Warnock and Warnock (Child support)

[2021] AATA 2430

Warnock and Warnock (Child support) [2021] AATA 2430 (10 June 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC020980 & 2021/MC021029

APPLICANT:  Mr Warnock

OTHER PARTIES:  Child Support Registrar

Ms Warnock

TRIBUNAL:Member F Staden

DECISION DATE:  10 June 2021

DECISION:

The decisions under review are affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether the provisional adjusted taxable incomes for past periods for the liable parent should be changed – treatment of business income and deductions – non lodgement of tax returns – decisions under review affirmed

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 Warnock and Ms Warnock are the separated parents of two children, born 2002 and 2003. There has been a child support assessment for this case from 29 January 2014. Mr Warnock is the parent liable to pay child support. Ms Warnock opted for collection of child support by Services Australia – Child Support (Child Support) from 18 April 2016.

2. On 2 November 2020, Child Support informed Mr Warnock and Ms Warnock by letter that the income amounts used to calculate Mr Warnock’s child support liability over the period 29 January 2014 to 31 March 2016 had been updated and his child support liability recalculated accordingly. The changes were as follows:

   ·     For the period 29 January 2014 to 31 December 2014, Mr Warnock’s 2012/13 provisional income of $95,576 was replaced with a 2012/13 provisional income of $103,224; and

   ·     For the period 1 January 2015 to 31 March 2016, Mr Warnock’s 2013/14 provisional income of $98,738 was replaced with a 2013/14 provisional income of $111,548.

3. On 4 December 2020, Mr Warnock lodged objections to the 2 November 2020 decisions to amend his 2012/13 and 2013/14 provisional incomes.

4. On 29 January 2021, Mr Warnock’s objections were each disallowed by an objections officer.

5. On 9 March 2021, Mr Warnock applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal) for review of the objections officer decisions about his 2012/13 and 2013/14 provisional incomes.

6. A hearing was held on 20 May 2021 in Canberra. The tribunal had before it papers provided by Child Support (97 pages), a copy of which was given to all parties before the hearing. Mr Warnock gave sworn evidence by telephone. Ms Warnock chose not to attend the hearing and instead provided a written submission (pages B1 to B2). The tribunal read the submission to Mr Warnock at the hearing and he and Child Support were given a copy after the hearing.

7. Relevant aspects of the evidence are referred to in the consideration below.

ISSUES

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

2. The key issue in this case is whether Child Support properly and accurately amended Mr Warnock’s 2012/13 and 2013/14 provisional incomes.

CONSIDERATION

1. The formula usually used to calculate the rate of child support payable by a liable parent takes into account various factors including each parent’s adjusted taxable income, as defined in section 43 of the Assessment Act, for the last relevant year of income for a given child support period.

2. Section 5 of the Assessment Act defines last relevant year of income in relation to a child support period as the last year of income that ended before the start of the period. Thus in this case:

   ·     For the child support period 29 January 2014 to 31 December 2014, the last relevant year of income was 2012/13; and

   ·     For the child support period 1 January 2015 to 31 March 2016, the last relevant year of income was 2013/14.

3. At the time of the original assessments for the above child support periods, Mr Warnock had not submitted his income tax returns for 2012/13 or 2013/14. His most recent income tax assessment by the Australian Taxation Office (ATO) was for 2010/11.

4. Section 58 of the Assessment Act applies to the situation where a parent’s child support liability is to be assessed for a child support period and, as in this case, the parent’s taxable income for the last relevant year of income has not been assessed by the ATO.

5. Under subsections 58(3) and 58(4) of the Assessment Act, if the ATO has assessed a parent’s adjusted taxable income for a year previous to the last relevant year of income, the Registrar can determine that the parent’s adjusted taxable income for the last relevant year of income is the amount worked out by multiplying the parent’s adjusted taxable income for the previous year by the ATI indexation factor. The ATI indexation factor is defined in section 58AA of the Assessment Act.

6. Mr Warnock’s provisional incomes for 2012/13 and 2013/14 were originally determined to be $95,576 and $98,738 respectively by applying the relevant ATI indexation factors to his 2010/11 adjusted taxable income of $87,846 as assessed by the ATO.

7. Section 58A of the Assessment Act, among other things, addresses retrospective determination of a parent’s adjusted taxable income for a particular year of income when that parent has not lodged an income tax return for that year within the allowable time. Relevantly here, if the Registrar makes a later determination of the parent’s adjusted taxable income for that year under section 58 which is higher than an earlier adjusted taxable income determined under section 58, then the Registrar must immediately amend the assessment for the child support period on the basis that the person’s adjusted taxable income for that year of income is, and has always been, the later amount.

8. By 2 November 2020, Mr Warnock had not lodged income tax returns for 2012/13 and 2013/14. On that day, Child Support obtained information from the ATO indicating that:

   ·     Mr Warnock’s 2012/13 provisional income was $103,224, a higher amount than the previously determined provisional income for that year of $95,576; and

   ·     Mr Warnock’s 2013/14 provisional income was $111,548, a higher amount than the previously determined provisional income for that year of $98,738.

9. Therefore, in line with section 58A, on 2 November 2020 Child Support amended the assessment such that:

   ·     The 2012/13 provisional income of $103,224 was used to calculate Mr Warnock’s child support liability for the child support period 29 January 2014 to 31 December 2014; and

   ·     The 2013/14 provisional income of $111,548 was used to calculate Mr Warnock’s child support liability for the child support period 1 January 2015 to 31 March 2016.

10. Mr Warnock queried how the amended provisional incomes were calculated. The tribunal found that the updated provisional incomes were accurately derived from the following ATO information in the Child Support papers:

    2012/13 – TOTAL $103,224

    ·     PAYG payment summary – Gross payments of $94,234

    ·     PAYG payment summary – Fringe benefits of $8,020

    ·     [Business 1] – payments of $62 and $64

    ·     [Bank 1] – payments of $46 and $404

    ·     [Bank 2] – payments of $107 and $29

    ·     [Insurer 1] – payments of $81 and $88

    ·     [Business 2] – payment of $89.

    2013/14 – TOTAL $111,548

    ·     PAYG payment summary – Gross payments of $97,764

    ·     PAYG payment summary – Fringe benefits of $12,033

    ·     [Business 1] – payments of $61 and $60

    ·     [Bank 1] – payments of $417, $417 and $19

    ·     [Bank 2] – payments of $173 and $142

    ·     [Insurer 1] – payments of $96 and $185

    ·     [Business 2] – payments of $92 and $89.

11. Mr Warnock also queried why deductions allowed in the ATO calculation of adjusted taxable income were not taken into account in determining his provisional incomes for 2012/13 and 2013/14. The tribunal noted that to properly allow for such deductions for 2012/13 and 2013/14 would have required Mr Warnock, in a timely way, to have lodged his income tax returns for those years or to have declared adjusted taxable incomes for those years which the Registrar was satisfied were correct.

12. Overall, the tribunal concluded that:

    ·     The 2 November 2020 decision to amend Mr Warnock’s provisional income for 2012/13 from $95,576 to $103,224 and to apply the amended amount to the child support period 29 January 2014 to 31 December 2014 was correct; and

    ·     The 2 November 2020 decision to amend Mr Warnock’s provisional income for 2013/14 from $98,738 to $111,548 and to apply the amended amount to the child support period 1 January 2015 to 31 March 2016 was correct.

DECISION

The decisions under review are affirmed.