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Child Support "Double Dipping" of Superannuation

Child Support "Double Dipping" of Superannuation after Court ordered Property Division and Preservation of Superannuation to be accessed by the Payer during retirement

A couple of recent cases have come to our attention that effect a Child Support “Double Dipping” of Superannuation after Court ordered Property Division and Preservation of Superannuation is to be accessed by the Payer during retirement

The propensity for Child Support to access a payers’ superannuation funds and deem a part of superannuation to be income for the purposes of child support, is an adverse action which unfairly disadvantages payers who access their superannuation money.

Superannuants may be permitted to receive an early withdrawal of part of their superannuation, on the grounds of hardship such as imminent mortgage foreclosure and re-possession by creditors or due to failing health. However it is not commonly known that vulnerable superannuants in need of funds due to hardship are likely to be put into further hardship by an arbitrary deeming of the withdrawn superannuation to be income and needing to pay additional child support.

Also this CS income ‘trap’ is not communicated in the CS Guide or any government literature.

A further adverse action is taken by CS when a superannuant enters “transition to Retirement” (TAP) and receives a yearly withdrawal from their superannuation which is also deemed by CS to be income, further adding to the retiree’s debt.

It appears counter-intuitive for CS to treat a withdrawal of superannuation savings for which tax has already been paid and property division effected by a court, to now be deemed as income subject to CS. This is a form of confiscation of savings rather than a legitimate form of child support income earnings.

Where payers have been at the brink of having their bank foreclose and confiscate their mortgaged home, and applied for and received part of their superannuation on the very onerous hardship grounds, CS simply treat any monies meant to prevent foreclosure ie payments to penalties of interest on home loans and mortgages, bank charges and the like, as additional income for the purposes of CS and thus burden the payer suffering mortgagee stress with a deemed arrears debt and higher CS payments.

This draconian action needs a re-think and hopefully the task force on the Child Support review is looking at these sorts of issues. Currently he purpose of Superannuation hardship provisions in law are not understood by CS and the apparent treatment in recent cases unfairly burdens the hardship applicant.

Furthermore, this is a form of double-dipping as the superannuation was split and apportioned equitably during the court ordered property division and should not be considered as income, rather it is savings as is the intent of the superannuation scheme for Australians to save for their retirement.

These issues need to be dealt with by the parliamentary enquiry…

Executive Secretary - Shared Parenting Council of Australia
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Secretary_SPCA, are these amounts taken through normal assessment or through a departure from administrative assessment (Change of Assessment)? Perhaps if the former then the error lies more in the way that they are reported than than at the hands of the CSA.

If you are pressing for a parliamentary inquiry the I'd suggest that a relatively close topic is how the CSA handles redundancy payments when they get wind of them. There are numerous flaws and injustices.

First they take the tax-free portion and gross this up, which they say they have to do according to the legislation. So for example if you get a redundancy payment of $60k that then become $90k as far.

The first points is that there is no such legislation as the CSA state; the proof is available. This is the grossest of abuses of power.

The second point is obvious how can any person see that you have $60 in hand and call it $90, not even the ATO. Mentioning the ATO is apt and for two reasons.

The first is that the ATO do gross up, but they only gross up Fringe Benefits Tax (FBT). This is because with such a benefit, the benefit provided does not consider the tax that would have been paid if the benefit was purchased by the employee (say buying a car for $1000, that need/benefit if purchased normally would still cost $1000 BUT to get that $1000 you would have to have paid tax on it). That in my words is why the ATO gross-up BUT THE ATO ONLY GROSS UP FBT.

The second reason that the ATO is apt is due to history. The CSA was originally part of the ATO and it is more than likely that calling something net income and grossing it up came from grossing up of FBT. I'd suggest that that alone is a very strong argument for the CSA be investigated for every reason 8 decision going back to it's formation. I also doubt that grossing up is limited to redundancy payments. I suspect that anywhere that they mention other income as net income then they gross up. The statement mentioned above does not specifically mention redundancy payments it mentions net income.

However, I cannot explain how the CSA have managed to forget how the ATO define income.  The ATO defines income as "The amount of money earned from personal exertion and investments."

However, that is not the whole  story. The CSA takes the grossed up amount and then adds the taxable component. The CSA then determine a weekly salary (from the previous tax return) they they divide the accumulated redundancy payment and determine how many weeks weekly salary the redundancy payment is worth. The decision (an income amount order(IOA)) will cover that length of time (in months). They will then work out the annual rate and write a decision that says to add that amount to the relevant taxable income. That may sound OK.

Around comes tax return time the parent gets a taxable income that includes the taxable components of the redundancy payment. So the taxable component is applied via the ATI and the again by the COA decision adjustment.

Still it goes on. The person is redundant and their income is lower. However because an IAO exists the person cannot submit an income estimate.

Even more. Burke (1993) FLC 92-553 very clearly determines that redundancy payments are not income. They are compensation, but specifically not compensation for lost wages (the CSA guide quite clearly indicates in two paragraphs that only compensation payments for lost wages or salary are considered), they are compensation for things such as loss of seniority.

Even if redundancy payments were considered income they are also considered joint payments (W & D [2005] FMCAfam 171 (21 February 2005) and Hauff and Hauff [1986] FamCA 16; (1986) FLC 91-747) and in the guide it clearly establishes that it cannot consider what is jointly owned as being owned by just one of the parties.

Last edit: by Dev_MikeT

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