Fannel and Snowdon (Child support)

[2018] AATA 3076

Fannel and Snowdon (Child support) [2018] AATA 3076 (21 June 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC013607

APPLICANT:  Ms Fannel

OTHER PARTIES:  Child Support Registrar

Mr Snowdon

TRIBUNAL:Member K Dordevic

DECISION DATE:  21 June 2018

DIRECTION TO ALTER DECISION OR REASONS FOR DECISION:

Pursuant to section 43AA of the Administrative Appeals Tribunal Act 1975, the following alterations are made to the decision and the written statement of reasons of the decision.

The decision is altered to read:

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

•Mr Snowdon’s adjusted taxable income is varied to $108,630 for the period 1 February to 31 October 2018 and to $107,000 for the period 1 November 2018 to 31 October 2019;

•Ms Fannel’s adjusted taxable income is varied to $122,458 for the period 1 February 2018 to 24 May 2018; and

•the annual rate of child support payable by Mr Snowdon’s is increased by $1,074 for the period 1 November 2017 to 31 October 2019.

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC013607

APPLICANT:  Ms Fannel

OTHER PARTIES:  Child Support Registrar

Mr Snowdon

TRIBUNAL:Member K Dordevic

DECISION DATE:  21 June 2018

DECISION:

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

·     Mr Snowdon’s adjusted taxable income is varied to $108,630 for the period 1 February to 31 October 2018 and to $107,000 for the period 1 November 2018 to 31 October 2019; and

·     Ms Fannel’s adjusted taxable income is varied to $122,458 for the period 1 February 2018 to 24 May 2018.

CATCHWORDS

Child support - Departure determination - Income, property and financial resources of both parents - A ground for departure exists - Decision to depart - 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. Relevant to this application, Mr Snowdon and Ms Fannel are the parents of [Child 1] (17 years) and [Child 2] (12 years). Ms Fannel is recorded as having 100% care of the children.

2. 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.

3. On 21 September 2017 Ms Fannel lodged a departure application with the Department of Human Services (the Department).

4. On 26 October 2017 a senior case officer determined that for the period 1 February 2018 to 31 October 2019 Ms Fannel’s adjusted taxable income be varied to $110,000 per annum and for the period 1 November 2017 to 31 October 2019 the annual rate of child support payable by Mr Snowdon is increased by a further $1,074 to the annual rate set by a previous objection decision dated 3 February 2017.

5. Ms Fannel lodged an objection to that decision on 1 December 2017. On 30 January 2018 her objection was disallowed.

6. On 27 February 2018 Ms Fannel sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal).

7. A telephone directions hearing was convened on 10 May 2018. The tribunal heard the matter on 21 June 2018. Both parties appeared in person. The Child Support Registrar was not represented at the hearing. In reaching its decision the tribunal has considered the sworn evidence of Ms Fannel and Mr Snowdon. The tribunal also considered the documentation provided by the Department (folios 1–363), Ms Fannel (folios A1–216) and Mr Snowdon (folios B1–67).

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

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure if the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either party’s income, property and financial resources. The central issue in this matter is whether the administrative assessment accurately reflects Mr Snowdon’s income and financial resources.

2. The history of this case is relevant to the current application. The case was registered on 19 July 2016. From 19 July 2016 to 18 October 2017 Mr Snowdon was required to pay $17,106 per annum (at that time for three children) based on his 2016 adjusted taxable income of $102,522 and Ms Fannel’s 2016 provisional income of $25,877. 

3. Mr Snowdon applied for a change of assessment on 3 August 2016. A senior case officer determined that Mr Snowdon’s income should be varied to $105,000 for the period 1 November 2016 to 30 November 2018, that Ms Fannel’s adjusted taxable income should be varied to $115,085 for the period 1 November 2016 to 26 January 2017 and for the period 27 January 2017 to 30 November 2018, Ms Fannel’s adjusted taxable income be varied to $107,491. On 3 February 2017 Ms Fannel’s objection was partly allowed. For the period 29 November 2016 to 31 January 2018 Ms Fannel’s adjusted taxable income was varied to $115,085, and Mr Snowdon’s annual rate of child support was increased by $14,679 for the period 29 November 2016 to 28 November 2018, in recognition of his half contribution to [Child 1]’s private school education.

4. Ms Fannel contends that Mr Snowdon has income and financial resources available to him that are not reflected in his adjusted taxable income. Her argument is fivefold. She asserts that Mr Snowdon has not declared interest that he receives from lump sums paid to him following the property settlement, he has not fully declared funds from the property settlement to the tribunal, and that he has falsely claimed tax deductions for expenses he has not incurred. She estimates his income is in the vicinity of $120,000 to $123,000 per annum.

5. Before the tribunal addresses Ms Fannel’s submission, it must first establish Mr Snowdon’s 2017 gross income. The 2017 notice of assessment in evidence indicates that his taxable income was $94,997; this would indicate that his gross income was $104,007. Mr Snowdon’s evidence is that his 2017 annual income was $110,000. He explained that he noticed that his PAYG summary incorrectly deflated his income; he is apparently planning on making enquiries with his employer. He does not dispute that it is appropriate to use actual gross 2017 income of $110,000 per annum to calculate his child support liability. The tribunal proceeds on this basis. The tribunal is also satisfied that his 2018 gross income is about $111,657.46 (based on his year to date gross income of $83,513.66 as at 31 March 2018) as in addition to his $110,000 salary he receives “bonuses” of $730 when undertaking on call work.

6. The tribunal will now address each of Ms Fannel’s submissions in turn.

7. It is not in dispute that in both his 2016 and 2017 income tax returns Mr Snowdon has not declared interest payments. The parties gave consistent testimony that at the end of the 2017 financial year Mr Snowdon received about $500,000 from the property settlement. His testimony at hearing is that he only placed the funds into interest bearing accounts at the commencement of the 2018 financial year. In the absence of evidence to the contrary the tribunal is not persuaded that Mr Snowdon has failed to declare interest income in his 2016 and 2017 income tax returns.

8. Ms Fannel contends that about $90,000 from the property settlement is “missing” from Mr Snowdon’s financial disclosures to the tribunal. The bank accounts in evidence indicate that about $410,000 from the settlement remains. Mr Snowdon explained that upon receiving the funds he was about $20,000 in debt. He purchased a new computer and a new motor vehicle. He also used the funds to meet his ongoing living expenses, including child support and private rental costs. Given the documentary evidence before it the tribunal is not satisfied that Mr Snowdon has failed to disclose his liquid assets to the tribunal. The tribunal also accepts Mr Snowdon’s testimony that he sold his [shares] in June 2017.

9. Mr Snowdon works as [a] consultant. His 2016 taxable income was $102,522, which included deductions relating to work related car expenses ($3,300) and other work related expenses ($5,806). As stated above, Mr Snowdon’s gross income was $110,000. Mr Snowdon was directed to provide a copy of his 2017 income tax return; the document provided did not include the last three digits from each section. Therefore, the tribunal relied on his oral testimony that claimed deductions were work related car expenses ($3,300), home office expenses ($3,081), depreciation ($1,931) and a low value pool reduction ($698).

10. There is a divergence between the taxation system and child support. While expenses and deductions claimed may be legitimate for taxation purposes, this does not automatically extend to child support. Expenses accepted for child support purposes must not only be legitimate, they must have a greater priority than the support of children. By the tribunal’s calculations, Mr Snowdon’s deductions represent 8% of his income.

11. Ms Fannel submits that, after careful examination of Mr Snowdon’s bank accounts, he spent on average $30 per week in petrol in a 13 week period. Based on the fuel consumption of his motor vehicle he would travel a total of 3,000 km each quarter and, taking into account personal travel, he would not travel 5,000 km per annum for work.

12. At hearing Mr Snowdon stated that his role requires him to provide support and development for different companies around Australia. He works from home and only attends the office about once per month, thus he claims his travel to the office. He is also required to travel to contractors’ work sites. He estimated that on average he is out on site a couple of days per week.  However there are occasions when he is on site all week; alternatively there are some weeks he works only from home.  He did not keep a log book for his travel and his deductions are based on estimates. He rejected Ms Fannel’s calculations, stating that she subtracted personal travel that was undertaken in his wife’s motor vehicle.

13. In the 2016 and 2017 financial years the Australian Taxation Office allows the cents per kilometre method, based on $0.66 per kilometre for a maximum of 5,000 business km per car without the requirement of written evidence. Mr Snowdon did not keep records and estimated his business travel, which was the maximum kilometres permitted without documentary evidence. His evidence is that he works from home, he travels to his employers’ offices about once per month and works off site at least two or three times per week on average. This is not markedly different from his situation with his 2016 employer. His evidence on this point was not detailed or compelling. The tribunal formed the view that, given the nature of his work and that he works remotely, he has somewhat overstated his business kilometres and he did not incur all the costs as claimed.

14. Ms Fannel stated that by her estimates, allowing $0.45 per hour for home office expenses, Mr Snowdon has claimed 1,300 work days in the financial year. She also stated that the bank statements provided in Family Court proceedings and to the tribunal do not substantiate his claimed deductions.

15. Mr Snowdon’s 2016 income tax return deductions refer to “other work related deductions” of $5,806. These deductions are split into two areas in his 2017 return: home office expenses and depreciation. In the 2017 financial year Mr Snowdon claimed home office expenses of $3,081. His calculations were based on measurements of electricity of home office equipment, a component of home and contents insurance and the provision of office equipment, including his computer which he uses for work purposes. His telephone and internet plan was $80 per month.  Mr Snowdon stated that he is reluctant to provide records substantiating his home office expenses as he fears the use Ms Fannel will put them to.

16. By the tribunal’s calculations Mr Snowdon claims home office expenses of $12.34 per NSW gazetted work day per annum. His internet and telephone expenses (at $80 per month) are $3.84 per work day. The tribunal is of the view that Mr Snowdon has somewhat inflated his home office expenses given the nature of his work and his description of his site work.

17. The tribunal next considered the depreciation expense. Mr Snowdon explained that he purchased a new computer and screen in March 2017 as his previous one was 10 years old. The computer will not require replacement in the foreseeable future. He also claimed depreciation on software and other office equipment. The depreciation claimed was not cash expenses and from an income perspective remained available to Mr Snowdon.

18. The tribunal has found that Mr Snowdon’s 2016 and 2017 gross income was $111,628 and $110,000 respectively. The tribunal is satisfied that of the $9,106 and $9,010 in claimed deductions, about half of these are deductions that ought to be permitted by way of reduction in Mr Snowdon’s income for child support purposes. The tribunal concludes that the income and financial resources available to Mr Snowdon in the 2016 and 2017 financial years are $108,630 and $107,000 respectively.

19. At the time Ms Fannel lodged her departure application Mr Snowdon was liable to pay $16,896 in child support per annum based on Ms Fannel’s previously varied adjusted taxable income of $115,085 and Mr Snowdon’s 2016 taxable income of $102,522. Mr Snowdon accepts that his 2017 taxable income does not accurately reflect his income. Application of Mr Snowdon’s income and financial resources of $108,630 and $107,000 to the child support assessment (as varied by the pervious departure application) would increase his child support liability by $1,024 and $2,048 respectively.

20. As Mr Snowdon’s income and financial resources are not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The tribunal therefore concludes that the ground provided for in subparagraph 117(2)(c)(ia) 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. In his Statement of Financial Circumstances Mr Snowdon declared weekly interest payments of $115 and a savings balance of $408,663. He owns a motor vehicle valued at $21,000 and estimates household contents of $2,000. As at 31 December 2017 he has a superannuation balance of $237,864. He has a credit card liability of $6,093. He declares weekly expenses of $1,186 which includes $120 for entertainment and $100 for holidays and food expenses of $200. He lives in his wife’s home and pays $100 in lodgings. He also provides the parties’ adult son with $92 per week whilst he attends university. His bank statements also indicate that he pays a monthly tithe of $150. He also claims $151 of his weekly expenses relate to the children, despite the fact that he has no care.

3. Ms Fannel asserts that Mr Snowdon possibly holds undeclared real property. She had no documentary evidence to support her claim on this point. In the absence of such evidence the tribunal proceeds on the basis that Mr Snowdon made a full disclosure regarding his real property holdings (that is, that he does not own any real estate). Ms Fannel also alleged that Mr Snowdon failed to disclose all his bank accounts to the tribunal. She submitted that she has a photograph of a Westpac bank statement dated 30 March 2017 that was not provided by Mr Snowdon under the directions. She came into possession of the document when going through a garbage bin at Mr Snowdon’s former property. The tribunal declined to take the document into evidence.

4. At the time that she completed her Statement of Financial Circumstances Ms Fannel was working on a full-time [basis]. She has worked as a full-time [for] over 25 years. She declared a gross weekly salary of $2,212 per week. She was acting in a higher duties role. She receives $62 per week in carer allowance in respect of [Child 1]. She estimates the value of her property at $1.21 million, and notes that Mr Snowdon has a $100,000 caveat on the property and she has a mortgage of $160,000. She has savings of $2,200 and two motor vehicles valued at $3,600. She holds $175,000 in superannuation, has a credit card liability of $1,000, has a $9,300 liability to [a government agency] and $19,121 in outstanding fees owed to [School 1]. She estimates weekly household expenses of $2,249, of which about $1,162 relate to the children. She estimates personal medical expenses of $200 per week, predominantly made up of medication that is not available under the pharmaceutical benefit scheme. She is not entitled to family tax benefit. Mr Snowdon has instigated proceedings in the Family Court, seeking 50% care of [Child 2]. Ms Fannel states that she has already spent $40,000 in legal fees on this matter.

5. In 2017 Ms Fannel was diagnosed with [a medical condition]. She underwent [treatment] during the period May to September 2017 and is now [recovering]. She has exhausted all sick leave entitlements. She sees a psychologist on a weekly basis. The visits are currently provided by Medicare, but will increase to $240 per hour once her mental health care plan is exhausted. She is in the process of seeking sickness benefits as a workplace injury means that she is unable to continue to work on a full-time basis. [Her employer] is endeavouring to place her in a suitable three day a week position; once that occurs, her salary will be about $60,000 per annum.  Mr Snowdon did not challenge Ms Fannel’s evidence regarding her health or future earning capacity.

6. Ms Fannel’s 2016 and 2017 income tax returns indicate her taxable income was $40,709 and $122,458 respectively. She claimed $102,409 in deductions in the 2016 financial year, of which $101,893 related to legal expenses incurred when litigating a workers’ compensation claim.  Mr Snowdon did not challenge this deduction at hearing.

7. In a previous change of assessment application an objections officer varied Ms Fannel’s adjusted taxable income to $115,085 for the period 29 November 2016 to 31 January 2018 (calculated on the basis that Ms Fannel’s income was $117,085 and allowing for deductions of $2,000). The decision under review varied Ms Fannel’s adjusted taxable income to $110,000 per annum from 1 February 2018 as from this date the administrative assessment would be calculated on the basis of Ms Fannel’s deemed 2017 income of $41,401. Ms Fannel lodged her 2017 income tax return on 25 May 2018.

1. A payslip in evidence for the period ending 22 March 2018 indicates that Ms Fannel’s year to date gross income was $88,056.16, which translates to $121,744 per annum. Ms Fannel earned $5,770 in interest in the 2017 financial year, however the tribunal understands that this income was generated from funds that have since been dispersed following the property settlement. The tribunal is satisfied that Ms Fannel will earn only minimal interest in the 2018 financial year. Applying the same dividends and deductions as claimed in the 2017 financial year, the tribunal is satisfied that Ms Fannel’s 2018 taxable income will be in the vicinity of $118,200.

2. [Child 2] is in Year Six at a public school. Ms Fannel advised that he will be offered a place at [a named] High School. The fees are about $2,000 per annum; she will seek a contribution from Mr Snowdon towards this expense. Ms Fannel solely meets [Child 2]’s out of school hour care costs. She conceded that her child care expenses do not exceed 5% of her adjusted taxable income. [Child 2]’s [specialist] costs have been addressed in a previous decision of the Department, whereby each parent is to contribute equally to the cost.

3. [Child 1] attends [School 1] and is in Year 12. The evidence before the tribunal indicates that [Child 1] has been diagnosed with [various medical conditions]. The tribunal understands that he remains at significant [risk]. In a previous decision made by the Department, Mr Snowdon was found liable to contribute to 45% of the tuition fees. Ms Fannel meets 55% of the remaining tuition costs and all other educational expenses relating to his attendance at the school.

4. Had the previous change of assessment application not been in place (that is, if the assessment was based on the parties’ 2016 financial year taxable incomes), Mr Snowdon’s child support liability would be $19,726. Applying Ms Fannel’s adjusted taxable income of $115,085, as determined by the previous departure application, meant that Mr Snowdon was liable to pay $16,896 in child support per annum. From 19 October 2017 Mr Snowdon was deemed to have a 2017 income of $104,265 and his child support liability then increased to $17,274.

5. From 25 April 2018 Mr Snowdon’s 2017 taxable income was used in the assessment and so reduced his annual liability to $15,928. The tribunal has already concluded that Mr Snowdon’s 2017 taxable income is over $13,500 less that his actual income and financial resources. Application of the parties’ 2017 adjusted taxable incomes, as determined by this tribunal, results in a child support liability of $17,262 per annum. The tribunal is of the view that it is both just and equitable to amend the assessment by using these 2017 adjusted taxable incomes from 1 February 2018. This will create arrears of $150. The tribunal is satisfied that payment of these arrears will not place Mr Snowdon in a situation of hardship.

6. It is appropriate that Ms Fannel’s adjusted taxable income is varied to $122,458 until 24 May 2018. From 25 May 2018 Ms Fannel’s 2017 taxable income will be reflected in the administrative assessment. The tribunal is of the view that it is appropriate to end the departure period in respect of Ms Fannel’s 2017 adjusted taxable income on this date, as it will allow the Department to amend the assessment should the mooted change to her income and earning capacity take place.

7. The tribunal is persuaded that it is not likely that Mr Snowdon’s income and financial resources will be reflected in his future income tax assessments. Given the desirability of predictability and of avoiding repeated proceedings, the tribunal has decided to extend the period of departure in respect of Mr Snowdon’s adjusted taxable income until 31 October 2019. It seems unlikely that Mr Snowdon’s circumstances will alter significantly during this period.

8. The tribunal is satisfied that the administrative assessment is unfair given Mr Snowdon’s and Ms Fannel’s incomes and financial resources and this results 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. Ms Fannel is not in receipt of income-tested benefits. Departing from the administrative assessment by increasing the child support payable by Mr Snowdon will result in no change to the 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:

·     Mr Snowdon’s adjusted taxable income is varied to $108,630 for the period 1 February to 31 October 2018 and to $107,000 for the period 1 November 2018 to 31 October 2019; and

·     Ms Fannel’s adjusted taxable income is varied to $122,458 for the period 1 February 2018 to 24 May 2018.