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  • Writer's pictureJarrod Carter

Child Support: What Does it Cover?

In Australia, where parents are separated, Child Support is critical in the upbringing of children as it helps to cover expenses associated with raising them. Such expenses include food, clothing, housing, medical care, school fees, and other activities related costs. However, there are no set regulations on how to use child support payments; parents can opt to pay for child-related expenses, and there is no limit to what these payments can or cannot cover.

Services Australia provides service and assistance to parents and carers on how to apply, collect, and transfer child support payments. Child support payments are based on both parents' taxable income and the percentage of care they give to the children. If a parent has more than one child, they could pay different child support fees for each child. If there are special circumstances, the child support assessment can be adjusted. For instance, if a child has significant medical expenses, the child support recipient can apply for a change in assessment.

Parents can also choose to self-manage child support payments. Child support payments can be paid for in monetary or non-cash items such as school fees, uniforms, medical expenses, and specific extra-curricular activities. Ultimately, the purpose of child support is to offer financial assistance that directly supports children.

How Child Support Is Calculated?

Child support payments are a crucial aspect of ensuring that children receive the financial support they need to thrive. In Australia, these payments are calculated using an administrative formula that takes into account the income of both parents and the cost of raising children.

The formula utilises an income shares approach, which means that it uses the combined income of both parents to calculate the child support payments. It also excludes a self-support amount from both parents' incomes, treating them equally.

The child support payments are then determined based on the cost of raising children, taking into consideration the incomes of both parents. Additionally, the formula recognises the contributions of both parents to the cost of their children through care. Percentage of care is usually calculated in reference to the number of nights spent in each parent’s care. However, it can be calculated on an hourly basis if one parent spends time with the children during the day and the number of overnight stays does not reflect the care provided.

It's important to note that the formula is not set in stone and can be subject to change if special circumstances apply. Parents who feel that the formula does not reflect the unique circumstances of their case can apply to Services Australia for a change of assessment. This process allows Services Australia to examine the broader financial circumstances of both parents and make a decision to depart from the formula assessment.

Parents can also choose to negotiate their own child support arrangements through a child support agreement. However, these agreements must meet the requirements of the legislation in order to be accepted by Services Australia. They can specify the amount, frequency, and method of payments.

Examples of Expenses Covered

Child support is a legal obligation that requires all parents, including same-sex parents, to financially assist in their child's "normal" expenses. These expenses can include food, medical and dental expenses, housing costs (rent or mortgage repayments), clothing, and tuition fees. However, it is important to note that child support is not limited to just these expenses. Parents can also use the funds to cover general expenses such as mortgage or rent payments and car maintenance, as long as they do not exclusively involve raising children and are not a misuse of child support.

Child support also covers a child's education and well-being. This includes school fees, uniforms, and school excursions. In some cases, special circumstances such as an unusual amount of medical expenses can lead to a change in the overall child support assessment. The recipient can apply for a payment variation, and there will be a review of the case before making any changes to how much child support is to be paid.

Extracurricular activities like sports teams or clubs can also be covered by child support if they are needed on an annual basis. However, it is important to note that the payer does not have any legal duty to pay for extracurricular activities, but they can be asked to contribute financially as part of their normal childcare responsibilities.

While child support covers a wide range of expenses, there are certain costs associated with raising a child that it does not cover. Private health insurance, some extracurricular activities, private schooling, and special needs of a child are some examples of expenses that are not typically covered by child support payments.

When parents separate, it is crucial to ensure that all financial questions are answered to make sure that the child's expenses are covered. Child support agreements are often entered into between both parents and may include an option for extra expenses to be paid by the paying parent. These "non-periodic" payments can help cover any additional costs associated with raising a child. Overall, it is important to understand the details of child support and seek professional guidance to ensure that your child's needs are met.

Child support is a payment made by one parent to the other, but there are no strict rules or guidelines dictating how the money should be spent. The recipient can choose to spend the money as they see fit. However, if a parent wants to provide something specific for their child, they will need to pay for it themselves. This is especially true for expenses incurred while the child is in their care.

In cases where both parents spend substantial time with the child, they should come to a mutual agreement about splitting the costs of fixed expenses such as school fees, uniforms, and dental care. The cost can be split evenly or divided based on certain arrangements.

Child Support and Taxable Income

Child support is calculated using the taxable incomes of the parents, which can be problematic for several reasons. Firstly, a person's taxable income does not always accurately reflect their financial situation. For example, someone may have a high income on paper but be struggling with debt or other financial obligations that reduce their disposable income. Conversely, someone with a low taxable income may have significant assets or other sources of income that are not reflected in their tax return.

Another issue with basing child support on taxable income is that it can be difficult to accurately assess self-employed or contract workers. These individuals may have variable income from year to year, making it challenging to calculate a consistent child support payment. Similarly, someone who receives irregular bonuses or commissions may find it challenging to predict their income for the coming year.

There is also the issue of parents purposely reducing their taxable income to pay less child support. This could include making large donations to charity, or purchasing assets for a business to reduce their income. Some parents may seek to minimize their taxable income by taking deductions or structuring their finances in a way that reduces their tax bill. This can lead to a situation where a parent appears to have a lower income than they actually do, resulting in a lower child support payment than is appropriate.

Overall, while basing child support on taxable income is often practical, it is not without its flaws. It can be difficult to accurately assess a person's financial situation based solely on their tax return, and there is the potential for parents to manipulate their income to pay less child support. As such, it is important for parents and policymakers alike to consider alternative methods for determining child support payments that are fair and accurate for all parties involved.

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