Ferguson and Little (Child support)

[2024] AATA 1876

Ferguson and Little (Child support) [2024] AATA 1876 (16 April 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/PC026539

APPLICANT:  Mr Ferguson

OTHER PARTIES:  Child Support Registrar

Ms Little

TRIBUNAL:Member D Lambden

DECISION DATE:  16 April 2024

DECISION:

The decision under review is set aside and substituted as follows:

• Mr Ferguson’s adjusted taxable income for the 2021-22 financial year is $158,582.

• Mr Ferguson’s year-to-date income for the period 1 July 2021 to 16 August 2021 is $53,937.01.

• Mr Ferguson’s estimated partial year income from 17 August 2021 to 30 June 2022 of $104,803.71 ($120,293 annualised) should not have been reconciled.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – adjusted taxable income – income estimate – estimate reconciliation – method statement – partial year income amount – application for review set aside and substituted

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 review relates to the child support assessment regarding Mr Ferguson and Ms Little’s children, [Child 1], [Child 2] and [Child 3] (“the children”).

2. On 27 April 2023 Services Australia – Child Support (Child Support) received Mr Ferguson’s tax return from the Australian Taxation Office (ATO) which stated his income was $158,582.00.

3. On 27 April 2023 Child Support decided to reconcile the estimate for the period 17 August 2021 to 30 June 2022 using a reconciled income of $168,246.63 (annualised) in place of Mr Ferguson’s estimated adjusted taxable income of $120,293.00 (annualised).

4. On 1 May 2023 Mr Ferguson contacted Child Support to discuss the estimate reconciliation and he stated that his year-to-date income was incorrect; he had changed employers in August 2021 and his income would be reduced and would be around $120,000.00 for the rest of the year.

5. On 25 May 2023 Mr Ferguson objected to the decision because he stated that he received his final payout of around $35,000.00 on 15 August 2021 which was not included in his year-to-date income (YTD) income.

6. On 4 August 2023 an objections officer disallowed Mr Ferguson’s objection and stated that although Mr Ferguson made his statements there was no evidence to substantiate his claims.

7. On 7 August 2023 Mr Ferguson requested a review by the Administrative Appeals Tribunal (“the Tribunal”).

8. Mr Ferguson and Ms Little attended a MS Teams audio hearing on 6 March 2024 and both gave evidence on affirmation.

9. The Tribunal had before it relevant documents provided to it by the Child Support Agency pursuant to subsection 37(1) of the Administrative Appeals Tribunal Act 1975, which were labelled Exhibit C1 folios 1 to 120; a copy of the papers was provided to Mr Ferguson and Ms Little prior to the hearing.

10. Mr Ferguson provided documents labelled A1 to A3 and Ms Little provided documents labelled B1 to B2; the documents were exchanged between the parties and a copy provided to Child Support.

11. The Tribunal adjourned the matter to provide Ms Little with the opportunity to respond to the payslips from [Company 1] that Mr Ferguson had provided to the Tribunal and she provided a response on 19 March 2024.

12. The Tribunal considered all the evidence available to it in the context of the relevant legislation and on 16 April 2024 the Tribunal proceeded to determine the matter.

ISSUES

1. The legislation relevant to this review is found in the Child Support (Assessment) Act 1989 (“the Assessment Act”) and the Child Support (Registration and Collection) Act 1988 (“the Registration and Collection Act”).

2. The issue which arises in this case is was the 2021-22 financial year income estimate for Mr Ferguson correctly reconciled?

CONSIDERATION

1. 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 requires the application of a statutory formula which considers factors such as the number of children, the level of care provided and the income of each parent. The specific income quantity is called a person’s adjusted taxable income, which is defined in section 43 of the Assessment Act.

2. The statutory scheme provides some flexibility for parents whose circumstances change from one year to the next. Relevantly, in specified circumstances, section 60 of the Assessment Act allows a person to elect that their adjusted taxable income is their current adjusted taxable income rather than the adjusted taxable income from the previous financial year.

3. Subsection 60(4) of the Assessment Act provides a method statement that must be followed where a parent makes a partial year election during an income year (section 60(3) of the Assessment Act). Essentially this involves a calculation of annualising the parent’s estimate for the remainder of the year so that an annual amount is used to determine the parent’s adjusted taxable income for a day in the child support period for the remainder of the income year that the estimate applies. The method statement is detailed below.

Method statement

Step 1.Estimate each income component amount for the parent for the period (the remaining period):

(a)starting on the start day for the election; and

(b)ending at the end of the last day of the year of income.

Step 2.Add up those amounts. The result is the partial year income amount.

Step 3.Divide the partial year income amount by the number of days in the remaining period.

Step 4.Multiply the quotient by 365.

1. The Child Support may refuse to accept the estimate if it is not accurate (section 63AA of the Assessment Act). Otherwise, it must accept the estimate and give effect to it.

2. If Child Support accepts an estimate election, the income estimate amount becomes the adjusted taxable income amount for the purposes of assessing the annual rate of child support payable in the application period (section 61 of the Assessment Act).

3. The section of the Assessment Act which is particularly relevant to the review is section 64. Section 64(3) deals with reconciliation of the estimated and taxable income amounts after the end of the year of income. Broadly, if it is determined the difference between the person’s actual adjusted taxable income and the parent’s applicable year to date income amount for the year of income is greater than their estimated partial year of income amount, then the assessment based on the estimate is reconciled.

4. The Tribunal has found that on 17 August 2021 Mr Ferguson lodged an estimate to Child Support pursuant to section 60(3) of the Assessment Act for 2021-22 adjusted taxable income of $120,293.00 (annualised) for the period 17 August 2021 to 30 June 2022 and he lodged a year-to-date income amount of $12,000.00 for the period 1 July 2021 to 16 August 2021.

5. The Tribunal has found that Mr Ferguson’s actual adjusted taxable income in the 2021-22 financial year was $158,582.00 and the source of the information was the ATO according to the “Client Income – PRODUCTION” screen at page 101 of the Tribunal papers.

6. The Tribunal has found that the application period has been affected by Mr Ferguson ceasing his employment with [Company 1] and his income subsequently reducing. The payslip that Mr Ferguson provided to the Tribunal from [Company 1] states that on 13 August 2021 he was paid $41,478.68 gross for annual leave on termination and long service leave entitlements and on this payslip it states that his year to date (YTD) income was $53,937.01. Mr Ferguson stated to the Tribunal that he was advised by Child Support to provide copies of his payslips; however, he was unable to within its timeframe because he had to request copies of his payslips from the company’s human resources department. He explained that since August 2021 he has been employed by [Company 2] and his income has been approximately $120,000.00 per year.

7. The Tribunal finds that Mr Ferguson's year to date income for the period 1 July 2021 to 16 August 2021 was $53,937.01. In considering section 64(3) of the Assessment Act and whether Mr Ferguson’s 2021-22 financial year income estimate should be reconciled the Tribunal found Mr Ferguson’s adjusted taxable income for the year of $158,582.00 minus $53,937.01 equals $104,644.99. This amount is less than the estimated partial year income of $104,803.71 ($120,293.00 annualised) which Mr Ferguson initially lodged as outlined on page 68 of the Tribunal papers and because this amount is less than no further action is taken.

DECISION

The decision under review is set aside and substituted as follows:

• Mr Ferguson’s adjusted taxable income for the 2021-22 financial year is $158,582.

• Mr Ferguson’s year-to-date income for the period 1 July 2021 to 16 August 2021 is $53,937.01.

• Mr Ferguson’s estimated partial year income from 17 August 2021 to 30 June 2022 of $104,803.71 ($120,293 annualised) should not have been reconciled.