Chilvers and Henny (Child support)

[2018] AATA 4518

Chilvers and Henny (Child support) [2018] AATA 4518 (15 November 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC014649

APPLICANT:  Mr Chilvers

OTHER PARTIES:  Child Support Registrar

Ms Henny

TRIBUNAL:Member J Longo

DECISION DATE:  15 November 2018

DECISION:

The tribunal sets aside the decision under review and, in substitution, refuses the application to depart from the administrative assessment.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property, financial resources and earning capacity of the carer parent – a ground for departure not established – refusal to make a determination – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. The issue to be determined in this application is whether there is a reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.

2. Mr Chilvers and Ms Henny are the parents of [Child 1] and [Child 2]. Mr Chilvers is the parent liable to pay child support. The application for child support was registered with the Department of Human Services – Child Support (the Department) from 6 February 2012 and is currently subject to departmental collection of child support. [Child 1] and [Child 2] are in the shared care of Ms Henny (62%) and Mr Chilvers (38%).

3. Prior to the departure application, Mr Chilvers was assessed to pay an annual rate of child support as follows:

   ·      For the period 1 January 2018 to 25 March 2019, Mr Chilvers was assessed to pay an annual rate of child support of $13 316. This assessment is based on an adjusted taxable income of $112 433 for Mr Chilvers, and an adjusted taxable income of $31 172 for Ms Henny.

4. Mr Chilvers applied to the Department for a departure from the administrative assessment on 13 February 2018 on the basis that, in the special circumstances of the case, that the income, property and financial resources of Ms Henny make the child support assessment unfair (Reason 8A).

5. On 27 April 2018 the Department found the ground established and decided to change the administrative assessment as follows:

• For the period 27 February 2018 to 31 March 2020, Ms Henny`s adjusted taxable income is set at $41,860.

1. On 22 May 2018 Ms Henny lodged an objection to the original decision. On 12 July 2018 an objections officer of the Department allowed the objection and determined the application as follows:

• From 13 February 2018 to 31 December 2019, the adjusted taxable income for Mr Chilvers is set at $116,132.

1. Mr Chilvers made an application to the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision on 24 July 2018. Directions for this matter were made on 27 September 2018. The application was heard on 15 November 2018. The tribunal considered the documents and information, including the oral evidence of Mr Chilvers and Ms Henny, which were provided to the parties prior to the hearing.[1]

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Department numbered 1 to 486; Mr Chilvers’ documents numbered A1 to A79; and Ms Henny’s documents numbered B1 to B179.

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). Pursuant to section 98C of the Act, the administrative assessment may be departed from upon satisfaction of three matters:

   a.one, or more than one, of the grounds for departure set out in subsection 117(2) of the Act exists; and

   b.it would be:

   i.just and equitable as regards the child, the liable parent and the carer entitled to child support; and

   ii.otherwise proper to do so.

Grounds for Departure

Reason 8 – Income, property, financial resources

1. Mr Chilvers also submitted that, in the special circumstances of the case, the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by him for the children because of Ms Henny’s income, property and financial resources (subparagraph 117(2)(c)(ia) of the Act).

10.  In relation to this ground, Mr Chilvers refers to Ms Henny’s capacity to repay a $695,000 mortgage on her taxable income of $31,172 (2016/2017 financial period). Mr Chilvers’ submission is that he does not believe that all of her income is being taken into account.

11.  Mr Chilvers referred to Ms Henny’s rental income: stating that Ms Henny has up to three people living at the property but the money received is not being taken into account. Mr Chilvers stated that Ms Henny is receiving $12,000 income from rent which is not being taken into account. The tribunal referred Mr Chilvers to item 21 in Ms Henny’s 2017/2018 income tax return[2] which showed rental income for the financial year of $12,000 and interest and other deductions of $11,667 resulting in a net rental income of $333. Mr Chilvers stated that he did not believe that the rent could be taken into account in this way when it was a person’s principal residence.

[2]Page B169 of Ms Henny’s documents.

12.  Ms Henny stated that her accountant prepared her income tax return and included the rent minus deductions. She stated that her accountant advised her that it was not necessary to include these payments as it was almost akin to a family arrangement but she asked for it to be included. A new boarder commenced living in the home on 2 November 2018 as the previous boarder was working in the CBD and decided to rent closer to work.

13.  Her only other sources of income are from family tax benefit (which is excluded as income from the calculation of a person’s adjusted taxable income under the Act) and the child support she receives. The tribunal notes that the treatment of the payments received by Ms Henny from her boarder in her tax return accords with the requirements under the Income Tax Assessment Act 1997. This income is ordinary income for the purpose of assessing income tax payable by an individual and accordingly expenses incurred in the production of the ordinary income, such as interest and other deductions for rental income, are permissible. Accordingly, the income is appropriately accounted for in Ms Henny’s income tax return. There is no material difference in whether the premises are occupied by Ms Henny or not: what matters is that both are income for tax purposes. Furthermore, if Ms Henny’s rental income was less than her deductions, resulting in a net loss for tax purposes, this net loss would be added back for the purpose of assessing her adjusted taxable income under the administrative assessment.

14.  Mr Chilvers stated that Ms Henny has power of attorney of her father’s financial affairs and therefore has access to his bank accounts. Ms Henny stated that her father is in receipt of the age pension and although she does have access to his accounts, he still looks after his own finances. She has not used his funds for her own expenses. Ms Henny’s father made a statement in which he states that he has not given any of his funds and that Ms Henny has not taken any funds from his account. In the documents before the tribunal, which included Ms Henny’s bank accounts for the period 1 August 2017 to 30 September 2018, there is are no identifiable transfers from Mr Henny to Ms Henny.

15.  Mr Chilvers also alleged that Ms Henny is able to procure cash income from her various clients as they are also personal friends of Ms Henny and therefore, she is in a position to make such arrangements. Ms Henny stated that she does sometimes receive payment in cash but this income is included in her gross income for taxation purposes. Having examined Ms Henny’s income tax returns, bank and credit card statements provided in the documents to the tribunal, there is nothing in these returns to indicate Ms Henny has greater income than what is assessed in the administrative assessment. That Ms Henny uses family tax benefit and her child support payments to meet her mortgage payments is not uncommon or unusual. The tribunal is satisfied that Ms Henny’s adjusted taxable income is a reflection of her income from self-employment and from her boarder. There is no evidence before the tribunal to indicate that Ms Henny has any other income which has not been taken into account. Family tax benefit is not income for the purpose of assessing child support income under the administrative assessment and is specifically excluded from the assessment for either parent.

16.  Mr Chilvers stated that he believes that Ms Henny’s income for child support purposes should be higher than her adjusted taxable income based on the mortgage she is repaying. Ms Henny stated that she is committed to remaining in her home to give the children some stability. She has been able to manage the repayments from her income from self-employment, her boarder’s payments, family tax benefit payments and child support. She stated that she has also borrowed some money from friends, sold some of her [shares] and utilises her credit card to pay her household and personal expenses. While her expenses in the Statement of Financial Circumstances are higher than her income, she stated that she does not spend more than she receives and has no other income. Her rates for her home are still unpaid and she has other outstanding bills. 

17.  In regard to Mr Chilvers, he confirmed at hearing that his income presently is from income protection payments. He confirmed his income is $9,761 per month ($117,132 per annum). This income is reflected in his income tax return for 2017/2018. The Department determined in the objection officer decision to depart from the administrative assessment on the basis that Mr Chilvers’ income was higher than his last income tax return. The tribunal finds that there is nothing uncommon or out of the ordinary regarding Mr Chilvers’ circumstances. It is not unusual for parent to receive increases in income in subsequent financial periods. The administrative assessment of child support takes into account these changes when a parent lodges an income tax return and their adjusted taxable income is taken into account for the purpose of the formula. Accordingly, any change in income is accounted and does not constitute a ground for departing from the administrative assessment.

18.  In the circumstances and on the basis of the tribunal’s findings above in relation to both Mr Chilvers and Ms Henny’s circumstances, the tribunal is not satisfied that either parent’s income, financial resources or property are such that they make the assessment of child support under the administrative assessment unfair or unjust. There is nothing in either parent’s circumstances which is unusual or uncommon which would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Chilvers or Ms Henny for the children. Therefore, in the circumstances, the tribunal is not satisfied that a ground for departure is established under subparagraph 117(2)(c)(ia) of the Act.

The earning capacity of Ms Henny

19.  Mr Chilvers also submitted that, in the special circumstances of the case, the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by him for the children because of Ms Henny’s earning capacity (subparagraph 117(2)(c)(ib) of the Act).

20.  Mr Chilvers stated at the hearing that he believes that Ms Henny has a higher earning capacity than the amount currently assessed as she has earned more in the past. No other submissions were provided on this ground, apart from Mr Chilvers’ allegation that Ms Henny could have undisclosed cash income from her self-employment. Mr Chilvers stated that he thinks her income should be around $40,000 per annum, based on her previous income in 2014/2015 financial period.

21.Subsection 117(7B) of the Act limits the circumstances under which a parent can be found to have a higher capacity to earn an income for child support purposes. According to the provisions, the tribunal must be satisfied that either the parent does not work despite ample opportunity to work; or the has reduced their hours per week below full-time work; or has changed occupation. In addition, the provisions require that the change is not justified on the basis of caring responsibilities or health and that the major purpose of the change was not to affect the administrative assessment of child support.

22.Ms Henny confirmed that her circumstances had not changed. She stated that she has been trying to build her business income over the last three years from $17,678 she earned in 2015/2016. Ms Henny stated that her income had been higher in the previous financial year due to a trust distribution to her from Mr Chilvers’ income and not due to her business income. The tribunal is satisfied that Ms Henny is working and has not changed her hours of work or occupation. Accordingly, the first criterion under subsection 117(7B) of the Act has not been met.

23.In the circumstances, the tribunal determines that this ground for departure from the administrative assessment based on earning capacity is not established as all of the criteria specified under subsection 117(7B) of the Assessment Act have not been met.

Conclusion

24.As the tribunal has determined that there are no grounds established to depart from the administrative assessment, no consideration is required of whether it is just and equitable and otherwise proper to depart from the administrative assessment.

DECISION

The tribunal sets aside the decision under review and, in substitution, refuses the application to depart from the administrative assessment.