Inflation adjustment (CS) 277-02050000

A customer may ask Child Support to vary their payments because of a new or existing clause in their court order, agreement or change of assessment decision. Alternatively, a Service Officer may become aware of a case that requires adjusting after receiving an auto-generated intray in Cuba.

Adjustments are made using 1 of 3 inflation methods:

• CPI - Consumer Price Index, go to Step 2
• CSI - Child Support Inflation factor, go to Step 3
• Other - as specified in the agreement or court order, go to Step 3

The Australian Bureau of Statistics (ABS) publishes quarterly CPI figures for each Australian State and Territory capital city as well as a National CPI based on a weighted average of the CPI figures for the 8 Australian capitals.

In September 2012, the ABS re-referenced the CPI figures. When performing manual calculations, for example for error corrections, the published values can be used up to that date. From September 2012, the published figures have to be converted to make them comparable to the values stored in Cuba.

For the published CPI figures from 1988 and the converted figures from September 2012, see Consumer Price Index (CPI) figures.

The CSI is based on the change in all employees average weekly earnings amount for the relevant June quarter. The CSI factor is updated by 1 January each year. For CSI factors from 1992 onwards see Basic Values.

The document may require the assessment to be adjusted by an amount other than a CPI or CSI amount. For example, a court order may state that the assessment is to be increased by $5 on the 1st of December each year. This type of adjustment will be recorded on Cuba as OTH (other).

All adjustments will be automatically processed by Cuba unless:

• the basic values inflation figures are not yet available
• no percentage or dollar amount is recorded for OTH cases

If Cuba cannot automatically process an inflation adjustment, a CPI/CSI Inflation Required intray will automatically generate to alert the Service Officer that a manual adjustment is needed.

If the details of the inflation adjustment are not already recorded in Cuba, obtain a copy of the originating document to determine the exact inflation requirements, see Correspondence received in Child Support.

If the details of the order or agreement are not documented in Cuba, document in the Case window for future reference.

See:

• Agreements between Child Support customers
• Court varied Child Support assessments (CVA) including lump sum orders
• Stage 1 – registrations for assistance on updating the assessment to reflect the departure

Most inflation adjustments use an annual frequency. The formula for calculating the new entitlement for an annual adjustment using the CPI figures is:

• (latest quarter index/previous year quarter index) x previous entitlement = new entitlement

See Consumer Price Index (CPI) figures for the converted index figures.

Example using existing liability of $45.60, to be inflated by 2018 June quarter CPI figure, and compared to the 2017 June quarter CPI figure (Sydney figures used):

• 204.2/200.0 = 1.021
• 1.021 x $45.60 = $46.56 per week

Note: Cuba rounds the inflation factors to 4 decimal places. For consistency, use 4 decimal places when manually calculating inflation factors.

If the adjustment is for:

• part of a month, go to Step 5.
• a frequency other than annual, go to Step 6.

The formula for calculating the new entitlement using the CSI figures is:

• old entitlement x CSI percentage = new entitlement

Example using an existing liability of $45.60 per week and a CSI percentage of 4

• $45.60 x 1.04 = $47.42 per week

If the adjustment is for part of a month, go to Step 5.

If the new entitlement calculated is less than the previous entitlement, examine the relevant clause in the court order or agreement.

If the court order or agreement says the entitlement is to be:

• increased in accordance with movements in the CPI, no variation is required. The wording of the clause must be checked closely for any subsequent periods. Determine if the CPI index is to be compared to 12 months prior or the CPI index in general to work out how to process the next CPI adjustment. Detail what is required for the next CPI variation in the Inflation Factors window
• varied reviewed or adjusted or similar terms in accordance with movements in the CPI, a variation is required

An order or agreement with a CPI clause will generally state the date on which the comparison is to be made and the figures to be used, for example the weighted average of CPI figures in all capital cities or a specific capital city, and the relevant quarter (March, June, September, December)

If an order or agreement simply refers to CPI, but not a specific measure of it, confirm with both parents which city (or weighted average) and/or quarter they want to use. If there is a disagreement, and the parent cannot be contacted or neither parent has a particular view, use the:

• weighted average of CPI in all capital cities
• most recent quarterly figures available at the time the annual adjustment is to be made (and compare with those from the corresponding quarter of the previous year). For example, if the annual adjustment is to be made on 1 July each year, the June quarter figures will not yet be available. Unless the document specifies otherwise, the March quarter figures would be used. The quarter must be specified in Cuba for future automatic adjustments to be made to the agreement or order

When a CPI, CSI or other inflation adjustment affects the assessment for part of a month:

• the amount of the overall increase for this first month may be more or less than the increase for subsequent months

The amount of child support payable for a whole calendar month is worked out using:

• daily rate x 30.4375 = monthly child support (30.4375 is the average number of days in a calendar month, that is 365.25 days/12 months)

If child support is payable for only part of a month, the liability for that particular month is worked using:

• daily rate x number of days for which child support is payable = total child support for that calendar month

If the daily rate changes during a month, the liability for that particular month is calculated as follows:

• previous daily rate x number of days at previous rate = sub-total 1
• new daily rate x number of days at new rate = sub-total 2
• total child support for the month = sub-total 1 + sub-total 2

Consequently the child support payable for any month in which the variation occurs mid-month is calculated by the actual number of days in the month, rather than the average number of days in a calendar month.

The frequency determines how often adjustments will occur. Cuba supports CPI adjustments for the following frequencies besides annual:

• quarterly
• half-yearly
• bi-annually. Note: this field is mislabelled in Cuba. It should read biennially. Use this field to record a frequency of every second year. The half yearly field is used to record a frequency of twice a year
• CSP

A different formula is used to calculate the new entitlement depending on the frequency. The formula is similar to when the frequency is annual (see Step 1), however the ‘previous year quarter index’ is not used as the base figure. The latest quarter index is compared to the corresponding previous quarter index based on the frequency.

Examples using existing liability of $45.60 per week and the latest quarter index of June 2018 for Sydney.

To adjust quarterly, the latest quarter index June 2018 is compared to the quarter index for 1 quarter prior, which is March 2018

• 204.2 / 203.4 =1.0039
• 1.0039 x $45.60 = $45.78 per week

To adjust half-yearly, the latest quarter index June 2018 is compared to the quarter index half a year prior, which is December 2017

• 204.2 / 202.9 = 1.0064
• 1.0064 x $45.60 = $45.89 per week

To adjust biennially, the latest quarter index June 2018 is compared to the quarter index 2 years prior, which is June 2016

• 204.2 / 195.7 = 1.0434
• 1.0434 x $45.60 = $47.58 per weekCSP frequency (only adjusted once at the start of each new CSP)

Cuba uses the annual calculation set out in Step 1. The start date of the CSP is the anniversary date. The latest completed quarter before the commencement of the CSP is compared to the corresponding quarter for the previous year (which may not always be the actual quarter that preceded the start of the previous CSP).

For 15 month CSPs, this automatic adjustment may result in under-inflation and for CSPs less than 12 months, the automatic adjustment may result in over-inflation. These may require manual correction.

To manually calculate an inflation adjustment for CSP frequencies compare the latest quarter index before the start of the CSP with the quarter that was completed most recently before the start of the previous CSP.

When making an adjustment for an inflation factor, document:

• how the case is to be adjusted including calculations
• the reasons for the decision and reference the legislation/policy used to make the decision

Document in the notepad on the Inflation Factors window.

Once the adjustment has been made, the following letters will be generated:

• MCP1-1 - Inform amount of child support varied to reflect change in CPI
• PAD7-1 - Employer schedule of deductions