3.1.7.13 Capitalised Maintenance

Summary

This topic provides information about capitalised maintenance, and how it is assessed under the maintenance income test for FTB Part A. It covers the following:

  • explanation of capitalised maintenance,
  • assessment of capitalised maintenance, and
  • payer dies during the capitalisation period.

Note: Capitalised maintenance made under court orders or agreements finalised before 1 July 2008 will continue to be assessed under the rules outlined in this topic.

Explanation of capitalised maintenance

Capitalised maintenance income is income provided by a:

  • lump sum cash payment, or
  • transfer or settlement of property (see example).

Example: A home, car or business.

Only the part specified as being provided as maintenance for a payee (1.1.P.71) or a child is assessed. If none of the amount is specified as maintenance, no amount is assessed. An individual with an informal child support agreement, rather than a court order or written agreement must nominate the percentage of a capitalised amount that is for maintenance.

Example: A court order involves the payer (1.1.P.72) transferring part of their share in the former family home to the payee. The total value transferred was $40,000, half of which was specified as maintenance. The amount assessed as capitalised maintenance income is $20,000.

Assessment stops at the end of the capitalisation period. The assessment does not change if the capitalised maintenance is spent or disposed of in any other way before the period ends.

Assessing capitalised maintenance income

Capitalised maintenance income is converted to an annualised rate of maintenance income by working out:

  • each person's share of the total amount, then
  • the equivalent annualised income the person's share represents, as if it had been received over the entire capitalisation period.

The child support order or agreement may state the amount apportioned to each person. In any case, the total amount is apportioned between the children in the case.

Example: The following table shows an example of apportioning $30,000.

If the $30,000 is for… The amount is apportioned as…
the payee and 2 children, $15,000 for each child.
2 children only, $15,000 for each child.

Capitalisation period

The capitalisation period is the period for which the maintenance is paid. This will generally be given in the terms of the child support order or agreement. The capitalisation period given in a court order or agreement may be varied by Centrelink if it is clear that the period is not appropriate for the circumstances of the case.

If the capitalisation period is not given in a court order or agreement, the period is taken to be the period stated by the payee. The following table shows when the capitalisation period is reduced in some situations.

When the capitalisation period is not specified in an order or agreement… Then the capitalisation period is…
and the maintenance is child maintenance and the FTB child is less than 18 years old when the payment was received, the period beginning on the day the payment was received, and ending the day before the child turns 18.
and the maintenance is spousal maintenance and the payee is less than 65 years old when the payment was received, the period beginning on the day the payment was received, and ending the day before the parent turns 65.

Act reference: FAAct Schedule 1 clause 24 Apportionment of capitalised maintenance income

Calculating the assessable amount

The following table shows how the amount of capitalised maintenance is assessed for the relevant period (1.1.R.25) during the financial year.

Step Action
1 Work out the amount attributable for the financial year using the following formula:

Capitalised maintenance income × Relevant period ÷ Capitalisation period.

2 Work out the annualised amount for the financial year using the following formula:

Result from Step 1 × Number of days in the financial year ÷ Number of days in the capitalisation period in the financial year.

Act reference: FAAct Schedule 1 clause 24 Apportionment of capitalised maintenance income

Policy reference: FA Guide 3.1.7.30 Application of the Maintenance Income Test

Payer dies during the capitalisation period

If the payer dies during the period that the capitalised maintenance covers, there is no change to the assessment of the capitalised maintenance under the maintenance income test.

Explanation: The capitalised maintenance income definition is met at the time the payment is received by the individual, and the payer is alive at the time.

Example: Carol receives $100,000 capitalised maintenance under the terms of a court order. The order specifies that the $100,000 applies for a period of 10 years. Under the maintenance income test, $10,000 is assessed per year. Carol's ex-husband dies after 5 years. The assessment of the capitalised maintenance does not change and it continues to be assessed for the whole 10 year period.

Last reviewed: 20 September 2016