Windfall gains in relation to Taxable Income and Child Support Payment

The Australian Government through the Department of Human Services has included the Child Support in one of its Master Programs. Established in 1988, the Child Support Agency (CSA) is the main government agency that is responsible for the implementation of the Child Support (Assessment) Act 1989.

Among its functions is to calculate the amount of Child Support that each parent needs to pay for raising and nurturing their child. In the process of determining the amount needed to be paid by each parent, the Agency developed the Child Support Formula.

The Child Support Formula varies according to the circumstances of each parent. Considering that many different families have different incomes, the number of dependents and the varying cost of living, the Child Support Formula will provide a balanced and viable way to work out the payment of the Child Support.

In assessing the capability and obligation of each parent in the payment of their Child Support, the taxable income is taken into consideration. Each of the shares of the parent will show how much they can afford in paying their child support.

However, unexpected income, otherwise known as Windfall Gain/Profit is not assessable as taxable income. Windfalls can either be an unexpected inheritance received by the Parent from their distant relatives; it can also be a lucky win in the lottery or gambling. In any case, this unexpected income will not form part of the taxable income of the parent. Consequently, it is not taken into consideration in the Formula Assessment of the payment of their Child Support.

In the case where the windfall gain/profit can increase the potential income of the parent, there may be a reasonable change in the formula assessment. An example of which is the investment made by the parent of his unexpected inheritance to a potential business venture that will gain additional revenue.

In this case, the said investment will potentially increase the taxable income of the parent. Thus, an adjustment to the assessment of his child support payment is reasonable and legally necessary.

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Alan Weiss

25th March, 2020

Alan Weiss developed aussiedivorce.com.au after he experienced himself how devastating divorce proceedings can be. I witnessed firsthand my own future security, and that of my familys, being destroyed by acrimonious and costly divorce litigation. I created aussiedivorce.com.au to help people avoid an experience like this and lose thousands of dollars. Instead the aussiedivorce.com.au system will assist them in getting on with their lives.