Brown and Wilson (Child support)

[2015] AATA 2001

Brown and Wilson (Child support) [2015] AATA 2001 (1 October 2015)

DIVISION  Social Services & Child Support Division

APPLICANT  Mr Brown

OTHER PARTIES  Mrs Wilson

Child Support Registrar

DECISION DATE  1 October 2015

DECISION

The tribunal affirms the decision under review.

CATCHWORDS
Child Support - Particulars of the administrative assessment - Taxable income as assessed under “an Income Tax Assessment Act” 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 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 application relates to a decision by the Department of Human Services – Child Support (the Department) to apply Mr Brown’s adjusted taxable income of $52,316 for the 2005/2006 financial year to the administrative assessment of child support for the period 1 July 2006 to 30 September 2007.

2. Mr Brown and Mrs Wilson are the separated parents of [their child].  Mr Brown is the payer of child support and Mrs Wilson the payee.

3. On 9 August 2010 the Australian Tax Office (ATO) provided information to the Department about Mr Brown’s 2005/2006 taxable income.

4. On 26 March 2015 an employee of the Department made a decision to apply Mr Brown’s 2005/2006 taxable income of $52,316 to the administrative assessment of child support for the period 1 July 2006 to 30 September 2007.

5. Mr Brown objected to this decision on 20 April 2015.  On 18 June 2015 an objections officer of the Department disallowed the objection.

6. On 18 June 2015 Mr Brown lodged an application with the Social Security Appeals Tribunal for an independent review of the Department’s decision.  The hearing was held on 2 September 2015, on which date Mr Brown and his [representative] spoke to the tribunal by conference telephone.  Mrs Wilson did not participate in the hearing.  The tribunal was assisted in this matter by documents provided by the Department numbered 1 to 83, copies of which had been provided to each of the parties prior to the hearing.  Following the hearing the tribunal deferred to allow Mr Brown to provide further information to the tribunal and to research the law.  The tribunal received a further email from Mr Brown’s representative which was provided to Mrs Wilson for her information, and the tribunal made a decision in this matter on 1 October 2015.  Information received from Mr Brown’s representative subsequent to this date was not considered by the tribunal as it did not raise further issues relevant to the legal considerations of the tribunal in this decision. 

7. From 1 July 2015 the Social Security Appeals Tribunal amalgamated with the Administrative Appeals Tribunal (AAT) and became the Social Services and Child Support Division of the AAT.  Under the transitional provisions in the Tribunals Amalgamation Act 2015, this application for review is taken to be an application for AAT first review.  This means that the tribunal’s decision and reasons are formally a decision and reasons of the AAT on first review.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act).

2. The issues to be considered by the tribunal in this review are whether the Department has correctly applied Mr Brown’s 2005/2006 taxable income to the child support assessment for the period 1 July 2006 to 30 September 2007.

CONSIDERATION

1. The Department documents indicate that Mr Brown and Mrs Wilson were issued assessments of child support for the period commencing on 1 July 2006 based on Mr Brown’s 2005/2006 provisional taxable income of $34,164 [folio 70].  It was not disputed by Mr Brown that his income tax return for the 2005/2006 financial year was lodged with the ATO in 2010.  This income tax return disclosed a taxable income of $52,316.

2. The tribunal finds from the documents before it that on 26 March 2015 this taxable income was applied to the administrative assessment for the period 1 July 2006 to 30 September 2007, resulting in arrears payable by Mr Brown of $4,087.86. The Department states that the assessment was amended under section 75 of the Act, which provides for the Registrar to, at any time, amend any administrative assessment by making alterations and additions as the Registrar considers necessary to give effect to the Act or to the Registration and Collection Act, including where the amendment gives effect to an event or change of circumstances that affects the annual rate of child support.

3. Mr Brown and his representative submitted to the tribunal that he has lodged an amended income tax return with the ATO for the 2005/2006 financial year.  There was a “substantial error” made by Mr Brown’s previous accountant which included the sale of a motor vehicle in Mr Brown’s earnings, and his taxable income was overstated by this amount.  His correct taxable income is $28,814.  Mr Brown’s current accountant took over the management of his tax affairs in January 2011, and when discussing previous tax years with the accountant in early 2015 the error was discovered.  Mr Brown’s accountant lodged an amended income tax return with the ATO in April 2015, and received a letter back from the ATO [in] June 2015 to advise this was outside of the two year time limit.  They then lodged a further objection to the assessment and are currently within this process, having been escalated to the highest level and advised there will be an outcome “very soon”.  In correspondence provided to the tribunal subsequent to the hearing, the tribunal was advised that Mr Brown was still awaiting the outcome of this process. 

4. Subdivision B of Division 7 of the Act relates to determinations of adjusted taxable incomes with reference to taxable incomes. At subsection 56(1) of the Act, the legislation provides that for the purposes of assessing a parent in respect of the costs of a child in relation to a child support period, if the parent’s taxable income has been assessed under an Income Tax Assessment Act for the last relevant year of income in relation to the child support period, the parent’s taxable income for that year is the amount so assessed. The last relevant year of income is defined in section 5 of the Act to be the last year of income that ended before the start of the period. In this case, the 2005/2006 financial year income is relevant to the child support period 1 July 2006 to 30 September 2007. Mr Brown’s 2005/2006 taxable income of $52,316 was assessed under an Income Tax Assessment Act and was therefore correctly applied by the Department in relation to the child support period in question.

5. The tribunal notes that, at the time of its decision, Mr Brown was awaiting for the ATO to approve an amended taxable income for the 2005/2006 financial year. This had not, at the time of the tribunal’s decision, been finally approved by the ATO and the tribunal finds that the decision of the Department to use Mr Brown’s taxable income of $52,316 for the 2005/2006 financial year is legally correct, pursuant to subsection 56(1) of the Act.

6. The tribunal notes however, for the information of the applicant, that even if his application to amend his income tax return is successful, subsection 56(2) of the Act limits the circumstances in which an administrative assessment of child support may be amended where a parent’s taxable income is amended. This subsection provides as follows:

   (2) If, after an administrative assessment of child support is made, the assessment (the tax assessment) of a parent's taxable income is amended (whether or not because of an objection, appeal or review), the Registrar must not amend the administrative assessment to take account of the amendment to the tax assessment unless one of the following applies:

   (a) the amendment to the tax assessment is made under item 5 of the table in subsection 170(1) of the Income Tax Assessment Act 1936 (amendment due to fraud or evasion);

   (b) the amendment to the tax assessment is made under provisions of an Income Tax Assessment Act that are prescribed by the regulations for the purposes of this paragraph;

   (c) the amendment is made in circumstances prescribed for the purposes of this paragraph;

   (d) the amendment is made solely for the purposes of working out the parent's adjusted taxable income for the last relevant year of income for the purposes of paragraph 60(1)(b) of this Act (first estimate must be lower than adjusted taxable income).

7. The effect of this provision is that where an administrative assessment of child support has been made and the tax assessment of a parent’s taxable income is amended, the administrative assessment cannot be amended unless one of the provisions set out in paragraphs 56(2)(a) to (d) are met.  If and when Mr Brown’s taxable income for the 2005/2006 financial year is amended by the ATO, the Department will be able to make a separate determination as to whether any of these events are met in Mr Brown’s circumstances.

8. However, in relation to the present decision which is under review by this tribunal, the tribunal finds that the Department’s decision to use Mr Brown’s taxable income of $52,316 for the 2005/2006 financial year is legally correct and is affirmed.  

DECISION

The tribunal affirms the decision under review.