Colbeck and Carder (Child support)

[2023] AATA 4465

Colbeck and Carder (Child support) [2023] AATA 4465 (19 December 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/SC026084 and 2023/SC026096

APPLICANT:  Mr Colbeck

OTHER PARTIES:  Child Support Registrar

Ms Carder

TRIBUNAL:Member H Moreland

DECISION DATE:  19 December 2023

DECISION:

The decisions under review are affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – where liable parent’s adjusted taxable income replaced with a subsequent amended adjusted taxable income – the administrative assessments are to be amended to take into account amended tax assessments - decision under review affirmed

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 Colbeck and Ms Carder are the parents of [Children 1 and 2].  According to records of Services Australia – Child Support (Child Support), the child support assessment in relation to [the children] was registered on 28 June 2016. In this case, Ms Carder is the parent with a child support liability. Child Support has been responsible for the collection of child support from Ms Carder since 28 June 2016.[1]

   [1] Child Support documents, p 168.

2. With regard to Ms Carder’s adjusted taxable income (ATI) for the 2014/15 financial year, on 9 December 2022, Child Support decided to replace Ms Carder’s Australian Taxation Office (ATO) ATI for 2014/15 of $41,546 with a subsequent ATO amended ATI of $7,746 and apply it to the child support assessment from 27 July 2016 to 27 September 2017. On 16 February 2023, Mr Colbeck objected to this decision and requested an extension of time (EOT) to make such an objection. On 21 March 2023, Mr Colbeck was granted the EOT. On 5 May 2023, an objections officer decided to disallow Mr Colbeck’s objection.

3. With regard to Ms Carder’s 2016/17 ATI, on 17 November 2022, Child Support decided to replace Ms Carder’s ATO ATI of $132,144 with a subsequent ATO amended ATI of $12,144 and apply it to the child support assessment from 28 September 2017 to 27 December 2018. On 16 February 2023, Mr Colbeck objected to this decision and requested an EOT to make such an objection. On 21 March 2023, Mr Colbeck was granted the EOT. On 5 May 2023, an objections officer decided to disallow Mr Colbeck’s objection.

4. On 5 May 2023, Mr Colbeck lodged an application to the Administrative Appeals Tribunal (the Tribunal) for an independent review of the decisions. The hearing took place at 1 pm on 9 November 2023. Mr Colbeck participated in the hearing by conference telephone and gave sworn evidence. Mr Colbeck was represented by [Ms A] of [Organisation]. The Tribunal made numerous attempts to contact Ms Carder (at 1.09 pm, 1.10 pm, 1.15 pm, 1.20 pm and 1.27 pm) and was unable to reach her. Having reviewed the communications to Ms Carder by the Registry (a notice of hearing issued on 18 October 2023 and an SMS reminder issued on 8 November 2023), the Tribunal was satisfied that Ms Carder had been provided with adequate notice of the date, time and mode of the hearing; and consequently, the matter proceeded in Ms Carder’s absence.

5. In making its decision, in addition to the oral evidence provided, the Tribunal considered the documents provided by Child Support (numbered 1–207 which were duplicated in both case numbers: 2023/SC026084 and 2023/SC026096), which were also sent to Mr Colbeck and Ms Carder; and written submissions made on behalf of Mr Colbeck (numbered A1–A7). The Tribunal also requested additional evidence from Child Support (numbered C1–C3). All of the material was exchanged between the parties. In the interests of procedural fairness, on 9 November 2022, the Tribunal issued Directions to Ms Carder that she could make any submissions she would like to make regarding the written submissions made on behalf of Mr Colbeck by close of business on 24 November 2023.

6. Ms Carder did not respond to the Directions, so the Registry contacted Ms Carder to ensure she had received all the documents. Ms Carder confirmed that she had. According to a file note made by a Tribunal officer, Ms Carder “… is still not clear on what the case is over. If it is the money that 1P received as a lump sum she is happy for him to keep that as it was for her chd. I asked her if the agency had ever discussed gifting the overpayment to 1P and she said no.”

CONSIDERATION

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

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. This administrative assessment is generally based on the income recorded by each parent according to their most recently completed income tax return, as lodged with the ATO, or the most recent estimate accepted by Child Support.

3. As outlined above, this matter relates to Ms Carder’s ATIs over two years and how each of these applies in a separate child support assessment period.

Child support liability from 27 July 2016 to 27 September 2017

1. As shown in a notice issued by Child Support, on 27 July 2016, Child Support made an assessment of Ms Carder’s child support liability for the period from 28 June 2016 (as noted above, the start of the child support assessment), to 26 July 2016, based on a provisional income of $47,504 for 2014/15 for Ms Carder, resulting in an annual child support liability of $5,502 payable to Mr Colbeck.[2] Another notice issued on 27 July 2016 shows that Child Support based its assessment of Ms Carder’s child support liability for the period from 27 July 2016 to 27 September 2017 on a provisional income of $20,453 for 2014/15 for Ms Carder, resulting in an annual child support liability of $414 payable to Mr Colbeck.[3]

   [2] Child Support papers, p 22.

   [3] Child Support papers, p 25.

2. On 17 November 2022, Child Support amended the assessment, based on an amended ATI for 2014/15 for Ms Carder of $41,546.[4] This increased Ms Carder’s annual child support liability from $414 to $4,168.[5] On 9 December 2022, Child Support again amended the assessment, based on an amended ATI for 2014/15 for Ms Carder of $7,746.[6] This decreased Ms Carder’s annual liability from $4,168 to $414.[7]

Child support liability from 28 September 2017 to 27 December 2018

[4] Child Support papers, p 178.

[5] Child Support papers, p 92.

[6] Child Support papers, p 178.

[7] Child Support papers, p 110.

1. As shown in a notice issued by Child Support, on 19 August 2017, Child Support made an assessment of Ms Carder’s child support liability for the period from 28 September 2017 to 27 December 2018, based on a provisional income of $14,029 for 2016/17 for Ms Carder, resulting in an annual child support liability of $420 payable to Mr Colbeck.[8]

   [8] Child Support papers, p 32.

2. On 17 March 2022, Child Support amended the assessment, based on an amended ATI for 2016/17 for Ms Carder of $132,144.[9] The effect of this was that $29,605.81 became payable by Ms Carder to Mr Colbeck.[10]

   [9] Child Support papers, p 174.

   [10] Child Support papers, p 62.

3. On 13 April 2022, according to Child Support’s records, Ms Carder “… did initiate an amendment to the 2016/2017 assessment on 13/04/2022”.[11]

   [11] Child Support papers, p 102.

4. On 16 November 2022, Child Support again amended the assessment, based on an amended ATI for 2016/17 for Ms Carder of $12,144.[12] This had the effect of returning Ms Carder’s liability to an annual liability of $420, payable to Mr Colbeck, for the period from 28 September 2017 to 27 December 2018.[13]

What was the effect of the amendments?

[12] Child Support papers, p 177.

[13] Child Support papers, p 93.

1. As a result of the amendments, the following payments were made to Mr Colbeck: on 12 April 2022, a payment of $10,779; and on 13 April 2022, a payment of $3,310.[14] On 9 December 2022, Child Support issued a notice to Mr Colbeck to inform him that he had received an overpayment of $14,555.29 in child support and that the amount would have to be repaid.[15] As shown in the Child Support papers, on 12 December 2022, Mr Colbeck was informed that he was not entitled to receive the “TRIPs” (the term used by Child Support for funds intercepted from income tax returns to satisfy child support debts) that he had received in April 2022.[16]

Should the amended tax assessments be taken into account?

[14] Child Support papers, p 196.

[15] Child Support papers, p 106.

[16] Child Support papers, pp 112-113.

1. Provisions relating to amendments to ATI are set out in Division 7 – Assessments and Estimates of Adjusted Taxable Income, contained in Part 5 – Administrative Assessment of Child Support of the Assessment Act.

2. Relevantly, according to subsections 56(2) and (2A) of the Assessment Act:

   When amended tax assessment may be taken into account

   (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 may amend the administrative assessment to take account of the amendment to the tax assessment.

   Retrospective determinations

   (2A)  An amendment of the administrative assessment under subsection (2) must be on the basis that the parent’s adjusted taxable income for that year of income is, and has always been, the amount worked out as a result of the amended tax assessment if:

   (a)  the parent’s adjusted taxable income worked out as a result of the amended tax assessment is higher than the parent’s previous adjusted taxable income; or

   (b)  the parent applied for the amendment of the tax assessment on or before:

   (i) the day by which the parent was required to lodge his or her income tax return for that year of income with the Commissioner of Taxation (taking into account any deferral under section 388‑55 in Schedule 1 to the Taxation Administration Act 1953); or

   (ii)  the end of 28 days after the parent was given the tax assessment (including an amended tax assessment) by the Commissioner of Taxation; or

   (iii)  the end of 28 days after the parent becomes aware that the tax assessment is not correct if the parent did not apply for the amendment on or before a day referred to in subparagraph (i) or (ii) because of circumstances beyond the knowledge or control of the parent; or

   (c)  the parent did not apply for the amendment of the tax assessment on or before any of the days referred to in paragraph (b), but the Registrar is satisfied that special circumstances exist.

3. As noted above, according to subsection 56(2) of the Assessment Act, the Registrar may amend an administrative assessment to take account of the amendment to the tax assessment if an amendment is made after an administrative assessment of child support is made.

4. Paragraph 56(2A)(a) of the Assessment Act provides that a retrospective determination may be made when the amended tax assessment is higher than the previous tax assessment.

5. With regard to an amended tax assessment that is lower than a previous tax assessment, paragraph 56(2A)(b) of the Assessment Act provides that one of three conditions must be met before an amended assessment that is lower than the one currently used can be retrospectively applied.

6. The first condition to be met in order for a retrospective amendment to be made is that Ms Carder applied for the amendment in respect of the tax return on or before the day on which she was required to submit her income tax return. The Tribunal concludes that as Ms Carder’s amended income tax returns for the 2014/15 and 2016/17 financial years were not applied to the corresponding child support assessments until November 2022, this condition has not been met.

7. The second condition to be met in order for a retrospective amendment to be made is that Ms Carder applied for the amendment in respect of the tax return at the end of 28 days after she was given the tax assessment by the Commissioner of Taxation (including an amended tax assessment).

8. The Tribunal asked Child Support to provide the dates on which Ms Carder made any requests/initiated amendments to her income tax return. Child Support provided the following response:

   Ms Carder contacted Child Support on the following dates to discuss amended
   incomes for 2014/2015 and 2016/2017 and the record of discussion is contained
   within the S37(1) file;
   13/04/2022 – page 66
   26/04/2022 – page 78

   22/06/2022 – pages 79–81[17]

   [17] C documents, pp C1-C2.

9. Noting that these page references are to the PDF page number settings, rather than the numbers as marked by Child Support, having reviewed the relevant pages, the Tribunal finds references to the 2016/17 financial year but not to the 2014/15 financial year.

10. The Tribunal also asked Child Support to provide the dates on which the ATO informed Child Support of Ms Carder’s ATI and amendments to that ATI. Child Support’s response was as follows:

    The dates on which the ATO informed Child Support of Ms Carder’s adjusted
    taxable income and amendments to that adjusted taxable income are recorded on the
    Cuba screens in the original S37(1) file.
    2014/2015:
    S37(1) file pages 177-179
    Please note: the Notification date is the date upon which Child Support has received
    the income amount from the ATO.
    Taxable income received 09/10/2020-$7,746
    Amendment received 16/11/2022-$41,456
    Amendment received 09/12/2022-$7,746

    2016/20176

    S37(1) file pages 174-176
    Please note: the Notification date is the date upon which Child Support has received
    the income amount from the ATO.
    Taxable income received 05/06/2020-$14,029
    Amendment received 17/03/2022-$132,144

    Amendment received 16/11/2022-$12,144[18]

    [18] C documents, p C3.

11. With regard to the 2014/15 financial year, the Tribunal concludes that as the ATO informed Child Support of the amendment of $7,746 on 9 December 2022 to the $41,456 amendment that was sent to Child Support by the ATO on 16 November 2022, Ms Carder must have asked the ATO for an amendment within 28 days of receiving the $7,746 amendment on 9 December 2022. Consequently, the Tribunal is satisfied that Ms Carder asked the ATO for an amendment to the 16 November 2022 amendment within 28 days.

12. With regard to the 2016/17 financial year, the amendment of $132,144 was sent to Child Support by the ATO on 17 March 2022 but an amendment to that amendment was not received until 16 November 2022. As noted in the written submissions made on behalf of Mr Colbeck, however, the Child Support papers show that “BSI” (Child Support’s Business Systems Interface team) confirmed the lodgement date of the amended income was 13 April 2022, so it “… was lodged within 28 days of the original/preceding tax assessment lodged 17/03/2022”.[19]

    [19] A documents, p A5 and Child Support papers, p 103.

13. The Tribunal finds that subparagraph 56(2A)(b)(ii) is satisfied with regard to Ms Carder’s amended tax assessments for the 2014/15 and 2016/17 financial years.

14. As highlighted in the written submissions made on behalf of Mr Colbeck, subsection 56(2), by the use of the word “may”, confers a discretion on the decision-maker. This means that it is open to the Tribunal to determine whether the administrative assessments in this assessment are to be amended to take into account the amended, lower tax assessments, or not.

15. On behalf of Mr Colbeck, [Ms A] submitted that Ms Carder “intentionally arranged her tax affairs so that a refund would be available and she could have avoided creating the circumstances our client finds herself in” and said that Ms Carder had sent an SMS message to Mr Colbeck on 15 April 2022, stating:

    I wanted you to know that you should receive a nice Easter present for our boys in your bank account today …[20]

    [20] A documents, p A6.

16. As submitted on behalf of Mr Colbeck:

    Our instructions are that our client was surprised to receive a significant sum of child support from Ms Carder. However, Child Support officers assured him that he was entitled to receive it and use it for the support of [the children] (T99). Our client has limited means and it is not surprising that much of the amount received was expended by the time he was notified of the debt resulting from the decision sunder review. He does not have the means to repay the debts arising from the two decisions. At present, Child Support has offset the minimal amounts owed by Ms Carder for the current child support period. On Thursday 2 November 2023, a Child Support officer advised me that notes on our client’s records state that Child Support has not yet considered how to recover the debt and will consider other options for recovery after the Tribunal makes its decision in these matters. We note that the only available option for recovery in our client’s circumstances is withholding from his Centrelink income support payments or family tax benefits.

    We say that recovery of the debt arising from the decisions under review is inconsistent with the principal object of the Act to ensure that parents receive a proper level of financial support for their children. At present, our client is not receiving even the minimum annual rate of child support. The debt offset will not significantly affect the outstanding debt and, in our view, it is likely that Child Support will start withholdings from his income support payments. This would further compromise his ability to meet the children’s proper needs

    As noted above, the Registrar must pay Ms Carter any amounts recovered even though it is unlikely she was entitled to receive the tax refunds intercepted and paid to our client. Ms Carter thereby receives a windfall and will not have to pay child support in the future. There is a particular injustice in recovery of money paid for the children in those circumstances.[21]

    [21] A documents, p A6.

17. [Ms A] acknowledged in the written submissions that should the amended tax returns not be accepted, Ms Carder would incur a significant debt. If this occurred, [Ms A] submitted, Ms Carder could make an application to court under section 111 of the Assessment Act. Section 111 of the Assessment Act provides for applications to be made for a change of assessment for amendments of administrative assessments that are more than 18 months old. The Tribunal is not persuaded that this would provide a remedy that would alleviate a debt liability for both parties.

18. The Tribunal is also not satisfied that Ms has received a “windfall” because there is no evidence before the Tribunal that, having apparently received an overpayment in the form of income tax return funds from the ATO that she appears to have not been entitled to, Ms Carder will not be required to repay those funds to the ATO.

19. The Tribunal acknowledges [Ms A’s] submissions regarding the objects of the Assessment Act and the difficult situation that Mr Colbeck now finds himself in.

20. The Tribunal, however, observes that the administrative assessment of child support is calculated on the basis of a number of factors, including: the ATIs of each parent; percentages of care; the percentages of the costs met by those percentages of care; and the costs of the child(ren). The Assessment Act does provide for departure determinations to be made in circumstances where the administrative assessment of child support produces an unfair outcome. The Tribunal concludes that unless there are grounds for a departure determination to be made, the application of the administrative assessment using an incorrect ATI or care percentage would produce an unfair outcome. In this case, the Tribunal finds, making a determination for the relevant administrative assessments to not take into account the amended tax assessments would produce an unfair outcome because it would ultimately result in Ms Carder being required to pay more child support than she was obligated to pay. As noted above, the Tribunal concludes that even if Ms Carder was to successfully make an application for a change of assessment, the Tribunal is not satisfied that it would result in both Ms Carder and Mr Colbeck having no debt in relation to these matters.

1. With regard to the Registry’s file note, noted at paragraph 6 of these Reasons, which states that Ms Carder indicated that she would be open to gifting the funds to Mr Colbeck, any such offer is outside the scope of the Tribunal’s review.

2. The Tribunal finds that the administrative assessments relevant to these matters are to be amended to take into account the amended tax assessments of $7,746 in relation to the 2014/15 financial year; and $12,144 in relation to the 2016/17 financial year.

DECISION

The decisions under review are affirmed.