Tag Archive for: child support

Navigating the Complexities of Child Support and Tax Compliance: What You Need to Know

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The child support system in Australia plays a crucial role in ensuring that financial responsibilities are met between separated parents. However, recent revelations highlight significant issues within this system, particularly concerning the manipulation of tax returns to avoid child support payments. At Southern Waters Legal, our Family Law team is dedicated to helping clients navigate these complexities.

The Growing Problem of Non-Compliance

Recent data reveals that over 160,000 parents in Australia’s child support system failed to lodge their tax returns last financial year. This non-compliance has significant implications, as Services Australia, which administers the child support scheme, referred 168,082 parents to the Australian Tax Office (ATO) for overdue tax returns in 2022-23.

Failing to lodge a tax return is a common tactic some parents use to reduce their child support obligations. This practice often involves underreporting income, using cash-in-hand work, or complex business structures to evade proper child support assessments. Such actions can be seen as a form of economic abuse, significantly impacting the receiving parent, who is predominantly female and already facing economic disadvantage.

The Impact of Non-Compliance

The failure to lodge tax returns can severely affect the calculation of child support payments. Without accurate tax returns, Services Australia estimates income based on previous returns or average earnings, may not reflect a parent’s true financial situation. This discrepancy often results in unfairly low payments, depriving children of the financial support they need.

The repercussions are far-reaching. According to an interview conducted by the ABC with Lara Freidin from Women’s Legal Services Australia, this issue is a form of ongoing violence and economic abuse. It undermines the stability of children’s lives and places undue stress on the receiving parent, who must often initiate investigations or legal proceedings to address these discrepancies.

An additional impact on those who are tardy and have yet to update their income with child support is that the child support agency can issue a debt if they discover you have not been paying child support at the correct rate and your income bracket.

Government Response and Reforms

In response to these challenges, the recent federal budget allocated $5 million for reforms aimed at improving compliance and enforcement within the child support system. The reforms include enhanced scrutiny of tax return compliance and measures to better enforce payment obligations.

Despite these efforts, the ATO’s enforcement program only managed to recover a fraction of the outstanding child support debts. For many parents, navigating this complex system can be daunting, especially when dealing with hidden income or intricate business arrangements.

How to Address Child Support Issues

If you’re facing challenges with child support payments—whether as a payer or a recipient—seeking professional legal advice is crucial. A family law lawyer can assist in several ways:

  1. Reviewing financial disclosures: Ensuring that all income and financial information is accurately reported to prevent disputes and discrepancies.
  2. Navigating complex cases: Dealing with hidden income, business structures, and cash transactions requires specialised knowledge to ensure fair assessments.
  3. Enforcing payments: Legal action may be necessary to enforce payment obligations and recover owed amounts.
  4. Appealing assessments: If you believe the current child support assessment is unfair, a lawyer can help you appeal and seek a revised assessment.
Get the Support You Need

At Southern Waters Legal, our experienced Family Law team is here to help you navigate the complexities of separation and child support. We understand that every family situation is unique and requires a tailored approach to ensure fair and just outcomes.

If you are struggling with child support issues or need assistance with your family law matter, contact us today for a consultation, and let us help you secure the support you deserve.

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Child Support, what is it and how does it work?

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One very important consideration in a family law matter in which a couple has children is what child support arrangements are going to be put in place in relation to the costs of the children moving forward. There are 3 main ways to document a child support agreement, set out as follows:

  1. an ad hoc arrangement agreed between the parties;
  2. a Child Support Assessment issued by the Child Support Agency; and/or
  3. a Binding Child Support Agreement.
Ad hoc agreement

Some parties are able to reach an agreement in relation to child support amongst themselves, which may involve one party paying the other party a set amount per week. Often, an ad hoc agreement is a verbal agreement between the parties and not formally documented in any way.

Whilst ad hoc arrangements are often suitable for very amicable couples, the risk associated with an ad hoc agreement is that there is nothing binding the paying party to continue paying child support in accordance with the agreement moving forward. In the event that the paying party were to cease making payments in accordance with the ad hoc agreement, the receiving party would have no recourse to compel the paying party to continue paying in accordance with the agreement. It is for this reason that ad hoc agreements in relation to child support are not recommended.

Child Support Assessment

A Child Support Assessment is issued by the Child Support Agency and is determined using a specific formula that addresses a number of variables. These variables include the number of children and each of their ages, the annual income of each party and the number of nights the children are in each party’s care.

If one party applies for a Child Support Assessment from the Child Support Agency, the Agency will issue an assessment which the paying party will be liable to comply with. Child Support Assessments vary if any of the above-mentioned variables change. For example, as the children grow older and specifically, once children turn the age of 13, the Child Support Agency will likely increase the assessment in circumstances where the cost of children increases as they grow older. Alternatively, in the event that either party’s income changes or the care arrangements for the children change, the Child Support Assessment will alter to reflect these new arrangements.

The benefit of a Child Support Assessment is that they are a legal obligation and the Child Support Agency will chase the payer in the event that they cease making payments in accordance with the assessment. However, in circumstances where child support assessments are dependent upon the above-mentioned variables, a Child Support Assessment amount can change quite regularly in the event that there are changes in care arrangements or income.

Binding Child Support Agreement

The final way that parties may agree to document a child support agreement is by way of a Binding Child Support Agreement. Binding Child Support Agreements set out both periodic amounts (ie weekly, fortnightly, monthly etc.) as well as non-periodic expenses that arise sporadically throughout the year (such as school fees and expenses, private health cover, extra-curricular costs, gap medical costs etc). Similar to an Assessment, Binding Child Support Agreements impose a legal obligation upon the parties to pay child support in accordance with the Agreement.

Unlike Child Support Assessments, Binding Child Support Agreements once entered into are binding and not variable. As such, obligations in accordance with Binding Child Support Agreements do not alter in the event of change in circumstances such as reduction or increase of income, change of care arrangements etc (unless a clause is included to specifically provide for such change in the agreement). The parties can expect to be bound by a Binding Child Support Agreement until the children reach the age of 18 years or finish their high school education (whichever is later), unless agreement is reached to alter the Binding Child Support Agreement prior.

If you require assistance with your family law matter, please not hesitate to contact a member of our Family Law Team.

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