Maltby and Maltby (Child support)

[2023] AATA 2670

Maltby and Maltby (Child support) [2023] AATA 2670 (4 July 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/MC025285

2022/MC025312

APPLICANT:  Ms Maltby

OTHER PARTIES:  Child Support Registrar

Mr Maltby

TRIBUNAL:Senior Member D Benk

DECISION DATE:  4 July 2023

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides:

• That from 9 March 2022 (the date of the application for a change of assessment) to 31 December 2024, Mr Maltby’s annual rate of child support is to be assessed at $15,000 (exclusive of school fee contribution).

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 set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Prior to Ms Maltby’s change of assessment application, Mr Maltby was assessed to pay child support of $12,676 per annum to Ms Maltby for the period 1 December 2021 to 28 February 2023 for his two children, [Child 1] now age 16 and [Child 2] now age 11. This was based on the adjusted taxable income of $75,000 for Mr Maltby as set in the objection decision dated 31 March 2021 and Ms Maltby’s 2020/21 adjusted taxable income of $50,835.

2. On considering the change of assessment application and following multiple internal reviews, an objections officer determined there were grounds to depart from the previous assessment and determined:

   ·      That for the period 1 July 2021 to 30 September 2022 Ms Maltby’s adjusted taxable income be set at $56,262.

   ·      That for the period 1 July 2021 to 31 October 2024 Mr Maltby’s adjusted taxable income be set at $116,000.

   ·      That for the period 1 July 2021 to 22 August 2022 the cost of child amount as it relates to [Child 1], be increased by $1,658.

3. The net effect of these findings was to increase the rate of child support payable by Mr Maltby as follows:

   ·      For the period 1 July 2021 to 20 October 2021 from $14,349 per annum to $23,140 per annum

   ·      For the period 21 October 2021 to 30 November 2021 from $12,866 per annum to $23,431 per annum

   ·      For the period 1 December 2021 to 3 March 2022 from $12,676 per annum to $23,463 per annum

   ·      For the period 4 March 2022 to 22 August 2022 from $10,389 per annum to $19,906 per annum

   ·      For the period 23 August 2022 to 30 September 2022 from $10,389 per annum to $18,663 per annum

   ·      For the period 1 October 2022 to 28 February 2023 from $10,389 per annum to $18,618 per annum.

4. Both parties are dissatisfied with this decision. Ms Maltby asserts that Mr Maltby has the capacity to earn in excess of $120,000 per year and this should be the starting point and that he should be paying $20,000 per annum in child support plus 50% of the school fees. Mr Maltby asserts that he is an open book, his accounts are uncomplicated and that the decision to backdate the assessment has resulted in arrears that are unjust in the circumstances of the case. He was able to afford the previous assessment, but the increased assessment and arrears are not sustainable.

5. The matter was listed for hearing on 4 July 2023 when both parties participated via conference telephone. Parties had complied with Directions issued by the Tribunal on 12 May 2023. In considering the matter, the Tribunal had regard to the oral evidence, the documentary evidence provided by the Agency and the documents produced under Direction by both parties.

CONSIDERATION

Issue 1 – Is there a ground to depart from the administrative assessment?

1. The parties are familiar with the process of departure. However, for the sake of completeness and background the Tribunal will summarise the law.

2. Before making an order for departure from an administrative assessment under section 116 of the Child Support (Assessment) Act 1989 (the Act), subsection 117(1) requires the Tribunal to be satisfied that a ground for departure exists under subsection 117(2); that it would be just and equitable as regards the child, the carer parent, and the liable parent to make such an order; and that it would be otherwise proper to make the order.

3. Subsection 117(2) sets out the grounds upon which such an order might be made. Relevantly, paragraph (c) states as follows:

   That, in the special circumstances of the case,[1] 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:

   (i)    because of the income, earning capacity, property and financial resources of the child; or

   (ia)   because of the income, property or financial resources of either parent; or

   (ib)  because of the earning capacity of either parent; or

   (ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.

   [1] The phrase ‘special circumstances of the case’ is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92-279 stated that:

   It is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

4. When submitting the change of assessment application, Ms Maltby requested Child Support to consider subparagraph 117(2)(c)(ia).

5. To establish this ground to depart, the Tribunal would need to establish that the administrative assessment which recorded an adjusted taxable income for Mr Maltby of less than $75,000 does not reflect Mr Maltby’s income, property or financial resources.

6. Ms Maltby asserts that Mr Maltby’s current lifestyle is not commensurate with this figure. In the past he has worked for cash and he told the bank that he earns $95,000 which should be the baseline assessment. He also owns luxury cars and his wife is a low income earner and so questioned how they otherwise afforded their luxury Gold Coast apartment.

7. Mr Maltby’s position is simple. He is [an Occupation]. He lives on the Gold Coast but his business is in Victoria. He provides [services] to [facilities] and other similar commercial entities. The work is secured via tender. He does not do cash work. Winter is slower than summer. He has casual staff who use his equipment that is stored in a storage facility in [Suburb 1]. This storage facility is owned by the company (subject to mortgage). Equipment and a ute is stored at the facility and is accessed by his regular contractors who are employed on a job-by-job basis but paid an hourly rate. He said there is nothing dodgy about their retainer. They are paid properly and the Workcover bill is paid annually which is based on turnover of the business (standard underwriting formula). He travels to Victoria to ‘get on the tools’ at times, supervise works and maintain clientele. He is constantly looking for more tenders and hopes to expand on the Gold Coast. He has an accountant and bookkeeper who audit his books. He admitted his bookkeeper is his wife but the transaction for the payment of her services is at arm’s length. There are no freebies and nor does he pay more than the standard market rate. Business varies. It can be a feast or a famine. He needs to keep funds in his account to cover the costs of materials, insurance and payroll for casual employees and himself. Mr Maltby confirmed he pays himself weekly.

8. With regards to assets, he lives in his wife’s home on the Gold Coast, purchased from the proceeds of her divorce settlement. He is not on the title. He owns a home in [Suburb 2], Victoria which is subject to mortgage. He is solely on the title. His two stepchildren live in his home rent free but they do maintain the property. His daughter, [Child 2] has her own room, and the current care percentage reflects the level of care provided by Mr Maltby. [Child 1] does not visit his father overnight.

9. In her application for a change of assessment, Ms Maltby maintained that when together, Mr Maltby earned at least $120,000 to $150,000. Mr Maltby did not dispute this but maintains the nature of his work has changed. He now contracts the vast majority of the labour and does not do domestic/residential work but rather commercial work via tender.

10. Mr Maltby accepts that he obtains benefits from self-employment, but these are limited. His [equipment] needs to be replaced frequently as [job tasks] equipment has a short life span. He said that it is wrong to add back depreciation as this is used to replacement equipment as needed. He also said that it was wrong to add back motor vehicle expenses and other expenses as had been done by the objections officer. Mr Maltby was critical of the Agency but it appears (certainly from the plain reading of the objections officer’s decision) that he had failed to co-operate with the requests for information of the Agency and so his criticism is misplaced.

11. Mr Maltby acknowledged that he misled the bank about his finances in order to obtain a low doc home loan. He admits to declaring an income of $95,000 but said that he ‘had to do that to get the low doc loan’. He said that this misrepresentation should not be fatal to his case as he was only doing what he had to in order to keep a roof over his head.

12. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott (1994) FLC 92-457; Carey and Carey (1994) FLC 92-489). As discussed with the parties, the role of the Tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost & Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it, the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.

13. At first glance, some may say that the financials are complex. Not so. Mr Maltby runs a company, [Company]. His taxation returns are easy to interpret. Child Support in its decision making appeared to make the simple, quite complex, but this was unnecessary, only causing angst and confusion between the parties. Having said that, Child Support did not have the most recent taxation returns and profit and loss statements and so did its best with the information to hand, but appears to have extrapolated data from a number of sources. This is not the most accurate way of assessing a self-employed individual’s income, but as the Agency was not provided with financials, it could not explore the matter in any other manner.

14. The Tribunal takes a different approach to such matters. It seeks to make the complex, simple. Over analysis of financial information can only lead to error as the full ‘set of accounts’ are not available and nor is it the role of the Tribunal to audit them. How Mr Maltby operates his business is entirely up to him and not the subject of criticism by the Tribunal. However, the financial information provided in response to the Directions confirms that Mr Maltby is able to make various legitimate business-related claims which have the effect of reducing his taxable income but from which he derives a financial benefit, both direct and indirect. Such benefits are not available to PAYG employees and whilst arguable that they represent income within the everyday definition of that word, certainly represent a financial resource that is available to Mr Maltby.

15. So given that such resources are available, the Tribunal must now determine the extent of them. This is not easy as there is much volatility in self-employment income on a month-to-month basis, particularly in the [Work sector], but the Tribunal will now attempt to assess a range of income and financial resources, otherwise referred to as adjusted taxable income with reference to the financial material supplied by Mr Maltby in response to Directions of the Tribunal.

16. The papers show Mr Maltby’s taxation returns are now up-to-date. Contained in those documents are his earnings, in which he pays himself regularly $66,300 per annum. There are retained profits in the business valued at $38,107. These combined (representing financial resources) total in excess of $100,000. There are also depreciation expenses claimed, and whilst this is a legitimate taxation deduction, such a claim increases the cash flow available to Mr Maltby both short and long term. At its simplest interpretation, Mr Maltby is able to have some of his vehicle and everyday expenses such as phone, internet and fuel, subsidised via the tax system through legitimate deductions, which increases his cash flow/financial resources. The above results in financial resources readily available of between $100,000 and $110,000 conservatively.

17. Mr Maltby most probably will disagree with this assessment. However, he did represent an income to the bank for the purposes of securing a loan at $95,000, which is close to the baseline financial resources above.

18. Alternatively, the statement of financial circumstances showed that the weekly net expenses incurred by Mr Maltby are $1,504, or alternatively $78,200 per annum (rounded). When grossed up to reflect taxation, again, the figure of financial resources is between $100,000 and $110,000.

19. The Tribunal could audit the accounts and pick apart the expenses and determine what personal benefits Mr Maltby derives in addition to his baseline salary. The result would likely be similar.

20. Overall, the above shows that Mr Maltby does have access to at least $100,000 to $110,000 per annum in income and financial resources from his self-employment venture.

21. Each of these approaches in assessing income are entirely legitimate and can withstand argument and indeed criticism. However, what is clear is that Mr Maltby’s income and financial resources exceed that represented in the administrative formula of $75,000 (approximately).

22. To not apply the full extent of financial resources from his self-employment venture would result in an inaccurate representation of the total level of funds available to Mr Maltby. The add back of depreciation, retained profits and other business expenses results in a greater level of financial resources than that reflected in the administrative assessment which results in a significant difference in child support liability. The Tribunal finds that these circumstances are special (as they are not available to PAYG employees) and due to their impact on any child support liability (more than $3,000 to $5,000 per annum) (subject to the change in care levels) the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Maltby’s income, property and financial resources.

23. As the requirements of subparagraph 117(2)(c)(ia) have been satisfied, there are grounds to depart from the administrative assessment. However, such departure is not automatic.

Issue 2 – Is it just and equitable to make a departure determination?

1. As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Act. In addition to the education costs of the child, already considered above, the Tribunal also took the following matters into consideration.

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the child

1. As indicated there are two children remaining in the assessment. [Child 2] is 11 and is in the regular care of Mr Maltby. Both parties agreed on this. Mr Maltby does not have overnight care of [Child 1]/ [Child 2] has no independent income. [Child 1] works at [Workplace]’s casually and earns between $200 and $250 per week. The Tribunal so finds.  Both children rely on their parents for support.

The proper needs of the child

1. Subsection 117(6) of the Act states that in having regard to the proper needs of the child, the Tribunal must 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/ren.

2. The parties agreed in this area. They both indicated that the children attend the local Catholic school and this is the subject of Federal Court Orders. The Tribunal will not interfere with this. Private school fees can be a ground for departure of the administrative formula but as this has been dealt with elsewhere with binding orders/agreement that each party has a 50% liability, the Tribunal will not interfere. Mr Maltby’s school fee contribution is $3,000 per child, currently payable only for [Child 1] but will kick in for [Child 2] next year when she enters high school.

3. Both children suffer asthma. [Child 1] has had many treatments for nasal issues including widening of the nostrils. This issue has caused the formation of a cyst which is the subject of further investigation by an ENT. Fortunately, Ms Maltby does hold private health insurance but this does not cover all the out-of-pocket expenses. The Tribunal notes that when assessing the matter, the Agency increased Mr Maltby’s child support liability by about $130 per month for 13 months to cover the expenses associated with the most recent surgical procedure.

The income, property and financial resources of Mr Maltby

1. This has largely been dealt with above. Ms Maltby asked the Tribunal to carefully review the bank records and taxation records as they show that the business pays for many private expenses. This was understood and acknowledged, but the Tribunal has dealt with this above, perhaps not in the detail requested by Ms Maltby, but with caution and globally.

2. The Tribunal assessed the income and financial resources made available to Mr Maltby arising out of his self-employment arrangement and finds that he will have access to income and financial resources of between $100,000 and $110,000. This is a conservative figure. The Tribunal so finds. Mr Maltby submits and has previously obtained legal advice that he should solely be assessed on his taxable income only. This is not possible given the findings that he has greater financial resources both by way of self-employment perks but also the ability to access retained profits which are properly considered a financial resource.

The income, property and financial resources of Ms Maltby

1. The Tribunal finds that the administrative assessment correctly reflects Ms Maltby’s circumstances. She works two jobs and is a PAYG employee. She is also studying to become [an Occupation]. Her taxable income has been consistent over the years. Mr Maltby did not query the income applied to the assessment for Ms Maltby. In addition to her wages, she also receives fortnightly family tax benefit estimated to be about $300. She is not partnered and so has the lion’s share of expenses for the children.

The earning capacity of Mr Maltby

1. On the basis of the evidence before it, the Tribunal finds Mr Maltby is working and has not reduced his weekly hours of work or otherwise changed his occupation, industry or working pattern. He has remained in the same industry. His clients are no longer domestic but commercial. The Tribunal finds it is not open to make an earning capacity determination in respect of Mr Maltby’s circumstances.

The earning capacity of Ms Maltby

1. On the basis of the evidence before it, the Tribunal finds Ms Maltby is working and has not reduced her weekly hours of work or otherwise changed her occupation, industry or working pattern in the main. The Tribunal finds that it is not open to make an earning capacity determination in respect of Ms Maltby’s circumstances.

The necessary commitments of Mr Maltby

1. Mr Maltby is in good health and his testimony confirmed he is not subject to any unusual out-of-pocket expenses relating to the management of his welfare.

2. He has no legal obligation to support other children. He does allow two of his stepchildren to live in his home at [Suburb 2] rent free in exchange for maintenance when he is not there.

3. The Tribunal accepts the record of income and expenditure in the Statement of Financial Circumstances which was in part inconsistent with Mr Maltby’s evidence of weekly earnings but is largely reflective of financial resources that he has available to him by virtue of his self-employment arrangement.

The necessary commitments of Ms Maltby

1. Ms Maltby testified she has no significant expenses relating to her welfare that impact her ability to support [Child 1], [Child 2] and their older daughter [Child 3].

2. The Tribunal accepts the record of income and expenditure in the Statement of Financial Circumstances which was entirely consistent with Ms Maltby’s evidence.

3. The Tribunal has had regard to/considered the commitments of each parent that is necessary to enable the parent to support himself or herself or any other child or another person they have a duty to maintain and could not find any self-support commitments that take priority over any child support liability and further each parent’s budget is sufficient to cater for such needs.

The direct and indirect costs incurred by Mr Maltby in providing care for [Child 2] and [Child 1]

1. Mr Maltby testified there are no significant direct or indirect costs in maintaining contact or providing care. Ms Maltby agreed. He sees [Child 2] when he comes to Victoria to check on his business activity but he also sees her at other times.

Hardship

1. Paragraph 117(4)(g) of the Act requires the Tribunal to consider any hardship that would be caused to the children or Ms Maltby by the making of, or refusal to make, a departure determination; and also, to consider any hardship that would be caused to Mr Maltby or any other child or person that Mr Maltby has a duty to support, by the making of, or the refusal to make, a departure determination.

2. Mr Maltby testified the departure should not be backdated as this would burden him with arrears which is unfair given Ms Maltby was aware of the process and especially as there was a previous departure in place. There was a general claim for hardship, which overall the Tribunal finds could not be sustained given its analysis of the financial material before it and the fact that he has elected not to charge rent to his stepchildren who live in his [Suburb 2] property.

3. No specific financial hardship was claimed by Ms Maltby. She reinforced that the children deserve to have the support of both parents and that it should not be forgotten that she has the lion’s share of the responsibility as the children are predominantly in her care.

What is the proposed departure determination in this case?

1. There is no outcome that will satisfy both parents. This is not the goal/purpose of the review process but is said as an acknowledgement. Mr Maltby expressed surprise at some of the matters raised in relation to [Child 1]’s ongoing nasal/asthma issues at the hearing, matters that were unknown to him until testimony was given. The lack of communication has caused a failure to appreciate each other’s position. It is regrettable that matters in relation to the children’s needs only come to light by way of third-party intervention. This is not uncommon in these matters, and it is unfortunate that the Tribunal cannot mediate a resolution between the parties. It must remain focused on the child support liability.

2. There are a number of ways that the assessment can be made. One common view is to apply adjusted taxable incomes, but in circumstances where there have been periods of self-employment, this can never be done with the greatest degree of accuracy.

3. Another option allowed by the Act is to set an annual rate of child support. The Tribunal considered this to be the best option in this matter as it allows for the parties to budget with certainty.

4. Once a special circumstance is established under subsection 117(2), the formula no longer governs the outcome. Rather, consideration must be given to the actual income and financial resources of the parties and the actual costs of the children in order to determine the amount of child support that should be paid.[2]

   [2] Carlson & Acuff & Anor (SSAT Appeal) [2010] FMCAfam 677

5. The Tribunal opted to set an annual rate on the basis that it provides certainty and will allow each party to budget.

6. Overall, the Tribunal finds that it is just and equitable to depart from the administrative assessment as follows:

   ·      From 9 March 2022 (the date of the application for a change of assessment) to 31 December 2024, Mr Maltby’s annual rate of child support is to be assessed at $15,000.

7. This figure considers the above discussed global adjusted taxable incomes and care levels which produce a baseline child support liability with reference to the formula in the ball park of $15,000 to $18,000 given the range of income. The figure excludes school fees as they have been addressed elsewhere and are considered to be in addition to this figure. The Tribunal once again reinforces that it was difficult to quantify the income/expenses of both parents but is overall satisfied that the above reflects the income and financial resources available to both of them. The figure is in line with the Child Support Calculator generally relating to the range of income assessed by the Tribunal and considering the care levels. It represents a liability of less than $41 per day (excluding school fees) and on assessment of the evidence before it, cannot be said to realistically result in hardship to Mr Maltby.

8. This start date is at odds with that of the Agency who backdated the assessment to 1 July 2021. The Tribunal declines to backdate the assessment as Ms Maltby was and is familiar with the process and could have elected to seek reassessment earlier. To backdate the assessment, causes arrears and hardship to Mr Maltby who was entitled to rely on the previous departure assessment of the Agency.

9. The Tribunal declined to extend the departure beyond 31 December 2024 as it is highly likely that the financial positions of the parents and the needs of the children will change. The Tribunal noted the parties’ request that the departure be extended to [Child 1]’s 18^th birthday but the Tribunal determined there are too many variables, particularly in relation to self-employment income.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The last issue to be considered is whether it is otherwise proper to depart from the administrative assessment. When doing so, subsection 117(5) sets out what the Tribunal must have regard to when deciding whether it would be otherwise proper to make a particular order. Subsection 117(5) states:

   In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:

   (a) the nature of the duty of the parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b) the effect that the making of any order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension , allowance or benefit payable to eth child or the carer entitled to child support.

2. Ms Maltby receives family tax benefit which will now be adjusted to factor in this assessment. Overall, the Tribunal therefore finds that it is ‘otherwise proper’ to depart from the administrative assessment.

Conclusion

1. Section 4 of the Act sets out the objectives of the Act. These objectives include:

   ·      Parents of a child have a primary duty to maintain that child;

   ·      That duty has a priority over all commitments of the parent other than commitments necessary for self-support;

   ·      The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and

   ·      The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts. The Tribunal could not identify on the basis of the evidence before it any hardship to either parent or child arising from this decision.

2. The Tribunal has found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper to make a departure determination in accordance with its findings above.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides:

• That from 9 March 2022 (the date of the application for a change of assessment) to 31 December 2024, Mr Maltby’s annual rate of child support is to be assessed at $15,000 (exclusive of school fee contribution).