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.

7.4.3.10 Employer withholding - paying from salary or wages

Context

The Registrar is required to collect amounts due to the Commonwealth in relation to deductible liabilities (1.1.D.10) by making deductions from the salary or wages of a payer (1.1.P.40) of an enforceable maintenance liability (1.1.E.30) (known as employer withholding (1.1.E.20)), as far as practicable.

When employer withholding is in place, protected earnings (1.1.P.120) is the amount of income an employer is required to leave a payer with after they have deducted child support (1.1.C.60) from their salary or wage.

On this page

  • When does employer withholding apply?
  • Salary and wages
  • Starting employer withholding
  • Collecting arrears through employer withholding

When does employer withholding apply?

The Registrar must, as far as practicable, use employer withholding to collect a deductible liability. 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 (1.1.C.90) (8.3)
  • a liability to pay a child support related debt (1.1.C.160) (8.3.1)
  • a carer liability (8.1.1).

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 (1.1.P.120) amount and the payer has agreed to pay via another method.

A payer may elect to make voluntary payments directly to Services Australia and the Registrar may accept this election (7.4.2). If this election is accepted, employer withholding will not be used to collect the payer's liability.

Act reference: CSRC Act section 4 Interpretation, Part IV Collection by deduction from salary or wages

CSRC Regs section 9 Protected earnings rate

Policy reference: CS Guide 7.4.2 Paying child support – paying Services Australia directly, 1.1.P.120 Protected earnings

Salary & wages

The definition of salary or wages has a broad meaning under the CSRC Act 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).

Act reference: CSRC Act section 4 Interpretation

PPLAct section 69 Deductions relating to child support

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. 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
    • pay to the Registrar the amounts deducted each month by the seventh day of the following month, and
    • give the Registrar notice of the amounts deducted, unless the employer reports deductions using single touch payroll to the Commissioner of Taxation.

The weekly deduction rate means:

  • for an enforceable maintenance liability - the weekly rate of payment specified in the particulars of the entry in the Register (1.2.1.10) 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.

The Registrar must give a copy of the notice to the payer.

Act reference: CSRC Act section 45 Notification to be given to employer and employee, section 46 Duty of employer to make deductions from salary or wages, section 47 Additional duties of employers

Collecting arrears through employer withholding

The Registrar can collect arrears (1.1.A.100) 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 (1.1.C.60), a carer debt, LPPs (1.1.L.20) (8.2) and estimate penalties (2.5.1.40).

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. 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 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 (8.3.2). 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.

Act reference: CSRC Act section 45 Notification to be given to employer and employee, section 46 Duty of employer to make deductions from salary or wages, section 47 Additional duties of employers
Policy reference: CS Guide 2.5.1.40 Reconciling an income estimate, 1.1.P.120 Protected earnings, 8.2 Late payment penalties, 8.3.2 Collection from third parties

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