Boon and Pilcher (Child support)

[2018] AATA 4580

Boon and Pilcher (Child support) [2018] AATA 4580 (7 November 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/PC014176

APPLICANT:  Mr Boon

OTHER PARTIES:  Child Support Registrar

Ms Pilcher

TRIBUNAL:Member S Brakespeare

DECISION DATE:  7 November 2018

DECISION:

The tribunal sets aside the decision under review and, in substitution, refuses to make a departure determination.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property, financial resources and earning capacity of the parents – costs of contact not significant – a ground for departure not established – refusal to make a determination – 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

BACKGROUND

1. This review is about whether there should be a departure from the administrative assessment of child support.

2. Mr Boon and Ms Pilcher are the parents of [Child 1], who is 16 and [Child 2] who is 13. The child support case commenced on 11 May 2009.

3. On 25 November 2016 Ms Pilcher applied for a change of assessment (the departure application) citing a number of grounds. At the time of application Mr Boon was required to pay Ms Pilcher an annual rate of child support of $252. For the child support period 1 December 2016 to 28 February 2018 Mr Boon’s child support liability reduced to $0. This assessment was based on a 2015/16 adjusted taxable income for Mr Boon of $22,000 and a provisional income for Ms Pilcher of $14,901.

4. On 15 March 2017 an officer of the Child Support Agency made a departure determination in the following terms:

   ·     from 25 November 2016 to 24 February 2018 the adjusted taxable income for Mr Boon is varied to $37,251

   ·     from 25 February 2018 to 24 May 2019 the adjusted taxable income for Mr Boon is varied to $38,033.

5. Mr Boon objected to the decision.

6. On 3 July 2017 an objections officer allowed the objection in part and made a departure determination in the following terms (the objection decision):

   ·     for the period 25 November 2016 to 31 December 2019 the adjusted taxable income of Mr Boon is varied to $65,000 per annum.

   ·    For the period 25 November’s 2016 to 31 December 2019 the annual rate of child support payable by Mr Boon is decreased by $1653 per annum.

7. Mr Boon lodged an application for review of the objection decision with the tribunal on 30 August 2017.[1]

   [1] Mr Boon lodged an extension of time location which was granted on 24 May 2018

8. A directions hearing took place by telephone on 25 September 2018. Mr Boon participated. Ms Pilcher could not be contacted at the time of the hearing. Directions were issued. Mr Boon complied with the directions.

9. A hearing was held on 7 November 2018. Mr Boon gave evidence on affirmation to the tribunal via conference telephone. Ms Pilcher had previously indicated that she did not wish to participate in the review and could not be contacted by the tribunal at the time set for hearing.

10. The Child Support Agency provided the tribunal and the parties with papers relevant to the review.[2] Mr Boon provided documents (folios A1 to A9). Ms Pilcher provided documents (folios B1 to B10). These documents were exchanged with the parties prior to hearing.

    [2] The papers were provided in accordance with sections 37 and 38AA of the Administrative Appeals Tribunal Act 1975.

11. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

1. The statutory provisions relevant to these reviews are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).

4. Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and

   ·if so, whether it is just and equitable to make a particular departure determination; and

   ·if so, whether it is otherwise proper to make a particular departure determination.

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

6. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held:

   as a generality 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 Legislature is that the court will not interfere with the formula in the ordinary run of cases.

7. Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the tribunal is 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 prescribed in section 98S of the Act.

9. The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

1. Ms Pilcher made her application citing three grounds for departure. At objection it was noted that the ground relating to the high costs incurred to spend time with or communicate with the children was not open to Ms Pilcher as she was not the paying parent. The ground relating to the significant costs of the children’s education was not considered further at the objection stage as Ms Pilcher conceded that the children were not receiving a private education. The tribunal did not further consider those grounds.

2. The third ground cited by Ms Pilcher was to do with income property and financial resources of Mr Boon. Mr Boon cross applied on the ground relating to the high costs incurred by him to spend time with or communicate with the children.

3. A ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the 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 because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

4. Ms Pilcher contended to the Child Support Agency that Mr Boon’s adjusted taxable income did not accurately reflect the income that was available to him from self-employment. She also said the low income did not reflect his expenditure on iPhones for the children and trips to [Country 1]. She suggested that the business deals in cash transactions which are not reflected in income tax returns.

5. Mr Boon contended that his business was a micro business he was attempting to build up. He said that he lived a very simple lifestyle and any excess funds he had went towards paying the children’s airfares to travel from [City 1] to [Town 1] as Ms Pilcher refused to pay airfares despite court orders requiring her to do so. Mr Boon said that he had started the business from scratch without access to much capital due to a poor credit rating from being previously bankrupt. He said that in the 2016 year he had borrowed $28,000 from [Organisation 1], a charitable organisation for people that cannot access credit elsewhere. At the time he had also accrued some $4,000 on his credit card.

6. At the time the objection decision was made Mr Boon’s 2015/16 financial statements and income tax returns were the last available. The tribunal had access to Mr Boon’s 2016/17 financial statements and income tax returns which are more appropriate, given that the departure application was made after the end of the 2016/17 financial year.

7. Mr Boon runs his [business] through the Mr Boon Family Trust.  For the 2016/17 year the business made a net profit before tax losses of $24,141 and   income of nil after tax losses were deducted. The business expenses included a $20,000 salary paid to Mr Boon and depreciation expenses of $16,169.

8. Mr Boon contended that the net profit before tax should not be included as income for child support purposes. He said that he had incurred business losses in previous years and had to borrow money to cover those losses.  He also had to retain some cash in the business as, due to his bankruptcy and poor credit rating, he is unable to buy goods on credit for the business. Mr Boon acknowledged that throughout 2016/17 he lived in a shed on the premises where his business operates; however he did not believe he got a significant rental benefit from that arrangement as the quality of the accommodation was very poor.

9. Mr Boon said that the profitability of the business had been increasing slowly; however the significant rain event that had occurred in [Town 1] in January and February this year has caused a major setback. Due to roadblocks, power outages and food shortages he had 8 weeks of no trade.  Mr Boon said that he was only able to pay himself wages of $8,000 in 2017/18. He also had to move to new business premises where the rent is less. He now lives on site in a very old caravan. He is currently behind in the rent but his landlord is understands his situation. His time with the children this year has been much less as he cannot afford the airfares.

10. He said he drew down about $50,000 from his superannuation in January 2018 and took the children for a holiday in [State 1]. However after the rain event he needed the remaining funds to keep the business afloat. He had to borrow more money from [Organisation 1]. [Organisation 1] has halved his repayments for the moment; however once that loan is repaid he will not be able to get further funds from that source; he will again have to try to get a loan through the normal banking system. Mr Boon said that his business will remain his source of income as due to his age, his lack of formal skills and the remote location in which he lives, his job opportunities are extremely limited.   

11. The tribunal finds that based on a  superficial viewing of the 2016/17 financial statements for the business Mr Boon could  be attributed with income for child support purposes of $60,000 taking into account his salary, the net profit before tax losses and with the depreciation expenses added back. However, given that the business was carrying losses from previous years, and Mr Boon had to borrow $28,000 that year to keep the business afloat, the tribunal does not find that to be a true figure of his income for child support purposes.

12. The tribunal is of the view that Mr Boon’s income is more than $20,000; given that he has spent up to $8,000 per annum in both 2016 and 2017 in respect of flights for the children to visit him and for him to see the children. Mr Boon also receives some private benefits for expenses paid through the business (e.g. power, water, rent, telephones etc.). The tribunal is of the view that those benefits are not of significant value but they do mean that he requires less disposable income than would otherwise be the case. That gives him some advantage over wage and salary earners. The tribunal accepts Mr Boon’s evidence that the accommodation attached to the commercial rental properties he has operated from is very basic. Mr Boon told the tribunal that if he had the funds to afford proper rental accommodation he would do so. He said his accommodation is less than satisfactory when the children come to visit.

13. The tribunal notes that the 2016/17 balance sheet indicates that the business liabilities exceed its assets. Mr Boon has no other assets.

14. Mr Boon told the tribunal that the Child Support Agency have consistently refused to investigate Ms Pilcher’s income, property and financial resources.  He said that despite not working for 15 years, when she relocated from [Town 1] to [City 1] with the children she was able to purchase a home.   He said that she and her brothers have recently inherited their mother’s home, which was subsequently sold for $6.9m.  The children have told him that Ms Pilcher has recently purchased a second property in [State 1].

15. From 25 November 2016 until 11 August 2017 Ms Pilcher was being assessed on adjusted taxable incomes which were less than the relevant self-support threshold. She had advised on the initial change of assessment application that she was in receipt of newstart allowance.  The tribunal accepts that to be the case. On 2 March 2018 a child support officer made a departure determination varying Ms Pilcher’s adjusted taxable income to $75,000 for the period 11 August 2017 to 31 December 2018 on the basis that Ms Pilcher had commenced full-time employment from 24 July 2017. The Child Support Agency had confirmed her pay details with the employer.

16. The tribunal notes that in her original change of assessment application Ms Pilcher had refused to disclose details of her property, mortgage or financial investments on the basis that it was private information. She told the Child Support Agency that she had received an inheritance which was being used for the mortgage and legal fees but disclosed no further details.

17. On a Statement of Financial Circumstances Ms Pilcher completed for the tribunal she indicated that she had a home valued at $450,000 to $500,000 and which has a mortgage of $400,000. She disclosed she owes $101,000 to private lenders. Her credit card debt was minimal.  She stated that she had no savings or investments and her only assets were a car valued at $2,800 and household furniture valued at $500.  The tribunal notes that Ms Pilcher indicated that her weekly expenses are approximately $4,100. She disclosed that her net weekly income was $960.00. The tribunal notes this significant unexplained discrepancy between Ms Pilcher’s income and expenditure.

18. Ms Pilcher did not make herself available to attend the directions hearing or the hearing. She cited family violence concerns but there was no evidence provided to the tribunal (e.g. apprehended violence order) to support that claim.

19. The tribunal  finds that the evidence in respect of Ms Pilcher’s property and financial resources is incomplete and, as Ms Pilcher was absent from the hearing the tribunal was unable to test the written information she had provided, or put to her the allegations made by Mr Boon in respect of financial resources resulting from inheritances.

20. The tribunal finds Mr Boon’s income for child support purposes, at the time the application was made, was likely to be higher than the adjusted taxable income of $20,000 that was being used in the administrative assessment. The tribunal finds that income amount is likely to be around $36,000 per annum.  If that amount were applied to the child support calculator in isolation, the tribunal could find that the assessed amount of $0 was indeed an unjust and inequitable level of child support to be paid by Mr Boon.

21. However, the ground for departure refers to the income, property and financial resources of either parent. The tribunal takes the view that all those factors must be considered in establishing whether there are special circumstances and that the ground for departure is established. At the time Ms Pilcher made the departure application she refused to disclose her property or financial investments. In her Statement of Financial Circumstances submitted to the tribunal she has disclosed an income of $75,000 but expenditure which would require financial resources of $213,000 per annum. Due to the lack of disclosure and the discrepancy in information Ms Pilcher has provided to the tribunal the tribunal cannot be satisfied that Ms Pilcher does not have property or financial resources that may affect the assessment.

22. The tribunal cannot be satisfied that there are special circumstances in this case that would make the administrative assessment of child support result in an unjust and inequitable determination of the level of financial support to be provided by Mr Boon.

23. This means that the ground for departure is not satisfied.

24. This means that Mr Boon’s child support liability remains at $0. Given that Mr Boon’s child support liability is $0 the tribunal did not further consider the ground regarding the high costs for him to have contact with the children, even though the tribunal accepts the costs are significant and that Mr Boon has met those costs without any contribution from Ms Pilcher (despite court orders that require her to be solely responsible for those costs).

DECISION

The tribunal sets aside the decision under review and, in substitution, refuses to make a departure determination.