Legislative changes will affect some separated parents from 1 July this year when the definition of income used to calculate child support assessments is expanded.
This will mean salary-sacrificed superannuation contributions and net losses from financial investments will be added to a parent?s adjusted taxable income for child support purposes, ensuring more accurate assessments for parents.
The changes will apply to income years starting on or after 1 July 2009.
Child Support Agency (CSA), Assistant General Manager Bruce Young saidThe changes will mean that, when calculating a parent?s income, individuals who have access to salary sacrifice to reduce their taxable income will be treated on an equivalent basis to those who do not have access to salary sacrifice arrangements.
Separated parents on a wage or salary can continue to enjoy the tax benefits of salary sacrificing into their superannuation while ensuring their children receive the right amount of financial support according to a more accurate assessment of both parents? financial circumstances.
It is important that parents consider their choices on salary sacrificed superannuation plans before or during the 2009-2010 financial year.
Parents that are currently salary sacrificing may wish to seek financial advice on how the legislation may affect their income for the purposes of child support. For a list of financial counsellors, go to the CSA?s Community Service Directory at www.csa.gov.au
The changes will generally affect child support assessments for child support periods that begin on or after 1 July 2010. This is because a parent's income for the 2009-10 financial year will usually only affect a child support assessment for a child support period that begins on or after 1 July 2010. However, a parent's income for the 2009-10 financial year, may be used for other types of decisions, such as estimates of income and Change of Assessment applications.
These changes will affect both paying and receiving parents equally. Compulsory super payments, such as employer contributions under superannuation guarantee requirements, will not be considered part of a parent?s child support income. The changes will only apply to voluntarily sacrificed payments.
The CSA has always had the ability to consider voluntary super contributions for determining a parent?s total income and financial resources through the Change of Assessment process.
The new measure will allow the CSA to include ?salary sacrificed? superannuation contributions (to be reported on employee payment summaries from 1 July 2009), as part of a parent's child support income. This will enable more accurate assessments based on a parent?s total salary package for the benefit of their children.
The changes will also expand the types of losses that will be considered in determining a parent?s adjusted taxable income.
The calculation will not only include a parent?s net losses from any rental properties, but will also include net losses from financial investments such as shares and managed funds. Net financial investment losses are the amount of allowable deduction claimed for financial investments that exceed the income received from those investments.
Capital gains and capital losses are excluded from the calculation of total net financial investment losses.
Financial counselling services and referral information is also available on the Department of Families, Housing, Communities and Indigenous Affairswebsite, the Centrelink website, at www.centrelink.gov.au, and the Australian Government's Understanding Money website