Campling and Bryant (Child support)

[2022] AATA 2096

Campling and Bryant (Child support) [2022] AATA 2096 (26 April 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC022660

APPLICANT:  Mr Campling

OTHER PARTIES:  Child Support Registrar

Ms Bryant

TRIBUNAL:Member C Breheny

DECISION DATE:  26 April 2022

DECISION:

The decision under review is affirmed.

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 affirmed

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 Bryant and Mr Campling are the separated parents of [Child 1], born [in] March 2006. A child support case has been registered with the (then) Department of Human Services – Child Support (Child Support) since 27 March 2006 and registered for collection since 30 May 2011. Child support is payable on the basis that Ms Bryant has 100% care of [Child 1] and Mr Campling is assessed as liable to pay child support to Ms Bryant.

2. There have been previous departure determinations in this case. An application was initially lodged by Ms Bryant on 28 June 2017 and ultimately decided by the Administrative Appeals Tribunal (the Tribunal), differently constituted, on 11 July 2018. The Tribunal determined that Mr Campling and his wife jointly controlled a company, [Company 1] and set Mr Campling’s adjusted taxable income at $62,000 for the period 1 April 2017 to 31 December 2019. The income amount increased slight due to CPI indexation and resulted in a child support liability of $8,829 per annum.

3. On 4 September 2019 Ms Bryant lodged a further change of assessment application, as she had been advised that Mr Campling’s child support liability would be administratively assessed from 1 January 2020 as being $2,396 per annum, based on Mr Campling’s 2018/19 deemed taxable income of $35,456 and Ms Bryant’s 2018/19 provisional income of $22,321. On 3 December 2019 COA decision-maker (DM) [named] determined that Mr Campling’s adjusted taxable income was set at $65,000 from 1 January 2020 to 31 December 2020. This resulted in a child support liability of $9,057 per annum. No one objected to that decision.

4. On 1 October 2020 Ms Bryant lodged a third change of assessment application, as she had been advised that Mr Campling’s child support liability would decrease to $7,182 from 1 January 2021, based on his 2019/20 adjusted taxable income of $56,800 and Ms Bryant’s 2019/20 adjusted taxable income of $22,760.

5. On 20 November 2020, DM [named] decided to change the administrative assessment on the basis of Mr Campling’s income and financial resources and determined that for the period 1 January 2021 until a terminating event ends the assessment of Mr Campling’s adjusted taxable income was set at $100,000 per annum.

6. On 8 February 2021, Mr Campling objected to the decision and on 3 June 2021, a Child Support objections officer decided to partly allow the objection. The objections officer decided that for the period 1 January 2021 until a terminating event ends the assessment of Mr Campling’s adjusted taxable income was set at $195,735 per annum. This increased Mr Campling’s child support liability to $27,485 per annum.

7. On 25 August 2021, Mr Campling applied to the Tribunal for an independent review of Child Support’s latest decision. A hearing into Mr Campling’s application for review was held on 26 April 2022. Both Ms Bryant and Mr Campling attended the hearing by conference telephone and gave evidence on affirmation. 

8. I had before me the statement and documents provided by Child Support pursuant to subsection 37(1) of the Administrative Appeals Tribunal Act 1975, received on 3 December 2021 and numbered 1–374. I also considered additional documents provided by Mr Campling (marked A1–A86) and Ms Bryant (marked B1–B31) as a result of written directions issued on 22 February 2022.

LEGISLATIVE FRAMEWORK AND ISSUES

1. The legislation relevant to this review is contained in the child support law, in particular the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula, which takes into account factors such as the number of children, the level of care provided and the income of each parent. Either the liable parent or the carer entitled to child support may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The registrar, and the Tribunal standing in place of the Registrar, must be satisfied that a ground for departure exists and that it is just and equitable and otherwise proper to make a departure determination.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Act. 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 Tribunal may make one of the determinations prescribed in section 98S of the Act.

4. In the legislation, each ground for departure is prefaced by the words, “in the special circumstances of the case”. Therefore, when considering whether one (or more) grounds exists, the Tribunal must be satisfied that there are “special circumstances” in the case. The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92-279 stated that:

   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 administrative formula result in the ordinary run of cases.

5. Subsection 98C(3) of the Act provides that subsections 117(4) to (9) of the Act apply and the Tribunal must consider these when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

CONSIDERATION

1. Ms Bryant asked for a departure from the administrative assessment on the basis that the assessment does not correctly reflect the parties’ respective income, property and financial resources (also known as “Reason 8A”).

2. Neither party submitted that the other had greater earning capacity for the purposes of this review and I have thus not considered this issue further.

Income, property, financial resources and earning capacity of both parties

1. Subparagraph 117(2)(c)(ia) of the Act provides that, in the special circumstances of the case, a ground for departure may be established if application of the legislative provisions relating to an administrative assessment results in an “unjust and inequitable determination of the level of financial support to be provided by the liable parent” due to the income, property and financial resources of either parent.

Mr Campling – income, property and financial resources

1. Ms Bryant lodged her application on 1 October 2020, asking for a change to the administrative assessment from 1 January 2021, as Mr Campling’s child support liability would reduce to $7,182 per annum, based on his 2019/20 adjusted taxable income of $56,800.

2. Ms Bryant submitted that Mr Campling has access to the financial resources of [Company 1], a business that he operates jointly with his wife. His income and financial resources are thus far greater than the income declared in his tax returns.

3. Mr Campling stated that he was happy to pay child support of about $9,700 per year (about $186 per week), based on an income of approximately $65,000 per annum.

   Business ownership/control

4. Mr Campling stated that he used to be the [Occupation 1] for a large, multinational company, specialising in products for the [specified] industries. He had been working for that company for a long time and acquired specialist knowledge relating to the [specified] industry. He was made redundant in 2014 and found it difficult to obtain new employment.

5. His wife started the business in late 2014. She has extensive experience in business administration and financial management and she is the sole director of the company. Mr Campling said that he is employed by [Company 1] as a [Occupation 1] and there are now two other employees, who are primarily responsible for logistics, ensuring that products reach the customers.

6. Mr Campling stated that [Company 1] supplies the [specified] industries and whilst his role is similar to the one he previously held, it is now much less complicated. He is no longer managing an international sales team but he is now only one person liaising with potential customers and trying to secure new contracts for the company.

7. Mr Campling said that he is not able to “run a business”. He does not have the energy that he used to have and he is often exhausted at the end of the day. He suffers from medical (mental health) issues and significant stress. His wife is capable of running the business and she is therefore the only director. Mr Campling agreed that he is the public officer for the company and the only signatory to all company accounts[1] (folio 289). I also note that the company website[2] lists the same contact telephone numbers that Mr Campling supplied to the Tribunal.

   [1] [Bank 1] accounts nos: xxxx3836, xxxx4660 and xxxx4652

   [2] [Source redacted]

8. I have considered the evidence before me. I accept that Mr Campling’s wife’s responsibility is the administration of the company and that she has great expertise in that area. On the other hand, Mr Campling is responsible for generating the company’s business, i.e. attracting potential customers and securing business contracts, due to his extensive knowledge in the industry. He and his wife are supported in their endeavours by two (unrelated) third parties, whose role appears to be ensuring that the contracts are met (i.e. products sold by [Company 1] reach the customers). Whilst I agree that the business may not function without Mrs Campling’s business administration expertise, I am also of the view that it would not function without Mr Campling’s specialist expertise in the [specified] industries and his ability to attract new customers.

9. I note that it is a long-established principle of law when a person conducts their business through an intermediary such as a company or trust that it is proper to “lift the corporate veil” to determine the value of a company or trust to that person.[3] In Ashton, the Court stated that “this Court is not bound by the formalities designed to obtain advantages and protection for the husband who stands in reality in the positions of the owner”. Similarly, the Full Court of the Family Court said: “in our view, the company [the Trustee of the Family Trusts] is a mere puppet of the husband” and could be disregarded. These principles have been affirmed by the Family Court in cases such as In the Marriage of Carey (1994), FamCA 74 FLC 92-489, with regard to the determination of a parent’s income for child support purposes. In these cases, effective control of the businesses was found to rest with the person conducting the business and not the intermediary.

   [3] Stein v Stein (1986) FamCA 27, FLC 91-779 and Ashton and Ashton (1986) FamCA 20, FLC 91-777

10. Taking into account the caselaw and evidence before me I find that effective control of [Company 1] rests with Mr Campling and his wife jointly (50/50), each bringing different, but complementary skills to the business partnership. I note that this is the same conclusion reached by the Tribunal (differently constituted) in its 2018 decision.

Business income

1. Mr Campling provided tax returns for [Company 1] for the 2020/21 financial year (folios A72–A78) and financial reports for the 2019/20, 2020/21 and part 2021/22 financial years (folios A79–A86).

2. The 2020/21 profit/loss statement for [Company 1] shows a gross income of $1,808,857, an increase from the gross income of $1,208,085 in 2019/20. Business expenses amounted to $670,927 in 2020/21 and $643,873 in 2019/20. In 2020/21 [Company 1] recorded a net profit (after tax) of $849,788, a substantial increase from the net profit (after tax) of $412,014 in 2019/20.

3. The 2020/21 balance sheet indicates a cash account balance as of 30 June 2021 of $1,208,168 and total business equity of $2,090,094) (folio A 81). There are no “directors loans” and the company does not appear to pay dividends. Thus company profits appear to be retained at the end of each financial year.

4. Company tax returns show that in 2020/21 [Company 1]’s taxable income was $1,108,235 (folio A75) and in 2019/20 taxable income was $553,447, reduced from $564,212 (as listed in the profit/loss statement) by various deductable expenses (folio 278).

5. I note that [Company 1]’s taxable income was considerably lower at the time of the previous Tribunal decision in 2018; being $102,826 in 2015/16 and $49,797 in 2016/17 (folio 81). Mr Campling noted that [specified] industry projects have a very long “lead time” and thus ongoing profits cannot be guaranteed. He stated that a major [contract] ended in December 2021 and it would take some time, maybe two or three years, before [Company 1] could secure another major contract of that nature. He expected net profits in 2021/22 to be lower.

6. The profit/loss statement for 2021/22 shows a net profit (before tax) of $564,099 in the eight-month period to the end of February 2022. Annualised this would indicate a before tax profit of about $846,148, which is certainly a reduction of the company’s 2020/21 taxable income of $1,108,235.

7. Mr Campling stated that his wife was a very careful businesswoman. She was aware that company profits would probably reduce in the next few years. She is trying to secure the company’s future by ensuring any profits remain within the company to help it “weather the storm” over the next two or three years.

Personal income

1. Mr Campling said that he is employed by [Company 1] as a [Occupation 1] and he receives a regular wage from the company. Child Support records indicate that his 2017/18 taxable income was $34,490 and the 2018/19 taxable income was $36,905 (folio 350).

2. Mr Campling’s 2019/20 personal tax return shows a taxable income of $56,800, comprising wages from [Company 1] (folio 191). In 2020/21 Mr Campling declared a taxable income of $59,515 (folios A34/35).

3. Payslips issued by [Company 1] (folios A14–A32) indicate current weekly earnings $1,153.85 or $60,000 per annum, from which taxation, superannuation and child support payments are being deducted. The current net weekly income for Mr Campling is $429.98.

Summary

1. Ms Bryant submitted that Mr Campling was responsible for managing all of the sale contracts for the company and indeed for “generating the company’s business”. He should therefore be entitled to half of the company profits. Ms Bryant suggested that the income amount set by the objections officer should probably be higher.

2. I have considered the evidence before me. As noted above, I am satisfied that Mr Campling’s gross income from employment (based on a regular gross payment of $1,153.85 per week) amounts to an annual gross income of about $60,000. I am also satisfied that Mr Campling conducts the business [Company 1] in a 50/50 partnership with his wife and therefore ought to be entitled to 50% of the company’s annual after-tax profits. In the 2020/21 financial year that would amount to about $424,894. I have estimated that in the 2021/22 financial year that sum might reduce to about $318,000, based on a 25% reduction in company income.

3. I therefore find that Mr Campling’s income and financial resources from employment and from company profits would amount to about $484,894 in the 2020/21 financial year.

Ms Bryant – income, property and financial resources

1. Ms Bryant is reliant on Centrelink payments. She provided Centrelink Income Statements (folios B13–B26) indicating that she receives disability support pension of about $882.20 per fortnight, pension supplement pf $32.90, carer allowance of $132.89 per fortnight and family tax benefit payments of about $109.20 per fortnight, a total of about $1,157.19 per fortnight or $578.60 per week.

2. Her 2018/19 personal tax return shows a taxable income of $0, indicating tax free Centrelink payments of $22,321(folio B31). Ms Bryant’s 2019/20 taxable income was $0 and her 2020/21 taxable income was also $0 (folios B27–B30).

3. Centrelink statements indicate that Ms Bryant has been in receipt of disability support pension since March 2013 and carer allowance for [Child 1] since June 2014. I have no evidence that Ms Bryant has any other source of income, and I am therefore satisfied that Ms Bryant’s income, property and financial resources are adequately represented by her annual income tax returns.

Conclusion – income, property and financial resources of both parties

1. Ms Bryant asked for a departure determination from 1 January 2021 (the 2020/21 financial year), when the rate of child support reduced to $7,182 per annum based on Mr Campling’s 2019/20 adjusted taxable income of $56,800 and Ms Bryant’s 2019/20 adjusted taxable income of $22,760.

2. I have found that Mr Campling’s actual income and financial resources in 2020/21 amounted to $484,894 and I have estimated that Mr Campling’s child support liability for [Child 1], if calculated on the basis of his actual financial resources would be $29,156 per year (the maximum child support amount) from 1 January 2021. Ms Bryant’s adjusted taxable income is below the self-support amount and thus does not affect the assessment.

3. I find that the difference between an annual child support liability of $29,156 and the annual rate of child support ($7,182) based on Mr Campling’s 2018/19 adjusted taxable income, is so great that it gives rise to special circumstances in this particular case.

4. I am therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Campling’s income, property and financial resources.

5. Subparagraph 98C(1)(b)(i) of the Act is satisfied if “one, or more than one” of the grounds for departure are established. Having found one ground for departure established, I will now consider whether it is just and equitable to make a departure determination.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. To do so I must have regard to a number of factors set out in subsection 117(4) of the Act, such as the needs of [Child 1], the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.

Mr Campling

1. Mr Campling’s income, property and financial resources have been discussed in some detail above. He provided a Statement of Financial Circumstances (folios A5–A13) indicating a current income from employment of $1,153 per week (about $60,000 per year). Mr Campling listed taxation, superannuation and private health insurance expenses of about $367 per week.

2. Household expenses for himself and his wife amount to $1,318 per week, including mortgage payments of $628 per week. Mr Campling noted that their family home is in his wife’s name, but the mortgage is in both names. Mr Campling allocated about half ($662 per week) of household expenses to himself.

3. As previously discussed, Mr Campling and his wife run a business and I have found that that effective control of the business rests with him and his wife jointly. Mr Campling indicated on his 2020/21 personal tax return that his wife’s income from the company is $141,142 (folio A36) and he confirmed that this is correct. Mr Campling only draws a wage of $60,000, thus his wife earns nearly two and half times more from the business. The reason for this disparity is unclear, but given this difference, I am of the view that it is reasonable to assume that she would therefore contribute (at least) 70% of general household expenses.

1. On this basis Mr Campling would have to meet expenses of $762 per week[4] from his weekly wages of $1,153, resulting in a weekly surplus of $390 and I therefore find that Mr Campling is able to meet all of his financial commitments.

   [4] $367 + $395, being 30% of $1,318

2. Mr Campling noted that his wife set up the business with money gifted to her from her family and I note that the previous Tribunal found that as of 30 June 2017 there were outstanding director’s loans of $190,140.09, owed by the company to Mr Campling’s wife (folio 81). As stated above there are no further director’s loans listed on the more recent company balance sheets, indicating that the loans have been repaid.

3. Mr Campling also suggested that he was suffering from medical conditions that affected his capacity to work. He previously provided medical evidence dated January 2018 (folios 237 and 238). The evidence indicates that he suffers from stress and anxiety and is not fit to work more than 40 hours per week.

4. There is no recent medical evidence before me to indicate the current impact of these conditions on Mr Campling’s ability to work. I note however the past evidence indicates that he is fit for full-time work, thus there appears to be no reduction in Mr Campling’s capacity to earn.

Ms Bryant

1. Ms Bryant stated on her Statement of Financial Circumstances (folios B1–B9) that her income is about $520 per week. Centrelink notices provided by Ms Bryant show that she receives a total of about $1,157.19 per fortnight or $578.60 per week. She noted total household expenses of $1,325, plus $27.50 life insurance for herself.

2. Ms Bryant shares a home with her mother, who is on the age pension and contributes to some expenses. They pay $450 rent per week and Ms Bryant noted that she would not be able to afford private rent, if her mother was no longer with her.

3. Ms Bryant indicated that essential expenses for [Child 1] amount to approximately $250 per week (or $13,000 per year). She did not list any out of the ordinary expenses for [Child 1]. [Child 1] is now 16 years old. He has no income, property or financial resources relevant to my determination. Overall it appears that Ms Bryant relies on child support payments from Mr Campling to meet [Child 1]’s expenses.

Otherwise proper  

1. The requirement to consider whether it is “otherwise proper” to depart from the administrative assessment 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 or benefits (subsection 117(5) of the Act).

2. 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.

3. Ms Bryant is in receipt of family assistance payments, which are affected by maintenance payments such as child support. Any increase to child support payable would result in an appropriate decrease in these payments. Such a result would be otherwise proper.

Conclusion

1. Section 98S of the Act describes the determinations that the Registrar, and the Tribunal standing in the shoes of the Registrar, may make if it decides to depart from the administrative assessment. It is open to the Tribunal to set a rate of child support payable or set some of the variables used in the administrative assessment formula (for example, vary one or both parents’ adjusted taxable income).

2. Ms Bryant applied for an increase to the administratively assessed child support liability of $7,182 from 1 January 2021, once the previous change of assessment determination ended. Ms Bryant contended that Mr Campling has access to greater financial resources from the business and he is able to decide his own wages. He increased his wages from about $35,000 to about $60,000 per year, after the previous Tribunal set his income at that rate. Ms Bryant initially noted on her application form (folio 146) that Mr Campling’s income ought to be set at $65,000 per annum, but now submitted that Mr Campling’s financial resources are much greater than that, probably even greater than found by the objections officer.

3. Mr Campling submitted that he was happy to pay child support based on earnings of about $65,000 and he had offered to pay $9,700 per year or about $186 per week (as this is the amount of child support requested on Ms Bryant’s application form). He noted that having to pay about $520 per week, as decided by the objections officer was stressful and he felt like he was going backwards financially. He was wondering how much of that money was actually going to support [Child 1]. Mr Campling emphasised that he had no issues supporting his son and, indeed, he was already thinking about how he could continue to support him into the future (i.e. after the child support case ended).

4. Both Ms Bryant and Mr Campling agreed that the any determination I make should cover the remainder of the child support case, as neither were keen to go through the “change of assessment” process again.

5. I note the objections officer based their decision on the company’s 2019/20 taxable income of $553,447. They acknowledged that the business has to retain funds on an annual basis to secure operations and thus found that only 25% of that taxable income should be considered to be a financial resource for Mr Campling. This would amount to $138,362 and together with Mr Campling’s 2019/20 personal taxable income of $57,373 would bring his total income and financial resources to $195,735 in 2019/20.

6. I have more recent financial information before me. Mr Campling’s 2020/21 personal taxable income was $59,515. The company’s 2020/21 taxable income was $1,108,235 and employing the same reasoning as the objections officer (i.e. allocating 25% of company taxable income), would bring Mr Campling’s income and financial resources to $336,573 in 2020/21[5].

   [5] $277,058 + $59,515 = $336,573

7. I note that I have found that Mr Campling has greater income and financial resources in 2020/21 ($424,894), on the basis that Mr Campling has access to 50% of after-tax company profits.

8. I have taken into account however of some of the information provided by Mr Campling during the hearing. In particular, that [Company 1] operates in a specialist market, that contracts, specifically in the [specified] industry, have a very long lead time and that company income is most likely going to be less in the next two to three years, before new major contracts can be secured.

9. I have therefore decided not to disturb the objections officer’s decision. I note the maximum rate of child support payable if the income amount was increased to either $336,573 per annum or $424,894 per annum is only about $37 per week more than the currently assessed rate. I am not persuaded that Ms Bryant would be in financial hardship if I did not increase the income amount.

10. I further note that this child support case will end in March 2024 or at the end of 2024, if [Child 1] continues in secondary education. Ms Bryant indicated that as of the beginning of 2022 Mr Campling’s child support liability was about $9,500 in arrears (folio B3). I have estimated that (at a rate of about $27,485 per annum), Mr Campling’s total (maximum) child support liability to the end of the child support case would be about $92,000[6]. I am of the view that Mr Campling has access to sufficient financial resources to meet this amount over the next three years.

    [6] $27,458 x 3 years (2022, 2023, 2024) + $9,500 arrears

11. Based on these deliberations, I therefore affirm the decision under review.

DECISION

The decision under review is affirmed.