We made an honest mistake with Family Tax Benefit and it cost us thousands

"The system is there to support families, but when you’re new to it, financially vulnerable and still finding your feet, it’s easy to make mistakes."

This time of year always makes my chest feel tight. As I pull together paperwork for our tax agent, I can still feel the ripple effects in my nervous system from a mistake we made in our early years after moving to Australia.

It ended up costing us thousands of dollars.

Back in the UK, we were familiar with a similar tax credit system to Family Tax Benefit. You were warned repeatedly not to underestimate your income, and with our predictable income and secure roles, it was easy to stay on track.

But after we moved to Australia, everything changed. My husband took on casual jobs and contract roles as we got settled. His income shifted - not just every month, but every week.

I was freelancing, so mine fluctuated just as much. Some months were full of big projects and deadlines, while others were much slower.

We did our best to estimate our income accurately for Family Tax Benefit. But about three- quarters of the way through the year, my husband’s workload unexpectedly increased at a time we had expected it to slow down.

He was offered a lot of overtime (and when you’re building a new life, you don’t say no), then I picked up a new freelance project. Our income jumped faster than we had anticipated.

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Karen didn't realise she wasn't doing things right. Image: Supplied

We thought we were doing everything right

When I realised, I updated Centrelink and expected our Family Tax Benefit to stop straight away. I knew we had already been overpaid. Nothing happened. I updated it again, estimating slightly higher, still unsure how the year would finish, but trying my best to be as accurate as I could.

Again, nothing changed. With Easter and public holidays around that time, I suspect processing delays played a part.

Eventually, I cleared my morning and called them. They finally paused our payments. But by then, there were only a few weeks left in the financial year.

Then came another blow. As the financial year ended, my husband’s work payment summary included a reportable fringe benefit. This was something we had never encountered in the UK, probably because we had never worked in roles that included them, so it had never been on our radar.

Suddenly, even more was being added to our income total. I felt uneasy but not panicked. Surely the overpayment wasn’t going to be that big?

We submitted our tax return and carried on as normal. Looking ahead, I made sure to overestimate our income for the new tax year.

A few days later, the letter alert arrived.

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Suddenly, we had pay thousands

It wasn’t a small adjustment. We were told we had an overpayment debt of thousands.

I felt like I had been punched in the gut. We had young kids, with one still in childcare. We were still recovering from the cost of our move across the world and trying to rebuild ourselves financially after a period of insecure work. That letter hit me so hard.

We immediately arranged a repayment plan and switched our payments to receive our Family Tax Benefit as a lump sum at the end of the next year instead of fortnightly payments. It felt safer, like a built-in savings plan, and it removed that fear of overpayment ever happening again.

Even now, years later, I still hold my breath when we file our tax return. We are no longer eligible to receive FTB, but the memory of that immense panic stays with me, and for some reason I am terrified of learning we have a debt all over again.

The system is there to support families, but when you’re new to it, financially vulnerable and still finding your feet, it’s easy to make mistakes. And the consequences can feel especially overwhelming when you're already under pressure.

I know we aren’t the only ones. Each year, many families receive debt letters. On paper, it is just a figure you owe back. But behind every one of those letters is a family already feeling the pressure of the rising cost of living, or that pressure of having little kids in daycare while juggling work around responsibilities at home.

A family who thought they were doing the right thing, but then realised all of a sudden they’d made an honest mistake.

We paid the money back and took full responsibility. It was an honest mistake, not an attempt to cheat the system, but that didn’t make it any less gutting to receive that dreaded debt letter.

The mum wants other parents to learn from her honest error. Image: Supplied

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Don't let it happen to you

We learnt a lot from the experience, but it’s a lesson I wouldn’t wish on anyone.

So let this be your warning!

Check your income estimate regularly. Learn how fringe benefits can affect your reported income. And if you can manage without the fortnightly payments, consider taking Family Tax Benefit as a lump sum at the end of the financial year.

It might just save you from the stress we experienced, and you will end up with a lovely lump sum at the end of it.

Because of one honest mistake, I still feel the anxiety every time we lodge our tax returns, and I think I always will.

Originally published as We made an honest mistake with Family Tax Benefit and it cost us thousands