Child Support late payment penalties and estimate penalties 277-04290000

Estimate penalties automatically apply to an account when:

• an estimate has been reconciled, and
• the actual adjusted taxable income for the estimated period is 110% or more of the estimated amount

The penalty is 10% of the difference between the liability that has applied for the period, and the amount that should have applied, based on the reconciliation amount.

Child Support has the discretion to remit estimate penalties under certain circumstances. This includes where the penalties have been paid.

Check the estimate penalty amount. If it appears there is an error with the estimate penalty calculation escalate to a Service Support Officer.

Note: the customer may request Child Support remit their estimate penalties. This request does not need to be in writing. It may also be determined that it is appropriate to remit estimate penalties without a customer request.

For more information, see References for a link to the Child Support Guide 2.5.1: Income estimates for a year of income.

Child Support will consider remitting estimate penalties if:

• the difference between the customer's adjusted taxable income and the estimated income was due to an amendment of the tax legislation, or a change to a ruling or determination under the tax legislation. For more information, see References for link to The Child Support Guide 2.5.1: Income estimates for a year of income

or

• satisfied that it would be fair and reasonable to do so

The decision-making process for remitting penalties is the same for all cases, including penalties that have been paid.

Before starting any process to remit estimate penalties, check:

• any previous remission or re-imposition notepads
• if the penalty has already been remitted in part or in full
• if any part of the penalty has been remitted and then re-imposed

Penalties remitted in error, can be re-imposed in full or in part.

Contact the customer to tell them of the change and the reason for the change.
See Contact with Child Support customers and Penalties Cuba Process Help for more information.

Fair and reasonable

Whether it is fair and reasonable to remit estimate penalties is determined on a case by case basis. Determine if the customer:

• intended to provide an inaccurate estimate
• can provide a reasonable explanation as to why the estimate was inaccurate
• can provide a reasonable explanation for failing to notify of any changes to their income
• was aware of all the conditions and implications of an estimate

For more information, see References for a link to the Child Support Guide 2.5.1: Income estimates for a year of income.

Use the Remitting and cancelling penalties macro to document the submission.

Paste the submission in the customer's Communication window, select the following from the dropdown menu:

Type - Phone In (as appropriate)

Reason - Debt Negotiation

With - Client

Category - Enforcement

Issue - Penalties

Penalties must only be remitted by an officer with the proper authorisation level.

If the amount of estimate penalty is within the submitting officer's authorisation level then clearly document the decision, see Documenting Child Support information in Cuba. Otherwise refer the submission to an officer with the appropriate authorisation.

The authorising officer must document their decision and the reasons in the estimate penalty submission.

If the submission is approved, go to Step 5.

If the submission is refused, go to Step 6.

Estimate penalties are varied through the Penalty Details window. See Penalties Cuba Process Help - Remit or cancel penalties for details on how to remit a penalty.

When processed in Cuba:

• copy the remitting penalties approval notepad recorded in the customer communication window, and
• paste into the notepad in the Penalty Details window against the remitted penalties, Documentation Cuba process help, Create or pend a new note

Where a decision has been made to fully remit estimate penalties contact the customer to advise them of the outcome by phone or in writing.

Where a decision is made not to remit all or part of the penalties:

• contact the customer by phone to explain the decision, and
• send 1 of the following letters:
• if the customer requested the penalty remission, send an MX29-1 Refusal to remit penalties letter, see Letters Cuba process help, Create a letter using fill-in fields or
• if the customer was not aware Child Support was considering remitting penalties, send a manually generated system letter advising a decision has been made not to remit the penalties. See Letters Cuba process help, Create a new letter and Letters for Child Support customers

LPP apply to an account when a parent does not pay their child support debt by the due date.

Child Support has the discretion to fully or partially remit LPP under certain circumstances.

LPP will not be remitted if:

• the case is currently in litigation
• the only payments received have been through enforcement action, unless there are special circumstances and it would be fair and reasonable to do so
• there is clear evidence that a customer has deliberately avoided paying child support. For example changing employment whenever EW is commenced, or
• there is a court judgement for the payment of LPP

Child Support will consider remitting LPP when:

• the customer requests that their LPP be remitted
• the circumstances make it appropriate to remit LPP
• the customer has had a bankruptcy discharged, see Bankruptcy for Child Support customers, Check case details, Penalties
• a New Zealand ‘In’ case is identified for withdrawal and return to Inland Revenue, New Zealand, see New Zealand Case Management - Withdrawals and Returns to NZIR from Child Support
• there is a commitment to remit LPP as part of a payment arrangement

Note: if LPP has been applied correctly it is appropriate to remit penalties. If subsequent events mean LPP should not have been applied, such as a retrospective variation to a debt, LPP must be cancelled See Step 1 in the Cancelling late payment penalties (LPP) table.

Before starting any process to remit penalties, check:

• any previous remission or re-imposition notepads
• if the penalty has already been remitted in part or in full
• if any part of the penalty has been remitted and then re-imposed

For more information on what to consider when making a LPP remission submission decision, see References for a link to the Child Support Guide 5.1.6: Late payment penalties.

Child Support can remit LPP in full or partially if the customer:

• was unable to pay on time due to circumstances:
• beyond their control and the customer took reasonable action to mitigate those circumstances or their effects, or
• within their control and the customers have taken reasonable action to mitigate those circumstances, or
• have accepted the LPP incentive offer

Note: if the customer did not pay because of circumstances within their control, the decision will depend on the customer’s special circumstances. Decide if it would be fair and reasonable to remit the LPP based on those circumstances.

For more information about each possibility, see References for a link to the Child Support Guide 5.1.6: Late payment penalties.

LPP that has been raised on a New Zealand ‘In’ case that has been withdrawn and returned to NZIR can be remitted in full, see New Zealand Case Management - Withdrawals and returns to NZIR from Child Support.

Go to Prepare and record submission table.

Do not remit LPP until the customer's maintenance arrears are nil, unless:

• a payment arrangement is negotiated under the LPP incentive, go to Step 6
• Cuba limitations have caused the accidental collection of penalties (where it is likely that LPP would have been remitted). For example, where an employer withholding with arrears (EWA) agreement has been ongoing and the last of the overdue child support payments is about to be paid. Remitting the penalties in advance may prevent penalties being collected after the child support arrears have been paid in full. Expected TRIP can be another situation where early remission may be appropriate
• there are special circumstances, or
• the payer was not at fault in the accrual of the LPP

Paid LPP can only be remitted in a limited number of circumstances.

When making a decision to remit paid late payment penalty amounts:

• consider the circumstances that lead to the inadvertent payment/collection of LPP
• be guided by the examples below, and
• make sure:
• the paying parent agreed to (and complied with) an arrangement to pay and
• there was a commitment to remit late payment penalties made by Services Australia

For further information, see References for a link to the Child Support Guide 5.1.6: Late payment penalties.

Example 1

Collection activity occurred in 2013, which recovered the payer's overdue child support and LPPs in full. LPPs again accrued following several missed payments in 2016. The payer entered into a payment arrangement and cleared the arrears in 3 instalments. The Service Officer decides to remit the balance of LPPs. It would not be appropriate to remit the LPPs paid in 2013 because at the time these were paid, the payer's circumstances did not satisfy the criteria to remit.

Example 2

A commitment was made to remit LPPs as part of a payment arrangement. A reduction in liability resulted in the next instalment amount paying the LPPs. As a commitment to remit the penalties was in place, it would be appropriate to remit the portion of LPPs recovered by the instalment paid.

Example 3

A commitment was made to remit LPPs as part of a payment arrangement. The customer lodged their tax return which paid all of their outstanding arrears as well as some of the LPPs. Although the arrears were paid via TRIP, it would be appropriate to remit the paid LPPs as the customer has fulfilled their commitment to pay by lodging their tax return.

Note: remitting paid penalties draws funds from consolidated revenue. The requirements for remitting must be met otherwise this will not be an authorised use of consolidated revenue.

Remitting any paid LPP will create excess cash credits on the account. Seek technical advice before taking any action if this is not the appropriate outcome. See Technical support in Child Support.

The LPP incentive offer can be used to encourage customers to enter into a payment arrangement. Base the payment arrangement on the customer's capacity, and in line with the debt repayment methodology, see Debt repayment.

It consists of:

• an upfront 25% remission of the customer’s LPP upon negotiation of a reasonable payment arrangement, and
• a recommendation that the remaining LPP be remitted in full if the payment arrangement is complied with

Note: before the late payment penalty incentive can be offered, determine the circumstances that led to the LPP and if the customer meets the general requirements for the remission.

Remit 25% of LPP (subject to levels of authorisation) if:

• the customer has entered into a reasonable payment arrangement
• the customer has committed to making payments for all ongoing child support, and
• a decision to remit 25% of the LPP has not previously been applied to the debt in which the payment arrangement has been negotiated

Check for a record of any previous 25% LPP remission in the:

• Collection window
• Payment Arrangement - Client window notepads
• Client Penalty Details window notepads, or
• Communication window notepads

Note: if the customer does not comply with the negotiated payment arrangement, the decision to remit 25% of LPP cannot be reversed.

Where a decision is made to remit an initial 25% of LPP, go to Prepare and record submission. See Penalties Cuba Process Help for instructions on how to remit 25% of single and multiple penalty entries.

The decision to remit the remaining LPP is made when the outstanding child support is paid in full. The officer making the final decision is accountable as the decision maker, not the officer who made the initial recommendation.

When making a decision to remit the remaining LPP, consider:

• the legislative requirements for remitting LPP, and
• the recommendation made when the initial 25% of LPP was remitted

If the customer has complied with the payment arrangement accept the recommendation and remit all outstanding LPP

Note: there may be times where the customer has not fully complied with the payment arrangement. Consider if special circumstances delayed or prevented payment during these periods of time before determining if full or partial remission of the LPP is appropriate. See Full or partial remission.

For more information, see:

• Circumstances to remit LPP
• References for a link to the Child Support Guide 5.1.6: Late payment penalties.

If a decision is made to remit the remaining LPP go to Prepare and record submission table.

If a customer has an arrangement under the previous ‘LPP incentive offer’ where the remission of LPP was guaranteed, the agreement will be honoured if:

• the negotiated payment arrangement has been complied with, and
• there is no outstanding child support

To determine if a payment arrangement exists under the previous ‘LPP incentive offer’ check:

• Communication, Payment Arrangement - Client and Collection window notepads, and
• Letter Details window for the LPP incentive offer letter

Note: there may be times where the customer has not fully complied with the payment arrangement. Consider if exceptional circumstances delayed or prevented payment during these periods of time before determining if full or partial remission of the LPP is appropriate. It may be appropriate to remit some LPP in some circumstances. See Full or partial remission.

Open the LPP submission in the Collection window by selecting:

• Category - Level 1
• Action - LPP Remission
• clicking the Go button

Use the Remitting and cancelling penalties macro to create a notepad for the LPP remission submission.

Copy the reason for remitting the LPP into the Circumstances for Failure to pay text box in the LPP submission.

Copy the recommendation whether to remit or not remit in the Recommendation text box in the LPP Submission.

Penalties must only be remitted by an officer with the correct authorisation level.

Penalties within delegation

If authorised to make the decision on the LPP amount in the submission, go to Step 3.

Penalties above delegation

If not authorised to make the decision on the amount of LPP in the submission:

• create a Pending Approval intray and paste a copy of the submission in the intray notepad, and
• refer the submission to an officer with the appropriate authorisation level

The submission will remain as keyed until accepted or rejected. The authorising officer will document their decision in the Recommendation text box in the LPP submission. See Documenting Child Support information in Cuba.

If the LPP remission is accepted:

• update the status on the LPP submission to Accepted
• go to Step 4

If the LPP remission is rejected:

• update the status on the LPP submission to Rejected
• go to Step 5

Remit LPP through the Penalty Details window. See Penalties Cuba Process Help for details on how to remit a penalty.

When a penalty has been remitted in error, all or part of the remitted amount can be reimposed, see Penalties Cuba process help, Re-impose penalties. Contact the customer to inform them of the change and reason for the change, see Contact with Child Support customers.

Child Support will only suspend the imposition of late payment penalties in exceptional circumstances, such as when a customer is deceased, see Deceased Child Support customer management, content.

Seek technical advice before taking any action to suspend LPP. See Technical support in Child Support.

Suspended LPP continue to accrue, however these are not imposed on the customer's account. Prior to lifting a LPP suspension, make a decision regarding the penalties. If there are grounds for remittance or cancellation, remit the suspended penalties. Refer to technical advice.

Note: if the decision is to remit LPP that are currently suspended, remove the suspension before doing so.

Full remission of penalties

Where a decision has been made to fully remit late payment penalties contact the customer by phone or in writing to advise them of the outcome. If unable to contact the customer by phone, see Contact with Child Support customers and Resources send a UQ11.01 - LPP remittance - accepted letter advising a decision has been made to remit the penalties.

Penalties not remitted or only partially remitted

Where a decision is made not to remit all or part of the penalties advise the customer by phone and in writing. Send 1 of the following letters:

• if the customer requested the penalty remission, send an MX29-1 Refusal to remit penalties letter, see Letters Cuba process help, Create a letter using fill-in fields or
• if the customer was not aware Child Support was considering remitting penalties, send a manually generated system letter advising a decision has been made not to remit the penalties, see Letters Cuba process help, Create a unique letter

Initial 25% remission due with payment arrangement

Where a payment arrangement is made including the remission of 25% LPP under the incentive offer:

• delete the Cuba generated payment arrangement letter, see Letters Cuba process help, Delete a letter and
• send a manually generated system letter. For accuracy, use the data from the deleted letter, see Letters Cuba process help, Create a unique letter and Resources with the UQ11.0 Payment Arrangement and LPP incentive offer
• Completed LPP incentive arrangement

If LPP are being remitted due to a completed LPP incentive arrangement send a manually generated system letter, see Letters Cuba process help, Create a unique letter and Resources UQ11.01 - LPP remittance - accepted text to the customer through Cuba.

Cancelling penalties is a manual process to correct LPP that have been applied to a maintenance balance that has subsequently reduced. This may be due to a retrospective variation, resulting in a reduction of the liability.

Cuba does not automatically reduce LPP when child support liabilities are reduced. If LPP has accrued against a child support liability that is no longer payable (for example, if a variation reduces the overdue child support) then the penalties are to be cancelled (not remitted).

It may be appropriate to combine the cancellation of some LPP with the remission of other LPP.

This excludes LPP that have accrued on the debt that is still payable.

Note: do not cancel LPP if the payee discharges the arrears on a case. If the LPP have been applied correctly, these can be considered for remission.

Investigate the customers account summary to determine if any retrospective variations have reduced the maintenance arrears.

In the Payer Account Balances section in the Collection Summary window:

• search for any periods that have a LIA - Reduce Maintenance posting with a Credit applying to the account
• expand the posting and note the periods the reduction has applied
• note the amount of the reduction for the period
• determine the amounts of the maintenance debt and the LPP amount on the date prior to the variation. This can be found in the Find Client Postings (Payer Maintenance Liability) window
• note the current maintenance debt and LPP

Note: if multiple reductions have occurred to the maintenance debt over a period of time, start with the earliest reduction period. Take note of the maintenance debt and LPP balances on the date prior to the next period of variation. This will assist in calculation (if required) for these periods.

Debt no longer due and payable

If the total debt is no longer due and payable (due to a retrospective variation) all penalties should be cancelled.

LPP applied to the debt

LPP is calculated on child support debts over $1,000 in the month following the due date of liability. If a variation or full payment of the debt occurred prior to the LPP accrual date, then no LPP have accrued on the variation and therefore do not need to be cancelled.

Check for payments made after the LPP have applied (including payments to Child Support or directly to the receiving parent, which has been applied as NAPs). If some LPP have been paid, it still may be appropriate to cancel them in full.

Prior cancellation/remission

Investigate the case to establish whether any or all of the penalties that have accrued during the variation period(s) have already been remitted or cancelled. Check the:

• Collection window
• Payment Arrangement - Client window notepads
• Client Penalty Details window notepads
• Communication window notepads

Manually calculate the amount of LPP to cancel using the information identified in Step 2.

Use the LPP cancellation calculator within the Remitting and cancelling penalties macro to calculate the amount to be cancelled.

This calculation may consist of 2 components:

• the calculation of the actual amount of LPP to cancel based on the variation, and
• the potential for a further reduction of LPP, based on how long the account was incorrect

For a time factor cancellation, we need to consider the amount of time the debt has been on the case. An additional 5% - 20% of LPPs may be further cancelled as LPPs accrue on a compound basis.

There is no defined rule on which percentage to apply for which time period, but as a guide you may apply:

• Short term under 1 year on case – 5%
• Mid-term 1-2 years -10%
• Longer term 2-5 year 15%
• Over 5 years – 20%

The exact amount to cancel is a matter for careful judgement, this must always be done in consultation with your Service Support Officer.

Note: if a time factor amount is to be considered for multiple periods of reduction, the time period will be from the date the variation occurred to the day prior to the next period of variation.

Open the LPP submission is recorded in the Collection window by selecting:

• Category - Level 1
• Action - LPP Remission
• clicking the Go button

Use the Remitting and cancelling penalties macro to document the submission. Where LPP is being cancelled, the submission must clearly state:

• that the LPP are recommended to be cancelled
• the reason(s) for their cancellation
• how the amount to be cancelled was calculated, and
• the amount to be cancelled

Copy the reason for cancelling LPP in the Circumstances for Failure to pay text box in the LPP submission.

Copy the recommendation whether to cancel the LPP in the Recommendation text box in the LPP submission.

The authorisation for remitting penalties also applies to cancelling penalties.

Penalties within delegation

If authorised to make the decision on the LPP amount in the submission, go to Step 6.

Example: the payer has LPP of $3,000. The Service Officer is an SO3 and is authorised to cancel LPPs of amounts up to $2,000. SO3 has made the decision to cancel $880 of the LPPs after a variation to the assessment reduces the payer’s child support arrears by 30%. SO3 may cancel $880 of the LPP as this amount is within the SO3's authorisation level.

Penalties above delegation

If not authorised to make the decision on the amount of the LPP stated in the submission:

• create a Pending Approval intray, and paste a copy of the submission notepad in the intray notepad, and
• refer the submission to an officer with the appropriate authorisation level

Example

Payer has LPP of $10,000. SO3 and is authorised to cancel LPPs of amounts up to $2,000. SO3 has made the decision to cancel $3,000 of the LPP after a variation to the assessment reduces the payer's child support arrears by 30%. SO3 will need to seek approval from a SO4.

The submission will remain as keyed until accepted or rejected. The authorising officer will document their decision in the Recommendation text box in the LPP submission, see Documenting Child Support information in Cuba.

If the LPP cancellation is accepted:

• update the status on the LPP submission to Accepted
• go to Step 7

If the LPP cancellation is rejected:

• update the status on the LPP submission to Rejected
• no further action is required

Cancel LPP through the Penalty Details window.

See Penalties Cuba Process Help for details on how to cancel a penalty.

Child Support will only suspend the imposition of late payment penalties in exceptional circumstances, such as where a customer is deceased, see Deceased Child Support customer management.

Seek technical advice before taking any action. See Technical support in Child Support.

Suspended LPP continue to accrue, however are not imposed on the customer's account. Prior to lifting an LPP suspension, a decision must be made regarding the penalties. If there are grounds for remittance or cancellation, remit suspended penalties. See Technical support in Child Support for advice.