Q: Can my Property Settlement impact on my child support?
A: Yes, it can. There is an important catch that you must be aware of when negotiating a property settlement. Where separating parties are equal Shareholders and Directors of a company, they may agree for a payment to be made to one of them in a property settlement, and it can happen that maybe the only place this payment can come from is the company. Parties are often conscious of the tax implications created by a Division 7A loan (a loan from the company to one or more of its directors). Sometimes issuing a dividend from the company to a party is a sensible solution for property settlement purposes. However, what often isn’t contemplated is the effect that this dividend may have on a party’s income for child support purposes eg. their “adjusted income”. It might:
- Increase your child support payments if you are a “payer” for child support purposes; and
- Increase your income. If you are in receipt of an income tested government benefit you must be sure to be careful not to forget about including the dividend in your income amount provided to Centrelink, otherwise it could result in you receiving an overpayment and subsequently have a debt owed to Centrelink.