Ladams and Wadburn (Child support)

[2024] AATA 2307

Ladams and Wadburn (Child support) [2024] AATA 2307 (17 May 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/HC026964

APPLICANT:  Mr Ladams

OTHER PARTIES:  Child Support Registrar

Ms Wadburn

TRIBUNAL:Senior Member D Benk

DECISION DATE:  17 May 2024

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides:

·     That between 1 May 2023 to 30 April 2025, Mr Ladams’ adjusted taxable income is to be set at $133,000.

CATCHWORDS

CHILD SUPPORT – departure determination – adjusted taxable income – income, property or financial resources – father self-employed – large taxation debt and legal fees paid from company funds – director loans added back but no other deductions – payment of many private expenses for mother and children – property proceedings ongoing – decision under review set aside

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 parties are the parents of three children under the age of 13.  As at 2 February 2024, Mr Ladams’ care percentage increased from 14% to 21%.  Child support is assessed and collected by Child Support (Child Support).

2. The administrative formula assessed Mr Ladams’ child support liability by applying an adjustable taxable income of $83,828, which resulted in an annual rate of child support payable of $15,966 for the period 26 January 2023 to 31 July 2023 and then $16,251 per annum for the period 1 August 2023 to 31 October 2024.       

3. Ms Wadburn lodged a change of assessment requesting a departure from the administrative formula maintaining the above taxable income did not properly reflect all of the financial benefits Mr Ladams receives from his self-employment.

4. The matter underwent multiple internal reviews. An objections officer ultimately set an annual rate of child support payable of $20,400 per annum for the period 1 May 2023 to 30 April 2025 (this sum was set before the above care change).

5. Mr Ladams now seeks independent review of that decision. The matter underwent the usual case management pathways with a telephone directions hearing convened, which resulted in the issue of directions. Both parties complied.  The matter was listed for hearing proper on 17 May 2024 at which time both parties gave evidence by conference telephone. A representative of Child Support was not present.

CONSIDERATION

1. Before making an order for departure from an administrative assessment under section 116 of the Child Support (Assessment Act) 1989 (the Act), subsection 117(1) requires the Tribunal to be satisfied that a ground for departure exists under subsection 117(2); that it would be just and equitable as regards the child, the carer parent and the liable parent to make such an order; and that it would be otherwise proper to make the order.

2. Subsection 117(2) sets out the grounds upon which such an order might be made. Relevantly, paragraph (c) states as follows:

   That, in the special circumstances of the case,[1] 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:

   (i)because of the income, earning capacity, property and financial resources of the child; or

   (ia)         because of the income, property or financial resources of either parent; or

   (ib)        because of the earning capacity of either parent; or

   (ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.

   [1] The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92-279, stated that:

   It is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

3. When submitting the change of assessment application, Ms Wadburn asked Child Support to reconsider subparagraphs 117(2)(c)(ia). That is, to depart from the administrative assessment based on Mr Ladams’ actual income, income/financial resources as failure to do so would result in an unjust and inequitable determination of the level of financial support he is required to pay.

4. The Tribunal will deal with the issue of Mr Ladams’ income, property, and financial resources first.

5. Mr Ladams’ position is simple. He is self-employed as [an occupation].  His books show the true picture.  He has nothing to hide.  It is wrong to add back taxation deductions/expenses to his adjusted taxable income as he literally works 24/7 and does not really derive any personal benefit from any taxation deductions.  He said that he has paid many private expenses for Ms Wadburn and the children and that any assessment of child support should take that into account.  The property proceedings are ongoing and have been listed for final determination late in the year.  He has incurred many legal costs and this dispute is much more than money. On specific questioning, Mr Ladams admitted that he has quite a large taxation debt and this is currently being repaid at $10,000 per month!  He said that this was an arrangement between his accountant and the Australian Taxation Office.  The Tribunal asked Mr Ladams what the ‘director loans’ in his balance sheets reflected and why they had increased so substantially over the last two financial years that is in 2021/2022 they were $144,384 and in 2022/2023 they were $192,173.  Mr Ladams said that this represented legal expenses that his company has paid to fund his family court proceedings.

6. The administrative assessment required Mr Ladams to pay child support on an adjusted taxable income of $83,828 (applying a taxable income figure from the 2021/2022 financial year).

7. The evidence discussed above confirms that Mr Ladams has been able to access company funds to pay legal fees (approximately $50,000 in the last financial year alone) and his company has enough liquidity to meet taxation liabilities of $10,000 per month.  It is evident from these factors alone that Mr Ladams has more than $83,828 in income and financial resources and to maintain that figure to the administrative assessment would not be representative of his financial means and his ability to support the children.

8. To not make the above adjustment would result in an inaccurate representation of the total funds available to Mr Ladams for child support purposes. The Tribunal finds that these circumstances are special and the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Ladams’ income, property and financial resources for the 2021/2022 and 2022/2023 financial year.  This allows for the consideration of a departure from the administrative assessment; however, such a departure is not automatic.

Is it just and equitable to make a departure determination?

1. 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 as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Act. In addition to the education costs of the child, already considered above, the Tribunal also took the following matters into consideration.

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the child

1. The children live primarily with Ms Wadburn.  All are in good health.  As at 2 February 2024, Mr Ladams’ care percentage has increased from 14% to 21%.  This increase has not affected his child support as an annual rate has been determined to apply.  Both parents agree that the children have no independent income. The Tribunal so finds.

The proper needs of the child

1. Subsection 117(6) of the Act states that in having regard to the proper needs of the child, the Tribunal must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child.

2. The evidence did not disclose any such significant expenses that would impact the costs of children table.  The Tribunal so finds.

The income, property and financial resources of Mr Ladams

1. The base line adjusted taxable income records earnings of $83,828.  Mr Ladams is self‑employed and ordinarily it is necessary to engage in various add backs of legitimate taxation deductions that provide a financial benefit to Mr Ladams.  Add backs in this matter would be rather academic.  Mr Ladams works in heavy industry and has many expenses, which have significantly increased since the pandemic. The expenses appear legitimate on the balance sheet and in any event, it is not the role of this Tribunal to forensically analyse such expenses.  However, the records show that he has been able to access director loans of at least $50,000 (approximately) in the last financial year and the Tribunal finds that this is a financial resource that must be added back to the overall assessment of child support.  The Tribunal confirmed that Mr Ladams is the sole director and shareholder and so ultimately has complete control of the company purse.  Whilst director loans must ultimately be repaid (otherwise there are taxation implications), there is a degree of flexibility.  Putting all that aside, what is clear is that he has been able to secure interest free and tax free benefits by virtue of his self-employment arrangement, which have improved his financial situation and which correctly should be applied in any departure. 

2. As a result the Tribunal finds that the director loans must be added to any taxable income resulting in an assessment of an adjusted taxable income of $133,000 per annum (that is, the taxable income ($83,828) plus directors loans ($50,000).  This is conservative as it was open for the Tribunal to add back additional deductions from which Mr Ladams obtains a personal benefit, however, given the already existing tension between the parties, the claims regarding monies owing between the parties (which will ultimately be the subject of a property settlement), the level of shared care etc, and the fact that Ms Wadburn did not make any further submissions on the matter, it was deemed appropriate in the circumstances of the case. 

3. The Tribunal finds therefore that it is appropriate to depart and assess Mr Ladams’ child support liability using an adjusted taxable income of $133,000 commencing from 1 May 2023 (the same date applied by the objections officer and coinciding with Ms Wadburn’s change of assessment petition). The Tribunal further finds that as it is unlikely that Mr Ladams’ working situation will change materially, this figure should be applied at least until 30 April 2025, as this will allow for some certainty to both parties and will hopefully coincide with the property settlement and any additional changes (final orders) relating to care.

The income, property and financial resources of Ms Wadburn

1. Ms Wadburn’s primary income is Centrelink benefits.  She has attempted to undertake some [job task 1] work but was unable to juggle this with the demands of caring for the children.  She has tried to do some work in [job task 2] but admits that this is not highly paid and she is still learning the ropes.  She finds it difficult to secure work with the court and child care commitments.  She has not worked full time for many years.  The Tribunal is satisfied and finds that the administrative assessment correctly reflects Ms Wadburn’s income, property and financial resources. Mr Ladams maintains that Ms Wadburn also works for cash and has a side hustle but admits he has no evidence. As a result, the Tribunal cannot take this allegation further.

The earning capacity of Mr Ladams

1. Mr Ladams works full time.  Earning capacity is not an issue in this factual scenario.

The earning capacity of Ms Wadburn

1. Ms Wadburn’s working pattern has not changed since the children were born.  Earning capacity is not an issue in this factual scenario.

The necessary commitments of Mr Ladams

1. Apart from legal fees, Mr Ladams has no financial commitments that would take priority over his child support liability (however, there is the ATO debt for which an active arrangement has been entered into).

2. The Tribunal accepts the record of income and expenditure in the Statement of Financial Circumstances, which was entirely consistent with Mr Ladams’ evidence.

The necessary commitments of Ms Wadburn

1. The Tribunal accepts the record of income and expenditure in the Statement of Financial Circumstances, which was entirely consistent with Ms Wadburn’s evidence.

1. Further, the Tribunal has had regard/considered the commitments of each parent that are necessary to enable the parent to support himself/herself and was satisfied that the evidence did not establish any self-support commitments that would take priority over any child support liability. Further, the Tribunal finds each parent’s budget is sufficient to cater for such needs as per the Statement of Financial Circumstances.

The direct and indirect costs incurred by Mr Ladams in providing care for the children

1. Mr Ladams did not advance any significant expenses incurred for securing contact.  In any event, the expenses are equally shared by Ms Wadburn and pick up and drop off times have been agreed via the court process.

Hardship

1. Paragraph 117(4)(g) of the Act requires the Tribunal to consider any hardship that would be caused to the children or Ms Wadburn by the making of, or refusal to make, a departure determination; and also, to consider any hardship that would be caused to Mr Ladam, by the making of, or the refusal to make, a departure determination.

2. The hardship in this case comes from lack of certainty moving forward but also the arrears that have resulted from various assessments.

3. Mr Ladams said that he is just trying to keep his head above water.  He continues to run his business knowing that it must stay afloat so he can support himself and the children but the constant interference by Child Support and now the large taxation debt has caused much anxiety.  He is upset as he perceives Ms Wadburn is not doing her fair share of paying for the children and is “happy to live on handouts”.

4. Ms Wadburn did not claim hardship. She expressed frustration at the process and does not expect that Mr Ladams will pay his fair share. She is doing the best with what she has.

5. Neither party made submissions on how long any departure should continue but both emphasised the need for certainty and lack of intervention by Child Support. As to the start date of the departure, the Tribunal will commence this from 1 May 2023 consistent with the objections officer. To further backdate would also be unjust as it would result in further arrears. The Tribunal finds that this is a balanced outcome as it reflects the factors raised above.  The Tribunal deems it appropriate for the departure to expire on 30 April 2025.  This will allow the parties some certainty.  The evidence did not suggest that the parties’ circumstances will change significantly in the interim.

What is the proposed departure determination in this case?

1. The findings of the Tribunal are that Mr Ladams has income and financial resources of at least $133,000.

2. Overall, the Tribunal finds that it is just and equitable to depart from the administrative assessment as follows:

   ·     That between 1 May 2023 to 30 April 2025, Mr Ladams’ adjusted taxable income is to be set at $133,000.

3. The Tribunal reinforces that it was difficult to quantify the income/resources of both parents but is satisfied that the above reflects the income and financial resources available to both parents and applying the above incomes to the child support calculator results in an annual liability of child support of approximately $21,000 per annum (subject to care levels).

4. The Tribunal is satisfied that this liability reflects Mr Ladams’ resources and is also satisfied that he has the means to pay such liability given that he has been found to be able to meet a taxation liability of $10,000 per month and has been able to access funds through director loans.  The Tribunal further emphasises that its assessment is conservative.

5. The last issue to be considered is whether it is otherwise proper to depart from the administrative assessment. When doing so, subsection 117(5) sets out what the Tribunal must have regard to when deciding whether it would be otherwise proper to make a particular order.  Subsection 117(5) states:

   In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:

   (a) the nature of the duty of the 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 any 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 eth child or the carer entitled to child support.

6. Again, both Mr Ladams and Ms Wadburn have the primary duty to support their three children.  This departure will now reflect that duty and reduce the impact on the public purse by way of any Centrelink entitlement.  The Tribunal therefore finds that it is ‘otherwise proper’ to depart from the administrative assessment.

Conclusion

1. Section 4 of the Act sets out the objectives of the Act.  These objectives include:

   ·      Parents of a child have a primary duty to maintain that child;

   ·      That duty has a priority over all commitments of the parent other than commitments necessary for self-support;

   ·      The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and

   ·      The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts. The Tribunal could not identify on the basis of the evidence before it any hardship to either parent or child arising from this decision.

2. The Tribunal has found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper to make a departure determination in accordance with its findings above.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides:

·     That between 1 May 2023 to 30 April 2025, Mr Ladams’ adjusted taxable income is to be set at $133,000.