Goodridge and Goodridge (Child support)

Goodridge and Goodridge (Child support) [2018] AATA 1236 (27 March 2018)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2017/PC012157
APPLICANT:  Mr Goodridge
OTHER PARTIES:  Child Support Registrar
Mrs Goodridge

TRIBUNAL:Member S Hoffman
DECISION DATE: 27 March 2018
DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period from 11 November 2016 to 31 March 2020, Mr Goodridge’s adjusted taxable income is varied to $60,000.

CATCHWORDS

Child support – Departure determination – Income and financial resources of parents – Business income – Period of departure – Decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988

REASONS FOR DECISION

BACKGROUND

This review is about the child support assessment in respect of three children, born March 2002, November 2003 and November 2006. Relevant to this review, the Department of Human Services – Child Support (the Department) has been responsible for collecting child support from 20 May 2016 and the mother has been providing 72% care of two of the children and 100% care of the oldest child.
On 11 November 2016 the mother lodged an application for a change of assessment with the Department, on the basis that the administrative assessment did not correctly reflect either parent’s income, property and financial resources.
The administrative assessment in place on that date was that the father’s annual child support liability was $5,044, based on the father’s estimate of income of $45,089 and the mother’s 2015/16 adjusted taxable income of $28,916.
On 22 March 2017 a senior case officer from the Department decided that the father’s adjusted taxable income was varied to $90,111 for the period 11 November 2016 to 31 December 2019 (the original decision).
On 16 April 2017 the father lodged an objection to the original decision. On 24 June 2017 an objections officer from the Department disallowed the objection which means there was no change to the original decision.
On 20 July 2017 the father lodged an application for review with this tribunal. Following a directions hearing held on 13 February 2018, the matter was heard on 27 March 2018. The parents attended via conference telephone and gave sworn evidence.
The tribunal had before it documents provided by the Department (numbered 1 to 340); by the father (numbered A1 to A49); and by the mother (numbered B1 to B14). Copies of these documents were sent to the parties before the hearing.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act). The Act provides for an administrative assessment of child support to be paid. Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:

A ground is established; and
It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and
It would be otherwise proper to make a particular determination.

The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include variations to the annual rate of child support payable, or to the adjusted taxable incomes of the parents and/or carer, or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the rate of child support because of the income, property and financial resources of either parent.

What is the father’s income for child support purposes?

The father controls a family trust. It traded as business A ([a particular type of business]) which generated most of the income for the business, business B and business C. The three businesses operated from the same premises which include a workshop. The father said that he has rented the premises for about 12 years. His current rent is $2,670 a month but there is no lease or formal arrangement as the owner, while not related to him, is part of the same community. The father said that when his businesses were at their peak, he employed four people, including an apprentice, but now it was just him.
According to the objection decision, the parents separated on 1 May 2013. The father’s taxable income for 2014/15 was $114,411 which included a net capital gain of $88,403. The tribunal is satisfied that this level of taxable income is not representative of the father’s usual income.
In 2015/16 according to the profit and loss account, the trust made a profit of $32,421. The father’s taxable income for that year was $38,417.
The father submitted an estimate of his income for 2016/17 of $45,089 a year. According to the profit and loss statement for 2016/17, the net profit from the trust was $16,333. In his Statement for Financial Circumstances (SFC) dated 7 August 2017, the father wrote that he received a profit distribution of $35,000 a year which equated to a weekly income of $673.
On 17 February 2016 the father made an application for a home loan with his brother. In the application the father stated that he was self-employed and his business income before tax was $96,000 in 2014/15 and $98,000 in 2015/16. The tribunal acknowledges that the father may have inflated his income in order to get a home loan.
The gross income generated by business A dropped from $176,250 in 2015/16 to $11,913 in 2016/17. The father said that his main customer was another [company] and he had been working for them as a subcontractor for about three years and then he lost that work. There was never a formal agreement or contract between them.
The gross income generated by the other two businesses dropped from $122,981 in 2015/16 to $110,260 in 2016/17. However the gross profit from trading for these two businesses increased from $64,783 in 2015/16 to $73,453 in 2016/17. The father said that he was not getting as much business now and turnover from these two businesses would not be as much as $100,000 a year.
The 2015/16 profit and loss statement shows that the father paid wages of $66,544 which he said were paid to his brother who drove the [vehicle of the business, Truck 1]. The father said that he and his brother each paid half the cost of [Truck 1] to purchase it when the business started. He said that his brother is now operating a [business] on his own, using [Truck 1] that he drove when he worked for the father. Asked if his brother paid anything to him for the truck, the father said no. He said that he did not use the truck so he gave it to his brother to use.
The mother told the Department that the father was business savvy, and that the brother who used to work for the father started a [business] after she and the father separated, which operated from the same premises as when the father operated the [business].
According to the Australian Business Register, the brother’s ABN was active from 17 November 2014 and registered for GST from 1 January 2015. This is consistent with the mother’s claim that the brother’s business was started after the parents separated. The brother’s business advertises itself on [social media] and regular posts are made, usually photos of [the operations of the business]. It operates from the same premises as the father’s business.
The trust’s profit and loss statement for 2015/16 records expenditure of $35,909 paid to a named subcontractor, which is the [business] operated by the brother. If the father’s evidence that the wages of $66,544 were paid to his brother was accurate, then the father’s business paid $102,453 to his brother ($35,909 + $66,544). The tribunal considers that the father was mistaken when he said that the wages paid in 2015/16 were paid to his brother; the father had said that he used to employ four people.
The tribunal had directed the father to provide the model and year of [Truck 1] in order for the tribunal to ascertain its value. Using the information provided by the father, the tribunal accessed websites advertising trucks for sale[1] and on that basis estimates the value of the truck to be about $25,000. The tribunal is not suggesting this is an accurate valuation but gives an idea of the value of [Truck 1]. The father said he did not know what the value of [Truck 1] was.
[1] The website of most relevance, in the tribunal’s view, was as it appeared to advertise more trucks of the relevant age and model compared to other websites.
The tribunal asked the father if he had thought about selling it. The father said that when people know that you have something like [Truck 1], they call on you for help because they know you have it. He also said that it was convenient for him to have in case he ever broke down, because he knew he would get picked up. The tribunal did not find this explanation for not selling his half share of the truck to be persuasive. The father said that [Truck 1] was parked at home in the evenings. The tribunal notes that he and his brother share a home.
When asked if his brother was generating enough business to make driving [Truck 1] worthwhile, the father said that there were more breakdowns and more accidents, and that was his brother’s life.
The tribunal is not satisfied that the father is no longer involved with the [business]. He and his brother purchased [Truck 1] together, they worked together in the [business], the brother started his own [business] operating from the same premises as the father’s business and subcontracted to him, and they share a home. The tribunal considers it more likely than not that that the father is continuing to operate the [business] with his brother but with the brother recorded as the business owner.
In considering what income should be used for the father for child support purposes, the tribunal had regard to principles noted in a Federal Magistrates Court decision as follows:[2]
In financial proceedings under the Family Law Act, the authorities make it clear that a Court “should not be unduly cautious about making findings in favour of the other party if it is not satisfied that proper disclosure has been made (see Chang & Su (2002) FLC93-117)”. Such principles, in my consideration, have similar application to these matters before the SSAT.[3]
[2] Conway & Child Support Registrar & Clivery (SSAT Appeal) (No.2) [2008] FMCAfam 985.
[3] The SSAT (Social Security Appeals Tribunal) was the body that conducted reviews of child support decisions before this function was transferred to the SSCS Division of the AAT on 1 July 2015.
The father lodged an estimate for 2016/17 of $45,089. In a letter addressed to the Administrative Appeals Tribunal dated 7 August 2017 the father commented on his dealings with the Department. He referred to a conversation he had with a departmental officer during which she spoke of assessing him for child support on an income of $90,000 “then discussed more reasonable figure of $60,000 but then didn’t follow through”.
The tribunal asked the father if he had a figure in mind for the amount of child support he thought he should pay or for the income he thought he should be assessed on. He said that he had not worked it out and he wanted the assessment to be fair and reasonable. The mother said that she agreed with the decisions to assess the father on an income of $90,111.
The departmental decisions to use an income of $90,111 for the father referred to relevant industry benchmark data from the Australian Taxation Office. According to the departmental decisions, the trust’s 2015/16 turnover was $300,371, and based on the benchmark, the costs would be 70% or $210,260, leaving $90,111 as the profit, which would be a resource available to the father.[4]
[4] The tribunal notes that the turnover figure as used by the Department in the calculation is not correct as it is made up of the turnover for business A, plus the gross profit from trading for businesses B and C.
The tribunal does not regard this method for determining an income to be satisfactory in this case as the discrepancy between the profit figure arrived at when applying the benchmark, compared with the profit according to the profit and loss statement ($32,421) has not been, in the tribunal’s view, adequately explained. Also the tribunal has the benefit of the 2016/17 financial statements which were not available to the objections officer.
The tribunal is not satisfied that $45,089, which was the income estimate provided by the father to the Department, adequately reflects the father’s income as the tribunal is not satisfied the father has made proper disclosure regarding his income. The tribunal considers that an income of $60,000, which is almost 50% higher than his estimate and to which the father referred as being more reasonable, better reflects his income for child support purposes.

What is the mother’s income for child support purposes?

The mother works part time as a [occupation]. She said that she works 14 hours one week and 15½ the next, and that her average weekly pay is $380 a week. In her Statement of Financial Circumstances (SFC) dated 1 August 2017, she wrote that her weekly pay was $389 which is very similar. This means her taxable income is in the range $19,760 to $20,228. Her taxable income for 2014/15 was $107,854. Like the father’s taxable income for that year, it included a capital gain and therefore is not indicative of her usual income. The mother’s taxable income for 2015/16 was $28,916 and for 2016/17 was $29,396 which is more than what she said she currently earns. The mother also gets newstart allowance which is taxable income.
The father suggested that the mother might be getting additional income from a rental property. He submitted a copy of a document which was about the estate of the mother’s mother and referred to two adjoining properties. Essentially the properties were to be shared between the mother in this case and her three siblings. The mother said that she has a 12.5% share in one of the properties, which is where her brother lives and she does not receive any rent from that. The mother said that her share of the second property was given to her sister who lives there, and she (the mother) has no financial interest in that property. The tribunal accepts the mother’s evidence that she receives no income from these properties.
The tribunal is satisfied that the mother’s taxable income adequately reflects her financial situation for the purposes of child support.

How does the administrative assessment compare with an assessment of child support using the tribunal’s income figure for the father?

The administrative assessment in place on 11 November 2016, which was when the mother lodged her application for a change of assessment, was that the father’s annual child support liability was $5,044, based on the father’s estimate of income of $45,089 and the mother’s 2015/16 adjusted taxable income of $28,916.
The tribunal estimates that using an income of $60,000 for the father and $28,916 for the mother results in a child support liability of $8,698 a year.
Given the difference between $5,044 and $8,698 a year, the tribunal is satisfied that in the special circumstances of this case, the administrative assessment does result in an unjust and inequitable rate of child support, and that a ground for departure from the administrative assessment has been established pursuant to subparagraph 117(2)(c)(ia) of the Act.

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

As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider a variety of factors, as set out in subsection 117(4) of the Act.[5]
[5] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares [2008] FMCAfam 886.
Section 3 of the Act makes it clear that parents have the primary duty to maintain their children, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case the father and the mother have the primary duty to financially support the children.

Income, property and financial resources – the father

The parents submitted SFCs dated early August 2017. Later that month there was a property settlement which affected their respective financial situations.
The father used to have a 50% share in the family home. The mother said that there was nothing owed on this property until the father took out a mortgage over it. These funds, or the balance of them, were frozen and distributed to the parties such that the father received $172,000. The father now has no interest in the family home.
In March 2016 the father had purchased a property jointly with his brother. According to his SFC, this property was worth about $550,000 and the mortgage over it was $508,000. The father said that he used about $130,000 of the settlement to reduce the mortgage. Although the father was unsure of the exact figures it would seem that the mortgage on the property where he lives is about $370,000.
As to his other assets and liabilities, the father said he has about $10,000 in his current account. In his SFC he wrote that he has $78,184 in superannuation and owns a [vehicle] worth about $12,000. He said at hearing that he owed about $1,400 to $1,500 on his credit card.
The father also said that he owned [another vehicle]. The mother said he owned a [particular type of vehicle]. The father said he had sold it which surprised the mother who said she had recently seen it. She said it was not in good condition and was worth $10,000 or $12,000 if that.
In his SFC, the father recorded income of $673 a week and outgoings of $732 a week, including child support of $105 a week.[6] The father has paid child support regularly at the rate of $420.33 a calendar month which is less than the assessed amount. During the hearing the mother checked the balance owed in child support and said it was $13,696.
[6] As $420.33 is the amount for the calendar month, the weekly equivalent is $97 rather than $105 but the difference is immaterial.
With regard to how he covers his expenses, the father said that when his brother was struggling he helped his brother and now his brother was helping him.

Income, property and financial resources – the mother

The mother was paid $292,000 from the property settlement and used this to discharge the mortgage and pay legal bills. She said that she has set aside the rest for the children for their futures.
In her SFC she wrote that she had 13% share (which she amended to a 12.5% share) in the property referred to under Issue 1 and has $94,053 in superannuation. She said that she has $188 in the bank at the moment. She did not record owning a vehicle. She wrote that she owes $5,000 to a friend who lent her money and owes $1,000 on her credit card.
The mother receives family tax benefit and newstart allowance as well as her income from employment and child support. She totalled her weekly income from these sources to be $764 ($39,748). The mother listed her outgoings to be $1,564 a week which is a shortfall of $800 a week or $40,000 a year. Some of the figures look high, such as $115 a week ($5,980 a year) for education expenses, when the children attend a public school. The mother referred to the cost of replacing items of school uniform when one of the boys outgrew or damaged his uniform, and also the cost of extra-curricular activities.

The mother indicated that she found the form difficult to fill in, which is the case for many parents. The tribunal was unable to resolve the discrepancy between income and outgoings. The mother said that she used her credit card and to a lesser extent, some of the monies from the property settlement.
The mother said that it was a real struggle to manage financially and she would like to do more for the children but she cannot afford it.

Other issues pertaining to the parents’ incomes, property and financial resources

Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met. These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.
The father submitted that his work arrangements have changed as he no longer operates a [business]. His explanation was that this business had a lost a contract. The tribunal discussed the [business] under Issue 1. It concluded that although the father no longer operated the [business], he was still involved with it as it operated from his business premises, and his brother, who used to drive [Truck 1] as an employee of the father, continued to drive it but as a sole trader.
As already discussed, the father said that he and his brother purchased [Truck 1] together some years ago and he just gave his brother the truck which, in the tribunal’s view, is worth around $25,000. The tribunal considers that if the father had ended his involvement in the [business], he would have sold [Truck 1], or at least his share of it. The tribunal found that the father continues to derive an income from the [business] and under Issue 1, the tribunal arrived at a figure for the father’s income for child support purposes. Given that, it serves no purpose to give further consideration to earning capacity in respect of the father.
For the period of relevance to this review the mother’s taxable income has been similar. In 2015/16 it was $28,916 and in 2016/17 it was $29,396. The mother has been in her current job for over 2½ years, and she has been in receipt of income support. The tribunal is satisfied that there has not been a change in her work arrangements, and therefore it is not open to it to make an earning capacity determination in respect of the mother.
Given the above, the tribunal is satisfied that it need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.
The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act). There was no evidence before the tribunal that either party had the duty to maintain other children or another person.

Income, earning capacity, property and financial resources of the child

The tribunal is also required to have regard to the income, earning capacity, property and financial resources of the child (paragraph 117(4)(b) of the Act).
In her SFC the mother recorded that the eldest son earned $150 a week, equivalent to $7,800 a year. She said this was from working at [an occupation].
The Child Support Guide (the Guide) at 2.6.10 provides policy guidance regarding income earned by a child of the case.6It states in part:
This means, for example, that as at 1 January 2018, a child would generally need to earn or receive a gross income of at least $340.55 per week for the earnings to be considered so significant as to be capable of affecting the assessment.
6 In Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60, the full Federal Court held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation.
The tribunal is satisfied that the income which the child receives is too low to consider making any changes to the child support assessment because of it.

Costs related to the children

In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs they may have (subsection 117(6) of the Act).
In his SFC the father, who provides 28% care for two of the children, recorded what he spent on himself but not any costs associated with the children. The mother did apportion weekly household expenses between herself and the children but the tribunal is not satisfied that her figures are reliable as the mother has listed expenses that are more than double her income.
In light of this, the tribunal concluded that using the “Costs of the Children Table” is reasonable in the circumstances of this case.[7]
[7] Clause 1 of Schedule 1 to the Act. The table is available at the Department of Social Services website, accessed 28 March 2018 align="left">Hardship
1. The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[8] in this respect:
  This requires the Court to balance the ‘hardship’ which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.
  [8] [1991] FamCA 93.
2. The tribunal is of the view that the mother is experiencing more financial difficulty than the father. It appears her income is not enough to cover her expenses. The father did not include in his SFC costs he incurs in relation to the care he provides for the children. Although the father’s SFC indicates that his income does not cover his outgoings the tribunal has found that his income is higher than he has stated on that form. The tribunal cannot tell if and by how much the father’s income exceeds his expenses. The father said he had $10,000 in his bank account and that his brother helps him out.
3. The tribunal’s decision represents an increase to the child support liability compared to the administrative assessment as referred to under Issue 1 in paragraphs 36 to 38.
Any other relevant matters
1. The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).
2. The tribunal’s decision has the effect of reducing the father’s arrears of child support. Because of the complexity of the child support formula, the calculations that follow are just estimates.
3. The child support liability based on the objection decision was $15,921 a year. For the 16 month period from 11 November 2016 to 11 March 2018, this amounts to $21,228 ($15,921 / 12 X 16). The tribunal’s decision results in an assessment of $8,698 a year which, for a 16 month period, is $11,597 ($8,698 / 12 X 16). The difference between $21,228 and $11,597 is $9,631.
4. As noted above, the mother said that the arrears were currently $13,696. The tribunal’s decision should therefore reduce the father’s arrears to about $4,065 ($13,696 - $9,631). The precise amount depends, amongst other things, on when the Department gives effect to the tribunal’s decision.
5. The mother lodged her change of assessment application on 11 November 2016 which was the date from which the departmental decisions started. As this is a reasonable approach and neither party made submissions for a different date, the tribunal is satisfied that departing from the administrative assessment from 11 November 2016, consistent with the departmental decisions, is appropriate in this case.
6. The tribunal’s determination ends 31 March 2020 which will give some certainty to the parents. It is open to either parent to lodge a further change of assessment application if their circumstances change.
Issue 3 – Is it otherwise proper to make a particular departure determination?
1. The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.
2. The mother is in receipt of family tax benefit. The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.
DECISION
The tribunal sets aside the decision under review and, in substitution, decides that for the period from 11 November 2016 to 31 March 2020, the father’s adjusted taxable income is varied to $60,000.

[2018] AATA 1236

27 March 2018

Key Legal Topics

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Family Law

Administrative Law

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Statutory Construction

Judicial Review

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