Soham and Atwell (Child support)

[2021] AATA 1694

Soham and Atwell (Child support) [2021] AATA 1694 (21 April 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2020/SC020451

2021/SC020586

APPLICANT:  Mr Soham

OTHER PARTIES:  Child Support Registrar

Ms Atwell

TRIBUNAL:Member M Martellotta

DECISION DATE:  21 April 2021

DECISION:

2021/SC020586 (Reconciliation of estimate)

The Tribunal affirms the decision to reconcile the estimate lodged on 15 May 2020 utilising an actual income of $45,626 for the estimate period 15 May 2020 to 30 June 2020. The reconciliation is to apply to the assessment.

2020/SC020451 (Change of assessment)

The Tribunal sets aside the decision under review and, in substitution, decides to vary the administrative assessment so that for the period 1 July 2020 to a terminating event Mr Soham’s adjusted taxable income is varied to $49,627.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate reconciliation – decision affirmed – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart – 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. Mr Soham and Ms Atwell are the parents of a child born on 1 January 2002[1] who was a child for the purposes of the administrative assessment of child support subject to this review.

   [1] The administrative assessment was extended beyond the child’s 18 birthday until the conclusion of high school.  The terminating event in the assessment was 11 December 2020.

2. Mr Soham seeks review of two decisions made by Services Australia (the Agency). One decision (SC020586) concerns an estimate of income lodged by Mr Soham. The other decision (SC0200451) concerns a change of assessment decision.

3. There is some inter-relationship between the two decisions and the background is as follows. There has been a registered child support assessment in place since 15 July 2011.

4. On 15 May 2020 Mr Soham lodged an estimate of income with the Agency advising a $nil income for the period 15 May 2020 to 30 June 2020. The Agency accepted the estimate on 19 May 2020. Mr Soham did not seek review of that decision.

5. On 29 August 2020 Ms Atwell lodged a change of assessment application with the Agency. The Agency considered whether there were grounds to depart from the administrative assessment on the basis that the other parent’s income, property and financial resources made the administrative assessment unfair. [2]

   [2] Ground of application was Reason 8A

6. The following assessment was in place at that time:

   ·For the period commencing 1 August 2019 to 14 May 2020 Mr Soham was assessed to pay an annual rate of child support of $16,000 based upon a 2018/19 adjusted taxable income (ATI) of $148, 588 for Mr Soham and a 2018/19 adjusted taxable income (ATI) of $120, 670 for Ms Atwell.

   ·For the period 15 May 2020 to 31 August 2020 Mr Soham was assessed to pay an annual rate of child support of $1,443 based upon a nil estimate of income for Mr Soham and a 2018/19 adjusted taxable income (ATI) of $120, 670 for Ms Atwell.

   ·For the period 1 September 2020 to 11 December 2020 Mr Soham was assessed to pay an annual rate of child support of $1,467 based upon a 2020/21 nil estimate of income for Mr Soham and a 2019/20 adjusted taxable income (ATI) of $119,106 for Ms Atwell.

7. On 11 September 2020 the Agency reconciled Mr Soham’s estimate with his actual income as assessed by the Australian Taxation Office (ATO). The Agency concluded that Mr Soham was liable to pay an additional amount of $2,176.99 for the period 15 May 2020 to 30 June 2020. This included a penalty of $218 due to Mr Soham under-estimating his income by 10% or more of his actual income. Mr Soham objected to the decision to reconcile his estimate on 14 September 2020.

8. On 20 October 2020 the Agency made a decision in relation to the change of assessment application. It found that a ground to depart from the assessment was established and varied the assessment so that for the period 1 July 2020 until a terminating event, Mr Soham’s ATI was varied to $120,141 and Ms Atwell’s ATI was varied to $128,871. On 25 October 2020 Mr Soham objected to that decision.

9. Mr Soham’s objection to the change of assessment decision was decided on 8 December 2020. The Agency changed the decision and instead decided that from 15 May 2020 until a terminating event for the child Mr Soham’s ATI was varied to $148,588 and Ms Atwell’s ATI was varied to $128,871 for the period commencing 1 July 2020 to a terminating event.

10. The Agency on 6 January 2021 made an objection decision in relation to the estimate matter it decided to allow the objection by ‘removing the original estimate reconciliation from the case and … (updating) …the year to date income in the original estimate to $137,807 …’[3] However the Agency went on to note that its decision had no impact on the assessment as a result of the change of assessment decision that was made on 8 December 2020.

    [3] Page 7 of SC020586

11. Mr Soham made applications to the tribunal seeking independent review of both decisions. A directions hearing was held on 4 March 2021. The tribunal convened a hearing on 21 April 2021. Mr Soham and Ms Atwell participated by conference telephone and each gave evidence on affirmation. The following documents were provided: Agency documents SC020586 – estimate decision (166 pages) and SC020451— change of assessment decision (233 pages). Mr Soham (A1–A36) and Ms Atwell (B1–B32).

ISSUES

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

2. Child support legislation is interpreted by the Department with the aid of the Child Support Guide (the Guide). The tribunal is not bound by law to apply the policy as set out in the Guide but provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it.[4]

   [4] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

3. The issues which arise in this case are:

   SC020586 – estimate decision

·      Did the Agency correctly reconcile Mr Soham’s estimate with his actual ATI?

SC020451- change of assessment decision

• Is a ground for departure established? If so,

• Would it be just and equitable as regards the children, the liable parent, and the carer entitled to child support determination to depart from the administrative assessment of child support?

• Is it otherwise proper to make a departure determination?

CONSIDERATION

SC020586 – estimate decision

Issue – Did the Agency correctly reconcile Mr Soham’s estimate with his actual ATI?

1. A person may make an estimate of income for a financial year, or part of a year, if the provisions in section 60 of the Act are met. In conjunction with other requirements such an estimate may be accepted if the Department is satisfied that the declaration amount made by a parent is correct.

2. Division 7A Part 5 of the Act allows for reconciliation of an estimate with a parent’s actual adjusted taxable income where the estimate is found to have been more than the amount applied pursuant to subsection 60(3) of the Act. Subsection 64(3) of the Act relevantly provides for reconciliation of a part of a year of income using a parent’s actual adjusted taxable income. Section 64AA requires the Department to take such action necessary to give effect to section 64 (whether by amending any administrative assessment that has been made or otherwise).

3. According to the Agency documents:

   a)Mr Soham advised on 15 May 2020 that he was unemployed, and he provided a nil estimate of income for the period 15 May 2020 to 30 June 2020. He provided year to date details of $4,000 per fortnight for the period 1 July 2019 to 14 May 2020. The Agency recorded that the expected ATI was $158,520.94 and this would be the figure used to reconcile against his actual 2019/20 income.[5]

   b)On 12 August 2020 Ms Atwell queried the nil estimate being used in the assessment as she advised that Mr Soham had received a redundancy. She was advised to lodge a change of assessment application.

   c)On 11 September 2020 the Agency reconciled the estimate with Mr Soham’s actual 2019/20 ATI of $183,433. It deducted his estimated ATI from his actual ATI resulting in a figure of $24,912.06 which was annualised to a figure of $193,465.99. This figure is arrived at by dividing the amount of $24,912.06 by the number of days between 15 May 2020 to 30 June 2020 (47 days) and multiplying it by 365 (days).

   d)The Agency does this in order to use an annualised figure in the assessment for the period 15 May 2020 to 30 June 2020.[6] This is how the Agency concluded that Mr Soham owed the amount of $2,176.99 for that period.

   [5] See pages 28-30 SC020586

   [6] Pages 51- 53 SC020586

4. Mr Soham says that the reconciliation is incorrect because he has never earned an annual income of $193,465.99. According to the Agency records he subsequently advised that he had made an error in his year to date estimate as he used a net fortnightly figure of $4,000 and not a gross figure of $6,000.[7]  

   [7] Page 100

5. On objection the Agency decided that Mr Soham had incorrectly estimated his year to date amount and also had incorrectly estimated his estimated income for the period 15 May 2020 to 30 June 2020 – this was because in that period he received a lump sum redundancy payment on 27 May 2020 (comprised of  owed annual leave and taxable redundancy payment). The Agency was able to refer to Mr Soham’s actual tax returns and ATO information which confirmed that he had received gross income of $142,090 + annual leave $18,210.40 + taxable redundancy payment $27,416.59 = $187,716 – deductions of $4,283 resulting in an 2019/20 ATI of $183,433.

6. The Agency then went on to remove the estimate provide by Mr Soham and replaced it with a year to date figure of $137,807. This figure was arrived at by taking Mr Sokak’s actual gross income of $142,090 and subtracting his deductions of $4,283. It then used this ‘new estimate’ to re-reconcile Mr Soham’s income with his actual income using the same methodology of taking his actual ATI of $183,433 and deducting his actual income of $137,807 resulting in a difference of $45,626 (in effect this reflect the annual leave payout and the redundancy amount) , which was then annualised by dividing that amount by 47 days (the period of the nil estimate)  and multiplying it by 365 days resulting in an annualised figure of $354,329. 57 for the period 15 May 2020 to 30 June 2020.

7. As the tribunal understands it, child support legislation utilises the year to date figure to assist in the reconciliation of an estimate.  The crucial figure however, in the reconciliation is what was the amount earned during the estimate period – that figure is the then annualised in order to provide an accurate income for the assessment for the estimate period.

8. In this case the Agency has concluded that during the estimate period Mr Soham’s received income of $45,626. On the available evidence the tribunal so finds. The tribunal is satisfied that utilising this figure results in an annualised figure of $354,329.57 for the estimate period 15 May 2020 to 30 June 2020. The tribunal concluded that in this matter the assessment should reflect the reconciliation of Mr Soham’s estimate with his actual ATI utilising these amounts.

SC020451- change of assessment decision

Issue one – Is a ground for departure established?

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (the Registrar) will utilise a parent’s ATI as assessed by the ATO for the last relevant year of income.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and as noted, establishes a three step process.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[8] In this matter the only ground contested at hearing was whether a ground for departure is established pursuant to Reason 8A.

Reason 8A – income, property and financial resources of the parties

[8] The phrase “special circumstances of the case” is not defined in the Act. However the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC 92-279). Likewise, in Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, property and financial resources of either parent.

2. Mr Soham submitted that the assessment should reflect his 2019/20 ATO assessed income up until 30 June 2020 but as from 1 July 2020 to the conclusion of the assessment, it should be nil because he was on income support payments. Mr Soham provided the following evidence

   a)He was made redundant from his employment with [Company] and became unemployed as from 15 May 2020.

   b)He commenced receiving jobseeker payments from 15 July 2020.

   c)Jobseeker has been his only source of income since becoming redundant until the terminating event of his son finishing secondary school on 11 December 2020.

   d)In the last two weeks he has finally secured some work as a contractor whereby he is working for a company but not as an employee but utilising his ABN. He will receive a daily fee of about $350 per day but at this stage he is uncertain of how much work he will undertake. He said he has probably to date received about $5,000–$6,000 in gross payments.

   e)He received some financial support from his brother who gave him a loan of about $11,000. There are no formal arrangements for repayment but when he saves enough money, he will pay his brother back.

   f)He received a redundancy payment from his former employer. He used most of those funds to pay down the home mortgage. He did not wish to draw back down upon those funds as the mortgage is a priority.

   g)He does not own any significant assets apart from the home where he lives with his wife, which has an estimated value of $320,000, and a mortgage of about $125,000.

   h)He has savings of about $3,000–$4,000 and a self-managed super fund with a balance of about $270,548.

3. Ms Atwell told the tribunal that her main issue was that Mr Soham had lodged a nil estimate of income when he had access to a redundancy payout. She also submitted that Mr Soham should have prioritised those funds for his child support liability rather than his mortgage. In terms of her circumstances she stated that:

   a)She was working as a contract [Occupation] but that her contract ended on 31 December 2020 and since then she has not had any further contract work and is in receipt of jobseeker.

   b)Her main asset was her family home which she values at $630,000 subject to a mortgage of about $580,000. She has savings of about $20,000 and values her superannuation at about $306,000.

4. Ms Atwell provided a copy of her 2019/20 tax return which declares an adjusted taxable income of $119,106.

5. According to information obtained and provided by the Agency the tribunal is satisfied and finds that:

   a)The ATO database shows that Mr Soham was in receipt of income as an employee until 15 May 2020 and he received his redundancy payment on 27 May 2020.

   b)Mr Soham’s gross income from his employment with his redundancy payments formed part of his 2019/20 return which resulted in an ATI of $183,433.

   c)Mr Soham was in receipt of jobseeker payments for the period commencing 15 July 2020 initially at the rate of $1,068.70 a fortnight (annualised to $27,768) and then at the rate of $768.70 from 16 October 2020 (annualised to $19,986).

6. As noted at the time of Ms Atwell’s application for change of assessment the following administrative assessments were in place:

   ·For the period commencing 1 August 2019 to 14 May 2020 Mr Soham was assessed to pay an annual rate of child support of $16,000 based upon a 2018/19 adjusted taxable income (ATI) of $148,588 for Mr Soham and a 2018/19 adjusted taxable income (ATI) of $120,670 for Ms Atwell.

   ·For the period 15 May 2020 to 31 August 2020 Mr Soham was assessed to pay an annual rate of child support of $1,443 based upon a nil estimate of income for Mr Soham and a 2018/19 adjusted taxable income (ATI) of $120,670 for Ms Atwell.

   ·For the period 1 September 2020 to 11 December 2020 Mr Soham was assessed to pay an annual rate of child support of $1,467 based upon a 2020/21 nil estimate of income for Mr Soham and a 2019/20 adjusted taxable income (ATI) of $119,106 for Ms Atwell.

7. In this matter, the tribunal has found that Mr Soham’s actual 2019/20 ATI was $183,433. The tribunal finds that in the 2020/21 financial year Mr Soham’s ATI will be comprised mainly of income support payments and from contract work that he has commenced from early April 2021. Mr Soham also received some financial assistance from his brother in the form of a loan of $11,000.

8. Based upon the rates of jobseeker Mr Soham was receiving and assuming that those payments will continue in some form dependent upon his contract work, the tribunal concluded that he would have an annual income comprised of about $23,627[9] from jobseeker payments and assuming on average about four days of contract work between April–June 2020 and allowing for some work related deductions, this would result in an income of about $15,000.[10] This would give Mr Soham an ATI in 2020/221 of about $38,627.

   [9] This figure is reached by averaging out the annualised income amounts.

   [10] This figure is reached by taking the daily fee of $350 x 3 over 12 weeks and allowing for some deductions

9. In assessing his ATI the tribunal has noted Mr Soham’s evidence that he obtained a loan from his brother. As noted in his evidence he said that he did not have access to the redundancy he received as he chose to apply that against the mortgage rather than keep some of that money back to meet his other financial liabilities. Including the loan as a financial resource would result in a total ATI of about $49,627.

10. The tribunal is satisfied that utilising a 2020/21 ATI of $49,627 in lieu of the 2020/21 $nil estimate utilised in the assessment would result in a significant change in the amount of child support payable by Mr Soham[11]

    [11] The annual liability would increase to about $4,500 per annum.

1. For this reason, the tribunal concludes that a ground of departure exists because in the special circumstances of the case, application of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, property and financial resources of the parents.

Issue 2 – Is it just and equitable to make a particular departure determination?

1. As the tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the tribunal is to consider whether it is just and equitable as regards the child and the parental parties to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters set out in subsection 117(4) of the Act, which is discussed in the following paragraphs.[12]

Proper needs of the child

[12] The tribunal notes the Federal Magistrates Court case of Tyagi & Meares [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4) the section need not be ‘slavishly followed, each of the relevant factors listed … should be considered’.

1. In determining the proper needs of the child it is necessary to have regard at a broad level to the manner in which the child is being, and in which the parents expect the child to be, cared for, educated or trained, and also any other needs of the child. There was no evidence presented in this regard and the tribunal was satisfied that this was not a relevant consideration.

Income, earning capacity, property and financial resources of the child

1. In having regard to the income, earning capacity, property and financial resources of the child the tribunal must disregard any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act).

2. There was no evidence presented to the tribunal that the child has any income or unused earning capacity that needs to be taken into account in the child support assessment and as such the tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

Other party receiving money, goods and property for the benefit of the child

1. Neither party made submissions in this regard and the tribunal concludes there is no basis for any adjustment pursuant to this consideration.

The income, property and financial resources of each parent who is a party to the proceeding

In this matter the tribunal has made findings in relation to the income and financial resources of the parents and does not repeat those findings.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the earning capacity of either parent (subparagraph 117(2)(c)(ib)).

2. Whilst there has been a change in Mr Soham’s pattern of work during the period of the assessment this was due to him becoming redundant. The tribunal is satisfied that earning capacity is not a relevant consideration in this matter. 

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain

1. The tribunal is satisfied taking into account the relevant costs of self-support utilised in the assessments and based upon evidence provided at hearing and in the parties’ Statements of Financial Circumstances and evidence presented at hearing that neither party has extraordinary costs of self-support that are relevant to the assessment.

Any hardship that would be caused

1. As noted, the tribunal can vary the rate of child support payable or it can vary some of the variables that are used in the administrative formula. Mr Soham told the tribunal that the Agency decisions have caused him extreme stress and it has affected his health. He said that he cannot afford the arrears that have been raised as result of its decisions. He is only just getting back on his feet.

2. Ms Atwell told the tribunal that Mr Soham had a responsibility to properly provide for their child during the period of the assessment and he should prioritise his finances accordingly. She has always done this in relation to her care of the children.

3. In this matter the tribunal notes the $nil estimate lodged by Mr Soham was as part of the usual administrative process reconciled with Mr Soham’s actual 2019/20 ATI. This resulted in Mr Soham being required to pay Ms Atwell an additional $2,176.99 for the child support period 15 May 2020 to 30 June 2020. The tribunal concluded that it is appropriate in the circumstances of this particular case that the usual administrative process apply to the assessment to 30 June 2020.

4. In relation to the period 1 July 2020 until the terminating event on 11 December 2020 the tribunal concluded that the administrative assessment which utilised a nil estimate for Mr Soham should be varied to reflect an ATI of $49,627. The tribunal also concluded that in relation to Ms Atwell it is appropriate for the administrative assessment to continue to rely upon the income tax returns as assessed by the ATO. This will have the effect of increasing Mr Soham’s annual liability by about $3,000 from that as originally assessed. This also means that his annual liability under the tribunal’s decision is reduced from the outcome resulting from the objection decision.

5. The tribunal is satisfied upon review of Mr Soham’s financial circumstances that a variation in these terms would not cause him hardship particularly as he has now been able to re-engage in contract work.

Issue 3 – Would it otherwise be proper to make a particular departure determination?

1. The final step is for the tribunal to determine whether it is ‘otherwise proper’ to make a particular departure determination. Subsection 117(5) requires the tribunal to take into account whether the proposed departure is proper in the context of public interest and the welfare expenditure of the community. A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should not be unnecessarily abrogated to the public welfare system.

2. During the period of the assessment it appears that Ms Atwell was not in receipt of family tax benefit. The tribunal is satisfied that the proposed departure from the administrative assessment will have no impact on either parents’ entitlement to government assistance. In this case the tribunal finds that the requirements under paragraph 117(5)(a) of the Act are met. 

Overall conclusion

1. To avoid any doubt the tribunal concludes that in this matter the assessment should reflect the reconciliation of the estimate lodged by Mr Soham on 15 May 2020 by utilising an actual income of $45,626 for the estimate period 15 May 2020 to 30 June 2020. Thereafter the administrative assessment is to be varied to reflect the tribunal’s change of assessment decision for the period commencing 1 July 2020 until a terminating event.

DECISION

2021/SC020586 (Reconciliation of estimate)

The Tribunal affirms the decision to reconcile the estimate lodged on 15 May 2020 utilising an actual income of $45,626 for the estimate period 15 May 2020 to 30 June 2020. The reconciliation is to apply to the assessment.

2020/SC020451 (Change of assessment)

The Tribunal sets aside the decision under review and, in substitution, decides to vary the administrative assessment so that for the period 1 July 2020 to a terminating event Mr Soham’s adjusted taxable income is varied to $49,627.