Gould and Gould (Child support)

[2019] AATA 5109

Gould and Gould (Child support) [2019] AATA 5109 (8 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC016485

APPLICANT:  Mr Gould

OTHER PARTIES:  Child Support Registrar

Mrs Gould

TRIBUNAL:Member Y Webb

DECISION DATE:  08 October 2019

DECISION:

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

• for the period 1 May 2018 until a terminating event occurs that ends the child support assessment, Mr Gould’s adjusted taxable income is varied to $90,000; and

• for the period 1 May 2018 to 30 April 2021 Mr Gould’s annual rate of child support is increased by $1,830 per annum in relation to orthodontic costs.

CATCHWORDS

CHILD SUPPORT – departure determination – Registrar initiated departure - financial resources of both parents – orthodontic costs - 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 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

1. This review relates to the issue of child support regarding the child of Mrs Gould and Mr Gould.  The child is 13 years old.  The care of the child is recorded as 100%    to Mrs Gould by the Department of Human Services (“Child Support Agency”) for the purposes of child support.

2. The child support case has been registered for collection by the Department of Human Services (“Child Support Agency”) since 13 November 2012. 

3. On 12 April 2018, the Child Support Registrar initiated the process of changing the administrative assessment.

4. The grounds on which the Registrar can depart from the administrative assessment on his or her own motion are limited to grounds relating to the income, property, financial resources or earning capacity of a parent.

5. Around the time that the Registrar initiated a change to the assessment, Mr Gould was required to pay an annual rate of child support of $1,416.  This was the fixed annual rate based on a 2016/2017 adjusted taxable income of $19,200 for Mr Gould and a 2016/2017 provisional income of $14,379 for Mrs Gould.  (Briefly, the fixed annual rate is payable by parents with a low adjusted taxable income and who do not receive income support payments from Centrelink.)

6. In this case where the Registrar was considering a departure from the administrative assessment the Registrar obtained information from and about both parents regarding their income, property and financial resources.  The Registrar issued notices of the intention to depart from the administrative assessment on 12 April 2018 as required by section 98M of the Assessment Act.  That provision requires the notice to contain “a summary of the information that the Registrar used to form the view that the Registrar should make a determination under this Division”. 

7. In this case that summary in the notice to Mr Gould consisted mainly of the following:

   “We are now considering a change to your assessment because we have information that suggest you are receiving benefits from your business activities and this income has not been included in your assessment

   We consider that (Mr Gould’s) adjusted taxable income should be set at $207,415 and that no change be made to (Mrs Gould’s) income. This would change your child support annual rate from $1,390 to a new rate of $22,101.

   The reason we are considering this change is that we have reviewed your business bank accounts and they show you are receiving personal benefits that would exceed the current income used in the assessment.  For the period 19/11/2017 to 19/02/2018 you have received personal benefits totalling $34,830.15.  When annualised it gives an amount of $136,698.  When this amount is grossed up to allow for tax, an amount of $207,415 is determined.[1]

   [1] C1:271

8. The information in the above notice was also provided to Mrs Gould. The Registrar advised the parents that a decision maker would consider the information and make a decision.  The decision maker decided on 31 May 2018 to change the assessment by varying Mr Gould’s adjusted taxable income to $85,000 for the period 1 May 2018 to 24 October 2020.

9. Mr Gould objected to that decision on the basis that the Child Support Agency had been “misled”.  He contended that due to multiple medical issues he had not had the mental capacity to make decisions in relation to the business. He also asserted that Mrs Gould was being financially supported by her wealthy family and that this should be considered in the child support assessment.

10. On 10 August 2018 an objections officer partly allowed Mr Gould’s objection but the decision was less favourable to him.  The objections officer decided that Mr Gould’s adjusted taxable income would be set at $95,000 for the period 1 May 2018 until a terminating event occurs that ends the child support assessment.

11. On 30 January 2019 Mr Gould requested a review by this Tribunal.  He was granted an extension of time on 10 May 2019.  A telephone directions hearing was conducted on 20 August 2019.

12. Mr Gould and Mrs Gould attended the hearing by way of a telephone conference on 8 October 2019.  Mr Gould gave evidence on affirmation.  Mrs Gould gave sworn evidence.

DOCUMENTARY EVIDENCE

1. The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule.  The Tribunal had regard to all of this evidence, and refers specifically to particular items in this statement of reasons.

CONSIDERATION

The child support law

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (Assessment Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act.  This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.

3. Part 6A of the Assessment Act empowers the Registrar to determine to “depart” from the administrative assessment on the basis of specified grounds and in a way which is just and equitable as between the payer, payee and children and which is otherwise proper.  Such a departure is commonly referred to as a “change of assessment”.

4. Section 98L of the Assessment Act refers to the matters as to which the Registrar must be satisfied before making such a determination:

   (1)Subject to this Part, the Registrar may make the determination if:

   (a)   The Registrar is satisfied that, in the special circumstances of the case, application in relation to a 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 because of the income, earning capacity, property and financial resources of either parent; and

   (b)   That it would be:

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

   (ii)Otherwise proper;

   to make a particular determination under this Part.

5. Therefore the central issues for the Tribunal to determine in this case are:

1. whether the ground for departure referred to in paragraph 98L(1)(a) exists; and if so,

   (ii)     whether it would be:

   ·     just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   ·     otherwise proper.

1. The phrase “special circumstances of the case” is not defined in the Assessment Act.  In the case of Gyselman and Gyselman (Gyselman),[2] the Full Court of the Family Court of Australia held that:

   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.

   [2] (1992) FLC 92-289

2. Furthermore, subsection 98L(2) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar in the exercise of his or her powers under section 98L and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision. 

Does the ground exist to depart from the administrative formula assessment?

1. In considering whether the ground set out in paragraph 98L(1)(a) of the Assessment Act exists and which justifies departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents.

Mrs Gould’s evidence and contentions in relation to her income, property and financial resources

1. Mrs Gould advised that she is receiving an income support payment from Centrelink and that she is in the final year of studying for her [degree].  She stated that she returned to university in 2015.  The Child Support Agency has confirmed that Mrs Gould received income support payments of $14,379 in the 2016/2017 year.  Mrs Gould provided her income tax returns for the 2017/2018 and 2018/2019 years and these confirmed that her taxable income in the 2017/2018 year was $14,033 and in the 2018/2019 year was $20,436 and that all of her taxable income was derived from Centrelink income support payments.

2. Mrs Gould advised, and the Tribunal accepts that she does not own any real estate.  She declared household contents which she valued at $10,000 and a motor vehicle valued at $15,000.[3] 

   [3] B4-B5

3. Mr Gould asserted that Mrs Gould had been financially supported by her father including receipt of $20,000 in the period between November 2017 and February 2018.  Mr Gould asserted that Mrs Gould’s father provides her with free accommodation as well as cash, holidays and support with her car and credit card expenses.

4. Mrs Gould agreed that she has received financial support from her father but she stated that this was out of necessity because Mr Gould’s financial support for the child’s needs has been very inadequate.  She advised that her father is [age range] years old and is a self-funded retiree.  She stated that his capacity to continue to assist with the costs of the child is uncertain.  The Tribunal accepts that Mrs Gould receives financial support from her father.  Mrs Gould was open and transparent about this family support.  However, as Mrs Gould has 100% care of the child her income and financial resources would need to be around $100,000 per annum to make a significant impact on the assessment.  The Tribunal has no evidence to suggest that Mrs Gould’s income and financial resources are anywhere near that level.  Hence, the Tribunal is satisfied that Mrs Gould’s income is reasonably reflected in the assessment and that her income and financial resources do not render the child support assessment unfair.

Mr Gould’s evidence and contentions in relation to his income, property and financial resources

1. Mr Gould told the Tribunal that he is the director and secretary and the major shareholder of [name] (“the company”).  He stated that he owns 59% of the shares and that there are two other minor shareholders who are not much involved in the operation of the company.  The Tribunal accepts this information as accurate.

2. He stated that he used to have other companies but they have all been deregistered or are not trading.  Mr Gould provided a letter from his accountant, [named] of [Accounting Firm], dated 9 September 2019 which confirmed that Mr Gould is the director, secretary and a shareholder of the company but that he is not involved as a director, secretary or shareholder of any other company.[4]  He did not refer to whether Mr Gould is involved in any trusts. Mr Gould submitted that the only significant entity in which he is involved is the company and the Tribunal accepts his statements in that regard as there is insufficient evidence of any other business activity.

   [4] A12

3. Mr Gould explained that the company owns a registered training organisation licence and administers multiple educational courses in conjunction with universities and other training/educational organisations. These universities and training/educational organisations with which the company has entered into contracts teach their courses using the company’s registered training organisation licence.  He stated that the company commenced trading around 2016.  Mr Gould’s role is administrative and managerial; he does not undertake any actual teaching of any courses.  He contracts out the teaching to other companies.  These other companies are unrelated to Mr Gould. The Tribunal accepts his evidence regarding his business activities.

4. Mr Gould provided a quarterly Business Activity Statement for the June quarter 2019.  This showed sales of $78,253 in that period.[5]

   [5] A14-A17

5. Mr Gould also provided the financial statements for the company for the financial year ended 30 June 2018.[6]  The profit and loss statement showed gross income of $362,827.34 and expenses of $381,883.55 and a net loss of $19,056.21 for the 2017/2018 year. 

   [6] A18-A25

6. The balance sheet for the same period showed total non-current assets of $48,442.94 and total assets of $82,963.71.  It also showed non–current liabilities of $1,488,979.57 including a loan to Mr Gould of $1,436,275.27.

7. Mr Gould provided the Company Tax Return for 2018.[7]  According to the Company Tax Return for 2018 the company has operated at a loss continuously since the 2013/2014 year. The Company Tax Return reflected the figures contained in the company’s 2018 financial statements.

   [7] A27-43

8. Mr Gould also provided a copy of his individual personal income tax return for both the 2016/2017 and the 2017/2018 years.[8]  These reflected the director’s fees from the company: being $19,200 in the 2016/2017 year and $17,892 in the 2017/2018 year.

   [8] A44-A48; A49-A53

9. Mr Gould submitted that since the beginning of 2017 he has had multiple surgeries and other health issues and that these medical issues have significantly affected his financial circumstances.  He stated that he estimates his out of pocket medical expenses to be well over $15,000.  He advised that he is about to undergo further [surgery] this month.  He provided a letter from his doctor ([Doctor A]) dated 27 August 2019 which confirmed that Mr Gould is due to have [specified] surgery and that he will be incapacitated [as specified] until early 2020”.[9]

   [9] A13

10. Mr Gould contended, in his Statement of Financial Circumstances that his current weekly income comprises director’s fees of $400 per week plus $150 per week of loan repayments from the company (which he said are not always regular): a total of approximately $450 per week ($23,400 per year).[10]

    [10] A2 and A3

Tribunal’s consideration

1. Mr Gould advised, and the Tribunal accepts, that he does not own any property other than household contents which he valued at $8,100 and a personal motor vehicle which he valued at $100.  However, he advised that the company owns a vehicle and the costs associated with this vehicle are detailed in the financial statements of the company.

2. The Tribunal does not have any financial statements in relation to the 2018/2019 year.  However, the BAS statement for the June quarter 2019 of $78,253 annualises to $313,012 which tends to indicate that the gross income for the 2018/2019 year will be considerable particularly as Mr Gould submitted that the beginning of the year was the busiest quarter and generated the most income. 

3. The Tribunal considered Mr Gould’s income in the 2017/2018 year. Despite the multiple surgeries and other medical procedures which Mr Gould underwent in 2017, the company’s gross income in the 2017/2018 year was $362,827.34 as evidenced in the financial statements of the company.  The Tribunal notes that most of the medical expenses were incurred between February 2017 and June 2017 and therefore not within the 2017/2018 year.

4. Despite the high gross income, the financial statements record that the company operated at a loss of $19,056.21 in the 2017/2018 year.  The expenses of the company were detailed in the profit and loss statement as follows:

   Advertising  $1,082.97
   Bank charges  $225.05
   Computer software  $750.59
   Consultants fees  $47,428.07
   Depreciation  $11,535.00
   Director’s fees  $17,891.76
   Electricity  $238.75
   Entertainment  $17,486.30
   General expenses  $1,138.62
   Insurances  $364.16
   Legal expenses  $577.00
   Materials  $1,035.70
   Motor Vehicle expenses  $3,635,37
   Office expenses  $9,042.01
   Printing and stationery  $3,630.03
   Repairs and maintenance                   $54,436.42
   Rent  $27,521.64
   RTO fees  $1,130.00
   Subcontract teaching  $143,555.28
   Subscriptions  $600.97
   Telephone  $1,905.75
   Travel and accommodation (local)          $36,672.11

   TOTAL  $381,883.55

5. The Tribunal queried a number of these expenses with Mr Gould.  In relation to the consultant’s fees Mr Gould confirmed that these fees were paid to a specific consultant who was engaged just for the 2017/2018 year and the Tribunal accepts his statements regarding that expense.

6. In relation to depreciation of $11,535 Mr Gould did not know to what that related.  He agreed that he received the director’s fees.  He did not know how he had spent more than $17,000 on entertainment expenses and suggested that perhaps that was spent on meals.  He agreed that the motor vehicle expenses had been incurred on his company motor vehicle. In relation to office expenses of more than $9,000 he did not know what office expenses had been incurred.  He confirmed that no formal meetings were held with the other two minor shareholders and therefore that no office expenses had been incurred as a result of office meetings.  The Tribunal sought clarification from Mr Gould of the amount of $54,436.42 expended on repairs and maintenance.  Mr Gould was unable to explain this expense.  In relation to the rent expenses of $27,521.64 Mr Gould explained that he did not have separate business premises but that he operated the company from a home office and essentially paid himself rent.  In relation to travel and accommodation of $36,672.11 Mr Gould stated that he travels quite a lot attempting to gain new contracts.

7. The Tribunal was not satisfied that all of the expenses were actually incurred for business purposes.  Mr Gould was unable to explain a number of items claimed and nor was he able to explain the amounts claimed.  In particular, the Tribunal was not persuaded that Mr Gould spent the amounts stated on depreciation, office expenses and repairs and maintenance.  This is a total amount of approximately $75,013.  In addition, while the Tribunal accepts that the company may have incurred some entertainment expenses and some travel and accommodation expenses these expenses of $17,486.30 (for entertainment) and $36,672.11 (for local travel and accommodation) seem high for a company described by Mr Gould as a “very small educational company”.   It would be reasonably expected that if necessary, these expenses would be trimmed to ensure that Mr Gould was able to pay a fair and reasonable amount of child support for the child.  Essentially, the Tribunal is not satisfied that Mr Gould as the sole director of the company has incurred company expenses of $381,883.55.  While Mr Gould told the Tribunal that he could not explain many of the expenses detailed in the profit and loss statement, he is self-employed, has no employees and is the sole director of the company.  Hence all of the spending is at his own direction.

1. Mr Gould confirmed that in addition to the director’s fees of $17,891.76, he received rent payments for his home office of $27,521.64.  He also declared in his Statement of Financial Circumstances that he received an amount of $150 per week ($7,800 per year) from the company towards repayment of his very large loan to the company confirmed in the balance sheet to be $1,436,275.27.  These items represent a total income of $53,213. 

2. In addition, the Tribunal is satisfied that Mr Gould had access to additional funds either because some of his listed expenses could not be substantiated or because expenses such as entertainment and travel appear to be inflated.  The Tribunal has, taking a very conservative approach, accepted most of the expenses other than the following: depreciation, office expenses, repairs and maintenance, entertainment and travel and accommodation.  Even with these identified items the Tribunal has accepted that there may be some modest expenses associated with the items. Taking a very conservative approach the Tribunal is satisfied that the expenses overall have been inflated by at least $50,000 in the areas identified above.  This would result in a profit to the company of approximately $30,944 (disregarding cents) rather than a loss of $19,056.   Mr Gould would be entitled to 59% of this profit as the major shareholder which is approximately $18,256.  Together with his director’s fees of $17,891.76, rent of $27,521.64 and loan repayments of $7,800 per year the Tribunal is satisfied that Mr Gould had access to income of at least $71,470 in the 2017/2018 year which grossed up very conservatively equates to at least $90,000.

3. The administrative formula assessment in the period 25 April 2018 to 21 November 2018  using an adjusted taxable income of $19,200 for Mr Gould and $14,033 for Mrs Gould results in the fixed annual rate of $1,416 being applied.  If the income of Mr Gould is replaced with $90,000 the assessment would be $10,556 per annum (and increasing to approximately $14,771 when the child turned 13 years old).

4. The Tribunal finds that special circumstances exist because it is satisfied that Mr Gould’s actual income and financial resources of at least $90,000 are considerably higher than the $19,200 taxable income which was being used in the administrative formula assessment and that this renders the child support assessment unfair and inequitable in relation to the financial support of the child.   Hence the paragraph 98L(1)(a) ground is established.

Would it be just and equitable to depart from the administrative assessment?

1. Section 98L of the Act provides that subsections 117(4) to (9) apply in this process to the decision maker.  Those provisions set out certain factors to which regard must be had in deciding whether a particular departure determination is just and equitable as between Mr Gould, Mrs Gould and the child.

2. Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain.  The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.

3. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act.  This requires an assessment of the duty of the parents towards the child; the needs of the child; any income, earning capacity and financial resources of the child; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parents (and/or the child) if the Tribunal increased or decreased the amount of child support payable.

4. In considering these issues, the Full Family Court, in the case of Gyselman, stated that:

   However, some of the matters listed in sub-section [117](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).

5. Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:

The proper needs of the child

1. In determining the proper needs of the child, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the child to be cared for, educated and trained as well as a consideration of any special needs of the child.

2. In relation to schooling, Mrs Gould advised that the child is attending a private Catholic school.  She provided documentation confirming that both parents signed the enrolment forms for the child’s education[11] commencing in prep in 2011.  Both parents signed agreeing that they were jointly and severally liable for the fees.  It was not disputed by Mr Gould that he has not paid any tuition fees for the child since 2013.  He stated that the fees were $25,000 per year and he could not afford to pay them.  Mrs Gould told the Tribunal that she did not wish to pursue Mr Gould regarding the school fees at this time because her father had kindly agreed to pay the school fees for the child for the time being.  The Tribunal acknowledges Mrs Gould’s statements that her father may not be able in the future to continue to afford to support the child but that for now she is not seeking that Mr Gould fund the school fees. 

   [11] C1:156-164

3. Mrs Gould stated that she is seeking that Mr Gould contributes to the multitude of other educational costs such as uniforms, laptop, school books, excursions and camps.  While the Tribunal acknowledges that these ancillary costs are significant, they are costs which may be incurred whether the child attends a private school or a government school.  For this reason it is expected that the costs associated with these items are factored into the child support payments.

4. Mrs Gould is seeking that Mr Gould share the costs of the child’s orthodontic treatment which she advised she could not afford to pay.  She provided a copy of the orthodontic treatment plan[12] together with a written quote from [Orthodontist A] (specialist orthodontist) dated 5 September 2019 confirming that the treatment costs will be $11,000 in total.  [Orthodontist A] confirmed that the treatment is needed to “establish a correct bite” and is “also necessary to ensure that in the future (the child) does not experience uneven or excessive wear of the teeth”.  In his report [Orthodontist A] stated that the child has “class 1 crowding with shortage of space for 13 tooth”.  While Mr Gould was sceptical of the need for orthodontic treatment the Tribunal is satisfied that [Orthodontist A] has provided a professional, qualified medical opinion regarding the need for orthodontic treatment.  The Tribunal accepts that the treatment is necessary rather than merely cosmetic.

   [12] B22-B23

5. Mrs Gould explained that the payment arrangements for the orthodontic treatment are that a $3,000 up front payment is made and then monthly payments over approximately 20 to 24 months of $350 per month.  The Tribunal calculates that in order to pay $11,000, following an up front payment of $3,000 there would be 22 payments of $350 and one payment of $300.  The Tribunal acknowledges that this is a considerable expense and which it is only fair and reasonable that Mr Gould shares as clearly his financial capacity is far greater than Mrs Gould.  The Tribunal will consider that extent to which Mr Gould should contribute after a consideration of the remaining just and equitable factors.

6. The Tribunal acknowledges that Mrs Gould has provided evidence of receipts for dental treatment, including past orthodontic treatment in 2016 and 2017.  However, the Tribunal is not inclined to amend the assessment for dental treatment so far in the past especially when there was no application to change the assessment in those years and the costs have already been paid some years ago.

7. In addition Mrs Gould stated that the child incurs psychology costs.  The child suffers from anxiety and sees a psychologist every fortnight.  Mrs Gould explained that currently these sessions are bulk billed which is only possible because Mrs Gould currently holds a health care card due to being dependent on an income support payment from Centrelink.  However, next year she is hoping to be employed and will no longer then be eligible for bulk billed sessions.  She anticipates that she will need to pay approximately $100 per session.  The Tribunal accepts Mrs Gould’s statements that the child sees a psychologist fortnightly.  However, currently these sessions are being bulk billed and therefore without cost to Mrs Gould.  Due to the uncertainty of Mrs Gould’s income in the future and the lack of detail regarding the possible costs and required ongoing frequency of psychology costs the Tribunal does not, at this time, consider it would be just and equitable to amend the assessment in relation to psychology costs.

The income, earning capacity, property and financial resources of the child

1. Mrs Gould confirmed that the child has no income, earning capacity, property or financial resources of her own.  Mr Gould asserted that he thought that the child has access to finances.  However, he provided no verification and there is no evidence within the documentation that the child has any income, property or financial resources of her own and the Tribunal so finds.  The Tribunal is satisfied that the child is dependent on her parents for the financial support associated with her care.

Mrs Gould’s income, property, financial resources and expenses

1. Mrs Gould’s income, property and financial resources have been covered at length above.  The Tribunal has found that she is dependent on Centrelink benefits and child support for her financial support of the child.  She has benefitted from very significant financial assistance from her father.  However, Mrs Gould’s father does not have any obligation to support the child and regardless of any contributions which he makes these do not replace the child support obligations of Mr Gould.

2. While the Tribunal takes into account that Mrs Gould receives financial support from her father, the Tribunal acknowledges that this is uncertain and may not always be available.  Mrs Gould told the Tribunal – and it accepts – that while currently her father owns the house in which she and the child live rent free – her father recently placed the house on the market for sale.  He subsequently withdrew the property from sale but Mrs Gould explained that as a self-funded retiree, his assets are reducing and he may not necessarily in the future have the financial capacity to continue to support her and the child.

3. In relation to her expenses Mrs Gould completed a Statement of Financial Circumstances.[13]  She declared that she has an $8,000 credit card debt which she is attempting to repay at $100 per week.  In addition, she declared weekly household expenses of $1,050 which included $120 per week for school requirements (not including school tuition fees) and $200 per week for the child’s medical, dental and optical costs. Predominantly these expenses were for the orthodontic treatment.  The amount of $200 seems a little high on the information provided at the hearing.  The amount declared of $120 per week for school requirements also seems quite high.  Mrs Gould’s other household expenses are unremarkable.  Even if Mrs Gould’s total expenses were less than she has declared (for instance around $900 per week rather than $1,150 (including credit card repayment), this still annualises to $46,800 which is far more than Mrs Gould receives from Centrelink.

   [13] B1-B10

Mr Gould’s income, property, financial resources and expenses

1. Mr Gould’s income, property and financial resources have been covered at length above.  In relation to his expenses he provided a Statement of Financial Circumstances.  Apart from food Mr Gould’s largest expense is his medical expenses.  He provided verification of numerous medical costs which he incurred in 2017 and mainly between February and June in that year.  While he holds private health insurance he explained, and the Tribunal accepts, that he was still liable for significant out of pocket medical expenses.  While these expenses were incurred well before the Registrar initiated the change of assessment process the Tribunal accepts that Mr Gould has continued to experience health issues and that he is due to undergo further surgery in the near future.  It accepts that he also has significant medication costs.  The Tribunal accepts that this will result in further out of pocket expenses although these cannot be precisely identified or verified at this time.  Nevertheless, the surgery has been confirmed by Mr Gould’s doctor and the Tribunal will take this into account in its deliberations regarding a just and equitable child support liability. 

2. Mr Gould’s other household expenses are reasonably unremarkable. The Tribunal queried an amount of $100 per week for education.  Mr Gould stated that this cost related to online course research and professional development courses necessary for his work.  It was not clear to the Tribunal why this was not a business expense rather than a personal expense but Mr Gould advised that was the case.  Mr Gould declared that he has borrowed $60,000 from friends which has not yet been fully repaid.  At the hearing Mr Gould stated that since separation he has borrowed approximately $100,000 but that he has not borrowed anything since 2017.  He stated that he has repaid his partner for the medical expenses she paid in 2017.  In relation to the cash withdrawals shown in his bank statements in the period November 2017 to February 2018 Mr Gould stated that these withdrawals of cash were used to pay back family and friends for the funds he borrowed from them.  He stated that he did not have a clear recollection of events and transactions at that time because he was on so much medication for his health conditions.

The parents’ earning capacity

1. Mr Gould is self-employed in the company and the Tribunal accepts that he has been working full-time in that capacity since the business commenced trading some years ago.  There is no evidence to suggest that Mr Gould is not exercising his full earning capacity and the Tribunal so finds.

2. Mrs Gould has not worked in the workforce since approximately 2014.  At that time she advised that her employment contract expired and she made a decision to return to university and retrain. She is currently undertaking her clinical placement which concludes her degree in December 2019 and she hopes to find employment from next year. She stated that she is already submitting applications for employment.  The Tribunal is satisfied that although Mrs Gould could be said to have changed her occupation the Tribunal accepts that she has done so to enhance her employment prospects and therefore there is no evidence to suggest that she has changed her occupation with the major purpose of affecting the administrative assessment of child support. Hence, the earning capacity provisions detailed in subsection 117(7B) of the Assessment Act are not enlivened.

Necessary commitments to support themselves or others

1. The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children.  This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans.  In Mee and Ferguson[14] the Full Court of the Family Court stated at paragraph 128:

   Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.

   [14] [1986] FamCA 3

2. Mr Gould contended that he has high self-support expenses due to his medical costs.  The Tribunal has accepted that Mr Gould incurred significant out of pocket medical costs in the period between February and June 2017 and that on an ongoing basis he has significant medication costs.  It also accepts that he is due to undergo further surgery and rehabilitation and that there will be out of pocket costs associated with those procedures.  Mr Gould estimated that his out of pocket costs could be up to $10,000 but as the medical costs for the surgery and associated expenses have not yet been incurred it is not possible to precisely determine the cost.  Mr Gould also expressed concern that he may need to borrow to cover the upcoming medical costs. 

3. Mrs Gould did not raise any out of the ordinary self-support expenses.

Any hardship to either parent or the child by the making of, or refusal to make, an order

1. Mr Gould reiterated that he does not have the money to pay for child support at the level that the objections officer has determined.  He does not believe it is fair particularly in circumstances where he does not see the child.  He finds it all very depressing.  He stated that he does not have a lot of money in the bank. 

2. Mrs Gould stated that she is finding it extremely difficult to make ends meet.  She would be in a very poor financial position if the Tribunal was to revert to the administrative formula assessment.  She stated that currently she does not have “one spare cent”.  She stated that unfortunately she cannot afford new clothes and shoes for the child.  She can’t afford for the child to go out with her friends.  She is very worried about her accommodation especially if her father sells the house that she and the child are living in.  She would have to pay rent and currently she just cannot afford that. She stated that she is finding it particularly difficult at the moment because her family tax benefit has been reduced as a result of the objections officer’s decision and the expectation that Mr Gould’s child support payments would increase.  However, Mr Gould is not paying the amount which has been determined which has significantly affected her finances and which has repercussions on the child as well.

Proposed determination

1. The possible determinations open in a change of assessment decision are those set out in section 98S of the Assessment Act.  Essentially a determination can vary any of the factors of the formula or can vary the rate of child support payable.

2. In making a determination the Tribunal does not suggest that there is a precise arithmetical solution to the question posed in the review as to the correct or preferable outcome of the Registrar-initiated change of assessment.  Most of the figures relied upon are themselves based on approximations or at times on incomplete evidence.

3. The Tribunal considered all of the circumstances in this matter and proposes to vary Mr Gould’s annual adjusted taxable income to $90,000.

1. It has reached this proposed determination on the basis that there is scope within the company’s income for Mr Gould to have access to at least an amount of approximately $71,470 in the 2017/2018 year which grossed up very conservatively equates to at least $90,000 (as explained above in paragraphs 37 to 44).  The Tribunal is satisfied that some of Mr Gould’s business expenses could be reduced or prioritised to improve his capacity to pay a reasonable amount of child support.  The evidence in the Business Activity Statement for the June quarter 2019 suggests that the company’s income in the 2018/2019 year will be similar in approximate terms to the 2017/2018 year.  While the Tribunal accepts that Mr Gould will be incapacitated for a period as a result of his upcoming surgery, extensive surgeries in 2017 did not appear to significantly diminish his income or his ability to meet his personal expenses at that time.  There is no evidence to suggest that his income will markedly decrease in the future.

2. In addition, the Tribunal proposes that Mr Gould contributes – on a 50% basis with Mrs Gould – to the cost of the child’s orthodontic expenses.  Half of the expense is an amount of $5,500.  The Tribunal proposes to apportion this amount over a three year period rather than a shorter period in view of the medical expenses which Mr Gould will incur in the near future and into 2020.  Over a three year period the amount by which the child support payable will be increased will be a rounded amount of $1,830 per year. The Tribunal considers that spreading the increase in the child support liability over a three-year period will mean that the weekly payments of child support are only increased to a smaller and more affordable degree.

3. In relation to the duration of the proposed determination Mrs Gould submitted that any change to the assessment should commence from May 2018 and remain in place until a terminating event occurs.  Mr Gould acknowledged that he did not have a firm view about the duration of any departure determination.

4. The Tribunal is satisfied that, in view of his self-employment, any income information lodged with the Australian Taxation Office will not accurately reflect Mr Gould’s true capacity to financially support the child.  In such a circumstance, the Tribunal considers that a determination until a terminating event occurs on the case is the most appropriate duration.  If there is a significant change in the parents’ financial circumstances, either parent may make an application to have those significant changes assessed and considered.  In relation to the start date the Tribunal considers this should be 1 May 2018 which is the start of the month following the Registrar’s decision to initiate the process of changing the administrative assessment.

5. Varying Mr Gould’s adjusted taxable income to $90,000 per year will result in an annual rate of child support of approximately $10,556 per annum. The liability will increase to approximately $12,386 per year (for a three year period) with the addition of $1,830 per year in relation to the child’s orthodontic costs.  In accordance with the formula assessment, once the child turns 13 years old, the child support liability increases further by approximately $4,000 per year in recognition that the costs of teenage children are significantly higher than younger children.

6. In all of the circumstances the Tribunal is satisfied that its proposed determination is fair and equitable and that it provides Mrs Gould with important financial support which she needs for the child.  The Tribunal is also satisfied that the proposed child support liability is affordable for Mr Gould.

Is it otherwise proper to depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment.  Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a)    the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)    the effect that the making of the order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

2. The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman).  It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system when the parents themselves have the capacity to maintain their children.  The Tribunal is satisfied that Mrs Gould needs financial assistance with the costs of supporting the child, including the orthodontic costs and that Mr Gould is able and can afford to contribute to those costs.

3. Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income tested benefit such as family tax benefit.    

4. Mrs Gould advised that she is aware of the impact of child support payments on that benefit.

5. The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

6. Taking all of these considerations into account, the Tribunal considers this proposed determination is fair, just, equitable and otherwise proper and that it balances the needs and financial capacities of both parents and therefore that the departure determination should be made.

DECISION

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

• for the period 1 May 2018 until a terminating event occurs that ends the child support assessment, Mr Gould’s adjusted taxable income is varied to $90,000; and

• for the period 1 May 2018 to 30 April 2021 Mr Gould’s annual rate of child support is increased by $1,830 per annum in relation to orthodontic costs.

SCHEDULE

List of Exhibits

1. Department of Human Services – Child Support Agency marked as C exhibits:

   ·     CSA’s large bundle of 577 pages marked as exhibit – C1

   ·     CSA’s smaller bundle from pages 578 – 600 marked as exhibit – C2

2. Mr Gould has provided the following documents marked as A exhibits:

   ·     A1-A10                Statement of Financial Circumstances

   ·     A11  Email to Registry re child support payments

   ·     A12  Letter from [Accounting Firm]

   ·     A13  Letter from [Doctor A]

   ·     A14-A17               Business Activity Statement for June quarter 2019

   ·     A18-A26               Financial Statements of company for year ended 30 June 2018

   ·     A27-A43               Company tax return 2018

   ·     A44-A48               Individual tax return 2016/2017

   ·     A49-A53               Individual tax return 2017/2018

   ·     A54-A55               Written submission

   ·     A56-A79               Medical receipts and invoices

3. Mrs Gould has provided the following documents marked as B exhibits:

   ·     B1–B10                Statement of Financial Circumstances

   ·     B11  Cover email

   ·     B12  Individual tax return 2017/2018

   ·     B13  Individual tax return 2018/2019

   ·     B14  Letter from [Orthodontist A] (specialist orthodontist)

   ·     B15-B17               Written submission

   ·     B18-B19               Letter from [named dental practice]

   ·     B20  Receipt – laptop computer

   ·     B21  [A named college]- information re courses

   ·     B22          -B23              Letter from [Orthodontist A] (orthodontist) to [named dental practice]

   ·     B24  Cover email

   ·     B25  Duplicate of [Orthodontist A’s] letter

   ·     B26  Cover email

   ·     B27-B29               Response to Mr Gould’s documents