Change of Assessment
A child support change of assessment (COA) is a manual change by a government officer. It follows an application for a COA on the basis that actual financial circumstances are not adequately captured by reported taxable incomes. Reason 8 is the most common basis for a parent seeking a COA and is the focus of this page.
Reason 8 concerns the capacity of parents to financially provide for children. You can select reason 8 in the Application to Change your Assessment - Special Circumstances form when:
The assessment does not correctly reflect one or both parent’s income, property and/or financial resources.
A parent's financial capacity is normally measured by the income recorded in their last tax return. But this can produce an unfair assessment in situations where current income is significantly different, the parent has other resources, or the parent is unreasonably earning below their potential.
Applying for an assessment change should not be done lightly as it can lead to a time-consuming review. You should check with Child Support first to see if easier options are available.
The most common Reason for a COA [Change of Assessment] is Reason 8 when ‘the income, earning capacity, property or financial resources of one or both of the parents’ is not properly reflected in the formula assessment. COA decisions based on this Reason seem to be one of the most contentious areas of decision making for the CSA. It is also a common cause of complaint to this office.
Child Support COA Statistics
18,092 child support change-of-assessment applications were filed in 2014-15. By far, the most common reasons for seeking a variation are “income, property or resources of parents” and “earning capacity” (both Reason 8 types) (Child Support Agency, ‘Facts and Figures 08-09’, p 20, table 2.8).
Historically, close to two-thirds of applications result in an assessment variation (p 19, table 2.7). The number of objections to change-of-assessment decisions in 2014-15 was 3,056, which was 17% of applications (Department of Human Services Annual Report 2014-15, ’Child Support’). While 2 out of 3 applications produce a change, only around 10-20% of objections to the change are upheld (Henderson-Kelly).
4-Step Assessment Process
If no parties appeal against the eventual decision, a change of assessment (COA) because of special circumstances is a 4-step process.
1. Written application
Either parent (payer or payee) can apply for a COA. You must apply in writing using the Application to Change your Assessment - Special Circumstances form.
Include enough information for the application to proceed. Applications can be refused at this stage if (i) no reason for a change is identified or (ii) a change would not be just and equitable or otherwise proper.
2. Written response
If the application is accepted, the Department of Human Services (DHS) will send a copy (and any accompanying documents) to the other party along with a response form: Response to Application to Change your Assessment - Special Circumstances. Responding to an application is not compulsory but is generally advisable.
3. Discussion with decision maker
Each party will have the opportunity to discuss the application and response with the decision maker by phone. The officer can use any discussions to help inform their decision.
Before making a decision, the DHS may do further investigation or ask either party for additional information. The process should be transparent, with each party being informed of, and given opportunity to comment on, essential considerations and information being used.
4. Decision based on law
The DHS will consider and balance evidence from the parties, including written and oral statements, and supporting documents. The decision should be consistent with the law and, in particular, with the Child Support (Assessment) Act (CSA Act). For legal guidance, the DHS may use the Child Support Guide and draw on agency knowledge.
A decision to change an assessment is an amendment to your administrative assessment. While any of the component variables can be adjusted (including the annual amount itself), Reason 8 normally corresponds with a decision to increase a parent's taxable income. Changes can be backdated to as much as 18 months before the application was lodged.
Situations Covered by Reason 8
Reason 8 casts a wide net. Almost anything which a parent can conceivably use to provide cash for children – and is not measured in taxable income – can be a counted as available income.
Examples of situations which could produce a change of assessment are where a parent:
- has substantial property or other assets which produce little net income
- is working part-time instead of full-time
- has taken a lower paying job
- has voluntarily become unemployed
- is studying instead of working
- is making little money from a family business
- has a work arrangement which credits personal income to a different person or entity
- overpays related employees in a family business
- has tax-deductible business expenses which generate personal benefits
- has a low reported business income because of depreciation or prior-year losses
- is salary packaging or making voluntary superannuation contributions
- has received a large lump-sum payment.
COA Decision-Making Method
COA Reason 8 decisions are predictable because officers consistently apply particular interpretations of the law. These interpretations are evident, to varying degrees, in the Child Support Guide.
As explained below, the particular interpretations have these 2 important implications.
- If you have extra financial capacity, it will be included in your assessment if this is allowed under the law (with some exceptions, such as where a mother has young children).
- Your taxable income will be set to your full deemed financial capacity, with no allowances for hardship or low living standards.
Departmental legal interpretations
The duty of a parent to maintain a child "has priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself; and any other child or another person that the parent has a duty to maintain" (Section 3 of the CSA Act).
The CSA Act makes it clear that child support is the number 1 financial priority beyond self support. For a Reason 8 decision, the DHS considers that any resources available to support children should be put to that use. Any and all resources are in scope.
An object of the CSA Act is that "the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support" (Section 4).
The Government interprets this as meaning that, where a parent has greater potential income than indicated by taxable income, the parent should be assessed based on potential income alone.
In determining whether a decision is just and equitable (and, therefore, allowable), the officer must have regard to "any hardship that would be caused" (CSA Section 117(4)). The provision is relevant to Reason 8 decisions because the Government looks at income which may not be immediately available to a parent (e.g. from finding work or selling a property).
While this suggests a decision which is liable to cause hardship should not be allowed, the Government has a different interpretation. If a parent has greater capacity to provide support, it's considered that the parent should be realising it (from the "duty to maintain a child"). Any financial hardship resulting from a decision is attributable to the parent, not the decision.
Moreover, the Government considers that parents should be assessed based on full potential income (from the "capacity to provide support" goal interpretation). It would fail that objective to set taxable income to a lower amount (which rules out trying to soften hardship effects).
Another object of the CSA Act (Section 4) is "that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them".
A parent's living standards depend on actual income, not potential or theoretical. But, as with the hardship provisions, this is ignored in Reason 8 decision making. Officers assume the goal is to assess parents using potential financial capacity.
Why Reason 8 Decisions are Usually Wrong
The Reason 8 COA facility is important to achieve fairer child support outcomes. Without it, parents could use a host of strategies to reduce payments or artificially inflate how much they receive.
But, at present, the COA system is structured towards stopping people from avoiding child support. It makes little allowance for parents who just happen to have unrealised financial capacity. For such parents, the decision-making method is unreasonable and the outcome usually unfair. Here's why.
Decisions are meant to be discretionary – but they're not
The CSA Act doesn't set out hard goals for COA decisions. It leaves the decision open to the officer, using words such as "reasonable" and "adequate". Any decision should be made by balancing the particular facts and considerations of the case. However, the Agency applies the law by re-purposing selected general objects of the Act (which aren't meant to handle unrealised financial capacity). COA decisions are predictable and pre-determined instead of flexible.
The CSA Act has a provision (in Section 3) which essentially says that both parents are responsible for paying for a child. Parents have the "primary duty" to maintain a child. And this duty "has priority over all commitments" beyond the need to support oneself and any other dependent children.
It's fine applying the "duty to maintain a child" principle when talking about how a parent spends their budget. But it's a different matter for unrealised financial capacity. Does a parent have a duty to sell a property in order to pay more child support? Is a parent compelled to never swap work hours for study hours, or to always stay in a high-paying job which makes them miserable? Of course not – there's more to life and being a good parent than maximising how much money you've got right now.
The DHS uses the "duty to maintain a child" principle in COA decisions to fully discount other reasons for a parent choosing a certain arrangement. In making an assessment variation, it will disregard your actual choice and simply assume that you sold the property, never studied, or stayed in the depressing job. Delegitimising a parent's choice in this way is a misapplication of the law.
Real budgets are ignored
If the DHS determines you have extra financial capacity than indicated by taxable income, it will assess you based on your full, theoretical capacity. Too bad if you're actually unemployed and not earning $100,000 a year. Too bad if you have to sell your house to pay the bills.
The Department justifies this on the basis that an objective of the Child Support Scheme is that child support should be "determined according to their [the parents'] capacity to provide financial support" (Section 4). However, this misinterprets the CSA Act. When looked at in context, "capacity to provide financial support", has ordinary meaning. It's not meant to capture theoretical funds. Furthermore, the legislation explicitly requires real incomes to be considered.
Decision makers are required to have regard to the potential for a decision to cause hardship. You would think this would prevent decisions which place payers into a position of poverty or potential homelessness. However, the DHS reasons that, if you have spare financial capacity, you can avoid hardship by realising that capacity. While this seems logical, it doesn't help payers who are unable or unwilling to do what is required (for example, a parent who resigned from work after suffering a nervous breakdown and struggles to regain employment).