End of year square up on income estimates
End-of-year square-up on income estimates for child support
If you are a paying parent and have chosen to estimate your income, at the end of the year (31 March) we work out what your child support payments should have been based on your actual income for the whole year. This process is called the square-up.
This page explains the sources we use for the square-up, and what happens if we establish that you have overpaid or underpaid child support.
Sources of income for the square-up
To square up your child support assessment, we use information about your income from:
- a tax return that you filed for the year on which you based your estimation
- a confirmed personal tax summary or income statement assessment
- salary and wage information from your employer, or
- if you are an overseas customer, confirmation of your overseas earnings.
If you are required to file a tax return and do not file it by the due date, we use the standard child support formula to calculate how much you should have paid. That is, we calculate the assessment using one of the three usual methods of calculating your income, rather than using your estimate.
If you have overpaid child support
If the square-up shows that you have paid more child support during the year than required, you receive a credit. We use this credit to reduce the child support you have to pay in the following year. However in some cases you can ask for the credit to be refunded.
If you have underpaid child support
If the square-up shows that you paid less child support during the year than required, you will be given 30 days to pay the difference.
If, based on your estimated income, your assessment was less than 80% of the assessment based on your actual income, you must pay a 10% underestimation penalty on the difference. The purpose of this penalty is to discourage deliberate underestimation of income by those who are trying to pay less child support.
Example
A paying parent had to pay $3,600 on their estimate but their actual income means they had to pay $6,000. We will charge a penalty because $3,600 is less than 80% of $6,000.
The 10% penalty is charged on the difference between the estimated and actual amounts - so the penalty would be $6,000 - $3,600 = $2,400 x 10% = $240
To avoid such a penalty, if your income changes during the year or you have made a mistake in your estimate, please contact us immediately on freephone 0800 221 221. Information on changing or cancelling your estimate is also provided on this site.
Date published: 14 Oct 2004
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