Income processing for Child Support customers 1 July 2008 to 29 June 2011 (21 November 2012 for WA ex-nuptial cases) 277-07020000

Determine the income type currently used in the assessment in Cuba and select the corresponding link below to determine the steps necessary to obtain a better income for the customer.

A parent's adjusted taxable income (ATI) from 1 July 2008 is the total of:

• taxable income for the last relevant year of income
• total reportable fringe benefits
• target foreign income
• net rental property loss (incomes before 1/7/2009)
• net financial investment loss (incomes after 1/7/2009)
• the total of any tax-free pensions or benefits received
• the parent's reportable superannuation contributions (incomes after 1 July 2009)

for that year of income. For detailed information References has a link for the Child Support Guide 2.4.4: Child support income.

Certain tax-free pensions and benefits must be included as part of a parent's ATI for the purposes of calculating child support. These include:

• an invalidity service pension under the Veterans' Entitlements Act 1986
• a partner service pension under the Veterans' Entitlements Act 1986
• income support supplement under the Veterans' Entitlements Act 1986
• Defence Force Income Support Allowance under the Veterans' Entitlements Act 1986

but only the amount that is:

• exempt from income tax and
• not a bereavement payment, pharmaceutical allowance, rent assistance, language, literacy and numeracy supplement or remote area allowance

For help in determining DVA pensions and benefits that are included in ATI, see Derived income for Child Support customers. Information should be sought from the customer, from checking the External Information window in Cuba and/or by checking the income details window for other years.

If there is any doubt, information can be requested directly from the Department of Veterans' Affairs (DVA) to determine the tax free pension or benefit component of a customer's ATI. See Direct requests for information from Department of Veterans' Affairs (DVA).

Income hierarchy

• Adjusted Taxable income - ATO issued
• Adjusted Taxable income - customer declaration
• Derived income
• Deemed income
• Default income (Statistical default - 2/3 MTAWE)

Note: an income cannot be replaced by an income lower in the hierarchy, see Table 6.

Definition

An ATO issued income is the income tax assessment, for a relevant year of income (RYI), to which their income components are added to make up a parent’s ATI. An ATO used income also sometimes referred to as a taxable income. (Child Support (Assessment) Act 1989 s56 (1)).

An ATO issued income is the most reliable income information for use in child support assessments.

If an ATO issued income is used in the assessment you are no longer permitted to determine a provisional income for that year of income.

If the customer is disputing the accuracy of the ATO issued income see Change in income circumstances, including ATO amended incomes

Change in income circumstances, including ATO amended incomes

A customer's financial circumstances may have changed since the relevant year of income (LRY), or since their last issued taxable income.

The following circumstances may apply to the customer, which may result in a change to their income:

• an ATO amended income is received due to tax evasion or fraud. See Table 3, Step 2
• an ATO income is received for an ended case. See Table 3, Step 2
• if the customer's income has increased since the last financial year, and is within 3 years of separation, discuss how post separation income can be excluded from the assessment
• if the customer faces financial pressure due to special circumstances, such as necessary medical costs and high contact costs, discuss Change of assessment in special circumstances
• if the customer's income has decreased since the last financial year, determine if the customer is eligible to lodge an estimate

Definition

An income tax declaration (ITD) is a parent's declaration of their adjusted taxable income for a relevant year. An ITD may be supplied verbally or in writing. (Child Support (Assessment) Act 1989 s60(1)(b)(ii)).

Customer income declaration recorded in Cuba

If an ITD is recorded in the customer's Client Income window, contact the customer and advise:

• the importance of lodging a tax return
• lodgement rules
• not required to lodge and
• consequences of non-lodgement

If the customer has been advised about the importance of lodging a tax return and the potential consequences of non-lodgement, no further action is required at this time.

Document the details of the call in the Client Income window.

Definition

A derived income is where Child Support has determined, from a source other than the customer or their tax return, the amount of assessable income a customer has received for at least 10 months in the last relevant year.

If the income is for less than 10 months, a derived income cannot be calculated as the income cannot be pro-rated.

A derived income is also known as a provisional income.

Derived income recorded in Cuba

If a derived income is recorded in the Client Income window, contact the customer and attempt to obtain a more accurate income by:

• encouraging lodgement of their tax returns and
• encouraging the customer to lodge an income declaration (ITD)

Review derived income

If Cuba has automatically derived an income as a result of at least 10 months of income information received from Centrelink, conduct searches to determine if the customer has additional income not included in the derived income.

If additional income information is available, go to Table 3 to update the customer's income.

If:

• the customer has been contacted and advised of the importance of lodging a tax return and the lodgement rules
• attempts have been made to obtain a more accurate income, including attempting to obtain an ITD and
• no other income information has been obtained,

no further action is required at this time.

Document the details of the call in the Client Income window.

Definition

When a parent has

• not lodged an income tax return, or supplied an income tax declaration (ITD), for the last relevant year of income (LRYI) and
• lodged an income tax return for the year prior to the last relevant year. (Child Support (Assessment) Act 1989 subsection 58AA)

Cuba automatically calculates a deemed income by applying an inflation factor to the taxable income of the year prior to the LRYI.

An income can only be inflated for one year and it cannot be deemed manually.

A deemed income is also known as a provisional income.

Inflation factor

The inflation factor used to calculate a deemed income is the percentage figure for the 'All Employees Average Weekly Total Earnings' amount for the September quarter of the last calendar year, ending before the child support period commenced. Cuba automatically applies the inflation factor to the income.

The inflation factor used to calculate a deemed income is the percentage figure for the 'All Employees Average Weekly Total Earnings' amount for the September quarter of the last calendar year, ending before the child support period commenced. Cuba automatically applies the inflation factor to the income.

To view the child support inflation factors, see the Child Support Guide 2.4.2: Formula tables and values.

Reviewing and updating a deemed income

If a deemed income is recorded in the Client Income window, contact the customer and attempt to obtain a more accurate income by:

1. encouraging lodgement of their tax returns
2. encouraging the customer to lodge an income declaration (ITD) and
3. attempting to derive an income

If:

• the customer has been contacted and advised of the importance of lodging a tax return and the lodgement rules and
• attempts have been made to obtain a more accurate income

no further action is required at this time.

Document the details of the call in the Client Income window.

Definition

A default 2/3 MTAWE income is applied when a parent has failed to lodge a tax return for the last two relevant years, and no other information about their income is available. (Child Support (Assessment) Act 1989 s58(3)).

Cuba automatically applies a statistical default income (2/3 MTAWE) when there is no other income information recorded in Cuba for the LRYI.

A default income is also known as a provisional income and is the least preferred income.

Reviewing and updating a default income

If a default income is recorded in the Client Income window, contact the customer and attempt to obtain a more accurate income by:

1. encouraging lodgement of their tax returns
2. encouraging the customer to lodge an income tax declaration and
3. attempting to derive an income

If:

• the customer has been contacted and advised of the importance of lodging a tax return and the lodgement rules and
• attempts have been made to obtain a more accurate income

No further action is required at this time.

Note: all attempts must be made to obtain a better income when a default income is used in an assessment.

Document the details of the call in the Client Income window.

All Child Support customers, who are parents, are required to lodge a tax return. In limited circumstances a customer may complete a non-lodgement advice with the ATO.

A taxable income is the preferred income, due to its accuracy.

Child Support cannot collect or record income details for non-parent carers.

Check if lodgement is required - not required to lodge indicator

If a customer receives any Australian Government allowances, pensions or payments (whether taxable or exempt), and:

• taxable income
• target foreign income
• reportable fringe benefits
• net financial investment loss
• net rental property loss
• reportable superannuation contributions

where the total amount is less than the self-support amount, they are not required to lodge a tax return. However, to ensure the most appropriate income is used in their child support assessment, they must lodge a non-lodgement advice with the ATO.

If a customer advises they are not required to lodge a tax return, check the customer's ATO records to ensure the ATO has recorded a 'not necessary to lodge' indicator (NN or NOTNEC) against the relevant income tax years. An indicator affects the dates the income can be used in a child support assessment. See Cuba rules.

It is important to advise customers of the need to complete a non-lodgement advice with the ATO or a provisional income may be applied. To ensure the correct income is used, advise the customer to visit the ATO website.

Contact the customer and encourage lodgement of tax returns

Before contacting the customer check the Client Income window:

• to determine which financial year's taxable incomes are required and
• for all available income information

Contact the customer using all available phone numbers. See Contact with Child Support customers. If you are unable to contact the customer, send a MX1-1 'Request to Contact CSA Letter' using the Letters List window in Cuba and the standard text. See Letters Cuba Process Help. Include an Income Declaration form when sending the letter.

Do not use the TRDB button when trying to locate an income unless processing a new or subsequent registration.

Encourage the customer to lodge the relevant tax return(s). Discuss:

• when they are able to lodge their tax return(s)
• the implications of non-lodgement, including
• if lodged out of time, and the income is lower than the provisional income currently being used in the assessment, it will not be backdated except in special circumstances. See Lodgement rules
• options for a low income earner including fixed annual rate (FAR) not to apply or Minimum Annual Rate (MAR) to nil. See Fixed annual rate not to apply applications or Minimum annual rate to nil - Reducing child support assessments
• prescribed circumstances, including if the customer is genuinely unable to provide timely information. See Section 11 of Child Support (Assessment) Regulations 2018

Gain the customers commitment to lodge and if appropriate take an income tax declaration (ITD) from the customer.

Ask the customer if they will be lodging with a tax agent as this will determine the date of effect the ATO income replaces a provisional income in the assessment. Advise the customer of the date of effect rules, including prescribed circumstances for late lodgement.

To obtain an ITD, go to Step 4.

Updating tax free pension and benefit amounts reported as taxable income

When a customer in receipt of certain tax free pensions or benefits lodges their tax return and includes the tax free pension or benefit as an income for taxation purposes, Cuba will use this income twice. Cuba records the income from ATO as a taxable income, then adds the tax free pension or benefit amount from their Centrelink payments or Department of Veteran's Affairs (DVA) (or other source) again as a tax free pension or benefits other component amount.

This error cannot be corrected administratively.

If the ATO amends a person's tax assessment and the amendment is issued prior to 23 May 2018, Child Support can only use the amended income in circumstances prescribed by sub-section 56(2) of the Child Support (Assessment) Act 1989.

An amended income will not be applied to a child support assessment (including estimate reconciliations) where the parent or the ATO Commissioner initiated the amendment to the taxable income on or after 1 July 2008 regardless of the year of income amended. There are 3 exceptions:

• An amended income will be used in a child support assessment if it has been recorded in the customer's Client Income window at the time the assessment is being made for a new child support period
• If, at the time an estimate of income is to be reconciled, the parent's taxable income for the relevant year has been amended by the ATO (and that amended income is available to the Registrar), the amended income will be used in the reconciliation.
• Where we are satisfied that the amendment to the income occurred due to one of the reasons specified in sub-section 56(2) of the Assessment Act. For example, tax evasion or fraud. For incomes issued prior to 3 May 2014, amendments were considered to have been due to tax evasion or fraud if they resulted in a higher income. These higher amended incomes were automatically applied to the assessment. For incomes issued from 3 May 2014 to 22 May 2018 we required verification of the reason for the amendment. These amended incomes had to be manually applied to the assessment.

For details on how to retrieve ATO issued income details, see the External searches guide. To load an Amended ATO issued income, see Income Cuba Process Help, record an amended taxable income.

Date of effect of amended income

If the ATO issue an amended taxable income prior to a child support assessment being made for a new child support period, the amended taxable income will be used to make the child support assessment from the first day of the new child support period.

If the ATO issue an amended taxable income after the child support assessment has been made and the income was amended due to tax evasion or fraud or any of the other reasons set out in s56(2), the amended taxable income will be used for all of the days in the child support period for which the parent's ATI is relevant (subject to the 'income rules' set out in section 58A).

Note: an amended ATO income, issued due to an ATO keying or scanning error, will not be used in a child support assessment. Either parent or the Registrar may initiate a change to the assessment (i.e. COA and RICA, respectively) or where the income is less than the income being used in the assessment, the parent whose income was amended may elect to estimate their income for the current financial year.

For information on how to apply amended ATO incomes, see Cuba rules.

Amendments to other components of a customer's ATI

If there is a change to the 'other components' of a customer's ATI, the child support assessment will be amended using the amended ATI, for all the days in the Child Support Period that the ATI is relevant (subject to the 'income rules' set out in section 58A), regardless of whether the income increased or decreased.

Go to Step 5.

Identify the income used for an incarcerated customer

Determine the income type used in the assessment. See Income Details Window Help. Contact the incarcerated customer if the assessment uses a:

• default income
• deemed income or
• derived income

Discuss with the customer:

• the period of imprisonment (to assist in determining administrative options for the customer)
• administrative options
• taking an ITD, including section 11 determination to backdate their ITD if applicable. See Table 5,Step 4.

Note: where a customer requests for their ATI to be applied from the start of the child support period, they may be required to provide evidence of their prescribed circumstances.

Unable to contact customer by phone

If unable to contact the customer by phone, send a unique letter and include:

• the income information located from system checks and
• relevant publications and forms

Request that the customer confirm the income information that has been identified and to include any other income details when completing the ITD.

If unable to obtain an ITD and the income used in the assessment does not reflect the customer's actual income, attempt to manually derive an income.

Payments a customer may receive while incarcerated

A prisoner may receive payments for:

• work
• study
• participation in approved programs or
• amenity allowance or gratuities (incidental payments for person items or other minor expenses)

These payments may be included when updating an incarcerated customer's income.

Example: John has been incarcerated since January 2007, with a role as payer in a single child support case. The only income John has received since his incarceration is a small amenity allowance. John's current assessment is based on an income of 2/3 MTAWE as more accurate income information is not available. As John is not earning an income he needs to:

• lodge an ITD
• apply for the FAR not to apply then
• apply to reduce the minimum assessment to nil

Administrative options for incarcerated customers

The following options may be applicable to an incarcerated customer:

• Where a customer is unable to provide information about their Adjusted Taxable Income (ATI) at the time the assessment is made due to prescribed circumstances, they can request their ATI be applied from the start of the child support period. See Table 5, Step 4.
• If the customer's assessment is the minimum annual rate, where the only payments received are those that are prescribed by Section 11 and therefore not considered to be income, the customer can apply for their assessment to be reduced to nil
• If the customer is on the FAR, they can make an application for the FAR not to apply
• If the customer is incarcerated for an entire financial year, and has no other source of income, their taxable income will be nil. Obtain an ITD, see Step 4.
• If the customer has been incarcerated for part of a year and has no other source of income during the period of incarceration their taxable income will be nil for this period. Obtain an ITD or manually derive an income if 10 months of information is available
• If the customer has only recently become incarcerated, they may be eligible to make an application for a Change of Assessment or lodge an Estimate of income.

Example 1: Jane is incarcerated. Jane's current assessment is based on an income of 2/3 MTAWE. Jane received a salary of $26000 for 6 months of the relevant financial year. Jane had no other source of income over the financial year. Jane can lodge an ITD that reflects her salary.

Example 2: John has been incarcerated since January 2007, with a role as payer in a single child support case. The only income John has received since his incarceration is a small amenity allowance. John's current assessment is based on an income of 2/3 MTAWE as more accurate income information is not available. As John is not earning an income he needs to:

• lodge an ITD
• apply for the FAR not to apply then
• apply to reduce the minimum assessment to nil

Note: John can request his ATI be applied from the start of the child support period

A list of relevant Publications, Forms and Referrals is available to assist incarcerated customers manage their Child Support responsibilities while they are in prison.

Encourage customer to lodge an income tax declaration (ITD)

If there is no ATO issued income available, an income tax declaration (ITD) can be used in an assessment. If a customer advises they are going to lodge a tax return, encourage them to lodge an ITD in the interim. This will enable Child Support to calculate a more accurate assessment and minimise the risk of being unable to vary the assessment retrospectively if there is a delay in lodgement.

Check the Client Income window to determine previous year's incomes. If the customer has not lodged a tax return for a number of years, remind the customer that they are required to lodge a tax return.

Obtain ITD details

An ITD can be provided verbally or in writing. When obtaining an ITD, ask the customer for their income for the LRYI including:

• income from salary and wage, including parental leave payments (post 1 January 2011)
• income from taxable and tax-free pensions/benefits

Note: to determine the tax free pension or benefit component of a customer DVA entitlement, request the information from DVA. See Direct requests for information from Department of Veterans' Affairs (DVA).

• details (e.g. name) of taxable and tax-free pensions/benefits
• the source(s) of income (e.g. employer name, Centrelink)
• details of other component income such as reportable fringe benefits or rental income
• details of allowable deductions
• how the amount was calculated

Note: if the customer has been incarcerated for an entire financial year, and has no other source of income, their taxable income will be nil.

Explain to the customer that an ITD is a signed declaration of their income for a past financial year and includes all sources of income.

Check:

• the External Information window in Cuba. See External information Window Help, and/or
• ATO systems

to locate any income information.

If income information is found, discuss with the customer and determine if this information will assist them in lodging an ITD.

Example: information is located indicating the customer received $50,000 from a sole employer. Ask the customer if this was the only source of income they received or if they received additional income.

If there are any discrepancies in the information provided by the customer, investigate and verify the information before accepting the ITD. This may involve clarifying the information provided with the parent or contacting third parties such as employers, Centrelink, or checking ATO systems.

Customers often confuse an ITD with an estimate. Clearly explain that an ITD relates to past income and an estimate relates to future income. Customers may need to provide an ITD to enable them to proceed with an estimate. See Child support estimates (Post 1 July 2010).

Document all details in the Client Income window using the Customer declared income (ITD) macro. Go to Step 7.

If unable to obtain an ITD from the customer, return to the income hierarchy to determine the best income or go to Table 4.

If a customer advises that they are not required to lodge a tax return, check ATO records to ensure that a ' not necessary to lodge' indicator (NN or NOTNEC) is recorded against the relevant income tax years. An NN or NOTNEC indicator will provide information that may help to determine the parent’s income.

Amended ITD

An amended ITD should only be accepted if is supported with reliable and accurate evidence (this can be supplied verbally).

If the amended ITD causes an overpayment the decision to replace the ITD must be confirmed with an SSO before actioning. This will ensure the accuracy of the income declaration and possible effect on the assessment including, FAR, MAR and Reduce Minimum Assessment to Nil (RMA). See Child support overpayments and other payee debt

Document in the Client income window:

• reasons for the income update or replacement
• supporting income evidence

Go to Step 7.

When an ATO issued income becomes available Cuba will automatically update or replace an existing income:

• if the case is active or
• if the case was active for the relevant year of income, or
• if the income applies to multiple cases and all cases are active

If a case is ended, go to Table 6, Step 2.

Go to Lodgement rules for date of effect rules.

Align child support periods

If a reverse case exists, a new ATO income may not trigger a new child support period in the reverse case. The child support periods in both cases must be aligned. Go to Creating and updating reverse cases.

Note: any adjustment of a child support period can have considerable effects on a case and any related cases, so SSO help is needed.

Go to Step 8.

If the customer has provided an ITD or an amended ITD, load the income in Cuba, see Income Cuba Process Help, record an ITD for more information.

An ITD must be loaded from the date of notification. It must not be backdated, unless Section 11, prescribed circumstances applies.

Note: Centrelink administer payments of Paid Parental Leave (PPL), however these payments are not considered an income support payment, therefore the ISP check box should not be checked. This will allow a FAR assessment to generate if appropriate.

Go to Step 8.

The following information must be documented using the Customer declared income (ITD) macro attached to the relevant income in the Client Income window in Cuba:

• all discussions with the customer
• calculations
• details and results of any investigations made
• reasons for the decision
• any commitment made by the customer and
• legislative reference used to make the decision

Go to Table 5.

If:

• a customer has not lodged a tax return for the Last Relevant Year of income (LRYI)
• a customer declared income (ITD) is unable to be obtained
• the income used in the assessment is a deemed or default - 2/3 MTAWE, and
• there is at least 10 months of income information available, then

this amount can be used in the assessment as the adjusted taxable income for the LRYI.

If there is less than 10 months of income information for the customer for the LRYI and the previous year's income is:

• ATO issued, then go to deemed income, or
• ITD, deemed, or derived, then go to default income

Contact the customer to encourage lodgement of tax returns

Attempt to contact the customer using all available phone numbers to:

• obtain the customer's commitment to lodge their tax return, and
• to lodge an ITD

See Contact with Child Support customers. If you are unable to contact the customer, send a MX1-1 'Request to Contact CSA Letter' using the Letters List window in Cuba and the standard text. See Letters Cuba Process Help. Include an Income Declaration form when sending the letter.

If you are unable to contact the customer, or the customer does not respond to the 'Request to Contact CSA Letter', then attempt to derive an income using available income information.

Go to Step 2.

The following searches may be conducted to locate income information for the customer. Information should be sought informally first (e.g. over the phone) as this is the most efficient method, only send an s161 notice if necessary.

Search using Cuba

Income information received from the Centrelink and ATO can be obtained from searching the External Information window in Cuba. The information is automatically retrieved on a periodic basis for customers.

For assistance see External Information Window Help.

Transaction search facility (TSF) search

A TSF search provides details obtained from various ATO databases. The following searches can be made:

• an immediate search will provide customer details on the previous three financial years, or an overnight search will provide customer details for years preceding the last three financial years

For assistance in accessing and using TSF, see the External searches guide.

Integrated core processing (ICP)

ICP is a system for processing all ATO registrations, forms, payments and accounting transactions. It provides a whole-of-client view of all transactions and provides:

• a customer's taxation return lodgement history
• if a tax return is 'not required', and
• if a tax return has been demanded

TR Corporate Applications search

The Declaration Management System within TR Corporate Applications provides information on a customer's employer details and employment history.

A search provides the name and address of an employer, including contact details and the customer's employment status.

This information may be used to send an s161 to an employer.

For assistance in conducting a search in TR, see the External searches guide.

Issue s161

Where necessary, an s161 can be issued to a customer's employer to seek information about the customer's income to correct an income to amend a formula assessment.

Note: a s161 cannot be used to seek information about income to assist in collection action. A s120 should not be used to collect income information. For more information or assistance in issuing an s161, see Child Support's information gathering powers.

When all income information has been sourced, go to Step 3.

Cuba derives income

Cuba will automatically derive an income for the LRYI where 10 months of income information is available. This information is received from Centrelink and can be viewed in the External Information window.

Check the derived income to ensure it is correct, as the payment received may be a once off lump sum. See Derived income for Child Support customers, Processing a derived income, Step 2.

Non-taxable income information received from Centrelink or the Department of Veterans' Affairs is displayed in the Client Income window as non-taxable incomes.

Note: if, on review of a derived income, additional income has been sourced go to Manually derive income.

Manually derive income

To derive an income, the parent must have received an income for at least 10 months of the LRYI. This income may include:

• salary and wages
• taxable pensions or benefits
• parental leave payments
• tax free pensions or benefits, and
• additional income identified including
• reportable fringe benefits
• net financial investment losses
• net rental property loss
• target foreign income
• reportable superannuation contributions

If a parent has received an income for less than 10 months of the relevant year, do not pro-rata a statistical default income to derive the customer's income. Return to the flowchart to determine the most appropriate income.

When an income has been derived, go to Step 4.

Where Cuba has automatically derived an income, check the income information is accurate.

Note: if the customer hasn't lodged a tax return in a number of years but receives income from Centrelink, Cuba will derive the customer's income based only on this income. Conduct searches to determine if the customer has any other form of income.

If the income has been derived manually add the income to Cuba see Income Cuba Process Help, manually derive an income.

Centrelink administers payments of Paid Parental Leave, however these payments are not considered an income support payment, therefore the ISP check box should not be checked. This will allow a FAR assessment to generate if appropriate.

If additional income information is located, go to Step 5. Otherwise go to Step 6.

A provisional income (derived, deemed and default) can only be updated with another provisional income if:

• new income information is received that is more reliable and accurate than the old provisional income. This includes locating additional income information for a customer whose income has been derived by Cuba on Centrelink income only, and
• all efforts to contact the parent and encourage lodgement of a tax return or to obtain an ITD have failed

The new provisional income can be more or less than the original provisional income. Usually, a default income should not be updated to a lower amount if it causes an overpayment. See

Overpayments and payee debt and Income Cuba Process Help, update an income.

Do not amend a default income unless you are reasonably certain that you have more correct information contact an SSO for help if necessary.

The following information must be documented in a notepad attached to the relevant income in the Client Income window in Cuba:

• Derived income created for name for financial year xx/xx
• Contact attempts with <<name>> unsuccessful contacts __/__/__ and __/__/__
• CAL issued __/__/__. Response due __/__/__. No response
• Current income for financial year __/__ is $xx,xxx inc type
• Search results
• date/type/result, e.g. TSF Search: 01.07.01 - 28.11.07 JobSeeker Payment $4,112
• Total derived income for financial year __/__ $xx,xxx
• More/less than 10 months income located
• Legislative reference: Subsection 58(2) Child Support Assessment Act 1989
• Derived income for financial year __/__/__ of $xx,xxx added to Cuba and applied to the assessment
• Legislative reference used to make the decision sxxx
• All discussions with the customer where applicable

When an income has been loaded into Cuba, run eligibility. See Eligibility Cuba Process Help.

Based on the income hierarchy, Cuba will automatically determine the best income in any child support period where the income record has been varied. Cuba will do this by adding a new income or updating or cancelling an existing income. See Cuba rules.

If an income has been added manually to the Client Income Window Help check the effect of this change on:

• the case
• the assessment and
• any related cases

in the Pre-confirmation window.

When a new income has been added to Cuba, a number of changes may occur. If the effect of adding the new income:

• results in arrears
• creates an overpayment
• results in the assessment being based on the fixed annual rate as the customer is on a low adjusted taxable income and they did not receive an income support payment during the LRYI, see the Child Support Guide 2.4.11: Fixed Annual Rate of child support for certain low income parents. If the customer is genuinely on a low income, they may be able to apply for the fixed rate not to be used
• results in the assessment being based on the Minimum annual rate, see the Child Support Guide 2.4.12: The minimum annual rate of child support

If the customer is in receipt of a Disability Support pension, see Minimum annual rate to nil - Reducing child support assessments.

For more information on how Cuba applies income, go to Cuba rules.

Go to Table 7.

Note: the rules regarding date of lodgement only apply to days in a child support period after 1 July 2008. Different rules apply to the days in a child support period prior to 1 July 2008. See Income processing for Child Support customers or the Child Support Guide 2.4.4: Child support income.

Key lodgement dates

All Child Support customers, who are parents, are required to lodge a tax return unless they satisfy the exemption rules specified by the Australian Taxation Office.

In these circumstances a customer should complete a Non-lodgement advice with the ATO. This will result in a 'Return Not Necessary' indicator (RNN) being placed on their tax records for the relevant year.

If a customer's Australian Government pension, allowance or payment (including DVA and Centrelink) and their taxable income is less than $16,000, the ATO may determine that they are not required to lodge a tax return. The agency who paid the pension, allowance or payment will advise the ATO, who will apply a RNN indicator to the customer's record if they determine the customer is not required to lodge. Note: $16,000 is based on 2011 figures. Refer to ATO.

The due date for individuals to lodge their tax return or a Non-lodgement advice is 31 October each year. If a customer uses a tax agent, they will have a later lodgement date according to the ATO tax agent lodgement program Cuba will determine if a return has been lodged late.

The key lodgement dates for businesses alter depending on what is required to be lodged. These dates can be found on the Australian Taxation Office website.

Key lodgement dates determine the date of effect:

• for ATO incomes when they are replacing provisional incomes in Cuba and
• when one provisional income is replacing another provisional income in an assessment

Replacing provisional incomes

A provisional income will be used in the assessment if the customers ATO issued income tax details are not available when a new Child Support Period starts.

The date a tax return is lodged determines if an income will be:

• backdated to the start of a child support period to replace a provisional income or
• used from the date the tax return was lodged

Cuba will recognise if an income received from the ATO was lodged by a tax agent on the customer's behalf and will automatically update the income in accordance with the correct 'backdating' rules.

Date of effect

When a new ATO income is received, the date of effect to the assessment is the beginning of the relevant child support period where:

• the tax return for the last relevant year of income is (or can be) lodged on time or
• the new income is higher than the current income, even if the tax return was lodged later than the ATO timeframe or
• the customer was genuinely unable to provide the income information due to prescribed circumstances or
• the customer was a resident of a reciprocating jurisdiction and the customer responded to a request for information within 60 days

Otherwise the amendment to the assessment will take effect from the issue date of the Adjusted Taxable Income (ATI), for the remainder of the child support period.

If a customer lodges their tax return late, and their ATO-issued income is lower than the provisional income and none of the prescribed circumstances apply, the income will not be backdated to the start of the child support period.

See the Date of effect table in Resources or the Child Support Guide 2.4.4: Child support income.

Where a customer is unable to provide information about their ATI at the time the child support assessment was made due to prescribed circumstances, they can request their ATO assessed income or newly determined ATI be applied from the start of the child support period if it had only been (or would only be) applied prospectively.

A customer can request their ATI be applied from the start of the child support period if at the time the assessment was made, they:

• were unaware that an assessment had been made
• had a serious illness or injury
• were under detention or imprison
• resided in a remote location which made it difficult to contact Child Support
• were prevented from contacting Child Support due to a natural disaster or
• were prevented from contacting Child Support due to some other exceptional circumstance

It is the responsibility of the customer to provide income details within a reasonable period of time after the special or exceptional circumstances ceased to prevent them.

Exceptional circumstances

The following may be considered to be exceptional for the purposes of Section 11:

• Customers who have expressed literacy issues and find Child Support forms difficult to understand and or complete. This includes customer from non-English speaking background
• Circumstances, other than those listed above, which made it difficult for the customer to contact Child Support

This list is not exhaustive. If exceptional circumstances are being considered, contact a TSO.

Consider customer's claim

If a customer is claiming prescribed circumstances, consider:

• the reasons why they could not provide the income information at the time the assessment was being made
• if the circumstances are considered exceptional and
• if the income information has been provided within a reasonable time after the prescribed circumstance ceased to prevent them

Document the decision in the Client Income window, including:

• the reasons for claiming prescribed circumstances
• supporting evidence (if required)
• reasons for the decision
• what the decision is, and
• legislative reference (Child Support (Assessment) Regulations 2018, Reg 11)

The decision to apply Section 11 must be reviewed by an ASO 4. Escalate to the team SO4 as per the appropriate team approval process.

To apply an amended income, see Table 6, Step 3.

Consequences of non-lodgement

If a customer does not lodge their tax return, their child support assessment may not be accurate. If an ATO income is not available, then the customer's income amount must be determined. If this income is incorrect the customer may be paying too much or not enough child support. This could cause a debt when the customer does lodge their tax return.

Lodgement enforcement

Where customer information is available that indicates that either the customer has arrears that may be addressed by a TRIP, or if there is sufficient evidence to indicate that Lodgement will alter the customer's CS assessment, then the customer can be referred for Lodgement enforcement. For more information or to refer a customer, see the Lodgement Enforcement page.

When an ATO issued income becomes available Cuba will automatically update or replace an existing income if the case is:

• active or
• if the income applies to multiple cases and all cases are active

If a case is ended, go to Step 2.

When a customer lodges their tax return which includes income support payments via a tax agent, the lodgement dates and income fields will auto populate in the Client Income window.

ATO amended incomes

Services Australia may receive notification that a customer's taxable income has been amended. If the amendment was issued prior to 23 May 2018, we will not take the amended income into account in the child support assessment (including estimate reconciliations) where the income amendment was initiated (by the customer or the ATO) on or after 1 July 2008 regardless of the year of income amended. There are three exceptions to this rule outlined below.

When we receive notification of an amended income Cuba will record the amended income with a status of 'FOR INFORMATION' but will not change the assessment

Determine if the assessment should be amended based on one of these 3 exceptions:

• An amended income will be used in a child support assessment if it has been recorded in the customer's Client Income window at the time the assessment is being made for a new child support period.
• If, at the time an estimate of income is to be reconciled, the parent's taxable income for the relevant year has been amended by the ATO (and that amended income is available to the Registrar), the amended income will be used in the reconciliation.
• Where we are satisfied that the amendment to the income occurred due to one of the reasons specified in sub-section 56(2) of the Assessment Act. (e.g. Tax evasion or fraud).

Note: if an amended taxable income is already being used in a child support assessment and the amendment to the income was initiated:

• before 1 July 2008, the amended income is not subject to the revised policy and will remain in use in the relevant assessment
• on or after 1 July 2008, the amended income will remain in use unless and until action is taken to manually remove it from the relevant assessment

There may be circumstances where a parent advises that the amendment of their tax assessment was initiated prior to 1 July 2008 and the amendment was not due to tax evasion or fraud (or any other reason set out in sub-section 56(2)). Such cases should be escalated to your Quality Advisor to seek clarification from Program Advice.

Amended taxable income due to tax evasion or fraud

An amended taxable income should be used in a child support assessment where the amendment occurred due to one of the reasons set out in sub-section 56(2) (e.g. tax evasion or fraud).

Unless there is reliable information to suggest otherwise, an amendment to a person's income tax assessment will not be considered to be due to tax evasion or fraud if the amendment was:

• initiated by the person or
• made within the person's statutory time limit for an amendment

The statutory time limits for amendments are:

• two years for most individuals or very small business taxpayers (small business entities), and
• four years for all other business taxpayers, trustees, beneficiaries of certain types of trusts, taxpayers who entered into or carried out a scheme for the sole or dominant purpose of obtaining a scheme benefit and taxpayers in other high-risk categories prescribed by Regulation

from the date of the original tax assessment.

The ATO have advised that amendments made within the statutory time limits are not made due to tax evasion or fraud.

Escalate these amendments to the QA for further assistance.

See Income Cuba process help, record an amended taxable income.

Amendments to other components of a customer's ATI

If there is a change to the 'other components' of a customer's ATI which does not affect the customer's ATO income, the assessment will be amended using the amended ATI for all the days in the Child Support Period that the ATI is relevant (subject to the 'income rules' set out in section 58A), regardless of whether the income increased or decreased.

ATO amended incomes - effect on provisional income

If a prior year ATO income has been amended and that income has been used in the calculation of a deemed or indexed default income in another assessment, the assessment based on the deemed or indexed default income will change.

Note: Cuba will not automatically use an ATO amended income to calculate a deemed or indexed default income. If you determine that a ATO amended income should be used in the calculation on the basis that the original tax assessment was amended due to 56(2), you must calculate and load the information into CUBA manually.

See Cuba rules for Child Support customers, Provisional incomes, Step 4.

ATO issued incomes are not automatically applied to the assessment if at least one of the child support cases that the income applies to is ended.

If the income is not automatically applied, a New income for ended case intray will generate. Check the changes to the assessment and run eligibility to apply the ATO issued income.

If the case is ended as the payee or payer is deceased, do not action the intray or run eligibility. Transfer the customer to the DCM team. See Customer referral guidelines for Child Support staff.

Lodged 'out of time'

When an ATO income is lodged out of time, Cuba will create a provisional income for the following year. See Step 4.

If a customer lodges their tax return late, and has applied under prescribed circumstances for their ATO income to be used from the start of the relevant child support period, Cuba will not automatically give effect to this change.

To ensure the correct date is used, contact an SSO to lodge a CIF to ensure the ATO income is used in the assessment from the start date of the child support period.

EL2 approval must be obtained. This is an ICT requirement.

Not required to lodge

Cuba does not apply an income amount when a Non-lodgement indicator is received. The non lodgement advice indicated that the customer received ISP income only for the duration of the financial year. If you are unable to determine an ATI for the customer, load the income in the Client Income window.

• ISP Box checked - This must be checked if Child Support is aware of an ISP payment otherwise a fixed annual rate may apply. See the Child Support Guide 2.4.11 Fixed Annual Rate of Child Support for Certain Low Income Parents for information about Income Support Payments (ISP) to determine whether the Includes ISP box should be ticked

If replacing the income causes an overpayment, see Child support overpayments and other payee debt.

For information regarding Non-lodgement of Tax Returns, see Table 3, Step 5.

Negative taxable income

If an income provided by the ATO is a negative amount, the taxable income amount is considered to be zero. The amount of zero is recorded in the Client Income window and an explanatory notepad is automatically added advising that a negative income has been received from the ATO.

If an:

• ATO income
• ATO amended income
• ITD or
• derived income

is not available when a child support period is due to commence, Cuba will attempt to create a deemed income. If the parent:

• has not lodged an income tax return, or supplied an ITD, for the last relevant year of income (LRYI) and
• has lodged an income tax return for the year prior to the last relevant year (subsection 58(3A))

Cuba will automatically inflate a previous year income and apply this amount to the assessment. For more information, see Table 2, Step 4

Note: a deemed income cannot be inflated from an ITD. Cuba will not automatically inflate an ITD. If a better income is available, see Table 2, Step 3.

If an:

• ATO income
• ATO amended income
• ITD
• derived income or
• deemed income

is not available when a child support period is due to commence, Cuba will automatically apply a default income - 2/3 MTAWE to the assessment.

Cuba will not automatically replace a default income with a better income. To process manually, see Income Cuba process help, update an income.

Where a new income is added to Cuba that is higher than the basic pension amount but lower than the self-support amount, the assessment will be based on the minimum annual rate (MAR). For further information, see Minimal annual rate to nil - Reducing child support assessments.

Where a new low income is added to Cuba, the FAR may be payable for a child by a parent if:

• the parent did not receive an income support payment in the LRYI and
• that parent's ATI for the LRYI is less than the pension PP (single) maximum basic amount or an estimate of the parent's current income has been accepted and the estimated income is less than the pension PP (single) maximum basic amount and
• that parent has less than shared care of the child

See Fixed annual rate not to apply applications for more information.

When an income is updated, the system automatically generates letters advising of an income change:

• MIR1-1: to a payee advising that a new income is being used (includes EST Reconciliation)
• MIR1-2: to a payer advising that a new income is being used (includes EST Reconciliation)
• MAC1-3 (No change to Annual Rate): to both customers if a new income has been added and used, but there has not been a change to the annual rate
• RPO-01 (Receiving Parent Overpayment): to a payee if the variation results in either the creation of a cash overpayment, or an increase in a payee's existing case overpayment balance. The RPO-01 will not generate if the case payment is subsequently removed on the same day it was created. See Child support overpayments and other payee debt, or
• NOA-01 letter to both parents. Post 5 December 2020 sometimes the system:
• suppresses the Cuba letters, and
• issues a NOA-01 letter consolidating the decision letters. When does a NOA-01 letter issue?

Variations resulting in the following scenarios incorporate the appropriate paragraphs in the letters alerting customers to the change:

• increased arrears
• overpayments or
• changes to employer withholding deductions

Check all Cuba generated letters to ensure they are correct. See Letters Cuba process help.

It may be appropriate to contact the customers by phone to discuss the consequences of an income change including:

• overpayments (including overpayment waiver and refunding), see Child support overpayments and other payee debt
• negotiation of payment of overdue child support, see Debt repayment
• estimate, see Child support estimates (post 1 July 2010)
• opt out arrears period, see Collecting child support payments privately and/or discharging arrears
• applications for a Change of Assessment, see Change of assessment in special circumstances
• application for the fixed annual rate (FAR) not to apply, see Fixed annual rate not to apply applications, or
• application to reduce a minimum assessment to nil (RMA), see Minimal annual rate to nil - Reducing child support assessments

Document all discussions and any follow up actions for finalisation in the Client Income window in Cuba.

Note: when documenting reasons for a decision, the legislative reference used to make the decision must be included.

Contact options are limited when a customer is incarcerated. All attempts must be made to contact the customer to ensure correct assessment details including income.

If contact is successful, discuss with the customer the following options:

• application for the FAR not to apply and/or
• application to reduce a minimum assessment to nil (RMA)

The following factsheets are available to assist incarcerated customers manager their responsibilities while they are in prison.

• Child support factsheet for prisoners
• Being an advocate for a prisoner who pays child support

For more information, see Table 2, Step 3.