5.5.5: Overpayments

Context

Overpayments of child support occur when a payee has been paid child support to which they are not entitled, usually because CSA has made a retrospective variation to a child support assessment, or where a court makes an order or declaration with retrospective effect. The payer is entitled to take action against the payee to recover overpaid child support. CSA is also entitled to recover some overpayments from the payee.

Legislative references

Sections 30, 76 and 79 Child Support (Registration and Collection) Act 1988

Sections 107 and 143 Child Support (Assessment) Act 1989

Sections 44 and 47 Financial Management and Accountability Act 1997

Section 1228(2B) Social Security Act 1991

Explanation

Where CSA makes a retrospective amendment to a child support assessment, or gives effect to a court order or declaration with retrospective effect, this can result in a child support overpayment.

Although the Assessment Act minimises the circumstances in which overpayments occur (for example, assessments are only amended prospectively when a parent estimates their income, or when a parent notifies CSA of a change to the level of care of a child) overpayments do occur in the ordinary course of child support cases. It is important for CSA to deal with overpayments in a way that is consistent with the objects of both child support Acts and that is fair to both parents.

The Financial Management and Accountability Act 1997 requires CSA to deal with Commonwealth revenue in an efficient, effective and ethical manner (section 44). It also requires CSA to pursue all relevant debts owed to the Commonwealth unless the debts are not legally recoverable or CSA considers that it would not be economical to pursue recovery of them (section 47).

There are two kinds of child support overpayments:

• overpayments where there is no registered maintenance liability
  (which are not debts the payee owes to the Commonwealth), and
• overpayments where there is a registered maintenance liability
  (which can be debts the payee owes to the Commonwealth).

Overpayments where there is no registered maintenance liability

There is no registered maintenance liability if a liability that was registered was never entitled to be registered.

When CSA receives applications to register liabilities or make child support assessments, provided all the requirements of the law are satisfied, CSA must register the liability or make the assessments. Sometimes other evidence or a subsequent court order requires that the registered liability be cancelled. In these circumstances, the liability was never entitled to be registered.

CSA cannot recover overpayments that occur when there is no registered maintenance liability because they are not debts due to the Commonwealth under section 79 of the Registration & Collection Act. A payer can take action to recover these overpayments from the payee in a court with family law jurisdiction. If child support was payable under a child support assessment, the payer can make an application to the court under section 143 of the Assessment Act to recover child support from the payee. If the registrable maintenance liability arose under a court order or court-registered agreement the person may be able to take recovery action against the payee in the court that made the order or registered the agreement.

Example

If the court makes a declaration that the payee was not entitled to an administrative assessment of child support for a child payable by a payer because the payer is not a parent of that child, the court is obliged to consider making an order for recovery of that overpayment (sections107(6), 107A and 143 of the Assessment Act). If the court orders the former payee (i.e. the payer of the order) to repay a specified sum to the former payer (i.e. the payee of the order), that parentage overpayment order can be registered with CSA for collection. Upon registration, the specified sum repayable by the payer of the order becomes a child support debt due to the Commonwealth under section 30 of the Registration & Collection Act. CSA can collect the specified sum for disbursement to the payee (i.e. the former payer). (See chapter 3.2.6 for more information about parentage overpayment orders). The administrative and other measures that CSA can use to collect the amounts owed under a registered parentage overpayment order are discussed in chapters 5.1 through to 5.4 of the Guide.

A payer (or former payer) is also entitled to apply to a court for an order under section 143 of the Assessment Act in any other situation where he or she has overpaid child support to the payee under a child support assessment. However, CSA can only register the order for collection if it is a parentage overpayment order requiring repayment of a specified sum.

If an overpayment occurs when there is no registered liability CSA will advise a payer that section 143 of the Assessment Act specifically provides for them to make an application to a court for recovery of child support paid where a liability no longer exists. The payer must name the payee as the respondent to their application, as the child support paid to CSA is taken to have been paid to the payee for the purposes of section 143 (section 143(4)). The court may make orders that are just and equitable in the circumstances to give effect to the rights of the parties and the child(ren). The court cannot make an order requiring CSA to repay the overpaid amount to the payer (Child Support Registrar and Z and T (2002) FamCa 182). Mercer v the Child Support Agency [2004] FCA 465).

Even if a payee is still a payee of a registered maintenance liability for other children in an assessment the overpayment that relates to the child/ren for which the section 107 declaration was made is not a debt to the Commonwealth that is recoverable from the payee under section 79 (Mercer v the Child Support Agency [2004] FCA 465).

The court may make whatever orders under section 143 of the Assessment Act as it considers are just and equitable in the circumstances to give effect to the rights of the parties and the child(ren) (section 143(3)). If the court is considering whether to make an order for the former payee to repay an overpayment arising from a declaration under section 107 of the Assessment Act, it must have regard to the matters listed in section 143(3B) of the Assessment Act. These include:

• whether the former payer or payee knew (or should reasonably have known) that the former payer was not a parent of the child;
• any conduct of the former payer and payee that led to CSA accepting the application;
• any delay by the former payer in making the application to court for a declaration under section 107 of the Assessment Act;
• whether child support is or will be payable for any other child of whom the former payer and payee are parents;
• the former payer's relationship with the child; and
• the former payer and payee's financial circumstances.

Retrospective variation after a terminating event

Where a registered maintenance liability exists and CSA is advised of a terminating event, CSA must vary the liability from the day the terminating event occurred. Although backdating a terminating event cancels part of the liability, it is not the same as cancelling a liability completely. Backdating a terminating event is a variation to a liability that is entitled to be registered. Any overpayment can be recovered by CSA from the payee under section 79 of the Registration & Collection Act.

Example

Overpayments where there is a registered maintenance liability

There is a registered maintenance liability if, at any time, a liability was entitled to be registered. Overpayments that occur in relation to registered liabilities are debts due to the Commonwealth and are recoverable from the payee by CSA under section 79 of the Registration and Collection Act. For there to be an overpayment under section 79:

• there must be a registered maintenance liability,
• CSA must have paid a payee an amount that it collected in satisfaction of the liability (section 76) or be taken to have received an amount because CSA offset amounts between the payer and payee (section 71AA), and
• the payee was not entitled to be paid the amount or the amount is subsequently repayable to CSA because of a subsequent variation to the liability.

CSA can amend an assessment in relation to the days in the child support period(s) before a terminating event even though the case has ended (See chapter 2.8 Making, amending and ending child support assessments). Any overpayment of child support arising from such an amendment is the payee's debt to the Commonwealth. Similarly, CSA can recover arrears from a payer where CSA amends an assessment in relation to the days in the child support period(s) before a terminating event and that amendment increases the amounts payable.

A payee does not owe a debt to the Commonwealth where CSA makes a payment using funds transferred from consolidated revenue for top up.

Recovery from payees

The administrative and other measures that CSA can use to collect a specified amount owed under a registered parentage overpayment order by a former payee (who is now the payer of the order) are discussed in chapters 5.1 through to 5.4 of the Guide. The remaining information in this chapter relates only to overpayments that are recoverable from the payee under section 79 of the Registration & Collection Act.

If a payee's overpayment is a debt due to the Commonwealth under section 79 of the Registration & Collection Act, CSA will contact the payee to discuss payment in full or a negotiated payment arrangement.

Negotiated payment arrangements with payees

Any payment arrangement will take into account a payee's capacity to pay. CSA will explain how the overpayment occurred and the options available for repayment. Although the overpayment should be paid in a lump sum where possible, CSA will seek a payment arrangement that:

• reflects the payee's capacity to pay
• will not disadvantage the child(ren) by minimising ongoing child support
• reflects the size of the debt and a reasonable repayment period
• takes into account the circumstances surrounding the overpayment.

A payee can pay instalments directly to CSA.

If a payee does not agree to repay the amount owed, CSA has statutory powers to recover the debt by:

• withholding an amount, determined by CSA, from future payments of child support (section 79(2)), or
• arranging for Centrelink to withhold an amount from any Centrelink payments to a payee (section 1228(2B) Social Security Act 1991).

CSA will take all necessary action to recover an overpayment from a payee.

CSA can recover overpayments in a court with a civil debt recovery jurisdiction. However CSA will not take legal action where an arrangement to pay has been made and the payee is complying with the arrangement. CSA will consider legal action if it has not been able to successfully recover an overpayment using its administrative powers.

Unlike a child support debt, a payee's overpayment can be extinguished by bankruptcy. Where a person who is overpaid is discharged from bankruptcy the overpayment becomes irrecoverable at law. (See chapter 5.1 CSA Collection)

From 1 January 2008, CSA can recover an overpayment from a payee's income tax refund under section 72 of the Registration and Collection Act. CSA cannot use a section 72A notice to recover an overpayment from a third party. (See chapter 5.2 Administrative Enforcement)

CSA may decide not to pursue a debt if it is uneconomical to pursue or is irrecoverable at law. (See chapter 5.1 CSA Collection)

Withholdings from future payments of child support

CSA can recover a payee's overpayment by withholding an amount from future payments of child support. However, CSA can only make further payments to the payee if the payer continues to make payments to CSA. In most cases, this means that the payee must have made a payment arrangement and the CSA must have refunded the overpaid amount to the payer. If no refund is made to the payer, the payee will not receive any further payments until the overpayment is fully absorbed by the ongoing entitlement.

Refunds to payers

CSA does not have authority to refund amounts overpaid to payers where the overpayment is not recoverable from the payee under section 79.

Even if the overpayment is recoverable from the payee under section 79, CSA is not obliged to refund amounts overpaid until the amount is recovered from a payee. CSA will not refund overpaid amounts to child support payers unless:

• it will further the objects of the Act, and
• the interests of the Commonwealth are protected, and
• the interest of the payee are taken into account.

Furthering the objects of the Act

One of the objects of the Act (See chapter 1.3 Objects of the scheme of the scheme) is to ensure that periodic payments of child support are paid 'on a regular and timely basis'. The Child Support Registrar must take this into account in exercising any discretion to refund amounts to payers.

Overpayments that are repayable by a payee under section 79 interrupt the regular and timely payment of child support unless the payee repays the overpaid amount immediately or enters into a suitable payment arrangement, allowing a refund to the payer. If no repayment or payment arrangement is made, the overpayment will be credited against ongoing maintenance until the credit is exhausted, meaning the payee will receive no payments until there is no overpayment left.

The interests of the Commonwealth

If the amount of overpayment is refunded to a payer (before recovery from the payee) the Commonwealth bears the cost until it recovers the amount from the payee. Whilst CSA has statutory powers to recover these debts, the debt may take years to recover or attempts to recover may be unsuccessful. CSA will generally not refund overpayments if it is unlikely to be able to recover the amount from the payee.

The interests of the payee

When an overpayment occurs a payee may be able to seek to have the liability increased to reduce the overpayment.

A payee may be able to:

• object to the decision that gave rise to the overpayment
• apply for a change of assessment
• make an application to the court for an increase in child support payable.

CSA will advise a payee of their rights to obtain a review of decisions that gave rise to an overpayment and the options open to them.

In some cases refunding an amount to a payer may affect the success of a payee's action to have the child support payable changed retrospectively. Decision-makers, such as Senior Case Officers and Judges, may take into account any hardship to a payer in repaying an amount once a refund has been made and may decide not to make a retrospective change (Halge v Carroll (1998) FLC 98-002). Even if a payee is successful in gaining an increase it may be difficult to recover lump sums already refunded to a payer, particularly if the payer has expended the amount on day-to-day living or on assets that cannot be liquidated easily. This may cause hardship for both parents.

Ongoing cases

In ongoing cases CSA will consider whether it is appropriate to refund amounts in order to continue regular and timely payments of child support. If the overpaid amount is refunded to the payer any further amounts received from the payer for the ongoing liability can be paid out to the payee under section 76.

To balance the interests of the Commonwealth and to promote regular and timely payment of child support CSA will refund amounts overpaid if all of the following conditions are met:

• the case is ongoing and likely to continue.
• the payer has a history of making full and regular payments and there are no new circumstances that indicate that this will change.
• CSA and the payee have negotiated an amount to be deducted from continuing payments of child support that will result in the overpayment being fully repaid before the case ends.
• the payee is not seeking to have the liability increased retrospectively.

Before making a decision CSA will examine the payer's payment history and ask parents if there are any changes in circumstances that may affect that record or lead to an early end to the case. CSA will also ask the payee if he or she is intending to take any action that could lead to a retrospective change to the child support payable.

Ended cases and ongoing cases where CSA decides not to refund

If a payee's ongoing entitlement to child support has ended, CSA will seek to recover the debt from the payee and will refund any recovered amounts to the payer as and when they are received.

CSA will also seek to recover overpaid amounts from the payee in ongoing cases where it has decided not to refund overpaid amounts to the payer. CSA will refund any recovered amounts to the payer as and when they are received.

Where there is an ongoing entitlement but a suitable payment arrangement cannot be made with the payee, CSA will generally decide not to refund the overpayment but will offset the overpaid amount against the ongoing liabilities. The payer will not have to make further payments until the overpayment credit is exhausted.

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Version 1.3

Issued 1 January 2008

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