6.4.3.30 Outcomes of non-lodger process

Summary

This topic outlines the possible outcomes of the non-lodger (1.1.N.33) process:

• when an individual (1.1.I.90) responds to contact by Centrelink
• when an individual lodges outstanding tax return/s
• when an individual fails to respond to contact by Centrelink
• the amounts of FA (1.1.F.02) to be raised as debts
• prohibition of FTB based on an estimate, and
• non-entitlement to payment of FTB.

For the purposes of CCS, all individuals (including those not required to lodge an income tax return) must meet the CCS reconciliation (1.1.R.10) conditions, including providing their ATI to Centrelink.

Individual responds to contact by Centrelink

FA can be reconciled if the individual:

• advises that they and/or their partner (1.1.P.30) (whoever was identified as a 'non-lodger') are not required to lodge an income tax return
• provide a final income amount for the relevant income year, and
• all the other conditions for reconciliation have been met.

Individual lodges outstanding tax return/s

An individual has their entitlement for the relevant income year (1.1.R.23) reconciled under the reconciliation process if they and/or their partner lodge an income tax return by the end of the lodgement period. If the individual lodges a tax return after the end of the lodgement period, late lodger rules may apply.

Individual fails to respond to contact by Centrelink

An individual has a debt due to the Commonwealth if they and/or their partner have not lodged an income tax return, or have not notified Centrelink that they and/or their partner are not required to lodge an income tax return by the end of the lodgement year (1.1.L.30).

Amount of debts to be raised - FTB

For FTB, the total amount of FTB paid to an individual for the relevant income year is raised as a debt if the individual fails to lodge relevant tax returns by the end of the lodgement year or a further period as allowed by the Secretary. This includes all FTB components, such as NBS, RA and FTB Part B etc and the NBU where applicable.

Note: Where NBS and/or NBU are included in a non-lodger debt, the individual's entitlement to NBS and/or NBU for that child is not reassessed until the non-lodger status is resolved.

Individuals who choose to defer some of their FTB entitlement for the relevant income year and do not lodge an income tax return by the end of the lodgement year will be subject to a non-lodger debt for the amount of FTB they actually received during the relevant income year.

For a debt to arise from a partner not lodging an income tax return or not advising Centrelink that they are not required to lodge an income tax return, an individual must still be partnered, as at the date the non-lodger debt is raised with the same person with whom they were partnered as at 30 June of the relevant income year.

From 2012-13 if an individual or their partner subsequently lodges their income tax return/s after a debt has been raised; the debt determination must be varied to reflect that the individual was entitled to the lesser of:

• the amount of FA the individual was paid during the relevant income year, or
• the amount of FA the individual was entitled to based on actual ATI.

An individual who has chosen to defer some of their FTB entitlement for the relevant year and lodges a tax return after the end of the lodgement year can only be paid for the relevant income year the lesser of their legislative entitlement based on ATI or the amount they would have received had the choice not been made to defer some or all of FTB.

For years prior to the 2012-13 financial year if an individual or their partner subsequently lodges their income tax return/s after a debt has been raised, but before 30 June of the extended lodgement year, the individual can be paid their full entitlement, including supplements. However, if an individual or their partner lodges their income tax return/s after a debt has been raised and after 30 June of the extended lodgement year, the debt determination must be varied to reflect that the individual was entitled to the lesser of:

• the amount of FA the individual was paid during the relevant income year, or
• the amount of FA the individual was entitled to based on actual ATI.

An individual who has chosen to defer some of their FTB entitlement for the relevant year and lodges a tax return after the end of the extended lodgement year, can only be paid for the relevant income year the lesser of their legislative entitlement based on ATI or the amount they would have received had the choice not been made to defer some or all of FTB.

Amount of debts to be raised - FTB advance

For FTB advances (1.2.8), the total amount of the advance repaid by the individual during the relevant income year is raised as an FTB advance debt if the individual fails to respond to Centrelink's non-lodger letters. The total amount repaid is the sum of the daily reduction amounts applied during the relevant income year.

After an FTB advance debt has been raised due to a non-lodger determination, if an individual or their partner subsequently lodges their income tax return/s or advise that they are not required to lodge income tax return/s the FTB advance debt is extinguished (i.e. it is taken never to have been an FTB advance debt) and normal reconciliation processes will apply where all other conditions for reconciliation have been met.

Amount of debts to be raised - SBP

For SBP (paid under the FTB Part A eligibility test), the total amount of the payment is raised as a debt if the individual fails to lodge relevant tax returns by the end of the lodgement year or a further period as allowed by the Secretary.

Note: SBP (where paid under the $60,000 income test) is not raised as a debt as there is no tax lodgement requirement.

Note: Where an SBP debt is raised due to an FTB non-lodger decision, the individual's entitlement to SBP for that child is not reassessed until the non-lodger status is resolved.

Prohibition of FTB based on an estimate

Where an individual has an outstanding income tax return for a relevant income year (that is the year for which they received an FTB entitlement) or they have not informed Centrelink they were not required to lodge for that year and a non-lodger decision was made that resulted in a debt, and the debt is still outstanding, they will be prohibited from receiving FTB payments based on an estimate (1.1.P.135). The prohibition of FTB will also apply to the current partner of an individual who has not lodged a tax return, or failed to inform Centrelink that they are not required to lodge, and has an outstanding debt as a result of a non-lodger decision.

Non-entitlement to FTB based on an estimate due to 3 or more non-lodger decisions

From 1 July 2010 if an individual has 3 or more FTB non-lodger decisions (variations under FA(Admin)Act subsection 28(2) for an income year) because the individual and/or their partner did not lodge a required tax return for the relevant income year, and for at least one of those decisions there is an outstanding FTB non-lodger debt that has not been fully repaid, the individual (and/or their partner, if applicable) will lose entitlement to FTB based on an estimate.

Treatment of non-lodger decisions made before 1 July 2010

Non-lodger decisions that were made before 1 July 2010 that did not generate a debt or where the debt was repaid before 1 July 2010 do not count towards the 3 non-lodger decisions for non-entitlement. Only variations for which there is an outstanding non-lodger debt as at 1 July 2010 onwards will apply for the purposes of determining non-entitlement to payment of FTB.