Sherman and Hardeman (Child support)
[2025] ARTA 250
•2 January 2025
Sherman and Hardeman (Child support) [2025] ARTA 250 (2 January 2025)
Applicant/s: Ms Sherman
Respondent: Child Support Registrar
Other Parties: Mr Hardeman
Tribunal Number: 2024/PC028434
Tribunal: General Member Hoffman
Place:Perth
Date:2 January 2025
Decision:
The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
An income estimate for Ms Sherman of $178,444 is used in the child support assessment from 6 March 2024.
This estimate of income is revoked on 29 March 2024.
A revised income estimate for Ms Sherman of $187,114 is used in the child support assessment from 30 March 2024.
Ms Sherman’s year-to-date income from 1 July 2023 to 5 March 2024 is recalculated, having regard to paragraphs 38 to 42 of the Statement of Reasons, and any other information available to the Child Support Registrar.
CATCHWORDS
CHILD SUPPORT – particulars of the administrative assessment – mother’s estimated income – Child Support’s calculations used incorrect information – pay increase – income recalculated using available information – separate decision on care percentage – decision under review set aside and sent back with directions
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 pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.
Statement of Reasons
BACKGROUND
Tribunal
On 20 August 2024, Ms Sherman lodged an application for review of a decision made by Services Australia – Child Support (Child Support) with the Administrative Appeals Tribunal (AAT).
From 14 October 2024, the AAT became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal.
The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.
Decision under review
Ms Sherman and Mr Hardeman are the parents of two children aged 8 and 6 years old. The child support case started on 12 February 2024 with Child Support collecting child support from that date.
On 6 March 2024 an officer from Child Support contacted Ms Sherman about the application by Mr Hardeman for a child support case to be registered. During that conversation, Ms Sherman’s income was discussed and that she could elect to provide an estimate of her income for child support purposes for the remainder of the financial year.
On or about 28 March 2024, Ms Sherman provided information about her year-to-date income and the amount she expected to earn between then and 30 June 2024.
On 4 April 2024, an officer from Child Support applied an estimate of Ms Sherman’s annualised income of $143,366 from 6 March 2024 (the original decision).
On 13 April 2024, Mr Hardeman objected to that decision.
Ms Sherman provided updated information about her income and the original income estimate of $143,366 was replaced by a revised estimate of $187,114 which was applied to the period 30 March 2024 to 30 June 2024 (the revised estimate decision).
On 6 August 2024, an objections officer from Child Support decided to allow the objection to the original decision and made a new decision, to refuse to accept Ms Sherman’s estimate election of $143,366 which was applied from 6 March 2024 (the objection decision).
Because the first estimate election was refused as a result of the objection decision, the revised estimate was treated as never having been made.
On 20 August 2024, Ms Sherman lodged an application for review with the Tribunal. The matter was heard on 18 December 2024. Ms Sherman attended the hearing in person and Mr Hardeman attended the hearing via conference telephone. Both gave sworn evidence.
The Tribunal had before it a bundle of documents provided by Child Support (numbered 1 to 218), copies of which were provided to the parties before the hearing.
Also on 18 December 2024, the Tribunal reviewed a care percentage decision with the same parties. It has written a separate decision statement for that review, number 2024/PC028509.
ISSUES
The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act).
The issue which arises in this case is whether to accept or refuse to accept Ms Sherman’s election to estimate her income from 6 March 2024.
CONSIDERATION
Legislation
Section 60 of the Act provides that a parent may elect to estimate his or her adjusted taxable income if certain criteria are met. These include that the estimated annualised income will not be more than 85% of the taxable income figure used to calculate the rate of child support.
Section 60 of the Act provides that having estimated each income component between the start day of the income election and last day of the financial year, those components are to be added up. The resultant total is to be divided by the number of days in the period between the start day and 30 June. The result of that calculation is to be multiplied by 365 to arrive at the annualised income estimate for the estimate period.
Subsection 61(3) of the Act sets out that the Registrar (Child Support) must immediately take such action as is necessary to give effect to an estimate of income in relation to a child support assessment.
Section 63AA of the Act sets out that Child Support may refuse to accept an income election if it is satisfied that the income estimate is less than the person’s income for the relevant period. Subsection 63AA(4) sets out that in making the decision as to whether to refuse to accept an income election, Child Support may act on the basis of information it has received or obtained about the financial circumstances of the parent; and may, but is not required to, conduct an inquiry into the matter.
Sections 62, 62A and 63 of the Act are about revoking an earlier income estimate and making a new income election if an event has occurred that has affected the accuracy of the first estimate. The requirement that the estimated annualised income will not be more than 85% of the taxable income for an estimate election to be accepted, does not apply to revised estimates.
In order to calculate the annualised income estimate for a part year, a parent will provide details of their year-to-date income. Section 63AC of the Act provides that the parent can elect to have the year-to-date figure replaced if they are satisfied the original figure was incorrect. Section 63AE of the Act provides that if Child Support is satisfied that the year-to-date income amount was incorrect, then Child Support may determine another amount to replace the incorrect year-to-date figure that had been provided.
Evidence and consideration of evidence
Ms Sherman was initially assessed to pay child support using her 2022–23 taxable income of $216,648. She said that her taxable income for 2022–23 included a capital gain and a payout of long service leave and was not an indicator of her 2023–24 income which was about $180,000.
As noted earlier, on 6 March 2024, a Child Support officer contacted Ms Sherman regarding the application made by Mr Hardeman for a child support assessment.[1] During this conversation, a number of issues were discussed including the income that Ms Sherman would be assessed on for child support purposes and estimates of income.
[1] Page 30 of the papers for 2024/PC028509
Ms Sherman provided further information about her 2023–24 income on or about 28 March 2024, including a payslip which recorded that her year-to-date income to 28 March 2024 was $144,063.
Ms Sherman said that when she spoke with Child Support in late March/early April 2024, she anticipated that she would earn $45,955.92 between then and 30 June 2024. She said she worked out the number of pay fortnights left in the financial year and used that to calculate what she would earn for the remainder of the year. Ms Sherman also said that $144,063 plus $45,955.92 represented her annual income which was over $180,000 a year. Those figures add to $190,018 (rounded).
As set out on page 43 of the documents, Child Support recorded that Ms Sherman’s
year-to-date earnings to 5 March 2024 (the day before the contact of 6 March 2024) added to $144,063 and that between 6 March 2024 and 30 June 2024, she would earn $45,955.92.Using those figures, Child Support calculated that Ms Sherman’s annualised income during the period 6 March 2024 to 30 June 2024 would be $143,366. However, those figures incorporate mistakes in that the year-to-date income amount of $144,063 was to 28 March 2024 and not 5 March 2024, and the amount of $45,955.92 was the amount Ms Sherman expected to earn from 29 March 2024 to 30 June 2024 and not from 6 March 2024 to 30 June 2024.
On 6 May 2024, Ms Sherman contacted Child Suppprt to advise that her pay had been increased and she wanted to amend her estimate. She advised that her fortnightly income was $7,176.34 and she would advise from when this increase applied.
On 11 May 2024, Mr Hardeman objected to the decision to use an estimate of income of $143,366 for Ms Sherman on the basis that her income was higher than that.
On 25 May 2024, Ms Sherman advised Child Support that her income changed to the higher rate from 30 March 2024. Ms Sherman then submitted more information about her pay. A revised income estimate of $187,114 was applied from 30 March 2024 to 30 June 2024.
Assessment notices were issued on 27 May 2024 which recorded that an income estimate for Ms Sherman of $143,366 was used for the period 6 March 2024 to 29 March 2024, and that a revised estimate of $187,114 applied to the period 30 March 2024 to 30 June 2024.
Ms Sherman’s payslips for the periods ended 28 March 2024 and 11 April 2024 both recorded her annual salary to be $165,171. However, the payslip for the period ended 28 March 2024 stated that her fortnightly gross pay was $5,994.86. The payslip for the period ended 11 April 2024 stated that her fortnightly gross pay was $7,176.34. Ms Sherman said that the discrepancy was due to allowances she was paid which were not reflected in the annual salary figure of $165,171.
The Tribunal considers that as Ms Sherman was taken to have elected to lodge an income estimate on 6 March 2024, she should have been asked to provide details of her year-to-date income to 5 March 2024. She provided a payslip which gave her
year-to-date income to 28 March 2024. The Tribunal observes that a Child Support officer did request that Ms Sherman provide her year-to-date income to 5 March 2024 at a later date but it is not clear that request was made when Ms Sherman first provided her March 2024 payslip. It seems that when the first estimate amount was calculated the discrepancy around the year to date was not noticed.Also, the Tribunal notes that the objections officer stated that Ms Sherman advised that her gross income was $5,499 a fortnight whereas her payslip for the period ended 28 March 2024 recorded it to be $5,994 a fortnight.
The original decision was made on 4 April 2024 and Ms Sherman provided her payslip on 4 April 2024. The Tribunal cannot ascertain whether Ms Sherman said the wrong figure or whether she gave the correct figure to Child Support and a mistake was made recording it. Regardless of where that mistake occurred, Ms Sherman had provided her payslip which recorded the correct figure. That is, it was available to Child Support.
The Tribunal is of the view that mistakes were made during the process of working out the amount of the first estimate which were apparent from looking at the March 2024 payslip. The Tribunal has worked out the income estimate amount relying on information Ms Sherman provided to Child Support and applying this information to the correct period.
The Tribunal notes that section 63AE of the Act provides for Child Support to determine another amount to replace the incorrect year-to-date figure that was used in the original decision.
What year-to-date amount should be used for the first estimate?
The Tribunal is satisfied that Ms Sherman’s year-to-date income can be worked out using her payslip to 28 March 2024. That payslip recorded year-to-date income of $144,063 and that Ms Sherman’s gross pay for the period was $5,994.86. This means her
year-to-date income was $138,068.14 to 14 March 2024 ($144,063 less $5,994.86).Pay of $5,994.86 per fortnight is equivalent to $428.20 a day. The Tribunal calculates that there are nine days from 6 to 14 March 2024 inclusive, during which Ms Sherman would have earned $3,853.80 ($428.20 x 9).
The Tribunal calculates that at 5 March 2024, Ms Sherman’s year-to-date income was $134,214 ($138,068.14 - $3,853.80).
The Tribunal is of the view that Child Support should recalculate the year-to-date figure to 5 March 2024, having regard to the preceding paragraphs, and any other information available to Child Support.
What was Ms Sherman’s estimated income from 6 March 2024?
When the child support case started, Ms Sherman was assessed on her 2023 taxable income of $216,648, of which 85% is $184,320. For an estimate election to meet the 85% criterion, it must be less than $184,320.
As noted earlier, Child Support recorded that Ms Sherman’s year-to-date earnings to 5 March 2024 (the day before the contact of 6 March 2024) were $144,063 and that between 6 March 2024 and 30 June 2024, she would earn $45,955.92.
Also as noted, Ms Sherman said that $144,063 plus $45,955.92 represented her annual income which was over $180,000 a year. Those figures add to $190,018.
However, the amount of $144,063 represented year-to-date earnings to 28 March 2024 not 6 March 2024, and $45,955.92 represented Ms Sherman’s estimated income from 29 March 2024 to 30 June 2024, rather than an estimate of her income from 6 March 2024 to 30 June 2024.
There are 117 days in the period 6 March 2024 to 30 June 2024 and 94 days in the period 29 March 2024 to 30 June 2024. Dividing $45,955.92 by 94 gives a daily rate of $488.89. Multiplying that by 365 gives an annual income of $178,444.
The Tribunal finds that the estimate of income based on the figures provided by Ms Sherman, if applied from 6 March 2024, is $178,444.
The revised estimate
Ms Sherman’s revised estimate of $187,114 is to be applied from 30 March 2024.
This is consistent with the decision made on 25 May 2024 and the assessment notice issued on 27 May 2024.
Concluding comments
The Tribunal is of the view that around the time the original decision was made, Ms Sherman provided the information she was requested to provide. She was unfamiliar with the Child Support system. Mistakes were made that were apparent from the March 2024 payslip. Ms Sherman contacted Child Support after she was notified that her income from 6 March 2024 had been calculated to be $143,366. She knew that was incorrect. She also advised Child Support that her income had increased from late March 2024, and provided a precise date for her pay increase soon after.
The Tribunal is satisfied that the appropriate outcome of this review is to correct the mistakes made in the calculation of the estimate that was applied from 6 March 2024 and that this estimate is revoked on 29 March 2024 and replaced by the later election.
DECISION
The Tribunal sets aside the decision under review and remits the matter for reconsideration in accordance with the order that:
An income estimate for Ms Sherman of $178,444 is used in the child support assessment from 6 March 2024.
This estimate of income is revoked on 29 March 2024.
A revised income estimate for Ms Sherman of $187,114 is used in the child support assessment from 30 March 2024.
Ms Sherman’s year-to-date income from 1 July 2023 to 5 March 2024 is recalculated, having regard to paragraphs 38 to 42 of the Statement of Reasons, and any other information available to the Child Support Registrar.
| Date(s) of hearing: | Wednesday, 18 December 2024 |
| Representative for the Applicant: | Not applicable |
| Representative for the Other party: | Not applicable |
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