6.4.1.40 Outcomes of reconciliation

Summary

This topic provides a summary of the outcomes that may result from the reconciliation of FA (1.1.F.02). The outcome of reconciliation may be a:

• nil adjustment
• top-up (positive adjustment), or
• overpayment (negative adjustment).

There are timing restrictions on when individuals (1.1.I.90) can receive top-up payments under reconciliation conditions (6.4.1.30).

This topic also covers:

• review of reconciliation decisions, and
• reconciliation after the end of the lodgement period.

Nil adjustment

When an individual's entitlement to FTB or CCS is the same as the amount they received for the relevant income year (1.1.R.23), there is a nil adjustment. This means the individual has received their exact entitlement. For CCS, any withheld amounts will be paid as a lump sum direct to the individual.

Top-up (positive adjustment)

When an individual's entitlement to FTB or CCS for the relevant income year is more than the amount they received for the relevant income year, there is a positive adjustment. This means the individual will receive the difference between what they should have been paid and what they actually received for the relevant income year. A top-up may result if the individual's estimated ATI (1.1.A.20) is higher than their actual ATI, as assessed by the ATO. For FTB, a top-up may also result if the individual chooses a More Choice for Families payment option that allows them to receive part of their entitlement during the income year and the rest of their entitlements after their payments have been reconciled.

Note: RA will be included in an individual's FTB top-up if:

• their FTB Part A entitlement is more than the base rate
• they would have received RA during the relevant income year except for the fact that they were only paid the base rate due of FTB Part A due to their estimated income, and
• their rent details have been verified by Centrelink.

For CCS, if reconciliation, or the review of the reconciliation outcome, is initiated through the provision of an updated 'attendance record report' after the end of the lodgement year (1.1.L.30), it may result in a top-up.

Overpayment (negative adjustment)

When an individual's entitlement to FTB or CCS is less than the amount they received for the relevant income year, there is an overpayment (negative adjustment). This means the difference between what they actually received and what they should have been paid for the relevant income year will be raised as an overpayment. The individual's income tax refund, as well as the income tax refund of another consenting adult, may also be used to recover any balance of the overpayment. An overpayment may result if the individual's estimated ATI is lower than their actual ATI, as assessed by the ATO. Other methods of recovery, including withholdings and garnishee, may also be used.

Review of reconciliation decisions

An individual's FA can be reconciled again if:

• ATI for either the individual or partner (1.1.P.30) changes
  • Example: An individual's income tax is re-assessed by the ATO, a non-lodger (1.1.N.33) lodges an income tax return or an individual revises an estimate.
• maintenance income (1.1.M.10) for either the individual or partner changes
  
  • Example: Child Support modifies a disbursement amount or retrospectively adjusts a private collect assessment.
• information is provided that an FTB child of the individual has met health check or immunisation requirements since the date of the previous reconciliation.

An individual's CCS will also be re-reconciled if an approved child care service submits an updated 'attendance record report' substituting new attendance information for that already provided. Processing of this information will result in an automatic re-reconciliation. This differs from a review initiated by an individual as it will usually occur without the individual's prior knowledge.

Re-reconciliation where individual lodges late (not relevant for CCS or ACCS)

In normal circumstances, where an individual is required to lodge a tax return in order for reconciliation to take place, and they do not do so within 12 months from the end of the relevant income year, they would be considered a late lodger. In such cases the late lodger provisions would exclude payment of a top-up. Where an individual's entitlement was originally reconciled on the basis that they were not required to lodge a tax return, but they later lodge a tax return more than 12 months following the end of the relevant income year, the late lodger rules cannot apply. A late lodger determination cannot be made at this re-reconciliation stage because the individual has already lodged their tax return. However, family assistance law still works to:

• exclude the FTB supplements from the recipients' entitlement as the reconciliation conditions were not satisfied on time, and
• limit the payment of any additional FTB top-ups via the date of effect rules relating to favourable decisions.

In re-reconciliation in the above circumstances, there are 3 rates that are considered:

• Rate 1: the amount the individual was paid via instalments during the relevant income year.
• Rate 2: the amount the individual was entitled to following the original reconciliation (including supplements).
• Rate 3: the amount the individual is now entitled to based on their actual income following tax lodgement (excluding supplements, as reconciliation conditions were not satisfied on time).

The re-reconciliation compares Rates 2 and 3 above. If the Rate 3 amount is higher than the Rate 2 amount, the date of effect rules would act to limit payment of any arrears if the re-reconciliation decision is made more than 52 weeks after the individual was given notice of the original reconciliation. If the re-reconciliation decision is made less than 52 weeks after the individual was given notice of the original reconciliation, arrears would be payable.

If the Rate 3 amount is lower than the Rate 2 amount, there is no limit to the date of effect and the Rate 3 amount would be the amount the individual is entitled to, meaning a debt is raised for the difference between Rate 2 and Rate 3.

Reconciliation after the end of the lodgement period (not relevant for CCS or ACCS)

Where reconciliation is initiated through the provision of actual ATI or maintenance income after the end of the lodgement year, it can only result in a nil or negative adjustment. This may occur where the individual and/or their partner lodge an income tax return after the lodgement year.

Note: If an income tax return is not lodged by the individual and/or their partner do not inform Centrelink that they are not required to lodge a tax return before the end of the lodgement year, no top-ups or FTB supplements are payable.

A non-lodger debt will be raised after the end of the lodgement year if the individual and/or their partner fail to lodge a tax return or inform Centrelink they are not required to lodge an income tax return.