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How redundancy can affect child support payments

1 March 2021

One of the sad hallmarks of 2020 was the number of people becoming unemployed. In the current economic climate, it could be considered “lucky” to receive a redundancy payout, rather than just becoming unemployed. So, how is a redundancy payment treated for child support?

If you have child support commitments, what does it mean for how you spend your redundancy cheque? And will Services Australia – formerly the Child Support Agency – take it into consideration?

Services Australia has a formula to work out how much child support a parent has to pay. The formula is applied to the taxable income of each parent and takes into account the number of children in each parent’s care, and the amount of time the children spend with each parent.

The formula is a one-size-fits-all approach that, while it takes into account the situations of many families, it can result in inequalities where there are special circumstances. This may occur when one parent receives a redundancy payment and the financial capacity of that parent to provide for a child is not accurately reflected in the assessment.

The other parent may be able to apply to depart from the child support assessment. There are three steps to be considered when making a departure from the agreed upon assessment:

  1. There is grounds for departure
  2. It is just and equitable to make a particular determination
  3. It is otherwise proper to make a particular departure determination

In a 2019 case, a father received a gross redundancy payment of $225,702 on May 30.

On May 31, he told the child support agency his estimated income was nil and based on the reduced income he was assessed to pay $2832 in child support annually.

The mother lodged an application to change the assessment, with reference to his redundancy payment. He objected on the basis he had spent his redundancy payment, to pay out various loans and expenses.

However, the tribunal found the redundancy payment should be taken into account as part of the father’s income. He was assessed as being able to pay $26,400 in child support annually, a significantly higher amount than the initial assessment.

The tribunal also found the father had been reckless in disposing of his redundancy payment and a departure from the assessment was just and equitable.

Redundancy payments are a relevant component when estimating income for the purpose of a child support assessment, and, depending on the circumstances of the case, a redundancy payment can significantly affect the amount of child support payable.

If you need help with child support, or any other family law matter, please contact Michael Lynch Family Law. Our family law experts can give you advice specifically tailored to your individual circumstances. Call our office on: (07) 3221 4300 or email: [email protected]

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2021-02-24T15:07:24+10:00

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