Child support and your Family Tax Benefit Part A

Child support payments and Family Tax Benefit (FTB) Part A are closely linked. Child support may affect the amount of FTB you receive.

We take any child support you and your partner receive into account when calculating your FTB payments. Any changes to your child support may affect your FTB.

Applying for child support while receiving FTB Part A

Where possible parents should take primary responsibility for the cost of looking after their children. This is why we ask you to apply for child support.

Parents with children from a previous relationship must take reasonable steps to obtain child support. This is called the Maintenance Action Test. Parents can meet this test by applying for a child support assessment.

If the parent doesn’t do this, the rate of FTB for that child may be reduced to the base rate.

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.

Period of grace to take maintenance action

You or your partner must take reasonable steps to obtain child support within 13 weeks of the latest of the following:

  • the date the child was born
  • the date you or your partner separated from the child’s other parent
  • the date the child entered your care
  • the date your percentage of care increased to 35% or above, or
  • any later date when you or your partner first became eligible to apply for child support

If you can’t apply for a child support assessment

If it’s difficult for you or your partner to apply for a child support assessment, please call us to talk about your situation. There may be other options available to you.

How child support affects FTB Part A

Generally the more child support you and your partner receive or are entitled to, the less FTB you can receive. We use the Maintenance Income Test to work this out. You and your partner can receive a certain amount of child support before it affects your FTB. This is called the Maintenance Income Free Area. We assess both of these automatically.

Example

Sally has 1 child 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. This means Sally’s FTB reduces by 50 cents for every dollar of child support over $1,565.85.

Therefore, $5,000 - $1,565.85 = $3,434.15.

This works out to be a reduction of $1,717.08 for the year ($3,434.15 x 0.50).

Based on her income and other circumstances, Sally’s annual FTB payment would be $4,423.80. Therefore, Sally will receive $2,706.72 FTB for the year ($4,423.80 - $1,717.08).

These amounts are for the 2016–17 financial year.

Your child support won’t reduce FTB below the base rate. However FTB is affected by other factors, like your household income. Read more about the income test for FTB Part A.

Our online estimators let you see how child support might affect your rate of FTB.

Collecting child support

How you and your partner collect your child support payments impacts your FTB and your ability to recover overpayments.

Private Collect and FTB

Private Collect is where the transfer of child support payment are managed between you and the other parent. We help by calculating the amount of child support to be paid as part of a Child Support Assessment.

When we calculate your FTB, we assume you collect your full child support assessment. This is regardless of whether you actually receive more or less than that amount.

If you can’t collect your full amount of child support, call us to talk about your options.

When we balance your FTB, we use the full amount of child support you were assessed to receive. We can’t pay you more FTB if you don’t collect the full amount of child support.

If we make a change to the child support assessment then it may retrospectively increase your child support entitlement. If this happens then your FTB payments may be rebalanced using the new information. This may happen whether or not you or your partner receive arrears of child support from the payer. This could result in an FTB overpayment, or debt, that you need to repay.

An example of this is where the paying parent lodges a tax return for a previous financial year and their income is higher than the income used in the child support assessment. This would mean the child support payable for that period increases.

If you think your child support could retrospectively change you may prefer us to collect your child support on your behalf. For example, if the other parent is not regularly lodging income tax returns.

Child Support Collect and FTB

Child Support Collect is where we work out how much child support you or your partner is entitled to receive. We’ll then collect and transfer the child support payments. This option means you don’t have to discuss child support payments with the other parent.

When we balance your FTB, we’ll recalculate it based on the actual amount of child support you received during the financial year. If you were paid less child support than you were assessed to receive, you may receive a FTB top up. If you received more, you may get an overpayment, which we’ll start collecting immediately. We can also use tax refunds to recover the overpayment.

You may accrue a Maintenance Income Credit if you haven’t used all of your Maintenance Income Free Area. If you have a Maintenance Income Credit and you get arrears of child support, we can use the credit to reduce an overpayment.

Choosing Child Support Collect means you can choose how we calculate your FTB.

Modified Entitlement Method

The Modified Entitlement Method is the default method we use to calculate your FTB rate. We’ll use this unless you ask us to use the Disbursement Method.

This method compares the amount of FTB you would get if you received your full child support assessment, to the amount of FTB you would get based on the amount of child support you actually receive. We then use which ever results in the most maintenance income to work out your ongoing FTB rate.

We estimate maintenance income in this way to reduce the risk of an overpayment.

Disbursement Method

This method uses the child support you actually receive during the financial year to work out your FTB rate. Each time you receive a child support payment, we’ll adjust your annual maintenance income for the financial year. This can result in your FTB rate changing throughout the year, depending on how often and how much child support you actually receive.

Using this method, your annual maintenance income is the combined total of:

  • all child support you’ve received so far in the financial year, and
  • an estimate of how much child support you may receive for the remainder of the financial year. We look at payments you received for the current and previous months to help us estimate

You must ask us before we use this method to calculate your FTB rate. It may work for you if:

  • the amount of child support you receive is substantially less than what you’re assessed to receive, or
  • you receive irregular payments

You can swap between these methods at any time during the financial year.

Changing how you collect child support and FTB

Changing how you collect your child support can affect your FTB and your ability to recover overpayments.

From Private Collect to Child Support Collect

If you chose to collect your child support privately and you’re not receiving the full amount, you should call us to talk about us collecting on your behalf. We’ll refer you to a family assistance specialist to discuss how this may impact your FTB.

We can collect up to 3 months of unpaid child support. If there are exceptional circumstances, you can apply for us to collect arrears unpaid for up to 9 months immediately before the date you lodged the application.

If the paying parent won’t pay child support they owe for periods earlier than this, you can seek legal advice about privately enforcing the debt through court action. This will be at your own cost.

From Child Support Collect to Private Collect

If we collect your child support payments for you and you then decide to collect privately, we can continue to collect any overdue amounts for you. Or, you can choose to collect any overdue amounts privately. Your choice may have an impact on your FTB. For example, if you choose to collect the overdue amount privately, we’ll assume you’ve collected the full amount when we work out how much FTB you should get.

Call us first to understand the impact on your FTB.

Example

Zara is the receiving parent in a child support case. She chose to collect her child support privately from the paying parent, John.

John falls behind in payments. Zara wasn’t able to collect the payments, so she asked us to start collecting on her behalf. She has now changed from Private Collect to Child Support Collect.

Unless there are exceptional circumstances, we can only collect unpaid amounts for 3 months prior to Zara asking us to collect on her behalf. We advised Zara she’d have to seek legal advice about collecting the rest through court action.

Zara doesn’t know if she’ll pursue court action due to a Domestic Violence Order in relation to John.

Zara can speak to one of our social workers. They’ll be able to talk to her about an exemption and if appropriate, possible further backdating.

Changes to your child support assessment

Changes to your child support assessment can retrospectively affect the amount of FTB you were entitled to receive.

An example of this is where the paying parent lodges a tax return for a previous financial year and their income is higher than that used in the child support assessment. This means the child support payable for that period increases.

This may result in the other parent owing you child support. It can also lead to an FTB overpayment, which we’ll start collecting immediately. We can also use tax refunds to recover FTB overpayments.

If updating your child support assessment changes your ongoing or previous rate of FTB, we’ll tell you in writing. If you have any questions you can call us.

Example

Yvette is the receiving parent in a child support case. She chose to collect her child support privately from the paying parent, Xavier.

We used Xavier’s provisional income to calculate child support. This is because he hadn’t lodged a tax return in 3 years.

Recently, we received information from the Australian Tax Office about Xavier’s income. His actual income was higher than the provisional income we’d used. So, we reassessed the child support Xavier should’ve paid Yvette. As a result, the child support assessment for that period increased. Xavier now owes Yvette child support.

Since the amount of child support Yvette was entitled to for the past period increased, we reassess her FTB for that period. We do this because we assume she received the child support Xavier owes her. Yvette gets an FTB overpayment of $500. This happens because Yvette’s child support case is Private Collect. This means her FTB payment is based on the amount of child support she’s assessed to receive, not the amount she actually collects.

We raise an FTB debt of $500, which Yvette has to start repaying immediately. She can appeal, and ask us to collect child support on her behalf, including up to 3 months of child support arrears Xavier owes her.

If you have a child support agreement

When we accept a child support agreement, we assess what the child support would be if the agreement wasn’t in place. We call this a 'notional assessment'. We use this amount to calculate your FTB, not your child support agreement amount. If you have an agreement that we accepted before 1 July 2008, notional assessments don’t apply to you. We’ll assess your FTB on the actual value of the agreement.

At the end of the financial year, we balance your FTB to determine if you received the right amount.

If you privately collected the child support as specified in the agreement,  we’ll use your notional assessment to balance your FTB.

If we collected the child support on your behalf, as specified in the agreement, we work out the percentage of the agreement amount you received during the year. We then apply that percentage to your notional assessment.

Example

Alex and Maria have a child support agreement. Maria has asked us to collect on her behalf. In their agreement, Maria will receive $8,000 per year from Alex. The notional assessment amount is $5,000. This is what we calculate Alex would’ve paid if there was no child support agreement.

We collect $6,000 in child support payments from Alex during the year. This is 75% of Alex and Maria's child support agreement amount of $8,000.

We apply 75% to the $5,000 notional assessment, which equals $3,750. This is the child support amount we use to calculate Maria’s FTB.

If your circumstances change

You must contact us to update your child support assessment. You can do this by calling us or using your Child Support online account through myGov.

Read more about the changes that affect your child support.

Page last updated: 4 May 2017

This information was printed Friday 26 May 2017 from humanservices.gov.au/customer/enablers/child-support-and-your-family-tax-benefit-part It may not include all of the relevant information on this topic. Please consider any relevant site notices at humanservices.gov.au/siteinformation when using this material.