Responsible Economic Management - Family Tax Benefit - cease fortnightly payments for recipients who do not lodge tax returns 

Key elements

This measure will reduce the number of existing and newly accrued Family Tax Benefit (FTB) non-lodger debts. Non-lodger debt occurs where a customer and/or their partner have not lodged a tax return within the prescribed time, or have not informed the Family Assistance Office that they are not required to lodge a tax return for the relevant financial year. A tax return is required so that FTB payments received on the basis of an income estimate in a financial year can be reconciled against actual annual family income.

The measure will prohibit customers from receiving FTB by instalment where the customer has an FTB non-lodger debt. The prohibition will remain in place until all outstanding non-lodger debt for a customer is resolved. Customers will remain eligible for FTB, however the only payment method available will be a lump sum paid through Centrelink once the customer's actual annual income has been verified.

The Government will also:

  • use a customer's tax refunds and FTB top-up payments to offset any type of FTB debt
  • extend the length of time that the ATO is able to transfer income details to Centrelink to ensure that FTB debts can be resolved as quickly as possible once tax returns are lodged
  • develop a Flexible Debt Management strategy within Centrelink. The current large debt strategy was introduced for reconciliation debts. It will now be extended to cover customers who have any type of FTB debt(s), including the FTB non-lodger debts of people who have ceased to receive FTB.

On an ongoing basis it is expected that this measure will affect an estimated 40,000 customers per year who continue to accrue a non-lodger debt. This is about two per cent of all families receiving FTB.
 

Background

In December 2005, non-lodger debt (debts accrued because recipients do not lodge a tax return to allow a reconciliation of their estimated income with their actual income for the financial year) became the most significant component of outstanding FTB debt. As at September 2007, non-lodger debt was approximately $400 million. This is an increase of around $90 million since September 2006. If no action were taken this could have increased to almost $680 million by September 2011. With this measure in place, non-lodger debt is expected to be around $300 million in September 2011 instead.

In September 2007, there were around 59,000 families with average non-lodger debts of around $6,700.

In November 2006, the Australian National Audit Office recommended in its report Management of Family Tax Benefit Overpayments that the Department of Families, Housing, Community Services and Indigenous Affairs should build on the success of measures employed to reduce reconciliation debt to prevent and reduce non-lodger debt.

Around 2.2 million families with 4.3 million children receive FTB during a financial year. Of all families with children under 16, approximately 80 per cent receive FTB.

FTB expenditure for 2007-08 is estimated to be about $16 billion.
 

Implementation

The measure will commence on 1 July 2009.
 

Total Government Funding

This measure produces a net saving of approximately $77 million over five years.

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Content Updated: 24 April 2014