Effective until 30 June 2008
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| CSA's previous online law & policy guide Effective until 30 June 2008 |
2.6.12: Reason 6 - payee's high costs of child careContext A payee can apply for a change of assessment in special circumstances if the costs of maintaining a child are significantly affected by the payee's high child care costs for the child (and the child is under 12 years). Legislative references Sections 5, 8, 98C, 98S, 117(2)(b)(i)(C), 117(3), 117(3B) and 117(4) to 117(9) Child Support (Assessment) Act 1989 Explanation An assessment can be changed if in the special circumstances of the case, the costs of maintaining the child are significantly affected because of high child care costs in relation to the child (section 117(2)(b)(i)(C)). The phrase 'special circumstances of the case' is not defined in the Assessment Act. The Family Court has held that 'it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary' (Gyselman and Gyselman (1992) FLC 92-279). This reason applies to child support assessments from 1 July 1999. At that time other amendments to the Assessment Act reduced the payee's 'disregarded income amount' by removing the automatic inclusion of a child care component in the formula assessment. Prior to the amendments a payee's disregarded income amount included provision for child care costs regardless of whether they were incurred or not. A payee can make an application to change their child support assessment if they consider that the costs of caring for the child are significantly affected by the high costs of child care. Before an assessment can be changed CSA must be satisfied that all of the following elements exist:
If all of these elements are not satisfied there are no special circumstances or reason for a change to the assessment. Are the child care costs high? Are the costs reasonable and necessary? Do the costs significantly affect the payee's ability to maintain the child? The kinds of decisions that reflect high costs of child care Are the child care costs high? Child care costs are not high unless they are more than 5% of the payee's child support income for the child support period (section 117(3B)). CSA will use the parent's child support income amount for the child support period in which the child care costs are, or will be incurred. This will be the income for the last financial year that ended before the start of the child support period, unless:
(in which case CSA will calculate the threshold using the payee's child support income as amended by that agreement, court order or prior change of assessment decision). This income amount is divided by 365 and then multiplied by the number of days in the period to give a child support income amount for the period. Example A payee, M, has child care costs of $3,000 over a 15 month child support period (457 days).
M's child support income amount for the child support period is $40,000. ($40,000 ÷ 365 days) × 457 days = $50,082 carer's notional child support income. 5% x $50,082 = $2,504 As $3,000 is more than $2,504 payee's child care costs are high. CSA will use the following method to calculate whether the payee's child care costs are high in a case where the payee's child support income amount changes within the child support period (for example, because the payee lodged an estimate of his or her income within the child support period):
Only 'net' child care expenses are taken into account (i.e. less any child care benefit that is deducted by the child care centre from the fees, or refundable to the payee by the Family Assistance Office). CSA will not take into account the possibility that the payee or his or her partner may receive a child care rebate in the future when working out the payee's net child care costs. The possibility of a rebate will, however, be considered when deciding whether a change to the assessment is 'just and equitable'. A payee should substantiate the costs incurred when making their application for a change to their assessment. Evidence can include enrolment forms for child care, holding fees and similar documentation. Costs are 'incurred' if there is a definite commitment to the expenditure even if an actual payment has not been made. But there must be a reasonable expectation that the cost will be incurred. Are the costs reasonable and necessary? There should be an element of necessity in incurring the child care costs, e.g. work-related purposes. This extends to parents attempting to join the workforce, including those who are undertaking study, training or education. CSA has to determine the reasonableness of the costs claimed. Examples of reasonable child care costs include:
Do the costs significantly affect the payee's ability to maintain the child? A payee must be able to show that the total costs of maintaining the child are high because the cost of child care for that child is high. If the cost of child care is high but the total cost of maintaining the child is no greater than usual there may not be a reason to change the assessment. The costs of maintaining the child are considered in the context of the financial circumstances of the payee. The kinds of decisions that reflect high costs of child care If CSA decides that the child support assessment should be changed because of high costs of child care, it may increase the payee's disregarded income amount by the total net child care costs. Adjusting this component of the formula assessment allows the parents to use other administrative processes such as estimates, if necessary. Example The payee, F, works full time and has sole care of 3 children, aged 2, 4 and 10. F pays $6,000 in child care costs for the 15 month child support period. F receives $2,500 in Child Care Benefit for that period. F's net child care costs for the child support period are $3,500. F's child support income amount for the period is $50,082. 5% of $50,082 = $2,504
F's total net child care cost exceeds 5% of F's child support income amount by $996. To add F's net child care costs to the disregarded income amount: Disregarded income amount = $39,312 Total net child care costs = $3,500 (for 457 days) Annualised net child care costs = $3,500 ÷ 457 x 365 Total = $2,795 The disregarded income could be increased by $2,795 to $42,107 Where an application for a change to the assessment includes more than one reason CSA will consider the impact that increasing the disregarded income amount will have on the overall change to the assessment. The decision made will depend on the individual facts of the case. If the payee's income is less than the disregarded amount, CSA will consider other methods of changing the assessment, such as varying the annual rate of child support. If a reason to change the assessment is established CSA is required to consider whether it would be just and equitable, or fair, and otherwise proper to make a particular decision. In deciding whether a change would be 'just and equitable', CSA will take into account that a 30% child care rebate is available to assist Australian parents with their child care costs from 1 July 2004. The maximum rebate per child is currently $4,000 and this can only be used to offset tax otherwise payable by that parent (or his or her partner). However, the rebate can only be claimed in the succeeding financial year (for example, the rebate for child care costs in 2004/5 can be claimed in the parent's tax return for 2005/6). CSA will take into account the circumstances of the individual case in deciding whether to factor in the future possible effect of the child care rebate into any change to the assessment. This will be included in the written reasons for the decision. Version 1.5 Issued 28 July 2006 |
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