Lowry and James (Child support)

[2020] AATA 4304

Lowry and James (Child support) [2020] AATA 4304 (4 September 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/AC017730

APPLICANT:  Mr Lowry

OTHER PARTIES:  Child Support Registrar

Ms James

TRIBUNAL:Member H Schuster

DECISION DATE:  4 September 2020

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that:

a)Mr Lowry’s objection to the decision made on 24 July 2017 is allowed and;

b)The child support assessment from 1 September 2017 to 26 August 2018 must be recalculated by the Child Support Registrar on the basis of Mr Lowry’s adjusted taxable income for 2016/17 of $19,643.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – adjusted taxable income – better information available at time objection was considered – 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 review is about a decision by the Child Support Registrar (the Registrar) on 24 July 2017 to assess Mr Lowry’s child support liability from 1 September 2017 to 26 August 2018 based on provisional 2016/17 income of $48,308.

2. Mr Lowry and Ms James are the parents [Child 1] (born 2008), [Child 2] (born 2008) and [Child 3] (born 2004) in respect of whom a child support assessment has been in place since 13 December 2011 and under which Mr Lowry was required to pay child support to Ms James at all relevant times.

3. The child support assessment in force in July 2017 required Mr Lowry to pay child support of $414 per annum. The Registrar had no record of tax returns lodged by Mr Lowry in 2014/15 or 2015/16. Thus, in the formula the adjusted taxable income (ATI) for Mr Lowry was a provisional income amount of $17,500 of 2015/16. Ms James’ ATI of $19,014 was based on her 2015/16 tax return assessed by the Australian Taxation Office (ATO).

4. On 21 July 2017 the Registrar received notice from the ATO of Ms James’ 2016/17 taxable income of $8,268. At that time Mr Lowry had not yet lodged his 2016/17 tax return. The Registrar made a new assessment of the maintenance liability based on Ms James’ 2016/17 ATI of $8,268. A new child support period commenced on 1 September 2019, for that period, in absence of a tax return, Mr Lowry’s 2016/17 income was assessed as $48,308, being two-thirds of the male total average weekly earnings (MTAWE) for the June 2017 quarter. The new child support assessment required Mr Lowry to pay child support of $7,125 per annum with effect from 1 September 2017.

5. The Registrar sent a copy of the new assessment notice to the address of Mr Lowry last known to the Registrar on 24 July 2017.

6. In July 2018 the ATO assessed Ms James’ 2017/18 income resulting in an ATI of $32,972. On 25 July 2018 a new assessment notice was issued with effect from 1 September 2018 based Mr Lowry’s provisional income of $49,071 (again using the amount of two-thirds of MATAWE for 2017/18) and Ms James’ ATO assessment of $32,972. Under that assessment Mr Lowry’s child support liability increased to $7,239 per year.

7. On 21 August 2018 Mr Lowry called the Registrar and spoke to an officer about lodging an application for a change of the assessment in special circumstances (COA). In the course of that conversation Mr Lowry told an officer that the ATI figure of $48,308 used for him in the assessment was wrong. The officer noted at the time (Folio 58) that:

   …customer has advised that he is dyslexic and has difficulty reading our documentation and understanding formula and legislation this has prevented him from understanding the incorrect income has been used in this assessment resulting in arrears.

8. A new assessment was issued on 21 August 2018 using 2017/18 provisional income of $10,661 for Mr Lowry and 2017/18 taxable income of $32,972 for Ms James.

9. On or about 27 August 2018 the Registrar was notified that the ATO had assessed Mr Lowry’s 2016/17 tax return. On 30 August 2018 a new assessment was issued which used Mr Lowry’s actual 2016/17 ATI of $19,643 and thus reduced his child support liability from $277.47 per fortnight to $16.37 per fortnight with effect from 27 August 2018.

10. Mr Lowry contacted the Registrar on 26 October 2018 to enquire about child support arrears and past assessments. His application for a COA was still pending at that time and an officer advised him that he could ask for any change to the assessment to be backdated: folio 78.

11. On 27 May 2019 Mr Lowry lodged a formal objection to the Registrar’s decision made on 24 July 2017 to assess his maintenance liability based on provisional income of $48,308 from 1 September 2017. He subsequently made an application to extend time for lodgement of the objection which was granted on 31 July 2019 (Folio 164).

12. On 3 October 2019 an objections officer affirmed the decision made on 24 July 2017 to use 2016/17 provisional income for Mr Lowry from 1 September 2017 to 26 August 2018 as no tax return for the 2016/17 financial year had been lodged during that time.

13. On 31 October 2019 Mr Lowry applied to the Administrative Appeals Tribunal (AAT) for review of that decision. A hearing was conducted by telephone on 10 February 2020 which was attended by Mr Lowry. Ms James declined to participate in the hearing.

14. In addition to evidence given by Mr Lowry during the hearing the Tribunal had regard to a bundle of documents prepared by the Registrar, containing numbered folios 1 to 200.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1988 (the Act).

2. The issues which arise in this case are whether, for the period 1 September 2017 to 26 August 2018, Mr Lowry’s 2016/17 income must be taken to be $48,308, being two-thirds of the annualised MTAWE, or whether the actual taxable income amount of $19,643 can be used.

CONSIDERATION

1. In order to calculate the maintenance liability under the child support formula set out in Part 5 of the Act, the Registrar must determine the ATI of each parent. The ATI is determined by considering the taxable income for a relevant income year, as determined by the ATO, with some amendments not relevant to this case. Both parties to a child support agreement are generally required to lodge annual returns.[1]

   [1] For the 2016/17 income year the liable and receiving parent in a child support case was required to lodge tax returns unless they were in receipt of a relevant social security payment (for example, newstart allowance) for the entire financial year and their total taxable income was less than $24,154: see “Requirement to lodge a return for the year of income ended 30 June 2017 under the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953 – Department of Human Services – parents with a child support assessment” (F2017L00528).

2. The ATI of each parent must be determined by the Registrar at the start of each new child support period using the ATO assessments for the relevant year of income: section 56 of the Act.

3. In this case a new child support period commenced on 1 September 2017 and the last relevant year of income was 2016/17. As noted above, Ms James had lodged her tax return and the Registrar was able to use her 2016/17 ATI of $8,268, based on the ATO assessment. However, Mr Lowry did not loge his tax return until August 2018.

4. Mr Lowry was employed by [Employer] until January 2017 and was thus required to lodge a tax return for 2016/17.

5. Section 58 of the Act sets out the bases on which the Registrar may determine a person’s ATI if no ATO assessment for the last relevant year of income is available:

   ·      An income amount can be determined using the information available to the Registrar, such as an income declaration, group certificates or other evidence provided by the person, to work out a reasonable approximation of the person's income for that income year: subsection 58(2).

   ·      The ATI can be based on person’s prior year tax assessment, in this case 2015/16, with an indexation factor to account for inflation: subsection 58(3).

   ·      If the parent’s taxable income has been assessed for an earlier year of income, the Registrar may use either the indexed amount from that previous tax assessment or an amount equal to two-thirds of the annualised MTAWE figure, whichever is the greater amount: subsection 58(4).

   ·      If an amount cannot be determined under subsections 58(2), (3) or (4), the Registrar may use as ATI an amount equal to two-thirds of the annualised MTAWE figure: subsection 58(5).

6. As at 24 July 2017 Mr Lowry had not lodged his 2016/17 tax return, there was no information available to the Registrar about his income for that year, nor had Mr Lowry’s income been determined by the ATO for either the 2014/15 or 2015/16 income year. Thus, the only course of action reasonably open to the Registrar was to make a determination under subsection 58(5) of the Act assessing Mr Lowry’s income based on two-thirds MTAWE as at June 2017, which was $48,308.

7. The Tribunal is satisfied that the decision made by the Registrar on 24 July 2017 was consistent with the requirements of section 58 of the Act. However, the question in this case is whether that decision may be set aside retrospectively, given that Mr Lowry’s actual taxable income for 2016/17 was assessed by the ATO as $19,643.

8. An objection to a decision under section 58 of the Act must generally be lodged within 28 days. Although he made enquiries about the assessment in August 2018, these were outside the review period and ultimately, he did not lodge an objection in the required form until May 2019. His evidence to the Registrar and the Tribunal was that the delay was based on a number of factors; this included his inability to read and understand the child support assessments sent to him due to dyslexia, mental health issues from the combined effects of losing access to his children and pursuing legal avenues to seek redress  and a lack of understanding of the formal requirements for an objection.

9. Mr Lowry stated that he had been in receipt of disability support pension for a period and during the 2016/17 financial year he was working at [Employer] casually on a return-to-work program organised through an employment service provider. He was living in a country town south of Adelaide during that year and did not receive the child support notices sent to him in 2017. When he did receive notices in 2018, he found them difficult to understand due to his dyslexia and lack of understanding of the child support rules. The Tribunal notes that evidence of his health issues and personal circumstances is corroborated by a letter from his GP, [Dr A] (folio 150) and a letter from his employment services case officer [Ms B] at [Employment services provider] (folios 82-84).

10. On 31 July 2019 the Registrar granted Mr Lowry an extension of time to object to the decision made on 24 July 2017.

11. Having accepted Mr Lowry’s objection, the objections officer stands in the shoes of the original decision maker and must make the original decision afresh. It is well established that in doing so, the objections officer and, by extension, the Tribunal, must have regard to all the relevant evidence, including evidence which may not have been before the original decision maker.

12. Unlike the original decision maker in July 2017, by May 2019 the Registrar had available a range of evidence of Mr Lowry’s 2016/17 taxable income which, pursuant to section 58(2) of the Act, allowed a reasonable approximation of his 2016/17 income to be made: Mr Lowry had declared to officers that his income had been less than $20,000 per year, had provided a 2016/17 tax return lodgment summary showing reported taxable income of $19,643. In addition, the Registrar had confirmation from the ATO that his 2016/17 taxable income was assessed to be $19,643.

13. This information cannot be ignored by a decision maker who is carrying out the task of determining the correct and preferable decision made on 24 July 2017.

14. The Tribunal thus finds that the decision of 24 July 2017 must be set aside and a new decision made using Mr Lowry’s ATI of $19,643 to determine his liability to pay child support from 1 September 2017 to 26 August 2018, pursuant to section 58(2) of the Act.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that:

a)Mr Lowry’s objection to the decision made on 24 July 2017 is allowed and;

b)The child support assessment from 1 September 2017 to 26 August 2018 must be recalculated by the Child Support Registrar on the basis of Mr Lowry’s adjusted taxable income for 2016/17 of $19,643.