CSR and Wolbers and Wolbers and Keppel and Bell
[2007] FMCAfam 196
•9 May 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| C.S.R. & WOLBERS & WOLBERS & KEPPEL & BELL | [2007] FMCAfam 196 |
| CHILD SUPPORT – Enforcement and departure applications – Registrar initiated change of assessment – application by payer for departure order – payer is carpenter/builder who transferred his business to his defacto wife – business subsequently incorporated with defacto wife as sole director, secretary and sole shareholder – no evidence of any consideration for the transfer – inadequate financial disclosure by applicant and defacto wife – applicant remains primary income generator for the business – applicant derives income and benefits from the business which justify the higher level of income set by the Child Support Registrar – applicant has earning capacity even if technically an employee – applicant failed to demonstrate any ground for departure under ss117(2) of the Child Support (Assessment) Act 1989. |
| Child Support (Assessment) Act 1989, ss.114, 117, 145 |
| Applicant (Enforcement): | CHILD SUPPORT REGISTRAR |
| Respondent (Enforcement): | MICHAEL WOLBERS |
| Applicant (Departure): | MICHAEL WOLBERS |
| 1st Respondent (Departure): | JULIE KEPPEL |
| 2nd Respondent (Departure): | JACQUELINE BELL |
| File Number: | MLM 5038 of 2006 |
| Judgment of: | Hughes FM |
| Hearing date: | 5 March 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 9 May 2007 |
REPRESENTATION
| Counsel for Child Support Registrar (Enforcement): | Mr Dickson |
| Solicitors for Child Suppport Registrar (Enforcement): | Australian Government Solicitor |
| Counsel for Mr Wolbers: | Mr Grant |
| Solicitors for Mr Wolbers: | Billings Cloak |
| 1st Respondent Ms Keppel (Departure): | No appearance |
| 2nd Respondent Ms Bell (Departure): | No appearance |
ORDERS
That the two applications for departure orders filed 5 June 2006 are dismissed.
That the applicant pay to the Child Support Registrar within 60 days, or such further time as is agreed between the applicant and the Child Support Registrar, all sums owing by way of child support arrears and penalties in relation to the children Tamra Keppel born 19 October 1990 and Darren Bell born 27 April 2000.
That the parties have liberty to apply in relation to the issue of enforcement.
That the Child Support Registrar serve a copy of these orders and reasons for decision on the respondent to each of the departure applications.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 5038 of 2006
| CHILD SUPPPORT REGISTRAR |
Applicant (Enforcement)
And
| MICHAEL WOLBERS |
Respondent (Enforcement)
| MICHAEL WOLBERS |
Applicant (Departure)
And
| JULIE KEPPEL |
1st Respondent (Departure)
And
| JACQUELINE BELL |
2nd Respondent (Departure)
REASONS FOR JUDGMENT
Introduction
These proceedings involve three separate applications heard simultaneously.
In the first proceedings the Child Support Registrar seeks enforcement of arrears of child support payable by the respondent, Mr Michael Wolbers, and payment of associated penalties.
In the remaining proceedings, the applicant father, Mr Wolbers, seeks a departure from the administrative assessment of child support for two children from two separate relationships. He seeks a departure for the period 30 June 2005 to 31 December 2005 and then each year from
1 January 2006 indefinitely into the future.
Background
As a result of his relationship with Ms Julie Keppel, the applicant is the father of the child Tamra Keppel born 19 October 1990.
As a result of his relationship with Ms Jacqueline Bell, the applicant is the father of the child Darren Bell born 27 April 2000.
The applicant is currently living in a de facto relationship with
Ms Anne-Marie Wolbers. The applicant and Ms Wolbers have previously been married. They married on 22 March 1997 and divorced in July 2003. They resumed living together in March 2004. They plan to remarry. They have four children together. At the time of the hearing their children were aged eight years, six years, 17 months and 10 weeks.
The applicant is a carpenter and builder. Until 1 July 2004 he worked as a carpenter and operated his own business as a sole trader obtaining work through a labour hire company. On 1 July 2004 Ms Wolbers took over the applicant's business as a sole trader. She has no carpentry or building skills. In her affidavit filed in the proceedings on 9 February 2007, Ms Wolbers said she engaged contractors to carry out the carpentry work for the business, explaining:
"I did this as Michael Wolbers was at that stage ill, suffering from Hepatitis C which caused him to be lethargic and have symptoms similar to chronic fatigue syndrome. During this period Michael Wolbers was studying for his Builders Licence which he completed in March, 2006.”
The implication in this evidence is that the applicant did not work between 1 July 2004 and March 2006 but this is not supported by the applicant's evidence. At paragraph 5 of his affidavit filed 5 June 2006 the applicant says as follows:
"From 1 July 2004 I worked for my wife as a subcontractor carpenter. Her business AMW Building Services had a taxable income in 2005 of $60,113. My wife supported me, as the business did not pay me for my work.”
This of course is nonsense as it was the applicant who generated the income of the business.
On 30 June 2005 the business was incorporated as AMW Building Services Pty Ltd (“the Company”). At that stage Anne-Marie Wolbers was the sole director, secretary and sole shareholder. The applicant became a director on 15 September 2006.
The applicant said in oral evidence that he took three or four months to study to obtain his builder’s licence. He did not say when he did this but it is reasonable to assume it was immediately prior to him obtaining his builders licence in March 2006. He said that most people have to study full-time for three months to obtain their builder’s license but, because of his extensive experience on building sites, he did not have to. I infer from this evidence that he worked for at least some of the time during the four month period prior to March 2006.
Although the applicant became a director of the Company in September 2006, it was clear on the evidence of Ms Wolbers that she regarded the applicant as an equal partner in the business from the time he obtained his builders license in March 2006. She said he was a 50 percent shareholder in the company from that time. When it was pointed out to her that the organisational extract produced by the Australian Securities and Investments Commission indicates the applicant was not, at the time of the hearing, a shareholder, Ms Wolbers said that she had directed the accountant to lodge the relevant documents but that he must have failed to do so. She said she had changed accountants because of such problems. She said that she would ensure the applicant was registered as a 50 percent shareholder in the Company as soon as possible.
During 2004, as a result of the applicant apparently earning no income at all, his child support liability fell to the minimum rate which was $130.00 per annum for each child.
In mid-2005 the Child Support Registrar initiated a change of assessment. At that time the applicant’s child support income amount was $23,042.00. On 12 July 2005 Senior Case Officer Noonan changed the assessment to increase the applicant’s child support income amount to $114,026.00 for the period 30 June 2005 until 30 June 2008.
It is apparent from the reasons of the Senior Case Officer, which are annexed to the application filed by Mr Wolbers in this Court on 5 June 2006, that Mr Wolbers had told the Agency that he did not work because of ill health. Mr Noonan said on page 2 of his reasons:
"It has been proposed that Mr Wolbers be assessed on the basis of an income of $114,026.00. When I put to Mr Wolbers the substance of the CSA recommendation he stated that he did not work due to medical reasons and therefore he did not agree with the proposed income. I asked Mr Wolbers to provide me with a medical report supporting this claim and he provided a brief note from a Medical Doctor outlining a small risk of infection from a medical condition. The report did not state that Mr Wolbers is unable to work. I must therefore assume that Mr Wolbers is able to work.
According to the information in the CSA recommendation Mr Wolbers continues to have the capacity to earn income as a carpenter/supervisor and he has the opportunity to do so. Mr Wolbers has not provided me with any evidence that would cause me to doubt the veracity of the CSA recommendation (which I cannot repeat here for privacy reasons).
I am therefore satisfied that on the basis of the CSA report Mr Wolbers has income and financial resources that are not reflected by the current assessment of child support and therefore that assessment is unfair. A reason to change the assessment is established."
An objection was lodged by the applicant who relied on the following three grounds:
i)that he earned no income during the previous financial year;
ii)that the Agency failed to take into account Mr Wolbers’ two children from his current relationship and that another child was due to be born; and
iii)that the Agency had not provided him with any reasons as to how his revised child support income had been calculated.
The objection was disallowed by Objections Officer Fern on
22 October 2005. The reasons for decision by the Objections Officer are also annexed to the application filed by Mr Wolbers on 5 June 2006. At page 2 of those reasons Ms Fern said as follows:
“The Child Support Registrar has proposed that Mr Wolbers the assessed on a child support income of $114,026. The details of this proposal were provided directly to Mr Wolbers during his telephone conference with CSO Noonan on 30 June 2005. However, due to Privacy Restrictions these recommendations cannot be outlined here.
… … …
The information before SCO in Noonan showed that Mr Wolbers has the capacity to earn income as a Carpenter/Supervisor and I noticed that he has declared that he derives income from the operation of a Carpentry business in his 2004 taxation return.
Mr Wolbers did not provide any information to SCO Noonan which would enable him to not accept the submission/proposal prepared by the Agency and accordingly he has made the decision to accept the Agency's recommendation and make a change to the assessment by increasing Mr Wolbers’ income.
In his objection, Mr Wolbers has not supplied any further information than what was available to SCO Noonan. The only other information that has become available is that Mr Wolbers’ 2004 taxable income has been amended by the Australia taxation office (ATO). However, as the basis of the CSA's submission is that Mr Wolbers should not be assessed on just his taxable income, this latter information does not allow me to overturn SCO Noonan's decision to accept the Agency's recommendations.
Mr Wolbers has also stated in his objection that his two relevant dependent children are not reflected in the assessment. However this is not the case, as his exempt income amount of $26,236 reflects the dependence of his other two children. No allowance can yet be made to reflect his expected child until after birth and Mr Wolbers will need to notify the Agency of this event when it occurs.”
The applicant complained that he was not provided with adequate reasons for decision at any stage of the change of assessment process. It appears from the reasons of Objections Officer Fern set out above that she believed Mr Wolbers was provided with the information which formed the basis for the increased assessment during a telephone conversation with senior Case Officer Noonan during the change of assessment process. Mr Wolbers denies that this is so. Presumably, the privacy considerations referred to related to the privacy of the information about the applicant's business arrangements. Nevertheless, the applicant is entitled to know (and have in writing) the full reasons for the original decision. Counsel for the Child Support Registrar in these proceedings acknowledged the legitimacy of Mr Wolbers’ complaint.
Current proceedings
The proceedings in this Court began on 24 April 2006 when the Child Support Registrar commenced enforcement proceedings in relation to unpaid child support in relation to both children. On 5 June 2006 the applicant filed two separate applications for departure orders. The proceedings were consolidated and heard together on 5 March 2007.
The Child Support Registrar intervened in the departure application proceedings. The applicant objected to the intervention. After hearing argument from counsel I ruled that the Registrar was entitled to intervene. I gave brief reasons for decision at the time which centred on sub-ss.145(1) and (2) of the Child Support (Assessment) Act 1989 which read as follows:
“145(1) [Registrar may intervene] The Registrar may intervene in, and contest and argue any question arising in, a proceeding under this Act.
145(2) [Registrar a party] If the Registrar intervenes in a proceeding under this Act, the Registrar is to be taken to be a party to the proceeding with all the rights, duties and liabilities of a party.”
It was the position of the Child Support Registrar that, as a result of the corporate structure of the applicant’s business, the applicant derived income and benefits not reflected in his taxable income. The applicant denied this. His position was that the administrative assessment resulting from the change of assessment process was excessive.
The applicant sought orders setting his child support income amount at $30,057.00 for the period 30 June 2005 to 31 December 2005.
For all periods from 1 January 2006, the applicant initially sought that the child support income be set at half the taxable income earned jointly by the applicant and his partner, Ms Wolbers, from the Company. During the proceedings however the applicant amended his position saying that, from 1 January 2006, Ms Wolbers’ income should be regarded as being $50,000.00 per annum and the balance of the net profit of the Company should be attributable to the applicant as income.
Both the applicant and Ms Wolbers gave evidence and were cross-examined by Counsel for the Child Support Registrar.
Neither of the respondent mothers participated in the proceedings although they were served. Counsel for both the applicant and the Child Support Registrar agreed that the issues in the proceedings concerned only the financial circumstances and income earning capacity of the applicant, rather than the circumstances of either of the mothers of the children, and neither the sought that the respondent mothers be present.
The law
Applications for departure from the administrative assessment of child support are governed by Division 4 of the Child Support (Assessment) Act 1989. Section 117 of the Act provides that the Court may make an order for departure if it is satisfied:
a)firstly, that one or more of the grounds in s.117(2) exists;
b)secondly, that it would be just and equitable to make the order; and
c)thirdly, that it would be otherwise proper to make the order.
The income, property and financial resources of the applicant
The applicant filed a form 13 financial statement on 5 June 2006 in which he stated that his gross weekly income was $600.00 per week. He declared that Ms Wolbers’ income was also $600.00 per week.
In his oral evidence on 5 March 2007, the applicant said that the 2006 tax return for the company had not yet been completed as it was not required to be lodged until 28 April 2007. Financial statements for the Company for the year ending 30 June 2006 were available and were tendered in evidence as exhibit A2. The applicant said there was no reason to think the company's tax return would not reflect the financial statements.
The 2006 financial statements for the Company indicated annual sales of $621,961.33 for the year. After deducting the costs of sales (purchases and subcontractors), the company had a trading profit of $200,328.25.
Expenses for the Company for the year ended 30 June 006 amounted to $118,821.23. They included wages of $70,479.20. Initially the applicant said they were the wages for himself and Ms Wolbers. He then said that the figure included the wage of an apprentice who is paid approximately $12,000.00 per year. Later in his evidence, when asked to confirm that the $70,479.20 included wages for the apprentice, Ms Wolbers and himself, the applicant replied “No, just Ann-Marie and myself”.
The Company had a gross operating profit for the year ended 30 June 2006 of $81,508.24. The applicant agreed that this amount added to the wages for the applicant and Ms Wolbers meant that a total amount of $151,987.44 was available to be distributed to the applicant and Ms Wolbers or retained as profits, as they chose. The Company paid income tax of $24,452.47 that year, leaving a net operating profit of $57,055.77 which was retained in the company as accumulated profit or shareholders’ equity.
Notwithstanding the inconsistent evidence of the applicant, I am prepared to accept that the wages of the apprentice in the sum of $12,000.00 are included in the wages item in the balance sheet. There appears to be no other item in the balance sheet which would otherwise account for those wages. This means that $58,479.20 was paid as wages to the applicant and Ms Wolbers for the financial year ended June 2006 and that a total of $139,987.44 was available to the applicant and Ms Wolbers to pay to themselves as wages or retain as profit.
The 2006 financial statements for the company include depreciation expenses of $18,937.00. This is a major expense item for the company, coming second only to wages. There is nothing in the financial statements which indicate that provision has been made for replacement of depreciated assets. The applicant agreed in cross-examination that it was a non-cash item.
It was put to the applicant in cross examination that he has been the income generator for the business in its various forms since it began. The applicant said that for some of the time he worked by himself but in the last few years some subcontractors have worked for him. He said the use of subcontractors began when Ms Wolbers took over the business.
The role of Ms Wolbers in the company was explored at some length during the proceedings. The applicant said that he used to pay a bookkeeper but that he could not now remember how much he paid. He said Ms Wolbers does all the clerical and administrative work as well as picking up supplies for him as needed. He said he estimated that it would cost him $50,000.00 per year to pay someone else to do the work Ms Wolbers does.
At paragraph eight of her affidavit filed 9 February 2007, Ms Wolbers said the following about her role in the business:
"During the period of July 2004 to June 2005 I worked 8 - 10 hours per day in the administration of the business and I had the sole responsibility for running the business as Michael Wolbers was ill. From July 2005 to 30th June 2006 I continued to work for 8 - 10 hours per day but I eased off around September 2005 as I was heavily pregnant with our third child Eden Lilly Wolbers. However, I continued working 2 - 3 hours per day until the New Year and that the end of January 2006 I resumed working 5 – 6 hours per day until November, 2006 when I was again heavily pregnant with our fourth child Harry Paul Wolbers. From November, 2006 I was doing minimal hours and still to date I am only doing minimum hours due to my commitments to the children. My tasks currently include doing the pay roll, paying of supplies, ordering and collecting materials and the general administration of the business.”
On the day of the hearing, Ms Wolbers produced material in answer to a subpoena directed to her which was originally returnable on
2 October 2006. The material consisted of two large shopping bags filled with miscellaneous documents. It included a number of brown paper sandwich bags containing loose receipts. When she was challenged in cross-examination about the lack of organisation of the documents she said words to the effect of "I threw the receipts in the bag. There wasn’t a lot of time to do the rest.”
Ms Wolbers was asked whether or not what she produced to the Court was the extent of her bookkeeping for the financial year ending 30 June 2006. She said it was, except that she also entered the information into QuickBooks, an accounting software program. She did not produce a printout of any documents from the QuickBooks program. She did not produce any bank statements. The tenor of her evidence was that she just grabbed whatever she could find and put it into the shopping bags to produce at Court on the day of the hearing.
Ms Wolbers said that there were two accounts for the business. When challenged about her failure to provide bank statements in relation to those accounts, especially as she was the Company bookkeeper and they were within her control, she pleaded lack of time. She said words to effect of “I’m doing only two to three hours, sometimes not even that. At the moment I’ve eased off because I have a 10 week old baby”. She agreed she was in the same position in late 2005. When asked where the bank statements were, she said "at home if they’re not in the bag.”
As a result of lack of adequate disclosure by the applicant and Ms Wolbers it was not possible to examine documents supporting expenditure by the Company. The Court was required therefore to make a determination on the affidavit material, the limited number of tendered documents and the oral evidence.
The evidence given by the applicant changed frequently during cross-examination and was at times quite hard to follow. When asked about the gross weekly income of $600.00 he declared in his form 13 financial statement, the applicant said "it might have changed by now…we expanded the company. I am earning more money.” He said that last financial year the company earned $120,000.00 but it is not clear to what that figure relates as the figures for the 2006 financial year are set out above.
The applicant said the Company currently had four jobs in Brighton which comprised over $1 million worth of work. He said the buildings were at lock-up stage and were expected to be completed somewhere between the end of March and the end of April 2007. He confirmed that most of the costs for the project, including the subcontractors, had already been paid and that the Company expected to receive over $500,000.00 on completion. He then appeared to realise the significance of this evidence and changed it. He said that, in fact, only the contractors had been paid, not the subcontractors, and that out of the $500,000.00 he was only expecting a profit of between $50,000.00 and $60,000.00.
When asked what his wages were at the moment, the applicant said "I probably draw $400.00 per week”. He then amended that figure to $350.00 per week, saying that he knew it was this amount as he stops at a service station on the way to work each day and withdraws $50.00 from the business savings account using a key card. Later in his evidence the applicant said that he withdraws extra money from the business account which he thought would be between $50.00 and $100.00 per week.
The applicant said he did not have a personal bank account. When asked why that was, he replied "I had money in the bank and the Child Support Agency took it out”.
It became clear during the course of the applicant's evidence that, in addition to the wages paid by the company to the applicant and Ms Wolbers, the Company pays for various personal expenses for the couple. The applicant said, for instance, that about three months ago he bought a motorbike for himself for $9,999.00 and another one for his eight-year-old son for $3,700.00. He said he paid cash for the motorbikes. When challenged about actually handing over that much cash, he said he wrote a bank cheque drawn on the business account. He said later "Anne got the bank cheque for me. I've got no signatures on anything”.
The applicant said he also bought his daughter a $900.00 quad bike for Christmas two years ago. His daughter at that time was four years old. He said that purchase was made from the business account.
The applicant said that the business pays for petrol for all vehicles used by the family, including the motorbikes.
The applicant said in evidence that Ms Wolbers had recently purchased a house for $293,000.00 which was subject to a mortgage of $271,000.00. When asked where the difference of $22,000.00 came from he said "I'd say out of the Company".” He said the house was purchased entirely in Ms Wolbers’ name because he did not want to own a house and preferred to rent. His name is not on the mortgage.
Ms Wolbers was a similarly unimpressive witness. When asked whether the applicant had a key card or any other form of access to the business accounts, Ms Wolbers said he did not. The applicant’s evidence about stopping at a service station on the way to work each day to withdraw money from the business account using a key card was put to Ms Wolbers. She then changed her evidence and said that the applicant does, in fact, have a key card but it is her key card which she gives him to use. She said she has another one. She further clarified by saying the applicant has a key card to the business overdraft account and she has one for the other general business account. This evidence directly contradicted her earlier answer.
Ms Wolbers said that she regularly transfers money from the business account into her own account via the Internet. She estimated that she transfers $800.00 per fortnight to her account. She said that, in addition, she pays the mortgage of $1,948.00 per month from the business account. Given the lack of documentation, it is not possible to tell whether these amounts, which total $44,176.00 per annum, are in addition to the wage paid to Ms Wolbers or comprise part of her wage.
In relation to the purchase of the property in which she and the applicant live with their children, Ms Wolbers said she purchased the property for $293,000.00 and took out a loan for $278,000.00. She said she paid the difference of $15,000.00 from savings in her own account. No bank statements were produced to support this evidence. Ms Wolbers was asked about payment of stamp duty in relation to the property. She said she could not remember how much the stamp duty was. She denied paying it out of the Company account.
Ms Wolbers was asked about the purchase of the motorbike for her eight-year-old son. She said it was paid for in cash from her own account. She emphatically denied it was paid from the business account, in direct contradiction to the applicant's evidence. She was then asked whether the money for the purchase had been transferred from the business account to her own account. Ms Wolbers replied "yes probably”. She denied the money for the applicant’s motorbike came out of the business account.
Ms Wolbers said that, since June 2006, she and the applicant had purchased two vehicles. The first, an Isuzu truck, was purchased for business use. The second, a Nissan patrol, is used 50 percent of the time for business use and 50 percent for private use.
Ms Wolbers was unable to explain an amount of $21,248.98 for “prepaid charges” in relation to a loan to GE Finance noted in the financial statements.
Ms Wolbers was asked about the depreciation expense in the Company’s 2006 financial statements. She suggested it related to the Nissan Patrol motor vehicle purchased in January 2006 and tools of trade. She then said that, in fact, she would just be guessing and that the accountant prepares the financial statements and allocates an amount for depreciation. The accountant was not called to give evidence.
It is not possible on the evidence for me to quantify precisely the value of the personal benefits the applicant and Ms Wolbers derive from the Company in terms of wages and expenses paid by the Company. It is clear, however, that the Company made a profit for the financial year ending June 2006 of $140,000.00 in round figures which was available to be paid to the applicant and Ms Wolbers as income. The applicant asserts that it is reasonable for Ms Wolbers to be paid a wage of $50,000.00 for the work she does for the Company. On the evidence I have seen, such a wage seems unjustified. I do not need to determine that issue, however, as there is no doubt on the evidence that, in addition to wages, the Company pays for personal expenses for the applicant and his family which ought to be taken into account for the purpose of child support.
Section 114 of the Child Support (Assessment) Act 1989 sets out the additional particular objects of Division 4 of the Act relating to departure applications. They include the object “that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents”.
The applicant asserts the administrative assessment of child support would result in unjust and inequitable determination of the level of support to be provided by the applicant for the children. The applicant has failed to demonstrate this. I am satisfied on the basis of the evidence before me that the amount determined by the Child Support Registrar as part of the administrative assessment is appropriate given the applicant’s financial circumstances.
Income earning capacity
I will specifically deal with the issue of income earning capacity as it is one of the grounds relied upon in the applications filed by the applicant on 5 June 2006.
Section 117(7B) of the Child Support Assessment Act 1989 sets out how determinations in relation to earning capacity are to be made. The provision is as follows:
Section 117(7B) “[Determinations in respect of paragraph (4)(da)] 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.”
During the change of assessment process, the applicant asserted that the Company is owned by his wife and that he simply derives a wage. At the beginning of these proceedings the applicant appeared to acknowledge at least joint ownership of the Company and said that his income should be no more than half of the net profit of the Company. By the time of the hearing before me, the applicant’s position was that his income should be taken to be the net profit of the Company less $50,000.00 payable as a wage to Ms Wolbers.
I am satisfied that the applicant has changed his working pattern. Prior to 1 July 2004 he had his own business and worked as a sole trader. On 1 July 1004 he transferred the business to Ms Wolbers. There is no evidence that Ms Wolbers invested any money of her own into the business or provided any consideration for the transfer. The business was incorporated on 30 June 2006. It is clear on the evidence that the applicant has remained the prime income earner for the business.
The applicant and Ms Wolbers asserted that the change in the applicant's working pattern was justified on the basis of the applicant’s stated health at the time. I reject that assertion. The evidence before me indicates that the applicant continued to work at the time Ms Wolbers took over the business, possibly reducing his hours for a short period in which he studied for, and obtained, a builders licence.
Having made these findings, the onus is on the applicant to demonstrate that it was not a major purpose of his decision to change his work pattern to affect the administrative assessment of child support. The applicant has failed to discharge that onus. On the contrary, he made a number of statements which reinforced my view that it was precisely to reduce his child support obligations that the change to his work pattern was implemented. The applicant said quite candidly that the reason he did not have a bank account was because the Child Support Agency previously took money from his account. He said that the purpose of incorporating the business was to minimise the amount of tax paid. The applicant's taxable income and his child support liability are, of course, intimately connected.
The applicant has failed to establish that, in the special circumstances of this case, application of the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the applicant to the children because of his earning capacity.
Conclusion
As no grounds for a departure from the administrative assessment of child support have been established, the existing administrative assessment will remain in force.
Enforcement
At the time of the hearing the applicant’s child support debt was $50,628.50 and there were penalties owing in the sum of $13,937.89. The issue of enforcement was barely addressed in the proceedings. I am not critical of either party for this as it was necessary to deal with the departure application prior to addressing enforcement.
As foreshadowed in the course of discussions with counsel, I will simply order that the arrears and penalties be paid within a certain time and grant liberty to the parties to apply.
I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Hughes FM
Associate: J Commins
Date:9 May 2007
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