CENTRELINK has, as a part of its responsibilities, the role of administering the child support assessment system. The amount of child support payable is based primarily on the adjusted taxable income of the supporting parent. As would be expected when the Income Tax Act is involved, a degree of complexity is added to an already complicated and emotive area of law.
Q I will soon be 60 and am planning to retire. My income will be a $50,000-a-year tax-free pension from a self-managed super fund. I currently pay child support and want to know if I will continue to be liable when I retire? If the answer is yes, then what is the logic as I have already paid child support on the income that went into super?
A The amount of child support payable depends on the number of nights each parent has their children, the number of children, the age of the children, and the income of each parent. Because the taxable income of an individual can be reduced due to discretionary factors, such as negatively geared investments and amounts contributed to superannuation, various adjustments are made to each parent's taxable income to arrive at the income counted by Centrelink.
One area where adjustments are made is when a supporting parent is retired and receiving a superannuation pension. What must be remembered is that the system is all about ensuring children receive a proper level of support, not what the parents would like to pay.
In arriving at the adjusted taxable income under the child-support formula some tax-free pensions and benefits are added to the taxable income of the relevant parent. This means for someone who is 60 or over and receives an income tax-free pension from a super fund their taxable income could be adjusted.
When the pension received is made up of taxable superannuation benefits the full amount of the pension is added back. Where the pension includes tax-free benefits, usually from after-tax non-concessional contributions, this part of the pension is not added back. This means in your case you will not be paying extra on income contributed to a super fund that was previously counted for child support.
Q I will be 62 in November and want to know when I can apply for a pension from Centrelink? I have about $45,000 in super and would like to withdraw that before leaving
full-time employment.
AIf you are a male you will reach retirement age for the pension when you turn 65, if you are female your retirement age will be 64.5. For both males and females born after July 1, 1952 the retirement age is set to increase in half-yearly increments, which reaches to 67 for both males and females born after January 1, 1957.
To access your superannuation you must meet a condition of release. When someone is under 60 they must retire and not plan to work more than 10 hours a week. People aged 60 to 64 can access their super by simply resigning from an employer. You could resign from where you are working now or start a part-time job then resign from that. The only other way you can access your superannuation if neither of these conditions of release can be met is by starting a transition to retirement pension. This would mean you could draw a pension of up to 10 per cent of your superannuation balance each year.
Questions can be emailed to super@taxbiz.com.au
Self-Managed Superannuation Funds: A survival Guide by Max Newnham, is available in book stores.
Frequently Asked Questions about this Article…
How does Centrelink calculate child support and which income is counted?
Centrelink bases child support on the adjusted taxable income of the supporting parent. The assessment also looks at parenting arrangements (how many nights each parent has the children), the number of children and their ages. Because taxable income can be reduced by things like negatively geared investments and super contributions, Centrelink makes specific adjustments to arrive at the income amount that is counted for child support.
Will I still have to pay child support after I retire and start a superannuation pension?
Retirement doesn't automatically remove child support liability. Centrelink adjusts your taxable income when you begin a superannuation pension, and the assessment will depend on the pension components (taxable vs tax‑free) and your parenting arrangements. The system is designed to ensure children receive appropriate support, so your pension may be included in the calculation depending on its composition.
How are tax‑free and taxable parts of a super pension treated for child support assessments?
If a superannuation pension is made up of taxable benefits, the full amount of that pension is generally added back into the supporting parent's adjusted taxable income for child support. Tax‑free components of a pension—usually arising from after‑tax non‑concessional contributions—are not added back. That means you won’t be charged extra on the tax‑free portion that was previously contributed to super.
What role do parenting arrangements (nights with children) play in child support calculations?
Parenting arrangements are a key input: the number of nights each parent has the children influences the amount of child support payable. Centrelink combines that information with the number and ages of the children and each parent’s adjusted income to calculate the support obligation.
Can negatively geared investments or extra super contributions change my child support assessment?
Yes. Discretionary factors that reduce your taxable income—such as negatively geared investments or additional contributions to superannuation—are taken into account through adjustments when Centrelink calculates the income that counts for child support.
When can I apply for a pension from Centrelink and what are the retirement ages?
Retirement age for the Centrelink pension is 65 for males and 64.5 for females in the examples given. For people born after July 1, 1952 the retirement age increases in half‑yearly steps, reaching 67 for those born after January 1, 1957. Actual eligibility to apply for a pension depends on meeting Centrelink’s age and other criteria.
I’m aged between 60 and 64 — how can I access my superannuation before leaving full‑time work?
People aged 60 to 64 can access their superannuation by resigning from an employer. The article notes you could resign from your current job or take a part‑time role and then resign. If you can’t meet those conditions of release, an alternative is to start a transition‑to‑retirement pension, which allows you to draw up to 10% of your super balance each year.
Where can I get more help or ask questions about child support and superannuation rules?
The article suggests sending questions by email to super@taxbiz.com.au for more information. It also references the book 'Self‑Managed Superannuation Funds: A Survival Guide' by Max Newnham as an additional resource.
Call 1300 880 160
Start a chat
Schedule a call
