Is child support taxable income or tax deductible in Australia?

When a family breaks down, the ATO doesn’t send you flowers – but they may send you a bill.

Taxation consequences are a silent spectre in family law proceedings. The majority of litigants going through the family law system are doing so for the first time, and so it is natural that they may not be familiar with the taxation pitfalls—especially so when it comes to child support. Services Australia is a government body that administers a range of social services, including child support and Centrelink. 

In 2022-2023 alone, Services Australia referred 168,082 parents to the Australian Taxation Office for not filing their tax returns. One of the most common questions we receive in this area is regarding the effect child support has on taxable income and whether child support can be considered as a deduction.

Child support is not always administered by Services Australia; it can also be managed by a private agreement. 

Are child support payments tax deductible?

The short answer is no, child support payments aren’t tax deductible. Payments you make to your former partner to maintain and support your child cannot be claimed as a deduction come tax time, according to the ATO. You will still have to pay tax on this portion of this income. 

However, you may report how much you have spent on child support and declare this to the ATO. The amount paid in child support may be deducted when calculating your ‘adjusted taxable income,’ a figure that can affect your eligibility for payments and services such as Family Tax Benefits. 

If you currently pay child support or may have to in the future, you may consider linking your Services Australia, Child Support Online, and ATO to your MyGov account. This can help you keep on top of your child support obligations and give you clearer record-keeping of what payments you have made to date come tax time.

Are child support payments considered taxable income?

Child support payments that you receive in the financial year are not considered taxable income and do not need to be disclosed to the ATO. The principle at work here is that child support is for the benefit of children and should not be used as a tool to gain a beneficial financial situation.

Taxation implications for child support 

As discussed above, child support payments paid by you can reduce your adjusted taxable income and affect your eligibility for certain government benefits and services. The adjusted taxable income is used as part of the assessment for tax offsets for people serving overseas in the Australian armed services or when working out whether your child is a dependent for Medicare levy purposes. 

Overdue payments and the ATO

Being entitled to child support is one thing. Recovering it is another. A commonwealth ombudsman investigation has found that many parents are abusing the tax system to flaunt their child support obligations. 

One tactic that has been deployed is disguising income by not filing a tax return. If delinquent parents are able to reduce their incomes on paper, then they may be obligated to pay less.  

As many as 153,000 parents in Australia owe outstanding child support payments.

Fortunately, if any tax is due to be refunded to a person at tax time, and they have outstanding child support payments, the ATO applies these funds to that debt unless it would cause that person financial hardship. 

Need some advice? If you have any further questions regarding child support, your entitlements, or any other family law issues, feel free to contact us using the below form, and we will get in touch with you. 

Alternatively, explore some of our other articles regarding child support, or learn more about child support with the Services Australia calculator.

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