Cipriano and Child Support Registrar (Child support)

[2022] AATA 3998

Cipriano and Child Support Registrar (Child support) [2022] AATA 3998 (16 September 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/MC024126

APPLICANT:  Mr Cipriano

OTHER PARTIES:  Child Support Registrar

TRIBUNAL:Member A Schiwy

DECISION DATE:  16 September 2022

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – late payment penalty – whether there were grounds to remit – no grounds to remit – 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 is about the amount of late payment penalty payable by Mr Cipriano.

2. Mr Cipriano is a separated parent.  A child support case was in place from 1995 until the case terminated in 2012.  Mr Cipriano was the parent liable to pay child support.

3. As of 28 June 2014 Mr Cipriano had arrears of child support of $13,704.58 and accrued late payment penalties of $36,958.74.  He entered a payment arrangement with the Department of Human Services (now Services Australia) – Child Support.

4. Mr Cipriano cleared the child support arrears on 3 March 2022.  At that stage there were late payment penalties of $42,887.18 and Child Support decided to remit $33,933.98 of the penalties.  Mr Cipriano applied to have the balance of late payment penalties remitted and on 30 March 2022 Child Support decided that no further remissions would be granted.

5. On 11 May 2022 Mr Cipriano objected to the decision not to remit the remaining penalties and on 23 May 2022 a Child Support officer disallowed his objection (the tribunal assumes that Child Support granted Mr Cipriano an extension of time to lodge his objection).

6. On 21 June 2022 Mr Cipriano made an application to this tribunal for an independent review of Child Support’s decision.

7. A hearing into the application was held by the tribunal on 14 September 2022.  Mr Cipriano participated in the hearing via teleconference.

8. Mr Cipriano said he did not know anything about the hearing until he received an ‘SMS’ reminder on 13 September 2022 and he had not had time to prepare properly.  The tribunal noted that he was informed in writing about the hearing time on 18 August 2022; the letter was sent to his current address.  Mr Cipriano said he did not receive the letter.  The tribunal gave Mr Cipriano additional time to email any further submissions he may have.  He sent an email on 16 September 2022.

9. The tribunal had before it relevant documents extracted from Mr Cipriano’s Child Support file and computer records, a copy of which had been provided to Mr Cipriano prior to the tribunal hearing. 

CONSIDERATION

1. The law relating to the imposition and remission of late payment penalties is contained in the Child Support (Registration and Collection) Act 1988 (the Act).

2. If a person fails to pay a child support debt when it falls due, the person also becomes liable to pay a late payment penalty pursuant to section 67 of the Act.  The Act allows for remission of the penalty in certain circumstances.  Subsection 68(1) of the Act states:

   If an amount (in this section called the late payment penalty) is payable by a person under section 67 in relation to a child support debt and:

   (a)the Registrar is satisfied that:

   (i)the circumstances that contributed to the delay in payment of the debt were not due to, or caused directly or indirectly by, an act or omission of the person; and

   (ii)the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; or

   (b)the Registrar is satisfied that:

   (i)the circumstances that contributed to the delay in payment of the debt were due to, or caused directly or indirectly by, an act or omission of the person; and

   (ii)the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; and

(iii)having regard to the nature of those circumstances, it would be fair and reasonable to remit the late payment penalty or part of the late payment penalty; or

(c)the Registrar is satisfied that there are special circumstances by reason of which it would be fair and reasonable to remit the late payment penalty or part of the late payment penalty;

theRegistrar may remit the late payment penalty or part of the late payment penalty.

1. The Child Support Guide sets out Child Support’s policy regarding the remission of late payment penalties at part 5.1.6.  It includes the following:

Circumstances beyond the parent's control

Examples of circumstances that may be beyond a parent's control include:

·the parent's employer failing to remit deductions to the Registrar

·short-term unemployment

·unpredictable adverse business conditions

·industrial accidents

·a debtor's failure to pay

·natural disasters.

Circumstances beyond the parent's control are not limited to these examples.

The Registrar will take into account the circumstances that applied at the time each payment was due and when each penalty accrued when deciding whether to remit penalties that accrued over a number of payment periods. It may be appropriate to remit the late payment penalty for one payment period but inappropriate to remit the penalty for another payment period.

The Registrar will remit the penalty in full if satisfied that the circumstances leading to the late payment were beyond the control of the liable parent. The Registrar needs to be satisfied that the parent has taken reasonable action to mitigate the circumstances that contributed to late payment or the effects of those circumstances.

Circumstances within a parent's control

Some examples of circumstances that may be within a parent's control:

·financial difficulties due to a number of debts, such as rates and electricity, becoming due at the same time, or

·voluntary unemployment during which the person takes no action to vary the liability.

Circumstances within the parent's control are not limited to these examples.

The Registrar will take into account the circumstances that applied at the time each payment was due and when each penalty accrued when deciding whether to remit penalties that accrued over a number of payment periods. It may be appropriate to remit the late payment penalty for one payment period but inappropriate to remit the penalty for another payment period.

The Registrar must consider whether the nature of the circumstances would make it fair and reasonable to remit the late payment penalty attributable to those circumstances. If so, the Registrar can remit the late payment penalty in part or in full but only if the parent can demonstrate that they have taken reasonable action to mitigate the circumstances that contributed to late payment or the effects of those circumstances.

Reasonable action to mitigate the circumstances that led to late payment, or the effect of those circumstances

The Registrar will consider any steps the parent has taken to reduce the effects of the circumstances that led to late payment. A parent's payment history may be sufficient to demonstrate the efforts they have made to meet their child support liability, in spite of the circumstances that led to the late payment.

Examples of attempts to mitigate the circumstances that led to late payment or to mitigate the effects of those circumstances include:

·part payment of the liability

·attempting to or succeeding in borrowing to pay some or all of the liability

·negotiating with creditors or debtors or both

·paying in full following resolution of a dispute (e.g. over arrears or a payment made directly to the payee)

·making and meeting an acceptable arrangement for payment.

Attempts to mitigate the circumstances that contributed to the delay in payment, or mitigate the effects of those circumstances are not limited to these examples.

Payments received as a result of Services Australia enforcement action such as:

·legal action to obtain payment

·intercepting an income tax refund, and

·deductions made from Centrelink payments

are unlikely to be a mitigating circumstance by themselves. This does, however, depend on the circumstances of the case. For example, action may prompt the liable parent to make an acceptable arrangement for payment, or the liable parent may draw the Registrar's attention to an expected refund.

Special circumstances

The Registrar can remit part or all of a late payment penalty if satisfied that there are special circumstances in the case that would make it fair and reasonable to do so. Special circumstances include those circumstances all parents face regardless of whether or not they separated.

Examples of special circumstances may include:

·a serious accident

·being unaware of the registration of the liability (if the Registrar does not know the parent's whereabouts)

·an unexpected and unavoidable expense

·serious health problems

·the payer acting on incorrect advice.

Special circumstances are not limited to these examples.

It may also be appropriate to remit a late payment penalty if the Registrar is satisfied that a parent made their first payment late because they did not understand the operation of the child support scheme. This would not be an acceptable reason for the Registrar to remit a penalty on more than one occasion.

Where the Registrar is satisfied that special circumstances exist that would make it fair and reasonable to remit a late payment penalty, the Registrar does not have to consider whether a parent has taken reasonable steps to mitigate the circumstances that led to late payment, or the effect of those circumstances.

Fair & reasonable to remit the penalty

The Registrar must be satisfied that it is fair and reasonable to remit a late payment penalty if the late payment was caused by circumstances within the parent's control, or because of special circumstances. The Registrar will take into account the parent's payment history, current income and necessary commitments, as well as the nature of the circumstances that led to late payment. It would not usually be fair and reasonable to pay other debts or acquire assets in preference to paying child support debts, although this depends on the predictability and nature of the expense.

1. The tribunal is not bound by policy, however, in Drake and Minister for Immigration and Ethnic Affairs 1979 2 ALD 60 the Full Federal Court held that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. In this instance the tribunal considers that the policy regarding the remission of penalties is unobjectionable and in the interests of consistency of decision-making under the Act considers that the policy should be applied.

2. Mr Cipriano initially submitted to Child Support that the late payment penalty should be remitted because he was advised on 28 June 2014 that if he repaid his maintenance arrears the penalties would be remitted.

3. In June 2014 Child Support were retaining Mr Cipriano’s tax refunds in accordance with section 72 of the Act.  Mr Cipriano entered a payment arrangement with Child Support which required him to pay $100 per month in addition to his tax refunds being applied to the debt.  He was advised that if he adhered to this arrangement the late payment penalties would be remitted.  It is not disputed that Mr Cipriano did not adhere to the arrangement. Child Support stated that Mr Cipriano did not contact Child Support between 2014 and 2022 about his arrears.

4. In March 2022 Mr Cipriano lodged six tax returns (2015-16 to 2020-21 inclusive) and $8,953.18 was taken from the resulting refunds by Child Support for late payment penalties.  The balance of the late payment penalties was remitted. 

5. Mr Cipriano submitted in his objection application that he didn’t make the payments due to suffering from depression and anxiety and his work has reduced.  He stated he was in financial hardship due to two ‘bouts of COVID’.  He noted that the penalties do not go to his children.

6. At the hearing Mr Cipriano stated:

   ·      While the children were under 18, he did not always pay the amount owing for child support.  He said the money wasn’t going to his children and he was not in the right head space.  Looking back, he regrets this.

   ·      He struggles with paperwork and dealing with child support issues.

   ·      He was diagnosed with depression and anxiety by his doctor about eight years ago.  He was prescribed antidepressants and attended about six counselling sessions at the time of diagnosis.  He still takes antidepressants and has good and bad days.

   ·      He works on farms and the work is seasonal.  He earns the most over the summer months.  He did have long term employment but in recent years has worked for several employers.

   ·      He confirmed that he earned around $45,000 in 20-21 and probably earned a bit more in 21-22.

   ·      As at the start of 2022 he had around $25,000 in savings; following his peak employment period over the summer.  He currently has no work, and his savings are down to $2,000.  He expects his employment income will increase over the summer.

   ·      He has no significant assets.  He owes $8,000 on his credit card and around $1,000 to Centrelink for overpayment of an income support payment. 

   ·      He has not applied for jobseeker, despite being unemployed, because he didn’t think he could apply due to the debt; and because he finds the application process difficult.

   ·      He is in a share house and pays rent of $120 per week.

   ·      He feels that he is being punished when the reason he didn’t pay was because he was ‘not in his right mind’.

7. Due to the significant passage of time that has elapsed it is difficult to ascertain the reasons for each late payment, when they occurred.  However, given Mr Cipriano’s evidence, the tribunal was satisfied that paragraph 68(1)(a) of the Act is not satisfied; it appears that Mr Cipriano was unwilling to pay child support at the time the debts were incurred.  The tribunal accepts Mr Cipriano’s evidence that he has depression and anxiety, since at least 2014, but there is no evidence that he had any mental health conditions when the debts were incurred; particularly to the extent that it prevented him from meeting his child support obligations.

8. In considering paragraph 68(1)(b) of the Act; the tribunal was not satisfied that Mr Cipriano took any action to mitigate the circumstances that contributed to the delay in payments; it appears that he simply did not want to make the payments.

9. The tribunal then considered whether there are special circumstances by reason of which it would be fair and reasonable to remit the late payment penalty or part of the late payment penalty.  Mr Cipriano has submitted that he is in financial difficulty.  The tribunal accepts that his income is relatively low however he managed to have savings of $25,000 as at the beginning of the year; despite years of relatively low income.  He has also chosen not to apply for income support; despite being unemployed.  Although he may currently be having financial difficulties, he still has $2,000 in the bank and prospects of increased income very soon.  In addition, the tribunal did not consider that Mr Cipriano’s current financial situation was a special circumstance. And lastly, Mr Cipriano appears to have already benefited from the application by Child Support of a very generous interpretation of paragraph 68(1)(c) to his circumstances; $33,933 of the penalties have already been remitted.

DECISION

The decision under review is affirmed.