Gabbard and Gabbard
[2006] FMCAfam 477
•7 September 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GABBARD & GABBARD | [2006] FMCAfam 477 |
| CHILD SUPPORT – Departure Order – whether “special circumstances” – whether error in calculation by Child Support Agency constitutes special circumstances. |
| Child Support (Assessment) Act 1989, ss.3, 4, 36, 37, 38, 38A, 76, 98B, 98J, 98X, 98ZC, 98ZF, 110, 114, 115, 117 |
| DJM and JLM (1998) 23 FamLR 396; FLC 92-816 Gyselman & Gyselman (1992) FLC 92-279 Hides v Hatton (1997) FLC 92-759 In the Marriage of Perryman (1993) FLC 92-433 Kearney & Roucek (1997) FLC 92-475 Magee & Gates [2006] FMCAfam 395 Savery & Savery (1990) FLC 92-131 Sheahan & Sheahan (1993) FLC 92-375 |
| Applicant: | MR GABBARD |
| Respondent: | MS GABBARD |
| File number: | BRM 1883 of 2006 |
| Judgment of: | Wilson FM |
| Hearing date: | 5 September 2006 |
| Date of last submission: | 5 September 2006 |
| Delivered at: | Brisbane |
| Delivered on: | 7 September 2006 |
REPRESENTATION
| Counsel for the Applicant: |
| Solicitors for the Applicant: | Mr El-Asswad |
| Counsel for the Respondent: | Mr J. Selfridge |
| Solicitors for the Respondent: | Legal Aid Queensland |
ORDERS
That the application filed 13 March 2006 be dismissed.
That there be no order as to costs.
IT IS NOTED that publication of this judgment under the pseudonym Gabbard & Gabbard is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM 1883 of 2006
| MR GABBARD |
Applicant
And
| MS GABBARD |
Respondent
REASONS FOR JUDGMENT
The application
The applicant seeks an order pursuant to Part 7 Division 4 Child Support (Assessment) Act 1989 (the “CSA Act”). By application filed 13 March 2006, the only order sought is:
“I am seeking an order that my child support payment be assessed on my actual taxable income.”
In support of his application, the applicant relied on his affidavit sworn 1 March 2006, which merely attached a number of documents:
a)a letter from the applicant’s accountant dated 21 February 2006 (Attachment 1);
b)Notice of Decision, and Reasons for Decision made under Part 6A of the CSA Act, dated 16 November 2005 (Attachment 3);
c)Notice of Objection on behalf of the applicant dated 4 December 2005 (Attachment 2);
d)Notice of decision on objection made under Part 6B of the CSA Act, dated 30 January 2006 (Attachment 4);
e)letter Child Support Agency to applicant dated 16 November 2005 (Attachment 5);
f)
copy of the applicant’s tax return for the financial year ending
30 June 2005(presumably forming part of Attachment 5).
In addition, the applicant relied on a financial statement in Form 13, which was also sworn on 1 March 2006.
On the hearing of the application the solicitor for the applicant sought leave to file and read two further affidavits:
a)an updated affidavit of the applicant; and
b)an affidavit of Mr C, the applicant’s accountant.
On behalf of the respondent, objection was taken to my receipt of these affidavits.
On 9 May 2006 Federal Magistrate Baumann made orders, inter alia:
“2. That the Applicant Father file and serve a financial statement within 14 days.
3. That the Applicant Father cause an Affidavit to be filed and served by his Accountant confirming the contents of the letter from the Accountant date 21 February 2006 within 21 days.”
Plainly, there has been non compliance by the applicant with these orders. No excuse was offered by the applicant for such non compliance. The applicant was, until recently, self-represented but that does not excuse non compliance with orders previously made by this Court.
The receipt of the affidavit evidence is further complicated by the fact that the deponent of one of the affidavits, the applicant’s accountant, is not available for cross-examination. Counsel for the respondent expressed a desire to cross-examine the accountant, which from my reading of the letter dated 21 February 2006 (Attachment 1 to the affidavit of the applicant filed 13 March 2006) was a not unreasonable request. Further, counsel for the respondent contended that if the affidavit evidence was received, his client would be prejudiced because of a lack of opportunity to properly consider the contents of the affidavit material, and if necessary, respond to it. It transpired during the course of argument that copies of the two most recent affidavits had not even been given to the respondent’s legal representatives.
In those circumstances, I indicated that if the two further affidavits were received by the Court, it would be on terms that there be an adjournment of the hearing with an adverse costs order against the applicant. Faced with that outcome, the applicant’s legal representative elected to proceed with the application on the affidavit material previously filed with the Court.
In those circumstances, in the absence of an affidavit from the applicant’s accountant, the weight to be given to the contents of Attachment 1 to the applicant’s affidavit is diminished.
On behalf of the respondent, an affidavit was filed on 22 June 2006, and a Form 13 financial statement was also filed on 22 June 2006. The respondent’s counsel was granted leave to file and read a further affidavit of the respondent sworn 26 June 2006, which had not been filed. A copy of this affidavit had been provided to the applicant shortly after it had been sworn. In those circumstances, the applicant was not prejudiced by the fact that the affidavit was not formally filed.
Evidence in support of the application
It is, I think, possible to discern from the applicant’s brief material evidence which supports a submission that his income available to pay child support is not as great as assessed by the Child Support Agency. An initial question that arises is what use, if any, can be made of the two sets of Reasons of officers of the Child Support Agency.
The nature of an application under Part 7 Division 4 CSA Act is not articulated in the legislation. It is not an appeal in any sense, but a fresh application for a departure from the administrative assessment of the Child Support Agency (In the Marriage of Perryman (1993) FLC 92-433 at 80,421). In that sense, the Court is not constrained by the reasons given by the Registrar or her delegate, nor by the Objections Officer. The Court is, however, permitted to make reference to the findings and recommendations of the Child Support Agency Officers, (Perryman, supra).
It is difficult to conclude, however, that the Reasons provide “evidence” of their contents. That is, simply because a fact is accepted by the Child Support Agency does not mean that the fact is proved before this Court. Something more is required. The facts relied upon to support the application must be deposed to. At the very least, an affidavit should be filed swearing to the accuracy of the facts set out in the reasons of the Child Support Agency, before those facts could be relied on as evidence in a hearing such as the present. That has not occurred in the present case.
In the present case, the decision of the delegate of the Child Support Registrar dated 16 November 2005 was to set the applicant’s child support income at $42,000 per annum for the period 1 November 2005 to 9 July 2007. Senior Case Officer Y observed that the assessment previously made by the Child Support Agency for the period 1 May 2005 to 31 July 2006 used the applicant’s taxable income for the year ending 30 June 2004 of $26,938, giving rise to an annual rate of child support of $3,639. Apart from this statement, there is no evidence from the applicant of his taxable income for the year ended 30 June 2004. At best, one can discern from Attachment 1 to his affidavit a taxable income in the order of $25,696.50.
The applicant’s Financial Statement asserts that his average gross weekly income is $600.00, and that his total weekly expenditure is $576.00. I observe that included in this average weekly expenditure is the sum of $148.00 for child support payments, being an annual amount of $7,705. I understand that if this is the amount the applicant is required to pay pursuant to the most recent reassessment of the Child Support Agency.
I also observe that the applicant has not included in the calculation of his weekly expenditure the average weekly expenses set out at paragraph 60 of his Financial Statement, which total $487.00 per week. The applicant was not challenged in cross-examination about the actual incidence or reasonableness of the items of personal expenditure recorded by him. The effect of this omission is that the applicant’s income is patently insufficient to meet his expenses.
The applicant records that his current wife earns an average of $300.00 gross per week. From this sum she would be required to meet her one half share of those expenses set out at paragraphs 21, 22, 26, 27, 28 and 60 of the applicant’s Financial Statement.
I am satisfied, on the evidence available, and in the absence of any meaningful challenge to it, that the applicant’s income actually received and expenses are of the magnitude set out in his Financial Statement.
A copy of the applicant’s 2004/2005 tax return is attached to his affidavit. Counsel for the respondent submitted that I should not pay any regard to this document as it is unsigned. The document is stamped “copy” and the applicant at paragraph 6 of his affidavit deposes to the fact that it is a copy of his 2005 tax return. In those circumstances, I am prepared to infer that the document is a copy of the tax return as lodged. This inference is supported by information in the letter from the applicant’s accountant which forms Attachment 1 to his affidavit. The tax return for the 2005 financial year records the applicant’s taxable income as $23,247. It records the receipt of a distribution from the partnership of which the applicant is a member of $35,543 but allows for deductions of $6,635. Supplementary deductions of $5,512 are also referred to in the return. This latter amount represents a deduction claimed as a result of a contribution to a superannuation fund.
The Respondent’s evidence
The Respondent applied for a change to the assessment previously made by the Child Support Agency, asking that it be increased. It is recorded in the reasons of the Senior Case Officer that the respondent to the present application contended that:
a)the present applicant’s income was not a true reflection of his income or earning capacity because the applicant was a qualified [tradesman] in high demand due to a building boom;
b)the present applicant had financial resources in the nature of shares and a rental property that he had not disclosed;
c)the present applicant must have additional financial resources because he managed an overseas holiday annually with his second wife.
Despite filing two affidavits the respondent has not adduced any evidence to substantiate these allegations. Paragraphs 20 and 21 of the affidavit of the respondent sworn 19 June 2006 are in the following terms:
“20. I believe the applicant is able to keep his income to a minimal level by being self employed. His wife is an accountant at the firm he employs to do his accounts.
21. I believe the respondent has the ability to pay more that (sic) the amount fixed by the Change of assessment decision. He is able to afford holidays overseas in Fiji and his stepdaughters go to private schools. In the last twelve months, he has painted his house and put in a new spa and fish pond. I believe he also has Telstra shares.”
In his evidence, the applicant conceded that his present wife assisted with administration and book-keeping tasks in the [omitted] business of which he is a partner. In his evidence, he accepted that his wife works between three and five hours per week on average and is paid in the order of $20.00 per hour. His wife undertakes additional work when financial documentation is required to be prepared for the lodgement of a Business Activity Statement or Taxation Returns. The applicant also accepted that in 2004 he and his present wife and two stepchildren travelled to Fiji for a holiday. There was, however, no direct evidence that the applicant paid for all or any part of this holiday, or indeed how much it cost. In his letter to the Child Support Agency dated
4 December 2005 (Attachment 2 to his affidavit) the applicant has stated that he has not been an [tradesman] since 1998, does not own any shares, does not own a rental property, and does not have any extra income, property or financial resources. The applicant swore to the correctness of this documentation in his evidence. He was not challenged about it in cross-examination, nor were the assertions made by the respondent to the Child Support Agency, referred to at paragraph 21 above put to him. Those allegations, particularly at subparagraphs (b) and (c) are not established by any evidence.
I am satisfied that the respondent is in an inferior financial position to the applicant. She suffers from a psychiatric illness and is effectively unable to work. The respondent survives on government benefits and lives in rented accommodation. The respondent has minimal assets and has recently been required to meet a rental increase for her accommodation which she shares with the children of the marriage. The respondent does receive some government assistance with regard to this rental expense, but such assistance by no means ameliorates the effect of the recent increase.
The statutory scheme
As the Full Family Court observed in Gyselman & Gyselman (1992) FLC 92-279 at 79,062:
“The Assessment Act provides a regime by which child support liabilities are established by the application administratively by the Child Support Agency of the formula provided in the legislation.
The basic formula, which is used when the custodian has the custody of all the relevant children and has income below average weekly earning and where the liable parent does support any other relevant dependant children (which is the case here), is the application of a legislatively designated percentage to the liable parent’s child support income.”
By section 3(1) of the CSA Act it is provided that the parents of a child have the primary duty to maintain the child. Section 3(2)(b) provides that a duty of a parent to maintain a child has priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself, and any other child or another person that the parent has a duty to maintain. Section 4(1) provides that the principal object of the Act is to ensure that children receive a proper level of financial support from their parents. This is determined according to the parents’ capacity to provide financial support, and that the level of financial support to be provided by parents for their children should be determined in accordance with legislatively fixed standards. Section 114 of the CSA Act provides additional objects for the purpose of Division 4 of Part 7. These additional objects include ensuring that:
a)the children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
b)parents share equitably in the support of their children.
Section 36 of the Act provides the basic formula which enables the calculation of the annual rate of child support payable. One component of this formula is the liable parent’s “adjusted income amount”. This amount is calculated according to section 36(2) by reference, initially, to the liable parent’s “child support income amount”. Section 38 of the CSA Act provides:
SECTION 38 LIABLE PARENT’S CHILD SUPPORT INCOME AMOUNT
38 The liable parent’s child support income amount in relation to the days in the child support period is, subject to section 38A and to Division 3, the total of:
(a)the amount of the liable parent’s taxable income under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 for the liable parent’s last relevant year of income in relation to the child support period; and
(b)the liable parent’s supplementary amount for the liable parent’s last relevant year of income.
In the present case, there is no evidence that the applicant has any exempted income, or any “supplementary amount” within the meaning of section 38A. By section 37 of the CSA Act a percentage figure is applied to the liable parent’s adjusted income to produce the annual rate of child support. Thus, in cases such as the present, the starting point is the amount of the liable parent’s taxable income for the liable parent’s last relevant year of income in relation to the child support period. Once the annual rate of child support is determined, it is required to be notified to the liable parent (section 76). An example of the form of notification is in attachment 5 to the applicant’s affidavit.
Pursuant to Part 6A of the Act the Registrar has the power to make a determination having the effect that the provisions of the Act relating to the administrative assessment of child support will be departed from in relation to a child. Such a determination can be made at the instigation of either parent (section 98B).
Part 6B of the Act provides for an objection procedure and AAT review of certain decisions. By section 98X of the Act a dissatisfied parent may object to a making of a departure determination under Part 6A of the Act. The Registrar is then required to consider the objection and either disallow it, or allow it in whole or part (section 98ZC). It seems that the only decisions which can be reviewed by the AAT are those made under section 64A(4) of the Act (see section 98ZF).
By Part 7 Division 3 of the CSA Act provision is made for appeals against incorrect administrative assessments. Section 110(1) of the CSA Act provides that if a liable parent is aggrieved by the particulars of an administrative assessment he or she may, subject to sub-section (1), appeal to a court against the assessment. Section 110(1A) proscribes an appeal unless an objection has been lodged under section 98X and the Registrar has dealt with it. Section 110(2) expressly provides that the grounds of the appeal may include:
“That an annual or daily rate of child support specified in the assessment was incorrectly assessed”
An appeal must be instituted within 28 days after receipt of notice given under section 98ZC(2) of the Act (Rule 25A.06 Federal Magistrates Court Rules 2001). No such appeal was instituted in the present case.
Before a departure order can be sought from the Court, Parts 6A and 6B of the CSA Act must be complied with. That has occurred in the present case. However, seeking a departure order is not a routine method of seeking a further reassessment, nor a means of circumventing the appeal procedure. The legislature has determined that the Court has a narrowly based jurisdiction to grant a departure order.
Section 117 of the CSA Act is the critical provision on an application for a departure order. Sections 117(1) and (2) confined the exercise of the Court’s discretion to make a departure order. Guidance is given in sections 117(4) – 117(8) of the CSA Act as to how some of those provisions are to be applied. Sections 117(1) and (2) are in the following terms.
117(1) [Court may make departure order] Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
117(2) [Grounds for departure order] For the purpose of subparagraph (1)(b)(i) the grounds for departure are as follows:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) because of high costs involved in enabling a parent to care for the child; or
(ia) because of special needs of the child; or
(ib) because of high child care costs in relation to the child; or
(ii) special needs of any child or another person that the parent has a duty to maintain; or
(iii) commitments of the parent necessary to enable the parent to support:
(A) himself or herself; or
(B)any other child or another person that the parent has a duty to maintain; or
(iv) high costs involved in enabling a parent to care for any other child or another person that the parent has a duty to maintain;
(b)that, in the special circumstances of the case, the costs of maintaining the child are significantly affected;
(i)because of high costs involved in enabling a parent to care for the child; or
(ia) because of special needs of the child; or
(ib)because of high child care costs in relation to the child; or
(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(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:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child; or
(iii) because an amount (the additional amount) of a liable parent’s child support income amount was earned, derived or received by the liable parent for the benefit of a resident child or resident children of the liable parent; or
(iv) because an amount (the additional amount) of an entitled carer’s child support income amount was earned, derived or received by the entitled carer for the benefit of a resident child or resident children of the entitled carer.
In Gyselman (supra at p.79,064) the Full Family Court observed that section 117(1)(b) of the CSA Act necessitates the Court undertaking a clear three step process:
(1)whether one or more grounds of departure in section 117(2) is established;
if so,
(2)whether it is “just and equitable” within the meaning of section 117(4) to make a particular order; and
(3)whether it is “otherwise proper” within the meaning of section 117(5) to make a particular order.
Their Honours made no reference to section 117(1)(a) of the CSA Act. Their Honours observed that the phrase “special circumstances of the case” was used as a preface to each of the grounds set out in section 117(2) of the CSA Act. It can be observed that that phrase is not only used in section 117(2) but is also used in section 117(1)(a) and in the heading to Division 4 of Part 7. Little useful guidance is found in the decided cases as to the meaning to be ascribed to the term “special circumstances”, which seems to me to operate as a threshold requirement to the jurisdiction of the Court to make a departure order.
In Gyselman (supra) at p.79,065 the Full Family Court stated:
“Whilst it is not possible to define with precision the meaning of that term, as a generality 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 Court will not interfere with the administrative formula result in the ordinary run of cases. In Savery’s case (p 77,897), Kay J, adopting the view in Philippe & Philippe (1978) FLC 90-433 at p 77,202 in a different context, said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The approach to the interpretation and application of the particular grounds in section 117(2) must be guided by that qualification.”
With respect, neither this passage nor the judgment of Kay J. in Savery provide any useful guidance. Each case has its own peculiar facts and any case can be distinguished from another on the facts. In Savery, his Honour was persuaded to find that there were special circumstances established where one of the grounds for a departure order specified in section 117(2) of the CSA Act was established. In my view it is not sufficient, in order to establish “special circumstances” to point to the satisfaction of a ground for a departure order in section 117(2) of the Act. That is a circular argument which deprives the phrase of any utility in section 117(1)(a) of the CSA Act.
Section 117(1) makes it clear that four elements must be satisfied in order for a Court to have jurisdiction to make a departure order. One of those is that a ground for departure in section 117(2) exists: see section 117(1)(b)(i). However, the question arises as to whether section 117(1)(a) simply requires the making of an application to a Court having jurisdiction (ie the procedure in Parts 6A and 6B has been exhausted) or whether it requires such application to be made “in the special circumstances of the case” thereby imposing a threshold requirement to establish special circumstances before the Court considers the elements set out in section 117(1)(b) of the CSA Act.
The answer to this question is not easy to resolve, due primarily to the clumsy drafting of the CSA Act. The phrase “special circumstances” is repeated in section 117(1) and section 117(2) of the CSA Act. Presumably if section 117(1)(a) was intended to impose a need to demonstrate special circumstances before the Court embarked upon determining the question of whether or not the requirements of section 117(1)(b) were fulfilled, there would be no need to again demonstrate special circumstances in proving a ground of departure under section 117(2) of the CSA Act.
In Sheahan & Sheahan (1993) FLC 92-375 Ellis J., delivering the judgment of the Full Family Court, said at pp.79,883-4:
“There is, understandably, no definition of the phrase “special circumstances” contained in the Act and, in my view, no purpose would be served by attempting to define it. We have, however, been referred to the decision of Savery & Savery (1990) FLC 92-131 where “special circumstances” were held to be “facts peculiar to the particular case which set it apart from other cases”. The relevant facts of the particular case must be considered to determine whether they constitute special circumstances which, in this context, if not taken into account, would result in injustice or undue hardship to any person.”
If this test were to be applied, there would be a discretion to make a departure order where a failure to do so would result in an injustice or undue hardship. That is, however, a ground for making a departure order under section 117(2)(c) of the CSA Act. Therefore, in my view, of itself injustice or undue hardship do not of themselves always constitute special circumstances.
“Special circumstances” are not defined in the CSA Act. However, the term is used not only in the heading to Division 4 of Part 7 of the CSA Act but also in section 117(1)(a) and each of the grounds set out in section 117(2). In my view, this evinces a legislative intention that a departure order will not lightly be made by a Court. Something must be shown which takes the case out of the ordinary. It may be a point of general application which will affect the assessment of child support not only for the applicant in the particular case but in a large number of cases. That is, a point of principle may have to be established by a Court to justify a departure order being made, which could thereafter be considered by the Child Support Agency in making its administrative assessments, or deciding applications for re-assessment. Further as Ellis J. observed in Sheahan (supra) injustice or undue hardship may constitute special circumstances, where, for example, the Child Support Agency has acted capriciously or unreasonably (in the Wednesbury sense). In my view, special circumstances are not established where the Child Support Agency has simply incorrectly calculated the amount of child support payable. In those circumstances, an aggrieved liable parent has the right of appeal under Division 3 of Part 7 of the CSA Act. Further, I do not consider that special circumstances are established merely by pointing to a ground for departure order under section 117(2) being satisfied (apart from the existence of special circumstances). In my view something more is required. This is emphasised by the insertion of the requirement to show special circumstances in section 117(1)(a) of the CSA Act. The phrase must be given some meaning. In my view this must mean that the matter demonstrates special circumstances generally and not just in respect of a ground of departure established in accordance with section 117(2) of the CSA Act.
Has the applicant demonstrated special circumstances
There is nothing unusual about the facts of the present case. The applicant father contends that he simply does not receive sufficient income to pay the amount of child support assessed by the Child Support Agency. The respondent wife contends that the applicant is deliberately minimising his income to avoid his child support obligations. These types of allegations are regularly made.
One matter which has caused me concern is whether the present applicant can show “special circumstances” by pointing to an error in the methodology of the Child Support Agency in reaching its decision. As is clear from the structure of the CSA Act, to which I have referred above, the decisions of the Senior Case Officer and the Objection Officer are administrative decisions. Ordinarily administrative review would be permitted if an aggrieved person could point to an error on the face of the record.
In the reasons of the Senior Case Officer (Attachment 3 to the applicant’s affidavit) the reasoning process is, in my opinion, fundamentally flawed. The Senior Case Officer has proceeded from an incorrect assumption. This is that the applicant’s profit share of $38,541 represents his taxable income. As pointed out above, it is the taxable income of a liable parent which is a component of the formula used to calculate the rate of child support. The distribution from a partnership is a component of the partner’s gross income but does not necessarily represent that partner’s taxable income. The partner may have deductions which can lawfully be made from the gross income received from the partnership before his taxable income is arrived at.
In the present case the Senior Case Officer has assumed that there are no such deductions. Further, there is an arithmetic error in an “add back” made by the Senior Case Officer. The Senior Case Officer has added back $4,000 representing the superannuation contributions made by the applicant in excess of the statutory 9% which would be payable by an employer to an employee. Putting to one side whether it is permissible to make allowance for the statutory 9% in the case of a self employed person, 9% of $38,000 is $3,420. The applicant made superannuation contributions entitling him to tax deductions in the 2004 year of $5,034 and in the 2005 year of $5,512. If it is assumed that these figures are the deductions claimable rather total superannuation contributions, the maximum amount which the applicant could have contributed to superannuation in the two financial years was $5,712 and $6,349 respectively. It is difficult in those circumstances to see how the Senior Case Officer has arrived at a figure of $4,000 excess superannuation contributions.
A reading of the reasons of the Senior Case Officer establishes, to my satisfaction, that the Senior Case Officer has erred in his/her assessment of the taxable income of the applicant. The Objection Officer has failed to rectify this mistake. There is no suggestion that the applicant receives any income beyond that from the partnership business.
The applicant could have brought an appeal relying on section 110(2) of the CSA Act to challenge the incorrect assessment of child support. He did not do so. I am cognisant of the fact that the applicant is now out of time to bring such an appeal. However, that is not the fault of the respondent. Further, the applicant can apply for a re-assessment of his child support liability (section 98J of the CSA Act). He can point to the error of the Senior Case Officer to which I have averted. If the Child Support Agency refuses to amend the assessment the applicant would have a right of appeal from that refusal. There appears to be no reason why a further reassessment should not be retrospective.
In those circumstances, I conclude that the incorrect assessment of child support by the Child Support Agency does not constitute special circumstances justifying the making of a departure order. Unfortunately, this Court cannot remit the matter for reassessment according to law: Kearney & Roucek (1997) FLC 92-475.
Does the applicant otherwise satisfy section 117 of the CSA Act
The solicitor for the applicant relied on three limbs of section 117(2) which he said established grounds for a departure order.
First, section 117(2)(a)(i) of the CSA Act was relied on. In my opinion, this ground is not made out. There is no evidence that the capacity of the applicant to provide financial support is significantly reduced because of the high costs involved in enabling him to care for his children. In my view, reliance on this sub-paragraph is misconceived.
Secondly, section 117(2)(a)(iii) was relied on. Here, the applicant is on stronger ground. As I have said, no meaningful challenge was made to the applicant’s estimate of his living expenses. The amounts stated by applicant seem to me to be very conservative. Nothing is allowed for house repairs, clothing and shoes, entertainment, pharmaceutical expenses, or gifts. Such expenses would be necessarily incurred by the applicant. The applicant’s current wife would no doubt contribute to the weekly expenses but even if all of her income was taken into account in paying for such expenses there would still be a deficiency of income on the part of the applicant if he was required to continue to pay child support in the amount assessed by the Child Support Agency. In my view, ground 117(2)(a)(iii)(A) would be made out on the evidence before the Court.
Thirdly, reliance was placed on section 117(2)(c)(ia). In my view, this ground is not made out because if the provisions of the CSA Act relating to the administrative assessment of child support were properly applied, with a concomitant reduction in amount of child support payable by the applicant, that would not result in an unjust and inequitable determination of the level of financial support to be provided by the applicant for his children. The amount of child support to be paid in those circumstances would be nowhere near enough to provide for the proper needs of his children. The fact that the assessment made by the Child Support Agency was incorrect does not ipso facto determine that it is unjust and inequitable. What section 117(2)(c) requires, in my view, is if the CSA Act is applied, according to its terms, that would be unjust or inequitable. That is not the present case.
Therefore, on the evidence presently available, had special circumstances been established, I would conclude that there is a ground for a departure order pursuant to section 117(2)(a)(iii)(A) of the CSA Act.
Are the requirements of section 117(1)(b)(ii) established
In Hides v Hatton (1997) FLC 92-759 at 84,351-2 the Full Family Court considered the discretionary jurisdiction to make a departure order. After referring to the three step process summarised in Gyselman (supra) their Honours said:
“It was also made clear in Gyselman that when the Court is considering whether it is just and equitable within the meaning of s 117(4) to make a particular order, the Court is required to undertake the task of considering the matters set out in paragraphs (a) to (g) of that sub-section, and in this regard the Full Court said as follows (at 79,078):
“However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s 117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2)”
The Full Court also made it clear in its decision in Gyselman that similar considerations apply to the Court’s determination as to whether it is “otherwise proper” within the meaning of s 117(5) to make a particular order (see at 79,080), and furthermore and very relevantly for present purposes the Full Court emphasised the importance of trial Judges providing adequate reasons for judgment in order to ensure a proper exercise of the discretion under s 117 (see at 79,080).”
Having concluded that the evidence establishes that the applicant simply does not have sufficient income, when his personal expenses are taken into account, to meet his child support obligations as assessed by the Child Support Agency, it follows that it would be just and equitable to make a departure order. The income of both parents in the present case is probably insufficient to meet the proper needs of their children. However, each have limited resources. It was submitted that the applicant could return to his trade as an [omitted] and earn a much higher income. I accept that the applicant has not worked as an [tradesman] since 1998 and that he does not presently hold the necessary qualifications for him to immediately resume that trade. The applicant also said that he held fears in returning to work as an [tradesman] because he had observed work mates being killed and was fearful for his own safety. There is no evidence before the Court as to what further qualifications the applicant may require to resume work as an [tradesman], or how long it would take for him to obtain those qualifications. Further, there is no evidence as to the likely earnings of the applicant as an [tradesman]. The applicant is in self employment in an established business which returns consistent income. Given the time that he has been absent from his trade, in my view it is reasonable for the applicant to maintain his current vocation and not sell his interest in the business with a hope to gaining more lucrative employment as an [tradesman].
In DJM and JLM (1998) 23 FamLR 396; FLC 92-816 the Full Court considered the circumstances in which a Court may properly base its decision on earning capacity as opposed to actual income when dealing with a child support departure application, and in circumstances where the person liable to pay child support has not deliberately reduced his income to reduce or avoid liability for child support. The Full Court said:
“Child support and child maintenance orders are governed by legislation which emphasises and priorities the obligation of parents to support their children and seeks to ensure that the level of financial support is to be measured according to the parents ‘capacity to provide financial support’.
Property adjustment orders have far less focus and are arrived at on the basis of what is ‘appropriate’ after weighing up many competing factors. Spousal maintenance is governed by a test of what is proper and having regard to the reasonable ability of the liable spouse to meet the needs of the other.
In our view, there can be different answers to the same question about earning capacity – depending on which head of power is sought to be exercised.
A Judge might reasonably say that a parent should be working longer hours or in more lucrative employment to meet child support obligations. A spouse is only required to support the other spouse to the extent that he or she is reasonably able to do so. This requirement does not impute the same degree of compulsion about it that the child support and child maintenance tests express…” [see Magee & Gates [2006] FMCAfam 395 per Coakes FM at 34]
However, there is no evidence in the present case that the applicant can work any harder in the [omitted] business of which he is a partner. There is no evidence that if he were to work longer hours more income would be generated.
There are, however, two matters which can be pointed to, to demonstrate a additional pool of income available to the applicant. The first is that the applicant’s drawings from the partnership are less than his profit entitlement. This is done to enable the partnership business to maintain a positive cash flow and to provide reserves for contingencies. Whilst prudent business practice, it is open to the applicant to increase his drawings if they where required to meet his child support obligations. That contingency is, in effect, already allowed for by using the applicant’s taxable income which is based, as a starting point, on his profit entitlement from the partnership as opposed to his actual drawings. Therefore, if the applicant’s correct taxable income was used in the calculation of his child support obligations, these additional reserves would be taken into account.
Secondly, the applicant makes voluntary superannuation contributions. He is not legally obliged to do so. In my view, it is inappropriate to make a notional allowance of 9% of gross income for superannuation contributions as if the applicant was in employment, and his employer had a statutory obligation to make such provision for superannuation. The fact is that the applicant is self employed. His two children, the subject of the present application are aged 17 and almost 15 years of age. In my view, it would be appropriate for the applicant to defer making superannuation contributions in order to augment his child support payments. Taking into account the taxation advantages which superannuation contributions by a self employed person attract, if total contributions of $5,500 were made per annum by the applicant the applicant would be entitled to a tax deduction of $4,875. At an average marginal tax rate of 25% this would represent a tax saving to the applicant of $1,218.75. Thus, if no superannuation contributions were made by the applicant until his children each turned 18 the applicant would have available a further sum of approximately $4,300 per annum which he could contribute towards his child support obligations.
In my view, having regard to the taxable income of the applicant but also taking into account the additional funds available to him were he to forego making superannuation contributions, a departure order would be justified under section 117(1)(b)(ii) of the CSA Act.
There is no evidence that the making of a departure order would have an adverse effect on the matters referred to in section 117(5)(b) of the CSA Act. In my opinion, if the applicant’s taxable income was augmented by money available to him by foregoing any superannuation contributions the applicant would as best he is able, be complying with his duty to maintain his children. In those circumstances, it would be otherwise proper to make a departure order.
Conclusion
As it is apparent from these reasons, I am of the view that the Child Support Agency has miscalculated the applicant’s child support obligations. It has used the applicant’s entitlement to a distribution of profit from the partnership of which he is a member in lieu of his taxable income as the starting point in calculating his child support obligations.
In my view, it would be reasonable for the Child Support Agency to augment the applicant’s taxable income by the amount of money he would actually have available if he were to forego making voluntary superannuation contributions. Further evidence will be required to make precise calculations in this regard.
In the circumstances, the applicant has good grounds for seeking a reassessment by the Child Support Agency of his child support obligations. If the Child Support Agency refuses to make that reassessment, the applicant would have appeal rights under Division 3 of Part 7 of the CSA Act.
In my view, notwithstanding the error of the Child Support Agency, the applicant has not demonstrated special circumstances which justify the interference by this Court, and the making of a departure order.
The application is therefore dismissed.
Having regard to the fact that the present proceedings were in large measure brought about by the errors of the Child Support Agency, there will be no order as to costs.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 7 September 2006