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5.3.2 Offsetting debts between payees & payers

Context

The Registrar can offset the debts owed by 2 people in the same child support case if the Registrar would be obliged to pay the amounts collected from one to the other.

Act reference

CSRC Act section 4, section 17, section 17A, section 69B, section 71AA

CSA Act section 143

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What kinds of debts can be offset

The Registrar may offset debts between 2 people in the same child support case who each have a child support debt or carer debt due to the Commonwealth under the CSRC Act if those debts arise under:

  • a child support assessment (CSRC Act section 17(2))
  • a liability to pay periodic child maintenance arising from a court order or court registered maintenance agreement or a collection agency maintenance liability (CSRC Act section 17(1))
  • a recovery order that is registered for collection by the Registrar (3.1.2) (CSRC Act section 17A), or
  • a carer liability (5.5.5) (CSRC Act section 4(1)).

Only debts arising from a liability referred to in CSRC Act section 17, section 17A and section 69B can be offset. In the case of amounts due under a child support assessment, child maintenance order, court registered agreement, collection agency maintenance liability, or a carer liability, the Registrar can only offset these if they relate to a child of whom both parties are the parents (CSRC Act section 71AA(1)(c)).

Debts due to spousal maintenance, registrable overseas maintenance liabilities and penalties are unable to be offset.

If 2 debts are offset, the person with the larger debt is required to pay the net amount to the Registrar.

Debts can be offset by deducting the whole amount, or part of the amount, of the smaller debt from the larger debt. The circumstances of an individual case may result in the Registrar determining that it is preferable to deduct only part of the amount. The decision will take into account the ongoing needs of the parent with care of the children, and the past and present obligations of both parents to pay child support when due. If one of the debts arises from a recovery order under CSA Act section 143, the Registrar will consider the terms of the order and in particular any repayment schedule specified in the order.

Where the debts are of equal amounts

If the debts are equal, the Registrar may offset one against the other and the Commonwealth is taken to have recovered both of the debts in full (CSRC Act section 71AA(2)). In most cases where the debt is equal, this is the desirable outcome.

Where the debts are not equal

If the Registrar offsets debts for different amounts, then the Commonwealth is taken to have recovered the amount of the smaller debt that is offset and an equal amount of the larger debt (CSRC Act section 71AA(3)). Where the debts are not equal amounts, it will generally be appropriate to offset the full amount of the smaller debt against an equal amount of the larger debt.

Offsetting a debt against an ongoing liability

Where the Registrar offsets unequal debts, the remaining amount of the larger debt is still a debt due to the Commonwealth. If the person with the larger debt is entitled to future child support payments payable by the other person, the Registrar may offset the remaining debt against all or part of the other person's ongoing liability as it becomes due and payable each month. In general, the Registrar will offset the remaining debt against all of the other person's ongoing liability. However, the circumstances of an individual case may result in the Registrar determining that it is preferable for only part of the ongoing liability to be offset.

Where the debt is offset in part, the balance of the month's child support liability is to be paid by the other person as it becomes due and payable.

The Registrar may pursue collection from the person with the larger debt by other methods even when a debt offset is in place, in relation to that person's current entitlement to child support, for example, by intercepting a tax refund. This is because the debt offset arrangement does not alter the fact that the person with the larger debt continues to owe a debt to the Commonwealth, so the debt owing can be recovered by methods other than offsetting.

Other methods of recovery would not apply to the person with the smaller debt. A full offset of that person's ongoing liability (the smaller debt) against the larger remaining debt of the other person means that if another smaller debt is accrued it is immediately recovered each time that it becomes due and payable, and so there is no debt owed (no 'overdue' debt) for the person with the smaller debt.

If a partial offset applies but the balance of the monthly liability that should be paid by the person with the smaller debt is not paid when it becomes due and payable, that unpaid amount would become a debt owed. In general, it would be appropriate to offset that unpaid amount against the larger debt, rather than to pursue other methods of recovery. The non-payment of the balance may also indicate a need to reconsider whether an ongoing partial offset continues to be a suitable arrangement, or whether a full offset would be preferable.

Example: Helena was previously the payer of a registrable maintenance liability. Helena's children have now come to live with her. Helena has a debt of $3,000 from the period when she was a child support payer. Even though the children are no longer living with Theo, he is entitled to $3,000 in child support when Helena pays it.

Theo has now been assessed as having a child support liability. Under that liability, Theo has a debt of $150 in respect of a calendar month.

The Registrar offsets $100 of the debt (part of it only) that became due and payable by Theo against the amount owed by Helena. The effect of the offset is that Helena is taken to have paid $100 of her debt per calendar month. Theo is taken to have paid $100 of his liability to pay $150. Under the liability, Theo must pay $50 for that calendar month.

Until Helena's debt has been fully offset, Theo's liability arising under his assessment may be offset against the remainder of Helena's debt.

Effect of offsetting a debt

Any amount recovered by way of offset is taken to be paid to the Registrar by the person with the debt and paid to the person owed the debt as provided for under the CSRC Act (CSRC Act section 71AA(4)). Therefore, a debt offset cannot be reversed.

When a liability is later varied

Where the Registrar offsets a person's child support debt against that person's entitlement to receive child support from the other person and their entitlement is later reduced with retrospective effect, the person may have an overpayment as the person is taken to have received the offset amount. This can create a carer debt and the person becomes liable to repay the debt to the other person (See 5.5.5 for further information on overpayments and carer debts).

If the person who has their debt offset against their entitlement becomes entitled to additional child support as a result of a retrospective increase, the additional child support would generally be fully offset against any remaining debt owed by the person. The debt offset would apply until the person's remaining debt is fully recovered.

Notification

All offset arrangements will be confirmed in writing with both people. However, neither person has the right to object to the Registrar's decision to offset, or refuse to offset, a debt.

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