Kirk and Cross (Child support)

Kirk and Cross (Child support) [2018] AATA 3798 (2 August 2018)

DIVISION: Social Services & Child Support Division

REVIEW NUMBER: 2018/SC013437

APPLICANT: Mr Kirk

OTHER PARTIES: Child Support Registrar

Ms Cross

TRIBUNAL: Member J Cuthbert

DECISION DATE: 2 August 2018

DECISION:

The tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment from 7 August 2017 to 31 March 2020 by varying Mr Kirk’s adjusted taxable income to $120,000.

CATCHWORDS

Child support - Departure determination - Income, property and financial resources of both parents - Business income - Special needs of the child - 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 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

HISTORY

This review concerns an application made by Ms Cross on 7 August 2017 for a change to a child support assessment.
Ms Cross and Mr Kirk are the parents of [Child 1] (born 2011). Since 18 September 2012 there has been a child support assessment in place, made by the Department of Human Services – Child Support. The assessment is currently based on Ms Cross having a care percentage of 86% and Mr Kirk having a care percentage of 14%.
For the child support period commencing 1 October 2016 Mr Kirk was assessed to pay an annual rate of child support of $1,373, based on his 2015/16 adjusted taxable income of $18,231 and Ms Cross’s 2015/16 adjusted taxable income of $19,744.
On 7 August 2017 Ms Cross applied to the Department for a departure from the assessment on the grounds that Mr Kirk’s income, property and financial resources were not properly reflected in the assessment and that she had significant costs related to [Child 1]’s special needs.
On 19 September 2017 a decision was made to depart from the child support assessment by varying Mr Kirk’s adjusted taxable income to $137,280 from 7 August 2017 to 30 November 2018.
An application for a departure from the assessment made by Mr Kirk on 21 November 2017 was refused by the Department on 8 December 2017. However, Mr Kirk was granted an extension of time to lodge an objection to the decision made on 19 September 2017. Ms Cross also sought to object to that decision. Mr Kirk’s objection was partly allowed on 20 January 2018. The objections officer set aside the earlier decision and decided to depart from the assessment by varying Mr Kirk’s adjusted taxable income to $81,353 from 7 August 2017 to 31 March 2020.
On 5 February 2018 Mr Kirk lodged an application for a review of the objection decision with the tribunal. His application was dismissed on 15 May 2018 as he withdrew his application after a directions hearing on 11 April 2018. However, on 6 June 2018 the matter was reinstated at Ms Cross’s request and further directions were issued to Mr Kirk and Ms Cross.
The application for review was heard on 2 August 2018. Mr Kirk attended the hearing in person. Ms Cross attended the hearing by telephone. The Child Support Registrar was not represented at the hearing. The tribunal had access to the statement and documents provided by the Department (folios 1 to 457), documents provided by Mr Kirk (folios A1 to A135) and documents provided by Ms Cross (folios B1 to B165).

CONSIDERATION

The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.
A liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the child support assessment under Part 6A of the Assessment Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the tribunal standing in place of the Registrar, must be satisfied:
(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; …
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act. If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations in section 98S of the Assessment Act. That section permits a range of determinations, including varying the annual rate of child support payable or a parent’s adjusted taxable income.
In Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409, Federal Magistrate Slack dealt with the issue of the disclosure of financial information in child support matters before the former Social Security Appeals Tribunal. His Honour stated that the principle of full and frank disclosure applicable to proceedings in the Family Court was also applicable to proceedings before the tribunal. He stated at [31]:
In financial proceedings under the Family Law Act, the authorities make it clear that a Court should not be unduly cautious about making findings in favour of the other party if it is not satisfied that proper disclosure has been made (see Chang & Su (2002) FLC93-117).
Also, in Agrippa & Horton (SSAT Appeal) [2010] FMCAfam 1144, Federal Magistrate Halligan stated:
If the SSAT is satisfied that a parent has made a deliberate non-disclosure of his or her financial circumstances, it should be reasonably robust in assessing the non-disclosing parent’s financial circumstances adversely to that parent and in favour of the other parent. That is not to say that it may arrive at an entirely arbitrary result, but rather that it may draw generous inferences adverse to the non-disclosing party about that party’s financial circumstances.

Issue One – Does a ground exist to depart from the administrative assessment?

Ms Cross sought a departure from the administrative assessment on the ground that Mr Kirk’s income, property and financial resources were not properly reflected in his adjusted taxable income used in the child support assessment.
The grounds for departure are set out in subsection 117(2) of the Assessment Act. Subparagraph 117(2)(c)(ia) provides as a ground 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; or …
The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

Mr Kirk’s income, property and financial resources

Mr Kirk describes himself as a [consultant]. Since 22 September 2016 he has contracted his services as an [Occupation 1] to [Company 1] using the trading name, [Occupation 2][Business 1].
Mr Kirk’s adjusted taxable income for 2016/17 was $35,880, made up of net income from [Business 1] of $35,333 and interest of $547. The business recorded gross income of $80,420 and expenses totalling $47,087 including depreciation of $5,491 (for motor vehicles, computer equipment and telephone), motor vehicle expenses of $18,255, office rent and electricity of $9,425, telephone and internet costs of $2,589 and protective clothing and laundry of $923.
Mr Kirk’s evidence is that he received income of $70,100 from [Company 1] and the remainder from other sources prior to starting work for [Company 1] in September 2016. This indicates annualised income of at least $93,000 from [Company 1] from 22 September 2017. However, information Mr Kirk provided to a court in March 2017 indicates he has had a set weekly income of $2,640 (or $126,720 for 48 weeks a year) at least since that time.
Initially Mr Kirk told the tribunal that 95% of his work is in [Company 1]’s office, with external meetings and site visits from time to time. He said that he also works from home, although this is not a requirement of his job. Mr Kirk said that flexibility to work from home, perhaps for one week each month, allows him to take [Child 1] to regular appointment, etc. While later in the hearing he told the tribunal that he visits sites and goes to meetings more frequently than he estimated earlier, the tribunal finds that Mr Kirk’s later statements are self-serving and prefers his earlier evidence.
Mr Kirk told the tribunal that he claims 10% of his rent as an expense of earning his income. However, the amount claimed of $9,425 in 2016/17 is clearly more than 10% of Mr Kirk’s costs as he pays rent of $650 a week for a two-bedroom unit. He told the tribunal that initially the smaller bedroom was intended to be for [Child 1] and that he had planned to work in the living area. However, he said that as [Child 1] prefers to sleep in his room, he has a desk and chair with a laptop, printer and some storage in the second bedroom. He acknowledged that when working from home he also works in other areas of the unit. The tribunal finds that the deduction of office expenses is a significant financial resource to Mr Kirk covering what would otherwise be personal expenses. The tribunal notes that he is likely to only have some small additional cost for electricity used when working from home.
In his 2016/17 income tax return Mr Kirk claimed expenses related to two vehicles, a motorcycle (95% of the costs) and a Mercedes which was owned by his mother (80% of the costs). Despite not owning the Mercedes he claimed depreciation of $834. Mr Kirk told the tribunal that the majority of the expenses he claimed were for travel from his home to [Company 1]’s premises, although he also occasionally travels directly to a site or used the vehicle for work purposes during the day. The tribunal finds that the claim for motor vehicle expenses for costs which are essentially for travel to and from work are a significant financial benefit to Mr Kirk. Mr Kirk told the tribunal that his motor vehicle expenses have increased as he purchased a VW Transporter on finance in July or August 2017 and has payments of about $1,100 a month.
The tribunal also finds that Mr Kirk receives a financial benefit as he claims at least 95% of his telephone and internet costs are business related.
Mr Kirk told the tribunal that the claim for protective clothing and laundry of $923 in 2016/17 related to dry-cleaning his suits and business shirts as well as laundry of clothing supplied by [Company 1]. He said that he has been provided with four shirts and four pairs of pants and that the shirts have [Company 1]’s logo on them. The tribunal notes that laundering of non-specific business clothing is not an allowable income tax deduction. The tribunal finds that a large proportion of the claim for laundry is of financial benefit to Mr Kirk.
Bank statements provided by Mr Kirk show 36 deposits of $2,640 from [Company 1] in the period 1 July 2017 to 23 March 2018. Mr Kirk told the tribunal that he had two weeks’ holiday over Christmas and a further two weeks in May or June 2018. The tribunal finds it likely that Mr Kirk received 48 weekly payments, or $126,720, from [Company 1] in the 2017/18 year.
Mr Kirk provided the tribunal with copies of statements for only one of his [accounts]. He did not proffer any explanation as to why he failed to comply with the directions issued by the tribunal to provide copies of all statements for a specified period. He denied knowledge of ever having an account with [a second bank], despite interest of $368 included from a joint account with [the second bank] shown on his income tax return for 2016/17.
Ms Cross contends that Mr Kirk has other income. She stated that he has experience as a [teacher] and an [Occupation 2] and suggested that he could also be providing contract services to others. Mr Kirk stated that he has no other income and that he ceased work as a [teacher] in 2014 due to a decline in student enrolments. He said that he has not worked as an [Occupation 2] since 2011. Although Mr Kirk failed to provide the tribunal with copies of all of his bank statements the tribunal accepts that he is working for [Company 1] on a full-time basis. The tribunal finds no evidence that he has any income from undisclosed sources.
The tribunal finds that Mr Kirk’s income and financial resources are not properly reflected in his adjusted taxable income for 2016/17. Although he is liable to pay GST on the gross income from [Company 1], he also pays less income tax than others with similar incomes and financial resources. After reasonable income tax deductions, the tribunal finds that since at least March 2017 Mr Kirk has had income and financial resources of at least $120,000 a year, far greater than suggested by his adjusted taxable incomes for 2015/16 and 2016/17.
Mr Kirk and Ms Cross jointly owned their former family [home]. The property was sold in late 2016 and they each received $280,000 as an interim settlement. The balance of the proceeds, about $325,000, is held in trust pending the finalisation of the property matter between the parties. Despite stating on 9 March 2018 that he has savings of only $351.46, Mr Kirk told the tribunal that after payment of legal bills and other expenses, including the repayment of loans from his parents, he gave to his mother about $18,000 to hold for him in order to meet tax and upcoming legal costs. There is no evidence to suggest that he has any other property which is capable of providing him with income.

Mr Kirk’s earning capacity

The tribunal also considered Mr Kirk’s earning capacity and the three criteria in subsection 117(7B) of the Assessment Act. The tribunal accepts that he has been working on a full-time basis since September 2016 and finds that the first criterion of subsection 117(7B) is not satisfied for that reason. Although Mr Kirk stated that he has several health conditions he did not suggest that they affect his ability to work on a full-time basis. As the tribunal finds that the three criteria of subsection 117(7B) of the Assessment Act are not satisfied, the tribunal is unable to determine whether Mr Kirk has any unused earning capacity.

Do the existing assessments provide a result which is unjust and inequitable?

Ms Cross’s income, property, financial resources and earning capacity

In order to determine whether Mr Kirk’s income and financial resources result in child support assessments which are an unjust and inequitable determination of the financial support he should provide for [Child 1], the tribunal considered whether Ms Cross’s adjusted taxable income is indicative of her income, property, financial resources and earning capacity.
Ms Cross is in receipt of parenting payment and family tax benefit. Her 2016/17 adjusted taxable income is $18,835. She received parenting payments totalling $19,260 in that year. Ms Cross’s 2015/16 adjusted taxable income of $19,744 was made up solely of parenting payments received from Centrelink.
Mr Kirk acknowledges that Ms Cross’s parents (aged 90 and 79) are wealthy. Ms Cross did not refute that her mother pays for health insurance cover for her and [Child 1] as well as meeting the cost of [Child 1]’s attendance at a private school. Ms Cross told the tribunal that she and [Child 1] live with her parents. She said that she does not pay board but meets the majority of grocery and gardening expenses for the household.
Mr Kirk suggests that Ms Cross receives income via [a] Trust. Ms Cross said that the trust is owned by her mother and that her parents do not operate any business. She said that she does not receive any income from the trust and does not receive money for caring for her parents as Mr Kirk suggested. She told the tribunal that although she holds powers of attorney for her parents she did not receive any benefit from the sale of a property they owned for $1.15 million as Mr Kirk also suggested. The tribunal notes that a person with a power of attorney has a duty to administer the affairs of the other person in the interests of that person and not to obtain any personal benefit. The tribunal has no evidence to support Mr Kirk’s contention that Ms Cross works for her parents, is paid for caring for them, or uses their income or assets for her own purposes. The tribunal finds that the support Ms Cross receives from her parents is not a financial resource which should be taken into account in the child support assessment for [Child 1].
Mr Kirk questions the legal expenses Ms Cross has been able to meet. He estimated that she spent more than $400,000, but has no knowledge of the actual costs she incurred. Ms Cross told the tribunal that she repaid her mother $223,000 for legal costs from the funds she received from the interim property settlement. She said that she also paid lawyers a further $21,313 and paid $7,150 to an expert witness. Ms Cross gave evidence as to how she expended the remainder of the funds she received. The tribunal accepts Ms Cross’s evidence that she has no funds left. She is hoping to build a granny flat on her parents’ property to accommodate herself and [Child 1] once the property matter is resolved. However, she acknowledged that she will not have sufficient funds and that her parents may proceed with the project and rent out the accommodation. The tribunal has no evidence that Ms Cross has other financial resources or property of significant value which is capable of providing her with any significant income.
The tribunal finds that at all relevant times, Ms Cross’s income, property and financial resources have been properly reflected in an adjusted taxable income which is less than the self-support amount used in the child support assessment formula.
Mr Kirk submits that Ms Cross has a capacity to work as an [Occupation 2]. The tribunal is satisfied that she has not been in paid employment since [Child 1] was born. Mr Kirk acknowledged Ms Cross’s evidence that her desire not to work and to stay home to care for [Child 1] was a source of contention during their relationship and that she was not working at the time they separated when [Child 1] was 15 months old.
The tribunal accepts Ms Cross’s evidence that in order to meet Centrelink job search requirements she has applied for part-time positions, as an [Occupation 2] and in [other sectors]. However, she started a [course] in July 2017. She said that she anticipates finishing the degree in late 2019 and then being able to obtain part-time work in [that area]. Ms Cross expressed what she said was a long-held belief that she should be available to care for [Child 1] and not be in paid employment. She said that she had no success when she applied for work and had only been offered one part-time role as an [Occupation 2] working from home. She said that she could not do the work as she did not have the necessary software. Mr Kirk refuted this saying that she had the relevant software before their separation. He confirmed that, before their separation, Ms Cross had stated that she did not ever intend to return to any external work, apart from caring for her parents.

The tribunal finds that although Ms Cross is not working it is not clear whether there is ample work available. On the evidence provided by both parties, the tribunal is satisfied that this is not a case in which Ms Cross is not seeking full-time work or failing to obtain employment in order to affect the child support assessment. The tribunal notes that even if she had earned an income it would not have affected the assessment previously due to Mr Kirk’s low adjusted taxable income for 2015/16. The tribunal is satisfied that the third criterion in subsection 117(7B) of the Assessment Act is not satisfied in this case. As a consequence, the tribunal is unable to determine that Ms Cross has any unused earning capacity.

Are there special circumstances for which to depart from the assessment?

Taking into account the objects of the Assessment Act (section 4), including that children should share in the standard of living of both their parents, the tribunal finds that the income and financial resources of Mr Kirk provide special circumstances for which to depart from the assessment. Mr Kirk would be liable to pay more child support if the assessment was based on his income and financial resources rather than his adjusted taxable incomes. The tribunal finds that the assessment is unfair to Ms Cross and to [Child 1] for that reason, and that a ground is established to depart from the assessment under subparagraph 117(2)(c)(ia) of the Assessment Act.

Issue Two – Would a departure from the administrative assessment be just and equitable?

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 to depart from the assessment having regard to the matters set out in subsection 117(4) of the Assessment Act.
Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. In accordance with the objects set out in section 4 of the Assessment Act, [Child 1] should receive a proper amount of financial support from his parents in accordance with their capacity to contribute.

[Child 1]’s needs

[Child 1] is seven years old. He attends [School 1]. A limited child support agreement that has been in place since 2016 states that Ms Cross is responsible for the payment of [Child 1]’s school fees at [School 1] and his associated educational needs. There is no dispute that those costs are met by Ms Cross’s mother.
[Child 1] has fortnightly appointments with a [psychiatrist], on the recommendation of an expert witness in parenting proceedings. The cost of each visit has increased from $280 to $300 before any health insurance rebate. The tribunal accepts that both Mr Kirk and Ms Cross attend appointments on a monthly basis and meet the costs. The tribunal finds that the appointments with a psychiatrist are part of [Child 1]’s proper needs and significantly affect the overall costs of his support.
Until Term 4 of 2017 Ms Cross also had out-of-pocket expenses of about $40 a week for speech therapy sessions for [Child 1]. She disputes Mr Kirk’s evidence that he paid for any more than one session. Mr Kirk had taken [Child 1] for an assessment at [a] Hospital. Ms Cross said that although there was a free service available at the hospital for children under six she had decided to use a private service recommended by [Child 1]’s school. In light of an available free service (at least until [Child 1] was six in May 2017), the tribunal is satisfied that although the costs were significant and related to a special need, it would not be just and equitable to make any departure from the assessment on the basis of the cost of speech therapy.
Ms Cross also pays for swimming lessons for [Child 1] as well as sports camps in school holidays and church activities. She did not suggest that the expenses were out of the ordinary or unusual, or that there was any agreement with Mr Kirk about [Child 1]’s participation in those activities. Mr Kirk told the tribunal that he has put [Child 1] on a waiting list for swimming lessons and that [Child 1] started karate lessons a week before the hearing, at a cost of $370 for 10 weeks. Mr Kirk did not suggest that the costs incurred are out of the ordinary or unusual, or that there was any agreement with Ms Cross about [Child 1]’s participation.

[Child 1]’s income, property, financial resources and earning capacity

The tribunal has no evidence that [Child 1] has any income, property or financial resources or any unused earning capacity that needs to be taken into account in the child support assessment.

The income, property, financial resources and earning capacity of Ms Cross

The income, property, financial resources and earning capacity of Ms Cross have been discussed above.

Ms Cross’s necessary commitments

Ms Cross lives with [Child 1] in her parents’ home. She does not pay rent or board but meets some household costs. The tribunal finds that her overall expenses are lower than they would be if she was in a position of having to pay for accommodation for herself and [Child 1], although she does have some costs related to her own health conditions, including surgery in 2017. The bank statements Ms Cross provided indicate that she has been able to meet the reasonable and necessary expenses she has for herself and [Child 1] although she is also reliant on the support of her parents who meet certain other expenses, including [Child 1]’s school fees as well as accommodation costs. The tribunal notes that Ms Cross’s parents have no legal duty to support [Child 1] and finds that their support should not be taken into account in the assessment.

The income, property, financial resources and earning capacity of Mr Kirk

The income, property, financial resources and earning capacity of Mr Kirk have been discussed above.

Mr Kirk’s necessary commitments

Mr Kirk lives in a two bedroom-unit costing $650 a week in rent. The tribunal notes that his bank statements record some discretionary spending such as for holidays and outings. While he said that he has additional costs for food due to his health condition, the tribunal is satisfied that Mr Kirk is able to meet his reasonable and necessary expenses and those he has for [Child 1] and also to pay child support.

The parents’ duty to support others

There is no evidence that Ms Cross and Mr Kirk have a duty to support any other person apart from [Child 1].

Terms and period of departure

Ms Cross made her departure application on 7 August 2017. She submitted that a decision to depart from the assessment should be backdated to September 2016 when Mr Kirk started working for [Company 1]. The tribunal notes that on 24 March 2017 Ms Cross spoke to an officer of the Department about information obtained from family court proceedings that Mr Kirk had an income of $2,640 a week. However, she did not contact the Department again for more than four months. Ms Cross told the tribunal that she was worried about the repercussions that lodging an application would have on her and on [Child 1]. She said that she made a decision not to pursue the issue in early 2017 as she assumed that Mr Kirk’s income tax return for 2016/17 would properly reflect his income from employment. She said that she lodged her application when that was not the case.
In the circumstances of this case, the tribunal finds that it would not be just and equitable to backdate any variation to Mr Kirk’s adjusted taxable income. The tribunal proposes to vary his adjusted taxable income to $120,000 from 7 August 2017, the date of Ms Cross’s application. As both parties acknowledged that their circumstances are unlikely to alter before the property matters between them are resolved, perhaps by the end of 2019, the tribunal finds that it is just and equitable to extend the departure until 31 March 2020 to provide some certainty.
Although Ms Cross has less income and fewer financial resources than Mr Kirk the tribunal does not propose to vary the child support assessment in relation to the costs she meets for [Child 1]’s appointments with [the psychiatrist] as both parents have similar costs and Ms Cross’s overall costs are lower because she lives with her parents.
The tribunal finds that the proposed variation results in a child support liability (currently about $200 a week payable by Mr Kirk) which reflects a reasonable level of support for [Child 1] given the differences between his parents’ incomes and financial resources and the care they each provide.

Hardship

The child support payable on the basis of the decision proposed should assist Ms Cross to meet [Child 1]’s proper needs.
The proposed decision will result in arrears of child support payable by Mr Kirk. However, in light of the findings made about Mr Kirk’s circumstances, particularly the savings held by his mother, the tribunal considers that the proposed decision will not result in hardship to him or to [Child 1].

Issue Three – Is it otherwise proper to depart from the administrative assessment?

The final step for the tribunal to undertake is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the tribunal to take into consideration the following matters:
(a)the nature of the duty of a 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 the 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 the child or the carer entitled to child support.
The child support law recognises that each parent has a primary duty to maintain their children. Ms Cross receives family tax benefit for [Child 1]. The tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter and to properly reflect Mr Kirk’s income, property and financial resources.

DECISION

[2018] AATA 3798

2 August 2018

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Statutory Construction

Remedies