Crandall and Keogan (Child support)

[2021] AATA 2725

Crandall and Keogan (Child support) [2021] AATA 2725 (21 May 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/MC020296

APPLICANT:  Ms Crandall

OTHER PARTIES:  Child Support Registrar

Mr Keogan

TRIBUNAL:Member S Brakespeare

DECISION DATE:  21 May 2021

DECISION:

The tribunal sets aside the decision under review and in substitution decides to make a departure determination in the following terms:

• For the period 8 May 2020 to 30 September 2020 Mr Keogan’s adjusted taxable income is varied to $63,960; and

• For the period 1 October 2020 to 31 March 2021 Mr Keogan’s adjusted taxable income is varied to $39,000; and

• From 1 April 2021 Mr Keogan’s child support liability is to be assessed in accordance with the provisions set out in Part 5 of the Act.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – income derived from business – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

1. Mr Keogan is the parent liable to pay child support to Ms Crandall in respect of their children [Child 1], who is 8, [Child 2], who is 7, and [Child 3], who is 4 (the children). The case commenced on 21 October 2016 and the liability became enforceable from 15 December 2019.

2. On 21 January 2020 Ms Crandall lodged an application for a change of assessment on the ground that Mr Keogan’s liability under the administrative assessment was unjust and inequitable because of the income, property and financial resources of either parent. At that time Mr Keogan was liable to pay Ms Crandall the minimum annual rate of child support of $435. This assessment was based on Mr Keogan’s 2018/19 provisional income of $20,192 and Ms Crandall’s 2018/19 adjusted taxable income of $5,000. (Mr Keogan’s actual adjusted taxable income of $22,140 subsequently replaced his provisional income.)

3. On 27 April 2020 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):

   ·For the period 15 December 2019 to 31 October 2021 Mr Keogan’s adjusted taxable income is varied to $123,888.

1. Mr Keogan objected to the original decision. On 11 November 2020 an objections officer allowed the objection in part and made the following departure determination (the objection decision):

   ·For the period 15 December 2019 to 15 April 2020 Mr Keogan’s adjusted taxable income is varied to $123,888;

   ·For the period 16 April 2020 to 31 March 2021 Mr Keogan’s adjusted taxable income is varied to $47,961;

   ·For the period 1 April 2021 to 31 October 2021 Mr Keogan’s adjusted taxable income is varied to $123,888.

2. Ms Crandall lodged an application for review of the objection decision with the tribunal.

3. Both parties participated in a telephone directions hearing and complied with the directions issued by the tribunal. A hearing was held on 12 May 2021. Ms Crandall and Mr Keogan gave evidence on affirmation to the tribunal via conference telephone. The Child Support Agency provided the tribunal and the parties with bundles of papers relevant to the review (474 pages). The tribunal also gathered extra documents from each party (folios A1 to A35 from Ms Crandall and B1 to B42 from Mr Keogan) and exchanged them prior to hearing. At hearing Mr Keogan advised that he had not received the supplementary documents from the Child Support Agency (folios 434 to 474). The matter was deferred for a short period to allow Mr Keogan to receive the documents and to provide further comments in writing. Mr Keogan’s further submission has been forwarded to Ms Crandall for her information. The tribunal did not seek further comment from Ms Crandall as no new relevant issues were raised in the submission.

4. 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 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. Mr Keogan’s income tax return for 2019/20 shows a taxable income of $21,110. This amount is made up of jobseeker payments totalling $3,897 and supplementary income of $17,213. The supplementary income is related to business income using Mr Keogan’s ABN. According to the Business Worksheet the business had a trading income of $28,596 which was topped up by jobkeeper payments of $6,000. The gross income was $34,596 and expenses were $17,383.

3. Mr Keogan’s accountant, [Mr A], wrote in a letter dated 19 April 2021 that Mr Keogan did not work from 1 July 2020 to 31 December 2020 and his business income was reported as $0.00. He stated that Mr Keogan was in receipt of jobkeeper at that time.

4. Ms Crandall is of the view that Mr Keogan is in receipt of a significant income earned through a number of sources which he is hiding through company structures in the names of third persons, principally his stepfather. Ms Crandall said that when she and Mr Keogan were partnered he set up a business in her name only so that his income could not be used by the Child Support Agency in respect of a child he had from another relationship. She said that he is using a similar arrangement to ensure she gets no child support from him in respect of their children.

5. Ms Crandall alleges that two businesses, [Company 1] and [Company 2] which were set up in Mr Keogan’s stepfather’s name are in fact businesses owned by Mr Keogan. In support of her contention she provided an invoice issued to [Company 3] by [Company 1] on 4 May 2020. She said that the email address used for [Company 1] is Mr Keogan’s email address.

6. Ms Crandall said that Mr Keogan continues to work as an [Occupation 1] and advertises frequently on Facebook. She said that his claims of not having any work are false because he continually puts off caring for the children as he is working.

7. Mr Keogan told the tribunal that his stepfather decided to set up a [Occupation 2] business and Mr Keogan was to be employed to run the business. Mr Keogan said that he was not in a position to continue working for himself as Ms Crandall had sold his tools and was badmouthing him to previous customers. Mr Keogan said that the [Company 1] business was not successful. His stepfather then decided to set up a [Occupation 3] business because he had previously been a [Occupation 3]. That business is no longer operating.

8. Mr Keogan said that he is now operating his own [Occupation 1] business using [equipment] that he bought. He said he made no money from the business last year due to COVID-19. He was receiving jobkeeper and jobseeker payments. He has fallen behind with the repayments for the equipment and is working with the banks to avoid foreclosure on his loans. He said that because he is new to the business he is having difficulty sourcing work and he is only getting the occasional job on an ad hoc basis.

9. The tribunal finds that Mr Keogan has no legal ownership of either [Company 1] or [Company 2]. The tribunal however notes that he was the joint signatory for the [Company 1] business bank account. According to the bank account [Company 1] appears to have been paid for one job being $9,319 on 14 May 2020. Those funds were drawn down progressively and the account went into deficit at the end of June 2020 and remained in deficit during 2020. The tribunal notes that some of the funds from the [Company 1] account were used for the repayments on the loan for the [equipment] which was purchased in Mr Keogan’s name on 29 May 2020. (The [equipment] purchased on 20 March 2020 was also in Mr Keogan’s name.) The tribunal is not satisfied that Mr Keogan’s stepfather was involved in either [Company 1] or [Company 2], despite being the legal owner of both businesses. The tribunal takes the view that Mr Keogan was the person who earned the income for [Company 1] and used that income for his own purposes. With respect to [Company 2] there is no indication that it owned any equipment or that the legal owner contributed any assets to the business. The tribunal is satisfied that it was equipment bought in Mr Keogan’s sole name that was to be used to derive income for [Company 2]. There does not appear to be a separate bank account for [Company 2].

10. The tribunal had regard to Mr Keogan’s personal bank statements, the statements for [Company 1] and the information provided regarding the loans Mr Keogan took out in respect of the [equipment] and a [motor vehicle of specified brand and model] (purchased under finance in December 2019). The tribunal accepts that Mr Keogan was involved in a number of business ventures during the period relevant to the change of assessment application. It appears however that none of those businesses was particularly successful and Mr Keogan has had, and continues to have, difficulty servicing the loans attached to the business equipment which he purchased.

11. Ms Crandall contends that Mr Keogan is continuing to earn undeclared cash income from the [Occupation 1] business. The tribunal notes that cash income, by its nature, is difficult to track and quantify. The fact that Mr Keogan is having difficulty repaying his loans suggests to the tribunal that it is unlikely that he is earning a significant cash income. In his Statement of Financial Circumstances Mr Keogan indicated that he is currently earning about $500 per week from the [Occupation 1] business. At hearing he indicated he is obtaining very little work. Ms Crandall provided a number of text messages from Mr Keogan to her which she said indicated that he was working regularly as he was unable to care for the children due to work commitments.

12. The tribunal finds the details surrounding Mr Keogan’s businesses to be opaque. The tribunal had regard to a text message between Ms Crandall and Mr Keogan dated 9 December 2019 where he suggests that he will pay her $3,000 per month in child support privately. He further indicates that if she goes through the Child Support Agency she will get nothing. The tribunal accepts that there is some basis for Ms Crandall’s claim that Mr Keogan’s income from business was higher than the income being used in the child support assessment, particularly in December 2019 when the text message was written and when Mr Keogan bought the [motor vehicle of specified brand and model]. However, there is insufficient material before the tribunal to make a finding that Mr Keogan’s income was significantly higher than the adjusted taxable income used in the administrative assessment in the period between December 2019 and April 2020. In particular the tribunal could see no basis for setting Mr Keogan’s adjusted taxable income at $123,888 from December 2019.

13. The tribunal is of the view that Mr Keogan has not derived an income of significance from his various business interests since at least April 2020. Further, in an attempt to start a new business he has incurred a significant level of debt using chattel mortgages, but has not derived enough income to consistently meet the repayments. The tribunal therefore considers that Mr Keogan’s main source of income has been the jobkeeper and jobseeker payments he has received.

14. It is evident that Mr Keogan was in receipt of both jobkeeper and jobseeker from 8 May 2020 through to the end of March 2021. (He told the tribunal he thinks he is still receiving some jobseeker payment.) The tribunal takes the view that the income Mr Keogan received from jobkeeper and jobseeker during the period 8 May 2020 to 31 March 2021, when annualised, is more than the adjusted taxable income of $22,140 that was used in the administrative assessment. From 8 May to 30 September 2020 he was receiving approximately $2,460 per fortnight ($63,960 annualised) in jobkeeper and jobseeker payments. There was a reduction to these payments from 1 October 2020 to approximately $1,500 per fortnight ($39,000 annualised). Whilst the jobkeeper payments ended on 31 March 2021 Mr Keogan indicated that he was continuing to receive some jobseeker payments and approximately $500 per week from his business. The tribunal has no information before it which would support a finding that Mr Keogan is deriving an income from his [Occupation 1] business that is significantly more than the adjusted taxable income used for him in the administrative assessment.

15. The tribunal finds that if an income of $63,960 is used for Mr Keogan in the administrative assessment his annual liability would be $7,870. The annual liability would reduce to approximately $2,750 if the income of $39,000 were applied to the administrative assessment. Both amounts are significantly higher than the amount of $435 that arose under the administrative assessment.

16. The tribunal is satisfied that there is a ground for departure as there are special circumstances and Mr Keogan’s liability under the administrative assessment is unjust and inequitable due to his income, property and financial resources.

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,[1] which are as set out in subsection 117(4) of the Act:

   [1] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 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). 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.[2]

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

3. There is no evidence to suggest that the children have any income, property or financial resources which should be taken into account for the purpose of the child support assessment.

4. The tribunal finds that Mr Keogan’s income from 8 May 2020 is in the vicinity of $63,960 per annum, decreasing to $39,000 per annum from 1 October 2020. Mr Keogan’s only assets of significance are the [equipment] purchased for his business, and a 2015 [motor vehicle of specified brand and model] which he purchased for $40,000 in December 2019. Mr Keogan obtained finance for the full cost of the vehicle. At the time of purchase his accountant wrote a letter stating that the vehicle was purchased primarily for business use. Mr Keogan told the tribunal that he has been unable to keep up the repayments on the vehicle and is unable to sell it as it is currently not working. Mr Keogan has minimal savings and no financial assets.

5. Mr Keogan told the tribunal that he has entered into arrangements with respect to his outstanding loans to try to ensure that his equipment is not repossessed. He said that he had to rely on his partner to pay his living expenses. He said that he used his partner’s money to help with the children’s school books in 2021.

6. Ms Crandall advised the tribunal that she is not employed. She is in receipt of parenting payment and family tax benefit (FTB). Mr Keogan told the tribunal that he believes that Ms Crandall receives cash income from [Company 3]. He said that she is a close friend of the owner’s wife. Ms Crandall provided a letter from the Director of [Company 3] who noted that he had assisted Ms Crandall with money from time to time but stated that Ms Crandall has not worked for [Company 3]. Ms Crandall told the tribunal that her father also helps out financially from time to time. The tribunal finds that Ms Crandall’s only asset of significance is a [vehicle of specified brand and model]. Ms Crandall told the tribunal that the vehicle had been under finance; however she was able to pay out the loan using the proceeds of the sale of the family home.

1. Ms Crandall told the tribunal that she has a rental commitment of $500 per week. She said that she generally manages to pay for the living expenses for her and the children using her parenting payment and FTB payments. She said her father helps her by paying for some of the children’s extracurricular activities or if she has an expense she cannot meet. She has no savings but also no debt.

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

   ·For the period 8 May 2020 to 30 September 2020 Mr Keogan’s adjusted taxable income is varied to $63,960; and

   ·For the period 1 October 2020 to 31 March 2021 Mr Keogan’s adjusted taxable income is varied to $39,000; and

   ·From 1 April 2021 Mr Keogan’s child support liability is to be assessed in accordance with the provisions set out in Part 5 of the Act.

1. The proposed determination means a liability for Mr Keogan of approximately $150 per week from 8 May 2020 and $52 per week from 1 October 2020. The tribunal takes the view that Mr Keogan had the capacity to pay the increased amount from his jobkeeper and jobseeker payments. He has been on notice since January 2020 that his child support liability was likely to increase.

2. The tribunal finds that Ms Crandall has no capacity to pay for the proper needs of the children as her income is below the relevant self-support amount as per section 45 of the Act.

3. 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. Ms Crandall is in receipt of FTB for the children. An increase in the child support liability will result in a decrease in her entitlement to FTB. This means that some of the support of the children moves from the taxpayer to the parents. The tribunal finds such a determination to be otherwise proper.

DECISION

The tribunal sets aside the decision under review and in substitution decides to make a departure determination in the following terms:

• For the period 8 May 2020 to 30 September 2020 Mr Keogan’s adjusted taxable income is varied to $63,960; and

• For the period 1 October 2020 to 31 March 2021 Mr Keogan’s adjusted taxable income is varied to $39,000; and

• From 1 April 2021 Mr Keogan’s child support liability is to be assessed in accordance with the provisions set out in Part 5 of the Act.