7.1.1 FA debts - general provisions
- defining debt,
- debts due to the Commonwealth,
- types of FA debt,
- identifying overpayments,
- raising overpayments,
- Centrelink and ATO responsibilities in relation to debts,
- recovering overpayments,
- CCS and ACCS debts, including transferred child care benefit (CCB) and child care rebate (CCR) debts, and
- notice of debts.
A person (1.1.P.80) incurs an FA debt if they are paid an amount of FA:
- to which they were not entitled, or
- that is more than the amount of assistance that should have been paid to the person under the FA law.
Act reference: FA(Admin)Act Part 4 Division 2 Amounts recoverable under this Act, section 71(1) No entitlement to amount, section 71(2) Overpayment
Debts due to the Commonwealth
An overpayment of FA is a debt due to the Commonwealth if it is a debt under the:
- A New Tax System (Family Assistance) (Administration) Act 1999, or
- Data-matching Program (Assistance and Tax) Act 1990.
Act reference: FAAct Part 3 Eligibility for family assistance (other than CCS and ACCS)
FA(Admin)Act section 70 Debts due to the Commonwealth
Types of FA debts
There are 4 main types of FA debts:
- Qualification debts: A debt that results from an individual (1.1.I.90) receiving a payment for which they were not eligible.
- Example: An individual receives FA and it is later determined through data-matching that they were not a resident of Australia and were therefore not qualified to receive the payment.
- Circumstance debts: Debts that may result from changes in a person's circumstances.
- Example: If there is a change in care arrangements for an FTB child and the individual continues to receive payment on behalf of that child based on previous care arrangements, an overpayment may be incurred as a result of the change in the person's circumstances.
- Reconciliation debts: Overpayments that result from an underestimation of family income. FTB individuals who receive payments as fortnightly instalments usually paid on the basis of an estimate of ATI (1.1.A.20) for an income (financial) year. The payment is reconciled at the end of the income year, after the individual and/or their partner (1.1.P.30) have lodged an income tax return, if required to do so, and the returns have been assessed by the ATO. If an individual received more FTB than they were entitled to receive for that income year, they would incur a reconciliation debt. This is also applicable for individuals who receive CCS or ACCS as fee reductions, and an underestimation of family income may result in a reconciliation debt. Reconciliation debts can also be raised for retrospective changes in circumstances.
- Non-lodger debts: A non-lodger debt can occur where an FTB individual or their partner has not lodged an income tax return within the prescribed time. When an FTB individual receives FTB payments based on an estimated income and/or maintenance income during the income year and if they and/or their partner are required to lodge an income tax return for that year and they have not done so by 30 June of the lodgement year, the entire amount of FTB paid to them for the relevant income year may be raised as a non-lodger debt to the Commonwealth.
FA overpayments may be identified in several ways including:
- through the end of year reconciliation process, or
- by the individual or ACO notifying Centrelink that their circumstances have changed (see example 1), or
- by compliance activities undertaken by Centrelink, DESE or the ATO (see example 2).
Example 1: The person advises of a change of circumstances several weeks after the event occurred.
Example 2: Data-matching with other agencies such as the Department of Home Affairs.
Generally, an overpayment arises when an individual has been paid:
- FA when they were not eligible for the whole, or part of the period, or
- more FA than they were entitled to receive.
FA overpayments can be raised when there are changes in eligibility or changes in circumstances.
An overpayment due to eligibility that does not require verification of income details to accurately raise the overpayment is raised immediately and is not left until the reconciliation process.
Where available information suggests that changes in an individual's circumstance is likely to result in an overpayment, the overpayment should be raised immediately.
If an overpayment of FA has been identified, and it is a debt due to the Commonwealth, the amount of the debt is normally recovered. For discussion on the various methods of debt recovery, refer to 7.2.
There are limited circumstances where recovery action for a debt is not taken, and the debt may be written off or waived. These are discussed in 7.3.
Centrelink & ATO responsibilities in relation to debts
Centrelink is responsible for identifying, raising and recovering FA debts. This includes offsetting FA top-ups against FA debts.
The ATO will offset an available tax refund (of the individual and/or any consenting person) against any FTB and/or CCS or ACCS debt to the extent of the available tax refund. Centrelink is responsible for recovering any remaining FTB and/or CCS or ACCS debt after any tax refund has been applied to the debt.
Recovery of debt from FTB individuals subject to prohibition of FTB based on an estimate
All individuals who are subject to a prohibition on being paid FTB based on an estimate will continue to be subject to any existing debt recovery action for their FA debts (that may include a non-lodger debt), with the exception of mandatory withholding, which will cease for as long as the prohibition is in place.
Example: Melissa is currently having $25 withheld from her fortnightly FTB instalment payments to repay an FA debt. Melissa becomes subject to a non-lodger decision resulting in a non-lodger debt and becomes subject to prohibition of FTB based on an estimate. Melissa's fortnightly instalment payments and her withholdings will cease, and new arrangements will need to be made to repay her FA debts.
Act reference: FA(Admin)Act section 84 Deductions from debtor's FTB, section 32AA Non-payment of FTB for non-lodgement of tax returns, section 32AB Prohibited periods for claimant
Policy reference: FA Guide 22.214.171.124 Prohibition of FTB based on an estimate
CCS & ACCS debts
The primary circumstances in which a CCS or ACCS debt is incurred are:
- when the payee has no entitlement (1.1.E.30) (including where the payment is made to an incorrect account), or
- an overpayment has been made to an individual or an approved provider (1.1.A.90) (ACCS (child wellbeing)), or
- the individual or approved provider makes a false or misleading statement, or
- a payment was made to a person incorrectly, or
- an approved provider failed to pass on or remit fee reductions, or
- a business continuity payment was made to an approved provider and must be recovered for sessions of care (1.1.S.40) provided in the period specified in the notice, or
- where the provider's approval or approval in respect of a service is suspended, cancelled or varied.
The FA(Admin)Act allows for the liability for a debt to be moved from an approved provider to an individual and from an individual to an approved provider under certain circumstances.
Debts incurred under the CCB and CCR arrangements may be transferred to be a treated as a CCS debt.
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 - overpayments, section 71E Debts in respect of ACCS (child wellbeing) for provider - individual at fault, section 71F Debts in respect of CCS or ACCS for individual - provider at fault, section 71H Debts in respect of business continuity payments paid to a provider, section 82 Methods of recovery, section 87A Setting off debts of an approved provider against child care service payments
Notice of debts
If a debt due to the Commonwealth has not been paid in full, Centrelink or the Department of Education, Skills and Employment must give the person a notice in respect of the debt.
The notice must specify:
- the date the notice was issued,
- the reason for the debt,
- the period to which the debt relates,
- the debt amount,
- the day the amount is due and payable, i.e. 28 days after the date of the notice,
- that an interest charge may be applied to the debt if the person does not enter into a payment arrangement and make a payment under that arrangement,
- that an interest charge may be applied to the debt if the person fails to comply with a payment arrangement or the payment arrangement is terminated,
- payment options, and
- contact details for enquiries concerning the debt.
More than 1 notice may be issued in relation to a debt.