Greenacre and Waghorn (Child support)

[2018] AATA 1712

Greenacre and Waghorn (Child support) [2018] AATA 1712 (4 May 2018)

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2018/BC013613

APPLICANT:  Mr Greenacre

OTHER PARTIES:  Child Support Registrar

Ms Waghorn

TRIBUNAL:  Ms Hamilton-Noy, Member

DECISION DATE:  4 May 2018

DECISION:

The tribunal affirms the decision under review.

CATCHWORDS
Child support – Particulars of the administrative assessment – Adjusted taxable income for the last relevant year – Income correctly determined - 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 relates to a decision by the Department of Human Services – Child Support (the Department) to determine Ms Waghorn’s adjusted taxable income for the 2016/2017 financial year based on information she provided to the Department on 13 November 2017.

2. Mr Greenacre and Ms Waghorn are the separated parents of [Child 1].

3. On 13 November 2017 Ms Waghorn contacted the Department to advise that her adjusted taxable income for the 2016/2017 financial year was $47,580.  On the same date an employee of the Department accepted this information.  Correspondence was sent to the parties advising that for the period 1 December 2017 to 28 February 2019, Ms Waghorn’s 2016/2017 provisional income of $47,580 would be applied.  As a result, Mr Greenacre was required under the new assessment to pay Ms Waghorn $421.33 per month in child support.

4. Mr Greenacre objected to this decision and on 10 February 2018 an objections officer of the Department disallowed the objection.

5. On 28 February 2018 Mr Greenacre made application to the Administrative Appeals Tribunal (the tribunal) for an independent review of the Department’s decision.  The hearing was held on 4 May 2018, on which date both parties spoke to the tribunal by conference telephone and gave evidence on affirmation.  The tribunal was assisted in this matter by documents provided by the Department (1 to 101), documents provided by the applicant (A1 to A8) and documents provided by the second party (B1 to B18).  Copies of the documents were provided to the parties prior to the hearing and they both confirmed receipt of the documents with the tribunal. 

CONSIDERATION

1. The statutory provisions relevant to this review are contained 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 legal issue for the tribunal in this case is whether the Department correctly accepted Ms Waghorn’s 2016/2017 adjusted taxable income information provided on 13 November 2017.

3. Part 5, Division 7 of the Assessment Act provides for assessments and estimates of adjusted taxable income. Section 55J of the Assessment Act provides a simplified outline to the Division and notes the following:

   ·      A parent's taxable income is generally the amount of taxable income that is assessed under an Income Tax Assessment Act.

   ·      The Registrar may determine a parent's adjusted taxable income in certain circumstances.

   ·      There are limits on the Registrar's ability to amend an assessment for past periods if the parent later lodges his or her tax return.

·      A parent can estimate the amount of his or her adjusted taxable income for a year of income.

1. The issue in dispute in this case relates to the Registrar’s ability to determine a parent’s adjusted taxable income in certain circumstances. At section 58 of the Assessment Act, the legislation provides for the Registrar to determine a parent’s adjusted taxable income in circumstances where they have not lodged an income tax return for the last relevant year of income.

2. Subsection 58(1) of the Assessment Act applies where a parent is to be assessed in respect of the costs of a child in relation to a child support period and either of the following apply:

   (a)  The parent’s taxable income for the last relevant year of income in relation to the period has not been assessed under an Income Tax Assessment Act; or

   (b)  The Registrar is unable to ascertain whether or not the parent’s taxable income for that year has been so assessed.

3. The tribunal accepted that, at the time Ms Waghorn contacted the Department on 13 November 2017, she had not lodged an income tax return for the 2016/2017 financial year, which was the last relevant year of income at the time of contact.

4. In these circumstances, subsection 58(2) of the Assessment Act provides as follows:

   (2)  If:

   (a) the Registrar or the Commissioner of Taxation has information (whether oral or written) or a document in his or her possession; and

   (b) either:

   (i)  an amount is specified in that information or document as the parent's adjusted taxable income for the last relevant year of income; or

   (ii)  that information or document allows the amount of the parent's adjusted taxable income for the last relevant year of income to be worked out; and

   (c) the Registrar is satisfied that the specified amount, or the amount so worked out, is a reasonable approximation of the parent's adjusted taxable income for that year;

   the Registrar may determine that the specified amount, or the amount so worked out, is the parent's adjusted taxable income for that year.

5. The tribunal accepted that Ms Waghorn contacted the Department on 13 November 2017 to advise that her total adjusted taxable income for 2016/2017 was total salary and wage income of $47,580; with no allowable deductions; and no other income components (such as reportable fringe benefits, target foreign income, rental property losses, investment losses or reportable superannuation contributions).

6. The tribunal heard from Mr Greenacre that he had applied for a review of the decision on the basis that Ms Waghorn had interest in four company structures: [Company 1], [Company 2], [Company 3] and [Company 4].  Mr Greenacre submitted that the last two of these had been disbanded in June 2017 and May 2017 respectively.  In addition to these, Mr Greenacre submitted that Ms Waghorn owns a rental property in [a particular location] which had been purchased and had not been disclosed to the Department as a financial resource.

7. The tribunal noted that it had before it an income tax return for 2016/2017 for [Company 1] and that no distributions appeared to have been made to Ms Waghorn from the company.  There was no evidence before the tribunal that any distributions or income had been earned from the other three entities in the 2016/2017 financial year.

8. As to the rental income, Ms Waghorn stated to the tribunal that she does own a rental property and believes she made just under $6,000 in net rental property losses during the 2016/2017 financial year.  As to why she had reported no rental property losses during her contact with the Department on 13 November 2017, she stated that on reflection she did not think she had answered that question correctly as she did not consider rental property losses as income.

9. In response to further questions from the tribunal, Ms Waghorn stated that her gross income for 2016/2017 had been $48,906.  She had prepared her income tax return and it was with her accountant but is not yet lodged with the ATO, and she has claimed some work-related deductions such as car expenses but is unsure how much, in addition to the net rental property losses claimed.

10. The legal issue for the tribunal is whether the information provided to the Department in the contact of 13 November 2017 was a reasonable approximation of Ms Waghorn’s adjusted taxable income for the 2016/2017 financial year.  The tribunal noted that any deductions claimed, plus any net rental property losses, would reduce Ms Waghorn’s taxable income for ATO purposes.  However, in calculating her adjusted taxable income for child support purposes, the net rental property losses would be added back on (effectively increasing her income for child support purposes back up to $48,906 minus deductions).  While Ms Waghorn did not advise the Department of the rental property in her contact of 13 November 2017, the total income she advised to the Department was a reasonable approximation of her adjusted taxable income for the 2016/2017 financial year. 

11. Therefore, while acknowledging the grounds on which Mr Greenacre lodged the application with the tribunal, the tribunal found that the Department’s decision to determine Ms Waghorn’s adjusted taxable income for the 2016/2017 financial year was legally correct and this decision is affirmed. 

DECISION

The tribunal affirms the decision under review.