Farkas and Conte (Child support)

[2019] AATA 3853

Farkas and Conte (Child support) [2019] AATA 3853 (8 August 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC015970

APPLICANT:  Mr Farkas

OTHER PARTIES:  Child Support Registrar

Ms Conte

TRIBUNAL:Member A Schiwy

DECISION DATE:  8 August 2019

DECISION:

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

·      for the period 11 May 2018 until 31 August 2024 Mr Farkas’ adjusted taxable income is varied to $68,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – benefits derived from 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. Mr Farkas and Ms Conte are the separated parents of two children aged [age] and [age] years.  This application is about the amount of child support payable by Mr Farkas to Ms Conte.

2. The child support case was registered in May 2017.  Mr Farkas lives in [Country] and Ms Conte is in Australia.  The children are residing with Ms Conte and the Department of Human Services (Child Support) have determined that Ms Conte has 100% care of the children.

3. The following administrative assessment issued:

   ·      for the period 1 January 2018 to 30 November 2018 Mr Farkas’ annual child support liability was assessed at $2,832 (fixed annual rate for two children), based on adjusted taxable incomes for 2016-17 of $17,935 for Mr Farkas and $51,024 for Ms Conte.

4. On 28 March 2018 Mr Farkas lodged a departure application with Child Support on the basis that the rate of child support payable under the administrative assessment was unfair because of the costs of contact with the children (Reason 1).  Ms Conte “cross applied” on the basis that Mr Farkas’ actual income was not reflected in the taxable income amount used to determine his child support liability.

5. On 16 May 2018 a Child Support case officer decided that Reason 1 had been established but it was not just and equitable to make a departure determination as there were court orders stating that Mr Farkas was responsible for costs of travel to see the children.  Mr Farkas’ income does not appear to have been reviewed.

6. On 23 July 2018 Mr Farkas objected to the decision and on 20 November 2018 a Child Support objections officer decided to disallow the objection.

7. On 21 February 2019 Mr Farkas lodged an application with this tribunal for an independent review of the objections officer’s decision (the objection and application are both within time as Mr Farkas lives overseas).

8. A hearing was held on 8 August 2019.  Both Mr Farkas and Ms Conte attended the hearing via teleconference and gave evidence on affirmation to the tribunal.

9. In considering this matter the tribunal took into account the oral evidence of Mr Farkas and Ms Conte; and the relevant documentation provided by the Child Support Registrar (numbered 1 to 154); Mr Farkas (numbered A1 to A64), and Ms Conte (numbered B1 to B167).  Copies of all of the numbered documents were provided to all parties.

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act) and in the Child Support (Registration and Collection) Act 1988.

2. The Assessment Act provides for an administrative assessment of the child support payable. It uses a formula that contains variables including the parents’ adjusted taxable incomes; their percentages of care for the children; and costs of the children. The Assessment Act also makes provision for a departure from the administrative assessment in certain circumstances.

3. The issues which arise in this case are:

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

   ·      is it just and equitable to make a particular determination? And if so,

   ·      is it otherwise proper to make a particular determination?

COMPLIANCE WITH DIRECTIONS

1. A pre-hearing conference was held with the parents on 13 June 2019.  At the hearing the tribunal discussed the directions that were to be issued that day.  In particular, the tribunal spent some time discussing the need for a profit and loss statement as there was no information contained in the Child Support papers showing how Mr Farkas’ business profit was derived.  It was explained to Mr Farkas that a statement was needed setting out the gross income he received and the list of expenses he claimed as a deduction against that income.  The tribunal also explained the possible consequences if the parents failed to provide the directed documents and information; including the possibility that an adverse inference may be drawn from noncompliance with the directions.  The tribunal also stated to the parents that if they were having any difficulty obtaining the directed documents they should contact the tribunal officer (case manager) as soon as possible.

2. On 13 June 2019 the tribunal issued directions to the parents and Mr Farkas was directed to provide the following:-

   -     Bank statements and credit card statements for all accounts (including loans and credit cards) held in the party’s name/or jointly with another, for the period 1 January 2017 to 31 May 2019.

   -     A copy of the last two income tax returns lodged in [Country] together with a statement setting out gross income and all expenses claimed for the business (please note there are no income tax returns included in the papers received from Child Support)

   -     Travel card statements for the period 1 January 2017 to 31 May 2019.

   -     For all personal loans and financial gifts received during the period 1 January 2017 to 31 May 2019; provide the date and amount of the loan/gift, name, address and relationship of the person providing the loan/gift, and details of how it was paid (for example, deposited to party’s bank account or payment to a third party).

3. Mr Farkas provided the following:

   ·      Copies of tax returns and assessments for the years ended 5 April 2018 and 2019 – only net profit from self-employment is included in the returns.

   ·      Bank statements for one account were provided from 3 July 2017 to 31 May 2019 with statements missing for the periods 29 June to 24 July 2018, 1 September to 10 September 2018, 29 September to 14 October 2018, and 30 March 2019 to 22 April 2019.

4. Mr Farkas completed a statement setting out his financial circumstances on 10 March 2018 and stated he had two bank accounts, a credit card and a mortgage.  As part of his change of assessment application he also provided statements from his Travel Money card for the period 13 September 2017 to 2 February 2018.

5. Mr Farkas was asked to explain the reasons for his noncompliance with the directions at the hearing and he stated that:

   ·      He believes he provided all of the statements as directed for his bank account.

   ·      His second bank account was dormant.

   ·      His credit card is now paid off.

   ·      The mortgage refers to a loan he took out from his father in around 2015.

   ·      He could not obtain statements for his Travel Money card and the post office would not provide them.

   ·      His profit and loss information was included in his tax return.  It was pointed out to Mr Farkas that the tax returns did not include details of his profit and loss and he kept repeating that the information was in his tax returns.  Eventually he conceded that he would have added up all of his expenses from his bank account to work out what his net income was.

   ·      He did not receive any personal loans or financial gifts during the period 1 January 2017 to 31 May 2019.  Mr Farkas’s bank statements show that he received several cash deposits from  [his father] and so clearly he did receive personal loans or financial gifts during the period under review.

6. Mr Farkas’s explanation for not providing his second bank account is plausible but his explanation for not providing his credit card and Travel Money card statements and details of his profit and loss were not convincing.  Mr Farkas had no trouble in March 2018 obtaining Travel Money statements going back to September 2017.  The statements also show that he was able to access his account online and input what dates he wanted the statements from.  His explanation about his profit and loss statement lacked credibility and the tribunal does not accept that he did not understand what it meant when he was requested to provide a statement setting out gross income and all expenses claimed for the business.

7. The tribunal formed the view that Mr Farkas has deliberately withheld his financial information from the tribunal and that it is more likely than not that this was due to him wanting to hide information about his true level of income and financial resources.

CONSIDERATION

Issue 1 – Does a ground for departure from the administrative assessment for child support exist?

Mr Farkas’ income

1. Mr Farkas describes himself as a [Occupation 1] who has been self-employed for several years.  His taxable incomes for the years ended 5 April 2018 and 2019 were [foreign currency amount] and [foreign currency amount].  This was income from self-employment.  No details of gross income or expenses making up the net profit figure were provided in the tax returns provided to the tribunal.

2. During the hearing Mr Farkas said he ceased working as [Occupation 1] in 2017 and he started deriving his income from renting out two rooms in his [residence].  He said he could not continue to hold a full time job due to the need to come to Australia each year.

3. The tribunal noted that on an ‘Incoming Passenger’ declaration made on [date] September 2017 when arriving in Australia; Mr Farkas stated his occupation as “[Occupation 1]” and therefore the tribunal found that he was working as a [Occupation 1] until at least September 2017.  Mr Farkas said that when he worked as a [Occupation 1] it was never for cash.

4. Mr Farkas’ bank statements (provided from 3 July 2017) show deposits from [residential rental], three deposits from [his father] and a transfer of [foreign currency amount] from a bank account ending in 3362 on 12 September 2017 (presumably his second account).  There was no income deposited from [Occupation 1] work.

5. Mr Farkas was in Australia from [date] September 2017 to [date] February 2018 (nearly five months).  During this time his bank statements show four transfers to his Travel Money card totalling [foreign currency amount] (AUD$4,924) and no other withdrawals for expenses incurred in Australia.  The Travel Money card statements show withdrawals for car registration of $689 (but not for the purchase of a car), petrol, small amounts of food, transfers to [an Australian bank] for $506, $656 and $506; Family Court costs of $330, tickets to the zoo, and two payments of $406 with reference of [Suburb] and [Town 1].  There were no cash withdrawals or payments for accommodation or legal fees (apart from Family Court cost) but Mr Farkas stated to Child Support that he incurred expenses for these.  The tribunal decided that it was more likely than not that Mr Farkas was earning money whilst in Australia and this is how he supported himself.  The fact that he registered a car with no corresponding withdrawal for a car purchase indicates he had cash for this purchase.

6. Mr Farkas was in Australia from [date] November 2018 to [date] February 2019.  According to Ms Conte he was [overseas] for a month prior to his arrival.  His bank statements show that he transferred [foreign currency amount] to this Travel Money card during this period but it is not known what the money was used for as he did not provide the statements.

7. The deposits to Mr Farkas’s account from [residential rental] are significant.  From 1 June 2018 to 31 May 2019 over [foreign currency amount] was deposited and this does not include any deposits made from 29 June to 24 July 2018 (peak tourist period), 1 September to 10 September 2018, 29 September to 14 October 2018, and 30 March 2019 to 22 April 2019 (bank statements not provided).  Mr Farkas said he had expenses including provision of food, linen and house costs.  He confirmed he did not pay interest on the loan from his father for the house.

8. Mr Farkas stated to Child Support that he had a mortgage and his repayments were [foreign currency amount] per month.  At the hearing he stated he borrowed $125,000 from his father as part of the property settlement (the tribunal noted that he was required to pay Ms Conte [foreign currency amount) and that the [foreign currency amount] per month referred to payments he made to his father.  He stated he did not pay his father interest and he had no idea how much was actually owing; his father kept a record.  On a statement setting out his financial circumstances Mr Farkas said he owed $125,000; at hearing he said it was [foreign currency amount] (it is not clear why he would need to borrow this much given the property settlement figure was [foreign currency amount]).

9. Mr Farkas’s bank statements show a withdrawal of [foreign currency amount] with the reference “[Name 1] Farkas payment” on 11 August 2017 and thereafter withdrawals to two bank accounts on the first of the month.  From September to December 2017 (4 payments) the withdrawals were for [foreign currency amount] and [foreign currency amount] with the references ‘[Name 1] Farkas’ and ‘[Name 2] Farkas’.  There were no payments from January to April 2018 and the payments were then changed to [foreign currency amount] pounds each.  There was no evidence of monthly payments totalling [foreign currency amount] per month provided.

10. [Name 1] and [Name 2] are the names of the parents’ children.  Mr Farkas said his father set up two accounts in the children’s names and the payments were possibly to these accounts.  Ms Conte stated that the children had told her that Mr Farkas had told them that he had bank accounts set up for them.  The tribunal found that it is more likely than not that Mr Farkas either did not borrow anything from his father, or if he did, he is not required to repay the loan.  This finding is further supported by the fact that Mr Farkas did not seem to know how much he owed or how much he was repaying.   It would appear that the regular withdrawals totalling [foreign currency amount] are to accounts in the children’s names and are not loan repayments.

11. The tribunal found that Mr Farkas is still working as a [Occupation 1] (both in [Country] and Australia) for cash.  He is also earning an income from [residential rental].  It is not possible to determine how much he is earning from either source as full financial information has not been provided to the tribunal and Mr Farkas denies earning anything other than income from [residential rental].

12. The [Country statistics authority] produced a report in 2017 stating that the median full time employee salary in [Country] in 2017 was [foreign currency amount] (Ref: [Source deleted]).  In the absence of full financial disclosure by Mr Farkas, the tribunal found that Mr Farkas would net around this amount from his [Occupation 1] business.  In addition the tribunal decided that his net profit from [residential rental] would be at least [foreign currency amount] as his expenses would be minor and he grossed over [foreign currency amount] in a 12 month period.  This would give a total income of [foreign currency amount] which equates to $68,000 at current exchange rates.

13. The current administrative assessment is based on an income for Mr Farkas of [foreign currency amount], giving a child support liability of $2,832. An income of $68,000 would result in a child support liability of around $10,200 which is significantly higher. The tribunal was therefore satisfied that there are special circumstances in this case and finds that the ground for departure in subparagraph 117(2)(c)(ia) of the Assessment Act does exist in relation to the income and financial resources of Mr Farkas.

Issue 2 – Is it just and equitable to make a particular determination?

1. As the tribunal is satisfied that a ground to depart from the administrative assessment exists the tribunal must consider whether it is just and equitable as regards the children, the liable parent and the carer entitled to child support to make a particular determination (subparagraph 98C(1)(b)(ii)(A) of the Assessment Act). Subsection 117(4) of the Assessment Act sets out a variety of factors that must be considered in deciding whether it would be “just and equitable” to make a particular determination. These factors include the proper needs and costs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Section 3 of the Assessment Act makes it clear that the parents have the primary duty to maintain their children and that this duty has priority over all commitments of the parents, other than commitments necessary for self-support or for the support of another person they have a duty to maintain. In this case Mr Farkas and Ms Conte have the primary duty to support their children.

Court orders

1. Mr Farkas has submitted that court orders which issued as part of the parents’ property settlement stated that he was not required to pay any child support and in return he would be required to pay for all costs of visiting the children.

2. Parts of these orders have been provided to Child Support (there is a significant amount missing and the pages are out of order).  The court orders were made in [Country] in December 2015 and provide that Mr Farkas retain the family home, both parents retain what is in their bank accounts and Mr Farkas pay Miss Conte [foreign currency amount].  It also allows for Miss Conte to take the children to Australia to reside.  It states at clause 6(d) that contact with the children should be primarily in Australia and that Mr Farkas is responsible for all costs associated with such contact which will ordinarily be for six weeks in the holidays.  It found that no maintenance should be paid to Ms Conte and this appears to refer to spousal maintenance.  At paragraph 10 (refer folio 48) it states:

   In any event, the fact that he is not being required to meet any costs to maintain his children should permit the pursuer [Mr Farkas] to save the costs of a return flight and accommodation in Australia on an annual basis and the consequences to him of relocation do not amount to a special circumstance justifying unequal division of matrimonial property.

3. In paragraph 24 (refer folios 49-50) there is a discussion about Mr Farkas visiting the children and it states:

   … I take the defenders’ point that she does not wish any ongoing payment for him, so he can use what he should be paying to support the children to come and visit them or have them come and visit him.  I have been troubled about the evidence about the purser’s financial position.  He ought to be able to earn about twice his declared income and appears to have a lifestyle consistent with him earning about twice his declared income so he may be better placed to afford contact trips than he presently declares. …

4. The tribunal found no evidence in the court orders provided that Mr Farkas was not to pay child support to Ms Conte.  It would appear that part of the discussion around how the property should be divided and who should pay for contact costs to visit the children relied on evidence that, at that time, Ms Conte was not desirous of any ongoing child support.

Mr Farkas’s financial position

1. Mr Farkas’s current income has been discussed and the tribunal has found that he currently earns approximately $68,000 per annum.  He pays very little income tax in [Country].  Taxpayers are allowed a [foreign currency amount] reduction off their income and he is therefore only required to pay an amount for national insurance ([foreign currency amount] in 2018, around $770).

1. He owns his residence which he did not provide a valuation for, but the tribunal noted that at the time of the property settlement it was valued at [foreign currency amount] ($310,000) and the tribunal assumes it is worth at least that much now.  Mr Farkas has not disclosed any other material assets.  As discussed, the tribunal does not accept that Mr Farkas has a mortgage on the property or any associated loan.

2. Excluding “loan repayments” Mr Farkas listed his weekly expenditure to be $495 which includes $68 for food, $50 for entertainment and $50 for holidays.  (Mr Farkas listed total household expenses adding up to $620 per week including loan repayments and this equates to around [foreign currency amount] per year which is significantly more than his stated earnings.  In addition he pays child support and the national insurance contribution.)

3. Mr Farkas made his application on the basis that he incurred significant costs for visiting the children.  He did not itemise the costs but provided evidence of flights (for the 2017/2018 visit) of [foreign currency amount] (approximately $1,357) and car hire for a month of $406.  He spent money on accommodation but gave no details.  Mr Farkas was also in Australia for a lot longer than the six weeks allowed for contact with the children.  If a parent’s cost of communication is more than 5% of their income it is considered to be significant (and a ground to depart from the administrative formula).  In this case Mr Farkas’s income has been found to be $68,000 and 5% of this equates to $3,400.  Mr Farkas has not provided evidence to show that he spends $3,400 per annum visiting his children and the tribunal therefore found that his costs were not significant.

4. The tribunal found that Mr Farkas spends $495 per week on household costs and $700 per annum on taxation.  This equates to $26,440.  He therefore has sufficient capacity to pay child support of around $10,200 and visit the children annually; without putting him into financial hardship.

5. In summary, regardless of whether he should be required to fund the travel costs now that he has been assessed for child support; the tribunal does not consider that such costs cause Mr Farkas any undue hardship and they are not significant given his income.

6. Mr Farkas has not been paying regular child support and a departure prohibition order was put in place when he was in Australia in 2018 and 2019.  As a result he paid $1,910 on 1 February 2018 and $2,832 on 8 February 2019 (the latter payment came out of his bank account) and his arrears were cleared.  His liability has been accruing at $236 per month and the tribunal is proposing to increase his liability to around $850 per month.  This will result in arrears of around $615 from the date of departure and $850 per month from March 2019.  The tribunal was satisfied that given Mr Farkas’s equity in his residence and his income, he will be able to finance these arrears without causing himself any financial hardship.

Ms Conte’s financial position

1. Ms Conte has been working for many years as a [Occupation 2] and doing [Occupation 3].  Ms Conte’s taxable incomes for the years ended 30 June 2017 and 30 June 2018 were $51,024 and $32,657 respectively.

2. Ms Conte said it is hard physical work and in recent years she has been developing problems in her neck.  She has been advised by her therapist to find less physically demanding work.

3. In December 2017 she was renting a house in [City].  She decided to move to [Town 2] and purchased a house for $590,000; partly financed with a loan of around $250,000.  The mortgage payments of $312 per week are less than the rent she was paying in [City].  In January 2018 she commenced full time study to become a [profession] and now only does around six to twelve hours work per fortnight.  Her income is supplemented with newstart allowance, family tax benefit, carer’s allowance ([Child 2] has been diagnosed with [medical conditions]) and child support.  She also receives financial support from her parents and she provided full details of this to the tribunal.

4. Ms Conte said that when she completes her studies (she is doing a four year course) she hopes to significantly increase her income.

5. Mr Farkas disputed Ms Conte’s evidence about her employment and financial position.  He stated that as part of the hearing into whether she could take the children to Australia she said she had been offered a job for life earning $55,000 with [Workplace 1].  Ms Conte said that she had been offered employment with this business (owned by friends) but the business had a down turn and she had to get a new job.  She started working at [Workplace 2].

6. Mr Farkas did not believe Ms Conte’s parents were giving her money.  He submitted that she had inherited money from her grandmother and put it in an account in her mother's name and she was now being drip fed that money by her parents.  Ms Conte said her grandmother died 15 years ago and her mother inherited the money.  The tribunal did not think there was any substantial evidence to support a finding that Ms Conte had substantial funds invested in another account.

7. The tribunal accepted that Ms Conte has changed her employment for health reasons and is currently trying to retrain to begin a new career that is less physically demanding.  After reviewing her bank statements the tribunal was satisfied that she is not earning undisclosed income.  Since she commenced her studies her income is likely to be below the self-support amount of $24,535.  The tribunal was satisfied that when Ms Conte does commence working in her new career her income will be reflected in her taxable income.

8. Ms Conte listed her expenses to be $877 per week which includes her mortgage.  There was nothing extraordinary about the expenses listed and they include very little in the way of discretionary spending ($41 for gifts, holidays and entertainment).

9. Ms Conte is on a much lower income than Mr Farkas and has a similar level of financial assets.  The tribunal found that while she is studying she is suffering severe financial hardship and if she was able to return to employment earing around $55,000 per annum she would still been a difficult financial position compared to Mr Farkas.  Child support of around $10,200 per annum would ease this burden.

The children

1. There is no evidence to suggest that the children have any other income or significant financial resources of their own.

2. There was no evidence presented to the tribunal that the children have anything other than the usual expenses and needs for their age; expenses that are dealt with in the administrative assessment and addressed in the Costs of the Children Table.

Summary – just and equitable

1. Mr Farkas is on significantly more income than Ms Conte and will be for the foreseeable future.  He also has capacity to take out a mortgage on his home if necessary.  After taking into account his living expenses he still has sufficient net income to meet his child support liability and travel costs to Australia; based on an income of $68,000.

2. The tribunal decided it would be just and equitable to assess Mr Farkas on his income, as found by the tribunal.

Issue 3 – Is it otherwise proper to make a particular determination?

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 their children.  Ms Conte is in receipt of family tax benefit.  Any increase or decrease in child support payments from Mr Farkas will have an impact on government payments.

Conclusion

1. It is open to the tribunal to vary the annual rate of child support payable, adjusted taxable income or the other variables such as costs of self-support used in the statutory administrative assessment formula.

2. The tribunal has taken all of the factors set out above into account and proposes to make a departure determination that varies Mr Farkas’ adjusted taxable income to $68,000.

3. The tribunal then considered what an appropriate start date for the departure determination would be, noting the maximum allowable is 18 months prior to the application being lodged.  The child support case commenced on 25 May 2017 and Mr Farkas applied for a departure determination on 28 March 2018.  Ms Conte “cross applied” on 11 May 2018; it was open to her to apply for a departure determination prior to this.  The tribunal decided it would be equitable to commence the departure determination from 11 May 2018 when Ms Conte first raised concerns about Mr Farkas’ income.  This will create additional arrears of around $615 per month, or approximately $9,300; and as discussed, the tribunal does not think this will cause Mr Farkas financial hardship.

4. The tribunal then considered what an appropriate end date for the departure determination would be.  Mr Farkas’ taxable income is likely to always be understated.  To enable Ms Conte to have some certainty about the level of financial support she will receive the tribunal decided that it would be appropriate to apply the departure determination for a lengthy period and therefore decided on an end date of 31 August 2024 (approximately five years).

1. If the parents’ circumstances change significantly it is open to both of them to lodge a further departure determination application.

DECISION

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

·      for the period 11 May 2018 until 31 August 2024 Mr Farkas’ adjusted taxable income is varied to $68,000.