Rowell and Rowell (Child support)

[2022] AATA 4014

Rowell and Rowell (Child support) [2022] AATA 4014 (29 September 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2022/HC024301; 2022/HC024306

APPLICANT:  Ms Rowell

OTHER PARTIES:  Child Support Registrar

Mr Rowell

TRIBUNAL:Member S Letch

DECISION DATE:  29 September 2022

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 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

1. This matter concerns two separate applications by Ms Rowell against two separate decisions by the Child Support Agency (CSA) to accept Mr Rowell’s estimate elections of a “nil” income made on 27 May 2022 in respect of the 2021/22 and 2022/23 financial years.

2. It is convenient by way of background to set out an extract from the objection decision dealing with the 2021/22 estimate (the same reasoning was applied to the 2022/23 financial year) dated 12 July 2022:

   DECISION UNDER REVIEW

   The decision made on 27 May 2022 to accept Mr Rowell's estimate of adjusted taxable income of $0 (annualised) for the period 27 May 2022 to 30 June 2022.

   Ms Rowell has objected to this decision stating she does not agree with Mr Rowell's $0 estimate as he is a high income earner. Works as [an Occupation] and [works] pa1t time for [Employer]. Ms Rowell said that Mr Rowell has two businesses called [Company 1] and [Company 2].

   …

   WE CONSIDERED THE FOLLOWING EVIDENCE IN THE DECISION

   1. From 1 April 2022, we used a provisional income of $190,625. This info1mation was obtained using info1mation available to us via the Australian Tax Offices.

   2. On 27 May 2022, Mr Rowell notified us that he ceased employment. We accepted an estimate of $0 (annualised) from 27 May 2022 to 30 June 2022.

   3. On 6 June 2022, Ms Rowell objected to this decision in writing.

   4. On 6 June 2022, we spoke to Mr Rowell about the objection and he stated that he is the director of 2 companies he has set up called [Company 1] and [Company 2]. Mr Rowell stated he is not paying himself a wage and as soon as he commences earning income he will notify us. Mr Rowell said he has spent funds to set up the business and believes over the next couple of years he will be financial stable again. Mr Rowell said at the moment he has been supported by his partner who has a good income with current employer.

   …

   REASONS FOR THE DECISION

   Mr Rowell's lodged an estimate of income of $0 (annualised) for the period 27 May 2022 to 30 June 2022.

   In this case, Mr Rowell can make an income estimate for the remaining 2021/2022 financial year if his current income is 85% or less than his 2020/2021 adjusted taxable income which was recorded as $190,625.

   After the end of the 2021/2022 financial year, we will compare Mr Rowell`s estimated income with his actual income for the year. If Mr Rowell`s actual income is more than his estimated income, the assessment will be amended using his actual income. If, after an estimate is reconciled, a higher amended taxable income issues, the child support assessment will be re-reconciled for that period using the higher amended taxable income.

   Ms Rowell objected to this decision stating she does not agree with Mr Rowell`s $0 estimate as he is a high income earner. He works as [an Occupation] and [works] part time for [Employer]. Ms Rowell said that Mr Rowell has two businesses called [Company 1] and [Company 2].

   When we spoke to Mr Rowell he advised he is the director of 2 companies, which he has set up called [Company 1] and [Company 2]. Mr Rowell stated he is not paying himself a wage and once he commences earning an income he will inform us. Mr Rowell stated he has used his savings to establish his businesses and is currently being supported by his partner.

   There was no evidence provided to show that Mr Rowell has been earning an income from 27 May 2022 to 30 June 2022.

   Based on this, we have made the decision to allow the $0 (annualised) estimate for Mr Rowell to apply from 27 May 2022 to 30 June 2022.

   The objection is disallowed.

   …

3. Ms Rowell and Mr Rowell participated in the Tribunal’s hearing by conference telephone. The Tribunal took into account the CSA materials, and additional materials submitted by both parties.

4. Ms Rowell’s position is summarised in her written materials to the Tribunal:

   …

   I have recently filed for a property settlement and these are the documents he has provided to my Lawyer so far. He is yet to provide his full bank statements and I feel he is intentially stalling due to our empending tribunal case scheduled for 27th September.

   It is clear that he is not disclosing his full financial circumstances and is being very clever with how the business is being managed. For example – you can see from the bank statements that he has disclosed that he withdrew thousands of dollars in cash and at times has also deposited some of it back into his account. In relation to the business his girlfriend is listed as the sole shareholder which means that she is receiving all the income from the business. No wonder why I am not receiving any child support as it is not being reported on his taxable income.

   You will also find a screenshot from his website clearly stating that he started [Company 1] in 2018 and has been operating for 4 years (clearly not a new business venture) you will see from his business statement that it has turned over 200k in the last year alone.

   If these documents could please be added to support my case it would be greatly appreciated.

5. In summary, Mr Rowell told the Tribunal he was “shattered” when he lost his job. At the time he made his estimates of income, he legitimately thought his income would be “nil”. He did not expect to gain work, or for the business entity he is connected with to be in a position to pay him a wage. In September 2022, the situation changed and he signed a contract of employment with [Company 1] to earn $26,000 per annum. The Tribunal reminded Mr Rowell he was obliged to inform the CSA of that fact; Mr Rowell indicated an intention to do so.

6. The pivotal provision in this case is section 63AA of the Child Support (Assessment) Act 1989:

   Registrar may refuse to accept an income election

   (1)  If:

   (a)  a parent makes an income election to which subsection 60(2) applies; and

   (b)  the Registrar is satisfied that the amount worked out under that subsection is less than the amount that the Registrar considers is likely to be the parent's actual adjusted taxable income for the year of income to which the income election relates;

   the Registrar may refuse to accept the income election.

   (2)  The Registrar may refuse to accept a parent's income election to which subsection 60(3) applies if the Registrar is satisfied that:

   (a)  the partial year income amount for the income election is less than the amount that the Registrar considers is likely to be the parent's actual adjusted taxable income for the remaining period in relation to the income election; or

   (b)  the total of the income component amounts estimated by the parent under paragraph 60(3)(b) for the period referred to in that paragraph is more than the amount that the Registrar considers is likely to be the total of the actual income component amounts for the parent for that period.

   (3)  If:

   (a)  a parent makes an election under subsection 62A(1); and

   (b)  the Registrar is satisfied that the partial year income amount for the income election is less than the amount that the Registrar considers is likely to be the parent's actual adjusted taxable income for the remaining period in relation to the income election;

the Registrar may refuse to accept the income election.

(4)  In making the decision as to whether to refuse to accept the income election, the Registrar:

(a)  may act on the basis of information that the Registrar has received or obtained as to the financial circumstances of the parent; and

(b)  may, but is not required to, conduct an inquiry into the matter.

(5)  Except for the purposes of Parts VII, VIIA and VIII of the Registration and Collection Act (dealing with objections and appeals), if the Registrar refuses to accept the income election, the election is taken never to have been made.

1. Relevantly, the Registrar may refuse to accept income elections of the types made by Mr Rowell in respect of the two subject financial years if the Registrar considers the estimate is likely to be less than the person’s actual adjusted taxable income.

2. The Tribunal had no reason to doubt Mr Rowell’s evidence that he genuinely considered his adjusted taxable income would be nil. He had lost his employment, and did not anticipate he would be in a position, as the “controlling mind” of [Company 1], to take income from the business in the form of a wage. That position changed in September 2022; the Tribunal had no reason to conclude that, at the time Mr Rowell made his original elections, it was likely Mr Rowell would derive more than a “nil” income.

3. Accordingly, the Tribunal does not consider there to be a proper basis for the Registrar to have refused Mr Rowell’s income estimate elections for the 2021/22 and 2022/23 financial years.

4. The Tribunal understands Ms Rowell will find this outcome unsatisfactory. As explained during the hearing, the issue in this application is of narrow focus, and pertains only to Mr Rowell’s adjusted taxable income, as to be assessed by the Australian Taxation Office (ATO), under the child support formula arrangements.[1] It seems clear that the thrust of Ms Rowell’s argument is that Mr Rowell’s financial capacity far exceeds that which is revealed in his adjusted taxable income. The Tribunal explained to Ms Rowell she is at liberty to apply to the CSA, as is commonly the case in this type of scenario, for a “change of assessment” to depart from the formula arrangements (including the “estimate regime”) on the basis that the assessment is rendered unfair because a parent’s true financial capacity exceeds that which is reflected by their income as assessed by the ATO. Such a process would involve a more forensic analysis of Mr Rowell’s financial and business affairs, and a capacity, if warranted, to increase his underlying child support liability.   

   [1] The Tribunal observes that the estimates provided by Mr Rowell will be subject to a reconciliation process; if his estimates were “too low”, his actual income can be retrospectively applied to the child support assessment, resulting in a retrospective increase to his liability.

5. As the Tribunal has reached the same conclusions as the objections officer, the decisions under review will be affirmed.

DECISION

The decisions under review are affirmed.