Whiteway and Sturridge (Child support)

[2021] AATA 1293

Whiteway and Sturridge (Child support) [2021] AATA 1293 (23 March 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2021/SC020693 & 2021/SC020568

APPLICANT:  Ms Whiteway

OTHER PARTIES:  Child Support Registrar

Mr Sturridge

TRIBUNAL:Member C Breheny

DECISION DATE:  23 March 2021

DECISION:

The decisions under review are affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – whether the estimate should have been accepted – estimate of income accepted – decision under review affirmed

CHILD SUPPORT – particulars of the administrative assessment – whether the adjusted taxable income was correctly applied by the Registrar – decision 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 Sturridge and Ms Whiteway are the separated parents of [Child 1].  Mr Sturridge is the parent liable to pay child support to Ms Whiteway. For the child support period commencing 1 May 2020, Mr Sturridge’s child support liability was assessed as being $14,114 per annum on the basis of his 2018/19 adjusted taxable income of $133,965 and Ms Whiteway’s 2018/19 adjusted taxable income of $82,810.

2. On 23 August 2020, Mr Sturridge contacted Services Australia – Child Support (Child Support) to lodge an income estimate for the 2020/21 financial year. Mr Sturridge estimated his income to be approximately $68,000 for the remainder of the financial year ($80,074 annualised). On 28 September 2020 Child Support accepted Mr Sturridge’s estimate election and applied it for the period 23 August 2020 to 30 June 2021.

3. On 20 August 2020 the Australian Taxation Office (ATO) notified that Ms Whiteway had lodged her tax return and her taxable income for the 2019/20 financial year was $69,932. Child Support applied this income amount for the new child support period from 1 October 2020 to 31 December 2021.

4. On 19 November 2020 the ATO notified that Mr Sturridge’s taxable income for the 2019/20 financial year was $79,646. This income was applied for the child support period 1 October 2020 to 31 December 2021, commencing from 1 July 2021 (after Mr Sturridge’s income estimate election finished).

5. On 2 October 2020 Ms Whiteway objected to the decision to accept Mr Sturridge’s income estimate and on 23 December 2020 a Child Support objections officer disallowed the objection.

6. On 19 November 2020 Ms Whiteway objected to the decision to apply Mr Sturridge’s 2019/20 taxable income to the child support assessment and on 21 January 2021 a Child Support objections officer disallowed the objection.

7. On 4 January 2021 Ms Whiteway applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal for an independent review of the objection decision made on 23 December 2020 in relation to income estimates (review number 2021/SC020568) and on 1 February 2021 Ms Whiteway applied for a review of the objection decision made on 21 January 2021 in relation to the taxable income (review number 2021/SC020693).

8. The applications were heard on 23 March 2021. Ms Whiteway attended the hearing by conference telephone and gave evidence on affirmation. Mr Sturridge was unable to attend the hearing and provided a written submission (marked B1-B3). A representative of the Child Support Registrar did not attend the hearing. I had before me the statement and documents provided by Child Support pursuant to subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975, received on 22 January 2021 and 2 March 2021 respectively. The documents were numbered 1–120 (review number 2021/SC020568) and 1–75 (review number 2021/SC020693).

ISSUES AND CONSIDERATION

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

   The income estimate election (review number 2021/SC020568)

2. In general, a person’s child support liability is calculated by using an adjusted taxable income, which is based on the person’s taxable income for the previous financial year.  The Act makes provision however for a child support assessment to be based on an estimate of current income if there has been a decrease in income of at least 15%.

3. A person may make an estimate of income for a whole financial year, or part of a financial year, if the provisions in section 60 of the Act are met.  

4. Subsection 60(2) of the Act provides for an income estimate for a whole year of income. It states that the election must be made before the year of income starts or on the first day of the year of income (i.e. 1 July of a given financial year). The parent must estimate the following amounts: their taxable income for the year, reportable fringe benefits and target foreign income for the year, total net investment losses for the year, tax free pensions or benefits and reportable superannuation contributions.

5. If a person has not made an estimate for the whole year of income and wishes to estimate their income during the financial year, i.e. after the first day of the financial year, they can make an income estimate for part of the year (subsection 60(3)). If the person has already made an income estimate election for the year of income and wishes to make another estimate due to a change in their circumstances they must make a later income estimate (section 62A).

6. Mr Sturridge submitted (folio B3) that he lodged his 2020/21 income estimate in line with his expected earnings from his employment. He estimated this income to be lower than his income in 2018/19. Mr Sturridge noted that his taxable income in 2019/20 was already significantly lower, as evidenced by his tax return and he expected the 2020/21 income to be similar.

7. Ms Whiteway stated that Mr Sturridge is self-employed. He owns a company and he pays himself a wage. She did not believe that Mr Sturridge’s taxable income or income estimate accurately reflected his financial resources from his business.

8. Section 63AA of the Act provides a discretion to refuse to accept an income estimate election. Paragraph 63AA(2)(a) enlivens the potential exercise of discretion to refuse if Mr Sturridge’s estimate of income for the period 23 August 2020 to 30 June 2021 was likely to be too low.

9. I note that in making an estimate, the person is attempting to forecast future income, so absolute precision cannot necessarily be expected. The provisions in the Act for the amendment of estimates by the Registrar if circumstances change, and for estimate reconciliation after the end of the tax year once the actual income is ascertained, suggest that an overzealous approach in scrutinising an income estimate is not warranted. Consistent with this, it is also relevant to note that the power to refuse to accept an estimate is discretionary, not mandatory, even if the Registrar is satisfied that the estimate is too low.

10. Mr Sturridge expected his 2020/21 income to be around $80,000 and advised that this amount would also include reportable superannuation contributions (folio 35). I note his 2019/20 taxable income was $79,646 (folio 97). Mr Sturridge’s income estimate for the 2020/21 financial year is similar to his taxable income in 2019/20 and there is no evidence before me to indicate that this income estimate is too low and should therefore be refused.

11. Section 61 of the Act provides that unless the income estimate is refused, Child Support must apply the estimate to the administrative assessment for a period beginning on the day the election is made and ending on the last day of the income year.

12. In this case, I find that Mr Sturridge made an income estimate election on 23 August 2020. This means that in accordance with paragraph 60(5)(a) and section 61 of the Act the income estimate applies to the administrative assessment from the date Mr Sturridge made the income estimate election, that is 23 August 2020. I therefore affirm the decision under review.

    The taxable income used in the assessment (review number 2021/SC020693)

13. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.  This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the taxable income of each parent.

14. Pursuant to section 43 of the Act, a parent’s income for child support purposes (referred to as their “adjusted taxable income”) comprises the total of the parent’s taxable income for the last relevant year of income. “Last relevant year of income” is defined in section 5 of the Act as the last year of income that ended before the start of the child support period. In this case I find that the “last relevant year of income” for the child support period from 1 October 2020 to 31 December 2021 is the 2019/20 financial year.

15. Section 34A of the Act provides that Child Support must assess the annual rate of child support payable by the liable parent as soon as practicable after a tax assessment is made under an Income Tax Assessment Act.

16. In this case Mr Sturridge had made an income estimate election for the 2020/21 financial year, which ends on 30 June 2021. The taxable income as provided by the ATO will be used in the administrative assessment after that date, i.e. from 1 July 2021.

17. For the purposes of this review I therefore find that Child Support correctly used Mr Sturridge’s 2019/20 adjusted taxable income as advised by the ATO and issued a new administrative assessment of child support in accordance with section 34A of the Act (folio 41) and I affirm the decision under review.

18. I note that it is open to Ms Whiteway to apply to Child Support for a “Change of Assessment” if she is of the view that Mr Sturridge’s taxable income (as assessed by the ATO) does not adequately reflect his financial resources or earning capacity.

DECISION

The decisions under review are affirmed.