Milburn and Milburn (Child support)

[2018] AATA 1718

Milburn and Milburn (Child support) [2018] AATA 1718 (3 May 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC013724

APPLICANT:  Mr Milburn

OTHER PARTIES:  Child Support Registrar

Ms Milburn

TRIBUNAL:Member K Timbs

DECISION DATE:  3 May 2018

DECISION:

The Tribunal affirms the decision under review.

CATCHWORDS

Child support - Application for fixed annual rate not to apply - Current income is not below the maximum base rate of parenting payment for a single person - Application refused - 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. Mr Milburn and Ms Milburn are the parents of [Child 1] and [Child 2]. At relevant times, the Department of Human Services made child support assessments for them. Mr Milburn is the parent liable to pay child support.

2. The Department assessed Mr Milburn to pay the fixed annual rate of child support of $2,780 for a child support period starting 1 August 2017. On 24 July 2017, Mr Milburn asked the Department not to apply that rate and to apply the notional minimum annual rate of child support. On 26 October 2017, the Department refused his request. On 9 March 2018, an Objections Officer of the Department disallowed his objection to that decision.

3. On 19 March 2018, Mr Milburn applied for review of that decision. The Tribunal heard the application for review on 3 May 2018.

ISSUES

1. Ordinarily, the Registrar assesses child support using a formula in the Child Support (Assessment) Act 1989. However, the fixed annual rate will apply if Centrelink does not pay the liable parent income support, they have an adjusted taxable income below the annual rate of parenting payment for single people and they do not have shared care of the child (section 65A).

2. A parent may ask for the fixed annual rate not to apply (section 65B). The Registrar may accept the request if satisfied that:

   ·     the parent’s current income is below the maximum base rate of parenting payment for a single person; and

   ·     it is just and equitable for the liable parent not to pay the fixed annual rate of child support. 

3. To deal with Mr Milburn’ application for review, the Tribunal considered whether Mr Milburn meets the criterion in the first dot point.

CONSIDERATION

Evidence considered

1. The Tribunal considered evidence relevant to the decision under review provided by the Department and Mr Milburn. It heard evidence from Mr Milburn and Ms Milburn at hearing.

Mr Milburn’s current income

1. The relevant pension rate for the child support period starting 1 August 2017 is $19,201. Mr Milburn’s evidence is that he has income of approximately $5,500 a year from renting a property that he previously lived in.

2. He works full-time in a [business] in [Suburb 1] he bought in May 2015 through his wholly owned company,[Company 1]. However, he said it does not pay him any income because it has made a considerable loss since he took it over. The tax returns show accumulated tax losses of over $200,000 over the 2016 and 2017 financial years. The profit and loss sheets for the 2018 financial year to date show continuing losses.

3. The Tribunal asked about why the business was not making a profit and Mr Milburn firstly said it was not in a central location. However, he admitted the business was profitable when he bought it from the former experienced [business owners].

4. He said that he was inexperienced and that he had not been able to manage the business in the same way as its previous owners. He said he did not make any changes to its operation at first. However, a family who ran the [premises] left the business and took customers with them. He said he closed [one part of the business]after unsuccessful attempts to run it himself and now closes the [other section of the business]at 6pm. He no longer has [additional] facilities because they were not making enough money to cover the cost.

5. Mr Milburn provided profit and loss sheets for the company for the 2017 financial year and for the first three quarters of the 2018 financial year. In 2017, it purchased approximately $67,000 of stock for the [business]. Mr Milburn confirmed that was largely [perishable stock]. However, the company reported takings for the [business] of approximately $17,000. In 2018, it reports purchasing approximately $40,000 stock for the [business] and selling only $6,000.

6. The Tribunal pointed out that it did not make sense for the business to continue to purchase much more [stock] than it sells. It suggested the obvious explanation is that the company did not report all of its cash income. Mr Milburn denied that was the case.

7. The Tribunal noted the financial statements suggest the business sells only a few [items]a day on average, which is unlikely. Mr Milburn said that was the case and that the business needs to buys more [perishable stock] than it sells because it spoils very quickly. The Tribunal suggested it was unlikely most of the stock[would be unsellable]. He agreed it was surprising and said he had begun to refuse delivery of [stock]with short use by dates so that it would not happen in the future. However, this is not consistent with the record of the business purchasing more stock in the last quarter of 2018 than it had in each of the first two quarters.

8. The Tribunal does not accept that the company sells a small proportion of the stock it purchases before it spoils. The evidence is so unlikely that it affects Mr Milburn’ credibility.

9. Mr Milburn said he also gives complimentary [items] drinks to [certain] [customers]. [Certain business] takings were approximately $36,000 in 2017 and $29,000 for the 2018 year to date. For this to be a reason for the discrepancy between the amount of [stock] purchased and sold, Mr Milburn would have to give out free [items] costing at least $10,000 a year more than the business takes in from [providing other services]. He told the Tribunal he was naïve and had not managed the business well. That might be the case but spending significantly more than you take from [providing other services] to encourage people to play them is not only poor business practice. It also defies common sense. It is not unlikely that Mr Milburn gives complimentary [items] to [certain customers]. However, the Tribunal does not accept that is why the business sells only a small proportion of the [stock] it purchases. Mr Milburn did not give any other explanation for the discrepancy and the Tribunal infers the company does not report most of the income from the [business].

10. The Tribunal accepts the business has not done well because [purchases] have reduced since Mr Milburn took over the business. This is unsurprising because Mr Milburn has limited the services it provides and closes at 6pm. The business might not make a profit but the evidence Mr Milburn gave about its income is not credible. The Tribunal is not satisfied he does not have cash income from the business and is therefore not satisfied his current income is below $19,201. He does not meet the first criterion above and the Tribunal will affirm the decision to refuse his request not to apply the fixed annual rate of child support.

DECISION

The Tribunal affirms the decision under review.