Australian parents owing or receiving child support who fail to lodge their tax returns should be fined as it distorts the financial support children ultimately receive, an independent senator has said.
More than 700,000 people receiving or paying child support had not filed their tax returns as of September 2020, Senator Rex Patrick said, calling on the Australian Tax Office (ATO) and Services Australia to do more to address the problem.
Child support payments are calculated by looking at the income of each parent, the cost of raising the child and who carries out childcare duties. However, more than 16,000 people paying or receiving child support haven’t lodged a tax return in a decade.
“If you put the wrong [tax] information in, you get the wrong information out. So if you’ve got people who are not filing tax returns, then there is erroneous information,” he told Yahoo Finance.
“That could cause children to suffer,” he added, calling for punitive measures.
With more than 700,000 failing to file returns, Patrick estimates as many as 1 million children could be affected by incorrect payments, when considering multi-children households.
“Both the tax office and Services Australia have been perfunctory in the performance of their duties,” he said.
“The tax office has responsibilities in relation to making sure that it receives the right amount of income from everyone, and the child support agency is responsible for making sure the correct amount of child support is paid.
“They both have a duty and they’re failing in that duty.”
However, responding to questioning in Senate Estimates last week, Services Australia CEO Rebecca Skinner rejected Patrick’s claims it was the agency’s responsibility to resolve.
“It’s a matter for the tax office,” she said, adding that the child support system is “very complex”.
In some instances, parents who haven't lodged tax returns aren't require to do so due to low levels of income.
“I certainly know that customers who are concerned about their child support arrangements can contact us... If people do contact us, we can assist them.”
Social Services Minister Anne Ruston said she was hearing the message “loud and clear” in the same Estimates hearing.
“I would like to think that the next time we are before you, which is not very far away, we'll have a very solid answer,” she said.
In a statement, she said family break downs are "incredibly difficult", and that support arrangements are in place to ensure children remain financially secure.
"It’s so important that both parents work together to ensure that they are providing correct, up to date information and lodging their tax returns in a timely manner, as child support calculations are based on the interests of the children," she said.
"Senator Patrick has raised this issue with me and I take the matter very seriously."
The ATO said it actively looks at taxpayers with outstanding lodgments before taking a tailored approach depending on the taxpayers’ circumstances.
“In addition to engaging with those taxpayers we identify through our own lodgment programs and risk assessments, we also take action with high risk clients referred to us directly from Services Australia (Child Support),” an ATO spokesperson said.
“We first attempt to work with the taxpayer to ensure they’re aware of their obligations and the support available to help them get back on track. For taxpayers who do not engage with us, we may consider other actions including penalties.”
Taxpayers who fail to lodge returns may then be hit with a penalty up to $1,110.
As it stands, parents who make late child support penalties may be penalised by Services Australia, with the penalty amount flowing to the Australian Government.
And under current legislation, Services Australia can recover unpaid child support through income support deduction, garnished tax refunds, bank account deductions, overseas travel bans, litigation and prosecution.
Yahoo Finance has contacted Services Australia for comment.