Poldark and Poldark (Child support)

[2023] AATA 2132

Poldark and Poldark (Child support) [2023] AATA 2132 (7 June 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2023/HC025427 & 2023/HC025498

APPLICANT:  Mrs Poldark

OTHER PARTIES:  Child Support Registrar

Mr Poldark

TRIBUNAL:Member M Baulch

DECISION DATE:  7 June 2023

DECISION:

The decisions under review are affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – whether the estimate should have been refused – estimate of income accepted – decisions 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. Mrs Poldark and Mr Poldark are the separated parents of two children.  Since 5 July 2021, Services Australia – Child Support (Child Support) has made administrative assessments of child support in respect of those children.

2. On 15 June 2022, Mr Poldark contacted Child Support and made an election to have an estimate of his adjusted taxable income of $135,999 per annum applied to the child support assessment for the period 1 July 2022 to 30 June 2023.  Then on 8 October 2022, Mr Poldark contacted Child Support via an online portal and provided an amended estimate of $105,271 for the period 1 October 2022 to 30 June 2023, which annualised to $140,747.

3. On 15 June 2022 and 9 October 2022, Child Support employees decided to:

   ·      Accept Mr Poldark’s election to have his estimated adjusted taxable income of $135,999 applied to the child support assessment from 1 July 2022 to 30 June 2023; and

   ·      Accept Mr Poldark’s amendment to his estimate, such that his estimated adjusted taxable income of $140,747 was applied to the child support assessment from 1 October 2022 to 30 June 2023;

   (the decisions under review).

4. Mrs Poldark objected to those decisions and, on 21 December 2022, those objections were disallowed.  Mrs Poldark has now applied to this tribunal seeking an independent review of Child Support’s decisions.

5. A hearing into the applications for review was held by the tribunal on 7 June 2023.  Mrs Poldark attended the hearing in person and Mr Poldark participated in the hearing by telephone and both gave evidence during the hearing.  A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 

6. The tribunal had before it relevant documents provided to it by Child Support pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (232 pages), copies of which both parties confirmed they had received prior to the tribunal hearing.  The tribunal also had regard to additional material provided by Mrs Poldark (labelled folios A1 to A35) and Mr Poldark (labelled folios B1 to B11).

ISSUES

1. The statutory provisions relevant to this review application are found within the Child Support (Assessment) Act1989 (the Act).

2. The issue which arises in these applications for review is whether an estimate election made by Mr Poldark on 15 June 2022, and an amended estimate made by Mr Poldark on 8 October 2022, should be accepted or refused.

CONSIDERATION

1. Child Support makes child support assessments using a statutory formula outlined in Part 5 of the Act.  The elements of this formula include, amongst other things, the adjusted taxable income of each parent.

2. Section 43 of the Act defines a parent’s adjusted taxable income to be the sum of the following:

   ·      The parent’s taxable income, as determined by the Australian Taxation Office;

   ·      The parent’s reportable fringe benefits total;

   ·      The parent’s target foreign income;

   ·      The parent’s total net investment loss;

   ·      The total of the tax free pensions or benefits received by that parent; and

   ·      The parent’s reportable superannuation contributions.

3. Section 60 of the Act permits a parent to elect to estimate his or her adjusted taxable income for a year of income and use the estimated income to replace their adjusted taxable income that was determined in accordance with section 43 of the Act.  The estimate must be not more than 85% of the parent’s adjusted taxable income determined in accordance with section 43 of the Act.

4. There is no dispute that Mr Poldark’s estimated income was less than 85% of his adjusted taxable income as determined under section 43 of the Act for the year of income.  Mr Poldark’s adjusted taxable income to apply in the assessment from 1 July 2022 was $625,750.

5. 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.  The term year of income is defined in subsection 5(1) of the Act and generally means a financial year.

6. Where a parent has provided an estimate of their income for an entire year of income, section 63AA of the Act provides that the Registrar may refuse to accept that estimate of the parent’s income if the estimated amount is less than the amount the Registrar considers is likely to be the parent’s actual adjusted taxable income for the year of income to which the estimate relates (paragraph 63AA(1)(b) of the Act).

7. Mr Poldark made his estimate election on 15 June 2022 for the entire year of income which was due to commence on 1 July 2022.

8. Section 63A of the Act permits the Registrar to amend the amount of an estimate if amongst other things, there is a change to the parent’s ongoing wage, salary or renumeration.  The Registrar may amend the estimate themselves, in certain situations, or following the parent notifying the Registrar of a change.

9. On 8 October 2022, Mr Poldark advised Child Support that his income had changed, and he provided an amended amount for his estimate of his adjusted taxable income.

Estimate of 15 June 2022.

1. On 15 June 2022, Mr Poldark contacted Child Support to make an estimate election and advised that his income was going to be $10,842 per month, with him earning an additional $1,980 per month for the period 1 July 2022 to 30 September 2022 (a period of three months).  It appears that Child Support calculated that this equated to an annualised estimate of $135,999 and Mr Poldark agreed with that amount.

2. Mrs Poldark submitted that Mr Poldark should have included his bonus, which he had been told he would receive when recruited to the role, when the amount of his estimate was determined.  Mr Poldark’s evidence was that receipt of the bonus was not guaranteed, so he did not include it in his estimate.  He noted that if he overestimated his income, there is no adjustment when his income tax return is lodged and the estimate is reconciled.

3. For the purposes of determining whether or not Mr Poldark could rely on receiving a bonus when he made his estimate election, I was guided by the terms of Mr Poldark’s employment contract which states “Any AIP payout depends on achievement of qualitative and quantitative targets, both on a Group and an individual level”.  The contract makes it clear that, irrespective of what was said during the recruitment process, payment of the bonus was not certain.

4. In relation to the payment of $1,980 per month for higher duties, Mr Poldark’s evidence was that he moved into his supervisor’s role, while his supervisor was undertaking a trial of a structural change for the business.  Initially he was only expecting to be in the higher role until September 2022, but ultimately it continued until April 2023.

5. Having regard to the evidence, I was satisfied that it was reasonable for Mr Poldark to not include an incentive bonus, due to its uncertainty, and to include only three months of higher duties when he made his estimate election on 15 June 2022.

6. I calculated that Mr Poldark’s likely income was $136,044 [($10,842 x 12) plus ($1,980 x 3)], which is $45 more than the amount calculated by Child Support.  However, it led me to conclude that Mr Poldark’s estimated adjusted taxable income is likely to be less than his actual adjusted taxable income for the 2022–23 year.  I therefore considered whether or not Mr Poldark’s estimate should be refused pursuant to section 63AA of the Act. 

7. I noted that Mr Poldark’s estimate was only $44 less than the amount I have calculated as his likely actual income.  I also noted that the evidence shows that Mr Poldark has regularly updated his estimate when changes in his renumeration become known.

8. I therefore declined to exercise the discretion provided for in section 63AA of the Act to refuse to accept Mr Poldark’s estimate election of 15 June 2022.  Therefore, the estimate is to be accepted and applied to the child support assessment from 1 July 2022.

Amendment of estimate on 8 October 2022

1. On 8 October 2022, Mr Poldark contacted Child Support and advised that he estimated his income would be $11,737 per month for the period 1 October 2022 to 30 June 2023, which was annualised to be $140,747.  Mr Poldark’s evidence at hearing was that he updated his estimate in October when his period of higher duties was extended.

2. I accept that it was reasonable, as of 8 October 2022, for Mr Poldark not to include the incentive bonus and further higher duties payment in his amended estimate due to the uncertainty about those arrangements at that point in time.

3. While section 63AA of the Act, and the discretion to refuse an estimate election, only applies if an initial estimate is provided pursuant to section 60 of the Act, section 63A of the Act permits the Registrar to make their own calculation of the amended estimate.  However, I was not persuaded that the annualised amount of $140,747 is unreasonable and concluded it should be applied to the child support assessment for the period 1 October 2022 to 30 June 2023.

Conclusion

1. Ms Poldark submitted that even the smallest underestimate of income on behalf of Mr Poldark has a significant effect on her financial circumstances. 

2. I noted that in making an estimate, a person is attempting to forecast future income, so absolute precision cannot necessarily be expected.  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 income year once the actual income is ascertained, suggest that an overzealous approach in scrutinising an income estimate is not warranted. 

3. 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 estimated amount is too low.

4. I would have accepted Mr Poldark’s initial estimate election made on 15 June 2022, and his amendment to that estimate on 8 October 2022. 

5. Therefore, and for these reasons, I decided to affirm the decisions under review.

DECISION

The decisions under review are affirmed.