Grainger and Grainger (Child support)
[2023] AATA 837
•8 February 2023
Grainger and Grainger (Child support) [2023] AATA 837 (8 February 2023)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2022/MC024691
APPLICANT: Ms Grainger
OTHER PARTIES: Child Support Registrar
Mr Grainger
TRIBUNAL:Member H Moreland
DECISION DATE: 8 February 2023
DECISION:
The Tribunal sets aside the decision under review and in substitution the Tribunal decides as follows:
· For the period from 21 July 2021 to 31 December 2021, Ms Grainger’ annual rate of child support is varied to $13,384 per annum.
· For the period from 1 January 2022 to 16 November 2022, Ms Grainger’ annual rate of child support is varied to $11,522 per annum.
· For the period from 15 November 2021 to 16 November 2022, Ms Grainger’ child support is increased by the sum of $4,257 per annum.
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources – special needs – 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 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
The issue to be determined in this application is whether there is a reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.
Ms Grainger and Mr Grainger are the parents of [Child 1]. Ms Grainger is the parent liable to pay child support. The application for child support was registered with Services Australia – Child Support (the Agency) from 21 September 2012 and was subject to a private agreement until 21 July 2021, when it became subject to collection. For the period from 21 July 2021 until the case ended on 16 November 2022, [Child 1] was in the below regular care of Ms Grainger (recorded as 10%) and in the above primary care of Mr Grainger (recorded as 90%).
Prior to the application for a change of assessment, Ms Grainger was assessed to pay child support as follows:
·For the period from 21 July 2021 to 5 August 2021, Ms Grainger was assessed on her 2020/21 adjusted taxable income (ATI) of $104,563. Mr Grainger was assessed on his 2020/21 ATI of $41,409. The annual rate was $16,338.
·For the period from 6 August 2021 to 11 June 2022, Ms Grainger was assessed on her 2021/22 estimated ATI of $82,812. Mr Grainger was assessed on his 2020/21 ATI of $41,409. The annual rate was $12,740.
·For the period from 1 July 2022 to 20 October 2022, Ms Grainger was assessed on her 2020/21 ATI of $104,563. Mr Grainger was assessed on his 2020/21 ATI of $41,409. The annual rate was $16,338.
On 10 December 2021, Ms Grainger applied to the Agency for a departure from the administrative assessment on the bases of Reasons 2, 3 and 8A because she said she incurred additional expenses due to the special needs of [Child 1], the high costs of educating [Child 1] in a manner expected by her and Mr Grainger, and she disagreed with the assessment of Mr Grainger’ child support income. Mr Grainger disagreed with the proposed change and cross-applied on the bases of Reasons 2, 3 and 8A because he also said that he incurred additional expenses due to the special needs of [Child 1], the high costs of educating [Child 1] in a manner expected by him and Ms Grainger, and he disagreed with the assessment of Ms Grainger’ child support income.
On 25 April 2022, the Agency refused to change the assessment because it decided that a reason to change the assessment had not been established.
On 23 May 2022, Ms Grainger objected to this decision. On 25 August 2022, an objections officer decided to disallow Ms Grainger’s objection because they decided that it would not be just and equitable to change the assessment.
On 19 September 2022, Ms Grainger lodged an application to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for a review of the objections officer’s decision. Directions for this matter were made on 30 November 2022 for the parties to provide additional information. The application was heard on 23 January 2023 by teleconference. Ms Grainger and Mr Grainger both gave sworn evidence. Mr [A], an accountant, appeared as a witness for Mr Grainger. The Tribunal considered the documents and information which were provided to the parties prior to the hearing, as well as the oral and documentary evidence of Ms Grainger and Mr Grainger and documents the Tribunal asked [Mr A] to provide.[1]
[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Agency numbered 1 to 780; Ms Grainger’s’ documents numbered A1 to A540; Mr Grainger’s’ documents numbered B1 to B347; and documents from [Mr A] numbered D1–D15.
CONSIDERATION
The legislative framework
The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act. Section 98C establishes a three-step process to be satisfied:
a)That there is a ground for a departure;
b)That it is just and equitable to depart from the administrative assessment; and
c)That it is otherwise proper to depart from the administrative assessment.
Once satisfied, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.
10.The Tribunal also had regard to the Child Support Guide (the Guide) where relevant. The Guide contains governmental guidelines and policy as to how the legislation is to be applied. The Tribunal acknowledges that, whilst it may be guided by policy, it is not bound to follow it: Re Drake and Minister for Immigration and Ethnic Affairs (No 2).[2] In the recent case of G v MIBP,[3] the Federal Court observed that it is clear from earlier authorities, that in the absence of any statutory indication to the contrary, any lawful executive policy enacted to guide the exercise of a statutory power is a relevant factor for the Tribunal to take into account in performing its review task. A lawful approach allows the adoption of appropriate policy as a guide but not so as to control the making of the decision and the Tribunal adopts that approach.
[2] (1979) 2 ALD 634.
[3] [2018] FCA 1229.
Grounds for departure
Reason 8A – The income, property and financial resources of each parent
Relevant legislation, case law and terminology
11.Subparagraph 117(2)(c)(ia) of the Assessment Act, commonly referred to as Reason 8A, provides that a ground for departure from an administrative assessment exists if:
(c) …in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia) because of the income, property and financial resources of either parent; …
The Tribunal notes that the term “in the special circumstances of the case” is not defined in the Assessment Act but that it was established in Gyselman and Gyselman,[4] where it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.
[4] (1992) FLC 92-279.
13.In considering the above, the Tribunal is mindful of the requirement of satisfying subsection 117(7A) of the Assessment Act having regard to the capacity of the parent to derive an income, but disregarding the capacity of anyone who does not have a legal duty to maintain the child. To this end, the Tribunal has considered Ms Grainger’s and Mr Grainger’s circumstances as the parents of [Child 1].
14.With regard to terminology, the Tribunal also notes that generally, “adjusted taxable income”, or “ATI”, is calculated according to section 43 of the Assessment Act and is the total of the following: (a) the parent’s taxable income for the last relevant year of income in relation to the child support period, disregarding the parent’s assessable FHSS released amount (within the meaning of the Income Tax Assessment Act 1997) for that year of income; (b) the parent’s reportable fringe benefits total for that year of income; (c) the parent’s target foreign income for that year of income; (d) the parent’s total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year of income; (e) the total of the tax free pensions or benefits received by that parent in that year of income; and (f) the parent’s reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year of income. According to section 2.4.4 Child support income in the Guide, a person’s ATI is used in administrative assessments for child support.[5]
[5] < discretion provided for under section 117 of the Assessment Act provides that the Tribunal can depart from the administrative assessment and this means that the Tribunal can determine that an income amount other than a parent’s ATI is to be used for the purpose of calculating the parent’s child support obligation. Where the Agency has referred to ATI for the purpose of making the administrative assessment, the Tribunal accepts its calculations. For clarity, the Tribunal will refer to this figure as the parent’s “child support income”. Another income amount to be referred to in these reasons is “taxable income” and that is the amount specified in ATO income tax returns.
Ms Grainger’s submissions about Mr Grainger’s income, property and financial resources
16.Ms Grainger told the Tribunal that she disagreed with the Agency’s estimates of Mr Grainger’s income because, she said, when she was married to Mr Grainger, he had structured his affairs in such a way as to minimise his child support obligations in relation to his child from a previous relationship; and she believed that Mr Grainger had done the same thing in the case of [Child 1].
17.Ms Grainger told the Tribunal that when she and Mr Grainger had separated, he warned her to not make any claim for child support because he would ensure she ended up paying child support to him.
18.Ms Grainger also told the Tribunal that Mr Grainger’s father had given Mr Grainger $400,000 when she and Mr Grainger were together. Ms Grainger also said that Mr Grainger had provided no evidence as to what he did with another $400,000 from the financial settlement when they were divorced.
19.Ms Grainger also told the Tribunal that Mr Grainger was living in a unit (at [address]) that is held in trust for him by his father. Ms Grainger also submitted that Mr Grainger lives in that property “rent free”.[6]
[6] Hearing papers, p 11.
Mr Grainger’s submissions about his income, property and financial resources
20.Mr Grainger told the Tribunal that he is a [manager] and does whatever work he can get a hold of. Mr Grainger told the Tribunal that his father has a building company, [Company 1], and he does do some work for that company. Mr Grainger told the Tribunal that recent years had been difficult for the building industry and this had impacted his income.
21.Mr Grainger disputed Ms Grainger’s submissions and said his father had never gifted him $400,000. With regard to the financial settlement between Ms Grainger and Mr Grainger, Mr Grainger said that the settlement amount was closer to $220,000 with $150,000 in legal fees and that this occurred in 2010, so what funds were remaining from the settlement have long been expended.
22.Mr Grainger told the Tribunal that he does not own any real property and does not have any equitable interest in the property he lives in. At the Directions Hearing, the Tribunal had asked Mr Grainger if there was any written rental agreement in relation to the property he lives in. Mr Grainger said there was, so he was directed to provide it to the Tribunal. The rental agreement, dated 1 June 2018, shows that the rent payable by Mr Grainger and his wife is $1,000 per calendar month, as well as all body corporate bills, council rates and utilities.[7] While the Tribunal observes this is an unusual rental agreement, the Tribunal accepts that there is a rental agreement between [Company 2]/[Company 1] Pty Ltd/Mr Grainger; and Mr Grainger and his wife, Mrs Grainger.
[7] Second party papers, B302.
The income tax returns and financial statements for Mr Grainger and [Company 3] Pty Ltd as trustee for the [Family trust 1]
23.[Mr A] told the Tribunal that Mr Grainger is the sole director of [Company 3] Pty Ltd which is the trustee for the [Family trust 1] and that Mr Grainger is currently the sole beneficiary of the [Family trust 1].
24.With regard to Mr Grainger’s 2020/21 income, as shown in Mr Grainger’s income tax return, his taxable income was $41,409.[8] The [Family trust 1] tax return for 2020/21 shows that its net income from business was $41,409;[9] and that this same amount was distributed to Mr Grainger.[10] The financial statements for [Company 3] Pty Ltd [Family trust 1] show that the total payment to beneficiaries for the year ended 30 June 2021 was $42,675. [Mr A] told the Tribunal that $42,675 represented the amount that Mr Grainger actually withdrew from the [Company 3] Pty Ltd bank account for his own use in that year and for payments such as to “Apple Music”.[11]
[8] Second party papers, B22.
[9] Second party papers, B31.
[10] Second party papers, B33.
[11] Second party papers, B63.
25.With regard to Mr Grainger’s 2021/22 income, as shown in Mr Grainger’s income tax return, his taxable income was $4,198.[12] The [Family trust 1] tax return for 2021/22 shows that the net income from business was $4,198;[13] and that this same amount was distributed to Mr Grainger.[14] The Tribunal notes that for the year ended 30 June 2022, the total payment to beneficiaries (which, as noted above, [Mr A] said was based on the withdrawals Mr Grainger made from the business bank account for his personal use) was $28,128.58.[15] The Tribunal notes that, as [Mr A] informed the Tribunal, the discrepancy between the income tax return and the financial statements is largely due to a hardship payment received by [Company 3] Pty Ltd [Family trust 1] of $20,000 from the Victorian Government, which was not taxable income. [Mr A] provided the hardship application and accompanying documents to the Tribunal.[16]
[12] Second party papers, B41.
[13] Second party papers, B51.
[14] Second party papers, B53.
[15] Second party papers, B74.
[16] Witness-supplied documents, D1–D15.
The Tribunal’s assessment of Mr Grainger’s income, property and financial resources
26.The Tribunal notes the well-established principle in the Federal Circuit and Family Court of Australia (the Court) that the taxable income of a person who runs their own business is not necessarily an accurate reflection of their personal earning capacity, income, benefits and financial resources for the purpose of ascertaining their child support liability (DJM and JLM;[17] Scott and Scott;[18] Carey and Carey).[19]
[17] [1988] FamCA 97.
[18] (1994) FLC 92-457.
[19] (1994) FLC 92-489.
27.The Tribunal also notes that the Court has observed it is not necessary, for the purpose of ascertaining a person’s child support liability, that a “forensic audit” or major investigation of the financial circumstances of a party be undertaken by the Tribunal (Podmore & Pillai (SSAT Appeal);[20] and Frost and Frost (SSAT Appeal)).[21] The Court has instead said that the Tribunal must ascertain the income, property and financial resources available to the parties for child support purposes, on the balance of probabilities, in order for a fair decision to be made with regard to a person’s child support liability (Shearer & Benson (SSAT Appeal)).[22]
[20] [2011] FMCAfam 952.
[21] [2011] FMCAfam 1311.
[22] [2011] FMCAfam 623.
28.The Tribunal acknowledges Ms Grainger’s submissions that Mr Grainger has structured his finances in such a way to reduce his income for the purpose of child support, including through hiding income and assets. The Tribunal finds however, that there is no evidence before it that Mr Grainger is earning more than he has declared in his income tax returns, the trust tax returns, or the financial statements he has provided in relation to [Company 3] Pty Ltd [Family trust 1]; nor is there any evidence before the Tribunal that assets are being held on trust for Mr Grainger.
29.Overall however, the Tribunal finds that Mr Grainger’s income is higher than as represented by his taxable income figure, or ATI.
The 2020/21 financial year
The Tribunal finds that the income figure of $42,675 is a more appropriate figure as the starting point for Mr Grainger’s income for the 2020/21 financial year, rather than his taxable income of $41,409, for the purpose of determining Mr Grainger’s child support income because this is the figure, as noted by [Mr A], that Mr Grainger withdrew from the business account he ultimately controls, for his personal use, in that year.
The Tribunal also notes the aforementioned well‑established principle in family law that the taxable income of a self-employed parent may not accurately reflect their income and financial resources because of the ability of self-employed people to derive additional benefits from their business that “pay as you go” employees do not necessarily have. For the purpose of taxation, such expenses and deductions can be quite legitimately claimed but for the purpose of child support, it is not always appropriate that such expenses and deductions be deducted. In the case of Mr Grainger, the Tribunal finds that, like many self-employed parents, Mr Grainger does enjoy a financial benefit due to the mingling of his personal and business activities.
32.In Mr Grainger’s case, Mr Grainger has the benefit of a motor vehicle, as well as telephone expenses paid for by the [Family trust 1]. For the year ending 30 June 2021, the motor vehicle expenses incurred by the [Family trust 1] were $3,663.77 and telephone expenses were $3,068.68.[23] [Mr A] told the Tribunal that the expenses for motor vehicle and phone were estimated to be 80% work use and 20% personal use. Mr Grainger told the Tribunal that he only drives one motor vehicle, which he uses for both work and personal purposes and when asked why his telephone expenses were so high, Mr Grainger told the Tribunal that the telephone expenses included internet for his business as well, in a Telstra bundle.
[23] Second party papers, B66.
33.The Tribunal concludes that it is unlikely that the work use of the motor vehicle and the telephone is 80% and finds it is more likely to be 50:50, particularly as Mr Grainger said he uses one motor vehicle and the telephone expenses are bundled. The Tribunal concludes it is appropriate to add back 50% of the total motor vehicle and telephone expenses to Mr Grainger’s income for the purpose of calculating his child support income. This means that $2,290 is to be added for Mr Grainger’s motor vehicle expenses, and $1,918 for his telephone expenses.
34.Taking all of this together, the Tribunal finds that for the 2020/21 financial year, Mr Grainger’s ATI of $41,409 did not adequately represent his income. The Tribunal concludes that for the 2020/21 financial year, Mr Grainger’s income, for the purpose of child support, was $46,883. This comprised $42,675 in distributions to him from the [Family trust 1], plus $4,208 for business resources Mr Grainger enjoyed the personal use of.
The 2021/22 financial year
35.With regard to the 2021/22 financial year, for the same reasons outlined above in relation to the 2020/21 financial year, the Tribunal finds that the more appropriate starting point for Mr Grainger’s income is $28,129, that being the amount distributed to him by the [Family trust 1], rather than his taxable income of $4,198, because this is the figure, as noted by [Mr A], that Mr Grainger withdrew from the business account he ultimately controls, for his personal use, in that year.
36.For the year ending 30 June 2022, the motor vehicle expenses incurred by the S&S Family Trust were $6,053.43 and telephone expenses were $3,320.91.[24] This means that $3,783 is to be added for Mr Grainger’s motor vehicle expenses, and $2,076 for his telephone expenses.
[24] Second party papers, B66.
37.Taking all of this together, the Tribunal finds that for the 2021/22 financial year, Mr Grainger’s income, for the purpose of child support, was $33,988. This comprised $28,129 in distributions to him from the [Family trust 1], plus $5,859 for business resources Mr Grainger enjoyed the personal use of.
38.Considering the evidence before it, and the case law relating to the taxable income of a person who is involved in their own business, the Tribunal is satisfied that the income Mr Grainger has derived from his business and the financial resources to which he has access, are higher than the taxable income that is represented in Mr Grainger’s income tax returns.
39.The Tribunal concludes however, that the administrative assessment that was in place overestimated Mr Grainger’s income as it was based on his 2020/21 taxable income of $41,409 for the period from 21 July 2021 to 20 October 2022, when Mr Grainger’s income for the 2021/22 financial year had dropped, as noted above, to $33,988.
40.Further, the Tribunal notes that the administrative assessment was based on provisional income amounts for the 2021/22 financial year, so upon the eventual lodgement of Mr Grainger’s income tax return for the 2021/22 financial year, his taxable income of $4,198 would not, for the reasons above, be an accurate reflection of Mr Grainger’s actual income for the 2021/22 year.
41.According to subsection 98B(1) of the Assessment Act, an application for a departure from an administrative assessment can only be made when an administrative assessment is in force in relation to the child. [Child 1] turned 18 years of age on [date] June 2022 and the child support case was extended, following an application by Mr Grainger, to 16 November 2022.
42.In this case, Mr Grainger’s income tax return was lodged after 16 November 2022, when the child support case ended, so Ms Grainger would not be in a position to lodge an objection in relation to Mr Grainger’s ATI for the 2021/22 financial year, as the child support case had ended by the time Mr Grainger’s income tax return for 2021/22 was lodged.
43.Taken together, this means the Tribunal finds that special circumstances exist, such that the administrative assessment resulted in an unjust and inequitable outcome. Therefore, the Tribunal finds that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) (Reason 8A) of the Assessment Act.
Other grounds
44.The Tribunal also notes that both Ms Grainger and Mr Grainger sought a departure from the administrative assessment in the special circumstances of the case, based on Reasons 2 and 3 because they both said they had incurred additional expenses due to the special needs of [Child 1], as well as the high costs of educating [Child 1] in a manner expected by both of them. Mr Grainger also cross-applied for a review on the basis of Reason 8A, because he disagreed with the assessment of Ms Grainger’ child support income.
As the Tribunal has determined that there is a ground to depart from the administrative assessment based on the considerations above, the Tribunal will consider the submissions on these issues in the context of whether it is just and equitable and otherwise proper to depart from the administrative assessment.
Would departure from the administrative assessment be just and equitable?
46.Having found that special circumstances exist, such that the administrative assessment resulted in an unjust and inequitable result, and a ground for departure established in relation to subparagraph 117(2)(c)(ia) (Reason 8A) of the Assessment Act, the next step for the Tribunal is to consider whether it is just and equitable to depart from the administrative assessment.
47.In deciding whether it is just and equitable, the Tribunal had regard to the matters set out in subsection 117(4) of the Assessment Act. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child over all commitments of the parents other than commitments necessary for self-support or the support of another person to which they have a duty.
Ms Grainger’s income, property and financial resources
48.Ms Grainger’s Statement of Financial Circumstances, dated 3 October 2022, shows that Ms Grainger’s weekly income is approximately $1,812 from her employment as [Manager] with [a company].[25] With regard to assets, the Statement of Financial Circumstances shows that Ms Grainger has assets totalling $199,500. This comprises, according to the Statement of Financial Circumstances: $8,000 in a bank account, $92,000 in investments, which Ms Grainger told the Tribunal she purchased with the proceeds from the sale of a property; $85,000 for a motor vehicle; $9,500 for a second motor vehicle (which appears to be [Child 1]’s motor vehicle); and household contents of $5,000. The Statement of Financial Circumstances also shows that at the time it was completed, Ms Grainger had $77,624 in liabilities;[26] and $140,367 in superannuation.[27] The Tribunal noted nothing out of the ordinary in Ms Grainger’ personal expenditure of $763 per week;[28] nor her household expenses of $1,517, which include $426 per week for rent.[29] The Tribunal asked Ms Grainger how she meets the shortfall of just under $470 each week between her income and total expenses. Ms Grainger told the Tribunal that she uses credit cards and sells shares to meet the shortfall in her expenditure.
49.Mr Grainger told the Tribunal that he believed that Ms Grainger’s share trading was not accurately reflected in her financial statements and that he believed that Ms Grainger was potentially hiding funds in online betting accounts. The Tribunal asked Ms Grainger to provide additional documents and written explanations regarding her share trading and betting accounts. Having reviewed the additional documents provided by Ms Grainger,[30] the Tribunal is satisfied that Ms Grainger’s share trading profits are accurately reflected in her income tax returns and that she does not hold more shares than she has declared to the Tribunal; and that Ms Grainger is not concealing funds in betting accounts.
50.The Tribunal also notes that Ms Grainger drew down $10,000 in superannuation funds in the 2020/21 financial year.[31] Ms Grainger told the Tribunal that she did this under the COVID hardship provisions, which, the Tribunal noted, unlike other extraordinary superannuation drawdowns, were exempt from income tax. The Tribunal, having reviewed Ms Grainger’s financial documents, concludes that Ms Grainger was not experiencing financial hardship in the 2020/21 financial year and finds it appropriate to add the $10,000 to Ms Grainger’s income for the 2020/21 financial year, as these were funds that Ms Grainger had the benefit of during that year.
51.The Tribunal concludes that Ms Grainger’s child support income for 2020/21 was $114,564. This comprised her taxable income of $69,569, as well as reportable fringe benefits of $34,995 and $10,000 from the superannuation drawdown.
52.For the 2021/22 financial year, the Tribunal concludes that Ms Grainger’s child support income was $86,997. This comprised $52,002 in taxable income, as well as reportable fringe benefits of $34,995.
53.Ms Grainger told the Tribunal that she has no other person whom she has a legal duty to support.
Mr Grainger’s income, property and financial resources
[25] Applicant documents, p A1.
[26] Applicant documents, p A5.
[27] Applicant documents, p A8.
[28] Applicant documents, p A7.
[29] Applicant documents, p A8.
[30] Applicant documents, pp A519–A537.
[31] Applicant documents, p A30.
As noted above, it is a well-established principle in the Court that the taxable income of a person who is involved in their own business may not be an accurate reflection of their earning capacity, income, benefits and financial resources for child support purposes (DJM and JLM;[32] Scott and Scott;[33] Carey and Carey).[34] Accordingly, the Tribunal has found, as above, that Mr Grainger’s child support income for the 2020/21 financial year was $46,883; and for the 2021/22 financial year it was $33,988.
[32] [1988] FamCA 97.
[33] (1994) FLC 92-457.
[34] (1994) FLC 92-489.
In addition, the Tribunal notes that in Humphries & Berry (SSAT Appeal),[35] the Court held that the requirement that parties make full and frank disclosures of financial matters in the Court, also applies to matters before the Tribunal. Further, the Court observed that while the Tribunal has powers to obtain information to clarify inconsistent, confusing and incomplete financial information, parties remain obligated to assist the Tribunal in coming to its determination with regard to a matter to which they are a party; and that it is open to the Tribunal to make findings in favour of the other party if it is not satisfied that proper disclosure has been made.
[35] [2008] FMCAfam 409.
Further, in K & M (No.2) the Court said:[36]
The law is clear: there is a duty in proceedings of this type on every party to provide full disclosure of their financial position. If full disclosure is not provided the Court is at liberty to make appropriate inferences and findings from the non-disclosure, and not to be unduly cautious in doing so when making findings or drawing inferences against the non-disclosing party.
[36] [2007] FMCAfam 920.
According to Mr Grainger’s Statement of Financial Circumstances, his average weekly income through self-employment is $1,122.23. The total expenses for Mr Grainger’s household, according to the Statement of Financial Circumstances provided by him, were approximately $2,959 per week.
Mr Grainger did not disclose his current partner’s income in the Statement of Financial Circumstances but the Tribunal notes that, according to Mr Grainger’s income tax return Mrs Grainger’s taxable income was $99,512 in the 2020/21 financial year;[37] and $132,239 in the 2021/22 financial year.[38] The Tribunal notes that Mrs Grainger has no legal duty in relation to [Child 1] but that Mrs Grainger’s capacity to make a significant contribution to the household expenses is relevant because when Mr Grainger was asked by the Tribunal why his household expenditure appeared to significantly exceed his income, he said that it was because Mrs Grainger makes a larger contribution to their household finances than he does.
[37] Second party papers, p B23.
[38] Second party papers, p B42.
At the hearing, the Tribunal commenced asking Mr Grainger some questions about his weekly expenses, as stated in the Statement of Financial Circumstances which appeared to have been completed by him and submitted to the Tribunal, as Mr Grainger was directed to do.[39] Mr Grainger told the Tribunal that he had based the expenses on a “formula” provided to him by [Mr A]. The Tribunal asked [Mr A] which formula he had advised Mr Grainger to use and [Mr A] told the Tribunal that he did not know what formula Mr Grainger was referring to. The Tribunal asked Mr Grainger to resubmit the weekly expenses section of the Statement of Financial Circumstances, showing exactly what the costs for him and [Child 1] were but Mr Grainger limited his corrections to one row (petrol expenses), rather than the entire table.[40]
[39] Second party papers, p B8.
[40] Second party papers, p B328.
The Tribunal concludes that as Mr Grainger was unable to explain how he came to include certain expense amounts in the Statement of Financial Circumstances, and then, when given the opportunity to resubmit the document failed to do so, it places little weight on that document.
Mr Grainger told the Tribunal that he has no other person whom he has a legal duty to support.
The needs of the child
In determining the proper needs of a child, it is necessary to have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Assessment Act). The Tribunal has considered the evidence of the parties relating to the needs of [Child 1]. As noted above, the Tribunal considered Reasons 2 and 3, which were raised by both Ms Grainger and Mr Grainger, in the context of whether it is just and equitable and otherwise proper to depart from the administrative assessment.
Reason 2: The special needs of the child
Mr Grainger told the Tribunal that [Child 1] had special needs in relation to orthodontic expenses, as well as her special talent for basketball. Ms Grainger acknowledged that [Child 1] has a special talent for basketball and that she and Mr Grainger had entered into an agreement with regard to [Child 1]’s orthodontic costs, prior to the child support case commencing.
Orthodontic expenses
Ms Grainger told the Tribunal that prior to the change in care on 21 July 2021, when she and Mr Grainger had 50:50 care of [Child 1] and there was no Agency collection arrangement in their child support case, she and Mr Grainger had agreed to split [Child 1]’s orthodontic expenses on a 50:50 basis. Ms Grainger said that she believed it was unfair that she was then required to pay orthodontic expenses in addition to child support, particularly as [Child 1] was in the above primary care of Mr Grainger without her agreement. The Tribunal acknowledges that Ms Grainger was unhappy about the change in care arrangements with regard to [Child 1] but this is not the subject of this review.
As shown in the Agency papers, the total cost of the orthodontics package was $8,980.[41] This was split equally, with Ms Grainger and Mr Grainger obligated to contribute $4,490 each. The Tribunal finds that this is a significant expense, so it did affect the cost of maintaining [Child 1].
[41] Agency papers, p 618.
In Mr Grainger’s case, a courtesy discount of $500 was applied, as [Child 1] was apparently “an additional family member” of the practice. This means that for Mr Grainger, the total cost of his agreement with the orthodontic practice was $3,990.[42] Documents show that after paying an initial deposit of $400, Mr Grainger was then obligated to make payments of $179.50 in 20 consecutive monthly payments, commencing 1 April 2021, with the full amount payable by 1 November 2022.[43] As shown in additional documents provided by Mr Grainger, however, a rebate of $1,018 was paid by BUPA, in relation to [Child 1]’s orthodontic treatment, on 13 May 2022.[44] This means Mr Grainger’s total out-of-pocket expenses for [Child 1]’s orthodontic treatment were $2,972.
[42] Agency papers, p 619.
[43] Agency papers, p 620.
[44] Second party documents, B333.
As shown in the hearing papers, Ms Grainger made monthly instalment payments of $204.50,[45] after, the Tribunal concludes, she made a deposit of $400. It appears no discounts nor rebates applied to Ms Grainger’s contribution. This means Ms Grainger’s total out-of-pocket expenses for [Child 1]’s orthodontic treatment were $4,490.
[45] Agency papers, p 568.
The total out-of-pocket expenses for [Child 1]’s orthodontic treatment therefore, were $7,462, and Ms Grainger paid approximately 60% of the out-of-pocket expenses and Mr Grainger paid approximately 40% of the out-of-pocket expenses. The Tribunal acknowledges that the orthodontic treatment appears to have commenced in April 2021 with the payments to [the clinic] commencing on 1 April 2021 and to have all been made by 1 November 2022, a 20-month period.[46] This means that in the three months prior to the case commencing, on a pro rata basis, Ms Grainger had expended $1,014 (a deposit of $400 and three $204.5 payments), leaving $3,476 of actual payments during the child support case period and Mr Grainger had expended $939 (a deposit of $400 plus three $179.50 payments), leaving $2,033 of actual payments during the child support case period. Removing these amounts of $1,014 and $939, from the total out of pocket expenses, leaves an amount of $5,509, which split equally between Ms Grainger and Mr Grainger is $2,755.
[46] Agency papers, p 620.
While the Tribunal finds that the cost of maintaining [Child 1] was significantly affected by her orthodontic costs, overall, the Tribunal finds that it is unfair that Ms Grainger has expended more than half of the orthodontic costs. Consequently, the Tribunal finds that Ms Grainger should be credited with $721.
Basketball expenses
As noted above, Ms Grainger and Mr Grainger agree that [Child 1] has a special talent for basketball. While decision-makers in the Agency did not find that Reason 2 applied for this purpose, the Tribunal has further information before it, that being that [Child 1] has been granted a basketball scholarship for [a college]. The Tribunal finds that [Child 1] does have a special talent for basketball. The Tribunal then considered whether [Child 1]’s special talent for basketball significantly affected the costs of maintaining her.
Mr Grainger submitted that, as a high-performance athlete, [Child 1]’s expenses, in relation to basketball, are higher than would usually be expected of a young person who engages in sport.
At the hearing, the Tribunal asked Mr Grainger about a list of costs he had provided in relation to [Child 1]’s basketball expenses which Mr Grainger has said he incurred during the period of the child support case (from 21 July 2021 to 16 November 2022).
Mr Grainger told the Tribunal that this was not a comprehensive list, so the Tribunal provided Mr Grainger with additional time to provide a list of any items that were not on that list. The list initially provided by Mr Grainger included the following:
Item
Expense
[Registration]
$128.39
[Registration]
$282.71
College Consulting
$1,200
[Report]
$300
Website development for [promotion]
$1,100
Basketball [Team] expenses
$950.35
Personal Training Zooms during COVID (7/21–02/22)
$638
Gym Membership
$534.20
Player Registration for Under [20s]
$340
Individual Workouts [weekly]
$686.60
New basketball shoes every 6 months
$609.99
Working with Children [Check]
$121
$6,891
With regard to the “Basketball [Team] expenses”, Mr Grainger acknowledged that Ms Grainger paid the other half of this expense. Ms Grainger also acknowledged at the hearing that this was the only expense she had incurred in relation to [Child 1]’s basketball. The Tribunal therefore, removed this expense from Mr Grainger’ expenses as outlined in the aforementioned table, as it had been met equally by Ms Grainger; this leaves a balance of $5,941 in expenses Mr Grainger said he incurred for [Child 1]’s basketball over the roughly 16-month period that the child support case was active (from 21 July 2021 to 16 November 2022).
Mr Grainger provided a written submission which stated that in addition to the aforementioned expenses, there were additional sessions of strength and conditioning training that [Child 1] had during the child support period, costing $660; and registration for [Child 1]’s selection in [a] Program for 2021, which cost $150, as well as registration for [Child 1]’s Monday night competition, costing $25; and “kitty money” for [Child 1]’s Under 20s competition, of $437. Mr Grainger also referred to an ankle brace that was purchased prior to the child support case commencing; as the purchase was made prior to the child support case commencing, the Tribunal has disregarded this expense.[47] These additions added expenses of $1,272, leaving a balance of $7,213.
[47] Second party documents, pp B326–B327.
Mr Grainger also told the Tribunal that the private health insurance taken out for his family, including him, his wife, his first child [name] and [Child 1], is top hospital and extras cover, costing $685.65 per month, because this is what is required by [Child 1]’s [team]. The Tribunal acknowledges that this is a significant expense but also notes that the other family members who are party to that health insurance policy enjoy a benefit from this health cover. The Tribunal concludes it is appropriate that one quarter of this expense be considered in relation to [Child 1]’s basketball expenses. Over the roughly 16-month period, this is an expense of $2,743. This leaves a balance of $9,956.
The Tribunal also considered maths tutoring expenses for [Child 1] in the context of her basketball career. Mr Grainger had submitted that [Child 1] had a learning difficulty in maths and required maths tutoring to improve her grades in mathematics.[48] As shown in the Agency papers, Mr Grainger submitted that he spent a total of $1,848 for maths tutoring for [Child 1]. Ms Grainger disputed that [Child 1] has a learning disability and the Agency decided that in the absence of a diagnosis of a learning disability, the tutoring expenses were not to be considered in relation to departing from the administrative assessment. At the hearing, Ms Grainger conceded that [Child 1]’s grades were a factor in determining whether she would be successful in obtaining a college scholarship for basketball. Having reviewed the evidence before it, the Tribunal is not satisfied that [Child 1] has a learning disability, as there is no medical evidence of [Child 1] having any such disability and therefore, is not satisfied that there is a special need. For this reason the Tribunal has disregarded this expense.
[48] Agency papers, p 379.
The Tribunal finds that [Child 1]’s basketball expenses do significantly affect the cost of maintaining her and accepts Mr Grainger’s submissions in relation to the amounts, most of which were supported by receipts and/or bank statements.
The Tribunal finds it is appropriate that 50% of [Child 1]’s basketball-related expenses are considered to be additional expenses incurred in relation to maintaining [Child 1]. This means the Tribunal finds it appropriate that Ms Grainger contribute an additional $4,978 towards the cost of maintaining [Child 1] (50% of $9,956).
Reason 3: The costs of maintaining a child are significantly affected by high costs of caring for, educating or training the child in the way both parents intended
There is no dispute that Ms Grainger and Mr Grainger agreed that [Child 1] was to be educated at [College 1] and that prior to the care changing, they had an agreement that they pay 50% of [Child 1]’s school fees each.
The Tribunal asked Ms Grainger about her financial contributions as they did not appear to be half of the total cost of [Child 1]’s school fees. Ms Grainger told the Tribunal that she was paying half of the school fees but that she had come to an arrangement with the school to make her payments over a longer period and that as at the date of the hearing, she had another eight payments to make.
The Tribunal concludes that there was a mutual intention that Ms Grainger and Mr Grainger share the cost of educating [Child 1] at [College 1] equally and that this expense significantly affected the costs of maintaining [Child 1]. This means that the Tribunal finds that Ms Grainger was obligated to pay 50% of [Child 1]’s school expenses. As there was an agreement between Ms Grainger and Mr Grainger that they should share the costs equally, and Ms Grainger has made her own arrangement with the school to pay her share of the fees directly, the Tribunal has decided to not depart on the basis of Reason 3.
Other expenses
Ms Grainger and Mr Grainger made various submissions regarding other costs in relation to [Child 1], specifically in relation to a motor vehicle, [Child 1]’s secondary school formal and a number of other items, such as clothing.
The Tribunal concludes that none of these expenses relate to the necessary supports required to maintain [Child 1], as these were all discretionary items, and has therefore disregarded those expenses.
Would there be resulting hardship from a departure from the administrative assessment?
Subsection 117(4) of the Assessment Act requires the Tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support.
Ms Grainger told the Tribunal that she does not believe she has the capacity to earn more income to provide more child support to Mr Grainger. She said that her income and expenses were neutral and she does not have the capacity to save.
Mr Grainger told the Tribunal that if he was to receive less child support, he would be unable to continue to fund some of [Child 1]’s expenses, such as her gym expenses.
Conclusion
88.The Tribunal concludes that it would be just and equitable to make a departure determination from the administrative assessment.
89.Noting that this is not a forensic accounting exercise, nor a major investigation, the Tribunal is required to make a decision based on the evidence before it.
90.As noted above, Ms Grainger raised concerns regarding Mr Grainger’s income and assets, making submissions that he had structured his finances in such a way to gain an advantage for the purpose of child support.
91.The Tribunal also notes that there is some ambiguity in relation to Mr Grainger’s household income and expenditure because the Tribunal is not convinced that Mr Grainger’s rental agreement with his father and his father’s company represents the market value of the rental property. Further, the Tribunal notes, Mr Grainger told the Tribunal that it is his wife who pays their rent, rather than him.
92.For the reasons outlined above, the Tribunal is also not satisfied that the weekly expenses as outlined in Mr Grainger’s Statement of Financial Circumstances are accurate, because he told the Tribunal that they were based on a formula provided by his accountant, and his accountant then said he did not know what formula Mr Grainger was referring to. Mr Grainger then failed to provide the Tribunal with a revised table showing his expenses and [Child 1]’s expenses.
93.For these reasons, the Tribunal decides that the preferred approach is to base the child support payable by Ms Grainger to Mr Grainger on the Australian Government’s “Costs of the Children” table,[49] and then make amendments according to [Child 1]’s particular needs, as outlined above.
[49] < shown above, the Tribunal concluded that for the 2020/21 financial year, Ms Grainger’s child support income was $114,564 and Mr Grainger’s 2020/21 child support income was $46,883. This is a total of $161,447. According to the Costs of the Children Table 2021 (which applies to the calendar year for 2021), for children aged 13+ years, where there is a combined child support income of $157,915 to $197,393, the costs of the child are $26,450 plus 9c for each $1 over $157,914. Applied in this case, the cost of [Child 1] is deemed to be a total of $26,768 and the amount to be contributed by each parent is half of this amount, which is $13,384. This was calculated as follows:
Combined child care income
$161,447
Difference between child support income and $157,915
$3,532
$3,532 x $0.09
$317.88
$26,450 + $318
$26,768
$26,768/2
$13,384
95.As shown above, the Tribunal concluded that for the 2021/22 financial year, Ms Grainger’s child support income was $86,997 and Mr Grainger’s 2021/22 child support income was $33,988. This is a total of $120,985. According to the Costs of the Children Table 2022 (which applies for the calendar year), for children aged 13+ years, where there is a combined child support income of $81,189 to $121,782, the costs of the child are $18,268 plus 12c for each $1 over $81,188. Applied in this case, the cost of [Child 1] is deemed to be a total of $23,044 and the amount to be contributed by each parent is half of this amount, which is $11,522. This was calculated as follows:
Combined child care income
$120,985
Difference between child care income and $81,188
$39,797
$39,797 x $0.12
$4,776
$18,268 + $4,776
$23,044
$23,044/2
$11,522
96.The Tribunal finds that the start date for the departure from the assessment should be 21 July 2021, because this is the first day that the Agency collection arrangement commenced and it should end on 16 November 2022, the last day of the child support case.
Considering these factors, the Tribunal has determined that it is just and equitable to depart from the administrative assessment as follows:
· For the period from 21 July 2021 to 31 December 2021, Ms Grainger’s annual rate of child support is varied to $13,384 per annum.
· For the period from 1 January 2022 to 16 November 2022, Ms Grainger’s annual rate of child support is varied to $11,522 per annum.
· Ms Grainger is to pay an additional sum of $4,257 to Mr Grainger ($4,978 in relation to the additional expenses incurred due to [Child 1]’s basketball minus a credit of $721 in relation the amount of orthodontic treatment Ms Grainger paid).
98.The above determination will result in an increase in the child support payable from the administrative assessment which was in place prior to the departure application. The Tribunal finds that while there is an increase in the amount of child support payable, the amount is within Ms Grainger’s means, based on her income and her expenses.
99.The Tribunal has carefully considered all of the income, resources, benefits and assets together with the commitments and liabilities of both parties to determine the above departure determination. In considering all of these factors, the Tribunal has taken the view that neither party will experience hardship as a consequence of this departure determination.
Is it otherwise proper to make a particular departure determination?
The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Subsection 117(5) of the Assessment Act sets out the matters that must be considered when deciding whether it would be ‘otherwise proper’ to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on the one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Assessment Act means that the Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the child may be affected by the level of child support. The Tribunal has concluded that it is otherwise proper in the circumstances to depart from the administrative assessment.
DECISION
The Tribunal sets aside the decision under review and in substitution the Tribunal decides as follows:
· For the period from 21 July 2021 to 31 December 2021, Ms Grainger’s annual rate of child support is varied to $13,384 per annum.
· For the period from 1 January 2022 to 16 November 2022, Ms Grainger’s annual rate of child support is varied to $11,522 per annum.
· For the period from 15 November 2021 to 16 November 2022, Ms Grainger’s child support is increased by the sum of $4,257 per annum.
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