Lowes and Lowes (Child support)

[2018] AATA 83

Lowes and Lowes (Child support) [2018] AATA 83 (9 January 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/BC012083

APPLICANT:  Mr Lowes

OTHER PARTIES:  Miss Lowes

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  9 January 2018

DECISION:

The decision under review is varied so that no child support is payable by either parent during the period from 1 May 2017 to 31 December 2018.

CATCHWORDS

Child support – Departure determination – Income and financial resources of parents – Loans from relatives – Decision under review varied

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 Lowes and Miss Lowes are the parents of [Child 1] who was born in 2013. A child support case was registered on 30 September 2016. Each parent has been recorded as providing 50% care to [Child 1].

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 child. From 30 September 2016 the administrative assessment was based on Mr Lowes’ 2015-16 adjusted taxable income of $72,043 and Miss Lowes’ 2015-16 adjusted taxable income of $35,734, and Mr Lowes was required to pay $2,938 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. On 22 November 2016, Mr Lowes lodged a departure application. On 27 January 2017 the Department of Human Services – Child Support (“the CSA”) decided to refuse his departure application. On 10 March 2017, Mr Lowes belatedly objected to that decision. He subsequently applied for an extension of time in which to object. The CSA granted his extension of time application and on 2 June 2017 an objections officer allowed his objection and decided to vary his rate of child support payable to $0 per annum from 1 May 2017 to 30 November 2019. Mr Lowes promptly sought further review by the Tribunal. I conducted a directions hearing on 31 October 2017 and a full hearing on 9 January 2018. Mr Lowes and Miss Lowes attended the hearings by conference phone. In reaching my decision I have considered the sworn evidence of Mr Lowes and Miss Lowes as well as the documentation provided by the CSA, Mr Lowes and Miss Lowes.

4. Subsection 98C(1) of the Act provides, relevantly, 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. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground 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; …

2. When Mr Lowes lodged his departure application on 22 November 2016 he failed to answer most of the questions concerning his income and financial circumstances, but he did state that he was employed in [a certain industry] and earning $89,000 per annum. I noted that figure during the full hearing and he said it was incorrect. He said he earned approximately $95,000 to $97,000 per annum. A payslip for the fortnight ending 3 May 2017 shows year‑to-date wages of $81,255. There are 307 days from 1 July 2016 to 3 May 2017. $81,255 / 307 x 365 = $96,606 per annum. On balance, I find that Mr Lowes was earning approximately $96,600 per annum whilst employed by [Employer 1].

3. Mr Lowes ceased employment on 30 June 2017. His separation certificate states, and Mr Lowes confirmed, that he had reached the end of his employment contract. He received a lump sum payment of $38,078 in respect of his 130 days of accrued leave, which represented ongoing wages in respect of the period from 1 July 2017 to 8 November 2017.

4. According to the CSA’s computer records, Mr Lowes was granted parenting payment on 7 August 2017. According to Mr Lowes, he started receiving parenting payments in late 2017 and he did not receive a parenting payment lump sum arrears payment. I accept his evidence on that issue. He was probably subject to a lengthy social security income maintenance period in respect of his lump sum leave payment: section 1068A of the Social Security Act 1991. He stated that his parenting payments are $265 per week.

5. On 19 July 2017, Mr Lowes partially completed a Statement of Financial Circumstances. After the directions hearing I directed him to provide a completed Statement of Financial Circumstances and he subsequently provided the first six pages of the nine-page Statement. The second Statement is dated 23 November 2017 and refers to a business name “[Business 1]”. At the full hearing, Mr Lowes stated that he is still unemployed but he has commenced a business partnership with a [Mr A] with a view to obtaining contract work in [the same industry] and related activities whilst also seeking to obtain full‑time employment in that field. He stated that the partnership has received revenue of approximately $15,000 and it has incurred expenses of approximately $10,000 and that he and [Mr A] will share equally in the partnership’s profits. He did not provide any documentation in support of that oral evidence. According to Mr Lowes, he has earned approximately ($15,000 - $10,000) / 2 = $2,500 in the last six or so months.

6. Miss Lowes submitted that Mr Lowes should be assessed on his earning capacity rather than his actual income. The Tribunal can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) of the Act 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.

7. In respect of subparagraph 117(7B)(a)(i), Mr Lowes stated that since July 2017 he has been actively seeking full-time employment in [a certain industry] and related fields. He acknowledged that he has not been seeking work in other unrelated fields, such as hospitality (e.g. waiter) or driving (e.g. Uber). He stated that he did not have the skills to work in such fields. I do not accept his evidence on that issue. I find that, apart from Mr Lowes’ unidentified periods of contract work, Mr Lowes has not worked despite ample opportunity to do so. Paragraph 117(7B)(a) is satisfied.

8. Mr Lowes also stated that he could not do hospitality or other casual work due to his caring responsibilities. I do not accept his evidence on that issue. He has been able to undertake contract work while fulfilling his caring responsibilities. Mr Lowes did not suggest that his state of health prevented such employment. Paragraph 117(7B)(b) is satisfied.

9. Mr Lowes stated, and Miss Lowes, based on her knowledge of Mr Lowes, agreed, that his election not to obtain employment in other fields was not for a major purpose of affecting the rate of child support payable. I accept that evidence. Paragraph 117(7B)(c) is not satisfied and I cannot have regard to Mr Lowes’ earning capacity.

10. In summary, Mr Lowes effectively earned a significant wage until 8 November 2017, and his income since then has consisted of parenting payment of approximately $265 x 52 = $13,780 per annum and contract work of approximately $2,500 x 2 = $5,000 per annum, making a total of $18,780 per annum (assuming Mr Lowes’ unsubstantiated oral evidence is accurate).

11. As noted earlier, the administrative assessment of child support payable was based, in part, on Mr Lowes’ 2015-16 adjusted taxable income of $72,043 and he was required to pay $2,938 per annum in child support. From at least 9 November 2017, Mr Lowes’ unemployment has constituted special circumstances such that the administrative assessment would have resulted 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. Miss Lowes is employed on a casual basis as [an occupation]. Her 2015-16 taxable income was $35,734. Her 2016-17 taxable income was $33,597. She stated, and Mr Lowes did not dispute, that she continues to earn a similar income.

3. Mr Lowes submitted that Miss Lowes should be assessed on her earning capacity. He acknowledged that she has been employed as [an occupation]and undertaking less than a full-time workload since prior to their separation. It follows that paragraph 117(7B)(a) of the Act is not satisfied and I cannot have regard to her earning capacity.

4. Miss Lowes has received, and continues to receive, financial assistance from her parents. On 15 May 2017 an objections officer noted, relevantly:

   ... Ms Lowes stated:

   * Her parents help her out with day-to-day costs such [as] car servicing and registration, mortgage payments when she is not being paid and unexpected expenses from time-to-time.

   * The assistance comes through bank deposits into her account and the use of her father’s credit card.

   * In addition to this assistance which is estimated to be in the vicinity of $20,000 per annum, her parents provided her with $166,000 in October 2016 to assist her with her property settlement. Miss Lowes purchased the matrimonial home and Mr Lowes received a $100,000 cash payment.]

   * She also receives gifts from her parents and occasional payments for airfares to travel to see them or her sister.

   * Neither her parents nor her keep a ledger of the assistance she receives.

5. On 16 May 2017 the objections officer spoke to Miss Lowes again after analysing a sample of her bank account statements. The objections officer noted, relevantly:

   ... I explained to Ms Lowes that the significant deposits she has received from her parents would be considered as a financial resource for the purposes of this decision. I reminded Ms Lowes that about $21,000 in ATM deposits were made into her bank account from October 2016 to May 2017, in addition to which $10,400 was paid into her account by her father.

   Ms Lowes confirmed the payments were from her parents are were [sic] to assist her [to] get on her feet after separation; help with unexpected bills; gifts; to help her pay her mortgage during [certain] periods when she does not get paid; day-to-day expenses and work on the house.

   ...

   Ms Lowes wanted it known that she won’t receive indefinite assistance from her parents because it is their plan to retire in the next year or so.

6. It is worth noting that there was no suggestion that Miss Lowes’ parents’ financial assistance was provided by way of a loan.

7. The objections officer subsequently calculated that Miss Lowes’ parents’ financial assistance equated to $64,084 per annum nett. On 2 June 2017, while Mr Lowes was still employed, the objections officer decided to reduce Mr Lowes’ rate of child support payable to $0 per annum from 1 May 2017.

8. On 6 July 2017, Miss Lowes’ father sent an email to Miss Lowes which stated, relevantly:

   This email is to confirm our discussions and agreement that in future all payments made by us to you or on your behalf will be on the basis of loans at the interest rate payable to us for our [Line] of Credit with [Bank 1]. As you know, we currently have three such accounts and we will dedicate one of these exclusively for you. That way, both you and us will know exactly the amount payable and the interest will automatically be calculated by [Bank 1].

   We have always told you that we hope you will spend as much time as possible with [Child 1] before he starts school and therefore we are happy to offer you this loan arrangement so that you do not have to worry about finances until he starts his formal education. At that point, we hope you will be able to secure a more permanent job and then you will not only be able to meet your ongoing expenses but eventually repay the loan to us.

9. At the directions hearing, Miss Lowes stated that all the financial assistance that she had received from her parents had been by way of a loan. In light of the evidence set out above, I asked Miss Lowes to repeat her statement to ensure there was no misunderstanding, and she repeated that all the financial assistance that she had received from her parents had been by way of a loan.

10. At the full hearing, Miss Lowes once again stated that all the financial assistance that she had received from her parents had been by way of a loan. Mr Lowes replied that he had documentary evidence which contradicted that evidence but he had not provided that documentary evidence to the Tribunal because he had been unaware that Miss Lowes would claim that her parents’ financial assistance was by way of a loan. In fact, Mr Lowes had been informed of that evidence prior to the full hearing. I informed Mr Lowes that he could provide that documentary evidence after the hearing and I would decide whether to take it into account. I also informed him of the substance of section 30 of the Child Support Review Directions. As at the date of the despatch of these reasons, Mr Lowes has not provided that documentation.

11. There is reason to doubt that Miss Lowes will ultimately be required to repay the money that her parents have provided, in part because there is some evidence to suggest that the earlier payments were not a loan (which in turn would indicate their generosity towards her), and in part because even if her parents currently view at least some of the payments as a loan, they are not precluded from waiving recovery of the loan at some later date. However, it is sufficient for present purposes to note that Miss Lowes received the immediate benefit of those payments and her parents are not pressing her for prompt repayment.

12. Miss Lowes did not dispute the objections officer’s calculation that the payments to May 2017 equated to $64,084 per annum. Miss Lowes stated that she has received less financial assistance since July 2017 and she provided a sample of bank account statements in support of that statement. She identified the following payments from her parents into her savings account during the months of August, September and October 2017: $700 on 29 August 2017; $300 on 11 September 2017 and (probably) $500 on 15 September 2017. She also identified a number of payments over the same period via a [Line] of Credit: $700; $59; $45; $47; $61; $510; and $500. Those payments total $3,422 over three months, which equates to $13,688 per annum. Mr Lowes did not dispute that evidence and I accept it as correct.

13. Mr Lowes very belatedly disclosed that he also receives financial assistance from his father. On 19 July 2017 he partially completed a Tribunal Statement of Financial Circumstances. He did not answer questions concerning “home” and “other real estate”, which suggested that he did not own any real estate. He stated that his only liabilities were two credit card debts, each of $1,000, and his “total liabilities” were $2,000.

14. After the directions hearing, Miss Lowes provided evidence that Mr Lowes was the sole owner of [Property 1], [Suburb 1], and that he had purchased the property on 2 May 2017 for $667,000. Mr Lowes provided another Statement of Financial Circumstances dated 23 November 2017 in which he stated that he and his father were both registered owners of an unidentified parcel of land and his (Mr Lowes’) home loan was $370,000, being “my share”.

15. At the full hearing, Mr Lowes conceded that he was the sole registered owner of [Property 1], [Suburb 1], and he had purchased the property on 2 May 2017, and he had borrowed $300,000 from his father and a further $350,000 or so from a bank to purchase the property. It follows that he had previously provided the Tribunal with misleading and false evidence. He stated that he could not recall the interest rate payable on his bank loan, but he suggested that it was approximately 5% to 6%, and he could not recall the interest rate payable on the loan from his father, but he stated that it was halfway between the interest rate payable on the bank loan and the interest rate payable on a term deposit. He added that his father was not requiring him to make any interest payments while he was unemployed, and the loan would be repaid when the house was sold in five to seven years’ time. I observed that if he were required to pay 5.5% interest on a $300,000 loan, the interest payments would be $16,500 per annum, and Mr Lowes’ father’s election to provide a loan of $300,000 and not press him for the interest payments represented short-term financial assistance of approximately $16,500 per annum. Mr Lowes did not take issue with that observation.

16. Mr Lowes submitted that Miss Lowes’ parents’ earlier and more substantial financial assistance should be grossed-up and added to Miss Lowes’ earnings, and Miss Lowes’ rate of child support payable should be administratively assessed accordingly. Mr Lowes’ submission would have more force if Miss Lowes had been entitled to tax-exempt payments from an unrelated third party. However, I am required to consider the particular facts of this case and the practical effect of Mr Lowes’ submission would be to require [Child 1]’s maternal grandparents to pay child support to Mr Lowes. A child’s parents, and not the child’s grandparents, are primarily responsible for providing for the child. When the child support case was registered, Mr Lowes was earning a relatively high income and he was not in need of child support from Miss Lowes to assist him in meeting [Child 1]’s costs while he was in his care, and Miss Lowes was earning a relatively low income but also receiving significant financial assistance from her parents and she was not in need of child support from Mr Lowes to assist her in meeting [Child 1]’s costs while he was in her care. It would have been just and equitable to require neither parent to pay child support to the other parent prior to July 2017. Mr Lowes was required to pay $2,938 per annum in child support from 30 September 2016 to 30 April 2017, which equated to $1,714 in respect of those 213 days. The objections officer varied his rate of child support to $0 per annum from 1 May 2017.

1. Miss Lowes stated, and I accept, that her parents have provided her with a lower level of financial assistance since July 2017. The evidence suggests, and I find, she has been receiving approximately $13,688 per annum in financial assistance since July 2017. From around the same time, Mr Lowes has effectively been receiving a similar level of financial assistance from his father. During the full hearing, Mr Lowes stated that while that state of affairs has existed, the financial assistance that each parent has received from their parent or parents has effectively “cancelled each other out”.

2. Mr Lowes received a lump-sum leave payment of $38,078 in respect of the period from 1 July 2017 to 8 November 2017, which equates to $106,911 per annum. The administratively assessed rate of child support payable during that period, based on Mr Lowes’ adjusted taxable income of $106,911 per annum and Miss Lowes’ 2016-17 adjusted taxable income of $33,597, would have been $5,552 per annum, and $1,977 would have been payable by Mr Lowes in respect of those 130 days.

3. If I were to reduce Mr Lowes’ child support liability by $1,714 in respect of the period from 30 September 2016 to 30 April 2017 and increase his child support liability by $1,977 in respect of the period from 1 July 2017 to 8 November 2017, there would be a net increase in his child support liability of $263.

4. From 9 November 2017 to date, both parents have been receiving similar levels of financial assistance from their parent or parents. Mr Lowes has been receiving parenting payment and, according to his unsubstantiated oral evidence, he has also earned a minimal income. Miss Lowes has continued to earn approximately $33,597 per annum. An administrative assessment of child support payable based on those incomes (and excluding the financial assistance that each parent has received from his or her parent or parents) would result in Miss Lowes being required to pay approximately $800 per annum in child support to Mr Lowes.

5. However, the determination of a departure application is not a purely mathematical exercise. I am mindful that the child support case commenced on 30 September 2016 but Mr Lowes did not lodge a departure application until 22 November 2016. Further, child support is intended to assist in meeting a child’s day-to-day expenses. With the passage of time, retrospective adjustments tend to become a more artificial exercise, which is a factor which weighs against such retrospective adjustments (hence the objections officer’s decision to vary the rate of child support payable from 1 May 2017 and not from an earlier date). Further, Mr Lowes has provided the Tribunal with misleading and incorrect information concerning his financial circumstances, and he has not provided any documentary evidence concerning his more recent earnings and he was unable to provide specific oral evidence concerning those earnings during the full hearing.

6. [Child 1] is due to commence school in 2019. Miss Lowes stated that both parents expected him to receive a private school education. Mr Lowes did not agree with that statement. The issue might form the basis of another departure application in due course: see, in particular, 2.6.9 of the Child Support Guide. Also, Mr Lowes remains hopeful that he will obtain full-time employment in the near future and he intends to continue with the partnership’s business in the interim. I suggested that if I made a new departure decision, it might be appropriate to make a decision with effect until 31 December 2018, and both parents agreed.

7. Viewing the matter as a whole, it would be just and equitable to vary the decision under review so that no child support is payable by either parent during the period from 1 May 2017 to 31 December 2018.

8. 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. Both parents receive family tax benefit in respect of their care of [Child 1]. A decision requiring Mr Lowes to pay child support of $0 per annum until 31 December 2018 would result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.

DECISION

The decision under review is varied so that no child support is payable by either parent during the period from 1 May 2017 to 31 December 2018.