Child Support Assement Act said

64AH  Remission of penalty
   (1)   The Registrar may remit the whole or a part of a penalty that a parent who made an income election is liable to pay under subsection 64AF(1) if:
   (a)   the parent underestimated an income amount in making the income election because of an amendment of an Income Tax Assessment Act, or because of a ruling or determination under that Act; or
   (b)   the parent underestimated an income amount in making the income election for some other reason, and the Registrar is satisfied that it would be fair and reasonable in the circumstances to remit the whole or that part of the penalty.
   (2)   If the Registrar makes a decision to remit only part of the penalty, or not to remit any part of the penalty, the Registrar must give written notice of the decision to the parent by whom the penalty is, or but for the remission would be, payable.
   (3)   The notice must include, or be accompanied by, a statement to the effect:
   (a)   that the parent may, subject to the Registration and Collection Act, object to the decision (the original decision); and
   (b)   that if the parent is aggrieved by a later decision on an objection to the original decision, he or she may, subject to that Act, apply to the SSAT for review of the later decision.
   (4)   A contravention of subsection (3) in relation to a decision does not affect the validity of the decision.

Oldboy said

So you think if people (payers or payees) show a consistent pattern of grossly underestimating income something should not be done about it?  I don't think it necessarily has to be a penalty but perhaps loosing the right to estimate it for a few years?

The CSA Guide - 2.5.1: Income estimates for a year of income (extract) said

Estimate penalties

A person will be required to pay an estimate penalty when CSA reconciles their estimate and their actual income for a year of income less any applicable year to date income amount is 110%, or more, of their estimated ATI for the year (section 64AF).

The penalty is 10% of the difference between the liability that would have applied if the original estimate or estimates was used to calculate the assessment, and the assessment(s) amended under section 64AA following reconciliation (section 64AG(1)). An estimate penalty is a debt due to the Commonwealth (section 64AG(2)).

Remission of estimate penalties

CSA can remit an estimate penalty, either in whole or in part, (section 64AH(1)) where:

    the difference between the adjusted taxable income amount and the estimated income was due to an amendment of the tax legislation, or a change to a ruling or determination under the tax legislation, or
    CSA is satisfied that it would be fair and reasonable to remit the penalties in the circumstances.

Amendment of a tax law, ruling or determination

When making an estimate, a parent cannot be expected to know that a change to the tax legislation or a change to a ruling or determination will increase their adjusted taxable income.

Example

If an expense that was deductible in previous years is no longer deductible, a parents taxable income may be higher than their estimate by the amount of the deduction.

This does not apply where a parents 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 it considers the parent did not intentionally misuse the estimate provisions.

CSA may consider remitting if the person inadvertently underestimated or had some good reason for not correctly managing their income estimate during the year, such that it would not be fair to penalise them for the estimate being inaccurate.

CSA will consider whether a parent was or 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 advise CSA of the change in circumstances and make a new estimate.

CSA will not remit an estimate penalty unless a parent has a reasonable explanation for failing to make a new estimate when their circumstances changed.

Example

M made their first estimate when their hours of work were reduced due to a fall in business for the company. M made a second estimate when they lost their job because the company stopped trading.  M was not sure if they would receive a termination payment, and did not include such a payment in their second estimate. M did in fact receive a termination payment of $9,000 on 30 May. As their ongoing circumstances had not changed M did not contact CSA about the payment.

Ms actual income was higher than their estimated income so the estimate was reconciled, the assessment amended and an estimate penalty imposed. M contacted CSA and requested the estimate penalty be remitted. CSA considered the facts of the case and decided it would be fair and reasonable to remit the penalty, as M had not intentionally misused the estimate provisions.

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).

If CSA makes a decision to remit only part of the penalty, or to not remit any part of the penalty, it must give written notice of that decision to the parent required to pay the penalty. The parent may object to that decision (section 64AH(2)).

Sleepy said

Deliberately inaccurate estimates aren't applicable in this context oldboy as I can show C$A the exact conditions for my employment. I could send them the FWA link to my EBA if they wanted it, and my ex knows my approximate income too (hence I'm anticipating a COA), but she might not know how it's comprised.

seriously said

If you get your tax returns in on time and CSA reconciles it against your estimate right away, the Payee gets a nice bonus as well...

Oldboy said

So you think if people (payers or payees) show a consistent pattern of grossly underestimating income something should not be done about it?  I don't think it necessarily has to be a penalty but perhaps loosing the right to estimate it for a few years?

Fairgo said

You should be able to provide an estimate that C$A will accept and then be reconciled when you lodge your tax return just like FAO do for calculating FTB entitlements for the past year. Estimate penalties should not exist.

Fairgo said

Oldboy - perhaps you could call C$A and act as Sleepy's advocate - you seem to have access to the movers and shakers.

Sleepy said

The latter portion of their advice is wrong and I know I can force the issue and recover the overpayment, but what's the best way to approach this in terms of convincing CSA that it's not an iron clad/no questions asked 13K extra?