Caruso and Caruso (Child support)

[2019] AATA 5420

Caruso and Caruso (Child support) [2019] AATA 5420 (13 November 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC016231

APPLICANT:  Mr Caruso

OTHER PARTIES:  Child Support Registrar

Ms Caruso

TRIBUNAL:Member M Baulch

DECISION DATE:  13 November 2019

DECISION:

The tribunal set aside the decision under review and, in substitution, decided that there should be a determination to depart from the administrative assessment of child support, such that:

• For the period 1 December 2018 to 30 November 2019 Mr Caruso’s adjusted taxable income is varied to be $108,697 per annum;

• For the period 1 December 2019 to 31 December 2020 Mr Caruso’s adjusted taxable income is varied to be $80,856 per annum; and

• For the period 1 December 2018 to 30 September 2019 Ms Caruso’s adjusted taxable income is varied to be $128,374 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from 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 is about how much child support Mr Caruso should be assessed to pay to Ms Caruso.

2. Mr Caruso and Ms Caruso are the separated parents of [Child 1] and [Child 2], who were born in 2008 and 2012.  Since 27 February 2012 Mr Caruso has been assessed as liable by the Department of Human Services – Child Support (the Department) to pay child support to Ms Caruso in respect of the children who are in the care of both their parents.

3. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one parent to the other.  It uses a statutory formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care. 

4. From 1 December 2018, Mr Caruso’s liability under the statutory formula would have been $806 per annum based upon his 2017–18 provisional income of $44,514 and Ms Caruso’s 2017–18 adjusted taxable income of $70,767.

5. The Act also provides for a departure from the administrative assessment of child support in certain circumstances.  On 27 August 2018, Ms Caruso applied to the Department seeking a determination to depart from the administrative assessment of child support on the basis that the child support assessment was unfair because of Mr Caruso’s income, property or financial resources and because of his earning capacity.

6. On 30 October 2018, a departmental decision maker decided to make a departure determination, such that:

   ·      For the period 1 December 2018 to 31 December 2019 the adjusted taxable income of Mr Caruso was set at $108,697; and

   ·      For the period 1 December 2018 to 31 December 2019 the adjusted taxable income of Ms Caruso was set at $138,283;

   (the decision under review).

7. Mr Caruso objected to that decision and, on 16 March 2019, that objection was disallowed.  Mr Caruso has now applied to this tribunal seeking an independent review of the Department’s decision.

8. A hearing into the application for review was held by the tribunal on 13 November 2019.  Mr Caruso and Ms Caruso both discussed the application for review with the tribunal by telephone and both gave sworn evidence during the hearing.  A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 

9. The tribunal had before it relevant documents provided to it, and the parties to the review, by the Registrar pursuant to sections 37 and 38AA of the Administrative Appeals Tribunal Act 1975, which were labelled folios 1 to 374.  The tribunal also had before it additional documents provided by Mr Caruso (labelled folios A1 to A168) and Ms Caruso (labelled folios B1 to B74).

ISSUES

1. The statutory provisions relevant to this review application are found within the child support law, in particular the Act.

2. Pursuant to section 98C of the Act, a determination to depart from the administrative assessment of child support may be made if the following three requirements are met:

   (i)that one, or more than one, of the grounds for departure referred to in subsection [117(2) of the Act] exists; and

   (ii)that it would be:

   (A)   just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)  otherwise proper;

   to make a particular determination under this Part; …

CONSIDERATION

1. On 1 December 2018, a previous departure determination ceased to apply.  Under the statutory formula that applied when Ms Caruso made her application, Mr Caruso’s liability was assessed to be $806 per annum from 1 December 2018 based upon his provisional income of $44,514 and Ms Caruso’s adjusted taxable income of $70,767, determined by reference to her 2017-18 taxable income. 

2. Had the decision now being reviewed not been made, the administrative assessment that would have applied from 1 October 2019 would have resulted in Ms Caruso being liable to pay child support of $5,146 per annum to Mr Caruso, based upon her adjusted taxable income of $128,374 and Mr Caruso’s adjusted taxable income of $28,915, determined by reference to the parents’ 2018-19 taxable incomes.

3. These therefore are the administrative assessments from which I am considering departing when considering the application for a departure determination made by Ms Caruso on 27 August 2018.

Is there a ground, or grounds, for departure?

1. All the grounds for departing from the administrative assessment of child support are prefaced by the term “… in the special circumstances of the case …”.  As noted by the Full Court of the Family Court:[1]

   Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases. In Savery's case (at Fam LR 815 FLC 77,897), Kay J, adopting the view in In the Marriage of Philippe (1977) 4 Fam LR 153; [1978] FLC 90-433 at Fam LR 155 FLC 77,202 in a different context, said that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases" . The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.

   [1] See Gyselman and Gyselman [1991] FamCA 93

The income, property and financial resources of either parent

1. Ms Caruso’s application for a departure determination relied upon the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act.

2. This provision – commonly referred to as “Reason 8A” by the Department – provides that a ground to depart from the statutory formula may be established if, in the special circumstances of the case, the child support 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.

3. Mr Caruso is a self-employed [Occupation 1].  His taxable income was $43,513 for the 2016-17 financial year, $65,913 for the 2017-18 financial year and $28,915 for the 2018-19 financial year.

4. There is a view that a person who is self-employed sometimes obtains an advantage by being so in comparison to a wage or salary earner.  In Voss & Child Support Registrar & Anor (SSAT Appeal) [2009] FMCAfam 1296, the Federal Magistrates Court commented on the common situation of a self-employed person's taxable income not corresponding with his or her income or financial resources for child support purposes:

   There is a body of cases where simple reference to a person's tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn't properly reflect the realistic capacity of the person to provide financial support for their children.

5. Mr Caruso did not dispute that his financial resources are greater than is reflected in his taxable income.  I was satisfied that Mr Caruso gains benefits by virtue of being self-employed, such as private use of the three motor vehicles operated by the business, private use of telephones and from the business paying the mortgage on the property in which he now lives.

6. The Department’s approach, which was not challenged by Mr Caruso, was to assess Mr Caruso’s income, property and financial resources as being 50% of his gross turn over.  His BAS for the 2017-18 financial year showed a gross turnover of $217,393,[2] half of which is $108,697.

   [2] $83,215 + $59,754 + $39,595 + $34,829 (folios 164 to 173)

7. Despite making directions to Mr Caruso for them to be provided, I do not have a full set of BAS for the 2018-19 financial year, however Mr Caruso’s financial statements show that his gross sales for that year were $147,013, compared to $197,633 for the 2017-18 year.  I considered that $80,856[3] to be a reasonable estimate of the financial resources Mr Caruso received from his business in the 2018-19 financial year.

   [3] $108,697 is 55% of $197,633.  $147,013 x 55% = $80,856

8. I formed the view that an assessment of child support based only on Mr Caruso’s taxable income is unjust and inequitable in light of his actual income, property and financial resources.  I was satisfied that Mr Caruso being self-employed makes this case sufficiently out of the ordinary to be a special circumstance. 

9. I therefore found that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act is satisfied in respect of Mr Caruso. 

10. Having found a ground for departure made out, I proceeded to consider whether it would be just and equitable to make a departure determination.  I will consider Ms Caruso’s income, property and financial resources when doing so.

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.  Regard must be had to a variety of factors, set out in subsection 117(4) of the Act, such as the needs of the children, the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.

[Child 1] and [Child 2]

1. Since 10 October 2018 the Department has recorded [Child 1] and [Child 2] as being in the care of both their parents, 65% care to Ms Caruso and 35% care to Mr Caruso.  There is no evidence that [Child 1] and [Child 2] themselves have any income, property, earning capacity or financial resources of their own.

2. I identified no evidence of any costs relating to any special needs either [Child 1] or [Child 2] might have.  There are also no out of the ordinary costs relating to educating or training [Child 1] or [Child 2] in the manner expected by both their parents.  If the parents’ adjusted taxable incomes are those used in the administrative assessment that applied as at 30 October 2018 ($44,514 for Mr Caruso and $70,767 for Ms Caruso), the costs of caring for both children under the administrative formula are $15,598 per annum.

3. According to Mr Caruso’s Statement of Financial Circumstances (Child Support Reviews) form, he spends $180 per week ($9,360 per annum) providing for [Child 1] and [Child 2] when they are in his care.  Ms Caruso did not separately specify the costs she incurs for [Child 1] and [Child 2] when they are in her care on her Statement of Financial Circumstances (Child Support Reviews) form.  Her evidence was that half of her weekly household expenses, which would be $742 per week ($38,584 per annum), are the costs she incurs for [Child 1] and [Child 2] when they are in her care.

Mr Caruso

1. As I have noted, Mr Caruso is a self-employed [Occupation 1].  His taxable income was $65,913 for the 2017-18 financial year and $28,915 for the 2018-19 financial year.  I was satisfied that his income, property and financial resources are adequately represented by $108,697 for the 2017-18 financial year, and $80,856 for the 2018-19 financial year.

2. Mr Caruso explained that his income had reduced, and would continue to reduce, because he had lost the business of two significant [clients]. He has also sustained an injury [that] is impacting on his work.

3. Mr Caruso owns a property from which he conducts his business and in which he recently commenced to live.  He puts the value of that property at $850,000.  Bank statements show that the mortgage secured over that property was $397,311 as at 21 August 2019.  Mr Caruso lists the ownership of three cars in his Statement of Financial Circumstances (Child Support Reviews) form, but the evidence was that one has recently been sold.  Mr Caruso will shortly receive an inheritance from the estate of his father in the amount of NZD$160,000.  He hopes to use these funds to refinance his debts to attain a lower interest rate, however his enquires with his lender have not been promising.

4. Mr Caruso’s Statement of Financial Circumstances (Child Support Reviews) form shows total weekly expenditure for his own support, excluding the liability to pay child support, as follows:

Income tax:	$275	Life insurance premium:	$41
Health insurance:	$31	Household expenses:	$1,345[4]

[4] Mr Caruso listed his total household expenditure as $1,525 and spending on [Child 1] and [Child 2] as $180.  $1,525 less $180 equals $1,345.

I calculated that Mr Caruso’s living expenses are currently $1,692 per week, or $87,984 per annum.

1. Under the administrative assessment of child support that would have applied from 1 December 2018, Mr Caruso has the benefit of a self-support amount of $24,535 per annum. I identified no evidence to persuade me that Mr Caruso’s commitments to support himself should not be measured by $24,353 per annum.

2. Subsection 117(4) of the Act requires that I considered the earning capacity of both parents.  Subsection 117(7B) of the Act prescribes a test that must be satisfied before a parent can be attributed with an earning capacity, the first limb of which is that:

   ·      the parent does not work despite ample opportunity to do so; or

   ·      the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged; or

   ·      the parent has changed his or her occupation, industry or working pattern;

   (paragraph 117(7B)(a) of the Act)

3. I identified none of these elements applicable in Mr Caruso’s circumstances and was satisfied that there are no issues with his earning capacity which can be considered in this case.

4. In relation to whether or not he would be caused hardship if I were to increase his child support liability, Mr Caruso submitted that the decision under review that increased his liability to pay child support has required him to borrow from his personal funds.

Ms Caruso

1. Ms Caruso has been a full-time wage and salary earner since 9 July 2018 after a period of approximately six months out of the workplace trying to establish a business, which was not profitable and has now been closed.  Her taxable income was $70,767 for the 2017-18 financial year and $128,374 for the 2018-19 financial year.  I was satisfied that, from 1 December 2018, her income, property and financial resources are adequately represented by her taxable income of $128,374 for the 2018-19 financial year.

2. Ms Caruso, together with her former partner, owns a property that Ms Caruso values at $1,000,000, on which they owe $550,000.  That property is now the subject of property proceedings and Ms Caruso’s evidence was that she hopes she will have the equity she put into that property, plus half the capital gain, once their property matters are settled.  Ms Caruso has no other assets of any significance, other than superannuation.

3. Ms Caruso’s Statement of Financial Circumstances (Child Support Reviews) form, together with her evidence at hearing, shows total weekly expenditure for her own support as follows:

Income tax:	$350[5]	Health insurance	$82[6]
Household expenses:	$733[7]

[5] As per her evidence at hearing

[6] As per her evidence at hearing

[7] Ms Caruso listed her total household expenditure as $1,465, but gave evidence that half of this is spending on [Child 1] and [Child 2].  Half of $1,465 equals $733.

I calculated that Ms Caruso’s living expenses are currently $1,165 per week, or $60,580 per annum.

1. Under the administrative assessment of child support that would have applied from 1 December 2018, Ms Caruso has the benefit of a self-support amount of $24,535 per annum. I identified no evidence to persuade me that Ms Caruso’s commitments to support herself should not be measured by $24,353 per annum.

2. As noted, subsection 117(7B) of the Act sets out a test that must be satisfied before a parent can be attributed with an earning capacity.   I identified none of these elements applicable in Ms Caruso’s circumstances and was satisfied that there are no issues with Ms Caruso’s earning capacity which are relevant in this case.

3. In relation to whether or not she would be caused hardship if I were not to increase Mr Caruso’s child support liability, Ms Caruso submitted that a decision not to depart from the administrative assessment of child support would cause her and the children hardship and that an administrative assessment of $806 per year was not acceptable.  She stated that she uses the child support currently being paid by Mr Caruso, under the decision now being reviewed, to pay for health insurance and the children’s extra-curricular activities.

4. Having considered those matters set out in subsection 117(4) of the Act, I was satisfied that it would be just and equitable to make a departure determination that increased Mr Caruso’s liability to pay child support.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper is set out in subsection 117(5) of the Act, which directs my attention to what is fair to the community.  It is necessary to consider the effect, if any, that a departure from the administrative assessment would have on entitlements to income tested pension, allowance or benefit of the carer entitled to child support, in this case, Ms Caruso.  Parents, rather than the community, have the primary duty to maintain their children.

2. While Mr Caruso receives family tax benefit, Ms Caruso’s evidence was that she does not.  Despite Ms Caruso having no entitlement to family tax benefit, I was satisfied that a determination that would increase the amount of child support payable by Mr Caruso would be otherwise proper.

Conclusion

1. Section 4 of the Act sets out the objectives of the Act; these objectives include:

   ·      Parents of a child have a primary duty to maintain that child;

   ·      That 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; and

   ·      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.

2. I have found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper for me to make a departure determination.  Section 98S of the Act describes the determinations that I may make if a decision is made to depart from the administrative assessment of child support.

1. Ms Caruso made submissions at hearing that I should extend the period for which any departure determination would apply into 2020 so she is not required to go through the process of making another application for a departure determination so soon.  Mr Caruso submitted that he was happy for any departure determination to end in December 2019.

2. I have found that a ground for departure exists on the basis that Mr Caruso’s income, property and financial resources render the administrative assessment of child support unjust and inequitable.  I have found that Mr Caruso’s income, property and financial resources are represented by $108,697, for the 2017-18 financial year, and $80,856 for the 2018-19 financial year.

3. I decided that departure determinations that varied Mr Caruso’s adjusted taxable income were appropriate as follows:

   ·      $108,697 per annum for the period 1 December 2018 to 30 November 2019; and

   ·      $80,856 per annum for the period 1 December 2018 to 31 December 2020.

4. Under the administrative assessment of child support that applied from 1 December 2018, Ms Caruso’s adjusted taxable income was $70,767.  I have found that Ms Caruso’s income, property and financial resources are adequately represented by her taxable income of $128,374. 

5. I decided that there should be a departure determination in respect of Ms Caruso’s income that varies her adjusted taxable income to be the amount of $128,374 from 1 December 2018.  However, I decided that Ms Caruso’s adjusted taxable income should revert to the statutory formula for the child support period that commences from 1 October 2019, noting that under that statutory formula, Ms Caruso’s adjusted taxable income for the new child support period is $128,374.

6. These departure determinations will have the effect of creating a child support liability of approximately $6,912 per annum for the period 1 December 2018 to 30 November 2019 and approximately $3,304 per annum for the period 1 December 2019 to 31 December 2020.  I was satisfied that this results in the respective hardships of both parents being appropriately balanced.

7. Accordingly, I concluded that the appropriate departure determinations to apply in this case are, pursuant to paragraph 98S(1)(g) of the Act:

   ·      For the period 1 December 2018 to 30 November 2019 Mr Caruso’s adjusted taxable income is varied to be $108,697 per annum;

   ·      For the period 1 December 2019 to 31 December 2020 Mr Caruso’s adjusted taxable income is varied to be $80,856 per annum; and

   ·      For the period 1 December 2018 to 30 September 2019 Ms Caruso’s adjusted taxable income is varied to be $128,374 per annum.

8. Therefore, and for these reasons, I decided to set aside the decision under review and substitute my own decision.

DECISION

The tribunal set aside the decision under review and, in substitution, decided that there should be a determination to depart from the administrative assessment of child support, such that:

• For the period 1 December 2018 to 30 November 2019 Mr Caruso’s adjusted taxable income is varied to be $108,697 per annum;

• For the period 1 December 2019 to 31 December 2020 Mr Caruso’s adjusted taxable income is varied to be $80,856 per annum; and

• For the period 1 December 2018 to 30 September 2019 Ms Caruso’s adjusted taxable income is varied to be $128,374 per annum.