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Objection, COA or just suck it up

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I have been paying child support for 2 children since 2005 and have always paid on time and dutifully accepted CSA's word as gospel on every dollar and every reason for increases etc. Last financial year, child #1 finished school and started full-time work. I continued paying CS for another 5 months until she turned turned 18. Then, for the first time I tried to plan for my future somehow with the hope of having something to leave the kids when I'm gone.

I bought an investment house with a 100% mortgage. I only owned it for 9 months of the 09/10 year and my real out of pocket loss was over $20 000.  This has been added back on to create my Adjusted Taxable Income and increasing my CS payments by over $100 per fornight. I am really struggling at the moment because the rental property has been untenanted for more than 2 months, so the loss for this year is growing, along with my current debts. I guess that next year my ATI will be higher because of a greater loss, which will mean a further increase in CS payments for next financial year. The lovely folks at the CSA were not interested in my financial difficulties and recommended that I sell the property. My new partner has had to borrow money from her Dad to help pay Child support costs and other ongoing expenses.

Are there any grounds for objection or COA? I have been reading as much information online as I can over the last few days, but my head is over full. We are struggling to get through this expensive time of year and another $100 every fortnight is really going to make it difficult to survive.

I have only just found out that for the first 3 years after separation you are allowed to have extra income disregarded for CS purposes. I was never told about this when I was first contacted by CSA 5 years ago. Is that grounds for objection?

I thought about doing an estimate based on a lower income, but by the time they add back on the huge loss I will cop this year I will owe them money and probably a penalty. Child #2 will turn 18 in March 2012, but I am assuming that they will hunt me down after that if my estimate is wrong.

I feel as though I have been hit with a double whammy. How can I pay CS based on money that not only did I never have but actually lost, in the hope of making some hypothetical capital gain at some time in the future, on a property that I want to leave my kids when I die?

Thanks for any advice
I am sorry to hear about your situation. But adding back net property losses has been a well known fact for a couple of years now. As hard as it may be to hear- buying an investment property on a 100% mortgage is risky and puts you in financial distress if things go wrong- eg no tennant or interest rate rises etc. I understand that you are doing tis for your future but you should have factored in the factv that the losses will be added back to ATI.

The CSA may have had a sensible solution in suggesting to sell the property. If you are living on a financial thread then you should not be in the property investment game.

I myself pay child support for one child and have 2 investment properties so I am familiar with the rules and the frustration of adding back losses for ATI calcs. But i bought my properties before I ever had a child.

You have two options as far as I can see-

1. sell the property at a loss. adv- more cashflow to meet CSA payments, can use extra cashflow to save a decent deposit to re-enter property market in future, reduce your gearing which is far too high to live comfortably.

or 2. Hang on until the second child turns 18 in early 2012. adv- no addit stamp duty or agents fees. disadvan- you will be living on a shorestring for a while. If you can borrow money interest free off your father in law then this will get your through until 2012. This is the best option I think. Also, I would slash your advertised rent to secure a tennant ASAP. You will drown in debt if you dont do this- you are now a 'price taker' not a 'price maker'!

I dont think in this case, that this is the CSA's fault. It is simply a poor investment decision (which we all have made in our lives at one time or another) :)

 take care
A few things here.  CSA should not have provided advice about your investment property -they are far from experts.  If you can handle the short term pain you will find your situation (wealth) is likely to improve rapidy.  Remember, you a likely to get a motza tax return which will help.

A couple of tricks to dodge the CSA fiend.  Use any spare cash to share trade - all costs are deductible.  Also look at your motor vehicles - if you can access a novated lease there are ways to dodge the CSA fiend.  And they are unable to close the loophole.
Thanks for both replies. At this stage I have no intention of selling the property. It cost far too much to set up. What we didn't bank on was having the property sit empty for so long. We have dropped the rental price by a lot since the last tenants left and dropping any more off would just make the property a joke. My partner and I decided that we are prepared to take a loss (which at this time is huge) but it's totally unreasonable that during a time when we are tightening the budget, the Ex is reaping rewards from our financial difficulty. Don't get me wrong I am proud to support my child and never try to avoid paying.  However, I already pay my Ex a LOT of money for one child (well over $1000/month before the current increase).

I am guilty of getting a lack of advice and poor advice though. I have been seeing a lovely country accountant for many years and while he's pretty up to date on the tax system, it seems he has no idea about CSA law. I was led to believe that this was normal for all accountants, but after reading posts on a few different forums it appears that some accountants are actually quite able to help their clients with CSA issues. I guess it is time for some serious financial advice from a new source.

Bigred, thanks for your ideas, but unfortunately my employer will not allow me to access a novated lease and only allows me to salary sacrifice my super. Which we all know gets added back on to out Adjusted Taxable Income. As for share trading, I don't know enough to make a profit and I can't take another loss just yet.

While I am extremely frustrated by this situation it might be time for me to forget it and move on with the hope of better years ahead. Having said that, my local and federal members for parliament can expect to hear from me some time soon. I always work on the premise that if you want to make a change or get things done the only place to start is at the TOP.

Thanks again.
GB said
Don't get me wrong I am proud to support my child and never try to avoid paying.
There are those who would say that unless you and your partner having nothing or less than nothing in some cases where not only playing the victim (see recent posts from karendavid whining because the two children only have 30,000 p.a. between them).

As explained in the post from karendavid, what is paid in child support is a not the complete amount destined by child support legislation for the child (unless the parent has under 14% care (which is most frequently due to the recipient denying access some way or another, rather than the parent not wanting contact) and the other parent's income is under the self support amount).

The actual amount for the child is, in the majority of situations, greater than what is most often stated (e.g. you say well over $1000 a month, when this could well be substantially more if you have greater than 14% contact (roughly a third as much again for the 24% care reduction that the other parent should pay for when the child is in your care). The other factor, when both parents earn over the self support amount is the percentage of the combined child support income. Roughly   100 * ((Income A - SSA) / (Income A - SSA + Income B - SSA)) or 100 * ((Income B - SSA) / (Income B - SSA + Income A)).

As an example both parents earn $50,000. CS is for one child under 13. One parent, the likely liable parent (in this case the liable parent, liability can change to the parent with the greater level of care in some circumstances), has 52 nights care (14% or regular care). Then the annual CS paid is $2508 ($209 per month). However, the annual cost of the child is calculated as $9646. Some of the cost not paid by the liable/spends time with parent is covered by the care parent has. Costs are also rightly apportioned according to the income of the parents (not that I don't disagree with some aspects).

Often there are other considerations such as FTB and benefits that increase the amount meant for the child, to which a liable parent who has worked at some time contributed to in that it is taxpayers money that pays FTB and other benefits. You rarely see recipients of CS acknowledging these amounts when they whine about what they get given.

GB said
While I am extremely frustrated by this situation it might be time for me to forget it and move on with the hope of better years ahead.
This is basically what I did and hey things only got better. My initial voluntary CS payments reduced from $1000 per month to around $410 per month under CS assessment.

GB said
Having said that, my local and federal members for parliament can expect to hear from me some time soon. I always work on the premise that if you want to make a change or get things done the only place to start is at the TOP.
Unfortunately this is very much the way things have to be done nowadays. It is quite rare that you will, especially in the CSA, meet with initiative driven from the lower levels. Considering you're GB, and perhaps from upover, then you might be old enough like some on here to remember Sunday nights (I wonder if the old grey matter recalls the correct night) and Esther Rantzen's show in which she, on a weekly basis, awarded the "Job's Worth" cap. Well my guess is that she simply wouldn't be able to meet demand nowadays and that's even if China made the caps. :) Find out about Esther Rantzen by clicking here.
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