More than 160,000 parents in Australia’s child support system failed to lodge tax returns last financial year and avoided paying or receiving the correct amount in child maintenance payments from their ex-partner.
Experts warned that failing to lodge a tax return was a common tactic used by parents to avoid paying their full child support obligations and should be recognised as a form of economic abuse.
Figures obtained by the ABC show Services Australia, which administers the child support scheme, referred 168,082 parents to the Australian Tax Office (ATO) in 2022-23 for having overdue tax returns.
Government data showed there were more than 651,465 parents in the child support system, meaning a substantial proportion of returns could be outstanding.
According to Services Australia’s figures just over three-quarters of child support parents were active paying parents without a debt.
Services Australia use tax returns to assess separated parents’ income and work out how much child support they must pay.
The ATO can also use money from a parent’s tax returns to pay any outstanding child support debts owed to the other parent.
If a parent doesn’t file a return, their income is estimated based on either their last tax return, adjusted for inflation, or two-thirds of the male total average weekly earnings, whichever is higher.
Experts said parents often used this strategy to pay less in child support than they would if they declared their true income.
The impact can be devastating, according to Women’s Legal Services Australia Executive Officer Lara Freidin.
“Australia has failed to recognise and respond to the link between non-payment of child support and economic abuse as a form of family violence,” she said.
“It’s a continuing form of violence.”
Ms Freidin said non-compliance had a profound impact on women who made up 83.4 per cent of child support recipients and were already facing significant economic disadvantage.
Multiple tactics used to avoid payment
Women’s Legal Services recently conducted a literature review looking at non-payment of child support that drew on academic works, government inquiries and data, media, policy papers and reports from frontline workers.
It found reports of parents avoiding child support by doing cash-in-hand work, salary sacrificing, setting up business structures, lodging tax returns late and using superannuation and trusts.
“Coupled with inadequate enforcement from Services Australia, the onus falls on the mother to contact Services Australia to initiate an investigation or court proceedings,” Ms Freidin said.
Of the outstanding returns, the ATO said in 2022-23 its enforcement program led to 73,426 tax returns being lodged and 21,038 child support debts recovered.
An ATO spokesperson told the ABC where returns were ultimately lodged, some clients’ earnings didn’t qualify for a tax refund and therefore no debts could be recovered.
Barrister Catherine Devine deals with some of the most complex child support cases and said the failure to lodge tax returns was far more common than people realised.
She said there could be many reasons why people didn’t lodge, ranging from mental health issues to poor literacy, while others were hiding their real income to lower the amount owed to their ex.
“Cash is a huge problem, particularly for tradespeople it is a big problem.”
The Women’s Legal Services review found there was even a website where paying parents were advised how to legally minimise their taxable income to reduce child support payments.
“The non-payment or underpayment of child support is enabled by a system that tends to take a hands-off approach, giving fathers an undesirable amount of control,” the review stated.
‘The numbers don’t stack up’
Legally, the ABC can’t identify people involved in family law proceedings so we have used a pseudonym to hide their identifies.
Timothy, a Victorian father-of-three who pays $900 a fortnight in child support and regularly submits a tax return, said his ex-wife hadn’t submitted a tax return for four years.
“I have always provided for my family. This has often come at the detriment to my health and wellbeing,” he said.
His ex-wife recently gave Services Australia a provisional income estimate of $11,000 — which increased his child support payments.
And while Timothy thinks that’s not accurate, it falls under the threshold that would have legally required her to submit a tax return.
“The numbers she’s providing don’t stack up. There’s no way she could buy me out of a house, pay its mortgage and pay private school fees on $11,000 a year, it’s just not possible.”
He suspected his ex-partner received cash-in-hand from a family business.
Timothy said he’d like to see payments held by Services Australia until tax returns were submitted.
Father suspected of hiding money offshore
Mother-of-one Yvette said she’d like to see more than just taxable income used as a measure to calculate child support.
She believes her ex-husband should be paying her child support, but instead, based on their taxable incomes, she has to pay him $2,000 a year.
She suspects he hides his real income in his business and she recently learned he’d purchased valuable real estate in his business’s name.
“The system needs to fairly account for parents that are business owners and can hide cash,” she said.
“He doesn’t need money from me. This is just another way to perpetuate financial abuse that was already there in the marriage,” she said.
Ms Devine said there were rules to help parents who wanted to appeal payments and the government had power to investigate unexplained wealth, using businesses to hide funds, or poorly-disclosed changes to income.
Timothy said he’d started this process but had found it too complex.
As the government’s wider review of child support continues, Women’s Legal Services Australia is calling for a series of urgent reforms, including better enforcement of deadlines for lodging tax returns.
It also called for the government to provide a child support guarantee, meaning the government would cover any amounts not paid by ex-partners.
Ms Freidin said more funding was also needed for Legal Aid services to help women appealing child support income assessments.
Collecting small sums of money costly
Another challenge was recouping what was often relatively small sums of money, with ATO data showing the average amount it clawed back for child support debts was $1,709 per return.
The table below from a 2017 audit shows how many people owed these small amounts.
Services Australia said the 168,000 parents referred to the ATO included anyone who had not lodged a return in the past five years, were referred multiple years in a row or had historical debts.
In a statement an ATO spokesperson said in the second six months of 2023 it made almost 1.5 million attempts via texts, emails, letters, and phone calls to contact taxpayers with outstanding returns who had child support debts.
In the recent federal budget the government allocated $5.1 million for a series of reforms including reviewing compliance in the child support scheme, with a focus on collection and enforcement.
Posted , updated