Fallon and Fallon (Child support)

[2018] AATA 5056

Fallon and Fallon (Child support) [2018] AATA 5056 (27 November 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC014802

APPLICANT:  Ms Fallon

OTHER PARTIES:  Child Support Registrar

Mr Fallon

TRIBUNAL:Member M Douglas

DECISION DATE:  27 November 2018

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the annual rate of child support payable by Mr Fallon for the period 22 December 2017 to 31 July 2019 be varied to $5,500.

CATCHWORDS

CHILD SUPPORT – departure determination – special needs of the child – income, property and financial resources of the liable parent – income from operation of a business – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

1. Ms Fallon and Mr Fallon are the parents of [Child 1], born [in] February 2015.  They separated [in] October 2017.  On 22 December 2017 Ms Fallon applied for an assessment of child support to be made for [Child 1].  Her application was accepted. 

2. Mr Fallon’s adjusted taxable income was nil. He was not in receipt of any income support payments. As required by section 65A of the Child Support(Assessment) Act1989 (the Act), the Child Support Registrar accordingly issued an assessment that obligated Mr Fallon to pay child support for [Child 1] at an annual rate of $1,390. 

3. On 16 January 2018 Ms Fallon made an application to the Child Support Registrar under subsection 98B(1) of the Act for a determination to depart from the provisions of the Act relating to the assessment of child support for [Child 1].  On 4 April 2018 a delegate of the Child Support Registrar, in response to Ms Fallon’s application, determined that for the period 1 February 2018 to 21 June 2020 the annual rate of child support payable by Mr Fallon be varied to $4,500. 

4. On 15 May 2018 Ms Fallon lodged an objection to that decision.  On 25 July 2018 another delegate of the Child Support Registrar allowed her objection “in part” and set aside the earlier decision with effect from 1 August 2018.  The earlier decision therefore remained in force from 1 February 2018 to 31 July 2018.  From 1 August 2018 to 31 December 2018 the delegate who made the objection decision determined that from 1 August 2018 to 31 July 2021 Mr Fallon’s adjusted taxable income be varied to $48,308 and that the annual rate of child support, based on that adjusted taxable income, be also varied by increasing it by $3,426 for the period 1 August 2018 to 31 December 2018 and by $2,691 for the period 1 January 2019 to 31 July 2019. 

5. The Tribunal observes that the ultimate effect of those determinations was, for the period 1 August 2018 to 31 December 2018, that Mr Fallon had to pay child support at an annual rate of $7,532.

6. On Ms Fallon’s application, the Tribunal is reviewing the objection decision. The Tribunal heard her application on 27 November 2018.  She and Mr Fallon participated in the hearing by telephone and both gave sworn oral evidence.  The Department did not appear.

7. Ms Fallon also provided documents to the Tribunal which were received into evidence and are marked A1-A188.  Mr Fallon also provided documents to the Tribunal which were received into evidence and his documents are marked B1-B156. 

8. The Registrar also provided the Tribunal two bundles of documents, in accordance with its obligation under subsection 37(1) of the Administrative Appeals Tribunal Act 1975. These were also received into evidence and are paginated 1-381. 

9. The Tribunal has had regard to this evidence.

RELEVANT LAW AND ISSUES

1. Part 5 of the Act contains the provisions by which the Registrar assesses the annual rate at which a liable parent is to pay child support to the carer entitled to child support. A liable parent or the carer entitled to child support may, if there are special circumstances, apply to the Registrar under subsection 98B(1) of the Act for a determination to depart from those provisions. The Registrar, or the Tribunal in the Registrar’s place, if satisfied that the criteria of subsection 98C(1) are met can make one or more of the determinations listed in subsection 98S(1) to depart from the provisions of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are:

   i.that one, or more than one, of the grounds for departure referred to in subsection (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 determination (under subsection 98S(1)).

2. The grounds for departure referred to in subsection 98C(2) are those set out in subsection 117(2) of the Act.  The matters that the Tribunal must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of Part 5 are listed in subsection 117(4) of the Act.  The matters the Tribunal must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of Part 5 are listed in subsection 117(5) of the Act.

CONSIDERATION

Is a ground for departure established?

1. In her application to the Registrar under subsection 98B(1), Ms Fallon relied on the grounds for departure provided in subparagraphs 117(2)(b)(ia), 117(2)(b)(ib) and (117(2)(c)(ia), which the Registrar described respectively as reasons 2, 6 and 8A.

2. It is convenient to deal with the ground for departure provided in paragraph 117(2)(b)(ia), which reads as follows:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   (ia) because of special needs of the child.

3. The general practitioner whom [Child 1] sees has diagnosed [Child 1] as suffering from moderately severe dermatitis.  As a consequence of that, [Child 1] requires various ointments to be applied including [medication].  Ms Fallon’s evidence to the Tribunal was that she purchased [the products] around six to eight times a year.  She presented to the Department of Human Services, through whom the Registrar acts, a receipt dated [in] December 2017 that she had received from the pharmacy where she purchases [Child 1’s] medications.  That revealed the cost of [the medication] to be $31.65. 

4. Ms Fallon’s evidence to the Tribunal was that she purchases [another medication] three to four times a year.  She said the cost for that medication is $8.  She said that [Child 1] is also required to take [a third medication], but that is not available at present and as a consequence she purchases substitution steroid creams around two times a year for $50 each purchase and a cream known as [medication], which she also purchases around two times a year at a cost of $20 each time.

5. Ms Fallon’s evidence is that to allay the symptoms [Child 1] has from his dermatitis he maintains a gluten free diet, which adds around $40 a week to her grocery bill.

6. Mr Fallon did not cavil with Ms Fallon’s evidence on this issue.

7. On the Tribunal’s calculation the cost of maintaining [Child 1] is raised by around $2,500 a year due to his suffering from moderately severe dermatitis.  In the Tribunal’s view the fact that [Child 1] has moderately severe dermatitis that increases the cost of his care gives rise to a special circumstance.  The Tribunal is also satisfied that the cost of maintaining [Child 1] is significantly affected because of his having moderately severe dermatitis.

8. The Tribunal notes that in her application to the Registrar Ms Fallon also relied on [Child 1] needing to have his speech and hearing assessed.  The delegate of the Registrar who made the objection decision considered that there would be costs of $980 a year due to therapy that [Child 1] may require due to speech and hearing problems.  Ms Fallon’s evidence to the Tribunal however was that [Child 1] has not yet had his hearing or speech assessed and as to whether he will require any therapy will depend on the outcome of those assessments.  He has an appointment on 5 December 2018 for his hearing to be assessed.  At this stage there has been no appointment made to have his speech assessed.  In those circumstances, the Tribunal is not satisfied that the costs of maintaining [Child 1] are significantly affected because of any need he has with respect to his speech or hearing.  Simply put, the evidence does not establish that he has a special need as a consequence of his speech or hearing.

9. Given that the ground for departure provided in subparagraph 117(2)(b)(ia) has been established as a consequence of the cost associated with [Child 1] having moderately severe dermatitis, there is no utility in considering whether any of the other grounds for departure on which Ms Fallon relied are also established.  The circumstances relating to the ground provided under subparagraph 117(2)(c)(ia) that Ms Fallon raised are considered when considering whether it is just and equitable to make a departure to change the assessment and, if so, what determination is just and equitable to make.

Is it just and equitable to make a determination?

1. As already mentioned, the matters the Tribunal must consider when considering whether it is just and equitable to depart from the provisions of the Act are listed in subsection 117(4) of the Act. The Tribunal is not required to go slavishly through each of those matters but have regard to those that are relevant to the particular circumstances of this case. Rather than dealing separately with each matter that is relevant, insofar as the matters have relevance it is convenient for the Tribunal to group the matters and consider them by reference to the following headings.

[Child 1’s] circumstances

1. [Child 1] has all the normal needs of a child of his young age.  As discussed above, he also has additional cost associated with his care as a consequence of his having moderately severe dermatitis, and those costs amount to around $2,500 a year.

2. The Tribunal notes that were it not to make a determination to depart from the provisions of the Act with respect to the assessment of child support so as to ensure that Mr Fallon makes a contribution towards the cost of [Child 1’s] care, including the cost associated with [Child 1’s] special need, in accordance with the capacity Mr Fallon has to do so, there is the potential for hardship to be caused to [Child 1] in that some of his needs might go neglected due to Ms Fallon not having sufficient resources to cover the costs of his care. 

Ms Fallon’s circumstances

1. Ms Fallon is without employment. 

2. She and Mr Fallon are currently involved in proceedings in the Federal Circuit Court of Australia relating to an adjustment of their interests in their property.  The Tribunal notes that interim orders have been made in those proceedings that essentially prevent either party from dealing with any of their assets, with the exception of Mr Fallon being to carry on a [business] that he and Ms Fallon previously conducted in partnership during the course of their relationship.  It is apparent from the evidence before the Tribunal that Ms Fallon has limited means so as to provide for the cost of [Child 1’s] care.

3. The Tribunal notes that she has a primary obligation to support [Child 1].  [Child 1] is recorded within the records of the Registrar as being within her care for 100% of the time.  Accordingly, she incurs all the cost associated with his care. 

4. She has another child from a separate relationship whom she also has a primary obligation to support.  There is no evidence to indicate to what extent the father of that child assists with the support of the child.

5. It is evident from the evidence before the Tribunal that Ms Fallon is suffering financial hardship as a consequence of her obligation to care for [Child 1] and, consequently, were there not to be a departure from the provisions of the Act with respect to the assessment of child support so as to ensure that Mr Fallon provides for the cost of [Child 1’s] care in accordance with his capacity to do so, undue hardship is caused to Ms Fallon.

Mr Fallon’s circumstances

1. At all times subsequent to the commencement of his child support obligation for [Child 1], Mr Fallon has derived his income from conducting a [family] business and from delivering [goods] to neighbouring [business] driving a truck that he owns.  He previously conducted the [business] in partnership with Ms Fallon.  His [business] involves [certain work].  Additionally, he leases part of the [land] to others and also allows other to [do work] on that land, for which he also receives an income.

2. The tax returns and financial statements for the 2016 and 2017 financial years for the partnership of Mr Fallon and Ms Fallon relating to their conduct of a [business], prior to their separation, are in evidence.  In both those years, the partnership sustained a large loss from the operation of the [business].  That loss was attributed equally to each of Mr Fallon and Ms Fallon for the purposes of the assessment of their personal taxable income. 

3. In the 2017 year, the tax return for the partnership whilst nevertheless revealing a loss of $47,126 for the purposes of assessment of taxable income indicates that there was likely to have been some cash flow that Mr Fallon and Ms Fallon would have been able to use to enable their upkeep in that year and also to care for [Child 1].  That arose from their partnership being able to claim against the gross assessable income an amount of $86,970 for depreciation, whereas in that year the depreciation schedule revealed that the only items purchased for the business were a shotgun for $809 and a motorcycle for $2,455.  Further, of the claimed expenditure there was an interest expense of $15,919 that could have potentially related to borrowings in earlier years for the purpose of purchasing depreciable assets.  In other words, the amount claimed in the 2017 year for depreciation exceeded the actual expenses in that year that related to the purchase of depreciable assets in that year or in  earlier years.  Insofar as the depreciation expenses exceeded the actual expenditure there was additional cash upon which Mr Fallon and Ms Fallon could have drawn.

4. Ms Fallon’s oral evidence to the Tribunal was that what was presented in the tax returns and financial statements for the partnership for the 2016 and 2017 years did not necessarily provide an accurate representation of how things actually were.  Notwithstanding that she and also Mr Fallon declared the content of the tax returns to be accurate, she suggested that there was more income than what was disclosed in the tax returns and financial statements.  Mr Fallon disputed that, saying that the data from which the tax returns and financial statements were prepared was obtained from the bank statements for the accounts the partnership held with financial institutions, which data had been uploaded onto a software programme that was then downloaded onto a USB stick that was provided to the accountants who prepared the returns and financial statements.  In other words, it was Mr Fallon’s evidence that the tax returns and the financial statements accurately recorded the financial circumstances of the partnership, in terms of income and expenses.  There is no credible evidence to which Ms Fallon was able to point the Tribunal to indicate to the contrary, and given that, the Tribunal accepts Mr Fallon’s evidence that the tax returns and financial statements for his and Ms Fallon’s partnership through which they conducted a [business] accurately recorded the circumstances with respect to their income and outgoings in those years.

5. Ms Fallon’s evidence to the Tribunal was also to the effect that things have improved for Mr Fallon with respect to the conduct of the [business] since the 2017 year in that he now [produces more] and allows his brother to run [run business on the] property for which he receives income.  She also said he receives benefits by virtue of one of his neighbours paying his expenses.

6. Mr Fallon denied most of what Ms Fallon said.  He agreed that one of his neighbours had, since the end of the 2017 financial year, paid one of his expenses in consideration of Mr Fallon having delivered a load of [items] to his property.  Mr Fallon said that the expense his neighbour paid was not a large amount.  He also agreed that he has received income from his brother for allowing his brother to [conduct work] on the property and more recently has received income by way of lease fees from leasing to his brother part of the property.  He said all the income for that is run through the bank accounts that are maintained for the conduct of his business and hence, will ultimately be accounted for in the preparation of the documents necessary for the assessment of his tax and the preparation of financial statements for the 2018 year.  Those documents have not as yet been finalised.

7. Ms Fallon has presented no credible evidence to the Tribunal that substantiates that Mr Fallon is concealing income.  It seems to the Tribunal that the best evidence in terms of establishing what income is available to Mr Fallon to enable him to support himself and also to contribute to the cost of supporting [Child 1], is what is revealed in the 2016 and 2017 tax returns for the [business] which Mr Fallon and Ms Fallon then conducted in partnership, but which Mr Fallon now conducts solely.  That reveals that there is not much income available to him.  Notwithstanding that, Mr Fallon’s evidence to the Tribunal was to the effect that he has been able to support himself to this point in time and also meet all payments of child support that he has been assessed as being liable to pay for [Child 1] under the assessments as varied by the objection decision, other than $600.  Given that, in the Tribunal’s view, an assessment of child support under the normal provisions of the Act, by which Mr Fallon’s adjusted taxable income would be nil and which would result in an assessment of child support being made under section 63A of the Act, would produce an unjust and inequitable result in terms of how the parties share the cost of [Child 1’s] support.  An assessment based on Mr Fallon having an adjusted taxable income of nil would cause unfair hardship to Ms Fallon and [Child 1]. 

8. In the circumstances, the Tribunal is satisfied that it would be just and equitable to make a determination to depart from the provisions of the Act with respect to the assessment of child support for [Child 1].  Difficulty however, arises in this case in terms of what would be a just and equitable determination to make, in that the evidence does not enable the Tribunal to make any precise finding with respect to the income that Mr Fallon has available to him through the conduct of the [business].  As mentioned above, the parties’ assets are essentially unavailable for sale, so as to provide cash, and that is as a consequence of court orders preventing them from dealing with their assets pending the resolution of the proceedings with respect to their property.  That means that the only method by which Mr Fallon can contribute to the cost of [Child 1’s] support is by means of the income or cash that he has available to him through the [business]. 

9. In the circumstances outlined, it seems that the best measure of what Mr Fallon is able to pay is what he has been able to pay in the past.  As mentioned, he has met his child support obligation, as assessed, from the commencement of his obligation with the exception of $600.  In the circumstances, the Tribunal considers that a just and equitable determination to make would be to increase Mr Fallon’s child support obligation to $5,500 commencing on 22 December 2017 and concluding 31 July 2019.  It seems to the Tribunal that that would be an appropriate time for Mr Fallon and Ms Fallon to have the Registrar revisit whether there are special circumstances in this matter and whether it would be just and equitable and otherwise proper to make a determination to depart from the provisions of the Act with respect to the assessment of child support.  By that time, [Child 1] will have undergone a hearing test and possibly a speech test and it may then be known whether there will be additional cost associated with his care in terms of his speech and his hearing.  Further, by that time, the 2018 tax returns and financial statements for Mr Fallon’s [business] and possibly those of the 2019 financial year might be available which may provide better information with respect to his ability to contribute to [Child 1’s] care.

Is it otherwise proper to change the assessment?

1. In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Ms Fallon and Mr Fallon, and also have regard to whether, and if so how, any determination it makes would affect the entitlement of Ms Fallon or [Child 1] to an income tested pension, allowance or benefit. 

2. The Tribunal understands that [Child 1] does not receive an income tested pension, allowance or benefit and, also, that circumstance will not change whatever determination the Tribunal makes. 

3. Ms Fallon receives family tax benefit from the Commonwealth Government.  The Tribunal takes into account that the increase in the child support Mr Fallon will pay based on the determination that the Tribunal considers it would be just and equitable to make, from that which he would be required to pay based on an assessment made under Part 5 of the Act, would result in a slight reduction in Ms Fallon’s family tax benefit.  Given however, that Mr Fallon and Ms Fallon have the primary obligation to support [Child 1], and not the Australian community, the Tribunal considers that the determination it considers it is just and equitable to make is also otherwise proper to make.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the annual rate of child support payable by Mr Fallon for the period 22 December 2017  to 31 July 2019 be varied to $5,500.