5.1.6 Late Payment Penalties

Context

Late payment penalties apply whenever a parent fails to pay their child support debt by the due date. The Registrar can remit late payment penalties in certain circumstances.

Act references

CSRC Act section 66, section 67, section 67A, section 68, section 69, section 80, section 89

Taxation Administration Act 1953 section 8AAD

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Applying a late payment penalty

The Registrar imposes a late payment penalty on a parent whenever they fail to pay their child support debt by the due date (5.1.5) (CSRC Act section 67). The purpose of a late payment penalty is to encourage parents to comply voluntarily with their obligation to pay child support and discourage late payment.

A late payment penalty is a debt due and payable to the Commonwealth (CSRC Act section 67(2)). Any late payment penalties collected are paid into consolidated revenue. They are not paid to the payee.

The Registrar calculates late payment penalties on the unpaid balance of a parent's child support debt after the due date for each payment period. The rate of the penalty is the general interest charge rate under Taxation Administration Act 1953 subsection 8AAD(1) (CSRC Act section 67(3)).

Prior to 1 January 2008 late payment penalties were linked to the annual rate of the penalty for unpaid income tax under the Income Tax Assessment Act 1936 and were calculated as follows:

  • Late payment penalty for a weekly payment period is 1/52 of the annual rate of penalty for unpaid income tax.
  • Late payment penalty for a fortnightly payment period is 1/26 of the annual rate of penalty for unpaid income tax.
  • Late payment penalty for a 4-week payment period is 4/52 of the annual rate of penalty for unpaid income tax.

Before 1 July 1992, late payment penalties were calculated monthly at the rate of 20% per annum, with a minimum penalty of $20 per month imposed whenever an amount of child support remained unpaid after the due date.

The Register can be varied to remove any late payment penalties applied because a parent failed to pay an amount of child support that is no longer due. Examples of situations where late payment penalties may be removed include instances where the parent's debt is adjusted to take into account:

  • a variation to the liability because of a retrospective court order, or an amended child support assessment,
  • a payment made directly to the payee on or before the due date, or
  • the correction of an administrative error.

Situations where a late payment penalty should be removed in part or in full are not limited to these examples.

Remitting a late payment penalty

The Registrar can decide to remit a late payment penalty in part or in full (CSRC Act section 68) and can decide to remit penalties whether or not they have been paid. The Registrar will use this discretion in a way that will further the objectives of the child support scheme, according to the particular circumstances of each case.

There is no particular form for a parent to request remittance of late payment penalties. The Registrar can remit late payment penalties without a request to do so, if there is sufficient information available to make a decision.

Late payment penalties can be remitted in any of the following 3 situations:

Circumstances beyond the parent's control

Examples of circumstances that may be beyond a parent's control include:

  • the parent's employer failing to remit deductions to the Registrar
  • short-term unemployment
  • unpredictable adverse business conditions
  • industrial accidents
  • a debtor's failure to pay
  • natural disasters.

Circumstances beyond the parent's control are not limited to these examples.

The Registrar will take into account the circumstances that applied at the time each payment was due and when each penalty accrued when deciding whether to remit penalties that accrued over a number of payment periods. It may be appropriate to remit the late payment penalty for one payment period but inappropriate to remit the penalty for another payment period.

The Registrar will remit the penalty in full if satisfied that the circumstances leading to the late payment were beyond the control of the liable parent. The Registrar needs to be satisfied that the parent has taken reasonable action to mitigate the circumstances that contributed to late payment or the effects of those circumstances.

Circumstances within a parent's control

Some examples of circumstances that may be within a parent's control:

  • financial difficulties due to a number of debts, such as rates and electricity, becoming due at the same time, or
  • voluntary unemployment during which the person takes no action to vary the liability.

Circumstances within the parent's control are not limited to these examples.

The Registrar will take into account the circumstances that applied at the time each payment was due and when each penalty accrued when deciding whether to remit penalties that accrued over a number of payment periods. It may be appropriate to remit the late payment penalty for one payment period but inappropriate to remit the penalty for another payment period.

The Registrar must consider whether the nature of the circumstances would make it fair and reasonable to remit the late payment penalty attributable to those circumstances. If so, the Registrar can remit the late payment penalty in part or in full but only if the parent can demonstrate that they have taken reasonable action to mitigate the circumstances that contributed to late payment or the effects of those circumstances.

Reasonable action to mitigate the circumstances that led to late payment, or the effect of those circumstances

The Registrar will consider any steps the parent has taken to reduce the effects of the circumstances that led to late payment. A parent's payment history may be sufficient to demonstrate the efforts they have made to meet their child support liability, in spite of the circumstances that led to the late payment.

Examples of attempts to mitigate the circumstances that led to late payment or to mitigate the effects of those circumstances include:

  • part payment of the liability
  • attempting to or succeeding in borrowing to pay some or all of the liability
  • negotiating with creditors or debtors or both
  • paying in full following resolution of a dispute (e.g. over arrears or a payment made directly to the payee)
  • making and meeting an acceptable arrangement for payment.

Attempts to mitigate the circumstances that contributed to the delay in payment, or mitigate the effects of those circumstances are not limited to these examples.

Payments received as a result of DHS enforcement action such as:

  • legal action to obtain payment,
  • intercepting an income tax refund, and
  • deductions made from Centrelink payments,

are unlikely to be a mitigating circumstance by themselves. This does, however, depend on the circumstances of the case. For example, action may prompt the liable parent to make an acceptable arrangement for payment, or the liable parent may draw the Registrar's attention to an expected refund.

Special circumstances

The Registrar can remit part or all of a late payment penalty if satisfied that there are special circumstances in the case that would make it fair and reasonable to do so. Special circumstances include those circumstances all parents face regardless of whether or not they separated.

Examples of special circumstances may include:

  • a serious accident
  • being unaware of the registration of the liability (if the Registrar does not know the parent's whereabouts)
  • an unexpected and unavoidable expense
  • serious health problems
  • the payer acting on incorrect advice.

Special circumstances are not limited to these examples.

It may also be appropriate to remit a late payment penalty if the Registrar is satisfied that a parent made their first payment late because they did not understand the operation of the child support scheme. This would not be an acceptable reason for the Registrar to remit a penalty on more than one occasion.

Where the Registrar is satisfied that special circumstances exist that would make it fair and reasonable to remit a late payment penalty, the Registrar does not have to consider whether a parent has taken reasonable steps to mitigate the circumstances that led to late payment, or the effect of those circumstances.

Fair & reasonable to remit the penalty

The Registrar must be satisfied that it is fair and reasonable to remit a late payment penalty if the late payment was caused by circumstances within the parent's control, or because of special circumstances. The Registrar will take into account the parent's payment history, current income and necessary commitments, as well as the nature of the circumstances that led to late payment. It would not usually be fair and reasonable to pay other debts or acquire assets in preference to paying child support debts, although this depends on the predictability and nature of the expense.

Late payment penalty incentive offer

On 12 April 2010, DHS started a new Late Payment Penalty Incentive Offer aimed at encouraging compliance and rewarding that compliance with an upfront remission of a portion of the late payment penalty.

This offer replaces the former incentive offer. Guarantees made under the former offer will be honoured where a parent has complied with the terms of that negotiated payment arrangement.

Under the new Late Payment Penalty Incentive Offer, if a parent enters into a reasonable payment arrangement to pay all arrears while maintaining full and timely payment of any current liability, and they satisfy the requirements of section 68:

  • the Registrar will remit 25% of the current late payment penalty immediately, and
  • at the same time, record a recommendation for the remission of the balance of the late payment penalty upon full payment of the arrears in accordance with the negotiated payment arrangement.

A 'reasonable payment arrangement' will depend on the circumstances of each case.

Note: a payment arrangement can be renegotiated if financial circumstances change such that the agreed rate is no longer affordable.

Notification of decision

If the Registrar makes a decision to remit only part of a late payment penalty, or not to remit any part of a penalty, the Registrar must serve written notice of the decision to the parent who is liable to pay the penalty (CSRC Act section 68(2)). The notice must also include, or be accompanied by, a statement that the parent can object to the decision (4.1) (CSRC Act sections 68(3)(a) and 80) and apply to the AAT for a first review of the objection decision if dissatisfied (CSRC Act sections 68(3)(b) and 89).

Last reviewed: 8 February 2016