Corwin and Corwin (Child support)

[2021] AATA 3606

Corwin and Corwin (Child support) [2021] AATA 3606 (20 August 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/PC021173

APPLICANT:  Mr Corwin

OTHER PARTIES:  Child Support Registrar

Ms Corwin

TRIBUNAL:Member S Brakespeare

DECISION DATE:  20 August 2021

DECISION:

The decision under review is varied so that there is a departure determination in the following terms:

• for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $103,308;

• for the period 1 July 2020 to 30 June 2021 Mr Corwin’s adjusted taxable income is varied to $87,536;

• from 1 July 2021 Mr Corwin’s child support liability is to be assessed in accordance with the administrative assessment provisions contained in Part 5 of the Child Support (Assessment) Act 1989.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – distribution of income from trust - 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. Mr Corwin is the parent liable to pay child support to Ms Corwin in respect of their children [Child 1] who is 15, [Child 2] who is 11 and [Child 3] who is 4.

2. On 1 July 2020 Ms Corwin applied for a change of assessment citing a number of grounds. On 15 October 2020 an officer of the Child Support Agency decided to make a departure determination in the following terms (the original decision):

   ·     for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $111,778;

   ·     for the period 1 July 2020 to 31 December 2020 Mr Corwin’s adjusted taxable income is varied to $100,000; and

   ·      for the period 1 January 2021 to 30 November 2021 Mr Corwin’s adjusted taxable income is varied to $80,000.

3. Mr Corwin objected to the original decision. On 18 March 2021 an objections officer partly allowed the objection and made a departure determination in the following terms (the objection decision):

   ·  for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $130,937;

   ·  for the period 1 July 2020 to  31 December 2022 Mr Corwin’s adjusted taxable income is varied to $84,800.

4. Mr Corwin lodged an application for review of the objection decision with the tribunal. A telephone directions hearing was convened on 7 July 2021. Both parties participated and complied with the directions that were issued.

5. A hearing was held on 20 August 2021. Mr Corwin and Ms Corwin gave evidence on affirmation to the tribunal via conference telephone. The Child Support Agency provided the tribunal and the parties with bundles of documents relevant to the review (910 pages). The tribunal also gather further documents from the parties which were paginated and exchanged prior to the review (folios A1 to A53 and B1 to B162).

6. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

1. The statutory provisions relevant to these reviews are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).

4. Section 98C of the Act provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and

   ·if so, whether it is just and equitable to make a particular departure determination; and

   ·if so, whether it is otherwise proper to make a particular departure determination.

5. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.

6. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman & Gyselman (1992) FLC 92-279 has held:

   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 formula in the ordinary run of cases.

7. Likewise, in Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the tribunal is satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Act.

9. The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

1. A ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the 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 because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

2. At the time the change of assessment application was made the relevant administrative assessments were as follows:

   ·  for the period 20 December 2019 to 30 June 2020 Mr Corwin was assessed to pay an annual rate of child support of $10,302 based on an income estimate for him of $59,958 and Ms Corwin’s 2018/19 adjusted taxable income of $1,504;

   ·  for the period 1 July 2020 to 7 July 2020 Mr Corwin was assessed to pay an annual liability of $24,891 which is based on his 2018/19 adjusted taxable income of $111,450 and Ms Corwin is 2018/19 adjusted income of $1,504;

   ·  for the period 8 July 2020 to 31 August 2020 Mr Corwin was assessed to pay an annual liability of $13,176 based on an income estimate for him of $69,948 and Ms Corwin’s 2018/19 adjusted taxable income of $1,504;

   ·  for the period 1 September 2020 to 30 June 2021 Mr Corwin was assessed to pay an annual rate of child support of $13,029. (The incomes used for the parents remained the same; the change in rate was due to a change in the formula).

3. Mr Corwin is the sole director, shareholder and employee of Corwin Wealth Management Proprietary Limited (CWM). CWM is operated through a trust, the Corwin Wealth Management Trust (the Trust).

4. Mr Corwin acknowledged to the tribunal that he distributes some of the income of the Trust to his children and to his parents for the purposes of reducing his tax liability. He acknowledged that his adjusted taxable income therefore was not truly representative of his income. In his view his income should be the net income of CWM. Mr Corwin said he did not accept the findings made by the objections officer in respect of personal benefit he receives from CWM. Mr Corwin told the tribunal that he does not get paid a salary as such; the business pays for all of his personal expenses and these are recorded in the business accounts as drawings. When the net profit of the company is being determined those drawings are added back as income. In his view the decision by the objections officer to add a further $17,000 represents double counting. As evidence he provided spreadsheets for 2019/20 which recorded all of the income and expenses of the business including personal expenditure attributed to him.  The personal expenditure is set out in the column labelled ‘owner drawings’. Mr Corwin told the tribunal that he gets a minor benefit from the use of the mobile phone paid for by the business and for personal use of the business vehicle, for which fringe benefits tax is paid.

5. Ms Corwin told the tribunal that she agreed with the calculations made by the objections officer. She said that the findings of the objections officer were based on bank statements. She also claimed that the rent payments that appear as an expense of the business are in fact funds that are available for Mr Corwin to use, as he owns the premises from which the business operates.

6. Mr Corwin explained that he and Ms Corwin each own 11% of the business premises, with their self-managed super fund (SMSF) owning the other 78%. He also said that all of the properties in which he has an interest and the SMSF are part of the assets pool which is the subject of Court proceedings. For this reason neither he nor Ms Corwin are able to access the funds held in their names arising from the rent or the funds held in the SMSF.

7. The tribunal had regard to the financial statements for the Trust for the year ended 30 June 2020. The  net profit available for distribution was $93,036. Of this amount $49,287 was attributed to Mr Corwin, with the remainder distributed to his parents and his children. The tribunal takes the view that Mr Corwin is to be attributed with all of the net profit available for distribution for the purpose of calculation of his child support. Mr Corwin’s individual income tax return for 2019/20 also includes an income of $17,491 being [employer] allowances and fees (his role of [Occupation 1] ceased at the end of 2019), and $1,252 being net rent. The tribunal notes there were no amounts recorded for reportable fringe benefits. The tribunal takes the view that the nominal amount of $5,000 should be added to Mr Corwin’s income for child support purposes to reflect in-kind benefit he receives in respect of personal use of the motor vehicle and mobile phone. The tribunal also noted a superannuation contribution expense of $4,000. Given that 78% of the rent from the business premises is already contributed to the Corwin SMSF on behalf of Mr Corwin and Ms Corwin, the tribunal finds that the $4,000 is in excess of the compulsory superannuation amount and should be added back as income for Mr Corwin.

8. Ms Corwin contended that Mr Corwin withdrew funds from his superannuation account in May 2020 and that this amount should be considered a financial resource. Mr Corwin agreed that he accessed $9,000 from his [superannuation] account under financial hardship conditions and used it to pay outstanding bills. The tribunal is of the view that the superannuation accounts form part of the joint asset pool, which is subject to property settlement. For this reason the tribunal does not find that is appropriate to add that amount to Mr Corwin’s income for child support purposes. The $17,491 should also be disregarded, given that Mr Corwin had ceased being a [Occupation 1] prior to when the change of assessment application was made.

9. The tribunal finds that from 20 December 2019[1] Mr Corwin’s income for child support purposes is in the vicinity of $103,308 per annum. This amount is made up of the net business profits (with the superannuation deduction added back), the rental income and the nominal amount for in-kind benefits.

   [1] This is the date Mr Corwin made an income election.

10. The tribunal had regard to the financial statements for the Trust for the year ended 30 June 2021. The net profit available for distribution was $81,284. Of this amount $40,036 was attributed to Mr Corwin and the remainder was distributed to his parents and his children. Mr Corwin’s individual tax return was not provided; however the tribunal is satisfied that he is still likely to receive $1,252 from rent. The tribunal is of the view that $5,000 should again be added to reflect in-kind benefits. The tribunal finds that Mr Corwin’s income for child support purposes for the 2020/21 financial year is in the vicinity of $87,536, being the total of the net income of the business, the rent and the in-kind benefits (no deductions were recorded for superannuation contributions).

11. Mr Corwin contends that his income for the current financial year (being the net profit of the business) is likely to be $55,000 per annum. He states that the drop in income is due to changes to the financial advice industry arising from the Banking Royal Commission. He said that he has lost an income stream from commissions and he is also required to pay increased regulatory fees. He said that it is difficult to forecast whether the income lost through commissions will be replaced by increased income from other sources; his income could just as easily decrease further. Mr Corwin said that his 2020/21 income was also inflated by jobkeeper payments, which will not be available in the current financial year.

12. The tribunal finds that there are special circumstances in this case in respect of Mr Corwin’s income, property and financial resources. From 20 December 2019 Mr Corwin was being assessed on his income estimate of $59,958; the tribunal finds that his income at the time was $103,308 per annum. Mr Corwin lodged a further income estimate of $69,948 from 8 July 2020; the tribunal finds that his income from 1 July 2020 was $87,536. The tribunal therefore finds Mr Corwin’s liability under the administrative assessment is unjust and inequitable as it relies on an adjusted taxable income that is significantly lower than the income which was available to him for child support purposes.

13. The tribunal finds that there is a ground for departure.

Issue 2 – is it just and equitable to make a particular determination?

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 as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below[2], which are as set out in subsection 117(4) of the Act:

   [2] The tribunal is required to give “overt consideration” to relevant factors listed in section 117(4) of the Act re Tyagi & Meares [2008] FMCAfam 886

   (4)  In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (a)  the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b)  the proper needs of the child; and

   (c)  the income, earning capacity, property and financial resources of the child; and

   (d)  the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)  the earning capacity of each parent who is a party to the proceeding; and

   (e)  the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)  himself or herself; or

   (ii)  any other child or another person that the person has a duty to maintain; and

   (f)  the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)  any hardship that would be caused:

   (i)  to:

   (A)  the child; or

   (B)  the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)  to:

   (A)  the liable parent; or

   (B)  any other child or another person that the liable parent has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. In having regard to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act). All three children of the assessment are being educated in the Catholic school system. Both parents agree that it was their intention for the children to be educated in this manner; they both signed the relevant enrolments forms and, prior to separation, they were jointly liable for the school fees and the school fees were paid from joint funds.

3. It is Mr Corwin’s contention that, whilst he would prefer the children to remain in the private education system, it is his view that neither he nor Ms Corwin has the financial resources to continue to educate the children in that manner. He said he had written to the schools to advise them that he would no longer be liable for the costs. He acknowledged he has not contributed to the costs and states that he has no capacity to pay. Mr Corwin said that money given by his parents was used to set up [a] fund to pay for the children’s education and that fund is now in Ms Corwin’s sole control. He said it contains approximately $30,000.

4. Ms Corwin told the tribunal that the children’s education fund forms part of the joint marital assets and as property settlement is pending she is unable to access any monies from that account. It was also her view that the education fund was for the children to attend university. (Mr Corwin disagreed with that claim). Ms Corwin said that the schools have confirmed that both parents remain liable for the school fees. However, she has managed to organise a significant discount based on being a concession card holder. She has been making payments for the school fees to the extent she is able. She has also attempted to reduce costs by buying second hand uniforms and negotiating book list discounts.

5. The tribunal finds that the Year 8 tuition fees and levies for the eldest child in 2020, after discounts was $1,880. Ms Corwin paid $1,254 in 2020. The primary school tuition fees and levies for the two younger children after discounts were $2,422 in 2020. Ms Corwin paid $730.50 in 2020. The tribunal finds that the Year 9 tuition fees and levies for the eldest child in 2021, after discounts were $2,435.  Ms Corwin has paid $1,500 in 2021. The tuition fees and levies for the two younger children after discounts were $2,338 in 2021. Ms Corwin has paid $1,040.61 in 2021.

6. The tribunal is satisfied that both parents remain liable for the school fees. Ms Corwin has made partial payments in respect of the school fees. The tribunal decided that it was not appropriate to include an amount for school fees in the child support assessment, given that both parents remain liable and only partial payment has been made. Further, the issue of the children’s education fund remains before the Family Court.

7. The tribunal finds that there are no extra costs to be taken into account in respect of the children’s needs and therefore it is appropriate to calculate the costs of their needs by reference to the Costs of the Children Table.[3]

   [3] Provided for in section 155 of the Act.

8. The tribunal is satisfied that the children do not have any income, property, earning capacity or financial resources that should be taken into account for the purpose of the child support assessment.

9. The tribunal has found that Mr Corwin’s income is $103,308 per annum from 20 December 2019 and $87,536 from 1 July 2020. The tribunal finds that at all relevant times Ms Corwin was limited to income support and family assistance payments.

10. The tribunal notes that Mr Corwin and Ms Corwin are in the midst of Family Court proceedings to do with property settlement. In the tribunal’s view it is up to the Court to decide the distribution of those assets and the tribunal will not pre-empt that decision by attempting to attribute a particular asset, or portion of an asset, to either party for the purpose of the child support assessment. The tribunal is of the view that if one party has had the benefit of a particular asset (e.g. withdrawals from superannuation funds, sales of artworks etc ) since separation then that amount is likely to be considered at the time of the property settlement.

1. The tribunal is satisfied that the earning capacity provisions do not apply in this case. The tribunal notes that Ms Corwin does not currently work; however her employment status has not changed since the commencement of the child support case.

2. The tribunal proposes to make a departure determination in the following terms:

   ·for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $103,308;

   ·for the period 1 July 2020 to 30 June 2021 Mr Corwin’s adjusted taxable income is varied to $87,536;

   ·from 1 July 2021 Mr Corwin’s child support liability is to be assessed in accordance with the administrative assessment provisions contained in Part 5 of the Act.

3. The proposed determination will result in Mr Corwin having the following approximate liability:

   ·$22,500 per annum ($432 per week) from 20 December 2019;

   ·$18,000 per annum ($345 per week) from 1 July 2020.

4. Under the administrative assessment Mr Corwin’s liability from 1 July 2021 is approximately $12,558 per annum ($240 per week ) and is based on an adjusted taxable income for him of $68,297. The tribunal is not prepared to disturb the income that would be used under the administrative assessment from 1 July 2021 as it is not satisfied that Mr Corwin’s income will be significantly lower.

5. The proposed determination will cause some arrears for Mr Corwin as it takes effect from 20 December 2019. Mr Corwin said that creating arrears for him is not just and equitable as the Child Support Agency previously advised him in September 2019 that the assessment would not be back dated, even though he had advised the Child Support Agency that his actual income was higher than the income he was being assessed on.  The tribunal takes the view however that the arrears arose because Mr Corwin provided an estimate of his income on 20 December 2019, which was less than his actual income (as determined under the departure provisions). The tribunal notes Mr Corwin has been meeting his ongoing liability both via payments collected by the Child Support Agency and via the credit of prescribed non-agency payments.

6. The tribunal finds that Ms Corwin has no capacity to support the children as her income at all times is below the self-support threshold. This means that Mr Corwin is responsible for the proper needs of the children. The tribunal notes that Ms Corwin is not currently paying the mortgage on the family home in which she resides; however she is making partial payments towards the children’s private education costs as well as meeting their other needs. The tribunal accepts that Mr Corwin has had a reduction in his income; however the tribunal is satisfied that Mr Corwin has the ability to pay the increased rate of child support.

7. The tribunal finds the proposed determination to be just and equitable.

Issue 3 – Is it otherwise proper to make a particular departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.

2. The tribunal finds that Ms Corwin is in receipt of family assistance in respect of the children. A determination which increases the amount of child support payable by Mr Corwin will decrease the amount of family assistance payable to Ms Corwin. Such an outcome moves some of the burden of supporting the children from the taxpayer to the parents. The tribunal therefore finds the proposed determination to be otherwise proper.

3. The tribunal makes a departure determination in the following terms:

• for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $103,308;

• for the period 1 July 2020 to 30 June 2021 Mr Corwin’s adjusted taxable income is varied to $87,536;

• from 1 July 2021 Mr Corwin’s child support liability is to be assessed in accordance with the administrative assessment provisions contained in Part 5 of the Act.

DECISION

The decision under review is varied so that there is a departure determination in the following terms:

• for the period 20 December 2019 to 30 June 2020 Mr Corwin’s adjusted taxable income is varied to $103,308;

• for the period 1 July 2020 to 30 June 2021 Mr Corwin’s adjusted taxable income is varied to $87,536;

• from 1 July 2021 Mr Corwin’s child support liability is to be assessed in accordance with the administrative assessment provisions contained in Part 5 of the Child Support (Assessment) Act 1989.