Ardron and Ardron (Child support)

[2021] AATA 2287

Ardron and Ardron (Child support) [2021] AATA 2287 (2 June 2021)

DECISION AND REASONS FOR DECISION

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2020/PC020400

APPLICANT:  Mr Ardron

OTHERPARTIES:  Child Support Registrar Ms Ardron

TRIBUNAL:  Member J D'Arcy

DECISION DATE:  2 June 2021

DECISION:

The decision under review is set aside and a new decision substituted that from 1 January 2021 to 31 October 2021 Mr Ardron’s adjusted taxable income is set at $77,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefit from sale of assets – income from employment – 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 Ardron is seeking a review of the decision to maintain his adjusted taxable income at $163,729 from 1 July 2019 to 31 December 2020 and to set his adjusted taxable income at $77,000 from 1 January 2021 to 31 October 2021.

1. Mr Ardron and Ms Ardron are the parents of twins, [Child 1] and [Child 2], born in August 2006. The children are in the primary care of their mother.

1. Following an application for a change of assessment by Ms Ardron on 12 October 2019,    Mr Ardron was assessed to pay child support on his 2018 adjusted taxable income of $163,729 from 1 July 2019 to 31 December 2020. From 1 January 2021 to 30 November 2021 he was assessed to pay child support based on his 2020 adjusted taxable income of $40,094.

1. On 1 August 2020 Mr Ardron lodged a change of assessment application under Reasons 5, 8A, 8B and 9. On 26 August 2020 a decision maker in Services Australia (Child Support) found that the reasons were not established. Mr Ardron objected and on 7 November 2020 a decision maker refused to change the assessment for the period 1 July 2019 to 31 December 2020 and then set his adjusted taxable income at $77,000 from 1 January 2021 to 31 October 2021, finding that Reason 8A was established but the remaining reasons – 5, 8B and 9 – were not established.

1. On 7 December 2020 Mr Ardron lodged an application for review with the Administrative Appeals Tribunal (the tribunal).

1. Directions were issued on 7 April 2021.

1. A hearing was held on 2 June 2021 with Mr Ardron and Ms Ardron by telephone.

1. The following material was available to the tribunal and the parties: the subsection 37(1) of the Administrative Appeals Tribunal Act 1975 Statement and Documents (361 pages), additional documents A1 to A378 from Mr Ardron and B1 to B9 from Ms Ardron.

1. Ms Ardron advised that she did not receive the additional material supplied by Mr Ardron but wished to proceed with the hearing, nevertheless.

1. At the commencement of the hearing Mr Ardron advised that he did not wish to pursue Reason 5.

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a

three-step process. The Registrar, and the tribunal standing in place of the Registrar, must consider:

(i)Whether a ground for departure exists; and

(ii)Whether it is just and equitable as regards the child, the liable parent, and the carer entitled to child support to change the administrative assessment, having regard to the matters set out in subsection 117(4) of the Assessment Act; and

(iii)Whether it is otherwise proper to change the administrative assessment of child support.

1. The grounds for departure from an administrative assessment of child support are covered by subsection 117(2) of the Assessment Act. The relevant Reasons in this case are:

·Reason 8A - That in the special circumstances of the case, an application relating to an administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support because of the income, property and financial resources of either parent; or because of the earning capacity of either parent, subparagraph 117(2)(b)(ia) & (ib).

·Reason 8B Earning capacity - A parent’s earning capacity, rather than actual income, can be considered if the following criteria are satisfied (paragraph 117(7B)):

(i)   The parent is either

·    Not working despite ample opportunity to do so; or

·    has reduced his or her weekly hours of work to below full-time work; or

·    has changed his or her occupation, industry or working pattern.

(ii)  The parent’s decision about his or her work arrangements is not justified by either

·    his or her caring responsibilities; or

·    his or her state of health.

(iii) The parent has failed to show that the decision about his or her work arrangements was not substantially motivated by the effect this would have on child support assessment.

·Reason 9 - That in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the duty of the parent to maintain any other child or another person, subparagraph 117(2)(a)(i).

1. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman [1992] FLC 92-279 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.

CONSIDERATION

Does a ground for departure exist?

1. Reason 8A: Mr Ardron submitted that Child Support should not have used his 2018 taxable income of $163,729 during the 2020 financial year, when he only earned $40,462 in 2020. He further submitted that the amount of $200,001 which he received from the sale of shares, should not have been considered in the assessment of his child support liability because he needed those funds to pay accrued debts and to establish a new life.

1. Under the property settlement Mr Ardron provided his former wife with a home, a car and half of his superannuation. He needed to use the proceeds of sale of the shares to find himself somewhere to live and so used the money to purchase a home and car for his wife in [Country 1] where he lived from July 2019 to mid-November 2019. Pre COVID- 19, his intention was to live part-time in [Country 1] and fly in and out of Australia to work. This intention was thwarted by the onset of the pandemic. He further stated that he did not have significant arrears of child support at the time that he received the proceeds of the sale from the shares. In addition, to repaying debts and purchasing a house and car, he used the balance of the funds to support himself in [Country 1] while not working. He also used around $6,000 of the funds to retrain.

1. In response to the tribunal’s directions, Mr Ardron provided an extensive amount of financial material enabling the tribunal to make the following findings.

1. On June 2019, under three separate Agreements for Sale of Shares, Mr Ardron as trustee for the [named] Family Trust, sold 90 shares in [Business 1] for a total of $200,001. Those funds were credited to Mr Ardron’s bank account on 3 July 2019.

1. Mr Ardron’s income tax returns for 2018, 2019 and 2020 showed the following sources of income. His gross salaries were as follows - $62,307 in 2018, $59,034 in 2019 and $40,062 in 2020. In 2019 he received capital gains income of $32,500. He received distributions from the family trust of $104,613 in 2018 and $101,059 in 2019. There were no distributions in 2020 as the trust is now dormant. His taxable incomes were as follows (after addition of small amounts of investment income and less deductions):

2018	$163,729
2019	$187,424
2020	$40,094

1. Mr Ardron works as [an occupation 1] for [Employer 1], a [service] company  in Western Australia. He stated that with a recent pay rise he estimated his current year taxable income to be around $100,000. Pay advices dated June and July 2020 indicate that, at that time, Mr Ardron was earning an annual salary of $78,000.

1. The tribunal’s findings on Reason 8A: Mr Ardron was assessed to pay child support on an adjusted taxable income of $163,729 from 1 July 2019 to 31 December 2020 under a change of assessment decision. Mr Ardron’s 2018 taxable income was lodged with Child Support on 6 May 2019. The lodgement of an income tax return usually triggers a new child support period where the most recent taxable income is used to assess child support liability. Had there been no change of assessment application, Mr Ardron would have been assessed on his 2018 taxable income of $163,729 from 6 May 2019 until 4 August 2020 when he lodged his 2019 income tax return showing taxable income of $187,424. He also lodged his 2020 income tax return on the same date which would have resulted in the use of the adjusted taxable income amount of $40,094 from 4 August 2020.

1. Under the change of assessment decision, the adjusted taxable income of $163,729 has been used from 1 July 2019 to 31 December 2020. Mr Ardron has not demonstrated that there are any special circumstances in his case to change the assessment and to use his actual earnings of $40,094 instead of his adjusted taxable income of $163,729. To use the lower income would effectively mean that the income from the sale of his shares would be disregarded and that his children would not benefit from his increased income.

1. From 1 January 2021 to 30 November 2021 Mr Ardron was being assessed on an adjusted taxable income of $40,094. His pay advices from [Employer 1], the company for which he still works, indicates that his annual income is $78,000.

1. The increase in income from $40,094 to $78,000 creates a significant increase in the amount of child support payable to Ms Ardron, thus creating the special circumstances to establish Reason 8A.

1. Reason 8B: The criteria for establishing Reason 8B are stated above. They do not apply to Ms Ardron’s situation. She has been unemployed since 2018 and receives a disability support pension for her back condition because she is unable to work. As she does not meet the first criterion, it was unnecessary for the tribunal to consider the remaining criteria. Reason 8B is not established.

1. Reason 9: To establish this reason, Mr Ardron must have a duty to maintain his [Country 1] wife and her son; special circumstances must exist; and his capacity to provide for [Child 1] and [Child 2] must be significantly reduced as a result of this duty.

1. The term “duty to maintain” is not defined in the Assessment Act however the Family Court in the matter of Vick and Hartcher (1991) FamCA79 found that the words “duty to maintain” is limited to a legal duty and does not include a moral obligation to maintain a person or a child. These principles were later adopted in Dwyer v McGuire (1993) FamCA82.

1. A legal duty to maintain another person is a duty imposed by an Australian federal, state or territory law or a foreign court. Examples of legal duties are - a duty to support a husband or wife under the Family Law Act 1975, a duty to support a de facto spouse where the parties are living in a genuine domestic relationship under state legislation, a duty to pay spousal maintenance to a former husband or wife under an order made under the Family Law Act 1975 or by a foreign court; a duty to pay maintenance to a former de facto partner under the Family Law Act, the WA Family Court Act 1975 or a foreign court; a duty to support an adult child under section 66L of the Family Law Act 1975; or, a duty to pay child maintenance for a child (including a stepchild) under a court order made in the Family Court or by a foreign court.

1. Mr Ardron stated that he had a legal duty to support his [Country 1] wife, likening his situation to an Australian man supporting his Australian wife.

1. The tribunal found that there was no evidence that Mr Ardron had a legal duty to support t his wife or his stepson in terms of the types of legal duties described above. There are no foreign court orders in place and there is no legal duty under federal or state family law. Mr Ardron may have a strong moral duty to support his [Country 1] wife and her son but that moral duty does not establish Reason 9.

1. Reason 9 is not established.

Is it just and equitable to depart from the administrative assessment, having regard to the following matters set out in subsection 117(4) of the Assessment Act?

1. In considering this issue subsection 117(4) provides that the tribunal must have regard to the matters stated below:

(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.

Is it otherwise proper to make a change to the administrative assessment of child support?

1. In his Statement of Financial Circumstances, Mr Ardron disclosed assets comprising superannuation of $75,461 and a car valued at $1,209. He has a personal loan and credit card debts of $4,850. He stated his income at $1,005 and his total expenses at $1,651. He advised that he boards with a friend, sends a few hundred dollars per week to his wife in [Country 1] to make the repayments on a car and for her living expenses. His  expenses also included education expenses of $50 a week for his stepson. The home and car in [Country 1] are in his wife’s name because of the prohibition on foreigners owning property. He stated that his health was generally good. If the assessment was not changed and the arrears reduced it would cause him hardship. It would take him a long time to repay the debt and it would make it impossible for him to enter the property market in Western Australia.

1. Ms Ardron stated that she receives around $1,100 per fortnight in Centrelink payments  from her disability support pension and family tax benefit. She received the former matrimonial home, valued at $235,000, under a property settlement. She has around $20,000 in savings, a car valued at $17,000 and household contents of $1,000. She has superannuation of $80,583. Her expenses are modest at $674 per week but notably her expenses on the children’s clothing, activities, entertainment, education are very minimal. She makes no provision for holidays or other discretionary expenditure. She described the children as being in good health. If she did not receive the current level of child support, she stated that the children would experience hardship.

1. Mr Ardron has requested that his earnings of $40,094 be substituted for the amount of $163,729 during the period in which they were earned, that is from 1 July 2019 to 30 June 2020, the effect of which would be to significantly reduce his arrears of child support. The consequence of using the lower income amount is that his children, [Child 1] and [Child 2] would not receive any of the benefits flowing on from his sale of shares in June 2019; and he would not be supporting his children in accordance with his income and resources. It would also have the consequence of allowing Mr Ardron to prioritise the needs of a new wife and stepson over the needs of his own children and deprive them of the child support needed during their expensive teenage years.

1. In July and August 2019 Mr Ardron transferred $105,262 to [Country 1] and he lived there between July and November 2019. He used the balance of the proceeds of sale to pay a tax debt of $35,368, a child support debt of $1,634 to Child Support, $6,000 on retraining expenses and $28,463 in personal debts. It appears that $29,274 was spent on his living expenses between July and November 2019 in [Country 1] and bringing his wife to Australia for their marriage. Notably Mr Ardron did not make any provision for payment of child support for his children during the time that he was out of Australia and not working. At 11 December 2020 his arrears of child support stood at $37,177.

1. The tribunal found that it is not just and equitable to change the assessment of child support for the period 1 July 2019 to 31 December 2020 for the reasons stated above.

1. It was open to the tribunal to change the assessment from 1 July 2020 to at least 4 August 2020 to use Mr Ardron’s 2019 taxable income of $187,424 to reflect the receipt of the proceeds from the sale of shares over two taxation years. However, the effect of such a change would be to increase his child support arrears. Although he is currently earning at least $78,000 in the current financial year, the tribunal was satisfied that a further increase in arrears would cause Mr Ardron hardship given that he has a legal duty to support his daughters and a moral duty to support his [Country 1] family. A further increase in arrears may jeopardise his ability to meet his current child support liability.

1. However, given that Mr Ardron has been earning $78,000 per year since mid-2020 it is just and equitable to change the assessment to reflect earnings of $77,000 (income earned less deductions) from 1 January 2021 to 31 October 2021, by which time Mr Ardron should have lodged his 2021 income tax return.

Is it otherwise proper to make a change the administrative assessment of child support?

1. Subsection 117(5) requires the tribunal to take into consideration the following matters:

(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

(b)the effect that the making of the order would have on:

(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

1. The issue of whether it is otherwise proper to change the assessment usually focuses on the impact that the change in assessment will have on payment of family tax benefit.

1. The increase in the amount of child support payable to Ms Ardron will reduce her entitlement to family tax benefit. However, considering the parents’ duty to maintain the children, it is otherwise proper to change the assessment, rather than have children supported by increased government payments.

DECISION

The decision under review is set aside and a new decision substituted that from 1 January 2021 to 31 October 2021 Mr Ardron’s adjusted taxable income is set at $77,000.