Wynne and Laxman (Child support)

[2020] AATA 5838

Wynne and Laxman (Child support) [2020] AATA 5838 (16 December 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/MC020200

APPLICANT:  Mr Wynne

OTHER PARTIES:  Child Support Registrar

Ms Laxman

TRIBUNAL:Member Y Webb

DECISION DATE:  16 December 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – calculation of adjusted taxable income under estimate reconciliation – provisions of the Act correctly applied to estimate reconciliation – 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. This review relates to the child support assessment regarding Mr Wynne’s and Ms Laxman’s child, who is now 19 years old (“the child”). 

2. The child support assessment ended for the child on 25 November 2019 (the Child Support Agency having accepted an application from Ms Laxman to extend the child support assessment for the child past his 18th birthday because he was still in full-time secondary education after his 18th birthday).

3. On 17 June 2019 Mr Wynne contacted the Department of Human Services (“Child Support Agency”) in relation to his income.  He estimated that his income for the 2019/2020 financial year would be nil[1].

   [1] C1- page 32

4. On that same date the Child Support Agency wrote to Mr Wynne confirming that it had accepted his estimate of income for the 2019/2020 financial year and that from 1 July 2019 he would be required to pay child support of $118 per month.  The letter also stated that:

   We will verify the accuracy of your estimate after you lodge your tax return. If you do not lodge your tax return by 30 June 2021, we may determine your actual income for the 2019/2020 financial year in order to verify the accuracy of your estimate. 

5. The letter enclosed a summary of Mr Wynne’s estimated income and this stated that for the 2019/2020 financial year his estimated income was $0.00. 

6. By letter dated 31 July 2020 the Child Support Agency wrote to Mr Wynne informing him that his actual income for the 2019/2020 financial year was $96,135 whereas his estimate for the 2019/2020 year was $0.  The letter advised that this meant that Mr Wynne owed an additional $4,725.75 in child support (plus a penalty).

7. On 21 August 2020 Mr Wynne objected to that decision and on 3 November 2020 his objection was disallowed.

8. On 9 November 2020 Mr Wynne requested a review by the Administrative Appeals Tribunal (“the Tribunal”).

9. Mr Wynne and Ms Laxman attended the hearing on 16 December 2020 by way of a telephone conference and both gave sworn evidence.

ISSUES

1. The main issue which arises in this case is:

   ·Was the reconciliation income calculated correctly?

CONSIDERATION

The child support law

1. The legislation relevant to this review is found in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment 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 income of each parent. The specific income quantity is called a person’s adjusted taxable income, which is defined in section 43 of the Assessment Act.

3. The statutory scheme provides some flexibility for parents whose circumstances change from one year to the next. Relevantly, in specified circumstances, section 60 of the Assessment Act allows a person to elect that their adjusted taxable income is their current adjusted taxable income rather than the adjusted taxable income from the previous financial year.

4. In this case Mr Wynne agreed that he made an election on 17 June 2019 that for the 2019/2020 year his income would be $0. This was an income estimate under section 60(1) and 60(2) of the Assessment Act. He also confirmed to the Tribunal that in the 2019/2020 financial year he did not make a later assessment. He stated that he did not do so because he calculated that the amount of income he would earn in the period from 1 July 2019 to 25 November 2019 would not exceed the self-support amount and therefore the result would be the same as the nil estimate he had already made.

5. After the end of the 2019/2020 financial year the Child Support Agency compared Mr Wynne’s estimated income of $0 with his actual income for the 2019/2020 year. Because his actual income was $96,136 the Child Support Agency amended the child support assessment in accordance with the provisions of Division 7A of Part 5 of the Assessment Act. This is known as the estimate reconciliation process and the legislation states that the reconciliation is done when the Child Support Agency ascertains the parent’s actual adjusted taxable income.

6. In circumstances where the parent has made a single income election for the whole of the financial year (as Mr Wynne did), the reconciliation process is undertaken in accordance with subsection 64(2) of the Assessment Act which states:

   64Reconciliation using a parent’s actual adjusted taxable income—single income election

   Reconciliation—election for a whole year of income

   (2)Subject to this section, if:

   (a)subsection 60(2) applied to the income election; and

   (b)the parent’s actual adjusted taxable income for the year of income is more than the amount that applied under that subsection;

   the parent’s adjusted taxable income for that year is taken to be, and to have always been, the parent’s actual adjusted taxable income for that year.

7. Essentially this means that where a parent has made one election for the whole financial year to which section 60(2) of the Assessment Act applied, the estimate election is reconciled when the parent’s actual adjusted taxable income for the year of income is known and it is greater than the estimated income. In that instance, the assessment will be amended and the actual income will replace the estimated income for the whole financial year.

8. Mr Wynne contended that the reconciliation of his income was calculated incorrectly.  He stated that income he earned outside of the relevant period (that is post 25 November 2019) has been wrongly applied to the assessment.  He stated that his actual income in the period 1 July 2019 to 25 November 2019 was $23,483.79 and therefore he contended that he had overpaid child support of $6,415.19.

9. The Tribunal accepts that Mr Wynne does not agree with the method of reconciliation but the estimate process is prescribed by the legislation. It is predicated on and aligned with financial years. In 2010 changes were made to the Assessment Act. The Explanatory Memorandum to the Bill (the Child Support and Family Assistance Legislation Amendment (Budget and other Measures) Bill 2010) explained that the amendments to the income estimate provisions aligned estimate periods with financial years rather than child support periods (which had been the process up till then). The Explanatory Memorandum stated that the amendments would make it easier for parents to estimate their income and for reconciliation to be done through an automated process.  These amendments changed the period over which income estimates are reconciled from 15 months, to a financial year. 

10. As the objections officer stated, the Assessment Act makes no distinction in instances where the child support assessment has ended part way through the financial year. This means, in Mr Wynne’s case, that all of his adjusted taxable income for the 2019/2020 financial year must be used to reconcile his income even though the child support assessment has ended.

11. The Tribunal accepts that Mr Wynne genuinely holds the view that the method of reconciliation is flawed but the Tribunal is satisfied that the Child Support Agency correctly applied the legislation when it amended the child support assessment by replacing his estimated income with his actual adjusted taxable income for the whole of the financial year.

12. As the Tribunal has reached the same decision as the objections officer the decision under review is affirmed.

DECISION

The decision under review is affirmed.