Garbutt and Crewe (Child support)

[2020] AATA 882

Garbutt and Crewe (Child support) [2020] AATA 882 (11 March 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC017724

APPLICANT:  Mr Garbutt

OTHER PARTIES:  Child Support Registrar

Ms Crewe

TRIBUNAL:Member K Dordevic

DECISION DATE:  11 March 2020

DECISION:

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

·     from 1 February 2019 until a terminating event occurs in relation to [the Child], Mr Garbutt’s adjusted taxable income is varied to $145,700 per annum; and

·     Mr Garbutt’s adjusted taxable income is to be increased on 1 July 2020 and each year thereafter on 1 July by the Consumer Price Index Amount Weighted Average for the preceding March quarter.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – business income – no earing capacity - a ground for departure established – decision to depart - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been 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 Garbutt and Ms Crewe are the parents of [the Child] (born [October] 2005). Ms Crewe is recorded as having 80% care and Mr Garbutt 20% care of the child. The case was registered with the Department of Human Services – Child Support (the Department) on 18 November 2009 and has been collectable since 21 October 2015.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.

3. On 1 February 2019 Ms Crewe lodged a departure application with the Department. Mr Garbutt lodged a cross-application. On 18 June 2019 a senior case officer determined that from 1 February 2019 to 31 December 2021 Mr Garbutt’s adjusted taxable income is varied to $120,000 per annum and that his annual rate of child support is increased by $4,426 during the period 1 June 2019 to 31 December 2019, by $3,128 during the period 1 June 2020 to 31 December 2020 and by $3,222 during the period 1 June 2021 to 31 December 2021.

4. Mr Garbutt objected to that decision on 15 August 2019. An extension of time in which to lodge his objection was granted on 15 August 2019. On 8 October 2019 Mr Garbutt’s objection was partly allowed, the objections officer determined that:

   ·from 1 February 2019 until a terminating event occurs in relation to [the Child] Mr Garbutt’s adjusted taxable income is varied to $113,658 per annum and Ms Crewe’s to $34,920;

   ·both parents adjusted taxable incomes will be increased on 1 July 2020 and each year thereafter on 1 July by the Consumer Price Index Amount Weighted Average for the preceding March quarter; and

   ·that Mr Garbutt’s annual rate of child support is increased by $3,037 during the period 1 June 2019 to 31 December 2019, by $3,189 during the 2020 calendar year, by $3,600 in the 2021 calendar year, by $3,799 in the 2022 calendar year and by $5,292 during the period 1 January to 30 September 2023. 

5. On 30 October 2019 Mr Garbutt sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal).

6. The tribunal heard the matter on 11 March 2020. Mr Garbutt and Ms Crewe appeared by conference telephone. The Child Support Registrar was not represented at the hearing. In reaching its decision the tribunal has considered the sworn evidence of Mr Garbutt and Ms Crewe. The tribunal also considered the documentation provided by the Department (folios 1-306), Mr Garbutt (folios A1-A218) and Ms Crewe (folios B1-B197).

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and

   (ii)that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

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

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

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

2. At the time Ms Crewe lodged the change of assessment application Mr Garbutt was assessed to pay an annual rate of child support of $5,405 based on Mr Garbutt’s provisional income of $55,958 and Ms Crewe’s 2018 adjusted taxable income of $13,520.

3. As the tribunal understands it Mr Garbutt seeks that his child support liability should be determined on the basis of his taxable income. The tribunal finds that his taxable incomes in the 2017, 2018 and 2019 years were $54,700, $48,947 and $78,729 respectively.

4. Mr Garbutt is the sole director and shareholder of [a Company]. The company’s 2018 and 2019 profit and loss statements indicate gross income of $190,135 and $299,064 and net profit of $24,482 and $41,780 respectively. Mr Garbutt’s 2018 income tax return indicates that he received a salary of $30,000 and was paid dividends of $13,486. In 2019 he was paid a wage of $67,000 and also received net rental income of $11,729. In response to questioning as to the personal expenses evident in the company bank account Mr Garbutt explained that he does not draw a direct wage from the business. Instead, he draws on funds available in the account to meet his living expenses. His bookkeeper then totals these expenses, and this is represented as a wage in his income tax return.

5. The tribunal considers that the company profit is also a financial resource available to Mr Garbutt, notwithstanding the fact that it accepts Mr Garbutt’s submission that he did not draw on these funds. The tribunal also considers that Mr Garbutt derives a personal benefit of at least $5,200 per annum from the business directly by provision of a motor vehicle and mobile phone. The tribunal is satisfied that the expenses of $2,344 in gifts and $4,205 in depreciation represent actual expenses incurred by the business.

6. The tribunal is not satisfied that Mr Garbutt’s partner’s involvement in the business is a vehicle by which he artificially reduces his income. The tribunal accepts that his partner works in the business two days a week, undertaking administrative tasks and manual labour. The profit and loss statement indicates that she receives about $22 per hour for this work, which is reasonable in the circumstances.

7. The tribunal will confine itself to considering the income and financial resources available to Mr Garbutt in the 2019 financial year, being the financial year that Ms Crewe lodged her application. The tribunal accepts that the $67,000 declared as income reflects the personal expenses Mr Garbutt has met directly from the business account. A PAYG income earner would have been required to earn about $20,000 more in order to meet these expenses. This, together with the net profit ($41,780), provision of a motor vehicle and mobile phone ($5,200), in addition to his net rental income ($11,729) leads the tribunal to the conclusion that in the 2019 financial year Mr Garbutt had income and financial resources available to him for the support of [the Child] in the vicinity of $145,700.

8. Mr Garbutt submits that his child support liability should be based on his taxable income only. However, it is clear that in addition to his taxable income he is in receipt of further financial resources that are available to him for the purposes of supporting [the Child]. At the time of lodging his application Mr Garbutt was assessed to pay $5,405 in child support per annum. Application of income and financial resources of $145,700 to the administrative assessment would result in an increase in Mr Garbutt’s child support liability to $16,877 (an increase of $11,472 per annum). As Mr Garbutt’s income and financial resources are not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The tribunal therefore concludes that the ground provided for in subparagraph 117(2)(c)(ia) of the Act is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Crewe’s application also sought a contribution from Mr Garbutt towards [the Child]’s private education costs, stating that [the Child] was being educated in a manner expected by the parents.

3. The tribunal finds that when partnered the parties agreed that [the Child] should be enrolled in a local Catholic primary school. Upon separation [the Child] remained at the school. Ms Crewe then moved house and enrolled [the Child] in a local public school, where she completed her primary schooling. [the Child] commenced Year 7 in 2019 at [School 1], an independent, non-denominational secondary school.

4. There is in evidence an email authored by Ms Crewe dated 25 September 2017 which advises Mr Garbutt that she had enrolled [the Child] at [School 1] was not granted a place at the public secondary school that Ms Crewe preferred. On 15 November 2017 Mr Garbutt emailed Ms Crewe and stated: “the offer to send her to [School 2] is on the table.” At hearing Mr Garbutt explained that his older son did, and his youngest step-child does, attend [School 2] College. That he suggested that she might be placed at [School 2] was a mere suggestion; he assumed further discussions would take place. He had thought that should she go to [School 2] he would have a similar arrangement that he had with his son’s mother, being that he would pay either child support or school fees, but not both. He went on to state that he never considered what school to send [the Child] to; he did not care as long as she was being educated and looked after. He simply thought that “she [Ms Crewe] would sort it out”. He stressed that he had no input into [the Child] being moved out of the Catholic system when she was in primary school and placed into the public system. Similar to her enrolment at [School 1], this was a unilateral decision made by Ms Crewe.  He did not dispute that he would contribute to the [School 1] school uniforms, books and trips away, as he would do so whether or not [the Child] would attend a private or public secondary school.

5. It is uncontroversial that this tribunal must consider the type of education intended by both parents, rather than any particular school: (Wild and Ballard (1997) FLC 92-771). There are aspects that suggest [the Child]’s attendance at [School 1] is the manner in which her parents intended her to be educated but other aspects which tend towards the opposite conclusion. It could be argued her enrolment in [School 1] was consistent with the parents’ intentions when partnered, as [the Child] was enrolled in a private Catholic systemic school. Upon [the Child] being enrolled at [School 1] Mr Garbutt suggested that [the Child] attend a senior systemic Catholic school. However, there is also evidence that Ms Crewe removed [the Child] from her private primary school and made the unilateral decision to enrol her in a public school for the remaining five years of primary school. Further, when she learnt that [the Child]’s application to a public secondary school was unsuccessful she made a unilateral decision to enrol [the Child] in [School 1].

6. On balance, the tribunal is not persuaded that [the Child] is being educated in a manner expected by her parents. The tribunal reached this conclusion as it was not persuaded that Mr Garbutt’s mere suggestion that [the Child] attend a systemic Catholic school, after learning that Ms Crewe enrolled [the Child] in [School 1], is indicative of the parties’ expectation that [the Child] be educated privately. Thus, the tribunal is not persuaded that it is just and equitable to depart from the administrative assessment on this basis.

7. Ms Crewe seeks a contribution from Mr Garbutt in respect of [the Child]’s [performing art] costs, which were $7,128.40 in the 2019 calendar year. Ms Crewe explained that [the Child] wishes to pursue a career in [a performing art]. She has been identified by her [performing art] school as an elite performer, received a merit in her recent [exam] and is [detail deleted]. Mr Garbutt does not dispute that [the Child] is a talented [performing artist], but does not agree that this is a special need that would warrant him directly contributing to the costs.

8. The term “special needs” is not defined in the Act. In the matter of Lightfoot and Hampson (1996) 20 Fam LR 69, the Full Family Court stated that needs are “special” if they are necessary or desirable for that child’s welfare and outside the normal needs of a child that is catered for within the formula. In Gyselman v Gyselman (1992) FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

9. The tribunal has no doubt that [the Child] shows great commitment to, and a talent for, [performing art] and is committed to a career in the [performing art] industry. However, it is not persuaded that her participation is necessary for her welfare or falls outside the normal needs for a child her age as already met within the formula assessment. Therefore, it is not appropriate to depart from the administrative assessment on this basis.

10. Mr Garbutt submits that his capacity to contribute to [the Child]’s costs are significantly reduced given his step-daughter illness and necessary treatment. He does not dispute that he does not have a legal duty to support his step-daughter. The tribunal finds accordingly. Therefore, this aspect of his cross-claim has no merit.

11. Mr Garbutt submits that Ms Crewe’s income and financial resources are in the vicinity of $100,000 per annum on the basis of the home improvements he has observed at her home and a development undertaken by her partner’s business. He would like to know where she and her partner got the money from to fund this development. He also submits that Ms Crewe has a [degree] and that her caring of [the Child] does not justify her decision not to work on a full-time basis.  

12. The tribunal makes the following findings. Ms Crewe’s 2015 to 2019 taxable incomes were $27,371, $267, $277, $13,520 and nil respectively. She completed Year 12 and undertook in-house training available by her employers. She was employed on a permanent part-time basis until mid-2015 by the [Employer], undertaking workshops and supervising the work experience program. Her partner had started his own business in 2013 and it had grown sufficiently that he could offer her work. She anticipated that she was soon to be made redundant by her employer. So, she resigned from her employment and commenced working with her partner. She generally undertakes administrative work, as well as deliveries and onsite assistance. She averages 28 hours per week. Her [Employer] income was about $24,000 per annum; the increase in her 2015 income reflects the payment of leave entitlements upon resignation.

13. In order for a person to be assessed in accordance with their earning capacity rather than their actual income, the three tests set out in subsection 117(7B) of the Act must be satisfied:

    In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

    (a)   one or more of the following applies:

    (i)the parent does not work despite ample opportunity to do so;

    (ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;

    (iii)the parent has changed his or her occupation, industry or working pattern; and

    (b)   the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

    (i)the parent's caring responsibilities; or

    (ii)the parent's state of health; and

    (c)   the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

14. Ms Crewe resigned from her permanent part-time role and commenced working with her partner in the 2016 financial year. She has changed her occupation and industry. Subparagraph 117(7B)(a)(iii) of the Act is satisfied.

15. Ms Crewe reports that she is in good health. Given [the Child]’s age the tribunal is not persuaded that her caring responsibilities prevent her from working on a full-time basis. Therefore paragraph 117(7B)(b) of the Act is satisfied.

16. Ms Crewe’s statements about the reasons behind her decision not to work do not demonstrate that the effect on the administrative assessment of child support was indeed a major purpose behind her decision. Furthermore, if her 2015 earning capacity was applied to the administrative assessment it would result in a decrease of $147 in Mr Garbutt’s liability and a decrease of $249 per annum if Mr Garbutt’s 2019 income and financial resources of $145,700 were applied. The tribunal is satisfied that it was not a major purpose of Ms Crewe’s decision to resign from her employment and work for her partner to affect the administrative assessment of child support.  Thus, the third criteria in subsection 117(7B) of the Act is not met.

17. The tribunal next considered whether Ms Crewe receives income and financial resources from the Crewe-[A] Discretionary Family Trust, of which she is a trustee that is not reflected in her taxable income. The trust’s net income was $34,804 in the 2018 financial year and it reported a net loss of $127,604 in the 2019 financial year. Even if the tribunal were to adjust Ms Crewe’s income by $5,200 in respect of the likely benefit she receives via provision of a  motor vehicle and mobile telephone expenses, and by the same amount again in respect of other expenses (such as utilities) she may receive from the trust, her income would remain below the self-support threshold. Thus, the tribunal is not satisfied that there is evidence to support a departure from the administrative assessment on this basis.  

18. In her Statement of Financial Circumstances form dated 11 November 2019 Ms Crewe estimates income from the Crewe-[A] Trust of $480 per week. She reports her half-share of the family home is valued at $405,000, savings of $1,306, a motor vehicle valued at $12,000 and estimates household contents valued at $90,000 and jewellery at $10,000. Her superannuation is valued at $183,506 and she has $197,757 in liabilities, made up of a $197,596 representing her share of the home mortgage and $160 owing on her credit card. Her personal expenditure is $264 per week and her household expenses are $1,762.50 per week. About $674 of these household expenses relate to her costs in caring for [the Child]. Ms Crewe reports that she and [the Child] are in good health.

1. Mr Garbutt provided a Statement of Financial Circumstances dated 17 November 2019. He reports gross income of $577 from [the Company] and $660 in gross rent.  His half-share of the family home is valued at $350,000 and he solely owns an investment property valued at $550,000. He has savings of $25, a life insurance policy of $200,000 and two motor vehicles with a combined value of $10,000. He estimates household contents valued at $10,000 and superannuation valued at $2,297 and liabilities totalling $775,206, made up of two mortgages totalling $702,429, unpaid tax of $2,462, a personal loan of $24,000, credit card liabilities totalling $23,904 and annual expenses for his investment property of $22,411. His personal expenditure is $565 per week, including a child support payment of $160. He declares household expenses of $3,123 per week, including $150 in respect of [the Child] and $1,724 for his partner. Mr Garbutt reports that he is in good health.

2. The tribunal has determined that it is appropriate to amend Mr Garbutt’s adjusted taxable income to $145,700 per annum from the date Ms Crewe lodged her departure application, being 1 February 2019. Given the tribunal’s conclusion regarding his income and financial resources, the tribunal is satisfied that he has capacity to meet an annual liability of $16,877 and that these funds are necessary for Ms Crewe to adequately provide for [the Child].

3. The tribunal is not satisfied given the history of this matter that Mr Garbutt’s income and financial resources will be accurately reflected in the administrative assessment on an ongoing basis. The tribunal is satisfied that it is just and equitable to depart from the assessment on the basis of the income and financial resources determined by this tribunal until a terminating event occurs in relation to [the Child] (at the latest December 2023). In the circumstances, it is appropriate to increase his adjusted taxable income on 1 July 2020 and each year thereafter on 1 July by the Consumer Price Index Weighted National Average amount for the proceeding March quarter. This period of departure will provide certainty to the parties and will minimise the need for repeat proceedings.

4. The tribunal is satisfied that the administrative assessment is unfair given Mr Garbutt’s income and financial resources and this results in an unjust and inequitable level of child support given the circumstances of each parent. For all the reasons above, the tribunal finds it just and equitable to depart from the administrative assessment.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Ms Crewe is in receipt of income-tested benefits. Departing from the administrative assessment by increasing the child support payable by Mr Garbutt will result in a more appropriate apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

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

·     from 1 February 2019 until a terminating event occurs in relation to [the Child], Mr Garbutt’s adjusted taxable income is varied to $145,700 per annum; and

·     Mr Garbutt’s adjusted taxable income is to be increased on 1 July 2020 and each year thereafter on 1 July by the Consumer Price Index Amount Weighted Average for the preceding March quarter.