Heywood and Annon (Child support) [2022] AATA 640 (1 March 2022)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2021/MC022366
APPLICANT: Ms Heywood
OTHER PARTIES: Child Support Registrar
Mr Annon
TRIBUNAL:Member C Breheny
DECISION DATE: 01 March 2022
DECISION:
The decision under review is set aside and a decision substituted that:
For the period 1 October 2020 to 31 December 2021 the rate of child support payable by Mr Annon is set at $370 per week, and
For the period 1 January 2022 to 31 December 2024 the rate of child support payable by Mr Annon is set at $400 per week.
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefits derived from business – income from family trust – a ground for departure established – 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
Ms Heywood and Mr Annon are the separated parents of [the child], born [on] January 2019. A child support case has been registered with the (then) Department of Human Services – Child Support (Child Support) since 30 January 2019. Child support is payable on the basis that Ms Heywood has 100% care of [the child] and Mr Annon is assessed as liable to pay child support to Ms Heywood.
There has been a previous departure determination in this case, lodged on 12 August 2019 by Ms Heywood and ultimately decided by a Child Support objections officer on 2 April 2020, which set Mr Annon’s adjusted taxable income at $136,000 for the period 1 September 2019 to 31 December 2022. This resulted in a child support liability of $13,342 per annum.
The decision was subject to a “COVID-19 clause”, which provided for the departure determination to cease if Mr Annon’s income was impacted by the pandemic. Mr Annon applied for the departure determination to cease on 14 May 2020 and on 2 June 2020 a decision was made for the child support assessment to revert to the “standard formula” assessment from 14 May 2020.
Thus for the period 14 May 2020 to 30 June 2020 Mr Annon’s child support liability was $4,830 per annum, based on an income estimate of $62,421 for Mr Annon and an income estimate of $22,291 for Ms Heywood. From 1 July 2020 to 30 November 2020 the rate of child support payable was $8,996 per annum based on Mr Annon’s 2018/19 adjusted taxable income of $96,912 and Ms Heywood’s income estimate of $19,944.
On 1 July 2020 Ms Heywood objected to the decision to enact the COVID clause and on 4 September 2020 her objection was disallowed. On 7 July 2020 Ms Heywood applied to the…
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Details
- Case
- [2022] AATA 640
- Decision Date
CaseChat Overview and Summary
This matter concerned an application by Ms Heywood for a departure determination regarding child support payable by Mr Annon. The dispute centred on the income, property, and financial resources of Mr Annon, with Ms Heywood alleging that he was using company and trust structures to minimise his income for child support purposes. The case was heard by C Breheny M.
The court was required to determine whether a ground for departure from the administrative assessment of child support was established, specifically concerning Mr Annon's income, property, and financial resources. It also needed to consider whether making a departure determination would be just and equitable, and otherwise proper, having regard to the financial circumstances of both parents and the needs of the child.
The court found that Mr Annon's declared income did not accurately reflect his financial capacity. It noted discrepancies in his financial information and evidence of significant funds being transferred to a family trust of which his wife was a beneficiary, suggesting Mr Annon had access to these resources. The court calculated Mr Annon's actual income and financial resources for the 2020/21 financial year to be approximately $199,040, a figure substantially higher than his declared income. This significant difference between his actual financial resources and his assessed income was found to constitute special circumstances warranting a departure. The court also considered the financial positions of both parties, noting Ms Heywood's reliance on Centrelink payments and significant expenses for the child, including childcare costs, while finding Mr Annon had the capacity to meet his commitments.
The court set aside the previous decision and substituted a new determination. For the period from 1 October 2020 to 31 December 2021, the rate of child support payable by Mr Annon was set at $370 per week. For the subsequent period from 1 January 2022 to 31 December 2024, the rate was increased to $400 per week to account for childcare costs. The court was satisfied that these increased payments would assist Ms Heywood and that Mr Annon had the capacity to meet them without undue hardship.
The court was required to determine whether a ground for departure from the administrative assessment of child support was established, specifically concerning Mr Annon's income, property, and financial resources. It also needed to consider whether making a departure determination would be just and equitable, and otherwise proper, having regard to the financial circumstances of both parents and the needs of the child.
The court found that Mr Annon's declared income did not accurately reflect his financial capacity. It noted discrepancies in his financial information and evidence of significant funds being transferred to a family trust of which his wife was a beneficiary, suggesting Mr Annon had access to these resources. The court calculated Mr Annon's actual income and financial resources for the 2020/21 financial year to be approximately $199,040, a figure substantially higher than his declared income. This significant difference between his actual financial resources and his assessed income was found to constitute special circumstances warranting a departure. The court also considered the financial positions of both parties, noting Ms Heywood's reliance on Centrelink payments and significant expenses for the child, including childcare costs, while finding Mr Annon had the capacity to meet his commitments.
The court set aside the previous decision and substituted a new determination. For the period from 1 October 2020 to 31 December 2021, the rate of child support payable by Mr Annon was set at $370 per week. For the subsequent period from 1 January 2022 to 31 December 2024, the rate was increased to $400 per week to account for childcare costs. The court was satisfied that these increased payments would assist Ms Heywood and that Mr Annon had the capacity to meet them without undue hardship.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
I note a weekly amount of $1,178 (if paid throughout 2020/21), plus $7,778 amounts to $69,034.[2] Mr Annon declared wages from [deleted] of $65,360 in his 2020/21 income tax return. I also note that the amount of $1,178 represents a net amount paid into Mr Annon’s bank account. A weekly wage of $1,178 net equates to approximately $1,520 per week gross[3] or approximately $79,040 per annum in 2020/21. Again, I cannot explain these discrepancies and Mr Annon was reluctant to provide further details.Summary[2] $1,178 x 52 = $61,256 + $7,778 = $69,034[3] >Ms Heywood submitted that there were a number of inconsistencies in the financial information provided by Mr Annon and obtained by Child Support. She alleged that Mr Annon was using the company and trust structures to minimise his income for child support purposes. She noted that Mr Annon transferred his shares in [Company 1] shortly after [the child] was born in January 2019 (folios A79 and A81) and his wife was appointed as beneficiary of the Annon Family Trust in August 2020 (folio 368). Mr Annon confirmed that his current income from his employer is $1,920 per week (gross) or about $99,840 per annum and Ms Heywood submitted that this was a further indication that Mr Annon had control over the company finances and could set his own income amount.Mr Annon said that he did not “understand numbers” and did not know how the Family Trust operated or whether it received any money from the companies. He said his father makes the business decisions and the accountants produce the financial statements and tax returns for the businesses. He had no input into any of these. As far as he was concerned, no money was taken out of the companies for private purposes. He certainly did not take any money from the companies. He was relying on his regular wages to pay his bills.Mr Annon also noted that he did not provide bank account statements to anyone. These were procured by Child Support and he was reluctant to discuss any financial information in front of Ms Heywood. I have considered the evidence before me. As noted above, I am satisfied that Mr Annon’s gross income from employment (based on a regular net payment of $1,178 per week) amounts to an annual gross income of $79,040. I am also satisfied that an amount of $240,000 was transferred into the Annon Family Trust, being the dividend paid by [Company 1] to the trust for the 2020/21 financial year. Whilst Mr Annon is not listed as a beneficiary of the trust, his wife, [Ms B] is one of two beneficiaries. I see no reason why Mr Annon should not have access to 50% of the distribution from [Company 1], given that it is Mr Annon, not his wife, who works in the company.I will accept Mr Annon’s and the accountant’s (folio 444) evidence that [Company 2] relied on its profits to repay a loan from [Company 1] and it needed a substantial amount of working capital to continue operating and meet its financial obligations. I have therefore not taken any financial resources from [Company 2] into consideration.I therefore find that Mr Annon’s income and financial resources from employment and from profits distributed by [Company 1] would amount to about $199,040 in the 2020/21 financial year.Ms Heywood – income, property and financial resourcesMs Heywood is reliant on Centrelink payments. She provided Centrelink Income Statements (folios A109–A114) indicating that she receives parenting payment of about $880.10 per fortnight, pension education supplement of $62.40 per fortnight and family tax benefit payments of about $185.92 per fortnight.Her 2020/21 personal tax return indicates a taxable income of $27,826, comprising Centrelink payments only (folio A137). Ms Heywood’s 2019/20 taxable income was $26,678 (folio 738).Ms Heywood said that she was employed by [Employer] prior to [the child]’s birth. She is able to return to the position, but her employer is unwilling to consider part-time work to enable her to continue her current studies and look after [the child]. She has been asking for a redundancy, but this is proving difficult to obtain.I have no evidence that Ms Heywood has any other source of income, and I am therefore satisfied that Ms Heywood’s income, property and financial resources are adequately represented by her annual income tax returns.Conclusion – income, property and financial resources of both partiesWhen Ms Heywood lodged her departure application on 14 July 2020 (the 2020/21 financial year), the rate of child support was $8,996 per annum based on Mr Annon’s 2018/19 adjusted taxable income of $96,912 and Ms Heywood’s income estimate of $19,944.I have found that Mr Annon’s actual income and financial resources in 2020/21 amounted to $199,040 and I have estimated that Mr Annon’s child support liability for [the child], if calculated on the basis of his actual financial resources would be $19,257 per year at the time Ms Heywood lodged her application. This amount changes only marginally (less than $2 per week) if Ms Heywood’s actual 2020/21 taxable income is used in the assessment.I find that the difference between an annual child support liability of $19,257 and the annual rate of child support ($8,996) based on Mr Annon’s 2018/19 adjusted taxable income, is so great that it gives rise to special circumstances in this particular case.I am therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Annon’s income, property and financial resources only. Subparagraph 98C(1)(b)(i) of the Act is satisfied if “one, or more than one” of the grounds for departure are established. Having found one ground for departure established, I will now consider whether it is just and equitable to make a departure determination.Just and equitable The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. To do so I must have regard to a number of factors set out in subsection 117(4) of the Act, such as the needs of [the child], the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.Mr Annon Mr Annon’s income, property and financial resources have been discussed in some detail above. I have found in the 2020/21 financial year Mr Annon’s income, property and financial resources amounted to $199,040. Mr Annon provided a Statement of Financial Circumstances (folios B1–B9) on which he indicated a current income from employment of $1,920 per week (about $99,840 per year). He listed taxation, superannuation and private health insurance expenses of $557 per week.Household expenses for himself and his other two children amount to $1,217 per week, including mortgage payments of $450 per week. Mr Annon noted that his wife works part time earning about $660 per week. The relevant bank statement (account xxxx3052) indicates that Ms Annon receives about $1,302 net per fortnight or $651 per week (folio 548). I am of the view that it is reasonable to assume that she contributes to (at least) one third of general household expenses.On this basis Mr Annon would have to meet expenses of $1,368 per week[4] from his weekly wages of $1,920, resulting in a weekly surplus of $552 and I therefore find that Mr Annon is able to meet all of his financial commitments.[4] $557 + $811, being two thirds of $1,217Ms HeywoodMs Heywood indicated on her Statement of Financial Circumstances (folios A3–A11) that her income is about $424 per week. Centrelink notices provided by Ms Heywood show that she receives a total of $1,128.42 per fortnight or about $564.21 per week. She noted expenses of approximately $1,293 per week, including taxation and repayment of a [Bank] loan ($270 per fortnight) and private rent of $300 per week. I note Ms Heywood assumed a tax rate of $125 per week, based on withholdings from Centrelink, but tax on her actual taxable income is about $35 per week (folio A 142). Most of the tax collected by Centrelink is being refunded. Thus her expenses are about $1,200 per week. These exceed her weekly income by about $636 and Ms Heywood noted that she often relies on food hampers from charitable organisations, as there is no money for groceries.Ms Heywood indicated that essential expenses for [the child] amount to approximately $472 per week (or $24,544 per year) and include about $100 per week for childcare costs. She provided evidence that [the child] attends childcare three days per week. From December 2020 to December 2021 she was able to obtain an increased childcare subsidy (CCS) payment from Centrelink, as she is studying (folios A101–A104). Her “out-of-pocket” costs for that period thus amounted to about $18.60 per week or about $967 for the year.Ms Heywood said that she no longer has access to the increased subsidy. From January 2022 the new CCS amount is $271.02 per week and childcare fees are $375 per week for three days. She will now have to pay about $103.98 per week “out-of-pocket” costs. Ms Heywood stated that attending childcare/kindergarten is important for [the child]’s development and Mr Annon ought to be contributing to these costs.From the information provided by Ms Heywood it appears that [the child] attends childcare throughout the entire year, except for a one-week period over Christmas. On this basis then Ms Heywood’s childcare cost would amount to about $5,200 per annum ($100 per week).[The child] is now three years old. She has no income, property or financial resources relevant to my determination. Overall it appears that Ms Heywood relies on child support payments from Mr Annon to meet [the child]’s expenses.Otherwise proper The requirement to consider whether it is “otherwise proper” to depart from the administrative assessment directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances or benefits (subsection 117(5) of the Act). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children. Ms Heywood is in receipt of family assistance payments, which are affected by maintenance payments such as child support. Any increase to child support payable would result in an appropriate decrease in these payments. Such a result would be otherwise proper.ConclusionSection 98S of the Act describes the determinations that the Registrar, and the Tribunal standing in the shoes of the Registrar, may make if it decides to depart from the administrative assessment. It is open to the Tribunal to set a rate of child support payable or set some of the variables used in the administrative assessment formula (for example, vary one or both parents’ adjusted taxable income).When Ms Heywood lodged her departure application on 14 July 2020 Mr Annon’s child support liability was $8,990 per annum. Ms Heywood submitted that Mr Annon has access to greater financial resources from the business and he is able to decide his own wages. Mr Annon recently increased his wages from about $65,545 (according to his 2020/21 income tax return) to about $100,000 per annum. She suggested that Mr Annon ought to be able to pay child support of about $2,500 per month (or about $577 per week). He has already been paying child support at a rate of $2,000 per month recently (to make up arrears), so there should be a capacity to pay more.Mr Annon submitted that his maximum salary from [Company 1] was probably about $80,000 to $100,000 per year and he did not derive any other benefits from the businesses and/or the family trust. He did not think that he could afford to pay any more child support than about $1,000 to $1,200 per month or about $230 to $280 per week.I have found that Mr Annon’s income and financial resources in 2020/21 amounted to about $199,040. This would result in a child support liability of approximately $370 per week, about $30 more per week than Mr Annon is assessed to pay under the current departure determination.I am cognisant that some of the information provided by Mr Annon was inconsistent and he did not wish to discuss his financial circumstances fully in the presence of Ms Heywood. It is difficult to set an income amount under those circumstances.I have therefore decided to set a rate of child support payable. I will set the rate of child support payable at $370 per week for the period 1 October 2020 to 31 December 2021 and from 1 January 2022 to 31 December 2024 I will set the rate at $400 per week in recognition of the childcare costs.I note that this will generate some arrears for Mr Annon but based on the evidence submitted in his Statement of Financial Circumstances he should be able to meet these costs. I am not persuaded that my decision will cause Mr Annon to be in financial hardship and the increased child support payments should assist Ms Heywood to meet her expenses for [the child].I note Ms Heywood wanted an extended departure determination, but I agree with Mr Annon in that Ms Heywood’s circumstances may be different in a few years. [The child] will be nearly six years old when the current departure determination ends and probably at school. Ms Heywood may have completed her studies and possibly have found employment. I have thus decided not to change the start date (1 October 2020) and end date (31 December 2024) set by the objections officer.I have reached a different conclusion than the objections officer and I therefore set aside their decision. DECISIONThe decision under review is set aside and a decision substituted that:For the period 1 October 2020 to 31 December 2021 the rate of child support payable by Mr Annon is set at $370 per week, andFor the period 1 January 2022 to 31 December 2024 the rate of child support payable by Mr Annon is set at $400 per week.
Ratio Decidendi
Legal Principle Established
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