2.8.1: The minimum rate of child support

Context

Where the child support formula produces an annual rate below the relevant minimum annual rate, a minimum assessment will generally be payable.

Legislative references

Sections 5, 66, 66A, 66B, 66C and 155 Child Support (Assessment) Act 1989

Regulations 7C and 7CA Child Support (Assessment) Regulations 1989

Explanation

What is the minimum annual rate of child support?

When does the minimum annual rate apply?

How is the annual rate calculated where a payer is liable in more than one case?

When can a minimum assessment be reduced to nil?

What is the minimum annual rate of child support?

From 1 July 1999 the minimum annual rate of child support is worked out using the following formula (section 66(4)):

$320 x	Highest index number for the September quarter of 2005 or for the September quarter of a later year that ends before the child support period commences
	Index number of the September quarter of 2005

The minimum annual rate changes each calendar year with adjustments to the Consumer Price Index. It applies to child support periods starting within that calendar year. As at 1 January 2007 the minimum annual rate of child support is $333 per annum.

CSA is required to publish the minimum annual rate of child support in the Australian Government Gazette before the end of each calendar year.

When does the minimum annual rate apply?

In most cases a payer is liable to pay at least a minimum annual rate of child support (section 66).

The minimum annual rate does not apply where (section 66B):

• the care of the child/ren is shared between parents,
• the care of the child/ren is divided between parents,
• either parent has substantial contact with the child/ren,
• the assessment is modified by a court order under Division 4 of Part 7 (a departure order), or
• the assessment is modified by a child support agreement.

How is the annual rate calculated where a payer is liable in more than one case?

Where a payer is paying child support to more than one payee any assessments excluded by section 66B (above) are not counted in working out whether the payer has a liability less than the minimum annual rate of child support. Where a payer has a liability to more than one payee the minimum liability is apportioned between the payees according to how many children each has in their care.

Example

Assessment 3 1/5.5 x $320 = $58.18 rounded to $58

Assessment 4 2/5.5 x $320 = $116.36 rounded to $116

F's total annual liability for all 4 cases is $455.

When can a minimum assessment be reduced to nil?

A payer can apply directly to a court for a departure order (Division 4 of Part 7) or can apply to CSA to have the minimum annual rate reduced to nil for a particular child support period (section 66A). An application to CSA must be made during that child support period.

CSA will grant a payer's application if it is satisfied that the payer's income for the first 12 months of that child support period will be less than the minimum annual rate of child support for that period. If a reduction is granted it will apply to the days in the child support period that are subject to a minimum assessment. If the minimum assessment applies only to part of the child support period (e.g., where the payer lodged an estimate of income after the beginning of the child support period) the reduction to nil will not apply to the earlier part of the child support period. The reduction cannot continue after a child support period ends (section 66A(3)). A payer can reapply in a later child support period.

'Income' is not restricted to taxable income. For the purposes of working out whether a person has an income of less than the minimum annual rate of child support for that period it is defined as (section 66A(4)):

• any money received, earned or derived for personal use or benefit, or
• any periodic payment by way of gift or allowance.

The only exclusions to this definition are prescribed in the regulations (regulation 7CA). They are:

• amenity allowances or gratuities (incidental payments for personal items or other minor expenses, but not payments for work or study) paid to prisoners, and
• disability support pensions or TPI pensions where the amount of the payment is 'substantially' used for self support. The term 'substantially' is not defined in the regulation. However, CSA uses 85% as a general guide.

'Money':

• includes coins and bank notes, cheques and deposits into bank accounts (but not goods, services, or some other benefit, even if the payment is capable of being valued in money terms).
• is 'earned' when it is received in return for labour or service, in compensation or as profit.
• is taken to be 'derived' in accordance with ordinary business and commercial principles. It includes capital payments, trust distributions and royalties.
• is taken to be 'received' when it comes into a person's possession. This covers most money which comes into a person's hands including capital payments, e.g. a tax refund, Lotto wins, lump sum compensation, profit from the sale of an asset, deposits into a joint bank account.
• must be received for the person's own use or benefit. Income received by a person in another capacity isn't included.

Examples

Only net income is considered. CSA will deduct the person's expenses that directly relate to them earning the particular type of income from their gross income. However 'paper expenses' (such as depreciation of property or assets or carried forward losses) should not be deducted, as they are not considered to relate directly to earning the income and do not reduce cash flow.

If expenses claimed are discretionary (e.g. repairs to a rental property) CSA must be satisfied that they were necessary before they will be deducted from income.

Example

Although taxable income is calculated by taking the total amount of deductions away from the total amount of assessable income CSA will consider each individual source to determine if the amounts in total are equal to or more than the minimum annual rate of child support for that period. Losses from one source will not be deducted from income from another source.

Example

CSA must notify an unsuccessful applicant in writing (section 66C). That person can object to the particulars of the assessment.

If neither parent objects to a decision to reduce an assessment to nil, the assessment will remain in place until the end of the child support period. If either parent believes that the assessment does not reflect the liable parent's actual income they can apply for a change of assessment.

If the minimum assessment was based on an estimate of income supplied by the payer CSA is able to amend or reconcile the income used or a payer can make a new election.

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Version 1.4

Issued 22 March 2007

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