Kearns and Sergeant (Child support)

[2024] ARTA 200

Kearns and Sergeant (Child support) [2024] ARTA 200 (28 November 2024)

Applicant/s:  Mr Kearns

Respondent:  Child Support Registrar

Other Parties:  Ms Sergeant

Tribunal Number:   2024/MC028563

Tribunal:Member I Sheck

Place:Melbourne

Date:28 November 2024

Decision:The Tribunal sets aside the decision under review and in substitution decides that Mr Kearns’s income estimate of $144,875 (annualised) made on 15 November 2023 is to be accepted.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – refusal of estimate – commissions on sales – income estimate not less than the actual adjusted taxable income – 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 omitted from this decision and replaced with generic information pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.

Statement of Reasons

BACKGROUND

1. Mr Kearns and Ms Sergeant are the parents of [Child 1], born [in] September 2023.  A case was registered by Ms Sergeant with Services Australia – Child Support (Child Support) for the assessment of child support and collection of the liability on 28 September 2023.  The application was accepted and on 15 November 2023 a Child Support officer decided to base the assessment of child support on the adjusted taxable incomes of $282,810 for Mr Kearns and $107,832 for Ms Sergeant, these amounts being Mr Kearns’s provisional income for the 2022-23 year and Ms Sergeant’s adjusted taxable income as assessed by the Australian Taxation Office for that year.  The resultant annual rate of child support was $19,599, payable by Mr Kearns to Ms Sergeant. 

2. On 15 November 2023 Mr Kearns had, in addition to providing details of his provisional  income for the previous financial year, also provided an estimate of his income for the 2023‑24 financial year.  Mr Kearns and Ms Sergeant were each notified by letter that Mr Kearns’s estimate of income of $144,875 (annualised) had been accepted and applied to the assessment of child support from 15 November 2023 to 30 June 2024.  The new annual rate of child support in this period was $13,181. 

3. On 8 December 2023 Ms Sergeant objected to Mr Kearns’s estimate of income being used in the assessment from 15 November 2023.  On 16 April 2024 a Child Support officer conducted a review of the estimate and spoke with Mr Kearns.  The officer determined that there would be no changes to the estimate.

4. On 7 September 2024 an objections officer allowed Ms Sergeant’s objection and determined that Mr Kearns’s estimate of income made on 15 November 2023 not be accepted.

5. By application received on 13 September 2024 Mr Kearns asked the Administrative Appeals Tribunal (AAT) to review the objections officer’s decision.  From 14 October 2024 the AAT became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.

6. On 28 November 2024 the Tribunal conducted a hearing at which Ms Sergeant gave evidence by MS Teams audio.  Mr Kearns did not attend the hearing but provided written submissions.  The Tribunal had before it the relevant documents from Child Support (pages 1 to 237), which had been copied to the parties, as well as documents A1 to A5 provided by Mr Kearns.

ISSUE

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act).  The issue which arises in this case is whether the income estimate made by Mr Kearns on 15 November 2023 was likely to be less than his actual adjusted taxable income for the 2023-24 financial year.

CONSIDERATION

1. A person may make an estimate of income for a financial year, or part of a year, if the provisions in section 60 of the Act are met.  If a person has not made an estimate for the year of income and wishes to estimate their income during the financial year, after the first day of the financial year, they can make an income estimate for part of the year (subsection 60(3)).  In providing an estimate for part of the year, the person must inform Child Support of their estimated income for the remaining period (paragraph 60(3)(a)), which is the period that starts when the estimate election is made and ends at the end of the financial year (subsection 60(4)).

2. Child Support may refuse to accept an income estimate for part of a year of income if the parent’s partial year income amount is less than what Child Support considers is likely to be the parent’s actual adjusted taxable income for the remaining period in relation to the income election (subsection 63AA(2)).  Unless the income estimate is refused, Child Support must apply the estimate to the administrative assessment for a period beginning on the day the election is made and ending on the last day of the income year, or, if the estimate is subsequently revoked and replaced by another estimate, on the start day for the later election (section 61).

3. When making his income estimate on 15 November 2023 Mr Kearns told Child Support that his income so far in the 2023-24 year had been $39,678 and his ongoing income after allowable deductions would be $14,166 per month, which was calculated as $90,894.58 over the remainder of the year.  When expressed as an annual amount, this was calculated to give an annualised income of $144,875.[1]  Mr Kearns spoke to another Child Support officer on 16 April 2024 and explained that he had not been employed for the first 3 months of the 2023-24 calendar year and expected his adjusted taxable income for the 2023-24 year to be around $122,000.  The officer accepted that this was accurate.

   [1] Hearing papers, pages 34 and 35.

4. Ms Sergeant told the Tribunal that the amount of $144,875 was Mr Kearns’s base salary.  He was additionally entitled to commissions on sales.  It was her belief that he was on a contract of around $200,000 with his current employer.

5. In setting aside the original decision to accept Mr Kearns’s estimate of income, the objections officer obtained data from the Australian Taxation Office which confirmed that Mr Kearns commenced employment in September 2023 and his gross monthly wage was $15,667.  The Tribunal notes that as 10 months on this gross salary would give income of $156,670, it appears reasonable to conclude that after tax deductions such as work‑related expenses, donations, cost of managing tax affairs and so on, the annualised income of $144,875 as his adjusted taxable income would be roughly accurate.

6. The Tribunal noted the objections officer’s statement that ‘We conducted searches with the Centrelink [sic], and we found no evidence to support [Mr Kearns] was in receipt of benefits from 1 July 2023 to 30 June 2024’.  The point must be made that Mr Kearns has never claimed that he had received Centrelink payments for any part of the 2023‑24 tax year.  As he received a termination payment of $105,880 from his former employer [named] on 21 March 2023 the Tribunal considers it likely that he would be precluded from Centrelink payments due to the application of an income maintenance period, even if he had made a claim for income support payments before commencing his new job in September 2023.

7. The Tribunal has concluded that the income estimate provided by Mr Kearns on 15 November 2023 was, at the time it was provided, likely to be accurate having regard to Mr Kearns’s period of unemployment and his subsequent gross salary and deductions in the 2023-24 year.  At the commencement of the hearing the Tribunal received additional documents from Mr Kearns, these being a statement of his actual gross and taxable income for the 2023-24 year as well as his PAYG income summary for the 2023‑24 year.  The latter document confirms that in the 2023-24 year Mr Kearns received gross salary and wages of $147,231.98 plus a vehicle allowance of $15,521.74, a total of $162,753.72.  In his submissions Mr Kearns states, and the Tribunal accepts, that his taxable deductions, mainly related to work‑related car expenses, will total around $27,000.  This would give a total adjusted taxable income of some $135,753.

8. As it is also clear with hindsight that the estimate of income provided by Mr Kearns will not be less than his actual adjusted taxable income, the estimate must be accepted and applied to the assessment of child support with effect from 15 November 2023 to 30 June 2024, in accordance with section 61 of the Act.

DECISION

The Tribunal sets aside the decision under review and in substitution decides that Mr Kearns’s income estimate of $144,875 (annualised) made on 15 November 2023 is to be accepted.

Date(s) of hearing:  Thursday 28 November 2024