Notional assessment relating to child support agreements 277-02020000

A PNA only exists until a Notional assessment (NA) is made, usually 23 days after the PNA generated, a customer can apply to vary the PNA during this period. Occasionally, the PNA will not become an NA for an extended period for example, whilst a variation such as a Change of Assessment is being finalised.

When the PNA becomes a NA, the parents’ FTB will be calculated on the NA, this is the amount of child support that would have been payable if the agreement was not in place.

After the PNA becomes an NA, an NA letter and notice off assessment is sent to both customers.

Note: when a customer contacts Child Support to discuss PNAs or NAs, they may actually want information on how to elect to end their limited agreement if the NA has changed. See Ending a Child Support agreement and the Resources page for a Summary of typical process for electing to terminate a limited agreement.

A customer may contact Child Support because they have:

• received a PNA notice which they want to discuss or vary. The PNA notice will have either:
• automatically generated. Go to Step 3 for an explanation of when a PNA automatically generates, or
• been requested by parent/carer if a limited agreement. Go to Step 4 Customer requests a new PNA
• an existing NA in place and they want to request a new PNA. Go to Step 4 for explanation of when a customer with a limited agreement may request a new PNA

If the customer has an active PNA and a Service Officer amends the case details after the PNA has already issued, the customer will either need to apply to vary their PNA or request a new PNA before this information will be used in the NA. The PNA that has already issued will not be automatically updated.

If the customer is seeking a variation to a single PNA, see Step 1 in the Varying a PNA table.

A PNA will automatically generate for limited and binding agreements:

• on the initial acceptance of the agreement
• 3 years after the most recent NA was generated
• if the child support rate payable under the agreement changes by more than 15%

Note: system limitations may result in part of or all of the agreement being recorded as a Stage 1 liability, see WA Ex-nuptial child support cases - Payee ceases to be an eligible carer with no terminating event and the agreement still applies - pre 15 May 2019

See Resources for an example of when a PNA will automatically generate.

If the customer has an NA in place but requests the generation of a new PNA, the rules for generating a new PNA differ depending on the type of agreement.

Limited Agreement

If the agreement is a limited agreement, in addition to the times a PNA will be automatically generated, either customer can request a PNA at any time. Service Officers must check that the assessment is as accurate as possible by amending any details that require updating such as care details and incomes before generating a PNA. This allows Child Support to provide customers with the most up to date and accurate PNA possible.

Note: a PNA may only be varied in 5 ways, see step 1 in the Varying a PNA table. It is important the case is updated prior to the PNA being issued as the customer may not be able to update PNA to reflect certain changes to their circumstances. For example, if the customer advises of a relevant dependent child after their PNA has already been issued, the PNA cannot be updated to include the relevant dependent child.

Customers have 23 days from the date the PNA generates to consider their options to apply to vary the PNA before it becomes a NA.

Customers will generally need to ask for a new PNA when their circumstances change and they want these reflected in the NA for FTB purposes, or as a means of ending their limited agreement, if they expect the new NA will change by more than 15% from the previous NA.

If a customer with a limited agreement has a recently issued NA, check whether they actually want to elect to end their limited agreement before generating a new PNA. If so, the recently issued NA may already meet their needs. For example, if that recent NA is a change of more than 15% compared to the previous NA, and the recent NA issued less than 60 days ago, they may already be able to make a written election to end the limited agreement, and they may not need another new PNA.

If a customer requests a new PNA, document the details of the request for a new NA in the Provisional Notional Assessment Detail window notepad. See Documenting Child Support information.

See step 1 in the Generate a PNA table.

Binding Agreement

Customers who have a binding agreement cannot request a new PNA. PNAs are only automatically generated when any of the following occur:

• on the initial acceptance of the agreement
• at the end of 3 years after the most recent NA was generated, or
• if the child support rate payable under the agreement changes by more than 15%

It is important to record all changes to individual circumstances, even if the change does not affect the existing NA. When the future PNA automatically generates, it will accurately reflect the circumstances of the case. For example, a PNA cannot be varied to reflect changes to relevant dependent details so it is important to record such changes before a PNA generates.

If a customer has asked for a new PNA but this is not possible because they have a binding agreement, discuss the reasons that the application for a new PNA cannot be accepted.

Discuss the customer’s situation and available options that may assist them. If the customer actually want to end their agreement, see Ending a Child Support agreement.

If the customer advised they are concerned about the impact the current NA is having on their FTB, consider whether an objection to the current NA may assist them. An application for an extension of time to the object may be needed.

If a customer is a party to a limited agreement, it is possible for more than 1 PNA to be un-finalised at the 1 time. This might happen where it is taking a long time to finalise a variation, such as COA, and where a customer's circumstances change that they want taken into consideration. Once 23 days pass any new applications for variation cannot be accepted on the original PNA and therefore a new PNA may be generated to allow for a new variation.

Where multiple PNAs are not finalised, all previous variations are taken to be made against the most recent PNA. Therefore, when the most recent PNA is finalised all PNAs result in a single NA.

For example, a PNA issues on 20 July 2008 and a customer applies to have their PNA varied by lodging a COA application on 1 August 2008. On 17 September, the care of the child of the agreement changes from regular/primary to shared care. The customer(s) contact Child Support to advise of the care change but they are unable to make a variation to the PNA as more than 23 days have passed. As the customers have a limited agreement they can request a new PNA and then vary that PNA by advising of the care change. The application to vary the original PNA, that is, the COA application, is taken to be made against the second PNA. When all variations to the second PNA are finalised both PNAs will be finalised, resulting in the 1 NA.

See step 1 in the Generate a PNA in Cuba table and step 1 in the Varying a PNA table.

A PNA will be calculated using the income and care details available in Cuba on the day the PNA is generated. For this reason, when a PNA is generated it is important to ensure that the details of the case are as accurate as possible before the PNA is generated. Check:

• the percentage of care recorded for each child
• the income record for the last relevant year of income
• that relevant dependent children are recorded on the case

Service Officers should clarify these details with the customers if possible and may need to contact 1 or both customers if the request to generate the PNA was made in writing or referred via an intray.

If the Service Officer who receives the request to generate a PNA is not at the SO4 level, create a Pending Approval intray (adjust the due date to 2 working days from the date the request was received) and route to a SO4.

The SO4 will update the previous note documenting why a new PNA is being issued.

The SO4 will generate the new PNA and will be responsible for any variations to the PNA by locking both customers until the finalisation of the NA. A PNA letter and notice issues to both customers. The 23 day period to vary the PNA commences from the date the PNA is generated. For assistance on manually generating a PNA, see Notional Assessment Detail Window Help.

If the customer has an estimate of income in place when the PNA is generated, see Agreements Cuba Process Help, Step 10 in the Steps for recording, updating and deleting a provisional notional assessment modification table.

Complete this process on the day the PNA is generated to ensure the customer letters are accurate. If the PNA is generated without following this process the customer’s estimate of income will be incorrectly applied in the PNA, instead of the adjusted taxable income (ATI) for the last relevant year of income for the current child support period which should be used in the PNA. After the PNA has issued using the correct ATI, the customer will still be able to apply to vary the PNA by making a PNA estimate.

When a PNA is issued, the customer has 14 days after receiving notification to request a variation to the PNA. Child Support allows a total of 23 days from the day the PNA is generated and issued (14 days plus 9 days for postage) to receive applications for variations to the PNA. These timeframes can be extended for international cases. This is determined on a case by case basis depending on the arrangements with each jurisdiction.

Applications for a variation received outside of the 23 day period are not valid. If an application for a variation is received after 23 days and the customer is on a limited agreement, the customer can request that a new PNA be generated. See step 1 in the Generating a PNA table. The application for a variation can then be considered on the new PNA.

A customer on a binding agreement cannot request a new PNA if an application for a variation is received outside of the 23 day period. There is no option for an extension of time for exceptional circumstances. They may object to the NA. See the Step 1 in the Post decision rights table.

Note: any changes to care levels and relevant dependent children etc. must still be recorded on Cuba so that they are available next time a PNA is generated.

When a PNA is in place, customers have specific options for seeking a variation by:

• Applying for post-separation income to be taken into account in the PNA, go to Step 2
• Applying to reduce the minimum annual rate of the PNA to nil, go to Step 3
• Applying for a change to the percentage of care used in the PNA, go to Step 4
• Making an estimate election of their income used in the PNA, go to Step 5
• Applying for a Change of Assessment in relation to the PNA, go to Step 6

Allow the customer time to respond. See Standard response timeframes.

Either customer can apply for post separation income to be excluded from the income used in the PNA. The customer can apply for this variation verbally or in writing.

The decision making process is the same as for all decisions to exclude post separation income on a normal administrative assessment. See Post separation Income for Child Support customers.

Once a decision has been made about the post separation income for the PNA, go to Step 7.

If a customer is assessed at the minimum annual rate they can apply to reduce the minimum assessment (RMA) in the PNA to nil. The customer can apply for this variation verbally or in writing.

The decision making process is the same as a decision to reduce the minimum annual rate to nil on a normal administrative assessment, see Minimum annual rate to nil - Reducing child support assessments.

When a decision has been made to reduce the minimal annual rate to nil in the PNA, go to Step 7.

Either customer can apply for a variation to the percentage of care used in the PNA. The customer can apply for this variation verbally or in writing.

The decision making process is the same as for a change in care decision on a normal administrative assessment. The 12 month care period starts from the day the PNA is made.

From 1 July 2010 (or 3 March 2011 for WA Ex-nuptial cases) most changes in care will result in a new decision being recorded in Cuba. A care change which affects the cost percentage (no matter how small) must result in the revocation of the existing care determination and a new care determination being made. If a care change does not affect the cost percentage but does affect the care percentage, a new care determination may be made as it may result in a change to a customer’s family tax benefit or other Centrelink benefits.

See Change in child support care levels from 1 July 2018 (15 May 2019 for WA Ex-nuptial cases).

Note: any change to a care arrangement must also be recorded in the Care window regardless of whether or not it will result in a change to the administrative assessment that is even if the annual rate is set by the agreement.

When a decision has been made to change the care level, go to Step 7.

Either parent can estimate their adjusted taxable income for use in the PNA. An estimate can only be made where the income used in the PNA is a taxable income as assessed by the Australian Taxation Office (ATO) or an income tax declaration (ITD). See Derived income for Child Support customers.

Note: accepting an agreement will create a new child support period. This may result in the PNA using a new last relevant year of income.

An estimate for a PNA can be lodged verbally or in writing and must meet the following criteria:

• a parent may make an election if they estimate that their adjusted taxable income for the 12 months from the date of the PNA will not be more than 85% of their adjusted taxable income based on their ATO income or ITD for the last relevant year of income for the child support period
• a PNA estimate cannot be lodged when the underlying assessment is based on an income amount order (other than the child support agreement) which is in force (applies) on the day the PNA was made, and
• a PNA estimate must be authorised by a SO5 or above

A Year to Date (YTD) income is not required for a PNA estimate as it is not aligned to a financial year.

An estimate on a PNA will not be reviewed or reconciled at a later date. SO5 must ensure they are satisfied of the accuracy of the estimate before accepting it. An estimate on a PNA can be refused but this must be done before the PNA becomes an NA.

A customer can choose to revoke their estimate and lodge a new estimate before the PNA becomes an NA.

Estimated adjusted taxable income

When a customer is estimating their adjusted taxable income they must include their:

• taxable income (including overseas income if the parent is a resident of a reciprocating jurisdiction)
• reportable fringe benefits
• target foreign income
• net investment loss
• specified tax free pensions or benefits
• reportable superannuation contributions

Payments (either ongoing or as a lump sum) received by customers under the National Disability Insurance Scheme (NDIS), National Redress Scheme or Territories Stolen Generations Redress Scheme are not considered income for Child Support purposes. See References for a link to The Child Support Guide 2.4.4: Child support income. If a customer provides NDIS, National Redress Scheme or Territories Stolen Generations Redress Scheme payment(s) as an income source or it is established the customer is receiving these payments, document it for information only. See Documenting Child Support information. Do not include it in any income calculations. For more information, see Resources for links to National Disability Insurance Scheme (NDIS), National Redress Scheme or Territories Stolen Generations Redress Scheme.

Be aware that when a customer states the amount of their taxable income, it may already include an adjustment for net rental property losses and/or investment losses (such as share trading, managed funds, margin lending and share market speculation). If a customer provides a figure for rental and/or investment losses, Service Officers should clarify whether the figure they have provided for their taxable income includes any adjustments for the income or expenses attributed to the rental properties. If so, you should request that the customer provide you with separate figures for their rental and investment income/expenses and all their other income and expenses

For further information about adjusted taxable incomes, see References for a link to The Child Support Guide 2.4.4: Child support income.

85% test

When testing a customer's estimated adjusted taxable income, Service Officers must identify the adjusted taxable income in the Client Income window that was ATO issued or client supplied for the last relevant year of income for the child support period. Then multiply this income x 0.85 (or 85%). The customer's estimated adjusted taxable income must be for this amount or lower before it can be accepted.

For example: A customer's ATO issued adjusted taxable income, as listed in the Client Income window is $43 000. $43 000 x 85% = $36 550. Therefore, the customers estimated adjusted taxable income must be $36 550 or less to be accepted.

Is additional investigation/information required?

As the customer's PNA estimate will never be reviewed or reconciled, Child Support must be sure that it is accurate when it is accepted. Check the parent's estimate history and any relevant information in Cuba, ATO systems and external information for:

• previous estimates of income. If these estimates have been reviewed or reconciled check the reasons for this, and
• any information that may contradict that supplied by the parent

If there is an indication that a parent has knowingly underestimated their income in the past, or Service Officers become aware of contradictory information, they must ensure that they are satisfied the customer's current estimate is accurate before approving it.

Use the information available to you such as:

• Client Benefits window
• External Information window
• other information in Cuba
• ATO systems, that is check for employment declarations, investment income information and pay as you go (PAYG) information

to attempt to confirm the information the parent supplied regarding their estimate of income, that is the reason for the estimate and the amount estimated.

If:

• the parent has a history that indicates they have knowingly underestimated in the past and Service Officers have been unable to confirm the information they have supplied, or
• Service Officers have located any information that contradicts that supplied by the parent

More information may need to be requested. If no additional information is required go to Step 7.

Request further information

If Service Officers identify information that contradicts that supplied by the parent discuss this with them. Provide the parent with the opportunity to explain why the information differs and if it is appropriate to amend or withdraw their estimate.

Whilst it is not a legal requirement for parents to provide documentary evidence of their claims, Service Officers must be satisfied that the customer's actual income will not be higher than their estimated income.

Documentary evidence Service Officers may request includes:

• an employment termination certificate
• payslips
• a statement of benefit from Centrelink (if this information is not available on the Client Benefits window)
• a provisional profit and loss statement

If the parent refuses to provide evidence, Service Officers must decide if they are satisfied that the actual income is likely to be the same as or lower than the estimated income. To assist, Service Officers can request information from third parties such as an employer. See Child Support's information gathering powers.

If Service Officers are satisfied that a parent has underestimated, they must obtain approved from a SO5 or above to refuse the election. For example, there is no apparent change in income and no reason is provided for lodging the estimate.

If Service Officers are satisfied that the parent's estimate of income is accurate, they obtain approved from a SO5 or above to accept the estimate. Once a decision has been made on the PNA estimate election, go to Step 7.

Either customer can apply for a change of assessment in relation to the PNA. The customer must apply for a PNA variation - Change of Assessment by using the change of assessment form.

Note: if an agreement is made and accepted during a change of assessment process, then the initial COA application is taken to be an application to vary the PNA under section 146D(1)).

The decision making process is exactly the same as for a change of assessment decision on a normal administrative assessment, see Change of assessment in special circumstances.

A PNA COA variation is unlikely to be completed within 23 days, but the PNA will not become an NA until the COA decision is finalised and any other application to vary the PNA is finalised. For more information, see Step 5 in the Vary or generate a Provisional Notional Assessment (PNA) table.

All variations to a PNA are processed on the Notional Assessment Modification window. A PNA Modification Pended intray will issue once a variation is processed to pending. The due date will be manually updatable with a default of 28 days. Multiple PNAs are possible, and each outstanding variation will be translated across to the most recent PNA until all are resolved. See Step 3 in the Vary or generate a Provisional Notional Assessment (PNA) table.

Process the decision to either accept or refuse the variation by updating the pending variation on the Notional Assessment Modification window.

Document the reasons for your decision and reference the legislation you used to make your decision. For more detail about what to document, see Documenting Child Support information.

Note: COA variations must be processed on the COA List window and then updated on the Notional Assessment Modification window. See Agreements Cuba Process Help, Record a modification to a provisional notional assessment.

Once all the variations have been resolved and the PNA has converted to a NA, letters will issue to advise the customers of their objection rights.

Processing an estimate election to vary a PNA when an ITD is in place

If the customer has lodged an estimate of income and an ITD is used in the PNA the estimate must be processed as a COA to ensure the correct income is used in the assessment. See Agreements Cuba Process Help, Record a modification to a provisional notional assessment, Modify a provisional notional assessment where an estimate is in place.

Processing an estimate election to vary a PNA when an estimate was removed from the initial PNA

If the customer had an estimate in place at the time the PNA was generated, the PNA should have been modified to remove the estimate and use the income from the last relevant year of income (LRYI). If the customer later elects to estimate their income for the purposes of the PNA, see Agreements Cuba Process Help, Record a modification to a provisional notional assessment.

After 23 days has passed since the PNA was issued and the processing of any PNA variations has been completed the PNA will convert to a Notional Assessment (NA).

When the PNA becomes an NA, an NA letter and notice issues to both customers, and the FTB part A that is payable will take into account the new Notional Assessment.

There are no objection rights to a PNA because a PNA can be varied to account for a variety of circumstances without the need for an objection.

There are objection rights to a NA.

A customer with a limited agreement who is dissatisfied with the new NA can ask for a new PNA at any time. But objecting to the NA may be the better option for the customer, as Child Support can then give effect to any changes from the date of the original NA.

A customer with a binding agreement who is dissatisfied with the new NA cannot ask for a new PNA, so objecting to the NA may be their only option.

If a NA is being reviewed as part of the objection or ART process, it will be updated in the Notional Assessment Modification window. See Agreements Cuba Process Help, Record a modification to a provisional notional assessment.

There is a separate window for NAs that can be updated on objections or ART decisions. This will flow from the Additional Registration window and maintain the details of the NA. It will work exactly the same except the drop down status will state allowed/disallowed. The actual objection/ART will be processed on the Objection/SSAT window. A modification to the NA will need to be made, see Agreements Cuba Process Help, Record a modification to a provisional notional assessment.