Taffet and Taffet (Child support)

Taffet and Taffet (Child support) [2020] AATA 1024 (18 March 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/MC016667
APPLICANT:  Ms Taffet
OTHER PARTIES:  Child Support Registrar
Mr Taffet

TRIBUNAL:Member R Anderson
DECISION DATE: 18 March 2020
DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that the adjusted taxable income used in the administrative assessment in respect of Ms Taffet for the period 25 March 2016 to 6 December 2016 is to be amended to $11,137.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – adjusted taxable income – whether paying parent was affected by prescribed circumstances – whether income details were provided within a reasonable time – 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

Mr Taffet and Ms Taffet are the parents of [Child 1] and [Child 2]. The child support assessment was initially registered with the Department of Human Services – Child Support (the Department) on 1 July 2011. As the children have been largely in the sole care of Mr Taffet from the outset, it is Ms Taffet who is the parent liable to pay child support to Mr Taffet. The Department has been responsible for collection of child support from Ms Taffet since 25 June 2012.
On 13 February 2016, the Department made a decision in relation to the commencement of a new child support period on 25 March 2016. That decision – in the absence of lodgement of tax returns by Ms Taffet in respect of the 2013/2014 or 2014/2015 years – was to apply a 2014/2015 adjusted taxable income of $47,504, to the child support assessment (or two-thirds of the Male Total Average Weekly Earnings (MTAWE)).
It was not until mid-2018 that Ms Taffet first became aware of the decision when deductions on account of arrears were reducing her newstart allowance payments. The arrears totalled $2,679.67. It became evident that the arrears were largely due to application of two thirds of the MTAWE in respect of the period 25 March 2016 to 6 December 2016. Victorian Legal Aid became involved and on 30 November 2018 Ms Taffet’s representative formally requested the Department to reduce her arrears in relation to the period 25 March 2016 to 6 December 2016. This request was on the basis that Ms Taffet satisfied the prescribed circumstances as set out in regulation 11 of the Child Support (Assessment) Regulations 1989 (the Regulations).
On 20 February 2019, a departmental officer decided that although Ms Taffet was affected by prescribed circumstances, she did not subsequently provide the income information within a reasonable timeframe in the circumstances. Therefore, her request to amend the decision of 13 February 2016 was refused.
Ms Taffet objected to the decision of 20 February 2019 and an objection officer decided to disallow the objection on 24 May 2019 on the same basis. Consequently, on 4 June 2019, Ms Taffet lodged an application with this tribunal for an independent review of the objection officer’s decision.
The matter was heard on 25 February 2020. Mr Taffet and Ms Taffet both participated by conference telephone and gave oral evidence to the tribunal on affirmation. Ms Taffet’s representative, [Ms A] of Victorian Legal Aid, also participated by conference telephone and gave oral submissions to the tribunal.
At hearing both parties confirmed receipt of documents provided by the Department numbered 1 to 127. On 25 February 2020, the tribunal decided to defer making a decision in this matter to allow time to access further information from Centrelink and for Ms Taffet to provide further information. Documents received from Centrelink numbered C1 to C50 and information from Ms Taffet numbered A1 to A3 were sent to the parties after the hearing. No further comment was received from either party. Consequently, on 18 March 2020, the tribunal proceeded to make a decision.

ISSUES

The statutory provisions relevant to this review are the Child Support (Assessment) Act 1989 (the Act) and the Regulations.
The issues which arise in this case are:
· Has the Department correctly applied two thirds of the MTAWE as Ms Taffet’s adjusted taxable income in respect of the period 25 March 2016 to 6 December 2016? If so;
· Are there prescribed circumstances that make it appropriate to give retrospective effect to the application of Ms Taffet’s actual income in the period 25 March 2016 to 6 December 2016?

CONSIDERATION

On behalf of Ms Taffet, [Ms A] submitted that there was not an unreasonable delay in provision of income details and therefore the grounds under regulation 11 of the Regulations are met. As such, it is appropriate to implement Ms Taffet’s 2014/2015 adjusted taxable income, based on her 2014/2015 taxable income, retrospectively to 25 March 2016.
Mr Taffet had little comment other than to say that he has little knowledge of Ms Taffet’s circumstances; he does not contact the Department and concentrates on caring for the children.

Issue one - Has the Department correctly applied two thirds of the MTAWE as Ms Taffet’s adjusted taxable income in respect of the period 25 March 2016 to 6 December 2016?

There is no dispute that at the time of decision on 13 February 2016, Ms Taffet’s most recently lodged tax return with the ATO was in respect of the 2012/2013 year. The Department received information on 4 January 2016 that it had been lodged with the ATO on 1 September 2013 and was below the self-support amount. While an estimate had been lodged in respect of the 2013/2014 and 2014/2015 years of $13,322 and $13,687 respectively, both being below the self-support amount, as no 2013/2014 or 2014/2015 tax return had been lodged, reconciliation was yet to occur.
In the child support period 1 July 2015 to 24 March 2016, the Department used a derived income of $13,061, presumably based on the 2012/2013 tax return.
In respect of the child support period commencing 25 March 2016, the last relevant year of income is the 2014/2015 year. In the absence of lodged tax returns at the time of assessment on 13 February 2016 in the last relevant year of income (in this case 2014/2015) and the year prior to the last relevant year of income (in this case 2013/2014), subsection 58(4) of the Act empowers the Department to apply the greater of the last lodged tax return (in this case 2012/2013) or two thirds of the MTAWE as the adjusted taxable income of Ms Taffet. The tribunal is satisfied that subsection 58(4) of the Act was applied correctly to Ms Taffet by applying two thirds of the MTAWE, or $47,504, as her adjusted taxable income in respect of the child support period 25 March 2016 to 6 December 2016. The tribunal finds accordingly.

Issue two - Are there prescribed circumstances that make it appropriate to give retrospective effect to the application of Ms Taffet’s actual income in the period 25 March 2016 to 6 December 2016?

Section 58A of the Act deals with what is to be done when the Department subsequently ascertains a person’s actual adjusted taxable income. In circumstances prescribed by subsection 58A(2) of the Act, the actual income may be given retrospective effect if certain criteria are met.
As the 2014/2015 tax return of Ms Taffet was due for lodgement by 31 October 2015 and was not lodged until August 2017, the criterion under paragraph 58A(2)(a) to lodge one’s tax return by the date required under Part IV of the Income Tax Assessment Act 1936 is unable to be met.
It is common ground that the actual income subsequently ascertained in respect of Ms Taffet for the 2014/2015 year of $11,137 was lower than the amount determined under section 58 of the Act of $47,050. Consequently, subparagraphs 58A(2)(b)(i) and 58A(2)(b)(ii) of the Act do not apply.
Paragraph 58A(2)(c) of the Act provides that if none of the other criteria in subsection 58A(2) apply but prescribed circumstances apply, as prescribed in the Regulations, then the administrative assessment must immediately be amended to reflect the adjusted taxable income subsequently obtained retrospectively. That is, that the 2014/2015 income amount of $11,137 be applied in respect of the relevant child support period commencing 25 March 2016. Presently, Ms Taffet’s taxable income for the 2014/2015 year in the amount of $11,137 is not used in the assessment until 7 December 2016.
Regulation 11(1) of the Regulations sets out the prescribed circumstances for the purposes of section 58A of the Act when a person was unable to provide information about their adjusted taxable income to the Registrar at the time the relevant administrative assessment was made. In short, if any of the prescribed circumstances apply to Ms Taffet, and, the information is later provided as soon as is practicable in the circumstances, then the effective date of the amendment of the assessment would be the commencement of the appropriate child support period of 25 March 2016.
[Ms A] submitted that 11(1)(a)(i) of the Regulations is relevant in this case because Ms Taffet had no knowledge of the assessment made in February 2016 until May 2018. While 11(1)(a)(i) of the Regulations refers to an initial application and knowledge of it being accepted, she asserted that the principal of “knowing” should be extended to apply to the administrative assessment decision of 13 February 2016, due to an incorrect address being held by the Department. The tribunal does not accept such an assertion on the basis that the assessment was accepted in July 2011 and both parties have been well aware of the process since that time.
Numerous medical certificates were before the tribunal, including those provided by Ms Taffet and also those provided by Centrelink. The medical certificates have largely been completed by Ms Taffet’s general practitioner, [Dr B], of [Medical Centre]. Ms Taffet has suffered from [Condition 1], [Condition 2] and [Condition 3] since 2013 and in early 2016 underwent [surgery]. In mid- 2016 she was also diagnosed with [Condition 4, related to Condition 2]. In a letter from [Dr B] dated 1 November 2018, she confirms the diagnoses evident in earlier Centrelink medical certificates of [Condition 1], [Condition 2], [Condition 3] and [Condition 5]. [Dr B] went on to state that Ms Taffet also has difficulty with concentration, poor memory and loss of interests in life. In her opinion, Ms Taffet lacks the capacity to work largely due to her [Condition 5], in addition to experiencing [Condition 2] and [Condition 3] levels. [Dr B] went on to explain that Ms Taffet’s medical condition impacts on her memory and ability to concentrate, such that to do a complicated task such as lodging a tax return is difficult.
Centrelink records indicate that Ms Taffet was incapacitated and exempted from meeting the activity test required for newstart allowance throughout the period 8 September 2014 to 5 March 2015 and was involved in a disability management service between 6 May 2014 and 11 May 2015. She was again incapacitated and exempted from meeting the activity test in respect of the period 17 December 2015 to 17 March 2016, 20 May 2016 to 19 August 2016 and 13 October 2016 to 13 January 2017. Centrelink records also indicate that Ms Taffet was in receipt of newstart allowance at the maximum fortnightly rate throughout the period 5 June 2014 to 11 January 2017, with the exception of an overseas absence from 1 March 2015 to 30 April 2015.
The Department accepted that there were prescribed circumstances in February 2016 that prevented Ms Taffet from lodging her tax returns. According to departmental records, Ms Taffet had lodged an estimate of $13,322 and $13,687 in respect of the 2013/2014 and 2014/2015 years respectively. In response to a question from the tribunal, Ms Taffet stated that she forgot to lodge the estimate for the 2015/2016 year. She further stated that she recalls speaking to the ATO at one point, who advised her that she was not required to lodge an income tax return because her irregular earnings from [job task] were below the tax-free threshold. She understood that information was automatically updated between the ATO and other government departments.
The tribunal observed from the departmental records that the Department was aware that Ms Taffet was in receipt of Centrelink payments as child support payments were being automatically deducted. While Ms Taffet has an obligation to keep the Department’s records up-to-date in regard to her details, the level of interaction that occurs between the departments could readily be interpreted by a member of the general public as the two departments being connected.
It is apparent from the information provided by Centrelink that Ms Taffet has been on regular fortnightly reporting from 10 September 2014, with the exception of the period 25 February 2015 to 6 May 2015 when it was suspended due to an absence overseas. Her income was largely from newstart allowance and fell well below the tax-free threshold in every financial year relevant to the review. Given that the ATO had historically provided information to the department in respect of Ms Taffet’s Centrelink income, the tribunal accepts that it is reasonable for Ms Taffet to believe that this would continue and that information provided to one Department would be automatically exchanged with the other, including discussions and advice that it is unnecessary to lodge a tax return for a particular period. This is by no means an uncommon understanding within the general public.
The tribunal considered the circumstances in respect of Ms Taffet’s health throughout an extended period, in particular around the time that she was required to lodge a 2015/2016 estimate and her 2014/2015 tax return was due for lodgement, in addition to her understanding that advice from the ATO also applied to Centrelink. In combination the tribunal is satisfied that there were exceptional circumstances that prevented Ms Taffet from providing the information (regulation 11(1)(a)(vi) of the Regulations). Furthermore the tribunal (standing in the shoes of the Registrar) also finds that such exceptional circumstances prevented Ms Taffet from providing the required information in respect of the 2013/2014 and/or 2014/2015 years at the required time, being prior to the time the child support assessment was made in February 2016, thereby satisfying regulation 11(1)(2) of the Regulations. Therefore, in respect of 11(1)(a) and 11(1)(b) of the Regulations the tribunal agrees with the findings of the Department.
The Department did not accept that in the circumstances, Ms Taffet had provided the information “as soon as practicable” in the circumstances, in accordance with 11(1)(c) of the Regulations. Ms Taffet told the tribunal that at the time the administrative assessment was made in February 2016, she was residing in the garage of a friend’s home. She had no hot water and no bathroom. (Since the home was sold in September 2018 she has been virtually homeless.) This was also the time leading up to her [surgery]. Of particular note is the undisputed fact that Ms Taffet did not receive information about the decision of February 2016 to assess her on an income of $47,504 until mid-May 2018 due to an incorrect address being held by the Department.
The tribunal notes that information in respect of the 2014/2015 year, as had been required in February 2016, had already been provided to the Department by Centrelink in early December 2016 and by the ATO in August 2017, prior to receipt of the arrears notice in May 2018. While this is outside of the timeframe required by the ATO and for child support purposes, Ms Taffet had medical exemptions for Centrelink purposes for most of the period from early August 2015 until mid-January 2017. Medical evidence is clear that her capacity to concentrate and complete complicated tasks such as a tax return has been limited by her various medical conditions.
Departmental records indicate that the Department received information in regard to the 2016/2017 tax return of Ms Taffet from the ATO on 24 February 2018, in the amount of $10,848. While this was clearly not in response to the arrears notice in May 2018, it was outside of the timeframe required by the ATO when completing an individual tax return without the services of a registered taxation agent. In any event, many parents in receipt of a child support assessment do not lodge a tax return until into June of the following year and therefore, for child support purposes, the tribunal considers lodgement in February 2018 to be within an acceptable period.
Upon receipt of the information regarding arrears in May 2018, information in regard to the 2017/2018 tax return of Ms Taffet from the ATO was received on 31 October 2018 in the amount of $13,988. Ms Taffet gave oral evidence that she had struggled to lodge the tax returns online and eventually was assisted by an ATO officer on the telephone, as her income was below the threshold. This was lodged within the required timeframe of the ATO. It is evident from departmental records that Ms Taffet made immediate contact with the Department to establish the details of how the arrears came about. Further investigation by the Department was not completed until 12 July 2018. At this time Ms Taffet sought legal assistance as soon as practicable. The Department received a letter from Ms Taffet’s authorised legal representative in regard to the issue at hand on 18 July 2018.
The tribunal considered the provision of information by Ms Taffet and the reasons discussed above for the delay in provision of the required information. The tribunal is satisfied that Ms Taffet did her best to lodge her tax returns as soon as practicable, given her medical conditions, in the full expectation that the information would be automatically provided to the Department. Accordingly, the tribunal finds that the circumstances prescribed in regulation 11(1) of the Regulations for the purpose of the application of paragraph 58A(2)(c) of the Act apply to Ms Taffet. As such, the administrative assessment is to be immediately amended to reflect Ms Taffet’s actual 2014/2015 adjusted taxable income of $11,137 for the period 25 March 2016 to 6 December 2016.
The tribunal also notes the contradiction in this case whereby Mr Taffet, who by his own evidence does not contact the Department, nor has he lodged a tax return since the 2010/2011 year, has at no time since then had the amount represented by two thirds of the MTAWE applied to him for the purposes of calculating the child support liability payable by Ms Taffet. In each financial year since 2010/2011, the adjusted taxable income of Mr Taffet has been derived from information received from Centrelink. It is difficult to understand why this is acceptable for one party and not the other.

DECISION

[2020] AATA 1024

18 March 2020

Key Legal Topics

Areas of Law

Administrative Law

Family Law

Legal Concepts

Judicial Review

Statutory Construction

Jurisdiction

Procedural Fairness