A separated parent can request the Australian Government to deduct child support payments from their partner's wages or salaries. 
When this happens, Child Support Australia (CSA) manages these payments on behalf of the parent making the request. Upon request from Child Support Australia, Employers are legally bound to deduct Child Support Payments from their employees and transfer them to CSA.

Child Support Australia will send a 'Child Support Deduction Notice' to the Employer detailing the amount to deduct from the Employee's wages for each pay period. Employers are then legally required to notify their Employees about this request. This can be done by detailing the Child Support deduction on their Payslip. 

The Notice will also include the Protective Earnings Amount (PEA) per pay period. If an Employee earns less than the PEA amount in a pay period, Employers should either not deduct the Child Support Payment or deduct a percentage of the payment proportioned to the amount paid in the pay period. Exceptions to Protective Earnings Amount apply when the Child Support request is made under Section 72A Notice (Garnish Deduction). 
Protective Earnings are set by Child Support Australia and are indexed each year in January. 

Employers are then required to make Child Support payments to Services Australia. A range of payment options is available to Employers. Although Services Australia does not impose a specific payment frequency to Employers, it is important to understand that the longer the payment is delayed to Child Services Australia, the longer is also delayed to the parent.

More information on Child Support Deductions is available on the Services Australia website.

An example of a Child Support Deduction Notice

Set Up Child Support Deductions

To correctly set up a Child Support Deduction in Xero, you need to complete three steps:

1. Create a Child Support Liability Account
2. Set up the Child Support Deduction Pay Item
3. Add the Child Support Pay Item to the Employee's Pay Template

Create the Child Support Liability Account

1. Go to Accounting > Chart of accounts
2. Scroll down to the Liability Accounts and check if you already have a Liability Account for Garnish Deductions, if not, you will need to create a new one.
3. To create a new Liability Account click on [Add Account]
   
   è  The Add New Account screen
   
   
   
   
4. Select/Enter the following details:
   • Account Type > Current Liability
   • Code > Enter a 3-digit code starting with 8
   • Name > Type: Payroll - Deductions Child Support
   • Tax > Select: BAS Excluded
5. Click on [Save]
   

Set up the Child Support Payroll Deduction

1. Once you have created the Deduction Liability Account, you can set up the Child Support Deduction Pay Item
2. From the Organisation Menu go to Settings > Payroll Settings
3. Click on the [Pay Items] > [Deductions] Tab
4. Click on [Add] > None
5. Select/Enter the following details:
   • Deduction Name > type: Child Support
   • Account > Select the Child Support Liability Account
   • Reduces PAYG Withholding > Leave blank
   • Reduces Superannuation > Leave blank
   • Excluded from W1 > Leave blank
6. Click on [Add]
   
   è  The Pay Item screen

Add the Child Support Deduction Pay Item to the Employee's Pay Template

1. Go to Payroll > Employees
2. Open the Employee details and click on the [Pay Template] Tab
3. Click on [+Add Deduction Line]
   
   è  The Add a Deduction Line screen opens
   
   
   
   
4. Select/Enter the following details:
   • Deduction Type > Select: Child Support
   • Calculation Type > Select: Fixed Amount
5. Click on [OK]
   
   è The Deduction Line is added to the Employee's Pay Template
   
   
   
   
6. Enter the applicable Deduction amount as detailed in the Child Support Deduction Notice
   Note: currently Xero does not have the ability to automatically manage Protective Earnings Amounts. Therefore, if an employee earns less than the PEA in a pay period, the Child Support Deduction amount will need to be manually amended in the Pay Run. 
7. Click on [Save]