6.4.4.20 Reconciliation - Ex-partners

Summary

This topic explains the treatment of ex-partners under the reconciliation process. The topic discusses the definition of ex-partner and situations where:

  • separation occurs during the income year (year of entitlement),
  • separation occurs during the lodgement year,
  • separation occurs after the lodgement year.

Definition of ex-partner

For the purposes of reconciliation, an ex-partner is an individual with whom the individual was partnered for part or all of the claim period during the relevant income year (1.1.R.23) but with whom they are no longer partnered. It applies to individuals who receive FTB by instalment payments and those individuals who have made a past period claim after the end of the income year.

Separation occurs during the income year (year of entitlement)

If an individual separates from their partner during the year of entitlement and either they and/or their ex-partner are required to lodge an income tax return for the relevant income year, and the ex-partner has not lodged an income tax return, a partial income reconciliation will occur when the individual's own actual income becomes known.

In the partial reconciliation process, the period when the individual was 'single' (the single period) will be reconciled using the individual's actual ATI either provided by ATO after lodgement of income tax return or confirmation of final ATI by the individual when notifying not required to lodge. The period when the individual was partnered to their ex-partner (the couple period) will be reconciled using the income estimates provided for the ex-partner during the relevant income year and the individual's actual ATI as above.

The FTB (Part A and/or Part B) supplement can be paid following partial reconciliation as the supplement is not affected by any under-estimation of the ex-partner's income.

Interim reconciliation for the period that the individual and their ex-partner were together (the couple period) will not occur until 1 July of the year after the lodgement year or when the ex-partner lodges a tax return, whichever is earlier. In other words, interim reconciliation for the 'couple period' will occur after the end of the lodgement year, if the ex-partner's tax return is not lodged by then. The income used in interim reconciliation is the individual's actual income and the ex-partners last known (most recent) estimate, indexed estimate or indexed actual income. This process may result in a top-up or nil adjustment for the 'couple period'.

For individuals who separate in the year of entitlement, a special rule prevents any income-based debt being raised for the 'couple period' (see FAAct Schedule 3 clause 3A).

Separation occurs during the lodgement year

If an individual separates from their partner during the lodgement year and their ex-partner is required to lodge an income tax return for the relevant income year, but has not lodged an income tax return by the end of the lodgement year, interim reconciliation will occur after the end of the lodgement year (from 1 July) as long as the individual's own actual income is known.

The income used in the interim reconciliation is the individual's actual income and the ex-partner's last known estimate, indexed estimate or indexed actual income.

FTB supplements may be paid following the interim reconciliation for the entitlement year. The interim reconciliation process may result in a top-up, an overpayment or nil adjustment. Unlike situations where separation occurs in the year of entitlement, an overpayment debt is possible because clause 3A does not apply to separations outside the entitlement year.

A final reconciliation using the ex-partner's actual income will occur when the ex-partner eventually lodges a tax return.

Separation occurs after the lodgement year

Generally, non-lodger debts arise if income tax returns for the individual and/or their partner are not lodged by the end of the lodgement year. If income tax returns for the individual and/or their partner are not lodged by the end of the lodgement year, neither the supplement nor any income top-up can be paid.

If separation occurs after the lodgement year, any non-lodger debt raised against the individual will be written off if it is only the ex-partner's income tax return that has not been lodged. This will result in the suspension of any non-lodger debt recovery, from the date of separation.

Interim reconciliation is not appropriate because neither the supplement nor a top-up can be paid after the lodgement year. If the ex-partner lodges an income tax return for the relevant income year, the non-lodger debt is set aside (rather than simply being written off).

Reconciliation then occurs using the individual's and their ex-partner's actual income for the relevant year. This may only result in a debt or a nil adjustment. No top-up or supplement can be paid.

Act reference: FAAct Schedule 3 clause 3A Working out adjusted taxable income in certain cases where individuals cease to be members of a couple

FA(Admin)Act section 28 Variation of instalment and past period entitlement determinations where income tax return not lodged, section 32A FTB Part A supplement and FTB Part B supplement to be disregarded unless and until individual has satisfied the FTB reconciliation conditions, section 95 Secretary may write off debt

Policy reference: FA Guide 6.4.1.30 Reconciliation Process, 6.4.3.10 Valid Reasons for Not Lodging a Tax Return, 6.4.3.20 Non-lodger Process, 6.4.4.10 Reconciliation - Current Partners

Last reviewed: 21 March 2016