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.

5.3.4 Reduction of debts when other debts paid back

Context

The Registrar can reduce child support debts or carer debts owed by one person in a child support case where that person would otherwise be entitled to be paid debt repayment amounts that were owed to them under a separate case.

Act references

CSRC Act section 69B(3), section 71AB, section 76

On this page

Reduction of debts under section 71AB

CSRC Act section 71AB allows for the reduction of child support debts or carer debts owed by one person in a child support case where that person would otherwise be entitled to be paid repayment amounts that were owed to them under a separate case.

Under section 71AB(1), if:

  • a person ('the first person') owes either a child support debt or carer debt ('the first debt')
  • the Registrar receives an amount ('the repayment amount') from another person that is owed by that person, and is intended by that person, to be in partial or complete satisfaction of a child support debt or carer debt owed to the first person, and
  • the Registrar would, apart from section 71AB, be required to pay the repayment amount to the first person under either section 69B(3) or section 76 (section 71AB(1))

then, the Registrar may:

  • credit the repayment amount against the amount payable under the first debt, and
  • if after the amount has been credited, the first debt has been paid in full, pay any excess to the first person (section 71AB(2)).

When deciding whether to credit the repayment amount against the amount payable under the first debt, the Registrar may consider a number of factors, including:

  • the nature of the debts (carer vs child support)
  • whether the cases are active or ended, and
  • the relative size of the debts.

The Registrar's primary consideration will be to ensure that the ongoing financial needs of any children in a parent's care can be met. The policy aims to balance the day-to-day needs of parents with actual care of a child support child and the expenses they are incurring, with the rights of parents to enforce a debt owed to them.

The Registrar may pursue collection from either person by other means even when a debt reduction is in place in relation to their child support debt or carer debt, for example, by intercepting a tax refund.

Effect of reducing a debt under section 71AB

Any amount reduced under section 71AB is taken to be paid by the first person, in relation to their child support debt or carer debt. Therefore, a debt reduction cannot be reversed.

When a liability is later varied

Where the Registrar has credited a child support payment towards the first person's debt and the first person's child support entitlement is later reduced with retrospective effect:

  • The first person may have an overpayment as the first person is taken to have received the repayment amount.
  • This can create a carer debt and the first person becomes liable to repay the debt to the payer of the child support payment (see 5.5.5 for further information on overpayments and carer debts).

Example: Polly owes a child support debt of $100 to Fergus, and Ned owes a child support debt of $50 to Polly in a separate child support case. Ned makes a $50 payment to the Registrar for the child support debt he owes to Polly. The Registrar credits this repayment amount to the child support debt that Polly owes to Fergus. Polly now owes $50 in child support debt to Fergus.

The child support assessment between Polly and Ned is varied with retrospective effect. The variation reduces Polly's entitlement by $50. As Polly is taken to have received the $50 that was paid by Ned, Polly now owes a carer debt of $50 to Ned.

If the first person, who has their child support payment credited to their other debt, becomes entitled to additional child support as a result of a retrospective increase:

  • Services Australia may credit the additional amount received to any remaining debt that the first person owes to another person in a separate case.
  • Where the first person owes a carer debt, Services Australia will make a considered decision before crediting the child support payment towards the carer debt.
  • If after the child support has been credited, the first person's debt has been paid in full, any excess amount is paid to the first person.

Notification

The first person will be advised in writing when amounts have been applied against their first debt under section 71AB. A person does not have the right to object to the Registrar's decision to reduce, or refuse to reduce, a debt under section 71AB.

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