Calculating and recording the Maintenance Income Credit (MIC) for Family Tax Benefit (FTB) lump sum claims 277-51190020

Bo became eligible for child support during the 2005-06 financial year. Bo was entitled to $6000 in child support for 2005-06, however only received $500.

Bo received FTB instalments during 2005-06 and FTB reconciliation has been finalised for that year.

The amount Bo received was less than the amount entitled to, and less than the Maintenance Income Free Area (MIFA) of $1182.60.

For 2006-07, Bo is entitled to $2000 in child support, however receives $3000. As the amount Bo received is more than the amount entitled to, the excess of $1000 is treated as arrears.

When Bo lodges an FTB lump sum claim for 2006-07:

• A MIC accrual of $682.60 is calculated for 2005-06 ($1182.60 less $500)
• The MIC balance as at 30 June 2006 is automatically calculated as $682.60. This is lower than the amount of child support Bo is owed, $5000, therefore accrues the full $682.60
• As Bo received more child support than was due in 2006-07, the MIC balance is used to reduce the effect of the arrears on the FTB payment
• The MIC depletion amount for 2006-07 is $682.60, which is the lower of the MIC balance and the amount of arrears received ($3000 - $2000 = $1000)
• Bo's affecting maintenance income of $1784.55 ($3000 less MIFA of $1215.45) is reduced by the depletion amount, so that the affecting maintenance income = $1101.95 ($1784.55 - $682.60)
• The MIC balance is reduced to nil and this is carried over for the next income year

Julie has one FTB child for the first 100 days and two FTB children for the remaining 265 days in a financial year.

Each child is from a previous relationship and each is a child support child.

The MIFA is $1182.60 for the first 100 days and $1576.80 for the remaining 265 days.

Julie is entitled to receive child support of $3000 in 2006-07 but receives nil.

The MIC daily accrual is:

• $1182.60 / 365 = $3.24 per day for the first 100 days ($324)
• $1576.80 / 365 = $4.32 per day for the remaining 265 days ($1144.80)

This equals a total accrual of $1468.80 for 2006-07 ($324 + $1144.80)

Rounding: The amount in each step is rounded to the nearest cent (0.5 cents rounded upwards).

Chris had two child support entitlements for the whole of 2006-07:

Case 1: For Anna, was entitled to $260 but received $100.

Case 2: For Ben and Casey, was entitled to $5000, but received $1000.

The Maintenance Income Free Area (MIFA) for three children was $1916.25

• Work out the daily MIC accrual amount:
• Global Maintenance Entitlement is $5260 ($260 + $5000)
• MIFA is $1916.25
• MIC accrual = $816.25 (MIFA of $1916.25 less $1100 received)
• Daily MIC accrual = $2.24 ($816.25/ 365 rounded to nearest cent)
• Calculate daily cap (underpaid amount) for each case:
• Case 1: ($260 - $100) / 365 = $0.44
• Case 2: ($5000 - $1000) / 365 = $10.96
• Divide the daily accrual amount by the number of child support cases to obtain the maximum daily accrual amount for each case:
• $2.24 / 2 = $1.12
• Apportion:
• Starting with Case 1 (case with the lower daily cap), as the daily cap of $0.44 is lower than the daily accrual amount of $1.12, $0.44 is the amount applied to Case 1. The remaining $0.68 ($1.12 - $0.44) can be applied to Case 2
• Case 2. As the daily cap of $10.96 is higher than the $1.12 accrual amount, the full accrual amount of $1.12 applies. The remaining $0.68 from Case 1 can also be applied. So the total daily accrual for Case 2 is $1.80 ($1.12 + $0.68). This is less than the child support amount owed (daily cap) for that case
• MIC accrual amount for the year is:
• Case 1 = $160.60 ($0.44 x 365)
• Case 2 = $657.00 ($1.80 x 365)

The MIC accrual amount is the lower of global maintenance entitlement (GME) and the MIFA, less the actual maintenance income received.

• Betty has one child come in to care on 1 January 2007
• The child support entitlement for the child from 1 January is $5000
• In the period 1 January 2007 to 30 June 2007 (181 days), Betty receives $6000 child support
• The other parent of the child has also provided capitalised maintenance in providing the family home, equivalent to $1000 per annum

Betty's global maintenance entitlement is the sum of:

• Annualised entitlement amount = $10082.87
• ($5000 x 365 / 181)
• Capitalised amount = $1000
• Disability percentage = $0
• Non-cash agreement = $0
• Total = $11082.87

Rounding: the amount in each step is rounded to the nearest cent (0.5 cents rounded upwards).

In 2006-07, Roberta is entitled to $4000 child support.

The MIC balance as at 30 June 2006 is $1500.

Roberta receives $5000 child support in 2006-07.

The arrears amount is $1000 (as amount received of $5000 is higher than entitlement amount of $4000).

The depletion amount is $1000. Roberta's affecting maintenance income for 2006-07 is reduced by $1000 to $4000.

The new MIC balance of $500 is carried over ($1500 - $100).

MIC accrual and depletion can only occur in the same financial year if there is more than one child support entitlement.

Sue and partner Robert both have a child support case in 2006-07.

The MIFA for the family is $2759.40.

Sue was entitled to receive child support of $1000 but received $1500, therefore $500 is classed as arrears. The MIC balance at the end of 2005-06 was $1000.

The $500 arrears amount is depleted from the MIC balance. Nil arrears are counted in the 2006-07 reconciliation. Sue has a MIC balance of $500 at the end of 2006-07 ($1000 MIC - $500 arrears).

Sue's partner Robert was entitled to receive child support of $2000 from a child support case but received nil.

The MIC accrual for Robert's child support case:

• MIFA of $2759.40 is less than global maintenance entitlement of $3000 ($1000 for Sue plus $2000 for Robert), the $500 arrears that Sue received is disregarded as it was depleted from the MIC balance)
• Subtract the child support received from the MIFA: $2759.40 - $1000 = $1759.40. (Again, the $500 arrears received by Sue is disregarded as it was depleted from the MIC balance)
• Sue does not have an underpaid child support entitlement for 2006-07 (as was paid arrears of $500), so the accrual amount is attributed in full to Robert's MIC. The amount does not exceed Robert's underpaid entitlement of $2000 for the year, so accrues $1759.40

Shannon has a MIC balance of $2000 at the end of the 2004-05 financial year.

FTB reconciliation conditions have not been met for the 2005-06 financial year.

In October 2007, FTB reconciliation conditions for 2006-07 financial year are satisfied.

For 2005-06, it is known that there is a potential MIC accrual of $1500 financial year.

For 2006-07, child support arrears of $2500 have been received.

Reconciliation for 2006-07 proceeds on the basis that the MIC balance before depletion is $2000 (not $3500, as reconciliation conditions for 2005-06 have not been met so accrual cannot occur).

The MIC balance is depleted to $0, and $500 of the arrears continues to be counted in the maintenance income test at reconciliation.

Subsequently in December 2007, the reconciliation conditions for 2005-06 are satisfied. An additional accrual of $1500 can now occur in respect of the 2005-06 financial year.

The reconciliation calculation for 2006-07 would be revisited, substituting a MIC balance before depletion of $3500.

Therefore, the $2500 of child support arrears received in 2006-07 is offset against the new MIC balance of $3500, leaving a balance of $1000 and adjusting Shannon's FTB entitlement for 2006-07 as no part of the child support arrears is counted in the maintenance income test.

Judy (FTB customer) and Roger (partner) both have a registered child support entitlement for a child from a previous relationship.

There is no child from the relationship between Judy and Roger, and Judy receives FTB for all children.

As at 30 June 2006, Judy has a MIC balance of $2000 and Roger has a MIC balance of $5000.

The payer in the child support case for Judy pays regular child support payments. The payer in the child support case for Roger pays irregular child support payments.

During the 2006-07 financial year Roger receives a large payment of child support (this could be due to the payer in the case having their tax return garnished for instance).

In January 2007, Judy and Roger separate.

Roger and Judy each lodge an FTB lump sum claim for 2006-07. Judy claims FTB for the children for the whole year. Roger claims FTB for a child in care from the date of separation.

For the period that Judy is a single person, only the maintenance income received affects the FTB rate. Roger's maintenance income can affect Sue's FTB for the period they were a couple.

MIC calculation for FTB lump sum claims:

• Judy's MIC balance cannot be used to offset Roger's child support arrears, therefore Judy may incur a debt due to the arrears
• Roger will have the MIC balance depleted due to the receipt of the arrears