Curfman and Saltman (Child support) - [2024] AATA 4130

Curfman and Saltman (Child support) [2024] AATA 4130 (30 September 2024)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2024/SC027883
APPLICANT:  Mr Curfman
OTHER PARTIES:  Child Support Registrar
Ms Saltman

TRIBUNAL:Member P Noonan
DECISION DATE: 30 September 2024
DECISION:

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

For the period 1 February 2021 to 30 June 2021 Mr Curfman’s adjusted taxable income is varied to $61,582 per annum.
For the period 1 July 2021 to 30 June 2022 Mr Curfman’s adjusted taxable income is varied to $122,118 per annum.
For the period 1 July 2022 to 11 September 2023 Mr Curfman’s adjusted taxable income is varied to $46,051 per annum.
For the period 12 September 2023 until a terminating event occurs with respect to the youngest child of the assessment Mr Curfman’s adjusted taxable income is varied to $160,000 per annum.

CATCHWORDS
CHILD SUPPORT – departure determination – income, earning capacity, property and financial resources – father self-employed – property settlements – father’s long-term loans from personal partner for business use – net business loss for one financial year – terminating event to happen soon – decision under review set aside and substituted

REASONS FOR DECISION

BACKGROUND

Mr Curfman (the father) and Ms Saltman (the mother) are the parents of two children covered by a child support agreement. The eldest child turned 18 on 18 July 2021 and the youngest child is due to turn 18 on 6 October 2024. Mr Curfman also has two dependent children living with him and his new partner. These relevant dependents are recorded from 25 November 2019.
The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula, which contains variables such as the parents’ adjusted taxable incomes (ATI) and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.
A child support case was first registered with the Department of Human Services – Child Support (Child Support) on 26 September 2011, and child support has been registered for collection by Child Support from that date. Care of the children is recorded as 100% to the mother but was 100% to the father in respect of the eldest child at the time of departure.
On 19 November 2020 a financial investigator employed by Child Support recommended that the father’s income be set at $238,372 per annum and that the mother’s income should remain set at $727 per annum. On 16 February 2021 the Child Support Registrar (the Registrar) initiated a departure from the administrative assessment on the ground that the administrative assessment resulted in an unjust and inequitable determination of the level of child support because of the income, earning capacity, property and financial resources of the father. During that period in time the father was assessed to pay child support of $1,352 per annum based upon a provisional 2019/20 ATI of $51,151 for the father and a 2019/20 ATI of $727 for the mother. The delegated decision-maker decided, upon reviewing the available evidence, that for the period 1 February 2021 to 31 December 2022, the adjusted taxable income of the father should be set at $80,000 per annum.
On 7 December 2023 the father lodged an objection to this decision. His application for an extension of time in which to lodge his objection was rejected by Child Support however, upon appeal to the Tribunal (differently constituted) he was given leave to object.
On 9 April 2024 a Child Support objections officer decided to disallow the objection. The officer noted that the father has not provided any tangible evidence outlining how his financial affairs are managed in relation to his business or why significant transfers are paid to him which he then uses to meet his self-support.
On 3 May 2024 the father appealed to this Tribunal for an independent review. The Tribunal conducted a directions hearing and issued directions to both parties for production of documents and information in preparation for the hearing which both parties complied with although the father fully complied at the last minute.
The mother advised prior to the hearing that she would not be participating in the hearing due to trauma. The Tribunal had previously advised the mother that if she decided not to participate in the hearing she would remain a party to the matter. The hearing was held on 30 September 2024 and the father gave evidence on affirmation by conference telephone. The Tribunal was assisted by an interpreter in the [Language] and English languages.

CONSIDERATION

The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the 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.
The Registrar may initiate a departure from the administrative assessment of child support under Part 6A of the Act (section 98K). Section 98L provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:
(i)that, in the special circumstances of the case, 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 liable parent for the child because of the income, earning capacity, property and financial resources of either parent; and
(ii)that it would be:
(A) just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B) otherwise proper; to make a particular determination under this Part.
In making a determination under section 98L, the Registrar, and the Tribunal, must have regard to subsections 117(4) to (9) of the Act (subsection 98L(2)).
If satisfied that the ground for departure exists and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal must make one of the determinations prescribed in section 98S of the Act. Section 98S sets out the determinations that may be made under the departure provisions. It permits a range of determinations, including varying the rate of child support payable or the adjusted taxable income.

Does a ground exist to depart from the administrative assessment?

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

In this case, the Registrar initiated a departure from the administrative assessment.
There is only one ground for departure, which is set out in section 98L of the Act. Paragraph 98L(1)(a) provides the ground that ‘in the special circumstances of the case, application in relation to a 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 because of the income, earning capacity, property and financial resources of either parent’.
The term ‘special circumstances’ is not defined in the Act. In Gyselman and Gyselman [1992] FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.
The father appears to be prosecuting this matter on the belief, which he has reiterated many times, that his Taxation Notices of Assessment should be the basis upon which his child support commitments be assessed and that loans from his partner should not be included for these purposes either. However, it is a well-established principle of the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources (DJM and JLM [1988] FamCA 97, Scott and Scott (1994) FLC 92-457, Carey and Carey (1994) FLC 92-489). When summarised, these cases establish that a ground of departure is established as self-employed people are able to derive additional benefits from their businesses, and also have a greater control over the structure of their finances than a PAYG employee. Having now supplied, for the first time in this lengthy appeals process, his full relevant business financials it is beholden upon the Tribunal to assess them with this principle in mind. Accordingly, the father may well end up with a result unfavourable to him in some relevant financial years once this process occurs, however that it is merely an unavoidable and natural outcome of the change of assessment process where full disclosure has only now occurred. The father is to be commended for having done so as it allows for a fair assessment of the amount of child support to be paid in support of the children of the assessment.
The father owns and runs [a] business. He supplied full relevant financials for the business for the purposes of his appeal. A complicating factor in this matter is the father and mother carried out a significant property settlement during 2023. This resulted in a significant capital gain for the mother, which lifted her ATI to $182,357 as at the date of advice from the tax office on 12 September 2023. It is also accepted by the father that he received capital proceeds of around $320,000 in September 2023 related to property settlement, however he appears not to have lodged an income estimate with Child Support that would reflect a pending capital gain event and he has not lodged a personal tax return for some time now.
Turning to the performance of the father’s business it generated total gross income of $286,951 in 2020/21, ($111,600 of which was subsidies), $277,006 in 2021/22 and $90,487 in 2022/23. The Tribunal asked the father why his income had dropped in 2022/23. The father said it was primarily because he was stressed and taking care of matters related to property settlement.
It is accepted that the father has recorded long-term loans from his current personal partner, [Ms A] in the business balance sheet. When this was discussed with the Tribunal he submitted that he has subsequently used the entirety of the $320,000 property settlement to repay the total long-term liability of $386,008 owed to his partner. The Tribunal asked the father whether he had considered his child support obligations before making this capital allocation decision. The father submitted that the mother had significantly benefited from property settlement and he needed to make these payments to honour his agreements and to survive.
Turning to the financial situation as at the date of departure initiation being 16 February 2021 the business financials disclose income of $286,951. From this, expenses of $309,229 were claimed. The business is not a capital goods intensive business and operates as a broker for [services]. It operates out of a commercial office which it has leased for many years and the business has been established for some time prior to these proceedings. It maintains a car for the father and there is no evidence of a fringe benefit tax schedule being maintained in this regard. In 2020/21 the business claimed significant depreciation of $39,074. The Tribunal asked the father if he separated out this amount for future capital costs. The father had no knowledge of any such arrangement and the Tribunal finds that he does not. There is no evidence that depreciation claimed is being used to meet other debts of the business and repairs and the like to the office appear to be met from recurrent income. The Tribunal finds that depreciation is an expense that is not actually being incurred by the business and is available for child support purposes. The net value to the father, after allowing for the business operating loss of $22,278, is therefore $16,796.
In addition in 2020/21 the father’s personal taxable income was recorded as $34,786. As such, financial resources available to him now total $51,582. In addition, as discussed, the father clearly derived personal benefits from the business vehicle as well as high phone and internet costs which were recorded as $16,550. The Tribunal is satisfied that these benefits are personally worth at least $10,000 to the father. The business expenses wages, some of which flow to the father and some to other employees. It was difficult to differentiate the amount attributable to the father however the amounts claimed since his last declared personal income tax of 2020/21 are relatively small compared to revenue.
Finally, there is the question of money transfers from the father’s personal partner into the business. The Tribunal will take a cautious approach to these associated person transfers as it is not clear if they were actually received or are an on paper construct for the purposes of dealing with property settlement money. The Tribunal will recognise their value as at the date the father clearly had control of equivalent financial resources, that is when he used property settlement to repay the money claimed to be owed to [Ms A] in September 2023. This conclusion will be incorporated into calculations contained below in the just and equitable considerations of these reasons.
The above considerations take the father’s total overall access to financial resources at the time of the departure initiation to $61,582 per annum.
At the point in time in question the evidence reflects that the mother was in receipt of family tax benefit and there is nothing before the Tribunal to suggest her taxable income of $727 at the time was not a reasonable reflection of overall access to financial resources at the time of the departure initiation.
Using the above income figures and the relevant care the Tribunal finds that the father would be liable to pay child support of $3,886 per annum. This is significantly higher than the child support payable under the administrative assessment of $1,352 per annum seen within the context of the mother’s very low income. As such the Tribunal is satisfied that there are special circumstances in this case that means that the application of the administrative assessment would result in an ‘unjust and inequitable’ determination of financial support. As a result, the Tribunal is satisfied that the ground for departure in paragraph 98L(1)(a) does exist.

Would departure from the assessment be just and equitable?

It is necessary to do a similar analysis of the father’s overall access to financial resources for the 2021/22 and 2022/23 financial years. He has not lodged personal tax returns for these financial years.
In 2021/22 the gross business profit was $136,389. The net profit was $111,610 which was offset by accumulated carried forward losses from past financial years. As per the discussion about depreciation, this is a paper loss only and, while a legitimate construct for tax purposes, the underlying profit must be recognised as a financial resources available to the father for child support purposes. It is appropriate and uncontroversial that the net profit be attributed to the father. Depreciation claimed was $508. Vehicle and communication costs were again attributed 100% to the business which again is deemed to be worth $10,000. Adding these up the father’s overall access to financial resources in the 2021/22 financial year was $122,118.
In 2022/23 the business fell into a net loss for the reasons described by the father above. Nevertheless, it is undisputed that the father personally received a $100,000 repayment of a shareholder loan in this financial year as reflected in the balance sheet. This must be attributed as a financial resource available to him personally. From this the net business loss of $66,639.22 must be deducted. Depreciation claimed was $2,690.54, communication costs were $12,280 and vehicle costs on fully depreciated vehicles were $7,844. The fully maintained provision of a company vehicle and communication costs are again attributed a nominal combined value of $10,000 and depreciation is also added back. As such the total financial resources available to the father are $100,000 less $66,639 plus $12,690 equalling $46,051.
With respect to 2023/24 there are no financials before the Tribunal. It is accepted that both parents have received significant capital gains proceeds from property settlement, which are flowing through to their taxable incomes in due course. The father however appears tardy in declaring this or filing his personal tax returns. As such, to ensure the remaining child of the assessment receives a timely and equitable level of support, given the mother’s ATI jumped to $182,357 on 12 September 2023, the Tribunal will apply the 50% capital gain discount to the lump sum received of $320,000 by the father in September 2023, which is an amount of $160,000, as an amount reasonably reflective of his overall access to financial resources from that same date until a terminating event occurs, which will be around 12 months from that date.
Looking at the father’s overall financial position in his Statement of Financial Circumstances he listed that he owns 35% of a property through his stake in his partner’s unit trust. He valued his holding at $840,000. He disclosed minimal other assets. He disclosed loans estimated at $4,725,000 however these appear to be of an associated person nature and with no immediate repayment requirements. The father gave evidence that much of these loans stem from borrowings from [Country] made many years ago. He has not been repaying them, apart from the aforementioned claimed loan to his partner. As such it is not appropriate that these claimed loans diminish the amount of child support payable which takes precedence over all other costs after necessary self-support costs are met. In respect to his regular outgoings he lives with his partner and pays $750 per week in accommodation costs. He estimated his weekly total outgoings as being around $2,430 or $126,360 per annum. The Tribunal notes this is largely in accordance with its assessment of his recent overall access to financial resources.
There was no evidence before the Tribunal to suggest that the mother has access to financial resources that would make the application of the Tribunal’s assessment of her adjusted taxable income result in an unjust and inequitable outcome in this matter. Clearly, she requires child support to assist in the maintenance of the child.

The children

In determining the proper needs of the child, it is necessary to have regard 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). In Eades & Cadell (SSAT Appeal) [2009] FMCAfam 275, at paragraph 22, Slack FM stated as follows:
In considering the proper needs of the child [s 117(4)(b)], the SSAT:
a.would ordinarily consider the evidence of the parties about the needs of the children to assess the reasonableness and quantum of those needs;
b.may have regard to publish guidelines as to the needs of the children (see Hallinan & Witynski at 94.323);
c.may also have regard to the costs of children used in the assessment of child support under the existing formula arrangements [although it is not sufficient or appropriate to rely upon the formula to perform that task, Lindenmayer J in Dwyer & McGuire (1993) FLC92-420 (and see also Gyselman (supra) at 79.078)].
No special needs costs were raised with respect to either child. Overall, the Tribunal considers this an appropriate case to largely distribute the costs of raising the children using the Costs of the Children Table maintained by Child Support, which is based on social science research giving the average costs of children in various family income brackets.

Conclusions

The Tribunal considers that it is just and equitable to depart from the administrative assessment of child support payable in this matter.
With respect to an appropriate date range for this departure determination the Tribunal considers the commencement date of 1 February 2021, as set by the objections officer, is appropriate. It is also appropriate to maintain a cessation date that is tied to a terminating event with respect to the youngest child of the assessment. This allows for certainty in this matter in the short amount of time remaining.
As discussed during the hearing the principal object of the Act is to ensure that children receive a proper level of financial support from their parents. Further, the Tribunal notes the statements contained in sections 3 and 4 of the Act to the following effect:
·      parents of a child have a primary duty to maintain the child;
·      the duty has a priority over all other commitments of the parent other than commitments necessary for self-support;
·      the level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and
·      the level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.
The Tribunal is satisfied that an appropriate departure determination in this matter is as follows:
·      For the period 1 February 2021 to 30 June 2021 the father’s adjusted taxable income is varied to $61,582 per annum.
·      For the period 1 July 2021 to 30 June 2022 the father’s adjusted taxable income is varied to $122,118 per annum.
·      For the period 1 July 2022 to 11 September 2023 the father’s adjusted taxable income is varied to $46,051 per annum.
·      For the period 12 September 2023 until a terminating event occurs with respect to the youngest child of the assessment the father’s adjusted taxable income is varied to $160,000 per annum.
This departure determination will require the father to make weekly child support payments of around $74 or $3,848 per annum from 1 February 2021 to 30 June 2021. From 18 July 2021 the father will be required to pay child support of around $317 per week or $16,500 per annum as this is when his care of the eldest child ceased as she ceased to be a child of the assessment. From 1 July 2022 he will have to pay child support of around $64 per week or $3,319 per annum. From 12 September 2023 until a terminating event the father will be required to pay child support of around $240 per week or $12,500 per annum which also takes into account the mother’s much higher ATI from that date. These amounts take account of backdated dependents care for the father and changed care records over the course of the periods in question with respect to the children of the assessment.
The father submitted that a maintenance amount or increase in child support payable by him would cause him financial hardship. The Tribunal disagrees. He clearly has access to significant money through property settlement and he has made a decision to prioritise payment of that money to his partner. The law requires that he has a duty over all other commitments, other than commitments necessary for self-support, to support his children. As such he is required to direct surplus funds first and foremost to the payment of child support debts, of which he will have a significant amount owing as he has not paid his child support at the required level for many years. The amount owing is a small percentage of the lump sum amount he freely, and without legal compulsion, recently transferred to his partner and his overall obligations are based upon his own freshly produced business financials and the Tribunals somewhat conservative interpretation of those figures.
On balance, while acknowledging the father’s evidence that he is now in his early sixties and feels indebted to his partner for her past financial support, the legislation requires the Tribunal to consider his overall access to financial resources, such that he can support the children once his necessary costs for self-support are met (which are currently calculated as $27,508 per annum in this case), above all other commitments. He also has a long-established business that has a proven ability to generate income, and he clearly has enjoyed ongoing personal benefits and tax minimisation arrangements on a year-to-year basis that are not available to the ordinary wage earner. The Tribunal notes the father’s concerns that a recent tightening in [specified] arrangements has occurred which may adversely impact the father’s business and the Tribunal accepts this may cause his business type some difficulties. In light of this the Tribunal has provided some further financial relief to the father by not including relatively small share sales in his income and legal costs claimed as business expenses, which are clearly partly related to personal matters and a percentage of wage expenses claimed which would further increase his debt. Seen in light of this, and the legislative requirement with respect to the priorities of the legislation, the Tribunal considers that this departure decision is just and equitable and that overall the mother will be provided with an appropriate level of child support and that she will also not experience hardship as a result of this variation decision as the amount payable to her will increase immediately.

Otherwise proper

The Tribunal is satisfied that changing the amount of child support payable will not have any adverse effect upon the community as this decision results in the parents being required to pay child support according to their actual capacity to do so. Such a result would be otherwise proper.

DECISION

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

·For the period 1 February 2021 to 30 June 2021 Mr Curfman’s adjusted taxable income is varied to $61,582 per annum.
·For the period 1 July 2021 to 30 June 2022 Mr Curfman’s adjusted taxable income is varied to $122,118 per annum.
·For the period 1 July 2022 to 11 September 2023 Mr Curfman’s adjusted taxable income is varied to $46,051 per annum.
·For the period 12 September 2023 until a terminating event occurs with respect to the youngest child of the assessment Mr Curfman’s adjusted taxable income is varied to $160,000 per annum.