Fixed annual rate not to apply applications 277-03090000

Item

Scenario

1

Current income support payments

• Payer: Graham
• Payee: Louise
• Current child support period: 01/11/2007 – 31/01/2009
• Last Relevant Year of Income: 06/07
• Paying parent's 06/07 income: $10,662 source: ATO (ICP) taxable
• Children of assessment: Hannah
• 1 July 2008 assessment: 2007 fixed annual rate x 1 child = $1,102
• Applicable PPS amount is $13,315 (2007)

Telephone application received from payer Graham for fixed annual rate (FAR) not to be used. In the application, Graham advised unable to work due to a heart condition. Graham had started receiving income support payments (ISP), but only did so in current taxable year, that is not in the LRYI. The LRYI had a low taxable income because Graham was on worker's compensation.

Graham's current income (annualised) details

$10,800 Centrelink payments – no other source of income.

Facts

• Checked assessment details with Graham. Income details are correct and care was confirmed as regular care
• Checked Graham's Client Benefits window on Cuba – in receipt of JobSeeker Payment (JSP) since 11/08/2007
• Graham was not in receipt of ISP in the LRYI but is currently in receipt of ISP

Outcome

• 1 July 2008 assessment: $0. Minimum annual rate does not apply as Graham has regular care of Hannah
• New assessment letters issued
• Rang Graham and Louise to advise of the updated assessment and objection rights

2

Current income (annualised) over the PPS amount

• Payer: Wanda
• Payee: Sam
• Current child support period: 01/05/2008 – 31/07/2009
• Last Relevant Year of Income: 06/07
• Payer's 06/07 income: $0 source: ATO (ICP)
• Children of assessment: Lily and Charlotte
• 1 July 2008 assessment: 2008 fixed annual rate x 2 children = $2,224
• Applicable PPS amount is $13,980 (2008)

Telephone application received from payer Wanda for FAR not to be used. Wanda advised unable to pay at the FAR as has zero income.

Current income (annualised) details

• Self-employed: company name is XYZ Pty Ltd - Wanda could not recall their ABN
• Not in receipt of a Centrelink payment as is self-employed and not entitled to any payments

Facts

• Confirmed income and care details are as recorded on Cuba
• Customer was not in receipt of any ISP
• Wanda confirmed the financial circumstances are pretty much the same as the previous financial year
• When questioned about the depreciation expenses, Wanda stated the accountant advised this could be included in the tax return, but there was not any costs relating to depreciation at the moment

Decision

• Checked Wanda's 06/07 tax return:
• non-primary income: a loss of $4,695
• Other business income: $92,019
• Contractors, sub-contractor & commission expenses: $10,000
• Depreciation expenses: $19,682
• Motor vehicle expenses: $12,890
• Carried forward losses: $11,000
• All other expenses: $54,142
• Total expenses: $96,714

Add back the depreciation and carried forward losses to Wanda's current income loss of $4,695 = $25,988. This is taken to be Wanda's current income (annualised).

Wanda's current income (annualised) is over the applicable PPS amount therefore the Wanda's application is refused.

Outcome

• Application is refused; assessment remains at $2,224
• Refusal letter issued to Wanda
• Wanda contacted and advised of outcome and objection rights

3

Unjust and inequitable

• Payer: Juan
• Payee: Ella
• Current child support period: 01/04/2008 – 30/06/2009
• Last Relevant Year of Income: 06/07
• Payer's 06/07 income: $7,655 source: deemed 05/06 taxable
• Children of assessment: Carlos & Ariel
• 1 July 2008 assessment: 2008 fixed annual rate x 2 children = $2,244
• Applicable PPS amount is $13,980 (2008)

Juan sent an application in writing for the FAR not to be used. In the application Juan stated the income is always around $7,000 a year and so cannot afford to pay $2,244. Juan listed the employer as XXX Furniture Restoration ABN: 123123123. Juan advised is self-employed and only takes home a small wage for food. Juan does not own any assets and has no other source of income. Juan is not in receipt of any ISP.

Current income (annualised) details:

STAC search of Juan's 05/06 income shows the taxable income was $7,208. The company return showed Juan is the sole director (no other partners);

• Total company income $84,230
• Cost of sales $47,435
• Rent expenses $11,892
• Vehicle expenses $6,842
• All other expenses $15,853
• No other source of income identified on the ATO and Cuba systems

Facts

Juan contacted to provide an ITD for 06/07 but advised is unable to at this stage as the bookwork/financials have not been completed. Juan did not dispute the current record of care. Juan was asked for their current income (annualised) for the next 12 months – was unable to provide that information, but said was expected to be much the same as recent income received.

Using 05/06 as a basis for comparison, Juan's income is $7,208. It is therefore likely Juan's current income (annualised) is below the applicable PPS amount of $13,980 therefore it needs to be determined if it would be unjust and inequitable for Juan to pay at the FAR.

Juan appears to be living at the business premises (address on Cuba is the same as the shop). When contacted to discuss this, Juan confirmed he has a flat above the shop. Juan confirmed the company is paying rent of about $473 per week for both flat and shop, which is shown as a rent expense of $11,892 in the company return.

When asked to explain the 'other expenses' of $15,853 Juan was unable to advise what they are comprised of, but some of it would be the electricity and water. Juan received only 1 bill for the shop and the flat. Some of it would also be for the company.

When asked about the vehicle expenses, Juan admitted the van is for personal use as well, as had no other means of transport, but exact records were not kept.

Decision

It has not been demonstrated it would unjust and inequitable for Juan to pay at the FAR when considering:

The customer has been running a business for the past several years that generates an annual 'total business income' of around $80,000; however Juan only derives an income of $7,208 from it.

Juan derives a substantial benefit from residing at the business premises (pays the rent and electricity and water through the business, which reduces the net income available). The business also appears to pay for the transport costs.

Juan could not provide full information or evidence about the 'Other business expenses', but admitted that at least some of the expenses were for personal benefit.

I am not satisfied it is unjust or inequitable for Juan to pay the FAR.

Outcome

Assessment remains at FAR of $2,244

Juan was advised of the outcome. The objection rights were explained in detail as Juan expressed extreme dissatisfaction at the outcome.

4

Farmer in receipt of drought relief

• Payer: Peter
• Payee: Jennifer
• Current child support period: 01/05/2008 – 31/07/2009
• Last Relevant Year of Income: 06/07
• Payer's 06/07 income: $10,952 source: ATO (ICP) taxable
• Children of assessment: Jemima, Patrick & Charlotte
• 1 July 2008 assessment: 2008 fixed annual rate x 3 children = $3,366
• Applicable PPS amount is $13,980 (2008)

Telephone application received from Peter (paying parent) for FAR not to apply. In the application stated is a farmer in a drought stricken area and as such is now on a lower income then previous years.

Current income (annualised) details

• Self-employed farmer - ABN 456456456
• In receipt of Drought Assistance from Centrelink of $437.10 per f/n ($11,364.60 annual income)
• Peter advised relying entirely on Drought Assistance payments

Facts

• Confirmed income and care details (regular care to Peter) are as recorded on Cuba
• Peter states there is no other interests or investments
• Peter does not have access to a Farm Management Deposit
• Peter was not in receipt of standard ISP, but CSU request issued confirmed Drought Assistance income Peter is currently receiving from Centrelink
• STAC search of Peter’s 06/07 income shows the taxable income was $10,952

Decision

Peter's current income (annualised) is under the applicable PPS amount and is in receipt of Drought Assistance, which indicates the resources are genuinely limited, therefore the Peter's application is granted.

Outcome

• Assessment reduces to nil (as Peter has regular care of the children)
• New assessment letters issued
• Contacted Peter to advise of the updated assessment and objection rights
• Advised Peter this decision can be amended at any time if new information is received

5

Payee applies for FAR not to apply

Payer: Donald

Payee: Marian

Current child support period: 01/05/2018 - 31/07/2019

Last Relevant Year of Income: 16/17

Payee Marian's 16/17 income: $11,586 (no ISP)

Payer Donald’s 16/17 income: $135,789

Children of assessment: Mary (100% in Marian’s care) and David (100% in Donald’s care)

Applicable PPS amount is $19,568

1 May 2018 assessment: Donald’s liability $12,406 - Marian’s liability 2018 FAR $1,416 = $10,990 payable by Donald

Telephone application received from payee Marian for FAR not to be used. Marian advises that she was previously self-employed and started receiving income support payments in the current financial year after her business closed.

Current income (annualised) details

$14,896 Centrelink payments - no other source of income

Facts

Confirmed income and care details are as recorded on Cuba

Checked the Marian's Client Benefits window on Cuba - in receipt of JobSeeker Payment (JSP) since 11/12/2018

Marian was not in receipt of any ISP in LRYI

Outcome

Application is accepted: Marian's rate reduces to $0

New assessment: Donald’s liability $12,406 - Marian’s liability $0 = $12,406 payable by Donald