5.2.3 Employer withholding - collection from salary or wages
The Registrar is required to collect amounts due to the Commonwealth in relation to deductible liabilities by making deductions from the salary or wages of a payer of an enforceable maintenance liability (known as employer withholding), as far as practicable.
The CSRC Act sets out an employer's obligation to withhold money from salary and wages and to send it to the Registrar.
Employers are required to report to the Registrar on information about the deductions they make from their employees' pay for child support purposes, unless they voluntarily report their employees' child support deduction information to the Commissioner of Taxation under single touch payroll reporting (6.8.1).
CSRC Act section 4, Part IV
CSRC Regs section 9
PPLAct section 69
Registrar to collect amounts in relation to deductible liability
The Registrar must, as far as practicable, use employer withholding to collect a deductible liability (CSRC Act section 43(2)). Employer withholding may not be a practicable method of collection where, for example, deductions could not be made in full due to the 'protected earnings amount' and the payer has agreed to pay via another method.
A deductible liability is any of the following liabilities that are due by the payer to the Commonwealth.
- An enforceable maintenance liability
- A liability to pay a child support debt (5.2.8)
- A liability to pay a child support related debt (5.2.8)
- A carer liability (5.5.5)
A payer may elect to make voluntary payments directly to Services Australia and the Registrar may accept this election (CSRC Act section 43(3), section 44) (5.2.2). If this election is accepted, employer withholding will not be used to collect the payer's liability.
However, employer withholding will be used to collect amounts due to the Commonwealth, if it is practicable to do so, where:
- the payer does not make an election for employer withholding not to apply
- the Registrar refuses the payer's election, or
- the Registrar revokes the payer's election.
Employer withholding can apply when the payer of an enforceable maintenance liability is an employee who receives salary or wages (CSRC Act section 43(1)(a)). This has a broad meaning under the CSRC Act (see definition of 'salary or wages' at section 4(1)) and includes:
- payments to employees
- payments to company directors
- payments to office holders
- return to work payments
- payments under labour hire arrangements
- payments of pensions and annuities
- payments for termination of employment
- payments for unused leave
- benefit payments
- compensation payments
- alienated personal services payments
- payments to independent contractors
- parental leave payments, and
- periodic payments received from a superannuation fund (including payments made under the Commonwealth Superannuation Scheme, the Defence Forces Retirement Benefit Scheme and the Defence Forces Retirement and Death Benefit Scheme).
Employer withholding can apply to an employee who has a:
- carer liability
- liability to pay back a child support debt or child support related debt, even if they do not have an ongoing enforceable maintenance liability.
Starting employer withholding
The Registrar will send a written notice to the payer's employer when a decision is made to collect a deductible liability through employer withholding (CSRC Act section 45(1)). The notice will:
- specify the name of the payer
- include sufficient particulars to enable the employer to identify the payer
- instruct the employer to
- make periodic deductions from salary and wages paid to the payer, from a specified day in accordance with the specified weekly deduction rate (CSRC Act section 46)
- pay to the Registrar the amounts deducted each month by the 7th day of the following month (CSRC Act section 47(1)(a)), and
- give the Registrar notice of the amounts deducted, unless the employer reports deductions using single touch payroll to the Commissioner of Taxation (CSRC Act sections 47(1)(b), 47(1A), 47(1B)).
The weekly deduction rate means:
- for an enforceable maintenance liability - the weekly rate of payment specified in the particulars of the entry in the Child Support Register in relation to the liability, or
- for any other deductible liability - the weekly rate of payment specified in the notice given in relation to the liability under CSRC Act section 45.
The Registrar must give a copy of the notice to the payer (CSRC Act section 45(3)).
Collecting arrears through employer withholding
The Registrar can collect arrears through employer withholding (this is known as employer withholding of arrears). Amounts overdue include debts owed to the Commonwealth that arise under or in relation to a deductible liability. This may include arrears of child support, a carer debt, late payment penalties and estimate penalties.
The Registrar can issue a notice to an employer for the collection of overdue amounts or, vary a notice already served on an employer to include an additional amount to cover arrears in addition to the deductions for the ongoing deductible liabilities (CSRC Act section 45(2A)). A copy of the notice to increase the deduction must be served on the employer. The Registrar will also send a copy of the notice to the payer.
As in all payment arrangements, Services Australia will provide a payer with the opportunity to respond before additional deductions commence. An opportunity to negotiate allows the payer to present Services Australia with any relevant facts for consideration. The protected earnings amount (5.2.4) still applies in these cases.
An arrangement to collect arrears by employer withholding will not prevent the Registrar from taking other administrative action or legal action to recover the debt. Services Australia will make this clear to a payer when negotiating any recovery arrangement.
Example: The Registrar is collecting Blair's arrears of child support by additional salary deductions. The Registrar becomes aware that Blair is about to sell a property in which they have significant equity. The Registrar would seek to satisfy the debt in full by reaching an agreement with Blair to pay their arrears at the time of settlement, or by issuing a section 72A notice. It is important to make clear to Blair that the Registrar will seek to satisfy the debt in the most efficient and timely way possible. If an additional amount becomes available, the Registrar will seek to apply it to the debt.