Tudor and Taylor (Child support)

[2018] AATA 961

Tudor and Taylor (Child support) [2018] AATA 961 (5 March 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2017/HC013090 & 2017/HC013137

APPLICANT:  Mr Tudor

OTHER PARTIES:  Child Support Registrar

Miss Taylor

TRIBUNAL:Member M Baulch

DECISION DATE:  5 March 2018

DECISION:

The decisions under review are affirmed.

Member M Baulch

CATCHWORDS
Child support – Particulars of the administrative assessment – Adjusted taxable incomes – Conditions to retrospectively apply actual incomes to the assessment not met – Decisions 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

BACKGROUND

1. This application for review is about the child support assessments that have applied in respect of [Child 1].

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one separated parent to the other.  It uses a statutory formula which contains variables such as the parents’ adjusted taxable incomes, the number and ages of children and the percentages of care. 

3. Mr Tudor and Miss Taylor are the parents of [Child 1].  From 19 April 2013 the Department of Human Services – Child Support (the Department) made assessments under which Mr Tudor was liable to pay child support to Miss Taylor and the Department had collected that liability on Miss Taylor’s behalf.

4. Mr Tudor’s liability to pay child support under the Act ended from 13 May 2017.  However, there are outstanding amounts of child support owed by Mr Tudor and, on 10 November 2016, the Department forwarded the case to New Zealand Inland Revenue Child Support seeking to have the outstanding amount collected on behalf of Miss Taylor.

5. From 1 September 2014 the assessments of child support were determined having regard to provisional adjusted taxable income amounts determined by the Child Support Registrar (the Registrar) as Mr Tudor had not lodged an income tax return with the Australian Taxation Office (the ATO) for the 2013-14 and 2014-15 tax years.

6. On 23 July 2017 Mr Tudor lodged his income tax returns with the ATO for the 2013-14 and 2014-15 tax years and assessments of his taxable income were made by the ATO. 

7. On 12 September 2017 the Department declined to reassess Mr Tudor’s outstanding child support liability from 1 September 2014 on the basis of his taxable incomes for the 2013-14 and 2014-15 (the decisions under review).

8. Mr Tudor objected to that decision and, on 29 November 2017, that objection was disallowed.  Mr Tudor has now applied to this tribunal for an independent review of the Department’s decisions.

9. A hearing into the application for review was held by the tribunal on 5 March 2018. Mr Tudor participated in the hearing by telephone and gave sworn evidence during the hearing. Mr Tudor was represented by [Ms A], who made submissions on Mr Tudor’s behalf. Miss Taylor did not participate in the hearing, so pursuant to paragraph 40(1)(b) of the Administrative Appeals Tribunal Act 1975, the tribunal proceeded with the hearing in her absence.  A representative of the Registrar did not participate in the hearing.

10. The tribunal had before it relevant documents provided to it by the Department pursuant to section 37 of the Administrative Appeals Tribunal Act 1975.  Mr Tudor advised the tribunal that he had not received a copy of those documents.  However, Mr Tudor had received a copy of the Department’s records pursuant to a request under the Freedom of Information Act 1982, and the tribunal was satisfied that Mr Tudor had access to the relevant material held by the Department in relation to this matter prior to the tribunal hearing.

ISSUES

1. The statutory provisions relevant to this review are found within the child support law, in particular the Act and the Child Support (Assessment) Regulations 1989 (the Regulations).

2. The issue which arises in this case is whether or not Mr Tudor’s taxable incomes for the 2013-14 and 2014-15 tax years can be retrospectively applied to the child support assessment.

CONSIDERATION

1. Part 5 of the Act provides that the Registrar must make an administrative assessment of child support in accordance with the statutory formula set out in that Part.  The statutory formula requires that there be a determination as to each parent’s adjusted taxable income.  Section 43 of the Act defines a parent’s adjusted taxable income to be the sum of the following:

   ·       The parent's taxable income for the last relevant year of income in relation to the child support period;

   ·       The parent's reportable fringe benefits total for that year of income;

   ·       The parent's target foreign income for that year of income;

   ·       The parent's total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income;

   ·       The total of the tax-free pensions or benefits received by that parent in that year of income; and

·       The parent's reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income.

For the purposes of determining a parent’s adjusted taxable income, their taxable income is the amount determined by the ATO (see section 56 of the Act).

1. Where a parent’s taxable income for a particular year has not been assessed by the ATO, for example, when a parent has not lodged an income tax return, section 58 of the Act allows the Registrar to make their own determination of that parent’s adjusted taxable income for that year and provides various methods for doing so.  In certain circumstances, subsection 58(5) of the Act allows the Registrar to determined that a parent’s adjusted taxable income for a particular year “is an amount that is at least two-thirds of the annualised MTAWE figure for the relevant June quarter in relation to the child support period”.  The MTAWE figure is determined by having regard to the Average Weekly Earnings – Trend – Males – All Employees Total Earnings published by the Australian Bureau of Statistics (see section 5A of the Act).

2. Until recently Mr Tudor had not lodged an income tax return for the 2013-14 and 2014-15 tax years so there had been no assessment of his taxable income by the ATO.  Therefore, his adjusted taxable income used to determine his child support liability from 1 September 2014 until 30 September 2016 was the two-thirds MTAWE figure determined pursuant to subsection 58(5) of the Act.[1]  The amounts that have applied to Mr Tudor in this case are set out in the table below.

   [1] From 1 October 2016 the adjusted taxable income used in the child support assessment was Mr Tudor’s overseas 2015-16 taxable income of $809.

3. On 23 July 2017 Mr Tudor lodged his income tax returns with the ATO for the 2013-14 and 2014-15 tax years and assessments of his taxable income were made.  Those assessments, so far as they are relevant to this matter, are also set out in the table below:

Tax year	Two-thirds MTAWE	Taxable income
2013-14	$47,046	$0
2014-15	$47,219	$5

Mr Tudor’s taxable incomes are significantly lower than the two-thirds MTAWE figures that have been used to determine his child support liability since 1 September 2014.  Mr Tudor is seeking to have the lower taxable incomes applied to determine his adjusted taxable income for the purposes of the child support assessment.

1. Where a parent had their adjusted taxable income assessed as the two-thirds MTAWE figure pursuant to subsection 58(5) of the Act, and information about a component of their adjusted taxable income (such as their actual taxable income) later becomes available, section 58A(2) of the Act provides a limitation on a retrospective amendment to the assessment of child support having regard to that information. 

2. When that later amount is lower than the amount determined under section 58 of the Act, such as in this case, the lower amount can only be applied to the administrative assessment of child support if the parent was unable to provide information about their adjusted taxable income to the Registrar at the time the particular assessment was made because, at that time, one of the following applied:

   ·       The parent did not know that an application for the assessment had been made and accepted; or

   ·       The parent had a serious illness or injury; or

   ·       The parent was under detention or imprisonment; or

   ·       The parent resided in a remote location which made it difficult to contact the Registrar; or

   ·       A natural disaster prevented the parent from being able to contact the Registrar; or

·       There was some other exceptional circumstance that prevented the parent from providing the information;

(see subregulation 7B(1) of the Regulations).

1. Mr Tudor was aware of the assessment of child support that had been made, and his evidence was that there was no serious illness, injury, detention, imprisonment, residence in a remote location or natural disaster which prevented him from giving the Registrar information about his adjusted taxable income at the relevant times.

2. In relation to what circumstances prevented him from giving the Registrar information about his adjusted taxable income, Mr Tudor advised me that he was unfamiliar with the Australian taxation system and did not realise he was required to lodge a return.  At one point he took advice from a tax professional at the local shopping centre, who advised him that a return was not required.  However, Mr Tudor acknowledged that the tax professional was unaware that he was subject to a child support assessment.

3. I was also told that shortly after arriving in Australia, Mr Tudor’s daughter had been diagnosed with [a medical condition] and this was a very stressful time.  I was told that Mr Tudor considered it more important to look after his daughter than deal with the Department. 

4. In relation to letters and notices of child support assessments sent to Mr Tudor, on 1 August 2014 and 24 October 2015, which clearly indicated that a provisional income was used in the assessment because the Department did not have his 2013-14 and 2014-15 taxable incomes, Mr Tudor advised me that he did not receive those letters as he had moved from the address to which they were sent.  Mr Tudor’s evidence was that he did not advise the Department of his new address.

5. It was my view that Mr Tudor did not lodge his income tax returns for the 2013-14 and 2014-15 tax years when he was required to do so, because he was simply unaware of that requirement.  However, I considered that had Mr Tudor advised the Department when he changed address, such that the notices dated 1 August 2014 and 24 October 2015 could have been delivered to him, he would have been in possession of sufficient information to negate that lack of knowledge and enable him to lodge his income tax returns when they were initially due.

6. I noted that all correspondence sent by the Department includes the following statement:

   Important

   To ensure that your child support assessment reflects your current situation, you need to tell CSA within 14 days of any changes to your circumstances, such as care arrangements, income, employment status or contact details.  We can only make the changes from the date you let us know.  [my emphasis].

   The Department’s records show that Mr Tudor contacted it by telephone on 24 April 2013, so he was obviously aware of how to make contact.  While acknowledging having a child diagnosed with [a medical condition]would be very difficult, I was not persuaded that this constituted a barrier to Mr Tudor contacting the Department to advise when he changed address.

7. Having regard to the evidence, I was not persuaded that there are other exceptional circumstances which prevented Mr Tudor from providing the Registrar with information about his adjusted taxable income for a particular year in a timelier manner.

8. Subregulation 7B(2) of the Regulations also provides that the lower amount can be applied to replace an adjusted taxable income determined under section 58 of the Act if:

   ·       The parent lived overseas and was not require to lodge a return; or

   ·       The parent provided the Registrar with information about their adjusted taxable income in a reasonable time in the circumstances. 

   Mr Tudor confirmed that he had resided in Australia during the 2013-14 and 2014-15 tax years and I was satisfied that neither of these circumstances apply in Mr Tudor’s case.

9. As none of the circumstances prescribed by regulation 7B of the Regulations apply in Mr Tudor’s case, it is not possible to apply his taxable incomes to the child support assessments that have applied for the period 1 September 2014 until 30 September 2016 to replace the amounts determined pursuant to section 58 of the Act using the two-thirds MTAWE figures. 

10. Consequently, and for these reasons, I therefore affirmed the decisions under review.

DECISION

The decisions under review are affirmed.