6.4.3.40 Prohibition of FTB based on an estimate

Summary

Individuals who receive FTB (and/or their partners, if applicable) are prohibited from receiving FTB payments via instalments based on an estimate if they have an outstanding non-lodger debt as a result of a non-lodger decision. The period of entitlement to which this applies is called the prohibition period.

Non-lodger decision

If an individual who receives FTB and/or their partner is required to lodge an income tax return in respect of an income year (1.1.I.75) by the end of the lodgement year (1.1.L.30) (the financial year following the income year) but fails to do so, the individual's entitlement determination may be varied. The effect of a non-lodger decision is that the individual was not entitled to FTB in respect of that income year. A non-lodger debt is then raised for the amount of FTB they received for that year.

A non-lodger decision may be made at any time following the end of the lodgement year (usually around September). Following this decision, a variation of entitlement notice is issued by Centrelink to the individual.

Commencement date of the prohibition period

If an individual has a non-lodger debt as a result of a non-lodger decision, the prohibition of FTB based on an estimate can be applied at the end of the grace period. A 75 day grace period for the lodgement of income tax returns or to fully repay a non-lodger debt (or a combination of both) takes effect following the Secretary making a variation, at which time the individual will be issued a variation of entitlement notice. The grace period may be a longer period if the Secretary determines that there are special circumstances to vary the length of the grace period.

FTB payments based on an estimate may continue during the grace period but would cease at the end of the grace period if there are still outstanding income tax returns or Centrelink has not been informed that the individual and/or their partner are not required to lodge and there is still an outstanding non-lodger debt.

Where an individual has repaid all their non-lodger debt/s, and/or lodged all their relevant income tax returns (or a combination of both), the prohibition will be removed to enable FTB payments based on an estimate to re-commence.

Act reference: FA(Admin)Act section 28 Variation of instalment and past period entitlement determinations where income tax return not lodged, section 32AA Non-payment of FTB for non-lodgement of tax returns, section 32AB Prohibited periods for claimant, section 32AC Prohibited periods for relevant partner, section 32AD Prohibited periods for new partner

Policy reference: FA Guide 6.4.3.60 Removal of prohibition of FTB based on an estimate

Target individuals

The prohibition of FTB will apply if an individual's rate of FTB is worked out on the basis of an income estimate or indexed income estimate, or an estimate of maintenance income (1.1.M.10).

The prohibition of FTB must be applied unless there are special circumstances that make it appropriate to end or defer the prohibition period.

Act reference: FA(Admin)Act section 20 Determination of rate may be based on estimate, indexed estimate or indexed actual income

Policy reference: FA Guide 3.2.1 Adjusted taxable income - general provisions, 3.2.8.10 Initial estimate when making a claim, 3.1.7.10 Maintenance income test - general provisions

Prohibition affects all components of FTB

Prohibition of FTB based on an estimate will prevent an individual from being paid FTB Part A, including RA, MBA, NBS, NBU and ES Part A, and FTB Part B including ES Part B, via instalment payments.

Individuals who receive RA as part of their FTB and who also receive income support will be prevented from receiving RA through their income support payments while they are subject to prohibition of FTB. This is because an individual remains entitled to FTB (including RA) although they are prohibited from being paid via instalments during the prohibition period.

In contrast, SBP is not an FTB payment, so it is not subject to prohibition of FTB. If an individual is eligible for SBP under either the SBP income test or the FTB Part A eligibility test, SBP would be paid immediately, regardless of whether the individual is subject to prohibition.

Prohibition of FTB will not affect the eligibility of an individual (or their partner, if applicable) for any of the following concessions, rebates or payments unless they lose entitlement to FTB through the operation of FA(Admin)Act section 32AE, non-entitlement to payment of FTB (1.1.N.31):

access to the lower threshold of the Extended Medicare Safety Net
Child Dental Benefits Schedule, and
health care card (FTB).

Act reference: FAAct section 36 When an individual is eligible for SBP in normal circumstances

FA(Admin)Act section 32AE Non-entitlement to payment of FTB after 3 or more variations under subsection 28(2)

SSAct section 1061ZK(4) Qualification for HCC

Health Insurance Act 1973

Dental Benefits Act 2008

Income Tax Assessment Act 1997

Policy reference: FA Guide 2.12 SBP eligibility

Verification of lodgement of tax returns

If an individual informs Centrelink that they (and their partner, if applicable) have lodged their relevant tax return, the prohibition of FTB payments will be lifted. However, the individual may be required to provide evidence of lodgement of outstanding tax returns.

Acceptable evidence may include, but is not limited to:

a printed copy of the My Tax lodgement notification
a TNA for any of the outstanding financial years
a tax invoice or bill, or letter from the servicing accountant, or
a copy of the cover of the tax return/s lodged.

The above are examples of evidence only and not intended to be inclusive.

Individuals in a shared care situation

Prohibition of FTB will apply to an individual (and/or their partner, if applicable) who receives less than 100% of the FTB for a child due to shared care of that child. The other carer who receives the remaining amount of FTB will not be subject to prohibition of their FTB, unless they, or their partner, are also subject to a prohibited period because they have an outstanding non-lodger debt due to not lodging their relevant tax returns or failing to inform Centrelink they are not required to lodge.

Example: Greg and Jill have a son Avi, for whom they have been receiving FTB by fortnightly instalments in the 2017-18 income year. Greg and Jill separate in April 2019 and share care for Avi on a 50-50 basis. Jill lodges her tax return for the 2017-18 income year, however Greg does not lodge a tax return for that year by 30 June 2019. After 1 July 2019 a decision is made that Greg is not entitled to FTB for the 2017-18 income year because he has not lodged his tax return and a non-lodger debt is raised. Greg still has not lodged his tax return or fully repaid the non-lodger debt at the end of the 75 day grace period and is prohibited from being paid FTB.

However, Jill could still be paid FTB by instalments based on her FTB shared care percentage of 50% for Avi, because she has lodged her relevant tax return.

Act reference: FA(Admin)Act section 32AD Prohibited periods for new partner, section 32AB Prohibited periods for claimant, section 32AC Prohibited periods for relevant partner, section 32AA Non-payment of FTB for non-lodgement of tax returns

Separated couples

If a prohibition of FTB has been applied to an individual and their partner due to the partner's outstanding income tax lodgement, and the couple subsequently separates, the prohibition will no longer apply to the individual. However, if the couple later reconcile and the partner has still not lodged the relevant tax returns or fully repaid the non-lodger debt, the prohibition of FTB will recommence.

Example: Agnes and Denzel are members of a couple. Denzel is paid FTB by instalments for the children for the 2017-18 income year. Agnes does not lodge her income tax return for the 2017-18 income year by 30 June 2019, and after 1 July 2019 Denzel's entitlement determination is varied so that he is not entitled to FTB for the 2017-18 income year due to his partner's non-lodgement. A non-lodger debt is raised for the entire amount of FTB he received for the 2017-18 income year. Denzel's partner Agnes does not lodge her income tax return and Denzel has not fully repaid the non-lodger debt by the end of the 75 day grace period. From the end of the grace period Denzel is prohibited from receiving FTB via instalments.

In April 2020 Agnes and Denzel separate, and share the care of their children. As a result of this separation Denzel's non-lodger debt will be written-off and the prohibition will be lifted for Denzel. However, if Agnes and Denzel reconcile, the non-lodger debt will be reactivated and Denzel will again be prohibited from receiving FTB if Agnes has still not lodged her income tax return in respect of the 2017-18 income year, or the non-lodger debt for 2017-18 is not fully repaid.

Act reference: FA(Admin)Act section 32AC Prohibited periods for relevant partner, section 32AB Prohibited periods for claimant, section 32AA Non-payment of FTB for non-lodgement of tax returns

Policy reference: FA Guide 6.4.4.20 Reconciliation - ex-partners

Blended families

If an individual in a blended family (1.1.B.30) is subject to prohibition of FTB (for not lodging their income tax returns), their current partner will also be prohibited from receiving FTB while they remain a couple, even if the partner is separately receiving FTB for children from a previous relationship.

If the prohibited person becomes a member of a couple, the new partner will also be prohibited from receiving FTB via instalments or for a past-period in a current income year. This applies regardless of whether the new partner also receives FTB instalments for children of a previous relationship.

Example: Carl and Dom have 2 FTB children, Tom and Anna. Carl claims FTB for Tom, a child from Carl's previous relationship and Dom claims FTB for Anna, a child of Dom's previous relationship. Carl does not lodge his tax return and he fails to inform Centrelink that he is not required to lodge, which results in a non-lodger debt. As a result Carl's FTB will be prohibited. Whilst they are partnered Dom will also be prohibited from receiving FTB until Carl lodges the requisite tax returns, or informs Centrelink that he is not required to lodge, or fully pays the non-lodger debt.

Carl and Dom separate and Carl subsequently partners with Jen, who also has a child from a previous relationship. Jen will also be prohibited from receiving FTB, even if Jen has no outstanding income tax returns, until Carl lodges the required income tax returns, or informs Centrelink that he is not required to lodge, or fully repays the non-lodger debt. Dom is no longer subject to a prohibited period as he is not Carl's current partner and has met lodgement requirements.

Act reference: FAAct section 26 Only 1 member of a couple eligible for FTB, section 28 Eligibility for FTB of members of a couple in a blended family, section 60 Sharing FTB between members of a couple in a blended family

FA(Admin)Act section 32AA Non-payment of FTB for non-lodgement of tax returns, section 32AB Prohibited periods for claimant, section 32AC Prohibited periods for relevant partner, section 32AD Prohibited periods for new partner

FTB advances

Prohibition of FTB may impact the receipt or repayment of an FTB advance.

Policy reference: FA Guide 1.2.8.10 FTB advance payments - details

Ongoing past period claim eligibility

Individuals (and/or their partners, if applicable) who are subject to prohibition of FTB may still be paid FTB for a past period in a previous income year once they (and/or their partner, if applicable) have had their actual ATI verified or have advised that they are not required to lodge an income tax return and have notified the Secretary of their actual income.

Policy reference: FA Guide 4.2.2.20 Specific requirements for past period claim, 6.4.3 Requirement to lodge an income tax return

Debt recovery

Individuals who are subject to prohibition of FTB will continue to be subject to any existing debt recovery action for their FTB non-lodger debts or any other FTB debt. However, mandatory withholdings will cease for as long as FTB payments are prohibited. Other methods may be used to recover any outstanding FTB debt.

Act reference: FA(Admin)Act section 82 Methods of recovery, section 84 Deductions from debtor's FTB

Obligations of prohibited individuals

While subject to FTB prohibition, individuals are obligated to continue to update their (and/or their partner's, if applicable) income and circumstances. This may include, but is not limited to:

inclusion in the automatic uplift process
inclusion in the new financial year assessment (NFYA) process, and
child reviews.

Prohibited individuals will also be required to lodge tax returns, or notify they are not required to lodge, for income years in which they were prohibited. This includes years during which they were prohibited from receiving FTB for the entire income year.

Act reference: FA(Admin)Act section 7 How to claim, section 14 Restriction on determining claim where income tax assessment not made

Application of section 32AE - loss of entitlement to FTB

Loss of entitlement will occur when an individual has 3 or more variations under FA(Admin)Act subsection 28(2) due to not lodging the relevant tax returns within the required timeframes and at least one of these results in a debt raised under section 71. Only variations for which there is an outstanding income tax return and/or debt as at 1 July 2010 onwards will apply for the purposes of determining non-entitlement to FTB.

Loss of entitlement to FTB may preclude the individual (and/or their partner, if applicable) from access to the add-ons such as the lower threshold of the Extended Medicare Safety Net from the start of the following calendar year, Child Dental Benefits Schedule or HCC (FTB).

Loss of entitlement to FTB may also preclude the individual (and/or their partner, if applicable) from eligibility to SBP under the FTB Part A eligibility test where the SBP income test is not met.

Individuals who are not entitled to FTB based on an estimate will be able to make a claim for payment of FTB for a past period in a previous income year, and payment made following reconciliation based on actual ATI for an individual and/or their partner (if applicable) for that particular income year. A new claim for payment of FTB based on an estimate will only be accepted once all outstanding income tax returns in respect of those income years have been lodged or all outstanding non-lodger debts are fully repaid.