Lomas and Randel (Child support)
[2024] ARTA 210
•26 November 2024
Lomas and Randel (Child support) [2024] ARTA 210 (26 November 2024)
Applicant/s: Mr Lomas
Respondent: Child Support Registrar
Other Parties: Ms Randel
Tribunal Number: 2024/PC028213
Tribunal:Member M Martellotta
Place:Perth
Date:26 November 2024
Decision:The Tribunal affirms the decision under review.
CATCHWORDS
CHILD SUPPORT – departure determination – costs of contact – mother and child living in another country – costs of past travel do not reach specified threshold as high – possibility of departure prohibition order on father – provision of money, goods or property – more than year’s worth of maintenance paid when mother and child departed – funds drawn from joint account and provided voluntarily – earning capacity – father in effect self-employed through own company – undistributed profits used to grow business – mother’s work and earning capacity – decision under review affirmed
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 pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.
Statement of Reasons
BACKGROUND
The applicant and second party are the parents of a child born 11 September 2017. The child is in the above primary care of the second party. The applicant is the payee. The second party resides in [Country].[1]
[1] [Country] is a reciprocating jurisdiction – Schedule 2 to the Child Support (Registration and Collection) Regulations 2018.
The applicant lodged a change of assessment application with Services Australia – Child Support on 3 July 2023. He raised as his grounds:
·Reason 1 – the costs of maintaining the child are significantly affected because of high costs involved in enabling the parent to spend time or communicate with the child.
·Reason 5 – the payee, child or third party has received money, goods or property from the liable parent for the benefit of the child.
·Reason 8B – the second party’s earning capacity.
At the time of the application the assessment in place was as follows:
·1 September 2022–31 August 2023: annual rate of $16,391 based on the applicant’s 2021/22 adjusted taxable income (ATI) of $147,267 and the 2021/22 ATI of $63,180 for the second party;
·1 September 2023–30 November 2024: annual rate of $12,669 based on the applicant’s 2022/23 ATI of $109,961 and the 2022/23 ATI of $63,180 for the second party.
The application lodged by the applicant was refused on the basis that no ground to depart from the assessment had been established. That decision dated 5 October 2023 was upheld on objection (25 June 2024).[2]
[2] The applicant was granted an extension of time by Child Support to make his objection.
The parties participated in a telephone directions hearing convened on 4 October 2024. The parties were directed to provide further information and documents. The parties participated in a hearing conducted by telephone on 13 November 2024 to present submissions and evidence.
The following materials were also provided: Child Support hearing papers containing documents and information from their records (240 pages), applicant documents (A1–A83) and second party documents (B1–B43).
Preliminary issues
At the commencement of the hearing the Tribunal re-confirmed that in undertaking full merits review and as a new decision‑maker,[3] the outcome of the review may result in a decision less favourable to the decision currently before the parties. The Tribunal also put the parties on notice that it was open to the Tribunal to find another ground to depart may be established, such as the income, property and financial resources of either parent. The Tribunal notes relevant authorities identifying the requirement upon a decision‑maker to provide fair notice of such considerations.[4]
[3] Section 53 and section 54 Administrative Review Tribunal Act 2024 – the Tribunal controls the scope of review of the decision and can exercise the powers of decision-maker.
[4] Child Support Registrar & Scullin and Anor (SSAT Appeal) [2015] FamCAFC 200 (23 October 2015).
The applicant took issue with this statement and submitted that the Tribunal was threatening him with an adverse outcome. The applicant further requested the Tribunal to state whether they had experience in international family law/child support matters. The Tribunal declined to do so. The applicant stated that he did not want the Tribunal as constituted to hear the matter. The Tribunal understood this to be a request that the member recuse themselves from the application. In the Tribunal’s assessment the request was not based upon any substantial ground which would warrant recusal and declined what it understood to be the applicant’s request for recusal.
The Tribunal observes that parties to the application have a duty to provide full and frank disclosure regarding their financial affairs and that this duty extends to presenting information in a way that can be reasonably and readily understood and examined.[5] Subsection 56(2) of the Administrative Review Tribunal Act 2024 provides that parties to a proceeding must use their best endeavours to assist the Tribunal to achieve the objectives in section 9 of the Act. Section 3.1 of the Administrative Review Tribunal (Child Support) Practice Directions 2024 notes, ‘Parties to a child support review have a legal obligation to make full and frank disclosure of their financial position to the Tribunal for the purpose of the review’.
ISSUES
[5] Humphries & Berry [2008] FMCA fam 409.
The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
Child support legislation is interpreted by Child Support with the aid of the Child Support Guide (the Guide). The Tribunal may be guided by policy but is not bound to follow it.[6] The Federal Court[7] has observed that in the absence of any contrary statutory indication, lawful executive policy enacted to guide the exercise of a statutory power is a relevant factor for the Tribunal to take into account in performing its review task. A lawful approach allows the adoption of appropriate policy as a guide but not so as to control the making of the decision and the Tribunal adopts that approach.
[6] Re Drake and Minister for Immigration and Ethnic Affairs(No 2) (1979) 2 ALD 634.
[7] G v MIBP [2018] FCA 1229.
The issues for the Tribunal to determine in this case are:
· Does a ground for departure exist? If so,
· Would it be just and equitable as regards the children, the liable parent and the carer entitled to child support to depart from the administrative assessment of child support?
· Is it otherwise proper to make a particular departure determination?
CONSIDERATION
Issue 1 – Is there a ground to depart from the administrative assessment?
The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (the Registrar) will utilise a parent’s ATI as assessed by the Australian Taxation Office (ATO) for the last relevant year of income.
Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and, as noted, establishes a three-step process.
The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[8]
Reason 1 – Costs of contact
[8] The phrase “special circumstances of the case” is not defined in the Act. However, the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC 92–279). Likewise, in Phillippe and Phillippe (1978) FLC 90–433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
A ground may be established if in the special circumstances the costs of maintaining the child are significantly affected because of high costs in enabling a parent to spend time with or communicate with a child.[9]
[9] Subparagraph 117(2)(b)(i) of the Act
The legislation provides that costs will be assessed as high if during a child support period the costs total more than 5% of the parents ATI for the period. This is calculated by:
·dividing the parent’s adjusted taxable income for the period (which is expressed as an annual figure) by 365; and
·multiplying by the number of days in the period.
The Guide[10] notes that in general the Registrar will use the parent’s ATI for the child support period in which the cost are or will be incurred.
[10] 2.6.7.
As the Tribunal understands, the applicant’s position is that the assessment makes it unaffordable for him to travel overseas to spend time with the child. The applicant stated that in discussions with Child Support he had been threatened with a departure prohibition order unless arrears were paid prior to a planned departure overseas. The applicant confirmed that he was not and is not subject to such an order. The applicant stated that there is no parenting agreement or other court orders pertaining to contact with the child. The second party confirmed this in her evidence.
The applicant provided Child Support evidence of his out‑of‑pocket expenses pertaining to a visit he made to [Country]. He said he has visited the child twice. The Tribunal sought to clarify the applicant’s dates of travel he stated that he had already provided all relevant information to Child Support. The applicant provided information to Child Support which evidenced he had spent a total of $5,696.19 for flights, car rental, accommodation and other costs.[11] The applicant was directed by the Tribunal to provide any further evidence he relied upon pertaining to those costs. No further evidence was provided. At hearing the applicant confirmed the costs as summarised in the hearing papers. The Tribunal finds that the applicant incurred out‑of‑pocket expenses of $5,696.19 in relation to costs of contact.
[11] Page 117–120, and summarised at p 15 of hearing papers.
The applicant stated that at this point in time he does not have plans to return to [Country] or to have the child travel to Australia due to affordability and because of the interactions and position taken by Child Support. He will not travel until Child Support ‘backs off’ with their threats of departure prohibition orders.
In this matter the relevant child support periods and income are:
| CS period | CS Period Days | ATI | ATI Div by 365 x CS period days | 5% |
| 1 September 2022 to 31 August 2023 | 365 | 147,267 | 147,267 | 7,363.25 |
| 1 September 2023 to 30 November 2024 | 457 | 109,961 | 137,677.20 | 6,883.86 |
On the available evidence the Tribunal concludes that the costs identified by the applicant do not meet the relevant threshold to be assessed as high. For that reason, the ground to depart under reason one is not established.
Reason 5 – provision of money, goods or property
The applicant stated that when the second party left for [Country], he provided at least a years’ worth of maintenance. He said he paid in excess of $10,000 which was from a joint account which is now closed. This was to help her, and the child establish themselves and this was prior to the involvement of Child Support. He also purchased or assisted in the purchase of a car for the second party, for an amount of about $6,000 he said he did that in 2022. He said it was suggested that he apply for that to be treated as a non-agency payment but did not do so.
According to Child Support the applicant was requested to provide evidence in support of the ground however no evidence was provided. The Tribunal directed the applicant to provide any evidence he held to support the ground. No additional evidence was provided.
At hearing the second party said that when she moved overseas the applicant provided funds ($10,000) to provided her with support for the child these were taken from a joint account. When regular payments ceased in the following year, she applied for child support assessment, initially they had a private collect arrangement but when payments ceased being regular, she requested that child support collect. She otherwise states that she was not provided funds to purchase a motor car. He did offer to purchase a car, but she declined as she has her own vehicle.
On the available evidence it appears that the funds provided by the applicant were drawn from joint funds and were voluntarily provided prior to the involvement of Child Support. There is no cogent evidence that the applicant purchased a motor vehicle for the second party which was for the child’s benefit. The Tribunal is not satisfied on the available evidence that a ground is established.
Reason 8B – second party’s earning capacity
This ground requires the following criteria to be established:
a) change in a pattern of work demonstrated by:
·the parent does not work despite ample opportunity to do so
·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
·the parent has changed his or her occupation, industry or working pattern.
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:
·the parent’s caring responsibilities
·the parent’s state of health.
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.
The applicant states that the second party is not exercising her full earning capacity. The second party gave evidence that she was employed by an Australian entity. When she left for [Country], she continued to be employed by that organisation. When the contract ended, she was able to secure employment with an employer in [Country] where she has been working for about 10 months.
The Tribunal notes that whilst there has been a change in the second party’s work arrangements, their overall working pattern has not altered. In any event, even if the Tribunal concluded that there had been a relevant change not justified by caring responsibilities or health, it was not a major purpose of the second party to affect the administrative assessment.
The ground to depart on this basis is not established.
Is there any other ground established?
The Tribunal considered whether any ground to depart could be established. In that regard the Tribunal sought evidence from the applicant in relation to his financial circumstances given he derives his income through a company structure.
The applicant complied with Tribunal directions and provided disclosure in the form of individual and company tax returns. At hearing, the applicant at times resisted questions from the Tribunal seeking further detail regarding the structure and operation of the company which would have assisted the Tribunal in obtaining a clearer understanding of how the applicant derived his income and his access to any financial resources which may not be reflected in his individual tax returns.
On the available evidence the applicant is [an occupation]. In previous years he derived his income by working for various entities. However, in the last two years he has worked through a company structure of which he is a joint director and shareholder. He is employed by the company. As the Tribunal understands, he and two other people are employed by the company as [occupation]s.
The financial information provided reflects that over the last two years the company has increased its total income from $242,276 in the year end 2023 to $609,808.30 in the year end 2024. The company returns show a net profit of $231,301 in the year end 2024 and in year end 2023 a net profit of $88,747. The Tribunal sought evidence regarding whether any of the net profit remained undistributed. As the Tribunal understands, the applicant’s position is that he is attempting to grow the business and any profit is returned to operation of the business to that end.
The applicant otherwise asserts his income relevant to child support purposes is that as reflected in his individual income tax returns which have been utilised in the assessment to date. The assessment as noted is utilising the applicant’s 2023/24 ATI of $109,244. As the Tribunal understands, the expectation is that the applicant expects to earn a similar amount in the current financial year.
The applicant disclosed that he owns a property which is his principal place of residence which is encumbered by a mortgage of about $258,000. He otherwise holds nominal amounts in his bank accounts and superannuation of about $100,000.
The second party confirmed that she derives her income from employment. The assessment utilises her overseas taxable income and currently utilises a deemed ATI of $44,885. The second party complied with directions and provided copies of her overseas tax returns and payslips. She stated at hearing that she and her partner have recently purchased a home which is subject to a mortgage. She otherwise discloses savings of about $90,000 and funds in her Australian superannuation of about $33,600.
The second party told the Tribunal that she understood the challenges faced by the applicant in spending time with their child. She said she has attempted to initiate discussions through a lawyer setting out proposals, but the applicant has not responded. She otherwise said she had no submissions to make regarding the applicant’s financial position other than to observe that if reducing the applicants annual rate meant it made it more affordable for him to travel to [Country] then she would not oppose that situation provided he makes a fair payment of child support.[12]
[12] The fact that the second party took that position does not mean that a ground to depart is established.
As noted, the applicant is in effect self-employed. He works for a company of which he is a joint director and shareholder. The Guide[13] notes that a parent who is self-employed may be able to legitimately deduct certain expenses for tax purposes. In Voss & Child Support Registrar & Anor,[14] the Court commented on the common situation of a self‑employed person’s taxable income not corresponding with his or her income or financial resources for child support purposes:
There is a body of cases where simple reference to a person’s tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn’t properly reflect the realistic capacity of the person to provide financial support for their children.
[13] 2.6.14.
In Costa & Fairbank,[15] the Court said about the interpretation of the term “financial resources”:
“Financial resource” refers to something which is not property but from which financial benefit is or may be gained. In light of the objects of the Act, the term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.
The Guide also notes:[16]
Income in the form of undistributed profits
A parent or a third person may retain profits in a company, trust or partnership structure instead of distributing the profits to themselves or others. This may have the effect of reducing the parent’s taxable income and could mean that the child support assessment is unfair.
[16] Op. cit.
The Tribunal notes that the company appears to have grown and increased its revenue over the last two years. It was difficult to obtain any clear evidence from the applicant on various aspects of the company’s operations. On balance however the Tribunal accepts that at this point in time the applicant’s access to income and financial resources for child support purposes remains as reflected in his individual ATI. Whilst noting evidence of undistributed profit which potentially could be viewed as a financial resource available to the applicant, the Tribunal on balance accepts that the company is utilising any undistributed amounts to grow its business and that at this point in time this is not a financial resource available to the applicant.
The Tribunal is also satisfied that the administrative assessment is currently reflecting the income and financial resources available to the second party.
The second party stated that the child has no special needs.
The Tribunal comes to the view that at this time a ground is not established to depart from the assessment on the basis of either party’s income, financial resources or property. In coming to this conclusion, the Tribunal has also taken into consideration that it is the primary duty of the parents to maintain the child and the objects of the Act which is to ensure that children receive a proper level of support from their parents.[17]
[17] Sections 3 and 4 of the Act. According to supplementary materials the applicant’s current annual rate is about $12,500.
The Tribunal concludes that no ground in the special circumstances of the case has been established to depart from the administrative assessment.
DECISION
The Tribunal affirms the decision under review.
| Date(s) of hearing: | Wednesday, 13 November 2024 |
[14] (SSAT Appeal) [2009] FMCAfam 1296.
[15] (SSAT Appeal) [2010] FMCAfam 39.
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