22.214.171.124 Outcomes of reconciliation
- nil adjustment
- top-up (positive adjustment), or
- overpayment (negative adjustment).
This topic also covers:
- review of reconciliation decisions, and
- reconciliation after the end of the lodgement period.
When an individual's entitlement to FTB or CCS is the same as the amount they received for the relevant income year (1.1.R.23), there is a nil adjustment. This means the individual has received their exact entitlement. For CCS, any withheld amounts will be paid as a lump sum direct to the individual.
Top-up (positive adjustment)
When an individual's entitlement to FTB or CCS for the relevant income year is more than the amount they received for the relevant income year, there is a positive adjustment. This means the individual will receive the difference between what they should have been paid and what they actually received for the relevant income year. A top-up may result if the individual's estimated ATI (1.1.A.20) is higher than their actual ATI, as assessed by the ATO. For FTB, a top-up may also result if the individual chooses a More Choice for Families payment option that allows them to receive part of their entitlement during the income year and the rest of their entitlements after their payments have been reconciled.
Note: RA will be included in an individual's FTB top-up if:
- their FTB Part A entitlement is more than the base rate
- they would have received RA during the relevant income year except for the fact that they were only paid the base rate due of FTB Part A due to their estimated income, and
- their rent details have been verified by Centrelink.
Example: Amanda is a member of a couple and receives FTB Part A by instalment for her 2 year old child. Amanda pays private rent of $370.00 a week. As Amanda receives more than the base rate of FTB Part A, they receive some RA as part of their fortnightly instalments. At the end of the income year, it is determined that Amanda's actual family income makes them eligible for the maximum rate of FTB Part A including the maximum rate of RA. Amanda receives a top-up.
For CCS, if reconciliation, or the review of the reconciliation outcome, is initiated through the provision of an updated 'attendance record report' after the end of the lodgement year (1.1.L.30), it may result in a top-up.
Overpayment (negative adjustment)
When an individual's entitlement to FTB or CCS is less than the amount they received for the relevant income year, there is an overpayment (negative adjustment). This means the difference between what they actually received and what they should have been paid for the relevant income year will be raised as an overpayment. The individual's income tax refund, as well as the income tax refund of another consenting adult, may also be used to recover any balance of the overpayment. An overpayment may result if the individual's estimated ATI is lower than their actual ATI, as assessed by the ATO. Other methods of recovery, including withholdings and garnishee, may also be used.
Review of reconciliation decisions
An individual's FA can be reconciled again if:
- ATI for either the individual or partner (1.1.P.30) changes
- Example: An individual's income tax is re-assessed by the ATO, a non-lodger (1.1.N.33) lodges an income tax return or an individual revises an estimate.
- maintenance income (1.1.M.10) for either the individual or partner changes
- Example: Child Support modifies a disbursement amount or retrospectively adjusts a private collect assessment.
- information is provided that an FTB child of the individual has met health check or immunisation requirements since the date of the previous reconciliation.
An individual's CCS will also be re-reconciled if an approved child care service submits an updated 'attendance record report' substituting new attendance information for that already provided. Processing of this information will result in an automatic re-reconciliation. This differs from a review initiated by an individual as it will usually occur without the individual's prior knowledge.
Re-reconciliation where individual lodges late (not relevant for CCS or ACCS)
In normal circumstances, where an individual is required to lodge a tax return in order for reconciliation to take place, and they do not do so within 12 months from the end of the relevant income year, they would be considered a late lodger. In such cases the late lodger provisions would exclude payment of a top-up. Where an individual's entitlement was originally reconciled on the basis that they were not required to lodge a tax return, but they later lodge a tax return more than 12 months following the end of the relevant income year, the late lodger rules cannot apply. A late lodger determination cannot be made at this re-reconciliation stage because the individual has already lodged their tax return. However, family assistance law still works to:
- exclude the FTB supplements from the recipients' entitlement as the reconciliation conditions were not satisfied on time, and
- limit the payment of any additional FTB top-ups via the date of effect rules relating to favourable decisions.
In re-reconciliation in the above circumstances, there are 3 rates that are considered:
- Rate 1: the amount the individual was paid via instalments during the relevant income year.
- Rate 2: the amount the individual was entitled to following the original reconciliation (including supplements).
- Rate 3: the amount the individual is now entitled to based on their actual income following tax lodgement (excluding supplements, as reconciliation conditions were not satisfied on time).
The re-reconciliation compares Rates 2 and 3 above. If the Rate 3 amount is higher than the Rate 2 amount, the date of effect rules would act to limit payment of any arrears if the re-reconciliation decision is made more than 52 weeks after the individual was given notice of the original reconciliation. If the re-reconciliation decision is made less than 52 weeks after the individual was given notice of the original reconciliation, arrears would be payable.
If the Rate 3 amount is lower than the Rate 2 amount, there is no limit to the date of effect and the Rate 3 amount would be the amount the individual is entitled to, meaning a debt is raised for the difference between Rate 2 and Rate 3.
Example: Bob received FTB via instalments for the relevant income year. On 13 July of the lodgement year, Bob advised Centrelink that they were not required to lodge a tax return and notified their income. FTB supplements and top-ups were paid to Bob upon reconciliation on 20 July of the lodgement year.
On 25 July of the lodgement year, Bob lodged their tax return for the relevant income year, despite prior advice that they were not required to lodge. Bob's entitlement for the relevant income year was recalculated based on income details provided by the ATO. Bob's rates for the relevant income year were as follows:
- Rate 1: $9,000 (amount paid during income year).
- Rate 2: $13,000 (annual entitlement following reconciliation including supplements).
- Rate 3: $10,000 (annual entitlement following re-reconciliation, excluding supplements).
As Bob's Rate 3 amount is less than their Rate 2 amount, they will have a debt of $3,000. However, it is worth noting that Bob's annual entitlement after re-reconciliation is still greater than what they received during the year. Had Bob simply lodged their tax return late, rather than advising that they were not required to lodge in the intervening period, they would only have been entitled to $9,000.
Act reference: FA(Admin)Act section 28 Variation of instalment and past period entitlement determinations where income tax return not lodged, section 32A FTB Part A supplement and FTB Part B supplement to be disregarded unless and until individual has satisfied the FTB reconciliation conditions, section 32C Relevant reconciliation time—first individual must lodge tax return, section 32J Relevant reconciliation time—individual not required to lodge an income tax return, section 107 Date of effect of certain decisions made under section 105 in relation to FTB by instalment
Reconciliation after the end of the lodgement period (not relevant for CCS or ACCS)
Where reconciliation is initiated through the provision of actual ATI or maintenance income after the end of the lodgement year, it can only result in a nil or negative adjustment. This may occur where the individual and/or their partner lodge an income tax return after the lodgement year.
Note: If an income tax return is not lodged by the individual and/or their partner do not inform Centrelink that they are not required to lodge a tax return before the end of the lodgement year, no top-ups or FTB supplements are payable.
A non-lodger debt will be raised after the end of the lodgement year if the individual and/or their partner fail to lodge a tax return or inform Centrelink they are not required to lodge an income tax return.