Boer and Magee
[2017] FCCA 1970
•18 August 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BOER & MAGEE | [2017] FCCA 1970 |
| Catchwords: CHILD SUPPORT – Application pursuant to s.112 of the Child Support (Assessment) Act for leave for the court to make an order under s. 118 of the Child Support (Assessment) Act in respect of a day in a child support period more than 18 months but less than 7 years earlier – leave granted – concurrent determination of whether an order should be made pursuant to s. 118 – departure order made. |
| Legislation: Child Support (Assessment) Act 1989, ss.56, 58, 98S, 111, 112, 117, 118 |
| Applicant: | MR BOER |
| Respondent: | MS MAGEE |
| Amicus Curiae: | CHILD SUPPORT REGISTRAR |
| File Number: | NCC 397 of 2017 |
| Judgment of: | Judge Terry |
| Hearing date: | 7 August 2017 |
| Date of Last Submission: | 7 August 2017 |
| Delivered at: | Newcastle |
| Delivered on: | 18 August 2017 |
REPRESENTATION
| The Applicant: | In Person |
| The Respondent: | In Person |
| For the Amicus Curiae: | Lyn James Acting Principal Government Lawyer, Legal Services Division, Department of Human Services |
ORDERS
Pursuant to s. 112 of the Child Support (Assessment) Act 1989 leave is granted for the court to make an order under s. 118 of the Child Support (Assessment) Act 1989 in respect of a day in a child support period which is more than 18 months but less than 7 years earlier than the day on which the application is made.
Noting that the court is satisfied that it is just and equitable and otherwise proper to depart from the administrative assessment of child support payable by MR BOER to MS MAGEE for the support of [X] born 1994, [Y] born 1995 and [Z] born 1997;
the amount of child support payable by MR BOER for the periods until 9 July 2015 shall be set at the amount of child support already paid as at the date of this order, including any funds held by the Child Support Registrar and yet to be disbursed.
The application filed on 17 February 2017 is otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Boer & Magee is approved pursuant to s.110X(4)(h) of the Child Support (Registration and Collection) Act 1988 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 397 of 2017
| MR BOER |
Applicant
And
| MS MAGEE |
First Respondent
And
| CHILD SUPPORT REGISTRAR |
(Amicus Curiae)
REASONS FOR JUDGMENT
Introduction
On 17 February 2017 Mr Boer filed an application seeking leave for the Child Support Registrar to make a determination under s. 98S of the Child Support (Assessment) Act in respect of assessments of child support made between 1 July 2008 and 11 September 2015.
He also sought an order that the child support for this period be set at a rate which meant that he owed no arrears of child support and that all “penalties/ interest/late fees” be “cancelled, waived or annulled” and that all intercepted tax returns be returned to him.
The purpose of Mr Boer’s application is to get rid of arrears of child support of about $55,000.00 and in a broad general sense there is merit in his application.
Mr Boer was first assessed to pay child support in 2000 and he paid regularly until his oldest child turned 18 in July 2015. He owed no arrears at that time and in fact was slightly in credit.
Later that year however he was re-assessed to pay a much higher level of child support for most of the period 2010 to 2015 after he late lodged his income tax returns for those years and declared double the income he had actually earned.
Mr Boer quickly discovered his mistake and lodged amended returns. The ATO accepted that he had made a mistake and issued amended income tax assessments but due to the operation of the Child Support (Assessment) Act the Child Support Registrar, for reasons which will be explained later, was unable to administratively amend the child support assessments it had issued based on the original income tax assessments.
Mr Boer has made his application to the court because it is the only way the situation can be rectified.
However although there is merit in Mr Boer’s application in a broad general sense there is a problem with the application he filed on 17 February 2017. All of his children are over 18 and the Registrar has no power to make a determination under s. 98S. The order Mr Boer needed to seek was that leave be granted for the court to make an order under s. 118 of the Child Support (Assessment) Act.
Mr Boer’s application was listed before me for hearing on 7 August 2017 and I granted him leave to orally apply to amend his application so that he sought an order which it was within the court’s power to make.
The respondent Ms Magee currently resides in the United States. It is tolerably certain that she has received by email a copy of the documents filed by Mr Boer and a copy of the order I made listing the matter for hearing on 7 August 2017. She has not filed a response nor has she ever given any indication of wishing to be heard about the matter.
Background
I am indebted to Lyn James of the Legal Services Division of the Department of Human Resources for the comprehensive summary of both the factual background and the applicable law which she provided as amicus curiae and I have drawn on her written submissions both in setting out the background to the matter and explaining the operation of the law.
Mr Boer and Mr Magee separated a long time ago. They have three children, [X] born 1994, [Y] born 1995 and [Z] born 1997. The child support liability for the children payable to Mr Magee commenced on 14 December 2000 and the case has been collectable by the Registrar since 16 December 2005.[1]
[1] Paragraphs 17 & 18, Submissions of the Child Support Registrar
Mr Boer always paid his assessed child support and when the case ended for the youngest child on 9 July 2015 Mr Boer was in credit in the amount of $1,253.42.
Mr Boer was however in default in respect of lodgement of his tax returns. In December 2015 he late lodged his returns for the 2009, 2010, 2011, 2012 and 2013 financial years and after issuing assessments the ATO notified the Child Support Registrar that Mr Boer had income of $120,300.00 for the 2009 financial year, $133,178.00 for the 2010 financial year, $132,204.00 for the 2011 financial year, $133,178.00 for the 2012 financial year and $151,512.00 for the 2013 financial year.
This was much higher than the income on which his child support had been assessed for those years and pursuant to s. 58A (2)(b) (i) of the Child Support (Assessment) Act the Registrar retrospectively amended the assessments for the most of the period from 1 July 2010 to 7 April 2015 resulting in Mr Boer owing a total of $54,143.64 arrears of child support.
When he became aware of this Mr Boer was horrified and perplexed but he quickly came to realise that in the income tax returns which he had prepared himself without the assistance of an accountant or tax agent he had duplicated his income for each year, so that in 2013 for example instead of showing an income of $76,800.00 he showed an income of $153,600.00.
Mr Boer promptly submitted amended income tax returns for each year and on 6 February 2016 the ATO issued amended assessments.
On the basis of the income in the amended returns Mr Boer had been historically assessed to pay child support on a slighter higher income than his actual income. However pursuant to s.56(2) of the Child Support (Assessment) Act the Registrar could not retrospectively apply these assessments because Mr Boer had not filed his tax returns by the date required by the Income Tax (Assessment) Act and because his amended taxable incomes for these years were lower than the taxable income on which he had been assessed.
Mr Boer was therefore left owing a debt of $54,143.64 with late payment penalties accruing.
Mr Boer immediately took steps to try and rectify the situation. He contacted the Registrar, he tried filing a change of assessment application which did not work because the assessments were more than 18 months old and unfortunately the first advice he received from a solicitor was to make a complaint to the Commonwealth Ombudsman who as it transpired could not do anything.
In due course he was advised by a Legal Aid lawyer to make an application to this court which he promptly did.
Whether leave pursuant should be granted under s. 112 for the court to make a departure order
S. 111(1) of the Child Support (Assessment) Act provides that:
(1)A liable parent, or a carer entitled to child support, (the applicant) may apply to a court having jurisdiction under this Act for leave for:
(a)the Registrar to make a determination under section 98S; or
(b) the court to make an order under section 118;
in respect of a day in a child support period, being a day that is more than 18 months, and less than 7 years, earlier than the day on which the application under this section is made.
S. 112(1) & (2) provide as follows:
If an application is made to a court under section 111, the court may grant leave for:
(a)the Registrar to make a determination under section 98S; or
(b) the court to make an order under section 118.
(2)The court may grant leave for an order to be made under section 118 if the court is satisfied that it would be in the interest of the parties to the proceeding for the court to consider, at the same time as it hears the application under section 111, whether an order should be made under section 118. If the court does so, the applicant is taken to have made an application to the court under section 116 for such an order.
S. 112(4) & (5) provide that:
(4)In considering whether to grant leave under subsection (1), the court must have regard to:
(a) any responsibility, and reason, for the delay in:
(i) making an application under section 98B or 116; or
(ii) making a determination under section 98S;
as the case requires; and
(b)the hardship to the applicant (other than the Registrar) if leave is not granted; and
(c)the hardship to the other party or parties (other than the Registrar) if leave is granted.
(5) The court may have regard to any other relevant matter.
There has been no undue delay in Mr Boer making an application. Since he first became aware of the problem in December 2015 he has made constant efforts to try to resolve the matter. There has never been a time when he has sat on his hands and done nothing.
It will cause considerable hardship to Mr Boer if he is not given leave to have the assessments reconsidered. He made a genuine error in preparing his original returns and it has resulted in assessments which are in no way commensurate with his income. He currently earns $77,428.00 per annum and has minimal assets. He can expect to have his future income tax refunds retained and his wages garnisheed if the matter is not resolved.
Mr Magee has not taken part in the proceedings and nothing is known of her circumstances other than that she is currently in the United States. She no longer has financial responsibility for the children who are all adults and she received child support prior to them turning 18 which the evidence suggests was appropriate given Mr Boer’s actual income. I cannot find that it would cause Mr Magee hardship if Mr Boer was given leave to proceed with an application for a departure order.
Whether the court should make a departure order
S. 117 of the Child Support (Assessment) Act provides as follows:
1.Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
S. 117(2) contains eight grounds of departure. Mr Boer could hope to rely on s. 117(2)(c) which provides that a ground of departure is:
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
If the court is satisfied that it should make a departure order a range of options are available as set out in s.118 (1).
One option is for the court to make is an order varying the payers adjusted taxable income and this was the option proposed by the Child Support Registrar. For reasons explained in detail in the written submissions filed by Ms James this would leave Mr Boer with a debt of either $5,000.00 or $6,000.00
Another option, which was discussed at the hearing, would be an order adjusting the annual rate of child support payable by Mr Boer to the amounts stood paid and disbursements. This was the outcome advocated for by Mr Boer.
Discussion
There is no justification for reconsidering Mr Boer’s assessments for the 2008 or 2009 financial years. He did not explain why he sought an order for those assessments to be reconsidered and I do not have the power to reconsider them anyway. Only assessments up to 7 years old as at the date the application is filed can be reconsidered.
Given the filing date of Mr Boer’s application I can reconsider the assessments dating back to March 2010 and I was specifically asked to reconsider the assessments for the period from 1 July 2010.
From that period the income Mr Boer actually received was half of the income he declared in the original tax returns he filed in late 2015. Using the figures in the original returns, which is all the Child Support Registrar can do absent a departure order, therefore results in an unjust and inequitable determination of the level of child support payable by Mr Boer.
I am satisfied that a ground of departure has been established but I must also be satisfied however of the matters in s. 117(1) (b) (ii).
Mr Boer paid child support throughout the period in question at or about the rate he would have been required to pay had he lodged his tax returns on time. Mr Magee and children received support throughout this period and I am satisfied that it would be just as equitable as regards the children, Mr Boer and Mr Magee to make an order setting Mr Boer’s child support at a rate commensurate with his actual income during this period.
I am also satisfied that it would be otherwise proper to make the order. This is not a case in which Mr Boer has ever sought to avoid paying child support or to cast the responsibility for supporting his child onto the public purse. He is in a predicament because of an error in completing his returns, not because he has ever sought to avoid his child support responsibilities.
The issue then is the form of order which should be made.
Ms James very helpfully provided a table setting out what the outcome would be if Mr Boer’s taxable income was adjusted as if he had lodged his income tax returns on time and correctly and alternatively if it was adjusted on the basis that he had lodged his income tax returns late but correctly.
In the first scenario Mr Boer’s debt would be reduced to $6,485.66 and in the second scenario would be reduced to $5,065.06.
A third option would be for the court to adjust Mr Boer’s annual rate of child support to the amount stood paid and disbursements.
At the hearing of the matter the court was advised there was a complication with this, namely that very recently the Child Support Registrar had retained Mr Boer’s tax refund of almost $3,000.00 although it had not yet disbursed it to Mr Magee.
If an order is made without reference to the tax refund then this amount would be refunded to Mr Boer. The alternative would be to order that Mr Boer’s annual rate of child support for the periods 1 July 2010 to 31 August 2012 and from 5 February 2013 to 9 July 2015 be set at the amount stood paid including any funds held by the Registrar.[2]
[2] The solicitor for the Child Support Registrar outlined in her comprehensive written submissions why the child support assessment for the period 1 September 2012 to 4 February 2013, which was set by a change of assessment decision, could not be changed.
During submissions Mr Boer said that if the Child Support Registrar retained the refund and he walked away without a debt that would be fair and I therefore intend to make the latter order.
It deprives Mr Magee of either $5,000.00 or $6,000.00 but Mr Boer has never been a child support avoider. Mr Magee received regular and reasonable child support for the children throughout their childhood and the children are now all adults.
For the avoidance of doubt I want to make it clear that my intention is to make an order which will result in Mr Boer having no further liability for child support. If there is an issue with the drafting of the order which means that this is not the outcome when the Child Support Registrar applies the order then Mr Boer should apply to the court to have the order corrected under the slip rule.
Mr Boer sought orders that all penalties, interest and late fees be cancelled/waived/annulled. I do not have the power to make that order. If there are late payment penalties which need to be dealt with Mr Boer will need to apply to the Child Support Registrar to administratively consider waiving them.
I certify that the preceding forty eight (48) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 18 August 2017
0
0