M and M
[2004] FMCAfam 2
•19 February 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2004] FMCAfam 2 |
| CHILD SUPPORT – Application for departure from administrative assessments for 10 years arising out of a decision by a Senior Case Officer of the Child Support Agency to amend assessments creating a liability payable by the father of $27,970 income – financial capacity – just and equitable – minor adjustments made. |
Child Support (Assessment) Act 1989 (Cth), ss.117, 117(1), 117(2), 117(4), 117(5)
Savery v Savery (1990) FLC 92-131
Gyselman & Gyselman (1992) FLC 92-279
Hides v Hatton (1997) FLC 92-579
| Applicant: | P A M |
| Respondent: | L M M |
| File No: | DGM 563 of 2002 |
| Delivered on: | 19 February 2004 |
| Delivered at: | Melbourne |
| Hearing dates: | 17, 18 & 19 December 2002 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr Robinson |
| Solicitors for the Applicant: | Nil |
| Counsel for the Respondent: | Mr Fronistas |
| Solicitors for the Respondent: | Ardley And Porter |
ORDERS
THAT there be a departure from administrative assessment of child support payable by the father for the period 1 July 1992 to 30 June 2003 to nil.
THAT there be a departure from administrative assessment of child support payable by the father for the period 1 July 1993 to 30 June 1994 to nil.
THAT there be a departure from administrative assessment of child support payable by the father for the period 1 July 1999 to 31 March 2000 and that the father's child support income for that nine month period be fixed at $30, 206.00.
THAT there be a departure from administrative assessment of child support payable by the father for the period 1 July 2001 to 30 September 2002 and the father's child support income be fixed at an annual rate of $52, 360.00.
THAT there be a departure from administrative assessment of child support payable by the father for the period 1 October 2002 to
31 December 2003 and the father's child support income be fixed at an annual rate of $52, 360.00.THAT the Child Support Registrar be requested to give effect to these orders by calculating child support payable by the father as soon as practicable.
THAT the father pay the mother's costs fixed in the sum of $6,537.25 as follows:
(a)to the mother the sum of $300.00 forthwith;
(b)to the mother's solicitor the sum of $770.00 forthwith;
(c)to the mother the sum of $5, 467.25 on or before the 19 February 2007 or upon sale of the wife's property whichever is the earlier
THAT the Application filed 14 March 2002 otherwise be dismissed.
THAT the Exhibits be returned to the parties tendering same.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
DGM 563 of 2003
| P A M |
Applicant
And
| L M M |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter involves an application by the father for a departure from child support assessments between the 1 July 1992 and 30 June 1999. The genesis of the application is a decision of a Senior Case Officer at the Child Support Agency, dated 16 M 2001 ("the decision") which departed from amended assessments and created a liability payable by the father of $27,970. The father contends he has no capacity to pay that sum and seeks a departure from the administrative assessments by reason of which the arrears were calculated. The mother opposes his application.
Background
The parties were married in 1972. The father was born on 26 June 1949 and the mother was born on 10 July 1951. In 1976 the father commenced working with a Transport Corporation as a train driver and derived income as a PAYE taxpayer from that source throughout all of the relevant periods.
The parties have three children. During their marriage the parties purchased three properties, being the former matrimonial home a lock up shop from which they conducted a printing business, and an investment property, all in Dandenong. They also had a vacant block of land. As well as the father generating an income as a train driver, the parties conducted a printing business and milk-bar/mixed business at some stage during their marriage. They sold the milk-bar/mixed business in about 1989 after several years of substantial losses.
They separated in January 1992 and lived under the one roof until June of that year. In June of 1992 the father left the matrimonial home and the mother and children continued to live there. The father continued making mortgage payments on the properties, including the matrimonial home, after separation. The properties were sold, some by mortgagees in possession by 1995. The mother commenced property proceedings in the Family Court of Australia in December 1996 and final orders were made on 12 May 1998. Pursuant to those orders the mother received the balance of the proceeds of sale of all the properties, together with the sum of $10,000 as representing her share of the matrimonial assets including the printing business and the father’s superannuation.
Child support issues
The father contends that after leaving the former matrimonial home in 1992 he was refused access to all records and other financial documentation, including, importantly, those of the businesses operated during the marriage, in particular the printing business. He contends that the printing and milk-bar/mixed business had been operated as a partnership between the wife and himself and through different years the losses they had made had been both small and large. These losses were set off against the income he earned as a train driver and to the extent that his tax liability was reduced this was a benefit they both shared. Without access to the documents recording the operation of the business, the father was unable to lodge income tax returns and this carried forward to later years, as accrued business losses had been carried forward in some years.
After separation, the mother sought a child support assessment, but without taxable income figures, the Child Support Agency were unable to generate an assessment for Child Support by using tax returns and instead relied upon provisions of the Child Support (Assessment) Act 1989 (Cth) (the Act) which enables the Registrar to apply a default income of two and a half times the average weekly earnings. That resulted in a high level of child support being assessed.
Those amounts were automatically deducted from the father's wages as a train driver, together with other deductions including mortgage payments on the former matrimonial home up until 1995, private health insurance for the father and the children and superannuation. The father asserts that to compound the difficulties for him, the Child Support Agency had been writing to him at the former matrimonial home where he no longer lived and that he was unaware of much correspondence that had apparently been sent to that address.
The father contends that after the automatic deduction of these amounts he was left with very little pay coming to him and forced to live on a meagre sum with which he was left. This resulted in him needing to rely on friends for loans and assistance and he borrowed money and ran up substantial debts over this time.
The father asserts that the situation eased somewhat after the sale of the former matrimonial home in 1995, however, the documents to enable him to complete his tax returns were still not provided and the default assessment continued up until 1999 when he obtained the documents and lodged his tax returns. The lodging of the tax returns for the businesses, which included losses over the relevant period, resulted in the Agency being able to assess the father on his taxable income. The resultant assessments were significantly less than they had been using the default assessment. Thus, on about 13 August 2000, a refund was paid to the father of $29,000. The father asserts that he immediately expended that money in repaying the loans he had incurred with friends in the preceding eight years.
In about December 2000 the mother lodged an application to vary the amended assessments. Over the next six-month period a number of meetings were held and on 13 June 2001 the Randall Decision was given.
The child support decision
The Senior Case Officer had to deal with the mother's application for a departure and the father's cross application. The mother's application included a reliance on the fact that the assessments did not take into account the income earning capacity, property and financial resources of the father and in addition that it cost her extra to care for, educate or train the children in the way the parents expected. The father's cross-application was based on the fact that income earning capacity, property and financial resources of the children were not taken into account, that he had made payments on behalf of the family that were not accounted for, that he had necessary expenses in supporting himself that affected his ability to support the children and that the assessment did not take into account the income earning capacity, property and financial resources of each of the parties.
It is apparent from the decision that all relevant material was considered and the parties had a thorough opportunity to present their cases. As to the mother's case, the Case Officer rejected her claim that there were extra expenses in educating or training the children which required being taken into account. However, he allowed her departure application in relation to the income of the father. The mother contended that the father should be assessed on either his initial default income or alternatively on his salary as a train driver. She contended that as from the property settlement in 1995 he should not be able to claim losses in relation to the businesses, in particular his current flower nursery business, which he appeared to conduct in partnership with another person. Conversely, the father believed he should be assessed on his taxable income and maintained he should be entitled to claim losses as they were fair losses and not artificial. He maintained he took over the printing business as an ongoing business; he had expanded that business, that there were losses and the losses should be allowed in consideration of his child support assessments.
The Case Officer's decision in relation to each of the relevant periods was as follows:
Assessment years
1993, 1994 and 1995
The Senior Case Officer took into account that during this period the mother and children continued to live in the family home after separation until it was sold in 1995, the payments had been made by the father in respect of a mortgage and that both parties were involved in the conduct of the partnership and the property settlement up to 1995. He determined therefore that against that background the father should be assessed for the 1993, '94 and '95 assessment years on his taxable income as lodged. That was respectively, $29,701, $9691 and $0 with the resulting annual child support rates of $5902, $468 and $0 dollars.
Tax years
1995/1996
Following the property settlement, the father continued to conduct the printing business at a loss and increased his business interests and consequently his business losses, which were offset against his salary income. The Senior Case Officer accepted the losses M be appropriate for income tax purposes but was not satisfied that they were appropriate for child support income assessment purposes. In this year the business loss was $35,500 with no business income. He inferred that given the 1995 taxable income was nil, the 1996 business loss M be included to carry forward loss. He was satisfied the loss should be excluded and therefore fixed the income level for assessment as the father's salary of $46,550 less work related tax deductions of $555 leaving a balance of $45,995.
1996/1997
The Senior Case Officer noted that again there was no detail of business income, merely a claim for a loss of $7632 which he disallowed for child support income purposes. He fixed the level of child support as being salary of $43,952 less work related tax deductions of $614 with a balance of child support income of $43,338.
1997/1998
In this year he noted a difference in the business income with a turnover for the business of $40,855 from which there was deducted cost sales and expenses, producing a loss of $14,209. He noted the expenses included depreciation and interest of $26,602. He was satisfied that the father had increased his debt level and that the losses should not be included for child support income assessment purposes. He determined the child support income as being $54,069, being salary less work related tax deductions.
1998/1999
The business loss of $26,000 was arrived at after taking into account business turnover less cost of sales and expenses. Again, it was noted the expenses included an interest figure which was $36,799 and the Senior Case Officer noted that the father's debt level had increased while his turnover had decreased, and in fact his interest exceeded his turnover. He disallowed the loss for child support income purposes and assessed the child support income as $52,657 being salary less work related tax deductions.
1999/2000 and 2000/2001
There was no information in relation to those years and the Senior Case Officer was satisfied that the income level of the previous year of $52,657 should continue for the period from 1 July 1999 to 30 June 2001.
The Senior Case Officer considered the other matters raised by the parties and made small adjustments in the 1995 year, partly because M commenced work in that year and became self sufficient and partly because the father had provided a monthly mortgage payment for portion of that period.
He considered in detail the father's contention that his necessary self-support should be taken into account. However, having considered in detail the matters raised by the father, was not satisfied that there were special circumstances which established that reason.
He noted that in essence he had found that the father's income for child support assessment purposes should be his salary income less work related tax deductions and that the income range for 1996 to 2001 periods was $43,308 per annum to $54,069 per annum. He was satisfied having regard to the other matters in the Act that there were no other matters that required adjustment. Finally, he considered the effect of the result of his reasons would be that a debt in the vicinity of $29,000 would be raised.
The mother had contended that the late lodgement of the father's income tax returns had led to an adjustment once those tax returns were filed which resulted in a refund to him. As she had received the child support, this had resulted in her incurring a debt to Treasury in the vicinity of $28,000 which she had no resources to repay. She contended that the father had the opportunity to lodge his income tax returns but had chosen not to do so and that as he had paid all his initial assessments he had indicated he had the capacity to pay.
The father conversely maintained that the delay in lodgement of the income tax returns was partly due to the non-co-operation of the mother in relation of information needed to complete the returns. He maintained he believed he was entitled to a $50,000 refund from the Agency, that the Agency had settled for $29,000 approximately which he had been paid. He believed that to be fair and believed it to be fair that the mother should be required to repay the debt to Treasury, although he did not think it was fair she should have to pay interest. He accepted she had no resources to meet that payment. He maintained that during the initial assessment periods while he had paid the assessments or while they were being deducted from his salary, he was short of financial resources and struggled to live.
The Senior Case Officer considered it appropriate that a re-assessment should be made to achieve, in essence, a liability as at 30 April 2001 of approximately $27,970 for repayment by the father. He determined that the father had a significant salary as a train driver which was financing shortfalls in his business operation including significant interest payments on borrowings incurred since separation. Because he found it fair that the losses should not be deducted for child support assessment purposes as from 1 July 1995, he concluded that the re-assessments, resulting as they did in a liability of $27,970 for the father, were proper in all the circumstances. The result for the relevant child support assessment periods was as follows:
a)1 July 1992 to 30 June 1993 assessment year. This is derived from the father's child support income amount of $29,701, his 1993 taxable income to raise an annual rate of $5902 less $495 and $1795. Thus the annual child support payable is $3612.
b)1 July 1993 to 30 June 1994 assessed on the father's child support income amount of $9691 per annum, his taxable income. Child support is $468.
c)1 July 1994 to 30 June 1995 assessed on the father's child support income amount of nil dollars, his 1995 taxable income. Child support is nil.
d)1 July 1995 to 30 June 1996 assessed on his child support income amount of $45,995. Child support is $6774.
e)1 July 1996 to 30 June 1997 assessed on his child support income amount of $43,338. Child support is $6229.
f)1 July 1997 to 30 June 1998 based on child support income amount of $54,069. Child support is $8111.
g)1 July 1998 to 30 June 1999 assessed on child support income amount of $52,657. Child support is $7851.
h)1 July 1999 to 31 March 2000 assessed on child support income amount of $52,657. Child support is an annual rate of $7639.
i)1 April 2000 to 30 June 2001 assessed on child support income amount of $52,657. Child support is an annual rate of $7592.
j)For the period 1 July 2001 to 30 September 2002 assessed on child support income amount of $52,657. Child support income is an annual rate of $7449.
The Law
The provisions of s.117 of the Act empower a Court to make an order for departure from administrative assessment in special circumstances.
Section 117(1) provides as follows:
“(i)That in special circumstances of the case one or more of the grounds of departure outlined in s 117 (2) exist before a Court can make an order for departure;
(ii)That under s 117 (1) (d) (ii) it will be just and equitable, as regards to the child, the care entitled to the support and the liable parent; and - the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
Himself or herself; or
Any other child or another person that the person has a duty to maintain and - direct and indirect costs incurred by the carer entitled to child support and providing care for the child and - any hardship that would be caused:
to the child
or the carer entitled to child support;
by the making of, or the refusal to make, the order;
to reliable parent;
or any other child by a person that the liable parent has a duty to support;
by the making of, or the refusal to make the order.”
It is necessary for the Court to consider s.117(5) and determine whether or not it is proper to make the departure order.
That it would be otherwise proper to make a particular departure order.
If these three conditions are satisfied, then the Court should make the departure orders sought.
In Savery v Savery (1990) FLC 92-131, Kay J said that:
Special circumstances -(were) facts peculiar to the particular case which set it apart from other cases.
In Gysleman v Gysleman (1992) FLC 92-279 the Full Court of the Family Court described the exercise under s 117 as one involving three steps and each of these steps must be addressed by the Court as a separate issue and are:
·Whether one or more of the grounds for departure in s.117 is established; if so:
·Whether it is just and equitable in the meaning of s.117 (4) to make a particular order; and
·Whether it is otherwise proper within the meaning of s.117 (5) to make a particular order.
It is also clear that the Court must follow this three-step process in respect of each year for which a departure order is sought (see Hides v Hatton (1997) FLC 92-759). When considering s.117 (4) the Court must consider the circumstances of the parties and the child in order to determine whether it is just and equitable to make a particular order.
The Father's case
1992-1993: The father's case is that the Court should place him in the same position he was prior to the Randall decision and that child support should be based on taxable income. The father has a number of contentions in relation to this period, some of which relate to all of the periods. The first of these is that as the child support assessment formula is normally applied using the income from two years previously and when a reassessment such as occurred in this case took place that is the appropriate figure to use. This argument appears to have been used for each of the child support periods. I reject that argument. The reason why the Act provides for assessment to be based on the earlier period is because that is normally the information that is available to the Agency at the time of assessing. Where there is a reassessment and the actual income figure is available, it makes no sense not to apply the real figures available and when a departure is being sought, it makes no sense to apply an income figure attributable to a period two years earlier.
During this period the father argues that he should have had a deduction for $273.75, being cost of electricity to charge a radio connected with his work. This also recurs, he asserts, for all assessment periods. I also reject this argument. If this is a work expense it will be included in the expenses taken into account by the child support Case Officer.
During this period the father contends, more significantly, that there were mortgage payments made on the former matrimonial home of $4368 and that he was living elsewhere. Further, he contends there were private health insurance payments which covered the wife and children during this period and that they totalled $2355.60. These two payments he contended should be offset against child support. Thirdly, he contends there were superannuation payments which totalled $2487.36. He contends that these should be taken into account because out of the wife's share of the property settlement she received moneys including an adjustment for his superannuation.
1993-1994: The father contends that during this period again there were mortgage payments of $2868.14, private health insurance payments of $1870.85 and superannuation payments of $2571.42. He says, in addition, he was off work for a number of months on Workcover payments during this period.
1994-1995: The father contends during this period that his son, M, was working during this year. However, the father's assessment for this period was nil and I do not intend to consider this period any further.
1995-1996: The father contends that his losses from his business should be taken into account and the taxable income figure should be used. The father contends that an income of $10,300 or $10,248.25 should be imputed to him rather than $45,995. The difference results from losses from the business offset against his income as a train driver. The father said in his affidavit, sworn 20 November 2002, that the business is called K P and is a nursery business established and running since that period. He swore that it occupies much of his spare time and that it was not a negatively geared investment property but:
A genuine business to which I commit most of my spare time and energy.
He further said that:
“During this period it generated sales in excess of $60,000. These sales were exceeded by expenses, a major component of which was interest payments on the property from which it operates. Interest expenses were just over $57,000 including repayments for P A and L M M, around 60 per cent of expenses, depreciation $2379, motor vehicle $5830, repairs and maintenance $983 and other expenses $16,987.”
1996-1997: The father contends that he should be imputed with a child support income of either nil or $35,432.25 but not $43,338. He swears in his affidavit that the business generated sales in excess of $50,000. However, despite a reduction in the expenses of over a third there was still a small loss generated for this period. The interest expenses were over $23,000, around 40 per cent of expenses.
1997-1998: The father contends that his income should be either $10,995 or $39,586.25 but not $54,069. He swore that the business generated sales in excess of $40,000 and the balance sheet showed a doubling of the loss from last year to around $14,000. Interest expenses were over $26,000, around 50 per cent of the expenses.
1998-1999: The father contends that child support income should be $37,134 or $26,273.25 but not $52,657. He contends that the business generated sales of just under $40,000 and the loss was doubled to around $26,000. Interest expenses were over $36,000, around 60 per cent of the expenses.
1999-2000: The father contended that his child support income should be $41,454 or $30,612.54 but not $52,657. The difference is again the expenses deducted for the business.
2000-2001: The father contends that his income from employment during this period was $52,934. The child support income should be $26,547 or $52,591 not $52,657.
2001-2002: The father contended that the income in his group certificate was $52,306. The child support income assessment amount should be based on that figure or the amount of his taxable income; that is after offsetting the business losses.
Evidence
The father swore a financial statement on 18 February 2002. He indicated that he had $930 salary or wages and that income from a business in Victoria (owned 100 per cent by him) was nil. He further said that he shared his home with three occupants. He indicated that they had no income. Under “assets” he asserted that he owned an interest in a home with another person, with a value to him of $250,000. He asserted that he owed $250,000 on the property and that he owed $47,000 to the Child Support Agency.
The father was cross-examined extensively in relation to his financial position and it would not be an over-statement to say that the father's real financial position only became apparent once he was cross-examined. The father added to his evidence with some short evidence-in-chief in which he said that he was still conducting a printing business on a small scale and that in 1995 he had started helping friends with a nursery, in which he now has an interest. He said that since 1995 there had been years of drought and problems with Telstra which had reduced the earnings. He said they made income in the first couple of years but subsequently suffered significant losses and were still having trouble with Telstra. He said he had not completed income tax returns after 1999 because someone had hacked into and altered relevant financial information in his computer
In cross-examination the following picture emerged from the evidence. The father had chronically failed to file tax returns over many years. During the 1970s and 80s there was a period of approximately ten years when no tax returns were filed by the father. He agreed that he had accounting advice to keep records and agreed that meeting deadlines was a problem for him. As far as the printing business was concerned, he said that it produces income and the equipment is paid for. He agreed that for the last ten years the business had gone quite well and had made money. He conceded that in his 1995/96 tax return and 1996/97 tax return there was no reference at all to the printing business. He said that he had used the name K P for both businesses since 1995. He said that the Australian Taxation Office had done an audit and had asked him to separate the two businesses out, which he had started to do in the 1999/2000 year.
The arrangement between the father and his present partners is an unusual one. The property, including house on which the nursery business is conducted, is apparently owned by R M. The father has jointly borrowed $300,000 but his evidence was that he is responsible for the entire $300,000 and when the loan is repaid he will then be entitled to a half share in the property owned by R M. He said that when he decided to buy into the business the price was $300,000 and hence he has borrowed that sum and is now paying it off. He produced an agreement between himself and R M whereby she agreed to sell him the business and one half of the property. The agreement states that the sale price of the property was to be $160,000 and the sale price of the nursery was to be $75,000. Ms M agreed to co-sign three loans in their joint names from the Commonwealth Bank using the property as security. The agreement stated that in the loans was a figure of $65,000 being money borrowed by R S and R M on behalf of the father and including interest paid on his behalf for his use. The father contended that it was a good business and that he went into it with a view to making money and thought that it would make a profit and was generating a good income. He initially said that he believed it would have done so had not it been for the problems with Telstra but then conceded that the problems with Telstra pre-dated the acquisition of the business and that it was profitable prior to his buying in. He conceded that since he bought in there had been no profits. He blamed the current water shortage for this happening.
The arrangement with the others who work there is also unusual. There is no partnership and the father appears to own the business, although they all work together. He said that the other two parties received no income and worked for no wages or drawings. Mr S has no other source of income of which the father is aware. He said they all lived independently on the property and were two or three families living under the one roof. The others buy their own food but they all put in for bills. To his knowledge the others have no employment. Some of the expenses claimed by the father in his financial statement, he conceded, would be deductible. For example, electricity and telephone. He said that Ms M had originally contributed to the $300,000 loan but it was now his responsibility. This appears to be inconsistent with the father's evidence that he was borrowing all of the money to acquire an interest in the property.
Apparently some of the factory debt was transferred onto the existing mortgage to the Commonwealth Bank for which the father is responsible. The father conceded that the certificate of business registration of the nursery was dated 13 M 1998 and that he hadn't used that name prior to then. He said he used his own name for the printing business, although it was not registered anywhere and that he hadn't initially differentiated between the businesses. He conceded that the real reason he had not done the tax returns for the most recent period was that he had been too busy doing other things. I find this is consistent with the father's past performance in late lodging of tax returns. He conceded that he was aware that the lodging of tax returns would affect the amount of child support. In differentiating the income from the nursery and the printing business, the father asserted that in the year '95/'96 the income from the printing business was approximately $5774 and that it would be about the same in other years, that is about ten per cent of the total income.
He conceded that the financial position was as follows:
·'94/'95 a loss of $50,776;
·'95/'96 a loss of $35,500;
·'96/'97 a loss of $7632;
·'97/'98 a loss of $14,209;
·'98/'99 a loss of $26,110; and
·As no tax returns have been prepared for the year '99/2000 or 2001/2002 no evidence of the position of the business was available.
He conceded that his accountant advised him to run the business at a loss as it was tax effective because he could offset his losses against his other earnings. He said that Ms M was involved in a car accident and could not work in the nursery and he had agreed to help with the mortgage and that is what he had done. The total borrowings from the bank appear to have been $309,142.49. He appears to have been paying about $1000 a month towards that borrowing.
As far as his expenses are concerned on a weekly basis, he said that electricity is shared but he pays for the gas, registration and insurance for the car. He has been living there since 1992 and paying the household expenses since 1994. His payslips for the period 1 July 2002 to 30 November 2002, a period of 153 days, indicate an average of $1121 per week. This compares with $930 which the father set out as his weekly income in his financial statement. He said that he had used the base rate, which did not include shift allowances. He denied deliberately misleading the Court. I find he has mislead the Court and the wife as to the real position with his income in that he regularly has shift allowances and that his income is approximately $1120 per week, not $930 as he asserts. He is currently paying a total of about $1200 per fortnight or $600 per week in relation to the Commonwealth Bank mortgage. That payment has increased and the father has been able to find an extra $134 per week for the mortgage which is now $600 per week. He said that the extra came from the printing/nursery sales.
He says his actual liability to the Child Support Agency was about $33,000, not $47,000 and the other $15,000 was in fact advanced by his mother for the purpose of these proceedings. More importantly, his capital debt has, since he commenced repayments, reduced by about $59,000 and despite the father's assertion that his expenditure exceeds his income, there is no evidence that his borrowings have been increased since his commitment to the $309,000 loan in 1994.
Receipt of documents from the home
The father conceded that for five months after separation he went to the matrimonial home and was free to take whatever documents he wanted. I am satisfied that he could have removed the documents necessary to do his tax returns but chose not to do so. This was consistent with the chronic failure to lodge returns over a long period of time prior to separation.
Medical cover
The father's explanation for continuing to pay the medical cover, where it appears the wife was also covered, was unconvincing. They had initially agreed that he would pay it and he did not get around to doing it. He conceded that he had the option to stop the deductions and that it was for his benefit as well as for the family.
Superannuation
The father's superannuation payments were made during the period 1989 to 1994 and totalled $9406. He had no superannuation before that. He conceded that the orders for property settlement did not require him to pay any amount to the wife from his superannuation but in fact enabled him to retain it. He also conceded that it could not be said that the children had any benefit from the property orders. The result of the property orders was in fact that the wife became entitled to the balance of moneys arising from the sale of the former matrimonial home, being sums of $10,623.97 and $1727.92 respectively, together with a further $10,000 payable by the father in two equal annual instalments. The father retained the business and his superannuation.
Mortgage payments
The father said that following separation there was no discussion with the wife and that mortgage payments on the former matrimonial home continued to be automatically deducted from his pay. He said that he had sought a variation from the Child Support Agency in relation to these payments and that they had told him they would ultimately be adjusted. The father conceded that there was money owing on the factory and that the factory debt was secured over the former matrimonial home. Judgment was entered for the sum of $43,000 against the father and wife and he asserted that he did not know at the time that the money was owed. Whilst the father did not concede that the former matrimonial home had to be sold to meet the mortgage debt over the factory, I find that this was in fact the case. Judgment was obtained and it is clear that from the proceeds, $44,496.04 was paid to the mortgagee.
The father now concedes that the wife also made mortgage payments and that she paid $8993 to the mortgagee in an effort to prevent a sale of the former matrimonial home. The father says that he was unaware that she had made contributions because he was not getting statements but conceded now that she had done so.
Tax refunds
On 17 March 2000, a notice of assessment was issued to the father as a result of his filing late returns. These relate to the period from 1989 to 1999. He received a refund of $34,509.06. Portion of that was for the period when the parties were running a business together. For example, the refund for 30 June 1991 was $6334. Similarly, there was a further assessment for the following year. The total refund in the two years 1991 to 1992 when the parties were still running the business was $11,545. The father conceded that this money was refunded as a result of income earned and deductions made when the parties were together.
As well as receiving $34,509 from the Taxation Department, the father also received $29,000, being the refund from the Child Support Agency. He conceded that in the year 2000 he received a total of $64,000 in cash from those sources which he had disposed of. In addition, he conceded that he had earned $50,000 and that in the 2000 calendar year at least he had available to him over $100,000. It was put to the father that the water problems which he said were currently preventing them from making a greater income from the business could have been fixed with this sum of money. The father responded that he had spent some money on improving the water supply but he otherwise did not explain where the funds had gone.
The father conceded that he lodged an objection in M 2000 to receiving no credit for non-Agency payments on the mortgage, private health insurance and superannuation. These were rejected by the Case Officer and the father was informed he could appeal to a Court. The father agreed that he never did so but raised these matters again with the Senior Case Officer, knowing that he had had them disallowed previously. He said:
I agree I took the opportunity to argue it before the Senior Case Officer.
The father denied that the wife paid any dental fees on his behalf or that he was asked to provide money for S's wisdom teeth.
In re-examination the father explained the moneys borrowed by him as being $160,000 for a half share of the property and $75,000 for a 100 per cent of the nursery and $65,000 being other money borrowed on his behalf, presumably towards the purchase of the nursery. The interest on all of these amounts is being deducted by the father as business expense.
The Mother’s financial position
The mother receives a Centrelink payment of $399 per fortnight and $165 per fortnight is paid direct to G as Youth Allowance total of $564 per fortnight. The mother previously received $427 for herself and $113 child allowance, a total of $540 per fortnight. The mother lives with G in a modest home. She pays a mortgage on the home of $100 per week, together with rates, insurance and maintenance costs. She purchased the home in November 1998 by paying $5000 deposit from the interim property settlement and $15,000 from the final property settlement. She has a mortgage of approximately $38,000 and values the property at about $85,000.
She is able to get occasional work and earned approximately $300 in the last financial year from all jobs. She has no qualifications and the jobs that she had were stocktaking at the supermarket and grape picking and of a menial nature. The amount she earned did not affect her Centrelink benefit.
G has completed year 10 and her expenses are all paid for by the mother. The mother receives $141.25 per week in child support.
Prior to the sale of the former matrimonial home, she made payments to the mortgagee in relation to the factory mortgage to avoid creditors who were regularly coming to the door threatening to execute on household goods.
Private health insurance
The mother assumed that the father had discontinued the payment after separation. She mentioned several injuries that had occurred to the children but never asked about the insurance and she had arranged for cover for the children.
Mortgage payments
The mother conceded that she wanted to live in the former matrimonial home and that the father had paid the mortgage until the house was sold. She said that she was quite happy for that to be taken into consideration in the child support assessment.
Documents
She said that the father had every opportunity to take his documents and she asked him to make arrangements on many occasions. I note that he conceded he had an opportunity to do so for a significant period after separation. I also find that the wife was aware of the factory address and could have sent documents to him there but there was clearly an obligation on him to make arrangements to obtain the documents he wanted to do tax returns immediately after separation. This concession that he had failed to lodge returns for between eight and ten years when the parties were together and has not lodged returns for the last two years leads me to find that the reason the returns were not lodged by the father was his own dilatoriness and not because he could not access the documents.
Have special circumstances been established?
I am required to consider each of the relevant child support periods:
·1992-1993: In this year the child support payable was based on the taxable income of the father. This was because for this year and 1994 and 1995 the Senior Case Officer considered that the parties were living in the family home and the father was making mortgage payments and health insurance payments. The losses being incurred by the business related to the business of the parties and there was no real opportunity in that year to make any significant adjustments to their financial arrangements. In my view it is reasonable to treat the mortgage payments and the health insurance payments as being child support paid on behalf of the family. I note also that the mother conceded it was reasonable for the father to have the mortgage payments taken into account. The mortgage payments in this period total $4368 which is more than the child support in that period. In my view it will be reasonable to offset those amounts and that the child support payable by the father in the period 1 July 1992 to 30 June 1993 should be nil.
·1993-1994: In this year the father was also making mortgage payments and the family still had not separated their affairs. The mortgage payments were $2868.14 and private health insurance payments of $1870.85 were paid. Child support was assessed at $468 and in my view it would be reasonable to offset the amounts providing for the child support for the 1 July 1993 to 30 June 1994 to be nil. I am satisfied in respect of these years that there are special circumstances by reasons of which there should be a departure as I have set out.
·1994-1995: The child support for that year has been assessed at nil and no further consideration needs to be given to it.
·1995-1996: The former matrimonial home was sold and settlement occurred on 6 February 1995. No mortgage payments were made after that date. Hence for the 1995/96 year the father was not making mortgage payments. The business between the parties had also ceased and the father was engaged in business at 16 Seamer Road, which he described as nursery business operated under the business name, Kesswald Park. The father said that the interest of $57,119 was largely interest on the factory sold by mortgagee sale, as well as interest in relation to Kesswald Park. It is very hard to accept the father's evidence in this respect. First, the tax return does not refer to the operation of the printing business at all, but only to the running of the nursery and the interest expenses are not broken down into various components as the father said they comprised. According to the document produced by him, the borrowings in relation to the business of $300,000 did not occur until 14 June 1996. It is difficult therefore to accept the evidence of the father that in any of this interest related to the nursery or if it did, that he was properly paying it. This evidence, which emerged in cross-examination is different from that in paragraph 40 of the father's affidavit in which he says:
“During this period it (the nursery business) generated sales in excess of $60,000. These sales were exceeded by expenses, the major component of which was interest payments on the property from which it operates. Interest expenses were just over $57,000 including repayments for P A & L M M.”
·No breakdown of these is given. It is difficult to see how the father could have had any legitimate interest expenses in relation to the nursery business which he appears not to have at that stage acquired and following the sale of the former matrimonial home in February 1995 he had ample opportunity to dispose of the factory. The choice to continue the payments was his and I am not satisfied that there are any special circumstances by reason of which the child support assessment should be altered during that period. A Senior Case Officer assessed the child support on the basis of the father's income from salary less work related tax deductions. For the period 1 July 1995 to 30 June 1996 the father's child support should remain at $6774.
·1996-1997: In June 1996 the father became a party to the borrowings of $300,000 which he says is for the purchase of a half interest in the property where he is living, 100 per cent of the nursery and apparent repayment of other borrowings. He continued to work as a train driver during this period. The father chose to undertake to purchase the business and to purchase an expensive property. There was no necessity for him to do so. He had an income as a PAYE income earner as a train driver, an occupation which he had had for a number of years. Like the wife, he could have purchased extremely modest accommodation which could have been paid for out of his income. Instead he has chosen to borrow a very large sum of money to purchase an expensive property and what must be a questionable business investment. I refer to it as questionable because the income that it generates is significantly offset by the expense in acquiring it.
·The father M think this has personal advantages to him. For example, because this investment is negatively geared he is able to obtain a tax deduction as the expenses can be offset against his other income. There is thus a benefit to him from the losses as he pays significantly less tax than would otherwise be the case if he was simply a PAYE taxpayer. Secondly, the father appears to be claiming the entirety of the interest as a tax deduction. The interest is apparently payable on the loan which is partly for the house on the nursery and partly to repay a loan. Whether all the interest would be a legitimate deduction was not pursued before me. The position was clear however that the acquisition of these assets occasioned by significant borrowings by the father in running a business ancillary to his full-time employment as a train driver was not necessary and should not be taken into account to reduce his child support liabilities. There are no special circumstances therefore in relation to this year. Thus for the year 1 July 1996 to 30 June 1997 the father's child support liability should remain at $6229. It should be noted that in the 1996/97 year the loss was only $7632 with income generated of $53,026. In addition to the interest payment, the father was able to deduct depreciation and motor vehicle expenses and other expenses.
·1997-1998: In this year the loss was $14,209 from an income of $40,855. For the reasons set out for the preceding period, I am not satisfied there are any special circumstances by which the figure for child support arrived at by taking into account the father's salary income less work related expenses should be varied.
·1998-1999: The father had a net loss of $26,110 from business income of $36,487. Interest payments in that year totalled $36,799 and there is no explanation for why the interest payments were $10,000 more than in the previous 12 months. For the reasons set out in relation to the two previous child support periods, I am not satisfied that there are any special circumstances by reason of which there should be a departure. The child support income was calculated by taking into account the salary less work related tax deductions and I am satisfied therefore that for the period 1 July 1998 to 30 June 1999 the child support assessment for the amount of $7851 should remain.
·1 July 1999- 31 March 2000 (nine months): No tax return had been lodged for this or subsequent years. The Senior Case Officer had therefore adopted the same child support income figure as in the previous year. The father's wage slips indicate that year to date total to the 25 March 2000 was $29,544.56. My calculation of that, extrapolated over a further six days, is that for the nine month period 1 July 1999 to 31 March 2000 the gross income of the father was $30,206. When faced with having to make an assessment of the father's income without this information, the child support review officer took into account the income in the previous year. It appears that during the course of this year the father had Workcover for some of the time and therefore had a somewhat reduced income. In any event, the period is only a nine month period and I am satisfied there are special circumstances in this period by reason of which there should be a departure from the assessment. Thus the father's child support income from period 1 July 1999 to 31 March 2000 should be $30,206.
·
1 April 2000 to 30 June 2001: This period is a 15 month period. There is now evidence of the father's income during this period from his employment as a train driver. The father's income during that period is conceded by him from his employment after what he says are work related deductions of $52,591. The child support assessment for the period was based on an income of $52,657. As the amounts are almost identical, in my view, there are no special circumstances by reason of which there should be any departure in that period and for the period 1 April 2000 to
30 June 2001, the child support should remain at $7639.
·1 July 2001 to 30 September 2002 (15 month period). The group certificate for the father for 1 July 2001 to 30 June 2002 shows an income of $52,360. I am satisfied there are special circumstances by reason of which there should be a slight adjustment during this period so that the child support income is fixed at $52,360 per annum for this period.
·1 October 2002 to 31 December 2003: The father concedes an income during this time of $52,360. There should be a departure, in my view, for this period as the income is fixed on a 2001/2002 provisional taxable income figure which does not represent the real income during that period.
Is it just and equitable?
I am left in considerable doubt, having heard the evidence of the father, as to the domestic arrangements in his household. In any event, the father's most significant liabilities are those connected with the purchase of the father’s property, the nursery and apparent repayment of $65,000 debt. These, as I have indicated, are not necessary expenses. Without these expenses there is nothing significant about the father's expenditure which make it unreasonable for him to pay child support on his salaried income. In any event, I note that, as I have previously indicated in the Judgment, the father has significant benefits flowing from the losses from the business.
I have not taken into account the private health insurance fees paid by the father after the 1995 year. In my view, there was plenty of time in that period for the father to ascertain whether or not the wife required him to pay the cover and his failure to do so cannot be attributed to her nor, in my view, should he be entitled to any further reduction in the child support which would otherwise be payable.
The father's personal expenses, which he asserts are $486 per week, and about which I have some doubts in any event, are easily met by him. This is so even allowing for his income tax deductions from source, which it must be recalled, result in him getting credits when he lodges his tax returns, as a result of losses incurred by the business.
I am satisfied that the father can and should have paid the child support for the periods under review.
It is also appropriate that I consider the effect of the substantial repayment the father will still need to make, notwithstanding some slight adjustment. The father asserts that he is unable to make this payment. In Hides v Hatton the Full Court said, (at page 84-355)
By this we mean that not only must the judge apply the three stage process under s 117 (2), (4) and (5) in relation to the circumstances of the parties as they "existed" in the child support year in question, but also in relation to the “present" circumstances of the parties (if at all relevant). For example, it M well be necessary in a particular case in addition to considering the circumstances of the parties in the past child support year in question, also to consider the present capacity of the payer to meet a new assessment, and/or the impact on a payee of any credit in the payer's favour which might be created by a departure from an assessment for an earlier child support year.”
The submission by counsel for the father is that the Court should have regard to the effect of leaving the father with a significant liability. I take that into account. However, this case is unusual in the sense that the father paid child support during the relevant years and then received a significant credit. Subsequent events have led to departures with the effect that he should not have received that credit. If no departure order is made, the wife will be left with a debt to Treasury, but more importantly child support would not have been paid in that period and that, in my view, brings into play s.117(5).
In my view this is a case in which it would not otherwise be proper for the father to avoid liability for child support in the periods when he ought to have been paying it in the amounts now determined. However, in particular, in relation to the father's own circumstances, it is relevant that in the calendar year 2000 he received a refund of income tax for the ten year period in which he had not lodged returns and in which the losses were able to be deducted. In that year he received $34,509. That is the same period in which he received the refund of $29,000. Both of those sums have been expended by him, together with an income of about $50,000. The father asserts that he spent the $29,000 repaying loans. I regard that as questionable. The $65,000 he borrowed in 1996 was said by him to be repayment of loans, although its precise origin and detail remains elusive. The repayment of the $29,000 remains equally mysterious. Given the borrowings in 1996, which would seem to have covered the period in which the father asserted he had little income, together with receipt from the Tax Department of $34,509, I have no confidence about the evidence given by the father. He did not volunteer the receipt of this credit and he has not explained where it went. In my view, there is no injustice to him in requiring him to repay sums which he, as it turned out, was erroneously paid. Indeed, having regard to the wife's position and her debt, it would be unjust and inequitable for him not to do so. It would be equally improper for the burden to fall upon the community.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 17 March 2004
0