Welfare Rights Review

FTB Reconciliation debts from “deemed” child maintenance

Some vulnerable women, including single mothers, are having debts raised on the basis of maintenance income that was never received.

National Welfare Rights Network (NWRN) recently wrote to the Federal Department of Social Services with our concerns about Family Tax Benefit (FTB) reconciliation debts arising from “deemed” private collect child maintenance.

Changes to the law in July 2012 are now beginning to result in debts for some people who have elected to collect their child support privately.

Since 2012 people who have elected to private collect are deemed to have collected the full amount of child support owing, regardless of how much was actually collected.

We are seeing women incur debts when:

  • the ex-partner finally lodges his tax return and it turns out his taxable income was higher than expected
  • the Child Support Agency then does a reassessment using his actual income and the amount of child support he owes for that year increases
  • the Family Assistance office then recalculates her FTB using the new “deemed” amount collected (ie the amount he owes, even if it she hasn’t received it), and
  • an FTB overpayment is raised because she was paid on the basis of the earlier (lower) child support assessment

The only ways out of this problem seem to be:

  1. Special circumstances waiver of the debt  (this is rare because of the high bar for special circumstances)
  2. The ex-partner might pay up (the debt will still exist but at least she has received the child support)
  3. Granting of a partial exemption from the maintenance action test (exemptions are narrow and need to be expanded)

Exemptions can be applied retrospectively but are quite limited:

“[An]…..exemption may be granted in cases where an individual is collecting child support privately and has a fear of violence or there is risk of harmful or disruptive effects if they were to pursue the collection of the full entitlement or to transfer collection method to Child Support…

What we are asking the DSS to do

The deeming rule is unfair for people who experience difficulty collecting the newly assessed amount.  Some vulnerable women, including single mothers, are having debts raised on the basis of maintenance income they may never receive.

NWRN considers that if people show reasonable action to obtain arrears, the actual amount of maintenance collected should be used. We think there should be an exemption from deeming for people:

  • who ask the CSA to collect arrears
  • who take other reasonable steps to private collect arrears, or
  • for whom there are no reasonable prospects for recovery of the arrears

Alternatively, this situation could be remedied by waiver or permanent write off of debts in such circumstances.

We await the Department’s response on this issue.