Faaborg and Taffet (Child support)

[2020] AATA 3653

Faaborg and Taffet (Child support) [2020] AATA 3653 (22 June 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017616

APPLICANT:  Mr Faaborg

OTHER PARTIES:  Child Support Registrar

Ms Taffet

TRIBUNAL:Member K Dordevic

DECISION DATE:  22 June 2020

DECISION:

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

• For the period 1 January 2019 to 31 October 2025 Mr Faaborg’s annual rate of child support is varied to $12,240 per annum; and

• For the period 1 January 2019 to 31 December 2019 Mr Faaborg’s annual rate of child support is increased by $2,661.

CATCHWORDS

CHILD SUPPORT – departure determination – high costs involved in enabling parent to spend time with child – high child care costs in relation to the child – income, property and financial resources of both parents – failure to fully and frankly disclose financial circumstances – 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

BACKGROUND

1. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.

2. This case was registered with the Department of Human Services– Child Support on 27 January 2015 and has been collectable since 5 June 2015. The parties have one child (born 2014) who is recorded as being in the mother’s 100% care.

3. The mother lodged a change of assessment application on 18 December 2018. A senior case officer determined that the father’s adjusted taxable income be varied to $118,665 for the period 1 January 2019 to 31 December 2022 and that his annual rate of child support be increased by $2,022 in the 2019 calendar year.

4. The father sought a review of that decision. On 30 August 2019 an objections officer allowed the objection, determining:

   ·for the period 1 January 2019 to 30 June 2019 the mother’s adjusted taxable income be varied to $62,213;

   ·for the period 1 July 2019 to 31 August 2020 the mother’s adjusted taxable income be varied to $70,500;

   ·for the period 1 January 2019 to 31 August 2020 the father’s adjusted taxable income be varied to $83,000;

   ·for the period 1 January 2019 to 31 August 2020 the father’s self-support amount is increased by $530; and

   ·from 1 January 2019 to 31 January 2020 the annual rate of child support payable by the father is increased by $2,183.

5. On 14 October 2019 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was held on 19 February 2020 and directions were issued, requiring compliance by 10 April 2020. On 5 March 2020, due to the COVID-19 restrictions, amended directions were sent to both parties advising that they must appear by conference telephone.

6. The tribunal heard the matter on 27 May 2020. The mother and father appeared by conference telephone. The Child Support Registrar was not represented at the hearing. The tribunal has considered the sworn evidence of the mother and father. The tribunal also considered the documentation provided by the Department (folios 1-324), the father (folios A1-A118) and the mother (folios B1-B211). At hearing the parents were advised that further directions would be issued requiring the father to provide additional documentation. The father confirmed that he could provide the documents if given a two-week period in which to comply. The matter was deferred.

7. Following the hearing further directions were issued, requiring compliance by 9 June 2020. The father was directed to provide bank statements for the period 1 May 2019 to 30 April 2020 for all accounts held in his name, as well as any companies of which he was a director, shareholder or office bearer. He was also permitted to provide written submissions addressing the bank statements provided.

8. On 8 June 2020 the father wrote to the President of the Tribunal seeking that I recuse myself or he would withdraw his application immediately. The President directed that this application be referred to me. Mr Faaborg’s primary concern was that I was biased and acted in an unprofessional manner at hearing, in addition to refusing his request to have the mother produce particular records post-hearing.

9. A decision by a tribunal member to recuse themselves is not a decision to be taken at all lightly. Indeed, a decision to recuse oneself without proper basis may potentially be no less damaging to the general administration of justice than a failure to recuse when that is warranted. On 10 June 2020 I decided not to recuse myself, finding that no proper basis for so doing is made out. There was the testing of both parents’ contentions at hearing; the father may not have appreciated this approach, but it is not a basis for recusal. Furthermore, refusal to accede to his wishes to direct the mother to provide documentation regarding the gross interest she received in the 2018 financial year (as outlined in her income tax return) does not justify recusal. Thus, I considered it appropriate that I continue to decide the father’s substantive application.

10. The parents were advised of the outcome of the recusal request on 11 June 2020 by email and letter. The father was invited to provide submissions by 19 June 2020 as to why his application should not be dismissed. The father was also contacted by telephone by a tribunal officer on the same day, to ascertain if he wished to withdraw his application. He responded that all communication with him must be in writing.

11. The father did not provide any further documentation or submissions to the tribunal by close of business on 19 June 2020, as requested. I considered dismissing the father’s application on the basis that he failed to comply with directions, pursuant to subsection 42A(5) of the Administrative Appeals Tribunal Act 1975. However, as both parents advised at hearing that they wished for the departure period to be extended in order to minimise repeat proceedings, I proceeded to determine the matter.

12. The tribunal reached its decision on 22 June 2020.

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and

   (ii)that it would be:

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

   (B)otherwise proper;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And if so,

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION               

A ground for departure

15.Subparagraph 117(2)(b)(i) of the Act states that a ground for departure is made out if, in the special circumstances of the case, the costs of maintaining a child are significantly affected by the high costs involved in enabling a parent to spend time with the child. Subsection 117(2B) of the Act states that costs are only regarded as high if they total more than 5% of the parent’s adjusted taxable income, calculated during a child support period.

1. The tribunal finds that the current parenting orders dictate that the father shall have two consecutive days of contact with the child every fortnight. The father lives in [Town] and the mother in [Suburb]. The tribunal accepts the uncontested evidence from the parents that the father travels to Sydney each fortnight and the mother then usually transports the child to the father’s Sydney location for contact to occur.

2. The father submits that his costs incurred to spend time with the child exceeds the 5% threshold of his adjusted taxable income. In his written submissions he has claimed that he incurs annual motor vehicle costs totalling $6,897.44 to spend time with the child.

3. The tribunal has reviewed and accepts the father’s calculations that he has driven 20,471 km in the 2019 calendar year in order spend time with the child. The tribunal also accepts his submission that the average price of petrol is $1.50p/L, finding that this generally accords with the Australian Institute of Petroleum’s average weekly regional price for petrol during the same period. Though the tribunal is concerned that it may somewhat overstate his actual fuel consumption, it accepts his evidence that his 1996 [vehicle] generally consumes 0.15L/1km. Thus, the tribunal accepts that his total petrol costs to facilitate contact are $4,606 per annum.

4. The mother claims that the father comes to Sydney for dual purposes – to see the child and to undertake work. The father denies this, stating that this is taken into account in his calculations provided to the tribunal. There are no driving logs in evidence to substantiate his claim that his contact driving accounts for the bulk of his driving, nor the mother’s claim that some of the father’s costs in travelling to Sydney are borne by the business. On balance, the tribunal accepts the father’s submissions that he has already made allowance for all travel that was for  dual purposes.

5. The tribunal next considered the father’s submission that 68% of his total driving relates to his contact with the child, 26% his business driving and 6% for personal use. He stated that his total motor vehicle costs (tolls, registration, insurance, paint repairs, oil and filter replacement and servicing (excluding petrol)) were $3,161.41; therefore $2,150 (68% of these costs) relates to his contact with the child.

6. The tribunal finds that in 2019 financial year the father claimed motor vehicle deductions of $3,400 relating to his [Occupation 1], on the basis of 5,000 km of motor vehicle use. Applying the 0.15L/1km formula to the 5,000 km travel deductions claimed would indicate that $1,125 of his deductions relating to petrol and the remaining $2,275 to car maintenance. Taking into consideration that $2,275 (out of a total car maintenance and registration costs of $3,161) was claimed as a deduction in his tax return, the tribunal concludes that the remaining net motor vehicle costs of $886 is a cost incurred by the father to enable contact with the child.

7. The father’s uncontested evidence is that he has an arrangement whereby he is accommodated by a friend when travelling to Sydney for contact. On weekends when he visits the child with his sister and mother they stay together at a hotel; he provided evidence of these costs. He also provided evidence of the cost of one night’s accommodation, to demonstrate that the costs of accommodating one adult is not significantly different to that of accommodating three. Whilst these accommodation receipts evidence the accommodation expenses borne by the father, the tribunal is not persuaded that these are necessary, as there is an arrangement in place where the father stays with a friend.  That the father may choose hotel accommodation on some occasions is, in the tribunal’s view, a discretionary cost that the father chooses to incur and is not indicative of his necessary expenses in having contact with the child.

8. The relevant child support period is 1 September 2018 to 30 November 2019 (456 days). The tribunal concludes that the father’s annual costs to enable contact with the child is $5,492 ($6,861 during the child support period). The relevant year of income is the 2018 financial year. The father’s 2018 taxable income was $21,243 ($27,063 during the child support period); 5% of this is $1,353. Therefore, the father’s out of pocket expenses to enable him to have contact with the child exceed the 5% threshold of his adjusted taxable income for the relevant income year.  The tribunal therefore concludes that the ground provided for in subparagraph 117(2)(b)(i) of the Act is established.

Just and equitable

1. 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 child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. At the time the mother lodged her change of assessment application a previous change of assessment decision was in place. On 17 August 2015 a senior case officer had determined that the father’s adjusted taxable income be varied to $82,000 for the period 17 August 2015 to 31 December 2018.

3. The tribunal finds that the mother’s 2018 and 2019 taxable incomes were $52,956 and $62,213 respectively. In her Statement of Financial Circumstances, dated 27 October 2019, the mother declares gross weekly income of $1,349 ($70,148 per annum) from her full-time role as a finance officer and an additional $10 per week in investment income. She reports savings of $370,436 (following the recent sale of her investment property), available finance of $200,030, investments valued at $5,312, a car valued at $12,000, household contents valued at $3,000 and $103,661 superannuation. She reports a personal loan from her father of $198,052 and $1,491 in credit card debt. She reports personal expenditure of $715 and household expenses of $1,334. This is likely to understate her actual expenses; by way of example it does not include household, pharmaceutical or education expenses or insurance and motor vehicle registration expenses. At least $465 of her expenses appear to relate to her costs in caring for the child.

4. The father alleges that the mother has access to financial resources that are not reflected in her income tax returns. He states that she was in receipt of an inheritance, which the mother vehemently denies. He also states that, as the mother declared gross interest of $2,070 in her 2018 income tax return, she must have at least $500,000 in liquid assets. In the absence of any documentation to support of his assertion and taking into account that the mother declared gross interest of $221 in her 2019 income tax return, the tribunal was not persuaded that the mother has access to property or financial resources that render the administrative assessment unfair.

5. The parents agree that the child is in good health. He attends a public primary school and has no out of the ordinary expenses. There is no evidence that the child is in receipt of independent income or financial resources and the tribunal finds accordingly.

6. The mother seeks a contribution from the father towards the child’s day care costs. The tribunal makes the following findings. The child is under 12 years of age and attended childcare four days a week from November 2018 until 30 June 2019 (net out of pocket expenses of $77.71 per week), five days per week from 1 to 14 July 2019 (net out of pocket expenses of $87.48 per week) and nine days a fortnight from 1 August 2019 until commencing school in January 2020 (net out of pocket expenses of $89.92 per week until 4 August 2019 and $90.85 thereafter).

7. The tribunal finds that the mother’s out of pocket childcare costs during the relevant child support period were $5,244.45. The mother’s 2018 adjusted taxable income was $52,956 ($66,158 in the child support period); 5% of this is $3,308. Therefore, the mother’s out of pocket childcare costs exceed the 5% threshold of her adjusted taxable income for the relevant income year. 

8. The tribunal notes that the since commencing primary school, the child has commenced before and after school care. The mother’s out of pocket expenses are $40.53 per week. Even allowing for $60 per day during eight weeks of school holidays and applying a child care subsidy of 85% ($360 per annum) in addition to the school term before and after school care (totalling $1,621 per annum) the mother’s out of pocket child care costs would not exceed the 5% threshold when applied to her 2019 adjusted taxable income, which is the relevant year of income in the current child support period.

9. The father completed his Statement of Financial Circumstances on 30 October 2019. He declares weekly income from his business and [Occupation 1] of $1,136 per week ($59,072 per annum). He reports minimal savings, real estate property valued at $775,000, with mortgages of $272,093 (taking into account $182,988 in an offset account), a motor vehicle valued at $1,000, personal property valued at $500, [stock] and machinery valued at $40,000 and his interest in [Company] as $10. His superannuation balance is $27,370. He reports a personal credit card liability of $850, a business credit card liability of $2,849, and an unpaid tax liability $6,920; the tribunal finds that this is not a personal liability, rather it is [Company’s] 2019 income tax liability. His personal expenditure is $436 and his household expenditure is $728, of which $203 relates to his care of the child.

10. The mother submits that the administrative assessment is unjust and inequitable because the father’s income and financial resources are not accurately reflected in the administrative assessment.

11. The tribunal finds that the father is [an Occupation 1] and is a qualified [Occupation 2] and now provides [services].  He is the sole director and shareholder of [Company], which provides [services]. At hearing he stated that he has some “leads” to work that may lead to a contract, but otherwise he has no active projects. He also has a [Workplace 1], where he [work-related detail deleted]. He states that the [Occupation 1] work takes up about five days of work per fortnight, made up of travel time, property maintenance, [work-related detail deleted] and planning disputes with neighbours. He reports that he attends to his [Company] work the remaining five days per fortnight; apparently most of his work is attending to administrative matters, though he is undertaking some developments on his own land. He stressed that these developments were financed through loans. The father submitted that his working capacity was affected by the parents’ separation, as he was under significant physical and mental strain. He rejects any suggestion that his previous earning capacity should form the basis on which his ongoing child support liability should be based. Instead, he was willing to have his child support liability assessed on an income of $60,000 for the next three years.  

12. The father’s 2016 to 2019 taxable incomes were $72,864, $38,761, $20,706 and $59,097 respectively. His 2019 tax return demonstrates that he received $100 per week from [Company], a dividend of $51,000 and minimal interest. His [Occupation 1] enterprise ran at a loss ($16,456).  The [Company] 2018 and 2019 financials declare a net loss of $158.90 and a net profit of $18,438.82 (after income tax) and retained earnings of $64,911.17 and $32,349.99 respectively. The tribunal finds that the 2018 and 2019 retained profits are available for the support of the child. Thus, the father’s 2019 income and financial resources from [Company] were in the vicinity of $88,550, excluding other benefits that he may receive from the business.

13. As outlined above, the tribunal requested at hearing, and issued directions immediately after, dictating that the father provide personal and business bank statements. The tribunal made this request as it is a well-accepted principle that parents who have companies have the ability to structure their affairs so as to minimise their income: Carey and Carey (1994) FLC 92-489. The provision of bank statements by the father would have provided a clearer indication of his income and financial resources.

1. The father did not comply with the tribunal’s post-hearing directions. His failure to make a full and frank disclosure of his bank statements and financial circumstances is unsatisfactory and leaves him open to adverse inferences being drawn: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 209. Child Support determined that the father’s income and financial resources were in the vicinity of $83,000 based on his declaration of expenses totalling $64,406. In his Statement of Financial Circumstances to this tribunal he declared weekly personal and household expenses of $1,164 ($60,528 per annum). This is likely to understate his actual expenses, as it does not include any discretionary spending. In order to meet such expenses a PAYG employee would be required to earn $78,687 per annum. The tribunal is of the view that this is likely to be a conservative estimate of his income for the reasons already outlined.

2. The financial evidence indicates that the father has a greater capacity to meet the child’s costs than his income tax return and submissions suggest. However, it is difficult to quantify this financial resource, without a forensic examination of his financial arrangements and a full and frank disclosure. The tribunal considers that the available evidence indicates that the father has the capacity to contribute at least $250 per week towards the child’s costs ($13,000 per annum), an increase of $43 per week to what he is currently paying (based on his declaration in his Statement of Financial Circumstances, which indicates that his annual income is $59,072). The tribunal next considered the father’s out of pocket expenses relating to his contact with the child. Increasing the father’s self-support rate by $5,492 per annum and applying this to the administrative assessment would reduce the father’s child support liability by $858 per annum. Thus, the tribunal considers it appropriate to reduce the father’s annual liability to $12,140 per annum. Given the tribunal’s conclusion regarding the father’s income and financial resources, it is satisfied that he has capacity to meet his annual liability and this will not place him in a situation of hardship. Furthermore, these funds are necessary for the mother to adequately provide for the child.

3. The tribunal next considered what, if any, contribution the father should make towards the child’s care costs. During the period 1 January 2019 to 24 January 2020 the mother incurred out of pocket childcare expenses of $5,322. The tribunal is of the view that generally it is appropriate that each parent contribute according to their income percentage. However, given that the tribunal has determined that the father should contribute $12,140 per annum towards the costs of the child, it is just and equitable in this case that the father contribute to 50% of these costs. Therefore, the father’s annual rate of child support for the period 1 January to 31 December 2019 is increased by $2,661.

4. The tribunal has determined that it is appropriate to amend the father’s annual rate from 1 January 2019 (the date from which the previous departure application expired) until 31 October 2025. The period of departure is appropriate in the circumstances, given that it is unlikely that the father’s income and financial resources will be reflected in his adjusted taxable income into the future. The decision will create arrears of about $3,700. The tribunal is satisfied that the father has capacity to meet these arrears and this will not place him in a situation of undue hardship.

5. The tribunal is satisfied that the administrative assessment is unfair given the father’s income and financial resources, the mother’s high childcare costs and the father’s high contact costs. These result in an unjust and inequitable level of child support given the circumstances of each parent. For all the reasons above, the tribunal finds it just and equitable to depart from the administrative assessment.

Otherwise proper

1. 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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

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

• For the period 1 January 2019 to 31 October 2025 Mr Faaborg’s annual rate of child support is varied to $12,240 per annum; and

• For the period 1 January 2019 to 31 December 2019 Mr Faaborg’s annual rate of child support is increased by $2,661.