Ganson and Ganson (Child support)

[2023] AATA 1651

Ganson and Ganson (Child support) [2023] AATA 1651 (27 April 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC025026

APPLICANT:  Ms Ganson

OTHER PARTIES:  Child Support Registrar

Mr Ganson

TRIBUNAL:Member J Leonard

DECISION DATE:  27 April 2023

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether post separation costs should be excluded from the adjusted taxable income for the last relevant year – an amount should be excluded - 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. Ms Ganson and Mr Ganson are the parents of three children. They separated on 13 March 2021. Since the case was registered on 21 June 2021, Mr Ganson has had a liability to pay child support to Ms Ganson. 

2. On 22 August 2022, Mr Ganson applied to the Registrar of Child Support (the Registrar) for the exclusion from his child support income of additional income earned post-separation during the 2021-22 financial year. 

3. On 26 August 2022, Child Support refused this application. Mr Ganson objected to that decision on 29 August 2022.  

4. On 28 October 2022, Child Support allowed this objection and excluded an amount of $21,238 as post-separation income.

5. On 14 November 2022, Ms Ganson applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for review of that decision. A hearing was conducted on 27 April 2023.

6. Ms Ganson attended the hearing by MS Teams audio. Mr Ganson was represented by [Representative A] from [a named firm]. Mr Ganson and [Representative A] attended the hearing by MS Teams audio.

7. Prior to the hearing, Child Support sent a bundle of its relevant documents to the Tribunal and to the parties.

ISSUES

1. The circumstances in which additional income earned post-separation can be excluded for the purposes of child support calculations are limited. The circumstances are provided for in section 44 of the Child Support (Assessment) Act1989 (the Act).

2. Section 44 provides for a number of threshold criteria, such as the parents having lived together on a genuine domestic basis for at least six months, and for any application to have been made within three years of separation. It is not in dispute that all these threshold criteria (paragraphs 44(1)(a), (b) and (c)) are satisfied.

10.Paragraph 44(1)(d) contains two additional requirements that must be satisfied before the ‘post-separation income’ can be excluded:

(d)  in the last relevant year of income, or in the application period for an income election  (if such an election has been made by the parent), the applicant earns, derives or receives income:

(i)  in accordance with a pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate; and

(ii)  that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events.

11.The issue in this case is whether Mr Ganson has earned, derived or received income in accordance with a pattern of earnings that is established after he separated from Ms Ganson, and, whether that income is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events.

CONSIDERATION

12.The legislation requires the Tribunal to examine the pattern of earnings before and after separation. 

13.Mr Ganson established a small business as [an occupation 1]. Ms Ganson stated the logo for the business was paid for in 2019. The documents from Child Support refer to the business being registered on 3 July 2020. Mr Ganson stated that the business may have been registered in 2020 but he was unable to recollect the date. It was agreed that the business was registered prior to Ms Ganson and Mr Ganson separating.

14.In the 2020-21 financial year, Mr Ganson was in receipt of carer payment from Centrelink in respect of the care he provided to Ms Ganson. Child Support’s documents show that he had non-taxable income of $17,525 and taxable income of $7,474 in respect of the 2020-21 financial year.

15.The Tribunal finds that the amount of $17,525 represents carer payment and the amount of $7,474 represents income derived from self-employment.

16.Ms Ganson stated that Mr Ganson received some income ‘off the books’ and suggested the income earned from the business may have been understated for taxation purposes in the 2020-21 financial year. She stated Mr Ganson wasn’t caring for her as he should, and that while they were together he had the capacity to work more if he chose to. She also said that it was in Mr Ganson’s interest to increase the income attributed to the business in the 2021-22 financial year in order to secure a loan. Mr Ganson’s 2021-22 taxable income was $70,794.   Mr Ganson stated that his self-employment as [an occupation 1] was impacted by COVID-19 restrictions and his capacity to work was impacted by his caring responsibilities.

17.A comparison of 2020-21 taxable income ($7,474) and his 2021-22 taxable income ($70,794) shows that Mr Ganson was not earning the same income prior to separation as he was after it. There is no corroborating evidence to support a finding that Mr Ganson’s employment income in 2020-21 was significantly higher than his taxable income as determined by the Australian Taxation Office.

18.In determining whether the additional income was earned in the ‘ordinary course of events’ the Tribunal had regard to the policy contained in the Child Support Guide (the Guide). The Guide is a publication designed to assist decision makers in administering social policy law.

19.The Guide at chapter 2.5.2 states the following in relation to the meaning of ‘ordinary course of events’:

Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent's adjusted taxable income. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events (section 44(1)(d)(ii)).

Income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their adjusted taxable income. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income.

However, income that parents earn outside the ordinary course of events is able to be excluded from their adjusted taxable income. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job. However, moving from an unemployment benefit to employment is considered to be within the ordinary course of events. Any income to be excluded must have been earned in a pattern established after separation.

20.After they separated, Mr Ganson stated his capacity to work increased significantly. He estimates that he works between 38-40 hours a week. This is somewhat weather dependent, and he sometimes works on weekends. He stated he had to earn more to re-establish himself, a claim that Ms Ganson denied.

21.[Representative A] submitted that Mr Ganson meets all of the criteria in section 44 of the Act.

22.The Tribunal finds that the 2021-22 financial year becomes the ‘last relevant year of income’ from 1 October 2022; the commencement of the child support period that extends from 1 October 2022 to 31 December 2023.

23.The Tribunal finds that a new pattern of earnings was established after separation when Mr Ganson was no longer caring for Ms Ganson which led to an increase in the hours he was available to undertake self-employment. It would not have been reasonable to expect the significant increase in income in the ordinary course of events.

24.The additional income earned by Mr Ganson is $63,320. Under paragraph 44(3)(a) of the Act, a determination may only reduce the adjusted taxable income by 30% or less. This means only an amount of $21,238 can be excluded. The law does not require that Mr Ganson provide evidence that the excluded amount was used for re-establishment costs.

25.The Tribunal finds that the decision to exclude an amount of $21,238 post-separation income from the 2021-22 adjusted taxable income from 1 October 2022 is correct in accordance with the law.

DECISION

The decision under review is affirmed.