Kinchen and Child Support Registrar (Child support)
[2022] AATA 2374
•25 May 2022
Kinchen and Child Support Registrar (Child support) [2022] AATA 2374 (25 May 2022)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2022/BC023290
APPLICANT: Mr Kinchen
OTHER PARTIES: Child Support Registrar
TRIBUNAL:Member M Baulch
DECISION DATE: 25 May 2022
DECISION:
The tribunal set aside the decision under review and, in substitution, decided that Mr Kinchen should be extended time until 6 October 2021, to object to a decision made on 13 July 2021, not to apply his amended taxable incomes to the child support assessment before 13 July 2021.
CATCHWORDS
CHILD SUPPORT – refusal to grant an extension of time to object – satisfactory explanation for the delay in lodging the objection late – some merit – no prejudice to the other parent - the extension of time should have been granted - 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
The Child Support (Assessment) Act 1989 (the Assessment 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 incomes, the ages and number of children and their percentages of care.
Mr Kinchen and [Ms A] are the parents of two children in respect of whom Services Australia – Child Support (Child Support) has made assessments under which Mr Kinchen is liable to pay child support to [Ms A]. That liability ended on 6 October 2021 when the children, who are twins, attained 18 years of age.
On 13 July 2021, Child Support received information from the Australian Taxation Office amending the assessments of Mr Kinchen’s taxable incomes for the 2013–14, 2014–15, 2015–16, 2016–17, 2017–18, 2018–19 and 2019-20 income years. Other than for the 2013–14 income year, the reductions in Mr Kinchen’s taxable income were significant.
On 13 July 2021, Child Support decided to apply the amended taxable income to the child support assessment from 13 July 2021, but declined to apply the amended taxable incomes retrospectively, that is, before 13 July 2021.
Mr Kinchen had a right to object to Child Support’s decision. Section 81 of the Child Support (Registration and Collection) Act 1988 (the Act) provides that an objection “must be lodged by a person within 28 days after a notice of the decision is served on the person”.
Mr Kinchen made a written objection on 6 October 2021. Child Support asserts that his objection was out of time. He also lodged an application for an extension of time within which to lodge his objection. On 28 January 2022, a Child Support decision maker decided to refuse Mr Kinchen’s application to extend time (the decision under review) and it is from that decision that Mr Kinchen applied to this tribunal, on 15 February 2022, seeking an independent review.
A hearing into the application for review was held by the tribunal on 25 May 2022. Mr Kinchen discussed the application for review with the tribunal by telephone and gave sworn evidence during the hearing. A representative of the Child Support Registrar did not participate in the hearing. The tribunal had before it relevant documents prepared by Child Support pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (390 pages), copies of which Mr Kinchen confirmed he had received prior to the tribunal hearing. The tribunal also had regard to additional material lodged by Mr Kinchen with the tribunal, which was labelled folios A1 to A141.
ISSUES
The issue for me to determine in this matter is whether or not Mr Kinchen should be extended time to object to the decision of 13 July 2021 not to apply his amended taxable incomes to the child support assessment prior to 13 July 2021.
CONSIDERATION
The Act offers no direction or guidance on how the decision on an extension of time application should be made. I had regard to the relevant case law, including Ingram-Nader v Brinks Australia Pty Ltd [2006] FCA 624, Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176 and Brisbane South Regional Health Authority v Taylor [1996] HCA 25.
The first two judgments cited set out a number of factors which are potentially relevant in determining such applications, such as the reason for the delay and the merits of the objection. In the third judgment, McHugh J sets out a clear explanation of the public policy considerations attaching to statutory time limits.
Introduction
On 4 December 2020, the Full Court of the Federal Court in Commissioner of Taxation v Douglas [2020] FCAFC 220 (the Douglas decision) dismissed the Commissioner of Taxation’s appeals against a number of decisions made by the Administrative Appeals Tribunal about the taxation treatment of disability benefits paid under various Commonwealth superannuation schemes. Mr Kinchen is a person who receives a benefit under one of those schemes.
The 28-day period during which the Commissioner of Taxation could appeal the Full Court’s decision lapsed on 2 January 2021 (as 1 January 2021 was a public holiday) and, on 7 January 2021, Mr Kinchen was recorded as making an objection against his income tax assessments for the years ending 30 June 2014 to 30 June 2020. On 17 March 2021, the Australian Taxation Office wrote to Mr Kinchen advising him that his objection had been allowed in full and that his income assessments for those years would soon be amended.
Mr Kinchen first contacted Child Support about the Douglas decision, and how it might impact his child support liability, on 5 January 2021.[1] He contacted Child Support about the matter again on many occasions since that date and has made various objections to child support assessments based upon his taxable income prior to the amendment being made by the Australian Taxation Office.
[1] Folio 59
Ultimately, Child Support did not receive information about Mr Kinchen’s amended taxable incomes from the Australian Taxation Office until 13 July 2021.
Reasons for the delay in objecting
Child Support applied Mr Kinchen’s amended taxable income to the child support assessment from 13 July 2021, but not to the child support assessment before this date. This decision was made on 13 July 2021. Mr Kinchen had lodged a number of objections about the child support assessments and the implementation of the Douglas decision before 13 July 2021, but it is not possible to object to a decision that has not yet been made (see section 80 of the Child Support (Registration and Collection) Act 1988).
Child Support wrote to Mr Kinchen on 3 September 2021 to advise him that an earlier objection was invalid, because the objection was lodged on 5 July 2021, which was before the decision of 13 July 2021 was made.[2] Mr Kinchen’s evidence was that he received this letter on 17 September 2021.
[2] Folio 230
I noted that by 3 September 2021, the 28-day period during which Mr Kinchen could have objected to the decision of 13 July 2021 had already elapsed. Mr Kinchen’s evidence suggested that until he received this letter, he had no idea his earlier objections were viewed as being invalid but, by the time the letter was sent, it was already too late to make an objection within time.
Mr Kinchen lodged a valid objection on 6 October 2021.[3] His evidence to me was that he believed that he had 28 days from the date he received the letter of 3 September 2021 (on 17 September 2021) telling him his earlier objection was invalid, to make a valid objection.
[3] Folio 245
I noted that Mr Kinchen contacted Child Support about the progress of his “objection” and whether the child support assessments would be amended based upon the amended taxable incomes on 15 July 2021,[4] 16 July 2021,[5] 22 July 2021,[6] 27 July 2021,[7] 5 August 2021,[8] 30 August 2021,[9] 31 August 2021[10] and 3 September 2021.[11]
[4] Folio 201
[5] Folio 204
[6] Folio 217
[7] Folio 221
[8] Folio 222
[9] Folio 223
[10] Folio 225
[11] Folio 227
I was satisfied that Mr Kinchen has not rested upon his rights and made his concerns in this matter clear to Child Support. I also noted that there were ample opportunities for Child Support to advise Mr Kinchen, between 13 July 2021 and 3 September 2021, that his earlier objection was invalid, but this advice does not appear to have been given within a timeframe that would permit Mr Kinchen to make his objection in time.
I found that Mr Kinchen has provided a satisfactory explanation for his delay in making his objection.
Merit of the substantive objection
To grant an application to extend time if there is no merit in the substantive objection would not be an appropriate exercise of the discretion to extend time.
Mr Kinchen submitted that Child Support is not applying its own legislation or policy, and that it must retrospectively amend the child support assessments. He asserted that this would result in him having paid some $40,000 too much in child support to [Ms A].
When the Australian Taxation Office amends a parent’s taxable income, subsection 58(3) of the Act provides that prospective amendments to the child support assessment must be made. Child Support has done this by applying the amended taxable income to the child support assessment from 13 July 2021.
Once a prospective amendment under subsection 58(3) of the Act is made, subsection 58(3A) of the Act provides the following:
(3A) If, after an administrative assessment of child support is amended under subsection (2) or (3) because of subparagraph (1)(b)(i), the assessment (the tax assessment ) of parent's taxable income is amended (whether or not because of an objection, appeal or review), the Registrar may further amend the administrative assessment to take account of the amendment to the tax assessment. [my emphasis]
The use of the word may means that the Registrar has a discretion as to whether or not they should make other amendments, such as a retrospective amendment, to the child support assessment. It is not the case that a retrospective amendment must be made.
Subsection 58(3B) of the Act provides the circumstances under which a retrospective amendment may be made, which include:
· The parent's adjusted taxable income worked out as a result of the amended tax assessment is higher; or
· The parent lodged their income tax return on time; and
oThe parent applied for the amendment of the tax assessment on or before the day by which the parent was required to lodge their income tax return for that year; or
oThe parent applied for the amendment of the tax assessment before the end of 28 days after the parent was given the tax assessment by the Commissioner of Taxation; or
oThe parent applied for the amendment of the tax assessment before the end of 28 days after the parent becomes aware that the tax assessment is not correct if the parent did not apply for the amendment on or before a day referred to above because of circumstances beyond the knowledge or control of the parent; or
oThe parent did not apply for the amendment of the tax assessment on or before any of the days referred to above, but the Registrar is satisfied that special circumstances exist.
Mr Kinchen’s evidence was that he lodged his income tax returns on time. Potentially, Mr Kinchen may be able to present evidence, or make submissions, that the last two dot points apply in his case (see paragraphs 58(3B)(b)(iii) and (iv) of the Act).
So, Mr Kinchen may be able to establish that the circumstances, set out in subsection 58(3B) of the Act, under which an amended taxable income could be retrospectively applied to the child support assessment apply in his case. However, subsection 58(3A) of the Act gives the Registrar the discretion not to make such an amendment. This is reflected in the Child Support Guide at 2.4.4.30, which its states:[12]
[12] Child Support Guide, Guides to Social Policy Law, Department of Social Services, version 4.63
Lower amended tax assessments
Where an amended tax assessment results in an adjusted taxable income that is lower than the adjusted taxable income from the previous tax assessment for the same financial year, the child support assessment will be amended prospectively, for each later day in the relevant child support period, and may also be amended retrospectively if certain criteria are met. The rules are different according to whether the Registrar made a determination of the parent's income under section 58 of the CSA Act in the absence of a tax assessment; whether the parent lodged their original tax assessment on time; and whether the original tax assessment was higher or lower than the Registrar-determined income (see 2.4.4.40 for more information about when the Registrar will determine a parent's adjusted taxable income). [my emphasis]
Information detailed in a Child Support file note, dated 1 February 2022,[13] suggests that the Registrar has decided not to make retrospective amendments to child support assessments because of amendments to taxable incomes arising from the Douglas decision.
[13] Folio 334
However, the legislation permits the discretion to be exercised differently and I was not persuaded that Mr Kinchen’s substantive objection is without merit.
Prejudice to the other parent
[Ms A] has not been invited to be added as a party to this review and has not had the opportunity to set out what prejudice she may face if the extension of time is granted.
I noted that the delay in lodging the objection is not great. I considered that it is unlikely that [Ms A] would face difficulty in recalling events and finding evidence relevant to the issues that would appear to be in dispute. I did not give potential prejudice to [Ms A] in this regard any particular weight.
If Mr Kinchen were successful, were his objection allowed to proceed, the result could be that [Ms A] might have a child support overpayment owed to Mr Kinchen. In Mr Kinchen’s submission, the extent of this potential overpayment is $40,000. This could be viewed as an outcome prejudicial to [Ms A]’s interests. However, if the outcome was the result of the correct or preferable decision being made, I did not view the potential prejudice as being significant in this case.
I did not consider that prejudice to [Ms A] is an influential factor in my consideration of whether to exercise the discretion to extend time in this case.
Prejudice to the general public and considerations of fairness as between Mr Kinchen and other persons otherwise in a like position
I identified no factors in this matter that make potential prejudice to the general community a material consideration.
I gave due regard to the existence of a statutory time limit for lodging objections. As a consequence of this regard, I placed weight on considerations of fairness between Mr Kinchen and other persons in a like position.
Conclusion
As a general rule, statutory time limits should be applied unless the decision maker is positively satisfied that it is proper to exercise the discretion to extend time.
I have found that Mr Kinchen has provided a satisfactory explanation for his delay in objecting. The legislation provides for a discretion to retrospectively apply amended taxable income to the child support assessment, so I cannot rule out Mr Kinchen’s substantive objection as potentially having merit. These factors weigh in favour of exercising the discretion to extend time. I have identified no factor which would weigh heavily towards not exercising the discretion to extend time in Mr Kinchen’s favour.
I am therefore persuaded that there is sufficient justification to exercise the discretion to extend time to allow Mr Kinchen to object to the decision made on 13 July 2021, to apply amended taxable incomes to the child support assessment prospectively, but not retrospectively.
Therefore, and for these reasons, I decided to set aside the decision under review and substitute my own decision.
DECISION
The tribunal set aside the decision under review and, in substitution, decided that Mr Kinchen should be extended time until 6 October 2021, to object to a decision made on 13 July 2021, not to apply his amended taxable incomes to the child support assessment before 13 July 2021.
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