1.2.8.20 Variations to FTB advance repayment period
Introduction
The original repayment period (1.1.O.30) for an FTB advance (1.2.8) is usually 182 days. However, the repayment period can be varied or suspended upon a request from the individual. The advance repayment period may also be less than 182 days due to a discretionary exception (3.1.11). In addition, the repayment period (1.1.R.33) may be extended due to a recalculation of FTB Part A for a prior repayment period. Where the repayment of a notional 'new advance' commences following the discovery of an unrepaid amount of an old advance the original repayment period for the new advance may be different than 182 days.
This topic provides detailed information on variations to FTB advance repayment periods due to:
- recalculation of FTB Part A for a prior repayment period resulting in a notional new advance
- variation to FTB Part A rate during repayment period
- increased repayments
- reduced repayments/suspended repayments, and
- additional repayments.
Recalculation of FTB Part A for a prior repayment period & new advances
If it is retrospectively determined for a previous period that an individual's FTB Part A rate before reduction for an advance was insufficient to satisfy the advance rate reduction for that period, this will result in an unrepaid amount of the advance. Such a retrospective determination can be made because of a reconciliation outcome or the individual advising of a change of circumstances outside of the required notification period (1.1.N.40). If such a determination is made and at that time the repayment period for the advance has NOT expired and the individual remains legislatively entitled in the current income year to FTB Part A instalments, then no advance debt for the unrepaid amount should arise. Instead, the repayment period for this advance will be extended, retaining the existing reduction amount for the advance.
If the repayment period for the advance HAS expired and the individual remains legislatively entitled in the current income year to FTB Part A instalments, no advance debt will arise. In this case, the old advance is taken to be repaid and a notional new advance is taken to have been paid to the individual equal to the unrepaid amount of the original 'old advance'. The new advance is then repaid by reduction of the individual's ongoing FTB Part A rate, generally at the standard reduction amount for the original old advance.
An individual is not entitled to a further advance where they have not fully repaid a previous advance payment granted more than 12 months before the new advance assessment day. This includes where an old advance is being repaid as a NOTIONAL new advance. (The date of the notional new advance is not relevant in determining an individual’s entitlement to a further advance.)
To determine the further advance amount an individual is entitled to, the original old advance amount is deducted from the individual’s maximum advance entitlement (not the new notional advance).
If no ongoing legislative entitlement to FTB Part A exists, the unrepaid amount will be raised as an FTB advance debt. If an unrepaid amount arises due to a non-lodger determination, specific FTB advance debt rules apply (6.4.3.30).
Example: Sam has a maximum $500 advance, and receives a $300 advance which is fully repaid after 182 days. A subsequent retrospective reassessment identifies an unrepaid amount of $100. A notional new advance of $100 is taken to be paid to Sam as a result of this reassessment. During the repayment period for the notional new advance, Sam requests a new one-off advance. The maximum advance Sam is now eligible for is her maximum advance amount ($500) minus the full amount of any advance not yet repaid ($300 - that is, the full amount of the original advance). Sam's maximum advance when the new one-off advance is requested is therefore $200 ($500 - $300). If Sam had requested the one-off new advance more than 12 months after the original advance was paid, she would not have been eligible for the second advance regardless of when the notional advance was paid. If Sam was not currently entitled to FTB Part A when her FTB was reassessed, an FTB advance debt would have been raised.
Where an unrepaid advance is retrospectively determined and a notional new advance is deemed to have been paid so as to enable repayment from ongoing FTB Part A instalments, the recommencement of the FTB Part A reduction from instalment payments depends on the existence and timing of any other advances previously paid. Priority is given to repaying advances where the reduction is already being applied to ongoing FTB Part A payments. Therefore:
| If … | then … |
|---|---|
| an unrepaid advance amount is determined and the reduction in FTB Part A for this advance has not ended (i.e. the advance is still being repaid) | the reduction for this advance will continue at the existing reduction amount by extending the repayment period. |
| an advance is initially fully repaid, but subsequently determined as unrepaid and the individual's FTB Part A rate is not currently being reduced due to any other advance | a notional new advance will be created and repayment of the notional new advance will generally re-commence from the beginning of the first instalment period for which it is practicable to reduce the individual's FTB Part A rate. |
| an advance is initially fully repaid, but subsequently determined as unrepaid and the individual's FTB Part A rate is currently being reduced due to another later advance granted before the original advance was fully repaid | a notional new advance will be created and repayment of the notional new advance will re-commence from the beginning of the first instalment period for which it is practicable to reduce the individual's FTB Part A rate (meaning that the individual's FTB Part A rate will be reduced to repay both advances concurrently). |
| an advance is initially fully repaid, but subsequently determined as unrepaid and the individual's FTB Part A rate is currently being reduced due to another later advance granted after the original advance was initially fully repaid | a notional new advance will be created and repayment of the other later advance will be given priority. The reduction of FTB Part A to repay the notional new advance will generally not re-commence until immediately after the other later advance is fully repaid. Repayment of the new advance may begin earlier if the concurrent repayment of advances would not cause severe financial hardship. |
| (subject to conditions above) there is more than one advance which is initially fully repaid, but subsequently determined as unrepaid, and the unrepaid advances previously had overlapping repayment periods | notional new advances will be created and the reduction in FTB Part A for these notional new advances will generally re-commence from the beginning of the first instalment period for which it is practicable to reduce the individual's FTB Part A rate (meaning that the individual's FTB Part A rate may be reduced to repay multiple advances concurrently). |
| (subject to conditions above) there is more than one advance which is initially fully repaid, but subsequently determined not to have been repaid, and the unrepaid advances previously did not have overlapping repayment periods | notional new advances will be created and the reduction in FTB Part A for the notional new advance whose original advance is the older will re-commence from the beginning of the first instalment period for which it is practicable to reduce the individual's FTB Part A rate. Any FTB Part A reduction for the other notional new advance whose original advance is younger will generally not recommence until immediately after the older advance is fully repaid. However, repayment of the younger advance may begin earlier if the concurrent repayment of advances would not cause severe financial hardship. |
In some cases, repayments may have commenced for a notional new advance to recover an unrepaid amount, or an advance repayment period may have been extended, as described above. If subsequently it is determined that the unrepaid amount was, in fact, paid in part or in full, any amount that was over-repaid as a consequence of the original decision should be paid to the individual as immediate arrears of FTB Part A.
Example: Michelle requests an advance and a $364 advance is determined on 15 June 2012 and reduction of Michelle's FTB Part A commences on 20 June 2012 at $2 per day. The advance is fully repaid on 18 December 2012. Michelle (and her partner) then lodge their tax returns and on 1 September 2013 and it is determined that there was no entitlement during the 2012-13 year due to their combined ATI being too high, so the reductions between 1 July and 18 December 2012 ($2 × 171 days = $342) did not actually occur. As Michelle has ongoing entitlement to FTB, the unrepaid amount of $342 then becomes a notional new advance and repayments commence at $2 per for a repayment period of 171 days from 11 September 2013 to 28 February 2014, and the advance is again fully repaid. On 1 April 2014, the ATO sends amended income details for Michelle for the 2012-13 year and she was actually entitled to their full rate of payment for the 1 July to 18 December 2012 period. Therefore the advance repayments during this period did actually occur. As the notional new advance of $342 was created and repaid incorrectly, the earlier determination of the notional new advance is revoked, and the $342 underpayment of FTB Part A is paid to the Michelle as immediate arrears of FTB Part A.
Example: Melissa requests an advance, and a $728 advance is determined on 29 December 2011 (with the repayment period running from 3 January to 2 July 2012 at an FTB Part A reduction of $4 per day. But on 1 May 2012 it is discovered that Melissa's FTB Part A rate before reduction for the period 3 January to 22 January was only $2 per day. The difference ($2 × 20 days = $40) then causes the repayment period to be extended by 10 days ($40 ÷ $4 = 10 days). Therefore, at the end of 12 July 2012, the advance is fully repaid. Then on 1 August 2012 it is discovered that the alteration to Melissa's rate during the 3 to 22 January 2012 period was incorrect and her rate was actually above $4 per day, meaning that the standard reduction of $4 per day was actually applied. Therefore, the extension of the repayment period for the 3 to 12 July 2012 period was incorrect, and the $40 underpayment of FTB Part A during this period is paid to Melissa as immediate arrears.
Where an individual is entitled to FTB Part A arrears which cover an advance repayment period (1.1.R.33), the arrears should not be reduced to offset the outstanding advance balance. However, in some situations the legislative rate of FTB Part A arrears payable to the individual are affected by the presence of the advance. These situations include where the arrears arise as a result of:
- a change in the FTB payment delivery date, or
- a restoration of FTB Part A following a suspension or cancellation.
In these situations, the rate reduction applied to the arrears is equivalent to the amount that payments would have otherwise been reduced to repay the advance if the suspension/cancellation/change of payment delivery date had not occurred.
Act reference: FAAct Schedule 1 clause 48 Changing the repayment period-recalculation of amount of unrepaid FTB advance, Schedule 1 clause 51 Recalculation of amount of unrepaid FTB advance
FA(Admin)Act section 35A Entitlement to FTB advance, section 71A Debts arising in respect of FTB advances
Policy reference: FA Guide 2.7 Entitlement to FTB advance payment
Variation to FTB Part A rate during repayment period
If an individual receives an FTB advance and their ongoing FTB Part A rate before the advance reduction decreases to below the advance repayment rate, the Secretary must increase the length of the repayment period. By doing so, the repayment rate for the advance will decrease to an amount that is equal to or less than the individual's FTB Part A rate before the advance repayment (that is, the individual's entire FTB Part A payment will be used to repay the advance). If the Secretary determines that the resulting repayment period will become unreasonably lengthy they may raise a debt for the unrepaid amount (7.6) instead.
If the individual's ongoing FTB Part A rate before the advance repayment is below the standard reduction and subsequently increases, the Secretary may then decrease the number of days in the repayment period. However, the reduction of the individual's FTB Part A rate must not be more than the standard reduction. Increasing the repayment amount above the standard reduction should only occur upon request from the individual as described below.
Where the individual is currently repaying multiple advances, the advances are approached one by one, taking the oldest advance first, and working through to the youngest. The reduction is adjusted individually because reductions for older advances may result in a nil FTB Part A rate, such that payment of a younger advance cannot occur at that time. In this instance, there is the capacity for the Secretary to suspend the repayment for such younger advances.
Act reference: FAAct Schedule 1 clause 43 Part A rate insufficient to cover reduction-single FTB advance, Schedule 1 clause 44 Part A rate insufficient to cover reduction-multiple FTB advances, Schedule 1 clause 45 Part A rate insufficient to cover reduction-discretion to create FTB advance debt
Increased repayments (decreasing the length of the repayment period)
An individual may request that the Secretary decrease the number of days in the repayment period which may result in the repayments for an FTB advance increasing to above the standard reduction. The Secretary must be satisfied that the increased repayments will not cause the individual financial hardship.
If an individual elects to increase the rate reduction following receipt of an FTB advance, but their ongoing FTB Part A rate before the reduction decreases to below the nominated higher reduction amount, the individual's entire FTB Part A payment will be reduced to nil to recover the FTB advance. If the individual's FTB Part A rate before the FTB advance reduction, then increases, the Secretary will only increase the advance reduction back to the standard reduction. This means that if the FTB Part A rate goes below the standard reduction, then increases, the advance repayment can return to the standard reduction, but not above. If the individual wishes to return to the higher reduction rate, they will need to request it again and meet the conditions as above.
Example: Iain receives an FTB advance with a standard reduction of $2.197 per day. He later requests to increase the repayments by decreasing the length of the repayment period, making his daily advance repayment $4.00. During the repayment period, Iain's daily FTB Part A rate before the advance repayment reduces to $1.50 per day. As a result, the Secretary extends the repayment period to make the new daily repayment amount $1.50, which is Iain's entire FTB Part A payment. A subsequent change occurs during the repayment period and Iain's FTB Part A rate before the advance repayment increases to $4.20 per day. As a result, the Secretary increases Iain's advance repayment back to the standard reduction of $2.197 per day. If Iain wishes to return to the increased repayment amount of $4.00 per day, he must lodge a new request.
Act reference: FAAct Schedule 1 clause 43 Part A rate insufficient to cover reduction-single FTB advance, Schedule 1 clause 44 Part A rate insufficient to cover reduction-multiple FTB advances, Schedule 1 clause 46 Changing the repayment period-individual requests shorter period
Reduced repayments (increasing the length of the repayment period)/suspended repayments
An individual may request to reduce the repayments for an FTB advance below the standard reduction by increasing the number of days in the repayment period. Repayments will be reduced if the individual's circumstances are special and could not reasonably have been foreseen at the time of requesting the FTB advance, and they would suffer severe financial hardship if the current reduction were to continue for the repayment period.
An individual may also seek to suspend the repayment of an FTB advance. To suspend the individual's repayments, their circumstances would generally be more serious than those of an individual whose repayments are reduced.
Example: Where an individual is imminently at risk of becoming homeless they may seek to suspend the repayment of their FTB advance.
Prior to approving the suspension of an individual's advance repayments, consideration is given as to whether reducing the repayments (as above) would be sufficient to alleviate the hardship the individual is experiencing. Where reduced repayments are sufficient, approval for suspension should generally not be granted. Suspending repayments has the effect of deferring the point at which the FTB advance is fully repaid.
The decision about whether to reduce or whether to suspend repayments should take into account the severity of the individual's circumstances on a case by case basis. A reduced or suspended repayment arrangement is only approved for a temporary period based on an estimate of when the individual's circumstances will return to normal. However, these arrangements are reviewed every 3 months as a minimum to avoid individuals remaining on reduced or suspended repayments longer than needed. An individual may not be granted further FTB advance payments (including regular advances) if reduced or suspended repayments currently apply to an existing advance.
Act reference: FAAct Schedule 1 clause 47 Changing the repayment period-individual requests longer period, Schedule 1 clause 49 Suspension of repayment period
FA(Admin)Act section 35A Entitlement to FTB advance
Additional repayments
While reduction of the individual's FTB Part A rate will be the general method for repaying an FTB advance (including capacity to seek increased repayments), there is also the capacity to repay the FTB advance by another method that is acceptable to both the individual and the Secretary (for example, a cash repayment). In general, when an individual requests that a portion of an FTB advance balance be repaid by a method other than a reduction in their ongoing FTB Part A instalments, it is taken that the individual also requested that the repayment period for the FTB advance is reduced, so as to maintain the same FTB part A reduction amount that was in place prior to the additional repayment.
Act reference: FAAct Schedule 1 clause 50 Repayment of FTB advance by another method