Ewell and Hargrove (Child support)

Ewell and Hargrove (Child support) [2021] AATA 2424 (18 June 2021)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2020/BC020421
APPLICANT: Mr Ewell

OTHER PARTIES: Child Support Registrar

Ms Hargrove

TRIBUNAL: Member P Jensen

DECISION DATE: 18 June 2021

DECISION:

The decision under review is set aside and, in substitution, Mr Ewell’s rate of child support payable is varied to $1 per annum from 28 April 2020 to 31 December 2021.

Note: The Tribunal’s decision applies in addition to the departure decision that was made on 8 September 2020 which increased Mr Ewell’s rate of child support payable by $2,945 per annum from 20 July 2020 to 20 July 2021. Mr Ewell’s total rate of child support payable from 20 July 2020 to 20 July 2021 is therefore $2,946 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - income derived from business – nominal child support rate – separate departure for orthodontic expenses – 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 omitted 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

Introduction

Mr Ewell and Ms Hargrove are the parents of [Child 1] who was born in 2002, [Child 2] who was born in 2007 and [Child 3] who was born in 2012. A child support case was registered in 2002 with what is commonly called the Child Support Agency or CSA.
The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances. This case has had a somewhat convoluted history of departure applications.
In March 2019, Ms Hargrove lodged a departure application. The CSA granted her application and varied Mr Ewell’s adjusted taxable income to $110,000 per annum from 8 March 2019 to 30 September 2020. (It appears that the administrative assessment had previously been based on his self-declared income of $20,000 per annum.) Neither parent objected to that decision.
In March 2020, [Child 1] turned 18 and ceased to be a child of the administrative assessment.
On 28 April 2020, Mr Ewell lodged a departure application. On 24 June 2020 the CSA refused his application.
In July 2020, Ms Hargrove lodged a departure application.
On 17 August 2020, Mr Ewell belatedly objected to the decision dated 24 June 2020, and he applied for an extension of time in which to object.
On 8 September 2020 the CSA granted Ms Hargrove’s departure application and increased Mr Ewell’s rate of child support payable from 20 July 2020 to 20 July 2021 by $2,945 per annum. The decision effectively required Mr Ewell to contribute to the costs of [Child 2]’s orthodontic treatment. Neither parent objected to that decision.
On 15 September 2020 the CSA granted Mr Ewell’s extension of time application. On 24 November 2020 an objections officer allowed Mr Ewell’s objection and varied his adjusted taxable income to $88,800 per annum from 28 April 2020 to 30 September 2021. (In the absence of a departure decision, the administrative assessment from 1 October 2020 would have been based on Mr Ewell’s provisional 2018-19 adjusted taxable income of $56,073.)
Mr Ewell promptly applied to the Tribunal for further review. I conducted a directions hearing on 9 April 2021 and a full hearing on 18 June 2021. Mr Ewell and Ms Hargrove gave sworn evidence by conference phone.
Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:
(i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and
(ii)... it would be:
(A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B)otherwise proper;
to make a particular determination under this Part; …

A ground for departure

At the directions hearing, both parents agreed that the only issue in dispute was Mr Ewell’s income and financial resources. They both agreed that the departure decision that was made on 8 September 2020 fairly addressed how the costs of [Child 2]’s orthodontic treatment should be shared by the parents. They also agreed that Ms Hargrove’s income and financial resources were fairly reflected in her adjusted taxable incomes as assessed by the Australian Taxation Office from time to time.
Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:
that, 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:
…
(ia)because of the income, property and financial resources of either parent; …
Mr Ewell is one of the two directors and one of the two equal shareholders of [Company] Pty Ltd (“the Company”). The essence of Mr Ewell’s submissions was that the Company’s revenue had dramatically decreased and his income had decreased accordingly. When the objections officer varied Mr Ewell’s adjusted taxable income to $88,800 per annum, the Company and Mr Ewell had a number of outstanding tax returns. Those tax returns were lodged in January 2021.
The Company’s primary expense is contractors’ fees. The profit that the Company would otherwise realise is paid as directors’ fees.
In 2016-17 the Company’s revenue was $474,792. It paid directors’ fees of $193,000. Mr Ewell’s 2016-17 adjusted taxable income was recently assessed to be $95,585.
In 2017-18 the Company’s revenue was $334,681. It paid directors’ fees of $124,000. Mr Ewell’s 2017-18 adjusted taxable income was recently assessed to be $54,572 (which incorporated a loss of $7,943 which had been carried forward from previous years).
In 2018-19 the Company’s revenue was $318,078. The Company paid directors’ fees of $84,070. Mr Ewell’s 2018-19 adjusted taxable income was recently assessed to be $40,474.
In 2019-20 the Company’s revenue was $65,567. It paid directors’ fees of $36,000. Mr Ewell’s 2019-20 adjusted taxable income was assessed to be $23,110. (Mr Ewell also owns an investment property which generated revenue of $16,401 and made a profit of $5,358, and the profit formed part of his adjusted taxable income.)
The Company’s business activity statements for the first three quarters of 2020-21 suggest that it will receive ex-GST revenue of ($8,342 + $39,164 + $18,213) / 3 x 4 = $87,625, which suggests that Mr Ewell’s 2020-21 adjusted taxable income is likely to be slightly more than his 2019-20 adjusted taxable income of $23,110.
Prior to the full hearing, Mr Ewell was directed to provide certain documentation including the Company’s and his bank account statements. Those bank account statements support Mr Ewell’s submissions concerning the dramatic reduction in the Company’s revenue and his income.
At the directions hearing, Ms Hargrove stated that Mr Ewell was also involved in a [business] and “[service]”. Mr Ewell stated that his fiancée, [Ms A], operates a [business], “[Name]”, as a franchisee, and it is run via a company of which he was neither a director nor a shareholder. Ms Hargrove referred to [website] which suggests otherwise. According to that website, the business consists of two people: Mr Ewell and [Ms A]. Each is said to be a “co owner of a [business]” with the other person. At the full hearing, Mr Ewell maintained that he did not have any involvement in the [business]. He said he had withdrawn $10,000 from his superannuation fund to contribute to the purchase of a $[Amount] machine (which provides [information]), but he had only done about four scans at a total cost of about $120. He said people normally get two scans for $60: one at the start of [a relevant period] and one at [the end]. He said [Ms A] had used the machine more frequently. He also explained that he had undergone three operations on his [body part] and he realised that he could not remain in [Industry 1] indefinitely, and he plans to transition to [Industry 2], but that has not occurred yet. He said that the Company’s reduced revenue, and his reduced income, were partly referrable to his inability to work for extended periods following such surgery. He provided evidence which confirmed that he underwent an operation in July 2020: page 261 of the hearing papers.
Mr Ewell was required to provide a completed Statement of Financial Circumstances, but he did not do so. During the hearing he confirmed that he owned an investment property, and was repaying an associated loan, and he did not own any other real estate. His household consists of himself, [Child 2], [Child 3], [Ms A] and two children from [Ms A]’s previous relationship. Mr Ewell stated, in effect, that [Ms A] met some of his costs which he was unable to meet. He also stated that he owed the Australian Taxation Office more than $30,000.
Doing the best I can in the circumstances, I accept Mr Ewell’s evidence that the Company’s revenue has decreased dramatically and his income had consequently decreased. It is inherently improbable that someone would persevere in an industry in which they were unable to generate even a basic income that would allow them to support themselves, but I accept that, at least from when Mr Ewell lodged his departure application on 28 April 2020 to date, Mr Ewell has had a minimal income, i.e. less than the child support self-support amount which is currently $26,390 per annum. When he lodged his departure application the administrative assessment was based on him having an adjusted taxable income of $110,000 per annum. The difference in those incomes and the consequential rates of child support payable constitute special circumstances such that the application of the administrative assessment resulted in an unjust and inequitable determination of child support payable. Reason 8 is established.

Just and equitable

The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.
Mr Ewell’s circumstances have been discussed. Ms Hargrove’s circumstances are straightforward. She has part-time employment. Her 2018-19 adjusted taxable income was $50,026. Her 2019-20 adjusted taxable income was $51,965. She lives in rented accommodation. Her household consists of herself and the three children.
Prior to 19 August 2020, Mr Ewell provided 26% care and Ms Hargrove provided 74% care for the children. A change in care occurred on 19 August 2020, when Mr Ewell started providing 38% care and Ms Hargrove started providing 62% care, but it was not reported until 29 September 2020, and that delay resulted in different dates of effect for child support purposes. If a parent is providing more than 65% care, they will not be administratively assessed to pay child support, regardless of the disparity in the parents’ incomes: section 40C of the Act. If Mr Ewell’s adjusted taxable income were varied to the child support self‑support amount, and the other departure decision that increased Mr Ewell’s rate of child support payable by $2,945 per annum were ignored, no child support would be payable between the parents prior to 29 September 2020, and Ms Hargrove would be required to pay approximately $1,900 per annum in child support from 29 September 2020. However, those rates of child support payable are the result of a formula. The requirement to make a departure decision that is just and equitable (and otherwise proper) requires a broader consideration of the case as a whole.
Mr Ewell lodged his departure application on 28 April 2020. That was the date on which he formally disputed the fairness of the child support case, and Ms Hargrove was notified for Mr Ewell’s application shortly thereafter. I consider it appropriate to made a departure decision with effect from 28 April 2020. Since at least that date, Ms Hargrove has enjoyed a higher income than Mr Ewell. She provides more care for the children. Both parents provide significant care and they have directly met the costs of the children while they have been in their care. I consider it appropriate that, subject to the other departure decision which increased Mr Ewell’s rate of child support payable on account of the costs of [Child 2]’s orthodontic treatment, neither parent should be required to pay a significant amount of child support to the other parent. However, to provide a base rate upon which the other departure decision can apply, it is appropriate to vary Mr Ewell’s rate of child support payable to a nominal rate of $1 per annum.
On Mr Ewell’s account of events, he is persevering in a business that he claims is barely profitable, and he intends to transition to another industry. It is appropriate to make a departure decision with effect until 31 December 2021. If either parent believes that the administrative assessment from 1 January 2022 is unfair, they can lodge another departure application.
The proposed decision will reduce Mr Ewell’s child support arrears but it will not place him in credit. The proposed decision will be just and equitable.

Otherwise proper

The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.
Ms Hargrove receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Ewell will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result will be otherwise proper.

DECISION

The decision under review is set aside and, in substitution, Mr Ewell’s rate of child support payable is varied to $1 per annum from 28 April 2020 to 31 December 2021.

[2021] AATA 2424

18 June 2021

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Remedies

Jurisdiction