Child Support Income

Child support income is calculated from the taxable income of the parent. The main adjustment is to subtract a self-support amount in excess of $30k to determine income available to support children. Other deductions may apply in specific cases.

Adjusted taxable income (ATI)

Adjusted taxable income is the starting point for child support income. It begins with your taxable income from your tax return, then adds back certain amounts that are not fully captured in that figure.

Financial adjustments can include reportable fringe benefits, foreign income, investment losses, tax-free pensions or benefits, and reportable super contributions. A parent’s ATI is often just their taxable income, but the system uses ATI to ensure income is measured consistently.

How child support income is worked out

Child support income starts with ATI and subtracts any required deductions. The one that applies to all parents is the self-support amount, which protects a base level of income. Other deductions recognise responsibilities to support other children.

The result is the income the system treats as available to support children in the case. This is the figure carried forward into the rest of the formula.

Role in the child support formula

Child support income has two key roles in the formula. First, both parents’ amounts are added together to produce the combined child support income. This combined figure is used to determine the costs of the children using the statutory cost tables.

Second, each parent’s child support income is used to work out their share of that combined total. This becomes their income percentage, which determines the proportion of financial responsibility they carry.

These two roles link income to both sides of the formula. The combined income sets the total cost of the children, and each parent’s share determines how that cost is divided between them.

Indexation of past income

At the start of each financial year, the system updates a parent’s past income using the ATI indexation factor. The adjustment applies wage growth to the most recent ATI so the assessment uses a current income figure while new tax returns are pending.

The updated amount becomes the parent’s provisional income and is used until the actual ATI is available. Once lodged, the assessment is recalculated and adjustments made for the previous period.

Income estimates

Child support is usually based on income from a past tax return. If your current income drops significantly, you can elect to use an income estimate instead. This allows the assessment to reflect what you are earning now.

The year is split into two periods if the estimate is made part-way through. The earlier period continues to use the original income, and the later period uses the estimated income. Delaying an estimate means more of the year remains assessed on the higher income.

An estimate can be made where your income has reduced by at least 15% compared to the income used in your assessment. The estimate replaces your ATI for the application period, which usually runs from the date you submit the estimate through to 30 June. After the end of the financial year, the estimate is reconciled against your actual income.

Example

James has a taxable income of $80,000. After adjustments, his ATI is also $80,000. The self-support amount is deducted first, reducing the income available for child support to under $50k. If he has no other deductions, his child support income becomes that amount.

If his income drops during the year, he can submit an estimate. The system will then use the updated figure for the remainder of the financial year, rather than relying on an older tax return.

How income affects your assessment

The impact of income depends on how care is shared between parents.

Less than shared care

If you have less than shared care, your child support income drives the assessment. A higher income increases the estimated cost of children and your income percentage. Changes to your income usually flow through strongly because you receive little to no credit for the direct costs of raising the children.

Primary care or above

If you have primary care or above, what you receive depends mainly on the other parent’s income. Your own child support income still affects the calculation, but it is not the main driver of the result.

A personal pay rise increases your income share but also the cost of children and the cost credits you receive for direct care. These effects offset each other to a degree, so the impact on the amount you receive is subdued.

Shared care

When care is shared at or near 50%, relative income becomes the main factor that determines who pays. With care balanced, both parents are treated as meeting a similar share of the children’s costs through care.

The formula then compares income. The parent with the higher child support income has the larger income percentage and is treated as having capacity to contribute more. This usually results in that parent becoming the payer.