The applicant made an extension of time application. Under section 91 the extension of time application 'must state the reasons for the person's failure to apply for the review within the period'. Section 92 simply requires the Tribunal to 'consider the extension application'. That was done at Tier 1 and the application was refused.
[2]
Section 96A provides that an application may be made to the AAT for review (AAT second review) of '...a decision under section 92 to refuse an extension application'. Such an application has been made and it is that application which is the subject of this decision.
[3]
The discretion provided by the Parliament is not fleshed out in any way. The only small clue as to how it should be approached is in the requirement that an explanation for delay must be provided in the application for an extension. This suggests the reasons for delay must be considered when deciding whether to grant the extension. Beyond that, the discretion is at large (subject of course to the statutory context in which it appears). I note that for many years the factors in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 (Hunter Valley Developments) have been regarded as relevant in extension of time cases. This approach has been taken notwithstanding that Hunter Valley Developments concerned an extension of time under the Administrative Decisions (Judicial Review) Act 1977 which confers a discretion to extend time in different terms and in a very different statutory context to the discretion in the Collection Act. I don't quibble with the utility of considering the factors identified in that case, but in my view a simple transfer of concepts from one statutory context to another is likely to overlook important contextual differences. In particular, it is worth noting that delay in resolution of child support issues can, at least in terms of practical enforcement, have an impact on the timing of payments for the support of a child. The expenses which must be met by the other parent are not delayed, but the payment of child support can be.
In this particular statutory context, the reasons for delay and the effect on the orderly payment of child support should be scrutinised very closely. It should also be noted that a statutory context where multiple opportunities are given to address the merits of a decision is very distant from a first instance application to a court on a question of the lawfulness of conduct.
If an applicant is seeking to put material concerning the merits of the decision before a higher tier decision maker which could have been put before the decision maker at first instance or on review, the possibility that the material might reveal that the application has merit would in many cases have significantly less power than the raising of a potentially meritorious argument for the very first time on judicial review. For that reason, the simple transfer of concepts from an extension of time in the judicial review context to an extension of time in the merits review context is likely to oversimplify how the discretion should be approached.
In my assessment, extensions of time within a system which provides for multiple tiers of merits review renders relevant the degree to which the applicant has engaged appropriately with earlier attempts to obtain a clear factual picture to enable the making of the correct or preferable decision - in this case, the correct amount of child support. Failure to provide important information in a timely way to assist earlier decision makers in the review hierarchy is an important consideration weighing against an extension of time in a merits review context that has no analogue in the judicial review context.
In approaching the discretion, it is important to recognise that because AAT review (and second tier review in particular) forms part of an administrative continuum where there can be significantly more material available to the Tribunal to consider the merits of an underlying application,[1] applicants have already had opportunities to have input into the material on which decisions at lower levels have been based. This places the Tribunal in a significantly different position to a court considering an extension of time application and in that context looking at the merits of a fresh judicial review claim based (usually) on a limited range of materials. For that reason, while Hunter Valley Developments provides a useful framework for structuring the Tribunal's discretion, some of the later Federal Court authorities, which in the context of judicial review take a particular approach to weak but not hopeless cases, should be approached with caution.[2]
In making my decision, I stand in the shoes of the Tier 1 Tribunal member who decided the first review and accordingly it is the discretion in section 92 which I must apply.
In light of the matters set out below, I am satisfied that I should refuse the extension of time application.
[4]
The applicant and the other party had three children together. Z, B (6/1/2005) and R (6/3/2006).
The applicant was liable to pay child support. By February 2021 only B and R were under 18 and relevant for the purposes of calculating child support.
What constituted the correct amount of child support became contentious in the first quarter of 2021 as a result of two things. First, there was a significant drop in the applicant's taxable income as assessed by the Australian Taxation Office (the cause of which is disputed), and the need for R to get braces.
The other party (the children's mother) contended that the applicant's drop in taxable income was the result of him re-structuring his income so that his earnings went into his earthworks company's account, which he then used to meet personal expenses. The applicant denied this and contended that the drop in income was the result of a drop off in business due to COVID.
The other party also sought contribution from the applicant towards R's braces based on R having special needs. The applicant resisted this and suggested for various reasons that he should be required to make a smaller contribution or no contribution at all to those costs.
The applicant also raised the fact that B had for some time been living independently and was earning income as a hairdresser's apprentice and failure to consider this had led to incorrect assessment of the proper amount of child support.
In light of these opposing positions (as well as fluctuations in taxable income of each parent), there have been a series of assessments calculating the child support owed by the applicant.
Set out below is a summary of these decisions.
On 2 March 2021 the Registrar provided an updated child support assessment for the period 1 February 2021 to 30 April 2022. The applicant's previously assessed income for the year of income (YOI) 2019-2020 (based on an estimate) was $52,988 which was consistent with income assessed by the ATO in the previous year which was $51,696. However, the applicant's taxable income as assessed by the ATO for YOI 2019-2020 was $12,834. As a result of the significant fall in the applicant's assessed taxable income, his child support obligation was reduced to $2,954 p.a. from $7,650 p.a.[3]
In response to the new assessment, the other party applied to change the assessment based on the contention that the applicant was disguising his income in his company and that additional support was needed for R's braces.
On 19 October 2021 the applicant was sent a letter and given an opportunity to respond to the request for a change to the assessment. In addition, on 19 October 2021, a notice was issued to the applicant for the production of information and documents about the applicant's banking arrangements.
On 1 December 2021 a new assessment was issued for the period 1 January 2022 to 31 March 2023. For the period 1 January 2022 to 5 January 2023 the assessment of the child support amount changed from $2,954.04 p.a. to $7,434 p.a. This was based on a YOI 2020/2021 taxable income of $52,963.[4] For 1 February 2021 to 31 December 2021 the child support amount remained $2,954 p.a.
On 3 December 2021 the applicant objected to the assessment. The objection was based on the proposition that B was in fulltime employment as a hairdresser's apprentice and was no longer living with either parent. A change was sought from 1 February 2021.[5] The applicant also submitted that the change in his income was not the product of any change in business structure but a change in the business earnings after the COVID 19 pandemic. He provided information suggesting that the total profit of the business was $18,084 with tax owing of $5,425 for the YOI 2020/2021. In relation to R's orthodontic work, the applicant proposed that it be paid for in shares in proportion to each parent's income.
On 7 December 2021 the Registrar made another decision. For the period 1 October 2021 to 31 December 2021 the child support assessed was based on taxable income for YOI 2020/2021 assessed at $64,734. The assessed child support amount increased to $12,847 p.a. In the same decision, for the period 1 January 2022 to 5 January 2023, the decision maker used the applicant's assessed taxable income of $64,734. The child support amount was assessed at $12,639 p.a. For the period 6 January 2023 to 31 March 2023 the same taxable income was used, and the child support amount assessed was $10,379 p.a.
The reasons for decision are set out at T19.
In determining the amount of child support payable, the decision maker increased the cost of the child amount relevant to R to $15,770, adding on $7,490 for the cost of her orthodontic work. In the assessment covering the period 6 January 2023 to 31 March 2023 the child support amount fell because B turned 18.
The applicant's YOI 2019/2020 taxable income was left at $12,834 (the same taxable income figure assessed by the ATO) for the purposes of calculating the child support from 1 February 2021 to 30 September 2021 but the applicant's 2019/2020 assessed income was increased to $64,734 for the purposes of making the child support assessments for the period 1 October 2021 to 31 December 2021 and following.
The decision to increase the applicant's assessed taxable income to a figure much larger than the taxable income assessed by the ATO, was based on the delegate's assessment of the personal benefit derived by the applicant from his business. The delegate's approach involved some estimation. The delegate reasoned that approximately one third of the expenses met from the applicant's business account were personal expenses. This conclusion was reached based on the identity of the vendors disclosed in the banking records. This equated to $71,304 of personal use income and financial resource from the business account. However, in case this figure was too high, the delegate also reasoned that the personal benefit derived from the applicant running the business (due to access to phones and cars etc.) was in the order of $5,200. When this was added to his earlier taxable income of $52,963, it gave a figure of $58,163.
The delegate decided that the half-way point between the two methods gave the best indication of the applicant's financial resources, hence $64,734.
The delegate was satisfied that given that a taxable income of $12,834 had been used in the assessment under review he was satisfied that special circumstances existed and a new assessment could be made. He also found that the child support assessment was unfair because the applicant had greater capacity to pay than the child support assessment under review indicated.
The delegate applied the new assessment from 1 October 2021.
On 22 December 2021 the applicant gave notice that he objected to the new assessment.
The objection noted that B was a hair dressing apprentice, was not financially dependent on either parent and was in a de facto relationship. On that basis the child support case for B should have been terminated. The applicant wanted the assessment changed from 1 January 2021. The applicant also objected to the high cost of the orthodontic assessment and submitted that his income was properly assessed at $18,834.
In response a further assessment was made.
On 17 March 2022 the review delegate determined that R had special needs as a result of the orthodontic work she required, and the cost was $7,490.
The review delegate was also satisfied that the applicant's income, property and financial resources made the child support assessment unfair. The delegate identified $49,773 in personal expenses coming out of the applicant's business account. The delegate also added a further amount to accommodate personal benefits derived from the operation of the business including motor vehicle expenses and other utility expenses. The personal benefits of this kind were judged to be $10,000. The delegate then determined that for a person to have access to $59,773 in financial benefits it would require a gross income of approximately $78,000 and as this number was consistent with statistics for the median earnings of a plant operator employee it should be used in the child support assessment.
Utilisation of that figure increased the child support amount to approximately $14,476 p.a. for the period from 1 January 2022 onwards. Based on the increase in the assessed income, the review delegate was satisfied that the original assessment was unfair and special circumstances existed.
The review delegate also dealt with the applicant's cross application for a change in the child support amount based on B's income, earning capacity, property and financial resources. The delegate was satisfied that B had regular income through fulltime employment and her income was in excess of the threshold requirements. The delegate did not directly consider whether B was no longer in the care of the other party however proceeded to make the assessment on the basis of one child instead of two in light of B's income.
The review delegate determined that it was fair for the applicant to pay half of the orthodontic costs (calculated in the amount of $7,495) but over a two-year period.
In summary the review delegate determined:
[5]
(a) From 1/10/21 the applicant's adjusted taxable income is set at $78,000 p.a.;
>
> (b) From 1/10/21 the administrative assessments will change to reflect an assessment based on only one child (R);
>
> (c) From 1/10/21 the annual rate of child support payable will decrease to approximately $11364;
>
> (d) From 1/1/22 the annual rate of child support payable will decrease to approximately $11,339;
>
> (e) From 1/10/21 to 30/9/23 the annual rate payable by the applicant will increase by $1,872 p.a. (to reflect half of the cost of orthodontic work);
>
> (f) From 1/10/21 to 31/12/21 the annual rate payable by the applicant will increase to approximately $13,236; and
>
> (g) From 1/1/22 the annual rate will increase to $13,211.
[6]
On 21 March 2022, five days after the delegate's decision, the applicant made a further submission. The submission added new points which had not been raised by the applicant when he objected to the original decision. He noted that 'I pay for private health cover for the children... I consider that this is my contribution for the braces.' He also provided evidence about B's living arrangements.
On 6 April 2022 the applicant was advised of a decision to refuse his application for a change of assessment. It was essentially refused because the earlier decision of the delegate took into account the fact that B was earning significant income and she had been excluded from the child support assessment.
On 8 June 2022 the applicant then applied to the Tribunal for review. It was more than 28 days after he received the decision. His grounds for review were as follows:
[7]
The Decision Maker failed to take into account my submission which emailed to the Department, 3 days prior to the decision. I believe the decision is biased against me. I would also like it noted that the Department did not call me to tell me that they were considering a decision that would affect my financial situation adversely, thereby denying me procedural fairness by not giving me a chance to make further submissions.
[8]
In order for the application to proceed an extension of time was necessary.
On 22 July 2022 a member of the Social Services and Child Support Division of the Tribunal refused to grant an extension of time.
On 9 August 2022 the applicant applied for a second review of that decision. On 16 August 2022 the applicant made a submission in relation to the extension.
In summary he submitted:
[9]
(a) He accepted that the application was submitted late but not so late as to be fatal to its success especially taking other factors into account;
>
> (b) He contended that the first review member made an error in the way he considered the applicant's contention that the delegate breached procedural fairness. He also noted that the real substance of his submission lies in the arguments on the merits;
>
> (c) He re-iterated that the other party does not have care of B;
>
> (d) He submitted that his income was $18,834 annually and that the delegate was wrong to form the view that he was earning at least as much as a wage earning plant operator;
>
> (e) He repeated his argument that as he paid for health insurance he shouldn't have to pay for the orthodontics;
>
> (f) He submitted that it was not possible to consider the merits of the application without examination of more substantial arguments relating to its merits; and
>
> (g) The interests of the other parent were not so adversely affected that they should weigh against the granting of the application.
[10]
The material before the Tribunal was supplemented on 15 December 2022. The applicant contended that there was a fundamental error in the reasoning of the delegate. The applicant submitted that the decision by the delegate to gross up from expenses to a taxable income of $78,000 'ignored the fact that the expenses are already part of the taxable income, with tax being required to be assessed on these amounts. It is completely erroneous to suggest that this income needs to be further inflated to meet a new gross income'.
The applicant also provided the Tribunal with a company tax return for his company and a personal tax return for the applicant for the YOI 2021/2022. The taxable income for the company was $10,005 and the applicant's taxable income was $35,379.
The applicant also submitted company accounts for YOI 2020/2021 and YOI 2021/2022. The accounts disclosed a profit for the company of $9,420 in the YOI 2021/2022 and $18,084 profit in the YOI 2020/2021.
At the hearing the applicant answered some questions about the financial statements and the earnings of the company more generally and how they were organised so that he could meet personal expenses as well as company expenses. It became clear that there was no structuring of the applicant's finances which allowed him to readily distinguish between expenses covered by the company which benefited him in a personal capacity and the payment of the business expenses related to the business of the company.
The question of whether the grossing up of the applicant's income which was undertaken by the delegate was appropriate or lawful was also considered. I permitted the parties further time to provide me with submissions on that question, as the document containing that contention had never been received by the respondent.
It is against this background that I must consider the application for an extension of time.
It is incumbent upon the Tribunal to consider all relevant circumstances and weigh relevant factors against each other in determining an application for an extension of time to apply for review before the Tribunal.[6] Consequently, in this matter, it is reasonable for the Tribunal to consider:
The length of the delay in applying for review;
Knowledge of the prescribed time limit;
Explanations provided for the delay;
Prejudice to the respondent or other party should the extension be granted;
The merits of the substantive application; and
Alternate remedies should the extension be refused.
[11]
As previously noted, the delay in this matter was 54 calendar days.[7] The period to apply for review of a reviewable decision has been established in statute and any exceeding of that period on the part of a party seeking review is liable to count against any subsequent application for an extension of time to apply. Such is the case in this matter. In a child support context with a time limit for applying of 28 days, 54 days is a significant delay.
[12]
Attached to the delegate's decision of 17 March 2022 was a letter which stated as follows:
[13]
If you do not agree with this decision
>
> If you think this decision is wrong, you can ask the Administrative Appeals Tribunal (AAT) to review it. You must do this within 28 days from the date you receive this letter. You can contact the AAT by going to their website aat.gov.au or calling them on 1800 228 333.
[14]
I am satisfied that the applicant was both notified of the time limit and aware that there was one.
The applicant has never suggested that he did not know that there was a time within which applications had to be made. This consideration counts against an extension.
[15]
The applicant, in his application for an extension, stated 'I rely on my daughter to assist me in electronic communications because I am illiterate in this area. My representative asked my daughter to prepare an email for me to notify the AAT of a request for review on 11 April but she did not realise the urgency to prepare the email and did not notify me until yesterday. Given the very short delay over the 28 day period I request that this extension be granted'.
The explanation for delay does demonstrate a lack of diligence on the part of the applicant. It was incumbent upon him to ensure that the application was filed. If he had to work through his daughter (which I accept he did, it was incumbent upon him to make sure that they did what he asks. The applicant should have followed up with his daughter to make sure that the application was filed in time. The explanation for delay is not one which tells in favour of granting an extension of time.
I do not consider that there is a good explanation for the 54-day delay. The applicant's own lack of diligence in following up to confirm that the application had been made is the cause of the late application. This consideration does not weigh in favour of granting the extension of time.
[16]
There is prejudice to the other party in the delay. So long as the dispute persists, she has been required to cover expenses and rely on others to enable her to do so.[8] The applicant's conduct in extending the length of the dispute by failing to meet statutory deadlines does prejudice the other party.
[17]
The merits of the substantive application are difficult to assess. Any review will have to be undertaken having regard to the same issues already dealt with by the delegate, but potentially on the basis of new evidence. The applicant has opted to establish merit by asserting that the approach taken by the delegate was conceptually flawed. This is advanced on two bases. The first is what I will calling the 'grossing up' contention. The second relates to the treatment of B for child support purposes. I will deal with each in turn.
The applicant, to advance the claim that there is merit in the application, contends that there is a basic error in how the delegate approached the assessment of the applicant's income for the purposes of calculating child support - in particular, in how the income was grossed up from a net expenditure figure. He has not made good that point.
The applicant contends that the grossing up by the Registrar was inappropriate because it 'ignores the fact that the expenses are already part of the taxable income, with tax being required to be assessed on these amounts'. With respect, this argument fails to address the basis on which the Registrar grossed up the applicant's earnings. There is a legitimate concern that the applicant is meeting personal expenses out of his company's account. There is evidence to support that in the form of credit card statements and the identification of items which are personal in nature.
If the company account is being used to meet personal expenditure, then it is possible that the applicant is claiming business tax deductions for amounts which should be declared as income. In this way the applicant is potentially receiving untaxed financial benefits which, to be properly captured in the child support calculation, need to be expressed as a gross amount to allow proper comparison with the other party's earnings. While it might be possible to show on the facts of a specific case that it was inappropriate for the Registrar to gross up, there is no conceptual error in the approach as claimed. The applicant has made no attempt to show that personal expenses were paid from the post-tax income of the company and the weight of existing evidence favours the conclusion that personal expenses are being met from company accounts. I am not satisfied that the grossing up which the delegate used was conceptually flawed or inappropriate in this case.
The applicant also contends that his application for review has merit on the basis that his daughter B has for some time not been supported by the other party as she was living with her boyfriend and was an apprentice hairdresser. This issue, as a practical matter has already been resolved in his favour in the delegates decision of 17 March 2022. It is clear from the decision that the applicant's child support obligations were calculated on the basis that his obligations from October 2021 were calculated only by reference to the applicant's youngest daughter. Given that the applicant's view about the appropriateness of him paying child support in relation to B have as a practical matter been accepted, it appears unlikely that the substance of the decision will change on review.
Also relevant to the question of the merits of the application is the extent to which the delegate who made the review decision accurately determined the personal financial benefit the applicant was receiving from the revenue of the company. In the course of the respondent's consideration of that question the applicant was of minimal assistance in terms of providing material that might allow the delegate to properly understand the applicant's financial position and the benefit he derived from company earnings. In my assessment the applicant has no prospect of persuading the Tribunal that he derives no personal benefit from the earnings of the company (in the sense that he pays for personal items out of company accounts). It might be possible for him to persuade the Tribunal that the delegate overstated that benefit. Whether he has a prospect of doing that is very difficult to determine. The reason it is difficult to determine is that despite a number of opportunities to clarify his financial position vis a vis the company over the course of the various decisions, the level of the benefit the applicant derives directly by spending company funds on personal items remains obscure. Consequently, the delegates and the Tribunal have been forced to consider this question based on very incomplete information. Even at this point, although some additional material has been provided, it remains unclear whether the applicant can establish that the delegate made errors in his approach.
Accordingly, it is very difficult to determine whether the application has any merit in the sense that the Tribunal might be persuaded to make a different decision. What is clear is that the applicant has more financial resources available to him than his personal taxable income has in the past indicated.
In relation to the financial resources that the applicant has at his disposal, the applicant contended on 16 August 2022 that his income annually was $18,834. That proposition is completely untenable. The applicant's own tax return for the YOI 2021/2022 now shows personal income of $35,379. Company profit adds a further $10,000 to that number and that is before the benefits which flow from expenses being met by the company are added in. In my assessment the applicant has made no serious effort to inform himself as to what financial resources he has access to and assess whether the respondent is right to have made the assessment that it did. While it is not inconceivable that following a full hearing a different number might be arrived at, I have no confidence that the applicant himself has any proper appreciation of what a fair and reasonable number might be.
As the applicant has never engaged with the key issue of how much personal benefit he was deriving from the earnings of the company, there is no basis on which I could be satisfied at this stage that his factual arguments have any merit.
Finally, there is the question of applying the orthodontic costs as an additional expense to be shared by the applicant with the other party. There is no doubt that those costs are being incurred and they have been calculated (in broad terms at least) net of the health insurance benefit.[9] There is no merit in the approach proposed by the applicant that he should get a free pass on meeting the uncovered orthodontic costs because he provides health insurance for his children.
In these circumstances I cannot be satisfied that there is any plausible merit to the underlying application. It is not impossible that the applicant could get a different result on review given the broad nature of merits review, but the applicant has had opportunities to put on material and address arguments, and he has consistently failed to engage properly. Consequently, my assessment is that his case on the merits is weak, and this does not count in favour of a grant of extension of time.
[18]
Having regard to the matters outlined above, and in particular the length of the delay and the impact on the third party, I affirm the AAT first review decision to refuse the applicant an extension of time to apply for review.
[19]
I certify that the preceding 73 (seventy-three) paragraphs are a true copy of the reasons for the decision herein of
[2] In particular the comments in Seiler v Minister for Immigration, Local Government and Ethnic Affairs[1994] FCA 878; 48 FCR 83 that 'it is difficult to imagine any case which appeared weak but not hopeless in which it would be proper to refuse an extension on that account' should be approached with caution in a merits review context where the applicant has already had opportunities to provide evidence to support his or her position on review.
[23]
[6]Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344, 348-349.
[24]
[7] Noting that the applicant at T35 p 314 identifies 18 March 2022 as the date he received the decision.
[25]
[8] She told the Tribunal that she has relied on her parents to cover the bills from the orthodontist.
[26]
[9] See delegates decision of 17 March 2022 at T30 p 280.
Legislation Cited (3)
Appeals Tribunal Act 1975
Decisions (Judicial Review) Act 1977
Support (Registration and Collection) Act 1988
Cases Cited (4)
NLLQ and Child Support Registrar (Child support second review) [2023] AATA 867 (20 April 2023)