Examples of payment deductions
These examples show how payments are deducted from an employee’s / contractor’s wage.
Example one—how to deduct the full amount of Child Support
The employer is asked to deduct $75.00 in Child Support each week.
| Gross weekly pay | $500.00 |
| Tax withheld | $46.00 |
| Weekly Protected Earnings Amount (PEA) | $333.53 (2013) |
| Pay remaining | $120.47 |
| Deducted Child Support (pay this amount to us) | $75.00 |
| Pay remaining | $45.47 |
| Plus PEA | $333.53 (2013) |
| Net pay to employee / contractor | $379.00 |
Other deductions such as an employee’s / contractor’s self contribution to superannuation and loan repayments can now be made from this amount.
Example two—how the PEA can affect the deduction of Child Support
The employer is asked to deduct $75.00 in Child Support each week.
| Gross weekly pay | $400.00 |
| Tax withheld | $34.00 |
| Weekly PEA | $333.53 (2013) |
| Pay remaining | $32.47 |
| Deducted Child Support (pay this amount to us) | $32.47 |
| Pay remaining | $0.00 |
| Plus PEA | $333.53 (2013) |
| Net pay to employee / contractor | $333.53 |
The employer can’t deduct the full amount of Child Support of $75.00 as it would leave the employee / contractor with less than the PEA.
The employer must deduct the Child Support ($32.47) and pay it to us. You will need to tell us the reason for the variation by phone, post or fax. Employers registered with Child Support Online Business Services can report the variations online.
Example three—how to deduct Child Support from annual leave payments
The employee / contractor goes on paid holiday leave on the last pay day in the month and their pay includes an advance payment for the next two weeks. The employee / contractor is paid $400.00 weekly.
The employer is asked to deduct $30.00 in Child Support each week.
| Total pay received | $1200.00 |
| Tax withheld (for three weekly payments) | $102.00 |
| Weekly PEA x 3 ($333.53 x 3) | $1000.59 |
| Pay remaining | $97.41 |
| Deducted Child Support (3 x $30.00) | $90.00 |
| Pay remaining | $7.41 |
| Plus PEA | $1000.59 |
| Net pay to employee / contractor | $1008.00 |
Child Support must be deducted from the advance payment of wages or salary.
The employer deducts $90.00 and forwards that amount to us on or before the seventh day of the following month. That is, $30.00 for the current pay week and $60.00 for the two weeks that are paid in advance.
The employer should pay the deductions to us and advise the reason for the additional payment by phone, post or fax. Employers registered with Child Support Online Business Services can report the variations online.
Example four—how to make deductions of Child Support from a casual or part-time employee’s / contractor’s pay
The employee / contractor works part-time and earns $498.00 a fortnight.
The employer is asked to deduct $40.00 in Child Support each fortnight.
| Gross fortnightly pay | $498.00 |
| Tax withheld | $2.00 |
| Pay remaining | $496.00 |
| Deduct Child Support | $0.00 |
| Fortnightly PEA | $667.06 (2013) |
| Net pay to employee / contractor | $496.00 |
When the remaining income after tax is withheld falls below the PEA, no Child Support can be deducted from the employee’s/contractor’s pay.
As no Child Support was deducted, the employer must tell us the reason for the variation by phone, post or fax. Employers registered with Child Support Online Business Services can report the variations online.
Example five—how to deduct Child Support and apply PEA when there is a salary sacrifice arrangement in place
The employee / contractor has a remuneration package valued at $2,000.00 per fortnight.
Of this, $900.00 is salary sacrificed payments for the employee’s / contractor’s mortgage, car lease, health insurance and school fees.
The employer is asked to deduct $398.00 in Child Support each fortnight.
| Gross fortnightly remuneration | $2000.00 |
| Salary package for car, etc. | $900.00 |
| Tax withheld | $108.00 |
| Pay remaining | $992.00 |
| Fortnightly PEA | $667.06 (2013) |
| Pay remaining | $324.94 |
| Deducted Child Support | $324.94 |
| Pay remaining | $0.00 |
| Plus PEA | $667.06 (2013) |
| Net pay to employee / contractor | $667.06 |
The employer cannot deduct the full amount of Child Support ($398.00) as it would leave the employee/contractor with less than the PEA.
The employer must deduct Child Support ($324.94) and pay it to us. The employer must tell us the reason for the variation by phone, post or fax. Employers registered with Child Support Online Business Services can report the variations online.
Note: a salary sacrifice remuneration package involving mortgage repayments is different to the situation where the employee / contractor asks their pay officer to deduct and pay their loan repayments from their regular pay. Where there is no formal salary packaging arrangement, the Child Support should be deducted after tax instalments but before making the loan repayments as mentioned in Example one.
Example six—how to make deductions when you receive a Notice Pursuant to Section 72A to deduct a cents-in-the-dollar amount
The contractor / employee is paid $450.00, excluding GST.
The Section 72A notice requires you to deduct 15 cents in the dollar.
| Total payment | $450.00 |
| Deducted Child Support ($450.00 x $0.15) | $67.50 |
| Pay remaining | $382.50 |
Note: tax must be deducted from the gross payment excluding GST and should be made before Child Support deductions
PEA does not apply to contractors / employees where Section 72A notices have been issued. The deducted amount should be paid to us within seven days of making the deductions.
Example seven—how to make deductions when you receive a Notice Pursuant to Section 72A to deduct a periodic amount
The contractor / employee usually receives payments of between $300.00 and $500.00 excluding GST each week for work done.
The Section 72A notice requires you to deduct $110.00 per week.
| In the first week the employee or contractor earns | $500.00 |
| In the second week the employee or contractor earns | $450.00 |
| In the third week the employee or contractor earns | $90.00 |
| Week 1 | |
| Total payment | $500.00 |
| Deducted Child Support | $110.00 |
| Pay remaining | $390.00 |
| Week 2 | |
| Total payment | $450.00 |
| Deducted Child Support | $110.00 |
| Pay remaining | $340.00 |
| Week 3 | |
| Total payment | $90.00 |
| Deducted Child Support | $90.00* |
| Pay remaining | $0.00 |
*You are unable to deduct the full $110.00. You can only deduct what is paid.
PEA does not apply to amounts deducted under a Section 72A notice.
Note: tax must be deducted from the gross payment and should be made before Child Support deductions
Example eight—how to make deductions when you receive a Notice Pursuant to Section 72A to deduct a lump sum from an employee’s / contractor’s termination payment
The employee’s / contractor’s weekly salary is $600.00. The employee / contractor resigns and is owed five weeks in unpaid annual leave.
We send a Section 72A notice for a lump sum amount of $962.00.
| Total annual leave payment | $3,000.00 |
| Child Support deducted | $962.00 |
| Pay remaining | $2038.00 |
The deducted amount of $962.00 must be paid to us within seven days of making the deductions.
Note: tax must be deducted from the gross payments and should be made before Child Support deductions.