Reduce Child Support Payments
How do you reduce child support payments?
Reduce Child Support Payments
There are two scenarios where you really need to reduce child support payments you pay.
You struggle to make ends meet and child support pulls you down even further.
Or you would much rather spend the money on your kids directly rather than handing the money over to somebody else.
How many options you have to you reduce child support payments depends on the type of arrangement you have with the other parent.
Child Support Agreement
With child support agreements there is little room to move.
Your payments are usually fixed, so you pay a fixed amount each month. And an agreement often covers the payment of school fees and private health insurance, resulting in higher payments than under an assessment.
Changing a child support agreement is difficult. You need to come to a new agreement with the other parent or obtain a court order to change to a child support assessment.
But if you have a valid reason – redundancy, unemployment, health issues etc – you got a chance at court.
Child Support Assessment
You have a lot more room to move with child support assessments. There is more you can influence.
Services Australia determines your child support assessment based on a complicated formula that takes each of your taxable incomes (+ adjustments) and nights spent with the children into account.
So there are five ways to influence those two factors.
Five Ways That Work
1 – Increase Care
The more time you spend with your children, the less you pay. And the more memories you create together.
2 – Work Less
The less you work, the less you pay. And the more time you have to spend with your children and look after yourself.
3 – Run Your Own Business
There is a lot you can do when you run your own business. Talk to your accountant or call me at numba.
4 – Move to an Island
An extreme solution and not for everyone. If you move to a country Australia doesn’t have a social security agreement with (Cook Islands, Samoa, PNG, Yukon or Israel), Services Australia can’t reach you. The question is just what happens when you come back to Australia later on.
5 – Work for Cash
Working for cash is illegal and we don’t recommend it, but it is a way to reduce child support payments.
So this is what works. And here is what doesn’t work.
Three Ways That Do NOT Work
If you are subject to an assessment, there is no point doing the following three to reduce child support payments.
1 – Salary-Sacrifice Super
Salary-sacrificing super has no effect on your child support payments, since any salary-sacrificed amount is added back as an adjustment.
2 – Investment Loss
Investment losses have no effect either, since they are also added back as an adjustment.
3 – Moving to a Reciprocating Country
Australia has reciprocating arrangements with most countries, so Services Australia will still be able to enforce your payment obligations if you move.
So in a nutshell you decrease your child support payments by working less and spending more time with your children.
Does this make sense? Please call me if you get stuck.
Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
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Last Updated on 05 March 2021
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We look after the tax and accounting of your business, wealth and SMSF. We are Chartered Accountants and Registered Tax Agents in Australia and IRS-registered CPAs in the US.