Bryant and Rivera (Child support)

[2019] AATA 5131

Bryant and Rivera (Child support) [2019] AATA 5131 (15 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC016930

APPLICANT:  Mr Bryant

OTHER PARTIES:  Child Support Registrar

Ms Rivera

TRIBUNAL:Member M Kennedy

DECISION DATE:  15 October 2019

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income - whether the estimate should have been refused - estimate of income correctly accepted - 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

1. Mr Bryant and Ms Rivera are the parents of [a child] and [another child], in respect of whom a child support assessment is in place.

2. Prior to 15 November 2018, the child support liability was calculated by taking into account adjusted taxable income for Ms Rivera of $109,080 (2017/2018).  On 15 November 2018, Ms Rivera elected to lodge an estimate of her income, annualised to $59,958.  The estimate was accepted and the child support liability changed accordingly.

3. Mr Bryant objected to the decision as he considered the estimate to be inaccurate.  The objection was lodged outside the prescribed time period to object, but an extension of time was subsequently granted and the objection process proceeded.

4. On 28 June 2018, an objection officer decided to disallow Mr Bryant’s objection, essentially accepting that there was no basis to refuse to accept Ms Rivera’s estimate.  The objections officer found that at the time the estimate was made, Ms Rivera’s likely income for the remainder of the financial year would be less than her estimate.

5. It must be noted however that before the objection process was completed, Ms Rivera’s financial circumstances had fundamentally changed from what she had anticipated at the time she made her estimate. Ms Rivera subsequently commenced earning substantially more than her estimate, and in these circumstances it is unsurprising that Mr Bryant was aggrieved by the estimate.  However, as explained below, the estimate provisions of the child support scheme oblige parents who make estimates to notify of changes to circumstances, and subsequent events do not necessarily make the initial estimate inaccurate at the time it was made, so as to be rejected.

6. Mr Bryant applied to the Tribunal for review on 12 July 2019.

CONSIDERATION

1. A parent may elect to estimate his or her current income as the adjusted taxable income to be used for the child support assessment (instead of the usual adjusted taxable income based on prior year taxation assessment).

2. An estimate can only be made for a financial year i.e., 1 July to 30 June, or for the remainder of a financial year.  When it is the first election in the financial year, the estimate election must not be more than 85% of the parent's adjusted taxable income for the last relevant year of income.  If a parent makes the estimate during the financial year, the parent also must estimate his or her year to date income amount. A parent may not make an estimate election if an income amount order is in force in relation to the parent (i.e. a departure determination or ‘change of assessment’ decision).

3. In the circumstances of this case, those essential criteria in relation to Ms Rivera’s estimate are all satisfied (paragraphs 60(1)(a), 60(1)(b) and subsection 60(6) of the Child Support (Assessment) Act 1988 (the Act).

4. Furthermore, the basis on which the estimated figure was calculated (T14) appears to follow the method for identifying the estimate required in the Act (sub-section 60(3) and 60(4) of the Act), although it is not entirely clear whether a proportion of net investment losses were taken into account as an income component amount.

5. In circumstances where the essential criteria are satisfied and the correct method followed for making the estimate, the estimate will be ‘accepted’, subject to a residual discretion held by the Registrar to refuse to accept it: section 63AA of the Act.  The Registrar may refuse to accept the estimate if satisfied that the amount worked out is less than the amount the Registrar considers is likely to be the parents actual adjusted taxable income for the remaining period of the financial year to which the estimate related: section 63AA(2)(b) of the Act.  The Registrar did not exercise that discretion in this case.  The practice of the Tribunal is to consider whether that discretion ought to have been exercised when reviewing the particulars of the assessment reflecting the making of the estimate.

6. During a financial year, a parent may revoke his or her estimate election and make a new one, for example when circumstances change.  A parent making an estimate incurs specific obligations to notify the Registrar of relevant changes at risk of criminal penalties if the obligation is not complied with.  See for example the notice issued to Ms Rivera at T16.

7. As explained to the parties during the hearing, the issue for me to decide is whether the discretion to refuse to accept the estimate ought to have been exercised at the time the estimate was made.  That question will not necessarily be informed by subsequent changes to circumstances if they were not known at the time the estimate was made.  To put this another way, I must decide if the estimate was not going to be accurate based on the state of affairs at the time the estimate was made, and not by reference to what may now be known about Ms Rivera’s income.  The obligations imposed on Ms Rivera to notify of changes of circumstances and the availability of the amended estimate process, and the application of reconciliation and penalties are intended to address subsequent variations from the estimate.

8. Mr Bryant’s position is that the estimate was not accurate at the time it was made.  He points to Ms Rivera’s previous taxable income and the evidence now available of her ongoing income from employment.  Mr Bryant is aggrieved by what he sees as a practice of the Department taking a parent’s word for it without further investigation.  Mr Bryant is concerned that he was obliged to pay in excess of the correct liability of child support and must await any reconciliation having already outlaid those funds.  Mr Bryant explained that remarks made by Ms Rivera prior to making the estimate suggested that circumstances may have been manipulated.

9. During the hearing, I received sworn evidence from Ms Rivera, supported by corroborating documentary evidence of her year to date income up to the point of making the estimate.

10. Ms Rivera explained that she had been employed by [Company 1] until her resignation on 24 October 2018.  Ms Rivera recounted the reasons why she resigned.  It is unnecessary for me to recount those matters in these reasons.

11. Ms Rivera then intended to commence work [in Occupation 1].  Ms Rivera described in some detail her plans for pursuing this form of work, including her assessment as to the likely number of clients she would have, the timing of opportunities for growth (after the Christmas period) and her hope to secure sustained and consistent retainer arrangements for financial security.

12. Ms Rivera explained that she had no firm contracts setting out the extent of work and fees available to her.  I accept that the process of estimation Ms Rivera engaged in with the Department in November 2018 would have been in every sense an ‘estimate’ based on her plans and intentions.  Ms Rivera’s explanation of these factors was cogent and, in my assessment, genuine.

13. Specifically, I accept Ms Rivera’s sworn evidence that at the time she resigned from [Company 1] and commenced her work [in Occupation 1], and also at the time she made her estimate to the Department, she had neither predicted nor anticipated that she would subsequently be offered full-time employment by a former client, [another company].  In this regard, Ms Rivera commenced full time employment on 11 February 2019.  If Ms Rivera knew she would take up this employment at the time she made her estimate, then clearly her estimate would have been inaccurate at the time it was made.  I accept that she did not know.

14. I have reviewed the documentary evidence provided by Mr Bryant, but am not satisfied it allows me to draw a conclusion that Ms Rivera’s estimate based on $5000 income per months from her work [in Occupation 1] was inaccurate or misrepresentative of her circumstances.  I accept Ms Rivera’s evidence that she had left full time employment and was establishing a consultancy business with a small group of clients and without firm contracts or retainers.  In these circumstances, I cannot say that at the time the estimate was made, the amount of the estimate was likely to be less than Ms Rivera’s actual adjusted taxable income for the remainder of that financial year.

15. In these circumstances, I would not have exercised the discretion to refuse to accept the estimate.  The estimate was properly accepted with the consequential adjustments to the child support liability, and the consequential imposition of obligations on Ms Rivera to notify of changed circumstances and exposure to subsequent reconciliation and penalty for inaccurate estimate.

Other matters

1. I appreciate that Mr Bryant’s grievance with the decision arises in part because he has seen no evidence that the child support liability was subsequently adjusted in response to Ms Rivera securing her full time employment on 11 February 2019. 

2. I have examined the Tribunal papers carefully and can only agree with Mr Bryant that on the evidence before me, the child support liability continued to be calculated on the basis of Ms Rivera’s estimate lodged on 15 November 2018 to 30 June 2019, even though her financial circumstances had fundamentally changed on 11 February 2019.

3. For example, the assessment notice at T88 issued on 9 May 2019 continues to show that child support is calculated by reference to Ms Rivera’s estimate of $59,958 for the period 4 March 2019 to 30 June 2019.  There is no subsequent amending notice, and the computerised records indicate the first estimated amount continued to be used.

4. Ms Rivera mentioned that she had been in regular contact with the Department to notify of her changes in circumstances and was adamant she had notified the Department of her new employment.  Certainly, her responses to the objection clearly show that she had fully disclosed her new employment and salary.  I am concerned however that for whatever reason, the scheme of the Act regarding the making of new estimates may not have not been followed or applied to the assessment.

5. Ms Rivera’s changed circumstances ought to have resulted in a new estimate being made for the remainder of the financial year reflecting her changed circumstances from the date of the change of circumstances (See section 62 and 62A of the Act).  My best understanding of the Tribunal papers indicate this has not happened, although I do not presume to have complete records of contact between Ms Rivera and the Department about these matters.  As such, reconciliation of the estimate against actual adjusted taxable income may be required and Ms Rivera may potentially be exposed to penalties (although I note provision for penalties to be withdrawn or waived).  These are not matters for me to decide in this review, and I have incomplete information to comment further.  It is however important that the parties are aware of my observations in this regard. 

6. I encourage the parties, and Ms Rivera in particular, to contact the Department and raise these observations in respect of the period 11 February 2019 to 30 June 2019 and query whether, and if not why, a subsequent estimate was not taken and applied to the assessment in light of the changed circumstances.

DECISION

The decision under review is affirmed.