Alborough and Manville (Child support)

[2021] AATA 467

Alborough and Manville (Child support) [2021] AATA 467 (7 January 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC020148

APPLICANT:  Ms Alborough

OTHER PARTIES:  Child Support Registrar

Mr Manville

TRIBUNAL:Senior Member R Ellis

DECISION DATE:  07 January 2021

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. This review is about the acceptance of an estimate election used to assess child support in respect of the children [Children 1-4].

2. Ms Alborough and Mr Manville are the parents of [Child 1] (born February 2009), [Child 2] (born March 2010), [Child 3] (born February 2012) and [Child 4] (born January 2017).  There has been a child support assessment in place since 23 June 2020 and Mr Manville is the parent liable to pay child support under the assessment.

3. On 22 July 2020 the Child Support Agency made the decision to accept an income estimate from Mr Manville of $44,375 (annualised) to be used in the child support assessment from 22 July 2020 to 30 June 2021.

4. On 19 August 2020 Ms Alborough objected to this decision and on 22 October 2020 the Child Support Agency disallowed the objection (the objection decision).

5. On 30 October 2020 Ms Alborough applied to the Administrative Appeals Tribunal (the Tribunal) for a review of the objection decision.

6. The Tribunal conducted a hearing into the application on 7 January 2021.  Ms Alborough and Mr Manville gave evidence on affirmation by conference telephone.  The Child Support Agency provided the Tribunal and the parties with papers relevant to the matter (136 pages).

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The Child Support Agency makes child support assessments for a child support period using a formula outlined in Part 5 of the Act.  The variables in the formula include the adjusted taxable incomes of both parents and ordinarily this is equal to the taxable income and supplementary amounts for the financial year that ended before the start of the child support period.  Supplementary amounts include such things as reportable fringe benefits.

3. Section 60 of the Act allows a parent to elect to use an estimate of their adjusted taxable income to apply from the day of the election to the end of the financial year (the estimate period).  The estimate is an annualised amount of their taxable income and supplementary amounts for the estimate period.  It must be no more than 85 per cent of the adjusted taxable income that applies when the parent makes the estimate election.

4. The parent making the estimate election must also estimate their adjusted taxable income from the start of the financial year to the beginning of the estimate period (year-to-date income).  This allows the Child Support Agency to reconcile the estimate when information is available from the Australian Taxation Office for the relevant financial year.

5. The Child Support Agency may refuse to accept an estimate election if satisfied the amount estimated for the partial year is less than the amount considered likely to be the actual adjusted taxable income for the partial year (section 63AA of the Act).

6. The issue which arises in this case is whether or not the Child Support Agency made the legally correct decision to accept Mr Manville’s estimate of income made on 22 July 2020.

CONSIDERATION

1. Ms Alborough told the Tribunal that Mr Manville was initially being assessed on a 2018-19 income of $222,158 and was due to pay child support of approximately $3,836 per month.  She said within a month of the child support assessment commencing Mr Manville had then submitted an estimate using a significantly lower annual income.

2. Ms Alborough said in her view Mr Manville was deliberately misrepresenting his financial affairs in order to reduce the amount of child support he was supposed to pay for the children.

3. Ms Alborough said that Mr Manville was currently the head [Occupation] working for a company owned by his brother.  She said Mr Manville was likely working for cash.  She added that Mr Manville also had his own business called [Business name] and she did not believe his income could have dropped so dramatically.  She said Mr Manville had a lifestyle that exceeded his income and the numbers simply didn’t add up.

4. Mr Manville told the Tribunal he did have a stable income until the COVID-19 pandemic had impacted his business.  He said his [business] was at a standstill and he was not working at the moment.  Mr Manville added that he was currently in receipt of the jobkeeper payment which had initially been at the rate of $3,000 per month and had since reduced.

5. Mr Manville explained that when he made his estimate he was only running his own business and not working with his brother.  He said his income at that time was from jobkeeper and rental income from his share in a factory.  He said the rental income had since ceased on 18 September 2020.

6. Mr Manville said he was not earning cash and was paid through the books.  He admitted to having a good year in 2017-18 but said that had since changed.  Mr Manville said he had lodged an income tax declaration of $108,400 for the 2018-19 financial year and that had since been replaced with a lower taxable income for that financial year.  Mr Manville said he had also provided the Child Support Agency with his bank statements to show he was receiving jobkeeper as well as a letter from his accountant.

7. The Tribunal notes in evidence from the Child Support Agency a letter from accounting firm [Name] dated 23 September 2020.  It confirms that Mr Manville’s business has been impacted by the COVID-19 pandemic and he is relying on the jobkeeper income supplement “to keep his business afloat”.  The Tribunal also notes a bank statement for a business transaction account in the name of [Business name] for the period from 1 July 2020 to 22 July 2020.  The statement shows a direct credit from the Australian Taxation Office of $3,000 on 8 July 2020.

8. An income estimate can be made if, in the case of a first election for a year of income, the estimate is 85 per cent or less than the parent’s adjusted taxable income for the last relevant year of income (paragraph 60(1)(b) of the Act).  A parent may not make an income estimate if an income amount order is in force in relation to the parent and any part of the period to which the election would apply if made (subsection 60(6) of the Assessment Act).

9. The last relevant year of income for the child support period which commenced on 23 June 2020 was Mr Manville’s 2018-19 adjusted taxable income.  The Tribunal notes in evidence from the Child Support Agency that on 22 July 2020 Mr Manville lodged an income tax declaration of $108,400 for the 2018-19 financial year.  This was subsequently replaced with a taxable income of $90,208.  The Tribunal is satisfied the annualised estimate of income of $44,375 (annualised) meets the 85 per cent test.  The Tribunal is also satisfied there was no income amount order in place at the time Mr Manville elected to lodge his estimate and he also provided the required information relating to his year-to-date income.

10. The Tribunal also considered the discretion, under section 63AA of the Act, to refuse the estimate election made by Mr Manville.  This discretion may be exercised in circumstances where evidence suggests a parent’s estimated income is less than the amount considered likely to be their actual adjusted taxable income for the election period.

11. The Tribunal notes in evidence a copy of Mr Manville’s individual tax return for the 2019-20 financial year.  It shows Mr Manville had an adjusted taxable income of $38,667.  The evidence provided by Mr Manville also indicates his income has dropped significantly.

12. There is no evidence before the Tribunal to suggest Mr Manville’s estimated income of $44,375 (annualised) for the period from 22 July 2020 to 30 June 2021 will be less than the amount considered to be his actual income for this period.  The Tribunal is satisfied the discretion to refuse the estimate made by Mr Manville should not be exercised in this case.

13. The Tribunal accepts that Ms Alborough is genuine in her view that Mr Manville is earning a higher income, however, an estimate is speculative by nature.  After the year of income has ended the Child Support Agency will compare his estimated income with his actual income for that year.  This is known as an estimate reconciliation.  If, after the estimate has been reconciled, Mr Manville has an actual income that is higher than the estimated income the child support assessment will be re-reconciled for that period using the higher income.

14. As all the relevant criteria under the Act have been met the Tribunal finds that the estimate election made by Mr Manville on 22 July 2020 should be accepted.

DECISION

The decision under review is affirmed.