Lin and Zhu (Child support)

[2020] AATA 4395

Lin and Zhu (Child support) [2020] AATA 4395 (10 September 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/MC019006

APPLICANT:  Mr Lin

OTHER PARTIES:  Child Support Registrar

Ms Zhu

TRIBUNAL:Member F Hewson

DECISION DATE:  10 September 2020

DECISION:

The tribunal decided to set aside the decision under review and substitute its decision to depart from the administrative assessment of child support so that:

• For the period from 24 October 2019 to 31 July 2020, the child support liability is varied to $10,800 per annum; and

• From 1 August 2020 to 31 December 2024, the child support liability is varied to $8,400 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefits derived from business – 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. Mr Lin and Ms Zhu are the parents of a child, now aged one, in respect of whom there is a child support assessment. A child support case commenced in October 2019.   

2. 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 child support liability is currently assessed on the basis that Ms Zhu has a percentage of care of the child of 100% and Mr Lin has a percentage of care of 0%.

3. The Act provides for a departure from the administrative assessment of child support in certain circumstances. The administrative assessment is as follows:

• In the period from 24 October 2019 to 23 January 2021, Mr Lin was assessed to pay an annual rate of child support of $1,443, on the basis of his adjusted taxable income for 2018/19 of $11,505 and Ms Zhu’s 2018/19 adjusted taxable income of $36,928.

1. On 28 November 2019 Ms Zhu lodged a departure application on the basis that the assessment is not fair because of the income, property, financial resources and earning capacity of Mr Lin (Reasons 8A and 8B).

2. On 30 January 2020 a decision maker of Services Australia – Child Support (the Agency) concluded that a ground for departure was established and decided to depart from the administrative assessment of child support so that:

   ·     for the period from 24 October 2019 to 23 January 2021 the adjusted taxable income for Mr Lin was varied to $160,000 per annum; and

·     for the period from 24 January 2021 to 30 April 2022 the adjusted taxable income for Mr Lin was varied to $163,840.

1. Mr Lin lodged an objection to the decision and on 7 April 2020 an objections officer part allowed the objection. The objections officer decided to depart from the administrative assessment of child support so that:

   ·     for the period from 24 October 2019 to 31 May 2023 the adjusted taxable income for Mr Lin was varied to $178,661 per annum.

2. On 8 May 2020 Mr Lin lodged an application for review by the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). The application was heard on 10 September 2020. Mr Lin spoke to the tribunal by conference telephone. Ms Zhu also spoke to the tribunal by conference telephone. The Child Support Registrar did not attend the hearing.

3. In reaching its decision the tribunal had regard to the evidence of Mr Lin and Ms Zhu at the hearing as well as the documentation provided by the Department (numbered 1–219) and Mr Lin (numbered A1–A127) and Ms Zhu (numbered B1–B11). 

ISSUES

1. Pursuant to section 98C 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;

   to make a particular determination under this Part …

2. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8A, provides as a ground for departure:

   (c)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 …

3. In this case the tribunal must determine whether a ground for departure from the administrative assessment of child support is established on the basis of the parents’ income, property, financial resources or earning capacity, and if so, whether it would be just and equitable and otherwise proper to make a particular determination.

CONSIDERATION

Income, property and financial resources of each parent

1. As set out above, in the period from 24 October 2019 to 23 January 2021, Mr Lin was assessed to pay an annual rate of child support of $1,443, on the basis of his adjusted taxable income for 2018/19 of $11,505 and Ms Zhu’s 2018/19 adjusted taxable income of $36,928.

2. The documents provided by the Agency include ASIC records dated May 2019 which show that Mr Lin was associated with the following companies:

   ·     [Company 1] Pty Ltd

·     [Company 2] Pty Ltd

·     [Company 3] Pty Ltd

·     [Company 4] Pty Ltd

1. The ASIC records show that in May 2019 Mr Lin was the sole director and shareholder of [Company 1] Pty Ltd, which was first registered in August 2017. Mr Lin said the company was registered with a view to establishing a [business]. He said that did not occur and the company has never traded. He has maintained the registration because he likes the name, and may use it at some time in the future.

1. The ASIC records show that in May 2019 Mr Lin was the sole director and shareholder of [Company 2] Pty Ltd, which was first registered in January 2018. Mr Lin said the company was registered for the purpose of his investments, including in [Company 4] Pty Ltd, discussed below.

2. The ASIC records show that in May 2019 Mr Lin was one of two directors and had a 33% shareholding in [Company 3] Pty Ltd, which was first registered in September 2017. Mr Lin said the company was registered with a view to operating a retail business, but they were not able to get the lease for the property they wanted to operate from. He said the company has never traded, and has been deregistered. Mr Lin referred the tribunal to the letter, dated 29 November 2019, from ASIC advising that it intended to deregister the company due to unpaid registration fees. He said no action has been taken to avoid deregistration, because there is no point.

3. The ASIC records show that in May 2019 [Company 2] Pty Ltd had a 50% shareholding in [Company 4] Pty Ltd, which was first registered in March 2018. Mr Lin said the company operates licensed premises (a [business]). He said the company had acquired the lease for the venue in [Street 1] in Melbourne, but there were problems with the liquor licence. Mr Lin referred the tribunal to the decision of the Victorian Commission for Gambling and Liquor Regulation, dated 1 May 2019, in relation to the transfer of the licence to [Company 4]. Victoria Police objected to the transfer of the licence and special conditions were applied, including that: “[Mr Lin] is not permitted to be involved in the management or control of the business (including any directorship or other position) and is not permitted to be on the licensed premises. Mr Lin said he and [Mr A], the director of [Company 4] came to an agreement that Mr Lin would withdraw from the company, and he would be compensated for his efforts in establishing the business. He believes he is no longer recorded as being associated with the company. As he is prevented from being involved in its management, he does not want to be liable for its debts. Mr Lin said he and [Mr A] had recently come to an agreement that Mr Lin will be the head of marketing for [Mr A]’s businesses. Mr Lin said he told [Mr A] he needed to be paid between $58,000 and $65,000, but [Mr A] agreed to between $52,000 and $58,000. Mr Lin submitted a copy of the [Company 4] company tax return for the 2018/19 year, which shows that its total income was $85,808, and it made a loss of $127,685.

4. In his Statement of Financial Circumstances, Mr Lin reported that he owns a unit in [Street 2] in Melbourne (valued at $950,000, against which there is a mortgage with a balance of $613,000), a unit at [Suburb 1] in Melbourne (valued at $758,000, against which there is a mortgage with a balance of $484,000), and land at [Suburb 2] (valued at $500,000, against which there is a mortgage with a balance of $215,000). Mr Lin agreed that each property is owned in his name, and the mortgages are also in his name. He referred the tribunal to bank statements from [Mr B], a friend, who invested in the [Street 2] property with him. He said [Mr B] had sold another property and wanted to invest $300,000. The transfers are shown in his bank statements. The intention was that [Mr B] would operate an AirBnB business from the property. Mr Lin referred to the lease agreement between him and [Mr B], which he said was for the purpose of the AirBnB business. Unfortunately they were not able to operate an AirBnB business from the property. He still owes [Mr B] $300,000. Mr Lin said due to the difficulty renting the property, and because he wanted to be in the city, he has moved into the property himself. Mr Lin said he also owes $80,000 to [Mr A] for monies loaned in relation to his investment in property.

5. In relation to the property at [Suburb 1], Mr Lin said it is currently rented, for about $480 per week, which is significantly less than it had been rented for previously. He said the property was vacant for several months this year. Mr Lin said the current tenant has asked for a 50% rent reduction due to COVID19, which he has not agreed to, but he is concerned that if he loses the tenant there may be another period where the property is vacant.

6. Mr Lin provided copies of his bank statements for a period of three months, in compliance with directions issued by the tribunal. As with the bank statements contained in the documents provided by the Agency, they include a large amount of deposits from a range of sources, including regular cash deposits. This was discussed at length at the hearing. Many deposits indicate they are for a “bill” or “dinner”. Mr Lin said this represents reimbursement when he has paid for something, such as a meal, for friends on his credit card, or where he is entitled to be paid for his meal expenses while promoting the [Company 4] businesses. Mr Lin said some of the deposits are for monies repaid to him after he has made a loan to someone, which he often does. He said he sometimes makes purchases on his credit card for [Mr A], so that he earns reward points, and [Mr A] reimburses him. The tribunal suggested to Mr Lin that this pattern of making loans to friends is not consistent with him having a low income. Mr Lin said he presents to others as someone who is doing okay financially, which he said is important because no one would lend to him otherwise. He said he borrows as well as loans money. He noted that he has a large amount of debt, and his mother and aunty assist him if he has a shortfall. In relation to deposits by “[Mr C]”, Mr Lin said these are amounts deposited by a friend he gambles with. He said payments he has made to “[Service]” is for gambling [an internet search shows that [Service] is a share/currency trading platform], which a friend has recently introduced him to. Mr Lin confirmed, as his accounts indicate, that he travelled overseas early in 2020. He said his wife’s parents, who live in [Country 1], pay for the family to travel to see them. Mr Lin said his wife pays for most of the household expenses, and he is responsible for the mortgages and expenses related to the properties. In relation to a question about his almost daily use of UberEats, Mr Lin said he does not eat with his family; his wife is very strict and only allows the children to eat clean, healthy food. To the suggestion that he could make his own food, which would be cheaper than buying restaurant food daily, Mr Lin said he has always eaten restaurant food. In relation to withdrawals for childcare, Mr Lin said his wife is now working, but they don’t like to have the children in childcare full-time. They used to use casual childcare, but the rates were very high. They now have a permanent full-time place, but they don’t use it all of the time. It provides flexibility so Mr Lin can also work flexibly without having the children in full-time care. Mr Lin said his ex-wife sometimes helps with the care of the children.

7. In his Statement of Financial Circumstances Mr Lin reported that his assets include the properties discussed above, the value of which is offset by the related debt. He also owns two vehicles (a car and a motorbike) valued at $42,000 and household contents valued at $20,000–$30,000. Mr Lin submitted a copy of his [Superannuation] statement, which shows he has a nil balance. Mr Lin said his personal expenditure includes minimum credit card payments of $500–$800 (which his account statements indicate is a monthly amount) and income tax, in addition to the household expenditure of about $2,000 a week, which does not include the expenses met by his wife.

8. Ms Zhu said she believes Mr Lin has a trust, although he did not provide any evidence of it. She said she was aware that he had been in the practice of giving his wife an amount of money each month for the household expenses, but she does not know how much it was. Ms Zhu said Mr Lin’s pattern of spending indicates that he has more income than he has declared.

9. It is difficult to determine the income, property and financial resources available to Mr Lin with any precision. As discussed above, there is clearly a lot of money moving in and out of his accounts, some of which I accepted was for reimbursement/payment of monies, as is now commonplace using smartphones. I also had no reason to doubt that Mr Lin loans money to friends, and borrows funds also. I accepted that Mr Lin has a large amount of debt, including $300,000 owed to [Mr B] in relation to the purchase of the [Street 2] property, and $80,000 to [Mr A], in addition to the mortgages against his properties. Nevertheless, despite his debt and declared limited financial resources, he is able to meet his significant mortgage liabilities, and he has a large amount of discretionary expenditure. Mr Lin indicated that he would continue to meet his expenditure from increased debt (credit cards or from friends) until he is able or forced to sell assets. He indicated that it was his intention to sell the land in [Suburb 2], to repay [Mr B], but this has been delayed due to the current economic climate.

10. The tribunal also considered Ms Zhu’s income, property and financial resources. Ms Zhu said she was in Australia from 2014, until she returned to [Country 2] in January 2020. She said she is not a permanent resident or citizen of Australia. After the child was born, in June 2019, and her lawyer sent a letter, Mr Lin paid her $8,000 to cover her medical expenses related to the birth at [a] Hospital in [Suburb 3]. She decided to return to [Country 2] because she could not afford to live in Australia. Ms Zhu agreed that she refused Mr Lin’s offer of child support of $500 per month, because she considered it was not in keeping with his income.

11. Ms Zhu said she lives with her parents who were supporting her until she commenced employment recently with a small [company]. She will be paid [Foreign currency amount 1] per month; which is equivalent to about $1,000. Ms Zhu said she does not pay rent to her parents, but as she is now working she is contributing to the household; an amount equivalent to about $240 per week. Ms Zhu said she does not have any savings or other assets, such as a house or car. She does not have any debts. Her mother works flexible hours in the family business, and is able to assist Ms Zhu with childcare.

12. The tribunal considered the available evidence. Ms Zhu’s change of assessment application was lodged on 28 November 2019, about a month after the case was registered on 24 October 2019. At that time, Mr Lin was assessed to have a child support liability of $1,443 per annum, the fixed annual rate, which generally applies to parents with a low income (below the self-support amount) who do not receive an income support payment. As discussed above, the tribunal assessed that Mr Lin’s income, property and financial resources are not consistent with the use of the fixed annual rate.

13. Having regard to the income, property and financial resources of Mr Lin and Ms Zhu, the use of the incomes in the administrative assessment to determine Mr Lin’s child support liability makes the child support assessment unfair. The tribunal was satisfied, having regard to the financial position of both parties that special circumstances exist such that the application of the administrative assessment would result in an unjust and inequitable determination of the child support payable. As a result, the tribunal concluded that a ground for departure is established on the basis of the income, property and financial resources of Mr Lin and Ms Zhu.

Just and equitable

1. The tribunal considered whether it would be just and equitable to make a particular departure determination having regard to the matters in subsection 117(4) of the Act.

2. 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 proper needs of the children, the parents’ income, earning capacity, property and financial resources, their commitments and any hardship that would be caused by departing or not departing from the administrative assessment.

The children

1. There is one child of the child support assessment between Mr Lin and Ms Zhu. Ms Zhu is assessed to have greater than primary care of the child (100%) and Mr Lin is assessed to have below regular care (0%).

2. The child lives with Ms Zhu in [County 2]. Ms Zhu said the child is in good health. As he is an Australian citizen, however, he is not eligible for national healthcare in [Country 2]. Ms Zhu said she cannot afford private health insurance for the child, which would cost about [Foreign currency amount 2] per annum and, therefore, she has been paying for all health expenses as they arise (e.g. immunisation).

3. There is no evidence before the tribunal that the child has any income, property or financial resources of their own that is relevant to the assessment of child support. It is evident, as discussed in relation to Ms Zhu’s income, property and financial resources, that Ms Zhu is not able to support the child from her income alone and requires a reasonable contribution from Mr Lin to meet the proper needs of the child, including in relation to healthcare.

Mr Lin

1. Mr Lin’s income, property and financial resources are discussed above. The tribunal was satisfied that the adjusted taxable income used in the administrative assessment, set out above, significantly understates Mr Lin’s income and financial resources, as demonstrated by his capacity to meet his commitments in relation to mortgage payments of about $7,000 per month ($2,426 for account …9332, $1,288 for account ...1123, and $3,263 for account …9188) as well as for other expenditure, including about $500 per week for childcare and a significant amount of discretionary expenditure.

1. As well as the child in the child support case with Ms Zhu, Mr Lin also has a private child support arrangement with his ex-wife, in relation to their [child], aged 11. Mr Lin indicated that he pays his ex-wife $500 per month and meets schooling expenses. Mr Lin also has two children, aged 5 and 2, with his current wife.

Ms Zhu

1. Ms Zhu’s financial circumstances are set out above. The tribunal was satisfied that her adjusted taxable income for 2018/19, of $36,928, which was used in the administrative assessment from the start of the case, was significantly higher than her actual income during that period. As discussed above, the child was born in June 2019 and Ms Zhu returned to [Country 2] in January 2020; she had no income until she recently commenced employment.

Conclusion

1. Having regard to the particular circumstances of this case, the tribunal concluded that it is just and equitable to depart from the administrative assessment of child support. In making such a determination the tribunal can, in accordance with section 98S of the Act, vary the rate of child support payable or it can vary any of a number of variables that are used in the administrative formula.

2. As discussed above, the tribunal was satisfied that during the period under review the incomes used in the administrative assessment for both parents are not a just and equitable basis for calculating the child support liability in this case.

3. At the hearing Mr Lin said he considers $500 a month is a reasonable amount, which he said he would find a way to pay even if he had to borrow the money. Ms Zhu said she believes she needs about $800 a month to support the child properly. Having regard to the available evidence, and in particular Ms Zhu’s evidence in relation to her expenses, which are less than if she lived in Australia, they are higher than they otherwise would be, due to the child not being eligible for free healthcare. As Ms Zhu does not have any savings or other assets, this means she is financially exposed if any significant health issues arose.

4. The tribunal proposed, having regard to Ms Zhu’s expenses for herself and the child, to vary Mr Lin’s child support liability:

   ·     to $900 (about [Foreign currency amount 3]) per month (equivalent to $10,800 per annum) for the period from 24 October 2019 until 31 July 2020, which is about when Ms Zhu secured employment; and

   ·     to reduce the liability thereafter to $700 (about [Foreign currency amount 4]) per month (equivalent to $8,400 per annum).

1. This will reduce the arrears owed by Mr Lin, but should not result in an overpayment to Ms Zhu. The tribunal proposed to extend the departure period to 31 December 2024, the year in which the child turns 5, so that the parties have some certainty about the liability in the short to medium term.

2. The tribunal was satisfied that the proposed departure determination will not cause hardship to Ms Zhu or the child, particularly as Ms Zhu is now employed. Although the amount of the proposed liability is less than the amount assessed by the objections officer, the tribunal was satisfied that it is sufficient to meet the proper needs of the child, including for healthcare.

3. The tribunal also considered whether the proposed departure determination would cause hardship to Mr Lin. As discussed above, as well as the child of the assessment with Ms Zhu, Mr Lin has another child he pays child support for, as well as his two children with his wife. He has a duty to maintain his children. He also has a significant amount of debt. Nevertheless, the tribunal was satisfied, having regard to Mr Lin’s spending, including a significant amount each month for discretionary spending, that the proposed departure determination will not cause him undue hardship.

4. The tribunal concluded that, having regard to the available evidence, including the evidence of Mr Lin and Ms Zhu at the hearing, the departure determination will not cause hardship to the parties or to the children, and is 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 their child.

2. Ms Zhu does not receive family tax benefit. The proposed departure determination results, in the tribunal’s view, in an appropriate apportionment of financial responsibility between the parents and the community. Such a result is otherwise proper.

DECISION

The tribunal decided to set aside the decision under review and substitute its decision to depart from the administrative assessment of child support so that:

• For the period from 24 October 2019 to 31 July 2020, the child support liability is varied to $10,800 per annum; and

• From 1 August 2020 to 31 December 2024, the child support liability is varied to $8,400 per annum.