Parnell and Colbeck (Child support)

[2022] AATA 2105

Parnell and Colbeck (Child support) [2022] AATA 2105 (7 June 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/BC023583

APPLICANT:  Mr Parnell

OTHER PARTIES:  Child Support Registrar

Ms Colbeck

TRIBUNAL:Member T Bubutievski

DECISION DATE:  07 June 2022

DECISION:

The Tribunal set aside the decision under review and, in substitution, decided that Mr Parnell’s adjusted taxable income for the period 8 August 2021 to 10 June 2022 is $69,261.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether post separation costs should be excluded from the adjusted taxable income for the last relevant year – additional income was earned not in the ordinary course after separation – an amount should be excluded - 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 omitted 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 application for review is about the assessment of child support applying to Mr Parnell and Ms Colbeck, who are the parents of one child born in 2012.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one parent to the other.  It uses a statutory formula which contains variables such as the parents’ adjusted taxable incomes, the number of children and their percentages of care. 

3. On 8 August 2021, Mr Parnell asked Services Australia (Child Support) (‘the Agency”) to exclude additional income earned since separation from his adjusted taxable income (ATI).  In particular, he sought that $34,428.75 of his annual adjusted taxable income of $114,762.50 be excluded from the assessment. On 11 September 2021 an Agency employee considered the matter and decided not to exclude any income because the application had been made more than three years after separation, the date of separation having been accepted to be 13 June 2018.

4. In the meantime, the parents attended this Tribunal in relation to a care percentage decision relating to the child (Application Number: 2021/BC022019). In the course of settling those proceedings the parents agreed that the correct date of separation was 11 June 2019. That matter was settled on 16 November 2021.

5. Mr Parnell objected to the decision not to make any change to his adjusted taxable income as his application had been made more than three years after separation. On 27 February 2022 the Agency granted him an extension of time to make his objection. On 28 March 2022 the decision was reconsidered by an Agency objections officer, who accepted advice from both parents that the correct date of separation was 11 June 2019, but who was satisfied that Mr Parnell’s additional income had been earned in the ordinary course of events and could not be excluded from the assessment. Mr Parnell’s objection was disallowed. 

6. On 29 March 2022 Mr Parnell applied to this Tribunal for an independent review of the Agency’s decision. The application was heard in Sydney on 7 June 2022. Mr Parnell and Ms Colbeck both attended the hearing by telephone and gave sworn evidence. A representative of the Child Support Registrar (“the Registrar”) did not participate in the hearing. 

7. The Tribunal had before it relevant documents provided to it by the Agency pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Copies of these documents were also sent to Mr Parnell and Ms Colbeck by the Agency prior to the hearing. At the hearing Mr Parnell advised the Tribunal about a number of privacy breaches in the documents he had received. The Tribunal’s Registry reviewed the documents and also identified a number of other possible breaches. The Tribunal notified the Agency of all the potential privacy breaches it had found following the hearing.

8. Prior to the hearing Ms Colbeck advised the Tribunal that there were bail conditions in place applying to Mr Parnell, and she was unsure whether the Tribunal proceedings would breach these provisions. At the hearing, Mr Parnell advised the Tribunal that there were non-contact orders in place between himself and Ms Colbeck. The Tribunal had not been provided with a copy of those orders by either party. Noting that such orders typically include exemptions for proceedings such as these, the Tribunal proceeded with the hearing with the consent of the parties in a tightly controlled proceeding.

9. At the hearing, Ms Colbeck advised the Tribunal that despite repeated contact with the Agency she had not received a copy of the hearing papers prior to the hearing. Given the number of potential privacy breaches in the papers, it was just as well that she had not. The Tribunal explained the nature of the matter before it to Ms Colbeck before commencing the hearing and allowed her to respond verbally to Mr Parnell’s evidence during the course of the hearing. It also requested that the Agency provide a fresh copy of the hearing papers to Ms Colbeck after it had rectified its errors in the redactions. The Tribunal is satisfied that procedural fairness requirements were met. Additionally, the Tribunal provided feedback to the Agency and the Tribunal’s senior management in relation to the problems with the section 37 documents experienced by both the parents.

ISSUES

1. The statutory provisions relevant to this review application are contained in section 44 of the Act, which provides a mechanism for a person to make an application for post-separation income to be excluded from the child support assessment in certain circumstances.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account a number of factors, including each parent’s adjusted taxable income. 

3. Section 44 of the Act provides that a parent may apply to the Registrar to amend the administrative assessment of child support to exclude additional income earned since separation, up to a maximum of 30% of a parent’s adjusted taxable income, if the following apply:

   ·      The parents of the child lived together on a genuine domestic basis for at least six months (paragraph 44(1)(a));

   ·      The separation of the parents occurred within the last three years and before either parent applied for a child support assessment (paragraph 44(1)(b));

   ·      At the time of the application, the parents remain separated (paragraph 44(1)(c);

   ·      That in the last relevant year of income, or in the application period for an income election, the applicant parent earned, derived or received income:

   • In accordance with a pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate (subparagraph 44(1)(d)(i)); and
   • That is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events (subparagraph 44(1)(d)(ii)).

   The last relevant year of income is defined in the Act as the income for the most recent financial year that ended before a child support period commenced.

4. The central issue for the Tribunal to determine in this case is whether post-separation income can be excluded and, if so, the amount which should be excluded and the date from which it can be excluded.

CONSIDERATION

1. In this instance, there was no dispute that Mr Parnell and Ms Colbeck lived together on a genuine domestic basis for more than six months and remain separated.  The date of separation, which the Agency now records as 11 June 2019, is also no longer disputed. Ms Colbeck made an application for a child support assessment on 28 January 2021, long after the separation. The requirements of paragraphs 44(1)(a)(b) and (c) are all satisfied.

2. Mr Parnell made his application under section 44 of the Act on 8 August 2021, during the child support period which commenced on 28 January 2021. A new child support period commenced on 1 September 2021. The last relevant year of income for Mr Parnell’s application is the 2019/20 financial year, being the most recent financial year that ended before the child support period commenced. This is not the financial year for which Mr Parnell seeks an amendment. Mr Parnell is seeking an amendment for the 2020/21 financial year. The Tribunal noted that the income for this year has never appeared in the child support assessment and Mr Parnell confirmed at the hearing that he had not yet lodged his income tax return for that year.

3. Mr Parnell’s 2019/20 financial year income was $80,730. The income amount which was used in the assessment for him at the time of his application was $76,080 in accordance with his original 2019/20 taxable income. On 6 December 2021 this taxable income was amended to $80,730. This new amount was substituted as Mr Parnell’s income in the child support assessment in place from 28 January 2021. From 1 September 2021, the Agency commenced to use a provisional adjusted taxable income for Mr Parnell of $82,900 as he had not lodged a 2020/21 income tax return. This income remains the adjusted taxable income used in the assessment for Mr Parnell.

4. Mr Parnell’s 2018/19 taxable income was $69,261. For 2017/18 it was $60,013 and for 2016/17 it was $33,328. Mr Parnell commenced his new employment in February 2020. This means that part of his taxable income in the 2019/20 financial year (the last relevant year of income) is attributable to his changed position. Under paragraph 44(1)(d) of the Act, the Tribunal can consider whether or not any part of that income can be excluded under the provisions of section 44.

5. There is a threshold test before section 44 can be applied. The income year for which an amendment can be made must be the annual adjusted taxable income used in the child support assessment. The Tribunal cannot consider whether or not part of Mr Parnell’s income for the 2020/21 financial year can be excluded from the assessment because that income has never appeared in the assessment. As the parties separated on 11 June 2019 that income amount will not appear in the assessment prior to the end of the three-year period in which a personal services income reduction is available to Mr Parnell.

6. As the Tribunal is satisfied that it is correct under the law to consider Mr Parnell’s income in the 2019/20 financial year for the purpose of the application under section 44 it proceeded to consider the other criteria set out in paragraph 44(1)(d).

Was a pattern of earnings established after Mr Parnell and Ms Colbeck separated?

1. As noted above, Mr Parnell and Ms Colbeck separated on 11 June 2019. At that time, Mr Parnell’s taxable income was $69,261. This was the highest that his earnings had been in the previous three years. There was an increase to Mr Parnell’s income in the 2019/20 financial year, to $80,730, followed by a greater increase in the 2020/21 financial year, during which he was employed in his current position for the whole of the financial year.

2. Mr Parnell said that he made his application because he believed that he met the criteria. He said that he did not believe that he had earned increased income in the ordinary course of events as he had to change to a higher paying job and take on considerable overtime to generate the additional income. He said that child support policy specifically refers to these two things as being circumstances in which an application may be successful. He also relocated to be available for 24/7 on-call work in his new position. Mr Parnell was of the view that this would not have been possible if he and Ms Colbeck had not separated.

3. Mr Parnell is an [occupation 1]. During the parties’ relationship he was employed in a local [service] firm although he travelled all around [City 1] conducting service work. He said that the business he worked for was a contractor to another company, and a position came up with the other company. Mr Parnell said that he was offered the chance to apply for the job with the other company, which was at a higher rate of pay with considerable overtime available. Mr Parnell said that there had been other applicants for the position, and he had gone through a competitive recruitment process. His previous job had a 38-hour standard week between the hours of 7 am and 3 pm. His new job has standard hours of 49 hours per week plus reasonable overtime. The new position is 60 km from where Mr Parnell and Ms Colbeck were living and Mr Parnell has relocated in order to take the job. Mr Parnell said that he could not have travelled from their previous home to do the work because the on-call requirements mean that he has to be located near the site.

4. Ms Colbeck told the Tribunal that Mr Parnell’s job had never been an issue and that she has in the past relocated with him to [Town 1] so that he could work in [regional work], doing 12-hour shifts.  She said that Mr Parnell was doing 12-hour shifts when she was pregnant with their daughter. She said that he was also on-call in his previous position and he could have moved to his current position regardless of whether or not they had been separated.

5. The Tribunal considered the requirements of subparagraph 44(1)(d)(i) of the Act. This only requires that the increased income received by Mr Parnell be: “…in accordance with the pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate…” This is not a “but for” test. The Tribunal does not need to be satisfied that Mr Parnell would have been unable to change to his new job prior to separation, it just needs to be satisfied that Mr Parnell did not change to that job prior to separation and that the increase in his earnings postdates the separation.

6. On the basis of the available evidence, the Tribunal is satisfied that there is a pattern of increased earnings after 11 June 2019, which has been established since Mr Parnell and Ms Colbeck separated. The Tribunal is satisfied that the provisions of subparagraph 44(1)(d)(i) of the Act are met.

Is the income of a kind that would not have been derived in the ordinary course of events?

1. Mr Parnell asserted that this increase in his income post separation did not come about in the ordinary course of events. Mr Parnell’s evidence, set out in his written statements to the Agency and at the hearing, was that following separation he changed to a higher paying role with a different company and took on significant amounts of overtime. His payslips bear this out. He changed from a job where his hourly rate was $38 per hour to a position where his hourly rate was $50 per hour. This was a job with a new company, obtained through a competitive recruitment process. He went from doing a minimal amount of overtime in his previous role to doing 132 hours of overtime between February and June 2020, 297.75 hours of overtime in the 2020/21 financial year, and 235.5 hours of overtime so far in the current financial year. He also relocated to take on the new role.

2. The Tribunal accepts Mr Parnell’s evidence, supported by the available documents, that the increase in his income from February 2020 onwards, was the result of a change in his employment after he and Ms Colbeck separated, and would not have occurred in the ordinary course of events. The Tribunal is satisfied that the requirement set out in subparagraph 44(1)(d)(ii) of the Act has been met. Consequently, the Tribunal is satisfied that Mr Parnell’s adjusted taxable income for the 2019/20 financial year should be adjusted to take into account post-separation income.

By what amount should the adjusted taxable income be amended?

1. Mr Parnell has provided the Agency with a number of payroll activity summaries covering several financial years. Of particular interest to the Tribunal was the summary for the 2019/20 financial year which says that during that period Mr Parnell worked 132 hours of overtime for his new employer with a total value of $6,600 and 750.5 hours of ordinary time at $50 per hour. Allowing for the $12 per hour difference in the normal hourly rate would add $9,006 to the overtime amount, giving a possible total deduction, of $15,606. Deducting the whole of this amount would bring Mr Parnell’s adjusted taxable income down to $65,124. This is lower than his taxable income in the previous year (which presumably would have also included a small amount of overtime in his previous position). Given that, the Tribunal decided that it would not be appropriate to amend Mr Parnell’s adjusted taxable income as a result of his new job to an amount lower than his 2018/19 taxable income of $69,261. This is a reduction of $11,469.

2. The amount of post-separation income which can be excluded in accordance with subparagraph 44(3)(a)(1) of the Act is limited to 30% of a person’s adjusted taxable income.  This reduction is approximately 14% of Mr Parnell’s adjusted taxable income and well within that limit.

From what date should the ATI be amended?

1. Subsection 44(2) of the Act provides that the Registrar may make a determination to exclude a specified amount of post-separation income for a day in the child support period. The relevant child support period in this case commenced on 28 January 2021 and ended on 30 August 2021. The determination can continue in a subsequent child support period until: “..a day that is less than 3 years after the last separation…” (paragraph 44(3)(b)).

2. Mr Parnell made his application on 8 August 2021 and the last day that any determination to exclude income under section 44 can take effect in this case is 10 June 2022.

3. The Agency’s policy, at 2.5.2 (Additional income earned post separation) of the Child Support Guide, provides that if the Registrar accepts an application to exclude post-separation income, this will ordinarily apply from the date the application was made, unless there are special circumstances, in which case it can apply from the start of the child support period. 

4. Mr Parnell told the Tribunal that he had been unaware that he could make such an application until he found the information about it on the my.gov.au website. The Tribunal was not persuaded that this amounts to special circumstances, such that it is appropriate to backdate the determination to exclude post-separation income from 28 January 2021.  

5. The Tribunal decided that the determination to exclude post-separation income, arising from the application lodged by Mr Parnell on 8 August 2021, should apply from 8 August 2021 to 10 June 2022. The amount of post-separation income to be excluded is $11,469.

DECISION

The Tribunal set aside the decision under review and, in substitution, decided that Mr Parnell’s adjusted taxable income for the period 8 August 2021 to 10 June 2022 is $69,261.