2.5.1.50 Estimates of income - before 1 July 2010

Context

The Child Support and Family Assistance Legislation Amendment (Budget and Other Measures) Act 2010 amended the provisions relating to estimates of income from 1 July 2010. The information in this section applies to:

• estimates made before 1 July 2010, and
• later estimates for the same child support period for parents who made an estimate for a period beginning before 1 July 2010.

A parent is required to keep their estimate accurate. However not every change or event will cause the assessment to change greatly. For the purpose of a retrospective decrease the Registrar will consider the effect on the existing child support assessment before considering to proceed with a review.

On this page

• What is an estimate?
• When can a parent estimate their income for the remainder of a child support period?
• Income amount orders
• What period does an estimate cover?
• Refusing to accept an estimate
• Effect of an estimate
• Revoking an estimate
• Reviewing an estimate
• Retrospective estimate reviews (income decrease)
• Events
• Reconciling an estimate
• Estimate penalties
• Remission of estimate penalties

What is an estimate?

An estimate is an election that a parent can make to have their assessment or notional assessment based on their expected income.

When the Registrar is required to calculate a notional assessment a parent can vary their provisional notional assessment by making an estimate election, see 2.7.4 'Varying a provisional notional assessment'.

The rest of this page relates to estimating incomes in relation to assessments (not notional assessments).

Estimating ATI for assessments

A parent can estimate their ATI for a child support period, or the remainder of a child support period, by (CSA Act section 60(5)):

• Step 1: Working out the length of the remaining period
• Step 2: Estimating the amount that would be the parent's ATI (2.4.4) for the remaining period, and
• Step 3: If the remaining period is shorter or longer than 12 months, dividing the amount by the number of days in the remaining period and multiplying that figure by 365.

If the remaining period is more than 12 months, a parent can choose to estimate their income for the next 12 months or for the rest of the child support period (CSA Act section 60(6)).

Where a parent is resident in a reciprocating jurisdiction (1.5.1) they must include their overseas income in the estimate amount (CSA Act section 58B).

Remaining period

The remaining period (CSA Act section 60(5)):

• starts on the day the person makes an estimate or the day the child support period starts, whichever is later, and
• ends 15 months after the start of the child support period.

When can a parent estimate their income for the remainder of a child support period?

An estimate can be accepted:

• if there is no income amount order in force on the day of the election or in the remainder of the estimate period, and
• in the case of a first election in a child support period - if the estimate is 85% or less than the person's ATI for the last relevant year of income (2.4.4). The ATI is based on the parent's taxable income and must be
  • as advised by the ATO
  • where the parent is a resident of a reciprocating jurisdiction, as advised by the relevant overseas authority (CSA Act section 58C), or
  • a declaration by the parent of their ATI (2.4.4) which the Registrar is satisfied is correct (CSA Act section 60(3)), or
• in the case of a subsequent election in a child support period - if the estimate is greater than or less than the amount of the first election relating to the period and it is 2 months or more since the last estimate was made (CSA Act section 60(4)), see revoking an estimate.

The Registrar can review a parent's estimate at any time if it is notified or becomes aware of an event, information or change of circumstances which might affect the rate of child support payable.

Note: The components of a person's ATI changed as of 1 July 2009 (2.4.4).

Income amount orders

An income amount order (CSA Act section 5) means:

• a departure order made by a court (4.3.2) or change of assessment decision under Part 6A of the CSA Act (2.6) that either
  • varies the annual rate of child support payable in a child support case by setting that annual rate, or
  • varies the ATI, or the child support income, of a parent by setting that ATI or child support income, or
• provisions of a child support agreement that has been accepted by the Registrar that have effect, for the purposes of making or amending an assessment, as if they were such a departure order made by consent. That is, varying the annual rate of child support payable, the ATI or the child support income of a parent.

An agreement that provides for the payment of child support other than in the form of periodic amounts is not an income amount order (2.7).

An income amount order can relate to only one parent or to both parents. An income amount order relating to only one parent will not prevent the other parent from making an estimate (CSA Act section 60(2)).

An order, agreement or change of assessment decision that varies a parent's child support percentage, a parent's self-support amount, a parent's relevant dependent allowance or multi-case allowance, the cost percentage, or the costs of children is not an income amount order.

What period does an estimate cover?

An estimate period starts on the day the parent makes the estimate election to the Registrar (or the day the child support period started if the parent makes the estimate before the child support period started). The estimate period ends at the end of the child support period (CSA Act section 60(5)).

However, if a parent chooses to make the estimate for the next 12 months rather than the whole remaining child support period, the estimate period ends at the end of the 12 months (CSA Act section 60(6)).

Once an estimate has been accepted, the estimate period is not altered by events such as the acceptance of a new estimate or the commencement of a new child support period. Even if the estimate itself ceases to affect the assessment for later parts of the original estimate period (for example, if another estimate is lodged), the estimate period for the original estimate remains the same.

When an estimate has been accepted the parent's ATI for each later day in the child support period is the amount the parent elected (CSA Act section 61(1)). A parent may have chosen to make an estimate of their income for the next 12 months, rather than the whole remaining child support period under CSA Act section 60(5). The estimate is used for all days in the whole remaining child support period.

When an estimate is reconciled, the Registrar must work out the parent's income for the whole estimate period. The Registrar annualises the income from the whole estimate period and uses this to amend any part of the period still affected by the original estimate.

Refusing to accept an estimate

The Registrar can refuse to accept an estimate if satisfied that the parent's ATI (including their overseas income for a parent resident in a reciprocating jurisdiction) is likely to be higher than their estimated amount (CSA Act section 60A).

The Registrar will consider all the circumstances and may obtain further information, either from the parent or a third party (for example, an employer or an overseas authority). A history of underestimating alone is not enough for the Registrar to refuse to accept an estimate. However, it may prompt the Registrar to investigate the circumstances further.

The Registrar will give a parent the opportunity to show that their estimate is accurate before refusing to accept an estimate.

If the Registrar refuses to accept an estimate, the parent will be given written notice of the decision.

Effect of an estimate

If the Registrar accepts a parent's estimate, their annualised estimate becomes their ATI amount for the purposes of assessing the annual rate of child support payable in a child support period on or after the date of the estimate (CSA Act section 61(1)). The Registrar will amend the assessment to take the estimate into account (CSA Act section 61(3)).

An estimate does not prevent a later income amount order (CSA Act section 61(2)), change of assessment decision, court departure order or agreement (CSA Act section 61(5)) from affecting the assessment for the estimate period.

Revoking an estimate

A parent can only revoke an estimate by making a new estimate (CSA Act section 62(1)). The Registrar will then amend the assessment to take the new estimate into account (CSA Act section 63(3)). The new annual rate of child support payable takes effect from the date of the new estimate (CSA Act section 63(1)).

However, if the original estimate resulted in a minimum assessment then the minimum annual rate will continue for 28 days after the day on which the person would cease to be assessed to pay the minimum rate (CSA Act section 66(4)(b)(ii)). See 2.4.12 for information about the minimum annual rate of child support.

If an income amount order takes effect after the estimate was accepted, a parent cannot revoke the estimate (CSA Act section 62(3)).

Reviewing an estimate

The Registrar can review an estimate to decide if the estimate is still accurate and, if not, to amend the assessment to use a more accurate amount as the parent's income (CSA Act section 63A and 63B).

A parent is required to tell the Registrar of any event that affects the accuracy of their estimate. This obligation is outlined in the notice that is sent to a parent when an estimate is accepted (CSA Act section 160 and section 162A(2)).

The Registrar can amend an assessment if it otherwise becomes aware that the estimate is no longer accurate.

The Registrar can amend an assessment in 2 ways:

• if the Registrar becomes aware of an event that has affected the accuracy of the estimate, or if the parent tells the Registrar that the event has occurred (section 63A), or
• if the Registrar has sent the parent a notice requesting information relevant to determining the accuracy of the estimate, under CSA Act section 161 or 162A(1) or (4) (section 63B) (6.2.3).

Most estimates are reviewed and the assessment amended under CSA Act section 63A when the parent informs the Registrar of a change in their income or when the Registrar otherwise becomes aware that the estimate may no longer be accurate.

The Registrar will only review an estimate under CSA Act section 63B if:

• every attempt has been made to contact the parent but they cannot, or will not, provide any information, or consent to any amendments, or lodge a new estimate
• all efforts to gather income information from third parties has been exhausted, and
• there is still not enough reliable information to proceed with an amendment under CSA Act section 63A.

If a parent complies with a notice issued under CSA Act section 161 or 162A(1) or (4), the Registrar can only amend the assessment to give effect to the review of the estimate from the date that the parent complied with the notice. If a subsequent estimate has been accepted, the Registrar cannot amend the earlier estimate.

Retrospective estimate reviews (income decrease)

A parent should advise the Registrar of a reduction in their income within 14 days of the event that led to the reduction in income (CSA Act section 160 and 162A).

The Registrar will review an estimate and amend the assessment in very limited circumstances where a parent does not advise of a reduction in income within 14 days of the event.

The Registrar will consider the following in order to determine whether a review is appropriate:

• the information available from the person who lodged the estimate or from other persons
• the effect upon both parties of any change, and
• the extent to which a review and amendment of the assessment would affect the accuracy of the estimate.

Information available

The Registrar will consider the reasons for the delay in updating the income information. The reason for non-compliance with the notification requirements must be compelling before a review will be undertaken.

The Registrar will also consider the degree to which the decrease in income was foreseeable by the parent when they made their estimate.

If the Registrar is satisfied that these 2 conditions have been met, the Registrar will need to consider the remaining 2 factors before proceeding with a review.

Effect upon both parties of any change

The Registrar will consider if the effect on both parties to the assessment would be fair and reasonable if the estimate was reviewed and the assessment therefore amended to reduce the child support liability for the period between the event and the date of notification.

Events

The happening of an event can provide a trigger for reviewing an estimate.

An event can include:

• an occurrence that was not expected when the estimate was made (for example, starting a new job or non-payment of an expected contract fee), or
• the first day on which the actual rate of income earned exceeded the rate of estimated income (that is, the first day the estimated income became inaccurate).

Reconciling an estimate

After an estimate period ends, the Registrar will compare the parent's estimate of income with their actual income for the estimate period. If a parent has earned more than their estimated income in the estimate period, the Registrar will reconcile the parent's estimate. If the Registrar has amended the assessment as a result of reviewing the estimate under CSA Act section 63A, 63B or 63C then the Registrar may decide not to reconcile the estimate (CSA Act section 64(2A)).

If a parent has made more than one estimate within a child support period it is only the last estimate that is reconciled (CSA Act section 64(1)(a)). Estimates made earlier in the child support period which were revoked when a later estimate was accepted may be reviewed.

The Registrar cannot reconcile an estimate until both the estimate period and the child support period have ended.

The Registrar cannot reconcile an estimate for a day in the child support period where the minimum annual rate applies (CSA Act section 64(1)(c)) but can review the estimate (CSA Act section 63C).

The actual income must be:

• calculated on the ATI the parent earned within the whole of the period covered by the parent's estimate (including overseas income for a parent who is resident in a reciprocating jurisdiction), and
• compared against the estimate.

The Registrar will ignore the following things when it reconciles an estimate:

• any income the parent earned before or after the estimate period, and
• whether the child support period ended early (for example, because the ATO issued a new tax assessment for the parent). If the child support period ended early the Registrar will still reconcile the entire estimate period.

If the parent's ATI earned over the estimate period is more than their estimate, the Registrar must amend the assessment. The Registrar will do this by using the parent's annualised actual income as the parent's ATI amount for all the days in the assessment still affected by the parent's estimate.

Estimate penalties

A person will be required to pay an estimate penalty when the Registrar reconciles their estimate and their actual income for an estimate period is 110%, or more, of their estimated income (CSA Act section 64A(1)).

The penalty is 10% of the difference between the liability based on the original estimate and the final liability based upon the ATI amount determined (CSA Act section 64A(2)). An estimate penalty is a debt due to the Commonwealth (CSA Act section 64A(3)).

Remission of estimate penalties

The Registrar can remit an estimate penalty, either in whole or in part, (CSA Act section 64A(4)) where:

• the difference between the ATI amount and the estimated income was due to an amendment of the tax legislation, or a change to a ruling or determination under the tax legislation, or
• the Registrar is satisfied that it would be fair and reasonable to remit the penalties in the circumstances.

Amendment of a tax law, ruling or determination

When making an estimate, a parent cannot be expected to know that a change to the tax legislation or a change to a ruling or determination will increase their ATI.

This does not apply where a parent's taxable income is amended for other reasons (for example, taxpayer error).

Fair & reasonable to remit the penalties in the circumstances

What is fair and reasonable depends on the circumstances of each case. Those circumstances do not need to be special, exceptional or unusual. Estimate penalties will be remitted if the Registrar considers the parent did not intentionally misuse the estimate provisions to defer payment.

The Registrar will consider whether a parent was or should have been aware of the conditions and implications of using an estimate.

A parent should use reasonable care and all information available to estimate their income. If their circumstances change, they should make a new estimate or advise the Registrar of the change in circumstances. The Registrar may not remit an estimate penalty unless a parent has a reasonable explanation for failing to make a new estimate when their circumstances changed.

Failure to mitigate the effects of the incorrect estimate income does not necessarily mean that the parent intended to misuse the estimate provisions. However, if a parent acts to mitigate the effects this could indicate that they did not intend to avoid or defer the liability.

The Registrar will remove any penalty that has been imposed incorrectly (for example, through error or miscalculation, or by a subsequent variation which decreases the liability).