Halsey and Halsey (Child support)

[2021] AATA 5186

Halsey and Halsey (Child support) [2021] AATA 5186 (4 November 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/PC021506

APPLICANT:  Mr Halsey

OTHER PARTIES:  Child Support Registrar

Ms Halsey

TRIBUNAL:Member M Martellotta

DECISION DATE:  04 November 2021

DECISION:

The tribunal sets aside the decision under review so that from 13 November 2020 to 30 November 2022 Mr Halsey’s adjusted taxable income for child support purposes is varied to $60,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart - decision under review set aside and varied

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. Mr Halsey and Ms Halsey are the parents of three children born [October 2017], [May 2015] and [May 2013]. Services Australia – Child Support (the Agency’s) record is that the children are in Mr Halsey’s 18% care and Ms Halsey’s 82% care.

2. On 13 November 2020 Ms Halsey applied for a change of assessment on the ground of Reason 8A which refers to a parent’s income, financial resources and property. At that point of time, the administrative assessment in place was that for the period:

   ·10 November 2020 to 30 December 2020 Mr Halsey was assessed to pay an annual rate of child support of $1,173. This was based on a 2019/20 provisional adjusted taxable income (ATI) of $31,360 and Ms Halsey’s 2019/20 ATI of $34,588.[1]

   ·31 December 2020 to 31 October 2021 Mr Halsey was assessed to pay an annual rate of child support of $507. This was based on a 2019/20 provisional ATI of $31,360 and Ms Halsey’s 2019/20 ATI of $34,588.[2]

   [1] In this period Mr Halsey had 0% care of the children.

   [2] In this period Mr Halsey had 18% care of the children.

1. The Agency found the ground was established and decided to vary the assessment.[3] For the period 13 November 2020 to 31 October 2021 Mr Halsey’s ATI was varied to $35,096. 

   [3] 9 February 2021

2. Mr Halsey objected to the decision. The Agency decided to vary Mr Halsey’s ATI to $70,000 for the period 13 November 2020 to 30 November 2022. This increased Mr Halsey’s annual liability to $6,804 and created arrears of $2,780.

3. The tribunal convened a telephone directions hearing attended by the parental parties following which it issued directions.  A hearing was held on 4 November 2021.  Mr Halsey and Ms Halsey participated by conference telephone and they each gave their evidence on affirmation.

4. The following documents were provided.  Agency documents (434 pages); Mr Halsey (A1-A124) and Ms Halsey (B1-B20).

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. Child support legislation is interpreted by the Agency with the aid of the Child Support Guide (the Guide). The tribunal is not bound by law to apply the policy as set out in the Guide but, provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it.[4]

   [4] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

3. The issues for the tribunal to determine in this case are:

   ·      Does a ground for departure exist? If so,

   ·      Would it be just and equitable as regards the children, the liable parent, and the carer entitled to a child support determination to depart from the administrative assessment of child support? And

   ·      Is it otherwise proper to make a departure determination?

CONSIDERATION

Issue 1 – Is there a ground to depart from the administrative assessment?

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the ATI, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (“the Registrar”) will utilise a parent’s ATI as assessed by the Australian Taxation Office (ATO) for the last relevant year of income.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and as noted, establishes a three-step process.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[5] In this matter the only ground contested at hearing was whether a ground for departure is established pursuant to Reason 8A.

Reason 8A – Income, property and financial resources of the parties

[5] The phrase “special circumstances of the case” is not defined in the Act. However, the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC 92-279). Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Act relating to the 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, property and financial resources of either parent.

Mr Halsey

1. Mr Halsey submits that there is no ground to depart from the administrative assessment.  He says that his only relevant income for child support purposes is that which is reflected in his personal income tax returns.

2. Mr Halsey provided the following evidence:

   a)He earns his income as a [Occupation 1].  He is self-employed and operates as a sole trader under the business name [Business name 1].  He has about 16 years of experience in the trade.

   b)All his work is invoiced and ‘on the books’.  However, he has in the past done work for cash but that would have been a long time ago; the last occasion being a job he did for Ms Halsey post separation at a discounted rate about three years ago. He said that he did not declare that income in his return for the relevant financial year.

   c)He essentially operates the business through a business bank account.  That account receives all income from the business, and he pays out work-related expenses from that same account.

   d)He previously operated two other personal accounts and would transfer money from his business account into those accounts and then back again depending on income flow and personal needs.  He no longer does this and no longer pays himself a regular wage, he just accesses the business account on an as-needs basis.

   e)He usually works full time four to five days a week, eight hours a day. He has recently decided to reduce his days of work to provide support to an adult child who had a work accident.  He also has reduced his work due to back issues which is why he sub-contracts out.   Mr Halsey initially told the tribunal that he did this in order to ensure that his son attended appointments.  He later clarified that his son was an inpatient at hospital.

   f)He has re-partnered and lives with his partner and his son (from another relationship). His partner often meets some of his expenses and costs.  They live at his parents’ property.  They are in their own self-contained unit on the property. The arrangement is that he pays them rent ($250 per week) when he can afford to do so. He does not pay any costs for utilities such as electricity, water or gas. He is lucky that he has good parents who support him. Mr Halsey initially stated that in the last six months he has paid his parents rent of $1,000 each month. He then stated that he might have missed one month. If he misses out on paying rent, he does not have to make it up. According to his bank statements for the period December 2020 to August 2021 Mr Halsey identified one occasion in that period in which he paid his parents rent of $2,000.  He agreed that this would be a financial resource.

   g)His parents and partner had lent him money (interest free) in March 2020 to buy a new work vehicle which he values at $40,000. His partner has paid to refurbish and update the kitchen in their home. He intends to pay them back this money he owes, about $33,000; he is not sure how much he has paid them back as he has nothing written down. He will try to pay them back over three to four years.  He said this is not a gift and not a resource. His parents bought the car for him for $46,000 and he contributed money from another car.

   h)He does not derive any personal benefit from his business expenses as those expenses only reflect business use of expenses such as the mobile phone and transport.  The business expense for depreciation is a book entry and he does not actually set aside that amount. He agreed that this would count as a financial resource for child support purposes.

   i)He has care of another dependent child (aged 15) on a full-time basis.

3. Documents provided to the tribunal included the following:

   a)Bank statements for three accounts ending in the following numbers 4134 and 0984 appear to be used as personal accounts and an account ending in the number 0544 appears to be the account mainly utilised for the business.

   b)2020/21 personal income tax return which records total income of $57,470, personal deductions ($240) and business expenses of $33,186 resulting in an ATI of $24,044.

   c)In the 2020/21 personal income tax return business-related expenses included sub-contracting costs; depreciation ($6,885) and other expenses which were predominantly made up of tools, materials and hardware ($15,455). Mr Halsey confirmed in his evidence that he would invoice clients for materials relevant to the project and would be reimbursed for those costs; this is confirmed by the invoices he provided.

   d)Invoices issued by Mr Halsey for projects.  The tribunal was able to correlate these amounts with deposits made into his business bank account.

   e)According to Agency documents, Mr Halsey’s taxable income has ranged between about $40,000 down to $25,000 since the 2016/17 financial year.

4. According to his Statement of Financial Circumstances Mr Halsey says that his main assets include his 2021 [vehicle] and a 2018 [motorbike] together with personal items he says he owns assets of about $54,800.  He has no superannuation and savings of about $2,800.

Ms Halsey

1. Ms Halsey told the tribunal that Mr Halsey’s tax return never reflects his actual income which she submits is in excess of $70,000.  She submits that:

   a)Mr Halsey benefits from cash jobs which he does not declare in his returns; she knows this because prior to separation he conducted his business in this manner.

   b)She also refers to media posts and spending as evidenced by his bank account which she says demonstrates a lifestyle that cannot be supported by someone who is earning an income of about $25,000. 

   c)Mr Halsey benefits from financial support he receives from his partner and his parents. He also receives payments in kind from one of his clients who is a friend of many years.

   d)Mr Halsey’s business expenses are inflated.

2. In terms of her own circumstances Ms Halsey provided the following evidence:

   a)She works part time in retail.  This is her only source of income other than family assistance payments and social security payments.

   b)She and her mother are joint owners of the home where she lives with the children. That property is valued at about $400,00 and her share of the mortgage is about $125,000. 

   c)She has no superannuation and her other asset is her car valued at $18,000.

Conclusions

1. Mr Halsey earns his income as a sole trader.  He is an experienced [Occupation 1] and has operated his [business] for a number of years. 

2. As identified in the Guide:[6]

   Low income from a family business

   A parent who receives a low taxable income from a family business may have access to additional financial resources …

   [6] 2.6.14

   Self-employment, business expenses & losses

   A parent may be involved in a business as a sole trader in the person's name or under a registered business name. A parent who operates a business as a sole trader is personally liable for all business debts and entitled to all business profits, is required to declare all income from the business in their personal tax return, and is responsible for any tax payable on the business income. A sole trader may or may not pay themselves a wage from the business. Alternatively, they may take drawings whereby goods or money are withdrawn from the business profit for personal purposes.

   A business may be able to deduct certain expenses from income for tax purposes and as a result legitimately may have a reduced income or may even run at a loss. These deductible expenses can result in a child support assessment that does not take into account the full financial resources available to the parent. In these cases, assessing child support on the basis of taxable income can result in an unjust and inequitable level of child support.

   When considering business expenses and losses in a change of assessment, it will be necessary to examine the full financial position of the business to determine any personal financial resources available to the parent from the business.

   ….

   If the tax deductible business expenses provide a personal benefit to the parent, this may make the child support assessment unjust and inequitable. The Registrar will consider whether the parent has a greater financial capacity than is indicated by their taxable income, either as a direct result of the deductions or of having certain personal costs defrayed by being tax deductible.

   ….

   A claim for depreciation can mean that a parent has financial resources available to them that are not necessarily reflected in their taxable income or the resources of the business. In cases that involve depreciation, the Registrar will determine whether receiving a benefit through claiming depreciation expenses results in a parent having greater financial resources or income than their taxable income would indicate …

3. According to authorities a financial resource refers to something that is not property but from which a financial benefit is or may be gained. The term is to be broadly defined and refers to any financial benefit that would enhance the capacity of a parent to provide a proper level of support for their children.

4. In this matter the tribunal does not accept Mr Halsey’s submission that the child support assessment should only utilise his income as assessed by the ATO in his last relevant return. Instead the tribunal considers the following financial resources as available to Mr Halsey:

   a)Net income from his business of $24,044.

   b)Depreciation of $6,885.

   c)Whilst Mr Halsey claims over $15,455 as a business expense for materials, tools and hardware it is apparent that he is reimbursed for materials. This is confirmed by details in the invoices he provided. Based on those invoices the tribunal is of the view that an amount of about $8,000 should be allocated as income.

   d)Mr Halsey in effect lives rent free in the property owned by his parents.  On the basis of a rental of $250 per week this amounts to an annual figure of $13,000 making allowance for an occasional rental payment. The tribunal is of the view that Mr Halsey has a financial resource of about $10,000 from this arrangement.

   e)Mr Halsey also does not pay for any utilities at the property (such as water, electricity or gas). The tribunal assesses that on average these costs would come to about $3,000 per annum.[7]

   f)Mr Halsey has also benefited from interest free loans from his parents and partner which has allowed him to purchase a new vehicle (a total of $33,000). There was no evidence of any repayment of these amounts. Based on a bank fixed interest car loan rate of 6.49% over five years Mr Halsey would save about $1,152 per year.[8]

   [7] Australian Utility Costs – Canstar Blue

   [8] Car Loan Calculator | Westpac

5. Overall, the tribunal concluded that utilising the above amounts, Mr Halsey has access to income and financial resources of at least $53,000. In coming to this amount the tribunal did consider submissions made by Ms Halsey that Mr Halsey regularly receives a considerable amount of cash income which is not reflected in his tax returns.  Whilst Mr Halsey agreed that he had many years ago done a cash job for Ms Halsey at a reduced rate there was no other cogent evidence to support such a finding of fact.

6. In terms of Ms Halsey the tribunal is satisfied that apart from Government payments she earns her income as a PAYG employee and that her income is that as reflected in her annual income tax returns. Whilst Mr Halsey submitted that Ms Halsey has benefitted from gifts made by someone she was dating; in the tribunal’s consideration the evidence does not support a conclusion that this was a regular aspect of her financial circumstances.

7. As noted, the administrative assessment in place at the time of Ms Halsey’s application utilised a provisional ATI of $31,360.  The tribunal has concluded, however, that Mr Halsey has access to income and financial resources of about $53,000.

8. Utilising this in the assessment in place of the amounts utilised in the administrative assessment in place at the time of the change of assessment application, would result in a significant change in the level of child support payable by Mr Halsey.  His annual liability would increase from about $507-$1,173 to about $4,800 per annum.[9] For this reason, the tribunal concludes that a ground for departure exists because in the special circumstances of the case, application of the provisions of the Act relating to the 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 children.

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

[9] This takes into account a relevant dependent child in his care

1. As the tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the tribunal is to consider whether it is just and equitable as regards the children and the parental parties to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters set out in subsection 117(4) of the Act which is discussed in the following paragraphs.[10]

Proper needs of the children

[10] The tribunal notes the Federal Magistrates Court case of Tyagi & Meares [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4) the section need not be “slavishly followed, each of the relevant factors listed in … should be considered”.

1. In determining the proper needs of the children it is necessary to have regard at a broad level to the manner in which the children are being, and in which the parents expect the children to be, cared for, educated or trained, and also any other needs of the children. No specific submissions were made at hearing in relation to this. On the basis of the presented evidence and submissions the tribunal concluded that there was no basis to further vary the assessment for this reason.

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

1. In having regard to the income, earning capacity, property and financial resources of the children the tribunal must disregard any entitlement of the children or the carer entitled to child support to an income tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act).

2. There was no evidence presented to the tribunal that the children have any income or unused earning capacity that needs to be taken into account in the child support assessment and as such the tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

Other party receiving money, goods and property for the benefit of the children

1. Neither party made submissions in this regard; as such the tribunal concludes there is no basis for any adjustment pursuant to this consideration.

The income, property and financial resources of each parent who is a party to the proceeding

1. In this matter the tribunal has concluded that Mr Halsey has income and financial resources of $60,000 and that Ms Halsey’s relevant income and financial resources are that as reflected in her ATO assessed personal tax return.

2. Neither party owns significant assets.  Mr Halsey resides in his parents’ property and his main assets consist of a vehicle and motorbike.  Ms Halsey’s main asset is the home where she lives with her children, which is jointly owned with her mother.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the 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 earning capacity of either parent (subparagraph 117(2)(c)(ib)).

2. Whilst Mr Halsey gave evidence that he has recently reduced his hours in order to spend more time with an adult son who is in hospital, Mr Halsey’s evidence regarding his income was based upon working full time. The tribunal was satisfied that there was no basis to consider earning capacity in any proposed departure. In this regard neither party made specific submissions.

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain

1. No specific submissions were made at hearing. The tribunal is satisfied taking into account the relevant costs of self-support utilised in the assessments and based upon evidence provided at hearing that neither party has extraordinary costs of self-support that are relevant to the assessment.

Any hardship that would be caused

1. Mr Halsey says that the departure made by the objections officer has caused him financial hardship. He owes arrears of child support. Ms Halsey says that Mr Halsey has been able to avoid paying a proper rate of child support due to the way he organises his business. She says that this has caused her and the children hardship.

Proposed departure

1. The tribunal has concluded that for the purposes of the child support assessment it is just and equitable that Mr Halsey should be assessed on an amount of $60,000 and Ms Halsey should continue to be assessed on her ATO assessed ATI. This will result in an annual rate of child support of about $5,000 per annum or $94 per week. It will also result in some adjustment to the amount of arrears created by the objection decision.

2. In coming to this conclusion the tribunal notes the following:

   a)Mr Halsey does not have significant costs of self-support.  He benefits from a living arrangement which means that he is not obliged to pay rent or meet utility costs.

   b)It is also apparent that in addition to the above Mr Halsey receives financial support from his parents and partner.  Mr Halsey made the observation that his parents are very supportive of him in this regard.  A review of his bank accounts shows a level of discretionary spending which includes regular items such as eating out and entertainment. Mr Halsey also provided evidence that his partner has paid for a kitchen renovation in the property owned by his parents.

   c)Overall tribunal was also not convinced by Mr Halsey’s evidence that some of the financial assistance provided to him by his parents and partner are loans with an expectation that they will at some point be repaid.

   d)The tribunal considers that the evidence suggests that Mr Halsey has the benefit of financial resources provided to him from time to time which are not reflected in the assessment.

3. In terms of the period of any departure determination, the tribunal notes that Ms Halsey made her change of assessment application on 13 November 2020. The tribunal is unable to make any departure for a period greater than 18 months prior to that date.

4. At hearing neither party made specific submissions on the period of any departure. The tribunal is of the view that the departure should commence as of the date of Ms Halsey’s application and should conclude on 30 November 2022.  The tribunal considers this just and equitable in all the circumstances and allows the parties some level of consistency.

5. The tribunal proposes changing the determination so that for the period 13 November 2020 to 30 November 2022 Mr Halsey’s ATI is varied to $60,000. The tribunal is satisfied that a departure in these terms is in the circumstances just and equitable. The tribunal is satisfied that on the presented evidence and information provided in his Statement of Financial Circumstances that Mr Halsey has the capacity to meet a child support liability in these terms.

Issue 3 – Would it otherwise be proper to make a particular departure determination?

1. The final step is for the tribunal to determine whether it is “otherwise proper” to make a particular departure determination. Subsection 117(5) of the Act requires the tribunal to take into account whether the proposed departure is proper in the context of public interest and welfare expenditure of the community. A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should not be unnecessarily abrogated to the public welfare system.

2. According to her Statement of Financial Circumstances Ms Halsey is in receipt of family tax benefit and the proposed departure from the administrative assessment may impact upon any entitlement to government assistance. In this case the tribunal finds that the requirements under paragraph 117(5)(a) of the Act are met. The tribunal concludes that it is otherwise proper to depart from the administrative assessment.

DECISION

The tribunal sets aside the decision under review so that from 13 November 2020 to 30 November 2022 Mr Halsey’s adjusted taxable income for child support purposes is varied to $60,000.