Australian Taxation Office (ATO) income for Child Support customers 277-07010010

If the customer advises the income used in the assessment is not an accurate reflection of their current circumstances, the following circumstances may apply to the customer and may result in a change to their income:

• the customer’s income has increased since the previous financial year, and is within 3 years of separation, discuss if post separation income can be excluded from the assessment
• the customer faces financial pressure due to special circumstances such as necessary medical costs, high contact costs of spending time with a child - discuss change of assessment in special circumstances
• the customer’s income has decreased since the Last Relevant Year of Income (LRYI) - determine if the customer is eligible to lodge an estimate
• the customer is being assessed on a fixed annual rate but their income is genuinely low
• the customer is being assessed on a minimum annual rate but their income is less than the minimum rate
• an ATO income is received for an ended case
• an ATO amended income is received, go to Step 7
• when the ATO has recorded a Return not Necessary indicator for a customer for a financial year, go to Step 4

All Child Support customers who are parents should lodge a tax return unless special circumstances apply.

An ATO issued taxable income is considered to be the most accurate income and parents should be encouraged to lodge their tax returns on time each year.

When the ATO issues a tax assessment the relevant income information transfers to the customer’s Cuba record automatically via the data exchange. ATO incomes received in the data exchange will automatically have amounts released under the First Home Super Saver (FHSS) Scheme excluded. These amounts do not form part of a customer’s adjusted taxable income (ATI) for child support purposes.

If ATO has accepted the customer’s advice and applied the lodgement status of Return not Necessary (RNN) deemed income on their ATO record:

• the RNN indicator is not included in the data exchange
• go to Step 4

Note: do not provide customers with any taxation-related advice, refer them to the ATO website.

Child Support cannot collect or record income details for non-parent carers.

Two taxable incomes – same lodgement date

When the ATO loads the customer’s tax return details into Integrated Core Processing (ICP), an income message is sent to Child Support. A taxable Income is recorded in Cuba which may be used in an assessment.

Sometimes the ATO makes adjustments to returns when they have selected a customer’s tax return for additional analysis. When the ATO reprocesses the tax return, they may add income that was not initially declared by the customer.

When the income is reprocessed, a second income message is sent to Child Support. This results in an additional taxable income (not an Amended Taxable Income) for the same financial year being loaded in Cuba.

As the first and second incomes loaded in Cuba relate to the same tax return, the lodgement dates will be the same on both incomes. The second taxable income is the correct income for Child Support to use in the assessment. It represents the final amount as assessed by the ATO.

Two taxable incomes – different lodgement dates

A second taxable income may also be received when the ATO have completely cancelled the first tax return and replaced it with a re-lodged return. The 2 incomes loaded in Cuba may often have different lodgement dates.

Before 15 June 2019 Cuba did not automatically apply the second income to assessments. The Child Support Solutions Gateway Team (SGT) and CS ATO and DVA Relationships (CSADR) team, identified and corrected affected assessments.

Cuba will now give effect to the second income where appropriate and the first income will have a status of CANCEL SYSTEM. This income is only visible in the income history.

In some cases, the incorrect first income results in letters being issued to customers. Where the second correct income results in a reassessment, a second set of letters will be issued.

Do not take any action. Explain to the customer:

• the reason for the 2 sets of letters and
• the correct income is currently being used in the assessment

If customers have concerns about their Income Tax Lodgement, refer them to the ATO.

A child support customer may not be required to lodge a tax return but may be required to lodge a Non-lodgement advice with the ATO if their only income was from certain Government payments, allowances and pensions.

In limited circumstances the customer may not be required to lodge a Non-lodgement advice if they meet the exemption requirements set out by the ATO.

Customers who have completed a non-lodgement advice with the ATO will have ‘Return not Necessary’ (RNN) recorded against the lodgement status if the relevant income tax year/s on their ATO income tax records. See ATO Lodgement program framework.

If unable to confirm the lodgement status with the ATO by using ICP, ask the customer to contact child support when they have lodged the advice. This will allow the RNN status to be confirmed and the relevant RNN deemed income loaded to the Client income window for the relevant financial year. See Deemed and Default income for child support customers.

Loading an RNN deemed income in the Client income window will not always result in a change to the child support assessment. The RNN deemed income must still be loaded to ensure the RNN status is recorded and the customer’s Client of Interest (COI) indicator is updated. Otherwise Cuba will not recognise the mutual customer has met lodgement compliance for the relevant year.

If the customer has not lodged their tax return and there is no Return not Necessary indicator present on the customer's ATO records, obtain an Income Tax Declaration (ITD) from the customer and advise the customer to discuss their lodgement requirements with the ATO or a Tax agent.

Note: NOTNEC and NRL are historical codes no longer used by the ATO.

Before contacting the customer, check the Client Income window and ATO records in ICP:

• to determine which financial year’s taxable incomes are required
• for all available income information

Contact the customer using all available phone numbers. If the customer is unable to be contacted, send a MX1-1 Request to Contact CSA Letter using the Letters List window in Cuba. Include pre-approved text Income tax declaration required. See Step 4 of Table 6 in the Letters Cuba Process Help.

Encourage the customer to lodge the relevant tax returns. Discuss:

• an ATO assessed taxable income is the preferred income type for child support assessments
• when they will be able to lodge their tax returns
• implications of non-lodgement, including:
• If lodged out of time, and the income is lower than the provisional income currently being used in the assessment, it will not be backdated except in special circumstances
• Options for a low income earner including fixed annual rate not to apply applications or minimum annual rate to nil assessments
• Prescribed circumstances, including if the customer is genuinely unable to provide Child Support with timely information. See the References page for a link to Section 11 Child Support (Assessment) Regulations 2018

Gain the customer's commitment to lodge and if appropriate, take an ITD. There is no need to wait for the customer to lodge their tax return before requesting they provide their income details. This will enable Child Support to:

• calculate a more accurate assessment
• minimise the risk of being unable to vary the assessment retrospectively if there is a delay in lodgement. See Income Cuba Process Help

Ask the customer if they will be lodging with a Tax agent or lodging a non-lodgement advice with the ATO as this may change the date of effect the ATO income replaces a provisional income in the Child Support assessment. Advise the customer of the date of effect rules, including prescribed circumstances for late lodgement.

To obtain an ITD, see Derived income for Child Support customers.

When the customer in receipt of certain tax free pensions or payments lodges their tax return and incorrectly includes the tax free pension or benefit as an income for taxation purposes, Cuba will include this income twice in the customer’s ATI.

Cuba records the taxable income from the ATO, and also separately records the tax free pension or benefit amount from Centrelink or Department of Veteran’s Affairs as a tax free pension or payments other component amount.

In calculating the customer’s ATI, both of the above amounts are included. This is the correct application of the law and is not considered to be an error. However, given the tax free pension or benefit has been accounted for twice in the ATI, the customer’s child support assessment may not accurately reflect their actual capacity to pay.

If the customer raises concern about the tax free pension or benefit being included twice, discuss appropriate options depending on the circumstances of the case. Examples of some of the options that may be available include:

• estimate of income if the affected income is being used in the current assessment, or
• change of assessment if the case has not ended and the affected period is within the last eighteen months (or leave can be sought from the court for Child Support to consider periods within the last 7 years or the court may make an order for these periods)

If there do not seem to be any administrative remedies under the Child Support Scheme, seek technical assistance. Tell the customer to contact the ATO to enquire about amending their tax assessment for that year.

For details about when an amended income can be used in a child support assessment, see ATO amended incomes and Amendments to other components of a customer’s ATI.

From 23 May 2018, if the ATO amends a person’s tax assessment, Child Support can use the amended income to amend their child support assessment in most circumstances. Whether the amended tax assessment will be used retrospectively or prospectively will depend on a number of factors, go to Step 8. To process ATO amended incomes issued prior to 23 May 2018, go to Step 9.

In most instances, ATO issued incomes will be retrieved and loaded into Cuba automatically. For details on how to retrieve ATO issued income details manually see External searches guide.

To load an amended ATO issued income manually, see Income Cuba Process Help.

An amended ATO income will not be loaded correctly for a small number of customers if 3 or more amended ATO incomes and 1 of the later amended incomes is the same amount as an earlier amended income.

Cuba does not receive the later amended income. It treats it as a duplicate of the earlier one.

Example

Taxable income $50,000, first amended $75,000, second amended $25,000, third amended $75,000. The third amended is incorrectly viewed as a duplicate of the first amended and no income record is created.

CSADR will correct impacted cases manually. If a case is identified that has not been corrected and the customer has made a request to apply the ATO issued income, email a request to CS ATO and DVA Relationships (CSADR) to correct the case.

If a customer makes a complaint about an ATO Amended Income, consider escalation to Level 2 via escalation reason 5 - Complex, cross programme or multiple issues.

Staff must escalate the complaint to Level 2 if:

• unable to administratively resolve the effect of an ATO Amended Income on a Child Support Assessment using income information from the ATO’s Integrated Core Processing system, or by seeking technical support where appropriate, and
• backdating a lower amended income where the amended return was lodged late due to circumstances beyond their knowledge or control (including ATO or agent error)

If the customer’s amended tax return affects only the 'other components' amount of their adjusted taxable income, go to Step 10

If the ATO issues an amended taxable income:

• prior to a child support assessment being made for a new child support period, the amended taxable income will be used to make the child support assessment from the first day of the new child support period
• after the child support assessment has been made, it will be used to amend the assessment from the date the department receives notification of the amended income from the ATO

The amended income will be used in the child support assessment retrospectively and will replace the original/preceding tax assessment in its entirety if the amended taxable income is:

• lodged on time (on or before the parent’s relevant taxation lodgement due date), whether the amended Adjustable Taxable Income (ATI) is higher or lower
• higher than the original/preceding tax assessment
• lodged within 28 days of the:
• issue date of the original/preceding tax assessment or
• customer becoming aware that the original/preceding tax assessment was wrong (this decision would need to be made and applied manually)
• lodged more than 28 days:
• after the issue date of the preceding tax assessment and
• special circumstances prevented the parent from taking more timely action to amend their return (this decision needs to be made and applied manually)

If a customer advises they have been impacted by the Federal Court decision, Commissioner of Taxation vs Douglas (the Douglas decision), the enquiry must be referred to the Solutions Gateway Team for managing.

If there is a provisional income in the assessment prior to the date the original/preceding tax assessment was applied, the rules of section 58A are relevant.

Unless specified, the above retrospective dates of effect will be determined automatically by the system. See Exceptions to the income date of effect rules in certain circumstances.

Where the ATO initiated the amendment, the lodgement date is the date ATO decided to review the income. However, this is not always the date that is used. For example, ATO may not change the lodgement date from that of the original tax assessment, despite the amended income issuing years later. If the lodgement date of an amended income is incorrect, and correction would impact the child support assessment, escalate via email to CS ATO and DVA Relationships (CSADR) to query the lodgement date with ATO.

See the Resources page for examples of dates of effect of provisional, original taxable and amended taxable incomes.

If an amended ATO income, either parent or the Registrar may choose to initiate a change to the assessment (COA and RICA respectively).

To apply amended ATO incomes, see Cuba rules for Child Support customers, ATO incomes.

Rules regarding amended tax assessments are different depending on when the amendment was issued (rather than on the financial year or the period in question).

If an amended income issued prior to 23 May 2018 and the relevant child support period had already been created, the amended income should only be used in the child support assessment if the:

• parent’s income was amended from nil, or
• amendment was due to 1 of the reasons set out in subsection 56(2) of the Child Support (Assessment) Act 1989 as it existed prior to 23 May 2018

For the rules on amended incomes issued before 23 May 2018, see Step 2 in Table 3 of Income processing for Child Support customers 1 July 2008 to 29 June 2011 (21 November 2012 for WA ex-nuptial cases).

Where a component of the customer's adjusted taxable income is amended as a result of an amendment to the customer's tax assessment, do not amend the child support assessment.

If there is a change to the other components of the customer's adjusted taxable income, the department’s policy is to amend the child support assessment for all the days in the child support period the Adjusted Taxable Income (ATI) is relevant. This is regardless of whether the income increased or decreased. The amended ATI will replace the original ATI in its entirety. If there is a provisional income in place prior to the application of the original ATI, the rules of section 58A are relevant. If the amended ATI is greater than the provisional income, the provisional income will be replaced. The Resources page has examples.

Customers are required to have the other components of their ATI amended by the ATO, Department of Veteran Affairs (DVA) or Centrelink before the department can amend the assessment. If there is going to be a delay in the amendment or an amendment is not possible, the ATI used in the assessment can be amended if sufficient evidence or information is provided which shows the original ATI component is incorrect, and the correct component amount can be determined. Do not manually amend the income on the customer's verbal claim.

Amending using the Correcting errors and Cuba Incident Form macros

If there is a change to the other components of a customer's adjusted taxable income, not the result of an ATO amendment of the customer's taxable income component of the assessment, Service Officers may update the 'other components' field in Cuba to reflect the change.

If the original ATI has been used to reconcile an estimate, consider if the estimate should be re-reconciled using the amended ATI. Include the considerations in the correcting errors submission before forwarding to an EL2 for approval.

Complete the:

• Correcting errors submission macro to seek EL2 approval to remove the income, and
• Cuba Incident Forms (CIF) macro

In some circumstances a tax assessment may issue for only part of a financial year. For example:

• If the customer leaves Australia permanently before the end of the financial year, they may be able to lodge their tax return early. The tax return will include their income for the period starting on the first day of the financial year up to the date they depart. For more information about calculating ATI for parents who change residency, see Income processing for Child Support customers (International parents)
• If the customer dies during a financial year, a tax return may be lodged for the period from the start of the financial year up to the date of death. A second, separate tax return may also need to be lodged for the deceased estate for the period from the parent’s date of death until the end of the financial year. The estate is considered a separate entity to the parent and so the tax return for the deceased estate is not included in the parent’s ATI for that financial year
• If the customer declares bankruptcy, they may lodge a tax return for the period from the start of the financial year up to the date of sequestration. A second tax return may also need to be lodged for the period from the date of sequestration until the end of the financial year. This is referred to as a split assessment.
  Where a split assessment occurs for a parent who became bankrupt, the 2 amounts must be added together to calculate the customer’s correct ATI for the full financial year. This total does not always transfer to Cuba automatically through the data exchange
• CSADR will correct impacted cases manually. If a case is identified that has not been corrected, email a request to correct the case to CS ATO and DVA Relationships (CSADR)

There are situations where the ATO cancel customer incomes and Cuba is not automatically updated. If a customer questions the ATO income being used in their assessment, staff should immediately conduct an ICP search and confirm the income being questioned is showing as Cancelled in the Received Lodgements section of ICP.

If the income is not cancelled, refer the customer to the ATO and do not escalate to CSADR. CSADR cannot remove incomes unless they have been cancelled by the ATO.

If the income is cancelled in the Received Lodgements in ICP, email CS ATO and DVA Relationships (CSADR) to request this income be removed from Cuba. The email should include:

• Customer Name:
• CSID:
• TFN:
• Financial year of cancelled Income Tax Returns (ITR):
• Lodgement Date of cancelled ITR:
• Income Figure of cancelled ITR:
• Is the cancelled income an original or amended ITR:
• Additional information (where necessary):
• I have confirmed income is cancelled in Received Lodgements in ICP: YES/NO

CSADR will remove the cancelled income and notify the referring officer, who will be required to review the case in detail prior to running eligibility and managing any other issues, for example, error correction if an income has deemed off the cancelled income. Staff should lock and monitor the customer until the income is deleted and the case is using the correct incomes.

Example

A customer calls and advises their Tax File Number has been compromised and an Income Tax Return (ITR) has been lodged fraudulently. The customer advises the ATO have been advised and have confirmed this was not a legitimate taxable income. An ICP search is conducted and the income is:

• Showing as cancelled in ICP:
• Escalate to CSADR
• CSADR to remove income from Cuba
• Not showing as cancelled in ICP:
• Refer customer back to ATO
• No further action can be taken until income is cancelled by the ATO

ATO Cancelled income applied after the child support period (CS period) commenced

If the cancelled income is for the LRYI in the current CS period and was applied to the assessment after the CS period was created, remove the income from the customer’s record. Replace the cancelled income with the income amount that would have applied if the cancelled income had not been available at the time the assessment was made. If a new income determination can be made based on income information that was available on the day from which the assessment is being amended, the date of effect of the new income determination is based on the current date of effect rules.

Example

The assessment commenced 1 September 2017 using a provisional income of $60,000. On 12 December 2017, the 2016/17 ATO taxable income of $55,000 was applied to the assessment. On 3 February 2018, the ATO advise that the income has been cancelled. There is no other ATO taxable income for the same financial year and the customer has not provided any other income information or lodged an Estimate of Income.

If the ATO cancelled income had not been applied to the assessment on 12 December 2017, the provisional income of $60,000 would have remained in use. Searches conducted on 3 February 2018 determine the customer’s income is $50,000. As the ATI based on this income would be less than the provisional income and has been determined after the lodgement due date, a derived ATI of $50,000 is applied to the assessment from 3 February 2018. If the customer’s derived ATI was $61,000 (greater than the provisional income), it would be applied to the assessment from 1 September 2017.

Cancelled income triggered a new CS period

If the cancelled income was the trigger for starting a new CS period, an error correction is required to remove the CS period and return to the previously used incomes.

Estimate Election made with reference to the ATO cancelled income

If the customer has made an estimate election and the estimate was compared to (for the purposes of the 85% validity test) the now-cancelled income, cancel the estimate unless the estimate meets the 85% test in relation to the original non-cancelled taxable income. If you cancel the estimate, contact the customer to discuss their options.

The customer’s adjusted taxable income includes any Reportable Fringe Benefit (RFB) they received from their employer. The RFB amount is the ‘grossed up’ value of any fringe benefit the customer received from their employer.

‘Grossing up’ is done by multiplying the customer’s taxable fringe benefit amount by a figure pre-determined by the ATO. The RFB amount will appear on the customer’s payment summary.

If more information is required, tell the customer to speak with their employer or the ATO.

See the References page for a link to the Child Support Guide 2.6.14: Reason 8 a parent's income, property, financial resources, or earning capacity.

Cuba does not automatically apply a Return not Necessary (RNN) indicator to a customer's account.

If child support become aware the ATO has recorded a RNN lodgement status for a customer, load the RNN deemed income to the Client income window.

Note:

• Pre 2022/2023 relevant years of income RNN deemed income is not an option. Use an Income Tax Declaration (ITD) or other appropriate income
• NRL and NOTNEC are historical codes no longer used by the ATO

A provisional income will be applied when an ATO assessed income amount is not available.

If the customer has been assessed on:

• 2/3 Male Total Average Weekly Earnings (MTAWE) but was in receipt of a Centrelink or Department of Veteran Affairs (DVA) pension or benefit for 10 or more months of the financial year, and
• this information was available in the Cuba income details window at the time the Child Support (CS) period was created

Cuba should have derived an income based on this information. If this has not occurred, an error correction may be required to replace the provisional income used in the assessment.

If, at the time the assessment is to be amended, the new provisional income is higher than the original provisional income or the customer could lodge their tax return by the date required (usually 30 October of the following financial year), the new provisional income can be applied from the start of the child support period. See Lodgement rules for incomes in Cuba.

If satisfied that the current provisional income used in the assessment:

• accurately reflects the customer's Adjusted Taxable Income (ATI), go to Step 2
• is more than the self-support amount, go to Step 3

In this case (provisional income is less than the self-support income), no further income correction is required.

Document the reason for not replacing the income in the Client Income window.

Procedure ends here.

A derived income must be determined to ensure an accurate assessment.

A derived income is 1 of the following:

• A customer supplied Income Tax Declaration (ITD). When contacting the customer to obtain an ITD, advise:
• they will need to supply their income details to Child Support because their ATO assessed taxable income information is not available to Child Support
• they should either lodge a tax return or contact Child Support each financial year they are not required to lodge a tax return to provide the relevant income details for use in their assessment
• An income manually calculated by Child Support, or
• An income automatically applied by Cuba based on Centrelink (CLINK) or DVA information

Take care when actioning reverse cases to ensure the new ATO income has been applied correctly to all relevant cases

If a reverse case exists, a new ATO income may not trigger a new child support period in the reverse case. The child support periods in all Cuba cases must be aligned.

See Child Support Period Processing Help.

Note: any adjustment of a child support period can have considerable effects on a case and any related cases, seek technical support from a Service Support Officer.

Document the following information in a notepad attached to the relevant income in the Client Income window:

• all discussions with the customer
• calculations
• details and results of any investigations made
• reasons for the decision
• any commitment made by the customer
• legislative reference used to make the decision

See Effect of income changes for Child Support customers.