Financial hardship 277-04360000

Use the Financial hardship macro to document the hardship discussion.

Where the customer indicates the action, intended action, or payment arrangement amount in line with Debt repayment will cause financial hardship, discuss:

• the type, amount and urgency of their expenses
• how the hardship occurred (to establish unforeseen and/or unavoidable circumstances)
• any history of hardship applications and what action the customer has taken to address their circumstances and debts, and
• what other financial resources the customer can access

If the hardship application relates to funds Child Support are seeking to intercept, tell the customer their application can only progress if they enter into a satisfactory payment arrangement.

If the customer has not yet lodged a tax return, correct the debt and go to Step 8.

Consider the customer’s individual circumstances in every situation. A customer is considered to be in financial hardship if they can show that:

• their necessary living expenses exceed their income, or
• they have other necessary expenses to pay outside of these living expenses

Necessary expenses include:

• basic groceries
• accommodation (rent or mortgage payments at minimum rate)
• utilities (electricity, water, council rates, phone bills)
• clothing
• children’s education costs
• urgent home repairs
• necessary medical treatment for self or children
• necessary vehicle repairs if vehicle is used for employment or to enable care of children

Not necessary expenses include:

• social or entertainment costs (such as pay television, streaming services)
• loan repayments above the minimum required amount, already allowed for in a COA decision, or that the customer is not legally responsible for
• non-compulsory superannuation contributions including salary sacrifice
• asset purchases (for example, boat, new/luxury vehicles, shares)
• unreasonably high general household expenses
• holidays
• other discretionary spending

Note: do not consider a financial hardship application if the customer has not taken action to negotiate with other debtors.

When considering a hardship application for an ongoing payment arrangement, remember that ordinary living expenses are already allowed for in the capacity formula.

If the application is about:

• an ongoing payment arrangement, go to Step 3
• action that has been (or intends to be) taken, go to Step 8

To reduce the ongoing debt repayment amount on hardship grounds, tell the customer they must:

• download the Statement of financial details for debt repayment form on the Services Australia website, and
• provide all requested details via phone, wherever possible

Customers who cannot provide all the information in the initial contact, must:

• complete the form on the Services Australia website
• provide all requested information within 2 to 3 days via:
• phone
• Child Support online account, or
• fax

Tell the customer their application will not progress until all information is received.

If the customer requests the form be posted to them, explain:

• the application will not progress and debt repayment will continue at the current rate until the information is received
• Child Support will need to speak with them to discuss the information they provide, and
• the form must be returned within 14 days

Allow the customer time to respond. See Standard response times.

Ask the customer for an immediate ‘goodwill’ payment (usually the proposed ongoing repayment amount) while awaiting the outcome of their hardship application.

If the customer is linked to their employer, or payments are being enforced, tell the customer their existing payment arrangement(s) will not change until the hardship application is finalised.

Note: do not process interim payment arrangements in the Payment Arrangement window.

Review the Statement of financial details for debt repayment form. Check the form:

• is complete
• information to ensure the assessment is correct
• for the customer’s declared income. Check the current income against the income used in the assessment. If administrative options are available to update the income:
• recalculate their disposable income using the capacity formula, and
• renegotiate a suitable debt repayment plan

Clarify any unusual expenses. Clarify any expenses that appear too high or out of the ordinary as there may be circumstances that justify these expenses.

Credit card expenses will usually not reduce a customer’s capacity to repay their child support debt, however consider the minimum credit card repayments. Pay careful attention to credit card spending and consider including necessary expenses the customer regularly pays for.

Determine the customer’s necessary expenses. Explain that the customer’s capacity to pay (disposable income) can only be reduced by the amount that the necessary expenses exceed the self-support amount already allowed for.

National Disability Insurance Scheme (NDIS) or National Redress Scheme

When determining a customer's capacity to repay their debt, do not:

• consider any payment(s) that are provided or received under the National Disability Insurance Scheme (NDIS) or National Redress Scheme as a financial resource or income source. Document amounts on the customer’s record for information only
• include NDIS payments in any capacity calculations, or
• suggest these payments be used to repay a child support debt or overpayment

See the References page for links to The Child Support Guide 2.4.4, Child support income and 2.6.14, Reason 8 - a Parent's Income, Property, Financial Resources, or Earning Capacity.

Use the Financial hardship macro and launch the Financial hardship - capacity calculator to determine a suitable ongoing payment arrangement that takes into account the customer’s necessary expenses.

Compare the repayment amount calculated with the initial acceptable range. A hardship submission is only required for repayment amounts below the acceptable range.

Explain that a recommendation to:

• accept the arrangement, will be made if the customer proposes a higher repayment amount than calculated
• reject the hardship application, will be made if the customer cannot agree to repay the amount calculated and offers a lower amount. Tell the customer Child Support cannot accept a lower amount and collection action will be taken at the amount initially calculated using the Debt repayment capacity formula

Note: after calculating the customer’s capacity to pay, the lowest acceptable arrangement for a customer not in receipt of an Income Support Payment (ISP) is 3 times the minimum weekly rate (the amount an ISP would be expected to pay). Customers who are not in receipt of an ISP cannot negotiate a payment arrangement below this amount, even when financial hardship is considered.

Where hardship is being considered to refund intercepted funds, the customer must:

• agree to a satisfactory payment arrangement
• provide evidence of urgent necessary expenses
• complete a Statement of financial details for debt repayment form to demonstrate they have no current capacity to meet these expenses, and
• provide this information by phone wherever possible

Tell the customer:

• a request for a refund of intercepted funds is treated urgently
• to provide evidence within 2 to 3 days (where practicable)
• to return evidence via Child Support online account or fax
• if they cannot provide evidence within 3 days, agree on a duration not exceeding 7 days
• the application will not progress if the information is not received
• intercepted funds cannot be held more than 48 hours. The onus is on the customer to provide the necessary information and evidence to support their application

If a customer is suffering serious hardship and is expecting a tax refund, they should contact Child Support to discuss. Customers can make a hardship application:

• before or after they lodge their tax return, and
• just before or when the refund becomes available

Consider applying a special recovery condition to the customer’s record when considering their hardship.

If a hardship application cannot be taken at this time, negotiate a satisfactory payment arrangement.

Special recovery condition for TRIPs

If a TRIP exception is required to prevent a tax refund from being automatically intercepted by Cuba, record a special recovery condition. See the Tax Refund Intercept Process (TRIP) Cuba Process Help.

Manage the customer’s expectations and explain:

• a financial hardship application can be taken when collection action is being considered, generally this is when a decision is required to intercept funds
• the customer must contact Child Support if they expect a tax refund:
• when a tax refund becomes available, an outbound contact attempt will be made by a Service Officer to complete a financial hardship application
• it is important the customer is available to discuss before a decision is made (usually within 48 hours of the first contact attempt)
• they should be ready with information that supports the financial hardship claim
• if Child Support are unable to speak with the customer, the tax refund will be intercepted and applied to the debt

Use Hold payments as interim measure on the expected funds while the application is considered and should not extend beyond 48 hours. Only request a ‘Hold Payment’ to give the customer an opportunity to state their case and provide the necessary information and evidence to support their application, before the money is received. This measure will allow regular payments such as employer deductions and Centrelink payments to disburse normally.

Contact a Service Support Officer (SSO) to have the payment put on hold with the reason Hardship (s72). See Technical support in Child Support.

Record the financial hardship application using the Financial hardship macro.

Document the financial hardship discussion in the Payer Collection window. Select the following from the drop down menus:

• Category - Level 1
• Action - CS Debt - Payer Contact (for payer child support hardship), or
• Action - OVP - Payee Contact (for payee overpayment hardship)
• Outcome - Customer Successfully Contacted or ALF completed

Customers experiencing financial hardship may benefit from referral to:

• a financial counselling service, or
• information/tools to manage money on the Services Australia website, see Resources

Offer to warm transfer the customer to the National Debt Helpline for financial counselling, using Services Australia Workspace. Alternatively, the customer can call the National Debt Helpline. Record the products and services offered. See Products and services Cuba Process Help.

Review the customer’s records to determine if they are in financial hardship. This will help decide whether the recommendation is to accept or refuse the hardship application.

Considerations include:

• if the customer has a history of making hardship applications
• options available to the customer to avoid similar hardship in the future
• how the debt occurred
• what actions the customer has taken to meet or avoid their child support commitments
• the customer’s compliance history, and
• recent notepads including s120 and s161 replies, to determine the customer’s capacity to pay the debt

Examine the Statement of financial details and any additional information/evidence provided. To form a recommendation, consider:

• funds the customer can access, including:
• the balance of their tax refund not intercepted
• unused amounts on their credit card
• equity in mortgage
• share ownership, and
• other assets
• actions the customer has taken to mitigate financial pressures outside of their child support obligations. For example, negotiating with other debtors or consulting a financial counsellor
• the circumstances of the hardship, is it temporary or ongoing, and
• recent purchases or payments for personal or luxury items where these funds could have been used for expenses claimed for in their hardship application

Ensure the decision:

• will not unreasonably disadvantage the child(ren) by delaying debt repayment, and
• reflects the size of the debt and a reasonable repayment period

Use the Financial hardship macro to document the recommendation to accept, partially accept or refuse the hardship application. Copy the recommendation document into the Collection/Capacity to Pay window.

• Category - Level 1
• Action - Information Gathering
• Method - Phone
• Outcome - Other
• Third party details > record Hardship application
• Type > Other > record Hardship application

Create a Pending Approval intray, with the subject heading ‘Financial hardship application’. Amend the due date to the next business day and route to an APS 6 for consideration. See Intray management Cuba Process Help.

Financial hardship claim decisions are made by an APS 6, who must:

• ensure all administrative options have been addressed
• consider what actions the customer has taken to mitigate their circumstances
• ensure there is a payment arrangement in place if the application relates to intercepted funds
• check there is sufficient evidence and it has been documented
• weigh the circumstances of both parents, considering the effect that withholding or releasing the intercepted or garnisheed funds will have on both parents
• check that the funds in question have not already been applied to the other customer’s account, and
• ensure the decision will not unreasonably disadvantage the child(ren) by delaying debt recovery

The customer’s financial hardship application can be:

• accepted in full
• partially accepted, or
• refused

If there is insufficient information to make a decision, ask the Service Officer to gather further information and evidence. Make a decision within 24 hours from receiving the recommendation.

Note: the APS6 is to ensure that they have the financial delegation to approve the repayment of the debt by instalments. See the Accountable Authority Instructions section 5 - Debts in the Accountable Authority Instructions (AAIs) and Financial Delegations on the References page.

Application accepted

If the APS 6 approves the application either partially or fully, they must:

• record their decision in the relevant notepad
• delete the Pending Approval intray, and
• inform the Service Officer of their approval so the Service Officer can finalise any other issues with the application

Application refused

If the APS 6 refuses an application, they must:

• record their decision in the relevant notepad stating the reason why the recommendation is not accepted
• route the intray back to the Service Officer, and
• request the Service Officer contact the customer and advise them of the decision

When a decision is made, phone the customer to tell them the outcome and next steps.

If the application is:

• not accepted, explain the reason and explore other options. If the customer cannot be contacted by phone, see Contact with Child support customers
• in relation to a payment arrangement, see Debt repayment
• accepted, and the paying parent is linked for Employer Withholding:
• check the letters issued to the employer for the start date of the new deduction amount
• notify the customer of the date the deduction will change

Employers require time to process changes in deductions, due to payroll cut off dates. This time is taken into account when letters issue for Employer Withholding and is reflected in the start date of the change. In exceptional hardship circumstances, contact the ES queue line via Services Australia Workspace to discuss options.

Note: customers do not have objection rights to a financial hardship decision or to enforcement action taken, such as intercepting a tax refund or garnisheeing a bank account.

If the hardship application is approved and there is a TRIP is to be released, see Tax Refund Intercept Process (TRIP) Cuba Process Help.

If a s72A garnishee notice needs to be withdrawn and/or reissued, see Section 72A, 72B and 72AC notices Cuba Process Help.

Contact a Service Support Officer (SSO) to assist with:

• apportioning the money correctly
• removal of the Hold Credit, and
• approval of a refund to the payer

See Technical support in Child Support.