188.8.131.52 Outcomes of reconciliation
- nil adjustment
- top-up (positive adjustment), or
- overpayment (negative adjustment).
This topic also covers:
- impact of reconciliation on NBS and NBU
- 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, and
- 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 daughter. Amanda pays private rent of $270.00 a week. As she receives more than the base rate of FTB Part A, Amanda receives some RA as part of her fortnightly instalments. At the end of the income year, it is determined that her actual family income makes Amanda 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.
Individuals who receive SBP may be indirectly affected by reconciliation. Where SBP is paid under the income test (2.12.1), it is not reconciled. Where SBP is paid under the FTB Part A eligibility test, the SBP is not reconciled directly, but is raised as a debt where FTB reconciliation results in nil FTB Part A entitlement for the day that SBP was paid.
Note: If SBP is raised as a debt due to FTB Part A reconciliation, the individual may still be eligible for SBP for a later date. In this case, a debt is raised for the original payment and the debt is offset by the new SBP entitlement for the later date. Where the later date is in a subsequent income year, the individual will be entitled to a top-up of the difference between the 2 rates.
Example: Jane is receiving FTB Part A by instalments for 2 children and gives birth to a stillborn child. Jane does not meet the $60,000 SBP income test, but is eligible for payment as she is in receipt of FTB Part A. SBP is paid due to Jane's FTB Part A eligibility on the day of the stillbirth. At FTB reconciliation, Jane's ATI is above the FTB Part A threshold. As such, all of Jane's FTB Part A for the relevant year and her SBP are raised as a debt during reconciliation. However, as Jane is still eligible for FTB Part A by instalments as at 1 July of the following year and it is still within 52 weeks beginning on the day of the stillbirth, Jane is now paid SBP due to her FTB Part A eligibility on 1 July. The new SBP is used to offset the debt raised for the original payment, and as the SBP rate had increased on 1 July due to indexation of NBS, NBU and FTB Part A under 13 rates, the difference is used to offset part of Jane's FTB Part A debt.
Act reference: FAAct section 36 When an individual is eligible for SBP in normal circumstances, section 66 Amount of SBP
Policy reference: FA Guide 2.12.1 SBP eligibility criteria, 3.12 SBP rate, 3.11 NBS rate, 184.108.40.206 Indexation of FTB, 3.6.1 FTB Part A - historical rates, 220.127.116.11 Payments affected by reconciliation, 18.104.22.168 Reconciliation process, 22.214.171.124 Verification of adjusted taxable income
Impact of reconciliation on NBS & NBU
Where an individual has received NBS and/or NBU during the relevant financial year, the payments are subject to reconciliation in the same way as FTB Part A. Where reconciliation results in nil FTB Part A entitlement for the day that NBU was paid, NBU is raised as a debt. Likewise, where reconciliation results in nil FTB entitlement for part or all of a period that NBS was paid, the NBS for that period is also raised as a debt. However, as an individual can be eligible for NBS/NBU for any day within a period of 52 weeks beginning on the child's birth or entrustment to care as part of an adoption process, NBS and/or NBU eligibility may exist for a later date. In these cases, the reconciliation debt raised may be offset with the NBS/NBU entitlement for the later period.
Example: Hunter has a child entrusted to his care as part of an adoption process on 1 March. Hunter claims FTB Part A and receives NBU and NBS for 91 days beginning on the day of entrustment to care. FTB reconciliation completes for the relevant year on 1 December and results in Hunter having nil FTB entitlement for the period that NBS was paid. However, as Hunter was still receiving FTB on 1 July of the subsequent year, Hunter is now eligible for NBU and NBS from 1 July. The FTB reconciliation debt is partially offset by the NBU and NBS entitlement for the period 1 July to 29 September of the subsequent year.
Act reference: FAAct section 58AA NBU of FTB if NBS added into Part A rate, Schedule 1 clause 35A Eligibility for NBS
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: The individual's income tax is re-assessed by the ATO, a non-lodger (1.1.N.33) lodges an income tax return or the 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 a private collect individual does not collect their full child support entitlement.
- 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 2012-13 income year. On 13 July 2013, Bob advised Centrelink that he was not required to lodge a tax return and notified his income. FTB supplements and top-ups were paid to Bob upon reconciliation on 20 July 2013.
On 25 July 2014, Bob lodged his tax return for the 2012-13 income year, despite prior advice that he was not required to lodge. His entitlement for the 2012-13 income year was recalculated based on income details provided by the ATO. Bob's rates for the 2012-13 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 his Rate 2 amount, he 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 he received during the year. Had Bob simply lodged his tax return late, rather than advising that he was not required to lodge in the intervening period, he 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.