Holland and Simpson (Child support)
[2019] AATA 4858
•1 October 2019
Holland and Simpson (Child support) [2019] AATA 4858 (1 October 2019)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2018/MC015348
APPLICANT: Mr Holland
OTHER PARTIES: Child Support Registrar
Ms Simpson
TRIBUNAL:Member P Noonan
DECISION DATE: 1 October 2019
DECISION:
The Tribunal sets aside the decision under review and, in substitution, decides that Mr Holland’s adjusted taxable income is varied to $87,659 per annum for the period 1 July 2018 to 30 October 2021. Further, that for the period 1 July 2018 to 30 October 2021, Ms Simpson’s adjusted taxable income is varied to $54,307 per annum. Further the annual rate payable by Mr Holland is varied (increased) by $1,196 for the period 1 July 2018 to 3 February 2020.
CATCHWORDS
CHILD SUPPORT – departure determination – whether there was a ground for departure – income, property and financial resources of both parents – costs of child care – 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 removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.
REASONS FOR DECISION
BACKGROUND
Mr Holland and Ms Simpson are the parents of two children who are currently relevant to the child support assessment.
The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of the 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. The Act also provides for a departure from the administrative assessment in certain circumstances.
A child support case was first registered with the Department of Human Services (the Department) on 2 November 2016 and child support is registered for collection by the Department. On 7 May 2018 Ms Simpson applied for a departure from the assessment of child support payable at that time. Care of the children was registered as being 339 nights per year to Ms Simpson and 26 nights per year to Mr Holland. At the time of Ms Simpson’s departure application the applicable assessment of child support payable was:
·For the period 10 April 2018 to 28 February 2019, Mr Holland was assessed to pay $4,626 per annum. This assessment used Mr Holland’s 2016–17 adjusted taxable income of $49,519 and Ms Simpson’s 2016–17 adjusted taxable income of $20,231.
On 3 July 2018 a Department officer, acting as a delegate of the Child Support Registrar, found that a ground for departure was established and decided to depart from the assessment in the following terms:
·For the period 1 June 2018 to 28 February 2019, Mr Holland’s adjusted taxable income is set at $90 000.
·For the period 30 July 2018 to 28 October 2018, the annual rate of child support payable by Mr Holland is increased by $728 as his contribution towards the child’s care costs.
Mr Holland objected to this decision and on 5 October 2018 a Department objections officer partly allowed his objection. The officer decided to depart in the following terms:
·For the period 1 June 2018 to 30 May 2020, Mr Holland’s adjusted taxable income is set at $90,000.
·For the period 1 June 2018 to 30 May 2020 the annual rate of child support payable by Mr Holland is increased by $1,196 per annum.
On 2 November 2018 Mr Holland applied to the Administrative Appeals Tribunal (the Tribunal) for an independent review.
A hearing for the matter was held on 17 September 2019. The Child Support Registrar did not attend the hearing. Mr Holland attended the hearing in person and gave evidence on affirmation. Ms Simpson also attended the hearing in person and gave evidence on affirmation.
Pursuant to paragraph 98C(1)(b) of the Act, a decision to depart from the administrative assessment may be made if the following requirements are met:
(i)that one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and
(ii)that it would be:
(A) just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B) otherwise proper; …
CONSIDERATION
Mr Holland’s income and access to financial resources
Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to as Reason 8, provide as grounds for departure:
(c) 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….
(ib) because of the earning capacity of either parent.
Mr Holland’s 2017–18 taxation return disclosed salary and wages of $80,186. He confirmed this was earned from his full time employment as a [Occupation 1] and that he was employed at arms-length which the Tribunal accepted to be the case. Mr Holland also runs his own business and declared gross income of $20,300. Mr Holland submitted he has no plans to conduct further business in 2018–19 or 2019–20. This is because it requires him to take unpaid leave from work and to travel overseas. His caring commitments in respect to the children make this unfeasible.
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).
The Tribunal discussed with Mr Holland the deductions claimed in respect to his business in 2017–18. He noted these were largely incurred in respect to a renovation he is undertaking in respect to his [business]. He is constructing a [new room]. He has been continuing this work this financial year. The Tribunal notes that this activity would appear to be reflective of a hobby activity. Mr Holland submitted he needed to be familiar with [specified] techniques due to his work with [named organisation]. However he also agreed that he is provided with space at work to conduct his paid endeavours and that he attends his place of work on a full time basis. The Tribunal does not consider Mr Holland’s 2018–19 business deductions in respect to his studio construction of $3,750 to be a necessary expense connected with generating his ongoing income. Further the purchase of further [equipment] worth $3,838, when he does not currently intend to pursue self-employment activities, is also not a necessary expense connected with generating his ongoing income. The Tribunal accepts all other claimed expenses for 2017–18, except for depreciation claimed on Mr Holland’s vehicle of $740, which is a paper expense not connected with capital expenditure related to his business.
As a result of these adjustments the Tribunal considers Mr Holland’s overall access to income and financial resources for the purposes of considering his ability to contribute to the maintenance of the children is reasonably reflected by an annual income of $87,659 per annum at the time of the departure application.
Ms Simpson’s income and access to financial resources
Ms Simpson’s 2017–18 taxation return declares that she was employed [and] earned $5,719. Her taxable income was $29,552. She runs [a] business which declared no income and expenses of $3,781. She claimed total losses of $7,216 which included a deferred loss of $3,435. She submitted that she is pitching for work and last made money for her business in 2016–17. Ms Simpson also declared a net income of $9,437 in respect to an investment property. The Tribunal does not consider Ms Simpson’ claimed business deductions are allowable for child support purposes in circumstances where the business declared no income. Accordingly the total claimed loss of $7,216 is to be added back to her income for the purposes of assessing her capacity to contribute towards the support of the children. The Tribunal notes that this situation is also reflective of her subsequent 2018–19 taxation return. In this return she claimed business expenses of $14,245 with no income declared.
In addition to the above considerations Mr Holland submitted that Ms Simpson works for her sister and that she has not declared this endeavour or associated income. Ms Simpson agreed she works for her sister but she does not receive a wage for this work as it is undertaken on a voluntary basis. She explained her sister is [a professional] and runs a firm [overseas] and she undertakes [certain] services for her. She has done this for the past year and a half for around 15 to 20 hours per week. Upon further questioning Ms Simpson agreed that her sister has paid for two overseas holidays for her in the past two years. However she disagreed this was representative of compensation for work undertaken. Rather she submitted she is learning valuable skills from her sister as she is not a qualified [deleted] and is effectively paying her back for in kind work her sister did for her in respect to her family law dispute with Mr Holland.
The Federal Magistrates Court has observed in K & M (No.2) [2007] FMCAfam 920 at [9] that:
The law is clear: there is a duty in proceedings of this type on every party to provide full disclosure of their financial position. If full disclosure is not provided the Court is at liberty to make appropriate inferences and findings from the non-disclosure, and not to be unduly cautious in doing so when making findings or drawing inferences against the non-disclosing party (see Tate & Tate [200] FamCA1040 and Chang v Su [2002]FamCA 156)
Further in Thomas & Harry (SSAT Appeal) [2010] FMCAfam 310 the Court noted that, in the event the Tribunal comes to a conclusion that for whatever reason a party has failed to disclose relevant information, then the Tribunal should not be unduly hampered in the exercise of its discretion.
The Tribunal considers Ms Simpson’s arrangements with her sister to be quite opaque. The Tribunal does not accept as reasonably plausible that she would work 15 to 20 hours per week for a year and a half undertaking her sister’s firm’s [details deleted] without any form of compensation. The Tribunal considers that she has effectively been compensated (at least in part) through the furnishing of overseas holidays. The current national minimum hourly wage for a casual employee is $24.36 per hour.[1] The Tribunal considers it appropriate to assess Ms Simpson at this rate for 15 hours per week given her evidence in respect to her arrangements with her sister. At 48 weeks a year her work for her sister is therefore worth at least $17,539 per annum.
[1]>
Given the above considerations the Tribunal considers Ms Simpson’s overall access to income and financial resources for the purposes of assessing her ability to contribute to the maintenance of the children is reasonably reflected by an annual income of $54,307 per annum at the time of the departure application.
Conclusion – the parents’ income and financial resources
Under the applicable assessment, the annual rate of child support payable by Mr Holland was $4,626 per annum. The Tribunal has determined that Mr Holland’s income and financial resources is reflective of an income of $87,659 per annum at the time of the departure application. The Tribunal has also determined that Ms Simpson’ income and financial resources is reflective of an income of $54,307 per annum at that point in time. The annual amount of child support payable by Mr Holland using these figures is approximately $9,298 per annum. Such a difference in the child support payable constitutes special circumstances as the application of the applicable assessment would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Holland in support of the children. As a result a ground for departure in subparagraph 117(2)(c)(ia) of the Act does exist.
Other grounds
Ms Simpson also raised departure grounds relating to the special needs costs of the children, child care costs and her necessary expenses for self-support.
22.In Marsh & Eccles [2008] FMCAfam 1417, Riethmuller FM stated, in regard to determining multiple grounds for departure from the administrative assessment, as follows (at paragraph 13):
Once a ‘special circumstance’ is established, it is then necessary to determine what would be a just and equitable and otherwise proper child support assessment … once a special circumstance has been established for each period, as only one special circumstance in the period is sufficient to satisfy the first step of the departure process.
The Tribunal will therefore consider these grounds in the context of whether it is just and equitable and otherwise proper to depart from the administrative assessment.
Would departure from the assessment be just and equitable?
Mr Holland
Mr Holland submitted a Statement of Financial Circumstances, dated 30 August 2019. He disclosed a property at [a location] in Victoria which he valued at $260,000. He services a mortgage for $212 per week. He also disclosed a car worth $4,800, [equipment] worth $6,000 and cash of $2,531. He also has a small credit card debt of $714. In respect to his expenditure he disclosed reasonable weekly expenditure which included high transportation costs. The Tribunal concludes he has sufficient income to meet his necessary expenses for self-support and that he has the financial capacity to make a contribution towards the maintenance of the children.
The Tribunal also considered Mr Holland’s 2018–19 taxation return. He earned $80,439 from his employment with a taxable income of $76,222. He also claimed $11,884 in business related expenses with no income earned. The Tribunal determined to add this expense to his taxable income to ascertain his overall capacity to provide for the children. This results in a 2018–19 adjusted taxable income of $88,106, which is very similar to his previous year’s adjusted taxable income as derived by the Tribunal, and will not materially affect the amount of child support payable.
Ms Simpson
Ms Simpson submitted a Statement of Financial Circumstances dated 2 September 2019. She disclosed ownership of a property worth $365,000 with a mortgage of $27,382. She disclosed around $4,700 in cash, a vehicle worth $1,000 and superannuation of $76,786. She disclosed some personal debt of around $8,000. Her weekly personal expenditure is around $309 per week and her weekly household expenditure is around $1,541 per week. In total this annual expenditure amounts to $96,200. This includes child care fees but still appears somewhat overstated as it includes $100 per week for holidays and expenses related to her investment property. The Tribunal considers that an increase in child support payable to her will assist her in maintaining the children.
The Tribunal notes that self-support expenses raised by Ms Simpson relate to exercise classes which she maintains are required due to an underlying health condition. The Tribunal concurred with the objections officer’s findings in regard to this issue in that the costs were not significant enough to significantly reduce her ability to support the children. The Tribunal also notes that applying the same add backs and income considerations in respect of her sister resulted in a very similar adjusted taxable income in 2018–19 to the previous financial year which also will not materially alter the amount of child support payable.
The children
In determining the proper needs of the children it is necessary to have regard to the manner in which the children are being, and in which the parents expected the children to be, cared for, educated or trained, and any special needs of the children (subsection 117(6) of the Act). In Eades & Cadell (SSAT Appeal) [2009] FMCAfam 275, at paragraph 22, Slack FM stated as follows:
In considering the proper needs of the child [s 117(4)(b)], the SSAT:
a.would ordinarily consider the evidence of the parties about the needs of the children to assess the reasonableness and quantum of those needs;
b.may have regard to publish guidelines as to the needs of the children (see Hallinan & Witynski at 94.323).
c.may also have regard to the costs of children used in the assessment of child support under the existing formula arrangements (although it is not sufficient or appropriate to rely upon the formula to perform that task, Lindenmayer J in Dwyer & McGuire (1993) FLC92-420 (and see also Gyselman (supra) at 79.078).
In respect to issues raised by Ms Simpson with respect to special needs costs and child care costs the Tribunal considered these costs, found to be $4,785 in care costs and $715 in respect to special needs costs by the objections officer to be reasonably reflective of costs incurred by Ms Simpson. The Tribunal considers it appropriate to maintain the objections officers’ departure determination in respect to care costs, being a variation in the annual rate payable by Mr Holland of $1,196 to ameliorate this cost to Ms Simpson, given her still relatively low income as derived earlier in these reasons. The Tribunal reduces the date range as the care arrangements in respect to the youngest child appear uncertain and subject to changes. The child may enter school in 2020 or 2021.The Tribunal did not consider a further adjustment in respect to the special needs costs is warranted as the amount incurred is relatively small. Overall the Tribunal considers that distributing the costs of raising the children using the relevant child support formula, which is based on social science research giving the average costs of children in various family income brackets, and incorporating the income as derived earlier in these reasons, results in a just and equitable outcome with an adjustment in respect to care costs. The Tribunal therefore declines to incorporate further consideration for these expenditures raised by Ms Simpson.
It is open to the Tribunal to vary the rate of child support payable or vary some of the variables that are used in the administrative assessment formula.
The principal object of the Act is to ensure that children receive a proper level of financial support from their parents. Further, I note the statements contained in sections 3 and 4 of the Act to the following effect:
·Parents of a child have a primary duty to maintain the child;
·The duty has a priority over all other 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 has considered the evidence given by each party in respect to the questions posed to them about any potential hardship that may be caused to them by a departure determination. Mr Holland noted he is without any form of family financial support. He has moved to a partially renovated shed in [the location] to make ends meet which necessitates a long commute to work. He lives cheaply. He requires a reduction in child support payable to assist him financially. Ms Simpson submitted she requires financial assistance and a drop in child support payable to her may cause her difficulties. She submitted Mr Holland can afford the assessed child support payable as he has low expenses and can afford to spend money on his hobby.
Overall the Tribunal considers it is just and equitable to depart from the administrative assessment of child support payable. This departure will commence from 1 July 2018 to incorporate both parents’ 2017–18 adjusted taxable incomes. The departure will cease on 30 October 2021 (in respect to varied adjusted taxable income), at which point it will be appropriate to reassess their respective financial situations. Such a date range also allows for both parents to plan their affairs with certainty and the Tribunal considers neither parent’s taxable incomes will reflect their actual income and access to financial resources, as assessed for child support purposes, at any stage in that time period.
With regard to all of the reasoning, as set out above, Mr Holland’s adjusted taxable income is varied to $87,659 per annum for the period 1 July 2018 to 30 October 2021. Further Ms Simpson’ adjusted taxable income is varied to $54,307 per annum for the period 1 July 2018 to 30 October 2021. Further the annual rate payable by Mr Holland is varied (increased) by $1,196 for the period 1 July 2018 to 3 February 2020.
With regard to the care records outlined earlier in these reasons, the amount of child support payable by Mr Holland in the period of departure is around $9,298 per annum or $178 per week with a further increase of $23 per week for the period 1 July 2018 to 3 February 2020 to account for child care costs. The Tribunal does not consider Mr Holland will be placed in undue hardship by this departure decision. He is afforded some financial relief when compared to the decision under review and he has steady full time employment and minimal debt.
The Tribunal also did not consider Ms Simpson will be placed in undue financial hardship by this decision. She will be paid child support that is commensurate with the Tribunal’s analysis of the parents’ overall access to financial resources. While some overpayment to her will likely be created as a result of this decision this is an unavoidable consequence of the review process.[2]
[2] Child Support Registrar & Pearce and Anor [2018] FamCAFC 10
The Tribunal considered this departure determination is a just and equitable outcome in regard to the respective situations of each parent.
Otherwise proper
An increase in child support payable may reduce the cost to the community. There is also nothing improper in adjustments to the amount of child support payable to reflect the parents’ actual respective capacities to provide support to the child.
DECISION
The Tribunal sets aside the decision under review and, in substitution, decides that Mr Holland’s adjusted taxable income is varied to $87,659 per annum for the period 1 July 2018 to 30 October 2021. Further, that for the period 1 July 2018 to 30 October 2021, Ms Simpson’ adjusted taxable income is varied to $54,307 per annum. Further the annual rate payable by Mr Holland is varied (increased) by $1,196 for the period 1 July 2018 to 3 February 2020.
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