Deemed and Default income for Child Support customers 277-07010030

For child support periods commencing on or after 1 July 2013

The ATI indexation factor is the:

• December quarter Average Weekly Earnings (AWE) of the LRYI, divided by the
• December quarter AWE of the financial year being indexed

For child support periods commencing on or after 1 July 2011 (22 November 2012 for WA ex-nuptial cases) to 30 June 2013

The ATI indexation factor is the:

• September quarter Average Weekly Earnings (AWE) of the LRYI, divided by the
• September quarter AWE of the financial year being indexed

The ‘Average Weekly Earnings’ (AWE) amount is the average weekly earnings (trend–persons - all employees' total earnings) amount published by the Australian Bureau of Statistics. See the Child Support Guide 2.4.2: Formula tables and values.

Note: an eligibility error will appear if a future child support period is created and the AWE value for this period is not yet available.

An updated income is required for John to be used in a new assessment. The LRYI is 2009/2010. John’s last Australian Taxation Office (ATO) income is $61,000 for the year 2008/2009. Cuba indexes this income by the ATI indexation factor as follows:

934.70/897.90 = 1.041

934.70 represents the September quarter Average Weekly Earnings (AWE) for 2009/2010

897.90 represent the September quarter AWE for 2008/2009

Therefore the deemed income for 2010/2011 for John is:

$61,000 x 1.041 = $63,501

A deemed income of $63,501 is used in the assessment for John.

Cuba automatically applies the indexation factor to the income.

To view the AWE amounts for a financial year see the Child Support Guide 2.4.2: Formula tables and values.

For financial years from 2022/2023 onwards, if child support become aware the ATO has recorded a not required to lodge (RNN) status for a customer:

• confirm the ATO has recorded a non-lodgement (RNN) status
• check the customers ATO Income Tax records for the lodgement status of Return not Necessary for the financial year
• If the status is Return not necessary for the financial year:
• manually load a RNN deemed income in the Client income window. record the information gathered in the mandatory notepad

Do not load the RNN deemed income until it is in the customers ATO Income Tax records even if a customer advises they:

• have recently notified, or
• will advise the ATO of non-lodgement required (RNN)

Ask the customer for an ITD (customer derived income) or see if a more accurate income can be derived while waiting for the RNN status on their ATO record.

Note: RNN does not mean the customer income is zero. See Derived income for Child Support customers.

Ask the customer to call back when they have completed their lodgement advice.

If a deemed income is recorded in the Client Income window and is being used in the assessment:

1. Contact the customer and attempt to obtain a more accurate income by:

• encouraging lodgement of their tax returns or a Non-lodgement advice with the Australian Taxation Office (ATO)
• encouraging the customer to lodge an income declaration (ITD)

2. Attempt to locate a more accurate income, this may involve attempting to derive an income.

No further action is required at this time if:

• the customer has previously been contacted and advised of the importance of lodging a tax return and the lodgement rules, see Lodgement rules for incomes in Cuba
• satisfied that the most appropriate income is being used in the assessment

Document the details of any call in the Client Income window for the relevant year of income. See Documenting Child Support information in Cuba.

When a customer has failed to lodge a tax return for the last 2 relevant years, and no other information about their income is available, Cuba will automatically apply:

• the indexed default, or
• 2/3 MTAWE where
• there is no income available to index, or
• the indexed default is less than 2/3 MTAWE

Example 1

Sven’s last Australian Taxation Office (ATO) income is $61,000 for the year 2006/2007. An income is required for the LRYI 2010/2011, for a child support period starting in October 2011. No other income information is available.

A default income is calculated for Sven by:

982.90/839.50 = 1.171

982.90 represents the September quarter Average Weekly Earning (AWE) for 2010 as the Relevant Year of Income (RYI) being calculated is 10/11

839.50 represents the September quarter AWE for 2006 as the financial year being indexed is 06/07

Therefore the indexed default income for 2010/2011 for Sven is:

$61,000 x 1.171 = $71,431

As this is higher than the 2/3 MTAWE amount for child support periods starting in 2011 of $41187 an indexed default income of $71,431 is used in Sven’s assessment.

Example 2

Heidi’s last ATO income is $25,000 for the year 2006/2007. An income is required for the LRYI 2010/2011, for a child support period starting in October 2011. No other income information is available.

A default income is calculated for Heidi by:

982.90/839.50 = 1.171

982.90 represents the September quarter AWE for 2010 as the RYI being calculated is 10/11

839.50 represents the September quarter AWE for 2006 as the financial year being indexed is 06/07)

Therefore the indexed default income for 2010/2011 for Heidi is:

$25,000 x 1.171 = $29,275

As this is lower than 2/3MTAWE amount for child support periods starting in 2011, a 2/3MTAWE default income of $41,187 is applied to Heidi’s assessment.

To view the relevant AWE and 2/3 MTAWE figures see the Child Support Guide 2.4.2: Formula tables and values.

A default income is also known as a provisional income, see Cuba rules for Child Support customers, Provisional incomes.

If a default income (indexed default or 2/3 MTAWE) is recorded in the Client Income window:

• contact the customer and attempt to obtain a more accurate income by:
• encouraging lodgement of their tax returns or a Non-lodgement advice with the Australian Taxation Office (ATO), see Lodgement rules for incomes in Cuba
• attempt to locate a more accurate income. This may involve attempting to derive an income, see Derived income for Child Support customers

If:

• the customer has been contacted and advised of the importance of lodging a tax return and the lodgement rules, see Lodgement rules for incomes in Cuba
• satisfied that the most appropriate income is recorded in Cuba;

no further action is required at this time

If a customer has a RNN indicator on their ATO Income Tax records go to Cuba rules for Child Support customers, Not required to lodge.

Document the details of the call in the Client Income window, see Documenting Child Support information in Cuba.