3.1.7.14 Notional assessments

Summary

This topic provides information about the use of notional assessments in the maintenance income test (MIT) for child support agreements made on or after 1 July 2008. It covers the following topics:

• notional assessments
• private collect agreements
• Child Support collect agreements
• treatment of child support arrears, and
• significant changes to binding agreements.

For child support agreements, Child Support will work out the annual rate of child support that would otherwise be payable under the child support formula if there was no agreement. This is called the 'Child Support notional assessment' because it is a 'notional' rather than an actual rate of child support. The notional assessment is determined by Child Support in the same manner as a child support assessment, and is the annual rate of child support that would be paid if the agreement was not in place. Once a child support agreement is accepted, calculation of FTB will be based on the notional assessment.

Private collect agreements

If a child support agreement is made on or after 1 July 2008 and the child support is collected privately, the MIT for FTB Part A will use the notional amount of child support rather than the agreement amount.

Where a payee collects their child support through private arrangements, FTB will be calculated by using 100% of the notional assessed amount of child support. This is because it is assumed the payee will collect 100% of the child support liability.

Child Support collect agreements

If a child support agreement is made on or after 1 July 2008 and the child support is registered for collection by Child Support, special rules apply if less than 100% of the child support amount payable under the agreement is collected.

Where a payee arranges for child support to be collected by Child Support, FTB is assessed on the notional amount paid. This is a percentage of the notional assessment, where the percentage is the proportion of the agreement amount collected by Child Support and divided by the agreement amount.

If less than 100% of the agreement amount of child support is collected, the MIT will not use 100% of the notional amount. Instead, a percentage of this amount that is equal to the percentage of the agreement amount received is used.

Provisional notional assessments

Once Child Support accepts a child support agreement, a provisional notional assessment must be made. This assessment is calculated taking into account both parents ATI and their most recent care details available for the children. Child Support must notify both parties of the provisional notional assessment, and both parties are entitled to seek variation of this.

A provisional notional assessment becomes a notional assessment either:

• 14 days after the notice of the provisional notional assessment is received by all parties, or
• if an application for variation was lodged, then on the day which it is varied, or is refused to be varied.

It is only once the provisional notional assessment becomes a notional assessment that it is used to calculate the FTB Part A entitlement.

A subsequent provisional notional assessment will be made where:

• the child support agreement (3.1.6.45) remains in force and it is 3 years since the notional assessment was last calculated
• the child support payable under the child support agreement (binding or limited) changes by more than 15%, or
• there is a limited agreement, and either party has requested a new provisional notional assessment.

Treatment of child support arrears

If the payee receives more than the agreement amount, FTB is calculated on the notional assessed amount plus the additional amount received. The additional amount of child support is treated as actual arrears or, if there had been an underpayment of child support in a previous financial year, notional arrears.

Where there has been an underpayment, the notional factor is calculated, which ensures that any arrears received will have the same effect as if the child support had been paid in the financial year it was due. If there has been an underpayment in more than one financial year, the arrears will affect the oldest underpayment amount first.

The notional factor is the amount of the notional assessment not paid, divided by the actual agreement amount that has not been paid.

Any arrears payments are multiplied by the notional factor to give the notional arrears amount. The payee's FTB is calculated on the notional assessed amount plus the notional arrears amount received.

If more than the agreement amount is collected and the payer does not have an underpayment from a previous financial year, FTB will be based on the notional assessment plus the additional amount received as actual arrears.

Significant changes to binding agreements

Liable parent under binding agreement increases their level of care to more than 65%

From 1 July 2018, if the care arrangements of a child change significantly so that the liable parent under the binding agreement now has over 65% care of a child, the agreement will be suspended for 28 days, or up to 26 weeks in some cases, from when the change in care occurs. The agreement will then terminate, unless the former carer entitled to child support under the agreement regains care while the agreement is suspended.

If there was a child support assessment in place under the formula before the binding agreement was made, child support will be payable according to the provisions of the formula while the agreement is suspended, rather than the notional assessment that was in place while the agreement was active. The MAT requirement would be satisfied and the MIT would be calculated according to the actual amount payable under the formula.

If the binding agreement started the child support case, there is no underlying formula assessment that takes effect during the suspension. Reasonable maintenance action needs to be taken within 13 weeks to satisfy the MAT. To receive child support payments for the child, the parent who is an eligible carer would need to apply for an assessment under child support formula provisions since there is no assessment that existed before the child support agreement (CS Guide 2.7.5). Once this action is taken, the MIT will be based on the formula assessment.

Changes in care where carer entitled to child support under binding agreement remains an eligible carer

If the liable parent under a binding agreement gains additional care, they cannot unilaterally end the agreement if the carer entitled to receive child support is still an eligible carer (and is still entitled to receive child support according to the terms of the agreement). The parent may seek to end the agreement and stop paying child support for that child by getting agreement from the other party to terminate the agreement or to make a new binding agreement, or by seeking a court order which sets the agreement aside. If the other party does not agree and there is no court order, the binding agreement will remain in place. The liable parent may become eligible to receive FTB as a result of the care change. While the agreement remains in effect, the MAT requirement is satisfied and the change in circumstances will be reflected after a new provisional notional assessment is created.

For the carer entitled to receive child support under the agreement, the new notional assessment could result in a decrease in the amount used in the MIT (this could reduce to nil if they are being notionally assessed to pay child support to the liable parent under the agreement). Any maintenance the liable parent is notionally assessed to receive will not be included in their MIT because they are not receiving child support under the agreement.