Larsen and Vancliff (Child support)

[2020] AATA 900

Larsen and Vancliff (Child support) [2020] AATA 900 (12 February 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC017893

APPLICANT:  Mr Larsen

OTHER PARTIES:  Child Support Registrar

Ms Vancliff

TRIBUNAL:Member M Baulch

DECISION DATE:  12 February 2020

DECISION:

The tribunal set aside the decision under review and, in substitution, decided that Mr Larsen’s adjusted taxable income for the child support period that commenced on
1 September 2019 is $79,755.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether post separation costs should be excluded from the adjusted taxable income for the last relevant year – additional income was earned not in the ordinary course after separation – an amount should be excluded - 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 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 Larsen and Ms Vancliff, who are the separated parents of two children, born in 2012 and 2014.

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. On 1 August 2019, Mr Larsen requested that the Department exclude additional income earned since separation from his adjusted taxable income.  On 29 August 2019, a departmental employee considered the matter and decided to refuse the request (the decision under review).  Mr Larsen objected to that decision and, on 11 September 2019, that objection was disallowed.  Mr Larsen has now applied to this tribunal for an independent review of the Department’s decision.

4. A hearing into the application for review was held by the tribunal on 12 February 2020. Mr Larsen and Ms Vancliff discussed the application for review with the tribunal by conference telephone and both gave evidence during the hearing. A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 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 113, copies of which Mr Larsen and Ms Vancliff 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 Larsen and Ms Vancliff 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 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);

   ·      That in the last relevant year of income, the applicant parent earned, derived or received 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).

   The last relevant year of income means the income for the most recent financial year that ended before a child support period commenced.

2. In this instance, there was no dispute that Mr Larsen and Ms Vancliff lived together on a genuine domestic basis for more than six months and remain separated.  Although the date of separation is the subject to some dispute, it is clear that the parents did not separate more than three years prior to 11 January 2018, when the most recent application for an administrative assessment of child support was made.

3. On 16 July 2019 the Department wrote to both parents advising them of the child support assessment that would apply to the child support period that would commence on 1 September 2019.  Under this assessment, the last relevant year of income used in the assessment was based upon the parents’ 2018-19 taxable incomes. 

4. Mr Larsen made his application to have his post separation income excluded on 1 August 2019.  On 7 August 2019, information about Mr Larsen’s 2018-19 taxable income was received by the Department from the Australian Taxation Office.

5. I was satisfied that the last relevant year of income Mr Larsen is seeking to have amended is his adjusted taxable income of $85,995, which has applied to the child support assessment from 1 September 2019.

Whether there is a pattern of earnings established after Mr Larsen and Ms Vancliff separated

1. The Department has taken the most recent separation of Mr Larsen and Ms Vancliff as occurring on 11 January 2018.  Information contained in the Department’s records show that, prior to separation, Mr Larsen’s taxable income was assessed to be:

   ·      $80,394 for the 2015-16 financial year; and

   ·      $87,464 for the 2016-17 financial year.

2. Mr Larsen and Ms Vancliff are recorded as being separated on 11 January 2018, which was during the 2017-18 financial year.  The Department’s records show that Mr Larsen’s taxable income was assessed to be:

   ·      $73,664 for the 2017-18 financial year; and

   ·      $85,995 for the 2018-19 financial year.

3. Mr Larsen’s evidence was that on 7 August 2017 he commenced employment as [an Occupation] with [Employer].  Mr Larsen stated that of his taxable income for 2017-18 of $73,664, this included $69,402 from his work as [an Occupation], which included his base wage, shift allowances and overtime pay.  I determined that Mr Larsen’s earnings from employment as [an Occupation] for the 2017-18 financial year are equivalent to an annual amount of $77,230.[1]

   [1] $69,402 ÷ 328 days x 365 days = $77,230.

4. The evidence shows that Mr Larsen’s base salary has increased since he commenced employment as [an Occupation].  Initially it was $50,186 while as a trainee, as at 11 January 2018 it was $55,924, at 1 July 2018 it was $57,845 and by 1 July 2019 was $59,740.

5. The evidence shows that Mr Larsen’s base wage has increased by 3.27% from 1 July 2018 to 1 July 2019.  It is reasonable to assume that shift allowances would have increased by the same amount.  However, the evidence shows that Mr Larsen’s earnings overall increased by 11.35%.  This difference supports Mr Larsen’s contention that he increased the amount of overtime he undertook after he and Ms Vancliff separated.

6. I was satisfied that there is a pattern of earnings from 11 January 2018, which has been established since Mr Larsen and Ms Vancliff 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 Larsen’s evidence was that the overtime he undertook was optional.  While he did some overtime prior to separation, there were only seven occasions between when he commenced employment as [an Occupation] and 11 January 2018 when he worked overtime.  After separation, he worked 16 overtime shifts between January 2018 and the end of June 2018.  Mr Larsen’s evidence was that he continued to work more overtime in the 2018-19 financial year.  Mr Larsen disputed that this pattern of increased overtime would have been derived in the ordinary course of events.

2. The Department has compared the number of overtime hours worked for one pay period prior to separation to two pay periods after separation, and concluded that Mr Larsen worked more overtime prior to separation and any increase in his income was due to incremental increases in his earnings.  I was not persuaded that such a limited comparison of hours worked before and after separation gives a true indication of whether or not Mr Larsen was doing more overtime after separation than before.

3. Considering Mr Larsen’s circumstances as a whole, a comparison of his earnings for the 2018-19 year with his annualised income as [an Occupation] for the 2017-18 year, discloses a difference that is not explained by the incremental increases in Mr Larsen’s earnings.  I was satisfied that the difference was due to Mr Larsen undertaking more overtime in 2018-19 than he did in 2017-18.

4. I was satisfied that the increase in Mr Larsen’s earnings, occasioned by him undertaking more overtime after he and Ms Vancliff separated, would not have occurred in the ordinary course of events.  I found that subparagraph 44(1)(d)(ii) of the Act has been satisfied.

By what amount should the adjusted taxable income be amended?

1. It’s not possible on the evidence before me to apportion Mr Larsen’s earnings as [an Occupation] in the 2017-18 year between the period before and after separation on 11 January 2018.  I noted Mr Larsen’s evidence that he did undertake some overtime prior to separation.

2. If Mr Larsen’s annualised earnings for work as [an Occupation] in 2017-18, being $77,230, were subject to an increase equivalent to the increase in his base wage, his annual earnings in 2018-19 would have likely been approximately $79,755.[2]  I was satisfied that Mr Larsen would have, more likely than not, earned $79,755 in 2018-19 had he not undertaken additional overtime shifts.  Mr Larsen actually earned $85,995.  I concluded that the difference between these two amounts – or $6,240 – should be the amount by which Mr Larsen’s adjusted taxable income is amended.

Conclusion

[2] $77,230 x 1.0327

1. Subsection 44(3) of the Act requires that the amount of the reduction to be made cannot be more than 30% of the applicant’s adjusted taxable income.  I was satisfied that the amount I am contemplating excluding does not exceed 30% of Mr Larsen’s adjusted taxable income.

2. Mr Larsen’s adjusted taxable income of $85,995, determined by reference to his 2018-19 taxable income, applied to the child support assessment from the start of the child support period commencing from 1 September 2019.  Mr Larsen made his application to have some of his post separation income excluded prior to this date.  I concluded that 1 September 2019 was the appropriate date for a determination under section 44 of the Act to commence.

3. According to paragraph 44(3)(b) of the Act, a determination to exclude post-separation income from a parent’s adjusted taxable income may only apply in respect of a day that is less than three years after the date of separation.  The maximum length of a child support period is 15 months (see section 7A of the Act).  I was satisfied that the current child support period, which commenced on 1 September 2019, will end no later than 1 January 2021 which is before the third anniversary of Mr Larsen and Ms Vancliff’s separation on 11 January 2021.  I concluded that the determination should apply for the entire child support period that commenced on 1 September 2019.

4. Therefore, and for these reasons, I decided to set aside the decision under review and, in substitution, decided that Mr Vancliff’s adjusted taxable income for the child support period that commenced on 1 September 2019 is $79,755 ($85,995 less $6,240).

DECISION

The tribunal set aside the decision under review and, in substitution, decided that Mr Larsen’s adjusted taxable income for the child support period that commenced on 1 September 2019 is $79,755.