Child support and your Family Tax Benefit Part A
Child support payments and Family Tax Benefit (FTB) Part A are closely linked. Any child support you receive may affect the amount of FTB you receive.
If you receive FTB and you or your partner receives child support, we will consider your child support amount when calculating your FTB payments. If the amount of child support you or your partner receive changes, your FTB payments may change.
If you have a child support agreement
If you have a child support agreement, we will make a notional assessment of how much child support you would have been entitled to receive and use this to calculate the amount of FTB you are eligible for. A notional assessment reflects the formula based administrative assessment that would have been in place if it was not for your child support agreement.
At the end of the financial year, we will balance your family assistance payments to determine whether you have been paid the correct amount of FTB. We do this by calculating how much child support you have received during the year. The way you choose to receive your child support is an important factor. For example, if we collect child support for you or if you collect it yourself, it can have an impact on how we balance your FTB payments. The 2 ways this is done are Private Collect transfer and Child Support Collect transfer.
Private Collect transfer
Your rate of FTB Part A is based on the amount of child support you are entitled to receive under your notional assessment, not what you actually receive under your child support agreement.
If you have an agreement that was accepted by us before 1 July 2008, estimate assessments do not apply to you. Your FTB will be assessed based on the actual value of the agreement.
Child Support Collect transfer
Your rate of FTB Part A is based on your notional assessment, not your child support agreement amount.
When we reconcile your FTB at the end of the financial year, we work out the percentage of the child support agreement amount that you received. We will apply the same percentage of your notional assessment in the Maintenance Income Test when we work out how much FTB Part A you should have received for the financial year.
Example of the effect on FTB when you have a child support agreement
Alex and Maria have a Child Support Collect transfer arrangement with us. In their child support agreement, Maria will receive an annual rate of $8,000 in child support from Alex. The notional assessment amount of child support is $5,000.
We collect $6,000 in child support payments from Alex which is equal to 75% of Alex and Maria's agreement amount of $8,000.
This means when we work out Maria's rate of FTB Part A, the Maintenance Income Test will use 75% of the $5,000 notional assessment.
For Maria, this means that $3,750 will be the child support amount we use to calculate her rate of FTB Part A instead of the notional assessment amount of $5,000.
Applying for child support while receiving FTB Part A
To get more than the base rate of FTB Part A when you or your partner has a child in your care from a previous relationship, you or your partner will need to take reasonable steps to obtain child support. This is known as the Maintenance Action Test. The parent of that child can meet this test by applying for a child support assessment.
If you do not apply for a child support assessment, you may only be eligible for the base rate of FTB for that child.
Period of grace to take maintenance action
If you or your partner are required to take reasonable steps to obtain child support from the other parent of the child, you or your partner must apply within 13 weeks of the latest of the following dates:
- the date the child was born
- the date you or your partner separated from the child’s other parent
- the date the child came into your care
- the date your percentage of care increased to 35% or above, or
- such later date that you first became entitles to apply for child support
The term ‘parent’ refers to a biological or adoptive parent or a person who is legally responsible for a child born through an artificial conception procedure or where a surrogacy court order is in place.
We ask you to apply for child support because where possible, parents should take primary responsibility for the cost of looking after ther children.
If you cannot apply for a child support assessment
If there is any reason that makes it difficult for you or your partner to apply for a child support assessment, it is important that you contact us to talk about your situation. There may be other options available to you.
How child support affects FTB Part A
Child support amount
The child support you or your partner get will be considered when we calculate your FTB Part A amount. We use the Maintenance Income Test to work this out.
The more child support you receive, the less FTB you may be able to receive. You can receive a certain amount of child support before it affects your FTB. This is called the Maintenance Income Free Area. If the amount of child support you are entitled to receive in a financial year is over your Maintenance Income Free Area, your FTB payments will be reduced by 50 cents for every dollar of child support until the base rate of FTB is reached.
Example of child support affecting FTB Part A
Sally has 1 child, 3 years of age, from a previous relationship. Sally is entitled to receive $5,000 in child support this year. Sally’s Maintenance Income Free Area is $1,565.85 per year.
Sally can receive $1,565.85 in child support before her FTB payments will be reduced. Therefore, $5,000 - $1,565.85 = $3,434.15. This means that Sally’s FTB payments will be reduced by 50 cents for every dollar of child support that she receives over $1,565.85. This works out to be a reduction of $1,717.08 ($3,434.15 x 0.50).
Based on her income and other circumstances, Sally’s annual FTB Part A payment would be $4,423.80. Therefore, Sally will receive $2,706.72 FTB Part A for the year ($4,423.80 - $1,717.08).
These amounts are for the 2016–17 financial year. FTB rates change each year on 1 July.
Your child support will not reduce your FTB below the base rate. However, other factors such as your household income may affect how much FTB you get.
We assess the Maintenance Income Test and Maintenance Income Free Area automatically. You do not need to apply for these to be assessed.
If you wish to estimate how your child support might affect your rate of FTB, our online estimators let you estimate or compare payments based on your circumstances.
Read more about the Income test for FTB Part A, including the Maintenance Income Test.
Transferring child support
The way you choose to transfer your child support payments, either privately or through us, can impact the way your FTB is assessed.
At the end of each financial year, we will balance your family assistance, including FTB payments, to check you have received the correct amount. The child support information we use to balance your FTB will also vary depending on if you chose to either transfer your child support privately or have us collect the money from the other parent and transfer it to you.
Private Collect and FTB
Private Collect is when we calculate how much child support you receive, or pay, but you manage the transfer of payments between you and the other parent privately.
When we work out how much FTB you should be paid, we use the Entitlement Method. This means we will work out your FTB based on the amount of child support you or your partner were assessed to receive under the child support assessment, not the amount you or your partner actually collects.
When we balance your FTB, we also use the amount of child support you or your partner is assessed to receive. We cannot pay you an FTB top up amount if you do not get paid all the child support you or your partner was assessed to receive under the child support assessment.
Your FTB payment will be calculated based on an assumption that you or your partner will collect the child support assessment in full, regardless of whether you or your partner actually receives more or less than that amount.
If we make a change to the child support assessment which retrospectively increases the child support entitlement, your FTB payments may be balanced again based on the new amount of child support you or your partner is entitled to receive. This may happen whether or not you or your partner receives the arrears. This may result in an FTB overpayment, or debt, for the past period that you need to repay. An example of this is where the paying parent lodges a tax return for a previous financial year and, because it is higher than the income used in the relevant child support assessment, the child support payable for that period increases.
If you are unable to collect your full amount of child support, you should call us to talk about the best options for you.
If you think your child support could retrospectively change—for example, if the other parent is not regularly lodging income tax returns—you may prefer the option where we collect child support on your behalf.
Child Support Collect and FTB
Child Support Collect means that once we work out how much child support you or your partner is assessed to receive, we collect the money from the other parent and transfer it to you or your partner. This means you do not have to discuss child support with the other parent.
There are 2 ways we can work out how much FTB you or your partner should be paid under the Child Support Collect arrangement.
Modified Entitlement Method
For this method, FTB will be calculated from 1 July of each financial year using the Entitlement Method. Whenever we collect money and transfer it to you or where a change to the child support assessment occurs, we will compare the FTB rate calculated using the Entitlement Method and the Disbursement Method. The method that results in the higher amount of maintenance income will be used to work out your ongoing FTB Part A rate. Maintenance income is estimated in this way to reduce the risk of overpayment due to changes in child support during the financial year. We will use this method unless you ask us to use the Disbursement Method.
Using the disbursement method, we will work out your FTB based on the amount of child support you are actually paid during the financial year. You must ask us before we can use this method. It may be appropriate where the amount of child support you actually receive from the other parent is substantially less than the amount you are assessed to receive, or the payments that you receive are irregular. This method can result in your FTB payments changing throughout the financial year, depending on how often and how much child support you are paid.
You can swap between these methods at any time during the financial year. For both methods, when we balance your FTB at the end of the financial year, we will recalculate your FTB payments based on the actual amount of child support you were paid.
If you were paid less child support than you were assessed to receive during the financial year, you may receive a top up payment of FTB.
If you were paid more child support than you were assessed to receive during the financial year, you may incur an overpayment. To minimise the chance of a FTB overpayment we may use your available Maintenance Income Credit. We can use your Maintenance Income Credit:
- if we are collecting child support for you and you do not get any child support payments, or
- if you receive payments on an irregular basis over more than 1 financial year
Changing how your child support is transferred
If you decide to change the way you transfer your child support, it may have an impact on your FTB Part A.
If you currently transfer child support privately and you want us to collect and transfer child support for you, you can also ask us to collect up to 3 months of unpaid child support, or up to 9 months of unpaid child support in exceptional circumstances.
If the paying parent does not agree to pay the child support that is payable for periods earlier than this, you can choose to seek legal advice about privately enforcing the debt through court action.
If you ask us to collect unpaid child support arrears for you, we will refer you to a family assistance specialist to discuss how this may impact on your FTB payments.
If we collect your child support payments for you and you then decide to collect, we can continue to collect any overdue amounts for you. Alternatively, you can choose to collect any overdue amounts privately. If you choose to collect your overdue child support arrears privately, we will assume that you have been paid those amounts in full when we work out how much FTB you should receive in that financial year.
If you are considering collecting your overdue child support privately, call us to understand the impact on your FTB payments.
Example of how changing your child support collection method may affect your FTB
Zara is the receiving parent in a child support case. She was registered for Private Collect to receive child support from the paying parent, John. We used a provisional income for John to calculate the child support because he had not lodged a tax return in 3 years.
Recently, we received information from the Australian Tax Office about John’s income. As the income from the Australian Taxation Office was higher than the provisional income we had used for John, we reassessed the child support that John should have paid Zara for the previous period. This resulted in an increase to the child support assessment for that period and child support arrears owed to Zara.
As the amount of child support Zara was entitled to for the past period increased, her FTB for that period was reassessed as she is deemed to have received the arrears. This resulted in an FTB overpayment of $500. This is because Zara’s child support case is Private Collect, meaning her FTB payment is based on the amount of child support she is assessed to receive, not the amount she actually collects.
Zara attempted to collect the increased liability and arrears from John and when she was unable to do this, she asked us to start collecting on her behalf.
Unless there are exceptional circumstances, we can only collect arrears for 3 months prior to Zara asking us to collect on her behalf. We advised Zara that she would have to seek legal advice about enforcing the rest through her own court action. We raised an FTB debt of $500, which Zara had to start repaying immediately.
Zara advised that there has previously been a Domestic Violence Order in relation to John. Zara was concerned about John’s potential response to any court action she takes to collect the child support arrears, and does not know if she will pursue court action.
Zara could speak with one of our social workers about a partial exemption from enforcing the child support arrears. If granted, an adjustment would be made to her FTB payments for the relevant period.
If your child support assessment is updated
If we update your child support assessment because your or the other parent’s circumstances have changed, your FTB payments may change too.
A change to your child support assessment could also affect the amount of child support you were assessed to receive in the past. These are called retrospective child support changes. A retrospective change in child support liability may affect the amount of FTB you have received.
In some cases this may create child support arrears, which are likely to lead to an overpayment of FTB, resulting in an FTB debt. We will start collecting for this FTB overpayment immediately. Tax refunds can also be used to recover the overpayment.
If a change to your child support assessment results in a change to your ongoing or previous eligibility for FTB, we will contact you in writing. If you have any questions, a family assistance specialist can help explain the changes to you.
Example of changes to FTB when your child support is updated
Yvette is the receiving parent in a Private Collect arrangement. Her previous child support assessments were based on estimates of income for the paying parent, Xavier. When more accurate details became available to us, the child support assessment was increased retrospectively.
As Yvette’s previous rate of FTB had been based on the lower assessment of Xavier’s income, the updated assessment caused a retrospective reconciliation of her FTB payment, which resulted in an overpayment of $5,000. This is because the FTB is based on the amount of child support Yvette is assessed to receive under the child support assessment in Private Collect cases, not the amount she actually collects.
Yvette is expected to start collecting the child support arrears from Xavier but he is no longer working and lodged an estimate of $0 income with Child Support. As a result, it is unlikely that she will be able to collect any retrospective child support from him. However, she is still required to start repaying the FTB debt immediately even though Xavier’s $0 estimate means her child support payments will immediately decrease.
If your circumstances change
If you pay or receive child support and your circumstances change, you should update your child support assessment. Changes to your circumstances may affect the amount of child support you pay or receive. You can update your child support assessment by calling us or using your Child Support online account through myGov.
We recommend you tell us when your circumstances change so you do not miss important information, there is no delay in your payments, or you do not pay more child support than necessary. Learn more about the changes that affect your child support.
Your percentage of care changes
If there is a change in the percentage of care you have for your children, it may affect the amount of FTB and child support you receive. When you tell us about a change in care, we work out your percentage of care and use this to recalculate how much FTB and child support you are eligible to receive.
If your level of care of your child changes to less than 35% of the time, you will not be eligible to receive FTB Part A or Part B for that child. However, if you care for your child between 14% and less than 35% of the time, you may be eligible to receive Rent Assistance, a Health Care Card, Remote Area Allowance, Child Care Benefit and Child Care Rebate, and the lower threshold of the Medicare Safety Net.
Your income changes
Although FTB and child support are closely linked, we take different income information into account when we work out how much FTB you are eligible to receive and how much child support you are assessed to receive or pay.
If your income changes, it may affect the amount of FTB and child support you receive in different ways. You should call us to discuss your income changes as soon as possible.
Your child turns 18 years of age
To receive more than the base rate of FTB Part A for a child up to 18 years of age from a previous relationship, you or your partner must apply for a child support assessment.
If you have a child who is about to turn 18 years of age and is in full time secondary education, you must apply for your child support assessment or agreement to continue until the last day of the school year to receive more than the base rate of FTB Part A. You need to do this before your child turns 18 years of age.
If you do not apply, your FTB will reduce to the base rate once your child turns 18 years of age. If there is anything that makes it difficult for you or your partner to apply for child support from the other parent, or you or your partner are unsure of what to do, you should call us to discuss the situation.