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Is a reassesment required after EOFY income change?

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Hi all,
I have a query around Child Support I pay. The other parent started the last year (from July) with an assessable income of approx. $85k. Then inOctober the other parent told CSA she was out of work and earning no money, therefore there was a change of assessment where it was calculated with a Zero income for her, significantly increasing the CS payments I was making. Move forward to the last couple of weeks where there was a tax return lodged by the other parent for last year where the other parent's Gross Taxable income for the year was $85k. My income/ salary has not changed through the last year.

CSA told me that there was no requirement for them to reassess the child support payed last year, it appears to me I overpayed for the full year based on the majority of the year payments calculated at zero income for the other parent, however they still earned $85k for the year.

Have I been told the right information by CSA?
I don't believe that you have been given the correct or full information.

It appears, from what you say, that the other parent made a single income estimate part way through the financial year.


The CS Guide - 2.5.1 Income Estimates for a Year of Income said
What is an income estimate?

An income estimate is an election that a parent can make to have their assessment or notional assessment based on their expected income for a year of income, or for part of a year of income (CSA Act section 60, section 62A).

Estimating adjusted taxable income for notional assessments

When the Registrar is required to calculate a notional assessment, as there is a child support agreement, a parent can vary their provisional notional assessment by making an income estimate election, see 2.7.4 heading 'Varying a provisional notional assessment'.

The rest of this page relates to estimating incomes in relation to assessments (not notional assessments).

When can a parent estimate their income?

An income estimate can be made if:

    there is no income amount order in force on the start day of the election or in the remainder of the financial year (CSA Act section 60(6),section 63(2A)), and
    in the case of a first election for a year of income - if the estimate is 85% or less than the person's adjusted taxable income for the last relevant year of income (2.4.4) (CSA Act 60(1)(b)). The adjusted taxable income is based on the parent's taxable income and must be:
        as advised by the ATO, or
        where the parent is a resident of a reciprocating jurisdiction, as advised by the relevant overseas authority (section 58C),
        a declaration by the parent of their adjusted taxable income (2.4.4) which the Registrar is satisfied is correct (CSA Act section 60(1)(b)(ii)),
    later income estimate elections for a year of income can be made at any time within that year of income, and the amount estimated may be higher or lower than the previous estimate (CSA Act section 62A).

Note: the components of a person's adjusted taxable income changed as of 1 July 2009 (see 2.4.4).

How does a parent estimate their income?

A parent makes an income estimate election by giving notice of it to the Registrar (CSA Act section 60(7)). The notice may be provided orally, by telephone or in person. A parent may also provide the notice by electronic means, using Child Support Online Services or by submitting the form available on humanservices.gov.au. A parent may also give notice in writing. The election is taken to be made on the date the election is received by the Registrar (regulation 12(2)).

The notice must specify the amount of the estimate election (CSA Act section 60(8)(a)). There are specific requirements for elections for a whole year of income (CSA Act section 60(8)(b)), for part of a year of income (CSA Act section 60(8)©), and for later elections (CSA Act section 62A(5)).


….

It appears that the other parent has not amended that estimate, even though it would appear that they should have.

The CS Guide - 2.5.1 Income Estimates for a Year of Income said
Accuracy of the assessment

A parent is required to keep their estimate accurate. However, not every change or event will cause the assessment to change greatly. For the purpose of a retrospective decrease, the Registrar will consider the effect on the existing child support assessment before amending the assessment.


As  an income estimate of $0 (actually a taxable income of around 20k ish assuming new parenting payment single) and the income appears to be 85kish then :-

The CS Guide - 2.5.1 Income Estimates for a Year of Income said
Estimate penalties

A parent will be required to pay an estimate penalty when the Registrar reconciles their estimate and their actual income for a year of income less any applicable year to date income amount is 110%, or more, of their estimated ATI for the year (CSA Act section 64AF).

The penalty is 10% of the difference between the liability that would have applied if the original estimate or estimates was used to calculate the assessment, and the assessment/s amended under CSA Act section 64AA following reconciliation (CSA Act section 64AG(1)). An estimate penalty is a debt due to the Commonwealth (CSA Act section 64AG(2)).

Remission of estimate penalties

The Registrar can remit an estimate penalty, either in whole or in part, (CSA Act section 64AH(1)) where:

    the difference between the adjusted taxable income amount and the estimated income was due to an amendment of the tax legislation, or a change to a ruling or determination under the tax legislation, or
    the Registrar is satisfied that it would be fair and reasonable to remit the penalties in the circumstances.

The Registrar can decide to remit estimate penalties whether or not they have been paid. The Registrar will use this discretion in a way that will further the objectives of the child support scheme, according to the particular circumstances of each case.

There is no particular process for a parent to request remittance of estimate penalties. The Registrar can remit estimate penalties without a request to do so, if there is sufficient information available to make a decision.
Amendment of a tax law, ruling or determination

When making an estimate, a parent cannot be expected to know that a change to the tax legislation or a change to a ruling or determination will increase their adjusted taxable income.

Example: If an expense that was deductible in previous years is no longer deductible, a parent's taxable income may be higher than their estimate by the amount of the deduction.

This does not apply where a parent's taxable income is amended for other reasons (e.g. taxpayer error).
Fair & reasonable to remit the penalties in the circumstances

What is fair and reasonable depends on the circumstances of each case. Those circumstances do not need to be special, exceptional or unusual. The Registrar will remit estimate penalties if the Registrar considers the parent did not intentionally misuse the estimate provisions.

The Registrar may consider remitting if the person inadvertently underestimated or had some good reason for not correctly managing their income estimate during the year, such that it would not be fair to penalise them for the estimate being inaccurate.

The Registrar will consider whether a parent was or should have been aware of the conditions and implications of using an estimate.

A parent should use reasonable care and all information available to estimate their income. If their circumstances change, they should advise the Registrar of the change in circumstances and make a new estimate.

The Registrar will not remit an estimate penalty unless a parent has a reasonable explanation for failing to make a new estimate when their circumstances changed.

Example: M made their first estimate when their hours of work were reduced due to a fall in business for the company. M made a second estimate when they lost their job because the company stopped trading. M was not sure if they would receive a termination payment, and did not include such a payment in their second estimate. M did in fact receive a termination payment of $9,000 on 30 May. As their ongoing circumstances had not changed M did not contact the Registrar about the payment.

M's actual income was higher than their estimated income so the estimate was reconciled, the assessment amended and an estimate penalty imposed. M contacted DHS and requested the estimate penalty be remitted. The Registrar considered the facts of the case and decided it would be fair and reasonable to remit the penalty, as M had not intentionally misused the estimate provisions.

The Registrar will remove any penalty that has been imposed incorrectly (e.g. through error or miscalculation, or by a subsequent variation which decreases the liability).

If the Registrar makes a decision to remit only part of the penalty, or to not remit any part of the penalty, the Registrar must give written notice of the decision to the parent who is liable to pay the penalty (CSA Act section 64AH(2)). The notice must also include, or be accompanied by, a statement that the parent can object to the decision (CSA Act paragraph 64AH(3)(a), and CSRC Act section 80) and apply to the AAT for a review of the objection decision if aggrieved (see 4.1) (CSA Act paragraph 64AH(3)(b), CSRC Act section 89).


I have little doubt that the penalty will be waived.


As for the assessment being amended, I believe that this applies to what you have described:-

The CS Guide - 2.5.1 Income Estimates for a Year of Income said
Income estimate for a part of a year of income, actual income known, single income election

When a parent made an election for part of the year of income and made no later income estimate for that year that estimate election will be reconciled when their actual adjusted taxable income for the year of income is known. If the actual income for the remaining period is more than the estimated partial year income amount, then the parent's actual income will be their adjusted taxable income for the application period (CSA Act section 64(3)). The amount to be used in the assessment is worked out by first subtracting the year to date income amount from the actual adjusted taxable income amount for the year. That amount is then divided by the number of days in the application period and multiplied by 365 to calculate an annualised amount (CSA Act section 64(4)). The assessment will be amended to use this amount based on the actual adjusted income (CSA Act section 64AA).

Example: F estimated their partial year income for the remaining period 1 November 2011 to 30 June 2012 to be $26,500, an annualised amount of $39,969. F estimated their year to date income to be $22,000. F's 2011/2012 tax assessment issues on 2 September 2012; their actual adjusted taxable income for 2011/2012 is $56,500.

The actual partial year income amount is $56,500 − $22,000 = $34,500.

There are 242 days in the remaining period. The daily rate is $34,500 242 = $142.56198.
The annualised amount is $142.56198 365 = $52,035.

The assessment for the application period, 1 November to 30 June, is amended using the annualised income of $52,035.



Here's a link to the CS Guide The CS Guide - 2.5.1 Income Estimates for a Year of Income
They most definitely should be reconciling her actual income against the assessed income. It should be done automatically once they get her details from the ATO. Thats how it always worked with my ex, they then intercept any tax return if it has not already been issued.

The CSA person you spoke to is talking out of their backside

Nothing i say should be taken as legal advice. I am not a Lawyer. If i help you it is of your own free choice to listen to what i say or not. I do not create documents for you. I do not represent you…. Purple Monkey Dishwasher
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