4.3.1.30 Mandatory Continuous Adjustment of FTB Instalments

Summary

Individuals who receive FTB by instalment and who advise of a change in their ATI estimate, or have their FTB estimate automatically uplifted by Centrelink during the year may have their FTB rate automatically adjusted if required, to reduce the risk of an overpayment at the end of the income year. This process is known as mandatory continuous adjustment (MCA).

MCA's objective is to reduce the potential for future FTB reconciliation debt by applying an adjustment process to the rate of FTB instalment payments for individuals who have a revision to their family's income/maintenance estimate (including 2nd automatic uplift) during the entitlement year.

The individual's daily rate of FTB is calculated on the basis of the new estimate for the remainder of the income year, but if there is a notional overpayment a deduction is made from their daily rate to take account of the notional overpayment of FTB based on the previous income estimate.

Note: The notional overpayment is not a debt and therefore debt recovery provisions do not apply.

Individuals will still be required to advise of changes to their income estimate, as currently applies. Any future increase or decrease in an individual's income estimate during the income year requires a new calculation of the adjustment to the daily rate of FTB for the remainder of the income year.

Note: There are no hardship exemptions for individuals whose FTB rate is automatically adjusted.

Income changes

Revised income/maintenance estimate/s include:

  • individual's revised estimate of their ATI,
  • individual's revised maintenance income estimate,
  • an indexed income estimate for the individual,
  • an indexed actual income for the individual,
  • system triggered maintenance income revision (e.g. disbursement method).

Note: Individual's income and maintenance estimates are to be read as income and maintenance estimates for the claimant and partner, if there is one.

MCA method

Where individuals who receive FTB by instalment have a revised income/maintenance estimate in the entitlement year, the system will apply the following process to calculate any possible daily overpayment amount.

Method statement

Step Action
1 Work out the total amount of FTB the individual was entitled to be paid during the period beginning at the start of the income year and ending when the new estimate begins.
2 Work out the total amount of FTB the individual would have been entitled to be paid during that period if the individual's rate of FTB were calculated using the new estimate.
3 Take the amount worked out at step 2 away from the amount worked out at step 1.
Once any notional overpayment is determined at Step 3 the following 2 steps will be used to calculate the individuals' daily overpayment rate.
4 If the amount worked out at step 3 is greater than zero, work out the number of days remaining in the income year starting from the date of the new estimate.
5 Work out the daily overpayment rate by dividing the amount worked out at step 3 by the number of days worked out at step 4.

Note: The process above is based on the method statement which is the legislative process for MCA. For the full method statement refer to FA(Admin)Act section 31E(2) Continuous adjustment of daily rate of FTB payable by instalment.

Example: Sean and Emily have a family with 2 children, aged 2 and 6. Sean's income estimate is $45,000 and Emily's is $0, making a combined income estimate of $45,000 for the 2012-13 income year. On 7 April they notify Centrelink that Sean has received a pay rise therefore their estimated family income will increase to $48,500.

Step Action
1 Calculate the amount of their FTB entitlement for the period 1 July 2012 to 6 April 2013 (280 days) based on their original income estimate of $45,000.

FTB Part A rate = $8,847.60

FTB Part B rate = $3,763.15

Total annual FTB rate = $12,610.75

Daily rate of FTB = $12,610.75 ÷ 365 days = $34.55

Total amount of FTB for the period 1 July to 6 April = $34.55 × 280 days = $9,674.00

2 Calculate the amount of FTB Sean and Emily would have been entitled to be paid for the period 1 July 2012 to 6 April 2013 (280 days) based on their new income estimate of $48,500.

Family income ($48,500.00) - FTB low income threshold ($47,815.00) = $685.00 × 0.2 = $137.00

FTB Part A entitlement amount $8,847.60 - FTB Part A rate reduction amount $137.00 = $8,710.60

FTB Part A rate = $8,710.60

FTB Part B rate = $3,763.15

Total annual FTB rate = $12.473.75

Daily rate of FTB = $12,473.75 ÷ 365 days = $34.17

Amount of FTB entitlement based on new income estimate = $34.17 × 280 days = $9,567.60

3 Calculate the notional overpayment by taking the amount of FTB they were entitled to be paid based on their original income estimate (Step 1) from the amount they are entitled to receive based on their revised estimate (Step 2) for the period 1 July 2012 to 6 April 2013.

$9,674.00 - $9,567.60 = $106.40 (indicating a notional overpayment)

4 Work out the number of days remaining in the income year (365 - 280 = 85 days).
5 Work out Sean and Emily's daily overpayment rate by dividing the notional overpayment amount (Step 3) by the number of days remaining in the income year (Step 4).

$106.40 ÷ 85 days = $1.25

Sean and Emily's daily rate of FTB for the remainder of the income year based on their revised income estimate should be reduced by the daily overpayment rate in Step 5.

Adjusted daily rate of FTB for remainder of income year = $34.17 - $1.25 = $32.92

If Sean and Emily revise their income estimate again later in the income year a new calculation will be required of the adjustment to their daily rate of FTB.

If there is a change in circumstances affecting the individual's daily rate in the period before the new estimate is provided, calculation of the adjustment must reflect the change in circumstances.

Where MCA has been applied to an individual, any subsequent MCA assessments will take this into account.

Maintenance income

If an individual receives maintenance income that affects their FTB Part A, the MCA calculation will also be applied to their daily FTB rate if their maintenance income changes during the entitlement year. Any change in maintenance income requires a new calculation of the adjustment to the individual's daily rate of FTB for the remainder of the entitlement year. MCA may also be triggered where the Secretary makes a revised estimate of maintenance income.

MIC rules do not impact on the MCA calculation process.

Policy reference: FA Guide 3.1.7.05 Maintenance Income Credit

Change of circumstance

The MCA process will only be applied for reasons of a non-circumstance related income/maintenance estimate revision. The revision does not have to result in a change to the claimant's legislative rate. A change in circumstances that would normally be followed by a revised estimate is generally not sufficient to trigger MCA in itself. For example, where an individual becomes partnered and their record becomes linked to another person's, the individual's income details are automatically updated. For the purposes of MCA, this automatic update after becoming partnered should not be considered a revised estimate. The individual must provide Centrelink with a revised estimate of their own income in order for MCA to apply.

However, if an individual already has an MCA daily overpayment amount being deducted from their ongoing rate and they advise of a change of circumstances that occurred earlier in the financial year, the MCA assessment will be recalculated under Secretary initiated review provisions to ensure the correct daily overpayment rate is applied.

Act reference: FA(Admin)Act section 105 Secretary may review certain decisions on own initiative

Payment of arrears

If an individual has their entitlement recalculated and they are found to have an amount owing, in general this arrears payment remains unaffected by MCA. However, if the arrears relate to a period where the individual has MCA applied to their FTB rate and the MCA amount has been under-recovered, the arrears can be used to balance the short fall of the notional overpayment for that period.

Arrears that are generated in respect of a period entirely unrelated to MCA impact cannot be used in this manner.

Break in entitlement/restoration of entitlement

Following an MCA assessment that results in a daily overpayment rate, if there is a break in the individuals' entitlement, but at a later date the FTB is restored (within the same financial year), MCA will still apply to the individual's rate and any amount of arrears, as well as ongoing payments, will reflect the previous MCA deduction.

Similarly, if an individual cancels their entitlement and this had an MCA applied at the time and the individual then makes a new claim for FTB (within the same financial year) the MCA deduction will continue relating to the new claim and affect the new entitlement amount, even if this is the same income amount as per the previous claim. Any arrears paid representing the past period falling wholly in that entitlement year will also have the appropriate MCA amount deducted from them.

Bereavement

The presence of a bereavement period will not exclude the MCA process. MCA applies as follows:

  • If the deceased child was not the last eligible FTB child, any new MCA assessment or any ongoing deduction will be applied against the individuals FTB ongoing instalment payment. If the individual chooses to take lump sum payment for the bereavement portion this will not be reduced by MCA.
  • If the deceased child was the last FTB qualifying child, then the MCA deduction will apply to the lump sum or ongoing FTB payment.

FTB advances

The MCA of an individual's FTB payment may be impacted by the receipt or repayment of an FTB advance.

Policy reference: FA Guide 1.2.8.10 FTB Advance Payments - Details

Payment delivery options

Where an individual chooses to defer part of their annual FTB entitlement under a payment delivery option (4.3.1.10) they are still subject to MCA. In these cases, the MCA method statement will have regard to the individual's legislative rate of FTB, rather than what they are receiving when assessing whether there is a notional overpayment.

Policy reference: FA Guide 4.3.1.10 FTB Payment Delivery Choices, 4.3.1.20 FTB Payment Choices for Instalment Individuals, 4.4.2.30 Date of Effect Rules - FTB Payment Choices

Last reviewed: 11 May 2015