Jeffress and Verey (Child support)

[2021] AATA 4788

Jeffress and Verey (Child support) [2021] AATA 4788 (19 October 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC022200

APPLICANT:  Ms Jeffress

OTHER PARTIES:  Child Support Registrar

Mr Verey

TRIBUNAL:Member S De Bono

DECISION DATE:  19 October 2021

DECISION:

The decision under review is affirmed. (This means the application for review is unsuccessful.)

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 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. Ms Jeffress and Mr Verey are the separated parents of [Child 1]. Ms Jeffress has 100% care of [Child 1]. A registered child support assessment has been in place for [Child 1] since 24 January 2019. On 20 May 2021 Mr Verey elected to revoke his existing estimate of income and made a new election of $260,714 (annualised) for the period 20 May 2021 to 30 June 2021. On the same date, an officer from Services Australia – Child Support (Child Support) made the decision to accept Mr Verey’s estimate of adjusted taxable income of $260,714 (annualised) for the period 20 May 2021 to 30 June 2021.

2. On 6 June 2021 Ms Jeffress lodged an objection to this decision and on 7 August 2021 an objections officer made the decision to disallow Ms Jeffress’ objection.

3. On 3 September 2021 Ms Jeffress applied to the Administrative Appeals Tribunal (the tribunal) for an independent review of the objections officer’s decision. On 19 October 2021 Ms Jeffress and Mr Verey gave evidence under affirmation via conference telephone to the tribunal. The tribunal had before it a bundle of documents (160 pages – referred to as the hearing papers) which had been sent to Ms Jeffress and Mr Verey prior to the hearing. Relevant aspects of the material and evidence before the tribunal will be referred to in the tribunal’s consideration of the issues to be decided.

LAW AND CONSIDERATION

1. The law 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). The rate of child support payable by the 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 takes into account factors such as the number and age of children, the level of care provided and the child support income amount of each parent.

2. Section 60 provides a parent may elect to estimate their taxable income for a year of income. Subsection 60(3) also provides that an estimate can be made for part of an income year. The income is worked out under the subsection 60(4) method statement which says:

   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.

3. Section 62A of the Assessment Act provides that if a parent has revoked an earlier income election they must elect a new adjusted taxable income worked out using the same method as that set out in section 60, starting on the start day for the new election.

4. Subsection 63AA of the Assessment Act provides the Registrar may refuse to accept an income election if the partial year income amount given by the person is less than the amount the person’s actual adjusted taxable income is likely to be for the remaining period. Subsection 63AA(2) provides that the Registrar may refuse to accept an income election if the person’s income is more than the Registrar considers likely to be the person’s actual income.

5. Income for child support purposes is estimated on the basis of the likely income for the whole financial year. The financial year in this instance was from 1 July 2020 to 30 June 2021 (the 2021 financial year).

6. The task of the tribunal is to review a single decision of Child Support – that is the decision of the objections officer made on 7 August 2021 to accept Mr Verey’s income estimate of $260,714 for the period 20 May 2021 to 30 June 2021.

Issue 1 – Is the decision to accept Mr Verey’s new income estimation of $260,714, made on 20 May 2021, correct?

1. On 3 July 2020 Mr Verey updated his income estimate to be $120,000 for the 2020/2021 financial year, which was an annualised income of $119,980[1] from 1 July 2020. Mr Verey’s child support liability was $1,333.42 a month at that time;[2] Ms Jeffress did not lodge an objection to this income estimation.

   [1] Page 10 of the hearing papers.

   [2] Page 12 of the hearing papers.

2. On 2 August 2020 Child Support sent Mr Verey a letter notifying him of the new child support period commencing on 1 September 2020 and ending on 30 November 2021,[3] which was a change of assessment decision based on Mr Verey’s cost of living.  From this date the annual rate of child support payable by Mr Verey was assessed to be $12,897,[4] which is a monthly rate of $1,363.58. 

   [3] Page 24 of the hearing papers.

   [4] Pages 27 and 29 of the hearing papers.

3. Ms Jeffress submitted that Mr Verey underestimated his income in his initial income estimate of $119,980 annualised and overestimated his later estimate of income of $260,714 annualised, which she believed would mean Mr Verey’s child support liability would be less than his liability had he estimated his income at a higher amount at the time of his initial income estimation. Ms Jeffress thought the effect of the higher income estimation later in the 2021 financial year would mean at the time Mr Verey’s estimated income is reconciled with his actual income she would have been paid a lower amount of child support than she would otherwise be entitled to receive.

4. Mr Verey said he updated his income to the higher income estimate because he had reviewed his payslips and found it was likely his income for the 2021 financial year would be more than his initial estimate of $120,000. Mr Verey said he calculated his income would be about $130,000 and he increased his income estimation to cover the short fall of child support that would arise from the difference between his income estimation of $120,000 and what his actual income for the 2021 financial year was likely to be. Mr Verey said this is the reason he overestimated his income to more than what his actual income would be so he would have a lesser debt when his actual income was reconciled with his income estimate for the purposes of his child support liability.

5. The outcome of the income estimation made on 20 May 2021 is that Mr Verey paid increased child support for a period of six weeks, which he hopes would reduce any debt he may incur once his actual income for the financial year is reconciled with his income estimates used during the year

6. Mr Verey said he is a casual worker and does not work fixed days. Ms Jeffress disagreed and said Mr Verey worked regular days even though he was casual. The tribunal had no information before it which could confirm either statement. Mr Verey said his work has been affected by COVID-19 and he estimated a higher income amount in the 2021 financial year, which was above his actual income for the 2020 financial year, because he thought his work would “pick up” during the current financial year.

7. Mr Verey said as soon as he became aware that his income was going to be higher than his income estimate for the 2021 financial year so he updated his income estimate to a higher amount to help cover some of the gap between what he had already paid and what he may be liable to pay once his income was reconciled.

8. The tribunal notes that any shortfall in Mr Verey’s child support liability will be owed by him once the child support liability he paid throughout the 2021 financial year is reconciled with his actual income for this period. The reason for Ms Jeffress’ objection is her understanding that she would be paid less child support than she otherwise would be entitled to due to Mr Verey’s updated higher income estimate; the tribunal understands that this will not be the case.

9. The tribunal accepts the revocation of income election and the new income election made by Mr Verey in accordance with subsection 663AA(3) of the Act which provides that the Registrar can only refuse an income election if the income estimation is lower than the amount the Registrar considers will be Mr Verey’s actual adjusted taxable income. As the amount is higher the tribunal finds the decision by the Registrar to accept the new income election made by Mr Verey on 20 May 2021 is correct.

DECISION

The decision under review is affirmed. (This means the application for review is unsuccessful.)