Langer and Clayton (Child support)

[2019] AATA 259

Langer and Clayton (Child support) [2019] AATA 259 (8 January 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC014075

APPLICANT:  Mr Langer

OTHER PARTIES:  Child Support Registrar

Miss Clayton

TRIBUNAL:Member P Noonan

DECISION DATE:  08 January 2019

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that from 1 November 2017 until a terminating event occurs in respect to the child of the assessment, Mr Langer’s adjusted taxable income is varied to $88,202. Further, for the period 1 July 2018 to 30 June 2019, the amount of child support payable by Mr Langer is varied by $560 in recognition of the special needs costs of the child.

CATCHWORDS

CHILD SUPPORT – departure determination – special needs of the child - cost of maintaining the child is significantly affected – financial resources of both parents - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. 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 Langer and Miss Clayton are the parents of the child [Child 1], born 2002.

3. A child support case was registered with the Department of Human Services (the Department) on 4 April 2002 and was registered for collection by the Department from 14 March 2012. The care of [Child 1] is recorded as being 365 nights a year to Miss Clayton.

4. On 17 January 2018, Miss Clayton applied for a departure from the administrative assessment of child support payable. The applicable assessment at that time was as follows:

   ·For the period 1 November 2017 to 31 January 2019, Mr Langer was assessed to pay an annual rate of child support of $5,760.00. This assessment is based on an adjusted taxable income of $58,459.00 for Mr Langer, and a derived income of $19,256.00 for Miss Clayton.

5. On 9 March 2018, a decision maker of the Department found a reason for departure was established and changed the assessment as follows: For the period 1 November 2017 to 31 January 2019, Mr Langer’s adjusted taxable income is set at $101,384.

6. An objection was lodged by Mr Langer and on 29 March 2018 an objections officer decided to disallow his objection.

7. An appeal was lodged by Mr Langer with this Tribunal for an independent review of the matter.  A hearing into the matter was held on 5 December 2018 and both parties participated and gave evidence to the Tribunal on affirmation. The matter was deferred for Mr Langer to supply further materials. These were subsequently exchanged between the parties. Miss Clayton raised further concerns in respect to missing items. The Tribunal has considered all subsequent evidence post the hearing and determined that it was appropriate to proceed based on the material before it. All further evidence has been exchanged for comment or the information of the parties.

8. Pursuant to paragraph 98C(1)(b) of the Act, a decision to depart from the administrative assessment may be made if the following 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; …

CONSIDERATION

A ground for departure

Mr Langer’s income and access to financial resources

1. Mr Langer is a self-employed [Occupation 1] who specialises in [products]. He resigned from full-time employment in 2016. He submitted he resigned as the hours he was required to work were too much and he also wanted to pursue his own business. The Tribunal noted that his previous employer advised the Department that his base wage was $103,404 per annum. The Tribunal noted Mr Langer’s 2015-16 gross wage was $141,471 which Mr Langer stated was due to a large amount of overtime. The Tribunal noted that Mr Langer quickly moved to establish his business as a going concern after his resignation and that the business, trading as a company named [name], recorded a reasonably significant income in the following financial year. Accordingly the Tribunal accepted that Mr Langer’s change in work pattern was not a change undertaken to affect the amount of child support he must pay.

2. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott [1994] FamCA 12; Carey and Carey [1994] FamCA 74).

3. Mr Langer submitted his 2017-18 personal taxation return to evidence. The Tribunal was satisfied Mr Langer’s financials have been prepared by a registered tax agent and were a reasonably reliable record of his overall claimed income and expenses. His total income was $42,419. His taxable income was $36,740. His main claimed deductions were $7,884 in respect to a rental property loss and $5,234 in work related car expenses. Mr Langer submitted that the vehicle was used nearly 100% for work purposes. It is a [car model] which is fitted out for work. He does occasionally use it for personal trips but primarily uses his partner’s [vehicle] for personal use. The Tribunal will add back the rental property loss but accepts the [car] deductions.

4. Mr Langer also submitted the company’s 2017-18 taxation return to evidence. While his partner is the sole director it was uncontested that Mr Langer is the income generator for the company through his personal efforts and skills. His partner also undertakes bookkeeping, invoicing, quoting and estimating. Mr Langer confirmed his partner has no qualifications in plumbing or other prior relevant experience. The company was in part set up to give her some work on top of looking after their three children, all of whom are seven years of age or younger. The gross income was $153,459. After all expenses the company declared a loss of $1,428. The Tribunal noted that wages were split reasonably equally between Mr Langer and his partner. Mr Langer submitted his partner should be considered to be contributing at least more than 20% to the company. The Tribunal disagreed. The skill involved in deriving the company income is entirely attributable to Mr Langer. While the Tribunal accepted that some invoicing and bookkeeping is undertaken by Mr Langer’s partner the Tribunal considered 10% of wages and profit should be attributed to his partner in recognition of the above considerations. Wages paid between Mr Langer and his partner were $76,417. Accordingly wages attributable to Mr Langer are $68,776.

5. Mr Langer informed the Tribunal that he sources many wholesale items such as [products]. In regard to other expenses claimed the Tribunal noted that the company claimed Mr Langer’s partner’s [vehicle]. Mr Langer stated that his partner uses this vehicle for ad hoc business purposes. He noted that all baby seats are in this car. The Tribunal considered all expenses related to this vehicle including depreciation should be considered a personal benefit to Mr Langer.. Vehicle expenses claimed were $9,735. The Tribunal noted that Mr Langer claims his own vehicle’s expenses in his personal tax return. The [vehicle] was purchased in 2017 and depreciation of $3,589 is also added back. Mr Langer also confirmed the company maintains a home office.  Utility costs are not claimed. All phone and internet costs are claimed, being $3,586. He submitted such costs are at least 80% work related. The Tribunal considered 50% to be reasonable, being $1,739. The Tribunal accepted other claimed company expenses as reasonable.

6. According to the above analysis Mr Langer’s overall access to financial resources is assessed as follows: His wages of $68,776 less his personal deductions of $5,679 plus his rental property loss of $7,884 plus his personal benefits from company expenses being $18,649 less the company loss of $1,428 equalling $88,202.

Miss Clayton’s income and access to financial resources

1. Miss Clayton’s taxable income has been based upon parenting payment from Centrelink for many years. There was no compelling evidence before the Tribunal that she has changed her occupation recently or that her most recent taxable income was not an appropriate basis upon which to assess her overall access to financial resources for child support purposes.

Conclusion

1. Under the applicable administrative assessment, the annual rate of child support payable by Mr Langer, at the time of the departure application, was $5,760 per annum. Mr Langer’s overall access to financial resources has been found to be reflective of an income of $88,202. The annual amount of child support payable using this figure and Miss Clayton taxable income is $11,702 or $225 per week. Such a difference in the child support payable meant that application of the applicable assessment would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Langer in support of the child. As a result a ground for departure in subparagraph 117(2)(c)(ia) of the Act does exist.

Would departure from the administrative assessment be just and equitable?

Mr Langer

1. In regard to assets, Mr Langer disclosed his home which he valued at $650,000, his investment property valued at $370,000, funds in the bank of $500, superannuation funds valued at $230,000. He noted loans secured against his home valued at $232,000 and his investment property valued at $366,000. He also noted credit card debt of $2,387. Household expenditure was estimated at $1,535 per week. The Tribunal considered the analysis of Mr Langer’s overall access to financial resources, as set out earlier in these reasons, to be appropriate in determining his capacity to pay child support during the period under consideration.

Miss Clayton

1. Miss Clayton disclosed minimal assets. She has superannuation of $10,000. She also has some credit card debt of $1,500 but no other outstanding debts. She disclosed weekly household expenditure of $901.83. It is clear that any child support payable to her would assist her in maintaining the child.

The child

1. In determining the proper needs of the child, it is necessary to 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 (subsection 117(6) of the Act). In Eades & Cadell (SSAT Appeal) [2009] FMCAfam 275 at [22], Slack FM stated as follows:

   In considering the proper needs of the child [s 117(4)(b)], the SSAT:

   a.would ordinarily consider the evidence of the parties about the needs of the children to assess the reasonableness and quantum of those needs;

   b.may have regard to publish guidelines as to the needs of the children (see Hallinan & Witynski at 94.323).

   c.may also have regard to the costs of children used in the assessment of child support under the existing formula arrangements (although it is not sufficient or appropriate to rely upon the formula to perform that task, Lindenmayer J in Dwyer & McGuire (1993) FLC92-420 (and see also Gyselman (supra) at 79.078).

2. Miss Clayton raised a special need in regard to [skin] treatment. This was verified by [the doctor] in a certificate dated [in] October 2018. Miss Clayton stated this requires 7 treatments over approximately 42 weeks at a cost of $130 per treatment. The Tribunal noted receipts in relation to this of $93.55 and $104 for two prescriptions. The Tribunal accepted this treatment is occurring and that this is a significant cost for Miss Clayton relative to her overall financial resources. The Tribunal considered it appropriate that Mr Langer make a further child support payment of $560 towards these special needs costs, spread out over a period of 12 months. No other particular special needs costs were raised.

3. Overall the Tribunal considered this an appropriate case to largely distribute the costs of raising the child using the relevant child support formula, which is based on social science research giving the average costs of children in various family income brackets.

Otherwise proper

1. Miss Clayton receives family tax benefit in respect of the child. As such an increase in child support payable to her may reduce the overall cost to the community. As such the Tribunal was satisfied that changing the amount of child support payable would not have any adverse effect upon the community. Such a result would be otherwise proper.

Conclusion

1. It is open to the Tribunal to vary the rate of child support payable or vary some of the variables that are used in the administrative assessment formula. As concluded earlier in these reasons, Mr Langer has access to financial resources such that it is reasonable to expect him to provide some additional child support.

2. The principal object of the Act is to ensure that children receive a proper level of financial support from their parents. Further, I note 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 other 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.

3. Miss Clayton submitted that she considered that Mr Langer has money such that he can afford to pay child support as assessed. If child support payable dropped significantly the child would miss out on ‘stuff’. 

4. Mr Langer submitted that the current level of child support payable is unaffordable for him. He and his family are struggling financially. He submitted that he works hard and Miss Clayton should get a job.

5. In respect of appropriate dates for a departure determination, the Tribunal agreed with the Department’s start date being from 1 November 2017. As the child is 17 the Tribunal considered that the departure should continue until a terminating event occurs. The departure determination is therefore that from 1 November 2017 until a terminating event occurs Mr Langer’s adjusted taxable income is varied to $88,202. Further for the period 1 July 2018 to 30 June 2019 the amount of child support payable by Mr Langer is varied by $560 in recognition of the special needs costs of the child.

6. With regard to the care records outlined earlier in these reasons, the amount of child support payable by Mr Langer is approximately $11,702 or $225 per week from 1 November 2017 until 30 June 2018, $12,262 or $235 per week from 1 July 2018 to 30 June 2019 and $11,600 or $224 per week from 1 July 2019 until a terminating event occurs.

7. The Tribunal did not consider Mr Langer will be placed in undue hardship by this decision and considered that he has access to sufficient financial resources to meet the child support requirements set by this departure decision. The Tribunal also did not consider Miss Clayton will be placed in undue financial hardship by this decision. She will be paid child support that is commensurate with the Tribunal’s analysis of the parents’ current overall access to financial resources.

8. Overall, the Tribunal considered both parents will be provided with certainty in planning their respective finances to adequately support the child by the implementation of this departure determination, and that it is a just and equitable outcome in regard to the respective situations of each parent.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that from 1 November 2017 until a terminating event occurs in respect to the child of the assessment, Mr Langer’s adjusted taxable income is varied to $88,202. Further, for the period 1 July 2018 to 30 June 2019, the amount of child support payable by Mr Langer is varied by $560 in recognition of the special needs costs of the child.