Guildenstern and Ladislaw (Child support)

[2023] AATA 2129

Guildenstern and Ladislaw (Child support) [2023] AATA 2129 (23 June 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/BC024656

APPLICANT:  Mr Guildenstern

OTHER PARTIES:  Child Support Registrar

Ms Ladislaw

TRIBUNAL:Senior Member S De Bono (Presiding)

Senior Member J Longo

DECISION DATE:  23 June 2023

DECISION:

The Tribunal sets aside the decision under review and, in substitution, refuses the application to depart from the administrative assessment.

CATCHWORDS

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

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

REASONS FOR DECISION

BACKGROUND

1. The issue to be considered in this application is whether there is a reason to change the administrative assessment of child support and, if so, whether it is just and equitable and otherwise proper to do so.

2. Ms Ladislaw and Mr Guildenstern are the parents of three children, [Child 1], [Child 2] and [Child 3]. There has been a child support assessment in place since 9 December 2021 and Services Australia (Child Support) has collected child support since that date. [Child 1] is recorded as being in the greater than primary care of Ms Ladislaw, [Child 2] is recorded as being in the primary care of Ms Ladislaw and regular care of Mr Guildenstern, and [Child 3] is recorded as being in the shared care of both parents.

3. Prior to the departure application, the administrative assessment of child support was as follows:

   ·      For the period 9 December 2021 to 10 February 2022 Mr Guildenstern is assessed to pay $5,879 on the basis of an adjusted taxable income (ATI) of $74,640 for Mr Guildenstern and the derived income of $161,743 for Ms Ladislaw (formerly [name]).

   ·      For the period 11 February 2022 to 8 March 2023 Mr Guildenstern was assessed to pay an annual rate of child support of $1,949 based on his 2021 ATI of $74,640 and the derived income for Ms Ladislaw of $161,743.

4. On 28 January 2022 Ms Ladislaw lodged a departure application on the basis that, in the special circumstances of the case, the income, property and financial resources of Mr Guildenstern (Reason 8A) were not reflected in the administrative assessment of child support. On 28 January 2022, Child Support made the following departure determination and departed from the administrative assessment as follows:

   ·      For the period 28 January 2022 to 27 June 2023 the ATI of Mr Guildenstern is set at $112,547.

5. On 23 May 2022 Mr Guildenstern lodged an objection to this decision. On 19 August 2022 an objections officer set aside the departure determination and made the following departure determination:

   ·      For the period 28 January 2022 to 30 November 2024 Mr Guildenstern’s ATI is set at $116,253.

6. On 14 September 2022 Mr Guildenstern sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal). Directions were issued to both parties on 31 March 2023. On 1 June 2023 a telephone hearing was held in which Ms Ladislaw and Mr Guildenstern gave evidence under affirmation. The Tribunal considered the documents and information provided to the parties prior to the hearing, as well as the oral evidence of Ms Ladislaw and Mr Guildenstern.[1] The tribunal deferred its decision to consider the relevant aspects of the material and evidence which will be referred to in the Tribunal’s Reasons for Decision.

CONSIDERATION

[1] Subsection 37(1) Statement and Documents provided by Child Support under the Administrative Appeals Tribunal Act 1975 (pages 1–296), which the Tribunal refers to as the hearing papers; Mr Guildenstern’s documents (A1–A492); and Ms Ladislaw’s documents (B1–B81).

1. 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) Act 1989 (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.

2. Section 98C of the Assessment Act establishes a three-step process to be satisfied: that there is a ground for departure; that it is just and equitable to depart; and that it is otherwise proper to make a departure determination. Once satisfied, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

Reason 8 – The income, property and financial resources of Mr Guildenstern

1. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure from an administrative assessment arises as follows:

   (c)that, 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;

2. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

3. Mr Guildenstern disagreed with the departure determination that his income should be set at $116,253 for the period 28 January 2022 to 30 November 2024 and thought it should be based on his ATI for the financial year ending 30 June 2022, which was the salary paid from the company.

[Business 1]

1. Mr Guildenstern is the director and sole shareholder of [Business 1] (the company), which primarily [provides services 1] to [market 1], including the [specific services]. He said the company does general [related services 2] for [market 1] which includes [specific services], but not [other specific services]. Mr Guildenstern said he has been [an occupation 1] for 11 years. The company employs a staff member in administration a couple of days a week, as well as 2 qualified [occupation 1s] and 3 apprentices at various year levels.

2. Mr Guildenstern said his role in the company is primarily managing the work for the company, which includes meeting clients, quoting for work and running the business. He operates from his residential home address and rents a storage facility through [a named provider] to store equipment.

3. Mr Guildenstern said the business was quiet in the first half of the financial year ending 2022 due to the Queensland floods and it operated at a loss for the whole of the 2022 financial year.

4. The financial statements for the company for the financial year ending 30 June 2022 shows that the company operated at a loss of $106,854.[2] This was a change from retained profits from the financial year ending 30 June 2021 of $50,371.[3] Total trading income increased from $936,541 in the financial year ending 2021 to $1,405,904 at the end of the 2022 financial year, but the costs of sales also increased from 2021 to 2022.[4]

   [2] Page A18 of Mr Guildenstern’s documents.

   [3] Page A18 of Mr Guildenstern’s documents.

   [4] Page A19 of Mr Guildenstern’s documents.

5. The company showed a trading profit of $427,408 for the 2022 financial year which is an increase from $356,377.58 on the 2021 financial year.[5] The company received an apprentice wage subsidy of $31,481 which was an increase from the 2021 financial year because the company took on a first-year apprentice. The company also received a [grant] of $10,000 which was a COVID-19 business support grant paid by the Queensland Government.[6]

   [5] Page A20 of Mr Guildenstern’s documents.

   [6] Page A19 of Mr Guildenstern’s documents.

6. In terms of expenses the company showed evidence of a bad debt of $85,646 which had been written off in the 2022 financial year.[7] Mr Guildenstern said this was from the 2021 financial year when the company had nine jobs with the same [business] to [provide services 1]. [That business] had paid for 6 of these jobs but there remained 3 outstanding payments. The Tribunal asked Mr Guildenstern if he had undertaken recovery for the remaining outstanding payments. Mr Guildenstern said he had contacted [a named agency] but had not proceeded further with recovery.

   [7] Page A20 of Mr Guildenstern’s documents.

7. Further expenses of the company included plant depreciation of $63,374 for the 2022 financial year, which had increased from $22,569 in the 2021 financial year. The Tribunal asked Mr Guildenstern about this and he thought this was the instant write off for the purchase of the [Model 1] motor vehicle.[8] This was reflected in the total increase in the accumulated depreciation which increased from $77,904 in the 2021 financial year to $137,859 in the 2022 financial year due to the hire purchase of the [Model 1].

   [8] Page A24 of Mr Guildenstern’s documents.

8. Further expenses included $74,412 in directors’ salaries which Mr Guildenstern confirmed were payments made to him.[9] Wages increased from the 2021 to 2022 financial years which were accounted for by taking on a new apprentice in the 2022 financial year; employer contribution superannuation payments also increased for these reasons.[10]

   [9] Page A20 of Mr Guildenstern’s documents.

   [10] Page A21 of Mr Guildenstern’s documents.

9. Mr Guildenstern told the Tribunal that the company runs four vehicles, one for himself – the [Model 1] – and one for each of the [occupation 1s] he employs and for use by the apprentices – three [Model 2] a dual cab and two single cab vehicles. Mr Guildenstern also has a trailer. Mr Guildenstern said the increase in the vehicle costs from 2021 to 2022 was due to an increase in vehicle numbers rather than increased use, Mr Guildenstern said he had 3 vehicles in 2021 but increased to 4 vehicles after another [occupation 1] came to work for him, but he left after a couple of months of employment. The Tribunal notes that motor vehicle expenses increased from the 2021 to 2022 financial year but did not seem to be out of the ordinary and reflected increased income from trading, and would be consistent with the addition of a fourth vehicle for work use.

10. Mr Guildenstern said the hire purchase of the [Model 1] is $1,265 monthly with a balloon payment at the end of 5 years. Mr Guildenstern said he uses the vehicle for both business and personal use and estimates the split between business and personal use to be 85%/15%. In relation to the split of the vehicle for business and personal use, Mr Guildenstern said he often works from home and uses the vehicle to take his children to and from school. Mr Guildenstern did not think this vehicle was utilised more than 15% for personal use.

11. Mr Guildenstern said he loaned the company $33,973 but said this was a loan to the company from funds borrowed from his current partner.[11] He said this was to keep the cash flow in the company to meet the company’s financial liabilities for the 2022 financial year.

    [11] Page A24 of Mr Guildenstern’s documents.

12. The cash assets for the company reduced from $54,545 in 2021 to $25,906 in the 2022 financial year. This showed Mr Guildenstern had to draw down on the retained profits from the company which he said was to keep the company viable.[12] No dividends were paid in the 2022 financial year and the company had loans of $117,690 which included bank loans, and a loan for the purchase of the [Model 1], and the hire purchase of one of the [Model 2] vehicles.[13]

    [12] Page A25 of Mr Guildenstern’s documents.

    [13] Page A35 of Mr Guildenstern’s documents.

13. The financial statements showed the company operated at a loss of $106,854 for the 2022 financial year when compared with a profit of $50,371 for the 2021 financial year. The financial reserves for the company in 2021 of $66,464 were depleted in the 2022 financial year because the business operated at a loss.

Conclusions regarding the income of the company

1. The Tribunal is satisfied that the company operated at a loss for the 2022 financial year as indicated by the financial statements. The Tribunal accepted the bad debt write off of $85,646 as money Mr Guildenstern is unlikely to recover, even if this amount were not accepted, then there would still be an operating loss for the company. There exist no liabilities of the company which the Tribunal considered could be considered a financial resource available to Mr Guildenstern, apart from a proportion of the running costs of the [Model 1]. The Tribunal concluded that the wages paid to Mr Guildenstern of $72,412 is the income he received from the company for the financial year ending 2022.[14]

   [14] Pages A20 and A71 of Mr Guildenstern’s documents.

2. Mr Guildenstern has the benefit of running the cost of the [Model 1] through the business and he estimated that 15% of the use of the [Model 1] was for personal use.

3. For the financial year ending 2022 the costs of running the 4 vehicles totalled $35,898.44.[15] The cost is then divided by 4 because there are four vehicles, this means each vehicle had a running cost of $8,974.61 for the financial year ending 2022. Accordingly, the Tribunal determines that the running costs of the [Model 1] though the business totals $8,794.61, 15% of this amount is $1,346.19 which is the financial benefit Mr Guildenstern has for the use of the [Model 1] for personal use. Accordingly, the Tribunal accepts this estimation, and this amount should be added back to the total of the income paid to Mr Guildenstern.

Financial resources available to Mr Guildenstern

[15] Page A21 of Mr Guildenstern’s documents.

1. Mr Guildenstern said the [Financial Institution 1] Card ending in account [number] is the card used solely for the business. The statements for the period 16 January 2022 to 9 January 2023 shows primary use is for business purposes and the Tribunal accepted Mr Guildenstern’s evidence that this account is used primarily for business purposes.[16]

   [16] Pages A125 to A213 of Mr Guildenstern’s documents.

2. The [Financial Institution 2] Visa business statement ending in account number 2L52 for the period 31 January 2022 to 31 December 2022 shows transfers from Mr Guildenstern’s personal account [number]. This account does not seem to be the main business credit card used by Mr Guildenstern but nor does it seem to be used for personal use.[17]

   [17] Pages A214 to A252 of Mr Guildenstern’s documents.

3. The [Financial Institution 2] Business Cheque account ending in account [number] for the period 7 February 2022 to 31 December 2022 shows wages and business expenses paid from this account. A review of these bank statements satisfies the Tribunal that this account is primarily used for business purposes.[18] The [Financial Institution 2] Saver account ending in account number [number] for the period 4 January 2022 to 23 January 2022 shows payment of superannuation.[19]

   [18] Pages A254 to A304 of Mr Guildenstern’s documents.

   [19] Pages A306 to A311 of Mr Guildenstern’s documents.

4. The [Financial Institution 3] statement ending in account number [number] for the period starting 4 January 2022 shows deposits of $75,019 into this account and withdrawals of $75,019 for the period 9 January 2022 to 8 July 2022.[20] Mr Guildenstern said this joint account was for joint expenses and he and his current partner keep their finances separate. Mr Guildenstern said the joint expenses includes payments on the home loan, household utilities and shared expenses.

   [20] Pages A313 to A341 of Mr Guildenstern’s documents.

5. The [Financial Institution 2] Access Statement ending in account number [number], which is in Mr Guildenstern’s name, for the period 2 January 2022 to 20 December 2022 shows this is the account that Mr Guildenstern’s wages are paid into. There are also deposits from [Ms A] who is Mr Guildenstern’s current partner.[21] Mr Guildenstern said [Ms A] has also loaned him money for everyday expenses. The Tribunal accepts that no other business income was deposited into this account except Mr Guildenstern’s wage from the company.

   [21] Pages A362 to A408 of Mr Guildenstern’s documents.

6. Further perusal of other expenses incurred by Mr Guildenstern through his [Financial Institution 4] credit card ending in account number [number] for the period 13 December 2021 to 12 January 2022 showed regular repayments and these repayments seem to be paid from the [Financial Institution 3] joint account. The Tribunal is satisfied that the bank statements do not show financial resources available to Mr Guildenstern from the business, but rather extra financial resources which are provided to Mr Guildenstern by his current partner.

7. Mr Guildenstern said he rolled over his superannuation with [Superannuation 1] to [Superannuation 2], Mr Guildenstern said he made no additional contributions to superannuation for the 2022 financial year. This is supported by the evidence contained in the material before the Tribunal.[22] Mr Guildenstern said he changed from [Superannuation 1] to [Superannuation 2] as the insurance was cheaper than [Superannuation 1].

   [22] Page A489 Mr Guildenstern’s documents.

8. In Mr Guildenstern’s Statement of Financial Circumstances (SOFC) he indicates average weekly income of $1,615 which is $83,980 gross annually.[23] He has a home loan of $475,000 which is 50% of his share of the principal home, which he shares with his current partner, with a current balance of $323,379.[24] Mr Guildenstern has $340,559 of personal liabilities. Mr Guildenstern indicated total weekly expenses of $1,417 or $73,684 annually which he said is shared between himself and his partner.[25] There were no expenses which the Tribunal concluded were out of the ordinary. In terms of Mr Guildenstern’s personal income tax return for the financial year ending 2022, it indicates gross income of $72,412,[26] and an ATI of $66,958.[27]

   [23] Page A3 of Mr Guildenstern’s documents.

   [24] Page A5 of Mr Guildenstern’s documents.

   [25] Page A8 of Mr Guildenstern’s documents.

   [26] Page A71 of Mr Guildenstern’s documents.

   [27] Page A72 of Mr Guildenstern’s documents.

Conclusions regarding the income, property and financial resources available to Mr Guildenstern

1. The Tribunal finds that while Mr Guildenstern has the benefit of a business structure the Tribunal did not conclude that Mr Guildenstern had access to income or financial resources which were not reflected in his personal or the company’s tax returns for the 2022 financial year.

2. The Tribunal determined that Mr Guildenstern has a financial benefit from using the vehicle run through the company for his personal benefit and accordingly has determined this equates to a financial benefit of $1,346.19 for the 2022 financial year.

3. The Tribunal is satisfied that this represents an ATI and financial resources available to Mr Guildenstern of approximately $68,304. Mr Guildenstern has stated in his SOFC that his income is $1,615 weekly, which is an annual income of $83,980.

4. The current administrative assessment in place prior to the departure determination assessed Mr Guildenstern on his 2021 adjusted taxable income of $74,640 with an annual rate of child support payable by Mr Guildenstern of $1,949, this is a weekly amount of $37.40. The difference between the administrative assessment of child support being based on an annual income of $83,890 (which is a child support liability of approximately $3,701 annually or $71.17 weekly) and an annual income of $74,640 (the income in place prior to the departure determination), is a difference of $33.77 weekly. If the ATI of $68,304 was used in the administrative assessment (the income the Tribunal has determined) the annual child support payable by Mr Guildenstern would be $580 annually or $11.12 weekly.

1. Accordingly, the Tribunal is satisfied that these circumstances are not circumstances which are out of the ordinary or uncommon to make it unjust or inequitable to determine the level of financial support to be provided on the basis of the administrative assessment of child support. The Tribunal has determined a ground for departure in accordance with subparagraph 117(2)(c)(ia) does not exist.

DECISION

The Tribunal sets aside the decision under review and, in substitution, refuses the application to depart from the administrative assessment.