The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

3.3.3 When provisional incomes are replaced by tax assessments

Context

When a child support assessment (1.1.C.70) is made using a provisional income (1.1.P.130) for a parent (1.1.P.10), this may be replaced with a tax assessment.

A provisional income may not replace a tax assessment for a past period. The rules around how provisional incomes are replaced are designed to encourage parents to lodge their tax returns on time and to minimise the risk that the other parent will be required to pay a debt or overpayment (1.1.O.20) due to the late lodgement of tax returns.

Act references

CSA Act section 5, section 5A, section 58

Description

When the Registrar has calculated a provisional income for a particular year and subsequently ascertains the parent’s actual ATI (1.1.A.20) (when a tax assessment issues for the parent) the child support assessment must be amended immediately (CSA Act section 58A).

A provisional income will be replaced with a taxable income (1.1.T.20) for the entire child support assessment if this is higher than the provisional income. The provisional income will only be replaced by a taxable income in the child support assessment if this is lower than the provisional income when:

  • tax lodgement rules have been complied with. The taxable income will replace the provisional income in full
  • tax lodgement rules have not been complied with. The taxable income will replace the provisional income in the CSP (1.1.C.150) from the day after this was received from the ATO.

Parent has lodged tax return on time

If the parent lodged their tax return on time, or still has time to lodge their tax return on time, as required under the income tax legislation (3.2.1) the date of effect of the amendment to the child support assessment will be the beginning of the relevant CSP (CSA Act section 58A(2)).

Parent is late lodging their tax return

If the parent does not lodge their tax return on time as required under the income tax legislation (3.2.1), the date of effect of the amendment to the child support assessment will take effect from the day after the assessment was amended, for the remainder of the CSP, unless one of the following circumstances applies:

  • the parent's ATI subsequently ascertained or later determined by the Registrar is higher than the amount previously determined
  • the parent was genuinely unable to provide the Registrar with timely information due to the parent being unaware that an assessment had been made, serious ill health or injury, natural disaster, remote location, imprisonment, or other exceptional circumstances and the parent provided income information as soon as was practicable in the circumstances, or
  • the parent resided overseas, was not required to lodge a tax return and the parent provided information about their income to the Registrar within a reasonable time in the circumstances.

If the Registrar is satisfied that one or more of the above apply, the assessment can be amended to use the new ATI retrospectively.

Exceptional circumstances

When making a decision about whether the circumstances prescribed by CSA Regs section 11 apply, the Registrar must consider all the relevant facts of the parent's particular circumstances and the extent to which they contributed to the parent's delay in providing information about their income to the Registrar.

For the purposes of section 11(1)(c) of the CSA Regs, the Registrar will consider a person provided their income information to the Registrar as soon as was practicable if they provided that information within a reasonable period of time after the special or exceptional circumstances ceased to affect them. A decision about whether the parent provided their income information to the Registrar as soon as was practicable will require an examination of the parent's individual circumstances.

Otherwise, the amendment to the assessment will take effect from the day after the assessment was amended, for the remainder of the CSP.

Example: In July 2018, Services Australia receive Lexi’s tax assessment and calculate a new child support assessment for the CSP 1 August 2018 to 31 October 2019. As Lexi’s former partner Shannon has not lodged his tax return, a provisional income of $40,000 for 2017-18 is calculated.

Shannon lodges his 2017-18 tax return late (on 15 July 2019) and his actual ATI is $43,000. As Shannon's actual ATI is higher than the provisional income amount, the child support assessment would be adjusted from 1 August 2018.

Example: In the above example, if Shannon’s actual ATI was $38,000, the child support assessment would be amended on 15 July 2019 to take effect from 16 July 2019. The date of effect is the day after the assessment is amended, as Shannon's tax return was lodged late and his actual ATI is lower the provisional ATI and none of the other circumstances in section 58A(2) of the CSA Act applied.

Example: Graham’s child support assessment is made for a CSP commencing 8 August 2018. Graham's 2017-18 tax assessment was not available due to his serious ill health, so his 2016-17 tax assessment was inflated to determine a provisional ATI of $55,000 for the purpose of the new assessment.

On 5 February 2019, Graham's tax return for 2017-18 was lodged as his health had improved, and his ATI was $43,000. Graham advises the Registrar that the late lodgement was due to his serious ill health. The Registrar, after considering all the relevant facts in Graham's case, determines, as per section 11(1)(c) of the CSA Regs, that Graham has provided his income information within a reasonable period of time in the circumstances.

Graham's 2017-18 actual ATI of $43,000 is lower than the provisional ATI $55,000 used for the assessment. The Registrar amends the assessment to use the actual ATI from the beginning of the CSP, 8 August 2018, as the date of effect can be applied retrospectively in these circumstances.

New information about incomes used in CSP commencing from 1 July 2008

Before 1 July 2008, the Registrar could determine a default income to be used to make a child support assessment, if the parent's taxable income could not be ascertained.

Prior to 23 May 2018, if the Registrar had based a parent's child support assessment on a default income (1.1.D.20) for a CSP which commenced before 1 July 2008 and later ascertained the parent's taxable income and/or supplementary income amounts, then the Registrar was required to immediately amend the child support assessment. This determined that the taxable income was the taxable and/or supplementary income amounts.

From 23 May 2018 the rules for CSPs commencing before 1 July 2008 were amended to be the same as the rules in effect from 1 July 2008.

If the CSP commenced prior to 1 July 2008, and the child support assessment used a default income, and the parent's taxable income and/or supplementary income amounts were subsequently ascertained the new rules meant Services Australia:

  • WOULD NOT amend the child support assessment if the new amount is lower than the previous income amount, and
  • MUST amend the child support assessment if the parent's new amount is higher than the previous income amount.

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