Baydun and Baydun (Child support)

[2020] AATA 2030

Baydun and Baydun (Child support) [2020] AATA 2030 (7 May 2020)

DIVISION:     Social Services & Child Support Division

REVIEW NUMBER:  2019/BC017557

APPLICANT:  Mr Baydun

OTHER PARTIES:  Child Support Registrar

Mrs Baydun

TRIBUNAL:Member J Thomson

DECISION DATE:  07 May 2020

DECISION:

The Tribunal varies the decision under review so that for the period 4 January 2019 to 31 December 2020, Mr Baydun’s adjusted taxable income is varied to $55,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business - decision under review varied

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

BACKGROUND

1. Mr Baydun and Mrs Baydun are the parents of [Child 1], born 2004, and [Child 2], born 2008 (the children). Both children are recorded as being in the greater than primary care of Mrs Baydun.

2. On 4 January 2019, Mrs Baydun applied to the Department of Human Services – Child Support (the Department) for a change of assessment on the grounds that the costs of maintaining the child [Child 1] were significantly affected because of the special needs of the child (commonly referred to as Reason 2), and that the income, property and financial resources of Mr Baydun were not accurately reflected in the administrative assessment of child support payable by him, making the assessment unjust and inequitable (commonly referred to as Reason 8A).

3. The administrative assessment in place at the time of Mrs Baydun’s application required Mr Baydun to pay an annual rate of child support of $5,732 for the period 1 December 2018 to 24 January 2019, based on his 2017/18 adjusted taxable income (ATI) of $46,166, and Mrs Baydun’s 2017/18 ATI of $19,497. For the period 25 January 2019 to 30 June 2019, the annual rate of administratively assessed child support payable by Mr Baydun was reduced to the minimum annual rate of $427, based on Mr Baydun’s 2018/19 income estimate of $25,550, and Mrs Baydun’s 2017/18 ATI of $19,497.

4. On 21 May 2019, a Department decision maker, [DM] found Reasons 2 and 8A established and changed the assessment, deciding that, for the period 4 January 2019 to November 2019, Mrs Bayduns’ ATI should be set at $30,000, and for the period 4 January 2019 to 29 February 2020, Mr Baydun’s ATI should be set at $66,903.

5. On 18 June 2019, Mr Baydun objected to [DM]’s decision of 21 May 2019, and on 13 September 2019, a Department objections officer set aside [DM]’s decision of 21 May 2019, and, in substitution, decided that for the period 4 January 2019 to 31 December 2020, the ATI for Mrs Baydun should be set at $30,368, and that for the same period, Mr Baydun’s ATI should be set at $64,659.

6. On 3 October 2019, Mr Baydun applied to the Tribunal for review of the objections officer’s decision of 13 September 2019.

7. The Tribunal heard the matter on 7 May 2020. Both parents attended the hearing via conference telephone and gave affirmed evidence. The Tribunal had before it documentation provided by the Department (Exhibit 1), Mr Baydun (Exhibit A) and Mrs Baydun (Exhibit B).

THE LEGISLATIVE FRAMEWORK

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Act), the relevant provisions of which are as follows. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children, and the level of care provided by each parent. Part 6A of the Act allows for a departure from the administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·One, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·A departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·It is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)).

CONSIDERATION

1. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2) of the Act.

2. 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 Registrar may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage of a child.

Grounds for departure

1. Subparagraph 117(2)(c)(ia) provides 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…

2. The words “special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislation in subsection 117(2) must be guided by the qualification that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman and Gyselman (1992) FLC 92–279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

3. In reaching its decision, the Tribunal has considered the affirmed evidence given by both parents at the hearing and the documentation contained in Exhibits 1, A and B.

4. Both parties acknowledged and agreed at the hearing that the only issue for determination by the Tribunal in this matter was Mr Baydun’s ATI for child support purposes. Mr Baydun did not challenge Mrs Baydun’s ATI determined by the objections officer, and Mrs Baydun did not pursue her claim for contribution from Mr Baydun for the special-needs costs with respect to the child, [Child 1].

5. Mr Baydun gave evidence that he is [an occupation 1], trading under the company name of [business name] (the company). He is the sole director and shareholder of the company and its only employee. Since April 2018, he has operated the company’s business from his home address, which he rents, and until early 2019, the company has contributed half of the rental on his residential property, which was claimed in the company’s 2018/19 profit and loss statement as a business expense in the amount of $12,941.

6. Mr Baydun said he drew a salary from the company of $26,569 for the 2018/19 financial year. He provided copies of payslips in support of his evidence, and the financial accounts prepared by the company’s accountants for that financial year reflected those drawings as did his and the company’s 2018/19 income tax returns.

7. Based on that evidence Mr Baydun submitted that the objections officer’s determination of his ATI for the period 4 January 2019 to 31 December 2020 should be varied from $64,659 to $26,464 which he said was his net taxable income reflected in the copy of the Australian Taxation Office assessment notice for the 2018/19 financial year he provided as part of Exhibit A.

8. Both parents gave evidence of a Family Law property settlement having been concluded in the Federal Circuit Court of Australia in January 2020, pursuant to which both parents shared in the proceeds of sale of the former matrimonial home. Mrs Baydun gave evidence that she received $197,000 (reflected in her Statement of Financial Circumstances (SOFC) dated 1 April 2020 she provided to the Tribunal and affirmed at hearing). She said her share of the property settlement included a component compensating her for the substantial donations recorded in the company’s expenses in its 2017/18 profit and loss statement, to which Mrs Baydun had objected as not being a legitimate business expense, and a deliberate attempt by Mr Baydun to reduce his taxable income for child support purposes in that financial year.

9. Mr Baydun gave evidence that he received $109,000 from the property settlement, most of which he said he applied to discharge debts incurred during the course of the marriage. He said he has a balance of $4,062 remaining from the settlement, which he holds in cash at his home. He acknowledged he did not disclose these funds in his most recent SOFC dated 24 March 2020, provided to the Tribunal as part of his documentation, Exhibit A. Otherwise, he affirmed the contents of that document at hearing.

10. In response to earlier directions by the Tribunal, Mr Baydun provided copies of the company’s 2018/19 financial statements and related income tax return, Mr Baydun’s income tax return for that financial year, and a copy of the company’s profit and loss statement for the current financial year, 1 July 2019 to 20 March 2020.

11. The Tribunal scrutinised these documents and, during the course of the hearing, questioned Mr Baydun on a number of expense items in the profit and loss statement for the 2018/19 financial year. In response to the Tribunal’s questioning, Mr Baydun conceded that most of the legal expenses of $15,470 reflected in the expenses summary related to his personal legal expenses incurred in the Family Law property settlement proceedings concluded in January 2020, and, accordingly, were not a legitimate business expense. He also conceded that the rental expenses of $12,941, representing approximately half of the rental on his residence, whilst arguably a legitimate income tax deduction for income tax purposes, were, in reality, a financial resource available to him for child support purposes.

12. Mrs Baydun gave evidence that her legal expenses for the property settlement proceedings were $103,000.

13. The Tribunal was satisfied that Mr Baydun’s drawings reflected in the company’s 2018/19 profit and loss statement at $26,569 reconciled with the payslips he provide, and that the motor vehicle expenses reflected in the statement were the actual expenses incurred for the use of his motor vehicle for business purposes, as recorded in his motor vehicle log book, and that no apportionment for private use should be made in relation to those expenses. He also confirmed that the company was no longer able to pay for the motor vehicle running costs, and would not be claiming those expenses for the 2019/20 financial year. That was reflected in the profit and loss statement he provided as part of Exhibit A for that financial year.

14. The Tribunal was also satisfied with Mr Baydun’s evidence as to the legitimacy of the expenses relating to staff training and subcontractors; he gave evidence that the former included the cost of a seven-month [specified] course and first aid safety course he undertook during the 2018/19 financial year. He said the [specified] course will reduce the company’s dependence on [subcontractors], and the first aid safety course was a workplace health and safety prerequisite for his work as [an occupation 1] [on specified jobs]. He confirmed that neither of these costs will be recurring in the 2019/20 financial year, nor would the company be claiming any rental expenses for that financial year. He gave evidence that the rental/mortgage item in his weekly household expenses summary in his SOFC referred to above reflected the total amount of the rental paid by him for his residence, with no contribution from the company, and that the motor vehicle expenses listed in his schedule of weekly household expenses were his private use expenses.

15. He did concede that there was a component of personal use of the company mobile phone included in the company’s telephone expense item of $2,874, but said that the bulk of the company’s business was done via mobile telephone rather than via its land line.

16. The profit and loss statement Mr Baydun provided for the 1 July 2019 to 20 March 2020 financial year corroborated his evidence that the company was no longer claiming rental or staff training expenses.

17. Mrs Baydun did not challenge Mr Baydun’s evidence regarding the company expenses referred to above.

18. The Tribunal also scrutinised the company’s [Bank] statements forming part of the Department’s documentation, Exhibit 1 for the period 10 January 2019 to 10 April 2019, upon which the objections officer relied in determining Mr Baydun’s ATI in the decision under review. In response to questioning from the Tribunal, Mr Baydun acknowledged (with some reservations), that the bank statements accurately reflected the income for the company during that period, and that the annualisation of the total of the income over that period as calculated by the objections officer at $287,372 was a reasonably accurate reflection of the company’s gross income, based on the income reflected in the bank statements over that limited period, and that an allowance of 75% of that figure ($215,529) for business expenses was also a reasonable estimate, particularly with an added reduction of 10% to compensate for a down turn in business activity (which Mr Baydun attributed to his post separation related health issues), resulting in a net income of $64,659 for the company. No evidence was provided with respect to his alleged health issues.

19. The Tribunal recognises that the objections officer did not have the benefit of the company’s 2018/19 financial data and corresponding income tax returns available during the objection process, reflecting the company’s gross income for that financial year at $183,809.

20. Mr Baydun intimated to the Tribunal at hearing that he would not object to the legal and rental expenses being added back to his income reflected in his drawings of $26,569 for the 2018/19 financial year, as a more accurate reflection of his income and financial resources for child support purposes.

21. The Tribunal finds that the evidence, on balance, is that the income and financial resources available to Mr Baydun for child support is $55,000 (his drawings of $26,569 + legal expenses of $15,470 + rental expenses of $12,941 = $54,980, rounded up to $55,000).

22. The administrative assessment for the period 1 December 2018 to 24 January 2019 required Mr Baydun to pay an annual rate of child support of $5,732, based on his 2017/18 ATI of $46,166, and Mrs Baydun’s 2017/18 ATI of $19,497, and for the period 25 January 2019 to 30 June 2019, he was assessed to pay the minimum rate of child support of $427, based on his estimate of income for the 2018/19 financial year of $25,550.

23. The Tribunal has found Mr Baydun’s income and financial resources available to him for the 2018/19 financial year was $55,000, making the administrative assessment for the period 4 January 2019 to 30 June 2019 unjust and inequitable, the case special, and a ground for departure established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. As noted above Mr Baydun provided an updated SOFC dated 24 March 2020. He acknowledged this document did not reflect the balance of his Family Law property settlement, concluded in January this year, of $4,062, which he said he holds in cash at his residence. He otherwise affirmed the contents of his 24 March 2020 SOFC at hearing. Mrs Baydun did not challenge the contents of Mr Baydun’s latest SOFC, other than to make reference to the omission of the proceeds of his property settlement, and did not challenge his evidence regarding the balance of his property settlement as set out above.

3. The Tribunal has scrutinised Mr Baydun’s updated SOFC, including his schedule of average weekly household expenses of $576, and considers it unremarkable.

4. As noted above, Mrs Baydun provided a current SOFC dated 1 April 2020, which she affirmed at hearing. It reflects the current gross weekly income as [an occupation 2] at $914, annualised to $47,528. She gave evidence that she was made redundant in December 2019 and received a redundancy payment of $10,000, and commenced work again as [an occupation 2] in late January 2020. She also lists family tax benefits A and B of $175 per week, and rental assistance of $41 per week which, together with combined child support for the children of $50 per week, brings her weekly income to $1,180. Her average weekly household expenses of $1,160 were unremarkable.

5. The proceeds of her Family Law property settlement and redundancy payment of $197,000 and $10,000, respectively, are listed in the assets section of her SOFC as bank savings. Mrs Baydun gave evidence that these funds are held in bank deposits and other than attracting nominal bank interest, are not otherwise invested. Mr Baydun did not challenge her SOFC. The Tribunal finds her statement otherwise unremarkable.

6. Although Mrs Baydun initially sought a contribution from Mr Baydun for the child, [Child 1’s] speech therapy and optical special needs costs, she acknowledged at the hearing that she is meeting those costs from her own resources, and did not pursue that claim at the hearing. The Tribunal is satisfied neither parent has special needs, and apart from the speech therapy and optical needs of the child [Child 1], which Mrs Baydun is meeting from her own resources, and for which she does not require contribution from Mr Baydun, the Tribunal is satisfied neither of the children has significant special needs.

Conclusion

1. The Tribunal has found that Mr Baydun’s income and financial resources available to him for child support purposes for the 2018/19 financial year amounted to $54,990, rounded up to $55,000, and a ground for departure from the administrative assessment established. The Tribunal will therefore vary his ATI from the amount of $64,659 determined by the objections officer in the decision and review to $55,000, with effect from 4 January 2019 to 31 December 2020. The Tribunal will not backdate the change in assessment beyond 4 January 2019, as it considers that to do so would create arrears of child support for Mr Baydun, and it was open to Mrs Baydun to apply to the Department for a change of assessment at an earlier date.

2. The Tribunal will not disturb the objections officer’s determination of Mrs Baydun’s ATI at $30,368 for the period 4 January 2019 to 31 December 2020 as her income for the 2018/19 financial year appears to have been accurately determined by reference to her payslips for that financial year, and neither parent challenged that determination at the hearing. Mrs Baydun’s income for the 2019/20 financial year will be recognised in the administrative assessment when she lodges her income tax return for that financial year.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Varying the income of Mr Baydun on which child support is calculated from that used in the administrative assessment, based on his income and financial resources which are not reflected in the administrative assessment will result in an appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

The Tribunal varies the decision under review so that for the period 4 January 2019 to 31 December 2020, Mr Baydun’s adjusted taxable income is varied to $55,000 per annum.