Holst and Marinos (Child support)

[2019] AATA 1746

Holst and Marinos (Child support) [2019] AATA 1746 (20 May 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC016021

APPLICANT:  Mr Holst

OTHER PARTIES:  Child Support Registrar

Ms Marinos

TRIBUNAL:Member M Baulch

DECISION DATE:  20 May 2019

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether additional income earned since separation should be excluded from parent’s adjusted taxable income - 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 for review is about the assessment of child support applying to Mr Holst and Ms Marinos, who are the separated parents of one child, born in 2016.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one parent to the other.  It uses a statutory formula which contains variables such as the parents’ adjusted taxable incomes, the number of children and their percentages of care. 

3. Since 25 July 2017 Mr Holst has been assessed as liable to pay child support to Ms Marinos by the Department of Human Services – Child Support (the Department).

4. On 21 September 2018, Mr Holst requested that the Department exclude additional income earned since separation from his adjusted taxable income.  On 27 November 2018 a departmental employee considered the matter and decided to exclude $38,650 from Mr Holst’s adjusted taxable income, reducing the amount of his income used in the child support assessment to $94,996.

5. Ms Marinos objected to that decision and, on 20 February 2019, that objection was allowed.  It was decided, instead, that Mr Holst’s application to exclude additional income earned since separation from his adjusted taxable income should be refused (the decision under review).  On 28 February 2019 Mr Holst applied to this tribunal for an independent review of the Department’s decision.

6. A hearing into the application for review was held by the tribunal on 20 May 2019.  Mr Holst and Ms Marinos discussed the application for review with the tribunal by conference telephone and both gave evidence under affirmation during the hearing.  A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 

7. The tribunal had before it relevant documents provided to it by the Department pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, which were labelled folios 1 to 444, copies of which Mr Holst and Ms Marinos both confirmed they had received prior to the hearing.

ISSUES

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

2. The central issue for me to determine in this case is whether post separation income can be excluded, in particular:

   ·       Whether there is a pattern of earnings established after Mr Holst and Ms Marinos separated; and if so

   ·       Whether the income is of a kind that would not have been derived in the ordinary course of events; and if so

   ·       By what amount should the adjusted taxable income be amended?

CONSIDERATION

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account a number of factors, including each parent’s adjusted taxable income.  Section 43 of the Act explains how to determine a parent’s adjusted taxable income.  It is essentially the sum of the following factors:

   ·       the parent's taxable income, as determined by the Australian Taxation Office;

   ·       the parent's reportable fringe benefits total;

   ·       the parent's target foreign income;

   ·       the parent's total net investment loss;

   ·       the total of the tax free pensions or benefits received by that parent; and

·       the parent's reportable superannuation contributions.

1. Section 60 of the Act provides that a parent may elect, either before the commencement of an income year (that is, a financial year) or during that income year, that their adjusted taxable income used in a child support assessment be based upon their estimate of their income as long as that estimate is not more than 85% of their adjusted taxable income used in the child support assessment. 

2. Mr Holst made such an election in respect of the 2018-19 financial year on 29 June 2018.  That election was accepted by the Department.  Mr Holst varied his estimated income after his initial election, such that from 10 September 2018 his liability to pay child support was assessed upon an estimated adjusted taxable income of $133,646.

3. Section 44 of the Act provides that a parent may apply to the Registrar to amend the administrative assessment of child support to exclude additional income earned since separation, up to a maximum of 30% of a parent’s adjusted taxable income, if the following apply:

   ·       the parents of the child lived together on a genuine domestic basis for at least six months (paragraph 44(1)(a) refers);

   ·       the separation of the parents occurred within the last three years and before either parent applied for child support assessment (paragraph 44(1)(b) refers);

   ·       at the time of the application, the parents remain separated (paragraph 44(1)(c) refers);

   ·       when an estimate election applies, the applicant parent earns, derives or receives income:

   • in accordance with a pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate (subparagraph 44(1)(d)(i) refers); and
   • 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 (subparagraph 44(1)(d)(ii) refers).

4. In this instance, there was no dispute that Mr Holst and Ms Marinos lived together on a genuine domestic basis for more than six months and remain separated.  It is also not disputed that the parents separated in the three years prior to 10 September 2018, when Mr Holst made his application to have some of his income excluded, and the separation occurred prior to the application for an assessment of child support being made on 25 July 2017.

Whether there is a pattern of earnings established after Mr Holst and Ms Marinos separated?

1. Information contained in the Department’s records show that prior to separation Mr Holst’s taxable income was assessed to be:

   ·       $71,592 for the 2014-15 financial year;

   ·       $86,347 for the 2015-16 financial year; and

   ·       $97,857 for the 2016-17 financial year.[1]

   [1] See folios 423

2. Mr Holst and Ms Marinos separated on 10 April 2017, which was during the 2016-17 financial year.

3. The Department’s records show that since the 2016-17 financial year, until 30 March 2019, the Australian Taxation Office has not made an assessment of Mr Holst’s taxable income.  Instead, since 1 July 2017, Mr Holst’s adjusted taxable income used in the child support assessments has been:[2]

   [2] See folios 423

1 July 2017	$100,108	An amount determined by the Registrar
4 October 2017	$0	An amount estimated by Mr Holst
22 January 2017	$114,077	An amount estimated by Mr Holst
10 May 2018	$0	An amount estimated by Mr Holst
23 May 2018	$93,857	An amount estimated by Mr Holst
29 June 2018	$0	An amount estimated by Mr Holst
16 July 2018	$73,000	An amount estimated by Mr Holst
13 August 2018	$0	An amount estimated by Mr Holst
10 September 2018	$133,646	An amount estimated by Mr Holst

1. I observed that Mr Holst’s income from 10 September 2018 is higher than any income he has earned before.  Mr Holst explained that this was due to his current position having a higher degree of seniority and greater responsibility.

2. I was satisfied that there is a pattern of earnings from 10 September 2018, which has been established since Mr Holst and Ms Marinos separated.  I found that subparagraph 44(1)(d)(i) of the Act is satisfied.

Whether the income is of a kind that would not have been derived in the ordinary course of events?

1. Mr Holst’s evidence was that he did not think he would have been able to earn a higher income than he did previously, had he and Ms Marinos not separated.  Mr Holst submitted that he does not believe that he would have been afforded opportunities to earning more had the relationship with Ms Marinos continued.  He gave the example of Ms Marinos not wanting him to attend a placement in [another country] that he would need to undertake to complete a course he was studying.

2. Ms Marinos disputed this, she stated that separation occurred when their child was very young, barely 12 months old.   She was on maternity leave and not working when the placement in [the other country] arose.  Ms Marinos asserted that they could not afford it at that particular time.

3. Mr Holst’s evidence was that being separated enabled him to commit more to his employment.  His job requires him to be on the road and engage in weekend work.  Sometimes he starts really early and might work back late.  He is on the telephone a lot and took the job on the understanding that he needed to make himself available outside normal work hours. 

4. Mr Holst did not dispute that it is a similar role to those he has undertaken previously, but said the job involved a greater remit and more responsibility.  He stated that he would not have been able to continue to develop himself had the separation from Ms Marinos not occurred.

5. The evidence was that Mr Holst was engaged in studies, which commenced prior to separation.  While he took breaks from those studies, these occurred after separation.  Mr Holst completed those studies, in a Bachelor of [subject], since he and Ms Marinos separated.  Mr Holst disputed the suggestion that it was his increased qualifications, resulting from a course of study commenced prior to separation, which has resulted in him earning a higher income.

6. I formed the view that Mr Holst’s increase in work responsibilities, and earnings, would have resulted in the ordinary course of events.  I concluded that it is more likely than not that it is his improved qualifications, which resulted from studies he commenced prior to separation, that have resulted in his increased responsibilities at work and the commensurate increase in income.  I concluded that Mr Holst would have completed his studies at some point in time, regardless of whether or not the parents separated, and that one could reasonably expect that this would result in Mr Holst’s income improving over time. 

7. I found that subparagraph 44(1)(d)(ii) of the Act has not been satisfied and, as a consequence, Mr Holst’s application to have additional income earned after separation excluded from the child support assessment must be refused.

8. Having arrived at the same decision as that of the objections officer, I decided to affirm the decision under review.

DECISION

The decision under review is affirmed.