Freeland and Banner (Child support)

[2023] AATA 1049

Freeland and Banner (Child support) [2023] AATA 1049 (17 March 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/BC024725

APPLICANT:  Mr Freeland

OTHER PARTIES:  Child Support Registrar

Ms Banner

TRIBUNAL:Member S Letch

DECISION DATE:  17 March 2023

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business – alienation of income – decision under review affirmed

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. Mr Freeland and Ms Banner are the parents of [Child 1], born February 2020. Mr Freeland has been assessed by the Child Support Agency (the CSA) as liable to pay child support to Ms Banner. Mr Freeland seeks a review of an objection decision by the CSA which “allowed” his objection to a “change of assessment” decision of 26 April 2022. 

2. By way of background, it is convenient to set out some extracts from the objections officer’s decision dated 1 September 2022:

   The child support assessment in place at the time of the decision subject to this review was as
   follows:

   For the period 6 April 2021 to 12 April 2021, Mr Freeland is assessed to pay Mrs Banner an annual rate of child support of $14,722. The assessment uses Mr Freeland 2019/20 adjusted taxable income (ATI) of $191,289 and Mrs Banner’s 2019/20 provisional income of $52,638*.

   For the period 13 April 2021 to 27 September 2021, Mr Freeland is assessed to pay Mrs Banner an annual rate of child support of $16,577. The assessment uses Mr Freeland's 2019/20 ATI of $191,289 and Mrs Banner’s 2019/20 provisional Income Tax Declaration (ITD) of $0.

   For the period 28 September 2021 to 31 January 2022, Mr Freeland is assessed to pay Mrs Banner an annual rate of child support of $1,477. The assessment uses Mr Freeland 2021/22 estimated income of $Nil and Mrs Banner s 2019/20 provisional ITD of $0.

   For the period 1 February 2022 to 30 June 2022, Mr Freeland is assessed to pay Mrs Banner an annual rate of child support of $1,521. The assessment uses Mr Freeland 2021/22 estimated income of $0 and Mrs Banner’s 2020/21 provisional ITD of $1,200.

   DECISION UNDER REVIEW

   On 4 March 2022, Mr Freeland applied for a change to the assessment on the basis of Reason 8A.

   On 26 April 2022, CoA DM Mark Pius found Reason 8A was not established and no changes to the assessment were made.

   I note that in the CoA application fo1m, Mr Freeland did not provide a listing of his current income or expenditure. I note Mr Freeland has lodged an estimate of $0 for the 2021/2022 fly on 28 September 2021 and for the 2022/2023 fly on 30 June 2022 (and applied to the assessment from 1 July 2022). Mr Freeland has further explained that it has been difficult for him to find work in his specialist field, due to issues surrounding his security clearances, due to this, he had not been working.

   Mr Freeland was invited to supply a series of additional financial documents to suppo1t his position, specifically in regards to his associated business, but despite ample provision, Mr Freeland is yet to forward all of the supplementary financial information requested.

   I have exercised the powers afforded to me under this section 161 of the CSA Act and issued a
   notice to appropriate financial institutions linked to Mr Freeland. I have reviewed the response received 26 August 2022 and note a number of accounts with limited significant credits or debits.
   Of note however, is Account No [number] in the name of [Business 1] which while no BAS information may be available, as of 26 August 2022 has available funds totalling $32,769.73.

   Further, the information suggests [Business 1] is active, as for the period the period 31 May 2022 to 26 August 2022 this account has deposits/credits of $36,284 and Debits totalling $11,982.
   With the above in mind, I acknowledge Mr Freeland`s concerns regarding the use of his 2019/2020 taxable income of $191,289, consisting of a lump sum received prior to the birth of [Child 1] and the registration of his child support assessment. Upon commencement of Mr Freeland’s child support assessment, being in the 2020/2021 financial year, Mr Freeland earned approximatel $78,000 from his employment. This amount being what Mr Freeland paid himself, in his capacity as Director of [Business 1]. I note that in the 2020/2021 f/y, the total sales of [Business 1] were $240,042, whereas in the previous 2019/2020 f/y Mr Freeland was able to pay himself $121,000, when sales were only marginally higher at $243,435.

   On the balance of the evidence, it is difficult to determine the full financial benefit available to Mr
   Freeland. Accordingly, when considering what financial resources are available to Mr Freeland and as the available figures suggest a consistent annual turnover, I believe it would be appropriate to use the figure Mr Freeland paid himself in the 2019/2020 f/y, being $121,000. I acknowledge that this figure may be conservative given Mr Freeland`s connections to a number of business entities.

   In considering if this reason is established, were I to set the ATI of $121,000 for Mr Freeland in the child support assessment, it would result in a decrease in the child support payable by Mr Freeland as follows; $14,722 to $9,562 for the period 6 April to 12 April 2021; and $16,577 to $11,035 for the period 13 April 2021 to 27 September 2021. As this is a significant change, I find the child support assessment is made unjust and inequitable as a result of Mr Freeland`s financial capacity/resources.

   Reason 8A is established.

   I have reviewed info1mation available via ATO databases and note there are no lodged on-boarding fo1ms or lodged tax returns for Mrs Banner. I have also reviewed Centrelink systems and note that Mrs Banner has not been in receipt of any Income Support Payments. Accordingly, I find it appropriate to adjust Mrs Banner's income from $52,638 to $0 for the period 6 April 2021 to 12 April 2021, being the time she assessed on this higher, provisional income. To her current circumstances, I have no information, which suggests Ms Banner’s current income or earning capacity is not fairly reflected in the child support assessment.

   Having found that Reason 8A is established, I must now consider what change to the assessment would be fair. As dete1mined above, I have found the approximate ATI of Mr Freeland to be $121 ,000.

   With this in mind, I will set Mr Freeland`s income at $121,000 to 30 November 2024 in order to provide simplicity and stability for both parents going forward and to reflect the ebbs and flows of Mr Freeland`s business and any expenses he may claim. Additionally, I believe this end date to be resources available to him to support [Child 1], or for his estimates to be reconciled. I highlight, the figure I have determined is for child support assessment purposes only and therefore, may not be consistent with Mr Freeland`s resultant individual taxable income reported from the ATO in the future.

   DECISION

   I have found special circumstances exist in this case and that it would be just and equitable and
   othe1wise proper to make a change. The change to be made to the assessment is:

   The objection is allowed:

   ·For the period 6 April 2021 to 12 April 2021 Mrs Banner's Adjusted Taxable Income is set to $0

   ·For the period 6 April 2021 to 30 November 2024, Mr Freeland's Adjusted Taxable Income is set at $121,000

3. Mr Freeland and Ms Banner attended the hearing in person. Ms Banner was represented by her barrister, [Barrister A], and [Solicitor A] from [named agency].

CONSIDERATION

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·     a departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)). 

3. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to by the CSA as Reason 8A, provides as a ground for departure:

   (c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   (ia)      because of the income, property and financial resources of either parent; or

   (ib)       because of the earning capacity of either parent

2. The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.

The hearing

10.In summary, Mr Freeland told the Tribunal that his financial capacity is reflected by his adjusted taxable income of around $38,000 per annum. He contended the original child support application should never have been accepted.[1] He said he is a “peculiar job contractor” in the [specified] sector in a specialised [occupation 1] role requiring a high security clearance; he has genuinely attempted to secure work, which is difficult outside of [a named region]. He contends his security clearance has been compromised by recent events connected to his family breakdown. He said his income is “nowhere near” $121,000; he presently works as an [occupation 2]. He is no longer a director or shareholder of any entity, and submits there are “special circumstances” in his case; namely his current personal and financial situation.

[1] The Tribunal explained to Mr Freeland that was not in issue in this application; he held objection rights (or the right to now seek an extension of time to object) in respect of the original decision to accept the application for a child support case. Given Mr Freeland seemingly concedes he is [Child 1’s] biological father, at face value, he appears to have no basis to challenge the acceptance decision.

11.[Barrister A] submits the decision of the CSA should be accepted. She observed Mr Freeland’s failure to comply with the Tribunal’s directions of 17 January 2023; she observed this was consistent with his failure of full and frank disclosure to the CSA during its deliberations.  

12.A summary of Mr Freeland’s key evidence is as follows:

·     The CSA was wrong to associate him with various entities, and wrong to say he “owns” them – he has reduced capacity to “perform in those roles” due to what he claims are the stressors of family breakdown.

·     In respect of the database extract at folio C4 of the materials revealing Mr Freeland held [number] shares in [Business 2], Mr Freeland insisted he had relinquished those shares when he resigned his directorships – later, he appeared to not strongly reject the assertion put to him by [Barrister A] that shares may have been transferred to his elderly mother; he denied the suggestion he was being evasive and that he had enacted a “scheme” to put his elderly mother in place as a director and transfer shares to her to attempt to alienate himself from income.

·     Mr Freeland denied any knowledge of who the trustee of [Family Trust 1] was, repeatedly asserting the CSA “had the details”; later in his evidence, Mr Freeland appeared to accept the trustee was [Business 2] but claimed he “didn’t know” saying he was “no longer part of the entity so did not know the structure”.  

·     Mr Freeland said that the financial structures were set up years ago “before the CSA case was even thought of” – he claimed “never personally held any shares”; he said he acted as a director but the moment he realised he was no longer capable of being a director he “handed back to the trust his directorships” and it was up to the trustee to determine who should “take over”.

·     Mr Freeland said his [age]-year-old mother was appointed as a director until “they” find somebody else – when asked who “they” were, Mr Freeland said “investors”. 

·     Mr Freeland conceded that whilst he was director of [Business 1], he controlled the company bank account, which the materials recorded had a balance of some $32,000; he claimed to no longer have control of that account when he resigned as a director in September 2022. He said the “money was not necessarily his income” and denied the money was his “personal money” despite not nominating any other person who controlled the account when he was a director.

·     Mr Freeland conceded that [Business 1] is still trading and derives income from other sources (not just the contracting work performed by Mr Freeland), including other [related] services and from “business domains”; Mr Freeland insisted that he was not obliged to provide evidence of the activities of [Business 1] as he did not see any relevance to the company activities which “fall outside child support” as it was not in his name personally.  

·     Mr Freeland denied the suggestion he was embittered by the child support case and that the reason for his resignations and alleged share disposals was a result of the CSA decision letter advising him his income had been varied to $121,000 – he said there were “personal circumstances” which meant he could no longer perform in his roles, including his suggestion he was falsely accused of domestic violence.

·     Mr Freeland denied he had elected not to extend the contract of employment which finished in August 2021 – he said the role could only be fulfilled in [a named region] and claimed he could not move there as Ms Banner had relocated to Brisbane; he conceded that particularly at present when he has no care of [Child 1], it was possible he could work in [the named region].

·     When asked how allegations of domestic violence could stop him from being a director, Mr Freeland claimed Ms Banner was making seeing [Child 1] “difficult”; he claimed that the “company was suffering and he could no longer perform”; he conceded that he did not think his mother could fulfil the role but that undisclosed “investors” would find somebody suitable.

·     Mr Freeland said he has “applied for hundreds of roles”; he had documentary proof on attending interviews; he said his roles have been specialised and that he would “like to keep his career” and suggested he has missed out on roles because he understands that there are issues with his security clearance.

·     Mr Freeland said he considers private organisations are reluctant to take on people like him who have worked in [his specified] sector for so long.

·     When pressed, Mr Freeland conceded he has not been advised of any decision to revoke his clearance, nor have any prospective employers advised there has been any issue with it; rather, it appears he has assumed that to be so; Mr Freeland denied that he could elect to relinquish any clearance previously given to him.

·     Mr Freeland said he is presently [doing occupation 2 work] as a “way of living to pay bills”; it was observed he is presently some $14,000 in arrears, and when pressed on what he considered a fair amount of child support, Mr Freeland refused to nominate a figure but said he should pay what he is “rightfully assessed to pay”.

·     Mr Freeland said that he considers Ms Banner is “using the child to make money” and to “keep her away from me”; he denied being resentful and said “all I know is the child is kept away for making more money for child support”.

·     Mr Freeland was taken to the regular, large, monthly deposits to his [Bank 1] bank account ending in 302 up to July 2022, for which there was no corresponding debit in any other account information supplied (apart from one sum of just over $1,000) – Mr Freeland, after initially being vague and denying knowledge as to the source of the monies, ultimately conceded those funds may have been disbursed from a company bank account (likely [Business 1])  – he said those transfers would have related to “any task I did” for the company; when it was suggested to him that he deliberately failed to produce relevant documents including bank statements, Mr Freeland maintained he was only required to supply “personal documents”, repeating that the company accounts were “not his bank accounts” despite conceding he was the sole controller of the accounts prior to resigning his directorships.

·     In response to the suggestion that this was his application and that he had failed to provide relevant evidence to challenge the assessment, and that he only provided selective and irrelevant material, Mr Freeland denied that was so and that he had provided “all relevant material” to both the CSA (notwithstanding its resort to statutory powers) and to the Tribunal.

·     In reply to the suggestion that all of this was a scheme by Mr Freeland to avoid child support, Mr Freeland denied that was so, asserting “this is a scheme devised by Ms Banner to get child support” and that Ms Banner has “misused” child-related services to her advantage.

·     Mr Freeland presently lives with his mother; apart from legal fees associated with his ongoing family law litigation, he did not identify any particularly unusual or irregular expenses.

13.Ms Banner confirmed that parenting payment and family tax benefit are her only sources of income. She also receives a child care subsidy; she is presently studying to become [an occupation 3]. She is hoping to gain employment around mid-year. She presently lives in an extended domestic violence shelter house; her stay has been extended because of her study.   

Consideration

14.For a variety of reasons, parties to child support cases will feel deeply aggrieved; that is particularly so where there are ongoing family law disputes. It is clear that Mr Freeland feels that the very existence of the child support assessment is unfair. He seems unwilling to provide support for [Child 1] as he feels Ms Banner is in some way being enriched by the relatively modest contribution he has been assessed to pay by way of child support.

15.I acknowledge Mr Freeland feels genuinely aggrieved. However, his subjective belief that he should be relieved from an obligation to pay child support, or to minimise any obligation, is misguided. [Child 1] is his daughter, and the child support scheme makes it very clear he is liable to provide support to her. [Child 1’s] interests take priority over all else.

16.I am comfortably satisfied that the evidence demonstrates Mr Freeland has embarked upon a deliberate and calculated process to attempt to distance himself from his business entities with a view to alienate himself from any income which might be attributed to him for child support purposes. He has failed to produce documents requested of him by the CSA; he only partially complied with the Tribunal’s directions. As a general observation, I found his oral evidence evasive, contrary and self-serving.  

17.Mr Freeland has been assessed under formula arrangements as having a “nil” income. I consider he effectively retains control of [Business 1], and [Business 2]. Mr Freeland failed to supply the Trust Deed for [Family Trust 1]. Despite indicating to the CSA he had a “nil” income, throughout 2022, he continued to receive monthly deposits to [Bank 1] account (ending in account number 302) described as “payment from Mr Freeland” until July 2022 - then, coincidental with increased scrutiny from the CSA, regular monthly deposits were described variously as “payment from [Relative A]” and ”payment from [Mr A]; Loan from [Mr A]”. I consider that a conservative assessment of Mr Freeland’s ongoing financial capacity is reflected by $121,000 which he extracted from [Business 1] in the financial year prior to the inception of the child support case (the 2019/20 financial year). The child support assessment is therefore rendered unfair; in the special circumstances of the case, there is a ground to depart from the formula.

Issue 2 – Is it just and equitable to depart from the administrative assessment?

18.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula. The Tribunal is obliged to conduct reviews in a way that is informal, quick and proportionate: section 2A of the Administrative Appeals Tribunal Act 1975.

19.I reject Mr Freeland’s claim that he is no longer connected with the identified financial entities. The appointment of his mother as director is disingenuous, solely designed, in my view, with the ultimate objective of minimising child support. I do not accept Mr Freeland’s evidence that he is no longer able to attend to director duties. Mr Freeland has presented no documentary evidence that he has transferred his shareholdings; the recent records from ASIC do not support his evidence. Regardless, if he did relinquish those shares (most likely by transfer to his mother), I would regard that as a transparent attempt at manipulation, and I would be satisfied that Mr Freeland’s level of control has persisted despite his concerted attempts to disassociate from his business structures. I note that Mr Freeland did not provide the Tribunal with recent income tax returns or financial statements for [Business 1] and the other entities, nor  the Trust Deed for [Family Trust 1].

20.In the absence of full and frank disclosure from Mr Freeland, the task of making a fair assessment of Mr Freeland’s financial capacity is made challenging. The CSA approach was to apply a sum of $121,000 referable to the 2019/20 financial year as the best representation of Mr Freeland’s financial capacity.  

21.I have reached the same conclusion. I consider Mr Freeland has demonstrated he has been very calculated and determined in his scheme to alienate himself from any income; the 2019/20 financial year was the last full financial year before the child support case began. I consider this to be the last and most genuine assessment of his financial capacity. I will vary Mr Freeland’s adjusted taxable income to $121,000 from the commencement of the case on 6 April 2021. I regard this as a conservative representation of Mr Freeland’s true financial capacity.

22.In terms of the assessment of Ms Banner’s income, she is presently solely reliant on income support from Centrelink. It is appropriate to vary her income to “nil” for the short period from 6 April 2021 to 12 April 2021 (when she had automatically assessed on a provisional income of some $52,000 not reflective of her actual financial capacity). Thereafter, I consider it appropriate to leave the assessment of Ms Banner’s adjusted taxable income to the rolling formula arrangements; any income from employment she may derive in future will ultimately be reflected in the rolling assessment. 

23.Neither party identified any other particularly unusual expenses for themselves, or for the children, which would warrant any further adjustment. The Tribunal is satisfied that, with appropriate budgeting, Mr Freeland will be able to meet his ongoing child support liability (some $11,000 per annum), in addition to extinguishing the arrears he owes.

24.In terms of going forward, I consider there is a temptation to extend the assessment of Mr Freeland’s income beyond 30 November 2024 given Mr Freeland’s future financial capacity is unlikely to be properly reflected in his declared adjusted taxable income. There are “pros and cons” in weighing the giving of further certainty to the parties against reactiveness to changes in circumstances. I consider an appropriate balance here is reflected by varying Mr Freeland’s income until 30 November 2024 (the same conclusion as the CSA). At such time, a fresh assessment can be made in light of up-to-date information for both parents for the 2023/24 financial year.

25.I consider it just and equitable to make a departure in the same terms set out above.

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

26.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.

27.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

28.As I have reached the same conclusion as the objections officer, the decision under review will be affirmed.

DECISION

The decision under review is affirmed.