Connolly and Judd (Child support)

Connolly and Judd (Child support) [2019] AATA 5027 (21 October 2019)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/AC016363
APPLICANT:  Mr Connolly
OTHER PARTIES:  Child Support Registrar
Ms Judd

TRIBUNAL:Member Y Webb
DECISION DATE: 21 October 2019
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that for the period 1 October 2018 to 31 October 2020, Mr Connolly’s adjusted taxable income is varied to $38,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground established with regard to the income of liable parent – decision to depart - 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

This review relates to the issue of child support regarding the children of Mr Connolly and Ms Judd (“the children”). The children are now aged 10 and eight and are in the 50/50 care of each of the parents.
The child support case has been registered for collection by the Department of Human Services (“Child Support Agency”) since 27 October 2017.
On 7 August 2018, Ms Judd applied to the Child Support Agency for a change to the administrative assessment on the basis of Reasons 8A and 8B.
At the time of Ms Judd’s application for a change to the assessment neither parent was assessed to pay child support to the other parent based on Ms Judd’s 2016/2017 adjusted taxable income of $5,800 and Mr Connolly’s 2016/2017 adjusted taxable income of $19,480. In the period 1 November 2018 to 31 January 2020 Ms Judd was required to pay child support of $22 per annum based on her 2017/2018 adjusted taxable income of $24,706 and Mr Connolly’s 2017/2018 provisional income of $19,928.
On 20 December 2018 a delegate of the Registrar decided that Reason 8A had been established but that Reason 8B had not. The delegate determined that for the period 1 October 2018 to 30 June 2019 the adjusted taxable income of Mr Connolly would be set at $44,452; for the period 1 July 2019 to 30 June 2020 at $45,341; and for the period 1 July 2020 to 31 October 2020 at $46,248. This resulted in Mr Connolly being the liable parent and his liability was calculated to be approximately $2,400 per year.
On 10 January 2019 Mr Connolly objected to that decision.
On 11 March 2019 an objections officer disallowed Mr Connolly’s objection.
Mr Connolly requested review by the Administrative Appeals Tribunal (“the Tribunal”). A telephone directions hearing was conducted with both parents on 6 August 2019.
Mr Connolly and Ms Judd attended the hearing by way of a telephone conference on 26 September 2019. Mr Connolly gave sworn evidence and Ms Judd gave evidence on affirmation.
The Tribunal deferred making a decision pending the receipt of further financial information from Mr Connolly. Ms Judd was provided with the opportunity to respond to that additional information and she did so.
On 21 October 2019 the Tribunal reconvened and made its decision.

ISSUES

The central issues for the Tribunal to determine in this case are:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (Assessment Act) exists; and if so,
·       Whether 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 to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule. The Tribunal had regard to all of this evidence, and refers specifically to particular items in this statement of reasons.

CONSIDERATION

The child support law

The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment 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.
A parent may apply to the Child Support Registrar for a determination to depart from the child support 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 as described in paragraph 12 above.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and 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 Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.
The phrase “special circumstances of the case” is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.
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.
[1] (1992) FLC 92-289
Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.

Does a ground or grounds exist to depart from the administrative formula assessment?

In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents.

Reasons 8A and 8B

The legislative grounds corresponding to Ms Judd’s application in relation to Reasons 8A and 8B are set out in subparagraphs 117(2)(c)(ia) and 117(2)(c)(ib) of the Assessment Act. The test is whether:
…in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child: [paragraph 117(2)(c)]
(ia) because of the income, property and financial resources of either parent;
(ib) because of the earning capacity of either parent…
To establish this ground it is necessary to show that either Ms Judd’s or Mr Connolly’s income, property and financial resources or earning capacity used in the assessment make the child support assessment unfair.

Ms Judd’s income, property and financial resources

Ms Judd has been employed since July 2018 at [Company 1] as a [Occupation 1]. She provided three consecutive payslips which confirmed that as at 30 June 2019 her pay rate was $26.50 an hour and that this increased to $27 per hour from July 2019. The payslips confirmed Ms Judd’s evidence that she is employed on a casual basis and her hours vary from fortnight to fortnight. The Child Support Agency also obtained information from Ms Judd’s employer which confirmed that her employment is casual and at the time of the contact in September 2018 Ms Judd’s pay rate was confirmed to be $25 per hour. The payslips which Ms Judd provided to the Tribunal showed that Ms Judd worked 66 hours in one fortnight and earned a gross fortnightly income of $1,780 (adding back $20 salary sacrifice); 64 hours in another fortnight and a gross fortnightly income of $1,787 (adding back $20 salary sacrifice); and 51.5 hours in another fortnight and a gross fortnightly income of $1,390.50.
Ms Judd’s taxable income in the 2017/2018 year was confirmed by the Australian Taxation Office to be $24,706 but this was earned at a time when Ms Judd was working for a different employer. Her 2018/2019 income tax return has not yet been completed.
Ms Judd told the Tribunal that she no longer was eligible for any parenting payment or newstart allowance. She stated that she works, on average about 25 to 30 hours per week (50 to 60 hours per fortnight) but that any leave she takes is without pay. The Tribunal accepts all of Ms Judd’s statements regarding her income. The Tribunal is satisfied that Ms Judd’s taxable income for the 2018/2019 year will be higher than her 2017/2018 income but her actual income will not be confirmed until her income tax return is finalised.
Mr Connolly contended that Ms Judd may be earning additional income as a [Occupation 2]. He did not provide any evidence to support this assertion and Ms Judd strongly denied that she was working as a [Occupation 2]. She told the Tribunal that she has not worked for reward as a [Occupation 2] since separation in 2017 and that she stopped doing that work because it was not financially sufficiently reliable. Mr Connolly stated that Ms Judd “made a lot of money” from [Occupation 2] when they were together but Ms Judd stated that even then she worked only on Saturdays and Wednesday nights and that she did not make a lot of money from [Occupation 2]. The Tribunal accepts Ms Judd’s statements that she no longer undertakes any [Occupation 2] work for payment and that the only [Occupation 2 work] she has done since separation has been without charge for family members and close friends. The Tribunal accepts Ms Judd’s statements that the only employment she has is the position at [Company 1]. The Tribunal found Ms Judd to be genuine and open in her statements to the Tribunal and accepts her evidence as truthful and reliable.
Ms Judd declared household contents of $3,750 and [Occupation 2] equipment of $500. She owns no real estate. She declared her share of savings to be $3,500 and she owns a car with a value of $10,000. She referred to the large legal fee debt which she has incurred in relation to family matters. She is paying it by way of instalments. She told the Tribunal that her family have assisted her with a loan of $65,000 and that she has not been requested to start repaying her family at this point. The Tribunal accepts Ms Judd’s statements regarding her property and financial resources.

Ms Judd’s earning capacity

Ms Judd has improved her earning capacity over the last few years. Her adjusted taxable income in the 2016/2017 year was $5,800; it increased to $24,706 in the 2017/2018 year and is most likely to be higher again in the 2018/2019 year. The Tribunal is satisfied that Ms Judd’s employment circumstances will not activate the earning capacity provisions. The Tribunal finds that Ms Judd is exercising her full earning capacity.

Mr Connolly’s income, property and financial resources

In relation to property, Mr Connolly owns his house which he declared in his Statement of Financial Circumstances is valued at approximately $750,000. Until recently he owned the house outright but the Tribunal accepts that he has redrawn on his mortgage twice in recent times: $9,500 towards the purchase of a caravan and $22,000 which he told the Tribunal he redrew for legal costs.
Mr Connolly declared that he owns household contents of approximately $19,000 and a caravan valued at approximately $15,000. He owns a vehicle valued at approximately $11,000 which he claims as a business expense. He also owns a scooter valued at $3,000. As at April 2019 he declared savings of approximately $4,500 in total.
Ms Judd asserted that Mr Connolly may have invested in gold. However, Mr Connolly denied that he had any gold or any other investments and no evidence was provided by Ms Judd to substantiate her claim that Mr Connolly may hold gold investments.
Mr Connolly is self-employed in two capacities: he is a sole trader as a [Occupation 3] and also in relation to his [specified] business, [Business 1]. He has been working work as a [Occupation 3] for many years but in relation to the [business] he has been doing this work for about three years since he completed his adult apprenticeship. This work predominantly involves [specified activities].
In relation to the [Occupation 3] work Mr Connolly explained that he [works] with three other [professionals] and the only work which they do is [specified] events predominantly around the Christmas period. He does not do any [Occupation 3] work at private functions. He stated that all of the money which he receives and spends relating to both components of his business is reflected in the transactions in his ANZ business account.
In the 2016/2017 year Mr Connolly’s adjusted taxable income was $19,480. In the 2017/2018 year it was $18,973. His income tax return for the 2017/2018 year showed that his total business income was $53,835 and his total expenses were $34,991. In relation to the [business] the income tax return of Mr Connolly shows that sales were $34,635 and the cost of sales was $12,048 resulting in gross trading income of $22,587. He declared expenses of $6,585 (which included his motor vehicle expenses of $2,838 and his other expenses such as telephone, tools, bank fees etc). His total net business income from the [business] was therefore declared to be $16,002. In relation to the income from his [Occupation 3] work his income tax return showed that he made gross sales of $19,200 (which Mr Connolly explained was for eight events at $2,400 per event) and that his purchases were $2,977 and therefore his gross trading income was $16,223. His expenses were $9,933 contract payments to the other three [Occupation 3]; equipment of $2,990; sundry expenses of $263; office expenses of $110; and advertising of $85. Mr Connolly declared that his total net business income from the [Occupation 3] work was $2,842 in the 2017/2018 year. In total therefore Mr Connolly declared that his total net business income from both the [business] and the [Occupation 3] work was $16,002 + $2,842 = $18,844. With interest of $129 Mr Connolly’s taxable income according to his income tax return was $18,973.
In the 2018/2019 year Mr Connolly advised that his taxable income was $19,358. He provided a copy of his income tax return for the 2018/2019 year and also a copy of the financial statements for the [Business 1] and [Occupation 3] businesses. The Tribunal sought clarification from Mr Connolly regarding the marked difference between his expenses in the 2018/2019 year compared with the expenses for the 2017/2018 year. Mr Connolly followed up those differences with his tax agent who provided revised financial statements and a written explanation advising that he (the tax agent) had inadvertently coded a couple of incorrect figures into the financial statements and that Mr Connolly was not at fault. He stated that the errors did not affect the income of the business. Despite the corrections there was a very significant increase in 2018/2019 in motor vehicle expenses from $2,838 in the 2017/2018 year to $8,510 in the 2018/2019 year. Mr Connolly explained that was because he needed new tyres and the vehicle required major and extensive repairs including new brakes and master cylinder repairs. The Tribunal accepts his statements about the increased vehicle expenses in 2018/2019. The corrections reduced the bank fees from $1,545 to $120 which was the same as in the previous year.
In his income tax return for the 2018/2019 year Mr Connolly declared total gross business income of $85,927 which was considerably higher than the gross business income in the previous year of $53,835. However, Mr Connolly stated that while business income had improved over the year (and especially in the summer months), he more frequently than in the past purchased the [goods] and then charged those back to the customer. This resulted in a much higher cost of sales which were $46,427 in the 2018/2019 year compared with $15,025 in the 2017/2018 year.
The Tribunal considered the 12 months of bank statements from June 2018 to June 2019 in relation to Mr Connolly’s business income and expenditure. The Tribunal finds that the deposits into that account approximately correlated with the total business income declared by Mr Connolly in his income tax return and that the cost of sales also approximately correlated with the cost of sales declared. The Tribunal accepts those figures as correct. Mr Connolly was adamant that all of his business income and expenses were reflected in the business bank statement transactions and, on an approximate and conservative basis, the Tribunal is reasonably satisfied that the bank statements relating to the 2018/2019 year correlate with the revised financial statements and Mr Connolly’s income tax return for the 2018/2019 year. These provide that Mr Connolly’s taxable income in the 2018/2019 year was $19,358.
However, when the Tribunal considered Mr Connolly’s personal and household spending, it was satisfied that this exceeds $19,358. Even when the motor vehicle expenses were removed from his household spending (having already being counted as a business expense) Mr Connolly’s weekly household spending was $613 which annualises to $31,876. Mr Connolly told the Tribunal that his food expenses were actually less than he had declared advising that he and the children often eat their meals at Mr Connolly’s mother’s place but the Tribunal was not persuaded that Mr Connolly’s food expenses for himself and the children were actually less than half than he had initially declared.
In addition, while it was not referred to in his Statement of Financial Circumstances, Mr Connolly told the Tribunal (and the Child Support Agency during the objection process) that he had redrawn against his home loan an amount of $9,500 in July 2018. The bank statements show that he is repaying this loan at $40 per week ($2,080 per year).[2]
[2] C1:159
In addition, Mr Connolly told the Tribunal that he has redrawn $22,000 against his home loan to pay for legal fees. Even when pressed around how he was funding his legal fees (which Ms Judd asserted would probably be similar to her own which totalled $65,000), Mr Connolly was very reluctant to confirm the amount of his legal fees or how he was paying for them other than advising of the $22,000 redraw. It therefore appears that two amounts have been redrawn: $9,500 in July 2018 and $22,000 more recently. Mr Connolly was not forthcoming about whether he is required to make additional loan repayments now that he has a larger loan against his home loan. In relation to the balance of his legal fees he stated that his family were assisting him to pay it.

Mr Connolly also referred to items which he has paid for the children such as dental fees of $2,230; prescription glasses at a cost of $199; orthotics and orthotic appointments of $500; [Sport 1] classes and expenses; and [Sport 2] fees and expenses.[3] These expenses total approximately $4,000 (presuming [Sport 1] and [Sport 2] expenses total approximately $1,000 per year).
[3] C1: 277
The Tribunal has conservatively calculated therefore that Mr Connolly’s personal and household expenditure totals approximately $38,000 per year (household expenses $31,876 + $2,080 loan repayments + $4,000 children’s medical/dental expenses and [Sport 1] and [Sport 2] costs). Mr Connolly stated and the Tribunal accepts that he no longer holds private health insurance for the children. The Tribunal is satisfied that Mr Connolly’s actual income is higher than the amount reflected in his income tax return. In addition of course Mr Connolly receives benefits such as a motor vehicle, phone and internet through his business rather than paying for these from his net income. While Mr Connolly could assert that the dental expenses were a “one off” expense and not an ongoing expense, the Tribunal is satisfied that the benefits from the business in relation to his vehicle, phone and internet make up for the medical/dental costs in subsequent years.
The Tribunal is satisfied that Mr Connolly has income and financial resources of approximately $38,000 per year. The income recently used in the assessment is $19,928 and his taxable income as assessed by the Australian Taxation Office for the 2018/2019 year is $19,358. The Tribunal determines that there are special circumstances in that there is a significant disparity between Mr Connolly’s actual income and financial resources and his taxable income. This renders the child support assessment unfair. The Tribunal finds that Reason 8A has been established in relation to Mr Connolly’s income, property and financial resources.

Mr Connolly’s earning capacity

Ms Judd contended that Mr Connolly is not exercising his full earning capacity. She stated that he chooses to work very limited hours even though both of the children are at school throughout the school week and despite the fact that he does not have any care of the children for 50% of the time and therefore could work unlimited hours on those days when he has no care.
Mr Connolly told the Tribunal that he does not work outside of school hours in the weeks when he has the care of the children because he does not want the children to attend out of school hours care. He stated that he has not sought to be employed as an [Occupation 4] by another business because having his own business gives him more flexibility in terms of work commitments and the needs of the children.
The earning capacity provisions are difficult to satisfy. There are three criteria all of which must be satisfied. In relation to criterion one, Mr Connolly is working; he has not reduced his hours below full-time since separation. He also has not, since separation, changed his occupation, industry or working pattern. At all times since separation, the Tribunal is satisfied that Mr Connolly has continued to work on a part-time basis in his own business. As criterion one has not been satisfied it is not necessary to consider the remaining two criteria. Hence, according to law, Mr Connolly is exercising his earning capacity.
The Tribunal concludes that Reason 8B in relation to earning capacity has not been established.

Would it be just and equitable to depart from the administrative assessment?

Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain. The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.
Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of the duty of the parents towards the children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues, the Full Family Court, in the case of Gyselman, stated that:
However, some of the matters listed in sub-section [117](4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).
Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:

The proper needs of the children

In determining the proper needs of the children, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the children.
The children both attend government schools although there are additional costs associated with their schooling such as camps and excursions which it is expected both parents share but which are not usually separately identified in a change to the assessment unless they are unusually costly or there are special circumstances associated with particular items.
Ms Judd referred to one of the children awaiting a specialist consultation regarding [health] issues. However, as out of pocket costs have not yet been incurred, nor a medical opinion regarding treatment provided, it would be premature for the Tribunal to change the assessment in relation to the [health issue].
The Tribunal accepts that Mr Connolly has paid out of pocket costs for dental work for the younger child albeit that Ms Judd was not consulted regarding the costs and treatment.
The Tribunal also accepts that both parents are paying for the children’s activities and hobbies.
The Tribunal is satisfied that both parents are meeting the usual medical and schooling costs of the children.

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

Ms Judd told the Tribunal that she believed Mr Connolly held bank accounts in the names of both children and that each child had savings of approximately $3,500 (a total of approximately $7,000). The bank statements within the C1 papers show that as at December 2018 there were two bank accounts of Mr Connolly (one held in trust for the elder child and one for the younger child) and each with a balance of $3,775.77. However at the hearing Mr Connolly told the Tribunal that he has withdrawn and spent the funds in both of those accounts. He did not provide any evidence regarding the withdrawal of the funds but the Tribunal accepts his statements that the funds held in trust for the children have been expended.
Hence the Tribunal finds that the children have no income, property or financial resources of their own and that they are completely dependent on their parents for the financial support associated with their care.

Direct and indirect costs incurred by the carer parent in providing care for the children

Ms Judd explained that she incurs out of school hours care costs for the children. She advised the Tribunal in writing, and the Tribunal accepts, that in the last 12 months she has incurred approximately $654.16 in out of pocket expenses for the children to attend out of school hours care while she is working. The Tribunal accepts that this is a necessary expense for Ms Judd. The Tribunal will take this into account in considering the determination to make in this case.

Necessary commitments to support themselves or others

The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson[4] the Full Court of the Family Court stated at paragraph 128:
Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.
[4] [1986] FamCA3.
Neither Mr Connolly nor Ms Judd raised any issues in relation to self-support and the Tribunal finds accordingly.

Ms Judd’s income, property, financial resources, expenses and earning capacity

Ms Judd’s income, property and financial resources as well as her earning capacity have been covered at length above.
In relation to her expenses, she provided a Statement of Financial Circumstances. This showed that her household costs were quite high especially with the inclusion of legal costs. It was not clear whether the expense of legal costs in Ms Judd’s household expenses was additional to the $65,000 which she borrowed from her family. Ms Judd also incurs out of pocket costs for consultations with her psychiatrist every three to six months. She told the Tribunal, and it accepts, that the out of pocket cost for each consultation is approximately $200. Ms Judd also pays rent. She advised that it has increased recently to $370 per week. She receives approximately $80 of rent assistance from Centrelink but the cost is still significant. Ms Judd indicated that she pays $40 per week for child minding ($2,080 per year) although this is at odds with her statement that her out of pocket costs for out of school hours care were approximately $654 for the last 12 months. Despite these anomalies the Tribunal accepts that Ms Judd’s financial circumstances are tight.

Mr Connolly’s income, property, financial resources, expenses and earning capacity

Mr Connolly’s income, property, financial resources, expenses and earning capacity have been covered at length above.

Any hardship to either parent or the children by the making of, or refusal to make, an order

Ms Judd told the Tribunal that she struggles to meet the day to day costs of the children including the out of school hours care fees. She does not believe that Mr Connolly’s household costs are anywhere near hers because he has no rent or mortgage costs and even if he has redrawn on his home mortgage the repayments are only a fraction of what Ms Judd is paying in rent. She also referred to expenses such as motor vehicle and phone costs which are paid for by Mr Connolly’s business. Given the significant difference in her and Mr Connolly’s financial circumstances, Ms Judd believes that Mr Connolly should pay some child support to assist with the costs of the children.
Mr Connolly acknowledged that he only has a very small loan against his home mortgage. Nevertheless he emphasised that he had recently used the redraw facility on his home mortgage to borrow $22,000 towards his legal fees. He also referred to the upcoming court trial which he advised will result in further large legal costs.
Mr Connolly did not provide any documentation regarding the $22,000 loan which he stated he has withdrawn using the redraw facility against his home mortgage to pay a portion of his legal fees. He did not disclose the repayments on the loan although the bank statements as at December 2018 showed that in relation to the $9,500 loan for the caravan, Mr Connolly was repaying this at the rate of $160 per month. The Tribunal presumes that he is continuing to repay at least that amount per month now that the loan has been increased. The Tribunal also accepts that Mr Connolly pays council and water rates on his home which total approximately $5,000 per year according to his household expenses declared in his Statement of Financial Circumstances. In addition to his very low accommodation costs (compared with Ms Judd) Mr Connolly also benefits from his significant vehicle expenses (particularly in the 2018/2019 year) and his phone and internet costs being paid for by the business rather than out of the net salary which is what Ms Judd must do. In addition, because he operates his work through a business structure Mr Connolly pays virtually no income tax whereas Ms Judd pays tax on her income.
In those circumstances the Tribunal finds that Mr Connolly’s financial circumstances are more favourable than Ms Judd’s.

Proposed determination

The Tribunal considered all of the circumstances in this matter and proposes that it would be just and equitable to vary Mr Connolly’s annual adjusted taxable income to $38,000.
It has reached this proposed determination on the basis that Mr Connolly’s spending would require an income of at least this amount to meet his household expenses and loan repayments as well as pay for the children’s medical/dental costs and their recreational/sporting activities. It also takes into account that Mr Connolly benefits from the business incurring his motor vehicle, phone and internet costs. It also recognises that Ms Judd incurs child care costs as a result of her employment. The Tribunal considers this is a conservative figure which does not over-inflate Mr Connolly’s income. The Tribunal accepts that Mr Connolly’s income is relatively modest despite being higher than Ms Judd’s income.
In terms of the parents’ respective financial positions Mr Connolly is in a more favourable position than Ms Judd for the reasons stated above and it is fair and equitable that this is taken into account in the Tribunal’s decision.
In relation to the duration of the proposed determination both parents submitted that any change to the assessment should commence from 1 October 2018 and the Tribunal agrees that that is a reasonable commencement date from which to change the assessment given that Mr Connolly would not have been aware of the change of assessment application until September 2018. In relation to the conclusion date the Tribunal considers that the date nominated by the original decision maker and the objections officer of 31 October 2020 is appropriate and will provide some certainty and stability for the parents in relation to the financial support of the children. If there is a significant change in the parents’ financial circumstances, either parent may make an application to have those significant changes assessed and considered.
Varying Mr Connolly’s adjusted taxable income to $38,000 per year will initially result in an annual rate of child support payable by Mr Connolly of approximately $1,596 on the basis of 50/50 care and calculated on Ms Judd’s 2017/2018 adjusted taxable income of $24,706. This level of child support will decrease once Ms Judd’s 2018/2019 adjusted taxable income is determined and applied to the assessment as it is likely that her income will have increased from the previous financial year.
The Tribunal considered incrementally increasing Mr Connolly’s adjusted taxable income for 2019 and 2020 but there is insufficient evidence to be reasonably satisfied that Mr Connolly’s income will significantly increase in the next couple of years.
In all of the circumstances the Tribunal is satisfied that its proposed determination is fair and equitable and that it provides Ms Judd with some financial support which she needs for the children. The Tribunal is also satisfied that the proposed child support liability is affordable for Mr Connolly.

Is it otherwise proper to depart from the administrative assessment?

The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination 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.
The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). 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 left to the public welfare system when the parents themselves have the capacity to maintain their children. The Tribunal is satisfied that Ms Judd needs financial assistance with the costs of supporting the children and that Mr Connolly is able and can afford to contribute modestly to those costs.
Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income tested benefit such as family tax benefit.
Ms Judd advised that she is aware of the impact of child support payments on that benefit.
The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that for the period 1 October 2018 to 31 October 2020, Mr Connolly’s adjusted taxable income is varied to $38,000.

SCHEDULE

List of Exhibits

Department of Human Services – Child Support Agency marked as C exhibits:
· CSA’s large bundle of 369 pages marked as exhibit– C1
Mr Connolly has provided the following documents marked as A exhibits:
·     A1-A10                Statement of Financial Circumstances
·     A11-A18               Income tax return 2019
·     A19-A27               Financial Statements 2019
·     A28-A77               Bank statements
·     A78  Email from Mr Connolly’s tax agent
·     A79-A87               Revised Financial Statements 2019
Ms Judd has provided the following documents marked as B exhibits:
·     B1–B27                Certified Domestic Partnership Agreement
·     B28-B37               Statement of Financial Circumstances
·     B238-B40             Payslips
·     B41-B42               Written submissions
·     B43-B44               Further written submissions

[2019] AATA 5027

21 October 2019

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Remedies

Statutory Construction