Gerberry and Murnan (Child support)

[2022] AATA 1703

Gerberry and Murnan (Child support) [2022] AATA 1703 (6 May 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC022258

APPLICANT:  Ms Gerberry

OTHER PARTIES:  Child Support Registrar

Mr Murnan

TRIBUNAL:Member K Dordevic

DECISION DATE:  6 May 2022

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that Mr Murnan’s adjusted taxable income is varied to $80,000 from 1 September 2019 to 31 January 2024.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – 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. 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.

2. Mr Murnan (the father) and Ms Gerberry (the mother) are the parents of one child. This case was registered with the Department of Human Services (now Services Australia) – Child Support (the Agency) on 1 February 2010 and has been collectable since 3 September 2018. The administrative assessment reflects that the child is in the mother’s sole care.

3. The mother lodged a departure application on 18 March 2020. On 14 May 2021 a senior case officer varied the father’s adjusted taxable income to $91,139 for the period 1 February 2021 to 30 June 2021 and to $75,000 from 1 July 2021 to 30 April 2023. On 9 June 2021 the mother lodged an objection to that decision. On 12 August 2021 an objections officer allowed the objection, determining that the father’s adjusted taxable income was $115,812 for the period 1 February 2021 to 30 June 2021 and $85,800 from 1 July 2021 to 30 April 2023.

4. On 8 September 2021 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was convened on 28 January 2022. Directions were issued requiring compliance by 18 March 2022.

5. The hearing took place on 6 May 2021. The mother and father appeared by MS Teams audio. The mother was supported by [Ms A], psychologist. Following the hearing [Ms A] was issued with a non-disclosure order, prohibiting her from disclosing information she gained in the course of the proceeding. The Child Support Registrar was not represented at the hearing. The tribunal also considered the documentation provided by the Agency (folios 1 to 214), the mother (folios A1 to A25) and the father (folios B1 to B10). At the commencement of the hearing the father confirmed that he wishes to proceed, despite not having the documentation provided by the Agency as he had failed to update the Agency and this tribunal with his new address details. The tribunal provided the father with the relevant documents post hearing.

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

2. At the time the mother lodged the departure application under review the father was liable to pay an annual rate of $747 from 1 September to 25 November 2020, based on the parents’ 2020 adjusted taxable incomes of $30,026 (the father) and $17,790 (the mother). From 26 November 2020 to 30 November 2021 the father was assessed to pay an annual rate of $1,024 based on the parents’ 2020 adjusted taxable incomes, reflecting that the child had turned 13 years of age.  

3. The mother states that she believes that the Agency correctly assessed the father’s income and financial resources. Her dispute is with the departure period; she seeks that the assessment is backdated to 18 months prior to her application (18 September 2018) and until the child turns 18 years of age. The backdating is necessary as she was unable to work from 28 September 2018 due to her debilitating medical conditions. Her delay in lodging the claim was because the father had not yet lodged his tax returns, though he had always worked.

4. The father’s testimony can be summarised as follows. He does not dispute the variation to his adjusted taxable income. However, he is opposed to the backdating of his adjusted taxable income, as the mother seeks.

5. As to his income, he gave the following evidence. He had registered the business [Business name] Pty Ltd back in 2015, which traded “off and on”. From 2016 to 2018 there was no income to report by the company and so it did not lodge tax returns. During the period 2015 to 2019 he was unemployed, and his wife supported him from 2017. He was not eligible for income support payments given his wife’s income. He tried to secure work, explaining that it is the nature of the housing industry that it lurches from boom to bust. He denies receipt of any cash payments. One’s longevity in such an industry is solely based on performance. Therefore very few people are retained by companies for long periods.

6. He began working for [Employer] in September or October 2019 when he relocated to South Australia. Around 18 months ago [Employer] advised him to “go off their books”. He did not contest the documentary evidence that he worked as a PAYG employee from 2019 to August 2020. He started operating under his company [Business name] Pty Ltd from 28 August 2020. The 2020 company returns were just lodged and his 2021 return remains outstanding. He recalls his 2019 and 2020 incomes are in the vicinity of $30,000 to $40,000.  [Business name] did not lodge company tax returns for the 2019 financial year as it was inactive. The tribunal did not have the benefit of the business financials to consider whether there were any other benefits that the father received from the business from September 2020 onwards.

7. In his Statement of Financial Circumstances the father declares gross business income of $2,200 per week. He states that the business owns his motor vehicle and the hire purchase contract currently owed about $35,000 (though in his Statement of Financial Circumstances form he declares the outstanding liability is $18,000); he estimates that it is worth about $39,000 and the monthly repayment is $870. He sets aside about $622 for tax purposes each week. He estimates that business expenses are about $40,000 per annum, including fuel of $200 per week and insurance of $95 per month. The father explained that he does not draw a wage as such from the business. Instead, he simply pays his personal bills, including rent, electricity, food, motor vehicle costs.

8. The tribunal makes the following findings. The father did not lodge an income tax return between the 2016 and 2019 financial years. He did lodge an income tax declaration of $0 for the 2019 financial year. From 1 July 2020, for child support purposes, his liability was varied to 2/3 of the Male Total Average Weekly Earnings ($51,151). The father then lodged his 2020 income tax return in March 2021 and his adjusted taxable income of $30,026 was applied to the administrative assessment, creating an overpayment of $2,126. [Employer] provided a payroll activity statement for the period 3 September 2019 to 28 June 2020 which indicates that the father received gross wages of $36,776 (at folio 191). This declared period is inconsistent with the documentary evidence and the father’s testimony that he ceased being a PAYG income earner from 1 September 2020. The tribunal has instead inferred that these wages were paid whilst the father was a PAYG employee from 1 September 2019 to 31 August 2020.  The tribunal accepts the father’s evidence that the lump sum commission payment of $45,735 were associated with sales whilst he was a PAYG employee. It is on this basis that the tribunal finds that the father’s gross income and financial resources during the period 1 September 2019 (when the father estimates he began working at the company) to 31 August 2020 was $82,511.

9. [Employer] provided evidence regarding the father’s commission paid from 29 August 2020 to 11 August 2021. The tribunal finds that during the period 1 September 2020 to 30 June 2021 the father received about $95,250 (many of the final digits in each line item are not visible) in commissions (excluding the commission lump sum payment outlined at paragraph 15). Allowing $40,000 per annum (or $3,333 per month) in expenses as claimed by the father, this would indicate that the father’s income and financial resources during that period were $61,910, which annualises to $74,293.

10. The father was liable to pay $4,256 per annum in child support from 1 September 2019 to 9 March 2020, $1,443 per annum from 10 March to 31 August 2020 and $747 in child support per annum from 1 September 2020. Application of the above findings regarding the father’s income and financial resources would require the father to contribute $9,308 from
    1 September 2019, $8,075 per annum from 1 July 2020, increasing to $11,100 per annum when the child turned 13 years of age.

11. As the father’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)(ib) 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 assessment.

2. The mother provided a Statement of Financial Circumstances dated 24 September 2021. She is in receipt of disability support pension of $483.75 per week. She lives in private rental accommodation. Her assets include savings of $27, she has household contents valued at $20,000 and superannuation of $26,035. Her liabilities include a personal loan of $43,000 and credit card charges of $14,600. She reports her personal expenditure of $199 per week and household expenses are $1,452 per week, of which $812.50 relates to the care of the child.

3. The tribunal finds that the mother was diagnosed with young onset Parkinson’s disease in October 2019. Her general practitioner, [Dr B], stated in a report dated
   4 February 2022 (at folio A20) that symptoms include mild cognitive impairment, distraction, disorganisation, difficulties in focus as well as sleep disruption impairing attention and judgement as well as anxiety and depression which can impact on memory storage and disrupt attention and complex task performance. It is on this basis that the tribunal finds that the mother has provided an adequate explanation for her delay in lodging her application for a departure application from at least September 2019.

4. The mother’s evidence is that the child is being privately educated in accordance with the parents’ expectations. She stated that whilst the parents were in a relationship the child was enrolled in kindergarten at a [Church] school. When they relocated the child was again enrolled in a [Church] school. When the mother relocated to Queensland she again enrolled the child in a private [Church] school. However, as the father did not sign the current enrolment forms she is solely liable to meet the private education costs of about $10,000 per annum. She is not entitled to any fee reduction. The father’s position is that whilst he did consent to the child being educated in the [Church] community when the parents were together, he is of the view that the child should attend a public school given the parents’ current financial resources. As there is no evidence before the tribunal regarding the mother’s current schooling expenses it was not persuaded that it is just or equitable to depart from the assessment on this basis. Of course, the mother is at liberty to lodge a departure application on this basis in the future.  

5. The tribunal finds that the child is in good health. She participates in various extra-curricular activities including [Activities 1-4]. There is no evidence that she is in receipt of income or financial resources that would render the administrative assessment unfair or unjust.

6. In his Statement of Financial Circumstances form dated 30 September 2021 the father reports that he is in receipt of gross business income of $2,211 per week. He lives with his brother and wife, who together earn about $2,500 per week, though he clarified at hearing that they are each in receipt of about $1,500 per week. His assets include savings of about $4,600, a motor vehicle valued at $38,000 (as advised at hearing), superannuation of $10,613 and household contents valued at $10,000. His liabilities include credit card charges of $7,047 and motor vehicle liability of $18,000. He reports personal expenses of $1,004 per week (including his child support liability of $262) and household expenses of $575 per week. The father cautioned against departing from the administrative assessment into the future, stating that he will be “technically” able to retire in April 2023. He does not even know if he will continue to work until then, given his medical conditions which include diabetes, peripheral neuropathy and recent unexplained weight loss.

7. The tribunal is of the view that it is not appropriate to depart from the administrative assessment from September 2018, as sought by the mother. Instead, the tribunal has concluded that it is appropriate that the father’s child support liability be varied to an adjusted taxable income of $80,000 (allowing for modest deductions from his gross income of $82,511) from 1 September 2019. The tribunal is satisfied that the mother did not rest on her rights given her medical condition and taking into account that she lodged her departure application on 18 March 2020, after first raising this as a possibility with the Agency in February 2020. Furthermore, to find otherwise would result in a disproportionate amount of the child’s costs being borne by the mother.

8. In the absence of evidence regarding his actual business expenses from 1 September 2020 the tribunal is satisfied that the father’s 2020 PAYG income is the best indicator of his 2021 income and financial resources. In the tribunal’s view this determination reflects the most reasonable conclusion to be drawn on the limited evidence regarding his income and financial resources from 1 September 2020.

9. The tribunal’s decision will place the father in arrears of about $11,300 (noting that there will be an overpayment for the period 1 February 2021 to 30 April 2022). The tribunal is satisfied that amending the father’s adjusted taxable income on this basis will not place him in a position of undue hardship given his savings, expenses, income and financial resources. Furthermore, these funds are necessary for the mother to adequately provide for the child.

10. The tribunal is of the view that the father’s income and financial resources will not be accurately reflected in his taxable income into the foreseeable future. The tribunal has determined that it is appropriate that his adjusted taxable income is varied to $80,000 until 31 January 2024. This determination will provide certainty to the parties and minimise the need for repeat proceedings.  Of course, either party is at liberty to lodge a change of assessment application should there be a significant change to their circumstances.

11. The tribunal is satisfied that the administrative assessment is unfair given the father’s income and financial resources. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it is 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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment 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 Mr Murnan’s adjusted taxable income is varied to $80,000 from 1 September 2019 to 31 January 2024.