Recovering a Child Support debt from a Family Tax Benefit (FTB) 277-04200000

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Example

1

Example 1 - Debt increases after new child is added

A case is registered with 2 children on 1 January. On 1 June a third child is added. Debt as of 30 June is $3,000.

Under the simple apportionment method, the debt per child would be:

$3,000 divided by 3 = $1,000

Clearly, this would be inequitable as the third child was not on the case for the same length of time as the other 2.

A more accurate calculation would be to compare the debt at 30 June to the debt at 31 May and apportion the debt per child as follows.

Debt 31 May $2,400.

Divide the debt equally between children 1 and 2 ($1,200 each).

The debt for June ($3,000 - $2,400) is divided between the 3 children ($200 each).

The debts per child is:

• Child 1: $1,400 ($1,200 + $200)
• Child 2: $1,400 ($1,200 + $200)
• Child 3: $200

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Example 2 - Debt reduces after new child added - Last in first out calculation

Use the same information as Example 1, except that the debt at June 30 is $2,000.

The debt for June would be $2,000 - $2,400 which equals a negative number. Therefore, it could be calculated that there is no debt for Child 3 because there was no increase in debt during June.

The debts would then be:

• Child 1: $1,000 (half of $2,000)
• Child 2: $1,000 (half of $2,000)
• Child 3: $0

This assumes the latest liabilities are credited prior to any arrears component being paid.

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Example 3 - Debt reduces after new child added - First in first out calculation

From Example 1: Debt was $2,400 as at 31 May.

Liability for June was $600.

Therefore, if the total debt at June 30 is $2,000, then the pre May 31 arrears would be $1,400 and the June arrears would be $600.

The per-child calculation is:

• Child 1: $900 (half of $1,400 plus $200)
• Child 2: $900 (half of $1,400 plus $200)
• Child 3: $200 (one third of $600)

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Question

1

What is FTB?

FTB is a payment from Centrelink to help with the cost of raising children. A parent claiming FTB can choose to receive fortnightly payments or a lump sum after the end of the financial year. The payment is made according to the level of care provided for a child. For example, FTB can be paid to a parent with a child in their care for 35% of more of the time.

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When can child support be collected from a customer’s FTB?

Customers who provide at least 35% care of the child/ren for whom they are liable to pay child support or an overpayment may be eligible to claim FTB either in instalments or in a lump sum.

Child Support may only recover the customer’s debt for that child/ren by ongoing deductions from the customer’s FTB fortnightly payment. Child Support cannot make deductions from lump sum FTB payments. FTB deductions can only be used to recover the portion of a customer’s child support debt that relates to the child or children for whom the FTB is being paid.

For example, if the total debt relates equally to 3 children, but the customer is only receiving FTB for 1 of the children, only one third of the total debt can be recovered via FTB deductions.

FTB deductions cannot be used to satisfy liabilities arising from:

• a spousal maintenance order
• any amounts a customer owes for penalties for late payment or for an incorrect estimate
• costs of fines, or
• a section 143 (parentage overpayment) order

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Why can FTB deductions not be used for multiple cases?

If a payer is liable to pay child support to more than 1 payee, any amount collected must be apportioned between the payees according to the apportionment rules in section 70 of the Registration and Collection Act. See the References page for a link to the Act.

This means that a payer’s FTB entitlement for 1 child might be disbursed to the payee caring for another child. This would be inconsistent with the intention that a payer’s FTB entitlement for a particular child could be applied to the payer’s child support debt for that same child.

The same applies when recovering payee overpayments.

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How are deductions made from a payer’s FTB?

CSU will advise whether the customer is being paid FTB for the child/ren for whom there is a debt and will advise how much can be deducted from their total amount of FTB payment - the maximum permissible amount.

Child Support can only deduct up to the maximum permissible amount (the maximum permissible amount is defined in the Family Assistance Act). See the References page for a link to the Act.

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Why is a section 120 notice to Centrelink (CSU) required?

CSU will advise whether the customer is being paid FTB for the child/ren for whom there is a debt and will advise how much of the total amount of FTB can be deducted - the maximum permissible amount. Child Support can only deduct up to the maximum permissible amount.

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Question

1

Is ongoing FTB is available?

Child Support will be advised by Centrelink. This information can be viewed in the Customer Benefits window. This is recorded automatically by transmission of data from Centrelink.

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How much can be deducted from a customer’s ongoing FTB?

Complete a section 120 notice via the Centrelink/Child support information exchange macro. The Child Support Unit (CSU) will respond via email and advise the maximum amount of FTB that may be recovered.

Once the response is received from CSU, it will be forwarded to the Mail Handling team for attaching to the customer record in Cuba. The response will be accessible in the View Correspondence window.

The Service Officer will then decide how much FTB to deduct (a variable rate equal to the maximum amount, or a fixed rate less than the maximum amount), or the amount negotiated with the customer.

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How long will it take for CSU to respond to the section 120 notice?

CSU will response within 5 working days.

4

How are payments deducted from the customer’s ongoing FTB?

• Issue a section 72AB notice to CSU advising the amount to deduct, and
• Request deductions on Cuba via the Centrelink Deductions window

Note: a written section 72AB notice is a legal requirement. However, Service Officers do not need to wait for a response. Centrelink will commence deductions in response to request made via the Centrelink Deductions window.