Chinn and Chinn (Child support)

[2021] AATA 4225

Chinn and Chinn (Child support) [2021] AATA 4225 (16 September 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC019746

APPLICANT:  Mr Chinn

OTHER PARTIES:  Child Support Registrar

Ms Chinn

TRIBUNAL:Member J Leonard

DECISION DATE:  16 September 2021

DECISION:

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

• from 1 September 2019 to 30 June 2020 Mr Chinn’s adjusted taxable income is varied to $28,583;

• from 1 July 2020 to 30 June 2021 Mr Chinn’s adjusted taxable income is varied to $54,087; and

• from 1 July 2021 to 30 October 2022 Mr Chinn’s adjusted taxable income is varied to $42,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefits derived from business – special circumstances exist – 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 omitted 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 the child support assessment applying to Mr Chinn and Ms Chinn.

2. Mr Chinn and Ms Chinn are the parents of [Child 1] (born 2008) and [Child 2] (born 2007). The case was registered with Services Australia (Child Support) on 3 September 2008. The children are recorded as being in the full-time care of Ms Chinn.

Child Support assessments

1. The Child Support (Assessment) Act 1989 (the Act) provides a formula to determine the annual rate of child support payable for a child. The variables in the formula (called “particulars”) include adjusted taxable incomes and care percentages for each parent.

2. For the period 18 January 2019 to 31 August 2019 Mr Chinn is assessed to pay an annual rate of child support of $427. This assessment is based on his adjusted taxable income of $8,120 for the 2017-18 financial year and Ms Chinn’s 2017-18 adjusted taxable income of $18,005.

3. For the period 1 September 2019 to 20 August 2020 Mr Chinn is assessed to pay an annual rate of child support of $435. This assessment is based on his 2018-19 adjusted taxable income of $13,186 and Ms Chinn’s 2018-19 adjusted taxable income of $19,185.

4. From 21 August 2020 Mr Chinn is assessed to pay an annual rate of child support of $982. This assessment is based on his 2019-20 adjusted taxable income of $29,662 and Ms Chinn’s 2019-20 adjusted taxable income of $21,504. The annual rate increased to $1,084 from 28 August 2020 when [Child 2] turned 13.

Change of assessment decision

1. The Act provides for a departure from the administrative assessment in certain circumstances. On 23 January 2020 Ms Chinn lodged a departure application with Child Support. On 5 May 2020 a decision was made to vary Mr Chinn’s adjusted taxable income to $45,000 for the period 1 September 2019 to 31 December 2021.

2. Mr Chinn objected to that decision on 15 June 2020.  On 20 August 2020 an objections officer determined that:

   ·      for the period 1 January 2020 to 31 March 2020 Mr Chinn is assessed to pay the fixed annual rate of $2,886 per annum,

   ·      for the period 1 April 2020 to 30 September 2020 Mr Chinn’s adjusted taxable income is varied to $55,000, and

   ·      for the period 1 October 2020 to 31 March 2021 Mr Chinn’s adjusted taxable income is varied to $47,200.

Application for review

1. On 7 August 2020 Mr Chinn sought review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal).  

2. The Tribunal heard the matter on 16 September 2021. Mr Chinn and Ms Chinn appeared by conference telephone. In reaching its decision the Tribunal has considered the oral evidence of Mr Chinn and Ms Chinn. The Tribunal also considered the documentation provided by Child Support (folios 1–290), Mr Chinn (folios A1–A39) and Ms Chinn (folios B1–B15).

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment 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) exists; and

   (ii)that it would be:

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

   (B)otherwise proper;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And, if so

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act. Ms Chinn applied for a change of assessment based on the ground in subparagraph 117(2)(c)(ia) of the Act that using a child support formula to assess child support:

   …in the special circumstances of the case…would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income…and financial resources of either parent.

2. The term “special circumstances” is not defined in the Act. In Gyselman v Gyselman [1991] FamCA 93 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 and that the intention of the legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

3. In her application for a departure from the administrative assessment Ms Chinn stated she was of the view that Mr Chinn’s lifestyle does not support a finding that his income is $12,000 per year and she sought to have an assessment based on his financial resources or earning capacity backdated 18 months prior to her application.

Mr Chinn’s income, property, financial resources and earning capacity

1. Mr Chinn’s income tax return for the 2018-19 financial year shows he earned $3,555 from employment as [an Occupation 1] and $9,631 from Centrelink. Information from the Australian Taxation Office shows that Mr Chinn has declared taxable income of less than $25,000 since at least the 2016-17 financial year.

2. On 21 August 2019 Mr Chinn contacted Centrelink and advised he was proposing to commence a business. He ceased receiving newstart allowance on 12 September 2019.

3. Mr Chinn purchased a [work asset] and is self-employed on a full-time basis. He acknowledged that the change in his circumstances occurred from 1 September 2019.

The 2019-20 financial year

1. Mr Chinn’s 2019-20 financial records show that his income from sales varied each month. He stated that initially he “had a great start” but then experienced a sudden and unexpected reduction in his income from January 2020 due to the impact of the fires on the New South Wales South Coast. Shortly after this markets were impacted by the coronavirus and he commenced to receive JobKeeper payment[1]. This is supported by the Income and Expenses Summary he provided in respect of the 2019-20 financial year which also shows no income from sales in April 2020 and the commencement of JobKeeper from May 2020.

   [1] JobKeeper payment was a scheme to subsidise businesses significantly affected by the coronavirus (COVID-19).

2. Mr Chinn’s 2019-20 income tax return shows total income of $44,106 and total expenses of $17,741. His taxable income of $29,662 includes $3,296 newstart allowance paid to him prior to commencing self-employment.

3. A business may be able to deduct certain expenses from income for tax purposes and as a result legitimately may have a reduced income or may even run at a loss. These deductible expenses can result in a child support assessment that does not take into account the full financial resources available to the parent. The Tribunal examined the financial records to determine whether Mr Chinn has personal costs defrayed by being tax deductible.

4. In the 2019-20 financial year Mr Chinn claimed $324 internet, $672 telephone and $3,400 motor vehicle expenses. His net income from the business was $26,365.

5. Mr Chinnl stated he owns one motor vehicle which is mostly used for business purposes such as transporting the [product] to meet the freight truck to be transported to the Melbourne or Sydney markets. He stated the motor fuel costs set out in the income and expenses summary ($248) in 2019-20 were for business purposes only.

6. Mr Chinn explained that in the 2019-20 financial year he had one phone for personal and business use and relied on the internet on his phone for [navigation].

7. The Tribunal considers that Mr Chinn derived a financial benefit from claiming 100% of his internet ($324), mobile phone ($672) and motor vehicle expenses ($3,400) through the business.  The Tribunal considers that 50% of these expenses, an amount of $2,198, is a financial resource available to Mr Chinn in the 2019-20 financial year.

8. In summary, the Tribunal determines that from 1 September 2019 Mr Chinn had income and financial resources of $28,583 ($26,365 + $2,198) available to him. If this figure was used in the child support assessment it would result in an annual rate of child support of approximately $852. As this is considerably more than the minimum annual rate of $424 per annum that Mr Chinn was assessed to pay from 1 September 2019, the Tribunal finds that a ground for departure is established.

The 2020-21 financial year

1. Mr Chinn’s financial circumstances improved in 2020-21. The 2020-21 financial records show that his income from sales totalled $62,664. JobKeeper payment totalled $13,500 and ceased in October 2020.

2. Mr Chinn’s 2020-21 profit and loss shows total income of $76,804 and total expenses of $24,318. His taxable income is $52,287.

3. In the 2020-21 financial year Mr Chinn claimed $3,600 motor vehicle expenses, $0 internet and $923 telephone. Mr Chinn explained he purchased a smart phone to be used for business purposes only at the commencement of the financial year and the expense of $923 is entirely work-related.

4. In his Statement of Financial Circumstances received by the Tribunal on 3 September 2021 Mr Chinn claimed he has telephone expenses of $30 per week ($1,560 per annum) and $60 per week for motor vehicle maintenance, insurance and registration ($3,120 per annum). He did not petrol as an item of expenditure.

5. Consistent with the reasons set out above, the Tribunal is of the view that Mr Chinn derives a personal benefit through the business paying for his motor vehicle expenses and considers that 50% of these expenses, an amount of $1,800, is a financial resource available to Mr Chinn in the 2020-21 financial year. As he purchased a second mobile phone, the Tribunal does not consider that the evidence supports a finding that Mr Chinn derives a financial benefit from the business paying for phone expenses.

6. In summary, the Tribunal determines that from 1 July 2020 Mr Chinn had income and financial resources of $54,087 ($52,287 + $1,800) available to him. If this figure was used in the child support assessment it would result in an annual rate of child support of approximately $6,664 increasing to approximately $7,360 when [Child 2] turned 13 on 28 August 2020.

From 1 July 2021

1. In his Statement of Financial Circumstances received on 3 September 2021 Mr Chinn estimated his average income was $750 per week. As the JobKeeper support has ceased his only source of income is from his business. He explained that he expected his income from sales to be similar to the income earned in the 2020-21 financial year ($62,664) with a similar level of expenses ($24,518) and was hoping for an assessment based on income in the range of $38,000–$42,000.

2. The Tribunal has carefully examined the financial records and Mr Chinn’s personal expenditure and household expenses.  Given he derives some financial benefit by the business meeting the costs of his motor vehicle, the Tribunal determines that he has income and financial resources of $42,000 available to him from 1 July 2021.

3. As Mr Chinn’s income and financial resources are not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The Tribunal therefore concludes that the ground provided for in subparagraph 117(2)(c)(ia) of the Act is established.

Is it just and equitable and otherwise proper to depart from the administrative assessment?

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 depart from the assessment having regard to the matters set out in subsection 117(4) of the Act.

2. Section 3 of the Act makes it clear that parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain.

The children’s needs

1. Ms Chinn stated that the children attend a local public school. There are no unusual expenses associated with [Child 2]’s needs however [Child 1] is under the care of a neurologist. Ms Chinn has private health insurance and estimates that the out of pocket expenses she incurs are approximately $20 per week.

The children’s income, property, financial resources and earning capacity

1. [Child 2] and [Child 1] do not have any income, property or financial resources or any unused earning capacity of any significance from which they can support themselves.

The parents’ duty to support others

1. Mr Chinn does not have a responsibility to support any other person.

2. Ms Chinn has two older children from another relationship who live with her. Her son is studying full-time and has recently claimed Centrelink assistance. Her eldest daughter is in year 12 and has a part time job. She is owed child support arrears for her eldest daughter.

The income, property, financial resources and earning capacity of the parents

1. Ms Chinn has been a full-time student and reliant on Centrelink support for a number of years. Her adjusted taxable income has been below the self-support amount since at least the 2016-17 financial year. Ms Chinn is currently receiving jobseeker payment but is exempt from seeking employment due to her caring responsibilities.

2. Mr Chinn’s income and financial resources have been discussed. He is employed full-time. Ms Chinn asserted that Mr Chinn is [an Occupation 2] by trade and his earning capacity exceeds his income.

3. In order for a person to be assessed in accordance with their earning capacity rather than their actual income, the three tests set out in subsection 117(7B) of the Act must be satisfied:

   In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a) one or more of the following applies:

   (i) the parent does not work despite ample opportunity to do so;

   (ii) 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;

   (iii) the parent has changed his or her occupation, industry or working pattern; and

   (b) the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i) the parent's caring responsibilities; or

   (ii) the parent's state of health; and

   (c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

4. Prior to becoming self-employed from September 2019 Mr Chinn’s taxable income was below the self-support amount for many years. He is now working full-time and his income has increased. The Tribunal finds that the criteria set out in subsection 117(7B) of the Act are not met.

5. Mr Chinn does not have any income, property or financial resources not already considered, and no unused earning capacity. 

The necessary commitments of the parents

1. Mr Chinn is meeting his necessary commitments. He listed household expenditure of $680 on his Statement of Financial Circumstances and has no unusual expenses associated with his own self-support.

2. Ms Chinn is finding it difficult to live on her income and relies on family tax benefit and child support to meet her necessary expenses. She has a HELP study debt but no other outstanding liabilities. She pays rent of $300 per week and her household expenses are $1,215 per week.

Terms and period of departure

1. The Tribunal considers that it is just and equitable to depart from the assessment for the period from 1 September 2019 when Mr Chinn commenced self-employment.

2. From 1 September 2019 the annual rate of child support payable by Mr Chinn is approximately $852. From 1 July 2020 the annual rate of child support is approximately $6,664. From 1 July 2021 the annual rate of child support is approximately $4,156.

3. In order to provide some certainty to the matter, the Tribunal proposes to extend the period of departure to vary Mr Chinn’s adjusted taxable income to $42,000 until 30 October 2022 to allow for lodgement of Mr Chinn’s 2021-22 income tax return.

4. The Tribunal is satisfied that this reflects a reasonable level of support for [Child 2] and [Child 1] in light of their parents’ circumstances and this outcome would be just and equitable.

Hardship

1. Mr Chinn’s bank statements and Statement of Financial Circumstances indicate a level of discretionary spending such that the Tribunal considers that the proposed decision will not result in hardship to Mr Chinn and would not result in hardship to Ms Chinn, [Child 2] or [Child 1].  

Issue three – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal to undertake is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment.  Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)the effect that the making of the order would have on:

   (i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

2. The child support law recognises that each parent has a primary duty to maintain their children. Ms Chinn receives family tax benefit and so the proposed decision may reduce the rate she receives which is appropriate. The Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter.

DECISION

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

• from 1 September 2019 to 30 June 2020 Mr Chinn’s adjusted taxable income is varied to $28,583;

• from 1 July 2020 to 30 June 2021 Mr Chinn’s adjusted taxable income is varied to $54,087; and

• from 1 July 2021 to 30 October 2022 Mr Chinn’s adjusted taxable income is varied to $42,000.