At the end of the financial year, many Victorians look forward to balancing their Family Tax Benefit or Child Care Subsidy, and potentially receiving a ‘top up’ amount.
However, if you have a debt owing to the Commonwealth, Centrelink may withhold top up amounts to offset the debt. This article explains why this may happen, what options you have, and steps to potentially avoid this occurring in future financial years.
What happens when Centrelink balances my family assistance payments?
Family Tax Benefit (FTB) and Child Care Subsidy (CCS) are referred to as ‘family assistance payments’.
Estimated income is used to calculate FTB and CCS payment rates throughout a financial year. At the end of the 2023-2024 financial year, Centrelink finalised the process of balancing family assistance payments. This involves comparing an individual’s estimated income against their actual income for the financial year to determine their correct entitlement to these payments. Centrelink balances FTB and CCS separately.
Most families need to confirm their income so Centrelink can start the balancing process. Typically, this means lodging their tax return or advising Centrelink that they are not required to lodge a tax return (this is commonly referred to as a ‘Non-Lodgement Advice’ or as a ’Return Not Necessary’ notice.) This includes confirming the income for any partners had during the relevant financial year.
New debts can arise when a person’s actual income for the financial year exceeds their estimated income, where the recipient or their partner fails to lodge their tax return within the prescribed time, or fails to advise Centrelink that they do not need to lodge a tax return within the prescribed time.
Generally, a recipient of family assistance payments has until the end of the following financial year to confirm their family income or claim FTB as a lump sum. For the 2023-24 financial year, this means a recipient has until 30 June 2025 to:
- Lodge their tax return for the 2023-24 financial year, so their FTB/CCS entitlements can be reconciled by Centrelink;
- Advise Centrelink that they are not required to lodge a tax return for the 2023-24 financial year;
- Make a claim for FTB as a lump sum for the 2023-24 financial year if not already lodged.
The 12-month lodgement timeframe may be extended if special circumstances exist that prevent someone from confirming their income. An extension can be granted for up to 24-months, until the end of the next financial year following the lodgement year. An extension must be requested, it is not automatic.
What happens if I do not meet the deadlines?
Family Tax Benefit
If a FTB recipient does not confirm their income either within the prescribed timeframes, Centrelink will raise a debt to recover all FTB payments paid to them in the 2023/2024 year. This is referred to as a ‘non-lodger debt.’ Additionally, the individual will likely be prevented from receiving FTB in instalments going forward, until all income for previous financial years has been confirmed.
Child Care Subsidy
There are separate time limits for CCS. If a recipient fails to confirm their actual income before 30 June 2025, their CCS will be reduced. If they then do not confirm their actual income by 7 July 2025 their CCS will be reduced to zero and then cancelled from the first CCS Monday after this date. All CCS paid during the relevant year will then be raised as a recoverable debt.
If a recipient’s CCS is cancelled, they will have to pay full fees for any child care that they use. It is possible for the individual to return to the subsidy, provided they are still eligible, if they confirm their income and reapply. If there is a period between someone’s CCS stopping and starting again, Centrelink will not backpay for that period.
Additionally, if an individual has an existing Centrelink debt or any other applicable Commonwealth debts, Centrelink can withhold their family assistance top up amounts and divert these to offset the debt.
The process of offsetting a debt using top up payments can still occur even if the individual has a repayment plan or recovery pause in place. However, debt offsetting should not occur where recovery is paused because of a disaster, emergency event or pending formal review.
Social Security Rights Victoria can provide advice and assistance to workers and individuals responding to these debts.
My FTB top up payment was offset against a Centrelink debt. Is there a way to get this money returned to me?
If an individual was expecting to receive a top up family assistance payment after their entitlements were balanced, but that payment was withheld by Centrelink to offset a debt, it is possible to seek internal review by an Authorised Review officer and request a partial or full refund of the amount withheld.
To be successful in this application, the individual will need to demonstrate that they are experiencing ‘exceptional and unforeseen circumstances that may create financial hardship.’ In other words, this involves demonstrating not only that they are experiencing financial hardship, but also that this financial hardship is a result of exceptional circumstances that they had no way of preventing or planning for.
For example, in our experience clients who are experiencing financial hardship because of payments that could be considered regular or expected (such as rent or mortgage payments, utility bills or car registration) will not be successful in satisfying the requirement for ‘exceptional and unforeseen circumstances’
I have a Centrelink debt, what can I do now?
If you have a Centrelink debt, we recommend you check out Social Security Debt Help.
Social Security Debt Help is a free online resource for people with Centrelink debts and those assisting them. It contains information about Centrelink debts, how they arise, and what you can do to address them.
It also includes a self-help assessment tool which you can use to better understand debts and the options available and get better advice and assistance.
Social Security Debt Help is live now.
Social Security Debt Help is aimed at helping people who have a debt themselves, and the information and tools are structured with this in mind. If you have a Centrelink debt, Social Security Debt Help is a great place to start to understand your situation, and to get help.
But, as with other similar resources, it’s also useful when supporting someone else with a debt. If you have a friend or family member you’re supporting, or you help people with Centrelink debts in your work, the tools and information are for you too.
We’d love to hear about your experience with this. Feedback is always greatly appreciated and will help us iterate on and improve the resource as the project continues.
If you have further questions and would like information or to potentially book a legal advice appointment with a SSRV lawyer, you are very welcome to call us on (03) 9481 0299.
