3.1.7.21 Maintenance Income - Entitlement Method

Summary

This topic outlines how the entitlement method (1.1.E.35) is utilised in the estimation and assessment of maintenance income for FTB Part A. It covers:

  • application of the entitlement method, and
  • effects of reconciliation.

Application of the entitlement method

The amount of maintenance income an individual should receive for the relevant period (1.1.R.25) is based on the Child Support assessment, or a court order.

The estimated amount of maintenance income for the financial year is annualised when applying the maintenance income test (3.1.7). If the amount of the liability changes during the relevant period, the amount of maintenance is reassessed and applied for the remainder of the financial year, or until the end of the relevant period, whichever occurs first. Where a new entitlement amount is received during the year, the maintenance income amount used to affect FTB is apportioned.

Explanation: This reduces the possibility of a debt being incurred at reconciliation.

Example: Michelle is privately receiving a Child Support assessed amount of $4,000 a year from July to December. This assessed amount reduces to $3,000 from January. Centrelink assesses the $4,000 maintenance income received during the relevant period from July to December. Due to the change in assessment amounts from January the total maintenance for the financial year is:

184 days at $4,000 = $2,016.44, plus

181 days at $3,000 = $1,487.67.

This amounts to $3,504.11 for the financial year.

Therefore, $3,504.11 should be applied from January until the end of the financial year (assuming no further changes). Any arrears are worked out in the reconciliation process. From the beginning of the new financial year, the Child Support amount of $3,000 is used until Child Support notifies of a new assessment amount. Applying $3,504.11 from January reduces the likelihood of an overpayment at reconciliation, depending on any other circumstances affecting her rate for that period.

Policy reference: FA Guide 3.1.7 Maintenance Income Test

Retrospective child support assessments

Where Child Support makes a retrospective assessment, changing the liability for a past period during the income year, the maintenance income estimate is revised and applied from the date of reassessment. No immediate debts or arrears will be raised or paid during the financial year. However, subsequent payments may be reduced through mandatory continuous adjustment (MCA) to offset a potential reconciliation debt.

Example: Mary has an assessment of $2,000 from 1 July 2011. On 19 June 2012, Child Support changes the assessment to $12,000 with a date of effect of 4 August 2011. This is received by Centrelink on 24 June 2012 and Mary has been paid up to 26 June 2012.

Following the reassessment, the estimated maintenance income is calculated as follows:

  • Period 1 is 1 July 2011 - 3 August 2011 (34 days): $2,000 ÷ 365 × 34 = $186.30
  • Period 2 is 4 August 2011 - 30 June 2012 (331 days): $12,000 ÷ 365 × 331 = $10,882.19
  • Total = period 1 ($186.30) + period 2 ($10,882.19) = $11,068.49.

$11,068.49 is the amount that would be applied from 4 August 2011 as this is the actual date that the assessment amount changed.

No immediate debts will be raised.

The MCA calculation will compare the new annualised maintenance income amount of $11,068.49 to the previously used amount of $2,000 to determine if MCA should be invoked to offset a potential reconciliation debt. As the new amount is higher and therefore the individual has an overpayment, MCA would apply.

At reconciliation, the amount of $11,068.49 would be applied to the whole financial year and the individual would potentially receive a debt as there were no pays left in the financial year to fully recover the potential overpayment.

Reconciliation

The estimated amount of maintenance used to assess an individual's entitlement to FTB Part A is reconciled against the actual amount of maintenance received after the end of the financial year. This may result in a recalculation of their FTB Part A rate for that year.

Policy reference: FA Guide 6.4 Reconciliation

Last reviewed: 20 September 2016