All you need to know about Child Support Debt

Having any significant debt can be a stressful experience, but unfortunately some parents are discovering that having a Child Support debt can have an even greater impact on a person’s life then other debts. This is because of the various powers that exist to enforce the payment of a debt.

You may be interested in our article Child Support Debt? Top 4 Actions you can take.

Child Support debt can easily be accrued, and in some cases a parent goes from owing no money to owing thousands in a very short period of time. One of the most common reasons that a parent can quickly receive a Child Support debt is when the Child Support Agency reassess a Child Support Assessment.

This can be done because new information is received (such as a person lodging a tax return), because one parent has asked for a new assessment through the Change of Assessment process or because of a Child Support objection or an appeal.

Having a Child Support Debt

If you have a Child Support debt it is very important to remember that the Child Support Agency will be the one chasing and enforcing the payment of the debt, not the other parent.

Under the legislation the Child Support Agency have a number of avenues and tools that they can utilise to try and recover Child Support debt. This includes:

1. Garnishing wages – so that your Child Support is paid to the Child Support Agency directly from your employer before you are paid.
2. Garnishing bank accounts – where the Child Support Agency can remove funds from banks accounts in your name, without your permission to pay your Child Support.
3. Garnishing tax returns – where the Child Support Agency can intercept any tax return that you may be due to receive and instead this money is paid to the Child Support Agency to pay your Child Support.
4. Having a Departure Prohibition Order made – which will prevent you leaving the country while you still owe Child Support, this can involve the Australian Federal Police removing you from an aeroplane if you are trying to leave the country (even if you are only leaving the country for a holiday or a work trip).
5. Orders to sell your assets – the Child Support Agency can commence Court proceedings against you and obtain Orders to sell assets such as motor vehicles or property.
6. Charging late payment penalties.

Late Payment Penalties

One of the biggest issues that parents have with their Child Support debt is that the Child Support agency can, and will, charge late payment penalties whenever someone owes any Child Support. The Child Support legislation establishes that the Child Support Agency can impose a late payment penalty on a parent whenever they fail to pay their child support debt in full by the due date.

The purpose of a late payment penalty is to encourage parents to comply voluntarily with their obligation to pay child support and discourage late payment. Child Support penalties are a debt payable to the government and not to the other parent. Any late payment penalties collected are paid into consolidated revenue.

But the Child Support legislation also establishes that the Child Support Agency can remit a late payment penalty in part or in full. The Child Support Agency have discretion to consider remitting a late payment fee, based on the circumstances of the individual case. Late payment penalties can be remitted in any of the following 3 situations:

1. The parent did not pay on time because of circumstances beyond their control, and they have taken reasonable action to mitigate those circumstances or their effects.
2. The parent did not pay on time because of circumstances within their control, and they have taken reasonable action to mitigate those circumstances, or their effects and it would be fair and reasonable to remit the penalty having regard to those circumstances.
3. There are special circumstances in the case which make it fair and reasonable to remit the penalty.

In addition to the above, the Child Support Agency have a Late Payment Penalty Incentive Offer aimed at encouraging parents to reduce their debt. Under the Late Payment Penalty Incentive Offer, if a parent enters a reasonable payment arrangement to pay all Child Support debt while maintaining full and timely payment of any ongoing Child Support payments the Child Support Agency can remit 25% of the current late payment penalties owing immediately.

Also, the Child Support Agency can record a recommendation for the remission of the balance of the late payment penalties upon full payment of the Child Support debt in accordance with the negotiated payment arrangement. A ‘reasonable payment arrangement’ will depend on the circumstances of each case.

However, penalties will keep automatically accruing when there is any Child Support owning. Penalties are automatically applied by the Child Support agency to any debt owing and they will not stop even if there is a payment arrangement in place.

It is important to remember if you a owe a Child Support debt that the late payment penalties will continue to increase, until you have paid your Child Support debt in full and can ask the Child Support agency to wipe the late payment penalties in full.