7.1.1 FA Debts - General Provisions

Summary

This section provides general information about FA debts (1.1.D.60) including:

• defining debt,
• debts due to the Commonwealth,
• types of FA debt,
• identifying overpayments,
• raising overpayments,
• FAO responsibilities in relation to debts,
• recovering overpayments,
• CCB and CCR debts attributable to false or misleading statements, and
• interest on debts.

Defining debt

A person 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

FA(Admin)Act section 70 Debts due to the Commonwealth

Policy reference: FA Guide 7.1.2 FA Debts - Individuals & ACOs, 7.1.3 FA Debts - Approved Child Care Services

Types of FA debts

There are 4 main types of FA debts:

• Qualification debts: A debt that results from a person receiving a payment for which they were not eligible.
  • Example: A person receives FTB 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 recipient 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 and/or CCB recipients who receive payments as either fortnightly instalments or fee reduction usually paid on the basis of an estimate of ATI for an income (financial) year. The payment is reconciled at the end of the income year, after the recipient and/or their partner have lodged an income tax return, if required to do so, and the returns have been assessed by the ATO. If a person received more FTB and/or CCB than they were entitled to receive for that income year, they would incur a reconciliation debt. Reconciliation debts can also be raised for child income and retrospective changes in circumstances.
• Non-lodger debts: A non-lodger debt can occur where an FTB recipient or their partner has not lodged an income tax return within the prescribed time. When an FTB recipient 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 relevant 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.

Identifying overpayments

FA overpayments may be identified in the several ways including:

• through the end of year reconciliation process for FTB and/or CCB, or
• by the individual (1.1.I.90), ACO or child care service notifying the FAO that their circumstances have changed (see example 1), or
• by compliance activities undertaken by the FAO 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 DIAC.

Generally, an overpayment arises when a recipient 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.

Raising overpayments

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 a recipient's circumstance is likely to result in an overpayment, the overpayment should be raised immediately.

Recovering overpayments

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 Methods of Debt Recovery.

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 Non-Recoverable Debts.

FAO responsibilities

The FAO 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 credit (of the recipient and/or any consenting person) against any FTB debt to the extent of the available tax credit. The FAO is responsible for recovering any remaining FTB debt after any tax credit has been applied to the debt.

Policy reference: FA Guide 7.2 Methods of Debt Recovery, 7.3 Non-Recoverable Debts

Recovery of debt from FTB recipients subject to non-payment of FTB based on an estimate

All recipients 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 a FA debt. Melissa becomes subject to a non-lodger decision resulting in a non-lodger debt and becomes subject to non-payment 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 family tax benefit, section 32AA Non-payment of family tax benefit for non-lodgement of tax returns, section 32AB Prohibited periods for claimant

Policy reference: FA Guide 6.4.3.40 Non-payment of FTB Based on an Estimate

CCB & CCR debts attributable to false or misleading statements

When a debt is owed by an individual to the Commonwealth and part or all of the amount is attributable to a false or misleading statement made by an approved child care service, the individual does not owe the debt. Similarly, when a debt is attributable to a false and misleading statement by an individual the debt is not owed by the service. However, if this impacts on the amount of CCR entitlement and the amount paid is greater than the entitlement, the difference will be treated as a debt to the Commonwealth attributable to the individual.

Act reference: FA(Admin)Act section 71F Debts arising under more than one provision, section 71CAA Debts arising in respect of CCR where no entitlement or rebate paid to wrong account, section 71B Debts where no entitlement or where enrolment advance wrongly paid, section 71C Debts arising in respect of CCB where overpayment, section 71D Debt arising in respect of CCB where false or misleading statement by individual - debt owed by individual, section 71E Debt arising in respect of CCB when false or misleading statement etc. by service - debt owed by service

Interest on debts

Penalty interest may be added to a debt. This can occur when the debtor is not receiving instalments of FTB and:

• does not enter into an agreement to repay the debt, or
• has entered into an agreement to repay the debt, but fails to make a payment within the specified timeframe.

Act reference: FA(Admin)Act section 77 Notices in respect of debt, section 78 Interest on debt

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Last reviewed: 1 July 2010