Caden and Pagani (Child support)

[2018] AATA 4422

Caden and Pagani (Child support) [2018] AATA 4422 (13 August 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/MC012899

APPLICANT:  Mr Caden

OTHER PARTIES:  Child Support Registrar

Miss Pagani

TRIBUNAL:Member S Lewis

DECISION DATE:  13 August 2018

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that:

• For the period 17 May 2017 to 29 February 2020, Mr Caden’s adjusted taxable income is varied to $88,000.

CATCHWORDS
CHILD SUPPORT – Departure determination – Income, property and financial resources of a parent from operation of a business – 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 application for review has been brought by Mr Caden who disagrees with a decision made by the Department of Human Services, Child Support (the Department) to depart from the administrative assessment of child support.

2. Mr Caden and Miss Pagani are the parents of the child, [Child 1] (born January 2014).  The Department records that Miss Pagani currently has 86% care of the child and Mr Caden has 14%.  Mr Caden is the parent liable to pay child support. 

3. On 17 May 2017 Miss Pagani applied to the Department for an increase to the assessed rate of child support on the ground that in the special circumstances of this case:

   ·       the costs of maintaining the child are significantly affected by his special needs;

   ·       the costs of maintaining the child are significantly affected by the costs of educating the child in the manner that was expected by the parents; and

   ·       the administrative assessment results in an unjust and inequitable level of child support because of Mr Caden’s income, property, financial resources and earning capacity. 

   At the time of the application, Mr Caden was assessed to pay an annual rate of child support of $0. 

4. On 9 August 2017, a senior case officer, acting as a delegate of the Child Support Registrar, considered the departure application and determined that:

   ·       For the period 1 July 2017 to 31 August 2017, Mr Caden’s adjusted taxable income is varied to $90,000;

   ·       For the period 1 September 2017 to 30 November 2018, Mr Caden’s adjusted taxable income is varied to $91,890; and

   ·       For the period 1 December 2018 to 29 February 2020, Mr Caden’s adjusted taxable income is varied to $93,820.

5. On 18 September 2017, Mr Caden objected to this decision.  On 20 September 2017, Miss Pagani also objected.  Mr Caden’s objection was partly allowed by an objections officer on 7 November 2017.  The objections officer determined that for the period 17 May 2017 to 30 June 2020 Mr Caden’s adjusted taxable income is varied to $174,000.  This resulted in an annual rate of child support payable of $11,129.

6. On 15 November 2017 Mr Caden lodged an application for a review with the Administrative Appeals Tribunal (the tribunal) seeking review of the decision of the Department.

7. Prior to the hearing of the application for review, directions were issued to both Mr Caden and Miss Pagani directing them to provide the tribunal with specified documents.  Mr Caden provided the tribunal with documents (folios A1 to A82).  Miss Pagani provided the tribunal with documents (folios B1 to B29).  Both parties were provided with a copy.

8. The matter was heard on 2 July 2018. The tribunal and the parties also had access to the statement and documents provided by the Department under subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975 (the AAT Act) (folios 1 to 319). Both Mr Caden and Miss Pagani attended the hearing by conference telephone and gave evidence on affirmation.

9. At the hearing, the tribunal noted that Mr Caden had not fully complied with directions; Mr Caden explained that he thought he had done so. The matter was adjourned after the hearing and the tribunal issued further directions in relation to the missing rates notices and additional information.  Mr Caden provided the tribunal with further documents (folios A83 to A132); a copy was provided to Miss Pagani for comment.  Miss Pagani also submitted additional evidence (folios B30 to B32).  A copy was provided to Mr Caden for comment.  The tribunal received no further submissions. 

10. The tribunal considered the matter and made its decision on 13 August 2018.

ISSUES

1. The statutory provisions relevant to this review are found in the Child Support (Assessment) Act 1989 (the Assessment Act). The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account such factors as the number of children, the level of care provided, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative 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. In the first instance, a ground for departure from an administrative assessment must be established. The grounds are set out in subsection 117(2) of the Assessment Act. If satisfied that:

   ·       a ground or grounds exist (step one); and

   ·       that it would be just and equitable (step two); and

   ·       otherwise proper to make a particular determination (step three),

   the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable and/or the adjusted taxable income of a parent.

3. To deal with Mr Caden’s application for review, the tribunal stands in the shoes of the Child Support Registrar.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

1. Miss Pagani has sought a departure from the administrative assessment on the ground that in the special circumstances of this case the administrative assessment would result in an unjust and inequitable level of child support because of Mr Caden’s income, property, and financial resources. This ground for departure is found in subparagraph 117(2)(c)(ia) of the Assessment Act.

2. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) 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.

3. There are a range of circumstances which may support the finding that the administrative assessment would result in an unjust and inequitable determination of the level of child support payable.  The tribunal referred to case law and the Child Support Guide (the Guide) which sets out government policy in relation to child support.  The tribunal notes that the calculation of income and benefits for the purposes of taxation law does not limit its consideration of the true resources available to a party to child support proceedings and is but one factor to be taken into account in the particular circumstances of the case.

4. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources (DJM and JLM [1998] FamCA 97; Scott and Scott (1994) FLC 92-457; Carey and Carey (1994) FLC 92-489). When summarised, these cases establish that a ground for departure may be established where self-employed people are able to derive additional benefits from their businesses, and also have greater control over the structure of their finances than a PAYG employee.

5. Child support legislation is interpreted by the Department with the aid of the Guide.  The tribunal is not bound by law to apply the policy as set out in the Guide, but, provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it (see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634). In chapter 2.6.14 of the Guide the following is included to which the tribunal has had regard:

   Low income from a family business

   A parent who receives a low taxable income from a family business may have access to additional financial resources, or alternatively he or she may have an additional earning capacity.

   In determining the parent’s financial resources, the Registrar may consider the following factors:

   ·past or current ability to maintain a particular lifestyle and acquire assets,

   ·identification of additional benefits obtained from the business,

   ·whether or not the business has been structured to minimise a parent’s income including: the degree of control which the parent has over the business or the person who is entitled to the profits of the business, or whether income splitting is occurring, and

   ·the person who actually does the work of the business.

   The Registrar may determine that a parent’s income is greater or lower than the amount upon which they have been assessed. Alternatively, the Registrar may decide that the parent’s financial resources give the parent a greater capacity to contribute to the financial support of the child than is indicated by the assessment.

   …

   Depreciation

   Depreciation represents the loss or expense attributed to the use of business property or equipment. It is an entry in the business account that is not necessarily an expense that is actually incurred by the business. The aim of depreciation is to spread the cost of a capital asset (e.g. motor vehicle, plant and equipment, machinery, building) over the period of its useful life, with a portion of the cost being expensed each financial year.

   A claim for depreciation can mean that a parent has financial resources available to them that are not necessarily reflected in their taxable income or the resources of the business. In cases that involve depreciation, the Registrar will determine whether receiving a benefit through claiming depreciation expenses results in a parent having greater financial resources or income than his or her taxable income would indicate. The Registrar will consider a parent’s complete financial situation including the business’ overall financial position and the individual circumstances of the case.

   Example: If business income is reduced by $10,000 as a result of depreciation and that amount is then used for day-to-day personal expenses the depreciation amount may be considered as an additional resource and added back to the parent’s adjusted taxable income.

   …

6. Mr Caden told the tribunal that the major reason for seeking review in relation to this ground was to prove that his income is not as high as determined by the Department.  Mr Caden submitted that the objections officer had insufficient information and failed to take account of the full extent of business expenses.  Mr Caden explained that he not only supplies equipment for hire, he also supplies raw materials for which he pays and then charges the customer.  The objections officer’s decision to use 40% of revenue as a measure of his expenses is inaccurate.  Miss Pagani submitted at the hearing that Mr Caden’s adjusted taxable income should be as determined by the Department.  The essence of her submissions to the tribunal and the Department are that Mr Caden enjoys a lifestyle which is reflected in an annual income of around $174,000.

7. The tribunal has reviewed the evidence provided by the parties and the evidence arising from the Department’s investigation of the case.  In this case, the tribunal has reached a level of satisfaction required for an administrative decision to be made.

8. In Humphries & Berry(SSAT Appeal) [2008] FMCAfam 409 Slack FM dealt with the issue of the disclosure of financial information in matters before the former Social Security Appeals Tribunal. His Honour stated that the principle of full and frank disclosure applicable to proceedings in the Family Court was also applicable to proceedings before the Social Security Appeals Tribunal. His Honour stated as follows at paragraphs [26] and [27]:

   Although the SSAT has the power to obtain information (s.103K) and the power to require the Child Support Registrar to exercise powers under the Assessment Act and the Child Support Registration and Collection Act for the purposes of gaining information relevant to a review (s.103L), there nevertheless remains a primary duty and obligation on the parties to the review to make a full and complete disclosure of their financial affairs relevant to the matter before the hearing and a duty to assist the Tribunal to come to its determination in the application. The obligation to disclose information and documents extends to the presentation of that material in a way that the true nature of their financial affairs can be readily understood. The obligation extends not just to providing financial records but also includes presenting the information in a way that can be reasonably and readily understood and examined.

9. In reaching its conclusions, the tribunal took this case law into consideration.  On balance, the tribunal considered that Mr Caden complied to a moderate level with his obligation to make full and frank disclosure of his financial circumstances to the tribunal for the purposes of the review.  The tribunal had significantly more evidence than was available to the Department.  The tribunal found Mr Caden’s oral evidence to be forthcoming although at times self-serving and the evidence he provided in relation to [Business 1] was not transparent.  The tribunal was not provided with a summary of the revenue and expenses as directed but was given bank statements from which Mr Caden said the numbers could be drawn.  This lack of robust accounting records for [Business 1] was unhelpful.  Further, the numbers provided in the bank statements did not support Mr Caden’s oral evidence that he “broke even” in [Business 1].  For these reasons, the tribunal has generally preferred the documentary evidence.

What incomes are used in the administrative assessment of child support?

1. The administrative assessment of child support is calculated for a child support period.  The child support period at the time of Miss Pagani’s application for a change of assessment ran from 1 September 2016 to 31 August 2017.  The incomes reflected in the administrative assessment at that time were:

   ·Mr Caden’s 2016 adjusted taxable income:  $21,337

   ·Miss Pagani’s 2016 adjusted taxable income:  $73,267.

2. The current child support period runs from 1 September 2017 to 30 November 2018.  In the absence of a change of assessment, the 2017 adjusted taxable incomes of the parties would be reflected in the administrative assessment as follows:

   ·Mr Caden’s 2017 adjusted taxable income:  $49,045

   ·Miss Pagani’s 2017 adjusted taxable income:  $80,169.

3. The tribunal then considered Mr Caden’s income, property and financial resources.

Mr Caden’s income, property and financial resources

1. There is no dispute that Mr Caden is a sole trader who operates a [business].  Mr Caden controls the business and provides the necessary personal services to that business.  The business trades as [Company 1] and the net revenue is reported in Mr Caden’s personal income tax return.  Mr Caden told the tribunal that his adjusted taxable income should be calculated only by reference to his income tax return.

2. The question before the tribunal relates to the value of Mr Caden’s income, property and financial resources; it is not limited to taxable income alone.  In summary, Mr Caden provided the following information and submissions to the tribunal:

   ·       Mr Caden commenced business in 2002.  He provides [various services].  Mr Caden also uses subcontractors to supply and deliver product.  Mr Caden invoices the customers and Mr Caden is then billed by the supplier;

   ·       Mr Caden said that it would be physically impossible for him to draw $174,000 from the business.  There is no cash income as people pay electronically or by cheque.  He also confirmed that he does not operate any form of barter.  Mr Caden said that his accountant helped prepare the statement of financial circumstances (SOFC).  The SOFC indicates that Mr Caden earns $943 per week from the business (after depreciation of $672 per week) but before repayments on business loans for [equipment] ($389 per week).  The tribunal calculated that this equates to Mr Caden currently having funds from the business of $83,980 per annum before payment of business loans and $63,752 after payment of such loans;

   ·       Mr Caden has no employees.  He pays his partner $200 per week for bookkeeping services.  This is evident in the bank statements supplied.  She works about eight to 10 hours per week paying bills and preparing invoices;

   ·       Mr Caden also participates in [Business 1].  He owns [equipment] which is listed in the depreciation schedule.  Mr Caden’s accountant confirmed that the revenue and expenses associated with this activity are reported in the financial statements for [Company 1].  Mr Caden said that he breaks even in this [activity] which he regards as a business.  There are no separate profit and loss records prepared for this activity.  The [earnings] are paid into the business account and Mr Caden pays for the expenses from that account or through a credit card in his name;

   ·       Mr Caden operates a business account and a credit account through which all his revenue and expenses are processed.  He has a savings account into which the rent from his rental property is paid;

   ·       Mr Caden owns a private residence in [Suburb 1].  He initially purchased the property in around the year 2000 with his father.  Mr Caden later sold a property in [Town 1] and after depositing the funds (approximately $250,000) in a term deposit for some months, he then used the funds to buy out his father’s 50% share of the residence.  Mr Caden now owns the [Suburb 1]  property outright (100%; capital improved value per rate notice: $688,000);

   ·       Mr Caden also owns a rental property in [Town 1] (a rates payment reminder was provided but no rates notice).  In his 2017 personal income tax return Mr Caden reported a loss of $1,761 on this property.  Mr Caden values the property at $180,000 which is subject to a mortgage of approximately $143,000.

3. On the available evidence, the tribunal did not consider that Mr Caden’s financial circumstances are entirely transparent.  Based on the available evidence, the tribunal notes that Mr Caden’s personal circumstances are inextricably entwined with that of his business enterprise; any consideration of his personal position without reference to the benefits and lifestyle which this business has funded in the past and currently maintains would lead to an unfair outcome.  A low annual income of $21,337 which was used in the administrative assessment is insufficient to provide and support Mr Caden’s ongoing assets and lifestyle.

4. The tribunal referred to the 2017 financial statements and income tax return prepared for Mr Caden by his accountant.  The tribunal makes the following findings in relation to the 2017 financial year:

   ·Net assets at 30 June 2017:                   $168,003.48

   ·Business revenue:  $269,125.95

   ·Business profit:  $49,045.38

   ·Motor vehicle depreciation:  ($30,709.00)

   ·Equipment depreciation:  ($4,199.00)

   ·Motor vehicle car expenses:                   ($3,094.57)

1. Mr Caden told the tribunal that 2017 was a good year as he had a higher percentage of [certain] jobs which generate a better rate of pay.  Mr Caden told the tribunal that those results would not necessarily be repeated.  Mr Caden also said that he purchased a [vehicle] in the 2018 financial year as well as [equipment].  He explained that he expects to be able to work on larger jobs but the business also has the added expense of meeting repayments on the equipment mortgages.  The tribunal notes that the contracts provided indicate that the business has ongoing equipment repayments of $2,867.16 per month ($34,405.92).  Overall, the tribunal considers that the investment in new business equipment is consistent with Mr Caden’s expectation/confidence that he can improve and grow the business.  The net assets position at 30 June 2017 supports that the business is in a robust position and is a significant financial resource for Mr Caden.

2. As noted above, depreciation represents an accounting entry with no corresponding cash outlay.  There was no evidence that the amounts were reserved or set aside in the 2017 financial year or earlier years to fund future capital purchases.  On balance, the evidence supports and the tribunal finds that this arrangement generated an additional financial benefit to Mr Caden in the 2017 financial year equivalent to the depreciation charges. 

3. The evidence supports that Mr Caden purchased additional equipment from late 2017 and from then on the business needed additional funds to meet its capital needs.  Taking into account:

   ·the strong net asset position of the business;

   ·Mr Caden’s evidence that he expects an increase in revenue associated with employing the new equipment;

   ·there will be additional depreciation charges derived from this new equipment in future years;

   ·the interest charges on the new equipment  will be deductible; and

   ·the ongoing repayments,

   the tribunal considers that overall Mr Caden will continue to benefit personally from having access to the funds represented by the depreciation charge.  This additional resource from the business is a significant benefit to Mr Caden and supports his lifestyle. 

4. Mr Caden told the tribunal that he has a mobile telephone and the “motor vehicle car expenses” in the financial statements probably relate to his personal [vehicle].  Given the nature of the business and the motor vehicle, the tribunal was satisfied that the benefit of deducting the costs of these items is not significant in calculating the annual value of Mr Caden’s resources for child support purposes.  The tribunal notes that these items are benefits and so the annual value of Mr Caden’s income and financial resources as calculated by the tribunal will be understated (this is considered further below in the context of whether or not it is just and equitable to depart from the administrative assessment).

5. The tribunal has also considered Mr Caden’s proposition that the [Business 1] is a business which breaks even.  The tribunal calculated that in the 2018 season for which Mr Caden supplied bank statements with expenses and revenue highlighted, Mr Caden’s outgoings exceeded his [earnings] by approximately $4,000.  The tribunal considers that the evidence supports that this activity is akin to a hobby and so Mr Caden’s other business ([Company 1]) is funding a personal expense which should be added back for child support purposes.  Alternatively, even if the tribunal were to consider [Business 1] as a separate business, given that each business operates separately, the tribunal considers that it would be appropriate to quarantine the profits and the losses to the relevant business.  This is similar to the approach taken by the legislation in relation to rental losses which are added back to taxable income in the calculation of adjusted taxable income.  The tribunal finds that $4,000 should be added back to Mr Caden’s income to take account of the personal benefit to Mr Caden for the purposes of calculating his child support obligations.

6. In terms of valuing Mr Caden’s income, property and financial resources, on balance, the tribunal was satisfied that since the date of application, Mr Caden has had access to a lifestyle commensurate with a person earning approximately $88,000 per annum.  In reaching this conclusion the tribunal has taken into account the 2017 profit of the business and added back depreciation and [Business 1] expenses in excess of any income (this assumes a similar rate of deduction as occurred in the 2018 season).  On balance, taking into account Mr Caden’s property, assets and his ongoing successful business, the tribunal finds that Mr Caden had access to income and financial resources commensurate with an annual income of at least $88,000 at the time of the application.

Mr Caden’s other financial circumstances

1. Mr Caden identified funds in the bank (approximately $23,000); motor vehicles ($20,000); superannuation ($38,628) to which he has no access, and personal/household contents ($10,000).  Aside from the income and resources discussed above, the tribunal did not consider that any of these items has a significant impact on Mr Caden’s ability to contribute to the child’s support.  There was no further evidence that Mr Caden has significant alternative sources of income or additional financial resources.  Mr Caden reported a tax liability of approximately $6,000; the tribunal did not consider this significant in the context of this case.

2. Whilst the tribunal was unimpressed with Mr Caden’s endeavours to fully comply with directions, on the available documentary evidence, the tribunal was not persuaded that Mr Caden’s financial resources yield an annual value substantially higher than that calculated by the tribunal.  The financial evidence supports that Mr Caden’s business interests are currently ongoing.  The purchase of capital equipment and funding of [Business 1] is consistent with Mr Caden’s confidence in that business. 

Miss Pagani’s circumstances

1. The tribunal found Miss Pagani to be a credible witness in relation to her financial circumstances.  Based on Miss Pagani’s submissions and the documents provided, the tribunal accepts that she is employed on a full-time basis as an [occupation].  Miss Pagani acknowledged that there may be some additional income from overtime.  However, this is limited due to her caring responsibilities for [Child 1].  The tribunal notes that any such income will be reflected in the administrative assessment of child support.  Based on the available evidence, the tribunal was satisfied that Miss Pagani’s circumstances are stable and adequately reflected in the administrative assessment.

2. The tribunal did not consider that any of the items disclosed in Miss Pagani’s SOFC has a significant impact on her ability to contribute to the child’s support.  The tribunal accepts that aside from her residence which she owns subject to a mortgage and her superannuation ($281,965.14), Miss Pagani has no significant assets and is financially vulnerable to changes in her cash flow.  Miss Pagani reported that she has no current access to her superannuation but accessed it in 2014 on the basis of financial hardship.  There was no further evidence that Miss Pagani has significant alternative sources of income or additional financial resources.

Summary and application of the law

1. Having considered the documentary and other evidence, the tribunal is of the view that as a result of the findings above there are special circumstances in this case that make the level of child support payable under the administrative assessment unjust and inequitable.  The findings may be summarised as follows:

   ·       Mr Caden is a sole trader who has access to benefits, assets, income and financial resources from his business, with an annual value of at least $88,000; and

   ·       Mr Caden’s adjusted taxable income of $21,337, which in the absence of a departure determination would have been used in the administrative assessment, is only 24% of the annual value of his income and resources which the tribunal has found is at least $88,000.

   In particular, the tribunal considers that the availability of additional income and resources to Mr Caden over and above his adjusted taxable incomes is significant and would have a significant impact on an assessment which reflected this amount. The tribunal calculated that under an administrative assessment which varies Mr Caden’s adjusted taxable income to $88,000, Mr Caden would be required to pay an annual rate of child support of around $5,300. At the date of application, Mr Caden was required to pay no child support. As a result, the tribunal decided that the ground for departure in subparagraph 117(2)(c)(ia) of the Assessment Act does exist in this case in relation to Mr Caden’s income, property and financial resources.

Issue 2 – Would it be just and equitable to make a particular departure determination?

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 make a particular departure determination. In doing so, the tribunal must have regard to the number of matters in subsections 117(4) to (9) of the Assessment Act. In summary this requires consideration of the parents’ duty to support the children, the income, assets and financial resources of the children and of the parents, the children’s proper needs and the self-support costs of either parent. The tribunal is not limited to exploring these parameters and is required to consider the global circumstances (Gyselman).

2. The tribunal had regard to the evidence which was presented, including the evidence which has been discussed above under subsection 117(4) of the Assessment Act. This evidence is further considered below.

The duty to maintain the child

1. Miss Pagani and Mr Caden each have a duty to maintain the child. Further, the tribunal notes the statements contained in sections 3 and 4 of the Assessment Act to the following effect:

   ·       Parents of a child have a primary duty to maintain the child.  The duty has a priority over all commitments of the parent other than commitments necessary for self-support;

   ·       The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards;

   ·       The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.

Proper needs of the child and the income, earning capacity, property and financial resources of the child

1. Miss Pagani provided medical evidence in relation to [Child 1]’ recent diagnosis with [a medical condition].  Ms Pagani has expressed concern that this diagnosis will result in ongoing medical expenses for which she would like provision made in the child support assessment.  The tribunal notes that at the date of application, the diagnosis had not been made and the ongoing costs associated with [various specialist appointments] were largely met by Medicare and were not ongoing.  Ms Pagani’s latest evidence indicates that future costs are unlikely to be so covered.  On balance the tribunal finds that the costs of managing [Child 1’s] [medical condition] were not significant at the date of application or so at the date of hearing.  In the event that this changes, it is open to Miss Pagani to lodge a new change of assessment application in light of the recent diagnosis.  The tribunal notes that any costs associated with the diagnosis and early intervention sought in relation to [Child 1’s] [medical condition] will be more affordable for Miss Pagani under an assessment which reflects the true value of Mr Caden’s income, property and financial resources.

2. There was no other documentary evidence presented to the tribunal that the child has anything other than the usual expenses and needs of a child of four years of age, expenses which are dealt with in the administrative assessment and addressed in the Costs of the Children Table.  Miss Pagani made submissions in relation to the costs of pre-school ($1,400 per annum) and extracurricular activities enjoyed by the child; Mr Caden submitted that he provides accommodation, transport and toys when [Child 1] is in his care.  The child support formula applies a cost percentage of 24% in calculating the rate of child support payable by Mr Caden – this adequately reflects the care provided by Mr Caden.  Once the adjusted taxable incomes as calculated by the tribunal are taken into account, the child support payable will be determined by reference to the amount of $16,364 derived from a higher Costs of the Children Table. The evidence does not support that the child’s expenses exceed the costs in that table by reason of any special needs.  The tribunal was satisfied that [Child 1]’ needs will be adequately reflected in the administrative assessment of child support.

3. There was no evidence that the child currently has significant independent income or resources.

Other party receiving money, goods and property for the benefit of the child

1. Given the available evidence, the tribunal concludes that neither party received money, goods or property for the benefit of the child which impacts on their ability to support him.

Income, property, financial resources and earning capacity of each parent

1. Mr Caden’s financial circumstances have been discussed above and further considered in this context.  Mr Caden reported having [an] injury which causes him some problems which he manages.  There was no documentary evidence, or suggestion by Mr Caden, that he is not engaged on a full-time basis in the management of his business and property interests.  The tribunal did not consider that Mr Caden has an annual earning capacity any greater than the value of financial resources, income and benefits as determined by the tribunal.

2. The tribunal notes that the annual value of Mr Caden’s income, property and financial resources as calculated by the tribunal ($88,000) is a modest amount as it does not take account of the value of the motor vehicle and telephone benefits.  The tribunal finds that the value of the benefits and any increase in depreciation associated with the new equipment are resources which help mitigate the impact of any modest changes in his fortunes due to trading conditions and other cash flow challenges on Mr Caden’s ability to afford child support.

3. Miss Pagani’s financial circumstances have been discussed above and further considered.  Miss Pagani is working full time and she noted that she generally enjoys good health.  The tribunal was satisfied that Miss Pagani has no additional earning capacity.

The direct and indirect costs incurred by the carer entitled to child support in providing care for the child

1. On the available evidence, the tribunal was satisfied that Miss Pagani is the parent entitled to child support from Mr Caden for the care of the child who is four years of age.  Given the child’s age, the tribunal was satisfied that Miss Pagani has forgone income or earning capacity in this regard.

Necessary commitments to support themselves

1. The self-support amount used in the administrative assessment is approximately $23,750.  On the documentary evidence available to the tribunal, including the disclosures to the Department and the SOFCs completed by both parties, the tribunal was satisfied that both Miss Pagani and Mr Caden have sufficient funds at their disposal to meet their necessary commitments.  There was no documentary evidence of mounting debts which would suggest that any expenses associated with Mr Caden’s self-support impact on his ability to pay child support (Mr Caden said that he tries to pay his credit card as it falls due).  Mr Caden reported total household expenditure of $800 per week which he meets from the operation of his business. 

2. The tribunal was satisfied that Miss Pagani is in need of child support to provide for the child.

Legal duty to support another person

1. The tribunal must take into account the commitments that are necessary to support any other child or another person that the parent has a duty to maintain.  Such commitments shall not however take priority over the obligation to the child whose maintenance is under consideration.  There was no evidence before the tribunal that either party has any outlays related to a legal duty to support another person which reduce their ability to support the child. 

2. Mr Caden submitted that he is required to support his partner and his other child, as well as her seven-year-old daughter who resides with them.  Mr Caden confirmed that he has no legal obligation to provide for the seven-year-old.  The tribunal notes that the evidence supports that Mr Caden’s partner is paid by him for bookkeeping services.  The tribunal finds that any support provided by Mr Caden to his partner and her child do not take priority or diminish his obligation to provide for [Child 1].  The other child of his will be taken into account as a relevant dependant under the administrative assessment of child support.  No further adjustment is necessary.

Hardship that would be caused to the parents and the child

1. If assessments were to be made in which Mr Caden’s adjusted taxable income was varied to $88,000 and Miss Pagani’s adjusted taxable income was calculated under the administrative assessment, the annual child support payable by Mr Caden at the date of application would be approximately $5,300 ($102 per week; $442 per month).  The rate will decrease to approximately $4,000 per annum once the relevant dependant is taken into account.

2. The tribunal considers that payment of child support at this level will not cause Mr Caden hardship.  Mr Caden owns his home outright; has funds in the bank and reported a moderate level of discretionary expenditure in his SOFC (for example, $95 per week on cleaning, holidays, gifts and hobbies).  He also spends a significant amount through the business on [Business 1].  Mr Caden will have to prioritise the payment of child support and it is appropriate that he do so.  On the basis of the available evidence, the tribunal is satisfied that there is no evidence to suggest that there would be hardship caused on Miss Pagani or the child by any departure from the child support assessment.  The proposed change in the child support assessment will ensure that both Mr Caden and Miss Pagani share in the costs of caring for the child at a level commensurate with their resources. 

3. The child support documents indicate that there are arrears in this case of $6,186.79 at 6 June 2018.  The Department records indicate that Mr Caden was making regular payments of $125 per week reducing to $80 per week from February 2018.  The tribunal did not consider that the level of indebtedness was related to financial hardship.  The tribunal’s decision will reduce the arrears.

4. Overall the tribunal finds that it is just and equitable that the child support assessment reflects that Mr Caden has income and financial resources commensurate with a person on an annual gross income of $88,000.  In reaching this conclusion, the tribunal has not been too robust but has taken a moderate position taking into account that Mr Caden’s access to funds may vary depending on trading conditions experienced by the business and the additional capital payments.  Overall, the tribunal considered that Mr Caden’s evidence is consistent with an optimistic future for the business.  Miss Pagani’s circumstances are stable and her resources are reflected in the administrative assessment of child support.

5. After consideration of all of the factors in subsection 117(4) of the Assessment Act, the tribunal is satisfied that it is just and equitable to depart from the administrative assessment. Having regard to all of the evidence, the tribunal considered that the decision under review should be set aside and a decision made that for the period 17 May 2017 to 29 February 2020, Mr Caden’s adjusted taxable income is varied to $88,000.

1. Taking into account the totality of the evidence, the tribunal considers it appropriate to determine that the assessment period should extend from 17 May 2017 until 29 February 2020.  The Department records support that the proposed start date is the date on which Miss Pagani sought a new change of assessment.  Given there is some financial uncertainty surrounding Mr Caden and his business interests, the tribunal was satisfied that the end date does not overreach into the future but permits a period of stability for both parents and the child.  It also coincides with the likely end of the next child support period.  Given the uncertainty as to the extent to which Mr Caden’s circumstances may improve and the long-term impact of purchasing new equipment, the tribunal did not consider it would be just and equitable to apply any indexation or to extend the date as proposed by the Department.

2. In the event that either party’s circumstances change during the assessment period, they have the opportunity to lodge a further change of assessment application.  The tribunal considers these dates to be in the best interests of the child and the parents as they promote certainty and consistency for those concerned. 

Issue 3 – Would it be otherwise proper to make a particular departure determination?

1. The final step for the tribunal to undertake is to determine whether it is “otherwise proper” to make a particular departure determination (subsection 117(5) of the Assessment Act). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children. Miss Pagani receives family assistance. The proposed departure determination may decrease Miss Pagani’s entitlement to family assistance but will reflect the parties’ real capacities to support the child. The tribunal concludes that it is otherwise proper to depart from the administrative assessment.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that:

·       For the period 17 May 2017 to 29 February 2020, Mr Caden’s adjusted taxable income is varied to $88,000.