What You Need to Know About Child Support and Business Income
For most parents, their just and proper child support assessment is easily obtained by registering with the Child Support Agency and producing their most recent tax returns and salary information.
Difficulties can arise where one or both parents are self-employed. For those parents, the salary they may draw from the business can be less than the real personal benefit they derive from the business. The line between business expenses and personal expenses can be blurred. For example, a parent may draw a low wage but have their car, telephone and accommodation costs met by the business.
Difficulties can also arise where a parent:
- Changes his or her occupation, industry or working pattern;
- Reduces their work hours; or
- Does not work despite ample opportunity to do so.
The Child Support (Assessment) Act 1989 enables aggrieved parents to seek have a self- employed, under-employed or unemployed parent’s true income or earning capacity reflected in their child support assessment.
Care should be had when responding to an aggrieved parent’s application for a departure from a child support assessment.
In the recent case of Yip & Wreford & Child Support Registrar  FamCAFC 21 a Mother was successful in increasing the Father’s taxable income from nil to $115,000.00. The Father had resigned from his long term employment, informed the Child Support Registrar his income was nil, then established a business which had a substantial turnover in its initial year. When the Father appealed his taxable income was further increased to $217,000.00. The further increase in the Father’s income was found to be just, equitable and proper after the Father disclosed in his appellate material that the business was:
- Paying him and his girlfriend equal director fees, despite the Father being the main driver and source of the business income and success;
- Paying the full rent of the residence of the Father and his girlfriend, despite the business only operating from one room of the residence; and
- Paying for the Father’s personal telephone expenses.
In other words the CSA ‘lifted the corporate veil’ to determine that the business was dividing income in circumstances when the true monetary benefit and earner of the income was in fact the Father.