Klayman and Nihill (Child support)

[2021] AATA 5039

Klayman and Nihill (Child support) [2021] AATA 5039 (8 September 2021)

DECISION AND REASONS FOR DECISION

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2021/SC021382

APPLICANT:  Mr Klayman

OTHERPARTIES:  Child Support Registrar Mrs Nihill

TRIBUNAL:  Member K Dordevic

DECISION DATE:  8 September 2021

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that from:

·     27 April 2020 to 26 April 2021 the father’s adjusted taxable income is varied to

$203,000; and

·     27 April 2021 until a terminating event occurs in relation to the child the father’s adjusted taxable income is varied to $206,800.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefits derived from inheritance – 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

1.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.

2.Mr Klayman and Mrs Nihill are the parents of three children. This case was registered with the Department of Human Services (now Services Australia) – Child Support on 10 July 2012 and has been collectable since that date. The parents’ youngest child remains subject to the administrative assessment, and the care record reflects that the child is in the mother’s 100% care. The case is due to end on 19 November 2021, when the child completes her Year 12 studies.

3.After an application was lodged by the mother on 17 August 2020, a senior case officer decided on 7 November 2020 to vary the father’s adjusted taxable income to $110,000 from 1 November 2020 until a terminating event occurs. The father lodged a timely objection and on 18 February 2021 an objections officer partly allowed the objection, varying the father’s adjusted taxable income to $90,000 from 1 November 2020 until a terminating event occurs.

4.On 19 March 2021 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was held on 21 July 2021 and directions were issued, requiring compliance by 13 August 2021. The tribunal also issued an order, pursuant to subsection 95H(1) of the Child Support (Registration and Collection) Act 1988, to the father’s brother, [Brother A] , Executor of the Estate of the late [Mother A] to provide a statutory declaration setting out the following information:

·The gross funds available for distribution from the Estate of [Mother A];

·The gross inheritance received by Mr Klayman from the Estate of [Mother A], including supporting documentation;

·All debts/loans (including any contract/s and all bank statement/s evidencing the loan/s and repayment/s) repaid on Mr Klayman’s behalf from his share of the inheritance (and attaching all relevant documents);

·The net inheritance paid directly to Mr Klayman or to another person on his behalf (and attaching all relevant documents); and

·Any outstanding loans or debts that Mr Klayman has to the Estate of [Mother A] or to you personally (and attaching all relevant documents).

[Brother A] largely complied with the tribunal’s request on 13 August 2021 (marked

folios D1 to D26).

5.On 2 September 2021 the father requested that [Brother A] appear as a witness. The Child Support Review Directions state that if a person wishes to call a person to give evidence, that request must be made at least 14 days before hearing. As the father made his request six days before the scheduled hearing, and taking into account that [Brother A] largely complied with the statutory order to provide relevant information, the request was refused.

6.The hearing took place on 8 September 2021. The mother and father appeared by MS Teams audio. The Child Support Registrar was not represented at the hearing. The tribunal considered the sworn evidence of the mother and father. The tribunal also considered the documentation provided by Child Support (folios 1 to 522), the father (folios A1 to A110), the mother (folios B1 to B22) and [Brother A] (D1 to D26).

ISSUES

7.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 …

8.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

9.Subparagraph 117(2)(c)(ia) of the Act provides a ground 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 parent’s income, property, and financial resources.

10.At the time the mother lodged the departure application under review the father was liable to pay $443 in child support per annum during the period 10 January 2020 to 15 February 2021, based on the parents’ 2019 adjusted taxable incomes of $16,194 (the father) and

$22,792 (the mother). The mother’s 2020 and 2021 taxable incomes were $20,025 and

$30,445 and the father’s were $18,187 and $21,918 respectively.

11.The tribunal accepts the evidence provided by the father’s brother, [Brother A], Executor of [Mother A’s] estate, the father’s mother. The proceeds of the estate were equally distributed amongst [Mother A’s] [children]. [Brother A] has provided evidence that the amount available for distribution was [amount] and that the father’s entitlement was $258,924.52 (at D21). [Brother A] withheld $164,957.17 from the father as repayment of credit card debts ($51,251.54), personal loans to [Lender A and Lender B] ($7,000(, rental bond ($1,200), the child’s laptop ($900), repayment of 20% equity in the father’s [Suburb 1] property ($99,605.63) and a $5,000 contribution towards the gift to the grandchildren from the mother’s estate. A direct transfer of $93,967.35 was made to the father on 27 April 2020. The tribunal finds accordingly.

12.The father’s inheritance is a financial resource available to him that is not taken into account when determining his child support liability under the administrative assessment. At the time the mother lodged her application he was liable to contribute $1.19 per day towards the child’s costs. If the income and financial resources of $258,925 were applied to the assessment, the father’s liability would increase to $78.15 per day ($28,544 per annum). As the father’s 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)(ia) of the Act is established.

Just and equitable

13.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.

14.In her Statement of Financial Circumstances dated 25 May 2021 the mother declares that she is unemployed and in receipt of jobseeker. At hearing she explained that after completing a [qualification] at [College 1] she has commenced working as [an occupation 1]. She has secured a permanent part-time position of 26 hours per week. She accepts more shifts when she is able, given the child’s high care needs. Her gross fortnightly income is $1,800 (net $1,500) and consequently she no longer receives her rent assistance of $160 per fortnight. Her assets include liquid assets of $4,646, a motor vehicle valued at

$3,000, household contents valued at $5,000 and superannuation of $13,040. Her liabilities include a personal loan to her sister of $3,000, the child’s [college] education costs which she is repaying at $24 per fortnight and Department of Housing bond debt that she is repaying at $29 per fortnight. She reports that her average weekly expenses are $802, where $370 of these costs relate to the child’s necessary expenses.

15.The tribunal understands that the mother lodged her departure application as she was aware that the father had received an inheritance, which would not be reflected in his taxable income. At hearing the mother stated that she was aware that the child’s paternal grandmother had died and that her home was sold. She waited for the father to make a “gesture” towards the child’s costs, particularly after she had requested assistance in purchasing the child hearing aids and for her [college] costs. When she realised that no additional support would be forthcoming, she lodged her application. She understands that the father had debts but considered it appropriate that he meet a higher level of the child’s costs given the inheritance he received.

16.The parents’ consistent evidence at hearing was that whilst the child resided with the father in Sydney, she became involved in an organised child sex ring, including child pornography and prostitution. The parents became aware of this after the child was sexually assaulted. She was immediately restored to the mother’s care and has had no gonging contact with the father. She continues to require ongoing psychiatric and psychological intervention to address her trauma. The child received compensation, and this sum is used to purchase the child [specified] lessons. The father did not contest the mother’s evidence that the child suffers from low self-esteem and the mother must be vigilant in ensuring her health and wellbeing and that this is the reason she cannot work on a full-time basis. It is also not in dispute that the child has [hearing loss] in one ear and requires hearing aids and that the mother met this cost. The child is now 18 years of age and the mother has been granted an extension to the administrative assessment until the child completes her Year 12 studies.

17.The mother states that the child is in receipt of $70 in income per week, as she works on a part-time basis. The father states that this renders the administrative assessment unfair, and so his liability should be reduced accordingly. The Child Support Guide (the Guide) (version 4.57) states at 2.6.10 when referring to a child’s income or financial resources:

Minimal earnings

Minimal earnings are generally not regarded as a reason to change an assessment of child support (Mee and Ferguson (1986) FLC 91-716).

The Registrar will not usually consider that the following types of income affect the financial responsibility of the parents:

·income derived from casual work in holidays or after school hours

·gifts of small amounts of money

·pocket money.

The Registrar must disregard an income-tested pension, allowance or benefit (2.6.17) received by the child (or by another person on behalf of the child) when considering that child's income, earning capacity, property and financial resources (section 117(7)).

In this case the tribunal accepts that the policy is consistent with the objects of the Act and that there is no inconsistency between the legislative provisions and the policy. The tribunal concludes that, in the particular circumstances of the case, the child’s income does not render the administrative assessment unjust or inequitable.

18.In his Statement of Financial Circumstances dated 4 June 2021 the father declared that he is a casual [occupation 1] and student, with weekly income of $118 from his [occupation 1] work and jobseeker of $316. He owns a 20% share in his home which he values at

$95,400. He declares liquid assets of $77,012, a [vehicle] valued at $3,200, household contents valued at $12,000 and superannuation which he estimates is valued at $70,000. He reports that he owes his siblings $100,000, and that his other liabilities include $2,241 in credit card debt, an interest-free loan from a friend and his child support liability totalling

$9,651. He reports weekly personal expenditure of $69, made up of $23 in superannuation,

$20 in private health insurance and $26 per week in child support. He reports household expenditure of $393, and states that he has no mortgage or rental payments. None of these costs relate to caring for the child. The bank statements in evidence suggest that the father’s declaration of household expenses is not reflective of his actual spending. He denied that his bank statements in evidence suggest that he has significant discretionary spending; he provided various justifications for his gym membership ($75 per month), private health insurance ($460 per month), political party membership (between $40 to

$276 per month), takeaway and café purchases and the gaming purchases in evidence.

He also recently incurred a legal expense of $1,200 when (unsuccessfully) seeking a stay order regarding the collection of his child support liability. The father is adamant that he is in a perilous financial position.

19.The father states that he is [an occupation 3] but has not been able to secure any work in this industry; he thinks that it is largely a result of age discrimination as he is [age] years old. He did not provide any evidence to support his contention that he has been unable to secure employment. He explained that he works two to three evenings a week as [an occupation 1], his shifts being about four hours each. He cannot work more, as his leg hurts. He states that he is undertaking a [qualification], which he states has about 20 contact hours per week. There is no evidence before the tribunal regarding his enrolment or contact hours. The tribunal is satisfied that the father does not work on a full-time basis, despite ample opportunity to do so. Whilst it is acknowledged that he incurred a lower limb injury in May 2020, there is no medical evidence before the tribunal which suggests (as the father contends) that his health justifies his decision to not work on a full-time basis. The tribunal is satisfied that the father’s statements about the reasons behind his limited work and decision to study demonstrate that the effect on the administrative assessment of child support was indeed a major purpose behind his decision.

20.The father stressed that the inheritance should not be considered as a financial resource available for the benefit of the child. The Guide relevantly states at 2.6.14:

Lump sum payments received by a parent

Where a parent receives a substantial amount of money (a lump sum) that would otherwise not form part of their income amount used for child support purposes, and therefore is not included in the assessment of child support, the lump sum may be taken into account in deciding whether the assessment should be changed.

Such payments may arise as a consequence of the parent:

…

·     receiving a distribution from a deceased estate

…In each case it will be necessary to decide whether receiving the money makes the amount of child support payable unjust and inequitable.

A relevant factor (but not the sole factor) is whether or not the payment results in 1 parent being in a better financial position compared to the other parent. However, the fact that there is a discrepancy in the parents' financial positions does not automatically mean that there is a reason to change the assessment (Hampson and Lightfoot (1997) FLC 92-775). It will depend on the circumstances of each case. [Tribunal’s emphasis]

…

21.The tribunal accepts that the policy is consistent with the objects of the Act and that there is no inconsistency with the law when determining whether an inheritance renders the administrative assessment unjust or inequitable.

22.The father explained that he has sought review of the objections officer’s decision as his debts were not taken into account. Thus, he asserts, he only received minimal funds from the inheritance. Therefore, his net inheritance must be the basis on which his capacity to provide for the child is assessed. He does not consider repayments of his debts as a benefit available to him. In fact, he has not repaid all his debts; his brother has provided him with an interest-free loan of $100,000 on the understanding that this would only be accessed in emergencies. He had thought that he had significant business debts overseas but was relieved to recently discover that he was in error and that his creditors are not seeking repayment. He later amended this statement, stating that the business debts were “forgiven, but not forgotten” and he may be required to repay them.

23.The father confirmed that apart from repaying his family debts he also purchased a 20% share in a home and his brother’s wife owns the remaining 80% of the home. He lives in the property and is not required to pay rent to his sister-in-law. He is concerned that if he is required to pay anything more than the minimum annual rate of child support he will be forced to sell his share in the home.

24.The father explained that since separation in 2012 he had borrowed funds from his brother on the understanding that it would be repaid when his financial circumstances changed. His brother has “not made a big deal over” repaying the debts. However, he decided to repay this family debts first, even though he was under no pressure to do so. He confirmed that these loans were all interest-free. Later in the hearing the father stated that he had to repay the debt, as culturally it was expected that he would support himself and that he was under “incredible” pressure to repay his debts to his family members. When asked, he could not adequately explain his contradictory testimony.

25.The father was directed to provide all documents evidencing the loans that were repaid from his inheritance, including bank statements, contracts and any other evidence of the loans, debts and repayments. In response he provided an A4 sheet of paper, with a table entitled “Agreement with [Brother A] to settle partially the debt and provide ongoing loan for emergencies/medicals” dated 19 April 2020. The father submitted that prior to this date there was always a “brotherly accord” (at A88) between himself and the brother, but in April 2020 his brother wanted all further financial dealings between them in writing. He states that this table outlines his debts to the brother in the sum of $159,850, including costs incurred for the child from January 2017 to July 2019 totalling $15,700. The father did not

provide any evidence of these costs by way of bank statements, invoices or receipts. The mother disputed that he incurred all these costs. By way of example, she stated that the child received a scholarship and was provided a laptop. The father responded by stating that the laptop was not adequate and he was required to provide another one. The table also indicates that the father borrowed $144,100 from the brother, to repay his credit card, a [line of credit] and hearing aids totalling $51,000, $7,000 from friends, legal costs totalling $55,700, housing costs totalling $21,500, job hunting costs of $900, a bike replacement of $4,200, counselling costs of $400 and a “[specified] wardrobe” of $1,600 (he was apparently required to buy clothing to appear [in a promotion]). At hearing the father explained that he has only a “vague memory” about the loans from his friends but believes that they were incurred in 2017 or 2018 when the child was in his care. He apparently still has the hearing aid receipt ($21,000) but did not think to provide it.

26.The father’s oral testimony and written submissions are in direct conflict with the evidence provided by the brother. As to the [line of credit] the father stated in his written submissions (at A87) that he was permitted to access this account held by his parents. He apparently borrowed from this account to repay debts held outside Australia in the vicinity of

$60,000, but “Regrettably I cannot find the relevant documents”. He went on to state that he repaid only about $59,000 of his debts to the brother and borrowed an additional $100,000 “with the condition that my share of the apartment that I partially owned and lived in, the surety”. The tribunal finds it curious that the brother apparently insisted from April 2020 that all financial dealings with the father be in writing, but there is no contract or written agreement to evidence this loan. Furthermore, the father’s statement on this point is in direct contradiction to the email authored by the brother which states that the father repaid credit and personal loans of $58,251.54, a rental bond of $1,200 and a laptop loan of $900. No mention is made to any of the other costs the father apparently owed the brother. The brother withheld $99,605.63 from the inheritance representing the father’s 20% share of his property and a $5,000 gift to the grandchildren. The tribunal prefers the evidence provided by the brother, being that the father repaid debts of about $60,000, purchased a 20% share in a property for about $100,000, the father then gifted $5,000 to the grandchildren and he received the remainder of $93,967.35 directly into his account. The tribunal is not persuaded, as the father contends, that the repayment of debts from the inheritance is not a financial resource available to the him. The father still had the benefit of these resources; that he chose to apply them to his debts does not negate that fact.

27.The father stated that the $50,890 in a term deposit (at A81) held in his name was not his but rather a loan from his brother for emergencies. The tribunal notes that the brother provided a copy of an email he sent to his siblings on 18 April 2020 (at D15) where he recommends that each sibling sets aside $50,000 of their inheritance for emergencies. In the absence of documentary evidence to the contrary, and in light of the brother’s evidence and advice, the tribunal is not persuaded that the $50,000 in the father’s term deposit is a loan from the brother. The father has already stated that the brother wanted all financial matters between them in writing; in the tribunal’s view it is telling that there is no documentary evidence regarding this apparent “loan”. The father also provided (at A98) a summary of his other bank accounts (date unknown) which indicates that he has net deposits of $24,306, which is consistent with his declaration in his Statement of Financial

Circumstances. The tribunal is satisfied that at or around the date of hearing the father had liquid assets of about $74,000.

28.The tribunal did not find the father a witness of credit. It formed the impression that he was willing to change his testimony when he perceived it was advantageous to do so. Certainly, the father has acknowledged that his previous statements to Child Support were in error (at folio A13):

I revisited my previous submissions for the Change of Assessment and Objection process, discovering that the estimates in relation to my inheritance and the paying of old debts contain many errors regrettably. Thus there are admittedly inconsistencies in the calculation of inheritance benefit and paid off debts between these two documents…

The father’s failure to make a full and frank disclosure of his financial circumstances is unsatisfactory and leaves him open to adverse inferences being drawn: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409.

29.At hearing the father declared that he would have a “miserable life” if he was required to pay child support commensurate with the inheritance he received; in fact, it would be “disastrous” to both his mental and financial wellbeing. The tribunal formed the view that the father believed that it was appropriate that he only contribute the minimum annual rate towards the child’s costs, irrespective of his income and financial resources. The mother and father each have a duty to maintain the child. In the tribunal’s view it is just and equitable that the father’s improved financial position is reflected in his contribution to the child’s costs, particularly in a context where he does not meet any of her costs directly and where the mother’s financial position only permits her to meet the child’s basic needs. Further, the tribunal notes 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 commitments of the parent other than those necessary for self-support; 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.

30.The tribunal is satisfied that the father is in a far more robust financial position that he claims, and certainly in a better financial position than the mother finds herself in. In this case the tribunal is satisfied the inheritance the father received is a financial resource that significantly enhances his capacity to contribute to the support of the child. To find otherwise would result in a disproportionate amount of the child’s costs being borne by the mother.

31.The tribunal is satisfied that it is appropriate to vary the father’s adjusted taxable income on the basis of his inheritance from the date he received the proceeds, being 27 April 2020. Whilst this pre-dates the mother’s application by about six months, the tribunal accepts her testimony that she delayed lodgement in the hope that the father would offer to increase his

minimal financial support in light of the significant change in his financial circumstances. The tribunal is satisfied that she did not rest on her rights.

32.In order to account for the financial benefit received by the father, the tribunal is of the view that it is appropriate to equally split his inheritance ($129,462) over two periods, rather than apply the full inheritance of $258,924 over a shorter period. In order to have access to a financial resource of $129,462, a person would require an adjusted taxable income of

$184,946. Thus, from 27 April 2020 to 26 April 2021 the tribunal finds that it is appropriate to vary the father’s adjusted taxable income to $203,000 (half of the grossed-up inheritance

+ his 2020 taxable income of $18,187). From 27 April 2020 until a terminating event occurs in relation to the child (likely to be 19 November 2021) it is appropriate to vary the father’s adjusted taxable income to $206,800 (half the grossed-up inheritance + his 2021 taxable income of $21,918). This will provide certainty to the parents and minimise the need for repeat proceedings. The tribunal’s decision will place the father in arrears of about $36,000. The tribunal is satisfied that this will not place him in a position of undue hardship given his financial resources. Furthermore, this level of financial support is required to provide for the child in a manner consistent with her parents’ combined income and financial resources.

33.The tribunal is satisfied that the administrative assessment is unfair given the father’s financial resources. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it is just and equitable to depart from the administrative assessment.

Otherwise proper

34.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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

35.The determination is otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that from:

·     27 April 2020 to 26 April 2021 the father’s adjusted taxable income is varied to

$203,000; and

·     27 April 2021 until a terminating event occurs in relation to the child the father’s adjusted taxable income is varied to $206,800.