Hyland and Hyland (Child support)

[2019] AATA 5508

Hyland and Hyland (Child support) [2019] AATA 5508 (31 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC016590

APPLICANT:  Mr Hyland

OTHER PARTIES:  Child Support Registrar

Ms Hyland

TRIBUNAL:Member K Dordevic

DECISION DATE:  31 October 2019

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period 14 November 2018 to 31 October 2022 Mr Hyland’s adjusted taxable income is varied to $110,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart – adjusted taxable income of liable parent is varied – 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

1. Mr Hyland and Ms Hyland are the parents of [Child 1] (born 2011) and [Child 2] (born 2013). Ms Hyland is recorded as having 100% care of the children. The case was registered with the Department of Human Services – Child Support (the Department) on 7 November 2017 and has been collectable since that date.

2. 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.

3. On 14 November 2018 Ms Hyland lodged a departure application with the Department. On 11 March 2019 a senior case officer determined that from 1 March 2019 to 30 September 2020 Mr Hyland’s adjusted taxable income is varied to $112,000 per annum.

4. Mr Hyland lodged an objection to that decision on 15 March 2019. On 14 May 2019 his objection was partly allowed. The objection officer determined that for the period 1 March 2019 to 30 September 2020 Mr Hyland’s adjusted taxable income is varied to $100,000 per annum.

5. On 24 May 2019 Mr Hyland sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal).

6. A telephone directions hearing was held on 12 September 2019. Both parties attended by conference telephone. The tribunal issued directions requiring compliance by 9 October 2019.

7. The tribunal heard the matter on 31 October 2019. The parties appeared by conference telephone. The Child Support Registrar was not represented at the hearing. In reaching its decision the tribunal has considered the sworn evidence of Mr Hyland and Ms Hyland. The tribunal also considered the documentation provided by the Department (folios 1-396), Mr Hyland (folios A1-A157) and Ms Hyland (folios B1-B51).  Mr Hyland advised that he would proceed with the application, though he had not received folios B1-B51; the tribunal notes that there is no record of Mr Hyland advising the tribunal that he had changed address in June 2019.

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three 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;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And, if so

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act provides grounds for departure if the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either party’s income, property and financial resources. The central issue in this matter is whether the administrative assessment accurately reflects Mr Hyland’s income, financial resources and earning capacity.

2. At the time Ms Hyland lodged the change of assessment application Mr Hyland was assessed to pay an annual rate of child support of $427 based on the parties’ adjusted taxable incomes of $19,620 (Mr Hyland) and $17,198 (Ms Hyland).

3. Mr Hyland’s 2015 to 2017 taxable incomes were $108,210, $83,548 and $26,280 respectively. Mr Hyland is a qualified [occupation] and at the time Ms Hyland lodged her application was a subcontractor for [Business 1], located in NSW.

4. It was difficult to get a coherent and consistent history from Mr Hyland regarding his working pattern with [Business 1]. As the tribunal understands it, prior to the parties’ separation they were living in [City 1] and Mr Hyland was contracting to [Business 1], as a fly in fly out worker. Ms Hyland states that during this period he was provided with a company car and free accommodation; Mr Hyland did not contest her evidence on this point. The parties separated in 2017 and Mr Hyland was then working on a full-time basis and receiving an allowance to meet his expenses. He then began a relationship with [an official] of [Business 1] in early 2018. At hearing Mr Hyland advised that in about April 2018 he began subcontracting to [Business 1] (that is, no longer as a contractor worker whose expenses would be reimbursed).

5. As the tribunal understands it, Mr Hyland states that his taxable income is indicative of his income and financial resources as it takes into account his expenses incurred when generating his subcontracting income. He stresses that the invoices in evidence also include tools and materials, and therefore are not reflective of his income and financial resources. The invoices in evidence for the period 4 December 2018 to 19 January 2019 indicate that he invoiced a total of $17,842.55 (excluding GST and office supplies). This 44 day period (excluding public holidays) indicates an average daily rate of $405.50, which is likely to under represent his earning capacity as it covers the Christmas period (and a time that Mr Hyland holidayed in [another state]). In any event, it is the best evidence that the tribunal has. Allowing for two weeks’ sick leave and four weeks’ annual leave, this would indicate an annual income (including tooling and materials) of about $131,900. Of course, there can be no precise measurement of what component of this was his actual income, as the hourly rate of $55 includes tools and materials. However, the bank statements in evidence during this same period would suggest that his tooling and material costs are minimal.

6. Mr Hyland’s 2018 income tax return indicates that he earned $23,800 from [Business 1] as wages and $31,700 as a subcontractor. He claimed $35,880 in expenses, including $5,000 in bad debts, as a subcontractor. As stated above, the bank statements in evidence do not support his claimed expenses; in fact, there is significant discretionary spending. It was put to Mr Hyland that his accounts during the same period did not show any rental (or for that matter other household expenses). He replied that his partner meets these expenses.

7. Recently Mr Hyland relocated with his partner and their children to [City 1]. He declares that in the period January to June 2019 his hours were significantly reduced as he was assisting his partner in caring for their infants. He then ceased all employment in June 2019, when he relocated. He is now employed by [Business 2], of which his partner is [an official]. He stated that [Business 2] operates on the same “principle” as [Business 1], just with smaller [projects]. He states that he has no reason to be a director or shareholder of the company. He rejected the suggestion that it was his exertion that primarily generated the business income and stressed that it is his partner who “looks after all the regulations” and it was best for him and his partner to have the consistency of him being paid a wage.

8. When it was put to Mr Hyland that his testimony regarding his partner’s involvement in the business was at odds with his declarations to the Department that his partner was unable to work because of her caring responsibilities he stated that his partner now works two days a week for [Business 2] and remotely for [Business 1] other days. He stated that their [children] started childcare the week of hearing.

9. Having considered the limited evidence before it, the tribunal is satisfied that the only reasonable conclusion to be drawn on the evidence is that the commercial arrangement in place between Mr Hyland, his partner and [Business 2] is a vehicle to reduce Mr Hyland’s child support liability. The tribunal formed the view that Mr Hyland’s partner’s involvement in the business is secondary to that of Mr Hyland. Certainly, the business is dependent on Mr Hyland’s skills for its ongoing viability; notwithstanding the fact that the tribunal is satisfied that his partner undertakes the administrative arm of the business. The tribunal notes that Mr Hyland was directed to provide [Business 2] payslips and he failed to comply with this direction. A bank statement in evidence (at A18) shows a deposit of $892.38 ($60,324 per annum), which is likely to indicate his weekly wage. At hearing Mr Hyland stated that his income is probably about $70,000 per annum, and he stressed that he has continued to pay child support on the basis that his income is about $65,000 per annum.There were a number of cash deposits into Mr Hyland’s account amounting to about $19,000; he stated that he purchased a car on his mother’s behalf and could not be more specific. There is also a payment of $13,585 from [another business], which Mr Hyland stated was a payment for a job he completed when he was transitioning back to working in [City 1].

10. Thus, in the assessment of Mr Hyland’s income and financial resources the tribunal places greater reliance on the invoices in evidence as indicating Mr Hyland’s capacity to contribute to the costs of the children. These invoices indicate income and financial resources of about $131,900. In the 2018 financial year Mr Hyland claimed deductions of $35,880, which include $5,000 in bad debts, superannuation of $3,170 and rental expenses of $4,000 (a cost which Mr Hyland concedes he does not meet). As stated above, there was little evidence in his bank statements of the other expenses Mr Hyland claimed in his tax return, including purchase costs of $11,000 and costs of sales $15,200. The tribunal notes that Mr Hyland failed to fully comply with its direction for him to provide all bank statements for the period 1 November 2018 to 30 September 2019 and was unable to satisfactorily account for this at hearing. Clearly Mr Hyland’s failure is unsatisfactory and leaves him open to adverse inferences being drawn as a consequence of his failure to provide a full and frank disclosure of his financial circumstances: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 209. The tribunal is satisfied that it is appropriate to allow for $20,000 in deductions and therefore concludes that Mr Hyland’s income and financial resources are in the vicinity of $110,000 per annum.

11. Application of this to the administrative assessment would result in a child support liability of $15,502 per annum; the administrative assessment dictated an annual child support liability of $427 per annum (the minimum annual rate). As Mr Hyland’s income and financial resources are not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The tribunal therefore concludes that the ground provided for in subparagraph 117(2)(c)(ib) of the Act is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Hyland was a full-time carer until she secured employment as [an occupation] in about April 2019. In her Statement of Financial Circumstances dated 8 June 2019 she declares weekly income of $989, parenting payment of $50 per week, savings of $4,340, her interest in the former marital home as $170,000, a mortgage of $190,000, a motor vehicle valued at $7,000, household contents and other personal property amounting to $20,000 and superannuation of $56,000. She reports that she owes her parents $15,000.  She estimates weekly household expenses of $1,105, of which about $550 relate to the children and her tax liability is $180 per week. Her 2019 taxable income was $29,184.

3. Ms Hyland reports that she and [Child 2] are in good health and that [Child 1] suffers separation anxiety and has been referred to a child psychologist.

4. Mr Hyland submits that aspects of the property settlement that have occurred between the parties should be taken into account for the purposes of determining his child support liability. Ms Hyland stressed that the property settlement has yet to be finalised. Without further evidence before it, the tribunal is not persuaded that the property settlement, or aspects of it, is relevant to the child support assessment.

5. Mr Hyland submits that his necessary costs relating to the premature birth of his [children], including driving to hospital and accommodation costs reduced his capacity to contribute to [Child 2] and [Child 1’s] costs. He stated at hearing that he could not provide a calculation of expenses. Without further evidence regarding these costs, the tribunal was not persuaded that it was just and equitable to depart from the assessment on this basis. The tribunal also accepts that Mr Hyland meets the children’s costs associated with their attendance at [a sport]. Mr Hyland did not contest Ms Hyland’s statements that they only attend at his insistence. The tribunal was not satisfied that the payments of about $150 per month render the assessment unfair.

6. In his Statement of Financial Circumstances dated 16 June 2019 Mr Hyland declares an annual income of $52,000 from [Business 1], $400 in savings, a half share in a property valued at $1,187,000 and his share of the mortgage as $187,000, a car valued at $31,500, household contents and other personal property valued at $1,000, superannuation valued at $50,715 and outstanding liabilities of $58,000. He declares weekly personal expenditure of $558 and weekly household expenses of $865. The tribunal notes that this does not appear to take into account his car repayments of $566.74 per month.  

7. Apart from meeting his necessary self-support expenses, Mr Hyland has no greater priority than to maintain his children. The tribunal has determined that it is appropriate to amend Mr Hyland’s adjusted taxable income to $110,000 per annum from the date Ms Hyland lodged her departure application, being 14 November 2018. Given the evidence of his income and financial resources, as well as his necessary expenses and significant discretionary spending, the tribunal is satisfied that this amount adequately represents his capacity to support the children and that these funds are necessary for Ms Hyland to adequately provide for them.

8. The tribunal is not satisfied given the history of the administrative assessment that Mr Hyland’s income and financial resources will be correctly reflected in the administrative assessment on an ongoing basis. The tribunal is satisfied that it is just and equitable to depart from the assessment on this basis until 31 October 2022. This period of departure will provide certainty to the parties and minimise the need for repeat proceedings. Given Mr Hyland’s income and financial resources, the tribunal is satisfied that the payment of child support arrears of about $7,000 and his ongoing child support liability will not cause him undue hardship.

9. The tribunal is satisfied that the administrative assessment is unfair given Mr Hyland’s income and financial resources and this results in an unjust and inequitable level of child support given the circumstances of each parent. For all the reasons above, the tribunal finds it just and equitable to depart from the administrative assessment.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper 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 and benefits. Parents rather than the community have the primary duty to maintain a child. Ms Hyland is in receipt of income-tested benefits. Departing from the administrative assessment by increasing the child support payable by Mr Hyland will result in a more appropriate apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that for the period 14 November 2018 to 31 October 2022 Mr Hyland’s adjusted taxable income is varied to $110,000 per annum.