2.6.16: Reason 10 - additional income for the benefit of a resident child

Context

A payer or payee can apply for a change of assessment in special circumstances if the child support assessment is unfair because they earn, derive or receive additional income for the benefit of their resident child.

Legislative references

Sections 98C, 98S(3A), 117(2)(c)(iii) and (iv), 117A and 117(4) to 117(9) Child Support (Assessment) Act 1989

Explanation

There may be a reason to change an assessment if, in the special circumstances of the case, the application of the formula assessment results in an unjust and inequitable level of child support to be paid by the liable parent because part of the child support income amount was earned, derived or received by the parent for the benefit of a resident child(ren) of the parent (section 117(2)(c)(iii) and (iv)).

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).

A parent can lodge an application to change the child support assessment on the basis that additional income they have earned (derived or received) for the benefit of a resident child in their current household results in an unjust and inequitable level of child support.

The Assessment Act defines 'resident child' and 'additional amount' (sections 117A(1), (2) and (3)). It also sets a ceiling on the amount by which the child support income amount of the parent can be reduced (section 98S(3A)).

The reasons for the change require that:

• the income is for the benefit of a resident child;
• there be an additional amount of the applicant's child support income amount;
• the additional income was earned, derived or received by the applicant; and
• this income results in an unfair or unjust and inequitable level of child support.

Resident child

A 'resident child' is (section 117A) a child who:

• normally lives with the parent;
• is less than 18 years of age;
• is not a member of a couple;
• is a child of the parent, or of a current or previous partner of the parent; and
• is not a child of which both the payee and the payer are the parents.

The definition excludes nephews, nieces or any child who is not a child of one of the members of the couple. 'Parent' has its ordinary meaning, extended by the definition in section 5 of the Assessment Act to include an adoptive parent, or a parent as the result of an artificial conception procedure.

An applicant should make clear in their application who the parents of the resident child are, and if they are not a parent of the resident child, what their relationship is or was to one of the resident child's parents.

A child who is the payer's relevant dependent child can also be a resident child, as long as the payee is not the child's other parent.

Normally lives

The term 'normally lives with' is not defined in the Assessment Act. CSA will apply a common sense interpretation of at least 50% of the time over a 12-month period as the basis for accepting that a child 'normally lives with' a parent. This does not exclude an extraordinary circumstance involving less than 50%.

Member of a couple

The term 'member of a couple' is defined (section 5) as meaning:

• a person legally married to another person and not living apart and separately from them on a permanent basis; or
• a person living with another person of the opposite sex as their partnpartner on a genuine domestic basis although not legally married.

If questions are raised about whether a parent meets the definition they may need to provide evidence to CSA that they are or were a member of a couple.

A person does not have to have a current partner to apply under this reason. The resident child can be a child of the applicant's former partner, if the child remained with the applicant after the applicant and his or her partner separated (sections 117A(1)(d)(ii) and 117A(2)(d)(ii)).

Additional amount of child support income

An amount of income will not be accepted as an additional amount if:

• the amount was earned as part of a pattern of earnings established before the child became a resident child; or
• in the case of a new born child, before the parent could reasonably have been aware of the pregnancy that resulted in the birth of the resident child; or
• it was reasonable to expect that the additional amount that was earned would have occurred in the ordinary course of events (section 117A(3)).

The 'additional amount' needs to be clearly identified in the application as a separate and quantifiable amount within the parent's total child support income amount. That amount could be part of the parent's taxable income, or supplementary amount that includes exempt foreign income, rental property losses or reportable fringe benefits.

An 'additional amount' can come from a variety of sources, e.g. overtime, a second job, a career change to a new higher-paid job taking on extra responsibilities or additional workload that result in extra income (such as increased commission payments), or from investment income. Additional allowances paid to members of the Australian Defence Force that are directly attributable to the resident child (for example a higher rate of District Allowance) can also be considered as an 'additional amount'.

For the self employed, an 'additional amount' may be earned, derived or received through extending the opening or closing hours of their business, increasing production or developing new markets or new products outside of normal business operation.

If the parent regularly worked overtime (voluntary or mandatory) or already had a second job before beginning the new relationship additional income cannot be claimed as specifically 'for the benefit of the resident child'. This includes pre-existing sources of commission, bonuses, etc.

Timing of events

The question of timing (when the additional income began to be earned) is crucial in establishing this reason. A parent will need to establish (e.g. by means of a sequence of pay slips, a letter from their employer, or some other evidence of 'before and after' income) that the additional income was specifically earned, derived or received for the benefit of the resident child. Evidence of the parent's earning history is needed along with the nature of the change that justifies the child support assessment being reduced. A parent needs to show that the claimed amount is 'additional' or outside any established pattern.

The parent's previous job or occupation will be relevant if they claim they have changed to a better paying job to support a resident child.

In considering whether to exclude an additional amount earned before the applicant 'could reasonably be expected to have been aware of the pregnancy that resulted in the birth of the (resident) child', what is 'reasonable' will be based on when the pregnancy was determined.

Additional amounts that would have occurred in the ordinary course of events

An increase in income that would have happened in the ordinary course of events will not give a reason to change an assessment even if the increase coincides with a child becoming a resident child.

Where a parent receives a yearly increment or some other form of anticipated increase that happens to coincide with the advent of a 'resident child' this will be straightforward. Where the additional income is due to promotion further evidence may be needed to establish that the parent sought the promotion for the benefit of a resident child. CSA can consider whether the parent would have been promoted in any event.

CSA will not consider any alterations to a pattern of income that it is reasonable to expect would have occurred even if the re-partnering (and establishment of a resident child) had not occurred.

Where an assessment might be unfair or 'inequitable and unjust'

Even if an additional amount of a parent's child support income amount was earned for the benefit of a resident child an assessment cannot be changed unless it produces an inequitable and unjust result.

In deciding whether there is an 'inequitable and unjust' result CSA may consider the total financial circumstances of a parent and determine whether the child support income amount correctly reflects their capacity to support their children. CSA will compare any change in the parent's income against any change in the parent's commitments and expenditure at the time of their application.

This element of the reason, in relation to whether the assessment results in an 'unjust and inequitable' level of child support, is narrower than the 'just and equitable' elements under section 98C of the Act. The amount of the additional amount of income in relation to the total child support income amount may be relevant.

Example

Privacy issues regarding the financial circumstances of a third party

An application under this reason may require a broader range of issues to be taken into account than applications under other reasons because CSA needs to consider the income and financial circumstances of the parent's household, and not just the parent. If there are other sources of income that already (or could) adequately provide for a resident child it would not be just and equitable to reduce the parent's child support income amount.

CSA can consider the following in deciding if a change is fair:

• the source and amount of any benefit paid to or in respect of the resident child (e.g. Centrelink payments),
• whether and how much child support is being paid for the resident child,
• the cost of caring for the resident child,
• the income and resources of the parent's partner,
• whether the assessment has already been adjusted to take the resident child into account (i.e. as a relevant dependant child),
• whether any other adult who has a legal duty to maintain the resident child has a capacity to do so,
• the total expenditure outlaid to maintain the household, and
• any assets and other resources held by, or available to, all the members of the household.

Privacy considerations

A parent requires the approval of their partner to provide detailed financial information relating to their partner. The change of assessment application form includes a declaration that must be signed by the parent stating that they have obtained consent from third parties to use their information. CSA will not accept an application that contains details of a partner's financial circumstances unless the declaration is signed.

If the parent's partner is the parent of the resident child, the partner will be asked to provide full child support details relating to the resident child. CSA can also consider any information held by CSA about child support matters relevant to the resident child.

See chapter 6-30 on Privacy, secrecy and POI for further information on privacy.

'Just and equitable' and 'otherwise proper' - the decisions that CSA can make

Once a parent has established a reason to change their assessment CSA must consider whether it would be fair or just and equitable in relation to the children of the assessment, the payer and the payee and the community to make a particular decision (sections 98C(1)(b)(ii), 98C(3) and 117(4) to 117(9)).

CSA's decision will depend on the circumstances of the case and any other reasons being considered.

A decision varying the child support income amount of a parent must not reduce their child support income amount by more than 30% (section 98S(3A)).

When making a decision under this reason CSA will determine the parent's actual income amount. This may be different from parent's child support income amount. CSA will set out the basis for determining the actual income amount in the decision.

A decision to reduce the applicant's child support income amount by up to 30% for this reason does not prevent CSA from further reducing the amount beyond 30% as part of the same decision if there is another reason(s) for a change to the assessment and CSA is satisfied that a further reduction would be just and equitable and otherwise proper.

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Version 1.3

Issued 30 December 2005

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