Auto reconciliation procedure for child support estimates (from 1 July 2011) 277-07060010

When a customer’s taxable income is received from the ATO and an estimate is in place for that financial year, Cuba will compare the actual Adjusted Taxable Income (ATI) with the estimated ATI. The estimate period will be reconciled if the actual ATI is higher than the estimated ATI.

If the actual ATI is not higher than the estimated ATI Cuba will automatically set the estimate status to Recon-No Change.

Most reconciliations are automatically performed by Cuba. Manual intervention is needed in specific circumstances. If manual intervention is needed as a result of an exception to the auto reconciliation process, an intray will generate. If this is the case see Manual reconciliation procedure for child support estimates (from 1 July 2011).

Note: automatically reconciled estimates of income for the 2011-12 financial year are not being applied to Child Support assessments. This is resulting in the reconciling amount having a status of 'recorded' in 'Client Income' window, however the reconciling amount is not applying to the assessment.

If you identify a customer record where you believe this issue has occurred please refer the record to a Service Support Officer (SSO) for confirmation. Once this has been confirmed by a SSO they will send the affected customer details to the Specialised Assessment Services (SAS) to apply an approved workaround.

For information about how Cuba processes an estimate reconciliation for:

• an estimate for the entire financial year, go to Step 2
• an estimate for a part of the financial year, go to Step 3
• more than one estimate, first estimate starts on 1 July, go to Step 4
• more than one estimate, first estimate starts after 1 July, go to Step 5

An estimate for the whole financial year will be compared to the actual ATI when it becomes available. If the actual ATI is:

• more than the estimate, the assessment will be amended to use the actual ATI. A new assessment notice will issue.
• not more than the estimate, Cuba will determine that the estimate does not need to be reconciled.

Example:

F estimated their full financial year income for 2011-12 to be $28 000

F’s actual taxable income for 2011/2012 is $43 500

As the actual ATI of $43 500 is higher than the estimated ATI of $28 000, the assessment for the financial year will be amended using an ATI of $43 500.

When a customer’s actual ATI becomes available, Cuba will compare it to the expected ATI. The expected ATI is made up of the YTD income and the estimate for the remaining period.

Cuba determines whether reconciliation is necessary by subtracting the YTD from the actual ATI. If the remaining actual ATI is higher than the partial year estimate, it will be annualised and used to amend the assessment for the estimate period. A new assessment notice and covering letters will issue.

If the remaining actual ATI is not more than the estimate, Cuba will determine that the estimate does not need to be reconciled. Cuba will update the estimate status to Recon no change.

Note: the YTD amount is presumed to be accurate. Any additional income, above the YTD, in the financial year is applied to the estimate period and used in the reconciliation.

Example:

• F’s YTD ATI was $22 000 for the period 1 July 2011 to 31 October 2011
• F estimated their partial year ATI for the remaining period 1 November 2011 to 30 June 2012 (242 days) to be $26 500. This is annualised as follows:
• Daily amount: $26 500/242 = $109.50413 (must be to 5 decimal places)
• Annualised amount: $109.50413 x 365 = $39 969
• F’s actual ATI for 2011-12 is $56 500
• The actual partial year income is $56 500 - $22 000 = $34 500 (i.e. actual 2011-12 ATI less the YTD ATI)
• The partial year actual ATI ($34 500) is higher than the partial year estimated ATI ($26 500), so the estimate is reconciled
• The partial year actual ATI is annualised
• Daily amount: $34 500/242 = $142.56198
• Annualised amount: $142.56198 x 365 = $52 035
• The assessment for the period 1 November to 30 June is amended using the annualised ATI of $52 035

When a customer’s actual ATI becomes available, Cuba compares it to the total estimated income for the financial year which is calculated as follows:

• A pro-rated estimated ATI is calculated for each estimate that has been revoked. This is necessary because when each estimate was lodged, the customer provided an amount they estimated they would earn between the start date of the estimate and the end of the financial year. Each of these amounts was then annualised to identify the income to be used in the child support assessments. As each estimate is revoked, the application period for that estimate is changed. The original estimate no longer represents the expected income until the end of the year
• To calculate the estimated ATI for each estimate, each annualised amount is divided by 365 to give a daily amount.
• The daily amount is then multiplied by the number of days in the application period for that estimate.
• The final estimate in the financial year does not need to be recalculated because it still represents the expected ATI for the final estimate.
• The final estimate for the financial year is added to each pro-rated estimated ATI amount to give the total estimated income for the financial year.

If the actual ATI is higher than the total estimated income, Cuba reconciles the estimates and amends the assessments using incomes based on the actual ATI.

The amount by which the actual ATI exceeds the total of the estimates is apportioned across all estimate periods. An ‘additional daily rate’ is calculated by dividing the extra income by 365 days. The ‘under-estimated amount’ for an estimate is the additional daily rate multiplied by the number of days in the application period for the estimate. The total for each estimate (the prorated estimate plus the under-estimated amount) is then annualised to calculate the income to be used to amend the assessment.

If the actual ATI is not more than the total estimated income, Cuba will determine that the estimate does not need to be reconciled.

Example:

• On 1 July S estimated their ATI for the full financial year to be $22 000
• On 1 November S revokes their first estimate and makes a new estimate of $58 000 for the period 1 November to 30 June (242 days). This amount is annualised as follows:
• Daily amount: $58 000/242 = $239.66942 (must be to 5 decimal places)
• Annualised amount: $239.66942 x 365 = $87 479
• The annualised amount of $87 479 is used to amend the assessment from 1 November
• S’s actual ATI for 2011-12 is $84 000
• The period for the first revoked estimate (1 July to 31 October) is 123 days. The estimated ATI for 123 days is calculated as follows:
• Daily amount: $22 000/365 = $60.27397
• Amount for estimate period: $60.27397 x 123 = $7414
• S’s estimated ATI for second estimate period 1 November to 30 June is $58 000
• Total estimated ATI is $65 414 ($7414+$58 000)
• The actual ATI ($84 000) is higher than the estimated ATI ($65 414), so the estimate will be reconciled
• Cuba subtracts the estimated ATI from the actual ATI to determine the under-estimated amount for the year:
• Under-estimated amount: $84 000 -$65 414=$18 586
• Additional daily amount: $18 586/365 = $50.92055
• Cuba adds the additional daily amount (multiplied by the number of days in the application period for the estimate) to each estimate and the assessments will be amended using the annualised income for each estimate based on the actual ATI
• Period 1 July to 31 October (123 days)
• Additional amount: $50.92055 x 123 = $6263
• Amending ATI for the period: $7414 + $6263 = $13 677 (original estimate plus the under-estimated amount)
• Cuba amends the assessment for this period using the annualised income:
• Daily amount: $13 677/123 = $111.19512
• Annualised income: $111.19512 x 365 = $40 586
• Period 1 November to 30 June (242 days)
• Additional amount: $50.92055 x 242 = $12 323
• Amending ATI for the period: $58 000 + $12 323 = $70 323 (original estimate plus the under-estimated amount)
• Cuba amends the assessment using the annualised income:
• Daily amount: $70 323/242 = $290.59091
• Annualised income: $290.59091 x 365 = $106 066

When a customer’s actual ATI becomes available, Cuba will compare it to the expected ATI. The expected ATI is made up of:

• the YTD income, and
• the total pro-rated estimated income for all estimates

Cuba determines whether a reconciliation is necessary by subtracting the YTD from the actual ATI. If the remaining actual ATI is higher than the total of the pro-rated estimates, Cuba will reconcile the estimates and amend the assessment for each estimate. New assessment notices will issue.

The amount by which the actual ATI exceeds the estimated ATI is apportioned to each estimate according to the number of days in each application period as follows:

• An ‘additional daily rate’ is calculated by dividing the extra income by the number of days from the start date of the first estimate until the end of the year
• The ‘under-estimated amount’ for an estimate is the additional daily rate multiplied by the number of days in the application period for the estimate
• The total for each estimate (the pro-rated estimate plus the under-estimated amount) is then annualised to calculate the income to be used to amend the assessment

If the remaining actual ATI is not more than the total estimated income, Cuba will determine that the estimate does not need to be reconciled.

Example:

• On 24 February, M advised that their year to date income was $34 600 and estimated their income amount for the remainder of the financial year (127 days) would be $9200. The annualised amount is as follows:
• Daily amount: $9200/127 = $72.44094 (must be to 5 decimal places)
• Annualised amount: $72.44094 x 365 = $26 441
• M contacts us on 13 April to advise that they have been working full time since 5 April. M revokes their first estimate and estimates their income for the period 5 April to 30 June (87 days) to be $11 000. The annualised amount is as follows:
• Daily amount: $11 000/87 = $126.43678
• Annualised amount: $126.43678 x 365 = $46 149
• F’s actual taxable income for 2011-12 is $60 000
• Cuba determines the estimated ATI amount
• The estimated ATI for the first revoked estimate period 24 February to 4 April (40 days) is $2898 ($72.44094 x 40)
• The estimated ATI for the second estimate (5 April to 30 June) is $11 000
• Total estimated ATI = $13 898 ($2898 + $11 000)
• Cuba subtracts the YTD ATI from the actual ATI to give the actual ATI amount for the period 24 February to 30 June: $60 000 - $34 600 = $25 400
• The additional daily amount is calculated as follows:
• Total under-estimated amount: $25 400 - $13 898 = $11 502
• Additional daily amount: $11 502/127 = $90.56693
• Cuba adds the additional daily amount to each income estimate as follows:
• Period 24 February to 4 April (40 days)
• Additional amount: $90.56693 x 40 = $3623
• Amending ATI for the period: $2898 + $3623 = $6521 (original estimate plus the under-estimated amount)
• Cuba amends the assessment for this period using the annualised income
• Daily amount: $6521/40 = $163.02500
• Annualised income: $163.02500 x 365 = $59 504
• Period 5 April to 30 June (87 days)
• Additional amount: $90.56693 x 87 = $7879
• Amending ATI for the period: $11 000 + $7879 = $18,879 (original estimate plus the under-estimated amount)
• Cuba amends the assessment for this period using the annualised income:
• Daily amount: $18 879/87 = $217.00000
• Annualised income: $217.00000 x 365 = $79 205

If a customer disputes the outcome of an estimate reconciliation, see the Customer disputes child support estimate reconciliation.