Regardless of the situation of a children’s parents, both have the legal duty to provide for their children. Child support payments are Australia’s answer to ensuring the financial requirements of the children are satisfied until they reach the age of 18, following the breakdown of their parent’s relationship. You may ask yourself whether child support will affect other government payments or benefits you may receive? And closely related to this is child support received taxable income?
This article will provide a definitive answer to both these questions and give some background information on child support in general, which you may find helpful.
What Is Child Support?
Before answering the question of ‘Is child support received taxable income, first let’s dive into what exactly child support is.
Child Support refers to payments made from one partner to another following a divorce or separation. This payment is to assist the other parent in meeting the needs of the party’s mutual children. Child support in Australia is regulated by the Child Support (Assessment) Act 1989.
In the typical situation, there will be a payer and payee of child support. The payer is usually the parent who has more income, and usually, the other parent will be the one with whom the child primarily lives.
When Child support is assessed by the Department of Human Services (‘DHS’), they will send a letter that details and reports on their assessment. This assessment letter determines a lump sum be paid regularly to the parent who is the primary caregiver.
The figure shown on the Child Support Assessment is the amount you will receive. However, other payments made by the paying parent in the period specified can be credited by the Department towards this amount.
What Are Child Support Payments For?
Before answering the question of ‘Is child support received taxable Income?’ it would be helpful to understand the variety of items, services and situations that the payment covers:
- Housing
- Clothing
- Schooling
- Food
- Medical expenses
- Extracurricular activities (situational basis – usually if agreed upon)
Typically, additional expenses such as extracurricular activities and private schooling are only included in the payments if both parents have agreed on their inclusion.
Hypothetically, suppose the parent receiving the child support payment wanted to send their child to a private school, and the paying parent does not. In that case, they will not have to pay anything towards the costs of private schooling if the receiver of the payment decides to enrol their children in private school.
What Constitutes Taxable Income?
The income earned from your business, wages, taxable government payments, and investments are all considered taxable income with the Australian Taxation Office. So you may be wondering, where exactly do child support payments fit within these categories? Is Child support received taxable income? Child support payments are in fact, not a tax deduction that is allowable because they are:
- Not incurred in producing or gaining assessable income;
- Private or domestic; and
- Child support payments can be made through both cash payments or other non-monetary means.
Ultimately, your income and your former partner’s income are the main determinants in determining the figure of child support to be paid (or received). Suppose you are the receiver of the child support payments. In that case, the amount received from the payments may negatively affect the amount of income received from other benefits such as family assistance payments, carer allowances, low-income supplements and so forth.
The Short Answer – Is Child Support Received Taxable Income?
Generally speaking, child support received is not taxable income. Accordingly, you are not required to pay any form of tax on child support payments you have received.
As the payments are in the same scope, it is essential also to note that spousal maintenance payments are not subject to tax either. These payments are not subject to taxation because the Australian Taxation Office (ATO) does not consider these payments as income. However, you are required to pay taxes on other government payments typically received from the Centrelink or Department of Human Services. However, the usual situation for these payments is that the taxable amount may be automatically deducted similarly to a paycheck to remove the hassle from the case.
Importance of Seeking Legal Advice
When discussing matters such as ‘is child support received taxable income?’ it is important to note
Here at JB Solicitors, we’ll make the process as pain-free as possible. We have fixed-fee pricing for family law, giving you a clear sense of the costs from the start, and we will be sure to help you out every step of the way. With years of experience under our belt, we pride ourselves on making each client’s family law experience as positive as possible.
Contact JB Solicitors today to speak with one of our friendly and experienced family lawyers.
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