This measure will assist parents receiving arrears of child support that may cause Family Tax Benefit (FTB) overpayments.
Most child support payees are unable to control when they receive their child support payments and may be disadvantaged if they receive child support arrears in a lump sum. Currently, families who receive arrears of child support payments from a previous year do not benefit from the free area under the Maintenance Income Test that would have applied if they had received the child support income in the year that it was due.
This measure will allow families to access their unused maintenance income free area from previous years to offset late child support payments.
This measure will increase the FTB entitlement for those families which receive late child support payments, as it will ensure that FTB recipients who receive child support payments on an irregular basis receive the same level of FTB over time as those receiving child support payments on a regular basis.
Under the Maintenance Income Test, any child support received in the income year above the maintenance income free area reduces FTB Part A by 50 cents in the dollar until base rate is reached. The maintenance free income area is currently $1,149.75 per annum (plus $383.25 per annum for each child after the first). Any unused free area is not carried forward from one year to the next.
An example of the new maintenance income credit is:
- Jill is entitled to receive $1,000 child support each year from her former partner. (This payment is below the free area of the Maintenance Income Test and would have no impact on her FTB Part A.) However, the former partner has failed to pay Jill any child support since July 2000.
- In June 2005 the Child Support Agency recovers $5,000, or five years worth, of child support from her former partner. Under the current arrangements this is applied in the year of receipt and results in an overpayment of FTB Part A for Jill in the 2005 financial year.
- Under the new arrangements the unused maintenance free areas from previous years would be offset against the arrears. Effectively this places Jill in the same position as if she had received her child support on time each year, and because these amounts would have been below the free area, she will not incur a debt.
1 July 2006.
Total Government Funding
$54.8 million over four years.