Bissett and Romney (Child support)

[2019] AATA 5016

Bissett and Romney (Child support) [2019] AATA 5016 (28 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017087

APPLICANT:  Mr Bissett

OTHER PARTIES:  Child Support Registrar

Ms Romney

TRIBUNAL:Member Y Webb

DECISION DATE:  28 October 2019

DECISION:

The decision under review is set aside and the matter is sent back to the Child Support Registrar for reconsideration in accordance with the directions that:

• The Registrar was entitled to review and amend the estimate for the period 2 July 2016 to 30 June 2017 (and apply it to the assessment for the period 2 July 2016 to 28 March 2017);

• The amended estimate is to be recalculated to ensure that the annualised income used in the assessment is accurate.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – review of an estimate of income - whether there is an income amount order – the Registrar not prevented from reviewing the estimate – income not accurately determined - decision under review set aside and sent back with direction for reconsideration

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed 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 decision by the Department of Human Services (“Child Support Agency”) to review Mr Bissett’s estimate of $27,071 for the period 1 July 2016 to 30 June 2017 and replace it with an adjusted taxable income of $152,078 (annualised) for the period 2 July 2016 to 30 June 2017 (applied to the assessment for the period 2 July 2016 to 28 March 2017).

2. The Child Support Agency made the above decision on 9 May 2019 and it was affirmed by an objections officer on 31 July 2019.

3. The decision had the effect of creating arrears of child support payable by Mr Bissett of $12,121.46.

4. Mr Bissett and Ms Romney are the parents of three children: twins aged 14 and a younger child aged 9.

5. On 22 June 2016 the Child Support Agency accepted Mr Bissett’s income estimate of $27,071 and applied it to the child support assessment for the 2016/2017 financial year.

6. On 29 March 2017 the Family Court of Australia made consent orders which in relation to child support required Mr Bissett to make certain non-periodic payments (predominantly education and medical expenses). These non-periodic payments were detailed in paragraph 10 of the orders. In addition, the orders at paragraph 11 stated:

   “That any administrative assessment requiring the payment of periodic child support by the Husband or the Wife that may issue from time to time by the Child Support Agency in accordance with the Child Support Assessment Act is to be varied to nil.”

7. Paragraph 12 of the orders stated:

   “That orders 10 and 11 continue until the happening of a child support terminating event as defined in the Child Support Assessment Act.”

8. Section 119 of the Child Support (Assessment) Act 1989 provides that when a court’s decision under the child support legislation becomes final, the Registrar must immediately take such action as is necessary to give effect to the decision in relation to any administrative assessment that has been made in relation to the children, the carer entitled to child support and the liable parent (whether by amending the assessment or otherwise).

9. The court-varied assessment did not include any statement about the status of arrears nor did it refer to the operative date of the departure decision. The Child Support Agency decided that, in accordance with its standard rule when the operative date is not referred to in the court orders, the orders would be registered as operating from the date of the orders; that being 29 March 2017.

10. Mr Bissett and Ms Romney attended the hearing on 17 October 2019 by way of a telephone conference and both gave evidence on affirmation.

11. The Child Support Agency provided a large bundle of documents numbered from page 1 to 632 (marked as Exhibit C1) and a small bundle numbered from page 633 to 641 (marked as Exhibit C2).

12. The Tribunal deferred making a decision to research the law more fully. The Tribunal reconvened on 28 October 2019 and made its decision.

CONSIDERATION

1. The legislation 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.

2. The rate of child support payable by a 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 of children, the level of care provided and the income of each parent. The specific income quantity is called a person’s adjusted taxable income, which is defined in section 43 of the Assessment Act.

3. The statutory scheme provides some flexibility for parents whose circumstances change from one year to the next. Relevantly, in specified circumstances, section 60 of the Assessment Act allows a person to elect that their adjusted taxable income is their current adjusted taxable income rather than the adjusted taxable income from the previous financial year, providing that their election is not more than 85% of the adjusted taxable income for the last relevant year of income for the child support period.

4. The Child Support Agency may refuse to accept the estimate if it is not accurate (section 63AA of the Assessment Act). Otherwise, it must accept the estimate and give effect to it.

5. If the Child Support Agency accepts an estimate election, the income estimate amount becomes the adjusted taxable income amount for the purposes of assessing the annual rate of child support payable in the application period (subsection 61(1A) of the Assessment Act).

6. In Mr Bissett’s case he lodged an estimate on 22 June 2016 and the Child Support Agency accepted the 2016/2017 estimate and applied his estimated income of $27,071 per annum in the child support assessment for that financial year. The Child Support Agency confirmed that it had accepted Mr Bissett’s estimate of income for the 2016/2017 year by its letter of 22 June 2016. The Child Support Agency issued a notice dated 23 June 2016 pursuant to section 160 of the Assessment Act informing Mr Bissett that he must provide information (within 14 days) regarding any event or change of the types listed in the notice and which may affect his estimate of adjusted taxable income or his estimate of the income component amounts.

7. After the end of the income year the Child Support Agency is required to undertake a reconciliation calculation which compares the parents’ estimated income with their actual income. If the actual income is higher than the estimated income, their assessment must be amended to use the actual income (sections 64 and 64A of the Assessment Act).

8. However, subsection 64(5) of the Assessment Act provides that section 64 does not apply “if an income amount order applies in relation to the parent and any part of the application period for the income election”.

9. An “income amount order” is defined in subsection 5(1) of the Assessment Act. It includes a departure order under Division 4 of Part 7 of the Assessment Act.

10. In this case, the Family Court of Australia made consent orders dated 29 March 2017 which, in relation to child support, required Mr Bissett to make certain non-periodic payments (including educational expenses and medical expenses). The orders included the following at paragraphs 11 and 12:

    Para 11: “That any administrative assessment requiring the payment of periodic child support by the Husband or the Wife that may issue from time to time by the Child Support Agency in accordance with the Child Support Assessment Act is to be varied to nil.”

    Para 12: “That orders 10 and 11 continue until the happening of a child support terminating event as defined in the Child Support Assessment Act.”

11. These orders in relation to child support were made pursuant to section 117 of the Assessment Act. The Tribunal finds that the Family Court of Australia consent orders constituted an “income amount order” and that the orders varied the administrative assessment to nil.

12. The consent orders did not include any statement about the status of arrears nor did they refer to the operative date of the child support departure order. The Child Support Agency registered the child support departure order as operating from the date of the order; that is, from 29 March 2017. The Tribunal is satisfied that was correct. However, the issue of arrears calculated prior to that date or subsequently calculated to be applicable to a period prior to that date was the contentious issue.

13. In a previous decision of the Administrative Appeals Tribunal based on the same facts as this matter, the Tribunal decided on 8 November 2018 that due to the income amount order applicable from 29 March 2017, the Child Support Agency could not conduct an estimate reconciliation for the 2016/2017 year using the provision of Division 7A of Part 5 of the Assessment Act. This was because section 64(5) provides that section 64 does not apply “if an income amount order applies in relation to the parent and any part of the application period for the income election”. In other words, the Tribunal found that the Child Support Agency could not reconcile the estimate for the full financial year because there was an income amount order in place for part of that financial year.

14. In the current matter, the Child Support Agency wrote to Mr Bissett on 9 May 2019 advising that it had recalculated the child support assessment for the period 2 July 2016 to 30 June 2017 using an income amount of $152,078. The Child Support Agency issued a notice pursuant to section 160 of the Assessment Act dated 9 May 2019 informing Mr Bissett that he must provide information (within 14 days) regarding any event or change of the types listed in the notice and which may affect his estimate of adjusted taxable income or his estimate of the income component amounts.

15. The Child Support Agency sent a letter to Mr Bissett dated 22 May 2019 explaining that it had decided to review his income estimate of $27,071 (pursuant to sections 63A or 63B of the Assessment Act) because in a discussion with Mr Bissett on 30 April 2019 Mr Bissett had confirmed that he received a trust distribution in February 2018 and that the trust distribution applied to the full 2016/2017 year. Hence, the Child Support Agency decided to review Mr Bissett’s income estimate of $27,071 and replace it with an income of $152,078 for the period 2 July 2016 to 30 June 2017 and apply it to the assessment for the period 2 July 2016 to 28 March 2017. The Child Support Agency advised that as a result of the amended estimate Mr Bissett was liable for arrears of $12,121.46.

16. On 29 May 2019 Mr Bissett objected to that decision but his objection was disallowed.

17. The Tribunal considered sections 63A and 63B of the Assessment Act. These sections permit the Registrar to review an income estimate and decide if it is still accurate and, if not, to amend the assessment to use a more accurate figure as the parents’ income.

18. The Registrar can amend an assessment based on an estimate in a number of different circumstances including if the Registrar becomes aware of an event that has affected the accuracy of the estimate (section 63A of the Assessment Act).

19. In this case the Child Support Agency became aware of a trust distribution to Mr Bissett. While it is appears that the Child Support Agency received  bank statement evidence of the precise amount received from the trust, the Tribunal does not appear to have been provided with that evidence. Notwithstanding, the Tribunal is satisfied that Mr Bissett’s income tax return for the 2016/2017 year showed that he had an adjusted taxable income of $149,647[1] which included trust income totalling $128,167. The Child Support Agency specified the information it had received from the Australian Taxation Office and the Tribunal is satisfied that that information is correct. Mr Bissett confirmed this trust income amount to the Child Support Agency on 15 March 2018[2]. The remaining income comprised interest and investment income of $3,518[3]; employment income of $21,372 and deductions (the amount of which could not be verified on the information provided). Unfortunately, while the Tribunal was satisfied that the Australian Taxation Office provided details of Mr Bissett’s interest/investment income and employment income in the 2016/2017 year[4], it was not clear what amounts were included in his income tax return in relation to these two components.

    [1] C1: 318

    [2] C1: 232

    [3] C1: 553

    [4] C1: 553

20. Mr Bissett explained in relation to the trust distribution that it was not received until 8 February 2018. It was a net amount of $100,000 which was gifted to him by his father. Mr Bissett did not know that he would be receiving it until very shortly before he received it. It was more tax effective for his father to make the gift via a distribution from his family trust than by a direct payment to him. However, as a consequence, it was necessary for the amount to be included in Mr Bissett’s income tax return for the 2016/2017 year. He does not consider that it is fair or reasonable to include this amount as income in the 2016/2017 year.

21. Ms Romney submitted that whatever the outcome, the matter should be decided correctly according to the law.

22. The Tribunal accepts the circumstances in which the trust distribution was made to Mr Bissett. However, it was included in his income tax return for the 2016/2017 year. The Australian Taxation Office has included the trust distribution as taxable income for the 2016/2017 year and on that basis, the Tribunal finds that the trust distribution forms part of Mr Bissett’s adjusted taxable income in the 2016/2017 year.

23. While the Tribunal agrees that the Child Support Agency was entitled to review and amend the assessment for the period 2 July 2016 to 30 June 2017 and apply it to the assessment for the period 2 July 2016 to 28 March 2017, the Tribunal does not agree that Mr Bissett’s revised estimate of income is $151,661.81 (prior to annualising) or the annualised figure of $152,078. The Tribunal considered the calculations of the objections officer and it finds that the investment and interest income has been incorrectly calculated to be $2,953 for the 2016/2017 year. The information obtained from the Australian Taxation Office shows that the income from investments and interest in the 2016/2017 year was $3,518[5] (an amount on 31 August 2016 of $209 being omitted and the objections officer’s figures being inaccurately added in any event). For one day, this would calculate to $9.63175 and multiplied by 364 = $3,505.9602, rather than $2,946 as calculated by the objections officer. The Tribunal is also concerned that Mr Bissett stated that his interest was only $403 for the whole of the 2016/2017 year[6] (rather than $3,518) but the Tribunal cannot verify what was included in his income tax return. In addition, it appears that there is an error with the deductions figure (which was not able to be verified in the C1 papers) because the reduced value of the various components of Mr Bissett’s adjusted taxable income (due to calculating their value for 364 days and 238 days for the employment income) add up to $152,515.96 (before annualising) which is significantly higher than Mr Bissett’s adjusted taxable income for the whole year of $149,647, and yet deductions are stated to be only $295 for the whole year. It is also apparent that some of the amounts provided by the Child Support Agency have been calculated on a year being 365.25 days and other components on a year being 365 days. This makes only a very minor difference to the calculations but nonetheless, the amount should be calculated exactly.

    [5] C1:553

    [6] C1:480

24. The Tribunal has not been provided with Mr Bissett’s income tax return for the 2016/2017 year or other information which may clarify the above issues, and therefore it will be necessary for the Child Support Agency to recalculate the amended estimate of income for the period 2 July 2016 to 30 June 2017.

DECISION

The decision under review is set aside and the matter is sent back to the Child Support Registrar for reconsideration in accordance with the directions that:

• The Registrar was entitled to review and amend the estimate for the period 2 July 2016 to 30 June 2017 (and apply it to the assessment for the period 2 July 2016 to 28 March 2017);

• The amended estimate is to be recalculated to ensure that the annualised income used in the assessment is accurate.