Disney and Cleary (Child support)

[2020] AATA 5118

Disney and Cleary (Child support) [2020] AATA 5118 (23 July 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/HC017951

APPLICANT:  Ms Disney

OTHER PARTIES:  Child Support Registrar

Mr Cleary

TRIBUNAL:Member Y Webb

DECISION DATE:  23 July 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – benefits derived by liable parent from business – ground for departure established – decision under review affirmed

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 relates to the issue of child support regarding the children of Ms Disney and Mr Cleary (“the children”).  The children are now aged 12 and eight.

2. The child support case has been registered for collection by the Department of Human Services (“Child Support Agency”) since 28 April 2014.  According to the Child Support Agency’s records the children are in the 81% care of Ms Disney and 19% care of Mr Cleary.

3. On 24 February 2019, Ms Disney applied to the Child Support Agency for a change to the administrative assessment on the basis of Reasons 8A and 8B.  As the matter progressed Ms Disney advised that she was no longer pursuing Reason 8B.

4. At the time of Ms Disney’s application for a change to the assessment and for the period 1 January 2019 to 30 November 2019 Mr Cleary was liable to pay an annual rate of child support of $6,054.  That rate was calculated using Mr Cleary’s 2017/2018 adjusted taxable income of $63,040 and Ms Disney’s 2017/2018 adjusted taxable income of $39,959.

5. On 4 July 2019 a delegate of the Registrar decided that Reason 8A had been established.  The delegate determined that for the period 24 February 2019 to 31 December 2021 the adjusted taxable income of Mr Cleary would be set at $119,028.  This resulted in an annual child support liability of $15,220 initially and decreasing to $14,438 from 1 September 2019.

6. On 5 August 2019 Mr Cleary objected to that decision.

7. On 22 November 2019 an objections officer partly allowed Mr Cleary’s objection. The objections officer found that Reason 8A had been established and that Mr Cleary’s adjusted taxable income should be varied to $90,400 per annum for the period 24 February 2019 to 31 December 2021.  In addition, the objections officer varied the adjusted taxable income of Ms Disney to $39,959 for the period 1 September 2019 to 31 October 2020.  This decision resulted in a child support liability for Mr Cleary initially of $10,742 decreasing to approximately $9,984 from 1 November 2020.

8. Ms Disney requested review by the Administrative Appeals Tribunal (“the Tribunal”). A telephone directions hearing was conducted with both parents on 3 March 2020.

9. Ms Disney and Mr Cleary attended the hearing by way of a telephone conference on 23 July 2020.  Ms Disney gave evidence on affirmation and Mr Cleary gave sworn evidence.

ISSUES

1. The central issues for the Tribunal to determine in this case are:

   · Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (Assessment Act) exist; and if so,

   ·      Whether it would be:

   (a)   just and equitable as regards the children, the liable parent, and the carer entitled to child support; and

   (b)   otherwise proper

   to make a particular determination to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

1. The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule.  The Tribunal had regard to all of this evidence, and refers specifically to particular items in this statement of reasons.

CONSIDERATION

The child support law

1. The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment 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 taxable income of each parent.

3. A parent may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act (section 98B).  Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 10 above.

4. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and that a ground or grounds exist 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 Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.

5. The phrase “special circumstances of the case” is not defined in the Assessment Act.  In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:

   Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.

   Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases.

   [1] (1992) FLC 92-279

6. Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision. 

Does a ground or grounds exist to depart from the administrative formula assessment?

1. In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents.

Reason 8A

1. The legislative grounds corresponding to Ms Disney’s application in relation to Reason 8A are set out in subparagraph 117(2)(c)(ia) of the Assessment Act.  The test is whether:

   in the special circumstances of the case, application in relation to the 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: [paragraph 117(2)(c)]

   (ia) because of the income, property and financial resources of either parent; …

2. To establish this ground it is necessary to show that either Mr Cleary’s or Ms Disney’s income, property and financial resources used in the assessment make the child support assessment unfair.

Ms Disney’s evidence and contentions re Mr Cleary’s income, property and financial resources

1. In her application to the Tribunal Ms Disney stated that she believes that Mr Cleary has access to additional funds from [Company 1] (“[Company 1]”) beyond the salary and benefits (such as a fully maintained car and a mobile phone) which [Company 1] provides.  She asserted that Mr Cleary and his partner had arranged their financial circumstances in a way which reduced Mr Cleary’s income for child support purposes. 

2. Ms Disney referred to Mr Cleary’s large expenses including flights for the children most fortnights (prior to COVID 19 restrictions) so that he could spend time with the children.  She also referred to Mr Cleary’s frequent holidays both with and without the children. 

3. At the hearing Ms Disney referred to transfers evident in the bank statements of [Company 1] which she asserted related to the company paying Mr Cleary’s credit card liability and there being large transfers into a joint account of Mr Cleary and his partner.

4. She also stated that she believed a second branch of [Company 1] was being established in [Australian State 1]. She stated that Mr Cleary and [Ms A] own another company [Company 2].  In addition, she queried how Mr Cleary was affording to pay for legal fees unless he was being assisted by [Company 1]. 

Mr Cleary’s evidence and contentions in relation to Reason 8A (his income, property and financial resources)

1. Mr Cleary submitted that he was no longer an office holder of [Company 1] but is an employee only.  He stated that this had been the case since 2017 when [Company 1] entered into administration.  He stated that at that time he relinquished his role as a director and shareholder. Mr Cleary described [Company 1] as a business which supplies, services and maintains [specified product].  His position as an employee is as [Company 1’s] [specified position].

2. Mr Cleary stated that the only income which he receives from [Company 1] is his base salary of $65,000 per year ($1,250 per week) plus a living away from home allowance of $10,400 per year ($200 per week), a total of $75,400 per year.  He provided copies of two recent consecutive payslips confirming these amounts.[2]  

   [2] B13 and B14

3. In addition, Mr Cleary confirmed that he receives a fully maintained vehicle and a mobile phone.  He estimated the value of the mobile phone to be approximately $21 per week and the value of the fully maintained car to be approximately $280 per week.  Combined this results in employment benefits valued at $15,652 per year ($301 per week).[3]

   [3] B3

4. Mr Cleary confirmed that he is not a director or secretary of [Company 1] and that his partner, [Ms A], is the sole director and secretary.  In relation to shareholdings of [Company 1], there is a total of 200 shares.  His father owns 75 shares; an independent third party owns 25 shares and [Company 2] – as trustee for [Trust 1] – owns 100 shares.  Mr Cleary confirmed that he and his partner are the joint directors and secretaries of [Company 2] and that they jointly own all of the shares in [Company 2].  Mr Cleary provided ASIC Company Extracts for [Company 1] and [Company 2].[4]

   [4] B15–B17 and B27–B30

5. In addition, Mr Cleary provided the 2018 Financial Statements for [Company 2] and the [Trust 1] Tax Return for the 2018 year.[5]  He advised that the 2019 Financial Statements have not yet been prepared.

   [5] B18–B26 and B39

6. Mr Cleary denied that his personal credit card liability was being paid by [Company 1].  He stated that he has a work-related credit card in his name and that all credit card transactions evident in the [Company 1] bank statements are work-related and therefore paid by [Company 1]. 

7. Mr Cleary admitted that he continued to be a signatory to the [Company 1] bank account even though he is no longer an office holder of the company.  He stated that he and [Company 1] were involved in negotiations with the ANZ bank in relation to the personal guarantee which Mr Cleary and his parents had signed related to the [Company 1] overdraft.  Mr Cleary explained that the bank was reluctant to accept [Ms A] (Mr Cleary’s partner) as a signatory to the bank account when she was not a signatory to the personal guarantee.  However, Mr Cleary stated that negotiations with the bank were positive and he was expecting that he could be removed as a signatory to the [Company 1] bank account in the near future.

8. Mr Cleary told the Tribunal that the business’ profitability has improved since [Ms A] has been in charge of its finances to the extent that [Company 1] is no longer in administration.  He stated that the business’ staffing was restructured and expenses were reduced.  However, he stated that in 2020 the business has been going through a very difficult time financially exacerbated by the COVID 19 pandemic.  He stated that prior to the pandemic he travelled extensively “chasing sales” but he no longer was able to do that to anywhere near the same extent due to the pandemic restrictions.

9. Mr Cleary agreed that the company was at one stage considering opening a second branch in [Australian State 1] but it was not possible to engage the necessary labour and equipment and [Company 1] has abandoned its plans to open a second branch of the company.

10. In relation to the frequent flights that Mr Cleary paid for the children to spend time with him (prior to the COVID 19 pandemic) Mr Cleary stated that he bought flights well in advance when the fares were on special.  He said that the cost was usually around $400 per fortnight for the flights.  However, he no longer is paying for flights due to the pandemic and he has lost money on flights for which he prepaid.  Mr Cleary stated that there have been times when his partner and also his parents have paid for flights for the children to spend time with him. 

The Tribunal’s consideration

1. The Tribunal acknowledges that Mr Cleary’s former involvement as a director of [Company 1] may lead to a perception that he continues to be instrumental in the control of the company’s finances.  However, a previous decision of the Tribunal in 2017 found that the decision by the shareholders of the company to appoint [Ms A] as sole director was justifiable in the context of the company being placed into administration and it needing to take decisive action to restore [Company 1]’ financial viability.  The Tribunal accepts that [Ms A] holds legal qualifications and that she has succeeded in reducing the company’s debt and facilitating the company trading out of administration.  Notwithstanding, the Tribunal finds that through Mr Cleary’s joint directorship and joint shareholding (with [Ms A]) in [Company 2] they are controlling shareholders of [Company 1] albeit only if they both exercise their shareholders’ rights in unison.  The Tribunal also accepts that the issue of Mr Cleary being a signatory to the personal guarantee to the bank in relation to the overdraft has complicated his attempts to sever his role as a signatory to [Company 1]’ bank accounts.  Control therefore of [Company 1] is complex legally, financially and personally for Mr Cleary.

2. Nevertheless, the Tribunal accepts that Mr Cleary is an employee of the company and that he receives a base salary of $65,000 a year; a living away from home allowance of $10,400 and work-related benefits comprising a fully maintained vehicle – which the Tribunal accepts has a value of approximately $14,560 per year – and a mobile phone with a value of approximately $1,092.  The Tribunal finds that his salary package has a total value of $91,052 (not including employer superannuation contributions).

3. Ms Disney asserted that Mr Cleary holds one or more credit cards which are being funded by [Company 1].  Mr Cleary admitted to having a credit card in his name but asserted that it was for work-related expenditure, not personal expenditure.  There is insufficient evidence to resolve that issue.  The Tribunal found both Mr Cleary and Ms Disney to be genuine and credible in their statements and responses and the Tribunal accepts their evidence as truthful.  For this reason, the Tribunal is not satisfied – on the available evidence – that [Company 1] is funding personal credit cards for personal expenses of Mr Cleary despite it being evident in the bank statements of [Company 1] that payments are or were being made to credit card accounts.

4. Ms Disney asserted that there were payments being made from [Company 1] to a joint account of [Ms A] and Mr Cleary.  While there were some payments – such as the payment of $26,940.31 to [Ms A] and Mr Cleary on 9 July 2019 – payments of this nature were not frequent and the purpose or nature of the payments was not clear.  In addition, the Tribunal is not able to take into account the resources of [Ms A] given that she does not have a legal or financial duty towards the children of the assessment.

5. The Tribunal accepts that Mr Cleary had – until the pandemic – been paying for flights for the children to spend time with him on a regular basis and that this must have been costly.  However, Mr Cleary openly admitted that [Ms A] or his parents were on occasions assisting with the costs of the flights and the Tribunal accepts that Mr Cleary purchased flights in advance to take advantage of special deals.

6. In relation to [Company 2] and the associated [Trust 1] the Tribunal considered the 2018 Financial Statements (these being the most recent available) and the Trust Tax Return for 2018.[6]  These show that the Trust operated at a loss of $4,660 and that the main business activity of the Trust was stated to be “[specified business activity]” with total business income of $6,000 and total expenses of $10,660.  Mr Cleary told the Tribunal, and it accepts, that while he and the children are named beneficiaries of the Trust, no distributions have been made and no dividends paid to Mr Cleary or [Ms A] as shareholders of [Company 2].

   [6] B18–B26 and B31–B39

7. In relation to the allegation that Mr Cleary’s personal legal fees were being funded by [Company 1], Mr Cleary denied that was the case and stated that legal fees paid by [Company 1] were in relation to legal expenses pertaining to the company.  There is insufficient evidence to substantiate a finding that [Company 1] was paying for Mr Cleary’s personal legal fees.

8. Hence, the Tribunal is satisfied, on the available evidence, that Mr Cleary has a salary package with a value of approximately $91,052 for child support purposes.  This figure includes the components described above in paragraph 36.

9. At the time of Ms Disney’s application the income used in the assessment for Mr Cleary was $63,040.  The Tribunal finds that special circumstances exist because it is satisfied that Mr Cleary’s actual income and financial resources are considerably higher than $63,040 and that this renders the child support assessment unfair and inequitable in relation to the financial support of the children.  Hence Reason 8A is established.

Would it be just and equitable to depart from the administrative assessment?

1. Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain.  The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.

2. Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment.  The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act.  This requires an assessment of the duty of the parents towards the children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.

1. In considering these issues, the Full Family Court, in the case of Gyselman, stated that:

   However, some of the matters listed in sub-section [117](4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).

2. Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:

The proper needs of the children

1. In determining the proper needs of the children, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the children.

2. The children attend a government school and incur the usual school expenses.  Both parents confirmed that there were no other issues which they wished to raise in relation to the proper needs of the children.  They agreed that the children had no special needs and that they incurred the usual and typical expenses for children of their age.

3. The Tribunal acknowledges that Mr Cleary’s private health insurance covers both of the children.  He confirmed that the total premium per week is approximately $97 and the Tribunal accepts that a portion relates to the children’s share of that cover.

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

1. Both parents agreed that the children have no income, earning capacity or property.  The Tribunal finds that the children are wholly dependent on their parents for financial support.

Direct and indirect costs incurred by the carer parent in providing care for the children

1. Ms Disney stated, and the Tribunal accepts, that she has occasional vacation care expenses for the children but these are not a regular occurrence and the costs are not significant to the extent that they would affect the child support assessment.

Necessary commitments to support themselves or others

1. The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children.  This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans.  In Mee and Ferguson[7] the Full Court of the Family Court stated at paragraph 128:

   Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.

   [7] [1986] FamCA 3.

2. Neither Ms Disney nor Mr Cleary raised any issues in relation to self-support and the Tribunal finds accordingly.

Ms Disney’s income, property, financial resources, expenses and earning capacity

1. Ms Disney provided a Statement of Financial Circumstances and confirmed that she works as an [Occupation 1] in an [Employer 1].  Ms Disney stated that she works on a permanent, part-time basis for 48 hours per fortnight.  Ms Disney stated that in the past she was able to significantly boost her income with additional hours, including at penalty rates, at the [workplace].  However, since the COVID 19 pandemic obtaining additional hours of work has been very difficult.  Staff are not being permitted to work at more than one [workplace] because of the concerns around cross-contamination of the virus.  This has led to Ms Disney obtaining work very recently as a [Occupation 2] for [Employer 2].  This work is in addition to Ms Disney’s work at [Employer 1].  Ms Disney stated that she is hoping to pick up one or more eight-hour shifts at [Employer 2].  However, this work is casual work and she has no guarantee that she will be offered shifts and if so, how frequently.  Ms Disney explained that the pay of around $33 to $34 per hour is a higher rate of pay than her work at [Employer 1].  She advised that she has not yet been paid for any work with [Employer 2] as her employment there has only just been confirmed.

2. Ms Disney provided two payslips from [Employer 1] from 2020.  These payslips confirmed that the basic rate of pay is $23.0905 per hour with time and a half payable on Saturdays and double time on public holidays and Sundays.  The payslips showed that Ms Disney earned $1,789.52 in one fortnight and $1,639.43 in the following fortnight (in February/March 2020).  The Tribunal accepts that Ms Disney’s pay varies depending on how many additional hours she works each fortnight.  In her Statement of Financial Circumstances Ms Disney declared that, on average, she earns approximately $700 per week ($1,400 per fortnight) from her work at [Employer 1].  The Tribunal accepts her statements regarding her income as the information is approximately consistent with her taxable income in the 2017/2018 year of $39,959.[8]

   [8] C1 – page 106

3. In relation to the 2018/2019 year Ms Disney provided her Notice of Assessment from the Australian Taxation Office.  This showed that her taxable income was $25,841.  However, Ms Disney explained that in that financial year she salary packaged for part of the financial year and this resulted in a reportable fringe benefit which inflated her income (for some purposes) to $50,365.  The Tribunal accepts that this occurred through a “grossing up” of a fringe benefit which Ms Disney is no longer receiving.  The Tribunal is satisfied that it would not be just and equitable to rely, in the assessment, on Ms Disney receiving an income of $50,365 because this is not an accurate reflection of her actual income.  In considering an appropriate figure, the Tribunal is mindful that the reportable fringe benefit grossed up amount reflects the gross salary that Ms Disney would have to earn to purchase the benefit from her after tax income.  In all of the circumstances the Tribunal agrees with the objections officer that it would be fair and equitable to determine an income for Ms Disney for a period of time which is equivalent to her 2017/2018 income of $39,959 and to the income which she could reasonably expect to have earned in the 2019/2020 year.

4. In relation to property, Ms Disney advised, and the Tribunal accepts, that she jointly owns the home in which she lives and she valued her 50% share of the house at approximately $105,000 and her share of the mortgage over the home as approximately $84,725.  This means that Ms Disney’s share of the equity in the home is approximately $20,000.  In addition, Ms Disney jointly owns a block of land with her 50% share valued at approximately $42,500.  She declared that she has no equity in the block of land.  Ms Disney owns one motor vehicle valued at approximately $18,000 and a 50% share of another car, her share being valued at $3,000.  She jointly owns a caravan with her share valued at $5,000 and she valued her household contents at $10,000.  The Tribunal accepts all of this evidence regarding Ms Disney’s property and real estate.  Mr Cleary submitted that he has paid Ms Disney $86,518 over four years as a result of the property settlement between them and that this amount should be taken into account in the Tribunal’s deliberations.  He provided a copy of the consent orders of the Federal Circuit Court of Australia dated 2 June 2016[9] in confirmation.  However, while the Tribunal accepts that Mr Cleary has paid these moneys to Ms Disney the court orders do not in any way specify or imply that the property settlement monies are intended to be a substitute for child support for the children and the Tribunal finds that the property settlement monies are not intended to replace Mr Cleary’s child support liability.

   [9] C1 – page 160

5. In terms of liabilities Ms Disney declared that she has two personal loans; on one loan she owes approximately $7,000 and on the other approximately $18,000.  In relation to her household expenses these totalled approximately $1,158 per week.  However, Ms Disney advised that her partner contributes approximately $280 per week.  Hence Ms Disney’s household expenses are approximately $878 per week or $45,656 per year.  Together with income tax payable of approximately $5,200 per year Ms Disney’s expenses are at least $50,856 per year which is more than her income. 

6. In relation to her earning capacity the Tribunal is satisfied that Ms Disney is exercising her full earning capacity.  She has been employed on a part-time basis for a number of years and frequently works additional hours to increase her income.  The Tribunal finds that no earning capacity issues arise in relation to Ms Disney’s employment and her income.

Mr Cleary’s income, property, financial resources, expenses and earning capacity

1. Mr Cleary’s income, property and financial resources have been covered already at length above.  In relation to his earning capacity the Tribunal is satisfied that Mr Cleary works full-time for [Company 1] and that he is exercising his full earning capacity. Ms Disney contended that the wage paid to Mr Cleary was below market rates compared with salaries paid for comparable positions elsewhere.  Ms Disney asserted that his salary was low to avoid Mr Cleary paying the correct amount of child support.[10]  However, Mr Cleary told the Tribunal that [Company 1] had to reduce its expenses, including wage and salary costs to trade its way out of administration. He stated that was the reason why his salary package may be below some other managerial positions out in the market.  The Tribunal does not consider that there is sufficient compelling evidence to substantiate that Mr Cleary’s salary has been reduced with the intention of avoiding or minimising his child support obligations.  Hence the Tribunal finds that his earning capacity is not in issue.

   [10] C1 – page 5

2. In relation to his expenses, Mr Cleary provided a Statement of Financial Circumstances.  He declared that he has two personal loans: he owes approximately $19,000 on one loan and $35,000 on the second loan. He pays approximately $270 per week in income tax.  His household expenses, which Mr Cleary has stated total $1,296 per week ($67,392 per year) seem high given that Mr Cleary does not pay rent or any mortgage repayments.  Together with his income tax of $14,404 per year his expenses total $81,432 per annum and this appears not to include his loan repayments.  Nevertheless the Tribunal considers that his household expenses could be reduced significantly as currently they include quite a lot of discretionary spending.  For instance Mr Cleary has stated that he allocates $100 per week to entertainment and $100 per week for holidays as well as $150 per week for clothing and shoes.

3. The Tribunal also acknowledges that Mr Cleary is one of the signatories (with his parents) to the personal guarantee but obviously that is not an actual expense unless it is triggered by the bank. 

Any hardship to either parent or the children by the making of, or refusal to make, an order

1. Ms Disney emphasised that financially it is difficult to pay for all of the things that the children need on a day to day basis.  It is even more difficult when Mr Cleary is in arrears.  If the Tribunal was to rely solely on Mr Cleary’s taxable income the children would miss out.  She does not think that would be a fair result.

2. In relation to hardship, Mr Cleary stated that if the Tribunal was to increase the child support payable beyond the level set by the objections officer, he would really struggle to pay it.  He stated that while he finds the payments manageable at the moment that would not be the case if his liability was increased.

Proposed determination

1. The Tribunal considered all of the circumstances in this matter and proposes that it would be just and equitable to vary Mr Cleary’s annual adjusted taxable income to $90,400.  The Tribunal acknowledges that it has found that Mr Cleary is receiving a salary package to the value of $91,052 but taking into account some modest deductions the Tribunal considers that the amount of $90,400 as varied by the objections officer is fair and reasonable.

2. The Tribunal proposes to put this determination in place from 24 February 2019 (when Ms Disney applied for a change to the assessment) until 31 December 2021.  At the hearing Ms Disney expressed a view that the determination should be for a shorter period but with the current economic climate the Tribunal considers that a determination until 31 December 2021 will provide greater certainty and stability to both parents in relation to the financial support of the children.  In addition, the evidence before the Tribunal does not suggest that there will be any significant change in Mr Cleary’s financial circumstances within the near future.

3. The Tribunal also agrees with the objections officer and proposes that in fairness to Ms Disney her income should be varied to $39,959 for the period 1 September 2019 (when the inaccurate income was applied to the assessment) until 31 October 2020.  By that time it is presumed that Ms Disney will have lodged her income tax return and her income will reflect her 2019/2020 taxable income.

4. In terms of the parents’ respective financial positions Mr Cleary is in a more favourable position than Ms Disney for the reasons stated above and it is fair and equitable that this is taken into account in the Tribunal’s decision.

5. If there is a significant change in the parents’ financial circumstances, either parent may make an application to have those significant changes assessed and considered. 

6. Varying Mr Cleary’s adjusted taxable income to $90,400 per year will initially result in an annual rate of child support payable by Mr Cleary of approximately $10,742 (approximately $205 per week) on the basis of Mr Cleary having 19% care of the children and Ms Disney 81% care and calculated on Ms Disney’s varied income of $39,959.  This level of child support may  change after 31 October 2020 once Ms Disney’s 2019/2020 adjusted taxable income is determined and applied to the assessment but it is unlikely to change to any significant degree.

7. In all of the circumstances the Tribunal is satisfied that its proposed determination is fair, just and equitable and that it provides Ms Disney with some financial support which she needs for the children.  The Tribunal is also satisfied that the proposed child support liability is fair and affordable for Mr Cleary.

Is it otherwise proper to depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment.  Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a)    the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)    the effect that the making of the order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

2. The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman).  It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system when the parents themselves have the capacity to maintain their children. 

3. Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income-tested benefit such as family tax benefit.  Ms Disney advised that she is aware of the impact of child support payments on family tax benefit.  She advised that she is not currently receiving fortnightly family tax benefits because of the issue pertaining to the Reportable Fringe Benefits amount in the 2018/2019 year.  However, she explained that she will consider whether to make a claim once she has finalised her tax return for the 2019/2020 year.

4. This means that there may be a change in the extent to which the community will be supporting the children.  In the circumstances, it is proper that this occurs.

5. The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

6. As the Tribunal agrees with the decision of the objections officer it affirms that decision.

DECISION

The decision under review is affirmed.

Schedule – List of Exhibits

1. Department of Human Services – Child Support Agency marked as C exhibits:

   ·     CSA’s large bundle of 354 pages marked as exhibit C1

   ·     CSA’s smaller bundle from pages 355–391 marked as exhibit C2

2. Ms Disney has provided the following documents marked as A exhibits:

   ·     A1–A8                Statement of Financial Circumstances

   ·     A9–A10                2019 Notice of Assessment

   ·     A11–A12              Payslips

3. Mr Cleary has provided the following documents marked as B exhibits:

   ·     B1–B10                Statement of Financial Circumstances

   ·     B11   Submission

   ·     B12  Letter re variation of directions

   ·     B13–B14              Payslips

   ·     B15–B17              Company extract – [Company 1]

   ·     B18–B26              2018 Financial Statements – [Company 2]

   ·     B27–B30              Company extract – [Company 2]

   ·     B31–B39              [Trust 1] Tax Return 2018