188.8.131.52 Reconciliation Process
Note: From 1 July 2012 individuals and/or their partners have 12 months after the income year (1.1.I.75) to lodge a tax return or notify Centrelink they are not required to lodge in order to receive FTB supplements or top-ups.
Prior to the 2012-13 financial year individuals had an extended lodgement time of 24 months to lodge tax returns.
- Iain was paid FTB for the 2011-12 financial year, he has 2 years in which he and his partner Catherine can lodge their tax returns for their full entitlement to be determined. Therefore he has until 30 June 2014 to lodge their tax returns.
- Iain was paid FTB for the 2015-16 financial year, he has 1 year in which he and his partner Catherine can lodge their tax returns for their full entitlement to be determined. Therefore he only has until 30 June 2017 to lodge their tax returns.
Extensions to the tax lodgement timeframe may be granted in special circumstances.
Note: Lodgements of tax returns are the responsibility of the individual, including those who lodge via a tax agent. Providing financial statements to a tax agent or accountant prior to 30 June of the relevant lodgement year does not constitute lodgement of tax returns for FTB purposes. Extensions to the lodgement period may be granted if there are special circumstances. Special circumstances are circumstances that are unusual, uncommon or exceptional. Failure by an accountant or tax agent to lodge a tax return within the lodgement period (e.g. forgetting to lodge in time or delay due to high workloads) will not ordinarily constitute special circumstances.
This topic outlines the steps involved in the reconciliation of FTB and CCB. It covers the:
- assessment of FA entitlement,
- FTB Part A supplement,
- FTB Part B supplement,
- comparison of amount entitled to amount paid,
- notification of reconciliation outcomes,
- different timing of FTB and CCB reconciliation, and
- using CCR to offset family assistance debts.
Assessment of FA entitlement
The first step of the reconciliation process is to determine the individual's entitlement for the relevant income year (1.1.R.23). This relies on the assessment of the individual's and their partner's (if applicable) actual ATI (for both FTB and CCB), actual maintenance income (for FTB Part A only as relevant) and/or child care attendance record reports from approved child care service providers within the relevant income year (for CCB). This information will determine the individual's entitlement for the relevant income year.
Entitlement may also be dependent on information about whether FTB children have met health check or immunisation requirements, if these requirements apply to the individual. For further details on when these requirements apply see 1.1.H.05.
Note: Individuals who are not required to lodge a tax return may also initiate a review of their entitlement by advising Centrelink they are not required to lodge and providing their final assessment of ATI for the relevant income year. If the individual provides a different assessment of ATI, it can be accepted only if it is considered to be reasonable.
Note: Once a determination of CCB entitlement or no entitlement has been made for an individual and a child, an individual who can show that the income for the income year that was taken into account was incorrect, may apply for a review of this decision or the Secretary may initiate a review.
The assessment of actual ATI normally relies on the assessment of taxable income, target foreign income, adjusted fringe benefits total, total net investment losses, reportable superannuation contributions and tax free pensions and benefits, minus child support paid. The assessment of child care attendance relies on child care services providing attendance record reports (1.1.S.120) for each week in the relevant income year.
Once the individual's actual income and child care attendance are obtained, their entitlement is determined using the individual's actual ATI and non-income related information previously notified to Centrelink.
Note: Determination of an individual's CCR entitlement can only take place after the CCB reconciliation has occurred.
Act reference: FA(Admin)Act section 51 Determination to be made if determination of conditional eligibility in force, section 51A Secretary must determine entitlement, section 51B Determination of entitlement, section 51C Determination that no entitlement, section 51E Notice of determination, section 105 Secretary may review certain decisions on own initiative, section 109A Review of certain decisions may be initiated by applicant
Policy reference: FA Guide 184.108.40.206 Verification of Adjusted Taxable Income, 3.2.2 Taxable Income, 220.127.116.11 Valid Reasons for Not Lodging a Tax Return, 18.104.22.168 Calculating a Rate of FTB - Overview, 3.5.2 Calculating Approved Care CCB Entitlement, 22.214.171.124 Change of Rate Circumstances, 3.8 CCR Rate Calculation
FTB Part A supplement
The FTB Part A supplement was introduced in 2003-04. It is paid to a person who is eligible to receive FTB Part A but is only payable as part of the reconciliation process.
Payment of the supplement is conditional on:
- the FTB individual and/or their partner lodging a tax return (if required) or informing Centrelink they are not required to lodge a tax return, and
- completion and notification of a health check for an FTB child who has turned 4 in the income year, if the health check requirement applies to the individual (for further details on the child health check requirement see 1.1.H.05), and
- meeting immunisation requirements for FTB children who turned 1, in the relevant income year, and in each income year after that until the age of 19 years (up to the end of the calendar year in which a child turns 19) if the immunisation requirement applies to those children (for further details on immunisation requirements see 1.1.I.10).
The FTB Part A supplement cannot be paid in fortnightly instalments. The FTB Part A supplement is included as part of the rate calculation process during reconciliation and therefore, may have the effect of reducing an overpayment incurred during the current or previous income year/s.
Example: Marlene receives FTB fortnightly payments for 1 child during the 2015-16 income year. The fortnightly entitlement is calculated using Marlene's estimate of $45,000. Marlene lodges her tax return in August 2016 and her income is assessed by the ATO to be $48,000. The under-estimate may give rise to an overpayment but, this would be offset by FTB Part A and Part B supplements to the value of the overpayment. If there is a supplement balance left over, it would be paid to Marlene.
FTB Part B supplement
The FTB Part B supplement is a payment that was introduced in the 2004-05 income year. It is paid to a person who is eligible to receive FTB Part B but is only payable as part of the reconciliation process, usually following the lodgement of income tax returns, if applicable. Where an individual (and/or their partner, if they have one) is not required to lodge an income tax return, they may receive the FTB Part B supplement after the end of the entitlement year, once they notify Centrelink they are not required to lodge. The FTB Part B supplement cannot be paid in fortnightly instalments. The FTB Part B supplement is included as part of the rate calculation process during reconciliation and therefore, may have the effect of reducing an overpayment incurred during the current or previous income year/s.
Example: Jane gets FTB Part B only as a fortnightly payment. The fortnightly entitlement is calculated using Jane's estimate of $7,000. Jane lodges her tax return in October of the lodgement year and finds that her actual income is $7,600. Jane's underestimate of income may give rise to an overpayment but this may be offset by the FTB Part B supplement to the value of the overpayment. If there is an FTB Part B supplement balance left over, it would be paid to Jane.
Note: FTB supplements are included in the rate calculation process during reconciliation and therefore may have the effect of reducing any FTB overpayment.
Amount entitled versus amount paid
The second step in reconciliation is to subtract the amount paid to the individual in FTB instalments or CCB fee reductions during the relevant income year according to Centrelink records from the individual's FTB and/or CCB entitlement. The result of this calculation is the reconciliation outcome which may entitle an individual to a top-up, require the repayment of a debt, or a nil adjustment.
Act reference: FA(Admin)Act section 56 Payment in respect of claim for which child care benefit by fee reduction if claim by individual, section 71B Debts where no entitlement or where enrolment advance wrongly paid, section 71C Debts arising in respect of child care benefit where overpayment
Notification of reconciliation outcomes
For FTB, in cases where a Secretary-initiated review (i.e. reconciliation) is carried out, only positive (top-ups) or negative (debts) adjustments of FTB need to be advised in writing to individuals. However, all individuals with a nil adjustment following reconciliation may be advised that they have been correctly paid. Individuals who receive CCB will be notified in writing in all cases, regardless of the outcome.
For CCB, once a determination of CCB entitlement or no entitlement has been made for an individual and a child, the individual will be notified in writing in all cases of the outcome of this decision.
In cases where the reconciliation of FTB is triggered by the lodgement of an income tax return, the reconciliation outcome may be advised to the ATO. The ATO may use some or all of a top-up payment for the recovery of any tax debts (after it has been used to recover family assistance debts). Conversely, once a tax refund has been applied to any tax debts, that may exist, the ATO may use any remaining tax refund to recover FTB or CCB debts. If the ATO is unable to fully recover a debt from the individual's or partner's tax refund (where the partner consents to such recovery), the residual debt amount will be advised to Centrelink for recovery. If the individual is entitled to a top-up, Centrelink will be advised, and will then issue the payment.
In all cases where an individual initiates a review of their entitlements, they must be notified in writing of the outcome.
Act reference: FA(Admin)Act section 106 Notice of review decision to be given, section 82 Methods of recovery, section 84A Setting off family assistance against debt owed, section 87 Application of income tax refund owed to person, section 92A Setting off family assistance of person against another person's debt, section 93 Application of income tax refund owed to another person
Different timing of FTB & CCB reconciliation
Due to different information being required to reconcile FTB and CCB, reconciliation can occur at different times for each payment, depending on when this information is available.
Example: Jack is widowed and is paid FTB by instalment and CCB by fee reduction for the period 1 July 2016 to 5 May 2017 based on an estimated ATI of $45,000. Jack lodges his income tax return on 1 September 2017 and his actual ATI is $38,000. Jack's top-up of FTB is paid by Centrelink. Jack's child care attendance details are provided by his approved child care service by the 4th Monday in July (when CCB reconciliation processing commences). As Jack's actual ATI becomes available on 1 September 2017, Centrelink notifies Jack of his CCB reconciliation and CCR annual entitlement outcomes at that time and directly credits any top-up to Jack.
Using CCR to offset debts
CCR is only used to offset current year or previous years CCB or CCR reconciliation debts. It is not used to offset other CCB or CCR debts, FTB reconciliation debts or other FTB debts. Where a CCR debt occurs this can be offset from any CCB or CCR top-up that may be payable. To facilitate these arrangements the CCR is identified as a separate component from the CCB reconciliation result.
Example: Karen is partnered to Scott. Karen is a full-time mother and part-time student, and is paid CCB for her 1 year old son for the period 1 July 2016 to 30 June 2017 based on Scott's estimated ATI of $42,000. Scott's actual ATI was $58,000. Karen was paid more CCB than she was entitled and has a debt. As Karen is now entitled to less CCB she would be entitled to a top up of CCR. Karen's CCB debt will be offset (fully or partially) using her CCR entitlement which is determined at the same time as CCB reconciliation.