What Income Does Services Australia Use for Child Support?

Under the Child Support (Assessment) Act 1989, assessments are built on the Last Relevant Year of Income (LRYI) — the financial year that ended most recently before your child support period began. The adjusted taxable income for that fixed historical year is what drives the formula.

What Is a Child Support Period?

Before the income rules make sense, it helps to understand what a child support period actually is — because the LRYI is defined relative to when the period began, not relative to the calendar year or when the ATO processes a return.

A new CSP begins whenever the Registrar makes a new child support assessment. The most common triggers are:

• A new application for assessment is accepted. The CSP starts on the day Services Australia received the application (s.7A(2)(a)).
• The ATO issues an income tax assessment for a parent. The Registrar must make a new assessment — and therefore start a new CSP — typically from the first day of the month after the new assessment is made (s.34A, s.7A(2)(d)).
• A child support agreement is accepted that affects the rate payable. The new CSP starts on the day the agreement alters the rate of child support payable (s.7A(2)(c)).

Importantly, amending an existing assessment — for example, adding a child or updating an income estimate — does not start a new CSP. The period continues and the LRYI stays the same; only the calculated rate changes.

A CSP ends when the Registrar makes a new assessment (at which point the old assessment and CSP end together), or at the 15-month maximum, whichever comes first (s.7A(3)).

How the CSP start date determines which income is used

The LRYI is the financial year that ended most recently before the CSP began. This means the start date of the period — not when you lodged a form or when the ATO processed a return — is the anchor for which income year goes into the formula.

For example: a CSP commences on 1 January 2024. The most recent financial year that had fully ended before that date is 2022–23. That is the LRYI. The assessment uses ATI for 2022–23 — earnings from roughly 18 months prior — regardless of what the parent earned in 2023–24.

When a new CSP starts — because, say, a parent's tax return triggers a new assessment — the LRYI resets to the financial year ending most recently before that new period's start date. This is how more recent income can flow into the formula without anyone lodging an estimate: the new CSP simply anchors to a newer income year.

The Last Relevant Year of Income — Why It Exists

Most parents assume child support is based on what they or the other parent earn right now. It is not. The legislation anchors assessments to a specific income year rather than real-time earnings, because real-time earnings are not independently verifiable.

Under s.5 of the Child Support (Assessment) Act 1989, the Last Relevant Year of Income is the financial year ending most recently before the child support period began. If your child support period commenced on 1 January 2024, the LRYI is 2022–23 — two full financial years prior. Services Australia calculates ATI using the taxable income for that fixed year under s.43 of the Act. The figure does not automatically move forward just because time passes or a new tax return is lodged.

What Is Adjusted Taxable Income?

ATI may differ from the taxable income figure on a tax return where any of the statutory components apply — so that investment strategy, salary packaging, or extra super contributions cannot be used to artificially suppress the income figure in an assessment.

Taxable income

This is the starting point for the ATI calculation — the figure the ATO produced for the LRYI after allowable deductions. For most employees, this is roughly equivalent to gross salary minus any standard work-related deductions. For self-employed parents or those with investment income, the figure can look very different from what actually flowed through the household.

Reportable fringe benefits

Some employers provide benefits that are not included in taxable income — things like a company car, subsidised housing, or salary-packaged expenses. These are called fringe benefits, and if they are reportable, they get added back into the ATI for the LRYI.

This matters because a parent whose employer packages a significant portion of their remuneration as benefits may have a lower taxable income than their actual standard of living suggests. The ATI calculation is designed to account for that.

Reportable super contributions

Standard compulsory employer super contributions are not included in the ATI. Reportable superannuation contributions — which are certain salary-sacrificed or additional employer contributions reported on a payment summary — are added back into the LRYI ATI figure. The intent is to prevent a parent from reducing their apparent income by funnelling extra money into superannuation.

Tax-free government payments

Some government payments are tax-free, which means they do not appear in taxable income. Where a parent received the following payments during the LRYI, they are added into the ATI calculation under s.5 of the Child Support (Assessment) Act 1989:

• Disability support pension (Social Security Act, Part 2.3), including any youth disability supplement
• Carer payment (Social Security Act, Part 2.5)
• DVA invalidity service pension (Veterans' Entitlements Act, Division 4 Part III)
• DVA partner service pension, where received on the basis of a partner's invalidity (Division 5 Part III)
• DVA income support supplement paid on the grounds of invalidity (Division 5 Part IIIA)

Note: the Defence Force Income Support Allowance under Part VIIAB of the Veterans' Entitlements Act ceased from 1 January 2022 and is no longer included in the definition of tax-free pension or benefit for child support purposes — though payments made before that date remain part of ATI for periods where they arose.

Target foreign income

Target foreign income — income received from outside Australia for which the parent does not pay Australian income tax — is also included in the ATI calculation under s.43(c). This applies where a parent earned income offshore that was not subject to Australian tax in the LRYI.

Total net investment losses

If a parent had investment losses during the LRYI — for example, from a negatively geared property — those losses reduced taxable income for ATO purposes. For child support, those losses are added back in so that investment strategy does not artificially suppress the income figure.

The above components cover the ATI calculation for the vast majority of parents. Target foreign income aside, these are also the items most likely to produce a result that differs from the taxable income shown on a tax return.

Current, Estimated, and Reconciled Income

These three terms cause a lot of confusion. Here is what they mean in relation to the LRYI.

Current assessed income

This is the ATI from the LRYI that Services Australia is currently using in your assessment. For most parents, this is the income for the financial year ending before their child support period began — a figure that can be one to two years behind current earnings. It does not update automatically mid-period. The LRYI changes when a new child support period commences or a parent takes action through an estimate or change of assessment.

Income estimate

If a parent's current income is significantly different from their LRYI figure, they can lodge an income estimate with Services Australia — a self-reported projection for the current financial year. Services Australia will use this estimate going forward in place of the LRYI figure, but it comes with a catch: at the end of the financial year, the estimate is reconciled against the actual tax return lodged with the ATO.

If the estimate was too low, the shortfall is backdated and additional child support becomes owing for the entire period the low estimate was in place — potentially the full financial year. Estimates are useful for parents whose income has genuinely dropped since the LRYI, but they carry real risk if the figure is understated, even unintentionally.

For a full walkthrough of how estimates work in practice, including the reconciliation process and what to do if you get the figure wrong, see child support income estimates explained.

Reconciled income

Reconciliation happens after tax time. When a tax return is lodged, Services Australia compares it against any estimate that was in place for that year. If there is a gap, the assessment is recalculated for the relevant period under the Child Support (Assessment) Act 1989. This is one of the main reasons parents see their child support change after tax time — not because the care arrangement changed, but because the income figure in the assessment has been corrected against what was actually earned.

Why the Numbers Feel Wrong — Practical Examples

Example 1 — The LRYI reflects a better year

A parent was working full-time with overtime in the financial year before their child support period began. That higher income is the LRYI. They are now working part-time following separation, but the assessment is still based on that earlier figure. Lodging an income estimate for the current year may be appropriate. The parent carries reconciliation risk, so accuracy matters — but using current projected earnings to replace an outdated LRYI is legitimate.

Example 2 — A pay rise that post-dates the LRYI

A parent believes the other side received a significant pay increase since the child support period started. The current assessment still uses the LRYI — the income year before the period commenced — which reflects the earlier, lower earnings. The assessment is technically correct based on the Act's framework. The recipient parent may need to request a change of assessment or wait for a new child support period to begin.

Example 3 — Self-employment and a low LRYI

A self-employed parent shows a modest taxable income after business deductions in their LRYI. Their lifestyle — the car they drive, the holidays they take, the assets in the business — does not match what the tax return suggests. The formula is working from the LRYI ATI figure. If there is a genuine gap between the paper income and the real financial position, that is a harder problem to address through the standard assessment process alone. For more on this, see the guide on hidden income and child support.

Example 4 — Salary packaging and a surprising ATI

A parent works in healthcare and salary packages a significant portion of their remuneration. Their LRYI taxable income looks lower than a direct-salary employee in an equivalent role. Because reportable fringe benefits are added back into the ATI, the adjusted income figure will be higher than the tax return suggests — which can come as a surprise to the parent being assessed.

When the LRYI Figure Can Be Updated

• New child support period commences. When a new child support period begins, the LRYI resets to the financial year ending most recently before that new period start date — which may bring a more current income figure into the assessment.
• Income estimate lodged. A parent can self-report an estimate for the current year if income has changed significantly since the LRYI. This replaces the LRYI figure going forward, subject to reconciliation at tax time. The estimate can be updated multiple times during the year if circumstances change again.
• Change of assessment (Reason 8A or 8B). A parent can apply for a formal change of assessment where the standard formula produces an unjust result — for example, where the LRYI does not accurately reflect a parent's actual income, property, or earning capacity.
• Court order or binding child support agreement. If parents reach a formal agreement or a court makes an order, the LRYI-based assessed income may become less directly relevant to the payment amount.

If your real issue is a mismatch between today's earnings and the LRYI figure in the assessment, the next page to read is income estimates explained.

How Income Works — Video Walkthrough

If you want to see the income calculation explained visually — including how the LRYI and adjusted taxable income feed into the broader formula, what estimates mean in practice, and how reconciliation works at tax time — the How Income Works video walks through this step by step. It is designed for parents who understand the basics from reading but want to see the numbers move in real time.

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