7.3.1.30 Capacity to Pay a Debt

Summary

This topic provides information on how a debtor's capacity to repay a debt (1.1.D.60) may affect its recovery. If repaying the debt will cause severe financial hardship (1.1.S.45), then the debt may be written-off.

Policy reference: FA Guide 7.3.1.10 Writing-off a Debt

Capacity to pay a debt

Unless recovering a debt will cause severe financial hardship, a debtor is considered to be able to repay the debt if it can be recovered using any of the following methods:

  • deductions from the debtor's FTB instalments, or
  • deductions from the debtor's pension, benefit or allowance, or
  • setting off FA against debt owed, or
  • using the debtor's income tax refund, or
  • setting off debts of an approved child care service against amounts of one or more enrolment advances to be paid to an approved child care service under section 219RA, or
  • setting off debts of an approved child care service against amounts to be paid to the approved child care service in respect of fee reduction under section 219Q or 219QA.

Act reference: FA(Admin)Act section 84 Deduction from debtor's FTB, section 84A Setting off FA against debt owed, section 87 Application of income tax refund owed to person, section 87A Setting off debts of an approved child care service against child care service payments, section 95(4) Secretary may write off debt

Last reviewed: 3 July 2017