Does Salary Sacrifice Affect Child Support?
Updated: 29 May 2024 ยท Read time: 4 minutes
The amount a parent has to pay in child support payments is based on their taxable income. This means that if a parent chooses to salary sacrifice, the amount of their taxable income is reduced and therefore their child support payments may be lower.
However, it is important to note that not all salary sacrifice arrangements will have an impact on child support payments, as some types of salary sacrifice are excluded from the calculation.
What forms of Salary Sacrifice won't effect child support payments?
Salary sacrifice arrangements that are excluded from the calculation of child support include those related to:
- Superannuation contributions: Salary sacrificed superannuation contributions are not counted as taxable income for child support purposes.
- Income protection insurance: Salary sacrificed income protection insurance premiums are not counted as taxable income for child support purposes.
- Laptop computers, tablets and mobile phones: If an employee salary sacrifices the cost of a laptop computer, tablet or mobile phone for work purposes, it won't impact their child support payments.
There are ways to take advantage of a salary sacrifice arrangement, while ensuring any obligations for child support are met.
Attempting to manipulate salary sacrifice arrangements solely to reduce child support payments may be viewed unfavourably by the court and could result in legal consequences.
It's important to seek legal advice from an experienced family lawyer to ensure that these kinds of arrangements do not put you in a position where your obligations can be said not to have been met.
Does a Novated Lease Affect Child Support?
One common form of salary sacrifice is a novated lease, which allows an employee to lease a car using pre-tax income.
The lease payments are deducted from the employee's pre-tax salary, reducing their taxable income. While a novated lease can be a tax-effective way to own a car, it can also affect child support payments.
This is because child support is calculated based on the parent's taxable income, which is reduced by the amount of the novated lease payments. As a result, the parent's child support payments may be lower than if they did not have a novated lease.
Are there ways I can reduce child support payments?
While salary sacrifice can have an impact on child support, there are other ways to reduce your payments.
One option is to negotiate (or renegotiate) a private child support agreement with the other parent, which can take into account factors such as the cost of caring for the children and each parent's financial situation.
Another option is to apply for a change of assessment, which allows you to seek a different assessment of your child support payments based on special circumstances, such as high medical expenses or child care costs.
FAQs
Do changes in assessable income affect child support?
If a parent's income changes significantly, then yes it can affect their child support payments.
This includes changes to salary sacrifice arrangements, as well as other changes in income, such as a promotion or redundancy. This can either increase or decrease your payments, depending on the circumstances.
It is important to notify the Child Support Agency (CSA) of any changes to your income, as they will recalculate your child support payments based on your new income.
Does child support take into account non-taxable income?
Child support is calculated based on the parent's taxable income, which includes income from all sources, including salary sacrifice arrangements.
However, non-taxable income, such as government benefits or child support payments from a previous relationship, is not included in the calculation.
Can I include child support payments as part of my taxable income?
No, child support payments are not considered taxable income for the parent receiving them, nor are they tax-deductible for the parent making the payments.
How can I change my child support payments if my income changes?
If your income changes, you can notify the CSA and request a reassessment of your child support payments based on your new income.
Alternatively, you can negotiate a private child support agreement with the other parent, or apply for a change of assessment based on special circumstances.
Can I reduce my child support payments if I have high expenses?
If you have high expenses, such as medical or child care costs, you may be able to apply for a change of assessment to have your child support payments reduced.
However, this will depend on your individual circumstances and whether the CSA determines that the expenses are reasonable and necessary.
Conclusion
If you need assistance via our Sydney family lawyers, feel free to contact our approachable team.
