Collecting child support payments privately and/or discharging arrears 277-04090000

The payee or the payee and payer jointly can elect to opt-out of collection verbally, electronically or otherwise in writing.

For requests received from the payer only, go to Step 2.

In certain circumstances, the Child Support Registrar can make a case private collect. See Registrar Initiated Private Collection (RIPC).

If an opt-out has already been processed and arrears remain on a case, a payee can choose to collect all or part of the arrears privately (discharge). See Step 1 in the Election to discharge arrears received table.

Where family and domestic violence concerns are identified, refer the customer to the Parent Support Team.

For New Zealand ‘In’ cases, do not make NZ in cases private collect. Refer the customer to NZIRD to discuss their options.

For other International cases: check the case for disbursement options. If funds are disbursed directly to the Central Authority (CA), the case may be 'agency reimbursement', meaning the CA is in fact the payee. In these cases, obtain confirmation from the CA that an opt-out is an option. The Central Authority team make contact with the CA. Create and route an International response required intray to the Central Authority team and record details of the information they are seeking in the intray notepad.

Zero annual rate: do not make cases that have had a zero annual rate since they started private collect. Neither party has the role of payee, so there can be no election to opt-out of collection. For more information about cases with an initial zero annual rate see Application for assessment - record a decision and finalise.

References has a link to collection policy information about zero annual rates.

For requests received from the payee or the payee and payer jointly, go to Step 3.

If the payer requests an opt-out, to guide the conversation open the Opting Out of Collection and Discharging Arrears macro.

• Explain to the payer a joint election is required, agreement will need to be gained from the payee
• Finalise the macro document and save in the Case Collection Details window notepad
• Contact the payee:
• Conduct additional authentication checks to protect the customer’s information. See Authenticating a Child Support customer
• Discuss the payer’s request and to determine if they agree to opt-out

Does the payee agree to opt-out?

• Yes, a joint election can proceed. Go to Step 3
• No. Contact the payer to advise Child Support cannot make the case private collect because there is no joint election. Payments must continue to be made to Child Support:
• Document the payer conversation in the Case Collection Details window notepad
• Consider Registrar Initiated Private Collect (RIPC)
• Procedure ends here

If a payee election or a joint election is received, pend the opt-out election in the Case Collection Details window.

For assistance to pend the opt-out election, see: Opt-out election Cuba process help

Before discussing the election in detail with the payee, check and finalise any pending issues that may impact the liability, customer roles or arrears amount including:

• Non-agency payments (NAP)
• estimates
• agreements
• care
• incomes

If an assessment is based on a default income, update the incomes where possible. If these issues cannot be resolved immediately, they may cause a change to the account later. See Income processing for Child Support customers.

For the conversation with the payee, open the Opting Out of Collection and Discharging Arrears macro and document the call:

Ask the Risk Identification Question in the macro

If the payee answers?

• Yes, warm transfer the customer to the Parent Support Team
• No, continue with the macro to discuss:
• the reason for the opt-out election
• the start date of the opt-out, go to Step 2
• any arrears remaining and are arrears to be collected, go to Step 4
• any uncredited non-agency payments (NAP), go to Step 5
• any overpayment, go to Step 6

The start date of the opt-out can be any date outside a low-income non-enforcement (LINE) period. For more information about LINE periods, see Stage 1 – low-income non-enforcement (LINE) period.

Check the Case Collection Details window to see if the opt-out date falls within a LINE period. If the opt-out date is within a LINE period, advise the payee to select another date either before or after the LINE period. This date cannot be more than 60 days after receiving the opt-out.

Note: if the opt-out takes effect from the 1st of the next month, the payer needs to pay the previous month’s liability to Child Support. If the opt-out takes effect before the end of the month, the payer needs to pay a pro rata liability payment.

A backdated opt-out is not a discharge of arrears. Where a payee has opted out of collection from a date in the past (a backdated opt-out, not a discharge) any arrears arising from the date the case was opted out will not be collectable even if a subsequent variation increases the liability. Arrears that accrue prior to the date of the opt-out will be collectable by Child Support. If the payee does not want the new debt collected, they will need to make an election to discharge the debt.

Note: a backdated opt-out may effect a customer’s Family Tax Benefit Part A entitlement. Refer the customer to Centrelink as this may influence their decision.

Example

The payee calls on 3 October 2016 and opts their case out of collection from

1 January 2016. In November 2016, after the election to opt-out has been finalised, an ATO taxable income replaces a default income. The liability from 1 July 2015 to 30 September 2016 increases.

The variation of the liability from 1 January 2016, that is the opt-out date to 30 September 2016 will not be collectable by Child Support. It will not accrue on the payer's account because this is a private collect period. The variation to the liability from 1 July 2015 to 31 December 2015, that is the period prior to the opt-out is collectable by Child Support and will accrue on the payer's account. If the payee does not want these arrears collected by Child Support, they must make an election to discharge.

A payee can elect to privately collect (discharge) the arrears. This decision can be made at the same time as the opt-out or at a later date. The payee can also choose to discharge some arrears immediately and discharge all or part of the remainder at a later date. For more information, see Step 1 of the Election to discharge arrears received table.

Advise the payee to contact Centrelink if they:

• elect to privately collect the arrears (discharge arrears) and
• are in receipt of Family Tax Benefit Part A

Explain to the payee that Centrelink will include the non paid arrears amount when assessing their FTB for the financial year in which the arrears are discharged. Advise the payee to discuss the possible impact on their FTB payments with Centrelink. Offer to cold transfer the payee at the end of the call.

If there is an unallocated NAP credit, both the payer and payee have the option of the following before opting the case out:

• using the credit to reduce the liability during private collection
• delaying opting out of collection until no credit remains

Ask the payee how they want the credit managed. Tell the payee, the payer will be contacted to confirm how the credit will be managed.

Where the parents cannot agree or cannot be contacted, the uncredited NAP will be removed from the account when the opt out is processed.

This is because a NAP amount paid within one enforceable period cannot be applied to future amounts that become payable in a different child support enforcement period.

This does not apply to a Prescribed NAP, which can carry over to a different child support enforcement period as long as it relates to the same liability.

If the payee wishes to proceed with the opt-out, see Process Table 13 in Non-agency payment (NAP) about Enforceable maintenance liability ended or opted out with unallocated NAP remaining.

For more information about options in crediting lump sum payments and offsetting liabilities, see References link to the Child Support Guide: 5.3 Non-agency payments.

Opting a case out from a date in the past may create an overpayment of child support. . Options for the payee to consider are:

• Using the credit to reduce the liability during private collection. For example, a $100 overpayment could be used as a $100 credit on the first month after the opt-out date. For accounting purposes, the payer would need to waive the overpayment
• Waive the overpayment
• Delaying the start date of the opt-out until no overpayment is created
• Leaving the credit on the account to be applied later if the case becomes collect

For more information, see Child support overpayments and other payee debt.

To support payees in receipt of Family Tax Benefit to make an informed choice about opting out, encourage them to contact Centrelink to discuss the effect of opting out of collection. This is especially important if they are considering discharging arrears or backdating the opt-out.

If a customer changes to private collect, they will be deemed to have received the full amount of child support they are entitled to, regardless of whether they actually do or not. If they discharge arrears, Centrelink will also deem that they have received the full amount of arrears. If the customer does decide to discharge arrears, they will need to contact Centrelink to advise them of the discharged amount.

If the customer has any questions about their FTB Part A payments under a private collect arrangement, at the end of their conversation cold transfer them to Centrelink services.

If family and domestic violence is an issue and/or the payee is being coerced into making an election for private collect, ask the payee if they would like to discuss their options of gaining an exemption from taking reasonable maintenance action with a Centrelink Social Worker. See the Family and domestic violence procedure.

Play the Automated Message – Election to collect child support privately to the customer using Services Australia Workspace.

If the payee:

• wants to continue with the opt-out and there will be:
• arrears remaining on the case, see Step 1 in the Election to discharge arrears received table, or
• no arrears remaining, see Step 2 in the Processing a discharge in Cuba table
• does not want to continue with the opt-out:
• add this decision to the ‘Additional information or comments’ field of the Opting Out of Collection and Discharging Arrears macro
• finalise the macro document and save in the Case Collection Details window notepad
• update the status on the pended opt-out to Withdrawn in the Case Collection Details window

An election to discharge arrears is considered a sensitive process. Additional authentication checks are needed to protect the customer’s information.

See Authenticating a Child Support customer for information about how and why authentication is conducted.

A payee cannot discharge arrears unless the case is ended or opted out. A payee can choose to have arrears removed from collection in 3 ways:

• They can choose to opt-out of collection from a date in the past (backdated opt-out)
• Where a case is ended or has been opted out they can elect to have all or some of the arrears discharged
• When opting out of collection they can choose to have arrears unpaid on that day discharged

Note: when employer withholding is in place for the payer, ensure the payee is aware of expected employer deductions not yet recorded on the payer account summary. Delay the discharge process until after the employer remits any final deductions to enable these amounts to be disbursed to the payee. After the discharge of arrears is processed, the payee will no longer have a child support entitlement therefore no disbursement can take place.

Ensure privacy when discussing the payer's employer withholding with the payee, see Table 7 Step 2 in Disclosing information under child support law.

Where family and domestic violence is identified, refer the customer to the Parent Support Team.

An election to discharge arrears can be accepted verbally, electronically or otherwise in writing. Before accepting the election ensure:

• the payee's intention is clearly established, go to Step 3
• they understand their options, go to Step 4
• they understand the implications of the decision, go to Step 5
• that all NAPs have been credited, go to Step 6
• that all incomes are as up to date as possible, go to Step 7

When discussing a payee's election to discharge arrears, use the Opting Out of Collection and Discharging Arrears macro as a guide for the conversation.

For payers who are outside of Australia, ensure all payments that have been sent are reflected on the Child Support account, or considered in discussions. There can be significant delays in payments arriving from overseas.

A payee must clearly advise that they wish to discharge all or part of the arrears owing and Service Officers must discuss the reasons for their decision with them. Ensure that they are using the most appropriate method to address their needs and minimise the chance of unintended consequences of the decision.

Example

If the payee has no intention of collecting the discharged arrears privately, they might not realise their Family Tax Benefits (FTB) entitlement will still be worked out on the basis that the arrears will be paid. In this situation, the payee might instead decide to collect a portion of the arrears privately to offset the effect that discharging the arrears will have on the FTB.

Ensure parents have a realistic understanding of the options available to them, including Child Support's collection powers. Customers do not need to elect to discharge arrears simply because Child Support has been unable to collect. Payees have been able to privately enforce child support debts at the same time that the liability is collectable by Child Support since 1 January 2007.

Example

The customer may have decided to discharge the arrears because only a small amount is owed due to a minimum assessment being in place for several years and Child Support has been unable to collect even this small amount. If the minimum assessment is the result of very low default incomes being used, this situation could change significantly when tax returns are lodged.

If the payee receives, more than minimum Family Tax Benefit (FTB) from Centrelink their decision to discharge arrears may affect these payments. Advise the payee to contact Centrelink to discuss the implications of their actions. References has a link to the Child Support Guide - 5.6.1 Election to end collection. At the completion of the call offer to cold transfer the payee to Centrelink.

Example

The payee discharges arrears on the basis of a verbal agreement that the payer will pay in the future. The payer does not fulfil their agreement. A decision to discharge arrears cannot be reversed.

Confirm the payee understands the implications of their decision. If necessary the payee can pursue collection privately or through the court.

Before processing a discharge, check if any NAPs have been paid and consider these in accordance with Non-agency payment (NAP).

Do not discharge arrears that have been met by NAPs. Correctly accepting NAPs could reduce the effect of a discharge of arrears on a payee’s FTB and will ensure a NAP credit is not added to a case after a discharge.

Note: do not discharge arrears instead of appropriately crediting NAPs.

Ensure the payee is aware that an assessment based on a default income or an estimate of income may be later updated causing a change to the assessment and possibly arrears or overpayment. Where possible, update any default incomes and review any estimates of income.

See also:

• Income processing for Child Support customers
• Child Support estimates - review (Post 1 July 2010)
• Child Support estimates - Reconcile(pre 1 July 2011)

A payee can discharge an amount of arrears from their case when it is ended, opted out or in conjunction with an opt-out. All discharge of arrears are by amount. Cuba calculates arrears to be discharged by:

• amount
• period, or
• amount and period

Despite these options being available in Cuba, Service Officers are always discharging arrears by amount, even if they use the period function to calculate the amount.

Note: a discharge by period is not a back dated opt-out. If the assessment is later varied it may result in additional arrears. In this case contact the customer to determine if they want the additional arrears collected or discharged, even if the period function has been used.

Take into account child support that is not yet due when helping a parent decide on an amount to discharge. For example, opting a case out from 6 February, the amount outstanding on the case may not reflect the liability due for the 5 days of February.

If the payee elects to opt-out, including an election to backdate the opt-out and there are no arrears remaining, go to Step 2.

There are separate processes outlined below for where the case status is currently active and collectable (opted in), and previously opted out or ended.

Payee elects to discharge arrears

Play the Automated Message – Election to have the liability no longer enforced to the customer using Service Australia Workspace.

Payee is opting out of collection

Pend the opt-out and discharge in the Case Collection Details window. Pending the opt-out with full or partial discharge will automatically generate a M005-1 Payee letter pre discharge arrears letter advising of the election and ‘cooling-off’ period.

If the case is already ended or not collectable (opted out)

• Before processing the election in the Discharge Arrears window, create a unique letter using the Pre discharge arrears - Payee letter. Resources has a link to this letter
• Finalise the Opting Out of Collection and Discharging Arrears macro document. Save it in the Case Collection Details window notepad
• As the discharge is not being pended in conjunction with an opt-out, create a Discharge Pending intray. If the payee has not contacted Child Support, check whether any variations have occurred on the account before processing the discharge
• Place a special recovery indicator on the payer account to make sure their tax refund is not automatically intercepted during the 'cooling off' period. Document the reason for the special recovery indicator in the Case Collection Details window so it is recorded in the case notes

Allow the customer time to respond. See Standard response times

See the Opt-out election Cuba process help and Discharge arrears Cuba process help and Letters Cuba process help for more information.

International customers

Do not finalise a discharge before the customer has had time to respond.
See Standard response times.

• Place a special recovery indicator on the payer's account to ensure the payer's tax refund is not automatically intercepted during the 'cooling off' period. Document the reason for the special recovery indicator in the Case Collection Details window so it is recorded in the case notes
• Finalise the Opting Out of Collection and Discharging Arrears macro document and save it in the Case Collection Details window notepad
• Pending the opt-out generates an Opt-Out Pending intray. If the payee has not contacted Child Support, check whether any variations have occurred on the account before processing the opt-out and discharge

The payer must be contacted if:

• there are outstanding issues, such as arrears, pending decisions or inaccurate incomes
• there is a history of non-compliance or escalated issues
• there are known family and domestic violence issues
• the customer is identified as Culturally and Linguistically Diverse (CALD)
• the customer is identified as Indigenous and/or Remote

In all other circumstances, go to Step 3.

If contact is required, discuss the following:

• the amount of any outstanding payment due
• the current assessed liability and what payment methods the customer will use when the case is opted out. The customer should agree on the amount, frequency, period of the payment(s) and a method of record keeping
• if incomes used in the previous and current assessments are updated in the future, arrears or an overpayment may be created
• any arrears discharged from the account are still owed to the payee and the payee is legally entitled to collect the amount directly from the payer or through a court if necessary
• options where a NAP credit remains:
• using the credit to reduce the liability during private collection
• delaying opting out of collection until no credit remains
• agreeing to reduce the credit to nil, or
• where the parents cannot agree, remove uncredited NAPs. NAPs paid within 1 enforceable period cannot be applied to future enforceable periods
• the payee is entitled to request collection at a later date if private collection is not working. The payee can also ask for up to 3 months unpaid arrears (up to 9 months in exceptional circumstances)
• the termination of EW/EWA where it is the current payment method
• the review or reconcile of income estimates and any default incomes are updated. See Income processing for Child Support customers.

Adjust any overpayment or NAP credits as per customer’s instructions:

• End EW (for cases where EW/EWA is the current payment method)
• Process the opt-out in Cuba following the Opt-out election Cuba Process Help
• If processing a discharge in the Discharge Arrears window, follow the process in the Discharge arrears Cuba Process Help

For more information, see:

• Employer Withholding (linking) for Child Support customers
• Documenting Child Support information in Cuba

Cuba will generate the following letters:

• MOO3-1 - a letter to the applicant (either payer or payee) to advise that an application to opt-out has been rejected
• MOO3-2 - a letter to both clients to advise that an application to opt-out has been accepted

If the case was opted out with unallocated NAP:

• for each parent, generate UQ19.04 - Unallocated NAP - Opt-out

For discharge of arrears not associated with an opt-out:

• UQ13.01 - Post discharge arrears - Payee
• UQ13.02 - Post discharge arrears - Payer

Create a manually generated system letter - free text letter if the application for opt-out was withdrawn and the customer needs to be contacted letter. See Table 1, Step 4 in Letters for Child Support customers.

After arrears are opted out or discharged, a subsequent variation can cause retrospective variations to a child support assessment. The effect a retrospective change to an assessment will have on the account will depend if the opt-out:

• was backdated, or
• if the arrears were discharged

Subsequent variation - Discharge of arrears by amount

Where a payee has discharged arrears by amount, (this includes Cuba's discharge by period function) a subsequent variation to a case may cause arrears to increase or reduce the amount that was previously unpaid and discharged by the payee.

If the arrears have increased, go to Step 2

If the liability has reduced, go to Step 3

When subsequent arrears are added to a child support account:

• contact the payee
• if the payee wishes to discharge the additional arrears, see Step 1 of the Process opt-out and/or discharge table

Example

The payee calls on 3 October 2016 and opts out their case from that day. The payee also requests that arrears on the case be discharged. A Service Officer uses the ‘period’ discharge function in Cuba to establish the amount of arrears from 1 January 2014 (SDOL) to 3 October 2016 and this is discharged. The liability from 1 August 2015 to 31 August 2015 is increased when a default income is replaced by an ATO taxable income. Arrears are created on the account for this period.

The payee is contacted and confirms they want the new arrears to be discharged. If the payee wishes for Child Support to collect these arrears they must remain on the account until collected.

Note: it is incorrect to discharge arrears without consulting the payee because the original discharge was actioned using Cuba’s period function. Service Officers must not discharge arrears unless requested by the payee.

For more information References has a link to the Child Support Guide - 5.6.1 Election to end collection.

Procedure ends here.

When a subsequent variation to a child support account reduces the liability in a period before the case was opted out consider the effect. If the effect is to reduce the amount that was unpaid and able to be discharged by the payee, the discharged amount must be adjusted in the Discharge Arrears window. Include a documented explanation of the adjustment in the window's notepad. For assistance to adjust the discharge amount seek technical support see Technical support in Child Support.

Is the customer is in receipt of FTB Part A?

• Yes, contact the payee to explain:
• the adjustment to the discharged amount
• the updated amount must be reported by the payee to Centrelink for FTB Part A purposes
• No, procedure ends here

Example

The payee calls on 15 February 2016 to opt-out their case from that day. The payee also elects for the $500 arrears owing to them as at 15 February 2016 to be discharged resulting in the payer’s account balance reducing to nil.

On 27 April 2016 a default income for the payee is replaced with a higher income and the liability for the period 1 August 2015 to 30 September 2015 is retrospectively varied resulting in:

• a new liability reduction of $800 which appears on the account as a payee overpayment. As there is no longer any child support arrears owing due to the payee’s prior discharge election, a manual adjustment needs to be made to the discharge amount. In this scenario, the $800 liability reduction exceeds the $500 discharged arrears amount, therefore the original discharge amount of $500 is adjusted to nil. The net outcome is a payee overpayment of $300, that is $800 liability reduction less the $500 discharge amount = $300 payee overpayment, or
• a new liability reduction of $100 which appears on the account as a payee overpayment. As there is no longer any child support arrears owing due to the payee’s prior discharge election, a manual adjustment needs to be made to the discharge amount. In this scenario, the $100 liability reduction is less that the $500 discharged arrears amount, therefore the original discharge amount of $500 is adjusted to $400. The net outcome is there is no payee overpayment, that is $500 original discharge less the $100 liability reduction = $400 adjusted discharge amount