Neilson and Neilson (Child support)

[2023] AATA 2951

Neilson and Neilson (Child support) [2023] AATA 2951 (25 July 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/SC025720

APPLICANT:  Mr Neilson

OTHER PARTIES:  Child Support Registrar

Ms Neilson

TRIBUNAL:Member C Breheny

DECISION DATE:  25 July 2023

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income - whether the estimate should have been refused - estimate of income accepted - decision under review affirmed

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. Ms Neilson and Mr Neilson are the separated parents of [Child 1].  Ms Neilson is the parent liable to pay child support to Mr Neilson. For the period 29 November 2022 to 28 February 2024 Ms Neilson’s child support liability was assessed as being $17,457 per annum ($1,454.75 per month) on the basis of her 2021/22 adjusted taxable income of $104,568 and Mr Neilson’s provisional income of $19,556.

2. On 10 January 2023, Ms Neilson contacted the Services Australia – Child Support (Child Support) to lodge an income estimate for the remaining 2022/23 financial year. Ms Neilson estimated her income to be “nil”.

3. On 10 January 2023 Child Support accepted Ms Neilson’s estimate election for the period 10 January 2023 to 30 June 2023 and calculated that Ms Neilson’s child support liability decreased to $1,521 per annum, being the “fixed annual rate” for one child.

4. On 16 January 2023 Mr Neilson objected to the decision on the basis that he believed Ms Neilson continued to be employed by [Employer 1] as she had not notified anyone that she suddenly lost her job.

5. On 13 February 2023 Ms Neilson contacted Child Support to make another estimate election to be applied from 30 January 2023. Ms Neilson estimated her income to be $31,485.71 for the remaining period of the financial year (annualised to $75,607).

6. On 27 February 2023 a Child Support objections officer disallowed Mr Neilson’s objection and on 6 March 2023 Mr Neilson applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal for an independent review of the objection decision. The application was heard on 25 July 2023. Ms Neilson and Mr Neilson attended the hearing by telephone and gave evidence on affirmation. I had before me the statement and documents provided by Child Support pursuant to subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975, received on 25 March 2023 and 12 July 2023 respectively (numbered 1–177). I also considered additional documents provided by Mr Neilson, marked A1–A31.

ISSUES AND CONSIDERATION

1. The statutory provisions relevant to this application are contained in the Child Support (Assessment) Act 1989 (the Act).

2. In general, a person’s child support liability is calculated by using an adjusted taxable income, which is based on the person’s taxable income for the previous financial year.  In this case the child support period in question is the period 29 November 2022 to 28 February 2024, which would generally use 2021/22 taxable incomes. Ms Neilson’s 2021/22 taxable income was $104,568, resulting in an annual child support liability of $17,457 (folio 26). Mr Neilson’s 2021/22 taxable income was not available at the time and a provisional income amount of $19,556 was therefore used in the assessment.

3. The Act makes provision for a child support assessment to be based on an estimate of current income if there has been a decrease in income of at least 15%. Subdivision C of Division 7 of Part 5 of the Act enables a person to elect that an estimate of their adjusted taxable income is used either before the income year commences or during the income year to replace the income amount used in the assessment.

4. A person may make an estimate of income for a whole financial year, or part of a financial year, if the provisions in section 60 of the Act are met. Subsection 60(2) of the Act provides for an income estimate for a whole year of income. It states that the election must be made before the year of income starts or on the first day of the year of income (i.e. 1 July of a given financial year).

5. If a person has not made an estimate for the whole year of income and wishes to estimate their income during the financial year, i.e. after the first day of the financial year, they can make an income estimate for part of the year (subsection 60(3)).

6. Subsection 60(4) of the Act provides the method to work out a parent’s adjusted taxable income when a “part-year” income election is made. It provides that the partial year income amount is to be divided by the number of days in the remaining period (for the financial year). That income amount is then multiplied by 365 to arrive at the “annualised” income amount.

7. In accordance with section 61 of the Act the annualised partial year income amount is the amount which will be used as the parent’s adjusted taxable income when the assessment is amended using the estimated income.

8. Section 62 of the Act states that a parent who has already made an income election relating to a year of income may, by notice given to the Registrar, revoke the income election.  Section 62A of the Act further provides that if a parent revokes an income election (the earlier election) and at the time of the revocation the application period for the earlier election has already started, the parent must make another income election for the year of income.

9. Subsection 62A(3) provides that the start date for the election for a later part-year estimate is either the day on which the parent makes the election (subsection 62A(2) refers) or, if the annualised amount of the later estimate election is more than the amount of the earlier election, the date of the event that occurred to change the parent’s income (subsection 62A(3) refers).

10. In this case there is no dispute that Ms Neilson contacted Child Support on 10 January 2023 to make an income election for part of the 2022/23 financial year in accordance with subsection 60(3) of the Act. Ms Neilson estimated her income to be “nil”.

11. There is also no dispute that Ms Neilson contacted Child Support again on 13 February 2023 to revoke her earlier income estimate and make another estimate election for the 2022/23 financial year (sections 62 and 62A of the Act refer). As the annualised amount of the later estimate election was more than the amount of the earlier election, the start date for the election for a later part-year estimate is the date of the event that occurred to change the parent’s income (subsection 62A(3) refers). In this case Ms Neilson stated that this date was 30 January 2023.

12. Mr Neilson contended that Ms Neilson’s income election made on 10 January 2023 should not have been accepted. He stated that Ms Neilson is a [Occupation 1] employed by [Employer 1]. It was the school holiday period when Ms Neilson lodged her estimate and Ms Neilson returned to work in late January 2023 at the beginning of Term 1 of 2023.

13. Mr Neilson provided copies of Ms Neilson’s bank statements which indicate regular fortnightly salary payments (e.g. 4 January 2023, 18 January 2023, 1 February 2023) and give no indication that Ms Neilson’s income was “nil” (folios A17–A20).

14. Ms Neilson stated that she had been trying to get leave without pay (LWOP) from her work. She made her first application for LWOP on 10 January 2023 and she was given every indication that her application would be approved. She thus contacted Child Support to lodge her income estimate.

15. Ms Neilson said that it was not until on or about 29 January 2023 that she was advised that her LWOP application would be refused. Ms Neilson agreed that she attended a staff development day at the school on 27 January 2023 and returned to work on 30 January 2023. She contacted Child Support again about 14 days later (on 13 February 2023) to amend her income estimate and ask that it be applied from 30 January 2023 (folio 54).

16. Ms Neilson submitted that her bank account statements do not provide an accurate picture of her situation. She made another application for LWOP in February 2023 to commence from the beginning of Term 2 (about the end of April 2023). She lodged her second income estimate on the basis that she would be granted LWOP from the beginning of Term 2. When her second application was also unsuccessful, she contacted Child Support again in May 2023 to lodge a third income estimate, which was applied to the assessment from 15 May 2023 (folio 105).

17. Ms Neilson said that she continued to apply for LWOP and her application was finally granted in late June 2023. She lodged a fourth income estimate, which was applied to the assessment from 26 June 2023 (folio 137). Ms Neilson confirmed that she is currently on LWOP pay and has no other income.

Should the estimate be refused?

1. Child Support records show that Ms Neilson advised on 10 January 2023 that she would not be working and her income would be “nil” (folio 16). She advised a “Year to date” income of $49,082.

2. As stated above the income estimate is for the remainder of the tax year (in this case to 30 June 2023) and according to Ms Neilson’s income estimate her total taxable income for 2022/23 would therefore be $49,082 (year-to-date income $49,082 (as advised) + $0).

3. Section 63AA of the Act provides a discretion to refuse to accept an income estimate election. Paragraph 63AA(2)(a) enlivens the potential exercise of discretion to refuse if Ms Neilson’s estimate of income for the period 10 January 2023 to 30 June 2023 was likely to be too low.

4. I note that in making an estimate, the person is attempting to forecast future income, so absolute precision cannot necessarily be expected. In essence, what is required in this context is a forecast of likely income for the rest of the tax year, taking into account any allowable deductions. The estimate should take account of what is known, as well as what is reasonable in contemplation as likely. However, when reviewing the efficacy of an income estimate, it is not appropriate to have regard to changes in circumstances that could not reasonably have been anticipated when the estimate was given.

5. The provisions in the Act for the amendment of estimates by the Registrar if circumstances change, and for estimate reconciliation after the end of the tax year once the actual income is ascertained, suggest that an overzealous approach in scrutinising an income estimate is not warranted. Consistent with this, it is also relevant to note that the power to refuse to accept an estimate is discretionary, not mandatory, even if the Registrar is satisfied that the estimate is too low.

6. On the other hand, if the Registrar were to take a lax approach, that may well encourage people to underestimate their income to avoid paying child support (in the short term at least). A balance must be struck and I consider that it is appropriate to ascertain whether the estimate was reasonable when it was given. If it was, the appropriate course of action is not to reject the estimate in the course of an objection or a tribunal review, but for the Registrar to amend the estimate if that is warranted.

7. Ms Neilson’s evidence to me was that she fully expected her application for LWOP to be granted when she made her estimate election on 10 January 2023. If it had been granted, she would not have received any income after that date. She updated her income estimate once she was told that her LWOP application was unsuccessful.

8. I accept Ms Neilson’s evidence in this regard. As a public servant she could have reasonably expected to be granted LWOP at that time. I note Ms Neilson continued to apply for LWOP and that she was ultimately successful, albeit not until the end of June 2023. Ms Neilson updated her income estimate in a timely manner and continued to make further estimate elections based on her circumstances.

9. Based on the evidence before me, I do not consider that the discretion to refuse to accept the estimate election made by Ms Neilson on 10 January 2023 should be exercised. Ms Neilson’s estimate election should therefore be accepted.

10. I have reached the same conclusion as the objections officer and therefore affirm their decision.

11. For completeness I will note here that Mr Neilson questioned Ms Neilson’s intentions behind her applications for LWOP. If Mr Neilson is of the view that Ms Neilson has greater earning capacity and that she reduced her work hours to affect the child support assessment, it is open to him to lodge an application for a change of assessment based on earning capacity with Child Support. Such matters however do not form part of this review.

DECISION

The decision under review is affirmed.