Child Support - Retrospective Assessments Beware!

If you pay child support under an assessment from the Department of Human Services, you may have received a reassessment notice that says that your child support payments are in arrears.  

When might this situation arise and what can you do about it?

If you lodge your tax return every year and make your child support payments as assessed by the Department, you are unlikely to receive a reassessment or a retrospective assessment – the amount of child support you pay is linked to your taxable income.  If, however, you lodge an amended tax return for previous years, or if you have not lodged a tax return for some time, you are likely to receive a
reassessment notice. 

A reassessment may be problematic if:

1. You have not lodged your tax returns and the Department has used your “estimated income” to calculate your child support payments; and

2. You lodge your returns late or lodge an amended tax return, under which your taxable income is significantly higher or lower than the “estimated income” used to calculate your payments.

If your tax returns show that your actual income was less than your estimated income, you may find that you have paid more child support than you would otherwise have been required to.  Problems can arise where the Department assesses your child support using your estimated income, your payments are in arrears, and you later seek to change that assessment (and reduce your arrears) based on your actual income from that time. 

If your tax returns show that your actual income was greater than your estimated income, then you will find yourself in arrears.  This is problematic if you don’t have the capacity to pay those arrears, or if the level of income in your tax returns (or amended tax returns) doesn’t reflect your financial circumstances at the time you earned that income.

What can you do? 

• First, ask the other parent!  If you have underpaid, the recipient parent has the discretion to waive their right to recover the arrears – if you have overpaid, you have the discretion to waive your right to recover the over payment. 

• Second, you have up to 18 months after the date of your assessment to ask the Department to reassess the amount you pay.  If, however, you are out of time, you will need to go to Court to seek an order for a reassessment.

The law in this area is complex.  However, in deciding whether to allow a reassessment out of time, the Court will consider whether you have a case for seeking to change your assessment, your reason for the delay (and whether you are responsible for it), the hardship that refusing the reassessment would cause you, and the hardship that reassessment would cause the recipient parent.

The Courts have consistently taken a poor view of parents who do not lodge their tax returns on time, find themselves liable to pay arrears as a result, and then seek a reassessment to avoid paying those
arrears. You can keep yourself out of this situation by lodging your tax returns on time, and if you do lodge your returns late or lodge an amended return, you should seek a reassessment promptly