The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

3.4.5 Estimate penalties

Context

A parent (1.1.P.10) should take reasonable care (1.1.C.10) and use all available information to estimate their income. If their circumstances change, they should advise the Registrar of the change in circumstances and make a new estimate. The estimate reconciliation (1.1.R.20) process ensures child support assessments (1.1.C.70) are based on the most accurate income information available.

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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.

The penalty is 10% of the difference between the liability based on the original estimate and the final liability based upon the ATI (1.1.A.20) amount determined. An estimate penalty is a debt due to the Commonwealth.

Act reference: CSA Act section 64A Reconciliation using a parent’s actual adjusted taxable income …

Remission of estimate penalties

The Registrar can remit an estimate penalty, either in whole or in part, where:

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.

Example: If an expense that was deductible in previous years is no longer deductible, a parent's taxable income (1.1.T.20) may be higher than their estimate by the amount of the deduction.

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.

Example: Logan becomes aware of the difference between their estimated income and their actual ATI. Logan contacts Services Australia for advice and arranges to pay the arrears (1.1.A.100) that will result from a reconciliation of the estimate. Logan has attempted to mitigate the effect of the underestimation. The Registrar will consider this when deciding whether to remit the estimate penalty imposed.

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).

Act reference: CSA Act section 64A Reconciliation using a parent’s actual adjusted taxable income

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