Dashwood and Dashwood (Child support)

[2021] AATA 4495

Dashwood and Dashwood (Child support) [2021] AATA 4495 (1 October 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/PC021123

APPLICANT:  Mr Dashwood

OTHER PARTIES:  Child Support Registrar

Mrs Dashwood

TRIBUNAL:Member S Brakespeare

DECISION DATE:  1 October 2021

DECISION:

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

• For the period 28 September 2020 to 31 March 2023 Mr Dashwood’s adjusted taxable income is varied to $220,000 per annum.

CATCHWORDS

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

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

REASONS FOR DECISION

BACKGROUND

1. Mr Dashwood is the parent liable to pay child support to Mrs Dashwood in respect of their children [Child 1], who is 15, and [Child 2] who is 11. The child support case commenced from 31 December 2019.

2. On 28 September 2020 Mrs Dashwood lodged an application for a change of assessment citing a ground relating to the income, property and financial resources of Mr Dashwood. At the time of the application the following administrative assessment was in place:

   ·For the period 31 July 2020 to 30 June 2021 Mr Dashwood was liable to pay an annual rate of child support of $5,392. The assessment was based on an estimated adjusted taxable income for Mr Dashwood of $52,142 and an estimated adjusted taxable income for Mrs Dashwood of $26,071. The assessment took into account that Mrs Dashwood had primary care of both children.

3. There have been a number of changes that have subsequently affected the administrative assessment including changes to the care percentages in respect of the children (the first change having effect from 8 November 2020) and an update to Mrs Dashwood’s income estimate to $45,848 with effect from 14 April 2021.

4. On 20 November 2020 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):

   ·For the period 1 October 2020 to 31 October 2022 Mr Dashwood’s adjusted taxable income is varied to $230,000.

5. Mr Dashwood objected to the original decision. On 18 March 2021 an objections officer of the Child Support Agency partly allowed the objection and substituted a departure determination in the following terms (the objection decision):

   ·For the period 28 September 2020 to 31 March 2023 Mr Dashwood’s adjusted taxable income is varied to $339,771;

   ·Mrs Dashwood’s self-support amount is reduced by 50%.

6. Mr Dashwood lodged an application for review of the objection decision with the tribunal. A telephone directions hearing was held on 30 June 2021. Both parties participated. A hearing was held on 1 October 2021. Mr Dashwood and Mrs Dashwood both gave evidence on affirmation to the tribunal via conference telephone. The Child Support Agency provided the tribunal and the parties with papers relevant to the review (758 pages). The tribunal also gathered documents from each of the parties which were exchanged prior to hearing (folios A1 to A10 and B1 to B54).

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

ISSUES

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

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

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

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

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

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

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

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

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

   as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.

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

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

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

CONSIDERATION

Issue 1 – Is there a ground for departure?

1. A ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

2. At all times relevant to this review, Mr Dashwood has been the sole proprietor of his own business, [Company 1].  There is also a related trust, the Dashwood Family Trust (the Trust).

3. Mr Dashwood provided the tribunal with the draft financial statements for the business for 2020/21. There were no draft financials for the Trust; Mr Dashwood told the tribunal that his accountant said that there would be no distribution to the Trust from the business for that financial year.

4. The administrative assessment that was in place at the time the change of assessment application was made was based on an income estimate for Mr Dashwood of $52,142. Mr Dashwood told the tribunal that he thought $185,000 was probably a more accurate figure. He stated that he is not paid a wage as such; he obtains his income via drawings taken from the business. He said he was unable to give the tribunal even a rough figure of his income based on his drawings.

5. The draft financial statements record a net profit for the business of $747,673 for the 2020/21 year. The balance sheet indicates that net equity of the business increased from $692,757 in 2020 to $1,439,430 in 2021. Mr Dashwood told the tribunal that whilst it had been an exceptional year for the business he expects the current financial year to be affected by COVID-19 and therefore he needs to retain funds in the business to cover an expected downturn. He said that he also used funds from the business to make capital purchases for the [business].

6. The tribunal accepts that there is a likely to be a business case for retaining some profits in a company. The tribunal also notes that Mr Dashwood has a significant amount of discretion in deciding how and when he distributes the profits of the business. Based on the profit of the business the tribunal does not believe that Mr Dashwood’s income estimate is accurate and further it is unlikely that Mr Dashwood’s actual adjusted taxable income, once the tax returns are completed, will be a fair indicator of the actual income that is available to him.

7. The tribunal finds that there are special circumstances in this case which mean application of administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Dashwood for the children because of the income, property and financial resources Mr Dashwood.

8. This means that there is a ground for departure.

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

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below,[1] which are as set out in subsection 117(4) of the Act:

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

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

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

   (b)  the proper needs of the child; and

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

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

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

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

   (i)  himself or herself; or

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

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

   (g)  any hardship that would be caused:

   (i)  to:

   (A)  the child; or

   (B)  the carer entitled to child support;

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

   (ii)  to:

   (A)  the liable parent; or

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

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

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

2. In having regard to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).  The parents agree that the children are being educated privately and that Mr Dashwood is solely liable for the school fees in accordance with the conditions of the property settlement. The tribunal will not make an adjustment for private school fees as the it is agreed that Mr Dashwood is solely liable for them.  Mrs Dashwood wanted the tribunal to have regard to the expenses she incurs in respect of [Child 1]’s sports participation. The tribunal does not consider such expenses to be a special need and will not adjust the assessment to have regard to them.

3. The tribunal finds that there are no extra costs to be taken into account in respect of the children’s needs and therefore it is appropriate to calculate the costs of their needs by reference to Costs of the Children Table.[2]

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

4. The tribunal is satisfied that the children do not have any income, property, financial resources or earning capacity which would affect the child support assessment.

5. With respect to Mr Dashwood’s income, property and financial resources the tribunal notes that, aside from the equity in his business, Mr Dashwood’s assets include the home in which he lives and an investment property, both which are subject to mortgage. Mr Dashwood said that the investment property is rented and the income it generates covers all expenses and most of the mortgage; he personally contributes $60 per week to the mortgage. He acknowledged that there are plans in place to eventually replace the current property with units; however, he said that is not likely to happen within the next couple of years. (Mrs Dashwood said she believes the redevelopment is imminent.) Mr Dashwood indicated that he only has personal savings of about $4,000; however, he stated that his business bank account has a balance of about $520,000. Mrs Dashwood contends that Mr Dashwood has over $1 million in savings; an allegation Mr Dashwood denied. The tribunal notes that the draft financial statements indicate that as at 30 June 2021 the business bank accounts had a balance of $977,994.

6. Mrs Dashwood derives her income from her [business], and a rental property. Mrs Dashwood told the tribunal that she has run the business for a number of years; however, prior to her separation it was more of a hobby than a profit-making concern. She said she is now attempting to build the business up as it will be one of her major income sources. She runs the business from her home. Mrs Dashwood said that as part of the property settlement she received the family home unencumbered. She subsequently sold that home and bought her current home and a 50% share of the investment property. Both properties are unencumbered by mortgage. Mrs Dashwood also has savings of $200,000 arising from the sale of the family home. Mrs Dashwood denied Mr Dashwood’s assertion that she is in receipt of significant cash income from her business which she does not declare for taxation purposes. Mrs Dashwood said that most clients pay her electronically and she declares her income correctly.  The tribunal finds that Mrs Dashwood was being assessed on an income estimate of $45,484. That estimate will be reconciled in due course. The information before the tribunal indicates that the estimate is a reasonable estimate of her income from all sources.

7. The tribunal proposes to make a determination in the following terms;

   ·For the period 28 September 2020 to 31 March 2023 Mr Dashwood’s adjusted taxable income is varied to $220,000 per annum.

8. The tribunal is of the view, based on the draft financial statements, that Mr Dashwood’s income is significantly higher than $220,000. However, under the administrative assessment the costs of the children do not change once the parents combined child support incomed exceeds a cap. In 2020 the cap was $191,815 and in 2021 the cap was $197,313. The maximum costs of the two children were $40,282 in 2020 and $41,453 in 2021. Whilst the maximum costs of the children do not change, a parent’s liability will change depending on their portion of the capped income and the percentage of care determinations in respect of the children. There have been a number of changes to the care percentages for the children since the changes to the assessment application was made. Having regard to those changes the tribunal finds that the proposed determination is likely to result in the following approximate liabilities for Mr Dashwood:[3]

   ·$29,700 per annum ($570 per week) from 28 September 2020;

   ·$14,800 per annum ($285 per week) from 8 November 2020;

   ·$19,000 per annum ($364 per week) from 8 July 2021.

   [3] The tribunal has not done a calculation based on every care change; only the significant changes are listed.

9. Mr Dashwood told the tribunal that he believes that the parents’ property settlement should be factored in when working out his child support liability. He said that Mrs Dashwood received significant unencumbered assets on the basis that she was the primary carer of the children. That has now changed with the care being shared. He also said that he works  hard to produce his income and the tribunal should have regard to his extra effort in earning that income, when compared to Mrs Dashwood’s effort in producing income.

10. The tribunal was not persuaded by Mr Dashwood’s arguments. Both parents advised the tribunal that the property settlement did not make specific provision in respect of child support (apart from school fees) and therefore the tribunal sees no reason to adjust the child support liability based on the property settlement. Changes in the children’s care are already taken into account under the administrative assessment.  As noted above, once the parents’ combined child support income reaches the cap, the costs of the children is also capped. This means that Mr Dashwood’s excess income does not increase the costs of the children used in the administrative assessment.

11. The tribunal notes that the objections officer reduced Mrs Dashwood’s self-support amount by 50% on the basis that Mrs Dashwood does not pay rent or mortgage. The tribunal does not find that to be appropriate taking into account the relative income and asset positions of the parents; and the fact that Mr Dashwood’s income above the capped amount does not increase his child support liability.

12. Both parents have significant cash assets and the tribunal is satisfied that there will be no hardship for the parents or the children in making the proposed determination. The tribunal is satisfied that the proposed determination is otherwise proper.

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

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

2. Mrs Dashwood is in receipt of family tax benefit in respect of the children. The proposed determination is likely to reduce the amount of family tax benefit payable to her. The tribunal concludes that the proposed determination will have the effect of shifting the costs of maintaining the children from the taxpayer to the parents. The tribunal therefore finds the proposed determination to be otherwise proper.

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

   ·For the period 28 September 2020 to 31 March 2023 Mr Dashwood’s adjusted taxable income is varied to $220,000 per annum.

DECISION

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

• For the period 28 September 2020 to 31 March 2023 Mr Dashwood’s adjusted taxable income is varied to $220,000 per annum.