Abel and Rachels (Child support)

[2020] AATA 5576

Abel and Rachels (Child support) [2020] AATA 5576 (19 November 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC019986

APPLICANT:  Mrs Abel

OTHER PARTIES:  Child Support Registrar

Mr Rachels

TRIBUNAL:Member M Douglas

DECISION DATE:  19 November 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – whether the estimate should have been refused – estimate of income accepted – decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mrs Abel and Mr Rachels are the parents of [the child].  A child support assessment has issued for [the child] requiring Mr Rachels to pay child support to Mrs Abel.

2. The child support assessment that issued for the child support period commencing 1 September 2019 used an adjusted taxable income for Mr Rachels of $112,365.  On 24 March 2020 Mr Rachels elected that his adjusted taxable income for the remainder of the financial year be $29,982, which reflected what he estimated his income would be for the remainder of the year when annualised.  Services Australia, being the government department through which the Registrar acts, accepted his estimate and on 6 April 2020 amended the assessment such that for the period from 24 March 2020 to 30 June 2020 it was calculated on an adjusted taxable income for Mr Rachels of $29,892.

3. On 29 July 2020 Mrs Abel objected to that decision.  Her objection was lodged out of time; however, Services Australia granted her an extension until 29 July 2020 within which to lodge her objection.

4. On 28 September 2020 Services Australia disallowed her objection.  Mrs Abel then applied to the Tribunal for a review of that objection decision.

5. The Tribunal heard her application on 17 November 2020.  She and Mr Rachels participated in that hearing by telephone.  They both gave sworn oral evidence.  The Tribunal has had regard to that evidence. 

6. The Tribunal, at the hearing, required Mr Rachels to provide, subsequent to the hearing, his payslip that his employer, [Employer 1], issued to him for the pay period ending 26 March 2020 and his payslips for last three months of 2019 financial year. He did so. The Tribunal has had regard to those documents and also to the documents Services Australia provided to the Tribunal in accordance with its obligation under subsection 37(1) of the Administrative Appeals Tribunal Act 1975.

CONSIDERATION

1. Subsection 43(1) of the Child Support (Assessment) Act 1989 (the Act) stipulates the components that are to comprise a parent’s adjusted taxable income.  Those components include the parent’s taxable income from the financial year preceding the commencement date of a child support period.  The other components listed within subsection 43(1) are not relevant to this case.

2. Subsection 43(1) of the Act is subject to subsection 60(1) of the Act.  In the circumstance where a parent estimates their current income is less than 85% of their income from the preceding financial year, subsection 60(1) allows the parent to elect that their adjusted taxable income be what they estimate their income will be.

3. Where a parent makes an election halfway through a tax year, the general scheme of section 60 is to require the parent to provide Services Australia information about their year-to-date adjusted taxable income and an estimate of their likely taxable income for the remainder of the tax year from the date the parent makes the income election. 

4. An estimate of income, by its nature, may eventuate to be imprecise.  In essence, what is required is for the parent to make a forecast of their likely income for the rest of the tax year taking into account any allowable deductions.  The estimate should take account of what is known, as well as what is reasonably in contemplation as likely.

5. Subsection 63AA(2) provides Services Australia, or the Tribunal in its place, a discretion to refuse to accept a parent’s income election if, essentially, Services or the Tribunal is satisfied that the amount the parent has elected for their income for the remainder of the income year is less than the amount the Registrar, or the Tribunal, considers is likely to be their adjusted taxable income for the remainder of the income year.  The Registrar, or the Tribunal, in deciding whether to exercise its discretion under subsection 63AA(2) is entitled to call for evidence of the likely income the parent may earn in the reminder of the year: see Lefroy & Lefroy(SSAT Appeal) [2009] FMCAfam 1043.

6. In the event that the Registrar accepts the income election, then under subsection 61(1) of the Act the parent’s estimate becomes the parent’s adjusted taxable income and the Registrar is obligated under subsection 61(3) to take such action as is necessary to give effect to that election.

7. Mr Rachels’s evidence to the Tribunal was that until January 2019 he had two jobs, one with [Employer 2] and the other as [an Occupation 1] with [Employer 1].  In January 2019 his position with [Employer 2] was made redundant and his employment with that company was terminated.  He has since then only had employment as [an Occupation 1].

8. His evidence was that as a consequence of losing his employment with [Employer 2] his income in the 2020 financial year was far less than his taxable income for the 2019 year.  He was aware that was going to the case on 24 March 2020, when he made an election for his estimate of income to be his adjusted taxable income. 

9. Services Australia did not require Mr Rachels to provide any verification of his estimate. The Tribunal did. 

10. Mr Rachels’s payslip for the pay period ending 26 March 2020 revealed that in the 20 fortnightly pay periods until then, he had received taxable gross wages of $25,864.03.  The Tribunal observes that the fortnightly average of that is $1,293.20.

11. The Tribunal also observes that the fortnightly average of the extrapolates over an annual period to around $32,600, which is slightly more than the income election Mr Rachels made under subsection 60(1) of the Act.  However, it seems to the Tribunal that it is likely that Mr Rachels would have incurred some expenses to receive his income that he would be allowed to deduct when his taxable income is assessed for the current financial year.

12. In the circumstances, the Tribunal considers that Services Australia was right not to exercise its discretion under subsection 63AA(2) to refuse to accept Mr Rachels’s election that his adjusted taxable income be what he estimated his annualised income would be for the period 24 March 2020 to 30 June 2020.  Accordingly, Services Australia was required to treat that as Mr Rachels’s adjusted taxable income and amend the assessment accordingly.

13. In the circumstances, the Tribunal affirms the objection decision

DECISION

The decision under review is affirmed.