Editors --- "Family tax benefit and maintenance payments" [2006] SocSecRpr 31; (2006) 8(3) Social Security Reporter, Article 8

• SECRETARY TO THE DFaCSIA and CRAIG
• Background
• Discussion
• Formal decision

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Family tax benefit and maintenance payments

SECRETARY TO THE DFaCSIA and CRAIG

(2006/546)

Decided: 23rd June 2006 by N. Isenberg

Background

Craig was in receipt of family tax benefit (FTB) for her two children in the 2004/2005 income year. During this time she also received maintenance payments totalling $7091.97 from the children’s fathers through the Child Support Agency (CSA). The amounts she received varied widely, ranging from $10.00 to $3856.97. As a result Craig’s FTB payments also varied greatly depending upon the amounts of maintenance she received. In total, Craig received $10,906.58 FTB during the 2004/2005 income year.

Centrelink undertook a reconciliation of FTB payments and maintenance and calculated that Craig had been overpaid FTB in the sum of $1254.09. Craig’s Part A and Part B supplement was used to reduce the overpayment of FTB so that she received only $122.54 as a ‘top-up payment’ on 28 July 2005.

The Social Security Appeals Tribunal (SSAT) set aside the authorised review officer’s decision and substituted a new decision:

that recovery of the debt amount of $1254.09 is waived according to section 101 of the Family Assistance (Administration) Act 1999 (the FAA Act). This amount is to be refunded to Ms Craig.

Discussion

Craig’s main concern was that it was unfair that the whole of the ‘back pay’ from the father of one of her children, notably the lump sum payment of $3856.97 in February 2005 was wholly taken into account for FTB purposes in the 2004/2005 year.

The AAT said that the legislation did not distinguish between the receipt of regular and receipt of arrears of maintenance and that the maintenance income test applies to all maintenance received during a financial year, as set out in Clause 20A of the Rate Calculator. Therefore while some of Craig’s maintenance payments may have related to past child support obligations by her children’s fathers, that income was counted in the financial year it was received by her.

The AAT considered that according to Clause 20A of the Rate Calculator in Schedule 1 of the FAA an arrears of maintenance payment was ‘income’ in the financial year in which it was received.

The AAT then considered the Department’s argument that the SSAT erred in law by finding that there was a ‘debt’ of $1254.09 under s.71(2) of the FAA Act and noted that the Department had referred to ‘aspects of the FTB scheme, of which the SSAT, apparently, had been unaware’.

Section 58 of the A New Tax System (Family Assistance) Act 1999 (‘the FA Act’) provides that the rate of FTB is worked out using Schedule 1 (‘The Rate Calculator’). FTB comprises FTB Part A and FTB Part B and Clause 1 of the Rate Calculator sets out that as a recipient of parenting payment (single) Craig’s FTB Part A rate had to be determined using Part 2 (Method 1) of the Schedule. FTB Part B is determined using Part 4 of the Schedule. As a recipient of an income support payment, Craig had an entitlement to the maximum Part B rate.

Clause 3 of the Rate Calculator sets out the overall calculation process for FTB Part A, and as it applies to Craig, can be represented by the following formula:

FTB Part A rate = (FTB Part A standard rate + FTB Part A supplement + Rent Assistance) - maintenance income reduction

Craig was subject to the maintenance income test set out in Division 5 of Part 2 of Schedule 1. The maintenance income test can be summarised, as it applied to Craig, as follows:

(total maintenance received in 2004/05 - maintenance income free area) ÷ 2 = reduction for maintenance income

The 2004/2005 maintenance income free amount for Craig was $1533.00. The total maintenance she received was $7091.97. Applying the above formula, the annual reduction for maintenance received in 2004/2005 was $2779.48 or $106.61 per fortnight.

As Craig’s maintenance varied throughout the income year, her fortnightly rate was worked out by estimating her maintenance received, by striking a new annual rate whenever additional maintenance was received (s.31B of the FAA Act).

The FTB Supplement

The FTB Supplement first became available in the 2003/2004 income year and according to s.32A of the FAA Act the FTB Part A supplement can only be included in the entitlement calculation after a person has met his or her FTB ‘reconciliation conditions’, that is, the supplement is not payable until that time.

Section 32A was inserted into the FAA Act by the Family Assistance Legislation Amendment (More Help for Families—Increased Payments) Act 2004. The Explanatory Memorandum to that Act explains the process:

the supplement will not be paid in respect of a particular income year until reconciliation occurs (which will generally be after the end of that income year).

Therefore throughout 2004/2005 the fortnightly payments made to Craig did not include an allowance for FTB supplement.

Reconciliation of payments to Craig occurred on 26 July 2005 and a letter was sent to her on that day which advised that she was entitled to total FTB of $11,029.12. This included supplements totalling $1254.09. She had however already been paid FTB totalling $10,906.58 during 2004/2005. Following reconciliation, the difference of $122.54 was paid to her as a top-up payment on 28 July 2005. Had Craig not received the maintenance payments then her entitlement to FTB would have been higher.

The SSAT apparently was unaware of the reconciliation process and had it not been for the legislative arrangements where no supplement is payable until the reconciliation occurred, the approach adopted by that Tribunal was probably correct. However, the effect of section 32A of the FAA Act is that Centrelink is required to undertake the reconciliation, which by necessity involves the re-calculation of entitlement having regard to maintenance payments, before a beneficiary is entitled to supplementary payments at all. Only after the reconciliation occurs is a person’s final entitlement to FTB able to be calculated. In this case, Centrelink was found to owe Craig $122.54 and this amount was paid to her.

Formal decision

The AAT set aside the decision of the SSAT and found that Centrelink’s calculation of Craig’s FTB for 2004/2005 was correct.

[S.P.]