Sheldon and Jenkins (Child support)

[2017] AATA 2864

Sheldon and Jenkins (Child support) [2017] AATA 2864 (16 November 2017)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/MC012168

APPLICANT:  Ms Sheldon

OTHER PARTIES:  Child Support Registrar

Mr Jenkins

TRIBUNAL:Member A Schiwy

DECISION DATE:  16 November 2017

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period 1 September 2016 to 14 May 2017, Ms Sheldon’s adjusted taxable income is reduced to $68,504.

Member A Schiwy

CATCHWORDS
Child support – Particulars of the administrative assessment – Adjusted taxable income – Post-separation costs – 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 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. Mr Jenkins and Ms Sheldon are the parents of two children.  The parents separated on 15 May 2014.  A child support case was registered on 10 June 2014. 

2. An administrative assessment was made for the child support period commencing 1 September 2016 and Ms Sheldon’s adjusted taxable income was based on her taxable income for 2015-16 of $86,174.

3. On 24 April 2017, Ms Sheldon lodged an application with the Department of Human Services – Child Support (the Department) to vary her 2015-16 adjusted taxable income by excluding $17,670 of her post separation income.

4. On 8 May 2017 the Department decided to accept Ms Sheldon’s application and her adjusted taxable income was reduced by $17,670 to $68,504 with effect from 1 September 2016.

5. On 10 May 2017, Mr Jenkins lodged an objection to this decision on the basis that Ms Sheldon did not have to “set herself up again”. 

6. On 21 July 2017, an objections officer partially allowed that objection by deciding that the adjusted taxable income could only be reduced from 24 April 2017; the date of application.

7. On 24 July 2017 Ms Sheldon applied to this tribunal for a review of the objections officer’s decision stating that she had been advised for two years that she could not have a post separation income reduction.

8. A hearing was held on 16 November 2017 in [City]. Mr Jenkins and Ms Sheldon both attended via teleconference and gave evidence on affirmation

9. The tribunal also had before it papers provided by the Department (194 pages). Ms Sheldon also provided a written submission (A1 to A3).  The parties received copies of these papers prior to the hearing. 

10. Relevant aspects of the evidence before the tribunal will be referred to in the consideration below.

ISSUES

1. The statutory provision most relevant to this review is section 44 of the Child Support (Assessment) Act 1989 (the Assessment Act).

2. For post-separation income to be excluded, it is necessary for certain requirements to be met. These include the requirements in subsection 44(1) of the Assessment Act:

   ·     The parents lived together on a genuine domestic basis for at least six months before the date of application (paragraph 44(1)(a));

   ·     The separation following that period of six months or longer occurred within the last three years and before the application for an administrative assessment of child support was made (paragraph 44(1)(b));

   ·     The parents remained separated at the time the application for exclusion of post separation income was made (paragraph 44(1)(c)); and

   ·     In the last relevant year of income the applicant earned, derived or received income:

   o   in accordance with a pattern of earnings, derivation or receipt that was established after separation; and

   o   that income “is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events” (paragraph 44(1)(d)).

3. Subsection 44(3) of the Assessment Act also requires that the amount of the reduction to be made cannot be more than 30% of the applicant’s adjusted taxable income and also the reduction can only apply for a period of three years after the date of separation.

4. It is not disputed by the parties that Mr Jenkins and Ms Sheldon lived together on a genuine domestic basis for at least six months before they separated and that their separation date was 15 May 2014.  It is also not disputed that the increased income received by Ms Sheldon for higher duties allowance is less than 30% of Ms Sheldon’s adjusted taxable income in 2015-16.

5. Mr Jenkins is submitting that Ms Sheldon did not have a change in her pattern of earnings. He has also submitted that Ms Sheldon did not have additional costs post separation and therefore the discretion to exclude the income should not be applied. (Subsection 44(2) of the Assessment Act states that if the above conditions are met the Registrar may decide to exclude the additional income.)

6. The issues to decide in this matter are:

   ·Whether or not Ms Sheldon has had a change in her pattern of earnings; and if so

   ·Whether the discretion to reduce Ms Sheldon’s adjusted taxable income should be exercised; and if so,

   ·From what date should Ms Sheldon’s adjusted taxable income be reduced?

CONSIDERATION

Did Ms Sheldon have a change in her pattern of earnings?

1. Ms Sheldon’s taxable incomes in recent years were:

   2013-14    $50,893;

   2014-15    $59,453;

   2015-16    $86,174.

2. Ms Sheldon’s payslips were obtained from December 2012 to May 2014.  They indicate that she had higher duties from 9 March 2013 to 17 May 2013.  There was no evidence that she took on higher duties for any long term or regular basis prior to separation. 

3. From 24 August 2013 her hours increased from 68.4 hours to 76 hours per fortnight.  This change, which was pre-separation is reflected by the increased income in 2014-15.  She commenced her current higher duties on 13 July 2015. 

4. Ms Sheldon’s base salary during 2015-16 was $68,504 and therefore the amount of higher duties allowance was $17,670.  This is less than 30% of her adjusted taxable incomes for 2014-15 and 2015-16.

5. Mr Jenkins submitted that Ms Sheldon did not seek the higher duties; they were offered to her. The tribunal did not consider this was relevant as the Assessment Act requires that the increased income “is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events”.

6. The tribunal was satisfied that the higher duties received by Ms Sheldon post separation were not received in the ordinary course of events and she has had a change in her pattern of earnings.

7. Ms Sheldon therefore meets the criteria set out in subsection 44(1) of the Assessment Act.

Should the discretion to reduce Ms Sheldon’s adjusted taxable income be exercised?

1. Subsection 44(2) is expressed in discretionary terms, that is, the Registrar “may” make a determination to exclude certain income. It does not necessarily follow that if all the criteria of subsection 44(1) are satisfied, then the exclusion determination must be made.

2. There is no guidance as to the exercise of the discretion provided for in the Child Support Guide. The discussion in the Child Support Guide at chapter 2.5.2 would suggest that there is no discretion once the criteria set out in the Assessment Act are satisfied.

3. The tribunal noted that the policy reason for allowing post separation income to be excluded was due to parents incurring additional costs post separation however this is not included as a requirement to be met in section 44 of the Assessment Act. The tribunal also noted that it would be very unusual for a parent not to incur additional costs post separation.

4. Mr Jenkins has submitted that Ms Sheldon did not incur any additional costs post separation.  He said he had incurred considerable costs to set up in a new residence.  He also stated that Ms Sheldon’s legal fees were paid for by her parents (which Ms Sheldon denies).  However Mr Jenkins did concede that Ms Sheldon took on the mortgage of the marital home and all of the household costs.

5. The tribunal was satisfied that the discretion should be applied.

From what date should Ms Sheldon’s adjusted taxable income be reduced?

1. Ms Sheldon first became aware of the post separation income provisions when Mr Jenkins applied for his post separation income to be reduced.  Ms Sheldon was notified by the Department in September 2015 about the application.  Ms Sheldon said that she asked if she could apply for the reduction and was advised she could not as she did not incur any expenses to move out of the family home.  The Department did not provide evidence of this contact.  As Mr Jenkins had moved out of the home and therefore incurred ‘set up costs’ Ms Sheldon decided not to take the matter further.

2. Ms Sheldon was contacted by the Department again on 13 December 2016 when Mr Jenkins had applied to continue with the reduction in post separation income.  The Department have made a file note of this contact (page 47).  They note that they advised Ms Sheldon the reduction was allowed when parents had expenses to ‘set themselves up’.  She was also advised that any reduction could only apply to 15 May 2017 (three years after separation). 

3. On 24 April 2017 Ms Sheldon rang the Department again about post separation income.  Ms Sheldon stated that she was referred to someone who was a specialist in post separation income and this person told her she was eligible for the income reduction.  

4. On 7 August 2016 Ms Sheldon was notified of a new assessment with a child support period commencement date of 1 September 2016.  The assessment was based on Ms Sheldon’s adjusted taxable income of $86,174.

5. The Assessment Act does not prescribe how to determine the date from which a determination about the reduction of adjusted taxable income should take effect. The Child Support Guide at item 2.5.2 states the following in relation to this issue:

   When does a determination to exclude additional income apply?

   If [Child Support Agency (CSA)] accepts an application to exclude additional income earned after separation this will ordinarily apply from the date the application was made. However, it can apply from the start of the child support period in which the application is lodged if there are special circumstances.

Special circumstances

Whether there are special circumstances to justify backdating the exclusion of additional income will depend on the facts in each particular case. Generally [CSA] will be satisfied special circumstances exist where the parent was prevented from applying earlier but did apply in a timely way once they were able to, generally within 28 days.

The following are the circumstances in which a parent will be considered to have been prevented from applying earlier:

·The income was not yet used in the assessment,

·The parent was not aware of the existence of the child support assessment,

·The parent was not aware of the existence of the provision because it was not discussed in their initial contact with [CSA] (where child support essentials are communicated), because, for example, that contact occurred prior to 1 July 2008,

·The parent was a victim of family violence,

·The parent (or a family member) was ill or had an accident that stopped the parent from applying,

·The parent suffered a personal trauma such as a death in the family or a natural disaster that caused damage to their property,

·The parent had communication difficulties because of, or including, isolation, illiteracy or poor English-language skills,

·The parents were involved in negotiations over child support and/or other matters and applying may have compromised those negotiations,

·There are other exceptional circumstances.

1. The tribunal will follow the Department’s policy unless it is inconsistent with the provisions or objects of the legislation. In this instance, the tribunal accepts that the policy is consistent with the objects of the Assessment Act and assists in making determinations under the legislation. Backdating any applications for separation income could result in the other parent owing child support and therefore the tribunal agrees that there must be good reason to allow the back dating. Therefore, the tribunal will apply the same considerations as to the “date of determination” as contained within the Guide.

2. The tribunal accepts Ms Sheldon’s evidence that she was advised by the Department in 2015 that she was not eligible for a post separation reduction in income as she had not been required to set up a new residence.  This is the advice she received again in December 2016 as it implied it was only for ‘set up’ costs.  Whilst she was aware of the provision, the tribunal found that she was given misleading or incorrect advice as to her eligibility by the Department.  The tribunal considered this to be an exceptional circumstance that prevented Ms Sheldon from lodging her application earlier.  (The tribunal also noted that she would not have been eligible for the reduction in the previous child support period.)

3. The tribunal therefore decided that Ms Sheldon’s adjusted taxable income should be reduced from 1 September 2016.  The three year limit for income reduction ends on 14 May 2017 (three years from the date of separation).

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that for the period 1 September 2016 to 14 May 2017, Ms Sheldon’s adjusted taxable income is reduced to $68,504.