When parents separate or divorce in Australia, one of the key financial responsibilities to manage is child support. Sadly, it’s a reality of two people separating that one will generally look after the children for a higher percentage of time than the other, normally for practical reasons (such as proximity to schools, housing arrangements etc), but potentially for emotional reasons too. While child support is intended to cover the costs of raising children, many parents are also concerned about the impact it may have on their tax obligations and/pr government benefits. This article explains how child support affects taxes in Australia and what both paying and receiving parents need to understand.

What Is Child Support?

Child support is the financial contribution one parent makes to the other (or directly to the child, in some cases) to assist with the costs of raising children, such as education, clothing, food, medical expenses etc.In Australia, child support is managed under the Child Support (Assessment) Act 1989 and is typically administered by Services Australia (Child Support). Separated parents may choose to self-manage child support rather than use Services Australia but must keep good records to avoid complications.

Payments are based on a formula that considers:

• Both parents’ taxable incomes

• The percentage of care each parent provides

• The number and ages of the children

Is Child Support Tax-Deductible?

For parents who pay child support:

• Child support payments are not tax-deductible.

• You cannot claim a tax offset, deduction, or reduction in taxable income for money paid as child support.

This is because child support is considered a personal obligation, not an expense incurred to earn income.

Is Child Support Taxable Income?

For parents who receive child support:

• Child support payments are not taxable income.

• You do not need to declare child support on your tax return.

This ensures that the money intended to support children is not reduced by additional tax liabilities.

How Child Support Affects Your Taxes Indirectly

Although child support itself is neither taxable nor deductible, it can still influence your tax position in other ways:

1. Adjusted Taxable Income (ATI)

The Australian Taxation Office (ATO) uses a measure called Adjusted Taxable Income to calculate eligibility for certain government benefits and offsets.

• Child support payments reduce your ATI if you’re the paying parent.

• This may affect your entitlement to Family Tax Benefit (FTB) Part A, the Parenting Payment, or other Centrelink benefits.

2. Family Tax Benefits

• Parents receiving child support may have their FTB Part A reduced, depending on the amount of child support received.

• The more child support you get, the lower your government assistance may be.

3. Private Agreements and Lump Sum Payments

• If parents make a private child support agreement, the structure of payments (e.g., lump sum transfers, paying expenses directly) may affect how Centrelink assesses benefits.

• Tax implications remain the same — not deductible, not taxable — but benefits could change.

Record Keeping

Even though child support doesn’t need to be reported on your tax return, you should:

• Keep records of payments made and received (bank transfers, receipts, or Services Australia statements).

• Maintain documentation if you’re relying on child support information for Centrelink benefits or legal purposes.

Key Takeaways

• Paying parents: Child support is not deductible.

• Receiving parents: Child support is not taxable income.

• Child support can indirectly impact your government benefits through Adjusted Taxable Income and Family Tax Benefit assessments.

• Always keep accurate records and, if unsure, seek advice from a tax agent or financial advisor.