Klayman and Mayne (Child support)

Klayman and Mayne (Child support) [2024] AATA 3240 (24 July 2024)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/MC027253
APPLICANT:  Mr Klayman
OTHER PARTIES:  Child Support Registrar
Ms Mayne

TRIBUNAL:Member S Irvine
DECISION DATE: 24 July 2024
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that for the period from 1 September 2023 to 30 June 2026, Mr Klayman’s adjusted taxable income is varied to $80,500.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources – additional financial assistance – ground for departure – special needs of the children – just and equitable – 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

Mr Klayman and Ms Mayne are the parents of [Child 1] (14) and [Child 2] (11), in respect of whom a child support assessment has been in place since 3 February 2022. As at 14 May 2023, under that assessment, Mr Klayman was assessed to pay child support to Ms Mayne at an annual rate of $7,360 based on Mr Klayman’s income set by a previous departure determination at $77,000, and Ms Mayne’s income set by a previous departure determination at $113,000.
On 14 May 2023 Ms Mayne applied for a departure from the administrative assessment raising a number of grounds. Ultimately the grounds considered by Services Australia – Child Support (Child Support) were the grounds known as Reason 2 and Reason 8A. Mr Klayman opposed Ms Mayne’s application and made his own cross-application on the basis of Reason 8A.
On 4 September 2023 a Child Support decision maker decided to allow the application, finding the grounds known as Reason 2 and Reason 8A were established. Child Support set Mr Klayman’s adjusted taxable income at $87,419pa for the period 14 May 2023 to 30 April 2026, based on findings about Mr Klayman’s income and benefits accruing to him from working for a family business. For the same period, Child Support increased the annual rate of child support otherwise payable by Mr Klayman to Ms Mayne by $600 to take account of costs associated with [Child 2’s] special needs.
On 6 October 2023 Mr Klayman objected to the decision made on 4 September 2023. On 1 December 2023 a Child Support objections officer disallowed the objection, and therefore the decision was not changed.
On 22 December 2023 Mr Klayman applied to this Tribunal for a review of the decision made on 1 December 2023. A hearing was held on 4 July 2024. Mr Klayman and Ms Mayne attended the hearing by telephone and gave sworn evidence. Mr Klayman was represented at the hearing by [Representative A].
Following the hearing I adjourned the matter to allow Ms Mayne to provide further evidence as to [Child 2’s] special needs. On 24 July 2024 I reconvened the matter and made a decision. In doing so I had regard to the oral evidence given by the parents and the documentary evidence as follows:
·Documents provided by Child Support in accordance with the provisions of the Administrative Appeals Tribunal Act 1975, marked pages 1 to 460;
·Documents submitted by Mr Klayman marked pages A1 to A107;
·Documents submitted by Ms Mayne marked pages B1 to B183.

ISSUES

The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the income of each parent.
Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Registrar in writing, requesting a departure from the administrative assessment in relation to a child.
Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more of the grounds set out in subsection 117(2) of the Act exist, and that it would be just and equitable and otherwise proper to make a particular determination.
The issues to be determined in this case are therefore:
·Whether one or more of the grounds for departure referred to in subsection 117(2) of the Act exists; and, if so
·Whether it would be just and equitable as regards the child, the liable parent and the carer entitled to child support, and otherwise proper, to make a particular determination to depart from the administrative assessment of child support.

CONSIDERATION

Is there a ground to depart from the administrative assessment?

The grounds for departure raised in this application are the grounds known by Child Support as ‘Reason 2’, relating to special needs of the children, and ‘Reason 8A’, relating to the income, property and financial resources of the parents.
As to reason 8A, subparagraph 117(2)(c)(ia) of the Act provides that a ground for departure is that, in the special circumstances of the case, application of the legislative provisions relating to administrative assessment ‘result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of either parent.

Mr Klayman’s income, property and financial resources

As at the date of the application for a change of assessment, under the administrative formula, Mr Klayman’s financial capacity to maintain his children was measured by reference to his adjusted taxable income of $77,000, which was set by an earlier departure determination made on 15 June 2022.
Mr Klayman provided the Tribunal with a copy of his income tax return for the 2022/23 financial year, which shows that his taxable income in that year was $70,840. This is based on gross earnings from employment of $71,173, with some modest and unremarkable tax deductions. Mr Klayman also provided payslips for the weeks ending 7 May 2024, 14 May 2024 and 21 May 2024. The payslips show that in each of those weeks Mr Klayman had income from his employer of $1,356, and that at 22 May 2024 his year-to-date earnings from his employer were $64,256, made up of $60,734 in ordinary earnings and $3,522 in “other previous earnings”. Mr Klayman’s evidence was that he does not work overtime and was not expecting to receive any bonuses or other remuneration from his employer. On that basis I am satisfied that Mr Klayman’s earnings from employment in the 2023/24 financial year are likely to be around $71,036, and that his taxable income for the 2023/24 financial year is likely to be similar to his taxable income in the 2022/23 financial year.
Mr Klayman’s evidence at the hearing was that he is employed by a business owned and operated by his parents. He has been employed in that same business for approximately 21 years. There is one other employee who is not a family member.
Mr Klayman denied receiving any benefits from his employment except that he agreed he has a motor vehicle that he is able to use for personal as well as work purposes, and he has a mobile telephone that is provided by the business. In relation to his work vehicle his evidence was that although it is available to him for personal use he uses it rarely. He said he has another vehicle that he and his partner use as their personal vehicle and the work vehicle is used as a second car which is only driven when needed. He estimated that the benefit he derives from that vehicle is perhaps $1,000 per year in fuel. Mr Klayman acknowledged that he had previously conceded to Child Support that an amount of approximately $7,000 would be appropriate, but at the hearing his evidence was that he no longer felt that was an appropriate amount since he and his partner acquired a new car of their own in May last year.
Mr Klayman said that his wages are set by negotiation with his parents. He has not received a pay rise in about four years, because the business hasn’t had the work to sustain a pay rise. Mr Klayman said that he hasn’t really looked for other roles, but from what he has seen it is unlikely he could find another role where he would earn more income for the type of work he does. His current work involves [specified duties]. This work is on non-unionised sites, which means that they aren’t required to comply with various union rules. Mr Klayman said that he has no interest in working on unionised sites because he has had bad experiences in the past.
It is not in dispute that Mr Klayman received an amount of $500,000 from his parents in October 2022, which was used to purchase a property. It is also not disputed that Mr Klayman repaid $100,000 of that money to his parents in December 2022. At the hearing Mr Klayman’s evidence was that the money he received from his parents was a loan and he does expect to repay the outstanding $400,000. He has not made any further repayments since December 2022, and there is no agreement or arrangement in place as to when he will make any repayments. When questioned Mr Klayman said that there is also no arrangement for him to pay any interest on the loan, but that he intends to pay back “more than expected” to cover interest. He has not discussed that with his parents, and they have not asked him to make any payments or pay any interest. Mr Klayman said he intends to repay the money when he can, at this stage he doesn’t know when that will be.
Mr Klayman said that he has not received any other loans from his parents or other family members.
I had before me bank statements from Mr Klayman’s bank accounts, both in the documents provided by Child Support and further bank statements submitted to the Tribunal by Mr Klayman in response to the Tribunal’s directions. I note that those statements show a number of deposits into Mr Klayman’s accounts as follows:
·     On 5 April 2023, a deposit of $10,000
·     On 15 May 2023, a deposit of $6,000
·     On 8 June 2023, a deposit of $9,000
·     On 28 June 2023, a deposit of $4,900
·     On 31 October 2023, a deposit of $2,000
Mr Klayman confirmed that the payments on 5 April 2023, 15 May 2023, 8 June 2023 and 28 June 2023 were payments made by his mother to pay Mr Klayman’s legal bills. He stated when questioned that those amounts were loans which he would be required to repay, but that there were no immediate arrangements for the amounts to be repaid. The final payment on 31 October 2023 is described in the bank statement as “loan to [Mr Klayman]”, and Mr Klayman’s evidence is that he could not recall what that payment was for, but said it was a loan. I note that his evidence as to these loans appears to contradict his earlier oral evidence that the $500,000 he received from his parents in October 2022 was the only loan he had received from his parents or other family members. In respect of those payments, Mr Klayman’s representative, [Representative A], submitted that they were one-off payments and so should be disregarded.
On the basis of the evidence before me, I am satisfied that Mr Klayman is employed and receives taxable income of approximately $71,000 per year. I am also satisfied that Mr Klayman receives additional benefits from his employment in the form of a motor vehicle and a mobile telephone service, which are available to him for his private use. I am satisfied that the benefit he receives from having private use of a work vehicle is at least $6,200 per year, allowing $1,700 for servicing and tyres, $2,000 for insurance and $1,500 for registration and CTP, plus $1,000 per year in fuel as per Mr Klayman’s evidence. In addition, I note that the use of a mobile phone, were Mr Klayman to have to pay that cost himself, would likely be at least $40 per month, or $480 per year.
Often such benefits would be reported as reportable fringe benefits for an employee. There is no evidence that any reportable fringe benefits are reported for Mr Klayman by his employer, and Mr Klayman’s evidence at the hearing was that he didn’t know anything about fringe benefits. I therefore find that Mr Klayman derives a tax-free benefit from his employer of $6,680 per year. In order to meet those costs from taxable income Mr Klayman would have needed to earn an amount of approximately $9,896 at the marginal tax rate that applied to him up to 30 June 2024. From 1 July 2024, due to a reduction in the marginal tax rate, the amount is approximately $9,540. I note those figures do not include the cost of purchasing either a motor vehicle or a mobile phone.
It is clear from the evidence that in addition to his income from employment, Mr Klayman enjoys considerable financial support from his parents. Between October 2022 and October 2023 Mr Klayman has received at least $531,900 from his parents in payments to his bank account. I accept that Mr Klayman did repay $100,000 of that money in November 2022, but no further repayments have been made and there is no evidence of when or if any further repayments will be made, beyond Mr Klayman’s evidence that it is his intention to pay back at least $400,000 of that money at some point. At the very least that represents a loan on extremely favourable terms, and there is no doubt that it has considerably improved Mr Klayman’s financial position. The fact that he is able to receive such generous support from his parents allows Mr Klayman to live a much more comfortable lifestyle than what he would otherwise be able to enjoy, given his relatively low income from employment. I also note that while Mr Klayman has received that financial support from his parents and not clearly as part of his employment, nevertheless his parents are his employers.
The question before me, however, is whether the financial assistance that Mr Klayman has received from his parents constitutes an additional financial resource that results in an unjust and inequitable determination of the level of financial support to be provided by Mr Klayman for his children. On the evidence before me, I have concluded that I cannot find that it does. Mr Klayman’s evidence, which is not contradicted by other evidence before me, is that the amount of $500,000 that he received toward his purchase of property in 2022 was a loan that will need to be repaid. There is some corroborating evidence of that, as there is evidence that a sum of $100,000 has already been repaid. In relation to the sums advanced to him to pay legal fees the evidence is less clear – Mr Klayman said initially that the outstanding $400,000 is the only loan he has from his parents, but then later said that the amounts for legal fees were also a loan. I am not persuaded that the payments toward the legal fees were loans, however I am satisfied that they were financial assistance given for a particular purpose and there is no evidence before me to suggest that there have been any ongoing gifts or financial assistance provided to Mr Klayman for legal fees or other living expenses since June 2023.
I am not satisfied that it would not be possible for Mr Klayman to find higher paying employment if he wished to do so. In particular I note Mr Klayman’s evidence that he has not had any pay rise in approximately four years because the business is not in a position to support a pay rise. However, this is not a situation where I can assess Mr Klayman on his capacity to earn additional income. Subsection 117(7B) of the Act provides that I may only make a determination that a parent’s earning capacity is greater than is reflected in his or her income if the parent does not work despite ample opportunity to do so, or has reduced the number of hours per week of his or her employment to below full-time employment, or has changed his or her occupation, industry or working pattern. Mr Klayman’s evidence is that he has worked for the family business for many years, and I accept that he works full time and has not changed his occupation, industry or working pattern.
Ms Mayne’s evidence was that while she and Mr Klayman were a couple Mr Klayman often received cash payments and gifts from his parents. While this may be the case, there is no evidence before me of any cash payments or gifts made to Mr Klayman recently, or as to the nature of any such payments or gifts, and so I am unable to make any further finding as to that.
I have found that Mr Klayman has a taxable income in the region of $71,000, and that he receives other benefits from his employment equivalent to further taxable income in the sum of approximately $9,500, giving him a total income of approximately $80,500.
If there were no departure from the existing child support assessments, the assessment would be based on the following adjusted taxable incomes for each parent:
·Up to 31 August 2023, Mr Klayman’s adjusted taxable income of $77,000 and Ms Mayne’s adjusted taxable income of $113,000;
·For the period from 1 September 2023 to 30 September 2023, Mr Klayman’s adjusted taxable income of $67,183 and Ms Mayne’s adjusted taxable income of $130,379;
·For the period commencing 1 October 2023, Mr Klayman’s adjusted taxable income of $70,840 and Ms Mayne’s adjusted taxable income of $114,843.
For the period up to 31 August 2023 I am not satisfied that replacing the income used in the child support assessment of $77,000 with an income of $80,500 would make a substantial difference to the rate of child support to be paid by Mr Klayman. For that period, I am not satisfied that reason 8A is established. However, commencing on 1 September 2023, when Mr Klayman’s adjusted taxable incomes would revert to reflect his taxable incomes of $67,183 and $70,840 I am satisfied that the ground in subparagraph 117(2)(c)(ia) of the Act is made out.
As set out above, Ms Mayne also sought a departure from the child support assessment under Reason 2. As I have already found that a ground is established to depart from the child support assessment, matters relevant to Reason 2 will be considered as part of the “just and equitable” considerations.

Is a particular departure from the assessment just and equitable?

As I am satisfied that there is at least one ground to depart from the administrative assessment of child support, the next step is to consider whether it is just, equitable and otherwise proper to depart from the assessment.
In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Act:
(a)         the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)         the proper needs of the child; and
(c)         the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da)       the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)       himself or herself; or
(ii)       any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)         any hardship that would be caused:
(i)       to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)        to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

I note that pursuant to section 3 of the Act, I must approach this task on the basis that the duty that a parent has to maintain their children has priority over all other commitments of the parent other than commitments necessary to support themselves and any other people they have a duty to maintain.

Ms Mayne’s income and financial resources

Ms Mayne’s income tax return indicates that in the 2022/23 financial year she received income from her employer of $105,976, plus an allowance of $13,720. Ms Mayne’s evidence is that the allowance was a car allowance. Ms Mayne’s taxable income for the 2022/23 financial year was $114,843.
Ms Mayne provided recent payslips showing that at the time of the hearing her income was $4,859 per fortnight. According to those payslips, Ms Mayne’s year-to-date gross taxable income up to 10 May 2024 was $111,530.16, so her projected gross taxable income from her employment in the 2023/2024 financial year will be approximately $126,107, and that is roughly reflective of her ongoing income from employment. I am satisfied that Ms Mayne does not have any other source of income.
Ms Mayne said that she does have access to salary sacrificing arrangements with her employer if she chooses to utilise them, and while she and Mr Klayman were together she did utilise that arrangement to reduce her taxable income. However, she no longer utilises a salary sacrifice arrangement, as in her view it no longer makes financial sense to do so for her family, taking into account advice she has received about the impact on family tax benefit paid for the children.
I accept that Ms Mayne is under no obligation to take up an offered salary sacrificing arrangement, and I accept her evidence that she has made the decision not to do so on the basis that she believes it to be in the best interest of her family.
Ms Mayne also provided bank account statements for bank accounts she holds. In particular, Ms Mayne provided statements for [Bank 1] account with an account number ending in #6993. This account shows a number of substantial deposits marked as “payment from [Father A]” as follows:
·     On 17 August 2022, a deposit of $20,000
·     On 22 August 2022, a deposit of $20,000
·     On 23 August 2022, a deposit of $20,000
·     On 7 September 2022, a deposit of $20,000
·     On 23 September 2022, a deposit of $4,000
·     Deposits of amounts between $300 and $1,000 approximately fortnightly in the period from 13 June 2023 to 7 March 2024
Ms Mayne’s evidence at the hearing was that the account #6993 is a joint account held by Ms Mayne and her father. Ms Mayne explained that she has purchased a property jointly with her brother, with Ms Mayne having a 97% share in the property and her brother having a 3% care. Ms Mayne’s brother lives in the property with Ms Mayne and the children. Her evidence was that the account #6993 operates as an “offset account” against the mortgage, so that funds invested in that account have the effect of reducing the interest payments on the mortgage. Ms Mayne’s evidence is that she contributes her share of the mortgage repayments into that account every fortnight, and the rest of the money in the account belongs to Ms Mayne’s parents. They contribute money to the account to help reduce the interest paid on the mortgage, and also to cover Ms Mayne’s brother’s share of the mortgage.
I am satisfied that Ms Mayne has income from employment equivalent to approximately $126,000 per annum. In relation to the funds held in account #6993, and the funds contributed to that account by Ms Mayne’s father, I am satisfied that Ms Mayne receives only a minimal benefit from those funds in the form of slightly reduced interest payments on her mortgage. I note that the benefit gained by Ms Mayne from this arrangement is significantly less than the benefit gained by Mr Klayman in respect of the substantial interest-free loan he has received from his parents. In addition there is no evidence that Ms Mayne’s parents have paid any of her expenses.

The proper needs of the children – special needs

It is not disputed that [Child 2] has attended psychologist appointments since 2021. The documents provided by Child Support contain evidence that [Child 2] suffers from anxiety, and requires periodic treatment to manage her symptoms.
Ms Mayne provided evidence that [Child 2] has attended the following appointments since February 2023:
·     28 February 2023 – total out of pocket expenses $105.35
·     28 March 2023 – total out of pocket expenses $105.35
·     4 May 2023 – total out of pocket expenses $105.35
·     1 June 2023 – total out of pocket expenses $105.35
·     8 August 2023 – total out of pocket expenses $112.10
·     31 October 2023 – total out of pocket expenses $112.10
·     20 December 2023 – total out of pocket expenses $111.65
·     6 February 2024 – total out of pocket expenses $111.65
·     9 May 2024 – total out of pocket expenses $111.65
Ms Mayne has also provided evidence that there are two future appointments booked for [Child 2] on 29 August 2024 and 7 November 2024. Ms Mayne’s evidence was that the May, August and November appointments were the only ones available. If [Child 2] feels that she needs additional appointments she will go on a waitlist and hope for a cancellation. In relation to future appointments Ms Mayne’s evidence is that it will depend on what [Child 2] needs.
In response, Mr Klayman accepted that [Child 2] does have special needs, and that her attendance at psychologist appointments is necessary. However, it was submitted on Mr Klayman’s behalf that his preference would be for accounts to be sent to him so that he could pay his half of the costs directly, rather than paying through an adjustment to his child support assessment.
On the basis of the evidence before me I accept that [Child 2] has special needs, and that Ms Mayne has incurred costs associated with those needs. In total the costs incurred by Ms Mayne in the 2023 calendar year were $757.25, and in the 2024 year the costs already incurred and expected will total $446.60.
Ms Mayne’s evidence was essentially that she expects that she will continue to incur costs for [Child 2’s] psychology costs in the future, however the extent of future treatment that [Child 2] will require, and the costs associated with that, is unknown. There is no evidence before me that would allow me to make any findings about [Child 2’s] treatment beyond the 2024 calendar year.
There is evidence in the documents provided by Child Support suggesting that [Child 1] also has special needs, in that he has a diagnosis of autism, however there is no evidence of any costs incurred in respect of [Child 1’s] special needs.
No matters arise in relation to the income, earning capacity, property and financial resources of the children, the commitments of each parent necessary to enable the parent to support themselves or other people they have a duty to maintain, or direct or indirect costs incurred by Ms Mayne.
I note that according to the evidence before me, Ms Mayne is not currently in receipt of family tax benefit for the children, although I note that she may be able to claim some benefit after the end of the financial year depending on her circumstances.

Assessment

Having regard to the analysis set out above, I consider a just, equitable and otherwise proper departure will take into account findings I have made in respect of each parent’s income and financial resources.
In relation to [Child 2’s] special needs, I note that the assessment up to 31 August 2023 already incorporates an amount of $600 per year that Mr Klayman is required to contribute to [Child 2’s] special needs. I do not intend to disturb that assessment. I am satisfied that in the period from 1 September 2023 to 31 December 2024 the total costs incurred and likely to be incurred for [Child 2’s] special needs are approximately $450, or an average of $28 per month. I do not consider that to be an amount that significantly affects the overall cost of maintaining [Child 2], and therefore I do not propose to make any further adjustment for [Child 2’s] special needs.
In relation to income, I consider it just and equitable for my findings as to income to commence from 1 September 2023, given that Mr Klayman’s income is already set by a previous departure determination at $77,000 up to 31 August 2023. From 1 September 2023 I am satisfied that the assessment should reflect an adjusted taxable income for Mr Klayman of $80,500. I am not satisfied that Mr Klayman’s future taxation returns will reflect the additional benefits he receives from his employment, and so I am satisfied that it is appropriate to set that income for Mr Klayman until 30 June 2026.
In relation to Ms Mayne’s income, I note that Ms Mayne’s income is comprised wholly of her income from employment, which is adequately reflected in her taxable incomes as provided to the Australian Taxation Office. While I note that Ms Mayne’s 2024 income is slightly higher than her 2023 income that is currently reflected in the child support assessment, I am satisfied that this does not in itself render the assessment unjust and inequitable.
On the basis of the current care arrangements reflected in the child support assessment, under which both children are in Ms Mayne’s 100% care, this decision will result in an annual rate of child support to be paid by Mr Klayman of approximately $12,694, or approximately $243 per week.
In the context of all the information known to me about each parent’s income and financial resources, and the details of household expenditure as documented in the statements of financial circumstances, I am satisfied that the proposed departure determination is just and equitable and will not cause hardship for either parent or for the children. Similarly, as the determinations are based on my best assessment as to the income and financial resources of each parent, I am satisfied the determinations are otherwise proper.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that for the period from 1 September 2023 to 30 June 2026, Mr Klayman’s adjusted taxable income is varied to $80,500.

[2024] AATA 3240

24 July 2024

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Remedies

Procedural Fairness