Financial hardship 277-04360000

Child Support customers can lodge a financial hardship application when they:

• have a debt, and
• will repay the debt in ongoing instalments, and
• can show that they are unable to meet necessary living expenses, or
• can show they have other necessary expenses to pay outside of these living expenses
• A financial hardship application is a priority work item and must be finalised within 48 hours

Necessary expenses include:

• basic groceries
• accommodation (rent or mortgage payments at minimum rate)
• utilities (electricity, water, council rates, phone bills)
• children’s education costs (such as school fees, school uniforms, textbooks)
• urgent home repairs
• necessary medical treatment for self or children (such as essential medication, x-rays, anaesthetist costs, physiotherapy, psychological services, dental costs etc)
• necessary transport costs to get to work or enable care of children (including emergency vehicle repairs)

Financial hardship can be due to unforeseen circumstances or unexpected events, for example:

• Unexpected changes in income and/or expenditure
• Changes in employment status (such as losing a job or a reduction in income)
• Significant life events (such as a relationship breakdown or a death in the family)
• Circumstances of financial abuse where the financial liability arose from a situation of family and domestic violence or financial difficulty being experienced by a person leaving a violent relationship
• Injury or illness
• Emergency event or natural disaster

A financial hardship application cannot be considered if:

• paying their debt merely limits social activities, entertainment, discretionary spending or access to goods or services of a better nature or standard
• the customer has prioritised higher repayments of other debts over child support, or has not taken action to renegotiate these repayments to improve their financial circumstances
• seeking a refund from funds intercepted if those funds are no longer held

Financial hardship applications will not be considered, and funds must not be refunded if the tax refund has been received before a financial hardship application has been lodged, and:

• the payment was made towards child support arrears and is posted on the Payee Account Summary window, or
• the payment was made towards an overpayment and is posted on the Payer Account Summary window

Expenses that are not necessary include, but not limited to:

• social or entertainment costs (such as pay television, streaming services)
• loan repayments above the minimum required amount, already allowed for in a COA decision, or that the customer is not legally responsible for
• non-compulsory superannuation contributions including salary sacrifice
• asset purchases (for example, boat, new/luxury vehicles, shares)
• unreasonably high general household expenses
• holidays
• other discretionary spending

Where the customer indicates the action, intended action, or payment arrangement amount in line with Debt repayment will cause financial hardship, discuss:

• the type, amount, and urgency of their expenses
• how the hardship occurred (to establish unforeseen and/or unavoidable circumstances)
• any history of hardship applications and what action the customer has taken to address their circumstances and debts, and
• what other financial resources the customer can access

Is a referral appropriate?

Customers experiencing financial hardship may benefit from referral to:

• National Debt Helpline, either warm transfer using Services Australia Workspace, or provide the customer with the number
• referral guidelines for Financial Information Service (FIS)
• payment and service finder on servicesaustralia.gov.au
• information/tools to manage money on the Services Australia website

If the application is about:

• repaying the debt in ongoing instalments, see Table 2
• refund of funds intercepted (or intends to be), see Table 3

When experiencing financial hardship, a lower repayment amount can be calculated that considers individual circumstances.

Tell the customer they must provide information over the phone about their:

• income
• necessary living costs
• loan repayments

Use the Financial hardship macro to document the hardship discussion.

Customers who cannot provide all the information in the initial contact, must:

• download and complete the Statement of financial details for debt repayment form on the Services Australia website, and
• contact us as soon as possible to provide all requested information via:
• phone

• Child Support online account, or
• fax

Tell the customer their application cannot commence until all information is received.

If the customer requests the form be posted to them, explain:

• the application cannot commence, and debt repayment will continue at the current rate or calculated rate until the information is received, and
• Child Support will need to speak with them to discuss the information they provide

Review the Statement of financial details for debt repayment form. Check the form:

• is complete
• information to ensure the assessment is correct
• for the customer’s declared income – check this against the income used in the assessment, and:
• use administrative options to update the income if possible
• recalculate their disposable income using the capacity formula, and
• renegotiate a suitable debt repayment plan

Clarify any unusual expenses, and expenses that appear too high or out of the ordinary. There may be circumstances that justify these expenses. It may be appropriate to request evidence to consider these costs.

Credit card expenses will usually not reduce a customer’s capacity to repay their child support debt, however, consider the minimum credit card repayments. Pay careful attention to credit card spending and consider including necessary expenses the customer regularly pays for.

Determine the customer’s necessary expenses. Explain that the customer’s capacity to pay (disposable income) can only be reduced by the amount that the necessary expenses exceed the self-support amount already allowed for.

If the customer has raised special or out of ordinary costs to support themselves, discuss Change of Assessment (CoA) for Reason 7. Open the Change of Assessment - Discussion macro to guide the conversation with the customer.

National Disability Insurance Scheme (NDIS) or National Redress Scheme

When determining a customer's capacity to repay their debt, do not:

• consider any payment(s) that are provided or received under the National Disability Insurance Scheme (NDIS) or National Redress Scheme as a financial resource or income source. Document amounts on the customer’s record for information only
• include NDIS payments in any capacity calculations, or
• suggest these payments be used to repay a child support debt or overpayment

See the References page for links to The Child Support Guide 2.4.4, Child support income

Ask the customer for an immediate ‘goodwill’ payment (usually the proposed ongoing repayment amount) while awaiting the outcome of their hardship application.

If the customer is linked to their employer, or payments are being enforced, tell the customer their existing payment arrangement(s) will not change until the hardship application is finalised.

Note: do not process interim payment arrangements in the Payment Arrangement window.

Use the information obtained in the Statement of Financial details form, and any evidence the customer supplied, or information obtained by Child Support, to calculate the customers’ necessary self-support expenses.

Open the Financial hardship macro and launch the ‘Financial hardship - capacity calculator’ to determine a suitable ongoing payment arrangement that takes into account the customer’s necessary expenses.

Compare the repayment amount calculated with the initial acceptable range. A hardship submission is only required for repayment amounts below the acceptable range.

Note: after calculating the customer’s capacity to pay, the lowest acceptable arrangement for a customer not in receipt of an Income Support Payment (ISP) is 3 times the minimum weekly rate (the amount an ISP would be expected to pay). Customers who are not in receipt of an ISP cannot negotiate a payment arrangement below this amount, even when financial hardship is considered.

Document the financial hardship discussion in the Collection window. Select the following from the drop down menus:

• Category - Level 1
• Action - CS Debt - Payer Contact (for payer child support hardship), or
• Action - OVP - Payee Contact (for payee overpayment hardship)
• Outcome - Customer Successfully Contacted

When experiencing financial hardship, the refund of funds intercepted and not yet disbursed can support the customer to meet urgent or unforeseen necessary expenses.

Requests for a refund of intercepted funds is treated urgently.

Tell the customer they must:

• agree to a satisfactory payment arrangement
• provide evidence, within 2 to 3 days (where practicable), of:
• the amount of urgent or unforeseen necessary expenses
• having no current capacity to meet these expenses
• upload evidence using online services wherever possible

Some examples of evidence include:

• bank statements
• credit card statements
• reminder notices, final notices, or default notices
• overdue utilities bills
• quotes for urgent car repairs
• eviction notice
• evidence of negotiations with other creditors

Explain:

• the application will not progress if the information is not received
• intercepted funds cannot be held more than 48 hours
• it is the customers responsibility to provide the necessary information and evidence to support their application on time

If a customer is experiencing serious hardship and is expecting a tax refund, they should contact Child Support to discuss. Customers can make a hardship application:

• before or after they lodge their tax return, and
• before or when a tax refund becomes available that has not been disbursed to the other parent

If a hardship application cannot be taken at this time, negotiate a satisfactory payment arrangement.

Apply a special recovery condition.

If a TRIP exception is required to prevent a tax refund from being automatically intercepted by Cuba, record a special recovery condition. See the Tax Refund Intercept Process (TRIP) Cuba Process Help.

Manage the customer’s expectations and explain:

• a financial hardship application can be taken when a decision is required to intercept funds
• the customer must contact Child Support if they expect a tax refund:
• when a tax refund becomes available, a Service Officer will make an outbound contact attempt to complete a financial hardship application
• it is important the customer is available to discuss before a decision is made (usually within 48 hours of the first contact attempt)
• they should be ready with information that supports the financial hardship claim
• if Child Support are unable to speak with the customer, the tax refund will be intercepted and applied to the debt

Review the evidence provided to determine if:

• the expenses claimed are urgent or unforeseen necessary expenses
• the customer has no current capacity to meet these expenses

Check the following:

• funds the customer can access, including:
• the remainder of their tax refund
• savings in their bank accounts
• unused amounts on their credit card
• equity in the mortgage
• actions the customer has taken to mitigate financial pressures outside of their child support obligations. For example, negotiating with other creditors or consulting a financial counsellor
• the circumstances of the hardship, is it temporary or ongoing, and
• recent purchases or payments for personal or luxury items where these funds could have been used for expenses claimed for in their hardship application

Record the financial hardship application using the Financial hardship macro.

Document the financial hardship discussion in the Collection window. Select the following from the drop down menus:

• Category - Level 1
• Action - CS Debt - Payer Contact (for payer child support hardship), or
• Action - OVP - Payee Contact (for payee overpayment hardship)
• Outcome - Customer Successfully Contacted

Use Hold payments as an interim measure on the expected funds while the application is considered. The hold should not extend beyond 48 hours and only request a ‘Hold Payment’ before the funds are received to give the customer an opportunity to provide the necessary information and evidence to support their application. This measure will allow regular payments such as employer deductions and Centrelink payments to disburse normally.

Contact a Service Support Officer (SSO) to have the payment put on hold with the reason Hardship (s72). See Technical Support in Child Support.

Review the customer’s records to determine if they are in financial hardship.

Considerations include:

• if the customer has a history of making hardship applications
• options available to the customer to avoid similar hardship in the future
• how the debt occurred
• what actions the customer has taken to meet or avoid their child support commitments
• the customer’s compliance history, and
• recent notepads including s120 and s161 replies, to determine the customer’s capacity to pay the debt

Launch the recommendation tab in the Financial hardship macro to capture your findings from reviewing the case and your recommendation whether the hardship application should be accepted, partially accepted, or refused.

Ensure the decision:

• will not unreasonably disadvantage the child(ren) by delaying debt repayment, and
• reflects the size of the debt and a reasonable repayment period

Copy the recommendation document into the Collection window.

• Category - Level 1
• Action - Information Gathering
• Method - Phone
• Outcome - Other
• Third party details > record Hardship application
• Type > Other > record Hardship application

Create a Pending Approval intray, with the subject heading ‘Financial hardship application’. Amend the due date to the next business day and route to an APS 6 for their decision. Notify the APS 6 of the intray in their position. See Intray management Cuba Process Help.

Financial hardship claim decisions are made by an APS 6, who must:

• ensure all administrative options have been addressed
• consider what actions the customer has taken to mitigate their circumstances
• ensure there is a payment arrangement in place if the application relates to intercepted funds
• check there is sufficient evidence, and it has been documented
• weigh the circumstances of both parents, considering the effect that withholding or releasing the intercepted or garnisheed funds will have on both parents
• check that the funds in question have not already been applied to the other customer’s account, and
• ensure the decision will not unreasonably disadvantage the child(ren) by delaying debt recovery

The customer’s financial hardship application can be:

• accepted in full
• partially accepted, or
• refused

If there is insufficient information to make a decision, ask the Service Officer to gather further information and evidence. Make a decision within 24 hours from receiving the recommendation.

Note: the APS6 is to ensure that they have the financial delegation to approve the repayment of the debt by instalments. See the Accountable Authority Instructions section 5 - Debts in the Accountable Authority Instructions (AAIs) and Financial Delegations on the References page.

Application accepted

If the APS 6 approves the application either partially or fully, they must:

• record their decision in the relevant notepad
• delete the Pending Approval intray, and
• inform the Service Officer of their approval so the Service Officer can finalise any other issues with the application

Application refused

If the APS 6 refuses an application, they must:

• record their decision in the relevant notepad stating the reason the recommendation is not accepted
• route the intray back to the Service Officer, and
• request the Service Officer contact the customer and advise them of the decision

When a decision is made, phone the customer to tell them the outcome and next steps.

If the hardship application is:

• not accepted, explain the reason, and explore other options. If the customer cannot be contacted by phone, see Contact with Child support customers
• accepted, and for repaying the debt in ongoing instalments:
• see Debt repayment to manage expectations and process the payment arrangement
• if the outcome changes deductions made by an employer, check the letters issued and confirm when the new deduction amount will start

Employers require time to process changes in deductions, due to payroll cut off dates. This time is taken into account when letters issue for Employer Withholding and is reflected in the start date of the change. In exceptional hardship circumstances, contact the ES queue line via Services Australia Workspace to discuss options.

Note: customers do not have objection rights to a financial hardship decision or to enforcement action taken, such as intercepting a tax refund or garnisheeing a bank account.

If the hardship application is approved and there is a TRIP is to be released, see Tax Refund Intercept Process (TRIP) Cuba Process Help.

If a s72A garnishee notice needs to be withdrawn and/or reissued, see Section 72A, 72B and 72AC notices Cuba Process Help.

Contact a Service Support Officer (SSO) to assist with:

• apportioning the money correctly
• removal of the Hold Credit, and
• approval of a refund to the payer

See Technical support in Child Support.