New child support protected earnings

What Payroll Needs to Know from 1 January 2026

From 1 January 2026, changes to Child Support Protected Earnings come into effect and while the concept itself isn’t new, the impact on payroll calculations, garnishees and take home pay is.

For payroll teams, this is one of those changes that sits quietly in legislation but has very real consequences if it’s misunderstood or misapplied.

What are “Protected Earnings”?

Protected earnings are the portion of an employee’s pay that cannot be touched by child support deductions.

The intent is simple and important. Even when child support is being deducted, an employee must still be left with enough income to meet basic living costs.

Payroll’s role is to ensure that:

• child support deductions do not reduce pay below the protected threshold, and
• deductions are adjusted correctly when pay fluctuates.

What’s Changing from 1 January 2026?

From 1 January 2026, the protected earnings threshold increases in line with updated policy settings.

In practical terms, this means:

• employees subject to child support garnishees may have less deducted per pay period
• payroll systems must recalculate available earnings before applying deductions
• previously working deduction amounts may now be incorrect

Importantly, this change applies automatically, payroll cannot continue using old thresholds.

Why This Matters for Payroll

Child support deductions are not optional but neither is compliance with protected earnings rules.

If payroll deducts too much:

• the employer may be in breach of legislation
• employees can experience real financial distress
• payroll teams often become the first point of escalation

If payroll deducts too little:

• the employer may be non compliant with a lawful notice
• reconciliation and remediation may be required later

This is a classic payroll balancing act, and one where precision matters.

Key Payroll Actions to Take Now

1. Review system configuration
   Ensure your payroll system is updated with the new protected earnings thresholds effective 1 January 2026.
2. Re-test deduction calculations
   Don’t assume last year’s logic still works. Test scenarios where:

• • pay varies
  • employees move between full time, part time or casual hours
  • multiple deductions exist

3. Watch for manual overrides
   Any temporary fixes or manual adjustments made in prior years should be reviewed. they may now be wrong.
4. Prepare for employee questions
   Some employees will notice:

• • smaller deductions
  • changes to their net pay
    Payroll teams should be ready to explain why.

5. Document your approach
   Clear documentation protects payroll when questions arise, internally or externally.

Changes like this remind us that confidence in payroll isn’t just about running a pay successfully, it’s about knowing your calculations still hold up when the rules change.

If you haven’t revisited your child support deduction process recently, this is your cue.

Need help reviewing your payroll deduction settings or assurance testing your compliance? Contact us at www.austpayroll.com.au

Now is the time to check, before January checks for you.