Effective until 30 June 2008
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| CSA's previous online law & policy guide Effective until 30 June 2008 |
2.4.11: EstimatesContext When a parent's income changes, they may be able to replace their existing child support income amount by giving CSA an estimate of their current income. Legislative references Subdivision B of Division 3 of Part 5, sections 59 to 64A, and 160 and 161 Child Support (Assessment) Act 1989 Explanation Can a parent estimate their income? What period does an estimate cover? Refusing to accept an estimate Remission of estimate penalties An estimate is an election that a parent can make to have their assessment based on their expected income. A parent can estimate their child support income for a child support period, or the remainder of a child support period by (section 60(5)):
If the remaining period is more than 12 months, a parent can choose to estimate as if the period were 12 months or provide an estimate of their income for the rest of the child support period (section 60(6)). The remaining period (section 60(5)):
Can a parent estimate their income? A parent can only estimate their income if:
A parent can make subsequent estimates for a child support period at intervals of 2 months or more. Subsequent estimates can be for more or less than the existing estimate. CSA can review a parent's estimate within 2 months if a parent complies with a notice under section 160. An income amount order (section 59) includes a:
An agreement that provides for the payment of child support other than in the form of periodic amounts is not an income amount order (see chapter 2.5). Those provisions have effect as if they were consent orders made under section 124 (section 95(3)(a)). Section 124 is not part of Division 4 of Part 7. An order, agreement or change of assessment decision is only an income amount order if it:
An income amount order can relate only to the payer or the payee, or to both of them. An income amount order relating to only one parent will not prevent the other parent from making an estimate (section 60(2)). An order, agreement or change of assessment decision that varies the child support percentage, payer's exempt income amount or the payee's disregarded income amount is not an income amount order. Example The child support assessment for parents, M
and F, is based on a court order which sets M's child support income amount at
$56,000. This is an income amount order for M. F can still make an estimate
election.
Example Parents, M and F, enter into a child support
agreement for child support for their child, A. The agreement states that M
will pay A's school fees and the costs of all school excursions and uniforms.
It states that an annual amount of $8,000 is to be credited against M's child
support liability. M applies to CSA for acceptance of the agreement. CSA
accepts the agreement and starts a new child support period reducing the annual
amount that M pays F by $8,000. The child support assessment is based on M's
taxable income for the last relevant year of $72,000. Three months later M's
income has reduced. M contacts CSA and estimates earning $50,000 during the
last 12 months of the child support period. M is able to make an estimate. The
child support agreement is an agreement for the payment of child support other
than by payment of periodic amounts to the other parent. The provisions of the
agreement are not an income amount order.
Example The child support assessment for parents, M
and F, is based on a change of assessment decision. The child support
percentage used in their assessment was adjusted to take into account F's high
costs of contact with their children. The change of assessment decision is not
an income amount order. If the change of assessment decision had increased F's
exempt income by a specified amount, it would not be an income amount order.
What period does an estimate cover? An estimate period starts on the day the parent made the estimate to CSA (or the day the child support period started if the parent made the estimate before the child support period). The estimate period ends at the end of the child support period (section 60(5)) - the remaining period. However, a parent may choose to make the estimate for 12 months rather than the whole remaining period, and in this situation the estimate period ends at the end of the 12 months (section 60(6)). Once an estimate is accepted, the estimate period is not altered by events such as the acceptance of a new estimate or the commencement of a new child support period. The estimate itself can cease to affect the assessment for later parts of the original estimate period (for example, if another estimate is lodged) but the estimate period for that estimate remains the same. When CSA reconciles an estimate, it must work out the parent's income for the whole estimate period. CSA annualises the income from the whole estimate period and uses this to amend any part of the period still affected by the original estimate. Refusing to accept an estimate CSA can refuse to accept an estimate if it is satisfied that the parent's income is likely to be higher than their estimated amount (section 60A). CSA will consider all the circumstances and may obtain further information, either from that parent or a third party (e.g., an employer). A history of underestimating alone is not enough to refuse to accept an estimate. CSA will give a parent the opportunity to show that their estimate is accurate before it will refuse to accept an estimate. If CSA refuses to accept an estimate, it will give the parent written notice of the decision. CSA can review an estimate to find out if the estimate is still accurate and, if not, to help the parent get their estimate right. A parent is required to tell CSA of any event that affects the accuracy of their estimate. This obligation is outlined in the notice that is sent to a parent when an estimate is accepted (section 160). CSA can also review an assessment based on an estimate if it finds out that the estimate is no longer accurate. CSA can review an estimate in 2 ways:
CSA will only review an estimate under section 63B if:
If a parent complies with a notice issued under section 161 CSA can only amend the assessment from the date that the parent complied with the notice. If a subsequent estimate has been accepted, CSA cannot amend the earlier estimate. It may be more appropriate not to review an estimate at a particular time, but to allow the estimate to be reviewed or reconciled later when information that is more reliable is available. An event can provide a trigger for reviewing an estimate. An event can include:
If CSA accepts a parent's estimate, their annualised estimate becomes their child support income amount for the purposes of assessing the annual rate of child support payable in a child support period on or after the date of the estimate (section 61(1)). CSA will amend the assessment to take the estimate into account (section 61(3)). An estimate doesn't prevent a later income amount order (section 61(2)), court departure order or agreement (section 61(5)) from affecting an assessment. A parent can only revoke an estimate by making a new estimate (section 62(1A)). A parent can't revoke their estimate if an income amount order was made after the estimate was accepted (section 62(3)). If a parent revokes their estimate and makes a new estimate then, for the purposes of assessing the annual rate of child support payable in a child support period on or after the date of the new estimate, their child support income amount is the annualised amount of the new estimate (section 63(1)). CSA will amend the assessment to take the estimate into account (section 63(3)). After an estimate period ends, CSA will compare the parent's estimate with their actual income for the estimate period. If a parent has earned more than their estimated income in the estimate period, CSA will reconcile the parent's last estimate. CSA cannot reconcile an estimate until both the estimate period and the child support period(s) have ended. The actual income must be:
CSA will ignore the following things when it reconciles an estimate:
If the parent's actual income earned over the estimate period is more than their estimate, CSA must amend the assessment. It will do this by using the parent's annualised actual income as the parent's child support income amount for all the days in the assessment still affected by the parent's estimate. Example F lodged an estimate on 27 May 2004 for the
child support period 1 July 2004 to 30 September 2005. F estimated earnings
$15,000 over the full child support period (annualised to $12,000). F's
2004-2005 tax assessment issued on 2 August 2005. A new child support period
commenced from 1 September 2005. F's estimate period ends on 30 September 2005.
The child support period ended on 31 August 2005. The earliest time that CSA
can reconcile the estimate is 1 October 2005.
Example M lodged an estimate on 29 June 2004 for the
child support period 1 July 2004 to 30 September 2005. M elected to make a
12-month estimate for the period 1 July 2004 to 30 September 2005 for $25,000.
M's 2004-2005 tax assessment issued on 13 July 2005. A new child support period
commenced on 1 August 2005. The end of M's estimate period is 30 June 2000. The
child support period ended on 31 July 2005. The earliest that CSA can reconcile
the estimate is 1 August 2005.
CSA may require a person to pay an estimate penalty when it reconciles (but not reviews) their estimate. An estimate penalty applies when a parent's actual income for an estimate period is 110%, or more, of their estimated income (section 64A(1)). The penalty is 10% of the difference between the liability based on the original estimate and the final liability based upon the child support income amount determined (section 64A(2)). An estimate penalty is a debt due to the Commonwealth (section 64A(3). Remission of estimate penalties CSA can remit an estimate penalty, either in whole, or in part (section 64A(4)) where:
If there are no grounds for remission but the parent does not have the capacity to pay or the amount is comparatively small, CSA can decide not to pursue the penalty. Amendment of a tax law, ruling or determination When making an estimate a parent can't be expected to know that a change to the tax legislation or a change to a ruling or determination will increase their taxable income and/or supplementary amount. 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 (for example, taxpayer error). Fair and 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. CSA will remit estimate penalties if the parent did not intend to misuse the estimate provisions to defer payment. CSA will infer an intention to misuse the estimate provisions if a very low estimate is made but the parent was employed, or if a parent has underestimated in previous periods. CSA will consider whether a parent 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 make a new estimate or advise CSA of the change in circumstances. CSA will not remit an estimate penalty unless a parent has a reasonable explanation for failing to make a new estimate (for example, the parent was overseas or had communication difficulties which delayed them making a new estimate before the end of the child support period). Failure to mitigate the effects of the incorrect estimate income does not necessarily mean that the parent intended to misuse the estimate provisions. However, if a parent acts to mitigate the effects this could indicate that they did not intend to avoid or defer the liability. Example M becomes aware of the difference between the
estimated income and taxable income and supplementary amount. M contacts CSA
for advice and arranges to pay the arrears that will result from a
reconciliation of the estimate. M has attempted to mitigate the effect of the
underestimation. CSA will consider this when deciding whether to remit the
estimate penalty imposed.
CSA will remove any penalty that has been imposed incorrectly (for example, through error or miscalculation, or by a subsequent variation which decreases the liability). Frequently asked questions Can CSA amend any part of the child support formula when reviewing an estimate? Answer: No. CSA can only consider whether or not to amend the child support income amount of the parent and not any other part of the child support formula (eg, annual rate, child support percentage). When reviewing an estimate is there any discretion in calculating the child support income amount? No. The child support income amount must be the income the parent will earn from the date of the event (or notification date) until the end of the estimate period. CSA cannot exclude amounts that the parent received in the period, or include amounts the parent received before or after the estimate period. How should an estimate be reviewed when more than one event has occurred since the estimate was accepted? CSA needs to work out the income earned from the date of the earliest event resulting in an increase in income and take into account all further income fluctuations. This can include income earned in a period that is now covered by a subsequent estimate. How is an estimate reviewed when a lump sum has been received? Lump sums are treated no differently to 'regular' assessable income. Receipt of a lump sum will usually be an event for reviewing purposes. CSA needs to work out the income earned from the event date (or notification date) until the end of the original estimate period taking into account any assessable lump sum payment within that period. How are multiple estimates reviewed? Every estimate has to be considered separately. There has to be an event for each estimate before it can be reviewed and amended. Version 1.6 Issued 1 January 2008 |
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