220.127.116.11 Reconciliation process
Note: From 1 July 2012 individuals and/or their partners have 12 months after the income year (1.1.I.75) to lodge a tax return or notify Centrelink they are not required to lodge in order to receive FTB supplements or top-ups.
Prior to the 2012-13 financial year individuals had an extended lodgement time of 24 months to lodge tax returns.
- Iain was paid FTB for the 2011-12 income year. Iain and his partner Catherine had until 30 June 2014 (2 years) to lodge their tax returns or advise they are not required to lodge a tax return, to ensure they receive their full entitlement (including supplements subject to eligibility requirements and any top up).
- Iain was paid FTB for the 2015-16 income year. Iain and his partner Catherine have until 30 June 2017 (1 year) to lodge their tax returns or advise they are not required to lodge a tax return, to ensure they receive their full entitlement (including supplements and any top-up).
Note: Lodgement of tax returns are the responsibility of the individual, including those who lodge via a tax agent. Providing financial statements to a tax agent or accountant prior to 30 June of the relevant lodgement year does not constitute lodgement of tax returns. Extensions to the tax lodgement period may be granted if there are special circumstances that prevent an individual from lodging their tax return before the end of the lodgement year. Special circumstances are circumstances that are unusual, uncommon or exceptional. Failure by an accountant or tax agent to lodge a tax return within the lodgement period (e.g. forgetting to lodge in time or delay due to high workloads) will not ordinarily constitute special circumstances.
This topic outlines the steps involved in the reconciliation of FTB and CCS. It covers the:
- assessment of FA entitlement
- assessment of CCS entitlement
- FTB Part A supplement
- FTB Part B supplement
- comparison of amount entitled to amount paid
- notification of reconciliation outcomes
- different timing of FTB and CCS reconciliation, and
- using CCS to offset FA debts.
Assessment of FA entitlement
Excluding CCS, the first step of the reconciliation process is to determine the individual's annual entitlement for the relevant income year (1.1.R.23). This relies on the assessment of the individual's and their partner's (if applicable) actual ATI (for FTB), actual maintenance income (for FTB Part A only as relevant). This information will determine the individual's entitlement for the relevant income year.
Annual entitlement is also dependent on whether an individual is eligible for the end of year FTB Part A supplement for each of their children and/or the FTB Part B supplement.
Note: Individuals who are not required to lodge a tax return must advise Centrelink they are not required to lodge and provide their final assessment of ATI for the relevant income year. If the individual provides a different assessment of ATI, it can be accepted only if it is considered to be reasonable.
Policy reference: FA Guide 18.104.22.168 Verification of adjusted taxable income, 3.2.2 Taxable income, 22.214.171.124 Valid reasons for not lodging a tax return, 126.96.36.199 Calculating a rate of FTB - overview, 188.8.131.52 Change of rate circumstances
Assessment of CCS entitlement
CCS reconciliation occurs for all individuals who had entitlement determined (including nil) for a week in a CCS fortnight that began in the relevant income year. The process begins once the reconciliation conditions have been met, that is, post the end of the financial year, the individual (and any partner during the relevant income year) have lodged and had tax returns assessed, or if there is no requirement to lodge, notified the Secretary of their actual ATI.
Using the actual ATI, each determination of entitlement is reviewed to determine a new entitlement amount, and the difference (if any) of any entitlements already received.
Act reference: FA(Admin)Act section 67CD(2) Entitlement to be paid CCS, section 67CD(8) No entitlement to be paid CCS or ACCS, section 103A CCS reconciliation conditions, section 103B First deadline, section 103C Second deadline, section 105 Secretary may review certain decisions on own initiative, section 105C Review of entitlement to be paid CCS or ACCS-taking account of changes of circumstances etc., section 105D Review of entitlement to be paid CCS or ACCS-time limit on increase, section 105E Review of individual's entitlement to be paid CCS by fee reduction-meeting CCS reconciliation conditions
Policy reference: FA Guide 184.108.40.206 Verification of adjusted taxable income, 3.2.2 Taxable income, 220.127.116.11 Valid reasons for not lodging a tax return, 3.5.2 CCS - activity test
FTB Part A supplement
The FTB Part A supplement is paid to a person who is eligible to receive FTB Part A for an FTB child, but is only payable as part of the reconciliation process. The FTB Part A supplement cannot be paid in fortnightly instalments.
Payment of the supplement is conditional on:
- the FTB individual and/or their partner lodging a tax return or informing Centrelink they are not required to lodge a tax return within 12 months of the relevant income year, and
- the FTB individual having family ATI of $80,000 or less for the relevant income year.
The FTB Part A supplement is included as part of the rate calculation process during reconciliation and may have the effect of reducing an overpayment incurred during the current or previous income year/s.
For financial years prior to 2018-19 payment of supplement is still conditional on:
- an individual meeting immunisation requirements for all FTB children who turned 1, in the relevant income year, and in each income year after that until the age of 19 years (up to the end of the calendar year in which a child turns 19), and
- completion and notification of a health check for an FTB child who has turned 4 in the income year, if the health check requirement applies to the individual (for further details on the child health check requirement see 1.1.H.05).
FTB Part B supplement
The FTB Part B supplement is paid to a person who is eligible to receive FTB Part B but is only payable as part of the reconciliation process. The FTB Part B supplement cannot be paid in fortnightly instalments.
Payment of the supplement is conditional on the individual and/or their partner lodging a tax return or informing Centrelink they are not required to lodge a tax return within 12 months of the income year. The FTB Part B supplement is included as part of the rate calculation process during reconciliation and therefore, may have the effect of reducing an overpayment incurred during the current or previous income year/s.
Amount entitled versus amount paid
The second step in reconciliation is to subtract the amount paid to the individual in FTB instalments or CCS fee reductions during the relevant income year according to Centrelink records from the individual's FTB and/or CCS entitlement. The result of this calculation is the reconciliation outcome which may entitle an individual to a top-up, require the repayment of a debt, or a nil adjustment.
Example: Marlene receives FTB Part A for one child during the 2017-18 income year. The fortnightly entitlement is calculated based on Marlene's estimate of $55,000. Marlene lodges her tax return in August 2018 and her income is assessed by the ATO to be $58,000. Marlene's underestimated income for 2017-18 may give rise to an overpayment but, this would be offset by the FTB Part A supplement to the value of the overpayment. If there is a supplement balance left over, it would be paid to Marlene.
Act reference: FA(Admin)Act section 71B Debts in respect of CCS or ACCS-no entitlement, section 71C Debts in respect of CCS or ACCS-overpayment
Policy reference: FA Guide 18.104.22.168 Payments affected by reconciliation, 22.214.171.124 Outcomes of reconciliation
Notification of reconciliation outcomes
For FTB, in cases where a Secretary-initiated review (i.e. reconciliation) is carried out, only positive (top-ups) or negative (debts) adjustments of FTB need to be advised in writing to individuals. However, all individuals with a nil adjustment following reconciliation may be advised that they have been correctly paid.
For CCS, in cases where a Secretary-initiated review (i.e. reconciliation) is carried out, the outcome needs to be advised in writing to individuals.
In cases where the reconciliation of FTB is triggered by the lodgement of an income tax return, the reconciliation outcome may be advised to the ATO. The ATO may use some or all of an FTB top-up payment for the recovery of any tax debts (after it has been used to recover FA debts). Conversely, once a tax refund has been applied to any tax debts, that may exist, the ATO may use any remaining tax refund to recover FTB or CCS debts. If the ATO is unable to fully recover a debt from the individual's or partner's tax refund (where the partner consents to such recovery), the residual debt amount will be advised to Centrelink for recovery.
In all cases where an individual initiates a review of their entitlements, they must be notified in writing of the outcome.
Act reference: FA(Admin)Act section 106 Notice of review decision not relating to CCS or ACCS, section 106A Notice of certain review decisions relating to CCS or ACCS, section 82 Methods of recovery, section 84A Setting off family assistance against debt owed, section 87 Application of income tax refund owed to person, section 92A Setting off family assistance of person against another person's debt, section 93 Application of income tax refund owed to another person
Policy reference: FA Guide 6.2 Internal reviews, 7.2.1 Debt recovery - general provisions, 7.2.3 Debt recovery from FA entitlement, 7.3 Non-recoverable debts
Different timing of FTB & CCS reconciliation
Due to different information being required to reconcile FTB and CCS, reconciliation can occur at different times for each payment, depending on when this information is available.
Using CCS withholding to offset debts
Five per cent of CCS payments made during the financial year are withheld to assist with managing any potential debts. Should a debt be raised at reconciliation, the withheld amount of subsidy will first be used to offset that debt.
Act reference: FA(Admin)Act section 67EB(3) The withholding amount, for a payment …
Policy reference: FA Guide 7.2 Methods of debt recovery