Millhouse and Vidal (Child support)

[2020] AATA 4302

Millhouse and Vidal (Child support) [2020] AATA 4302 (13 August 2020)

DIVISION:   Social Services & Child Support Division

REVIEW NUMBER:  2020/MC019343

2020/MC019367

APPLICANT:  Mr Millhouse

OTHER PARTIES:  Ms Vidal

Child Support Registrar

TRIBUNAL:  Member Mr J Longo

DECISION DATE:  13 August 2020

DECISION

The tribunal sets aside the decisions under review and, in substitution, decides that Mr Millhouse’s income for the following child support periods is amended as follows:

• From 1 July 2018 to 28 February 2019 his amended 2016/2017 taxable income is $92,324;

• From 1 March 2019 to 28 November 2019 his amended 2017/2018 taxable income is $105,722.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – adjusted taxable income – amended tax assessment – whether retrospective determination should be made – special circumstances exist – 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

1. This review is about whether Mr Millhouse’s income for the child support liability should be amended for the period from 1 July 2018 to 28 November 2019.

2. Mr Millhouse and Ms Vidal are the parents of [Child 1], [Child 2] and [Child 3]. Currently, Mr Millhouse is the parent liable to pay child support. The application for child support was registered with the Department of Human Services – Child Support (the Department) from 4 October 2011 and is currently subject to Department collection of child support.

3. The Department was using Mr Millhouse’s 2016/2017 declaration of income of $94,321 from 1 July 2018 to 28 February 2019 and his 2017/2018 declaration of income of $101,987 from 1 March 2019 to 28 November 2019 to assess his child support liability.

4. On 11 November 2019 the Australian Taxation Office (ATO) provided the Department with Mr Millhouse’s 2016/2017 taxable income of $157,607 and 2017/2018 taxable income of $155,119 and the assessments were amended.

5. On 29 November 2019 Mr Millhouse’s taxable income was amended by the ATO for the 2016/2017 period to $94,324 and for 2017/2018 period to $105,772. The Department used this income from 11 November 2019. On 13 March 2020 the Department decided not to use the amended income.

6. Mr Millhouse objected to the decisions on 18 March 2020 and the objections were disallowed on 29 May 2020.

7. On 29 June 2020 Mr Millhouse applied for a review of these decisions by the Administrative Appeals Tribunal (the tribunal). On 13 August 2020 the tribunal conducted a telephone hearing. Mr Millhouse and Ms Vidal spoke to the tribunal and gave sworn evidence. The Department provided documents numbered 1 to 161 and 1 to 285 to the tribunal and both parties.

8. The tribunal notes that the objection decision relating to Mr Millhouse’s 2016/2017 amended taxable income was sent to him on 2 June 2020 but the decision relating to Mr Millhouse’s 2017/2018 amended taxable income was sent to him on 29 May 2020. Mr Millhouse stated that he received the objection decision regarding the 2017/2018 amended taxable income on 3 June 2020.

9. The tribunal accepts that Mr Millhouse was notified on 3 June 2020 in relation to the objection decision regarding the 2017/2018 amended taxable income and therefore his application to the tribunal was within the prescribed 28-day time limit. Even if that date is incorrect and Mr Millhouse received notification of the objection decision relating to the 2017/2018 amended taxable income on 29 May 2020, the issues with the provision of the documents by the Department and the fact that the application was only two days late are reasons to extend the time for the application.  

CONSIDERATION

10.The law relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act).

11.The evidence in this matter is not in dispute. Mr Millhouse stated that he initially lodged his income tax returns for 2016/2017 and 2017/2018 with his accountant in November 2019 in preparation for protracted family law proceedings which were being heard in January 2020. He had been late in preparing the returns due to a combination of financial, personal and work pressures. When the income tax returns were prepared, he was contacted by the Department and advised that he owed $30,000. He didn’t know why and so he went back to his accountant to find out what had happened. He spoke to the accountant and after some delay, it was realised that there was an error in his income tax returns for 2016/2017 and 2017/2018. The accountant, having relied upon information from previous income tax returns, had included distributions from his brother’s family trust but these never occurred.

12.The trust returns were not prepared by his accountant, but by another accountant. As they had to wait for this information to be provided, and the information was delayed due to the time of year and the other accountant being on leave, the amended income tax returns could not be filed until they returned. He filed the returns as soon as the information was made available to his accountant. On 27 February 2020 Mr Millhouse advised the Department of his amended income tax returns for 2016/2017 and 2017/2018.

13.Mr Millhouse stated that he lodged his amended income tax returns with the ATO as soon as he was advised of the error in the original income tax returns. The delay in lodging the amended income tax returns was due to the information being delayed by the trust accountant. The tribunal notes that Ms Vidal did not dispute the submissions made to the tribunal but stated that she believes that the reasons the income tax returns were amended is because Mr Millhouse was told by the Department that he owed child support.

14.Section 58 of the Act states that if a parent’s taxable income has been not been assessed by the ATO for the last relevant year of income in relation to the child support period, then the parent’s income will be determined by the Child Support Registrar for the purpose of determining the child support liability. Section 58A of the Act also allows for retrospective and prospective amended tax assessments to be taken into account. Specifically, subparagraph 58A(3B)(b)(iv) allows for the amended tax assessment to apply even if the parent did not apply for the amendment on or before the 28-day time limit in section 58A(3B) (i), (ii)  or (iii) but the registrar is satisfied that special circumstances exist.

15.Mr Millhouse stated that he sought an amended tax assessment as soon as he was made aware by the accountant for his brother’s trust that the information used was incorrect and trust distributions had not been made to him. He stated that the financial, legal and personal pressures of dealing with family law proceedings over a four-year period and the delays from the trust’s accountant led to both the income tax returns and the amended income tax returns being lodged late. 

16.The tribunal accepts that Mr Millhouse contacted the Department to advise that the income tax returns were incorrect and that an amended assessment was lodged as soon as he was provided with the required information to do so by the trust’s accountant.

17.The tribunal is satisfied that the notification of the error in his assessment by the trust accountant and the other pressures of the financial, legal and personal issues were circumstances which can be considered special and therefore falls within subparagraph 58A(3B)(b)(iv) of the Act.

18.As the tribunal is satisfied that special circumstances existed, the Department can determine the administrative assessment on the basis that Mr Millhouse's adjusted taxable income for the 2016/2017 and 2017/2018 years of income are, and have always been, the amounts worked out as a result of the amended tax assessments made by the ATO, that is, $92,324 and $105,722 respectively for each financial year.

DECISION

The tribunal sets aside the decisions under review and, in substitution, decides that Mr Millhouse’s income for the following child support periods is amended as follows:

• From 1 July 2018 to 28 February 2019 his amended 2016/2017 taxable income is $92,324;

• From 1 March 2019 to 28 November 2019 his amended 2017/2018 taxable income is $105,722.