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Does CSA look at mother's capacity to earn?

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Hi,

Our son starts primary school next year and my ex. wife is a qualified accountant capable of earning a significant income, however I believe she will either choose not to work or do cash in hand work. My question is can CSA look at her capacity to earn good money (potentially around $80 - $100k) and factor this into the child support assesment. If so, how do I go about making this CSA review occur and what are the things I should be aware/ careful of?
You can try to get her capacity to earn taken into account with a Change of Assessment application under reason 8. Generally CSA will take into account the last tax return she filed. Now if she has not been working since the child was born, they most likely will not consider her to have the earning capacity for full time work. Centrelink rules are that single parents with school age children are considered to be able to work 15 hours per week and CSA will not decide it's time to earn a full time wage if they don't. We went through the same thing with mother of child not having worked since birth and now with child in high school, one would think she could get back to work. Neither Centrelink nor CSA are interested though. Very frustrating!
Very Similar to my situation where my ex was working full time, then reduced her hours to just over the required minimum of 15 hours per week as she is claiming Centrelink benefits.

Also, a professional in that she has a degree (which I supported her during her studies) and in a number of emails she outlines her plan (now executed) to reduce her hours so as to increase my payable child support. In addition, I too suspect she is billing privately under her ABN and not declaring that income. She did this whilst we were together and I always held the view she should declare it in her tax return

I discussed this in person with the Child Support Agency and Centrelink and both agencies stated they have no powers to investigate this.

The C$A agency suggested I contact the Australian Tax Office and speak to them about my suspicions she is billing private work and not declaring it.

The C$A also advised I could…. wait for it… lodge a COA application where they can look at her earning capacity.

Given what I fast learnt from this site and despite the fact the form / application is over onerous to complete, the COA does not return any  just decisions for payers, therefore I am not prepared to take the chance and give the C$A any opportunity to increase my level of child support. Again, as I say in all my other posts at this point, it's not that I avoid my obligations for those that will be quick to judge, I pay over $1600 per month.

All I can say is I understand your situation, but if you contact the C$A and they advise you to complete a COA, I would proceed with "extreme caution"

Best of luck..
I do not understand. What happens if I were to give up work (not that I would do that) and have next to no income or I started my own business where it didn't "return much profit" ?? CSA would just accept that? Isn't this the same as the current earning potential of my ex. or is there one set of rules with CSA for the payer and a different set of rules for the payee..? My ex. could easily go out and earn $80k - $100k p.a. but what's the reason if she can milk the entire system for all it's worth?
Lamson said
I do not understand. What happens if I were to give up work (not that I would do that) and have next to no income or I started my own business where it didn't "return much profit" ?? CSA would just accept that? Isn't this the same as the current earning potential of my ex. or is there one set of rules with CSA for the payer and a different set of rules for the payee..? My ex. could easily go out and earn $80k - $100k p.a. but what's the reason if she can milk the entire system for all it's worth?

If you gave up work (i.e your decision) and had an income of less than the maximum normal parenting payment single (PPS currently $14,615), then you would by default be assessed at the fixed rate ($1193 per child for up to 3 children). However, a change of assessment, could apply a capacity to earn. The result would likely be that you have the capacity to earn what you were earning and thus your income would be assumed to be what you were earning. There are 3 criteria that must be met for a capacity to earn to apply.  

The first is that the parent is not work despite ample opportunity to work, or has reduced their weekly hours to below full time work or has changed occupation, industry or work pattern.

The second is that the decision is not justified by caring responsibilities or health.

The third is that the parent has not shown that the decision was not substantially motivated by the effect the decision would have on the parent's earning capacity.

If the decision were that you started your own business (WARNING the self-employed are particularly vulnerable to astoundingly biased and basically illegal decisions by the CSA) then the above could apply. However, the CSA do some astounding things with change of assessments for self-run businesses. They have been known to use years old business loan applications to conjure up business profits. They very typically turn items of loss into company profits. They refuse, even to the extent of endangering the public, business expenses with no justification.

One of the few available examples that highlight some of the financial abuses that the CSA (and then SSAT in this case) dish out to the self-employed is Ladd & Child Support Registrar & Anor (SSAT Appeal). Here's an extract:

FM Sexton said
# I accept the appellants counsels submission that this conclusion was not open to the Tribunal on the evidence. I agree with counsels submission[11] that the Tribunal failed to understand that it needed to look at the whole of the financial evidence of the appellant, including the financial records of his company, in the context of determining what the actual personal financial resources of the appellant really were. This required a careful analysis of the personal benefits the appellant actually had available to him from the company, (such as the car, telephone, drawings and salary).

# While I am satisfied it was appropriate for the Tribunal to analyse the companys depreciation expense as it did, and I find no error in that analysis, it was also necessary for the Tribunal to have considered the financial effect of treating a portion of that depreciation expense (in this case, nearly half) as a financial resource available to the appellant. This exercise would necessarily involve a consideration of the other company expenses. It was then a matter for the Tribunal, in the exercise of its discretion, to decide which of those expenses should be regarded as reasonable for child support assessment purposes, and which (if any) should not.

# The company accounts[12] for the 2007 financial year show the company made an overall loss in that year of $48,734.90[13]. It was not open to the Tribunal to simply disregard all other expenses of the company resulting in that loss, as it has done. It is clear that if an amount of $39,266 (the depreciation expense the Tribunal found was not used for the purchase of new equipment) were omitted from the Statement of Financial Performance for the company for the 2007 financial year[14], the company would still have an operating loss of $9,468.90 [a loss of ($48,734.90) plus $39,266]. In other words, that amount of $39,266 is not left in the hands of the appellant because, in the circumstances of this case, it makes no impact on the funds available to the appellant from the company. The position may have been different had the company achieved a net profit in that year. It is noteworthy that there is consistency in the company accounts in the 2006 and 2007 financial years. The company has negative equity in both the 2006 and 2007 financial years[15], and the companys trading result in the 2006 financial year was worse than in the 2007 financial year. The Tribunal did not have regard to these facts.

# I find the Tribunal misinterpreted the meaning of financial resources when it failed to examine the financial evidence before it in the context of determining what the actual personal financial resources of the appellant really were. This required an analysis of the personal benefits which actually flowed to the appellant from the company from the companys financial records. While I accept Mr Gouliaditis contention that it was a matter for the Tribunal whether or not to include particular liabilities of the company when deciding the extent of the appellants personal financial resources, the Tribunal could not simply disregard those liabilities without explanation, and the loss incurred by the company in that year. I do not accept the submission that the Tribunals approach was consistent with the Gyselman decision, nor that Gyselman should be distinguished because it concerned the debts of an individual. Gyselman makes clear that the assessment of financial resources required to be undertaken must be a realistic one, based on the evidence available.

# I agree with the appellants counsels submission that on the authority of Gyselman, the interpretation of financial resources in sections 98(1)(a) and 117(4) of the Assessment Act, is a question of law. I find the Tribunal misunderstood the task it was required to undertake to establish the true extent of the financial resources available to the appellant. This was an error of law.

# It follows that the appeal must be allowed on this Ground.

Here's a link to the case on Asutlii Ladd & Child Support Registrar & Anor (SSAT Appeal)
The CSA objections officer told me that reason 3 was a "rebuttable presumption" ie for " that the parent has not shown that the decision was not substantially motivated by the effect the decision would have on the parent's earning capacity", they assume it's true and you have to prove otherwise.

I've asked the SSAT to consider that one.
You can use the COA process as long as you are satisfied C$A will not find a way to increase your liability. You just have to weigh up your current financial situation and compare to the ex. If you think your lifestyles with be much the same if they give you what you want, then you might succeed. If not they may try to find a reason to increase your liability to try to equalise the lifestyle the children have with the ex and yourself.

They are generally there to look after the payee as this results in increased collection which justifies their existence. I think your claim would have to show a significant difference in lifestyles to succeed.

If you do lodge a COA application then the ex has the right to respond with a counter claim and this is where many people fall foul as C$A has then be an adjudicator and it does not look good for them if they are reducing liabilities when they exists to increase them.

If your ex is CPA accredited she has to follow a code of conduct to keep her wings. Most accountants I know are very careful what they do.
Just a question was your ex working as  an accountant prior to the children being born?
Ex tried capacity to earn on me soon after I left him because prior to even falling pregnant with my first I was able to earn upto $1800 a week in a manager role (never did though as only worked part time) but it was not an industry to work in once i had kids for various reasons (long/late hours for one). I fought my coa as just a simple response - I hadn't worked in that industry for 5 years thus I would have to start at the ground up again to reach that level and that I also was primary carer for the children.
My situation this was accepted so watch out if she hasn't worked since kids were born or there are reasons she stopped working like a child with disabilities or ill health.
Basically my ex. has children from a previous marriage and worked fulltime as an accountant whilst they went to school, up to the birth of with our child together. Since the birth of our child 5 yrs ago she has worked part time as a company accountant for a medium business (not hers). This year our child will be going to school and I my ex. has the capacity once again (as she did before) to return to full time work.

From what I have heard I believe she is going to choose to go down the "own business" route in order to officially minimise her income for greater CS & govt. benefits including a health care card which she has through some amazing "self accounting" techniques.

So should I lodge a COA based on her capacity to a earn significant greater income with her ability now to work full time or will CSA just ignore this and assess her at her official (and incorrect) ATO tax return of just over $30k. Obviously as a full time accountant her earning potential/ capacity is far greater than this; what are my chances of CSA re-assessing her income?

Interestingly from a previous COA (objection) I lodged CSA currently calculate her income on a greater amount than her declared last year ATO assessment as there was evidence produced of other signficant undeclared income she had. Funnily enough CSA do not provide this insight or evidence of obvious tax evasion back to the ATO.
Adding to what I said before if your ex runs as a business and you work for wages then you could also argue the fairness over the facts that she has access to tax rules that allow her to minimise her taxable income whilst you do not.
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