Upchurch and McKeand (Child support)

[2022] AATA 731

Upchurch and McKeand (Child support) [2022] AATA 731 (22 February 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC022858

APPLICANT:  Mr Upchurch

OTHER PARTIES:  Child Support Registrar

Ms McKeand

TRIBUNAL:Member T Bubutievski

DECISION DATE:  22 February 2022

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the Registrar is to refuse to accept the income election allegedly made by Mr Upchurch on 5 August 2021.

This means the application is successful.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income - whether the estimate should have been refused - estimate of income should be refused - 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 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 review concerns whether or not Services Australia – Child Support (the Agency) correctly accepted an estimate of income for 2021/22 for Mr Upchurch of $0 on 5 August 2021.

2. Mr Upchurch contacted the Agency on 5 August 2021 in response to an increase in his child support assessment communicated to him by letter and received by him on 4 August 2021. This change to the assessment increased the annual rate of child support payable by Mr Upchurch from $3,178 to $10,041 due to a change in care. During this call, it is recorded that Mr Upchurch made an estimate of income of $0 for the remainder of the financial year. The Agency accepted this estimate.

3. Mr Upchurch contacted the Agency again on the same day seeking further clarification around the estimate process. On 6 August 2021 he contacted the Agency and advised that he did not want to continue with the estimate. On 9 August 2021 Mr Upchurch was advised that the estimate was unable to be revoked as it had already started to be used, but that he could provide a new estimate.

4. On 31 August 2021 Mr Upchurch lodged an objection to the decision to accept an estimate on 5 August 2021. In considering the objection an Agency delegate spoke to Ms McKeand on 12 October 2021. She advised the Agency that as Mr Upchurch is self-employed she would have expected that he would be receiving jobkeeper and government grants in relation to COVID-19, which would mean that the estimate of $0 would not be correct.

5. On 14 November 2021 the Agency disallowed the objection and decided that it had been correct to accept the estimate. The objections officer decided the estimate was correct on the date that it was lodged and there were no grounds on which it should not be accepted.

6. On 1 December 2021 Mr Upchurch made an application to the Social Services and Child Support Division of this Tribunal for a review of that decision.

7. The application was heard in Sydney on 22 February 2022. Mr Upchurch and Ms McKeand gave sworn evidence by telephone.

ISSUES

1. The issue the Tribunal must decide is whether or not the estimate was correctly accepted.

2. The relevant legislation is contained in sections 60, 62A and 63AA of the Child Support (Assessment) Act 1989 (the Assessment Act). Section 60 allows a person to make an estimate of income for a financial year or part of a financial year. Section 62A says that if the person has made an estimate, and the period covered by the estimate has already started the estimate is unable to be revoked. The person is able to make a new estimate instead. Section 63AA sets out the circumstances in which the Child Support Registrar (the Registrar), and the Tribunal, can refuse to accept an estimate of income. In particular, subsection 63AA(2) sets out the circumstances in which the Registrar may refuse to accept an estimate for a partial year period.

CONSIDERATION

1. Mr Upchurch told the Tribunal that he felt that the matter was well covered in the documents provided, other than in relation to a later call made on 1 November 2021. Essentially, in August 2021 Mr Upchurch was advised of an increase to the child support assessment due to a change of care. Their son is now 18. The child support assessment for him was due to end on 17 November 2021, the end of the school year. Mr Upchurch contacted the Agency on 5 August 2021 in response to this new assessment, as he had previously been of the understanding that he did not have arrears of child support owing. This call ended up with Mr Upchurch having been recorded as lodging an estimate of income.

2. The Tribunal noted that Mr Upchurch has made a complaint to the Agency about the customer service he received around the estimate. The response to this complaint, dated 8 February 2022, has listed under the heading: “Outcome”: “… The SO you spoke with on 5 August 2021 did not include all details of the call in their documentation. In addition, the SO did not fully explain how we apply estimates of income (EST) to your child support assessment i.e. that the EST will only take effect from the date of lodgement. The SO did not document the call accurately, nor did they attempt to call you back after experiencing technical difficulties while your call was on hold …”.

3. It appears from the above that the Agency has accepted that Mr Upchurch’s estimate was taken without the officer dealing with him explaining the impact of making an estimate or correctly documenting the content of the call. The Agency provided Mr Upchurch with the recordings of several telephone calls, including the call of 5 August 2021 in which the initial estimate was taken by an officer by the name of [Ms A]. Mr Upchurch provided the Tribunal with a transcript of this call, which states, in part:

   [Ms A] - you need to tell me what you think you're gonna earn
   Unintelligible
   [Mr Upchurch] - Well I can tell you what I have earnt so far. You're talking ...
   [Ms A] - OK so what I will do is this is how it's gonna work. So it's gonna take about 15 minutes. So what we are in is the 5 of August now. So from the first of July to the 4th of August, the year to date in this tax year what have you earnt so far?
   [Mr Upchurch] – I have lost $495.59
   [Ms A] - Ok so then that's zero. OK so that's fine so let's do the estimate and then if it yeah and then basically you know it will change your assessment. So it's not like
   [Mr Upchurch] - [Unintelligible] So far this year I have lost $498.00 right?
   [Ms A] - Yeah yep OK
   [Mr Upchurch] - Right so there is only one month this year this tax year so ...
   [Ms A] - Yeah and so what I am going to say is it is what you think you're gonna earn for the rest of the financial year
   [Mr Upchurch] - I have no idea how much I will earn. I run a business myself I run a business myself I have no idea how much I will earn. I haven't got a clue. I don't earn salary

   ….

   [Ms A] - Do you want to say at this point that you estimate that you're going to be earning zero?
   [Mr Upchurch] - Yeah I have to I have no other way of assessing it

   …

   [Ms A] -OK this is we've asked for your annualised income so basically moving forward so at this point you're gonna do the zero for now is that correct
   [Mr Upchurch] - How do I know? You're asking me what my future income is going to be I have no idea. I might get paid $10 tomorrow I might get paid $1000 I might get paid $40,000. I do not know.
   [Ms A] - OK so we're gonna put it zero for now as I said it can be updated

1. Mr Upchurch explained that this telephone call had been made in the context of some former disagreement with Ms McKeand and that he was attempting to ascertain how much child support he owed and what he needed to do going forward. He said that he did not contact the Agency with the intention of making an estimate of income, nor did he suggest making an estimate of income. He said that instead he did clearly tell [Ms A] that he could not predict his income going forward. He said that he did not suggest the estimate of zero and that estimate was clearly wrong at the time it was made. If his income was zero he should “shut up shop”. Mr Upchurch said that he was in receipt of jobkeeper payment and the COVID-19 business supplement and he disclosed this to the Agency. Mr Upchurch said that although he had made a loss briefly at the beginning of the financial year his hope and expectation was that his income would recover.

2. The Tribunal noted that if it was to decide that the Registrar should refuse to accept his estimate this would have the effect of returning to the previous assessment of $10,041 per annum based on Mr Upchurch’s 2019/20 taxable income of $86,794. Mr Upchurch said that he is in the process of completing his 2020/21 income tax return and his current year-to-date income is slightly below the taxable income previously being maintained in the assessment. He said that at least a return to the previous assessment would give the parents some certainty about what needed to be paid.

3. The Tribunal could see that Mr Upchurch had written to the Agency on 15 November 2021 and that in this letter he indicated that he hoped his income for the current financial year to be in the vicinity of $70,000. The Tribunal asked Mr Upchurch if the Agency had updated his estimate as a result of this communication. Mr Upchurch said that it had not. Mr Upchurch said that he suspected this had occurred because he had advised the Agency that any income amount he came up with was a “wild guess” as there were too many variables in his situation to allow him to make an accurate estimate. He thought that perhaps the Agency had taken his $70,000 income to be a wild guess rather than an estimate and so had not used it in the assessment.

4. Ms McKeand said that she had not invested a lot of time or effort in dealing with this issue, although she did ask the Agency questions about the source of Mr Upchurch’s income when it seemed to her that he would have access to government benefits and grants. She said that she was content to accept the decision made by the Tribunal in the matter.

5. The parents explained that their son has [medical condition]. His treatment and recovery is the priority. Mr Upchurch said that they had had some discussions about whether or not they could opt out of the child support system so that they could focus on more important things but that he had not yet had a response from the Agency about this.

6. Section 60 of the Assessment Act says that a parent may elect to estimate his or her adjusted taxable income for a year of income. A parent may access the estimate provisions (described as an income election in the Assessment Act) if their current income is less than 85% of the adjusted taxable income amount being used in the assessment. A parent may make an estimate for a part year of income if the financial year has already commenced in accordance with the provisions of subsection 60(3). This requires the parent to estimate components of their income for the remainder of the financial year.

7. The components for which an estimate is required are set out in subsection 60(2). They include the parent’s taxable income, reportable fringe benefits, target foreign income, net investment losses, tax-free pensions or benefits and reportable superannuation contributions. The document which purports to record Mr Upchurch making an estimate (and which the Agency has, by its own admission, accepted is incorrect) states: “…Year to date customer has earned zero ‐ sole trader. All income types, income components and deductions confirmed…”. There is no record that Mr Upchurch provided estimates of income for each component required under subsection 60(2), as required by the Assessment Act.

8. Having reviewed the transcript of the telephone call in which the estimate was alleged to be made, the Tribunal has some doubts about whether or not Mr Upchurch elected to estimate his income or whether this election was actually made by [Ms A]. Mr Upchurch consistently said that he was not in a position to make an estimate of his income. This would presumably mean that he was unable to meet the provisions of subsections 60(2) and 60(3). This brings the validity of the estimate into question.

9. Leaving that issue aside, the evidence before the Tribunal indicates that this estimate was not correct at the time it was made and could not have been correct. It must be kept in mind that the estimate was for the whole of the remainder of the financial year – at that time nearly 11 months. While Mr Upchurch had made a loss in the first month of the financial year, his evidence to the Tribunal was that he did not expect that to continue although he did expect his income to be lower than it had been previously. An expectation of an income being lower than it was previously, coupled with an inability to make an estimate, does not make an estimate of $0 correct.

10. Mr Upchurch told the Tribunal that he advised the Agency that he was in receipt of jobkeeper payment and COVID-19 business relief. When the Agency contacted Ms McKeand about her view of the estimate, she made this very point. The Tribunal is of the view that the Agency did not correctly consider the circumstances in which the estimate was made and did not have due regard to the likely trajectory of Mr Upchurch’s income in forming the view that the estimate was accurate at the time it was lodged. The estimate was not accurate at the time it was lodged.

11. Subsection 63AA(2) says that the Registrar may refuse to accept a parent’s income election if the Registrar is satisfied that:

    …(a)  the partial year income amount for the income election is less than the amount that the Registrar considers is likely to be the parent's actual adjusted taxable income for the remaining period in relation to the income election; or ….

12. The Tribunal is satisfied that the partial year income amount for the income election allegedly made by Mr Upchurch on 5 August 2021 is less than the amount that it considers likely to be his adjusted taxable income for the remaining period. If Mr Upchurch had been questioned more fully at the time the estimate was allegedly made this would have been apparent at that time. In fact, it is likely that Mr Upchurch would have been advised that the Agency was unable to accept an estimate from him as he was unable to estimate his future earnings. The assessment would then have proceeded on the normal administrative basis.

13. The Tribunal finds that the estimate of income allegedly made by Mr Upchurch on 5 August 2021 should be refused. The effect of this in law is that the estimate is taken never to have been made.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the Registrar is to refuse to accept the income election allegedly made by Mr Upchurch on 5 August 2021.

This means the application is successful.