Danvers and Aguado (Child support)

[2020] AATA 1748

Danvers and Aguado (Child support) [2020] AATA 1748 (25 March 2020)

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2019/MC017922

APPLICANT:  Mr Danvers

OTHER PARTIES:  Child Support Registrar

Ms Aguado

TRIBUNAL:  Member S Hoffman

DECISION DATE:  25 March 2020

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides as follows:

·       For the period 1 July 2018 to 30 June 2019, Mr Danvers’ adjusted taxable income is varied to $150,470.

·       For the period 1 July 2019 to 31 October 2020, Mr Danvers’ adjusted taxable income is varied to $152,492.

·       The annual rate of child support payable by Mr Danvers is to be increased as follows:

oSchool fees

§1 January 2018 to 31 December 2019, by $2,222 a year

§1 January 2020 to 31 October 2020, by $4,260 a year

o[Medical] costs

§1 January 2019 to 31 December 2019, by $1,039 a year

§1 January 2020 to 31 October 2020, by $1,247 a year

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – alienation of income – costs of the children include private education – children have special medical costs - 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.This review is about the child support assessment in respect of three children aged 15, 13 and 10 years old. The case was first registered on 25 March 2015 with Services Australia – Child Support (the CSA). The CSA started collecting child support from 9 December 2015. The father pays child support to the mother.

2.The father’s adjusted taxable income was varied to $181,155 from 5 June 2017 to the end of case as a result of a change of assessment decision made 6 December 2017 by a CSA officer. That decision was not objected to at the time.

3.A change of assessment decision made 2 July 2018 left the father’s adjusted taxable income unchanged but he was required to pay an additional amount of $2,222 a year as a contribution to school fees from 1 January 2018 to 31 December 2019.

4.On 2 November 2018, the mother lodged an application for a change of assessment with the CSA. The father cross-applied. At that time, according to the CSA’s records, the father was providing 33% of the children’s care and the mother was providing 67% of their care. The father was required to pay child support based on his adjusted taxable income of $181,155 and the mother’s 2017/18 adjusted taxable income of $19,751, plus the additional amount of $2,222 to 31 December 2019. His child support liability was $34,907 a year.

5.On 1 April 2019 a senior case officer from the CSA decided to vary the assessment in place such that there was a further amount to be paid in respect of [medical] costs, being $1,996 from 1 January 2019 to 31 January 2020.

6.On 2 May 2019 the father objected to the original decision and on 15 July 2019, an objections officer from the CSA affirmed the original decision, meaning it was unchanged.  

7.On 20 August 2019, the father lodged an application for review with the Administrative Appeals Tribunal. A directions hearing was held on 29 January 2020 after which directions were issued. The matter was heard on 25 March 2020. Both parties attended via conference telephone and gave sworn evidence.

8.The tribunal had before it documents provided by the CSA (numbered 1 to 330 and 331 to 333); by the father (numbered A1 to A56); and by the mother (numbered B1 to B76).  Copies of these documents were sent to the parties before the hearing. The father said that he had not received the documents numbered 331 to 333. These were sent out by the CSA and included details of directorships and shareholdings held by the father. Most, if not all, of this information was contained elsewhere in the documents. The tribunal has not relied on information in those pages that is not elsewhere in the documents in making its decision. Copies of pages 331 to 333 were emailed to the father two days after the hearing.  

ISSUES

9.The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act). The Act provides for an administrative assessment of child support to be paid. Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:

i.A ground is established; and

ii.It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and

iii.It would be otherwise proper to make a particular determination.

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

11.If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include 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 – Does a ground exist to depart from the administrative assessment?

12.Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the rate of child support because of the income, property and financial resources of either parent.

What is the father’s income for child support purposes?

13.The father has been a business owner for a number of years. He said he has been involved in [Industry 1] for some 20 years.

14.The CSA decision dated 6 December 2017 discusses [Company 1] as being a partnership with the legal name [Trust 1] and [Trust 2].

15.According to the CSA decision made 2 July 2018, [Company 1] was split into two different businesses as the business partnership between the father and [Mr A] had ended.

16.At the hearing the father said that he started working with his business partner in 2011. It was in April 2018 that the [Company 1] partnership, which operated in [City 1] and [City 2], ended. The partner took the [City 2] operation and the father took the [City 1] operation. He had said at the directions hearing that [Trust 1] ceased to exist after the partnership broke up.

17.The father said that was the start of [Trust 3], a business he said he sold about 12 months later.

18.The father described the business he was involved in as selling and installing [Product 1]. After the partnership was split into two separate businesses, the father said there was a problem he had not anticipated in that he was required to hold a builders licence and did not have one. His former business partner had a builders licence.

19.Schedule 2 to the Building Regulations 2018 (Victorian state legislation) is about domestic building work authorised to be carried out by registered domestic builders, and includes [Product 1]. These Regulations came into force on 2 June 2018. According to the Victorian Building Authority, a company must be registered as a building practitioner if a person wants to undertake certain building-related activities in the company name. For that registration to occur, at least one director of the company must hold a current registration as a building practitioner.[1]

[1] Victorian Building Authority (2020), Building Companies, accessed 27 March 2020 at

20.The tribunal accepts that requirement would have had a significant impact on the father’s business. The father said that was why he sold the business. The tribunal returns to this later in this decision record.

21.The father provided the CSA with a contract for sale document for [Company 2], described as a construction company. The name of the purchaser was blacked out. The father was not willing to give the name of the purchaser. He referred the CSA to clause 9(u) of the contract for sale which states that “The seller must not disclose the purchaser’s details to any person or regulatory authority without the written approval from the purchaser.”

22.The father provided the CSA with a statutory declaration dated 13 February 2019, as follows:

I have sold the business known as [Company 2]. The sale took place on [day]/1/19. The sale price was $[amount] plus stock and equipment. The sale document prevents me from disclosing the purchasers’ details. But I can confirm it was not sold to an individual family member.

23.The objections officer recorded that she did not have enough information to determine if the sale of the business was at arm’s length or to a related entity. The tribunal observes that if the latter, the sale of the business could have been effected to alienate income for child support purposes.

24.The tribunal obtained a company extract from the Australian Securities and Investment Commission (ASIC) which showed that 12 ordinary shares had been issued in relation to [Company 2].

25.According to that document four shares were transferred to each of [Ms B] and [Ms C] effective 31 July 2019. The remaining four shares were held by [Company 3]. [Ms B] is the father’s de facto partner. The father said [Ms C] was an individual not related to him and said he did not know who owned [Company 3]. The mother said it was owned by the father’s brother’s partner. The father said again he did not know who owned it.

26.The tribunal said it might obtain an ASIC search to ascertain the owner of [Company 3] and did so after the hearing. This company issued one share and the shareholder is [Mr D]. [Ms E] is director and secretary. The company was registered [in] March 2019. It has an Australian Company Number but no Australian Business Number which suggests that it is not trading.

27.In a statement to the CSA, the mother referred to the father’s brother as [Mr D]. The tribunal could not locate any mention of an [Ms E]. Regardless of the precise relationship, the tribunal is satisfied by virtue of the shared surname that [Company 3] is owned by a relative of the father, and together with the father’s de facto partner, this relative and the father’s de facto partner own two-thirds of the [Company 2] business. According to ASIC records, the father is director and secretary of [Company 2].

28.The other director is [Mr F]. The father said that [Mr F] holds a builders license. The mother told the CSA that [Mr F] was the father’s cousin. The appointment of [Mr F] as a director was made 21 August 2018 and notified to ASIC on 31 August 2018. That appointment would have resolved the problem caused by the new Regulations that came into force on 2 June 2018. The father said sales were affected for four months. The tribunal was not satisfied with the father’s claim that he sold the business because of the new Regulations as he appointed a director with a builders licence within three months of them being introduced, and the sale of the business took place five months after the new director was appointed. It takes time to find a purchaser for a business but in this case it was sold to two people closely connected to the father.

29.The tribunal asked the father why he sold a third of his shares in the business to his partner. He said it had been too stressful, he could not cope with it and he needed to get out of it. He said the plan was that after three years, she would sell her share to the other two shareholders; it was part of an exit strategy. Meanwhile the father remained a mentor to the business and a non-financial director. The tribunal does not consider that to be a satisfactory explanation as to why the father sold his shares to his partner whose background, based on what he told the CSA, is as a [Occupation 1], rather than sell two-thirds of the business and retain one third, with a view to selling his shares at a later date. Or alternatively sell the business to third parties without he or his partner retaining shares in the business.

30.The father said that the sale of the business was at fair market rates. He repeated that he had to sell the business as he could not trade because of the builders licence. The tribunal accepts that he could not trade for a period of time and that would have been a stressful period but the problem was resolved.

31.The contract for sale document sets out that full payment by the purchasers would be made by 31 January 2022 in accordance with a promissory note. The arrangement was that the father would receive a payment of $41,666 every six months for three years. He said that if the payments were not made, the business would revert back to him as a Group A distributor, a term the tribunal will return to below.

32.An arrangement such as this, whereby the final of six equal payments is made in 31 January 2022, suggests (a) that the first instalment would be paid in July 2019, some six months after the date of sale and (b) that no deposit was paid before or on the date of the sale. The absence of any payment, such as a deposit, on or around the date of sale, adds to the impression that this was a contrivance to alienate income.

33.In any event, given the identities of the new shareholders, the tribunal does not accept that there was an arm’s length sale of the business.  As noted, one third of the shares were sold to the father’s de facto partner, and another third to a relative who may well be his brother. This also adds to the impression that this was an attempt on the part of the father to alienate income.

34.The father said he had retained a Group A distributorship in relation to [Company 2] which was similar to holding a master franchise. He said that he mentors two [Product 1] companies for which he is paid a fee.

35.In addition to the mentoring fee, the father said that as a Group A distributor, he takes a fee from every sale made. The amount depends on the size of the [product]. As an example, he said he is paid $233.51 when a [smaller] size [product] is sold and up to $400 when a larger [product] is sold.

36.The father said the payments he receives for the mentoring role are paid to him personally and the Group A related payments are paid into [Company 4] as trustee for [Trust 4].

37.In a letter dated 19 February 2020, [Mr G], principal of [a financial adviser company], wrote that [Company 4] is not a trading entity. In the past it has received income distributions from various trusts within the Danvers Group. The last year income distributions were received was 2017/18. Such income was internally generated income and not additional turnover of the Danvers Group. [Mr G] wrote that [Company 4] receives interest on loans between it and these trusts, and such interest appears as outgoings in the relevant trust accounts. He also wrote that dividends are declared each year and the amount of the dividend is applied to loan balances to reduce them. He also stated that there was no income or expenditure for this company for the first half of the 2019/20 financial year.

38.The father said his income for 2019/20 as a Group A distributor was likely to be about $55,000 a year and could be $60,000 a year; the previous year’s income was $63,000. He said in reference to 2019/20 that it was hard to tell because of the coronavirus. Given that restrictions on businesses have increased since the hearing, the tribunal considers it appropriate to use the lower figure of $55,000 as the father’s potential income for 2019/20 as a Group A distributor.

39.This is supported by the financial statements of [Company 4] as trustee for the [Trust 4] for 2018/19 which shows gross income of $63,056, expenditure (interest paid) of $11,960, leaving an operating profit of $51,096 of which $48,002 was distributed to the father. Based on [Mr G]’s comment that interest as an expense is paid to another entity in the Danvers Group, the tribunal considers that it is appropriate to attribute $63,056 to the father as income for child support purposes in 2018/19, rather than the distribution figure. That is a difference of $15,054 ($63,056 - $48,002).

40.The father said that [Trust 3] stopped trading when he sold the [business] which was in January 2019. He submitted financial statements for the [Trust 3] and as it stopped trading in January 2019, the profit and loss figures will only show income and expenditure for about seven months of the year. Aside from that, the financial statements as submitted by the father are incomplete. The profit and loss statement shows gross profit from trading for 2018/19 as $302,339 but the preceding page which would show turnover less cost of sales was not provided. A balance sheet was provided but not the pages that set out the notes accompanying the balance sheet. At the bottom of the balance sheet there is a note that says “The accompanying notes form part of these financial statements.”

41.The directions issued to the father specified “financial statements, including balance sheet and profit and loss statement”. That strongly suggests the required documents were not limited to the profit and loss statement and balance sheet. The directions letter also set out that the parties were expected to comply with their obligations to make full and frank disclosure of their financial circumstances to the tribunal for the purposes of the review. A note to the directions stated that the tribunal may draw adverse inferences against a party if that party fails to comply with a direction to give information or evidence to the tribunal.

42.In this regard the tribunal is particularly concerned by what it regards as the father’s failure to provide information about the sale of his shares to family members and his claim he did not know the identities of the [Company 3] shareholder and director. His statutory declaration dated 13 February 2019 included the statement “I confirm that it was not sold to an individual family member.” That wording taken literally may well be true but it does not convey what occurred which was that at least eight of the 12 shares were sold to family members.

43.In his Statement of Financial Circumstances (SFC) dated 24 December 2019, the father recorded that he owned 50% of the property he and his family live in. When asked about this, he said he owned the property with his partner, [Ms B]. This was at odds with another document that stated the father was the sole owner of that property. When this inconsistency was put to the father, he confirmed that he alone had legal title to the property. He offered an explanation as to why he filled in the SFC as he did, which was not entirely clear but seemed to be that when you shared a home with someone you were in a relationship with, it was as if it was jointly owned.

44.For some of the hearing, the tribunal formed the impression that the father was being honest and straightforward in giving his evidence, but because of this inaccuracy in the SFC, the wording in the statutory declaration referred to above, and the share ownership information obtained by the tribunal from ASIC, the tribunal has reservations as to the reliability of all of the father’s evidence.

45.The father maintained that the payments made of $41,666 every six months in relation to the sale of the business should be disregarded for child support purposes, as they were assets from the sale of his business and not income in the usual sense. He said he was using these payments to pay down his mortgage and provided bank statements to support that. These showed that soon after $41,666 was paid into his bank account, $30,000 was directed to his home loan account.

46.However as the tribunal is not satisfied that the sale of the [Company 2] business was not done to alienate income for child support purposes, it finds that the amounts of $41,666 paid every six months are to be treated as income, in addition to the income identified by the father in his SFC. According to that, he earns $69,160, made up of $400 a week ($20,800) from mentoring and $930 a week ($48,630) paid to [Company 4] as trustee for the [Trust 4] in relation to the Group A distributorship. The tribunal notes that the father said he expected to earn between $55,000 and $60,000 this year in relation to the Group distributorship. Given the impact of coronavirus on business, the tribunal considers the amount of $48,630 included in the father’s SFC to be reasonable.

47.[Company 4] owns a property that is usually rented out. The father said that it was not rented at the moment as repairs were being done. He said that he and his partner jointly own the investment property which he valued at $400,000. The mother said it was worth about $600,000. The mortgage secured against it is for $100,000. This means the equity in that property is in the range $300,000 to $500,000.

48.The father wanted the tribunal to review his adjusted taxable income from 1 July 2018. According to his 2018/19 tax return, his taxable income was $95,551. On the basis of his evidence, this would reflect income from the business for only seven months of the financial year as it was sold on 31 January 2019.

49.The balance sheet for [Trust 3] as at 30 June 2019 recorded an unpaid present entitlement of $65,176 as a liability owed to [Company 4] which arose during the 2018/19 financial year. The balance sheet shows an asset of $250,000 described as “vendor terms”. This suggests that although the sale was made 31 January 2019, no payments had been made some five months later.

50.The profit and loss statement for [Trust 3] for 2018/19 shows a profit of $5,829 which is for a part year and which was a resource available to the father as the business owner.

51.Although the balance sheet as at 30 June 2019 suggests that no payment of $41,666 had yet been made, the tribunal is of the view it was a resource available to the father. As already discussed the tribunal has formed the view that the sale of the business was done to alienate income and the tribunal considers it reasonable that the six-monthly payment of $41,666 is taken to be what would have been the father’s drawings from the business or represent what would otherwise be the profit from the business.

52.The father’s tax return for 2018/19 records his taxable income to be $95,551. That includes the trust distribution of $48,002. To this the tribunal will add a further $15,054 to capture the trust’s income for 2018/19 for reasons set out in paragraph 39.

53.The father’s taxable income as per his tax return includes a net capital gain of $7,630 related to the sale of a property in [Suburb 1]. The father said that [Company 1] owned that property which was sold during 2018/19 and he received half the proceeds. He said that this was covered by the property settlement. The mother said she could not confirm or deny that but given the parties’ evidence on this point, the tribunal was satisfied this was the case. As the proceeds from the property sale were dealt with by the courts through the property settlement, the tribunal will disregard the capital gain of $7,630 for child support purposes.

54.In light of the foregoing, the tribunal considers that an income figure of $150,470 ($95,551 + $5,829 + $41,666 +15,054 - $7,630) better reflects the father’s income, property and financial resources for 2018/19.

55.Based on his SFC, the father’s income for the current year is $69,160 a year from his mentoring fees and Group A distributorship income. In addition to that he receives $83,332 a year based on the promissory notes. That gives an income figure of $152,492 for 2019/20.

56.As noted above, the tribunal is not satisfied that the father’s evidence can be relied upon in its entirety. It is not satisfied that it has been provided with all relevant information from the financial statements. At the same time the tribunal has to make findings on the evidence before it and is not satisfied there is sufficient evidence to conclude that the father should be assessed on an income of $181,155 a year as he has been in the past. There was a major change in his business set-up when the [Company 1] partnership ended, and there was a period of some four months from June 2018 when sales were most likely affected by the new building regulations requiring a director to hold a builders licence in order for the company to be registered as a building practitioner, that being a requirement to install [Product 1].

57.The tribunal was minded to make a departure determination that ended on 31 December 2022 to give the parties some certainty into the future. However because of the impact of the coronavirus on business, and the difficulty in determining what the father's income is likely to be for child support purposes that far into the future, the tribunal has decided a better approach is to end its determination on 31 October 2020.

What is the mother’s income for child support purposes?

58.The mother’s taxable income for 2018/19 was $26,049, made up of income from employment of $23,570 and an income support payment of $3,096, less deductions of $629.

59.The mother worked part-time for a [business] as a [Occupation 2]. She said she was about to lose told her job because of Covid-19 affecting the business. The tribunal estimates that over a full year, the change in the mother’s income would affect the rate of child support by about $150. Given the timing of when her income will reduce this financial year, and when her 2019/20 tax return will likely be lodged, the effect on the rate of child support of using her taxable income (rather than varying that in this review and replacing it with her actual income based on her not working from April 2020) will be immaterial.

How does the administrative assessment compare with an assessment of child support using the tribunal’s income figures for the parents?

60.The administrative assessment that applied on 2 November 2018 when the mother lodged her change of assessment application was that the father was required to pay the mother $34,907 a year, based on the father’s adjusted taxable income of $181,155 and the mother’s taxable income for 2017/18 of $19,751. The child support liability included a contribution to school fees of $2,222.

61.Using incomes of $150,470 for the father and $19,751 for the mother results in a child support liability of $27,093. (The tribunal would stress that because of the complexity of the child support formula, its calculations of rates of child support are just estimates.) Adding $2,222 gives $29,315.

62.Given the difference between the father being required to pay $34,907 a year or $29,315 a year, the tribunal is satisfied that in the special circumstances of this case, the administrative assessment does result in an unjust and inequitable rate of child support, and that a ground for departure from the administrative assessment has been established pursuant to subparagraph 117(2)(c)(ia) of the Act.[2]  

[2] These are the annual rates of child support before additional amounts for school fees or [medical] costs are added.

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

63.As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother 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 a variety of factors, as set out in subsection 117(4) of the Act.[3]

[3] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi and Meares (SSAT Appeal)  [2008] FMCAfam 886.

64.Section 3 of the Act makes it clear that parents have the primary duty to maintain their children, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case the father and the mother have the primary duty to financially support their children. 

Income, property and financial resources – the father

65.In addition to the information already set out, in his SFC the father recorded total outgoings of $2,456 ($958 plus $1,498) a week and that his income was $1,330 a week. He recorded child support payments of $688 a week, which was the assessed amount rather than what he has been paying - $220 a week. The tribunal has found that his income for 2019/20 is about $3,076 a week. The father wrote that his partner averages income of $1,000 a week. On that basis the tribunal is satisfied that the father’s income alone is sufficient to cover all household and his personal expenses.

66.The father wrote he has $2,000 in his bank account and owns a 2004 [car of specified make and model] worth $2,000. He said that it had broken down and he was driving his partner’s car. He said he did not have credit cards. He recorded [a Bank 2] loan of $193,926, and that he was owed $208,333 from the sale of the business. He said that apart from child support, he had no debts other than a mortgage.

67.The mother said she had checked the father’s arrears of child support the day of the hearing and they were $10,737.

68.The father said he was financially stressed and it was due to child support. He said that last year he had a bad year and referred to the CSA garnisheeing his tax refund of $12,000 and that they took $10,000 from his bank account.

69.The father said it was difficult to pay bills and he has sold assets to do so. He said that now they only have one car in the family.

70.The mother said the father was claiming financial hardship yet he went on an overseas holiday to [Country 1] and [Country 2] with the children which cost $10,000.  The father agreed that he went on this holiday. He said it had been planned six months previously and was a huge financial commitment, and a once in a lifetime opportunity promised to the children.

71.The mother submitted documents pertaining to the father’s property (his residence) including an application for planning permission to subdivide it into three lots. The father said the application had not yet been approved. It may well be that this will generate funds in the future but the tribunal does not consider it is appropriate to consider this further for the purposes of child support at this time as there is too much uncertainty as to if and when any financial benefit will be realised, and how much that might be.

72.The tribunal has already recorded that the father has a 50% share in an investment property that is usually rented but is currently undergoing repairs and maintenance, and that the equity in this property is in the range $300,000 to $500,000.

Income, property and financial resources – the mother

73.In her SFC dated 20 December 2019, the mother recorded average weekly income of $1,043 which included family tax benefit and child support payments of $220 a week, reflecting what the father pays rather than the liability as per the child support assessment.

74.As noted, the mother said she was about to lose her job because of Covid-19. It may well be that she will be entitled to receive further government assistance.

75.The mother recorded that she owns her family home which is worth about $700,000 against which there is a mortgage of $49,419. She recorded over $3,600 in bank accounts and said that this was what was left after the CSA paid her about $10,000, having garnisheed that from the father.

76.The mother wrote that she owns a 2016 [car of specified make and model] worth $31,000. She has no debts apart from her mortgage.

77.According to her SFC, her outgoings exceed her income by about $400 week. The mother said that she covered that from what she had in her bank account and she has tried to get a reduction in the school fees for one of the children. The tribunal will discuss school fees later in this decision record. She said that if the father paid her what he was supposed to in child support, she would cover her expenses.

78.The mother’s schedule of weekly household expenses includes $300 a week on food, $157 a week on education expenses and $100 a week on medical, dental and optical. It includes discretionary spending such as $115 a week on the children’s activities, $30 a week on entertainment and hobbies and $40 a week on holidays.

Other issues pertaining to the parents’ incomes, property and financial resources

79.Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met. These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.

80.The tribunal has already discussed the father’s situation with regard to the change in his work arrangements and need not consider it further.

81.The mother’s income has been similar over a number of years. She earned $22,248 in 2016/17, $19,751 in 2017/18 and $26,049 in 2018/19. She has worked part-time for three years in the same job. In the documents she refers to her caring responsibilities for the three children. As already noted, she told the tribunal she was about to lose her job for reasons outside of her control. The tribunal is satisfied that the mother has not changed her work arrangements to affect the rate of child support.

82.The tribunal concludes that it is not open to it to make an earning capacity determination in respect of either parent and need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.

83.The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act). There was no evidence before the tribunal with regard to this provision.

High costs involved in enabling a parent to care for a child

84.Subsections 117(2B) and (2C) set out the criteria as to whether or not costs involved enabling a parent to care for the children can be taken into account in a child support assessment.

85.If a parent has at least regular care of a child, as does the father, then only travel costs are relevant. Those costs can only be taken into account if they are more than 5% of the person’s adjusted taxable income.

86.As discussed earlier, the father’s income for child support purposes during 2018/19 was $150,470 and for 2019/20, it was $152,492.  Five per cent of each of those figures is $7,523 and $7,642 respectively.  

87.The father submitted his calculations of the costs he incurred each week in travelling to see the children. It was agreed by the parties he drives from his home to the mother’s home town on average once a week to collect the children, a distance of 80 kilometres. He takes the children back to his home, making a round trip of 160 kilometres.

88.The father then returns the children to the mother’s home town and then has to drive back to his home, a second return journey of 160 kilometres in the same week.

89.It was agreed that he drives 320 kilometres a week. According to the father, he incurs $4,018 a year in fuel costs and depreciation. That falls well short of the required 5%.

90.The tribunal concludes that it need not consider this provision any further.

Costs related to the children

91.In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs they may have (subsection 117(6) of the Act).

92.The mother has requested the father contribute to the private school fees and [medical] costs for the children. The father has agreed to contribute to these costs, subject to the amount he is required to contribute and his capacity to pay.

93.Previous decisions increased the annual rate of child support for the period 1 January 2018 to 31 December 2019 by $2,222 a year in respect of school fees. The tribunal determines to leave this unchanged and vary the assessment from 1 January 2020. The school fees for the two older children for the 2020 school year amount to $5,898.62, say $5,900. The school fees for the youngest child for 2020 are $1,210. The tribunal has not considered additional levies for items like excursions, camps, hot dogs and Chrome Books as these types of expenses are factored into the child support formula.

94.That means the school fees for the children are $7,110 ($5,900 plus $1,210) for calendar year 2020. The tribunal finds that the father is to contribute 50% of these fees which amounts to $3,550 a year for 2020. Because the departure determination ends on 31 October 2020, an annual increase to the rate of child support of $4,260 means that the father will have contributed $3,550 towards school fees by 31 October 2020.[4] This means school fees for 2020 will not need to be factored in to any future change of assessment that starts from, say, 1 November 2020.   

[4] $4,260 a year, divided by 12 = $355. Ten months from January to October; $355 x 10 = $3,550.

95.The father said of the [medical] work for two of the children, that he thought it was desirable rather than medically necessary, and he agreed to make a contribution to the cost.

96.The mother was directed to provide her out-of-pocket costs in relation to the [medical] work. She submitted various documents but did not specify her out-of-pocket expenses. She said that would depend on what happened with regard to rebates and the like which depended on time. There was a general discussion around the costs. As mentioned at the hearing, it is the mother’s responsibility to identify her out-of-pocket costs if she wanted them factored into the child support assessment and if she is unable to do so, then the tribunal can only calculate them as best as it can. The tribunal calculated the likely out-of-pocket costs for the mother, as follows.

97.In relation to the younger son, the father calculated that the out-of-pocket costs would be $647 in 2018/19 and $427 in 2019/20, totalling $1,074.

98.According to a letter from [a health service provider] dated 19 October 2018, the total fee was $2,984.50. The initial payment was $772.50. The remaining amount of $2,212 was to be paid over 20 months in monthly payments of $110.60.

99.Limits on health insurance claims apply to calendar rather than financial years. The mother provided information from her insurer showing that each child has a lifetime [medical] limit of $2,900. The tribunal understood from her evidence that the maximum benefit payable in a calendar year was $900 for each child. She was paying for the treatment for the younger son during 2018, 2019 and 2020. She paid $200 in 2020 and obviously a $900 benefit would not be paid in that year. The tribunal concludes that the benefit would total $2,000 ($900 for each of 2018 and 2019 and $200 for 2020), leaving an out-of-pocket expense of $984. If the father was to contribute 50%, his share would be $492 in total or $246 a year over two years.

100.In relation to the older son, a letter from [a health service provider] dated 17 September 2019 set out that the total fee was $7,458. The deposit was $2,458 and the balance of $5,000 was to be paid in instalments of $200 over 25 months from 1 December 2019. Payments would be made in calendar years 2019, 2020 and 2021 and it is likely the mother can claim $900 for each of those years, $2,700 in total.

101.That leaves an out-of-pocket expense of $4,758 ($7,458 - $2,700). Over three years, that is $1,586 a year. If the father is to contribute 50%, his share is $793 a year. Added to $246 a year gives $1,039.

102.To summarise, the tribunal will not change the contribution to school fees of $2,222 a year that applies from 1 January 2018 to 31 December 2019, as per a previous decision. The father is to contribute $3,550 for school fees for 2020, paid over ten months.

103.The tribunal will set aside the contribution the father is to make in respect of [medical] costs as per the previous decisions, of $1,996 for each of the calendar years 2019 and 2020. This will no longer apply.

104.Instead, the father is to contribute $246 a year in each of 2019 and 2020 for [medical] care for the younger child and $793 a year for each of 2019 and 2020, totalling $1,039 a year for 2019 and 2020. The tribunal has not included the cost of $793 a year for 2021 as its determination ends on 31 October 2020.

105.In similar fashion as with school fees, the father is to contribute $1,039 to [medical] costs for 2020, paid over ten months. An annual increase to the rate of child support of $1,247 means that the father will have contributed $1,039 towards [medical] costs by 31 October 2020 (($1,247 / 12 = $103.91) x 10 = $1,039). This means a contribution to [medical] costs for 2020 will not need to be factored in to any future change of assessment that starts from, say, 1 November 2020.  

106.Neither parent, when filling out their SFCs, apportioned all the various household costs between them and the children. The tribunal concluded that using the “Costs of the Children Table” is reasonable in the circumstances of this case for the other costs related to the children.[5] 

[5] Clause 1 of Schedule 1 to the Act. The table is available at the Department of Social Services website, accessed 28 March 2020: align="left">Hardship

107.The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[6] in this respect:

This requires the Court to balance the “hardship” which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.

[6] [1991] FamCA 93

108.Both parents referred to being under some financial stress. As already noted, the mother said that she could cover her expenses if the father paid child support at the rate assessed by the CSA. The tribunal’s decision will reduce the assessment by about $5,000 a year.

109.The tribunal has identified discretionary spending in the mother’s list of household expenses which gives her some capacity to reduce her expenses.

110.The father has submitted he cannot afford to pay child support at the rates he has been assessed. He said he thinks he should pay $220 a week ($11,440 a year) in child support which is what he has been paying on a regular basis for some time. The tribunal estimates that would be his child support liability if his adjusted taxable income was about $75,000 a year.  

111.The tribunal notes that upon being paid $41,666 as per the sale agreement, $30,000 was transferred to the father’s home loan account. The father acknowledged that he spent $10,000 on an overseas holiday for the family.

112.The tribunal is satisfied the father has the financial resources to pay child support in line with the tribunal’s determination.

113.The tribunal estimates its decision will reduce the father’s arrears by about $9,000.

Any other relevant matters

114.The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).

115.The father requested that the tribunal conduct its review from 1 July 2018 which it has done. Generally when a change of assessment decision results in a variation to a parent’s adjusted taxable income, the start date for that variation will align with when a parent lodged a change of assessment application, which in this case was 2 November 2018 when the mother lodged her application with the CSA.

116.The mother did not express a view about the date from which the tribunal should commence its review. The time difference between the two possible dates is some four months. Given the annual rate of child support paid by the father and that he has been assessed on the same adjusted taxable income for a number of years, the tribunal is satisfied the start date of its determination is reasonable.

117.The tribunal has decided to end its determination on 31 October 2020, for reasons set out in paragraph 57.

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

118.The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.

119.The mother is in receipt of family tax benefit. The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides as follows:

·       For the period 1 July 2018 to 30 June 2019, the father’s adjusted taxable income is varied to $150,470.

·       For the period 1 July 2019 to 31 October 2020, the father’s adjusted taxable income is varied to $152,492.

·       The annual rate of child support payable by the father is to be increased as follows:

oSchool fees

§1 January 2018 to 31 December 2019, by $2,222 a year

§1 January 2020 to 31 October 2020, by $4,260 a year

o[Medical] costs

§1 January 2019 to 31 December 2019, by $1,039 a year

§1 January 2020 to 31 October 2020, by $1,247 a year