Hachey and Hachey (Child support)

[2020] AATA 4289

Hachey and Hachey (Child support) [2020] AATA 4289 (15 June 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/MC018768

APPLICANT:  Mr Hachey

OTHER PARTIES:  Child Support Registrar

Ms Hachey

TRIBUNAL:Member M Baulch

DECISION DATE:  15 June 2020

DECISION:

The tribunal set aside the decision under review and, in substitution, decided that Mr Hachey’s estimate of his adjusted taxable income of $51,960, that he made on 13 January 2020, should be accepted.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – whether the estimate should have been refused – estimate of income accepted – decision under 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 application for review is about the child support assessment that applies to Mr Hachey and Ms Hachey.

2. The Child Support (Assessment) Act1989 (the Act) provides for an administrative assessment of the child support payable by one separated parent to the other.  It uses a statutory formula which contains variables such as the parents’ adjusted taxable income, the number of children and their percentages of care. 

3. Mr Hachey and Ms Hachey are the separated parents of two children.  Since 10 January 2020, Mr Hachey has been assessed as liable, by Services Australia – Child Support (Child Support), to pay child support to Ms Hachey in respect of their youngest child.  That assessment was based upon a previous estimate election made by Mr Hachey under which his adjusted taxable income was set at $78,075 per annum.

1. On 13 January 2020, Mr Hachey contacted Child Support to amend his estimate of his adjusted taxable income.  Child Support accepted that amendment and, from 13 January 2020, Mr Hachey’s amended estimated of his adjusted taxable income of $51,960 applied to the child support assessment.

2. Ms Hachey objected to that decision and, on 28 March 2020, that objection was allowed.  The objections officer decided that Mr Hachey’s request to amend his estimate of his adjusted taxable income should be refused (the decision under review).  Mr Hachey has now applied to this tribunal for an independent review of Child Support’s decision.

3. A hearing into the application for review was held by the tribunal on 15 June 2020.  Mr Hachey participated in the hearing by conference telephone and gave sworn evidence during the hearing.  Ms Hachey advised the tribunal at the commencement of the hearing that she would not participate in the hearing due to her work commitments.  A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 

4. The tribunal had before it relevant documents provided by Child Support pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (136 pages) and by Mr Hachey (folios A1 to A16), copies of which had been sent to both parties prior to the tribunal hearing.

ISSUES

1. The statutory provisions relevant to this review are found within the Act.

2. The issue which arises in this case is whether Mr Hachey’s earlier estimate election can be replaced with a new estimate of his adjusted taxable income from 13 January 2020.

CONSIDERATION

1. The statutory formula set out in Part 5 of the Act requires the Registrar to determine a child support liability having regard to a number of factors, including each parent’s adjusted taxable income.  Section 42 of the Act defines a parent’s adjusted taxable income to be the sum of the following:

   ·      The parent's taxable income for the last relevant year of income in relation to the child support period;

   ·      The parent's reportable fringe benefits total for that year of income;

   ·      The parent's target foreign income for that year of income;

   ·      The parent's total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income;

   ·      The total of the tax-free pensions or benefits received by that parent in that year of income; and

·      The parent's reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income.

1. Subsection 60(1) of the Act allows a parent to elect to estimate his or her adjusted taxable income for a year of income, and use the estimated income to replace their adjusted taxable income, so long as the estimated income is not more than 85% of the parent’s adjusted taxable income used in the child support assessment. 

2. Section 61 of the Act provides that where such an election is made, the estimated income is to be used in the child support assessment.  On 23 May 2019, Mr Hachey made such an election, which was accepted by Child Support, to have his estimated adjusted taxable income of $78,075 applied to the child support assessment.

3. A parent can seek to change the amount of their estimated adjusted taxable income during an income year.  To do this, they must revoke their earlier election (section 62 of the Act) and elect a new estimate of their adjusted taxable income for the balance of the income year (section 62A of the Act).   Mr Hachey did this on 13 January 2020; seeking to have an estimated adjusted taxable income of $51,960 applied to the balance of the income year.

4. Subsection 63AA(3) of the Act states that the Registrar may refuse to accept an election made under section 62A of the Act if the Registrar is satisfied that the estimated amount is likely to be less than the parent’s actual adjusted taxable income for the remaining part of the income year.  Subsection 63AA(5) of the Act says that if the Registrar refuses to accept an income election (or estimate), that election is taken to have never been made.

5. In addition to being a wage and salary earner, for which he is paid $100,035 per annum, Mr Hachey engages in the business of trading shares in his and his partner’s name.  During the 2018-19 financial year, Mr Hachey incurred losses of $55,483 from these business activities.  Mr Hachey’s evidence was that his salary remains unchanged, and he is expecting his business losses this financial year will be in the order of $50,000, justifying his amended estimate amount of $51,960 from 13 January 2020.

6. The question for me is not, with the benefit of hindsight, whether Mr Hachey’s likely adjusted taxable income will be $51,960 for the entire financial year; but is whether, as at 13 January 2020, it was likely that Mr Hachey’s adjusted taxable income for the remainder of the financial year would be less than an annualised amount of $51,960. 

7. Mr Hachey’s submission was that he was in a position to know, as at 13 January 2020, that his income for the remainder of the financial year would be the annualised amount of $51,960.  His evidence was that he was already down by $30,000 from his share trading activities as at the end of 2019.

8. If Mr Hachey was already holding business losses of $30,000 at the end of 2019, I did not consider it likely that he would be more successful with his business ventures during the second half of the financial year.  I was not persuaded that Mr Hachey’s actual adjusted taxable income would be less than $51,960 per annum during the period 13 January 2020 to 30 June 2020.  Therefore, subsection 63AA(3) of the Act does not apply and Mr Hachey’s amended estimate should not have been refused and should have been accepted.

9. Therefore, and for these reasons, I decided to set aside the decision under review and substituted my own decision that Mr Hachey’s request of 13 January 2020 to amend his estimated adjusted taxable income to $51,960 should be accepted.

DECISION

The tribunal set aside the decision under review and, in substitution, decided that Mr Hachey’s estimated adjusted taxable income of $51,960, that he made on 13 January 2020, should be accepted.