Zalewski and Taylor (Child support)

Zalewski and Taylor (Child support) [2024] AATA 800 (8 March 2024)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2024/SC027468
APPLICANT:  Mr Zalewski
OTHER PARTIES:  Child Support Registrar
Ms Taylor

TRIBUNAL:Senior Member R Ellis
DECISION DATE: 08 March 2024
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the estimate of income of $136,491 (annualised) lodged by Mr Zalewski to be used in the child support assessment from 1 July 2023 to 30 June 2024 should be accepted.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – estimate of income – where estimate of income was refused - estimate of income should be accepted - 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 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

This review is about the acceptance of an estimate election used to assess child support in respect of [the children].
Mr Zalewski and Ms Taylor are the parents of [Child 1] (born May 2010), [Child 2] (born May 2010) and [Child 3] (born October 2015). There has been a child support assessment in place since 16 January 2018.
On 17 May 2023 Services Australia – Child Support (Child Support) made the decision to accept an income estimate from Mr Zalewski of $136,491 (annualised) to be used in the child support assessment from 1 July 2023 to 30 June 2024.
On 11 July 2023 Ms Taylor objected to this decision and on 15 January 2024 Child Support allowed the objection and made the decision to refuse the income estimate made by Mr Zalewski (the objection decision).
On 5 February 2024 Mr Zalewski applied to the Administrative Appeals Tribunal (the Tribunal) for a review of the objection decision.
The Tribunal conducted a hearing into the application on 6 March 2024. Mr Zalewski and Ms Taylor gave evidence on affirmation by Microsoft Teams audio. Child Support provided the Tribunal and the parties with papers relevant to the matter (162 pages). The Tribunal received additional evidence from Mr Zalewski prior to the hearing a copy was distributed to the parties (A1–A5).

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
Child Support makes child support assessments for a child support period using a formula outlined in Part 5 of the Act. The variables in the formula include the adjusted taxable incomes of both parents and ordinarily this is equal to the taxable income and supplementary amounts for the financial year that ended before the start of the child support period. Supplementary amounts include such things as reportable fringe benefits.
Section 60 of the Act allows a parent to elect to use an estimate of their adjusted taxable income to apply from the day of the election to the end of the financial year (the estimate period). The estimate is an annualised amount of their taxable income and supplementary amounts for the estimate period. It must be no more than 85 per cent of the adjusted taxable income that applies when the parent makes the estimate election.
Child Support may refuse to accept an estimate election if satisfied the amount estimated is less than the amount considered likely to be the actual adjusted taxable income for the financial year (section 63AA of the Act).
The issue which arises in this case is whether or not Child Support made the legally correct decision to refuse the estimate of income made by Mr Zalewski on 15 May 2023.

CONSIDERATION

Mr Zalewski told the Tribunal when he contacted Child Support on 15 May 2023 to lodge his estimate he had just commenced working with [Company] after a long period of unemployment. Mr Zalewski said the estimate of his income was based upon his annual salary as detailed in his contract of employment. Mr Zalewski said he had sent a letter from his employer to the Tribunal which confirmed his salary upon commencement as $135,746.60 per annum.
The Tribunal notes in evidence from Mr Zalewski a letter dated 12 February 2024 from [Company] Director [Mr A]. The letter states that Mr Zalewski commenced employment in May 2023 on a salary of $135,746.60.
Mr Zalewski explained that after starting at [Company] he was not paid for several weeks due to a change the company was making to the payment system. Mr Zalewski said he was informed by his employer there would be a delay in processing his salary but unfortunately this had taken longer to resolve than initially expected. Mr Zalewski said as a result he had eventually received an amount in backpay which had fallen into the 2023–24 financial year.
The Tribunal notes in evidence from Child Support a payslip for the pay period from 1 July 2023 to 15 July 2023. It shows an annual salary for Mr Zalewski of $135,746.60. The payslip also shows that for the 15-day period Mr Zalewski received total gross earnings of $22,624.43. A note at the bottom of the payslip states that ordinary earnings “includes backpay from 15 May to 30 Jun $16,968.32”. The Tribunal further notes a payslip for the pay period from 1 December 2023 to 15 December 2023. It shows an annual salary for Mr Zalewski of $135,747. The payslip also shows that for the 15-day period Mr Zalewski received total gross earnings of $5,656.10.
Mr Zalewski told the Tribunal when he lodged his estimate he was not aware it was going to take three pay cycles for him to receive his first salary payment. Mr Zalewski reiterated that although he was aware there would be a delay it was always expected his salary from 15 May 2023 would fall within the relevant financial year rather than roll over into 2023–24.
Ms Taylor informed the Tribunal that in previous roles Mr Zalewski had been paid a much higher salary than the amount indicated in his estimate. Ms Taylor said when she was advised by Child Support that an estimate of income for Mr Zalewski had been accepted she felt the income used in the estimate did not appear correct given his income history.
Ms Taylor said although she was aware Mr Zalewski had commenced a new role she had no knowledge of how much he was being paid. Ms Taylor said the parents did not communicate about such matters but she had been shocked given Mr Zalewski had previously earned much higher salaries. Ms Taylor added that she felt evidence was needed to confirm his actual salary and the accuracy of his estimate.
An income estimate can be made if, in the case of a first election for a year of income, the estimate is 85 per cent or less than the parent’s adjusted taxable income for the last relevant year of income (paragraph 60(1)(b) of the Act). A parent may not make an income estimate if an income amount order is in force in relation to the parent and any part of the period to which the election would apply if made (subsection 60(6) of the Act).
The last relevant year of income for the child support period which commenced on 1 September 2022 is Mr Zalewski’s 2021–22 adjusted taxable income of $487,048. The Tribunal is satisfied the annualised estimate of income he made of $136,491 meets the 85 per cent test. The Tribunal is also satisfied there was no income amount order in place at the time Mr Zalewski elected to lodge his estimate.
The Tribunal also considered the discretion, under section 63AA of the Act, to refuse the estimate election made by Mr Zalewski. This discretion may be exercised in circumstances where evidence suggests a parent’s estimated income is less than the amount considered likely to be their actual adjusted taxable income for the election period.
Mr Zalewski has told the Tribunal that when he submitted his estimate of income of $136,491 (annualised) to apply from 1 July 2023 it was based upon his actual income as set out in his contract. Mr Zalewski has explained that due to a systems change there was a delay in processing his pay and he received backpay in the pay period commencing 1 July 2023. This is supported by the payslip provided in evidence from Child Support.
The payslip for the pay period from 1 July 2023 to 15 July 2023 shows total gross earnings of $22,624.43 including backpay of $16,968.32. If the backpay were excluded Mr Zalewski received a gross amount of $5,656.11 in the 15-day pay period. The payslip for the pay period from 1 December 2023 to 15 December 2023 shows Mr Zalewski received a gross amount of $5,656.10 in the 15-day pay period. These amounts are consistent with a gross annual salary of $135,746.60 which was the amount used by Mr Zalewski when he lodged his estimate on 15 May 2023. A gross income of $135,746.60, or $5,221 per fortnight, is equal to an annualised amount of approximately $136,491.
The Tribunal is satisfied that when Mr Zalewski lodged his estimate of income on 15 May 2023 to apply in the assessment from 1 July 2023 to 30 June 2024 it was reasonable to expect it was correct based upon his salary as advised in his contract of employment. Mr Zalewski did not know at the time that his actual salary from 1 July 2023 might be inflated due to backpay arising from a systems change of which he could not have been aware.
An estimate is speculative by nature. The Tribunal notes that after the year of income has ended Child Support will compare Mr Zalewski’s estimated income with his actual income for that year. This is known as an estimate reconciliation. If, after the estimate has been reconciled, Mr Zalewski has an actual income that is higher than the estimated income the child support assessment will be reconciled for that period using the higher income.
The Tribunal finds that the discretion available under section 63AA of the Act to refuse the estimate made by Mr Zalewski should not be exercised in the circumstances of this case.

DECISION

[2024] AATA 800

8 March 2024

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Remedies

Procedural Fairness