Ricciuti and Steitz (Child support)

[2020] AATA 1407

Ricciuti and Steitz (Child support) [2020] AATA 1407 (6 April 2020)

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2020/MC018294

APPLICANT:  Mr Ricciuti

OTHER PARTIES:  Child Support Registrar

Ms Steitz

TRIBUNAL:Member P Sperling

DECISION DATE:                           6 April 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – determination of adjusted taxable income – decision under affirmed

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 review concerns the income used for Mr Riccuiti in a child support assessment from 1 September 2017.

2.Mr Ricciuti and Ms Steitz are the parents of [the Child] (born 26 January 2004). A child support assessment was in place prior to 1 September 2017 and a new child support period commenced from 1 September 2017.

3.On 23 July 2017 the Department decided to apply a provisional income for Mr Ricciuti for the 2016/17 financial year of $59,002 to the child support assessment from 1 September 2017 as he had not lodged his 2016/17 income tax return.

4.On 14 November 2018 Mr Ricciuti objected to this decision on the grounds that the Department had calculated his provisional income from past wages. The objections officer disallowed the objection.

5.On 28 January 2019 Mr Ricciuti made an application to the tribunal for review of the objection decision.

6.The application was heard on 6 April 2020. Mr Ricciuti and Ms Steitz both participated in the hearing via conference telephone. In addition to oral evidence, the tribunal had regard to documents provided by the Department (pages 1 to 38).

ISSUE

7.The statutory provisions relevant to this review are found within the child support law, in particular the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Assessment) Regulations 1989 (the Regulations) as was in force at that time.

8.The issue in this matter is the provisional income to be used for Mr Ricciuti in the child support assessment from 1 September 2017.

CONSIDERATION

9.The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the adjusted taxable income of each parent.

10.Adjusted taxable income is defined in section 43 of the Assessment Act as being composed of taxable income for the last relevant income year plus reportable fringe benefits, target foreign income, total net investment loss, specified tax free pensions or benefits and reportable superannuation contributions.

11.Section 5 of the Assessment Act defines the last relevant year of income in relation to a child support period as the last year of income that ended before the start of the period. The start of the child support period in this case is 1 September 2017. The last relevant year of income is therefore 2016/17.

12.There is no dispute that Mr Ricciuti had not lodged his 2016/17 income tax return before 1 September 2017. During the hearing he told the tribunal that he hadn’t lodged his tax return by September 2017 because he had undergone ankle reconstruction surgery around this time and was therefore unable to work and had no income to declare to the ATO. He said that he wasn’t exactly sure when he had this surgery or how long he spent rehabilitating at home and therefore was unable to work. He also told the tribunal that he didn’t know he was required to lodge a tax return because he had a child support assessment, even if he didn’t earn any income.

13.During the hearing Mr Ricciuti confirmed that he lodged his income tax returns for the financial years 2016/17, 2017/18 and 2018/19 in November 2019, as set out in the Department’s documents (page 34). He said he didn’t lodge his tax returns prior to this because his income was low and he didn’t know he had to until he received a debt notice from the Department regarding his child support assessment. In summary he said that he has no problem paying child support but he disagrees with the amount owing because it is based on an incorrect income amount.

14.During the hearing Ms Steitz told the tribunal that she had received a phone call from the Department to advise that Mr Ricciuti’s child support assessment had increased because he had not lodged his tax return for the previous year. She was told that, because of this an earlier year’s taxable income was used to determine Mr Ricciuti’s provision income from 1 September 2017. She said that sometime in 2018 she had cancelled child support collection and, by mutual agreement, Mr Ricciuti is now repaying his outstanding child support debt and she is using this money to pay for orthodontic work for their child.

15.In summary Ms Steitz said that she does not know whether or not Mr Ricciuti was working during 2016/17 or what his income was for that financial year. She also said she does not know whether or not Mr Ricciuti was incapacitated and therefore unable to submit his 2016/17 tax return on time.

16.Section 58 of the Assessment Act allows the Child Support Registrar to determine a person’s adjusted taxable income if they have not lodged their income tax return for the last relevant year of income as follows:

·subsection 58(2) allows the Registrar to use available information to work out a reasonable approximation of the person’s income;

·subsection 58(3) provides that the person’s adjusted taxable income for the previous year of income can be multiplied by the ATI indexation factor;

·subsection 58(4) allows the Registrar to use the greater of the amount worked out by multiplying the parent’s adjusted taxable income for the most recent year of income assessed by the ATO by the “ATI indexation factor” and the amount that is equal to two-thirds of the annualised male total average weekly earnings (MTAWE) for the relevant June quarter in relation to the child support period; and

·subsection 58(5) permits the Registrar to use an amount that is at least two-thirds of the annualised MTAWE figure.

17.Section 58A of the Assessment Act states that a provisional income determined under section 58 must be amended immediately if the Child Support Registrar ascertains the person’s adjusted taxable income for the last relevant year of income.

18.The tribunal notes that in this case the Registrar used the provisions of subsection 58(4) to Mr Ricciuti to determine a provisional income for 2016/17 of $59,002 as follows:

·the most recent taxable income available was $56,516 for the 2013/14 financial year, which when indexed by the ATI indexation factor of 1.004 generated a provisional income of $59,002;

·the relevant MTAWE figure for the period from 1 September 2017 was $48,308;

·the indexed income of $59,002 was greater than the MTAWE figure of $48,308;

·in accordance with subsection 58(4), the greater of the two figures, being $59,002 was applied as the provisional income for 2016/17.

19.The tribunal finds that, in the absence of other information regarding Mr Ricciuti’s income for 2016/17 being available at the time, a provisional income figure of $59,002 for the period commencing 1 September 2017 is correct, in accordance with subsection 58(4) of the Assessment Act and consistent with the methodology set out in paragraph 18 of these Reasons.

20.The tribunal finds that Mr Ricciuti had not lodged his 2016/17 or his 2015/16 income tax returns by 23 July 2017 when the Registrar determined this 2016/17 provisional income amount. The Department’s documents show that, on 4 May 2018, more than nine months later, Mr Ricciuti first contacted the Department and provided an income estimate of $23,287 for 2016/17. The tribunal notes that the Department applied this income estimate from 4 May 2018 but not any earlier.

21.The tribunal therefore turned to the question of whether the income estimate provided by Mr Ricciuti on 4 May 2018 could be taken to be his income estimate for any of the period from 1 September 2017 to 3 May 2018.

22.The tribunal notes that, where a parent has had their adjusted taxable income assessed pursuant to section 58 of the Assessment Act, and information about a component of their adjusted taxable income later becomes available, subsection 58A(2) imposes a limitation on a retrospective amendment to the assessment of child support having regard to that information.

23.When that later assessed amount is lower than the amount determined under section 58 of the Assessment Act (as is the case for Mr Ricciuti), in accordance with subregulation 7B(1) of the Regulations, the lower amount can only be applied retrospectively to the administrative assessment of child support if the parent was unable to provide information about their adjusted taxable income to the Registrar at the time the particular assessment was made because, at that time, one of the following applied:

-    the parent did not know that an application for the assessment had been made and accepted; or

-    the parent had a serious illness or injury; or

-    the parent was under detention or imprisonment; or

-    the parent resided in a remote location which made it difficult to contact the Registrar; or

-    there was some other exceptional circumstances that prevented the parent from providing the information.

24.During the hearing Mr Ricciuti told the tribunal that around the time under consideration he had [surgery] which meant that he was unable to work and therefore didn’t earn any income. He said that he therefore didn’t think he had to lodge a tax return as he hadn’t been working.

25.The tribunal notes that the Department’s documents explicitly acknowledge that Mr Ricciuti was not advised of the Department’s decision to apply a provisional income for the 2016/17 financial year of $59,002 either in writing or verbally by the original decision maker (page 18). On this basis, the tribunal accepts that Mr Ricciuti may not have been aware of this decision until the debt was raised for arrears of child support.

26.Notwithstanding this, the tribunal also notes that Mr Ricciuti had been assessed in previous years on the basis of his income estimate and lodged income tax returns. Therefore, in the tribunal’s view, as a person with a child support assessment Mr Ricciuti should have been aware of his ongoing obligation to lodge a tax return regardless of his income. In addition, there is no evidence that Mr Ricciuti provided any income estimate to the Department for 2016/17 prior to 4 May 2018, even though he should have known that this was necessary in order to update the child support assessment. Further, Mr Ricciuti acknowledged that he didn’t finally lodge his 2016/17 tax return until November 2019, some years after it was required to be lodged.

27.On the evidence before it, the tribunal is not satisfied that Mr Ricciuti had a serious illness or injury that physically prevented him from lodging his 2016/17 tax return on time. Further, the tribunal is not persuaded that the reasons outlined by Mr Ricciuti are exceptional circumstances that prevented him from providing information regarding his 2016/17 income to the Department and/or from lodging his 2016/17 tax return.

28.Accordingly, under subsection 58(4) of the Assessment Act the tribunal finds that $59,002 is a reasonable approximation of Mr Ricciuti’s adjusted taxable income for 2016/17 to be applied to the child support assessment from 1 September 2017.

DECISION

The decision under review is affirmed.