Malleson and Medwin (Child support)

[2022] AATA 4989

Malleson and Medwin (Child support) [2022] AATA 4989 (21 October 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC022811

APPLICANT:  Ms Malleson

OTHER PARTIES:  Child Support Registrar

Mr Medwin

TRIBUNAL:Senior Member J Longo (Presiding Member)

Senior Member S De Bono

DECISION DATE:  21 October 2022

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart - decision under review affirmed

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

BACKGROUND

1. The issue to be determined in this application is whether there is a reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.

2. Mr Medwin and Ms Malleson are the parents of [Child 1] and [Child 2]. Mr Medwin is the parent liable to pay child support. The application for child support was registered with Services Australia – Child Support (the Agency) from 6 June 2008 and is currently subject to collection. The children are in the primary care of Ms Malleson.

3. Prior to the application for a change of assessment, Mr Medwin was assessed to pay an annual rate of child support as follows:

• For the period 1 November 2020 to 13 April 2021, the annual rate of child support payable by Mr Medwin was $34,275, based on income of $157,000 for Mr Medwin and a 2019/2020 adjusted taxable income of $68,282 for Ms Malleson.

• For the period 14 April 2021 to 31 January 2022, the annual rate of child support payable by Mr Medwin was $28,598, based on the income of $157,000 for Mr Medwin and a 2019/2020 adjusted taxable income of $68,282 for Ms Malleson. The decrease in the annual rate was due to [Child 2] turning 18 years of age.

1. Mr Medwin applied to the Agency for a departure from the administrative assessment on 15 April 2021 on the basis that, in the special circumstances of the case, his capacity to provide financial support for the children is significantly affected because of a reduction in his income, property and financial resources (Reason 8A) and in the special circumstances of the case, his capacity to provide financial support for the children is significantly affected because of his duty to maintain another child or another person (Reason 9).

2. On 28 May 2021 the Agency did not find change the assessment as a Reason was not established.

3. Mr Medwin objected to the decision on 23 July 2021. An objections officer of the Agency allowed the objection in part on 28 October 2021 and changed the assessment as follows:

• For the period 15 August 2021 until 30 September 2021, Mr Medwin’s adjusted taxable income is set at $nil.

• For the period 1 October 2021 until 31 December 2022, Mr Medwin’s adjusted taxable income is set at $52,000.

1. On 25 November 2021, Ms Malleson lodged an application to the Administrative Appeals Tribunal (the Tribunal) for review of the objections officer’s decision. Directions for this matter were made for the parties to provide additional information. The application was heard on 19 August 2022. Additional information was directed to be provided by the parties after the hearing. The Tribunal considered the documents and information which were provided to the parties prior to the hearing, as well as the oral evidence of Mr Medwin and Ms Malleson.[1]

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Agency numbered 1 to 294; Ms Malleson’s documents numbered A1 to A166; and Mr Medwin’s documents numbered B1 to B316.

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act. Section 98C establishes a three-step process to be satisfied: that there is a ground for a departure; that it is just and equitable to depart; and that it is otherwise proper. Once satisfied, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

Grounds for departure

Reason 8 – Income, property, financial resources of Ms Malleson and Mr Medwin

1. Ms Malleson stated in her request for review with the Tribunal that she did not believe that all the facts have been reviewed in this case. She stated at the hearing that she felt like she was shouldering all of the responsibility regarding the children and felt that the departure determination of the Agency had not taken into account Mr Medwin’s circumstances.

2. Mr Medwin disagreed with Ms Malleson’s submissions on his income and stated he was previously working in [Country 1] at [Company 1] but his employment was terminated on 19 February 2021. The Tribunal notes that a letter from [Company 1] was provided to the Agency by Mr Medwin, confirming his termination.[2] Mr Medwin stated that his experience in [Country 1] was traumatic and that he was suffering from anxiety and depression as a consequence. He stated he was paid a severance payment, in lieu of any notice, of 196,050.03 [Country 1 currency] (AUD $86,478.93) less tax payable, leaving a net amount of 117,153.60 [Country 1 currency] (AUD $51,677.22).

   [2] Page 59 of subsection 37(1) and section 38AA Statement and Documents provided by the Agency.

3. Mr Medwin stated that he came back to Australia in April 2021, after having to spend time in quarantine for 14 days. He stated that he tried to find employment when he arrived in Australia but was unsuccessful. He then decided to start his own business. He stated that he bought a gardening franchise, [Business 1].

4. He told the Tribunal that he has been granted the right to the [specified] area. His main business is sourced through home care providers and he assists with the gardening needs of people who are living at home but require home care. He has also been able to find some private customers. He commenced as an employee and then transitioned to self-employment once he had bought the franchise. He is paid through Xero, sending an invoice to the home care providers and his private clients. He does not have any employees presently but is hoping to be able to increase the business turnover such that he can have at least one employee. This will allow him to do work for clients more quickly, and therefore service a greater number of clients per day or to service clients simultaneously.

5. Mr Medwin stated that [Business 1] is operated through the [named] Trust (the Trust). [Company 2] (the Trustee) is the trustee of the trust. Mr Medwin is the sole shareholder and Director of the Trustee.  He told the Tribunal that he has bought the mowing equipment outright but has a work vehicle on hire purchase arrangement. The Tribunal notes that the [Business 1] has generated income of $74,577 for the 2021/2022 financial year.

6. The Tribunal has examined the Trust Deed provided and notes that Mr Medwin is the only named beneficiary of the Trust, however the Trustee retains the discretion to decide what, if any, income to distribute and to whom within named beneficiaries and the classes of eligible beneficiaries.

7. He told the Agency that he estimated that he will earn around $1,000 per week ($52,000 per annum), consistent with his declaration on his Statement of Financial Circumstances and his evidence to the Tribunal. The Tribunal finds that the Trust profit, after expenses, for 2021/2022 financial year was $32,413, which excludes the depreciation of the purchase of mowing equipment ($14,647) for the business. Mr Medwin stated that the income from [Business 1] is seasonal and while it is difficult to gauge how well the business will progress, he is optimistic for the future. He hopes that [Business 1] will generate more income as he is able to expand the business.

16.In the circumstances and on the basis of the Tribunal’s findings above in relation to Mr Medwin’s circumstances, the Tribunal is satisfied that Mr Medwin’s income is such that it makes the assessment of child support under the administrative assessment unfair or unjust. It is clear that Mr Medwin’s circumstances have changed and he is no longer earning the same income ($157,000 per annum) as previously assessed under the administrative assessment. Therefore, in the circumstances, the Tribunal is not satisfied that a ground for departure is established under subparagraph 117(2)(c)(ia) of the Act.

Would departure from the administrative assessment be just and equitable?

17.As the Tribunal is satisfied that there is a ground to depart from the administrative assessment, the next step is to consider whether it is just and equitable to depart from the administrative assessment. In deciding whether it is just and equitable, the Tribunal had regard to the matters set out in subsection 117(4) of the Assessment Act.

18.Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case Mr Medwin and Ms Malleson have the primary duty to support [Child 1] and [Child 2] under the Assessment Act.

The income, property and financial resources of each parent who is a party to the proceeding

19.In relation to Mr Medwin’s income, the Tribunal finds that he is employed through the business [Business 1], which is run through the Trust. The Tribunal finds that his 2021/2022 taxable income was $30,095. Mr Medwin’s taxable income for 2020/2021 was nil as he was working in [Country 1] until February 2021. Notwithstanding Mr Medwin’s taxable income, at the time of completing the Statement of Financial Circumstances he stated that his income was $1,000 per week ($52,000), which he stated at the hearing was correct when he completed the statement but did not realise that the income would be seasonal. Mr Medwin stated at hearing that this level of income is reflective of the current income from [Business 1].

20.In relation to Ms Malleson, her Statement of Financial Circumstances shows that she is currently working part time as an [Occupation 1]. Ms Malleson confirmed at hearing that she has been employed on a part-time basis since 2014 and is 0.8 (full-time equivalent). Ms Malleson’s taxable income for 2020/2021 was $69,195 and for 2021/2022 was $65,816.

21.Accordingly, the Tribunal finds the following:

• Mr Medwin is currently employed through [Business 1] operated through the Trust;

• Mr Medwin’s taxable income was $30,395 in 2021/2022;

• Ms Malleson is employed as an [Occupation 1];

• Ms Malleson’s taxable income in 2020/2021 was $69,195;

• Ms Malleson’s taxable income in 2021/2022 was $65,816;

22.In regard to Mr Medwin’s assets, they consist of the following according to his Statement of Financial Circumstances: household contents and personal property valued at $10,000 and funds in his bank account of approximately $644. He owns a motor vehicle ($62,000) which is used in his work through [Business 1] and has a share in another motor vehicle ($20,000). He has valued the business [Business 1] at $35,000 and has a 50% share of the home in which he resides ($863,000). Mr Medwin has superannuation of approximately $154,000. He has a joint mortgage of approximately $236,000 and a credit card debt of approximately $1,500.

23.In regard to Ms Malleson’s assets, she stated in the Statement of Financial Circumstances that they consist of the following: $25,000 in household contents, $5,000 in jewellery and approximately $38,000 in her bank accounts. Ms Malleson has approximately $156,000 in superannuation. Ms Malleson states that she has a 25% interest in her principal residence which is valued at $737,500 (Ms Malleson’s share). Her liabilities include mortgages of $128,250 and $9,250 (25%).

The proper needs of the child

24.In determining the proper needs of a child, it is necessary to have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6)). The Tribunal has considered the evidence of the parties relating to the needs of the children and the published guidelines to assess their reasonableness as stated in Eades & Cadell (SSAT appeal) [2009] FMCAfam 275 at 22.

25.Ms Malleson has 100% care of [Child 1] and [Child 2] according to the Agency documents. Ms Malleson’s expenses for the children are contained in her Statement of Financial Circumstances provided to the Tribunal. The Tribunal is satisfied that the children do not have income, property or financial resources and that they are reliant on their parents to meet their proper needs.

26.In regard to the children’s needs, Ms Malleson has made submissions regarding the children’s education costs and extra-curricular activities. In relation to the education costs, Ms Malleson confirmed that the children are at public secondary school. Ms Malleson stated in her Statement of Financial Circumstances that she has paid $14,000 for orthodontic treatment for two children and anticipates further costs for orthodontics in the next 24 months. Ms Malleson stated that she has funded the cost of this treatment through early release of her superannuation and withdrawing $20,000.

27.Ms Malleson has estimated in her Statement of Financial Circumstances household costs for the children of $1,683. These costs are for four children currently residing in the household. This amount includes expenditure for holidays, entertainment, children’s activities. While these may be desirable, the Tribunal does not consider this expenditure to be a necessary cost towards the proper needs of the children. The estimated household costs for [Child 1] and [Child 2] would be $727.50 per week according to the Statement of Financial Circumstances.

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

28.  In relation to her household expenses, the Tribunal notes that Ms Malleson has indicated, according to the Statement of Financial Circumstances, that her expenditure is approximately $358 per week out of the total household expenses of $2,445 per week for herself, the children and her husband. Ms Malleson has indicated approximately $325 per week of personal expenditure, including health insurance and life insurance expenses.

29.  In relation to his household expenses, the Tribunal notes that Mr Medwin has indicated, according to the Statement of Financial Circumstances, that his expenditure is approximately $593 per week out of the total household expenses of $1,650 per week for himself, the children and his wife. Mr Medwin has indicated approximately $578 per week of personal expenditure, including health insurance, child support and credit card payments.

Any hardship that would be caused to the child, the carer entitled to child support and to the liable parent, or any other child or another person that the liable parent has a duty to support, by the making of, or the refusal to make, the order

30. Subsection 117(4) of the Assessment Act requires the Tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support. In relation to Ms Malleson, the Tribunal finds that she is currently able to meet her personal and household costs and is assisted in doing so with the aid of her partner.

31.  In terms of hardship Mr Medwin stated that an increase above the current assessment of child support would cause hardship as he was, at the time of the hearing, only repaying the interest on the mortgage and this arrangement was due to expire. Consequently, his costs would increase which would make it more difficult to meet his child support obligations. Ms Malleson stated that she would not likely experience hardship if the amount of child support was not increased because any shortfall is made up from her partner. The Tribunal has determined that there would be hardship to Mr Medwin if a departure determination were not made in this matter. Equally, the Tribunal also finds that a reduction in the child support payable by Mr Medwin from the administrative assessment, at the time of the application for departure, would cause Ms Malleson hardship. However, the Tribunal has determined that the hardship caused to Mr Medwin would be greater, as he was assessed under the previous administrative assessment on a level of income which is not commensurate with his current circumstances.

32. The Tribunal has carefully considered all the written and oral evidence, including the costs regarding the children’s proper needs. The Tribunal has also considered the income, resources and assets together with the commitments and liabilities of both parties. In considering all of the factors in subsection 117(4), the Tribunal is satisfied that it is just and equitable to make a determination departure as follows:

• For the period 15 August 2021 until 30 September 2021, Mr Medwin’s adjusted taxable income is set at nil;

• For the period 1 October 2021 until 31 December 2022, Mr Medwin’s adjusted taxable income is set at $52,000;

33.  The above determination reflects Mr Medwin’s current circumstances and his more limited ability to contribute to the cost of the children. The Tribunal has formed the view that limiting the departure determination to the period as specified in paragraph 32 above will minimise any hardship caused to Ms Malleson and also allow for any changes in Mr Medwin’s income as the business grows. The nil assessment of child support payable for the period from 15 August 2021 to 30 September 2021 notes his employment status for part of the period prior to the establishment of his business. Mr Medwin would then be required to pay child support on the basis of income of $52,000 from 1 October 2021. The annual rate of child support based on this income amount is $6,098 per annum, or approximately $116 per week. The Tribunal acknowledges that this is considerably lower than under the administrative assessment at the time of this departure determination. However, this amount is based on income higher than Mr Medwin’s taxable income for the 2021/2022 financial year. The Tribunal has formed the view that such a departure would be just and equitable.

34. Subsection 98S(3) of the Assessment Act states that the Tribunal may make a determination in relation to the child support period or periods. In the present case, the Tribunal has determined that the current departure should be made from 15 August 2021 until 31 December 2022. The Tribunal has determined not to extend the period of the departure determination further. It is open to the parties to apply for further departure determinations during this period should their respective circumstances change.

Is it otherwise proper to make a particular departure determination?

35. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Assessment Act means that the Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support. The Tribunal has concluded that it is otherwise proper in the circumstances to depart from the administrative assessment as Ms Malleson is not in receipt of family tax benefit and so any change to the payment of child support will not affect the amount of family tax benefit payable.

DECISION

The decision under review is affirmed.