Molven and Kingsford (Child support)

[2022] AATA 318

Molven and Kingsford (Child support) [2022] AATA 318 (14 January 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC022392; BC022393; BC022394; BC022395

APPLICANT:  Mr Molven

OTHER PARTIES:  Child Support Registrar

Mrs Kingsford

TRIBUNAL:Member S Letch

DECISION DATE:  14 January 2022

DECISION:

The Tribunal decides to:

(a)affirm the decisions in matters 2021/BC022393, 2021/BC022394 and 2021/BC022395;

(b)set aside the decision in matter 2021/BC022392 and determine that for the child support period from 1 June 2018 to 31 August 2019, Mr Molven’s adjusted taxable income is to be assessed as $15,277 (his actual 2016/17 adjusted taxable income as assessed by the Australian Taxation Office).

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether the adjusted taxable incomes for past periods for the liable parent should be changed – conditions for changing income to higher income retrospectively – conditions for changing the incomes to lower amounts – decisions under review affirmed – decision in one matter 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

1. This matter concerns four separate decisions by the Child Support Agency (CSA) involving adjusted taxable incomes for the 2014/15, 2016/17, 2018/19 and 2019/20 financial years. During that period, the CSA applied various adjusted taxable incomes for Mr Molven in the absence of income tax returns being lodged by Mr Molven. Since around 2012, Mr Molven has been unemployed and in receipt of Centrelink benefits. Mr Molven says he has been assessed on an income far in excess of his actual means, and maintains the child support debt in the tens of thousands of dollars the CSA says he owes is unfair.

2. Mr Molven participated in the Tribunal’s hearing by conference telephone; Mrs Kingsford advised the Tribunal in advance of the hearing that she would not be participating.

Matter 2021/BC022393 – 2014/15 income

1. It is convenient by way of background to set out some extracts from the objection decision dated 11 August 2021:

…

DECISION UNDER REVIEW

[Mr Molven] is objecting to the decision on 17 April 2021 to replace his 2014/2015 provisional (derived) income of $20,786 with his 2014/2015 ATO assessed adjusted taxable income of $30,547 for the period 1 December 2015 to 28 February 2017.

[Mr Molven] has objected to this decision because he was unaware he was required to lodge tax returns due to being on an income support benefit.…

An assessment has been in place between [Mr Molven] and [Ms Kingsford] for [Child 1] since 16 May 2005. On 16 April 2021, we received information from the ATO regarding [Mr Molven]`s adjusted taxable income of $30,547 for the 2014/2015 financial year. On 17 April 2021, we applied this income for [Mr Molven] to the assessment from the start of the child support period for which 2014/2015 is the last relevant year of income which was 1 December 2015. The ATO adjusted taxable income of $30,547 replaced the provisional income being previously used in the assessment from 1 December 2015 of $20,786. Letters were issued to both parties advising them of the decision. On 31 May 2021, [Mr Molven] objected to our decision.…

At the time we commenced the child support period on 1 December 2015, no ATO assessed adjusted taxable income was available for [Mr Molven]`s income for the 2014/2015 financial year. If there is no ATO assessment for a parent for the last relevant year of income and we have been given information that allows us to work out the parents adjusted taxable income, we may use that income information to determine a provisional income to be used in the assessment until an ATO assessed adjusted taxable income is available.

A provisional income of $20,786 for the 2014/2015 financial year was determined and used in the assessment from 1 December 2015.

On 16 April 2021, we were notified by the ATO of an assessed adjusted taxable income amount of $30,547 for the 2014/2015 financial year for [Mr Molven].

Where we have made a determination of a parent`s adjusted taxable income for a particular year and subsequently ascertain the parent`s actual taxable income for that year (when a tax assessment issues for the parent), the child support assessment must be amended immediately. We must also amend the assessment if we obtain other new information about a parent`s adjusted taxable income and make a later determination of the appropriate adjusted taxable income amount.

The date of effect of the amendment to the child support assessment will be the beginning of the relevant child support period where:

(a) at the time, the parent has lodged, or still has time to lodge, his or her tax return on time as required under the income tax legislation (for example, under a relevant tax agent lodgement program); or (b) paragraph (a) does not apply and the adjusted taxable income subsequently ascertained or later determined by us is higher than the amount previously determined.

[Mr Molven]`s 2014/2015 ATO assessed adjusted taxable income of $30,547 is higher than the previously determined provisional income of $20,786 for the 2014/2015 financial year.

As such, we have made the decision to apply [Mr Molven]`s 2014/2015 ATO assessed adjusted taxable income of $30,547 to the assessment from 1 December 2015 to 28 February 2017.

The objection is disallowed.

…

1. Section 58 of the Child Support (Assessment Act) 1989 (the Act), in simple terms, permits the CSA, in situations where a parent has not lodged a tax return, to apply information available to it to the assessment. Frequently, the CSA will have information about taxable income for an earlier tax year which, with a “CPI uplift”, can be applied to the assessment. In the absence of better information, the CSA can assess a parent’s adjusted taxable income for the last relevant year of income as an amount that is at least two-thirds of the annualised MTAWE (male total average weekly earnings) figure.

2. Section 58A of the Act provides the following:

   Subsequently ascertaining components of a parent’s adjusted taxable income

   (1) The Registrar must immediately amend an administrative assessment of child support payable by or to a parent in relation to a child support period if:

   (a) the assessment was made on the basis of a determination under section 58; and

   (b) either:

   (i) the Registrar subsequently ascertains the amount of the parent‘s adjusted taxable income for the last relevant year of income; or

   (ii) the Registrar makes a later determination under section 58; and

   (c) either:

   (i) if subparagraph (b)(i) applies--the amount that was subsequently ascertained is different from the amount that was determined under section 58; or

   (ii) if subparagraph (b)(ii) applies--the later amount that the Registrar determines is different from the earlier amount determined under section 58.

   Retrospective determinations

   (2) If:

   (a) at the time the Registrar is to amend the administrative assessment under this section, the parent could lodge his or her tax return by the date required under Part IV of the Income Tax Assessment Act 1936(taking into account any deferral under section 388-55 in Schedule 1 to the Taxation Administration Act 1953 ); or

   (b) paragraph (a) of this subsection does not apply and:

   (i) the amount subsequently ascertained, as mentioned in subparagraph (1)(b)(i), is higher than the amount that was determined under section 58; or

   (ii) the later amount that the Registrar determines, as mentioned in subparagraph (1)(b)(ii), is higher than the earlier amount determined under section 58; or

   (c) neither paragraph (a) nor (b) applies, but circumstances prescribed by the regulations for the purposes of this section apply in relation to the parent;

   then the Registrar must immediately amend the administrative assessment for the child support period on the basis that the parent‘s adjusted taxable income for that year of income is, and has always been, the amount that was subsequently ascertained or later determined (as the case requires).

   Prospective determinations

   (3) If subsection (2) does not apply, then the Registrar must immediately amend the administrative assessment for the child support period on the basis that for each later day in the period the parent‘s adjusted taxable income for that year of income is the amount that was subsequently ascertained or later determined (as the case requires).

   (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 a 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.

…

1. Simply put – if a tax return is ultimately lodged revealing an adjusted taxable income higher than the sum applied to the assessment, it is retrospectively applied to the assessment. If the income is lower, the starting point is that it is not given retrospective effect, unless certain requirements are met.

2. Section 11 of the Child Support (Assessment) Regulations 2018 (the Regulations) provides the following:

   11 Adjusted taxable income—prescribed circumstances

   (1) For the purposes of section 58A of the Act, the following circumstances are prescribed in relation to a parent who was unable to provide information about the parent’s adjusted taxable income to the Registrar at the time the relevant administrative assessment was made:

   (a) one or more of the following applied in relation to the parent at that time:

   (i) the parent did not know that an application for the assessment had been made and accepted;

   (ii) the parent had a serious illness or injury;

   (iii) the parent was under detention or imprisonment;

   (iv) the parent resided in a remote location which made it difficult to contact the Registrar;

   (v) a natural disaster prevented the parent from being able to contact the Registrar;

   (vi) there was some other exceptional circumstance that prevented the parent from providing the information;

   (b) the Registrar confirms that the parent was unable to provide the information at that time because of a circumstance mentioned in paragraph (a);

   (c) the parent later provides the information to the Registrar as soon as is practicable in the circumstances.

   (2) For the purposes of section 58A of the Act, the following circumstances are prescribed in relation to a parent who resided overseas during the last relevant year of income for the child support period for which the Registrar made the relevant administrative assessment:

   (a) the parent was not required to lodge a tax return under the Tax Act;

   (b) the parent provides the information about the parent’s adjusted taxable income to the Registrar within a reasonable time in the circumstances.

3. The Child Support Guide, at 2.4.4.60, provides an accurate summary of the relevant law:

New information about adjusted taxable income

Where the Registrar has made a determination of a parent’s adjusted taxable income for a particular year and subsequently ascertains the parent’s actual taxable income for that year (when a tax assessment issues for the parent), the child support assessment must be amended immediately (CSA Act section 58A). The assessment must also be amended if the Registrar obtains other new information about a parent’s adjusted taxable income and makes a later determination of the appropriate adjusted taxable income amount (CSA Act section 58A). The later determination of adjusted taxable income will be subject to the different rules pre- and post-1 July 2011, depending on which financial year the later determination relates to.

If more recent income information becomes available that would allow the Registrar to determine a more current indexed income for the parent, another adjusted taxable income will be determined and the assessment will be amended to use the more recent information.

The date of effect of the amendment to the child support assessment will be the beginning of the relevant child support period where (CSA Act section 58A(2)):

a.the parent lodged their tax return on time, or still has time to lodge, his or her tax return on time as required under the income tax legislation (e.g. under a relevant tax agent lodgement program)

b.paragraph (a) does not apply and the adjusted taxable income subsequently ascertained or later determined by the Registrar is higher than the amount previously determined

c.paragraphs (a) and (b) do not apply and the parent was genuinely unable to provide the Registrar with timely information due to the parent being unaware that an assessment had been made; serious ill health or injury; natural disaster; remote location; imprisonment; or other exceptional circumstances and the parent provided income information as soon as was practicable in the circumstances, or

d.paragraphs (a) and (b) do not apply and the parent resided overseas, was not required to lodge a tax return and the parent provided information about his or her income to the Registrar within a reasonable time in the circumstances.

If the Registrar is satisfied that one or more of the above apply, the date of effect can be applied retrospectively.

When making a decision about whether the circumstances prescribed by CSA Regs section 11 apply, the Registrar must consider all the relevant facts of the parent’s particular circumstances and the extent to which they contributed to the parent’s delay in providing information about their income to the Registrar.

For the purposes of section 11(1)(c) of the CSA Regs, the Registrar will consider a person provided their income information to the Registrar as soon as was practicable if they provided that information within a reasonable period of time after the special or exceptional circumstances ceased to affect them. A decision about whether the parent provided their income information to the Registrar as soon as was practicable will require an examination of the parent’s individual circumstances.

Otherwise, the amendment to the assessment will take effect from the day after the assessment was amended, for the remainder of the child support period.

Example 1: On 20 July 2018, Shannon advises their adjusted taxable income for 2017-18 is $40,000. That figure is used to calculate the child support assessment for the child support period 1 August 2018 to 31 October 2019.

0n 15 July 2019, Shannon’s tax return for 2017-18, lodged late, issues and their adjusted taxable income is $43,000. As Shannon’s income is higher, the child support assessment would be adjusted from 1 August 2018.

If Shannon’s adjusted taxable income was $38,000 and the child support assessment is amended on 15 July 2019, the amended assessment would have effect from 16 July 2019. Under section 58A(3) of the CSA Act, the day after the assessment is amended is the date of effect, as Shannon’s income is lower and the tax return was lodged late.

Example 2: The Registrar made an assessment for a child support period commencing 1 August 2019. As there was no ATO assessment available, the adjusted taxable income used in this assessment was $50,076, two-thirds of the 2019 annualised Male Average Weekly Earnings (MTAWE). On 26 September 2019, Amit’s 2014-15 tax assessment issues, resulting in an adjusted taxable income of $52,000. The Registrar considers determining a 2018-19 adjusted taxable income based on the 2014-15 adjusted taxable income.

The Average Weekly Earnings (AWE) amount for the December quarter of the last relevant year of income (2018-19) is the November 2018 amount of $1,225.00. The AWE amount for the December quarter of the tax year (2014-15) is the November 2014 amount of $1,128.90. The adjusted taxable income indexation factor is therefore $1,225.00 ÷ $1,128.90 = 1.085.

Amit’s 2018-19 adjusted taxable income is $52,000 × 1.085 = $56,420 or two-thirds MTAWE, which is the 2019 value of $50,076. As the indexed value is greater, Amit’s adjusted taxable income is $56,420.

The Registrar amends the assessment from the beginning of the child support period, 1 August 2019, because the new adjusted taxable income determined by the Registrar of $56,420 is higher than the previous determination of adjusted taxable income, $50,076.

Example 3: The Registrar made an assessment for Graham for a child support period commencing 8 August 2018. Graham’s 2017-18 tax assessment was not available due to his serious ill health, so his most recent tax assessment available (2016-17) was inflated to determine an adjusted taxable income of $55,000 for the purpose of the assessment.

On 5 February 2019, Graham’s tax return for 2017-18 was lodged as his health had improved by this time, and his adjusted taxable income was $43,000. Graham advises the Registrar that the late lodgement was due to his serious ill health. The Registrar, after considering all the relevant facts in Graham’s case, determines, as per section 11(1)(c) of the CSA Regs, that Graham has provided his income information within a reasonable period of time in the circumstances.

Graham’s new adjusted taxable income $43,000 is lower than the $55,000 used for the assessment. The Registrar amends the assessment to use the new adjusted taxable income from the beginning of the child support period, 8 August 2018, as the date of effect can be applied retrospectively in these circumstances.

1. Returning to the decision pertaining to the 2014/15 tax year, it is important to observe that the decision under review is not the original decision in 2015 which determined Mr Molven’s provisional income as some $20,786 – that would require the CSA to grant an extension of time in which Mr Molven could object, and for an objection decision dealing with that particular matter to give the Tribunal jurisdiction. The Tribunal is limited to considering whether the CSA correctly substituted Mr Molven’s 2014/15 adjusted taxable income of $30,547 as assessed by the Australian Taxation Office (ATO) into the assessment for the child support period beginning on 1 December 2015.

2. The Tribunal also observes that in practical terms, this decision concerns a difference between an annual rate of child support of $0 (on the basis of an income of some $20,000) and $896 and up to a maximum of around $1,500 per annum (on the basis of an income of some $30,000): see folios 55 to 57 of the CSA papers.

3. Pursuant to subsection 58A(2), given Mr Molven’s income was higher than the sum applied in the assessment, his higher income of $30,547 must be retrospectively applied to the child support period. There is no discretion to determine otherwise. The CSA decision is correct at law; as the Tribunal has reached the same conclusion as the objections officer, the decision under review will be affirmed.

Matter 2021/BC022392 – 2016/17 income

1. It is convenient to set out some extracts from the objection decision dated 1 September 2021:

   DECISION UNDER REVIEW

   The decision on 16 April 2021 not to apply [Mr Molven]`s 2016-17 ATO-assessed adjusted taxable income of $15,277 to the assessment from 1 June 2018 to 31 August 2019.

   [Mr Molven] has objected to this decision because he was unaware he was required to lodge tax returns due to being on an income support benefit and he was struggling with his mental health.

   …

   On 21 April 2018, we commenced a new child support period for the period 1 June 2018 to 31 August 2019, using 2016-17 as the last relevant year of income to calculate the assessment.

   [Mr Molven]`s 2016-17 ATO-assessed income was not available and therefore we applied a provisional income of $139,253 (indexed default) as his income to the assessment from 1 June 2018.

   On 16 April 2021, we received [Mr Molven]`s 2016-17 ATO-assessed income of $15,277. As per our date of effect rules, we did not to apply [Mr Molven]`s 2016-17 ATO-assessed income of $15,277 to the relevant child support period as he lodged his tax return late and it came in lower than the provisional income used in the assessment.

   …

   [Mr Molven] acknowledges he did not lodge his tax returns on time or update his incomes with us. He explained this was because he was struggling with mental illness and furthermore, he was not aware he had to lodge a tax return when he was claiming Centrelink benefits.

   [Mr Molven]`s main source of income in 2016-17 was from Centrelink`s pensions and allowances. Our records indicate this was predominantly the case since the 2012-13 financial year.

   However, [Mr Molven] ceased lodging his tax returns some time before the 2012-13 financial year. Before lodging his 2014-15, 2016-17, 2017-18, 2018-19 tax returns on 16 April 2021 and his 2020-21 tax return on 20 April 2021, the last tax return [Mr Molven] lodged was for the 2007-08 financial year on 19 February 2009.

   ATO records indicate [Mr Molven] continued to receive income from employment for at least the 2009-10 and 2010-11 financial years. [Mr Molven] still has not lodged his tax returns for 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 and 2015-16 financial years.

   In conclusion, [Mr Molven]`s established history of non-lodgement of tax returns commenced sometime before the 2016-17 financial year and sometime before his main source of income was from Centrelink. Therefore, [Mr Molven]`s reasons for late lodgement of his 2016-17 tax return are not convincing and places doubt on his reasons. Additionally, we have no credible evidence that he had a serious illness or injury, which prevented him from lodging his tax returns on time. Nor, that he meets any of the other requirements listed.

   On this basis, we are not satisfied [Mr Molven] meets the prescribed circumstances to backdate his 2016-17 income of $15,277 to the commencement of the child support period 1 June 2018.

   Accordingly, [Mr Molven]`s 2016-17 ATO-assessed adjusted taxable income of $15,277 will not have effect in the child support period from 1 June 2018 to 31 August 2019, as his tax return was lodged on 16 April 2021, being after the relevant assessment period ended on 31 August 2019.

   The objection is disallowed.

1. In this matter, Mr Molven’s 2016/17 adjusted taxable income as assessed by the ATO is much lower than the sum applied to the assessment from 1 June 2018. Mr Molven would need to satisfy the requirements of section 11 of the Regulations for retrospective effect to be given to his lower income.

2. Mr Molven’s evidence is that he suffers a very serious sleep disorder which results in him sleeping up to 22 hours a day. He also suffers from diabetes and a bleeding disorder. He is in the process of claiming a disability support pension; he has not been able to work since around 2012. The Tribunal is satisfied Mr Molven was, at all material times, suffering a serious illness. As soon as Mr Molven became aware of the issue with the child support assessment, as soon as practicable, he lodged income tax returns and drew the matter to the attention of the CSA.

3. In the Tribunal’s view, and consistent with “Example 3” cited in the policy guidelines above, Mr Molven satisfied the requirements of section 58A of the Act and section 11 of the Regulations for his actual (lower) 2016/17 adjusted taxable income to be substituted into the assessment and be given retrospective effect during the child support period (from 1 June 2018 to 31 August 2019).

4. As this is a different conclusion to the objections officer, the decision under review will be set aside.

Matter 2021/BC022394 – 2018/19 income

1. The objections officer decision letter dated 11 August 2021 contains the following reasons:

   DECISION UNDER REVIEW

   [Mr Molven] is objecting to the decision on 17 April 2021 to replace his 2018/2019 provisional (derived) income of $14,313 with his 2018/2019 ATO assessed adjusted taxable income of $24,129 for the period 1 September 2019 to 30 November 2020.

   [Mr Molven] has objected to this decision because he was unaware he was required to lodge tax returns due to being on an income support benefit.

   …

   On 16 April 2021, we received information from the ATO regarding [Mr Molven]`s adjusted taxable income of $24,129 for the 2018/2019 financial year. On 17 April 2021, we applied this income for [Mr Molven] to the assessment from the start of the child support period for which 2018/2019 is the last relevant year of income which was 1 September 2019. The ATO adjusted taxable income of $24,129 replaced the provisional income being previously used in the assessment from 1 September 2019 of $14,313. Letters were issued to both parties advising them of the decision.

   On 31 May 2021, [Mr Molven] objected to our decision.

   …

   [Mr Molven]`s 2018/2019 ATO assessed adjusted taxable income of $24,129 is higher than the previously determined provisional income of $14,313 for the 2018/2019 financial year.

   As such, we have made the decision to apply [Mr Molven]`s 2018/2019 ATO assessed adjusted taxable income of $24,129 to the assessment from 1 September 2019 to 30 November 2020.

   The objection is disallowed.

2. The Tribunal observes that in 2019, the “self-support amount” was $25,308. The application of his actual income of $24,129 makes no difference to his assessed annual liability of $435.

3. Regardless, the CSA has correctly applied Mr Molven’s higher adjusted taxable income to the assessment; as this is the same conclusion as the objections officer, the decision under review will be affirmed.

Matter 2021/BC022395 – 2019/20 income

1. The objections officer decision letter dated 11 August 2021 includes the following:

   DECISION UNDER REVIEW

   [Mr Molven] is objecting to the decision on 20 April 2021 to replace his 2019/2020 provisional (derived)

   income of $16,756 with his 2019/2020 ATO assessed adjusted taxable income of $26,583 for the period 1 December 2020 to 22 June 2021.

   …

   On 20 April 2021, we received information from the ATO regarding [Mr Molven]`s adjusted taxable income of $26,583 for the 2019/2020 financial year. We applied this income for [Mr Molven] to the assessment from the start of the child support period for which 2019/2020 is the last relevant year of income which was 1 December 2020. The ATO adjusted taxable income of $26,583 replaced the provisional income being previously used in the assessment from 1 December 2020 of $16,756.

   Letters were issued to both parties advising them of the decision.

   …

   [Mr Molven]`s 2019/2020 ATO assessed adjusted taxable income of $26,583 is higher than the previously determined provisional income of $16,756 for the 2019/2020 financial year.

   As such, we have made the decision to apply [Mr Molven]`s 2019/2020 ATO assessed adjusted taxable income of $26,583 to the assessment from 1 December 2020 to 22 June 2021.

   The objection is disallowed.

2. Again, the Tribunal observes the original decision involves no practical impact; Mr Molven’s annual liability remained at $443 (folio 64 of the CSA materials refers).

3. Consistent with the reasons already set out, the CSA decision is legally correct; the Tribunal will affirm the decision under review.

DECISION

The Tribunal decides to:

(a)affirm the decisions in matters 2021/BC022393, 2021/BC022394 and 2021/BC022395;

(b)set aside the decision in matter 2021/BC022392 and determine that for the child support period from 1 June 2018 to 31 August 2019, Mr Molven’s adjusted taxable income is to be assessed as $15,277 (his actual 2016/17 adjusted taxable income as assessed by the Australian Taxation Office).