Harmann and Burnett (Child support)

Harmann and Burnett (Child support) [2017] AATA 2904 (8 November 2017)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2017/BC011698

APPLICANT: Mr Harmann

OTHER PARTIES: Miss Burnett

Child Support Registrar

TRIBUNAL: Member P Jensen

DECISION DATE: 8 November 2017

DECISION:

The decision under review is affirmed.

CATCHWORDS

Child support – Departure determination – Income and financial resources of parents – Income from business and trust – No special circumstances – Decision under review affirmed

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

Introduction

Mr Harmann and Miss Burnett are the parents of [Child 1] and [Child 2]. A child support case was registered from 21 July 2015. The Department of Human Services – Child Support (“the CSA”) initially recorded each parent as providing 50% care to each child. Since 4 August 2016, Mr Harmann has been recorded as providing 65% care and Miss Burnett has been recorded as providing 35% care to [Child 1].
The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. From shortly after the child support case was registered, the administrative assessment was based on Mr Harmann’s estimate of income of $0 – he was unemployed – and Miss Burnett’s 2014-15 adjusted taxable income of $51,566 and Miss Burnett was required to pay child support of $3,704 per annum.
The Act also provides for a departure from the administrative assessment in certain circumstances. On 31 August 2015, Mr Harmann lodged a departure application. On 17 November 2015 an original decision-maker decided to grant his application and:
· vary Miss Burnett’s adjusted taxable income to $110,000 per annum from 31 August 2015 to 4 October 2015; and
· vary Miss Burnett’s adjusted taxable income to $88,000 per annum from 5 October 2015 to 20 October 2016.
I will refer to that decision as the 2015 departure decision. Mr Harmann objected to the 2015 departure decision and an objections officer disallowed his objection. Neither parent sought further review by the Tribunal.
On 29 April 2016, Miss Burnett lodged a departure application. An original decision-maker refused her application. Neither parent objected to that decision.
From 21 October 2016 the administrative assessment was based on Mr Harmann’s estimate of income of $74,298 per annum and Miss Burnett’s provisional income of $74,396 per annum and Miss Burnett was required to pay child support of $3,170 per annum.
On 1 November 2016, Miss Burnett lodged another departure application. An original decision-maker decided to refuse her application. Mr Harmann objected to that decision and an objections officer disallowed his objection. Mr Harmann sought further review by the Tribunal. I conducted a directions hearing on 8 August 2017 and a full hearing on 2 November 2017. The parents attended the directions hearing by conference phone and the full hearing in person. In reaching my decision I have considered the sworn evidence of Mr Harmann and Miss Burnett as well as the documentation provided by Mr Harmann, Miss Burnett and the CSA.
Subsection 98C(1) of the Act provides that a decision to depart from the administrative assessment may be made if certain requirements are satisfied including a requirement that “one, or more than one, of the grounds for departure referred to in subsection 117(2) exists”.

Potential grounds for departure

When Miss Burnett lodged her departure application on 1 November 2016 she submitted that subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, was established because the parents expected the children to be educated at a private school and that was occurring and each parent was paying half the associated tuition fees.
She also submitted that subparagraph 117(2)(c)(ii) of the Act, commonly referred to as Reason 5, was established because the children received pocket money.
She also submitted that sub-subparagraph 117(2)(a)(iii)(A) of the Act, commonly referred to as Reason 7, was established because she was incurring legal expenses in respect of the parents’ matrimonial property dispute.
The original decision-maker and the objections officer explained why they concluded that those potential reasons for departure were not established. At the full hearing, Miss Burnett conceded that those potential reasons for departure were not established. In my opinion, those concessions were properly made.
Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:
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; …
Mr Harmann commenced employment with [Company 1] in April 2016 as [an occupation]. His 2016-17 adjusted taxable income was $81,793. He stated that his employer provides him with the use of a car for work purposes, including travelling to and from work, but it is not available for general personal use and he uses his own car for general personal use. He also stated that his employer provides him with the use of a mobile phone for business and personal use. I accept his evidence on those issues. Miss Burnett submitted, in effect, that Reason 8 was established in respect of Mr Harmann for those reasons. I do not accept that submission. The value of the provision of transport to and from work and the provision of a mobile phone is relatively minor. Mr Harmann’s income and financial resources are fairly reflected for child support purposes in his adjusted taxable income as assessed by the Australian Taxation Office (“the ATO”).
Miss Burnett commenced employment with [Company 2] on 4 July 2016 as [an occupation]. Her 2016-17 adjusted taxable income was $74,377. Mr Harmann conceded that, so far as 2016-17 was concerned, Miss Burnett’s income and financial resources were fairly reflected for child support purposes in her 2016-17 adjusted taxable income. In my opinion that concession was properly made.
The 2015 departure decision ended on 20 October 2016. Following a reconciliation of Mr Harmann’s former estimate of income against his ATO-assessed adjusted taxable income, the administrative assessment from 21 October 2016 was based on Miss Burnett’s 2015‑16 adjusted taxable income of $74,396 and Mr Harmann’s income of $81,924. Miss Burnett’s 2016-17 adjusted taxable income was $74,377 and Mr Harmann’s 2016‑17 adjusted taxable income was $81,793. The differences between those respective figures are negligible. For those reasons, Reason 8 is not established in respect of Mr Harmann’s or Miss Burnett’s income and financial resources from 21 October 2016 onwards.
Mr Harmann’s principal submissions concerned Miss Burnett’s income and financial resources in respect of 2015-16. Miss Burnett was the director of [Company 3] Pty Ltd (“[Company 3]”) which was the trustee of the Burnett- Harmann Family Trust (“the Trust”). Practically speaking, Miss Burnett ran her [business] through [Company 3]. She stated to the CSA that [Company 3] ceased trading on 30 June 2015 and she commenced employment with [Company 4] Pty Ltd (“[Company 4]”) on 1 July 2015. The 2015 departure decision was based on information provided by [Company 4].
In 2015-16 the Trust made a profit of $28,309. On 25 June 2016, Miss Burnett resolved to distribute the Trust’s profit to [Child 1], [Child 2] and her nephew. At the full hearing, Miss Burnett acknowledged that the profit was the result of her work in what was effectively her business. She acknowledged that she was a beneficiary of the Trust and she could have resolved to distribute the Trust’s funds to herself. The profit of $28,309 was a financial resource that was available to her. I asked her whether [Child 1], [Child 2] and her nephew had actually received the distributions. She asked whether she could refuse to answer that question on the basis that she would be revealing private information. I directed her to answer the question. She said they had not received the distributions.
Mr Harmann noted that on 3 August 2015, [Company 3] made three payments to [Company 4] which totalled $11,264. Mr Harmann queried the legitimacy of those transactions. Miss Burnett explained that some of [Company 3]’s clients had fully paid for work that [Company 3] had only partly completed. [Company 4] agreed to complete the work and the three payments were [Company 4]’s remuneration for that work. In the absence of any further evidence on point, I accept Miss Burnett’s evidence in respect of those three payments.
Mr Harmann provided a number of emails that were sent on 3 July 2015. The first email informed Miss Burnett that Mr Harmann was willing to move out of the matrimonial home. Miss Burnett forwarded the email to [Mr A] and she sought his opinion. He expressed an opinion. Miss Burnett sent another email to [Mr A] and he replied:
its easy my darling, i've got somme thoughts i'm putting down now. I think its important to get momentum while you can and especially in advance of him finding out the business is worth nothing. Lets go hard to get as much locked away as possible today ..email coming your way soon x
At the hearing, Miss Burnett said she commenced a relationship with [Mr A] in June 2015. Mr Harmann said he had copies of emails between Miss Burnett and [Mr A] which demonstrated that they were in a relationship prior to June 2015. He indicated that the emails were of an intimate nature. I did not consider it necessary to investigate the matter further.
Mr Harmann stated, and Miss Burnett did not dispute, that [Mr A] controlled [Company 5] Pty Ltd (“[Company 5]”). On 3 August 2015, [Company 5]’s bookkeeper emailed six invoices to Miss Burnett. According to the invoices, [Company 5] provided “[services]” as follows:
5 May 2015: 7 hours x $330 per hour = $2,310
12 May 2015:       6 hours x $330 per hour = $1,980
18 May 2015:       11 hours x $330 per hour = $3,630
24 May 2015:       12 hours x $330 per hour = $3,960
6 June 2015:        9 hours x $330 per hour = $2,970
12 June 2015:      5.5 hours x $330 per hour = $1,815
The invoices total $16,665. [Company 3] paid the invoices. Mr Harmann said the invoices were Word documents and he provided screenshots of the Word documents’ properties. All six documents were created between 3:41pm and 3:44pm on 3 August 2015. Mr Harmann submitted that the invoices were “manufactured” to transfer money from [Company 3] and reduce the value of the parents’ matrimonial asset pool, and that the transferred money should be treated as a financial resource that was available to Miss Burnett. Mr Harmann submitted, in effect, that it was not necessary to decide whether [Company 5] actually provided the services in question but, if it did, they were provided for the purpose, or at least predominately for the purpose, just stated.
Miss Burnett stated, in effect, that the invoices and the transactions were legitimate and [Mr A] had provided business [services] at a time when [Company 3] was not profitable and she was considering her options concerning the business and her future employment. She did not provide any corroborative evidence on the issue, notwithstanding Mr Harmann’s repeated and lengthy submissions on the matter.
I am required to make findings of fact on the balance of probabilities, taking into account the gravity of the consequences that might flow from those findings: Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93. [Mr A] opined on 3 July 2015 that Miss Burnett’s business was worth nothing and he suggested “lets”, i.e. “let us”, “go hard to get as much locked away as possible today”. There is no dispute that Miss Burnett was in a relationship with Mr Harmann at the time. Mr Harmann has provided evidence from which the inference that the invoices were “manufactured” could reasonably be drawn. Miss Burnett has not provided any evidence on point apart from her oral evidence at the hearing. On balance, and assuming that [Company 5] provided the services in question, I find that Miss Burnett’s decision to have [Company 3] retain [Company 5]’s services was predominantly for the purpose of transferring funds from [Company 3]. Those funds were a financial resource that were available to Miss Burnett.
Finally, Mr Harmann submitted that Miss Burnett made a cash withdrawal of $500 from [Company 3]’s bank account on 25 August 2015 and she had not provided evidence that the money had been used to pay business expenses. At the hearing, Miss Burnett stated that she could not recall the particular transaction in question but she paid for business expenses in cash from time to time. I am mindful that Miss Burnett was attempting to recall a transaction that had occurred approximately two years ago and the sum involved was relatively minor. On balance, I am not persuaded that the $500 formed part of Miss Burnett’s financial resources.
In summary, Miss Burnett’s income and financial resources in respect of 2015-16 are fairly reflected for child support purposes in her 2015-16 adjusted taxable income of $74,396, plus the Trust’s profit of $28,309, plus the transfers to [Company 5] which totalled $16,665. Those amounts total $119,390.
From 21 July 2015 to 30 August 2015 the administrative assessment was based on Miss Burnett’s 2014-15 adjusted taxable income of $51,566. From 31 August 2015 to 4 October 2015 the administrative assessment was based on the 2015 departure decision to vary Miss Burnett’s adjusted taxable income to $110,000 per annum. From 5 October 2015 to 30 June 2016 the administrative assessment was based on the 2015 departure decision to vary Miss Burnett’s adjusted taxable income to $88,000 per annum. Varying Miss Burnett’s adjusted taxable income to $119,390 per annum from 21 July 2015 to 20 June 2016 would increase her child support liability in respect of that period by $3,675. (A summary of my calculations appears in Annexure 1 to these Reasons for Decision.)
However, from 1 July 2016 to 20 October 2016 the administrative assessment was based on the 2015 departure decision to vary Miss Burnett’s adjusted taxable income to $88,000 per annum but her income and financial resources were fairly reflected for child support purposes in her 2016-17 adjusted taxable income of $74,377. Varying her adjusted taxable income to $74,377 per annum from 1 July 2016 to 20 October 2016 would decrease her child support liability in respect of that period by $579.
Further, from 1 July 2017 to 31 August 2017 the administrative assessment was based on Miss Burnett’s 2015-16 adjusted taxable income of $74,396 and Mr Harmann’s 2015-16 adjusted taxable income of $33,678. Varying Miss Burnett’s adjusted taxable income to $74,377 per annum, which was her 2016-17 adjusted taxable income, and varying Mr Harmann’s adjusted taxable income to $81,793 per annum, which was his 2016-17 adjusted taxable income, would decrease Miss Burnett’s child support liability in respect of that period by $900.
The periods from 21 July 2015 to 20 October 2016 and 1 July 2016 to 31 August 2017 total 520 days. Varying the parents’ adjusted taxable incomes according to the three preceding paragraphs would increase Miss Burnett’s child support liability by $2,196, which equates to an average rate of $2,196 / 520 x 365 = $1,541 per annum.
Varying Miss Burnett’s average rate of child support payable by $1,541 per annum appears significant when compared to the existing rates of child support payable, but the existing rates of child support payable are relatively low because the parents have shared care of both children and, for the majority of the time in question, both parents were earning full‑time wages. It is more useful to consider the proposed variation against the total costs of the children. Both parents were required to list the children’s costs in their Statements of Financial Circumstances. Neither parent did so. The administrative assessment is based on the “ordinary” costs of a child, taking into account the child’s age and the parents’ combined income. According to the current administrative assessment which is based on the parents’ 2016-17 adjusted taxable incomes, the children’s “ordinary” costs are $29,502 per annum, which include the ordinary costs of attending a state school but do not include additional costs associated with attending a private school. Miss Burnett stated that her half of the children’s private tuition fees is $9,476 per annum. It appears that the children’s costs are approximately $29,502 + $9,476 + $9,476 = $48,454 per annum. Of course, those figures suggest a degree of mathematical precision that belies the necessarily imprecise assessment of the parents’ and the children’s constantly changing circumstances, but in broad terms it suggests that the existing administrative assessments in respect of the periods in question have not been unjust or inequitable.
It is also important to note that child support is intended to assist in meeting the children’s day-to-day expenses. Miss Burnett’s income and financial resources were investigated in the course of the two previous departure applications and on both occasions Mr Harmann effectively acquiesced to the operative decisions even though he had a right to seek further review. The 2015 departure decision commenced on 31 August 2015. The child support case was registered from 21 July 2015. Of the $2,196 referred to above, $933 is referrable to the period from 21 July 2015 to 30 August 2015. Those matters weigh against a finding that there are special circumstances for the purposes of Reason 8 in these current proceedings.
Viewing the circumstances of the case as a whole, they do not constitute special circumstances such that the administrative assessment resulted in an unjust and inequitable assessment of child support payable because of Miss Burnett’s and Mr Harmann’s income and financial resources. Reason 8 is not established.
A ground for departure has not been established. The decision under review was the correct decision.

DECISION

The decision under review is affirmed.

Annexure 1 – rates of child support payable by Miss Burnett under the current administrative assessments and rates of child support payable by Miss Burnett pursuant to the proposed departure decision.

Period Admin assessment Proposed decision

From To Days Rate/yr Liability Rate/yr Liability

21/07/15 21/07/15 1 -5,564 -15[1] 2,500 7

[1]Child support was payable by Mr Harman to Miss Burnett for one day.

22/07/15 27/07/15 6 3,704 61 12,016 198

28/07/15 30/08/15 34 3,704 345 12,016 1,119

31/08/15 04/10/15 35 10,960 1,051 12,016 1,152

05/10/15 01/03/16 149 8,388 3,424 12,016 4,905

02/03/16 12/04/16 42 234 27 3,690 425

13/04/16 30/06/16 79 1,820 394 5,342 1,156

01/07/16 03/08/16 34 876 82 -784 -73

04/08/16 09/08/16 6 4,536 75 2,553 42

10/08/16 20/10/16 72 4,421 872 2,434 480

01/07/17 31/08/17 62 7,984 1,356 2,688 457

7,671 9,868

The proposed departure decision would have increased Miss Burnett’s child support liability by $9,868 - $7,671 = $2,196.

[2017] AATA 2904

8 November 2017

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Statutory Construction

Judicial Review

Jurisdiction

Procedural Fairness