Retrospective child support assessments and Family Tax Benefit (FTB) 277-51130010

Item

Scenario

1

Increase in child support entitlement for 2011-12

On 1 July 2011, Paul has an annual child support entitlement of $5,000.

On 1 March 2012, Child Support advises a new annual child support entitlement of $10,000 with effect from 1 October 2011.

Calculation of annual maintenance income under the Entitlement Method on 1 March:

• $5,000 for the period 1 July - 30 September 2011 (92 days) = $1,260
• $10,000 for the period 1 October 2011 - 30 June 2012 (274 days) = $7,506
• Annualised amount = $8,767 x 366/365 = $8,791

On 1 April 2012, Paul contacts about the FTB Part A rate for 2011-12. Paul is unable to collect the arrears associated with the backdated Child Support assessment.

Summary:

• Paul received the original amount ($5,000) during the period 1 July 2011 - 28 February 2012
• Paul advised that from the 1 March 2012 the higher rate of child support ($10,000 per annum) was collected after becoming aware of the new assessment
• Paul advised unable to collect any arrears from the payer for the period 1 October 2011 - 28 February 2012

Although Paul did not receive the arrears associated with the backdated assessment, the new assessment amount was received, and Paul was not required to transfer to Child Support collection. Paul has met the MAT for the full year through continuing to collect (ongoing) the amount assessed by Child Support. Paul's FTB rate for 2011-12 can be adjusted and the non-paid child support arrears taken out of the FTB assessment.

Paul's adjusted child support amount for 2011-12 would be $6,671.43 for the whole financial year:

• $5,000 for the period 1 July 2011 - 28 February 2012 (243 days) = $3,328.77
• $10,000 for the period 1 March 2012 - 30 June 2012 (122 days) = $3,342.46
• annualised amount = $3,328.77 + $3,342.46 = $6,671.43

2

Decrease in child support entitlement

As at 1 July 2005, Helen has an annual child support entitlement of $10,000.

On 1 April 2006, Child Support advises Centrelink of a new annual child support entitlement of $2,000 with effect from 1 July 2005.

Helen has been paid FTB up to 31 March 2006.

Calculation of annual maintenance income under the Entitlement Method on 1 April:

• $10,000 for 274/ 365 days (1 July 2005 - 31 March 2006) = $7,506
• $2,000 x 91/ 365 days (1 April - 30 June 2006) = $497
• Annualised total = $8,005 x 365/365 = $8,005

For ongoing FTB Part A payments, annual maintenance income was assessed as $10,000 from 1 July 2005 and $8,005 from 1 April 2006.

Under mandatory continuous adjustment of FTB, on 1 April any potential overpayment of FTB is based on estimated maintenance income of $8,005.

At FTB reconciliation, annual maintenance income is assessed as $8,005 for the whole financial year.

A negative adjustment of -$6,005, ($2,000 - $10,000) x 274/ 365, is calculated due the backdated Child Support assessment. This amount would be deducted from the paying parent's annual maintenance income if Helen confirmed this child support was paid back.

3

Decrease and increase in child support entitlement

As at 1 July 2005, Kim has an annual child support entitlement of $4,000.

On 1 April 2006, Child Support advises Centrelink of a new annual child support entitlement of $2,000 with effect from 1 July 2005, and $8,000 with effect from 1 January 2006.

Kim has been paid FTB up to 31 March 2006.

Calculation of annual maintenance income under the Entitlement Method on 1 April:

• $4,000 for 274/ 365 days (1 July 2005 - 31 March 2006) = $3,002
• $8,000 x 91/ 365 days (1 April - 30 June 2006) = $1,995
• Annualised total = $4,997 x 365/365 = $4,997

For ongoing FTB Part A payments, annual maintenance income was assessed as $4,000 from 1 July 2005 and $4,997 from 1 April 2006.

Under mandatory continuous adjustment of FTB, on 1 April any potential overpayment of FTB is based on estimated maintenance income of $4,997.

At FTB reconciliation, annual maintenance income is assessed as $4,997 for the whole financial year.

An adjustment amount of approximately nil is calculated due the backdated Child Support assessments with a status of 'Waiting'. It is the sum of:

• $2,000 - $4,000 x 184/ 365 for 1 July - 31 December 2005 = approximately -$1,000
• $8,000 - $4,000 x 90/ 365 for 1 January - 31 March 2006 = approximately $1,000

4

Overpayment (OVP) method

Example of the OVP method:

Jane (payee) received $5,000 in the 2016/2017 financial year. Jane then contacts Centrelink to apply for a formal review of the Family Tax Benefit (FTB) after receiving advice from Child Support of an overpayment due to being entitled to a lower amount of child support.

The Child Support Unit (CSJ) contacts Child Support via the Income Estimate Excel template, advising Jane has been overpaid $3,000 in the 2016/2017 financial year. Using this information, the CSJ code the new received amount of $2,000 for the 2016/2017 financial year. This results in 2016/2017 being re-reconciled.

In column I of the 'Overpayments' sheet, Child Support advise that this is an OVP rather than a CR. This means that John (payer) will not make any child support payments to Jane until the value of the $3,000 is used up. John has an ongoing assessment of $3500pa. Jane is placed on the Entitlement Method, which assesses Jane’s ongoing FTB on her ongoing child support assessment ($3500). During the financial year, the full $3000 is drawn down, and John then pays the remaining $500.

Before reconciliation, MNOI needs to be coded with $3500, otherwise reconciliation will occur based on the $500 which is shown on MNGP.

5

Retrospective assessment affects FTB Part A rate for 2011-12, customer does not receive child support arrears and does not transfer to Child Support collection

On 1 July 2011, Paul has an annual child support entitlement of $5,000.

On 1 March 2012, Child Support advises a new annual child support entitlement of $10,000 with effect from 1 October 2011.

Paul has been paid FTB up to 24 February 2012.

• The new assessment amount ($10,000) is used in the maintenance income test from date paid to plus one (DPT + 1), 25 February 2012
• Annualised maintenance income for 2011-12 year is recalculated taking into consideration the new assessment, applied from the actual event date of 1 October 2011
• A year-to-date debt may be calculated with mandatory continuous adjustment of the ongoing FTB rate

At FTB reconciliation, annual maintenance income is assessed as $8,791 for the whole financial year.

• $5,000 for the period 1 July - 30 September 2011 (92 days) = $1,260
• $10,000 for the period October 2011 - 30 June 2012 (274 days) = $7,506
• Annualised amount = $8,767 x 366/365 = $8,791

On 1 October 2012, Paul contacts about the FTB Part A rate for 2011-12. Paul was unable to collect the arrears associated with the backdated Child Support assessment.

Assumptions:

• Paul received the original entitlement amount ($5,000) during the period 1 July 2011 - 24 February 2012. If Paul privately collected:
• less than the entitlement, Paul would have failed the Maintenance Action Test (MAT) for the period a lower amount was received
• more than the entitlement, the actual amount received must be included in the maintenance income test calculation
• Paul received the new assessment amount ($10,000) during the period 25 February 2012 - 30 June 2012. If Paul privately collected less than the entitlement, Paul would fail the MAT for the period a lower amount was received

See Recording private maintenance income.

Paul has met the MAT for the full year. Although Paul did not receive the arrears associated with the backdated assessment, Paul received the new assessment amount, and was not required to transfer to Child Support collection. Paul's FTB rate for 2011-12 may be adjusted and the non-paid child support arrears taken out of the FTB assessment.

Paul's adjusted child support amount for 2011-12 would be $6,771 for the whole financial year:

• $5,000 for the period 1 July 2011 - 24 February 2012 (239 days) = $3,273
• $10,000 for the period 25 February - 30 June 2012 (127 days) = $3,479
• annualised amount = $6,753 x 366/365 = $6,771

6

Retrospective assessment affects FTB Part A rate for 2011-12, customer transfers to Child Support collection with no 'opt in' arrears

On 1 July 2011, Paul has an annual child support entitlement of $5,000.

On 1 March 2012, Child Support advises a new annual child support entitlement of $10,000 with effect from 1 October 2011.

Paul has been paid FTB up to 24 February 2012.

Paul transfers to Child Support collection on 1 March 2012, and does not seek collection of arrears.

• The new assessment amount ($10,000) is used in the maintenance income test from DPT + 1 (25 February 2012)
• Annualised maintenance income for 2011-12 is recalculated taking into consideration the new assessment, applied from the actual event date of 1 October 2011
• A year-to-date debt may be calculated with mandatory continuous adjustment of the ongoing FTB rate

At FTB reconciliation, annual maintenance income is assessed as $8,447 for the whole financial year.

• $5,000 for the period 1 July - 30 September 2011 (92 days) = $1,260
• $10,000 for the period 1 October 2011 - 29 February 2012 (152 days) = $4,164
• $3,000 Child Support disbursements for the period 1 March - 30 June 2012
• annualised amount = $8,424 x 366/365 = $8,447

On 1 October 2012, Paul contacts about the FTB Part A rate for 2011-12. Paul was unable to collect the arrears associated with the backdated Child Support assessment.

Assumptions:

• Paul received the original entitlement amount ($5,000) during the period 1 July 2011 - 24 February 2012. If Paul privately collected:
• less than the entitlement, Paul would fail the MAT for the period a lower amount was received
• more than the entitlement, the actual amount received must be included in the MIT calculation
• Paul received the new assessment amount ($10,000) during the period 25 - 29 February 2012. If Paul privately collected less than the entitlement Paul would fail the MAT for the period a lower amount was received

See Recording private maintenance income.

Paul has met the maintenance action for the full year. Paul's FTB rate for 2011-12 may be adjusted and the non- paid child support arrears taken out of the FTB assessment.

Paul's adjusted child support amount for 2011-12 would be $6,426 for the whole financial year:

• $5,000 for the period 1 July 2011 - 24 February 2012 (239 days) = $3,273
• $10,000 for the period 25 - 29 February 2012 (5 days) = $136
• $3,000 Child Support disbursements for the period 1 March - 30 June 2012
• annualised amount = $6,409 x 366/365 = 6,426

7

Retrospective assessment affects FTB Part A rate for 2011-12, customer transfers to Child Support collection with 'opt in' arrears period

On 1 July 2011, Paul has an annual child support entitlement of $5,000.

On 1 March 2012, Child support advises a new annual child support entitlement of $10,000 with effect from 1 October 2011.

Paul has been paid FTB up to 24 February 2012.

Paul transfers to Child Support collection on 1 April 2012, and seeks collection of arrears for the maximum period of three months (from 1 January 2012).

Calculation of annual maintenance income under the Disbursement Method on 1 March:

• $5,000 for the period 1 July - 30 September 2011 (92 days) = $1,260
• $10,000 for the period 1 October 2011 - 31 March 2012 (183 days) = $5,013 (although Child Support has backdated Paul's case, the system does not recognise this event date)
• $4,500 Child Support disbursements reported during the period 1 April - 30 June 2012 (the reported disbursements may include entitlements for the period 1 January - 31 March 2012 and 1 April- 30 June 2012)
• annualised amount = $10,773 x 366/365 = $10,802

At FTB reconciliation, annual maintenance income is assessed as $10,802 for the whole financial year.

On 1 October 2012, Paul contacts about the FTB Part A rate for 2011-12. Paul does not agree with the child support amount used to calculate the rate of FTB and asks for it to be reviewed. Paul does not agree with the amount of child support assessed for the period Chid Support is collecting payments for.

Assumptions:

• Paul received the original entitlement amount ($5,000) during the period 1 July 2011 - 31 December 2011. If Paul privately collected:
• less than the entitlement, Paul would fail the MAT for the period a lower amount was received
• more than the entitlement, the actual amount received must be included in the maintenance income test calculation
• Paul privately received the original entitlement amount ($5,000) during the period 1 January - 24 February 2012

Paul has met the MAT for the full year. Paul's FTB rate for 2011-12 may be adjusted for the following reasons:

• The non-paid child support arrears associated with the retrospective assessment can be taken out of the FTB assessment
• Actual child support received during the period 1 January - 31 March 2012 adjusted to ensure double-counting does not occur (Centrelink is not told that the Child Support collection period has been backdated)

Paul's adjusted child support amount for 2011-12 would be $8,288 for the whole financial year:

• $5,000 for the period 1 July - 31 December 2011 (184 days) = $2,520
• $5,000 for the period 1 January - 31 March 2012 (91 days) = $1,246 (Paul advised the original assessment amount was privately collected during this period. Paul has asked Child Support to collect arrears associated with the new assessment)
• $4,500 Child Support disbursements reported for 2011-12
• annualised amount = $8,266 x 366/365 = $8,288

8

Retrospective assessment for a period that starts on or after 1 July 2012 and elects for Child Support collection

Zara is the receiving parent in a child support case. Zara's child support case against the payer John was registered for private collection. Child Support used a provisional income for John to calculate the amount of child support payable because John had not lodged tax returns for the 12/13, 13/14 and 14/15 financial years.

In September 2015, Child Support received information from the Australian Taxation Office (ATO) about John's income. As the income assessed by the ATO was higher than the provisional income used for John, child support reassessed the amount John should have paid Zara for the periods from 1 July 2012 onwards based on John's actual income. This resulted in an increase to the child support assessed rate for those periods with the result of child support arrears owing to Zara.

As the amount of child support Zara was entitled to for past period increased, her FTB for those periods was reassessed as Zara is deemed to have received the assessed amounts. This resulted in an FTB overpayment of $5000 over the three financial years. This is because Zara's child support case is private collect and the FTB is based on the amount of child support Zara is assessed to receive, not the amount that is actually collected.

Zara attempted to collect the increased liability and arrears from John privately, and when unable to do this, has asked Child Support to start collecting.

Unless there are exceptional circumstances, Child Support can only collect arrears for 3 months prior to the date Zara asked for collection to begin. Zara must seek legal advice about enforcing the remainder of the arrears through court action. Centrelink raised the $5000 FTB debt, which Zara had to start repaying immediately.

Zara sought legal advice and provided Centrelink with a letter from her legal practitioner advising that they were unable to assist her as it would not be cost effective. Zara should be referred to a Centrelink social worker to discuss a partial exemption from enforcing the child support arrears. If granted, an adjustment would be made to the FTB payments to reflect the amount of child support Zara actually collected.