Hepton and Roddam (Child support)

[2022] AATA 5014

Hepton and Roddam (Child support) [2022] AATA 5014 (7 December 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC024296

APPLICANT:  Mrs Hepton

OTHER PARTIES:  Child Support Registrar

Mr Roddam

TRIBUNAL:Senior Member D Benk

DECISION DATE:  07 December 2022

DECISION:

The tribunal sets aside the decision under review and, in substitution decides:

• For the period 14 January 2022 to 30 June 2022, Mr Roddam’s adjusted taxable income be set at $70,000;

• For the period 1 July 2022 to 30 September 2023 Mr Roddam’s adjusted taxable income be set at $62,400 per annum;

• For the period 14 January 2022 to 30 June 2022, Mrs Hepton’s adjusted taxable income be set at $31,300;

• For the period 1 July 2022 to 30 September 2023 Mrs Hepton’s adjusted taxable income be set at $59,280.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established – decision to depart - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been 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. Mrs Hepton and Mr Roddam are the parents of [the child] age 11.  Care is shared.  On 14 January 2022, Mrs Hepton asked the Child Support Agency (the Agency) to depart from the administrative assessment of child support maintaining Mr Roddam had greater income, financial resources and/or capacity than the taxable income reflected in the administrative assessment of $25,436 due to his self-employment arrangement. 

2. Following multiple internal reviews, the Agency ultimately determined Mr Roddam derived greater income/benefits/financial resources than that reflected in his adjusted taxable income and determined, in the special circumstances of the case, that departure was appropriate and applied an adjusted taxable income of $58,918 per annum for the period 1 September 2021 to 31 December 2023.

3. The matter was heard on 7 December 2022 when both parties gave evidence via conference telephone.  During the course of the decision making, the tribunal had regard to the oral evidence, the documentary evidence and the law.

ROLE OF THE TRIBUNAL

1. As there appeared to be some confusion about the role of the tribunal, it is appropriate to reinforce that its role is to conduct a de novo review of the application before it.  The tribunal is not a complaints handling body nor regrettably a family mediation service.

2. It is relevant to state here that both parties’ compliance with Directions fell short of what was required.  Mrs Hepton elected to provide information she saw as relevant, thereby selectively excluding pertinent information in the Statement of Financial Circumstances.  Mr Roddam completed his Statement of Financial Circumstances with regard to his financial situation at the time of the Agency’s review and not his current situation, (which had markedly changed). It was explained to the parties that the tribunal deals with facts, proceeds to making findings of fact and applies the relevant law to its findings.  It is unclear how the parties expect the tribunal to make a decision in the absence of accurate financial particulars. The tribunal formed the view the motivation for this review stemmed beyond child support.  The tribunal did consider deferring decision making to obtain further information from the parties.    

3. However, the case management strategy of the tribunal must also meet the objective referred to in s 2A of the Administrative Appeals Tribunal Act 1975, which refers to the need to create a dispute resolution process that is (a) accessible, (b) fair, just, economical, informal and quick, (c) proportional, and (d) likely to enhance public trust and confidence in the tribunal’s decision-making. (Those aspirations may be in tension with each other; balancing them requires an exercise of judgment.)

4. Motivation aside, the tribunal contained its assessment to child support on the evidence at hand.  Given the extensive material in the file, coupled with the parties’ evidence, the tribunal elected not to delay decision making as it was satisfied it could make findings. The tribunal determined the delay would not assist the parties and that any further information was unlikely to significantly impact the level of child support payable. 

CONSIDERATION

1. Before making an order for departure from an administrative assessment under section 116 of the Child Support (Assessment Act) 1989 (the Act), subsection 117(1) requires the tribunal to be satisfied that a ground for departure exists under subsection 117(2); that it would be just and equitable as regards the child, the carer parent and the liable parent to make such an order; and that it would be otherwise proper to make the order.

2. Subsection 117(2) sets out the grounds upon which such an order might be made. Relevantly, paragraph (c) states as follows:

   That, in the special circumstances of the case,[1] 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:

   (i)because of the income, earning capacity, property and financial resources of the child; or

   (ia)         because of the income, property or financial resources of either parent; or

   (ib)        because of the earning capacity of either parent; or

   (ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.

   [1] The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92-279 stated that:

   It is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

3. When submitting the change of assessment application, Mrs Hepton asked the Agency to consider subparagraphs 117(2)(c)(ia) and (ib). That is, to depart from the administrative assessment based on Mr Roddam’s income/financial resources and/or earning capacity as failure to do so would result in an unjust and inequitable determination of the level of financial support provided by Mr Roddam for [the child].

4. The tribunal will deal with the issue of Mr Roddam’s income, property, and financial resources first.

5. Mr Roddam’s position is simple.  He was self-employed as [an Occupation] in his wife’s company [Company name].  The company remains registered whilst it attempts to recoup some outstanding debt but Mr Roddam understands it will ultimately be deregistered.  However, as it hasn’t been, he is still seeking contract work.  Since 11 May 2022 he has worked as a PAYG employee for [Employer 1].  His current wage is $1200 gross per week.  He has completed his probation period and will approach his employer for a pay rise in due course.  He did work as a contractor for [Employer 1] prior to May but found that keeping up with insurances, taxes, payroll and constantly marketing for work was taking a toll and his efforts were not being rewarded financially, hence electing for secure work, with annual leave, sick leave and superannuation without the red tape associated with managing a small business.

6. Mr Roddam admits that the company is owned by his wife and does not dispute the findings of the Agency.  He also agreed that the administrative assessment of $25,436 did not reflect the full extent of income and financial resources available to him as he was able to income share with his wife, did have access to various depreciation/motor vehicle benefits which temporarily improved his cash flow and he also benefited personally from some of the business expenditure. 

7. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott v Scott [1994] FLC 92-457; Carey v Carey [1994] FLC 92-489). As discussed with the parties, the role of the tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it, the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.

8. To not apply the full extent of financial resources from his self-employment venture would result in an inaccurate representation of the total level of funds available to Mr Roddam. The add back of depreciation and other business expenses results in a greater level of financial resources than that reflected in the administrative assessment.  The tribunal finds that these circumstances are special (as they are not available to PAYG employees) and the ground for departure set out in in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Roddam’s income, property and financial resources.

9. Mrs Hepton also asks the tribunal to assess whether Mr Roddam earning capacity. The tribunal will now determine whether the provisions of subparagraph 117(7B)(2)(c)(ib) are established.

10. However, in order to find the provisions of subparagraph 117(1)(c)(ib) have been satisfied, the tribunal would need to find Mr Roddam is deliberately not exercising his earning capacity in order to reduce his child support liability.

11. Subsection 117(7B) of the Act states as follows:

    (7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

    (a) one or more of the following applies:

    (i) the parent does not work despite there being an opportunity to do so;

    (ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is occupied or otherwise engaged;

    (iii) the parent has changed his or her occupation, industry or work pattern; and

    (b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on that basis of:

    (i) the parent’s caring responsibilities; or

    (ii) the parent’s state of health; and

    (c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

12. Without doubt, Mr Roddam is working.  He is [an Occupation] with significant experience.  He now works full time as an employee for the reasons discussed above.  His gross pay will now be higher than his self-employment income and he has the security of stable employment, a flexible employer, annual leave, personal leave and guaranteed superannuation without the hassle of red tape associated with operating a small business particularly in a recessed economic environment.  The tribunal concludes Mr Roddam’s earning capacity does not satisfy the requirements of subparagraph 117(2)(c)(ib) as a ground for departing from the administrative assessment.

13. As the requirements of subparagraph 117(2)(c)(ia) have been satisfied, there are grounds to depart from the administrative assessment. However, such departure is not automatic.

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

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent and the carer entitled to child support 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 a range of factors, set out in subsection 117(4) of the Act.  In addition to the education costs of the child, already considered above, the tribunal also took the following matters into consideration:

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the child

1. The care of [the child] is shared and the records of the Agency correctly reflect the level of care.  Both parents agree that [the child] has no independent income and relies entirely upon them for financial support. The tribunal so finds.

The proper needs of the child

1. Subsection 117(6) of the Act states that in having regard to the proper needs of the child, the tribunal must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child/ren.

2. [The child] is in public school.  There was no evidence that her every day costs relating to proper needs exceed that provided by the Costs of the Children Table. The tribunal so finds.

The income, property and financial resources of Mr Roddam

1. Since 11 May 2022 Mr Roddam has become a PAYG employee earning $1200 per week gross as [an Occupation] for [Employer 1].  He has completed his probation period and is confident that he will be able to secure a pay rise from his employer.

2. Prior to 11 May 2022, Mr Roddam was employed in a company owned by his wife.  Mrs Hepton submits the self-employment/income split arrangement is dodgy designed entirely to avoid child support liabilities.

3. Mr Roddam testified that he was ‘on the tools’ and is ‘shocking at marketing’ preferring to send his wife out to quote on jobs which included a [job task] component.  He stated that she has had much exposure to [job task] and had in the past worked for [Employer 2] and her knowledge about current [job task] and indeed ‘making the sale’ is second to none.  He did the hands on work and confirmed quotes but maintained his wife did the initial contacts and negotiations.  The tribunal has no reason to dispute this but ultimately finds that income generated via the business was in return for the labour expended by Mr Roddam.  He was on the tools.  He did the installations and was engaged in ensuring work was done on time.  Towards the latter part of 2021 and early 2022 much of his work was contract work with [Employer 1] and [Employer 3].  There seems to be little money earned from private work with much of the revenue of the business being derived from contract work for which he was solely responsible.  The tribunal finds it is appropriate to assess Mr Roddam with the entirety of the wages paid by the company. This does not mean that it rejects the evidence that his wife played a role, however, the circumstances, and particularly the nature of the work in the relevant child support period suggests that the majority of the work and income was derived from his subcontracted labour.

4. The tribunal assessed the income and financial resources made available to Mr Roddam arising out of his self-employment arrangement and finds the following:

   ·     It is appropriate to attribute all of the wages paid by the company to Mr Roddam, that is $56,000 for the 2021/2022 financial year. This is because Mr Roddam was ‘on the tools’ particularly with regard to the subcontract work and there was little other work throughout the course of the year to justify income splitting with his wife.   His wife may have paid herself a wage from the company, for her administration, but as the contribution was likely to be insignificant to the actual generation of income, it is inappropriate to engage in an income split arrangement for the purposes of child support;

   ·     As the company is now likely to close, it is also appropriate that the full extent of depreciation be added back to Mr Roddam’s financial resources as there is no evidence that monies representing depreciation will be reinvested into new equipment/machinery or vehicles for the purpose of the business.  This represents a figure of $9,791;  

   ·     The records show that the company ran at a loss in the 2021/2022 financial year so it is inappropriate that any retained profits be attributed to Mr Roddam;

   ·     The evidence also revealed that Mr Roddam did obtain some personal benefits from company expenses for telephone/vehicles.  The assessment by the Agency of the value of that financial resource at $5,200 per year ($100 per week) is appropriate in the absence of other evidence;

   ·     The tribunal has not discounted Ms Hepton’s submission that there was likely to have been cash jobs or other benefits derived from the self-employment arrangement.   In the absence of any evidence, from any source, the tribunal cannot take this further;

   ·     Overall, the tribunal finds Mr Roddam’s access to income and financial resources for the 2021/2022 financial year is a combination of the above totalling approximately $70,000.  The tribunal so finds.  The tribunal finds that it is appropriate to apply this figure from the date of the change of assessment application, that is 14 January 2022 and ceasing on 30 June 2022;

   ·     Mr Roddam is now a PAYG employee and has been so from 11 May 2022.  His earnings are now $1200 per week or $62,400 per annum.  The tribunal finds it appropriate to depart from the administrative assessment using this figure between
   1 July 2022 and 30 September 2023.  This will give Mr Roddam an opportunity to have lodged his taxation returns both PAYG and any final company tax return.  The tribunal declines to extend the assessment beyond that date as Mr Roddam did indicate he sought to negotiate his employment package and assess the future of the company;

   ·     The tribunal acknowledges Mrs Hepton compels it to make a higher assessment, compelling the tribunal to engage in what could be seen as a forensic audit.  This is beyond the scope of these proceedings. Further, the representations made by Mr Roddam about the nature of his industry, work pattern and deductions claimed are entirely consistent with his financial records which have been the subject of scrutiny and audit by his accountant.

The income, property and financial resources of Mrs Hepton

1. The administrative assessments of child support were based on Mrs Hepton’s  adjusted taxable income of $24,983.[2]  The 2021/2022 taxation return records a taxable income of $28,192 but also records deductions of $6,220 including motor vehicle expenses and other expenses which she claimed to arise from her subcontracting work in that financial year.  Mrs Hepton said that she worked from home and that the majority of deductions relate to expenses incurred by working at home. She failed to provide a schedule of those expenses or breakdown of those costs although testified that they were all legitimate taxation deductions.  The deductions represent 20% of the income which is rather high given that the work was administrative in nature with little overheads required apart from a home office and further Mrs Hepton was not working full-time hours.  Regardless of this assessment, the tribunal finds the deductions allowed for increased cash flow at the end of the financial year.  The tribunal does not accept that the administrative assessment is a true representation of the income and financial resources available to her.  The Statement of Financial Circumstances did not assist the tribunal as Mrs Hepton opted to selectively complete it citing privacy concerns as her grounds for doing so. 

   [2] 2020/2021 adjusted taxable income

1. The tribunal assessed the income and financial resources made available to Mrs Hepton and finds that her adjusted taxable income should be assessed as follows for the period:

   ·     $31,300 (rounded) representing $28,192 in taxable income and $3,110 representing financial resources arising from subcontracting work from home arrangements (taxation deductions).  The tribunal so finds.   As indicated above, a forensic audit of expenses is not required, and this addition to the base line taxable income represents half of the taxation deductions secured from the working from home arrangement which the tribunal finds is appropriate given the nature of the work undertaken.

2. The tribunal finds that it is appropriate to apply this figure from the date of the change of assessment application, that is 14 January 2022 and ceasing on 30 June 2022.

3. The tribunal was informed Mrs Hepton commenced full-time PAYG employment in July 2022 and now earns $1140 gross per week.  This equates to $59,280 per annum.  The tribunal finds it appropriate to depart from the administrative assessment using this figure between 1 July 2022 and 30 September 2023.  This will give also give Mrs Hepton an opportunity to have lodged her taxation returns.  The tribunal declines to extend the assessment beyond that date as Mrs Hepton’s situation may change given her domestic situation, particularly as her younger child with profound disabilities is likely to commence school.

4. The tribunal appreciates Mr Roddam compels it to make a higher assessment of Mrs Hepton’s income and earning capacity up to a figure of $110,000 based on her spend identified in the bank statements.  As indicated above, the bank statements and Statement of Financial Circumstances were incomplete.  Regardless of this, there is no evidence that Mrs Hepton has ever earned this level of income and such a finding is not possible on the information before it.  It is also inconsistent with Mrs Hepton’s current lifestyle where the records show the budget is tight and work capacity is somewhat curtailed by her children’s needs.

The earning capacity of Mr Roddam

1. As discussed in these reasons, on the basis of the evidence before it, the tribunal finds that Mr Roddam is working and has not reduced his weekly hours of work or otherwise changed his occupation, industry or working pattern.  The tribunal finds that it is not open to make an earning capacity determination in respect of Mr Roddam’s circumstances.

The earning capacity of Mrs Hepton

1. Mrs Hepton has now returned to full-time work but has always in the past largely worked flexible part-time hours to accommodate caring commitments.  On this basis, the tribunal finds grounds for an earning capacity determination in respect of Mrs Hepton’s circumstances is not established. 

The necessary commitments of Mr Roddam

1. The tribunal accepts that care of [the child] is shared between the parties.  His health is satisfactory and he is not subject to any unusual out of pocket expenses relating to the management of his welfare.

2. Mr Roddam does have 3 other children to support who are in his sole care aged [Ages 1-3].  The oldest son was born with [a serious birth defect]. Despite multiple surgical procedures his son has been left with significant medical problems and his wife now receives a carer allowance.  There are medical expenses associated with his ongoing specialist medical monitoring and medications which are largely controlled.  The other children have no special needs.  Mr Roddam confirmed his oldest son is not in receipt of NDIS.

3. The tribunal accepts the record of income and expenditure in the Statement of Financial Circumstances which was entirely consistent with Mr Roddam’s evidence.

The necessary commitments of Mrs Hepton

1. Mrs Hepton testified she has no significant expenses relating to her welfare that impact on her ability to support [the child].    However, she does have 2 other children aged [Ages 4 and 5].  The [Age 5]-year-old was born with global development delay and is severely delayed in all aspects of function.  He is in receipt of an NDIS package but this does not cover all of the expenses associated with his care nor Mrs Hepton’s time in sourcing appropriate therapeutic supports.

2. As indicated Mrs Hepton’s Statement of Financial circumstances did not assist the tribunal due to its selective completion.

3. The tribunal has had regard/considered the commitments of each parent that is necessary to enable the parent to support himself or herself or any other child or another person they have duty to maintain and could not find any self-support commitments take priority over any child support liability and further each parent’s budget is sufficient to cater for such needs.

The direct and indirect costs incurred by Mr Roddam in providing care for [the child]

1. There was no evidence of significant or extra ordinary direct or indirect costs incurred in providing care for [the child].  Mr Roddam testified he lives close to his daughter and her activities are largely local.  

Hardship

1. Paragraph 117(4)(g) of the Act requires the tribunal to consider any hardship that would be caused to [the child] or Mrs Hepton by the making of, or refusal to make, a departure determination; and also to consider any hardship that would be caused to Mr Roddam or any other child or other person that Mr Roddam has a duty to support, by the making of, or the refusal to make, a departure determination.

2. Mr Roddam testified the departure should not be backdated as this would burden him with arrears which is unfair given Mrs Hepton was aware of the process.  Further it was not unfair given shared care of [the child].  Mr Roddam said that his budget is tight especially with his wife now being on maternity leave and the family is supplementing his income by accessing his wife’s inheritance that she received from her late uncle.  There was no real claim for hardship. 

3. Mrs Hepton said that her budget is tight and that any support helps.  She did not claim hardship as it is difficult to quantify any impact of an assessment on already precarious financial circumstances.  No specific hardship was claimed.

4. Ms Hepton also maintained that the assessment should be backdated as far back as possible however the tribunal considers this to be inappropriate in the absence of an earlier change of assessment application.   The tribunal considers the departure should commence from the date of the change of assessment application.

What is the proposed departure determination in this case?

1. Overall, the tribunal finds that it is just and equitable to depart from the administrative assessment as follows:

   ·     That between 14 January 2022 and 30 June 2022, Mr Roddam’s adjusted taxable income be set at $70,000.

   ·     That between 1 July 2022 and 30 September 2023 Mr Roddam’s adjusted taxable income be set at $62,400 per annum.

   ·     That between 14 January 2022 and 30 June 2022, Mrs Hepton’s adjusted taxable income be set at $31,300.

   ·     That between 1 July 2022 and 30 September 2023 Mrs Hepton’s adjusted taxable income be set at $59,280.

2. The tribunal once again reinforces that it was difficult to quantify the income of both parents but is overall satisfied that the above reflects the income and financial resources available to both of them.

3. The last issue to be considered is whether it is otherwise proper to depart from the administrative assessment. When doing so, subsection 117(5) sets out what the tribunal must have regard to when deciding whether it would be otherwise proper to make a particular order. Subsection 117(5) states:

   In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:

   (a) the nature of the duty of the parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b) the effect that the making of any order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension , allowance or benefit payable to eth child or the carer entitled to child support.

4. Again, both Mr Roddam and Mrs Hepton have the primary duty to support [the child]. This departure will now reflect that duty and reduce the impact on the public purse by way of any Centrelink entitlement. The tribunal therefore finds that it is ‘otherwise proper’ to depart from the administrative assessment.

Conclusion

1. Section 4 of the Act sets out the objectives of the Act. These objectives include:

   ·      Parents of a child have a primary duty to maintain that child;

   ·      That duty has a priority over all commitments of the parent other than commitments necessary for self-support;

   ·      The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and

   ·      The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.  The tribunal could not identify on the basis of the evidence before it any hardship to either parent or child arising from this decision.

2. The tribunal has found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper to make a departure determination in accordance with its findings in paragraph 46 above. 

DECISION

The tribunal sets aside the decision under review and, in substitution decides:

• For the period 14 January 2022 to 30 June 2022, Mr Roddam’s adjusted taxable income be set at $70,000;

• For the period 1 July 2022 to 30 September 2023 Mr Roddam’s adjusted taxable income be set at $62,400 per annum;

• For the period 14 January 2022 to 30 June 2022, Mrs Hepton’s adjusted taxable income be set at $31,300;

• For the period 1 July 2022 to 30 September 2023 Mrs Hepton’s adjusted taxable income be set at $59,280.