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.

3.5.1 Post-separation income - additional income & time limits

Context

A parent (1.1.P.10) can apply to have PSI (1.1.P.90) (additional income) that was earned, derived or received after separation excluded from their ATI (1.1.A.20) (3.1.1) in certain circumstances. A parent may apply to have additional income excluded, regardless of whether they pay or receive child support (1.1.C.60).

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Application for PSI to be excluded

A parent may apply for additional income to be excluded from their ATI if the following requirements are met:

  • the parents lived together (2.1.1) on a genuine domestic basis for at least 6 months
  • the separation following that 6-month period occurred
    • within the last 3 years, and
    • before the application for administrative assessment (1.1.A.30) was made
  • at the time of the application, the parents remain separated (1.1.S.30)
  • in the last relevant year of income (1.1.L.10), or in the application period (1.1.A.90) for an estimate of income (3.4), the parent earns, derives or receives additional income
    • in accordance with a pattern that was established after separation with the other parent, and
    • it is reasonable to expect would not have been earned, derived, or received by the parent in the ordinary course of events.

Act reference: CSA Act section 44(1) Application for post‑separation income to be excluded

Additional income

Additional income to be excluded is income that was earned, derived or received in a pattern established after separation. Parents may earn additional income from a variety of sources, including from overtime, a second job, a career change to a higher paying job, or from investment income.

For a self-employed parent, additional income may be earned, derived or received through extending the opening hours of their business, increasing production or developing new markets or new products (to a greater extent than before separation). The parent must be able to show that the change which resulted in the additional income being earned happened after separation.

Act reference: CSA Act section 44(1)(d)(i) Application for post‑separation income to be excluded

The ordinary course of events

Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent's ATI. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events.

Additional income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their ATI. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income, or moving from an unemployment benefit to employment.

Additional, income that parents earn outside the ordinary course of events is able to be excluded from their ATI. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job.

Act reference: CSA Act section 44(1)(d)(ii) Application for post‑separation income to be excluded

30% limit for reduction of ATI

The exclusion of additional income cannot reduce a parent's ATI by more than 30%. If excluding all the additional income earned post separation would reduce the ATI by more than 30%, the Registrar can only reduce the ATI by 30%.

Example: Lesley has an income of $30,000 at the date of separation from Irena in May 2021. From June 2021, Lesley's income increases to $60,000 as Lesley takes on a second job.

In August 2022, Lesley lodges her tax return for 2021-22 and her child support liability is assessed on an ATI of $60,000, as that was Lesley's income for the last relevant year of income (2021-22 financial year). Lesley applies to have additional income earned post separation excluded from her ATI of $60,000.

If Lesley's application is successful, Lesley's current income used in the assessment, $60,000, can only be reduced by a maximum of 30%, or $18,000. Therefore, Lesley's ATI would be set at $42,000.

Lesley could not have the full additional income of $30,000 excluded from her ATI as this would be more than 30% of ATI.

In certain circumstances, the parent's new ATI, after excluding the additional income, will be lower than their income at the date of separation.

Example: Abdul has an income of $50,000 at the date of separation from Neela in December 2021. From January 2022, Abdul takes on a new role which increases his annual income by $10,000, as stated by his employer.

In August 2022, Abdul lodges his tax return for the 2021-22 financial year, which includes $1,000 of work-related deductions for his new role (for example, vehicle and travel expenses and home office expenses). Abdul's resulting ATI is $59,000 and this is applied to his child support assessment (1.1.C.70).

Abdul applies to have the additional income of $10,000 earned post separation excluded from his ATI. Abdul's application is successful and the extra $10,000 is excluded from the assessment. The $10,000 is less than a 30% reduction in Abdul's ATI of $59,000. As a result, Abdul's ATI is now assessed at $49,000, which is less than Abdul's income of $50,000 at separation.

Act reference: CSA Act section 44(3)(a) Application for post‑separation income to be excluded

3-year limit on excluding additional income

Additional income cannot be excluded for more than 3 years from the date of separation.

Act reference: CSA Act section 44(3)(b) Application for post‑separation income to be excluded

When does a determination to exclude additional income apply?

If the Registrar accepts an application to exclude additional income this will ordinarily apply from the date the application was made. However, it can apply from the start of the CSP (1.1.C.150) in which the application is made if there are special circumstances.

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