Child support and business income

Difficulties with child support and business income often arise when one or both parents are self-employed. In these situations, the salary drawn may not reflect the full personal benefit they receive from the business. The distinction between business and personal expenses can be unclear—for instance, a parent might report a low wage while having car, phone, and accommodation costs covered by the business. Difficulties can also arise where a parent:

The Child Support (Assessment) Act 1989 allows aggrieved parents to request that a self-employed, under-employed, or unemployed parent’s true income or earning capacity be accurately reflected in their child support and business income assessment. In the recent case of Yip & Wreford & Child Support Registrar [2015] FamCAFC 21, a mother successfully had the father’s taxable income increased from nil to $115,000.00. The father had resigned from long-term employment, reported no income to the Child Support Registrar, and then launched a business with significant turnover in its first year. When he appealed, his taxable income was further adjusted to $217,000.00. This increase in assessed income was deemed just, equitable, and proper after the Father disclosed in his appellate material that the business was:

The Father and his girlfriend received equal director fees, even though the Father was the primary driver behind the business’s income and success. The business also paid the full rent for the residence they shared, despite operations being confined to just one room, and covered the Father’s personal telephone expenses. In this case, the Child Support Agency (CSA) effectively ‘lifted the corporate veil’ to reveal that income was being distributed in a way that masked the true financial benefit. Ultimately, the CSA determined that the child support and business income assessment needed to reflect that the Father was the actual earner and beneficiary of the income.