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This topic provides information about the use of notional assessments in the maintenance income test for child support agreements made on or after 1 July 2008. It covers the following topics:
For child support agreements, the CSA will work out the annual rate of child support that would otherwise be payable under the child support formula if there was no agreement. This is called the 'CSA notional assessment' because it is a 'notional' rather than an actual rate of child support. The notional assessment is determined by the CSA in the same manner as a child support assessment, and is the annual rate of child support that would be paid if the agreement was not in place. Once a child support agreement is accepted, calculation of FTB will be based on the notional assessment to calculate FTB.
Example 1: Michael and Jane have registered for collection by the CSA a binding child support agreement for their son, Thomas. They have agreed that Michael will pay an annual rate of $4,000 in child support. The CSA notional assessment for the year is $5,000. The $5,000 is the amount that would have been payable had the agreement not been made. When applying the maintenance income test in calculating Jane's FTB Part A rate, the notional amount of $5,000 will be used instead of the actual agreement amount of $4,000.
Example 2: Jason and Rachel have registered for collection by the CSA a binding child support agreement for their son, Lee. They have agreed that Jason will pay an annual rate of $6,000 in child support. The CSA notional assessment for the year is $4,000. The $4,000 is the amount that would have been payable had the agreement not been made. When applying the maintenance income test in calculating Rachel's FTB Part A rate, the notional amount of $4,000 will be used instead of the actual agreement amount of $6,000.
Act reference: FAAct Schedule 1 clause 20B(2) Individual taken to have received notional assessed amount
Child Support Assessment Act 1989 see section 146A
If a child support agreement is made on or after 1 July 2008 and the child support is collected privately, the maintenance income test for FTB Part A will use the notional amount of child support rather than the agreement amount.
Where a payee collects their child support through private arrangements, FTB will be calculated by using 100% of the notional assessed amount of child support. This is because it is assumed the payee will collect 100% of the child support liability.
Example: In Michael and Jane's example above, the notional amount of child support ($5,000) would be used in the maintenance income test for FTB Part A to work out Jane's rate of FTB Part A.
If a child support agreement is made on or after 1 July 2008 and the child support is registered for collection by the CSA, special rules apply if less than 100% of the child support amount payable under the agreement is collected.
Where a payee arranges for child support to be collected by the CSA, FTB is assessed on the notional amount paid. This is a percentage of the notional assessment, where the percentage is the proportion of the agreement amount collected by the CSA and divided by the agreement amount.
If less than 100% of the agreement amount of child support is collected, the maintenance income test will not use 100% of the notional amount. Instead, a percentage of this amount that is equal to the percentage of the agreement amount received is used.
Example 1: Mary's notional assessment amount is $20,000 but she makes an agreement with her ex-partner to receive $10,000 in child support for her 8 year old daughter. Over the income year, Mary only receives $5,000 from the CSA. To work out what amount should be used for the maintenance income test, the amount collected ($5,000) is divided by the agreement amount ($10,000). This works out to be 50%. As Mary only received 50% of her agreement amount, only 50% (or $10,000) of the notional assessment amount ($20,000) is used for the maintenance income test.
Example 2: Alex and Maria have a child support agreement and payments are registered for collection by the CSA. They have agreed that Maria is to receive an annual rate of $8,000 in child support from Alex. The notional amount of child support is $5,000. The CSA collects $6,000 in child support payments from Alex. This is equal to 75% of Alex and Maria's agreement amount of $8,000. This means that, when working out Maria's rate of FTB Part A, the maintenance income test will use 75% of the notional amount of $5,000. That is, $3,750 will be used instead of the notional assessment amount of $5,000.
Act reference: FAAct Schedule 1 clause 20B(3) Underpayments
Policy reference: FA Guide 3.1.7.20 Estimating Maintenance Income, 3.1.7.30 Application of the Maintenance Income Test, 3.1.7.05 Maintenance Income Credit
If the payee receives more than the agreement amount, FTB is calculated on the notional assessed amount plus the additional amount received. The additional amount of child support is treated as actual arrears or, if there had been an underpayment of child support in a previous financial year, notional arrears.
Where there has been an underpayment, the notional factor is calculated, which ensures that any arrears received will have the same effect as if the child support had been paid in the financial year it was due. If there has been an underpayment in more than one financial year, the arrears will affect the oldest underpayment amount first.
The notional factor is the amount of the notional assessment not paid, divided by the actual agreement amount that has not been paid.
Example: If the agreement amount is $4,000 and only $3,000 is collected, and the notional assessment is $5,000 then:
Any arrears payments are multiplied by the notional factor to give the notional arrears amount. The payee's FTB is calculated on the notional assessed amount plus the notional arrears amount received.
Example: A child support agreement provides for payment of an annual child support amount of $4,000. CSA collects the child support payments. At the end of the financial year, CSA has collected $4,500. The notional assessment is $5,000.
In the previous financial year, the CSA collected $3,000, resulting in an underpayment amount of $1,000 for that year and a notional factor of 1.25 (see calculation in the above example). The additional amount of $500 collected in the current financial year, if multiplied by the notional factor, equals a notional arrears amount of $625 ($500 x 1.25). The payee's FTB would be calculated on the notional assessed amount of $5,000 plus the notional arrears amount of $625. The year 1 underpayment is reduced from $1,000 to $500, and the year 1 notional factor remains at 1.25.
If more than the agreement amount is collected and the payer does not have an underpayment from a previous financial year, FTB will be based on the notional assessment plus the additional amount received as actual arrears.
Example: The agreement amount is $3,000 and $4,500 is collected. The full agreement amount of child support has been collected in previous financial years. The notional assessment is $5,000. FTB will be based on $5,000 plus the additional amount received of $1,500, that is $6,500.
Act reference: FAAct Schedule 1 clause 20B Working out amounts of child maintenance using notional assessments, Schedule 1 clause 20C Working out amounts of child maintenance in relation to lump sum payments
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Last reviewed: 30 April 2012
