Sinclair and Sinclair (Child support)

[2024] AATA 3243

Sinclair and Sinclair (Child support) [2024] AATA 3243 (31 July 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2024/SC027682, 2024/SC027683, 2024/SC027685

APPLICANT:  Ms Sinclair

OTHER PARTIES:  Child Support Registrar

Mr Sinclair

TRIBUNAL:Member A Ryding

DECISION DATE:  31 July 2024

DECISION:

In application 2024/SC027682, the decision under review is affirmed.

In application 2024/SC027683, the decision under review is set aside and the matter is sent back to the Registrar with the direction that Mr Sinclair’s overseas income for the period is set at 4,85,538.22 rupees.

In application 2024/SC027685, the decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – overseas income for past periods – Indian taxation documents – decisions under review set aside and one matter sent back for reconsideration 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 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 is an application to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for review of three related decisions of Services Australia – Child Support (Child Support) regarding the income used in assessing child support payable by one of the parties, Mr Sinclair, who resides in India.

2. The applicant, Ms Sinclair, and Mr Sinclair are the parents of one child, [Child 1] (born [in] July 2016).

3. Ms Sinclair and Mr Sinclair have had a registered child support case in relation to [Child 1] since 11 February 2020. 

4. On 27 March 2021, Child Support determined to apply Mr Sinclair’s provisional income of $0 for the 2019–20 financial year to the child support assessment from 11 May 2021.[1]

   [1] Notified to the parties by letters dated 27 March 2021, folios 86 and 88.

5. On 28 October 2021, Child Support determined to apply Mr Sinclair’s provisional income of $0 for the 2020–21 financial year to the child support assessment from 1 December 2021.[2]

   [2] Notified to the parties by letters dated 28 October 2021, folio 113.

6. On 12 July 2022, Child Support determined to apply Mr Sinclair’s provisional income of $0 for the 2021–22 financial year to the child support assessment from 1 August 2022.[3]

   [3] Notified to the parties by letters dated 12 July 2022, folio 128.

7. For completeness, Child Support made a number of other determinations in this period but these are not before the Tribunal.[4]

   [4] On 15 September 2020, Child Support determined not to apply a fixed annual rate (FAR) in respect of Mr Sinclair’s income for the period 11 February 2020 to 10 May 2021, on the basis that Mr Sinclair was earning nil income in India (folio 75). It also determined on the same date not to replace Mr Sinclair’s provisional income for the 2018–19 financial year with his overseas income for that period of $0 for the period 11 February 2020 to 17 March 2020. On 16 July 2021, Child Support accepted Mr Sinclair’s application for a FAR not to apply for the period 11 May 2020 to 30 November 2021 (folio 107). On 8 December 2021, Child Support rejected Mr Sinclair’s application for a FAR not to apply for the period 1 December 2021 to 28 February 2023 (folio 123).

8. Ms Sinclair objected to a number of Child Support’s decisions, including the three decisions regarding Mr Sinclair’s provisional income, on 26 July 2023 (folio 144). An extension of time in which to object was granted by Child Support on 15 November 2023 (folio 168).

9. On 19 February 2024, Child Support provided its decisions on the various objections Ms Sinclair had lodged to various decisions of Child Support.[5] The Objection Decisions relevant for the purposes of this application (which the Tribunal will refer to collectively as the Objection Decisions) provided Child Support’s decisions that:

• The objection in relation to the decision to set Mr Sinclair’s 2019–20 provisional income at $0 from 11 May 2021 was disallowed (folio 202). This is the subject of application 2024/SC027685 to the Tribunal.

• The objection in relation to the decision to set Mr Sinclair’s 2020–21 provisional income at $0 from 1 December 2021 was disallowed (folio 220). This is the subject of application 2024/SC027682 to the Tribunal.

• The objection in relation to the decision to apply Mr Sinclair’s 2021–22 provisional income of $0 from 1 August 2022 was disallowed (folio 225). This is the subject of application 2024/SC027683 to the Tribunal.

  [5] The objections officer made decisions on other objections by Ms Sinclair which are not before this Tribunal, refer folios 194, 207, and 215.

1. On 17 March 2024, Ms Sinclair applied to the Tribunal for review of the Objection Decisions. Her grounds of appeal were as follows:

   Reason for appeal: In all 3 of these decisions, Child Support decided that [Mr Sinclair’s] income for 2019/2020 and 2020/2021 financial years would remain at $0. Under s 58D of the Child Support (Assessment) Act 1989, Child Support may determine that [Mr Sinclair’s] income is 2/3 of the annualised male average weekly earnings where there is insufficient information or documents to determine [Mr Sinclair’s] overseas income. It is not enough for [Mr Sinclair] to declare that his income is $0, he should be required to provide more documentation.

2. On 27 June 2024, the Tribunal issued directions in this matter[6] and Mr Sinclair provided documents in response.

   [6] Pursuant to section 33 of the Administrative Appeals Tribunal Act 1975.

3. On 18 July 2024, the Tribunal conducted a hearing in this matter by MS Teams audio. Ms Sinclair and Mr Sinclair participated in the hearing (Mr Sinclair from India). Ms Sinclair was assisted by a representative from [Agency 1]. Child Support did not participate and instead relied upon its documents. Before the Tribunal were hearing papers supplied by Child Support, numbered 1 to 250, submissions made on behalf of Ms Sinclair numbered A1 to A4 and documents provided by Mr Sinclair numbered B1 to B15 (together, the hearing papers). Ms Sinclair and Mr Sinclair provided evidence on affirmation at the hearing.

4. Mr Sinclair told the Tribunal that he had not received a copy of the hearing papers so these were sent to him after the hearing and he was given a period of seven days to provide any further comment or evidence after reviewing the documents. Mr Sinclair did not provide any further submissions or evidence. A further document was requested from Child Support, which responded that it did not hold any such document (this is discussed further below).

5. The Tribunal has had regard to all of the documents provided to it and the evidence provided by Ms Sinclair and Mr Sinclair. Reference below is made only to the documents and evidence relevant to this decision.

ISSUES

1. The child support scheme is intended to assist separated parents to take responsibility for the financial support of their children. It recognises that parents have a primary duty to maintain their children.[7]

   [7] Section 3 of the Act.

2. How child support is assessed by Child Support and provided by parents is governed by the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act).

3. Part 5 of the Act sets out the way in which the annual rate of child support payable by a parent for a child for each day in a child support period is to be calculated. A critical element of that calculation is each parent’s income.

4. The issues for consideration in these applications are:

• What was Mr Sinclair’s income in the applicable financial years?

• What should Mr Sinclair’s income have been set at in the applicable child support periods?

CONSIDERATION

1. Child Support uses each parent’s adjusted taxable income to assess the rate of child support payable. “Adjusted taxable income” includes each parent’s taxable income for the last relevant year of income. Where a parent resides in a reciprocating jurisdiction, “adjusted taxable income” includes “overseas income” as determined under sections 58C or 58D of the Act.[8]

   [8] Refer sections 43 and 58B of the Act.

2. A “reciprocating jurisdiction” means a foreign country that is prescribed by the regulations to be a reciprocating jurisdiction.[9] India is a reciprocating jurisdiction for child support purposes.[10]

   [9] Section 5 of the Registration and Collection Act.

   [10] Schedule 2 to the Child Support (Registration and Collection) Regulations 2018.

3. The “last year of relevant income” means the year of income that ended before the start of the relevant child support period.[11]

   [11] Subsection 5(1) of the Act.

4. Where Child Support possesses sufficient information and documents to determine overseas income, Child Support may use those documents and information to determine the parent’s overseas income for the relevant income year for the purposes of working out their adjusted taxable income.[12]

   [12] Section 58C of the Act.

5. If, however, Child Support does not have sufficient information or documents to determine the parent’s overseas income, despite Child Support requesting information and documents from the parent pursuant to section 162A of the Act, Child Support may determine that the parent’s overseas income for the relevant year of income, for the purpose of working out their adjusted taxable income, is an amount that Child Support considers appropriate of at least 2/3 of the annualised MTAWE figure for the relevant June quarter.[13]

   [13] Section 58D of the Act.

6. “MTAWE” stands for Male Total Average Weekly Earnings, a figure set each year by the applicable Child Support (Assessment) (MTAWE Amount) Determination.[14] The relevant June quarter is the quarter ending on 30 June in the calendar year ending before the start of the child support period. 

   [14] Section 5A of the Act.

The evidence as to Mr Sinclair’s overseas income

1. Ms Sinclair submitted, in written submissions to the Tribunal prepared by her legal representative, that it was not sufficient for Mr Sinclair to make oral assertions regarding his overseas income and he must also provide supporting documents. Other than that, Ms Sinclair was unable to make any comments as regards the income actually earned by Mr Sinclair.

2. Mr Sinclair told the Tribunal that after arriving in India in 2019, he did not work at all for almost two and a half years. He lived with his parents, and his father and his friends supported him during this period. Mr Sinclair said that his father is [age] years old and has his own business selling [product 1] which he has had for 30 or 40 years. Mr Sinclair told the Tribunal that he helped out with his father’s business around two days a week in the office. When the supplier brought in [product 1] he would write in the weight of the [product 1]. He said that sometimes his father would give him 500 rupees and sometimes 1,000 rupees, but he was not on a particular income. 

3. Mr Sinclair told the Tribunal that, in 2020, his father's business shut down as a result of the COVID-19 pandemic for almost six months. After a while, after businesses reopened, Mr Sinclair started his own [product 1] business, and rented a shop. He said that he would earn around 10,000 rupees a month and that he operated this business in 2021 to 2023. He could not recall the exact date he started the business. He had two people working for him and paid them around 300 rupees a day.

4. Mr Sinclair told the Tribunal that, after expenses, he earned the equivalent of around $2,000 to $2,500 a year. He said that his father does not help him out financially but Mr Sinclair lives at his father’s house. Mr Sinclair said that he married in 2023 and his wife is expecting their child. At present she lives with her parents and does not work.

5. Mr Sinclair provided the Tribunal with a number of documents he relied upon to evidence his income, as follows:

• Accounting records for the Indian 2021–22 financial year, comprising a balance sheet, profit and loss account, current assets and ledger account all in Mr Sinclair’s name (folios B6 to B9). The Tribunal notes that the financial year in India runs from 1 April to 31 March. Mr Sinclair told the Tribunal that this was his equivalent of a tax return in India for that financial year. He said that the reference in folio B7, in the profit and loss account, to salary expenses of 72,000 rupees was to money paid to his employees. He drew the Tribunal's attention to the net profit on folio B7 of 4,85,538.22 rupees which he said was the equivalent of about $8,000. Mr Sinclair was asked repeatedly about the inclusion in the current assets, in folio B8, to loans from individuals he told the Tribunal were his parents of 43,56,760.63 rupees (the rough Australian equivalent of which is $80,000). Mr Sinclair refused to accept that these were loans made by his parents to him and instead said that there were amounts he owed for [product 1] supplies and that his father sells [product 1] to him which Mr Sinclair then sells to third party businessmen. The company his father operates is in his father and mother’s names. He was unable to explain to the Tribunal why these were included as assets. The Tribunal notes that the ledger account has a closing balance of 46,01,345.85 rupees, the rough Australian equivalent of which is $81,696.

• A document headed “Indian Income Tax Return Acknowledgement” for the Indian assessment year 2022–23 in Mr Sinclair’s name (folios B4 and B5). This appears to show net income of 4,85,540 rupees, the rough Australian equivalent of which is $8,906.[15]

• A document headed “Indian Income Tax Return Acknowledgement” for the Indian assessment year 2023–24 in Mr Sinclair’s name, filed on 5 October 2023 (folios B2 to B4). This document is for a financial year after the period relevant to these applications. It shows a broadly equivalent figure for income to the Indian 2021–22 financial year.

• An income declaration for income earned outside Australia signed by Mr Sinclair on 24 April 2024 (folios B11 to B15). This applies to the Indian 2023–24 financial year and is outside the period relevant to the Tribunal's consideration.

• A taxpayer information summary that Mr Sinclair told the Tribunal relates to his father and was provided in error (folio B10). The Tribunal accepts that it is irrelevant and has disregarded this document.

  [15] The conversions to Australian currency throughout this decision are rough only, and are not intended to be a conversion of foreign currency to Australian currency under regulation 12 of the Child Support (Assessment) Regulations 2018.

1. Mr Sinclair told the Tribunal that, after he left for India, he did not earn any income in Australia. The Tribunal notes that Child Support was unable to find any evidence of income earned in Australia after [January] 2019.

2. On 27 June 2024, the Tribunal issued directions to Mr Sinclair, requiring production of:

   ·     His income tax return acknowledgment and/or company accounts for the Indian 2019–20 and 2020–21 financial years (the equivalent of the documents at folios B to B10).

   ·     Any other documents evidencing income earned by Mr Sinclair in any jurisdiction in either the 2019–-20 or 2020–21 financial years.

   ·     Bank statements for the period 1 April 2019 to 30 June 2021 on all bank accounts held by Mr Sinclair, whether in India, Australia or elsewhere.

3. Mr Sinclair did not provide any documents in response. He told the Tribunal that he had nothing to produce. He said that he had no documents between 2019 to 2021 and that he opened a bank account in either 2021 or 2022.

Issue 1: What was Mr Sinclair’s income?

1. Noting that Mr Sinclair has lived in India since he left Australia [in] January 2019 with a new partner and a child on the way, the Tribunal finds (as it appears that Child Support has done) that Mr Sinclair has, since that date, been a resident of India, which the Tribunal has already found is a reciprocating jurisdiction. This means that the Tribunal can consider Mr Sinclair’s overseas income in working out his adjusted taxable income for the purposes of his child support assessment, under section 58B of the Act.

The Indian 2020–21 financial year

1. Mr Sinclair told the Tribunal that he did not work for around two and a half years after arriving in India and was supported by family and friends. He also told the Tribunal that he had no taxation documents to provide for this financial year and did not set up a bank account until after this period. The Tribunal notes in particular his evidence that businesses shut down during the COVID-19 pandemic (as they did throughout the world) and that before that, when he did work it was for a minimal amount for his father. There is nothing in the evidence before the Tribunal to cast doubt on this evidence and therefore the Tribunal accepts it.

2. The Tribunal therefore finds that Mr Sinclair’s income for the Indian financial year 1 April 2020 to 31 March 2021 was nil.

The Indian 2021–22 financial year

1. The Tribunal accepts Mr Sinclair's evidence as set out in the documents he provided about the amounts he earned in the Indian 2021–22 financial year of around $8,000 a year, noting that these documents were provided by Mr Sinclair to the Indian taxation authorities and can therefore be assumed to be accurate. The Tribunal notes that the position regarding a liveable wage in India is very different from that in Australia.

2. Based on the available evidence, the Tribunal finds that there is sufficient information and documents to determine Mr Sinclair’s overseas income from 1 April 2021 to 20 March 2022, and that his income in that period was 4,85,538.22 rupees. The Tribunal does not make any allowances for living expenses from Mr Sinclair’s income as Child Support is required to take into account income, not income after living expenses.

3. The Tribunal is unable to determine whether the “loans” of around $80,000 are assets or not, in particular as it is not in a position to comment on Indian accounting practices, and has therefore excluded them.

4. The Tribunal finds that Mr Sinclair’s overseas income for the Indian 2021–22 financial year was 4,85,538.22 rupees. Noting that the exchange rate to be used is that in effect during the financial year in which the income was earned, the Tribunal does not make a finding as to the Australian dollar equivalent

Issue 2: What should Mr Sinclair’s income have been set at in the applicable child support periods?

The Tribunal’s findings as to the application of a provisional income of $0 to the child support assessment from 11 May 2021 (Application 2024/SC027685)

1. Child Support’s approach, where the parent is a resident of a reciprocating jurisdiction, is to use the income period for the last relevant year of income, the last completed financial year for the country in which the parent resided, although it is applied as if it is the applicable Australian financial year.[16] As noted above, in India the financial year runs from 1 April to 31 March.

   [16] Refer Income processing for Child Support customers (International parents) 277-07030000 in Operational Blueprint.

2. The applicable child support period is 11 May 2021 to 30 November 2021.[17] That makes the applicable Indian financial year 1 April 2020 to 31 March 2021. 

   [17] Folio 242.

3. The Tribunal has found that Mr Sinclair’s income in this period was $0.

4. Ms Sinclair submitted that there were insufficient documents or information to determine Mr Sinclair’s overseas income for the Indian financial year 1 April 2020 to 31 March 2021 and that the Tribunal should therefore make a determination as regards Mr Sinclair’s income for those years pursuant to section 58D of the Act.

5. A necessary precondition of the exercise of the discretion in section 58D is that a notice has been sent to the individual requiring details of their financial position under section 162A of the Act. The only such certificate in the hearing papers is dated 27 April 2021 (folio 99). Child Support responded to a request the Tribunal made after the hearing for a copy of the income statement sent to Mr Sinclair with this letter (so that the Tribunal could confirm the income year to which it relates) that it did not hold the document.

1. Given the date of this section 162A request and given that it requests “income for the most recently ended financial year in the country where the income was earned”, the Tribunal considers it is reasonable to assume that the applicable income year addressed by the request was the Indian 2020–21 financial year, of 1 April 2020 to 31 March 2021. As this is the only section 162A request in the hearing papers this is the only year in which the Tribunal considers it would be open to it to exercise the discretion in section 58D to apply an income at 2/3 of MTAWE.

2. However, in the present matter, the Tribunal does not consider it appropriate to exercise its discretion to apply an income of 2/3 of MTAWE for the 2020–21 financial year given Mr Sinclair’s evidence.

3. In all the circumstances the Tribunal finds that Mr Sinclair’s income was correctly set by Child Support at $0 for the Indian 2020–21 financial year, pursuant to section 58C of the Act. This means that the decision under review in application 2024/SC027685 is affirmed.

The Tribunal’s findings as to the application of a provisional income of $0 from the 2020–21 financial year to the assessment from 1 December 2021 (Application 2024/SC027682)

1. The applicable child support period is 1 December 2021 to 31 July 2022.[18] That makes the applicable Indian financial year, again, 1 April 2020 to 31 March 2021. 

   [18] Folio 242.

2. The Tribunal refers to and repeats its analysis above as regards application 2024/SC027685.

3. In all the circumstances the Tribunal finds that Mr Sinclair’s income was correctly set by Child Support at $0 for the Indian 2020–21 financial year, pursuant to section 58C of the Act. This means that the decision under review in application 2024/SC027682 is affirmed.

The Tribunal’s findings as to the application of a provisional income of $0 from the 2021–22 financial year to the assessment from 1 August 2022 (Application 2024/SC027683)

1. The applicable child support period is 1 August 2022 to 31 October 2023.[19] That makes the applicable Indian financial year 1 April 2021 to 31 March 2022. The Tribunal has found that Mr Sinclair’s income in this period is 4,85,538.22 rupees.

   [19] Folio 242.

2. In the circumstances, the Tribunal finds that Mr Sinclair’s income was incorrectly set by Child Support at $0 for the Indian 2021–22 financial year. Pursuant to section 58C of the Act, the Tribunal finds that it should have been set at 4,85,538.22 rupees. This means that the decision under review in application 2024/SC027683 is set aside and sent back to the Registrar with the direction that Mr Sinclair’s income was 4,85,538.22 rupees, in order that Child Support may calculate the Australian dollar equivalent pursuant to regulation 12 of the Child Support (Assessment) Regulations 2018.

DECISION

In application 2024/SC027682, the decision under review is affirmed.

In application 2024/SC027683, the decision under review is set aside and the matter is sent back to the Registrar with the direction that Mr Sinclair’s overseas income for the period is set at 4,85,538.22 rupees.

In application 2024/SC027685, the decision under review is affirmed.