 (CSA Act section 65B(1)(a)).

If immediately before the end of the previous child support period a determination had been made (under CSA Act 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 (CSA Act 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) (CSA Act section 65B(2)(a)). The relevant parenting payment (single) maximum basic amount is the value of the amount as at 1 January of 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 (CSA Act 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 (CSA Act 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 (CSA Act 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 (CSA Act 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 (CSA Act 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 CSA Act section 65B for the fixed annual rate not to be used, the Registrar must use the definition of income in CSA Act 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 (CSA Act section 65B(3)). In CSA Act 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 (CSA Regs section 13). 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
• 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. 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, 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 (e.g. repairs to a rental property) the Registrar must be satisfied that they were necessary before they will be deducted from 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 relevant pension parenting payment (single) maximum basic amount. Losses from one source will not be deducted from income from another source.

Amending an assessment if CSA Act section 65B conditions no longer satisfied

The Registrar may become aware that the liable parent no longer satisfies the requirements of CSA Act 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 (CSA Act section 66B(b)).

The Registrar will amend the assessment from:

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

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