Arterton and Wilbur (Child support)

[2021] AATA 5209

Arterton and Wilbur (Child support) [2021] AATA 5209 (7 December 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC022442

APPLICANT:  Mr Arterton

OTHER PARTIES:  Child Support Registrar

Ms Wilbur

TRIBUNAL:Member S De Bono

DECISION DATE:  7 December 2021

DECISION:

The objections officer’s decision is affirmed. (This means the application for review is unsuccessful.)

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – annualised income correctly applied – 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. Mr Arterton and Ms Wilbur are the separated parents of [Child 1]. There has been a registered child support assessment in place since 22 December 2017. Mr Arterton lodged a new income estimate for the 2020/2021 financial year which applied from
   25 August 2020. At this time Mr Arterton estimated his income would be $0 and the Child Support Agency (the Agency) accepted this income estimation. Ms Wilbur did not agree that Mr Arterton’s income would be $0 and requested the Agency follow this up with him.

2. An officer from Child Support contacted Mr Arterton on 25 September 2020 and accepts a new estimate based on Mr Arterton’s advice that he earns $4,000 a month commencing on 21 September 2021. Child Support calculate this to be a new estimate of $37,190.96 for the period 21 September 2020 to 30 June 2021 which equals an annualised amount of $47,967 to be used in the assessment.

3. On 10 February 2021 an officer from the Agency contacted Mr Arterton to conduct an income estimate review. During this phone call the officer discussed Mr Arterton’s estimate with him and notified him that his year to date (YTD) income reported from the Australian Tax Office (ATO) was $55,414.34. Mr Arterton had a discussion at this time with the officer when he said to the officer “just update [the income estimate] to $55,414, I don’t actually care I won’t be paying anymore child support”. During this phone call Mr Arterton said he only commenced working for [Company 1] from September 2020. At this time the officer from the Agency worked out a new income estimate based on the YTD income reported by the ATO was worked out by dividing $55,414.34 by 5 months which equals an income of $11,082.86 a month. At this stage the officer wrote that Mr Arterton “advised he is being paid monthly but does not know exactly what he will get monthly as it depends if he works a full month”. This was classed as a new estimate by Mr Arterton and applied from 22 September 2020. This estimate was purported to be accepted under section 62A of the Assessment Act.

4. On 24 February 2021 Mr Arterton called the Agency and spoke with an officer, Mr Arterton was concerned about his income estimation update because he was working one month on and one month off and thought his income estimation was wrong. A note placed on the Agency record at this time says “[Mr Arterton] to lodged an objection to the last estimated as this has created over 6k debt and work out what his actual income is his contact is for $104,700 if worked for the full year – gets flat $53 ph and paid for x amount of hours per year so works out to approx. $2014 pw but also can do all his hours one month and not get paid for 5 weeks when home – payer will check his payslips and send in or do new estimate”.

5. On 31 May 2021 Mr Arterton lodged an objection to the decision made on 10 February 2021 to his income estimate of $132,892 (annualised) for the period 22 September 2020 to 30 June 2021. An extension of time was granted to Mr Arterton by the Agency. On 22 September 2021 the objections officer disallowed Mr Arterton’s objection to his income support estimate of $132,892 annualised.

6. On 30 September 2021 Mr Arterton applied to the Administrative Appeals Tribunal (the tribunal) for an independent review of the objections officer’s decision. On 7 December 2021 Mr Arterton gave evidence under affirmation via conference telephone to the tribunal. Ms Wilbur remained a party to the proceedings but elected not to participate in the hearing. The tribunal had before it a bundle of documents (288 pages – referred to as the hearing papers) which had been sent to Mr Arterton prior to the hearing. Relevant aspects of the material and evidence will be referred to in the tribunal’s consideration of the issues to be decided.

LAW AND CONSIDERATION

1. The law relevant to this review is found in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the child support income amount of each parent.

2. Section 60 of the Assessment Act provides a parent may elect to estimate their taxable income for a year of income. Subsection 60(3) also provides that an estimate can be made for part of an income year. The income is worked out under the subsection 60(4) method statement which says:

   Step 1.   Estimate each income component amount for the parent for the period (the remaining period):

   (a)     starting on the start day for the election; and

   (b)     ending at the end of the last day of the year of income.

   Step 2.   Add up those amounts. The result is the partial year income amount.

   Step 3.   Divide the partial year income amount by the number of days in the remaining period.

   Step 4.   Multiply the quotient by 365.

3. Section 62A of the Assessment Act provides that if a parent has revoked an earlier income election they must elect a new adjusted taxable income worked out using the same method as that set out in section 60, starting on the start day for the new election.

4. Subsection 63AA(2) provides that the Registrar may refuse to accept an income election if the person’s income is more than the Registrar considers likely to be the person’s actual income.

5. Income for child support purposes is estimated on the basis of the likely income for the remainder of the relevant financial year. The financial year in this instance was from 1 July 2020 to 30 June 2021 (the 2021 financial year).

Issue 1 – Was the objections officer’s decision to disallow Mr Arterton’s objection correct?

1. The objections officer writes in their Reasons for decision:

   When making a later income estimate election, the parent must inform us of the start day of the election, the partial year income amount, which is the total of each income component amount for the remaining period, and, the amount of their income estimate election.

   In order to calculate the amount to be used in the assessment, the partial year income amount must be divided by the number of days in the remaining period, to identify a daily income amount. That daily income amount is then multiplied by 365 to identify the annualised income which is the amount the parent is required to provide as their income estimate election.

   Mr Arterton reported in his subsequent estimate that his income was $11,082 per month that started occurring from 22 September 2020. We applied the subsequent estimate to the assessment from 22 September 2020; this means there were 282 days until the end of the estimate, being 30 June 2021.

   $11,082 x 12 months = $132,984 (annualised income)
   $132,984 365.25 = 364.09 (daily rate)
   364.09 x 282 = $102,673.47 (adjusted taxable income)

   The adjusted taxable income will included your year to date income, to ensure accuracy when we reconcile your income against the ATO.[1]

   [1] Page 11 of the hearing papers.

2. The Agency accepted the following income estimations during the 2020/2021 financial year, with each subsequent estimate replacing the earlier estimate:

   Estimate Period: 2020/2021 Financial year
   Total estimated income in estimate period: $93,984.46
   (Including YTD)

   Breakdown of estimate period:

   Estimate 1

   Year to Date: 1 July 2020 to 24 August 2020

   Year to date income: $0
   Actual estimate for period 25 August 2020 to 30 June 2021: $0
   Remaining estimate period: 25 August 2020 to 20 September 2020 (27 days)
   Estimate of income in remaining period: $0

   Estimate 2
   Actual estimate for period 21 September 2020 to 30 June 2021: $37190.96
   Remaining estimate period: 21 September 2020 (1 day)
   Estimate of income in remaining period: $131.41 (annualised to $47,967.00 a year)

   Estimate 3 (the estimate under review)

   Actual estimate for period 22 September 2020 to 30 June 2021: $102,673.47

   Remaining estimate period: 22 September 2020 to 8 March 2021 (168 days)

   Estimate of income in remaining period: $61,167.12 (annualised to $132,892 a year)

   Estimate 4

   Actual estimate for period 9 March 2021 to 30 June 2021: $32,689.93

   Remaining estimate period: 9 March 2021 to 30 June 2021 (114 days)

   Estimate of income in remaining period: $32,685.92 (annualised to $104,652 a year)

3. Mr Arterton’s estimated income for the period of 22 September 2020 to 30 June 2021 was worked out by dividing his monthly income of $11,082 by 30.4375 (the figure used by Child Support to convert monthly figures to daily), then multiplying that daily figure by the 282 days left of the estimate period which equals an income estimation of $102,673.47.

4. The Child Support Guide (the Guide) at 2.5.1 provides:

   In order to calculate the amount to be used in the assessment, the partial year income amount must be divided by the number of days in the remaining period, to identify a daily income amount. That daily income amount is then multiplied by 365 to identify the annualised income which is the amount the parent is required to provide as their income estimate election (CSA Act sections 60(3)(a) and 60(4)).

   Example: Joanne has estimated her partial year income amount for the period 1 November 2017 to 30 June 2018 to be $26,500.

   There are 242 days in the remaining period. The daily rate is $26,500 ÷ 242 =$109.50413.

   The daily amount is multiplied by 365 to identify the annualised amount: $109.50413 × 365 = $39,969, which is the amount of the income estimate election.

   The annualised partial year income amount is the amount which will be used as the parent's adjusted taxable income when the assessment is amended using the estimated income (CSA Act section 61).

5. Mr Arterton objected to the decision because he objected to his annualised income being recorded as $132,892. The Child Support formula requires an annual income figure to be used in the assessment calculations. If Mr Arterton’s actual estimate of $102,673.47 was used in the assessment it would not be an annual amount but only a 282-day income amount. It was therefore correct that the Agency use the annualised figure of $132,892 in the assessment calculations for the period 22 September 2020 until it was replaced by the later estimate on 9 March 2021. It does not mean that the Agency is saying that Mr Arterton actually earned a total of $132,892 in the 2020/2021 financial year.

6. When it became clear following a review by the Agency that Mr Arterton’s income estimations of $0, and later $37,190 were likely to be incorrect his income estimation was updated. The Agency purportedly updated this income estimation in accordance with section 62A of the Act, meaning the Agency took the view that Mr Arterton updated his income estimation. Even if Mr Arterton did not intend to lodge that estimate, the Agency had the ability to amend the assessment based on the information they had received to show the previous estimate was not accurate, pursuant to sections 62A and 62B of the Assessment Act. Whether the Agency updated the assessment, or Mr Arterton revoked his former estimate and lodged a new estimate (as he was taken to have done), the assessment income for that period would still have been reconciled against Mr Arterton’s 2020/2021 taxable income once it became available.

7. Mr Arterton objected to the income estimation of $132,984 which is an annualised income amount, on the basis that he thought this income estimation was too high. As it transpired Mr Arterton’s taxable income for the 2020/2021 financial year was actually $113,822.20[2] but his child support liability for the period of 22 September 2020 to 8 March 2021 was calculated on the basis that he had been estimated to earn $102,673 in the period 22 September 2020 to 30 June 2021.

   [2] Page 206 of the hearing papers.

8. In terms of reconciling an income estimate for a year of income the Guide provides that if there has been more than one income estimate:

   …all the income estimate elections will be reconciled when their actual adjusted taxable income for the year of income is known.

   If the actual income is more than the estimated ATI amount for the year, then the assessment will be amended (CSA Act section 64A(2)).

   The estimated ATI amount for the year (CSA Act section 64A(3)) is the total of the income expected in each application period for each income estimate election for the year of income. The income expected for the application period of the first estimate, the full year of income estimate, is identified by dividing that estimate by 365, giving a daily income amount. That daily figure is then multiplied by the number of days in the application period (to the day before the start date of the next estimate) to identify the amount of income expected for that application period.

   If one or more later estimates have been revoked, the estimated income amount for each relevant application period is calculated by multiplying the daily rate for the estimate by the number of days remaining in the application period for that revoked estimate.

   The partial year income amount for the last estimate is added to the figures for all of the earlier estimates (CSA section 64A(3)). …

   The assessment is amended by identifying the difference between the person's estimated ATI amount and their actual income for the year of income. That number is then divided by 365 to calculate the additional daily rate. For each estimate, multiply the additional daily rate by the number of days in the application period for the estimate to calculate the underestimated amount for the estimate (CSA Act section 64A(4)). The underestimated amount is added to the estimated ATI amount for each application period, or to the partial year income amount for the last estimate. The total for each estimate is then divided by the number of days in the application period for the estimate to calculate the reconciled daily rate. That number is then multiplied by 365 to calculate the annualised income to be used to reconcile each estimate.

9. The tribunal notes that the estimates made by Mr Arterton in the 2020/2021 year have been reconciled against his taxable income in accordance with the Assessment Act and the policy in the Guide above. This includes the estimate the subject of the objection, which on reconciliation was altered to an annualised figure of $142,061.65. Again, this is an annualised figure of the actual income that ought to have been used in the assessment for the period

   
   

   22 September 2020 to 8 March 2021, and not reflective of Mr Arterton’s actual annual income for the financial year. The tribunal notes that the total of Mr Arterton’s estimated income for the financial year was $93,984.46 which was less than his actual taxable income of $101,772, and the reconciliation of his estimates amended the assessments accordingly.

10. The tribunal finds the decision of the objections officer to disallow Mr Arterton’s objection is correct as calculating Mr Arterton’s child support liability on the annualised income of $132,892 was correct for the period from 22 September 2020 until it was replaced by the later estimate.

DECISION

The objections officer’s decision is affirmed. (This means the application for review is unsuccessful.)