Harwell and Hawksley (Child support)

[2024] AATA 4123

Harwell and Hawksley (Child support) [2024] AATA 4123 (23 September 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2024/MC027553

APPLICANT:  Mr Harwell

OTHER PARTIES:  Child Support Registrar

Ms Hawksley

TRIBUNAL:Senior Member T Hamilton-Noy

DECISION DATE:  23 September 2024

DECISION:

The Tribunal affirms the decision under review.

CATCHWORDS 
CHILD SUPPORT – change of assessment – trust should be considered to be financial resources available to father – parents’ roles are currently reversed – mother’s decision to cease work is justified by her state of health – no grounds for departure established – decision under review affirmed 

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 theChild Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mr Harwell and Ms Hawksley are the separated parents of two children.  A case has been registered with Services Australia – Child Support (Child Support) since June 2013 and payments are currently collectable by Child Support.  Since 30 November 2023, due to a change in the care arrangements for the children, Ms Hawksley has been the payer of child support and Mr Harwell the payee. 

2. There is an existing AAT decision in place, made on 18 January 2023, which provided (in relevant part) for a departure determination as follows:

   ·For the period 1 July 2021 until [Child 1] ceases to be an eligible child of the assessment, Mr Harwell’s adjusted taxable income is varied to $575,000;

   ·For the period 1 January 2023 until [Child 1] ceases to be an eligible child, child support payable by Mr Harwell is increased by $2,800.

3. On 13 July 2023, Mr Harwell made a departure application on the basis of his income, property and financial resources (called “Reason 8A” by Child Support).

4. On 18 November 2023, an employee of Child Support refused to change the assessment as no reason for departure was established.

5. On 29 November 2023, Mr Harwell objected to this decision. 

6. On 16 February 2024, an objections officer of Child Support disallowed the objection.

7. On 22 February 2024, Mr Harwell made an application to the Administrative Appeals Tribunal for an independent review of Child Support’s decision.   

8. A directions hearing was conducted by the Tribunal on 2 July 2024, in which Mr Harwell participated by MS Teams audio.  Ms Hawksley did not participate in the directions hearing.  Following the directions hearing, the Tribunal issued directions to the parties for the provision of further documents. 

9. The hearing was held on 15 August 2024, on which date Mr Harwell and Ms Hawksley both participated by MS Teams audio and gave evidence on affirmation.  At the hearing, the Tribunal had before it documents provided by Child Support (1 to 601), documents provided by Mr Harwell (A1 to A107) and documents provided by Ms Hawksley (B1 to B6).  Copies of all documents were provided to the parties prior to the hearing and they confirmed receipt of the documents with the Tribunal.

10. Following the hearing, the Tribunal deferred for Mr Harwell to provide additional information.  Upon receipt of this information (A108 to A208), the documents were sent to Ms Hawksley with time for comment.  Ms Hawksley’s response (B7 to B14) and an additional document provided by Mr Harwell (A209) was sent out for information only, given the documents did not contain new information on which the Tribunal based its decision.  The Tribunal then proceeded to make a decision on all of the information before it on 23 September 2024.

ISSUES

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

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in the place of the Registrar, must be satisfied that:

   (i)there is a ground to depart from the administrative assessment of child support;

   (ii)it is just and equitable to depart; and

   (iii)it is otherwise proper to depart.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the legislation. In Gyselman and Gyselman (1992) FLC 92-279, 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.

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

5. The Tribunal notes that, while Mr Harwell’s application to Child Support in July 2023 related to one ground – that of his own income, property and financial resources – the Tribunal must proceed to consider what is reasonably before it on the evidence provided by the parties and by Child Support.  Based on the information before it, the Tribunal considered that it was also required to consider the schooling costs for [Child 1] and the earning capacity of Ms Hawksley. 

6. Because there is an existing AAT decision covering that period that Mr Harwell is seeking also be considered in this matter, the Tribunal must consider section 98J of the Assessment Act. Subsection 98J(1) of the Assessment Act allows for a person to make a further departure application in respect of an assessment of child support where, because of circumstances existing at the time when the subsequent application is made, there are grounds for departing from the administrative assessment. The Tribunal has had regard to this provision when making a decision in this matter.

The income, property and financial resources of the parties

1. Subparagraph 117(2)(c)(ia) provides that a ground for departure is established where, in the special circumstances of the case, the use of the administrative assessment of child support results in an unjust and inequitable determination of the level of financial support to be provided by a liable parent, because of the income, property and financial resources of either parent.  In order to determine whether there are special circumstances that make the administrative assessment unfair, the Tribunal is required to consider the financial circumstances of both parents.

The income, property and financial resources of Mr Harwell

1. The Tribunal accepted that Mr Harwell is currently the sole director and shareholder of[Company 1].  The Tribunal accepted Mr Harwell’s evidence that the company was set up in 1982 and that in 2021 he had bought his father out of the company and had become the sole director and shareholder of the company.

2. The Tribunal accepted that Mr Harwell had also established the Harwell Family Trust which he resigned from following a dispute around the arrangements that arose during Family Court proceedings.  Mr Harwell claimed in his evidence at the hearing to not know what assets were held in the trust at the time of his resignation.  He further claimed that he had not provided documents sought by the Tribunal for the trust due to no longer being involved in the trust structure.  The Tribunal had some difficulty accepting this evidence given Mr Harwell was the sole person running the company and trust structures up to early 2024.

3. The Tribunal accepted that Mr Harwell established another trust, the new Harwell Family Trust, in or around April 2024.  The Tribunal found from Mr Harwell’s evidence at the hearing, and from the various bank statements and financial statements that were made available to it, that Mr Harwell is the sole person making decisions for the company and the current trust and that there is significant flow of financial resources between the company and trust structures and Mr Harwell’s personal financial arrangements.  Given this, the Tribunal finds that any income, property and financial resources available to the company and trust should be considered to be financial resources available to Mr Harwell for child support purposes. In so finding, the Tribunal notes the comments of the then Federal Magistrates’ Court in Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39, in recognising that a financial resource refers to something from which financial benefit may be gained and that this term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to financially support their children.

4. The administrative assessment of child support, for the purposes of this decision, is the adjusted taxable income set by a previous decision of this Tribunal, that for the period 1 July 2021 until [Child 1] ceases to be an eligible child of the assessment, Mr Harwell’s adjusted taxable income is varied to $575,000.

5. Mr Harwell is seeking that his adjusted taxable income be reduced.  Mr Harwell submitted to the Tribunal that the income attributed to him is not reflective of his financial position because $300,000 worth of government grants during the COVID-19 pandemic were taken into account in setting his income and because the business’s losses for the last part of the 2022/23 financial year were not taken into account.

6. In considering Mr Harwell’s submissions on this point, the Tribunal had particular regard to the following factors.

7. Firstly, the Tribunal is mindful that it has before it a decision made previously by this Tribunal, covering the period that Mr Harwell is seeking be reviewed in this decision.  The previous decision of the Tribunal was made partway through the 2022/23 financial year and the previous decision sets out that, in making its decision, the Tribunal noted that the 2021/22 financial year was the first year in which Mr Harwell was the sole shareholder.  The Tribunal considered the functioning of the company over three financial years and found that the profit of the company in the 2021/22 financial year ($465,064) in addition to the wage Mr Harwell had paid himself ($110,000) was representative of the level of income, property and financial resources available to Mr Harwell. 

8. Mr Harwell submitted that the previous decision had not taken into account the second half of the 2022/23 financial year or that COVID payments were no longer available to the company.  In response to questions by the Tribunal, Mr Harwell gave evidence that the second half of the 2022/23 financial year was not different to the first half of the financial year.  As noted above, the previous decision relied on the 2021/22 figures, being the full financial year figures available at the time of the previous Tribunal’s decision. The decision noted that COVID payments had ceased to the company in the 2021/22 financial year.  The Tribunal accepted that the figures relied on in the previous decision were an appropriate representation of the income, property and financial resources available to Mr Harwell at the time the decision was made.

9. Secondly, consideration of the information provided to the Tribunal regarding the 2022/23 and 2023/24 financial years indicates that the company continues to enjoy a strong financial position.  The sales income of the company increased from $3,758,851 in the 2022 financial year to $6,647,694 in the 2023 financial year and the gross profit was consistent across the two years ($1,736,941 in the 2023 financial year and $1,879,528 in the 2022 financial year, due to purchases increasing from $1,832,466 to $4,887,255).  While the company declared a net loss in the 2023 financial year, this was largely due to modest increases to depreciation and motor vehicle costs and due to a significant increase in wages, from $1,020,988 in 2022 to $1,430,737 in 2023. 

10. Further, the balance sheet for the company as of 30 June 2024 indicates that the company held amounts totalling $602,794 in various bank accounts, in addition to accounts receivable totalling $227,423.  Taking into account the amount of accounts payable as of 30 June 2024 of $398,684, the overall cash position of the company as of 30 June 2024 remained consistent with Mr Harwell’s adjusted taxable income.

11. Thirdly, the ability of Mr Harwell’s current trust to purchase a property without needing to finance the property purchase through a mortgage suggests to the Tribunal that Mr Harwell’s level of income, property and financial resources continues to be within the vicinity of the adjusted taxable income he has been set on.

12. Mr Harwell told the Tribunal that he had set up a new trust, the new Harwell Family Trust, in February or March 2024.  He stated that there were “no” assets put into the trust at the time of its establishment but that the trust now owns a property as a house was purchased in April 2024.  When asked about the source of money used to purchase the house, Mr Harwell gave evidence that an amount of $417,000 was obtained by redrawing from his home loan and by a loan from the company.  When asked how much he had redrawn from his home loan, Mr Harwell stated that he would have to check the numbers.  When asked how much the company had loaned, Mr Harwell stated that the current loan is $200,000.  During his evidence Mr Harwell acknowledged that he was able to “move money around” for the purchase. 

13. Mr Harwell stated that the property was purchased to house employees arriving from [overseas] and that there is a “side apartment” for which he will find a tenant.  He estimated the rent “may be $150 a week each” and that, at the time of the hearing, he had not had any discussion with the employees about the intended rental arrangements.  When the Tribunal observed that Mr Harwell’s current home mortgage has only $8,000 owing, Mr Harwell stated that he had pulled the money out of his savings and again referred to moving things around and having paid the amount back down from what he had redrawn. Mr Harwell stated that he had redrawn $100,000 and then $120,000 and, when asked how he had repaid these amounts to his home loan, stated that he thinks the funds “might be my loan”.    When asked about the $585,000 loan owed to the company indicated in his Statement of Financial Circumstances, Mr Harwell stated that this would have been partly for the purchase of the house and he is not sure about the other $100,000.  The ability for Mr Harwell to move money around between his savings, home loan, company and trust suggests to the Tribunal that the adjusted taxable income he has been set on continues to fairly represent his level of financial resources.

14. Some time following the hearing, Mr Harwell provided written submissions that the 2023/24 financial statements had been prepared for the company and the company declared a net profit of $105,283 and Mr Harwell had declared a personal income of $119,957.  In the absence of being provided the financial statements themselves, the Tribunal was not persuaded that the preparation of draft financial statements for 2023/24 makes the above findings of the Tribunal inappropriate.

15. The Tribunal was not persuaded that the use of an adjusted taxable income of $575,000 per annum for Mr Harwell makes the assessment of child support unjust and inequitable. 

The income, property and financial resources of Ms Hawksley

1. Ms Hawksley’s adjusted taxable income for 2021/22 is recorded by Child Support as $84,161 and for 2022/23 is recorded by Child Support as $86,176.  In the absence of any clear evidence to the contrary, the Tribunal accepted this represented Ms Hawksley’s level of income available to her from PAYG work in the 2021/22 and 2022/23 financial years.

2. Ms Hawksley gave evidence at the Tribunal hearing that she ceased work in February 2024 due to a health diagnosis and that, after using up her sick leave, her employment ended in April 2024.  Ms Hawksley presented as reluctant to provide any details of her health circumstances, but confirmed in her evidence to the Tribunal that she left work for medical reasons, that she is currently undergoing treatment and is currently unable to work, and that she doesn’t anticipate being able to return to employment at any time in the near future. Ms Hawksley provided a copy of her final payslips from her former employer, for the period ending on 26 April 2024.  The final amount paid to her for a fortnightly period was $4,159.11 and year-to-date payments received were $70,595.27.  The Tribunal accepted this information as correct.

3. The Child Support documents indicate that Ms Hawksley provided an estimate of income to Child Support of $0 income which was accepted by Child Support on 16 May 2024.  The assessments issued by Child Support at this time used Ms Hawksley’s last relevant year of income ($86,176 being her 2022/23 adjusted taxable income) for the period 18 February 2024 to 6 May 2024 and her estimate of income of $0 for assessments covering from 7 May 2024 to 31 January 2025. 

4. Based on the adjusted taxable incomes reflected in the Child Support documents, the payslips provided by Ms Hawksley to the Tribunal and her oral evidence at the hearing, albeit limited in its details, the Tribunal finds that the adjusted taxable incomes used in the administrative assessments of child support for Ms Hawksley do not create an unjust and inequitable determination of the level of child support that is payable in this matter.

5. For the above reasons, given the Tribunal finds that both parents’ levels of income, property and financial resources are appropriately reflected in the relevant assessments, the Tribunal has concluded that this ground for departure is not established.

The schooling costs for the children

1. One of the primary changes in circumstances since the previous AAT decision was made in January 2023 is that [Child 1] has been in Mr Harwell’s 100% care since November 2023, as a result of which Mr Harwell has become the payee of child support, rather than the payer.  The previous AAT decision increased Mr Harwell’s child support liability based on him being the payer of child support and the Tribunal had regard to the change in circumstances around care for [Child 1] when considering this ground for departure.

2. Subparagraph 117(2)(b)(ii) of the Assessment Act provides that a ground for departure is established where, in the special circumstances of the case, the costs of maintaining a child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents.

3. Mr Harwell gave evidence at the hearing that [Child 2] is currently in Year 12 and that he has attended a government high school in 2023 (Year 11) and 2024 (Year 12).  The Tribunal accepted Mr Harwell’s evidence that [Child 2] does not have any additional costs for his current education arrangements. 

4. The parties were in agreement that [Child 1] has been attending [a] College since Prep and the Tribunal found from this evidence that [Child 1] is being educated in a manner expected by both parents. 

5. Mr Harwell told the Tribunal that in the 2023 school year, Ms Hawksley had paid [Child 1]’s school fees directly to the school and that he had paid an additional $2,800 in child support for his part of the school fees.  The Tribunal accepted that this arrangement was in place up to the time that care changed for [Child 1], on 30 November 2023.

1. As to the 2024 arrangements, Mr Harwell gave evidence that [Child 1] is in Year 10 in 2024 and that he paid half of [Child 1]’s 2024 school fees in March 2024 and that the other half is awaiting payment by Ms Hawksley.  Mr Harwell provided an invoice for [Child 1]’s 2024 school fees and the Tribunal accepted from this that [Child 1]’s fees for 2024 are $5,748 (being total fees of $6,130 minus an early payment discount of $382).  An amount of $2,743.95 was paid on 22 April 2024 and the Tribunal accepted that this amount was paid by Mr Harwell and was the amount referred to in his evidence to the Tribunal.  Mr Harwell provided other written information prepared by [Child 1]’s school and the Tribunal accepted from this that the total cost of $6,130 is constituted by school fees totalling $3,820, levy of $1,460 and camp costs of $850. 

2. Ms Hawksley provided written submissions to the Tribunal after the hearing and stated that an amount of $260 in credit (referenced in the invoice for the 2024 school fees) related to an amount she had left in the account to support her in 2024.  Ms Hawksley noted in her submissions that she was in contact with [Child 1]’s school about her payment towards half of [Child 1]’s tuition.  This was consistent with her oral evidence at the hearing in which she indicated she would pay half of the 2024 school fees directly to the school. 

3. Following the hearing Mr Harwell provided written submissions to the Tribunal and the Tribunal accepted from these that [Child 1]’s estimated school fees for 2025 will be $5,800.  Ms Hawksley noted in her written submissions that it is unclear whether [Child 1] will remain at [a] College in 2025 and 2026.

4. The Tribunal finds that for the majority of the 2023 calendar year, which has now passed, Mr Harwell’s child support was increased to reflect the 2023 schooling fees for [Child 1] which were, in that year, being paid to the school by Ms Hawksley.  Care changed as of 30 November 2023 and the parents’ roles are currently reversed with respect to the child support assessment.  Since the time that Mr Harwell became the payee of child support, the impact of the previous AAT decision that related to the schooling costs for [Child 1] ended, as evidenced by more recent assessments issued by Child Support and contained in the supplementary Child Support papers provided to the Tribunal and to the parties.  The evidence before the Tribunal is that, for 2024 schooling costs, Mr Harwell has paid half of the fees to the school and Ms Hawksley has spoken to the school about her payment towards the other half.  There was no evidence before the Tribunal that Ms Hawksley does not intend for this arrangement to cease in 2025 should [Child 1] remain at the same school.  The Tribunal finds that, as of the 2024 school year, the intention of the parties is that the costs be equally borne by the parents and paid directly to the school.  Given this, the Tribunal was not persuaded that there are special circumstances in this case that would establish this ground for departure.  The Tribunal finds that the ground relating to [Child 1]’s schooling costs is not met in this case. 

The earning capacity of Ms Hawksley

1. Subparagraph 117(2)(c)(ib) of the Assessment Act provides that a ground for departure is established where, in the special circumstances of the case, the use of the administrative assessment of child support results in an unjust and inequitable level of child support because of the earning capacity of a parent.

2. Subsection 117(7B) of the Assessment Act requires the Tribunal to consider the following matters in determining whether a parent’s earning capacity is greater than is reflected in their income used in the administrative assessment:

   ·   Whether the parent:

   ois not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i));  and/or

   ohas reduced their weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii));  and/or

   ohas changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii));  and

   ·   If the parent’s decision about their work arrangements is not justified by either their caring responsibilities (subparagraph 117(7B)(b)(i)) or their state of health (subparagraph 117(7B)(b)(ii));  and

   ·   If the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).

3. The Tribunal finds that Ms Hawksley is not working despite ample opportunity to do so and that subparagraph 117(7B)(a)(i) of the Assessment Act is met.

4. As noted above, Ms Hawksley was reluctant to provide details of her current circumstances to the Tribunal.  She has provided written information to the Tribunal about her involvement with family violence services and the Tribunal accepted that this involvement provides a reasonable basis for her reluctance to give more detailed information about her health condition.  The Tribunal was of the view that the limited evidence Ms Hawksley did give was persuasive that she has ceased her employment due to significant health concerns for which she is receiving treatment and which lead to her doubting her ability to return to the workforce in the foreseeable future.  Given the Tribunal has accepted this evidence, it follows that the Tribunal accepts that Ms Hawksley’s decision to cease work is justified by her state of health. 

5. The Tribunal finds that the earning capacity criteria do not apply to Ms Hawksley’s circumstances.  The ground for departure relating to Ms Hawksley’s earning capacity is not met.

6. As there are no grounds for departure established on the evidence before the Tribunal, the Tribunal affirms the decision made by Child Support.

DECISION

The Tribunal affirms the decision under review.