Mortimer and Burton (Child Support)

[2016] AATA 2011

Mortimer and Burton (Child Support) [2016] AATA 2011 (22 November 2016)

APPLICANT  Mr Mortimer

OTHER PARTY  Miss Burton

Child Support Registrar

TRIBUNAL  Member P Jensen

DECISION DATE  22 November 2016

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides to amend Mr Mortimer’s estimate of income from 2 September 2014 to 17 June 2015 to $97,216 per annum.

CATCHWORDS

Child Support – Estimate of income - Review and amend estimate – Identify date of event – 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

1. Mr Mortimer and Miss Burton are the parents of [two children]. A child support case was registered in 2000. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes. The Act also allows a parent to provide an estimate of their adjusted taxable income and, if accepted, the rate of child support payable is provisionally assessed on the basis of that estimate, subject to a reconciliation once the parent’s actual adjusted taxable income becomes known.

2. On 4 July 2014, Mr Mortimer provided an estimate of income of $13,322 per annum (“the first estimate”). The Department of Human Services – Child Support (“the CSA”) decided to accept that estimate, with effect from 4 July 2014.

3. On 18 June 2015, Mr Mortimer provided an estimate of income of $14,625 per annum. The CSA decided to accept that estimate, with effect from 18 June 2015.

4. On 2 December 2015 the CSA decided to amend the first estimate to $77,504 per annum, with effect from 5 July 2014 to 17 June 2015. Mr Mortimer belatedly objected to that decision and applied for an extension of time in which to object. An objections officer granted his extension of time application and disallowed his objection to the substantive decision. He sought further review and on 12 July 2016 this Tribunal set aside the objections officer’s decision and remitted the matter to the Child Support Registrar for reconsideration in accordance with directions that:

   ·       notices are to be issued to [Superannuation Company 1] and [Organisation 1] requiring them to provide details of the payments and fringe benefits they provided to Mr Mortimer during 2014-15;

   ·       Mr Mortimer be given 14 days to provide evidence of the tax-deductible expenses he incurred during 2014-15, if any; and

   ·       Mr Mortimer’s estimate of income that he lodged on 4 July 2014 is to be amended accordingly.

5. The CSA obtained further information concerning Mr Mortimer’s receipt of payments and fringe benefits. Mr Mortimer did not provide any evidence of the tax-deductible expenses, if any, he incurred in 2014-15. On 2 September 2016 an objections officer decided to amend the first estimate to $83,555 per annum, with effect from 5 July 2014 to 17 June 2015. Mr Mortimer sought further review and I heard the matter on 22 November 2016. I spoke to him by phone. Miss Burton elected not to participate in the hearing. In reaching my decision I have considered the sworn evidence of Mr Mortimer and the documentation provided by the CSA.

6. The CSA’s decision to amend Mr Mortimer first estimate was made pursuant to section 63A of the Act which states, relevantly:

Amendment of assessment based on income election if event affecting accuracy of estimate occurs

(1)This section allows the Registrar to amend an assessment of child support payable by or to a parent for some days in a child support period if:

(a)those days occur in the application period for an income election that the parent has made; and

(b)the Registrar has given the parent a notice under section 160 … requiring or requesting the parent to notify the Registrar of the occurrence of an event that may affect the accuracy of an estimate on which the election is based.

(2)If the parent gives notice of the event as required or requested under section 160 …

(3)If the parent does not give notice of the event as required or requested under section 160 … the Registrar may amend the assessment to affect the annual rate of child support payable by or to the parent for those days in the child support period that occur on or after the day the event occurred.

1. The term “application period” is defined, relevantly, in sections 5, 60 and 61 of the Act. The application period for the first estimate was the period from 4 July 2014 to 17 June 2015.

2. When the CSA decided to accept the first estimate it gave Mr Mortimer a notice under section 160 of the Act which stated, in part, that he was required to notify it within 14 days of “any event or change in circumstances which will affect your estimate of [your] adjusted taxable income” including “any receipt of a lump sum payment which will be included in your taxable income.” Paragraph 63A(1)(b) is satisfied.

3. For reasons that are set out below, an event within the meaning of section 63A occurred. Mr Mortimer did not notify the CSA of the event. Subsection 63A(2) of the Act is not satisfied.

4. Subsection 63A(3) of the Act allows a decision-maker to amend the child support assessment “for those days in the child support period that occur on or after the day the event occurred.” It is therefore necessary to identify the day the event that affected the accuracy of the first estimate occurred.

5. Mr Mortimer was employed by [Organisation 1] as [occupation]. He commenced leave without pay on 12 June 2014 and Centrelink promptly granted him the sickness allowance. He was, according to [Organisation 1], “ill-health retired” on 22 May 2015. On 2 September 2016 an objections officer wrote that in the week ending 2 September 2014, Mr Mortimer received arrears of income protection payments from [Superannuation Company 1] totalling $12,494.43, and he commenced receiving ongoing income protection payments of $1,329.38 per week until the week ending 24 May 2015. The CSA did not provide any evidence in support of that submission; presumably that was an inadvertent slip. I asked Mr Mortimer whether he disputed the CSA’s submission on that issue. He said he did not. On that basis, I did not direct the CSA to provide the missing evidence. The CSA did provide evidence that [Superannuation Company 1] paid Mr Mortimer $63,010 during 2014-15 and, in the absence of more precise evidence on point, I find that he was paid that amount during the period from 2 September 2014 to 24 May 2015.

Sickness Allowance

1. The objections officer identified 4 July 2014 as the day the relevant event occurred, and gave the following reasons:

   Our investigations of Centrelink records show, in the 2014/15 financial year, Mr Mortimer received $3,117 in Centrelink sickness benefits from 1 July 2014 to 17 September 2014 …

   1 July 2014 to 17 September 2014 is 79 days
   $3,117 / 79 = $39.45570 daily rate

   $39.45570 daily rate x 14 days = $552.38 (fortnightly)

   Mr Mortimer initially estimated he would receive $511 per fortnight in sickness benefit, however as shown above Mr Mortimer was receiving sickness benefits at a rate of $552.38 per fortnight.

   Based on this evidence we have determined that an event affecting the accuracy of Mr Mortimer’s estimate of income occurred on 4 July 2014, as his estimate of income was inaccurate from the first day it was lodged. (Other parts of Mr Mortimer’s income were also inaccurate on this day, e.g. reportable fringe benefits from [Organisation 1] however these are addressed later in this report.)

2. The objections officer identified a discrepancy between Mr Mortimer’s estimate of income and his actual income. The objections officer was not consequently required to amend the first estimate from 4 July 2014; the objections officer needed to consider whether doing so was the preferable decision, taking into account all relevant matters including the following. First, Mr Mortimer had provided an estimate of income, and the very nature of an estimate is that it does not purport to be mathematically precise. Second, Mr Mortimer’s estimate of income would be reconciled against his actual adjusted taxable income in due course. Third, the estimate was used in the administrative assessment formula. That formula includes a variable called the “self-support amount”, which is effectively an amount considered necessary for self-support and from which a parent cannot make a significant financial contribution towards their children’s costs. As at July 2014, that amount was $23,523. If Mr Mortimer’s 2014-15 adjusted taxable income was $23,523 or less, the actual amount had no bearing on the rate of child support payable under the formula. $511.00 x 26 = $13,286. $552.38 x 26 = $14,361.

Reportable fringe benefits

1. The objections officer stated that other parts of Mr Mortimer’s estimate of income were also inaccurate as at 4 July 2014 and gave, as one example, his reportable fringe benefits. I was unable to find any other examples.

2. At the hearing, Mr Mortimer’s only dispute with the objections officer’s decision was that she had included his reportable fringe benefits of $12,681 in the amended estimate. He stated, and I accept, that the reportable fringe benefits were payments that salary-sacrificed from his regular wages and, given that he ceased receiving a regular wage on 12 June 2014, the reportable fringe benefits of $12,681 were referrable to the period from April to June 2014. He acknowledged that the fringe benefits he received during the period from April to June 2014 formed part of his 2014-15 adjusted taxable income.

3. The first estimate was lodged pursuant to section 60 of the Act. If Mr Mortimer had lodged his estimate “before the year of income starts or on the first day of the year of income”, he would have been required to estimate a number of income component amounts including “the parent’s taxable income for the year” and “the parent’s reportable fringe benefits for the year”: subsection 60(2). The sum of all the components would be his estimated adjusted taxable income. However, because he lodged his estimate during the year of income, he was required to estimate those income component amounts for two periods. The first was the period from 1 July 2014 until the day before the day he lodged his estimate of income, i.e. from 1 July 2014 to 3 July 2014, and the second was the period from 4 July 2014 until 30 June 2015: subsections 60(3) and (4).

4. Regardless of whether a parent lodges an estimate of income under subsection 60(2), or under subsections 60(3) and (4), the parent is required to fully account for their estimated adjusted taxable income for the year. In Mr Mortimer’s case, that adjusted taxable income included $12,681 in reportable fringe benefits. The reportable fringe benefits were not received during the period from 1 July 2014 to 3 July 2014 and they were not received during the period from 4 July 2014 to 30 June 2015. However, they were “for the year”, being 2014-15, to use the phrase that appears in subsection 60(2). They were referrable to 2014-15 as a whole and it is appropriate to attribute their value across the whole year.

4 July 2014

1. As at 4 July 2014, Mr Mortimer was receiving $14,361 per annum in sickness allowance and his 2014-15 adjusted taxable income was also going to include $12,681 in reportable fringe benefits, making a total of $27,042, which was $3,519 more than the self-support amount. Amending Mr Mortimer’s estimate of income to $27,042 per annum would effectively increase his estimate, for practical purposes, by $3,519 per annum. Different decision-makers might reach different conclusions on the issue, but I consider that discrepancy to be minor in the context of an estimate. It was preferable not to amend the first estimate on that basis. A relevant event did not occur on 4 July 2014.

Income protection payments

1. For the reasons stated earlier, Mr Mortimer received income protection payment arrears of $12,494.43 on 2 September 2014 and commenced receiving ongoing income protection payments of $1,329.38 per week. That was the event that significantly affected the accuracy of the first estimate and made it appropriate to amend the first estimate. That was the relevant event for the purposes of section 63A.

2 September 2014

1. If Mr Mortimer’s estimate of income had been amended promptly, it might have been appropriate to calculate it on the basis that he would receive $1,329.38 per week throughout the balance of 2014-15. Mr Mortimer could have then lodged another estimate of income when those payments ceased. That option is no longer available to Mr Mortimer and so it is fairer to proceed on the basis of what Mr Mortimer is known to have received, rather than on what might have been estimated at the time based on what was known at the time. It is also fairer to base the estimate on what he received during the period from 2 September 2014 to 17 June 2015, given that he lodged another estimate from 18 June 2015. During that period he received $63,010.00 in income protection payments. He also received one-off payments from [Organisation 1] of $964.13 on 12 December 2014 and $2,357.40 on 22 May 2015. He was granted newstart allowance on 20 May 2015 and he received $1,123.00 during the period from 20 May 2015 to 30 June 2015. He estimated that he would receive $520.92 during the period from 18 June 2015 to 30 June 2015, so the balance of $602.08 is referrable to the period from 20 May 2015 to 17 June 2015.

2. In summary, the evidence suggests that Mr Mortimer received $63,010.00 + $964.13 + $2,357.40 + $602.08 = $66,933.61 during the 289 days from 2 September 2014 to 17 June 2015, which is a rate of $66,933.61 / 289 x 365 = $84,535 per annum. It is also appropriate to add the reportable fringe benefits of $12,681 per annum, making a total of $97,216 per annum.  

Tax-deductible expenses

1. On 21 May 2015, Mr Mortimer wrote to the CSA and stated that “[m]y employer has medically retired me as of today” and that “[u]ntil this time I had been on unpaid sick leave”. He did not disclose that he had been in receipt of income protection payments.

2. On 16 June 2015 he wrote to the CSA and stated:

   I received a response that my income estimate is based on my sickness allowance that I was receiving and all was fine. However, the estimate ends in a few weeks and has not been updated. Also, as I was living off savings and not Centrelink, ..

3. Again, he did not disclose his receipt of income protection payments.

4. On 18 June 2015 he provided an estimate of income. He was required to estimate his adjusted taxable income to date and his adjusted taxable income for the balance of the financial year. Again, he did not disclose his receipt of income protection payments.

5. On 28 August 2015 he stated: “I was on unpaid sick leave for the last year living off credit cards.”

6. On 20 January 2016 he objected to the first objections officer’s decision on the basis that the decision was made “without making any allowance for tax deductions.”

7. On 3 March 2016 he stated:

   My group certificate gross income in 2014 was more than $85,000 by my taxable income was $37,000. My group certificate for 2015 was less than $85,000 and I have the same deductible items as last year. My taxable income for 2015 was less than $37,000.

8. On 14 July 2016 this Tribunal remitted the matter to the CSA with a direction that Mr Mortimer be given 14 days to provide evidence of his 2014-15 tax deductible expenses, and he was given that opportunity. Further, the CSA wrote to him and asked him to provide that evidence.

9. To date, Mr Mortimer has not provided any documentary evidence that he incurred any tax‑deductible expenses during 2014-15. At the hearing, he said he had recently lodged his 2014-15 tax return with the Australian Taxation Office. He did not provide the Tribunal with a copy. He asked whether I wanted to know what information he put on his tax return. I said I did not. I would not have accepted his unsubstantiated oral evidence concerning any tax‑deductible expenses he may have claimed to have incurred and I would not have granted him any further time in which to provide documentary evidence in support of any such claim. The evidence provided to the Tribunal does not establish that Mr Mortimer incurred any tax-deductible expenses.

Conclusion

1. For those reasons, it is appropriate to amend the first estimate to $97,216 per annum from 2 September 2014. It will apply until 17 June 2015, which is the day before Mr Mortimer estimate of $14,625 per annum took effect.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides to amend Mr Mortimer’s estimate of income from 2 September 2014 to 17 June 2015 to $97,216 per annum.