7.2.3 Debt Recovery from FA Entitlement

Summary

This section provides information about using the use of FA entitlements to recover a debt (1.1.D.60). It also discusses circumstances under which it may be appropriate to refund part or all of a top-up amount that has been used to offset a debt (explained below).

Available FTB top-ups (including supplements or lump sum payments) can be used to offset any outstanding FA and/or other Commonwealth debts.

Act reference: FA(Admin)Act section 84A Setting off FA against debt owed

Top-up payments

A top-up is the balance of an entitlement due to an individual, generally individuals who receive FTB by fortnightly instalments or CCB as reduced child care fees. Top-up payments include any supplements to which an individual is eligible.

Available FTB top-ups can be used to offset any outstanding FA and/or other Commonwealth debt.

Note 1: As an FTB top-up is just an entitlement to FA, all debts under the FA(Admin)Act and Social Security Acts, plus a range of other Acts, can be recovered from a top-up.

Note 2: CCB and CCR top-ups and lump sums can be used to offset CCB reconciliation debts determined on or after 1 July 2006 and CCR debts. CCB and CCR top-ups and lump sums cannot be used to offset FTB or other Commonwealth debts.

FTB lump sum payments

Lump sums are the total FTB entitlement, including supplements, due to an individual who chooses to receive FTB in annual payments.

For debt recovery purposes, FTB and/or SIFS lump sum entitlements are treated similarly to top-up payments. Individuals who receive FTB by lump sums will receive the balance of entitlements, if any, after all applicable debts have been recovered.

Act reference: FA(Admin)Act section 70 Debts due to the Commonwealth

Policy reference: FA Guide 7.2.1 Debt Recovery - General Provisions

FTB arrears payments

An FTB arrears payment is a lump sum amount that arises when a reassessment of an individual's entitlement occurs with retrospective effect. This can occur when an individual provides some additional information or does something that gives rise to additional entitlement (for example, resolving their non-lodger status and having a prohibition on instalment payments lifted). These arrears amounts can be used in their entirety in debt offsetting.

Act reference: FA(Admin)Act section 84A Setting off FA against debt owed

Refunding offset amounts

The Secretary may review a decision to offset an individual's FA debts against their FTB top-up if exceptional and/or unforeseen circumstances arise that may create severe financial hardship (1.1.S.45). In that instance, the Secretary may choose to refund part or the entire offset amount. Offset amounts should not be refunded for the purposes of meeting regular living expenses, such as car registration or insurance premiums.

Example: An individual's FTB top-up is used to offset their existing FA debt. However, an immediate family member residing in another state becomes critically ill and the individual is required to travel to assist them. As this is an exceptional and unforeseen event, the individual will experience financial hardship if they are forced to use monies allocated to regular expenses. Centrelink may determine that some or all of the offset amount can be refunded.

Offsetting debt against FTB entitlement owed to a consenting person

Debts arising under the provisions of the following Acts can be recovered by offsetting the debt against another individual's entitlement to FTB top-ups, lump sum amounts and/or arrears:

  • A New Tax System (Family Assistance) (Administration) Act 1999,
  • Social Security Act 1947,
  • Social Security Act 1991,
  • Data-matching Program (Assistance and Tax) Act 1990,
  • Farm Household Support Act 1992,
  • Student Assistance Act 1973,
  • Veterans' Entitlements Act 1986,
  • Military Rehabilitation and Compensation Act 2004,
  • Paid Parental Leave Act 2010, or
  • Student and Youth Assistance Act 1973 (Part 8) as in force before 1 July 1998.

The individual must consent to the deductions from their amount of FTB, and they may revoke the arrangement at any time.

The amount deducted from the person's arrears is paid against the debtor's debt.

Act reference: FA(Admin)Act section 92A Setting off FA of person against another person's debt

Offsetting CCB entitlement

Only a CCB or CCR debt can be recovered by withholding from an arrears payment of CCB owed to a debtor. The debtor may be either an individual (1.1.I.90) or an approved child care service provider (1.1.A.90). Up to 100% of the arrears payment can be used to repay the CCB or CCR debt. The amount withheld from the arrears payment is applied to the debt.

There are 2 CCB debt recovery processes that have been implemented since 1 July 2007:

  • recovery of CCB reconciliation debts determined on or after 1 July 2006 from income tax refunds (including ATO delivered FTB lump sum payments), and
  • recovery of CCB reconciliation debts from CCB top-up and CCB and CCR lump sum payments.

Arrears of CCB cannot be used to repay another person's debt. Arrears of CCB cannot be used to repay an FTB debt.

Act reference: FA(Admin)Act section 84A(3) Setting off FA against debt owed, section 92A(2) Setting off FA of person against another person's debt

Last reviewed: 3 January 2017