Bartley and Templar (Child support)

[2018] AATA 1469

Bartley and Templar (Child support) [2018] AATA 1469 (13 March 2018)

DIVISION:       Social Services & Child Support Division

REVIEW NUMBER:  2017/SC011995

APPLICANT:  Mr Bartley

OTHER PARTIES:    Child Support Registrar

Ms Templar

TRIBUNAL:    Member J Cuthbert

DECISION DATE:     13 March 2018

DECISION:

The tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying Mr Bartley’s adjusted taxable income from 1 October 2016 until the assessment for [Child 1] ends to the figure for Male Total Average Weekly Earnings (MTAWE); and

• increasing the annual rate of child support payable by Mr Bartley by $600 from 1 February 2017 until the assessment for [Child 1] ends.

CATCHWORDS
Child support - Departure determination - Income and financial resources of liable parent - Business income - Special needs of the child - Decision to depart - 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 removed 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

HISTORY

1. This review concerns an application for a change to a child support assessment made by Ms Templar on 3 October 2016.

2. Ms Templar and Mr Bartley are the parents of [Child 1] (born 2002) and [Child 2] (born 2006) as well as an adult son, [Child 3]. There has been a child support assessment in place, made by the Department of Human Services – Child Support (the Department), since 2011. The child support assessment is currently based on Ms Templar having care percentages of 100% for [Child 1] and [Child 2].

3. A departure decision made by the Social Security Appeals Tribunal on 27 May 2014 varied Mr Bartley’s adjusted taxable income to $87,620 from 17 September 2013 to 30 September 2016. For the period 1 to 30 September 2016 Mr Bartley was liable to pay an annual rate of child support of $16,638.

4. From 1 October 2016 Mr Bartley was assessed to pay child support of $414 a year based on his 2015/16 adjusted taxable income of $23,750 and a provisional income of $9,840 for Ms Templar.

5. On 3 October 2016 Ms Templar applied to the Department for a departure from the assessment on the grounds that Mr Bartley’s income, property, financial resources and earning capacity were not properly reflected in the assessment.

6. On 7 March 2017 a decision was made to depart from the child support assessment by varying Mr Bartley’s adjusted taxable income to $87,620 from 1 October 2016 to 28 February 2018.

7. Mr Bartley lodged an objection to that decision. On 2 June 2017 his objection was disallowed. On 27 June 2017 Mr Bartley lodged an application for a review of the objection decision with the tribunal.

8. The matter was heard on 21 December 2017. Mr Bartley and Ms Templar both attended the hearing in person. The Child Support Registrar was not represented at the hearing. The tribunal had access to the statement and documents provided by the Department (folios 1 to 395), documents provided by Mr Bartley (folios A1 to A322) and documents provided by Ms Templar (B1 to B41).

9. Following the hearing Mr Bartley and Ms Templar were given an opportunity to provide further documents. Mr Bartley provided documents (A323 to A339), and Ms Templar provided documents (B42 to B44). Copies of those documents were sent to the parties for comment.

CONSIDERATION

1. The rate of child support payable by a 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 and the income of each parent.

2. A liable parent or a carer may apply to the Child Support Registrar (the Registrar) for a determination to depart from the child support assessment under Part 6A of the Assessment Act (section 98B). 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 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. If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations in section 98S of the Assessment Act. That section permits a range of determinations, including varying the annual rate of child support payable or a parent’s adjusted taxable income.

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

1. Ms Templar sought a departure from the administrative assessment on the grounds that Mr Bartley’s income, financial resources, property and earning capacity were greater than reflected in his 2015/16 adjusted taxable income used in the assessment from 1 October 2016.

2. The grounds for departure are set out in subsection 117(2) of the Assessment Act. Subparagraphs 117(2)(c)(ia) and (ib) provide as grounds 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

   … 

3. The term “special circumstances” is not defined in the Assessment Act. In Gyselman v 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.

Mr Bartley’s income, property and financial resources

1. Mr Bartley is a [Occupation 1]. He is the principal for a company, [which] has operated [an] agency for about 20 years. Mr Bartley is a director of [COMPANY 1] as is[Mr A]. Mr Bartley and [Mr A] each have a 50% shareholding. Mr Bartley told the tribunal that [Mr A] is 83 years old. He lives overseas and does not play an active part in the business.

2. [COMPANY 1] operated as a franchise of [another business] until July 2010. At the hearing Mr Bartley said that [COMPANY 1] has two casual employees as well as him. He said that until October 2017 [COMPANY 1] employed a full-time [manager], [who] was paid $720 a week. Mr Bartley said that he is working six days a week as [COMPANY 1] cannot afford a receptionist.

3. The latest payslip provided by Mr Bartley shows year-to-date income of $12,400 to 30 November 2017, including a car allowance of $1,600; a gross amount of $775 a week including a $100 car allowance. The payslips provided state that Mr Bartley is paid $18 an hour for 37.5 hours a week rather than in accordance with the hours that Mr Bartley told the tribunal that he works.

4. In 2016/17 [COMPANY 1] had a turnover of $200,366, about $33,000 less than the previous year. After expenses of $188,639 [COMPANY 1] made a profit of $11,727 in 2016/17. The expenses included motor vehicle expenses of $3,593 and commissions of $27,871 as well as telephone costs of $6,430. At the hearing Mr Bartley told the tribunal that sales commissions of 1.9% that he receives are paid into [COMPANY 1]. He subsequently stated that the commissions [were] paid to [Mr B], the [manager] at the time and also to [Mr C], a friend who offered his assistance. Mr Bartley provided details of transfers of $3,379 and $3,458 to [Mr C] on 5 October 2016 and 13 February 2017 and copies of a letter and emails in June 2016 and August 2016 indicating that [Mr B] had some involvement in the sale of[certain products]. The tribunal notes that despite having opportunity to do so, Mr Bartley did not provide evidence supporting an expense of $27,871 for commissions in the 2016/17 year.

5. Mr Bartley told the tribunal that he was unaware what the motor vehicle expenses claimed in 2016/17 related to. He was adamant that [Company 1] does not pay for fuel or any other expenses for his vehicle, despite the claim for motor vehicle expenses made by [Company 1] and a statement in his own tax return that [Company 1] paid fuel expenses. He said that he was unsure what the expense relates to. He acknowledged that [Company 1] pays for a mobile telephone for him ($49 a month) as well as landlines and mobile phones for other staff.

6. Mr Bartley said that at the time of the hearing there were no [work]. He said that the majority of the income comes from [Company 1]’s rent roll, which is shown on the company’s balance sheet at a cost price of $55,000. At the hearing Mr Bartley told the tribunal that an attempt to sell the rent roll for $235,445 in August 2017 had been unsuccessful. He subsequently provided evidence of a sale to take place on 2 April 2018 for a total price of $244,147. Mr Bartley stated that the sale was subject to finance and would be completed over six months. He claims that he will be left with a personal debt of $56,000.

7. The balance sheet for [Company 1] shows net assets at 30 June 2017 of $251,932. However as the rent roll is valued at its cost price rather than the sale price anticipated, the tribunal finds that the net assets are valued at about $62,000. At the hearing Mr Bartley said that he was unsure what he would do after the rent roll was sold.

8. The balance sheet for 2016/17 indicates that Mr Bartley or [Mr A] loaned $70,906 to [Company 1] in that year. Mr Bartley said that he and [Mr A] had not loaned money to the company. He told the tribunal that [Company 1] had recently borrowed money [on] a short term loan. 

9. Mr Bartley’s 2016/17 adjusted taxable income is $26,695, made up of income and allowances from [Company 1] of $41,810; less deductions of $15,115, made up of motor vehicle expenses of $9,699, travel of $281, uniform and laundry costs of $199, gifts and donations of $1,200, other work-related expenses of $3,554 and tax agent’s fees of $182. The other work-related expenses include licence renewal ($560), mobile phone ($470), home office ($338), office expenses ($79), depreciation of two pairs of sunglasses ($144), a Christmas lunch for staff ($213) and sunglasses ($80) as well as $1,670 for stationery, etc. The motor vehicle claim is stated to be based on a log book recording business mileage of 90% in respect of Mr Bartley’s 2010 Lexus which he purchased in 2013 via a lease arrangement.

10. Mr Bartley’s statement that he meets all of his own motor vehicle costs is at odds with his accountant noting on Mr Bartley’s tax return “petrol through the company” and the claim for motor vehicle expenses in [Company 1]’s profit and loss statement.

11. The tribunal notes that Mr Bartley claimed a deduction for his mobile telephone despite the expense being met by [Company 1]. He acknowledged that the amount claimed for gifts and donations relate to his regular purchase of art union tickets. He said that he does some work from home on his iPad but does not have a separate office area.

12. Due to discrepancies in the financial statements for [Company 1] and Mr Bartley’s income tax return, the tribunal finds that those documents are not reliable. The tribunal finds it likely that Mr Bartley has financial resources available to him through the operation of [Company 1] that are not apparent from his adjusted taxable incomes. The tribunal notes that he also could have been paid dividends from profits or a higher salary commensurate with working six days a week.

13. Ms Templar does not suggest that Mr Bartley has income and financial resources which are greater than he has had in the past. She acknowledged that [Company 1] was always struggling when she and Mr Bartley were married, although she said that she had not been aware of what he was earning. She said that she had earned $18,000 to $20,000 a year at a [Workplace 1] to meet household expenses.

14. As well as his interest in [Company 1] Mr Bartley owns a car (which is subject to finance) and has a small amount of savings. There is no evidence that he has any other property which has a potential to provide him with income.  However, on the evidence available the tribunal finds that Mr Bartley has income and financial resources available to him far greater than suggested by his adjusted taxable incomes of $23,750 in 2015/16 and $26,695 in 2016/17.

15. Mr Bartley estimated that he had weekly expenses, including motor vehicle costs, of $1,053 a week or almost $54,000 a year. The tribunal is satisfied that he has at least sufficient income and financial resources to meet those expenses.

Mr Bartley’s earning capacity

1. The tribunal also considered Mr Bartley’s earning capacity and the three criteria in subsection 117(7B) of the Assessment Act. He told the tribunal that he is working for six days a week. The tribunal finds no indication that he has altered his work pattern or industry or that he is working less than full-time hours. A reduction of income is not indicated in Mr Bartley’s adjusted taxable incomes which, apart from the 2016/17 year, have been less than $25,000 since at least 2010/11.

2. Mr Bartley told the tribunal that he suffers from depression which has affected his ability to work for the last four years. He provided medical evidence that he is being treated with anti-depressants and has counselling with a psychologist. However, the tribunal finds no evidence to support his statement that his condition has an effect on his income or earning capacity.

3. On the evidence available and in light of the findings about Mr Bartley’s income and financial resources, the tribunal finds that the three criteria of subsection 117(7B) of the Assessment Act are not satisfied. As a consequence the tribunal is unable to determine whether Mr Bartley has any unused earning capacity.

Do the existing assessments provide a result which is unjust and inequitable?

Ms Templar’s income, property, financial resources and earning capacity

1. In order to determine whether Mr Bartley’s income and financial resources result in child support assessments which are an unjust and inequitable determination of the financial support he should provide for [Child 1] and [Child 2], the tribunal considered whether Ms Templar’s adjusted taxable income is indicative of her income, property, financial resources and earning capacity.

2. Ms Templar was employed by [Employer 1] as an [Occupation 2] for about two years. She worked full-time for some time and then worked on a part-time basis for two days a week, with additional days when available. However, the tribunal accepts that her employment ended from 20 December 2017 due to a reduction in funding.

3. Ms Templar’s 2015/16 adjusted taxable income of $23,750 replaced the provisional income used. Her 2016/17 adjusted taxable income is $39,623, made up of salary of wages of $35,936 and newstart allowance of $3,747, less some work-related deductions. The tribunal infers that Ms Templar’s 2016/17 adjusted taxable income has since been used in the child support assessment following as a notice of assessment was issued by the Australian Taxation Office on 22 August 2017.

4. The latest payslip Ms Templar provided shows year-to-date income of $7,975 to 16 November 2017. Ms Templar was also receiving a part payment of newstart allowance when she was working. On 2 February 2018 she advised the tribunal that she was still unemployed but was actively seeking work.

5. Ms Templar has equity in her home and has some savings, a car, household contents and superannuation. There is no evidence that she has any other financial resources or property of significant value which is capable of providing her with any significant income.

6. Mr Bartley stated that Ms Templar has potential to earn more income. He noted that she left her work at [Workplace 1] after their separation and that she had been employed there for 16 years. The tribunal considered Ms Templar’s earning capacity noting her evidence that she ceased work at the [Workplace 1] after a fire which resulted in the deaths of several patients. She said that she lost her passion for the work and subsequently completed a course in business administration. She said that she is looking for administrative work and that she is currently undertaking a course in events management that will continue until February 2019. She noted that she was working part-time at the [Workplace 1] when she and Mr Bartley separated. She said that she had worked full-time [with Employer 1] until her days were reduced due to funding issues.

7. The tribunal finds that the three criteria in subsection 117(7B) of the Assessment Act are not satisfied in this case as the tribunal is satisfied that the decisions Ms Templar has made about her employment are not motivated by a desire to affect the child support assessment. As a consequence the tribunal is unable to determine that Ms Templar has any unused earning capacity.

Are there special circumstances for which to depart from the assessment?

1. Taking into account the objects of the Assessment Act (section 4), including that children should share in the standard of living of both their parents, the tribunal finds that the income and financial resources of Mr Bartley provide special circumstances for which to depart from the assessment. Mr Bartley would be liable to pay far more child support if the assessment was based on his income and financial resources rather than his adjusted taxable income. The tribunal finds that the assessment is unfair to Ms Templar and to [Child 1] and [Child 2] for that reason, and that a ground is established to depart from the assessment under subparagraph 117(2)(c)(ia) of the Assessment Act.

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

1. As the tribunal is satisfied that there is a ground 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 having regard to the matters set out in subsection 117(4) of the Assessment Act.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. In accordance with the objects set out in section 4 of the Assessment Act, [Child 1] and [Child 2] should receive a proper amount of financial support from their parents in accordance with their capacity to contribute.

The children’s needs

1. [Child 1] is 15 years old and [Child 2] is 12. They both attend public schools.

2. [Child 1] is in Year 10 in 2018. She attends singing lessons and guitar lessons and also has tutoring in mathematics. Ms Templar acknowledged that she did not have any discussion with Mr Bartley in 2017 when [Child 1] started the classes and tutoring. Ms Templar provided a letter from [Child 1]’s singing school which states that [Child 1] is improving her musical ability. However, it does not suggest that [Child 1] has a particular talent which would amount to a special need, the costs of which should be taken into account in the assessment.

3. Ms Templar also provided a letter from [Child 1]’s school principal that states that [Child 1] has experienced difficulty with mathematics and often requires one-to-one assistance. It is noted that “individual tutoring would be extremely beneficial”. The tribunal finds that the cost of tutoring, $30 a week during school terms or $1,200 a year, is an expense related to [Child 1]’s special need which significantly affects the overall cost of her support.

1. Apart from the costs mentioned above, the tribunal is satisfied that the costs related to the care of [Child 1] and [Child 2] are not out of the ordinary range of expenses for children of their ages.

The children’s income, property, financial resources and earning capacity

1. The tribunal has no evidence that either [Child 1] or [Child 2] has any income, property or financial resources or any unused earning capacity that needs to be taken into account in the child support assessment.

The income, property, financial resources and earning capacity of Ms Templar

1. The income, property, financial resources and earning capacity of Ms Templar have been discussed above.

Ms Templar’s necessary commitments

1. Ms Templar lives with [Child 1], [Child 2] and [Child 3] in a house she owns which is subject to a mortgage. At July 2017 she owed about $235,000. Ms Templar told the tribunal that [Child 3] is an apprentice who “pays board when he wants to” although he is supposed to pay her $50 a week.

2. She told the tribunal that she had probably overstated her weekly expenses to be about $1,500 and that she has cut back a lot.  The tribunal notes that even when she was working part-time her stated expenses exceeded her income. The tribunal notes that she has been utilising her savings to meet the reasonable and necessary expenses that she has for herself, [Child 1] and [Child 3]. In July 2017 she had remaining savings of about $12,000.

The income, property, financial resources and earning capacity of Mr Bartley

1. The income, property, financial resources and earning capacity of Mr Bartley have been discussed above.

Mr Bartley’s necessary commitments

1. Mr Bartley pays $250 a week for accommodation and utilities. His bank statements and other evidence he provided do not indicate that he is unable to meet his reasonable and necessary costs as well as discretionary expenses.

The parents’ duty to support others  

1. The tribunal finds that neither Mr Bartley nor Ms Templar has a duty to support any other person apart from [Child 1] and [Child 2]. Although Ms Templar provides support for [Child 3] by way of meeting household cots, the tribunal finds that she has no legal duty to do so. Even though [Child 3] is working as an apprentice [on] a fairly low income, he should have sufficient means to support himself.

Terms and period of departure

1. Ms Templar made her departure application on 3 October 2016, a few days after the earlier departure ended on 30 September 2016. The tribunal finds that it would be just and equitable to depart from the assessment from 1 October 2016.

2. The tribunal finds that it would be just and equitable to depart from the assessment by varying Mr Bartley’s adjusted taxable income to the figure for Male Total Average Weekly Earnings ($71,256 for a child support period which commenced in 2016 and $72,462 for a child support period which commenced in 2017).

3. Although Ms Templar was not working at the time of the hearing, the tribunal does not propose to vary her adjusted taxable income, so as to allow her to lodge an estimate of her income with the Department if necessary.

4. The tribunal also finds that it would be just and equitable to increase Mr Bartley’s child support liability from the start of the 2017 school year by 50% of the cost of [Child 1]’s private tuition, $600 a year. In the circumstances of this case and to provide some certainty to the parties, the tribunal proposes that the variations to the assessment should continue until the assessment for [Child 1] ends.

5. The tribunal finds that the proposed variations result in a child support liability (currently about $290 a week) which reflects a reasonable level of support for [Child 1] and [Child 2] given the differences between their parents’ incomes, property and financial resources and [Child 1]’s special need.

Hardship

1. The child support payable on the basis of the decision proposed should assist Ms Templar to meet the children’s proper needs.

2. In July 2017 Mr Bartley owed child support arrears of close to $17,000. The proposed decision will result in a reduction of the arrears. However, the tribunal considers that the proposed decision will not result in hardship to Ms Templar and the children. In light of the findings made about the income and financial resources of Mr Bartley, the tribunal finds that the proposed decision will not result in hardship to him.

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

1. The final step for the tribunal to undertake 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 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.

2. The child support law recognises that each parent has a primary duty to maintain their children. Ms Templar receives family tax benefit. The tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter and to properly reflect Mr Bartley’s income and financial resources as well as the costs related to [Child 1]’s special need.

DECISION

The tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying Mr Bartley’s adjusted taxable income from 1 October 2016 until the assessment for [Child 1] ends to the figure for Male Total Average Weekly Earnings (MTAWE); and

• increasing the annual rate of child support payable by Mr Bartley by $600 from 1 February 2017 until the assessment for [Child 1] ends.