Ruffer and Bignot (Child support)

[2022] AATA 310

Ruffer and Bignot (Child support) [2022] AATA 310 (14 January 2022)

DECISION AND REASONS FOR DECISION

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2021/HC020866

APPLICANT:  Ms Ruffer

OTHERPARTIES:  Child Support Registrar Mr Bignot

TRIBUNAL:  Senior Member R Ellis

DECISION DATE:  14 January 2022

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the 2019-20 adjusted taxable income of Mr Bignot of $94,811 should be applied to the child  support assessment from the start of a new child support period commencing on 1 November 2020.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – remittal of matter to the Tribunal – whether the adjusted taxable income of the liable parent was correctly applied – determining the start date of new child support period – 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 review is about a decision by the Child Support Agency to determine an adjusted taxable income for Mr Bignot and the date from which this adjusted taxable income amount should be applied to the administrative assessment of child support.

2.Ms Ruffer and Mr Bignot are the parents of [Child 1] (born April 2001) and [Child 2] (born  September 2007). This matter is relevant to [Child 2] only as [Child 1] is no longer a child of the assessment.

3.There has been a child support assessment in place since 15 March 2002 with collection by the Child Support Agency from 9 December 2004. Mr Bignot is the liable parent.

4.On 29 October 2020 the Child Support Agency received notification from the Australian Taxation Office (ATO) that Mr Bignot had a taxable income of $94,811 for 2019-20.

5.On 29 October 2020 the Child Support Agency made the decision to fix the adjusted taxable income of Mr Bignot at $94,811 and also to apply this amount to the assessment  from the commencement of a new child support period on 1 December 2020.

6.On 20 November 2020 Ms Ruffer objected to this decision and on 29 January 2021 the Child  Support Agency disallowed the objection (the objection decision).

7.On 24 February 2021 Ms Ruffer applied to the Administrative Appeals Tribunal (the Tribunal)  for a review of the objection decision and on 24 June 2021 the Tribunal, separately constituted, affirmed the decision.

8.Ms Ruffer appealed to the Federal Circuit and Family Court and [in] September 2021 the  Court remitted the matter for further consideration by the Tribunal with the consent of the parties. The remittal requires the Tribunal to consider the review application anew.

9.The Tribunal conducted a hearing into the application on 30 November 2021. Ms Ruffer gave evidence on affirmation by conference telephone. Mr Bignot advised the Tribunal      on 24 November 2021 that he was unable to attend the hearing and requested the matter    proceed in his absence. As a result Mr Bignot did not participate in the hearing.

10.The Child Support Agency provided the Tribunal and the parties with papers relevant to the matter (98 pages). The Tribunal also received additional information from Ms Ruffer (A1– A100). At hearing the Tribunal agreed to accept a further submission from Ms Ruffer in the form of transcripts of proceedings in the Tribunal on 24 June 2021 and in the Federal Circuit and Family Court [in] September 2021 which she said were important to her case (A101–A137). A copy of this submission was sent by the Tribunal to Mr Bignot for his consideration and comment.  No response was received from Mr Bignot.

ISSUES

11.The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

12.The Child Support Agency makes child support assessments for a child support period using a formula outlined in Part 5 of the Act. The variables in the formula include the adjusted taxable incomes of both parents. Section 43 of the Act provides a description of how a parent’s adjusted taxable income is calculated. The obligation to assess a new rate of child support once a new tax assessment is made is set out under section 34A of the Act. Child support periods start and end as prescribed in section 7A of the Act.

13.The issues which arise in this case are whether or not the Child Support Agency made the legally correct decision to fix the 2019-20 adjusted taxable income of Mr Bignot at

$94,811 and then to apply this amount to the assessment from the start of a new child support period commencing on 1 December 2020.

CONSIDERATION

14.Fixing a parent’s adjusted taxable income and determining the start date of a child support period are matters affecting the details, or particulars, of the administrative assessment. Each is a discrete and separate decision made by the Child Support Agency which has objection rights and may then be independently reviewed by the Tribunal.

Issue 1 – calculating the adjusted taxable income of Mr Bignot

15.Ms Ruffer told the Tribunal she believed the adjusted taxable income amount determined by the Child Support Agency for Mr Bignot of $94,811 was likely to be incorrect and required   greater scrutiny. Ms Ruffer said it was her view Mr Bignot was in receipt of benefits from his employer that were not reflected in his adjusted taxable income for 2019-20.

16.Ms Ruffer explained that Mr Bignot worked for a company, [named], which offered its employees a range of benefits including the option of salary packaging. Ms Ruffer said under his salary package Mr Bignot may receive a company car, a fuel card and a mobile telephone. Ms Ruffer said she believed Mr Bignot was also salary sacrificing into his superannuation. She said Mr Bignot had received such benefits through his employer in the past and although he had denied receiving them now he should not simply be taken at his word. Ms Ruffer said Mr Bignot had never provided a copy of his individual employment contract for examination. She said Mr Bignot should be required to provide further evidence so her claims can be thoroughly reviewed.

17.Ms Ruffer told the Tribunal that, according to a payroll activity report she had provided, it appeared Mr Bignot was being paid “under the table” because his regular pay and his overtime did not add up to his gross pay. Ms Ruffer said, furthermore, in previous financial years Mr Bignot had claimed a rental loss against his investment property by overstating the expenses on this property. Ms Ruffer argued that through the use of what she termed

“creative accounting” Mr Bignot had also failed to declare rental income in his 2019-20  tax return. Ms Ruffer said these matters also required further investigation.

18.Ms Ruffer submitted that through appeals she had made the courts had agreed Mr Bignot’s adjusted taxable income should be properly examined. Ms Ruffer pointed out that in a matter before [Judge A] [in] July 2020, which dealt with the fixing of the 2018-19 adjusted taxable income amount for Mr Bignot, his Honour had clearly indicated that she should be able to dispute this amount. Ms Ruffer said in her appeal to the Federal Circuit and Family Court, relating in part to the fixing of the 2019-20 adjusted taxable income amount for Mr Bignot, [Judge B] had suggested similarly. Ms Ruffer said it was her view both cases reinforce that the adjusted taxable income amount of Mr Bignot should be investigated and without the need for a change of assessment application.

19.Ms Ruffer provided the Tribunal with transcripts of proceedings for the matter before [Judge A]     and the matter before [Judge B]. The Tribunal notes that, in both cases, neither Court determined the issue but remitted the review applications to the Tribunal for consideration  afresh.

20.The provisions relevant to calculating the adjusted taxable income amount of a parent are set out in subsection 43(1) of the Act:

Working out parent's adjusted taxable income

43(1) Subject to this Part, a parent's adjusted taxable income for a child for a day in a child support period is the total of the following components:

(a)  the parent's taxable income for the last relevant year of income in relation to the child support period;

(b)  the parent's reportable fringe benefits total for that year of income;

(c)  the parent's target foreign income for that year of income;

(d)  the parent's total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income;

(e)  the total of the tax free pensions or benefits received by that parent in that year of income;

(f)  the parent's reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income.

21.The Tribunal notes in evidence from the Child Support Agency figures taken from the income tax return of Mr Bignot. These figures show a taxable income of $94,811, no reportable superannuation amount, no target foreign income amount, no reportable fringe benefit amount and no net investment loss (gross rental income of $9,232 less rental interest deductions of $6,167 and other rental deductions of $2,830).

22.Although Mr Bignot did not participate in this hearing it is noted that in the decision of the Tribunal, separately constituted, dated 24 June 2021 it is recorded that Mr Bignot gave

verbal evidence he only had income falling under component (a) of subsection 43(1) in 2019-20.

23.In determining the adjusted taxable income amount of Mr Bignot at $94,811 for 2019-20 the Child Support Agency applied the provisions of subsection 43(1) of the Act. Ms Ruffer argues that Mr Bignot may have fringe benefits which have not been divulged. Ms Ruffer alleges Mr Bignot may also be paid “under the table” and has not declared rental income. Ms Ruffer submits her views should be investigated by the Tribunal without the need for a change of assessment.

24.It is Part 6A of the Act which creates the process referred to by Ms Ruffer as a change of assessment. Under Part 6A a liable parent or a carer entitled to child support may apply for a departure from the administrative assessment in respect of a child. In making any determination to depart from an administrative assessment the Child Support Agency must first find a ground for departure and these grounds are listed in the Act. A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act). The emphasis, in deciding such a ground, is that there must be special circumstances. In other words, a change would not happen as a matter of course.

25.It is the firm view of the Tribunal that the issues raised by Ms Ruffer, as they relate to the adjusted taxable income of Mr Bignot, are more properly considered in the context of a  change of assessment application under Part 6A of the Act.

26.In the previous decision of the Tribunal, separately constituted, on this matter the Member states in relation to the fixing of Mr Bignot’s adjusted taxable income:

…while there could be some unusual circumstances where the fixing of a person’s ATI at an amount is in fact legally incorrect (eg because the Registrar has simply overlooked some income components such as fringe benefits or excess super contributions, which can readily be quantified) care needs to be taken that a challenge to the fixing of an ATI for a parent does not descend into complex argument and factual dispute about the true value to a person of their terms of employment, or benefits flowing from employment.

Those are exactly the sort of matters raised in Ms Ruffer’s submissions in this matter, and are matters which Part 6A is intended to deal with, not a “direct challenge” to the fixing of an ATI.

27.This remains a salient point. In reconsidering the arguments put by Ms Ruffer, based on the  evidence provided, the Tribunal does not consider there has been an error in determining the adjusted taxable income of Mr Bignot at $94,811 for 2019-20.

28.The Tribunal finds that the legislation has been correctly applied in calculating the adjusted taxable income amount for Mr Bignot for 2019-20 and affirms this decision.

Issue 2 – start date of the child support period

29.Ms Ruffer told the Tribunal the Child Support Agency had made an error in determining that the adjusted taxable income amount for Mr Bignot for 2019-20 should apply to a new child support period commencing on 1 December 2020. Ms Ruffer said it should apply from  the first day of the calendar month after the assessment of his adjusted taxable income had      been made and in this case that should be on 1 November 2020.

30.Ms Ruffer said in the matter before [Judge B] [in] September 2021 even the representative from the Child Support Agency had agreed an error of law had been made in  deciding the date from which the adjusted taxable income amount for Mr Bignot should apply.

31.The Tribunal reviewed the transcript of proceedings provided by Ms Ruffer of the matter before the Federal Circuit and Family Court [in] September 2021. The representative appearing for the Child Support Agency acknowledges the original and objection decisions  made by the Child Support Agency on 29 October 2020 and 29 January 2021 respectively     were “contrary to a plain reading” of section 34A of the Act.

32.A child support period ends, in accordance with section 7A of the Act, at whichever of the following times occurs soonest after the start of the period:

·15 months after the period started;

·the end of the calendar month during which the Registrar makes an assessment relating to the annual rate of child support payable for the child as required by section 34A;

·immediately before the day on which an application is made for acceptance of a child support agreement;

·the end of the day immediately before the first day a new child support agreement is to affect the rate payable when child support is already payable.

33.Under section 34A of the Act the Child Support Agency must assess the new rate of child support after a new tax return is lodged:

34A Registrar must make assessment when new tax figure is available

Application of section

34A(1) This section requires the Registrar to assess the rate of child support payable in some cases if:

(a)child support is payable by a liable parent for a child for a day in a child support period (the

earlier period); and

(b)during the earlier period, an assessment (the tax assessment) is made under an Income Tax Assessment Act of the taxable income, or any other component of the adjusted taxable

income, of the liable parent or the other parent, for the latest year of income (the last year) that ended after the start of the earlier period.

Registrar must make assessment using new tax figures.

34A(2) As soon as practicable after the tax assessment is made, the Registrar must assess the annual rate of child support payable for the child for days in a child support period starting on the first day of the next calendar month (after the calendar month in which the Registrar makes the assessment).

34.In this case the Tribunal is satisfied the Child Support Agency received notification from the ATO on 29 October 2020 that Mr Bignot had a 2019-20 taxable income of $94,811. The Tribunal is also satisfied the decision by the Child Support Agency to assess the annual rate of child support payable using the adjusted taxable income of $94,811 for 2019-20 was  made on 29 October 2020.

35.Pursuant to subsection 34A(2) of the Act the Tribunal finds that the start date of the new child support period must, therefore, be 1 November 2020 as this is the first day of the next calendar month after the calendar month in which the assessment was made.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the 2019-20 adjusted taxable income of Mr Bignot of $94,811 should be applied to the child support assessment from the start of a new child support period commencing on 1 November 2020.