Artfull and Rochester (Child support)

[2023] AATA 2131

Artfull and Rochester (Child support) [2023] AATA 2131 (14 June 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/AC025403

APPLICANT:  Mr Artfull

OTHER PARTIES:  Child Support Registrar

Ms Rochester

TRIBUNAL:Member S Letch

DECISION DATE:  14 June 2023

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – whether the estimated income is less than the amount likely to be the actual income – estimate of income correctly refused – 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

1. This matter concerns a decision by Child Support to refuse an estimate election for the 2022–23 financial year made by Mr Artfull on 14 June 2022.

2. It is convenient by way of background to set out some extracts from the objection officer’s decision dated 8 January 2023:

   DECISION UNDER REVIEW

   Ms Rochester objected to the decision on 28 June 2022 to accept Mr Artfull's 2022/2023 estimate of adjusted taxable income of $70,190 (annualised) for the period 1 July 2022 to 30 June 2023.

   Ms Rochester objected to this decision because she believes Mr Artfull's pay slips state that his annual salary is $79,040. However, the average of his pay over four pay slips dated 7 July 2022 for $5,000, 21 July 2022 for $3,334, 4 August 2022 for $5,373 and 18 August 2022 for $5,000, indicate that his yearly income will exceed $114,000. Ms Rochester stated Mr Artfull significantly underestimated his 2021-2022 income, and he has done the same thing again.

   …

   Mr Artfull' s estimate of income of $70,190 (annualised) is the first estimate election in the relevant year of income. The estimate period is from 1 July 2022 to 30 June 2023.

   Mr Artfull' s estimate of income is less than 85% of his 2020/2021 income of $159,629, which is the last relevant year of income.

   We are satisfied Mr Artfull made a valid estimate election.

   Mr Artfull' s income estimate election lodged on 14 June 2022 is the first estimate election in the relevant year of income. The estimate period is from 1 July 2022 to 30 June 2023. This is known as a whole year estimate of income.

   We must now consider whether all relevant income information was taken into account when [Mr Artfull lodged his income estimate election.

   Mr Artfull recorded when he made his estimate election that his gross income is $2,884 per fortnight.

   Mr Artfull stated when he lodged his estimate election that his income is $70,190 as he has changed employer.

   Ms Rochester advised us Mr Artfull's payslips indicate his annual income will exceed $114,000.

   Mr Artfull based his estimate on earning $2,884 gross per fortnight for the period 1 July 2022 to 30 June 2023. He declared he was not receiving an income from any other sources.

   As Mr Artfull's fortnightly income varies, it is appropriate to calculate his average fortnightly earnings over the period from 1 July 2022 to 23 November 2022. We find this will best represent his actual earnings through the estimate period. We have calculated Mr Artfull' s average fo1tnightly earnings are $4,148.06 gross or $4,148 (rounded) ($41,480.60/10). The amount calculated of $4,148 per fortnight is higher than $2,884 being the amount Mr Artfull estimated as his fortnightly income.

   With Mr Artfull underestimating his income from 1 July 2022, we find his estimate election is not a true reflection of his expected income, as it is likely his actual income will be higher than his estimated amount.

   We can refuse to accept an estimate of adjusted taxable income if we are satisfied that the parent's partial year income amount is less than what we consider is likely to be the parent's actual adjusted taxable income for the remaining period in relation to the income election (section 63AA(2)(a)).

   In this case we are satisfied Mr Artfull`s actual taxable income is likely to be higher than his estimate.

   Based on the information available we are satisfied that at the time Mr Artfull lodged his income estimate election that not all relevant income information was taken into account.

   On the available evidence we are satisfied Mr Artfull`s estimate election of $70,190 for the period 1 July 2022 to 30 June 2023 is less than what we consider is likely to be Mr Artfull`s actual adjusted taxable income for this period.

   Therefore, we refuse to accept Mr Artfull`s estimate of income of $70,190 (annualised) for the period 1 July 2022 to 30 June 2023.

   The objection is allowed.

3. Mr Artfull and Ms Rochester participated in the Tribunal’s hearing by conference telephone. The Tribunal took into account the Child Support hearing papers, and additional materials submitted by Mr Artfull prior to the hearing. Ms Rochester provided an email to the Tribunal following the hearing which was not accepted and not taken into account in the making of the decision.

4. Mr Artfull’s submissions at the hearing were consistent with his written submission to the Tribunal:

   Background – I worked as [an Occupation 1] from 2008 until September 2021. I resigned in September 2021 due to ill mental health after Ms Rochester unilaterally relocated from [Town] where we lived, to [City] NSW with our three children in February 2021. When I resigned, I received a lump-sum payment of leave entitlements. I advised CSA of this lump sum, however as my CSA collect case had started after I received that payment I did not have to pay child support on that amount at that time. I lodged an estimate and it was accepted, however at the end of that financial year my earnings were conciliated at approx. 166k and I received an arrears CS amount of about 7k, which was garnished from my tax return 21/22.

   Advice was sent to Ms Rochester and It appeared to her that I had deliberately underestimated my yearly income as no explanation was given to her by CSA as to why my estimate was lower than what I actually received. This caused a lot of angst between Ms Rochester and I as she believed that I had deliberately underestimated my income and she repeatedly refers to it in her original objection form (Pg 85 – He significantly underestimated his 2021-2022 income and he has done the same again… Pg 100 “He significantly underestimated his 2021-2022 income and he has done the same again”).

   I commenced new employment with [Employer] as [an Occupation 2] in mid-December 2021. My salary and leave entitlements were reduced to approximately $69,160 P/A. Due to my previous years’ income, I received advice from CSA to lodge another estimate prior to the end of the financial year (2022) or my estimate would revert to 166k due to the previous year’s income (that included my severance payment). On 14 June 2022 I submitted an income estimate which was accepted on the 28 June 2022 – Annualised estimate $70,190 (pg 31).

   The pay slip I had at the time is what I used to make that estimate is Attachment to Docs A1. (At pg 133 is a supplementary payslip for the same period which was issued to include an underpayment of a travel allowance).

   This pay slip included the 15 previous fortnights between 16 Dec 2021 and 9 June 2022 in the YTD Column. I used this YTD column and divided it by 15 and then multiplied by 26 to be able to estimate my income for the following financial year. This calculation came to $76,949. At the time I had an investment property which would normally return an annual deficit of $6,000 P/A. This is why I lodged an income estimate of $70,190.

   I received a pay-raise of $5 per hour in July 2022, and at the same time decided to sell my investment property as interest rate rises were becoming too much for me to afford. I sold the house in October 2022 at a capital loss of 50k. I incurred $18,980 in real-estate fees for the sale of the house. I calculated that this would offset the pay rise and overtime for the year and my financial income for the year was still within 10% of my estimate. I forwarded this document to CSA (Pg 121).

   …

5. Simply put, Mr Artfull suggests he made a genuine estimate with the best information available to him at the time he made it.

6. In short, Ms Rochester contends that Mr Artfull’s estimated income was not genuinely made. It should have been clear at the time the estimate was made that he would likely earn considerably more; this much is borne out by the subsequent series of payslips revealing a much higher income than projected by Mr Artfull.

7. The pivotal provision in this application is section 63AA of the Child Support (Assessment) Act1989:

   63AA  Registrar may refuse to accept an income election

   (1)  If:

   (a)  a parent makes an income election to which subsection 60(2) applies; and

   (b)  the Registrar is satisfied that the amount worked out under that subsection is less than the amount that the Registrar considers is likely to be the parent’s actual adjusted taxable income for the year of income to which the income election relates;

   the Registrar may refuse to accept the income election.

   (2)  The Registrar may refuse to accept a parent’s income election to which subsection 60(3) applies if the Registrar is satisfied that:

   (a)  the partial year income amount for the income election is less than the amount that the Registrar considers is likely to be the parent’s actual adjusted taxable income for the remaining period in relation to the income election; or

   (b)  the total of the income component amounts estimated by the parent under paragraph 60(3)(b) for the period referred to in that paragraph is more than the amount that the Registrar considers is likely to be the total of the actual income component amounts for the parent for that period.

   (3)  If:

   (a)  a parent makes an election under subsection 62A(1); and

   (b)  the Registrar is satisfied that the partial year income amount for the income election is less than the amount that the Registrar considers is likely to be the parent’s actual adjusted taxable income for the remaining period in relation to the income election;

   the Registrar may refuse to accept the income election.

   (4)  In making the decision as to whether to refuse to accept the income election, the Registrar:

   (a)  may act on the basis of information that the Registrar has received or obtained as to the financial circumstances of the parent; and

   (b)  may, but is not required to, conduct an inquiry into the matter.

   (5)  Except for the purposes of Parts VII, VIIA and VIII of the Registration and Collection Act (dealing with objections and appeals), if the Registrar refuses to accept the income election, the election is taken never to have been made.

8. In short, the Registrar may refuse to accept an income election if the estimated amount is less than the amount that the Registrar considers is likely to be the parent’s actual adjusted taxable income for the year of income to which the income election relates.

9. A record of Mr Artfull’s online submission on 14 June 2022 appears at folio 25 of the Child Support hearing papers. He reported employment income expected for the period 1 July 2022 to 30 June 2023 as $2,884 per fortnight. He was asked to record gross rental income ($33,984) and “rental deduction” ($40,000). He also recorded $5,000 worth of “allowable deductions”. In his written application to the Tribunal, Mr Artfull advises that he arrived at the estimate of $70,190 by deducting some $6,000 from a figure of some $76,000. I can only speculate that it appears Mr Artfull may have claimed the “net rental property loss” (which I note is effectively disallowed when arriving at a person’s adjusted taxable income for child support purposes) as an “allowable deduction”.

10. I note that the test here is not whether Mr Artfull’s estimate was genuinely made. His state of mind is not determinative. The test is whether the Registrar could reach a level of satisfaction on the facts known at the time that the estimate was likely to be lower than the actual adjusted taxable income.

11. Putting to one side the possibility that Mr Artfull had effectively claimed a rental loss against his salary – which would, of itself, provide a basis for the Registrar to doubt the estimate – I observe that the payslip for the fortnight ended 22 June 2022 (folio 133) which encompasses the period when Mr Artfull made his estimate election records an annual salary of $69,160. This would be the starting point, and it is only around $1,000 less than Mr Artfull’s estimated income. The additional payslip provided by Mr Artfull for the fortnight ended 22 June 2022 (folio A1) was issued at a later date and contains more information. It reveals a “YTD” of base hourly amount of $32,042.50 and a fortnightly base of $2,660; dividing the latter sum into the year-to-date figure yields a figure of 12, suggesting that there were 12 pay fortnights in the financial year leading up to the fortnight ended 22 June 2022.

12. Mr Artfull’s submission is that he divided his total year-to-date (including overtime) income by 15 fortnights. This appears a mistake on his part. On that basis, the estimated income was always likely to be too low given Mr Artfull significantly overestimated the number of total fortnights. It is notable, too, that by the fortnight ended 22 June 2022, Mr Artfull had derived nearly $10,000 in overtime; extrapolating that figure out to some $20,000 and adding that to a “base figure” of $70,000 would lead to an expectation of $90,000, and indeed the subsequent payslips bear that out with a considerable level of overtime pushing Mr Artfull’s adjusted taxable income far beyond the estimated income he supplied.

13. Accordingly, I am comfortably satisfied that the Registrar ought to have exercised the discretion to refuse to accept Mr Artfull’s income election. That election is taken not to have been made; as a consequence, the assessment falls to be made on Mr Artfull’s much higher 2021–22 adjusted taxable income.

14. The decision under review will therefore be affirmed.

15. I understand Mr Artfull will find this outcome unsatisfactory. He might suggest it would be just and equitable for his child support liability from 1 July 2022 to be calculated upon a figure more in line with his actual level of income. I note that he is at liberty to apply for a departure from the formula assessment (commonly referred to as a “change of assessment” application); in certain limited circumstances, assessments can be backdated for a period of up to 18 months.

DECISION

The decision under review is affirmed.