Bayes and Bayes (Child support)

[2022] AATA 350

Bayes and Bayes (Child support) [2022] AATA 350 (18 January 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC021716

APPLICANT:  Ms Bayes

OTHER PARTIES:  Child Support Registrar

Mr Bayes

TRIBUNAL:Member M Douglas

DECISION DATE:  18 January 2022

DECISION:

The decision under review is varied such that the period during which Mr Bayes’ adjusted taxable income has been varied to $51,777 shall end on 31 October 2022.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart – 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. Ms Bayes and Mr Bayes are the parents of [Child 1], [Child 2], [Child 3] and [Child 4], in regard to whom the Child Support Registrar has issued administrative assessments of child support with the first having effect from 18 May 2020. 

2. An assessment of child support is made in accordance with the provisions of Part 5 of the Child Support (Assessment) Act1989 (the Act).  Broadly speaking, those provisions prescribe formulae that apply to several variables to work out the amount of child support one parent must pay the other.  Those variables include the parents’ taxable incomes from the financial year before the start of the child support period to which the assessment relates, the level of care that each parent provides for their children and the cost of the children. 

3. If a parent believes there are special circumstances in their case, the parent may apply to the Registrar under section 98B of the Act for a determination to depart from those provisions of the Act by which an assessment of child support is made.  The Registrar, who acts through persons employed within Services Australia – Child Support (hereafter Services Australia), describes such an application as a “change of assessment application”.

4. On 8 December 2020 Ms Bayes made such an application to Services Australia, seeking a change be made to the assessment that had issued for the period after 1 November 2020.  That assessment required Mr Bayes to pay child support to Ms Bayes for the children at an annual rate of $4,400.  The assessment was based on Mr Bayes’ 2019 taxable income of $19,965 and Ms Bayes’ 2019 taxable income of $25,169. It was also based on Ms Bayes having care of the children all of the time.  

5. Ms Bayes’ reason for making her change of assessment application, as articulated in her application form, was, briefly, that Mr Bayes was receiving greater income than his 2019 taxable income.  

6. On 10 February 2021 Services Australia decided that there should be a departure from the provisions of the Act with respect to assessment of child support and determined that Mr Bayes’ adjusted taxable income be varied to:

   $90,000 for the period 1 November 2020 to 31 January 2022;

   $92,250 for the period 1 February 2022 to 30 April 2023; and

   $94,600 for the period 1 May 2023 to 31 July 2024.

7. On 17 March 2021 Mr Bayes lodged an objection with Services Australia to that decision. On June 2021 Services Australia allowed his objection in part and decided to set aside the determinations it made on 10 February 2021 and replace them with a determination varying his adjusted taxable income to $51,777 for the period 1 November 2020 to 31 July 2022.

8. The effect of that departure determination Services Australia made by way of its objection decision was that Mr Bayes was required to pay child support for the children at an annual rate of $7,076 from 1 November 2020 to 31 October 2021 and at an annual rate $6,876 from 1 November 2021 to 31 July 2022.  The reason for the variation in the rate of child support payable from 1 November 2021 is that a new child support period commenced on that date in which Ms Bayes’ adjusted taxable income is $28,174, being her taxable  income for the 2020 financial year.

9. On 10 June 2021 Ms Bayes applied to the Tribunal for review of Services Australia’s objection decision. 

10. On 21 September 2021, the Tribunal conducted a directions hearing and made directions that required both Mr Bayes and Ms Bayes to produce to the Tribunal various documents relevant to their financial affairs.  Ms Bayes complied with that, but Mr Bayes did not, despite being reminded on 9 November 2021 to do so by a member of the Tribunal’s staff.

11. The Tribunal conducted an audio hearing of Ms Bayes’ application for review on 18 January 2022.  Both Ms Bayes and Mr Bayes participated and gave sworn oral evidence.  No one from Services Australia participated.  The Tribunal has had regard to the oral evidence Ms Bayes and Mr Bayes gave as well as the documents Ms Bayes produced in compliance with the Tribunal’s directions, which are marked A1-A31, and the papers Services Australia provided to the Tribunal in accordance with its obligation under subsections 37(1) and 38AA(1) of the Administrative Appeals Tribunal Act1975, which were paginated and comprised 400 pages in total.

THE REQUIREMENTS FOR THE DEPARTURE FROM AN ASSESSMENT

1. As already mentioned, a parent may, if there are special circumstances, apply to Services Australia under subsection 98B(1) of the Act for a determination to depart from the provisions of the Act relating to an assessment of child support.  Services Australia, or the Tribunal in its place, if satisfied that the criteria of subsection 98C(1) are met, can make one or more of the determinations listed in subsection 98S(1) to depart from the provisions of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are that:

   i.A ground for departure exists;

   ii.It would be just and equitable as regards the child, the liable parent, and the carer entitled to child support to make a determination [under subsection 98S(1)]; and

   iii.It would be otherwise proper to make a determination [under subsection 98S(1)].

2. The grounds for departure are listed in subsection 117(2) of the Act. 

3. The matters that are to be considered in deciding whether it is just and equitable to make a determination to depart from the provisions of the Act are listed in subsection 117(4) of the Act.  Broadly speaking, consideration of those matters ensures that any departure will be fair for both parents and fair for the children. 

4. The matters to be considered regarding the third criterion are listed in subsection 117(5) of the Act, and broadly speaking consideration of those matters ensures that any departure reflects that the parents of children, rather than the Australian community through the social security system, have primary responsibility for the cost of their children’s care.

CONSIDERATION

Is a ground for departure established?

1. In her change of assessment application, Ms Bayes relied on the ground for departure provided in sub-subparagraph 117(2)(c)(ia) of the Act, which Services Australia describes as “Reason 8A”, and which reads:

   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

2. As mentioned above Ms Bayes in her change of assessment application form contended that Mr Bayes received a greater income than his 2019 taxable income.  She said in her application form that Mr Bayes was self-employed as a [Occupation 1] and did “frequent cash in hand jobs” by which she obviously meant that Mr Bayes received income for contracting out his services as a [Occupation 1] that he did not declare to the Australian Taxation Office (ATO) and which consequently was not included in his taxable income.  She said that Mr Bayes could earn $350 a day for his services as a [Occupation 1]. 

3. Ms Bayes’ evidence to the Tribunal at the hearing includes that she had recently received a letter from Services Australia dated 8 December 2021 notifying her that from 1 August 2022 Mr Bayes would be assessed to pay child support to her of $46.69 a week, based on Mr Bayes having a taxable income in the 2021 financial year of $35,336.  She submitted to the Tribunal that Mr Bayes had far greater income than that. 

4. Mr Bayes’ evidence was that the ATO had assessed his taxable income in the 2021 year to be $35,336.  He confirmed that he receives his income in self-employment as a [Occupation 1].  He contended that his child support obligation ought to be assessed by reference to his taxable income as, according to him, that was his correct income.  He denied earning income that he did not declare to the ATO.  He said that his income is irregular because of the weather.  He said that he cannot work as a [Occupation 1] on days that it rains, and that if there have been periods of heavy rain he is unable to work for some days thereafter due to the ground being sodden.

5. Mr Bayes said that he incurs significant expenses to earn his income including having to pay for the services of an excavator and having to meet the cost of purchasing steel.  His evidence was that he also has regular expenses relating to his receipt of income, being the cost to insure his vehicle, the cost to purchase petrol, repayments on a car loan and the cost of his mobile phone.  His evidence was that his cost with respect to his phone is $130 a month; his fuel expenses are between $100 to $200 a week; his insurance premium for his car is $122 a month and his car loan repayments are $771 a month.  His evidence was that he declares in his tax return that half of his total cost for these expenses relate to his receipt of income and half relates to his private purposes. 

6. Mr Bayes’ evidence was that his personal expenses include $370 a week he pays to a friend with whom he has lived since 14 September 2020, which is his contribution to the rent his friend pays for the house in which they reside and the cost of water and power services supplied to the house.  He said he also spends between $250 and $300 a month at a supermarket to purchase groceries.  His evidence was that the arrangement he has with his friend is that she will purchase the groceries once in a four-week period and he will do likewise.  In other words, their grocery bills over a four-week period are split between them. 

7. As detailed above, Mr Bayes’ evidence was also that half of his overall costs with respect to his phone, the insurance of his car, his purchases of petrol, and the repayment of his car loan relates to his personal use, rather than his derivation of income.

8. Mr Bayes’ evidence was that he also purchased two mini bikes as gifts for the children, one purchase being made on 17 July 2020 and the other just before Christmas 2020.  Each cost $6,300, but Mr Bayes’ evidence was that his parents contributed half of that cost, as they wanted to be involved in the gifting of these bikes to the children.  Hence, Mr Bayes’ contribution was $6,300 in total for the two bikes.

9. The documents that the Tribunal directed Mr Bayes to produce to it were his 2021 tax return, copies of his bank statements for the three-month period ending 30 September 2021 and a completed Statement of Financial Circumstances.  As mentioned, Mr Bayes failed to produce those documents and did not provide a satisfactory explanation for his failure.  Services Australia, however, as part of the process of considering the objection Mr Bayes made to its departure determinations of 10 February 2021, obtained access to the ATO’s records relating to Mr Bayes and also obtained copies of statements that [Bank 1] had issued for an account Mr Bayes holds with it that covered the period  2 November 2020 to 19 June 2021.  The records of the ATO to which Services Australia obtained access revealed that in the Business Activity Statements that Mr Bayes had lodged with the ATO for the first three quarters of the 2021 financial year, Mr Bayes had reported receiving $68,495 in total from sales. 

10. The Tribunal observes that [Bank 1] statements revealed that in the period 1 April 2021 to 16 June 2021, excluding amounts that were deposited into Mr Bayes’ account on 1 June which did relate to Mr Bayes’ receipt of income for contracting his services as a [Occupation 1], amounts totalling $22,662.58 were deposited into his account.  The Tribunal infers that that amount was income Mr Bayes received as income.  When that amount is added to what Mr Bayes reported in his BAS statements for receipts from sales in the first three quarters of the 2021 financial year, he would have received gross income of $91,157.50 from contracting out his services as a [Occupation 1], which would reduce to $82,870 when GST is stripped from that.

11. The information Services Australia obtained from the ATO also revealed that in the 2019 financial year Mr Bayes’ expenses to earn his income amounted to 67% of his gross income in that year and that in the 2020 year his expenses were 49% of his gross income.  If those percentages were to be applied to the amount of $82,870, which the BAS statements for the first three quarters of 2021 and Mr Bayes’ bank statements suggest Mr Bayes’ 2021 gross income may have been, then that would produce figures of $40,606 and $27,347 respectively.  As mentioned earlier, the evidence of Ms Bayes and Mr Bayes was to the effect that Mr Bayes’ taxable income was $35,336 in the 2021 financial year, which falls roughly in the centre of the two figures aforementioned.

12. The evidence before the Tribunal indicates, however, that Mr Bayes has money or resources available to him beyond that income level. 

13. [Bank 1] statements, covering an approximate seven-month period between 2 November 2020 and 19 June 2021, reveal that Mr Bayes debited his account in that period for purchases he made at hotels or bottle shops or the like for amounts totalling $2,241.51; the most common purchases being at [Hotel 1], [Hotel 2], [Hotel 3] and [Hotel 4].  That amount extrapolates to an annual figure of $3,842.58.  Further, the statements reveal that in the seven-month period Mr Bayes also debited his account for purchases he made at fast food outlets, restaurants and cafes for amounts totalling $897.47, which expands to an annual amount of $1,538.52.  In other words, the evidence indicates that Mr Bayes is spending approximately $5,400 a year in purchasing liquor and meals at restaurants and fast food outlets.  That is out of proportion, in the Tribunal’s view, to his having a taxable income of $35,336, and certainly out of proportion to the adjusted taxable income of $19,965 which was the amount by which his child support obligation was assessed at the time Ms Bayes made her change of assessment application.

14. Further, as has been set out above, his evidence was to the effect that his annual personal expenditures, that is, his expenditures, would defray from his taxable income and whatever other financial resources he has, comprising $19,240 for rent, $3,300 for groceries, $3,900 for fuel, $732 for car insurance, $780 for phone and $4,660 for loan repayments for his car.  Those tally to $32,612.  In addition to that, he also spent $6,300 in the 2021 financial year so as to purchase motor bikes as gifts for the children. 

15. Consequently, he has the capacity to expend a total of $42,926 a year for personal purposes.  The Tribunal infers from that, that he has income or resources available to him beyond the taxable income he achieved in the 2021 year.  The Tribunal observes that the amount Services Australia determined by way of its objection decision should be Mr Bayes’ adjusted taxable income, when tax and Medicare levy are deducted, correlates with what the evidence reveals Mr Bayes spends on personal purposes.

16. That is far greater than his 2019 taxable income, which was the income used to assess his child support obligation at the time Ms Bayes lodged her change of assessment application with Services Australia.

17. The Tribunal is satisfied that the fact that Mr Bayes has income and resources available to him that is greater than his 2019 taxable income, and indeed his 2021 taxable income, that special circumstances exist in this case and that, as a result of Mr Bayes’ income and financial resources, the assessment of his child support obligation results in an unjust and inequitable determination of the level of financial support to be provided by him for his children.

18. It follows that this ground for departure is established.

Is it just and equitable to make a determination?

1. As already mentioned, the matters the Tribunal must take into account when considering whether it is just and equitable to depart from the provisions of the Act with respect to the assessment of child support are listed in subsection 117(4) of the Act. The Tribunal is not required to go slavishly through each of those matters but must have regard to those that are relevant to the particular circumstances of this case and do so in a practical and flexible way.[1]

   [1] Gyselman and Gyselman (1992) FLC 92-279; Ross v McDermott (1998) FLC 98-003; and Lawson and Edney [2017] FCWA 77

2. Ms Bayes’ evidence to the Tribunal, which the Tribunal accepts, is that none of the children has special needs.  Her evidence was that she incurs all the normal cost to ensure the proper needs of the children are met. 

3. Ms Bayes completed a Statement of Financial Circumstances, declaring the contents to be true and correct, in which she revealed that her income consists only of payments she receives from the Commonwealth Government.  Noting that the ages of the children range from 2 to 10, the Tribunal considers that Ms Bayes does not presently have an earning capacity. 

4. Ms Bayes indicated in her Statement of Financial Circumstances she has no assets of significance.

5. The Tribunal is satisfied that she is experiencing financial difficulty to ensure the proper care of the children.  The Tribunal is satisfied that were a determination not to be made to depart from the provisions of the Act with respect to the assessment of child support which, as mentioned, relies upon the taxable income for Mr Bayes from the prior financial year, undue hardship would be caused to Ms Bayes and the children. 

6. As mentioned earlier, Mr Bayes failed to abide the directions the Tribunal made for him to provide it with a copy of his 2021 tax return, his bank statements for the three months ending 30 September 2021 and a completed Statement of Financial Circumstances.  The Tribunal therefore does not have the most readily available evidence regarding Mr Bayes’ present financial situation.  However, based on the analysis above of the evidence the Tribunal does have before it, the Tribunal is satisfied that Mr Bayes has income and resources available to him that results in his situation equating to a taxpayer with a taxable income $51,777. 

7. Mr Bayes contended to the Tribunal that he is in a difficult financial situation. The evidence before the Tribunal does not reveal that he is going into debt, and as mentioned he has income and resources sufficient to meet personal expenditure of $42,926 a year.  

8. As the Tribunal understood Mr Bayes’ evidence, his assets consist of the car that he uses both for work and personal purposes, a motor bike that he purchased for his own use some years ago and also a boat that he similarly purchased some years ago.  As the Tribunal understood his evidence the value of both the boat and the motor bike are modest and none of those items would, if sold, enhance his ability to pay child support.  It would seem, with respect to his car, that it would not be reasonable for him to sell that, given that that may impede his ability to earn an income.

1. The Tribunal considers that were a departure determination to be made to vary Mr Bayes’ income to $51,777 then, noting that Mr Bayes has been meeting personal expenditures of $42,926 a year, no real hardship would be caused to him.

2. In the circumstances, the Tribunal considers it would be just and equitable to make a departure from the provisions of the Act with respect to the assessment of child support by varying Mr Bayes’ adjustable taxable income to $51,777 for the period 1 November 2020 to 31 October 2022.  With respect to ending that departure on 31 October 2022, the Tribunal notes that by that time further details about Mr Bayes’ income and financial situation may be available, and it seems to the Tribunal that it would be appropriate, if either party considered that the assessment that will issue for the period beyond that did not produce a just and equitable determination of the level of financial support to be provided by Mr Bayes for the children then that party can make a further change of assessment application to the Tribunal.

Is it otherwise proper to change the assessment?

1. In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Mr Bayes and Ms Bayes, and also have regard to whether, and if so how, any determination it makes would affect the entitlement of Ms Bayes or the children to an income-tested pension, allowance or benefit. 

2. The evidence does not reveal that any of the children receive an income-tested pension, allowance or benefit.  As the Tribunal understands it, that circumstance will not change if the determination the Tribunal considers it is just and equitable to make, is made.

3. Ms Bayes indicated in her Statement of Financial Circumstances that she receives family tax benefits from the Commonwealth Government.  A departure from the provisions of the Act to increase the adjusted taxable income of Mr Bayes will result in an increased child support obligation on his part, which if collected by Services Australia and received by Ms Bayes, may, as the Tribunal understands it, result in a slight reduction in the family assistance Ms Bayes receives from the Commonwealth Government; but the reduction will be a lesser amount than the additional child support she receives from Mr Bayes.

4. The Tribunal considers that the determination it considers just and equitable to make is also otherwise proper to make because ultimately it will result in Ms Bayes receiving more child support from Mr Bayes, and the Commonwealth Government paying slightly less than what it currently does by way of assistance to Ms Bayes for the care of the children.

DECISION

The decision under review is varied such that the period during which Mr Bayes’ adjusted taxable income has been varied to $51,777 shall end on 31 October 2022.