Smullen and Curwood (Child support)

[2018] AATA 1229

Smullen and Curwood (Child support) [2018] AATA 1229 (19 March 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/AC013145

APPLICANT:  Ms Smullen

OTHER PARTIES:  Child Support Registrar

Mr Curwood

TRIBUNAL:Member K Millar

DECISION DATE:  19 March 2018

DECISION:

The decision under review is affirmed.

Catchwords

Child support - Estimate of likely adjusted taxable income - Discretion to refuse not exercised - Decision under review affirmed

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

1. Mr Curwood pays child support to Ms Smullen for the support of [Child 1] and [Child 2], who are in the 100% care of Ms Smullen.

2. In general, a person’s child support liability is calculated on the basis of his or her adjusted taxable income. This in turn is based on the person’s taxable income. Where a person’s income is likely to be not more than 85% of their adjusted taxable income, the person may elect to have the child support payable based on an income election. This is referred to by the Child Support Agency as an estimate of the person’s income.

3. In the 2016/2017 financial year Mr Curwood had previously lodged an estimate of his income, but after he received a payment from [Employer 1], which he says was accumulated leave payments, his ultimate taxable income for 2016/2017 was $158,865.

4. A new child support period commenced 1 August 2017, which in the absence of an income election would result in Mr Curwood being assessed to pay child support on his 2016/2017 adjusted taxable income of $158,865.

5. Mr Curwood lodged an income election, electing his income for the 2017/2018 financial year as $82,429. This was made up of [Superannuation Scheme 1] payments and wages from [Employer 2]. On 21 September 2017 a delegate of the Registrar accepted this election from 17 August 2017.

6. Ms Smullen objected to this decision, and on 16 December 2017 an objections officer disallowed her objection to a decision to accept Mr Curwood’s income election. Ms Smullen has applied to this Tribunal for a review of that decision.

ISSUES

1. The statutory provisions relevant to this application are contained in the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988.

2. The issues which arise in this case are:

   ·     Whether Mr Curwood is to be assessed in respect of the costs of the children for a day in a child support period, and if

   ·     The amount of the income election is not more than 85% of Mr Curwood’s adjusted taxable income for the child support period

   ·     Whether the amount of his income election is less than the amount that is likely to be his actual adjusted taxable income for the financial year to which the income election relates.

CONSIDERATION

1. To have an election of income accepted in the place of his adjusted taxable income, Mr Curwood must meet subsection 60(1) of the Act. This requires that he is assessed in respect of the costs of the children for a day in a child support period,[1] and that the amount of the income election is not more than 85% of his adjusted taxable income for the last relevant year of income for the child support period.[2]

   [1] Paragraph 60(1)(a) of the Act

   [2] Subparagraph 60(1)(b)(i) of the Act

10.  Mr Curwood is assessed for child support in the child support period 1 August 2017 to 31 October 2018 and his income election of $82,429 per annum is less than 85% of his $158,865 income.

11.  The amount of the income election for a period that is less than a whole financial year, as in this case, is to be calculated in accordance with subsection 60(3) of the Act. This says the method to be used is that given in subsection 60(4) of the Act, and the person must estimate each component of income starting on the first day of the year of income and ending the day before the start day of the election, or in this case the period 1 July 2017 up to and including 16 August 2017. Subsection 60(4) requires the person to estimate his or her income from the date the parent makes the election to the end of the income year, or in this case from 17 August 2017 to 30 June 2018. What this means is the period for which Mr Curwood was making the income election is the period 17 August 2017 to 30 June 2018, and what must be considered is his likely income in this period.

12.  If the preconditions in subsection 60(1) of the Act are met, the Registrar may still refuse to accept an election of income if satisfied that the amount of the income election is less than the amount the Registrar considers is likely to be the parent’s adjusted taxable income for that part of the year of income to which the income election relates.[3] This is the central issue in this case.

[3] Subsection 63AA(2)

13.  If the Registrar, and the Tribunal in place of the Registrar, refuses to accept the income election, the election is taken never to have been made.[4]

[4] Subsection 63AA(5)

Is this less than the amount likely to be his adjusted taxable income?

14.  Under subsection 63AA(2) the Registrar, and the Tribunal in the place of the Registrar, may refuse to accept an income election if satisfied that the partial year of income is less than the amount that is likely to be Mr Curwood’s actual adjusted taxable income for the remaining period in relation to the income election.

15.  What this means is that the Tribunal must consider whether at the time he made the income election his income for the period 17 August 2017 to 30 June 2018 was likely to be $82,429.

16.  The Child Support Agency issued a notice to [Superannuation Provider 1] requiring information about Mr Curwood’s entitlements under the [Superannuation Scheme 1]. In a response dated 5 October 2017, [Superannuation Provider 1] advised Mr Curwood receives $74,014.20 per year and pays tax on these payments.

17.  Mr Curwood advised the Child Support Agency he received $2,800 per fortnight gross ($72,800 per annum). This is approximately $1,214 less than the $74,014.20 the [Superannuation Provider 1] advised he receives.

18.  Mr Curwood initially said at hearing that the amount of pension had been the same for a long period of time. The letter from [Superannuation Provider 1] states the pension is indexed in January and July of each year in accordance with the CPI. A search of the [Superannuation Scheme 1] website shows that the pension was increased by 0.8% in January 2018. This results in an increase of approximately $5,921 to Mr Curwood’s gross superannuation payments, with an annual gross payment of $79,935.

19.  After this was put to Mr Curwood at hearing, he recalled there had been an increase and checked the amount in his statement which was now $1,961.47 net per fortnight, and that child support had said it was about $2,800 which was missing $40 to $50 per week.

20.  On the request of the objections officer, Mr Curwood provided payslips to the Child Support Agency for two weeks from [Employer 2]. One payslip shows $441.57 gross for one week and the other shows $460.77. His gross taxable earnings in the year to date, being 8 October 2017, were $7,364.23 per week. There are approximately 14 weeks in the period 1 July 2017 to 8 October 2017. This gives an average weekly pay of approximately $526 per week.

21.  At hearing he was asked to orally provide evidence from his most recent payslip. He said his most recent payslip for the period ending 4 March 2018 showed $422.04 gross. He was asked the year to date figure which he said was $17,988.35. There are 35 weeks in the period 1 July 2017 to 4 March 2018, and the average he has been paid per week is $513.95. Assuming he works approximately 46 weeks in a year, allowing for sick leave and annual leave, this results in an annual income of approximately $23,640.

22.  The sum of his approximate annual rate of [pension] and his salary to January 2018 is $97,654. For the period from the time his pension increased it is approximately $103,575.

23.  Mr Curwood lodged a form estimating his income dated 15 August 2017. This states his estimated income is $94,000 and his estimated allowable deductions are $10,229. At hearing, Mr Curwood initially said that his deductions are high because he has to travel to his employment and travel from specialist to specialist. He claims his travel between specialists can be deducted from his [specified] pension.

24.  On being questioned about his claim for deduction to travel to work, Mr Curwood then said he has to travel between [workplaces]. He also said he has to test products from the [workplace] so he can provide sales advice.

25.  These deductions seem high for a person on a pension and who works two shifts a week in sales, however Mr Curwood states he took this figure from his previous tax return, and I have no other information on what was claimed in his previous tax return.

26.  The Child Support Agency records shows that in the telephone contact with the Child Support Agency on 21 September 2017, Mr Curwood advised that his income from employment as $406 and his [pension] was $2,800.

27.  At the time his income election was lodged, Mr Curwood estimated his income at $94,000 when it was more likely to be approximately $97,500. He has estimated his tax deductions as over $10,000 which then resulted in an income election of $82,429 (annualised).

28.  Mr Curwood has consistently understated his income, understating his [Superannuation Scheme 1] by approximately $50 per fortnight and his wages by approximately $100 per week. However, his overall estimated of his income of $94,000 per annum is not significantly different from his projected income at the time he lodged the estimate.

29.  Ms Smullen reasonably has real doubts about the amount he has claimed will be his tax deductions, and it is difficult to see how such large deductions would result from his current employment; the income election he provided was not such that it was unlikely at the time he provided it. The objections officer required further information on Mr Curwood’s [Superannuation Scheme 1] and his wages from [Employer 2] before making a decision.

30.  In addition, it is common ground that Mr Curwood’s income will not be the same as the previous financial year, and that he is also unlikely to earn more than 85% of this amount. If the income election is now not accepted, under subsection 63AA(5) the income election will be taken never to have been made, and he will be assessed on an income he will not receive for the six months that have now passed since he lodged the income election.

31.  In circumstances where his income is likely to be more than his estimate, but not a great deal more and Mr Curwood has provided at least some basis for his tax deductions, and where not allowing the election will result in an assessment of child support based on an income Mr Curwood will not receive, it is not appropriate to refuse to accept his income election.

32.  As a result, the decision under review is affirmed.

Other matters

33.  Ms Smullen has reasonable concern about Mr Curwood’s income election given the events of the previous year, where Mr Curwood lodged an income election of $47,816 when his ultimate taxable income was $158,865. The decision to accept this income election is not before me, and has not been reviewed by an objections officer. As such, I do not have jurisdiction over this decision, but offer some observations.

34.  The Child Support Agency records that Mr Curwood’s income election of $47,816 was retrospectively considered “invalid” on 28 March 2017 and replaced with an income election of $98,598. The income election of $98,598 is still at least $60,000 lower than his ultimate taxable income.

35.  I am unclear how the legislation allows for an income election to be retrospectively considered “invalid”. The Registrar either accepts or does not accept an income election, and I cannot see how this acceptance or non-acceptance can retrospectively be unmade and the income election found invalid.

36.  Mr Curwood’s taxable income was at least $60,000 more than any income election he made. A purpose of the child support legislation is to ensure children receive a proper level of support from their parents and share in the standard of living of both parents.[5] As this amount of income is not available to Mr Curwood on an ongoing basis, it would be of benefit if the income elections made in the 2016/2017 financial year are reconciled as soon as practicable so that any child support resulting from this reconciliation can be recovered from lump sum payments made to Mr Curwood. It is, of course, ultimately a matter for the Registrar to determine when estimates are reconciled.

[5] Section 4 of the Act

DECISION

The decision under review is affirmed.