Brickey and Haseltine (Child support)

[2021] AATA 5191

Brickey and Haseltine (Child support) [2021] AATA 5191 (7 December 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC022033

APPLICANT:  Mr Brickey

OTHER PARTIES:  Child Support Registrar

Ms Haseltine

TRIBUNAL:Member M Douglas

DECISION DATE:  07 December 2021

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 direction that for the purpose of the calculating the “actual ATI amount” of Mr Brickey under subsection 64A(2) of the Child Support (Assessment) Act 1989 (the Act) the amount in subparagraph 64A(2)(a) of the  Act for Mr Brickey’s actual adjusted taxable income for the year is $1,905,329. 

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether the adjusted taxable income of the liable parent was correctly applied – adjusted taxable income should be used rather than modified figure - decision under review set aside and the matters sent back for reconsideration with directions

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 Brickey and Ms Haseltine are the parents of [three named children].  With effect from 7 August 2013, the Child Support Registrar has issued administrative assessments of child support for those children.

2. The Child Support Registrar acts through staff employed within the government agency known as Services Australia – Child Support.  It is convenient to refer to the Registrar and the staff of that agency who make decisions on behalf of the Registrar, as Services Australia.

3. The assessment of child support in force as at 5 February 2020 used an adjusted taxable income for Mr Brickey of $374,601, which was his taxable income for the 2019 financial year. On 5 February 2020 Mr Brickey made an election under subsection 60(1) of the Child Support (Assessment) Act 1989 (the Act) that his adjusted taxable income be nil for the period 5 April 2020 to 30 June 2020.[1]  In accordance with subsection 61(1) that amount became Mr Brickey’s adjusted taxable income for the period 5 February 2020 to 30 June 2020.

   [1] Pages 118-121 of the documents Services Australia provided the Tribunal in accordance with subsection 37(1) of the Administrative Appeals Tribunal Act 1975 (the hearing papers).

4. At the time Mr Brickey made that income estimate election, Mr Brickey was also required by subparagraph 60(3) to estimate his year to date income; that is, his income for the period 1 July 2019 to 4 February 2020.  He advised Services Australia it was $1,738,557.[2]

   [2] Pages 111 and 121 of the hearing papers.

5. On 26 May 2020 Mr Brickey revoked, pursuant to subsection 62(1) of the Act, the income estimate election he made on 5 February 2020.  In accordance with subsection 62A(1), he made a further election that his adjusted taxable income be $26,671 for the period from 26 May 2020 to 30 June 2020.[3]  In accordance with subsection 63(1), that became Mr Brickey’s adjusted taxable income for the period 26 May 2020 to 30 June 2020.

   [3] Pages 214 and 321 of the hearing papers.

6. On 27 May 2021 Services Australia ascertained from the Australian Taxation Office that Mr Brickey’s taxable income for the 2019/2020 financial year was $1,905,329.[4]  Subsection 64(2) of the Act required Services Australia, upon ascertaining that, to establish whether the sum of Mr Brickey’s actual taxable income for the 2019/20 year and the amount he advised Services Australia for his year to date income to 4 February 2020 was greater than his estimates of income that he had elected be used as his adjusted taxable incomes for the period 5 February 2020 to 30 June 2020.

   [4] Pages 269 and 309 of the hearing papers.

7. Services Australia calculated it was greater and, as a consequence, Services Australia was thereupon required by subsection 64A(2) of the Act to recalculate the adjusted taxable incomes used for Mr Brickey in the period 5 February 2020 to 30 June 2020 in accordance with the method stipulated by subsection 64A(4) of the Act. Upon doing that, Services Australia was required under section 64AA of the Act to amend the assessment such that it was based on those recalculated income amounts.

8. On 27 May 2021, Services Australia carried out that recalculation and notified both Mr Brickey and Ms Haseltine that it had amended the assessment so as to use an adjusted taxable income for Mr Brickey of $401,029 for the period 5 February 2020 to 25 May 2020 and $427,700.81 for the period 26 May 2020 to 30 June 2020.[5] 

   [5] Pages 269-276 of the hearing papers.

9. On 12 June 2021 Mr Brickey objected to Services Australia’s decision to change his adjusted taxable incomes for the period 5 February 2020 to 30 June 2020.

10. In the process of considering Mr Brickey’s objection, Services Australia decided, under subsection 63AE(1) of the Act, to replace the year-to date-income Mr Brickey had notified it on 5 February 2020 with an amount of $1,777,862.12.[6] Having done that Services Australia then “partly allowed” Mr Brickey’s objection and decided, pursuant to subsection 64A(2) of the Act, that his adjusted taxable income for the period 5 February 2020 to 25 May 2020 be $303,431.80 and for the period 26 May 2020 to 30 June 2020 it be $330,116.95.[7]  On 29 July 2021 Services Australia notified Mr Brickey and Ms Haseltine of both of its decision under subsection 63AE(1) to vary Mr Brickey’s year-to-date income and its objection decision to change Mr Brickey’s adjusted taxable incomes for the period 5 February 2020 to 30 June 2020.

    [6] Page 19 of the hearing papers.

    [7] Pages 339 and 342 of the hearing papers and pages 30-35 of the hearing papers.

11. On 3 August 2021 Mr Brickey applied to the Tribunal for review of Services Australia’s objection decision.  The Tribunal heard his application on 7 December 2021. No one from Services Australia participated in the hearing. Ms Haseltine did not participate in the hearing.  Mr Brickey appeared in person and gave brief sworn oral evidence. 

12. The Tribunal notes there has been no challenge to the decision of Services Australia under subsection 63AE(1) of the Act to substitute the amount of $1,738,557 that Mr Brickey advised Services Australia on 5 February 2020 for his year-to-date income with the amount of $1,777,862.12.  By virtue of Item 11D of the Table in section 80 of the Child Support (Registration & Collection) Act 1988, Mr Brickey is the only party who can object to that decision and he has not.

13. As mentioned above, Services Australia ascertained Mr Brickey’s taxable income for the 2019/20 financial year was $1,905,392. The hearing papers also reveal that Services Australia modified that amount for the purpose of the reconciliation it was required to undertake under subsection 64A(2) by reducing it by $2,630.56 to $1,902,698.44.[8] That amount of $2,630.56 was the “partial year income amount” that Mr Brickey was required to estimate in accordance with subsection 64A(2) as part of the process of making his second income estimate election. This is apparent from the fact that the income election Mr Brickey actually made for the period 26 May 2020 to 30 June 2020, which comprises 36 days, was $26,671. In other words, when that amount is divided by 36 the amount of $2,630.56 is achieved.

    [8] Page 259 of the hearing papers.

14. Section 64A of the Act reads as follows:

    Reconciliation using a parent’s actual adjusted taxable income--more than one income election

    (1)  This section applies for the purposes of assessing a parent in relation to the costs of a child of the parent for a day in a child support period if:

    (a)  the day occurs in the application period for an income election relating to a year of income that was made by the parent; and

    (b)  the parent made more than one income election relating to the year of income; and

    (c)  the parent‘s actual adjusted taxable income for the year of income has been ascertained by the Registrar; and

    (d)  if the Registrar has made a determination under subsection 64AB(1) in relation to the parent--the parent‘s actual adjusted taxable income for the year of income is more than the parent‘s determined ATI for that year; and

    (e)  if, under section 63A, 63B or 63C, the Registrar has amended an assessment of child support payable by or to the parent—the Registrar determines that this section should apply in relation to the parent.

    Reconciliation

    (2)  Subject to this section, if the difference (the actual ATI amount ) between:

    (a)  the parent‘s actual adjusted taxable income for the year of income; and

    (b)  the parent‘s applicable year to date income amount (if any) for the year of income;

    is more than the parent‘s estimated ATI amount for the year of income, then the parent‘s adjusted taxable income for a day that occurs in the application period of each income election made by the parent is taken to be, and to have always been, the amount worked out for that income election using the method in subsection (4).

    Estimated ATI amount

    (3)  The parent‘s estimated ATI amountfor the year of income is worked out using the following method:

    Method statement

    Step 1. For each income election relating to the year of income that had an application period that ended before the last day of the year of income:

    (a)      if subsection 60(2) applied to the income election--divide the amount that applied under that subsection by 365; or

    (b)  otherwise divide the partial year income amount worked out under subsection 60(4) or 62A(1) by the number of days in the remaining period to which the income election related.

    Step 2. For each of those income elections, multiply the result of step 1 by the number of days in the application period for the income election.

    Step 3. Add up each of the amounts worked out under step 2.

    Step 4. Add the result of step 3 and the partial year income amount worked out under subsection 62A(1) for the last income election relating to the year of income that was made by the parent.

    Amount for the purposes of subsection (2)

    (4)  For the purposes of subsection (2), the amount for each income election is worked out using the following method:

    Method statement

    Step 1.  Subtract the parent‘s estimated ATI amount from the parent‘s actual ATI amount.

    Step 2. Divide the result by the total number of days in the application periods for each income election relating to the year of income that was made by the parent. The result is the additional daily rate .

    Step 3.  For each of those income elections, multiply the additional daily rate by the number of days in the application period for the income election. The result is the underestimated amount for the income election.

    Step 4. For each of those income elections, add the underestimated amount for the income election and:

    (a)  if the income election had an application period that ended before the last day of the year of income--the amount worked out for the income election under step 2 of the method statement in subsection (3); or

    (b) otherwise--the partial year income amount worked out under subsection 62A(1) for the income election.

    Step 5. For each of those income elections:

    (a) divide the result of step 4 by the number of days in the application period for the income election; and

    (b)  multiply the quotient by 365.

    Income amount orders

    (5)  This section does not apply if an income amount order applies in relation to the parent and any part of an application period for any of the income elections.

15. As noted above, for the purpose of paragraph 64A(2)(a) Services Australia “modified” the  amount it ascertained from the Australian Taxation Office for Mr Brickey’s actual taxable income for the 2019/20 year. That is, rather than using his actual taxable income of $1,905,328.00, it used an amount of $1,902,694.44.  The hearing papers do not include the actual steps of the calculation that Services Australia did under subsections 64A(2) and 64A(4), but the Tribunal has performed that calculation using the modified amount of $1,902,694.44 and the amount that Services Australia determined for Mr Brickey’s year-to-date income by its decision of 29 July 2021; that is, $1,770,862.12. 

16. Using those figures, an actual ATI amount for Mr Brickey, as calculated under subsection 64A(2), is $124,836.32. Mr Brickey’s estimated ATI amount, as calculated under section 64A(3) is $2,630.56, given that he elected to use an estimate of income of nil for the period 5 February 2020 to 25 May 2020 and, as earlier mentioned, his partial year income amount for his last income election was $2,630.56.

17. Step 1 of the calculation to be done under subsection 64A(4), using an actual ATI amount of $124,836.32, produces a result of $122,205.76.  Step 2 produces a figure of $831.33. Step 3 produces an amount of $92,277.63 for the first election period and $29,927.88 for the second election period.  Step 4 produces a figure of $92,277.63 for the first election period and $32,558.445 for the second election period.  Step 5 then produces the adjusted taxable incomes of $303,431 and $330,116 that Services Australia used in the amended assessments of child support that followed its objection decision of 29 July 2021.

18. There is no provision within the legislation that permitted Services Australia to modify Mr Brickey’s actual adjusted taxable income for the purposes of the calculations Services Australia did under subsection 64A(2). That is to say, Services Australia had to use the taxable income for Mr Brickey that it ascertained from the Australian Taxation Office and not the modified figure it used, to establish what Mr Brickey’ actual ATI amount was for the purposes of reconciling his estimate of income with his actual taxable income.

19. Consequently, Services Australia’s objection decision of 29 July 2021 is wrong.

20. The Tribunal will consequently set aside that decision and remit the matter to Services Australia in order that it can conduct the reconciliation in accordance with subsection 64A(2) of the Act using Mr Brickey’s actual adjusted taxable income for the 2020/21 year.

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 direction that for the purpose of the calculating the “actual ATI amount” of Mr Brickey under subsection 64A(2) of the Child Support (Assessment) Act 1989 the amount in subparagraph 64A(2)(a) of the Act for Mr Brickey’s actual adjusted taxable income for the year is $1,905,329.