Child support late payment penalties and estimate penalties 277-04290000

Estimate penalties automatically apply to an account when:

• an estimate has been reconciled, and
• the actual adjusted taxable income for the estimated period is 110% or more of the estimated amount

The penalty is 10% of the difference between the liability that has applied for the period, and the amount that should have applied, based on the reconciliation amount.

Child Support has the discretion to remit estimate penalties under certain circumstances. This includes where the penalties have been paid.

Check the estimate penalty amount. If it appears there is an error with the estimate penalty calculation escalate to a Service Support Officer.

Note: the customer may request Child Support remit their estimate penalties. This request does not need to be in writing. It may also be determined that it is appropriate to remit estimate penalties without a customer request.

For more information, see References for a link to the Child Support Guide 3.4.5 Estimate penalties.

Child Support will consider remitting estimate penalties if:

• the difference between the customer's adjusted taxable income and the estimated income was due to an amendment of the tax legislation, or a change to a ruling or determination under the tax legislation. For more information, see References for link to the Child Support Guide 3.4.5 Estimate penalties, or
• satisfied that it would be fair and reasonable to do so

The decision-making process for remitting penalties is the same for all cases, including penalties that have been paid.

Before starting any process to remit estimate penalties, check:

• any previous remission or re-imposition notepads
• if the penalty has already been remitted in part or in full
• if any part of the penalty has been remitted and then re-imposed

Penalties remitted in error, can be re-imposed in full or in part. See Table 2 in Penalties Cuba Process Help.

Fair and reasonable

Whether it is fair and reasonable to remit estimate penalties is determined on a case by case basis. Determine if the customer:

• intended to provide an inaccurate estimate
• was aware of all the conditions and implications of an estimate
• can provide a reasonable explanation:
• as to why the estimate was inaccurate
• for failing to notify of any changes to their income

For more information, see References for a link to the Child Support Guide 3.4.5 Estimate penalties.

If a decision is made to remit the estimate penalty, see Table 3.

LPP apply to an account when a parent does not pay their child support debt by the due date.

Child Support has the discretion to fully or partially remit LPP under certain circumstances.

LPP will not be remitted if:

• the case is currently in litigation
• the only payments received have been through enforcement action, unless there are special circumstances, and it would be fair and reasonable to do so
• there is clear evidence that a customer has deliberately avoided paying child support. E.g., changing employment whenever EW is commenced, or
• there is a court judgement for the payment of LPP

Child Support will consider remitting LPP when:

• the customer requests that their LPP be remitted
• the circumstances make it appropriate to remit LPP
• the customer has had a bankruptcy discharged, see Table 2 > Step 8 in Bankruptcy for Child Support customers
• a New Zealand ‘In’ case is identified for withdrawal and return to Inland Revenue, New Zealand, see New Zealand Case Management - Withdrawals and Returns to NZIR from Child Support
• there is a commitment to remit LPP as part of a payment arrangement

Note: if LPP has been applied correctly it is appropriate to remit penalties. If subsequent events mean LPP should not have been applied, such as a retrospective variation to a debt, LPP must be cancelled See Table 4 > Step 1.

Before starting any process to remit penalties, check:

• any previous remission or re-imposition notepads
• if the penalty has already been remitted in part or in full
• if any part of the penalty has been remitted and then re-imposed

For more information on what to consider when making a LPP remission submission decision, see References for a link to the Child Support Guide 8.2 Late payment penalties.

When a penalty has been remitted in error, all or part of the remitted amount can be reimposed. See Table 2 in Penalties Cuba Process Help.

Child Support can remit LPP in full or partially if the customer:

• was unable to pay on time due to circumstances:
• beyond their control and the customer took reasonable action to mitigate those circumstances or their effects, or
• within their control and the customers have taken reasonable action to mitigate those circumstances, or
• have accepted the LPP incentive offer

Note: if the customer did not pay because of circumstances within their control, the decision will depend on the customer’s special circumstances. Decide if it would be fair and reasonable to remit the LPP based on those circumstances.

For more information about each possibility, see References for a link to the Child Support Guide 8.2 Late payment penalties.

LPP that has been raised on a New Zealand ‘In’ case that has been withdrawn and returned to NZIR can be remitted in full, see New Zealand Case Management - Withdrawals and returns to NZIR from Child Support.

See Table 3.

Do not remit LPP until the customer's maintenance arrears are nil, unless:

• a payment arrangement is negotiated under the LPP incentive, go to Step 6
• Cuba limitations have caused the accidental collection of penalties (where it is likely that LPP would have been remitted). E.g., where an employer withholding with arrears (EWA) agreement has been ongoing and the last of the overdue child support payments is about to be paid. Remitting the penalties in advance may prevent penalties being collected after the child support arrears have been paid in full. Expected TRIP can be another situation where early remission may be appropriate
• there are special circumstances, or
• the payer was not at fault in the accrual of the LPP

Paid LPP can only be remitted in a limited number of circumstances.

When making a decision to remit paid late payment penalty amounts:

• consider the circumstances that lead to the inadvertent payment/collection of LPP
• be guided by the examples below, and
• make sure:
• the paying parent agreed to (and complied with) an arrangement to pay and
• there was a commitment to remit late payment penalties made by Services Australia

For further information, see References for a link to the Child Support Guide 8.2 Late payment penalties.

Example 1

Collection activity occurred in 2023, which recovered the payer's overdue child support and LPPs in full. LPPs again accrued following several missed payments in 2024. The payer entered into a payment arrangement and cleared the arrears in 3 instalments. The Service Officer decides to remit the balance of LPPs. It would not be appropriate to remit the LPPs paid in 2023 because at the time these were paid, the payer's circumstances did not satisfy the criteria to remit.

Example 2

A commitment was made to remit LPPs as part of a payment arrangement. A reduction in liability resulted in the next instalment amount paying the LPPs. As a commitment to remit the penalties was in place, it would be appropriate to remit the portion of LPPs recovered by the instalment paid.

Example 3

A commitment was made to remit LPPs as part of a payment arrangement. The customer lodged their tax return which paid all of their outstanding arrears as well as some of the LPPs. Although the arrears were paid via TRIP, it would be appropriate to remit the paid LPPs as the customer has fulfilled their commitment to pay by lodging their tax return.

Note: remitting paid penalties draws funds from consolidated revenue. The requirements for remitting must be met otherwise this will not be an authorised use of consolidated revenue.

Remitting any paid LPP will create excess cash credits on the account. Seek technical advice before taking any action if this is not the appropriate outcome. See Technical support in Child Support.

The LPP incentive offer can be used to encourage customers to enter into a payment arrangement. Base the payment arrangement on the customer's capacity, and in line with the debt repayment methodology, see Debt repayment.

It consists of:

• an upfront 25% remission of the customer’s LPP upon negotiation of a reasonable payment arrangement, and
• a recommendation that the remaining LPP be remitted in full if the payment arrangement is complied with

Note: before the late payment penalty incentive can be offered, determine the circumstances that led to the LPP and if the customer meets the general requirements for the remission.

Remit 25% of LPP (subject to levels of authorisation) if:

• the customer has entered into a reasonable payment arrangement
• the customer has committed to making payments for all ongoing child support, and
• a decision to remit 25% of the LPP has not previously been applied to the debt in which the payment arrangement has been negotiated

Check for a record of any previous 25% LPP remission in the:

• Collection window
• Payment Arrangement - Client window notepads
• Client Penalty Details window notepads, or
• Communication window notepads

Note: if the customer does not comply with the negotiated payment arrangement, the decision to remit 25% of LPP cannot be reversed.

Where a decision is made to remit an initial 25% of LPP, see Table 3.

The decision to remit the remaining LPP is made when the outstanding child support is paid in full. The officer making the final decision is accountable as the decision maker, not the officer who made the initial recommendation.

When making a decision to remit the remaining LPP, consider:

• the legislative requirements for remitting LPP, and
• the recommendation made when the initial 25% of LPP was remitted

If the customer has complied with the payment arrangement accept the recommendation and remit all outstanding LPP

Note: there may be times where the customer has not fully complied with the payment arrangement. Consider if special circumstances delayed or prevented payment during these periods of time before determining if full or partial remission of the LPP is appropriate. See Step 3.

For more information, see Step 2 and the References page for a link to the Child Support Guide 8.2 Late payment penalties.

If a decision is made to remit the remaining LPP, see Table 3.

For late payment penalty submission, go to Step 2

For estimate penalty submission, go to Step 3

Use the Remitting and cancelling penalties macro to document the submission.

Paste the submission in the Collection window by selecting:

• Category - Level 1
• Action - LPP Remission
• select Go

Copy the reason for remitting the LPP into the Circumstances for Failure to pay text box in the LPP submission.

Copy the recommendation whether to remit or not remit in the Recommendation text box in the LPP Submission.

Is the decision on the LPP within delegation?

• Yes, go to Step 5
• No, go to Step 4

Use the Remitting and cancelling penalties macro to document the submission.

Paste the submission in the customer's Communication window by selecting:

• Type - Phone In (as appropriate)
• Reason - Debt Negotiation
• With - Client
• Category - Enforcement
• Issue – Penalties

Is the decision on the estimate penalty within delegation?

• Yes, go to Step 5
• No, go to Step 4

Penalties must only be remitted by an officer with the correct authorisation level.

If not authorised to make the decision on the amount of penalty remission in the submission:

• create a Pending Approval intray and paste a copy of the submission in the intray notepad, and
• refer the submission to an officer with the appropriate authorisation level

After the decision is made, go to Step 6.

Documentation

• For late payment penalties: The authorising officer will document their decision in the Recommendation text box in the LPP submission. See Documenting Child Support information
• For estimate penalties: The authorising officer will document their decision in the Communication window with the submission. See Documenting Child Support information

Process in Cuba

Is the decision to remit the penalties?

• Yes:
• Remit the penalties through the Penalty Details window if the decision is to remit or partially remit. See Table 1 in Penalties Cuba Process Help
• Copy the approval notepad in the Penalty Detail window against the remitted penalties. See Table 2 in Documentation Cuba Process Help
• Go to Step 6
• No, no further updates in Cuba is required. Go to Step 6

Contact the customer by phone to advise of the outcome.

Issue the appropriate letter when penalties are not remitted, or partially remitted.

• Customer requested remission, issue an MX29-1 Refusal to remit penalties letter from Cuba letter list, or
• Customer not requested remission, issue the UQ11.03 - Penalty remittance - refusal letter
• Initial 25% remission due to a payment arrangement offer;
• delete the system generated payment arrangement letter, see Table 8 in Letters Cuba Process Help. and
• issue the UQ11.00 Payment Arrangement and LPP incentive offer

Child Support will only suspend the imposition of late payment penalties in exceptional circumstances, such as where a customer is deceased, see Deceased Child Support customer management.

Seek technical advice before taking any action. See Technical support in Child Support.

Suspended LPP continue to accrue, however are not imposed on the customer's account. Before lifting an LPP suspension, a decision must be made regarding the penalties. If there are grounds for remittance or cancellation, remit suspended penalties. See Technical support in Child Support for advice.

Cancelling penalties is a manual process to correct LPP that have been applied to a maintenance balance that has subsequently reduced. This may be due to a retrospective variation, resulting in a reduction of the liability.

Cuba does not automatically reduce LPP when child support liabilities are reduced. If LPP has accrued against a child support liability that is no longer payable (e.g., if a variation reduces the overdue child support) then the penalties are to be cancelled (not remitted).

It may be appropriate to combine the cancellation of some LPP with the remission of other LPP.

This excludes LPP that have accrued on the debt that is still payable.

Note: do not cancel LPP if the payee discharges the arrears on a case. If the LPP have been applied correctly, these can be considered for remission.

Investigate the customer’s account summary to determine if any retrospective variations have reduced the maintenance arrears.

In the Payer Account Balances section in the Collection Summary window:

• search for any periods that have a LIA - Reduce Maintenance posting with a Credit applying to the account
• expand the posting and note the periods the reduction has applied
• note the amount of the reduction for the period
• determine the amounts of the maintenance debt and the LPP amount on the date before the variation. This can be found in the Find Client Postings (Payer Maintenance Liability) window
• note the current maintenance debt and LPP

Note: if multiple reductions have occurred to the maintenance debt over a period of time, start with the earliest reduction period. Take note of the maintenance debt and LPP balances on the date before the next period of variation. This will assist in calculation (if required) for these periods.

Debt no longer due and payable

If the total debt is no longer due and payable (due to a retrospective variation) all penalties should be cancelled.

LPP applied to the debt

LPP is calculated on child support debts over $1,000 in the month following the due date of liability. If a variation or full payment of the debt occurred before the LPP accrual date, then no LPP have accrued on the variation and therefore do not need to be cancelled.

Check for payments made after the LPP have applied (including payments to Child Support or directly to the receiving parent, which has been applied as NAPs). If some LPP have been paid, it still may be appropriate to cancel them in full.

Previous cancellation/remission

Investigate the case to establish whether any or all of the penalties that have accrued during the variation period(s) have already been remitted or cancelled. Check the:

• Collection window
• Payment Arrangement - Client window notepads
• Client Penalty Details window notepads
• Communication window notepads

Manually calculate the amount of LPP to cancel using the information identified in Step 3.

Use the LPP cancellation calculator within the Remitting and cancelling penalties macro to calculate the amount to be cancelled.

This calculation may consist of 2 components:

• the calculation of the actual amount of LPP to cancel based on the variation, and
• the potential for a further reduction of LPP, based on how long the account was incorrect

For a time factor cancellation, we need to consider the amount of time the debt has been on the case. An additional 5% - 20% of LPPs may be further cancelled as LPPs accrue on a compound basis.

There is no defined rule on which percentage to apply for which time period, but as a guide you may apply:

• Short term under 1 year on case – 5%
• Mid-term 1-2 years -10%
• Longer term 2-5 year 15%
• Over 5 years – 20%

The exact amount to cancel is a matter for careful judgement, this must always be done in consultation with your Service Support Officer.

Note: if a time factor amount is to be considered for multiple periods of reduction, the time period will be from the date the variation occurred to the day before the next period of variation.

Open the LPP submission is recorded in the Collection window by selecting:

• Category - Level 1
• Action - LPP Remission
• select Go

Use the Remitting and cancelling penalties macro to document the submission. Where LPP is being cancelled, the submission must clearly state:

• that the LPP are recommended to be cancelled
• the reason(s) for their cancellation
• how the amount to be cancelled was calculated, and
• the amount to be cancelled

Copy the reason for cancelling LPP in the Circumstances for Failure to pay text box in the LPP submission.

Copy the recommendation whether to cancel the LPP in the Recommendation text box in the LPP submission.

The authorisation for remitting penalties also applies to cancelling penalties.

Penalties within delegation

If authorised to make the decision on the LPP amount in the submission, go to Step 7.

Example

Payer has LPP of $3,000. The Service Officer is an SO3 and is authorised to cancel LPPs of amounts up to $2,000. SO3 has made the decision to cancel $880 of the LPPs after a variation to the assessment reduces the payer’s child support arrears by 30%. SO3 may cancel $880 of the LPP as this amount is within the SO3's authorisation level.

Penalties above delegation

If not authorised to make the decision on the amount of the LPP stated in the submission:

• create a Pending Approval intray, and paste a copy of the submission notepad in the intray notepad, and
• refer the submission to an officer with the appropriate authorisation level

Example

Payer has LPP of $10,000. SO3 and is authorised to cancel LPPs of amounts up to $2,000. SO3 has made the decision to cancel $3,000 of the LPP after a variation to the assessment reduces the payer's child support arrears by 30%. SO3 will need to seek approval from a SO4.

The submission will remain as keyed until accepted or rejected. The authorising officer will document their decision in the Recommendation text box in the LPP submission, see Documenting Child Support information.

If the LPP cancellation is accepted:

• Update the status on the LPP submission to Accepted
• Cancel LPP through the Penalty Details window
• See Penalties Cuba Process Help for details on how to cancel a penalty

If the LPP cancellation is rejected:

• Update the status on the LPP submission to Rejected
• Procedure ends here