Morrallis and Morreitt (Child support)
[2025] ARTA 1107
•11 April 2025
Morrallis and Morreitt (Child support) [2025] ARTA 1107 (11 April 2025)
Applicant/s: Mr Morrallis
Respondent: Child Support Registrar
Other Parties: Ms Morreitt
Tribunal Number: 2024/SC028888
Tribunal:General Member A Beckett
Place:Sydney
Date:11 April 2025
Decision:The Tribunal affirms the decision under review.
CATCHWORDS
CHILD SUPPORT – income, property and financial resources – adjusted taxable income exceeds the income estimate – taxable component of a superannuation withdrawal – decision under review affirmed
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 pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.
Statement of Reasons
BACKGROUND
Mr Morrallis and Ms Morreitt are the parents of two sons (born [in] September 2006 and [in] September 2008) and a daughter (born [in] February 2013). The case was registered with Services Australia – Child Support (Child Support) on 14 October 2019.
On 10 June 2022, Services Australia – Child Support (‘Child Support’) wrote to Mr Morrallis to advise that his current estimate of income only applied until 30 June 2022; if he did not lodge another estimate which was accepted, then from 1 July 2022, his child support liability would be based on his adjusted taxable income for 2020/21, which was $170,825.
On 27 June 2022, Mr Morrallis estimated his income for the 2022/23 financial year to be $111,669.86. Services Australia – Child Support (‘Child Support’) accepted the estimate and the child support assessment for that year was calculated using that figure.
On 18 August 2023, Child Support was notified that Mr Morrallis’s adjusted taxable income for 2022/23 was $577,962. Child Support undertook an estimate of income reconciliation based on his adjusted taxable income and this resulted in an additional retrospective child support liability for Mr Morrallis of $9,672.64. A penalty of $1,258 was also applied.
On 22 September 2023, Mr Morrallis objected to the decision, and on 24 October 2024, a Child Support objections officer disallowed Mr Morrallis’s objection.
On 21 November 2024, Mr Morrallis applied to the Social Services and Child Support Division of the Administrative Review Tribunal (the Tribunal) for an independent review of the decision of Child Support.
Mr Morrallis attended the hearing convened by the Tribunal on 2 April 2025. Ms Morreitt participated by telephone.
Prior to the hearing, Child Support provided a bundle of its relevant papers (pages 1 to 284) to the Tribunal, Mr Morrallis and Ms Morreitt. Additional documents were provided by Mr Morrallis (A1 to A69) and Ms Morreitt (B1 to B12). These have been copied to the other parties.
ISSUES
The law that applies is the Child Support (Assessment) Act 1989 (the Act).
10.The issue to be determined is whether Child Support was correct in using $577,962 as the income amount when reconciling Mr Morrallis’s 2022/23 income with his estimated income for that year.
CONSIDERATION
11.The rate of child support payable by a liable parent is usually based on an administrative assessment that requires the application of a statutory formula which takes into account, among other things, the adjusted taxable income of each parent. The adjusted taxable income is normally the parent’s taxable income.
12.The Act allows a parent to elect to estimate their adjusted taxable income for a year of income and use the estimated income to replace their adjusted taxable income. The parent can make an estimate prior to the year of income based on their estimate of their income for that year; or they can make an estimate during an income year based on what they estimate they will earn for the rest of the year.
After the end of the income year, Child Support is required to undertake a reconciliation calculation by comparing the parent’s estimated income with their actual income. If the difference between the actual adjusted taxable income and the applicable year to date income is higher than the estimate, the assessment must be amended to use the actual income (sections 64 and 64AA of the Act).
14.Section 64AF of the Act states that a parent is liable to pay a penalty when they underestimate their income. Child Support initially applied such a penalty but Mr Morrallis confirmed at the hearing that this has since been waived.
15.Mr Morrallis said that his ATO assessment of his income for 2022/23 was significantly higher because he made a one-off withdrawal from his superannuation account on 28 March 2023 which closed his [Super Fund 1] account. He made this withdrawal because he had retired on medical grounds from his employment with [Employer 1] on 19 January 2023 and he believed he would not work again. He remains unemployed. He said that in the circumstances he was extremely stressed about his financial situation and believed he needed the money to live on. It did not occur to him that the taxable component of his withdrawal ($462,406) would be added to his other income. If this had not occurred, his other income would have been within the estimate that was used in the child support assessment for 2022/23.
16.Mr Morrallis’s evidence about this was not disputed. I accept that he did not understand that his superannuation withdrawal would be treated as income and so he did not update his estimate when this occurred.
17.Section 64 of the Act relevantly states that if a person has lodged an estimate prior to the start of the financial year and that estimate is for the whole of the financial year:
the parent's actual adjusted taxable income for the year of income is more than the amount that applied under that subsection;
the parent's adjusted taxable income for that year is taken to be, and to have always been, the parent's actual adjusted taxable income for that year.
18.Section 43 of the Act states that one of the components of a person’s adjusted taxable income is a person’s taxable income, which is as assessed under the Income Tax Assessment Act 1997 (section 56).
19.Mr Morrallis referred to the Child Support Guide which sets out policy and practice regarding child support matters. This gives the example of a one-off withdrawal of superannuation as a potential basis for changing the assessment of a person’s income. This can only occur as part of the change of assessment process under the Act. Mr Morrallis has not lodged a change of assessment application.
20.Although I accept Mr Morrallis’s submission that his superannuation withdrawal, and the circumstances in which it was made, may be the basis for a change of assessment under what is known as Reason 8A in the change of assessment process, I have no jurisdiction to consider a change of assessment as no change of assessment application has been lodged or decision regarding this made by Child Support.
21.I note that on 21 August 2023 and 22 July 2024, Child Support advised Mr Morrallis of the option of applying for a change of assessment to have his child support liability reduced, given that lodging an objection may not lead to the outcome he wanted to achieve. Mr Morrallis said that he believed he had filled out the correct form for this to occur. There is an 18-month time limit for backdating a change of assessment determination through the Child Support process although it is possible to apply to the court to allow for further backdating. This 18‑month period has now been exceeded. Mr Morrallis believes that he has suffered a financial loss because of the 14‑month delay by Child Support in processing his objection and its failure to ensure he had the correct forms for a change of assessment regarding his income.
22.However, there is no discretion in the Act to allow for the superannuation payment to be disregarded when completing the income estimate reconciliation or to allow for a lower assessment in the circumstances.
23.Applying the law cited above, I find that Mr Morrallis’s adjusted taxable income for 2022/23 is $577,962. I therefore affirm the decision by Child Support to use this amount in the income estimate reconciliation process for Mr Morrallis.
DECISION
The Tribunal affirms the decision under review.
| Date of hearing: | Wednesday 2 April 2025 |
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