FTB and Child Support: How Maintenance Income Affects Your Payments

For separated parents receiving Family Tax Benefit, understanding how child support interacts with FTB payments is crucial for financial planning. The relationship between these two income sources involves the Maintenance Income Test, which can reduce your FTB Part A payments depending on how much child support you receive.

Understanding Maintenance Income

Maintenance income refers to any financial support you receive for your children from a former partner, whether through formal child support arrangements or informal private agreements. This includes regular child support payments collected through Services Australia Child Support, direct payments from your former partner, lump sum payments or property settlements in lieu of ongoing payments, and non-cash benefits provided for your children.

Services Australia uses your maintenance income to assess your FTB Part A entitlement through the Maintenance Income Test. This is separate from the regular income test that applies to your own earnings. Both tests can affect your final payment, so understanding how they work together is essential for managing your family finances effectively.

The Maintenance Income Test Explained

The Maintenance Income Test reduces your FTB Part A payment when you receive child support above a certain threshold. For the 2026-27 financial year, the Maintenance Income Free Area is $1,853.20 per year for families with one child, plus an additional $617.73 for each additional child in your care. This means you can receive this amount of child support without any reduction to your FTB Part A.

Once your maintenance income exceeds the free area, your FTB Part A is reduced by 50 cents for every dollar above the threshold. For example, if you receive $5,000 per year in child support for one child, only $3,146.80 ($5,000 minus the $1,853.20 free area) counts towards the reduction. This would reduce your annual FTB Part A by approximately $1,573.40.

Importantly, the Maintenance Income Test can only reduce your FTB Part A payment down to the base rate—it cannot eliminate it entirely if you otherwise qualify. This ensures that families receiving child support still have access to some level of government assistance.

Registered Versus Private Child Support

How you collect child support affects how it's treated for FTB purposes. If you receive child support through Services Australia Child Support (registered arrangement), they automatically share information with Centrelink about the amounts you receive. This ensures your FTB is calculated accurately based on your actual receipts.

If you have a private arrangement where your former partner pays you directly, you're responsible for reporting this income to Centrelink. You should report the amount you actually receive, not the amount you're supposed to receive under your agreement. If you're owed child support but haven't received it, you generally don't need to count it as income.

Families who choose private collection but are registered with Child Support can benefit from what's called the "disbursement method." Under this approach, Centrelink uses the amount Child Support calculates you should receive, rather than what you actually receive. This can work in your favour if you're receiving less than your entitlement.

Maintenance Action Test Requirements

To receive more than the base rate of FTB Part A for a child from a previous relationship, you must take reasonable action to obtain child support. This is known as the Maintenance Action Test. Generally, this means applying for a child support assessment through Services Australia Child Support, unless you have an exemption.

You may be granted an exemption from taking maintenance action in certain circumstances, such as when there has been family violence, when you don't know the identity of the other parent, or when obtaining child support would put you or your child at risk. If you have an exemption, you can receive the maximum rate of FTB Part A without pursuing child support.

Even if you don't want to receive child support, you typically need to apply for an assessment to receive more than the base FTB rate. The exception is if you have a valid exemption. Centrelink assesses your maintenance action status when you apply for FTB and during ongoing reviews of your payment.

Lump Sum Payments and Property Settlements

Sometimes child support is paid as a lump sum rather than ongoing periodic payments, or a property settlement might include an amount designated for child support. These arrangements are treated specially for FTB purposes. A capitalised maintenance income amount—where a lump sum is meant to cover a period of time—is annualised and spread over the relevant period.

For instance, if your former partner agrees to pay $50,000 upfront to cover child support for the next five years, Centrelink would treat this as $10,000 per year in maintenance income for that period. This prevents large lump sums from drastically reducing your FTB in a single year while having no effect in subsequent years.

Impact on FTB Part B

It's worth noting that maintenance income does not affect FTB Part B. The Maintenance Income Test only applies to FTB Part A. This is good news for single parents, who are eligible for FTB Part B regardless of how much child support they receive. Your FTB Part B will be assessed only on the income of a new partner, if applicable.

For single parents, FTB Part B provides additional support at the higher rate of $167.74 per fortnight for children under 5, or $116.80 for children 5-18. This payment continues in full even if you receive substantial child support, making it a valuable component of your overall family assistance.

Strategies for Managing FTB and Child Support

Understanding how child support affects your FTB allows you to make informed decisions about your payment arrangements. If you're negotiating a child support agreement, consider the total financial picture, including how the agreed amount will impact your FTB payments. Sometimes a slightly different arrangement can result in better overall outcomes for your family.

Keep detailed records of all child support received, especially if you have a private arrangement. This helps ensure accurate reporting to Centrelink and provides evidence if there are any disputes about amounts received. Regular communication with both Child Support and Centrelink helps keep all your records aligned.

Key Takeaways

• Maintenance income reduces FTB Part A by 50 cents per dollar above the free area
• FTB Part B is not affected by child support received
• You must take maintenance action to receive more than base rate FTB Part A
• Exemptions are available for family violence and other circumstances
• Lump sum payments are spread over the relevant period
• Report private child support accurately to avoid overpayments

Navigating the intersection of child support and Family Tax Benefit can be complex, but understanding these rules helps you maximise your family's income while meeting your obligations. If you're unsure about your situation, consider speaking with a Services Australia social worker or a family law professional who can provide personalised advice.