Aragona and Pacitto (Child support)

[2020] AATA 1754

Aragona and Pacitto (Child support) [2020] AATA 1754 (16 April 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017956

APPLICANT:  Ms Aragona

OTHER PARTIES:  Child Support Registrar

Mr Pacitto

TRIBUNAL:Member T Bubutievski

DECISION DATE:  16 April 2020

DECISION:

The decision under review is set aside and substituted with the following:

a)Mr Pacitto’s adjusted taxable income is set at $39,876 for the period 15 January 2019 to 1 July 2019; and

b)Mr Pacitto’s adjusted taxable income is set at $52,000 for the period 2 July 2019 until such time as a terminating event occurs in relation to [the Child].

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - 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

1. Mr Pacitto and Ms Aragona are the parents of two children. Their son turned 18 years of age on 20 April 2019, and lives with Mr Pacitto. Their daughter will turn 18 years of age in 2021, and lives with Ms Aragona. There have been a number of departures from the administrative assessment during the history of the case.

2. On 21 December 2018 Ms Aragona made an application to the Department of Human Services (Child Support) (the Department) for a change to the child support assessment on the basis that Mr Pacitto’s income and financial resources were not correctly reflected in the assessment. At that time Mr Pacitto was assessed to pay child support at the annual rate of $2,225 based on his 2018 taxable income of $39,876. On 5 March 2019 a Departmental delegate decided to depart from the administrative assessment on the basis that a reason was established by virtue of Mr Pacitto’s [pension], which is paid to him in $US and does not appear in his Australian taxable income. The delegate increased Mr Pacitto’s adjusted taxable income by $31,637 per annum from 15 January 2019 until such time as a terminating event occurs in relation to their daughter, [the Child].

3. Mr Pacitto objected to this decision, and on 5 August 2019 a Departmental delegate of the Child Support Registrar allowed the objection and decided to increase Mr Pacitto’s adjusted taxable income by $19,265 for the period 15 January 2019 until 19 April 2019, and then by $18,561 per annum from 20 April 2019 until such time as a terminating event occurs in relation to their daughter, [the Child]. The reason for the reduction from 20 April 2019 is that this is their son’s 18^th birthday, and from that date Mr Pacitto would no longer be eligible for a dependent supplement for him (US$46 per month) as part of his [pension].

4. On 24 September 2019 Ms Aragona made an application for review by the Social Services and Child Support Division of this tribunal. The tribunal held a telephone directions hearing on 11 February 2020 and issued Directions, with which the parties largely complied. Mr Pacitto was directed to file copies of all his bank statements. The day before the hearing he provided the tribunal with bank statements from [Bank 1] (in the USA), which he said he thought he had provided in response to the Directions, but he had not done so. As relevant evidence, the tribunal took them into account.

5. The matter was heard by the tribunal on 31 March 2020. Mr Pacitto and Ms Aragona both attended the hearing by telephone and gave sworn evidence. The Child Support Registrar did not seek leave to appear. Both parties and the tribunal had access to documents numbered 1 to 383 from the Department, and after all submissions were received, documents A1 to A16 from Ms Aragona, B1 to B25 from Mr Pacitto and the [Bank 1] statements.

6. Subsequent to the hearing Ms Aragona provided evidence in relation to what she believed Mr Pacitto’s income to have been in previous periods. These are not matters that the tribunal can review. The tribunal is legally prevented from reviewing an assessment which is more than 18 months old without the leave of a court with a family law jurisdiction. Ms Aragona may choose to seek legal advice about the process of amending prior assessments.

ISSUES

1. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (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, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process. In order to depart from the administrative assessment the Registrar, and the tribunal standing in place of the Registrar, must be satisfied:

   (i)       that one, or more than one, of the grounds for departure referred to in   subsection 117 (2) exists; and

   (ii)that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to           child support; and

   (B)otherwise proper;

   to make a particular determination under this Part;

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act.

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

Issue 1 – Does a ground exist to depart from the administrative assessment?

Does a ground exist to depart from the administrative assessment under Reason 8?

1. Ms Aragona’s case is based on the receipt by Mr Pacitto of a [pension]. Ms Aragona was of the opinion that Mr Pacitto has deliberately lied about the extent of these payments over many years, and that the letters Mr Pacitto has produced in response to requests from the Department and the tribunal have been altered. Ms Aragona drew the tribunal’s attention to a document at B13, a letter dated 2 December 2019, purporting to be from the US [Government department], which she thought had been altered by Mr Pacitto. She said the letter had too many fonts on it and she did not believe its content was consistent with Mr Pacitto’s payments. This letter shows Mr Pacitto’s monthly payment rates since 2014, and says that he has been paid at a 60% rating other than a brief period in 2017 where his rating was increased to 90% following surgery.

2. Ms Aragona said that Mr Pacitto came out of the [Employer] with a 70% impairment, and has never had a 60% rating. She said that at times his rating increased to 90% after further  [surgery]. Ms Aragona said that Mr Pacitto has previously said that he lost some of his [pension] because he was working, but that her research indicates that this would only occur if Mr Pacitto was considered to be 100% disabled. She says that he now says that he is unemployable, so therefore must be on 100% benefits.

3. Ms Aragona said that she believed that Mr Pacitto had been evasive in relation to his income and assets and had still not provided the correct information to the tribunal. She said that Mr Pacitto has said that his only bank account is a [Bank 2] account, but that this account does not show his [pension], only his newstart allowance.

4. Ms Aragona said that the week before the hearing she received a letter offering her $4,000 in child support if she discontinued the tribunal proceedings.

5. The tribunal put to Mr Pacitto Ms Aragona’s assertion that the document at B13 had been altered by him. Mr Pacitto gave sworn evidence that the document had not been amended. The tribunal examined the document and information on the [Government department] website in relation to the rates of disability compensation for [recipients], and was satisfied that the letter is consistent with the published information and absent proof that Mr Pacitto has altered the document, the tribunal must accept it. It is in fact crucial evidence on which the tribunal will need to rely in its decision making.

6. This letter says that during the relevant period Mr Pacitto’s monthly rate of income in US$ was, or was intended to be, as follows:

   From December 1, 2017             $1,198.52

   From December 1, 2018             $1,231.86

   From April 20, 2019  $1,181.86 (son’s 18th birthday)

   From December 1, 2019             $1,200.68

   From September 8, 2021            $1,131.68 (daughter’s 18th birthday)

   There would no doubt be a further cost of living increase on December 1, 2020.

7. The tribunal noted that Mr Pacitto provided bank statements from [Bank 1] the day before the hearing, showing a balance of US$23,402.41 as at 16 January 2020. It is apparent that the [Bank 2] bank account is not Mr Pacitto’s only bank account, and that Mr Pacitto has finally disclosed this information during the tribunal process. The statement provided to the tribunal does not show deposits of [pension], and the tribunal therefore still cannot be confident that Mr Pacitto does not have further financial resources that remain undisclosed.

8. Mr Pacitto said that he “would rather fess up” and say that he is to receive 100% disability backdated from [surgery] he had on 2 July 2019. He said that he has not yet received this money, but that it has been approved and he will receive a back payment. The tribunal confirmed from the [Government department] website that the amount payable to Mr Pacitto from 2 July 2019 will be US$3,221.85 per month being for 100% disability with one child (US$38,662.20 per annum). There is a cost of living increase on 1 December each year.

9. Mr Pacitto said that he was working in the [workplace] when the parties separated and that at that point he was on 60% disability. He acknowledged that his rating has gone up and down over time when he has had surgery. Mr Pacitto said that he needs to advise Centrelink of the receipt of the increased rate of [pension], and he expects that his newstart allowance will cease.

10. Ms Aragona has sought a departure from the administrative assessment on the grounds that the administrative assessment does not reflect Mr Pacitto’s earning capacity; or his income, property and financial resources. Subparagraphs 117(2)(c)(ia) and (ib) of the Assessment Act provide as a ground for departure:

    (c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

    …

    (ia) because of the income, property and financial resources of either parent; or

    (ib) because of the earning capacity of either parent; or…

11. At the time of Ms Aragona’s application the annual rate of child support payable by Mr Pacitto was $2,225 per annum, based on his Australian taxable income for 2018 of $39,876. Mr Pacitto was not employed for that full financial year due to an aggravation of his pre-existing  [injury]. This taxable income amount does not include his overseas income, which at the time of the application was US$14,782.32, and which has subsequently significantly increased. While the tribunal acknowledges that Mr Pacitto’s [pension] is not considered overseas income for the purposes of the taxation law, for the purpose of child support law it is absolutely a financial resource available to Mr Pacitto on which child support should be calculated. Using the average exchange rate for the period ending 31 December 2018 as published by the Australian Taxation Office converts Mr Pacitto’s [pension] to AU$18,864.62. The addition of this amount to his taxable income would increase his adjusted taxable income to $58,740, a significant increase. The annual rate of child support payable on such an increased income is more than twice the amount returned by the administrative assessment.

12. From 2 July 2019 onwards the situation becomes even more difficult. While Mr Pacitto is currently in receipt of newstart allowance, he will no doubt be required to repay most, or all, of these entitlements once he receives his back payment of [pension]. The decision on objection increased Mr Pacitto’s adjusted taxable income by $18,561 from 20 April 2019 until a terminating event occurs for [the Child], but his total income is likely to be much higher than this allows for. Using the average exchange rate for the period ending 31 December 2019 as published by the Australian Taxation Office converts Mr Pacitto’s [pension] to AU$51,494.

13. Allowing for the increase to Mr Pacitto’s adjusted taxable income made on objection, he was assessed to pay child support on the following incomes from 20 April 2019: $29,323 for the period 20 April 2019 to 30 June 2019; $58,437 for the period 1 July 2019 to 17 July 2019; and $33,030 for the period 18 July 2019 to 30 June 2020. Even if it is accepted that he has no income other than his [pension], the rate of child support payable has clearly been under assessed from 2 July 2019.

14. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. The tribunal is satisfied that the continued assessment of Mr Pacitto on an income which was significantly lower than his actual income, and which returned a much lower rate of child support than he should pay, resulting in [the Child] missing out on the financial support that she should receive from Mr Pacitto amounts to a special circumstance. The tribunal finds this ground established. As a ground is established, the tribunal must also consider whether it is just and equitable, and otherwise proper, to change the assessment.

Issue 2 – Would departure from the administrative assessment be just and equitable?

1. As the tribunal is satisfied that a ground has been established to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable, the tribunal must have regard to the following matters set out in subsection 117(4) of the Assessment Act:

   (a)the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b)the proper needs of the child; and

   (c)the income, earning capacity, property and financial resources of the   child; and

   (d)the income, property and financial resources of each parent who is a   party to the proceeding; and

   (da)the earning capacity of each parent who is a party to the proceeding;   and

   (e)the commitments of each parent who is a party to the proceeding that   are necessary to enable the parent to support:

   (i)himself or herself; or

   (ii)any other child or another person that the person has a duty to   maintain; and

   (f)the direct and indirect costs incurred by the carer entitled to child   support in providing care for the child; and

   (g)any hardship that would be caused:

   (i)to:

   (A)the child; or

   (B)the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)to:

   (A)the liable parent; or

   (B)any other child or another person that the liable parent   has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The tribunal only has to consider the factors set out in subsection 117(4) of the Assessment Act to the extent they are relevant in any particular case (see Gyselman).

3. There is no doubt that Ms Aragona requires as much child support from Mr Pacitto as he is reasonably able to pay to her. At the time of the hearing she had lost her job as [an Occupation] due to COVID-19, but it was intended that she and her employer enter into the Jobkeeper program, which will essentially safeguard her normal income of around $680 per week for the next six months. She has all the usual expenses to be expected in the support of herself and their daughter. Her income is relatively low, and it remains to be seen how secure her income is at the end of the Jobkeeper period. Her taxable income is correctly reflected in the child support assessment and the tribunal sees no reason to make any change in respect of it. Ms Aragona should be aware that she is at liberty to make an estimate of income to the Department if her circumstances change.

4. Mr Pacitto is in rental accommodation. His bank statements disclose no employment income. His personal expenses are relatively modest, and his expenses in managing his ongoing medical condition are relatively small, with larger expenses being reimbursed by [Government department]. Their son lives with Mr Pacitto, but has his own income and contributes equally to the rental expenses. The tribunal accepts Mr Pacitto’s evidence that he does not receive additional payments from [Government department] in respect of their son.

5. The issue of Mr Pacitto’s [pension] is longstanding and there have been multiple departures from the administrative assessment in this case. Generally, Mr Pacitto has not been particularly honest about his circumstances. He has in the past alleged that he is not receiving a [pension] because he resides outside the United States; that his pension had been taken away from him as he was working; and that he does not have a bank account in the United States into which the [pension] is paid. All of this prior evidence is untrue. In that situation, it is extremely difficult for the tribunal to have confidence that the evidence that Mr Pacitto has provided is the full picture, even now.

6. In Humphries & Berry [2008] FMCAfam 409 (SSAT Appeal (Humphries & Berry), Slack FM dealt with the issue of the disclosure of financial information in matters before the tribunal. His Honour stated that the principle of full and frank disclosure applicable to proceedings in the Family Court was also applicable to proceedings before the SSAT (and in this case, the AAT). His Honour stated as follows at paragraphs 26 and 27 and 30 and 31 below:

   Although the SSAT has the power to obtain information (s.103K) and the power to require the Child Support Registrar to exercise powers under the Assessment Act and the Child Support Registration and Collection Act for the purposes of gaining information relevant to a review (s.103L), there nevertheless remains a primary duty and obligation on the parties to the review to make a full and complete disclosure of their financial affairs relevant to the matter before the hearing and a duty to assist the tribunal to come to its determination in the application. (paras 26 and 27)

   …In financial proceedings under the Family Law Act, the authorities make it clear that a Court should not be unduly cautious about making findings in favour of the other party if it is not satisfied that proper disclosure has been made (see Chang & Su (2002) FLC93-117). Such principles, in my consideration, have similar application to these matters before the SSAT. (paras 30 and 31)

1. This brings the tribunal to findings about Mr Pacitto’s income and financial resources. Mr Pacitto’s adjusted taxable income was set at $67,000 under the terms of a departure until 30 June 2018. In her application, Ms Aragona requested the extension of this income amount. She claimed that Mr Pacitto remained employed and continued to be in receipt of a [pension]. Mr Pacitto claimed not to be in receipt of a [pension]. It appears to be established that he ceased employment in May 2018 due to an aggravation of his existing injury. He clearly remained in receipt of a [pension], despite his firm evidence to the contrary.

2. During the period 1 July 2018 to 14 January 2019 Mr Pacitto was assessed to pay child support on the basis of his 2018 taxable income of $39,876. At that time he was in receipt of newstart allowance and [pension]. Mr Pacitto’s [pension] was AU$18,864.62, and he was also in receipt of newstart allowance, which his Centrelink statement shows to be at the rate of $559 per fortnight ($14,534). In the absence of evidence to the contrary, the tribunal accepts that Mr Pacitto did not work in the 2018/19 financial year and had a minimum income of $33,398.

3. At the time of the change of assessment decision, the decision maker noted information provided by AUSTRAC to the effect that Mr Pacitto received a payment of AU$8,029 on 21 August 2018 and AU$23,608 on 4 January 2019, totalling $31,367. The officer determined these amounts to be Mr Pacitto’s [pension]. On objection, Mr Pacitto gave evidence that these were accumulated funds that he needed to use due to his [injury], and they were disregarded. Given the opacity surrounding Mr Pacitto’s financial circumstances, the tribunal does not find that the child support assessment for this period is out of keeping with the level of financial resources available to Mr Pacitto even though it was calculated on a higher income amount. It is not satisfied that Mr Pacitto has been over-assessed to pay child support by virtue of being assessed on his 2018 taxable income for that period.

4. The effect of the decision made from 15 January 2019 is that Mr Pacitto has been assessed on an adjusted taxable income of $30,027 for the period 15 January 2019 to 19 April 2019; and an adjusted taxable income of $29,323 between 20 April 2019 and 30 June 2019. These amounts are clearly too low.

5. Mr Pacitto provided evidence to the effect that he had been overpaid [pension] between October 2017 and January 2018 (a period in which he was assessed at 90% disability following  [surgery], for three months, but continued to be paid at a higher rate for an additional three months in error). The total amount of this overpayment was US$3,001.20, which was recovered from Mr Pacitto between April and September 2019 at the rate of US$501.20 for April 2019 and US$500 per month between May and September. The tribunal notes that under the terms of a previous departure from the administrative assessment, at the time this overpayment was made Mr Pacitto’s adjusted taxable income was set at $67,000. Mr Pacitto was at that time receiving [pension], employment income, and his bank statements showed a high number of overseas transfers. He was also being less than transparent about his income in response to the Department’s processes. Mr Pacitto contended that the impact of the repayment of the overpaid amounts should be taken into account in determining his adjusted taxable income for the period April to September 2019. Given that Mr Pacitto has “come clean” about his income so late in the piece, and the evidence provided still appears likely to be incomplete, the tribunal will not make any specific adjustment in relation to this, in accordance with the principles laid down in Humphries & Berry.

6. The tribunal can also see that Mr Pacitto was reimbursed AU$7,621.82 by [Government department] on 26 November 2019, but that this amount was in respect of invoices rendered for Mr Pacitto’s most recent  [surgery], not income to Mr Pacitto. The tribunal does not propose to have regard to this amount in considering Mr Pacitto’s income.

7. The tribunal finds that Mr Pacitto’s 2018 taxable income of $39,876 was a reasonable estimate of the financial resources available to him until 1 July 2019. Absent the departure, this would have been the income amount maintained for him in the assessment and the tribunal proposes to reinstate it for the period 15 January 2019 to 1 July 2019.

8. From 2 July 2019 the situation changes. Mr Pacitto’s [pension] will increase to around AU$51,494 from that date. An income at this level will preclude him from receipt of any amount of jobseeker payment, and while he has received newstart allowance in the interim, the tribunal accepts that this will need to be repaid and should be disregarded in Mr Pacitto’s financial resources. The amount of the cost of living increase to be paid in December 2020 is as yet unknown, but the previous increases have been around 1.5%, making it likely that Mr Pacitto’s payments will increase to the vicinity of $52,266 from 1 December 2020. Rather than making such a detailed change to the assessment, and having regard to the known financial resource in the [Bank 1] account, the tribunal will set Mr Pacitto’s adjusted taxable income at $52,000 from 2 July 2019 until such time as a terminating event occurs in relation to [the Child].

9. The tribunal acknowledges that this decision will create significant arrears of child support payable by Mr Pacitto. It is satisfied that he currently has the resources to meet the payment of these arrears from the balance of the [Bank 1] account and the receipt of his arrears of [pension]. Payment of child support arrears will not cause him financial hardship.

10. The tribunal is satisfied that it would be appropriate in this case to set Mr Pacitto’s adjusted taxable income at $39,876 for the period between 15 January 2019 and 1 July 2019; and $52,000 for the period from 2 July 2019 until such time as a terminating event occurs in respect of [the Child], as long as it is otherwise proper to do so.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the tribunal is to determine whether it is “otherwise proper” to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the tribunal to take into consideration the nature of the duty of a parent to maintain a child, and the effect that any change to the assessment would have on the rate of any Centrelink benefits being received by the parties or the children.

2. The child support law recognises that each parent has a primary duty to maintain their children. In the case that they cannot, the government may assist in the form of family assistance payments. This decision should reduce the amount of family assistance Ms Aragona receives for the relevant period. The tribunal is satisfied that a departure from the assessment will better reflect the financial resources that have been available to Mr Pacitto and ensure that the level of financial support provided by the parties for both the children is determined according to their capacity to provide that support. It is therefore otherwise proper to depart from the administrative assessment in this matter. 

DECISION

The decision under review is set aside and substituted with the following:

a)    Mr Pacitto’s adjusted taxable income is set at $39,876 for the period 15 January 2019 to 1 July 2019; and

b)    Mr Pacitto’s adjusted taxable income is set at $52,000 for the period 2 July 2019 until such time as a terminating event occurs in relation to [the Child].