Rayner and Wale (Child support)

[2021] AATA 2748

Rayner and Wale (Child support) [2021] AATA 2748 (27 May 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/PC021025

APPLICANT:  Ms Rayner

OTHER PARTIES:  Child Support Registrar

Mr Wale

TRIBUNAL:Senior Member R Ellis

DECISION DATE:  27 May 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether the provisional adjusted taxable income for a past period for the liable parent should be changed – lower adjusted taxable income based on ATO income should be retrospectively applied – 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. This review is about the adjusted taxable income amount that should be applied for Mr  Wale in the administrative assessment of child support.

2. Ms Rayner and Mr Wale are the parents of [Child 1] and [Child 2] (born October 2003).  There has been a child support assessment in place since 28 September 2005.

3. On 21 September 2019 the Child Support Agency made the decision to use a 2018–19 provisional adjusted taxable income of $89,786 for Mr Wale in the child support assessment for the period from 1 November 2019 to 30 September 2020.  It is relevant to note that Mr Wale had not lodged his tax return for this financial year at that time.

4. On 11 November 2020 the Child Support Agency received Mr Wale’s adjusted taxable income amount of $35,054 for the 2018–19 financial year from the Australian Taxation Office.

5. On 2 December 2020 the Child Support Agency made the decision to replace the 2018–19 provisional income used in the assessment for Mr Wale and retrospectively apply his 2018–19 adjusted taxable income of $35,054 for the period from 1 November 2019 to 30 September 2020.

1. On 23 December 2020 Ms Rayner objected to this decision and on 12 February 2021 the Child Support Agency disallowed the objection (the objection decision).

2. On 15 March 2021 Ms Rayner applied to the Administrative Appeals Tribunal (the Tribunal) for a review of the objection decision.

3. The Tribunal conducted a hearing into the application on 27 May 2021.  Ms Rayner and Mr Wale gave evidence on affirmation by conference telephone.  The Child Support Agency provided the Tribunal and the parties with papers relevant to the matter (178 pages).

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act) and the relevant policy regulations.

2. The Child Support Agency makes child support assessments using a formula in Part 5 of the Act. The elements of the formula include adjusted taxable incomes for each parent.  In the ordinary case, this is equal to the parent’s taxable income for the previous financial year (last relevant year of income).  If there is no information available about the parent’s taxable income, the Child Support Agency may determine an appropriate amount to be the parent’s provisional adjusted taxable income for the last relevant year of income (section 58).

3. If the Child Support Agency has determined a parent’s income under section 58 and subsequently ascertains the parent’s actual adjusted taxable income for the last relevant year of income, then the child support assessment must be amended immediately (section 58A).  If that occurs, then the Child Support Agency will be required to amend the assessment in accordance with subsection 58A(2) in respect of retrospective determinations or subsection 58A(3) in respect of prospective determinations.

4. The issue which arises in this case is whether or not Mr Wale’s actual adjusted taxable income amount for 2018–19 can be applied retrospectively to the child support assessment.

CONSIDERATION

1. Ms Rayner told the Tribunal that since the commencement of the case she had always been advised by the Child Support Agency to be prompt in updating changes to her circumstances especially in relation to her income.  Ms Rayner said she had always done just that and felt she was being punished as the Child Support Agency had backdated the income used in the assessment for Mr Wale even though he had been late in lodging his tax return.  Ms Rayner added she felt this was particularly unfair as she now had a child support debt as a result of the lower income being backdated in the assessment.

2. Ms Rayner said she was not aware of any reasons which might have prevented Mr Wale from submitting his tax return on time and he should not be rewarded for his inaction.  Ms Rayner said there was little communication between the parents and so she had no knowledge of Mr Wale’s employment circumstances at that time.

3. Ms Rayner pointed out that as both children were now in her 100 per cent care, forcing her to pay back a child support overpayment simply meant the children would be impacted.

4. Mr Wale told the Tribunal he had not seen his son since 2013 and issues related to his access to the children as well as his separation had severely impacted on his mental health.  Mr Wale said he had not seen his daughter since mid-2020 and this had compounded the problem.  Mr Wale said that as a result he found it difficult dealing with anything at all and this included tax matters.

5. Mr Wale explained that in late 2018 he changed phone providers and the email address he had been using was no longer working so he had not received any communication from the Child Support Agency.  Mr Wale said when he realised the amount of child support being deducted from his salary was incorrect he contacted the Child Support Agency to seek an explanation.  Mr Wale said when he was advised that child support had been based on a provisional income for 2018–19 he immediately got in touch with his accountant to arrange for his tax return to be submitted.  He said he thought the Child Support Agency would automatically adjust his child support using his correct income and when they did not he requested that it be applied retrospectively.

6. Mr Wale said as a result of his struggles with mental illness he had lost his position with [Company 1] and only started his own [business] as a subcontractor in the second half of 2019.  Mr Wale said suffering with depression was debilitating.

7. The Tribunal notes in evidence from the Child Support Agency a letter from [Dr A] at [a medical centre] in relation to Mr Wale.  The letter, dated 3 November 2020, states that Mr Wale had a medical condition with a long history which escalated in 2018 to the point of him being unable to work.  The letter also states that this condition was severe in 2019 and as a result Mr Wale was unable to deal with issues relating to his children and let his tax returns lapse.

8. Ms Rayner said despite the circumstances of Mr Wale she did not feel the child support debt arising from the backdating of his income was fair and equitable.

9. In circumstances where the Child Support Agency has not received a parent’s income tax assessment from the Australian Taxation Office at the time of issuing a child support assessment then a provisional adjusted taxable income may be used.  Section 58A of the Act deals with circumstances when a parent’s adjusted taxable income is later ascertained.  Subsection 58A(2) of the Act states, relevantly, in relation to retrospective determinations:

   If:

   (a)  at the time the Registrar is to amend the administrative assessment under this section, the parent could lodge his or her tax return by the date required under Part IV of the Income Tax Assessment Act 1936 (taking into account any deferral under section 38855 in Schedule 1 to the Taxation Administration Act 1953); or

   (b)  paragraph (a) of this subsection does not apply and:

   (i)  the amount subsequently ascertained, as mentioned in subparagraph (1)(b)(i), is higher than the amount that was determined under section 58; or

   (ii)  the later amount that the Registrar determines, as mentioned in subparagraph (1)(b)(ii), is higher than the earlier amount determined under section 58; or

   (c)  neither paragraph (a) nor (b) applies, but circumstances prescribed by the regulations for the purposes of this section apply in relation to the parent;

   then the Registrar must immediately amend the administrative assessment for the child support period on the basis that the parent’s adjusted taxable income for that year of income is, and has always been, the amount that was subsequently ascertained or later determined (as the case requires).

10. As Mr Wale did not lodge the relevant tax return on time and his adjusted taxable income was lower than the provisional income used in the assessment, the Tribunal does not consider that paragraphs 58A(2)(a) or 58A(2)(b) apply in this case.

11. The Tribunal also considered the relevant regulations as per paragraph 58A(2)(c) of the Act.  These regulations state:

    (1)  For the purposes of section 58A of the Act, the following circumstances are prescribed in relation to a parent who was unable to provide information about the parent’s adjusted taxable income to the Registrar at the time the relevant administrative assessment was made:

    (a)  one or more of the following applied in relation to the parent at that time:

    (i)  the parent did not know that an application for the assessment had been made and accepted;

    (ii)  the parent had a serious illness or injury;

    (iii)  the parent was under detention or imprisonment;

    (iv)  the parent resided in a remote location which made it difficult to contact the Registrar;

    (v)  a natural disaster prevented the parent from being able to contact the Registrar;

    (vi)  there was some other exceptional circumstance that prevented the parent from providing the information;

    (b)  the Registrar confirms that the parent was unable to provide the information at that time because of a circumstance mentioned in paragraph (a);

    (c)  the parent later provides the information to the Registrar as soon as is practicable in the circumstances.

12. Mr Wale has told the Tribunal his illness prevented him from completing his tax returns.  This is a prescribed circumstance under the regulations.  The letter from [Dr A] supports this contention.

13. The Tribunal is satisfied that Mr Wale was impacted by a prescribed circumstance and was not able to provide his adjusted taxable income at the time the child support assessment was made.  The Tribunal is also satisfied that Mr Wale provided his adjusted taxable income as soon as was practicable under the circumstances in which he found himself.

14. After careful consideration of the evidence provided the Tribunal finds that paragraph 58A(2)(c) of the Act applies and the administrative assessment for the child support period must be amended using Mr Wale’s adjusted taxable income for that year of income.

15. The decision to retrospectively apply Mr Wale’s 2018–19 adjusted taxable income of $35,054 for the period from 1 November 2019 to 30 September 2020 is affirmed.

DECISION

The decision under review is affirmed.