Levitan and Karlin (Child support)

[2018] AATA 3933

Levitan and Karlin (Child support) [2018] AATA 3933 (7 August 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/BC012915

APPLICANT:  Mr Levitan

OTHER PARTIES:  Ms Karlin

Child Support Registrar

TRIBUNAL:Member P Jensen

DECISION DATE:  7 August 2018

DIRECTION TO ALTER DECISION OR REASONS FOR DECISION:

Pursuant to section 43AA of the Administrative Appeals Tribunal Act 1975, the following alteration is made to the written statement of reasons for the decision:

• on the cover page, “2018/BC012915” is altered to read “2017/BC012915”.

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/BC012915

APPLICANT:  Mr Levitan

OTHER PARTIES:  Ms Karlin

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  7 August 2018

DECISION:

The decision under review is set aside and the matter is sent back to the Child Support Registrar for reconsideration in accordance with directions that:

• the rate of child support payable between the parents from 28 July 2016 to 6 August 2018 is to be varied to a rate that, after taking into account all of the child support payments that the parents have made up until 6 August 2018, results in neither parent owing child support arrears as at 6 August 2018; and

• the rate of child support payable between the parents from 7 August 2018 to 30 June 2019 is to be varied to nil.

CATCHWORDS

Child support - Departure determination - Income and financial resources of the liable parent - Property settlement is not to be taken into account in determining the liable parent’s financial resources - No undisclosed financial resources - Criteria for earning capacity do not apply - Decision under review set aside and the matter sent back with directions

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

Introduction

1. Mr Levitan and Ms Karlin are the parents of [Child 1] who was born in 2009 and [Child 2] who was born in 2011. A child support case was registered from 28 July 2016. The Department of Human Services – Child Support (“the CSA”) has recorded Mr Levitan as providing 50% care to both children from 28 July 2016, and 27% care to both children from 13 December 2016, and Ms Karlin has been recorded as providing the balance of care.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of 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. From 28 July 2016 the administrative assessment was based on Mr Levitan’s 2015-16 adjusted taxable income of $18,302 and Ms Karlin’s provisional income of $92,869, and Ms Karlin was required to pay $8,128 per annum in child support. From 13 December 2016, following the change in care, Mr Levitan was required to pay $2,746 per annum in child support, which was the fixed annual rate of child support payable: see 2.4.11 of the Child Support Guide.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Mr Levitan lodged a departure application on 7 March 2017. The CSA granted his application and made the following decision:

   ·       from 28 July 2016 to 12 December 2016, Ms Karlin is required to pay $8,128 per annum in child support;

   ·       from 13 December 2016 to 27 October 2017, Mr Levitan is required to pay $4,446 per annum in child support; and

   ·       from 28 October 2017 until a terminating event, Mr Levitan’s adjusted taxable income is varied to $95,000 per annum.

4. Mr Levitan objected to that decision and an objections officer disallowed his objection. Mr Levitan sought further review by the Tribunal. I conducted a directions hearing on 3 July 2018 and a full hearing on 7 August 2018. The parents attended both hearings by conference phone.

5. Subsection 98C(1) of the Act relevantly provides that a decision to depart from the administrative assessment may be made if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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 …

A ground for departure

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to as Reason 8, provide as grounds for departure:

   that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   …

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

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

2. The Tribunal can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) are satisfied. That subsection states:

   In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a)one or more of the following applies:

   (i)the parent does not work despite ample opportunity to do so;

   (ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii)the parent has changed his or her occupation, industry or working pattern; and

   (b)the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i)the parent's caring responsibilities; or

   (ii)  the parent's state of health; and

   (c)  the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

3. Mr Levitan and Ms Karlin commenced their relationship in 2008. In 2013, Mr Levitan received approximately $1,600,000 from the sale of a property. The objections officer’s reasons for affirming the CSA’s original departure decision included the following:

   ... I am not satisfied with Mr Levitan’s accounting of how the 1.6 million lump sum has been utilised and I believe it is likely that some amount has been invested into income producing investments. Aside from this, Mr Levitan has the option of borrowing against his assets in order to fund further business or investment opportunities. On this basis, I find that Mr Levitan has the benefit of at least $1 million in financial resources.

4. Mr Levitan and Ms Karlin separated in or about October 2015. They reached an agreement in April 2017 concerning the distribution of their matrimonial assets and liabilities, and the Family Court made orders that reflected their agreement. It is not the role of this Tribunal to review the Court’s orders. I will proceed on the basis that the Court’s orders fairly distributed the parents’ matrimonial assets and liabilities. As an aside, I note that Mr Levitan was self‑represented and Ms Karlin was legally represented when the Court made its orders.

5. Mr Levitan controls [Business 1] which runs [a service] business. The company has made losses since 2013-14. According to its 2016-17 tax return, it received gross revenue of $41,943 during that year. Mr Levitan’s personal income has been less than $20,000 per annum since 2013-14.

6. The CSA obtained some of the company’s and Mr Levitan’s bank account statements, and, in response to my directions, Mr Levitan provided further bank account statements. According to those statements, the company had a few thousand dollars in cash and Mr Levitan had a few thousand dollars in cash shortly after the parents’ property settlement. Various searches by the CSA failed to locate any additional funds. In summary, it appears that Mr Levitan’s assets are as he has disclosed and his income consists of the income he derives from his involvement in the company.

7. In July 2018, Mr Levitan completed a Statement of Financial Circumstances. He stated that his income was $322 per week. However, he also stated that his household expenses were $677 per week. I observed, and Mr Levitan conceded, that his expenditure suggested that his income is at least $677 per week, which is approximately $35,000 per annum.

8. Ms Karlin conceded that there was no evidence that Mr Levitan had additional undisclosed assets or that he had an additional undisclosed income. In my opinion, those concessions were properly made. I find that Mr Levitan’s income and financial resources are fairly reflected for child support purposes in an adjusted taxable income of $35,000 per annum. Ms Karlin submitted that Mr Levitan should be assessed on his earning capacity. I referred her to the requirements of subsection 117(7B) of the Act and she readily conceded that Mr Levitan’s circumstances did not satisfy those requirements. In my opinion, that concession was properly made.

9. In the absence of a departure decision, the administrative assessment would use Mr Levitan’s 2016-17 adjusted taxable income of $16,745. The discrepancy between that income and the income of $35,000 per annum that fairly reflects his income and financial resources for child support purposes, and the consequential discrepancy between the administratively assessed rates of child support payable pursuant to those two incomes, constitutes special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. Reason 8 is established.

Just and equitable

1. 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 children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Karlin’s 2014-15 adjusted taxable income was $91,497. She has not lodged her 2015-16 or 2016-17 tax returns, notwithstanding her legal obligation to do so. In November 2017 she informed the CSA that she was earning $130,000 per annum and she has been provisionally assessed on that income. After the directions hearing I directed her to provide certain documentation including a Statement of Financial Circumstances and a copy of her most recent payslip. She failed to comply with those directions. She corresponded with the Tribunal registry and applied for a lengthy extension of time in which to comply with my directions and for the full hearing to be relisted on a later date because she was unwell and the severity of her symptoms prevented her from being able to comply with my directions or properly participate in the full hearing. She emailed supporting documentation to the Tribunal registry, including documentation from her work email address. Presumably it would have been just as easy for her to email a copy of her most recent payslip. I refused her applications. At the full hearing, she reiterated her application to have the full hearing relisted on the basis that she was unwell. However, she also confirmed that she was, on the day of the full hearing, attending the first day of a three‑day work conference in her capacity as [an occupation]. Her ability to attend that conference clearly demonstrates that she had the ability to comply with my directions and participate in the full hearing. I note that it transpired that she appeared to have no difficulty in taking an active role in the full hearing.

3. Notwithstanding Ms Karlin’s failure to comply with my directions, Mr Levitan did not take issue with Ms Karlin’s statement that she earns approximately $130,000 per annum. I noted that a current administrative assessment based on Mr Levitan having an adjusted taxable income of $35,000 per annum and Ms Karlin having an adjusted taxable income of $130,000 per annum would result in neither parent being required to pay child support to the other parent. After some discussion, both parents submitted, in effect, that such a result would be just and equitable. I suggested, and both parents agreed, that it would be appropriate to vary the rate of child support payable to nil until 30 June 2019. The issue then arose as to what decision should be made in respect of the period from 28 July 2016 to 6 August 2018. After some discussion, both parents submitted, in effect, that neither parent should be required to pay any more child support and neither parent should be required to repay any child support in respect of that period. In my opinion, such a result would be just and equitable.

Otherwise proper

1. 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. Mr Levitan does not receive family tax benefit in respect of his care of the children. Ms Karlin has not disclosed whether she receives family tax benefit in respect of her care of the children. However, if she does, the proposed decision would result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

The decision under review is set aside and the matter is sent back to the Child Support Registrar for reconsideration in accordance with directions that:

• the rate of child support payable between the parents from 28 July 2016 to 6 August 2018 is to be varied to a rate that, after taking into account all of the child support payments that the parents have made up until 6 August 2018, results in neither parent owing child support arrears as at 6 August 2018; and

• the rate of child support payable between the parents from 7 August 2018 to 30 June 2019 is to be varied to nil.