Is child support tax-deductible or taxable income in Australia?

Child support – whether you’re paying it or receiving it – can be a significant portion of your income. But do you need to pay taxes on it? Is it tax-deductible? Or is it taxable income?

Taxes in general can be confusing, but we can help. Whether you’re the one making payments or the one receiving them, here’s everything you need to know about paying taxes on child support in Australia.

How do I get child support?

It is firstly relevant to quickly cover the ways child support can be paid. There are four main ways to deal with child support:

1. private agreement between the parents;
2. making an application to Services Australia;
3. limited child support agreement; and
4. binding child support agreement.

If you’re weighing up private agreements versus assessments, our guide to child support alternatives in Australia explains the key differences.

Is child support considered taxable income?

The short answer is no.

Child support is not considered taxable income here in Australia. This is because child support is designed to help cover the cost of raising children and is not earned income in the same way your salary or investment income might be. So, the Australian Taxation Office (ATO) doesn’t treat it the same as salary or investment income for tax purposes either.

What this means is that if you’re receiving child support payments, you don’t need to declare them as income on your tax return. The money also won’t push you into a higher tax bracket or impact the amount of tax you’ll need to pay.

Is child support tax-deductible?

Again, the answer is no.

Child support is not tax-deductible for the person paying it. This often catches people by surprise. In fact, most people believe that because payment is required by the law or is determined by the court, it should be tax-deductible.

But if you’re making child support payments, you can’t claim them as a tax deduction on your tax return. The ATO treats these payments as a personal expense – not a business or income-generating expense.

How child support affects your tax situation

Child support is not income for the receiver for tax purposes and isn’t a tax break for the payer for tax purposes, so it really does not impact your tax situation. Because you don’t pay tax on child support, you don’t have to report it on your tax return (either as income or an expense).

However, receiving child support can impact some other Australian Government benefits.

How child support impacts your Australian Government benefits

If you receive child support payments, it can impact the amount of Australian Government benefits you might be entitled to receive. In particular, your Family Tax Benefits, Rent Assistance and the Child Care Subsidy.

Family Tax Benefits (FTB)

The Family Tax Benefit (or FTB) is a two-part payment, being Part A and Part B, that can help you with the cost of raising your children. You might be eligible for Part A if:

1. You have a child or children up to the age of 15 or from 16 to 19 if they are studying, and you care for them at least 5 days a fortnight.
2. You meet the income test (less than $80,000 taxable income), and
3. You and your child are citizens on a permanent visa or other special visa.

You might be eligible for Part B if:

1. You are in a relationship relying on one income and have a child under 13, or you are a single parent caring for a child under 15 or from 16 to 19 if they are studying; you have dependent children who aren’t getting a pension or payment of a benefit; you care for the child at least 35% of the time; and you meet a set income test (along with other requirements). You may also be eligible for Part A or Part B of the FTB (which are the two parts) or only Part A.
2. You meet the income test (less than $80,000 taxable income for the house), and
3. You, your partner (if applicable), and your child are citizens on a permanent visa or other special visa.

Part A is a payment made for the intended benefit of the children. Part B is a payment made for the intended benefit of the family generally.

However, child support can impact the amount of FTB you might receive. In fact, the more child support you receive (or are entitled to), the fewer FTB A payments you are eligible for. The Australian Government will look at the amount of child support you receive and use the Maintenance Income Test to work out when the child support will impact your FTB benefits.

Once your child support is above the threshold set by the government, your FTB A payments will be reduced by 50 cents for every dollar of child support you receive over the threshold.

The threshold and amount of base payments for FTB Part A will be set by the government using the family income estimate. If you are getting FTB, you will need to update your family income estimate before the start of each financial year.

If you need more information about your personal FTB benefits, contact our team. Or you can read more about the test and thresholds on the Services Australia website.

Rent Assistance

To obtain Rent Assistance, it can be paid with another Services Australia payment, including Austudy, Carer Payments, Disability Support Pension, or, as relevant in this case, Family Tax Benefits. To get rent assistance, you also need to be paying accommodation costs, including rent, retirement village fees, lodging and board, or mooring fees.

If you’re receiving Family Tax Benefits, if you have dependent children, and you meet the eligibility requirements, you’ll usually get Rent Assistance with your FTB Part A payments. These payments are calculated based on how much your fortnightly rent accommodation costs are, your pay, and your family situation (i.e., your marital or relationship status, the number of children you have, and other factors such as illness).

Because Rent Assistance is often included in the FTB Part A payment, where this is reduced, Rent Assistance may also be reduced proportionally based on the amount received.

Child Care Subsidy

Child support payments can also impact your Child Care Subsidy (CCS), which is a benefit you may be eligible to receive to help you to cover the cost of child care.

The amount of CCS you are eligible to receive is based on your adjusted taxable income set by Services Australia, rather than the ATO. So, while your taxable income for the ATO won’t change due to child support payments, for CCS, it can. It can then impact the amount of CCS you are eligible to receive.

Keeping good records

The ATO is very clear that child support is not taxable income or tax-deductible. However, for benefits and financial planning, it’s important that both parties keep clear records of any child support payments made or received.

Here are some quick tips:

• Keep all receipts, bank statements, and formal agreements or orders to show child support transactions.
• Update your tax agent or accountant about all your support obligations and entitlements (whether you’ve received payments or not).
• Let Centrelink/Services Australia know about changes to your family situation anytime they occur.
• If you are receiving Government benefits, update your family income estimate before the start of each financial year.

Financial planning & child support

If you’re receiving, paying, or expecting to receive or pay child support, it’s a great time to get professional advice. Speak to your family lawyer (we’re always here to help) and your accountant or financial advisor to get guidance on how to plan for the future care of your family.

While these payments won’t show up on your tax return, it’s still important to understand what you could be eligible for, what you will receive, and how to budget well to set yourself and your family up for a strong financial future. Understanding how child support fits into your broader financial life will help you plan ahead with confidence.

Get support

Still got questions? Chat with our experienced family law team.

Watts McCray Lawyers can provide you with advice and assistance at each stage of your child support journey. Should you have any queries about child support or a child support dispute, contact Watts McCray Lawyers on 1300 516 443 for assistance.