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How can they estimate a 5% increase in income? Especially as Tax returns do not have to be lodged until 31st Oct or later if lodging through a tax agent? Is there a way around this other than lodging an Estimate of Income?

Hello

I've tried searching for this answer without success.

My Husband just received new CS Assessment. Ex has lodged her Tax for 08/09 so they have issued a new assessment commencing 1st Nov 09. My Husband has not lodged his 08/09 income yet and CSA have estimated a Provisional Income for him of 5% higher than his last Taxable Income (07/08).

My question… how can they estimate a 5% increase in income? Especially as Tax returns do not have to be lodged until 31st Oct or later if lodging through a tax agent? Is there a way around this other than lodging an Estimate of Income?

Ex's income has decreased by 7% to just over $31k. Her income is dropping even though the children are now 15 and 11. Meanwhile, I am pregnant with our 2nd and will have to continue working throughout. We are not going to bother with a COA as we know from our 1st born than I will not be considered a dependant after the child is 2 months old.

Any help will be appreciated.
cbear said
Hello

I've tried searching for this answer without success.

My Husband just received new CS Assessment. Ex has lodged her Tax for 08/09 so they have issued a newassessment commencing 1st Nov 09. My Husband has not lodged his 08/09 income yet and CSA have estimated a Provisional Income for him of 5% higher than his last Taxable Income (07/08).

My question… how can they estimate a 5% increase in income? Especially as Tax returns do not have to be lodged until 31st Oct or later if lodging through a tax agent? Is there a way around this other than lodging an Estimate of Income?

Ex's income has decreased by 7% to just over $31k. Her income is dropping even though the children are now 15 and 11. Meanwhile, I am pregnant with our 2nd and will have to continue working throughout. We are not going to bother with a COA as we know from our 1st born than I will not be considered a dependant after the child is 2 months old.

Any help will be appreciated.

cbear, I believe that this is yet another case of the CSA acting to grab whatever money they can and ignoring the actual legislation.

P.S. to get to

I believe the CSA have looked in the guide and failed to read it correctly. Here's the snippets :-

The CSA Guide - 2.4.4 said
Where a parent has not lodged a tax return, CSA may make a determination of the parents adjusted taxable income  see determination of adjusted taxable income below. A child support assessment must be amended where CSA later ascertains the amount of the parents adjusted taxable income  see new information about adjusted taxable income below.

They have likely acted upon that, however :-
The CSA Guide - 2.4.4 said
Determination of adjusted taxable income

If an ATO issued income is not available CSA may determine an amount considered appropriate to be the parents adjusted taxable income for a year of income (subsection 58(1)).

This decision must be in accordance with the requirements under section 58:

Determination where parent fails to comply with requirement

CSA may make a determination if:

    * a parent has not lodged a tax return for the year of income; and
    * CSA or the ATO is unable to readily ascertain the parents adjusted taxable income on the basis of existing documents or information; and
    * CSA or the ATO has required the parent to give a return or information or to produce a document for the purposes of ascertaining the adjusted taxable income; and
    * the parent has refused or failed to comply with the requirement (subsection 58(2)).

Determination where income information provided

If a parent has not lodged a tax return for the relevant year of income and CSA or the ATO has been given information (either orally or in writing) or a document that specifies or allows CSA to work out the parents adjusted taxable income, CSA may use that income information to determine the parents adjusted taxable income (subsection 58(4)). For example, the ATO may have full year payment summary information recorded for a parent.

Example

An application for an assessment is accepted in July 2008, with the first child support period being 22 July 2008 to 21 September 2009. A parent, M, has not yet lodged their 2007/2008 tax return. M advises CSA that their adjusted taxable income for 2007/2008 is $40,000. Where satisfied of the accuracy of the information, CSA uses that figure to calculate the child support assessment.

If the parent has also failed to lodge a tax return for the previous year of income, the amount determined for the parents adjusted taxable income in the above circumstances must be at least 2/3 of the annualised MTAWE figure for the relevant September quarter (subsection 58(3)). The figure to be used in assessments for child support periods beginning in each calendar year is published before the beginning of the calendar year. See Chapter 2.4.2 for the relevant figures.

Determination where tax return lodged two years ago

If a parent has not lodged a tax return for the relevant year of income but has lodged a tax return for the previous year of income, CSA may determine the adjusted taxable income based on the tax return for the previous year multiplied by an inflation factor (subsection 58(3A) and regulation 7A). In these circumstances, CSA is able to readily ascertain the parents adjusted taxable income and it is not necessary to seek information from the parent.

Determination of overseas income where parent is a resident of a reciprocating jurisdiction

If CSA has sufficient information and documents, CSA may use that information to determine an amount of overseas income for the purpose of working out the parents adjusted taxable income (section 58C). When determining the income of a resident of a reciprocating jurisdiction CSA will look at the parents income in the last relevant year of income in the country in which the parent lives.

If CSA does not have sufficient information despite requesting income information from the parent or an overseas authority under section 162A, CSA may determine an appropriate adjusted taxable income, which must be at least 2/3 of the annualised MTAWE figure for the relevant September quarter (section 58D). If CSA does not have sufficient information to determine an overseas income and is unable to serve a notice under section 162A on the parent or the relevant central authority then CSA is unable to determine an overseas income for that parent.

New information about adjusted taxable income

The action to be taken by CSA when new information about taxable income becomes available will depend upon dates where the income has been used. The legislative changes from 1 July 2008 have introduced new rules for assessments after that date.

If the child support period commenced before 1 July 2008 then the rules in operation at that time still apply (section 58(2) of the then Assessment Act), for the period up to 30 June 2008, even if the information has become available after 1 July 2008.

For the remainder of the child support period that continues after 1 July 2008, or if the child support period commenced on or after 1 July 2008 then the rules to be used are explained below.

New information about incomes used before 1 July 2008

The Assessment Act in operation before 1 July 2008 permitted CSA to identify a default income to be used in assessments if the parent's taxable income could not be ascertained. If CSA has based a parent's child support assessment on a default income, and the parents income taxable and/or supplementary amounts is later ascertained, then CSA must immediately amend the child support assessment on the basis that the taxable and/or supplementary amounts is and always has been the taxable income (section 58(2) of the then Act). This is applicable to all assessments up to 30 June 2008.

CSA can ascertain a taxable income in this situation even if the ATO has not made an income tax assessment. It can act on information that provides a better basis for a default income.

However, CSA will not amend an assessment if a parent provides details of income and supplementary amounts and CSA has other evidence that suggests that the information provided is incorrect.

Example

Ms taxable income and supplementary amounts cannot be ascertained because M hasn't lodged a tax return for the relevant year. CSA has asked M to provide details of taxable and supplementary incomes for the relevant year but M doesn't provide the details requested. CSA can make a child support assessment using an income amount it considers appropriate. CSA decides to use an amount of $32,000 based on Ms past income history. M later lodges a tax return, which shows that Ms taxable income is $28,000 and that there is no supplementary income. CSA must amend the child support assessment to reflect M's taxable income of $28,000.

New information about adjusted taxable income for assessments after 1 July 2008

Where CSA has made a determination of a parents adjusted taxable income, the child support assessment must be amended immediately if CSA subsequently ascertains the parents adjusted taxable income (when the parents tax assessment issues) and that amount is different to the amount previously determined. CSA must also amend the assessment if it obtains other new information about a parents adjusted taxable income and makes a later determination of the appropriate adjusted taxable income amount (subsection 58A(1)).

The date of effect of the amendment to the child support assessment will be the beginning of the relevant child support period where:

(a) at the time, the parent has lodged, or still has time to lodge, his or her tax return on time as required under the income tax legislation (for example, under a relevant tax agent lodgement program); or

(b) paragraph (a) does not apply and the adjusted taxable income subsequently ascertained or later determined by CSA is higher than the amount previously determined; or

© paragraphs (a) and (b) do not apply and the parent was genuinely unable to provide CSA with timely information due to ill-health, natural disaster, remote location, imprisonment or other exceptional circumstances OR the parent resided overseas and was not required to lodge a tax return and the parent provided information about his or her income to the Registrar within a reasonable time in the circumstances (section 58A(2) and regulation 7B).

Otherwise, the amendment to the assessment will take effect from the date the adjusted taxable income was ascertained or determined, for the remainder of the child support period (section 58A(3)).

Example

M rings CSA on 20 July 2008 and advises their adjusted taxable income for 2007/2008 is $40,000. CSA uses that figure to calculate the child support assessment for the child support period 1 August 2008 to 31 October 2009.

0n 15 July 2009, Ms tax return for 2007/2008, lodged late, issues and their adjusted taxable income is $43,000. As Ms income is higher, the child support assessment would be adjusted from 1 August 2008.

If Ms adjusted taxable income was $38,000 then the child support assessment would be adjusted from 15 July 2009. This is the date the adjusted taxable income was determined, as this amount is lower and Ms tax return was lodged late.

Example

F has not lodged 2006/2007 tax return when child support period commences 1 March 2008. CSA determines an adjusted taxable income for 2006/2007 of $80,000 (from the taxable income in the year prior to the LRYI) and uses that figure to calculate the child support assessment for the child support period 1 March 2008 to 30 May 2009.

0n 1 November 2008, Fs tax return for 2006/2007 issues and their adjusted taxable income is $55,000. As Fs income is lower, the child support assessments would be amended using income as follows:

    * From 1 March 2008 to 30 June 2008: $55,000 (pre-1 July legislation);
    * From 1 July 2008 to 31 October: $80,000;
    * From 1 November 2008: $55,000 (s58A(3)) as Fs tax return was lodged late.


The Child Support Assessment Act - Section 58 said
58  Registrar determination of adjusted taxable income
   (1)   For the purposes of assessing a parent in respect of the costs of a child in relation to a child support period, the Registrar may determine, in accordance with this section, that an amount that he or she considers appropriate is the parents adjusted taxable income for a year of income.
Note:   The Registrar is required to amend an administrative assessment made on the basis of such a determination if the parents adjusted taxable income is subsequently ascertained or the Registrar makes a later determination under this section (see section 58A).
Determinations where parent fails to comply with requirement
   (2)   The Registrar may make a determination if:
   (a)   a parent has not, under an Income Tax Assessment Act, lodged a tax return for the year of income; and
   (b)   the Registrar or the Commissioner of Taxation is unable to readily ascertain the parents adjusted taxable income for the year of income on the basis of the documents and information in his or her possession; and
   ©   the Registrar or the Commissioner has, for the purposes of ascertaining that adjusted taxable income, required the parent:
   (i)   to give a return; or
   (ii)   to give information (whether orally or in writing); or
   (iii)   to produce a document; and
   (d)   the parent has refused or failed to comply with the requirement.

   (3)   If the parent also has not lodged a tax return for the year of income before the year of income referred to in subsection (1), the amount determined for the parents adjusted taxable income for the year of income must be determined to be at least two thirds of the annualised MTAWE figure for the relevant September quarter.
Determination if tax return lodged 2 years ago
   (3A)   The Registrar may make a determination if:
   (a)   a parent has not, under an Income Tax Assessment Act, lodged a tax return for the year of income; and
   (b)   the parent lodged a tax return under that Act for the previous year of income; and
   ©   the amount determined by the Registrar under subsection (1) is the amount based on the tax return for the previous year of income multiplied by a factor specified in the regulations for the purposes of this subsection.
Determination if Registrar given taxable income or total
   (4)   The Registrar may make a determination if:
   (a)   a parent has not, under an Income Tax Assessment Act, lodged a tax return for the year of income; and
   ©   the Registrar or the Commissioner has, for the purposes of ascertaining that adjusted taxable income, been given:
   (i)   information (whether orally or in writing); or
   (ii)   a document; and
   (d)   either:
   (i)   an amount was specified in that information or document as the parents adjusted taxable income for the last relevant year of income; or
   (ii)   that information or document allowed the parents adjusted taxable income for the last relevant year of income to be worked out; and
   (e)   the amount determined by the Registrar under subsection (1) was the amount specified or worked out under paragraph (d) of this subsection.

As I see it, unless you have not provided the tax return for 2007-2008, then you are in compliance with the Tax Assessment Act. Thus the CSA cannot make a determination of your adjusted taxable income and by doing so they are in breach of the Child Support Act 1989, section 58(2).

I would suggest that you request that the CSA remedy the situation immediately so as to not continue acting illegally and that the remedy consist of an immediate transfer of any funds overpaid (P.S. they can break into the kitty they use for entertainment purposes, e.g. celebrating their 25th year of operation, the rather exuberant lunches they provide when entertaining guests). I would also officially object to the decision that they made (Item 11 section 80(1) of the registration and collections Act) (section 4.1.2 of the CSA guide). If you are unhappy with the objection you can then take the matter to SSAT. You may also wish to make the ombudsman aware of what appears to be an illegal action by the registrar.

Here's a link to the guide, you may wish to have a read of this, perhaps print it even to prepare for your discussion of the matter with the CSA.

The CSA Guide

P.S. to get to, for example, 2.4.4, move the mouse over Part 2, more options will be displayed, move the mouse over 2.4, more options will be displayed, move your mouse over 2.4.4 and click.

There are ample links to the CS legislation in the guide (I use a copy on my PC).

Keep us informed, as I believe that this is not the first time I've heard of this happening, although I think I missed the bit about the requirements myself that time. Hopefully if I did give the wrong advice back then the person might see this.

Secretary_SPCA, if what I have said here rings true and the CSA are making determinations of ATI when one parent's ATI is changed when there is no failure to comply, then this should likely be raised as an issue and I'd say urgently.
MikeT, I thank you for your reply and all the relevant information. I printed, highlighted, and notated all the relevant points in order to make my case and keep my thoughts on track. For-armed, I contacted CSA.

I was told that as payee has lodged 08/09 tax return and assessment is using that income, Payer's income must be based on the same year. They are within their right to estimate even though Payer still has time to legally lodge their Tax Return. Advised that this will be amended when the tax return is lodged. I pointed out that CSA can only determine an estimate of income if Payer is in breach of Income Tax Assessment Laws etc, etc. I pointed out that our history would show we lodge our Returns in Feb of the following year. They received our 07/08 income in Feb 09. Their story did not change. I was transferred to a "senior" (name noted) and told that were not going to get into an argument about this, nor were they there to argue the point of law. I was read section 58 (4) of the Act (very kind of them, I am apparently unable to read/decipher it for myself?) Again, I drew attention to 58 (2) stating that we were not in breach of Income Tax Law, and that CS were breach the Act by estimating. Again I was told not to argue with them. Overall, a hostile phone conversation.

I will now be drafing an Objection Letter which I will email AND post to ensure it reaches it's destination. My Husband and I are so disillusioned at all of this. Simply because payee has lodged a return.
I received one of those assessments in the mail the other day although I think they had reduced the liability rather than increasing it, and then my tax return was processed and I received yet another lot of paperwork a few days later. What a waste of resources.

cbear - With the information you have provided I can make a few points about your situation.

The general rule for the C$A is to get your tax return in ASAP. Usually recipients of Family Tax Benefit have the most incentive to do this so they can access their $600 bonus per child.

As a partner of a child support payer you are better off planning your finances in advance and getting tax returns in ASAP rather than delaying them or planning one year at a time. As I have said many times before, seeking good financial advice might be very helpful to your situation.

You could put in an income estimate however make sure it in no more than 10% from previous income.

Once your 2nd child is born your partner's child support assessment will reduce from the DOB, however if your pregnancy is not gong well and you cannot work as a result, then you should be able to get a change of assessment. I think a Doctor's certificate is all you may need to get the ball rolling.

What industry does your partner's ex work in?
I would suggest that it should be asked of the registrar; under what part of the legislation they have the authority to make a determination of a parent's adjusted taxable income, when that parent is acting in accordance of the Tax Assessment Act. The registrar should also be asked under what part of the legislation they have the authority to make a determination of a parent's adjusted taxable income when that parent has not been required, by either the registrar or the Tax commissioner to provide a tax return, or to provide information, or to produce documentation. The registrar should also be asked under what part of the legislation they have the authority to make a determination of a parent's adjusted taxable income when that parent has not failed to comply with such a requirement.

1) I see nothing in the following that allows the registrar to invent their own assessment/determination. To me it very clearly states that, yes the registrar must redo the assessment, but only based upon the new tax figure.

The Child Support Assessment Act said
34A  Registrar must make assessment when new tax figure is available

Application of section
   (1)   This section requires the Registrar to assess the annual rate of child support payable in some cases if:
   (a)   child support is payable by a liable parent for a child for a day in a child support period (the earlier period); and
   (b)   during the earlier period, an assessment (the tax assessment) is made under an Income Tax Assessment Act of the taxable income, or any other component of the adjusted taxable income, of the liable parent or the other parent, for the latest year of income (the last year) that ended after the start of the earlier period.
Registrar must make assessment using new tax figures
   (2)   As soon as practicable after the tax assessment is made, the Registrar must assess the annual rate of child support payable for the child for days in a child support period starting on the first day of the next named month (after the named month in which the Registrar makes the assessment).
When new assessment is not required
   (3)   This section does not require the Registrar to make an assessment if:
   (a)   the Registrar calculates that the tax assessment for the last year could not affect the annual rate of child support payable for the child for a day in a child support period; or
   (b)   the annual rate of child support payable for the child for the first day of the next named month is to be worked out without reference to the actual taxable income of the parent mentioned in paragraph (1)(b) because of:
   (i)   a child support agreement between the parents of the child; or
   (ii)   a determination under Part 6A (departure determination); or
   (iii)   an order made by a court under this Act or the Registration and Collection Act; or
   ©   the earlier period will end before the end of the earliest named month in which it is practicable for the Registrar to make the assessment mentioned in subsection (2).
Note:   In the case of paragraph (3)©, the Registrar must use the information from the tax assessment to make an assessment for the period starting immediately after the end of the earlier period (unless the information is not relevant to an assessment, because of an agreement, determination or order) (see section 34C).

It could be that they are trying to use 58(4), however 58(4)(a)  is the same as 58(2)(a).

Uhhm looking at it 58(3), could be the loophole, however that also has 58(3)(a) as being the same as 58(2)(a).
My Husbands ex was working full time in the Hospitality Ind and was earning $36k 06/07. Began study in Aged Care, working pt earning $34k in 07/08. Now in Aged Care full time (or rather 30hrs/wk we believe) earning $31k. We could understand a drop in salary while studing and doing a transition. We were pleased that she seemed to be bettering herself and her earning capacity, however, it seems her career change has not been of any benefit to her (or ultimately us).

I don't know if we have grounds for Capacity to Earn. It seems when this type of COA is directed at the payee, it doesn't stand up.

I would hope it could be argued that her Capacity to Earn is greater than mine, given her 2 children are 15 & 11 and mine will be newborn and 3 (in March 2010) but I hold little hope that they see common sense over revenue earning.
Given the ex's occupation I don't think you would be successful with trying to get anymore out of her with a capacity to earn COA application.

Also your earning capacity has little to do with the equasion.

I think the best decision would be to obtain some professional financial advice on your situation and see if there is anything that can be done to improve the situation.

And also followup Mike's advice.
Hi Cbear,

Dont panic to much on this issue, same thing happened to me.

Just ring them and give them your estimate of actual income for the year. They will use the info you give them.

My situation was they used provisional income of 70,000. My income was actually lower according to my tax statement. All i did was use the gross amount on my tax certificate and deduct my known deductions and phoned add told them the new amount was 63,000. They instantly updated using my 63,000 figure and issued new assesment. About 2 weeks later had my tax done and taxable income was 61,000 so a new assesment was automatically issued on this actual amount. The only thing you have to avoid is telling them your income will be lower than it will be when u do your tax or u will have to back pay.

Hope this helps….Cheers Bert

PS Let us know how you go as it will help others
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