Child Support late payment penalties and estimate penalties 277-04290000

Item

Example

1

Calculation 1:

Payer has child support arrears of $15,000 and LPP of $5,000. The payer lodges tax returns and the assessment is recalculated causing a variation on the case for the period 01/06/2010-30/04/2011. This variation reduces the arrears by $2,000 on 26/08/2011.

All LPP which accrued prior to the variation period, 01/06/2010-30/04/2011, are still due and payable. A proportion of the LPP which accrued during and after the period of variation should be cancelled in line with the arrears as these are no longer due and payable.

The Service Officer calculates how much LPP to cancel:

Steps:

1. Account balance on the day prior to the variation period (31/5/2010)

Debt $5,000, LPP $2,000

2. Account balance on the day prior to the maintenance correction (25/08/2011)

Debt $15,000 LPP $5000

Note: if multiple periods of cancellation are required, repeat the steps above for each period. The amount of LPP to be cancelled will be the total of each variation (which includes individual time factor calculations where appropriate).

3. The amount of maintenance which accrued during and after the variation period

= $15,000 - $5,000 (The debt on 25/08/2011 - step 2 minus the debt at step 1.)

= $10,000

4. The percentage of maintenance cancelled

= $2,000 ÷ $10,000 (The amount of the reduction divided by the amount at step 3.)

= 0.2 or 20%

5. The amount of LPP which accrued during and after the variation period

= $5,000 - $2,000 (The LPP at 25/08/2011, step 2 minus the LPP at step 1.)

= $3,000

6. Amount of LPP to be cancelled is calculated:

= $3,000 x 20% (LPP at step 4. multiplied by the percentage at step 3.)

= $600

The Service Officer will cancel $600 in LPP.

Time factor

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.

2

Calculation 2:

In the above example, if the paying parent had lodged a late tax return and the assessment was recalculated for the period 01/06/2005-30/04/2006 on the 26/08/2011, a 20% time factor will need to be considered as it has been over 5 years since the recalculation has occurred.

Time Factor to be used = 20%

Steps:

• LPP balance on the day prior to the maintenance correction - LPP’s cancelled
• = $5000 - $600 = $4400
• $4400 x 20% (time factor) = $880
• The amount of LPP to be cancelled plus the amount from Calculation 1
• = $880 + 600 = $1480

Therefore the Service Officer will cancel $1480 in LPP.