The Question of whether child support is taxable income comes up quite often. The aim of this quick guide is to provide some clarity on this commonly asked question, as well as to provide information on what may or may not be taxable income in fields commonly related to child support.
What Does Child Support Typically Cover?
- Housing
- Clothes
- Food
- School
- Medical
- Extra-curricular activities (on a situational basis)
In the typical situation, there will be a payer and payee of child support. The payer is typically the parent who has more income and/or spends less time with the children.
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 to be paid on a regular basis 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 specified period can be credited by the DHS towards this figure. These payments are referred to as either ‘prescribed’ or ‘non-agency’ payments.
What is Taxable income?
Taxable income encompasses the income earned from your wages, business, investments and any taxable government payments.
So what does this mean for child support? Is child support a taxable income? Child support payments are not an allowable deduction because they are both:
- Private or domestic in nature
- Not incurred in gaining or producing assessable income and
Child support may be paid by either traditional cash payments or non-cash items. You and your ex-partner’s income is the main factor to determine how much child support you pay or receive. If you are the payer of child support, this figure may affect the calculated income used to determine how much you can receive for carer allowances, family assistance payments or low-income supplements.
So… Is Child Support Taxable Income?
The short answer is generally NO – Child support is not a taxable income and so you are not required to pay tax on any child support payments you have received.
Similarly, this also applies to recipients of spousal maintenance payments and is because the Australian Taxation Office does not categorise these payments as income. Contrastingly, you are required to pay tax on certain government payments received from either the Department of Human Services or Centrelink. For these taxable payments, the payable figure can be deducted by the relevant department before you receive it to remove the hassle.
Importance of Seeking Legal Advice
It is important to note when assessing child support and school fees, and who pays that every case is different and needs to be assessed depending on your own unique situation, and needs. For questions such as whether child support is taxable income, and any other matters relating to child support or family law, do not hesitate to Contact JB Solicitors today to speak with one of our friendly and experienced family lawyers.
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If you have any more questions involving family law, and circumstances involving your children, check out some of our other articles.
Child Support and School Fees – Does Child Support Include School Fees
