Millward and Millward (Child support)

[2020] AATA 4281

Millward and Millward (Child support) [2020] AATA 4281 (2 September 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017812

APPLICANT:  Mr Millward

OTHER PARTIES:  Child Support Registrar

Ms Millward

TRIBUNAL:Member H Schuster

DECISION DATE:  2 September 2020

DECISION:

The Tribunal sets aside the decision under review and, substitutes a decision to depart from the child support assessment by:

·      Varying the adjusted taxable income of Mr Millward to $53,000 for the period 1 January 2019 to 31 December 2020.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – benefits derived from business 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 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. This review is about Ms Millward’s application for a change from the administrative assessment of child support made on 22 February 2019.

2. Mr Millward and Ms Millward are the parents of [Child 1] (born in January 2005), and [Child 2] (born in December 2008). [Child 2] is in Ms Millward’s care, while [Child 1] is in Mr Millward’s care. There are two child support cases in effect: Mr Millward is the parent liable to pay child support in case 444314071 which commenced on 15 March 2011; Ms Millward is the liable parent in case 444314072 which commenced on 27 June 2017.

3. Prior to the application for departure made on 22 February 2019, the administrative assessment was based on a previous departure decision made on 13 November 2017 as follows:

   ·Mr Millward’s adjusted taxable income (ATI) was to be set at $50 000 from 27 June 2017 to 31 December 2018;

   ·The annual rate of child support payable by Mr Millward was to be increased by $2,066 from 27 June 2017 to 31 December 2017, representing his share for the cost of educating [Child 1] in the last two terms of the 2017 academic year;

   ·From 1 January 2018 until a terminating event occurred for [Child 1], Mr Millward’s annual rate of child support payable was to be increased by 50% of the tuition fees payable for [Child 1] based on evidence of the tuition costs.

4. On 22 February 2019 Ms Millward applied for a change to the assessment on the basis of the income, property and financial resources of Mr Millward (Reason 8A) and the earning capacity of Mr Millward (Reason 8B).

5. On 31 July 2019 an officer of the Registrar found Reason 8A established and determined that Mr Millward’s ATI was to be set at $75,000 from 1 January 2019 to 31 December 2021.

6. Mr Millward objected to the decision on 19 August 2019 on the basis that his income was set too high and his actual income was significantly less.   

7. On 23 October 2019 the objection officer allowed the objection in part. The objection officer found there was a reason to depart from the assessment (Reason 8A) and made the following determination:

   ·For the period 1 January 2019 until [Child 1] ceases to be an eligible child of the assessment, Mr Millward`s ATI is set at $59,738;

   ·For the period from 1 January 2019 until [Child 1] ceases to be an eligible child of the assessment, Mr Millward`s self-support amount is reduced by 50%.

8. Mr Millward applied to the Tribunal for review of the objection decision.

9. The Tribunal had as evidence before it the following documents:

   ·Bundle of documents provided by the Department, Folios 1-417

   ·Documents provided by Mr Millward, Folios A1-A60

   ·Documents provided by Ms Millward, Folios B1-B12.

10. Mr Millward and Ms Millward gave oral evidence and made submissions to the Tribunal at the hearing on 22 May 2020.

CONSIDERATION

Legislative framework and issues for Tribunal to determine

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Act).

2. Part 5 of the Act sets out the statutory formula under which child support assessments are generally made. The formula takes into account the number and age of children, the percentage of care in relation to each child and the adjusted taxable income of each party. It allocates the costs of supporting the children between the parents according to their care percentages and incomes.

3. Under Part 6A of the Act a parent can apply to the Child Support Registrar for a determination to depart from the administrative assessment in the special circumstances of a case. Section 98 of the Act requires the Registrar to employ a three-step process before making a determination that departs from the formula. The Registrar, and the Tribunal which stands in the shoes of the original decision maker, must be satisfied:

   ·      that one, or more than one, of the grounds for departure referred to in subsection 117(2) of the Act exists; and

   ·      that it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support to depart from the assessment; and

   ·      that it would be otherwise proper to make a particular determination.

4. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Each of the grounds, which for administrative purposes are referred to as reasons, require that special circumstances be established. The term ‘special circumstances’ is not defined in the Act. In Gyselman and Gyselman [1991] FamCA 93 the Full Court of the Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

5. If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations in section 98S of the Act. That section permits a range of determinations, including varying the annual rate of child support payable or setting a parent’s adjusted taxable income.

6. To deal with Mr Millward’s application the Tribunal must stand in the shoes of the original decision maker and must decide whether it is satisfied of the three relevant matters set out above. If so, the Tribunal must determine what change (if any) it should make to the assessment.

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

1. The Tribunal can only make a decision to depart from the child support assessment if one of the reasons set out in the legislation is found to exist. There must be special circumstances in the case. However, as stated in paragraph 14 above, the Act does not define that term.

2. Paragraph 117(2)(c)(ia) of the Act states that a ground for departure exists where, in the special circumstances of the case, because of the income, earning capacity, property and financial resources of either parent the formula assessment would lead to an unjust and unfair assessment.

Mr Millward’s income, property and financial resources

1. Ms Millward sought a departure from the administrative assessment because Mr Millward’s adjusted taxable income, in her view, did not properly reflect his income and financial resources. Specifically, she alleged that Mr Millward received untaxed income, though she had no direct evidence of this. Ms Millward stated that during their marriage Mr Millward would undertake and be paid for work which was not declared to the Australian Taxation Office (ATO) and would not be reflected on his tax returns.

Mr Millward’s assets

1. Mr Millward’s main assets are two properties which he owns outright: his home in [Suburb 1] and a holiday block at [Suburb 2]. He told the Tribunal that his mother purchased the [Suburb 1] property for him by selling other assets to allow him to have stable accommodation at a time when his income was only $18,000 per year. He pays all the costs associated with the home, such as rates, water and electricity. The property at [Suburb 2] is a holiday home which he has owned for many years. It is not subject to land tax as council regulations prohibit a permanent residence to be maintained there. He cannot rent the property but uses it as a holiday house, where he has a boat. He said the property was not a financial resource to him and he had no intention to sell the property.

2. He is owed $160,000 by a former associate, [Mr A]. He has obtained a judgment order against the debtor and an agreement had been in place for a number of months for repayment of the debt at the rate of $4,000 per month. He received $24,000 until the debtor reneged. He commenced proceedings to recover the debt from [Mr A], and is currently in proceedings to challenge asset transfers made by the debtor prior his bankruptcy. Mr Millward said he owed his solicitor $30,000 in fees which he will repay when he obtains money through proceedings currently in progress. Fees incurred till now had been paid by Mr Millward’s mother. He said it could take another two years to recoup any money through these proceedings and he intended to use the funds to re-establish himself. He currently owes $30,000 in legal fees.

3. The Tribunal found that Mr Millward’s major assets are presently not income-producing.

Income from Employment

1. Mr Millward is a trained [occupation 1] of around 40 years experience who has worked as an employee for many years. He started at [Employer 1] from about 2015 working three days per week. He denied having any interest in the business and noted that it commenced operations long before he started working there.

2. His taxable income was $18,500 in 2016/17, $18,960 in 2017/18 and $18,603 in 2018/19.

3. Mr Millward said that the owners of [Employer 1] suggested that instead of being an employee he should work as a contracted sole trader through a company structure. He had never done this before but agreed. His new employers set him up as the owner and director of [Business 1], a shelf company their accountant arranged for him. In August 2019 he transferred the shares back to the owners of [Employer 1] and became a permanent part-time employee of [Employer 1]. He said that [Business 1] was never used to conduct other business activities and he himself did not receive income from any other source, it held no assets and incurred no debts and that all of its financial statements were prepared by [Accountants 1], who were also his employers’ accountants. In a letter to the Child Support Registrar dated 27 November 2019 [Accountants 1] confirmed that Mr Millward’s involvement in [Business 1] ended on 15 August 2019.

4. Mr Millward stated that he remained at [Employer 1] and continued to do part-time work for relatively low income because his employers were flexible about his attendance which suited him. He is not looking for full-time work because he wanted to provide care of the children and drop them off and pick them up. He alleged that he was focused on his court proceedings which reduced his work capacity, both due to attendance in court and counselling and other appointments. He suggested that once he recovered the money from [Mr A] he would reconsider his employment options.

5. [Employer 1] is a small [business] and does not have enough work to warrant  overtime or weekend trade. Mr Millward’s work hours recently increased because one of the owners is currently overseas and due to travel restrictions is unable to return to Australia. For that reason his income has also slightly increased. He now earns $825 gross ($703 net) per week or income at the rate of $42,900 per year.

6. Mr Millward’s weekly income is below the average weekly income of $1,436 posited for [an occupation 1] on the Job Outlook website, and his work hours are also considerably less than the 43 hours suggested. Mr Millward, however, stated that he was older than the average age of [an occupation 1] and that he felt he was not as employable as he once was.

7. Mr Millward denied that he undertook any work on a cash basis, saying he did not have time because he was busy taking care of his children when he was not working.  Ms Millward noted that even when the care for both children was shared, the children attended after school care and the part-time work pattern would leave Mr Millward sufficient time to undertake additional work. Mr Millward stated that the children attended after school care because their friends did. The Tribunal was not persuaded that Mr Millward’s part-time work pattern is justified by any caring responsibilities, nor that he wouldn’t have the capacity to undertake other work when not engaged at [Employer 1]. 

8. Mr Millward contended that he was unable to take on other work because his time was consumed by civil proceedings against a creditor and family law proceedings. The Tribunal asked Mr Millward how many hearing days he attended in relation to the matters in the past year but he said he could not remember. Ms Millward stated there were few actual days in court in the family proceedings between them. The Tribunal was not persuaded that Mr Millward’s participation in either family court or civil proceedings would have substantially affected his capacity to undertake full time work.

9. Mr Millward stated that following the separation he suffered from depression which, also, reduced his capacity to work. The Tribunal accepts that depression can affect work capacity but notes that there is no evidence that Mr Millward is so impaired as to affect his work capacity. Indeed, Mr Millward has been able to work continuously and more recently had no difficulties increasing his hours when the opportunity arose.

Should Mr Millward be assessed on his earning capacity?

1. In order to make a finding that Mr Millward should be assessed on his earning capacity the Tribunal must be satisfied that he either is not working, despite ample opportunity to do so, or has reduced his work hours to a below full time occupation or changed his occupation or working pattern. If so, the Tribunal must be satisfied that the reduction of work hours or change in working pattern is not justified by caring responsibilities or state of health, and that the parent has not demonstrated that a major purpose for changing their work pattern was to affect the child support assessment.

2. The Tribunal did not find that Mr Millward’s change from working as a contractor to [Employer 1] and then becoming an employee reduced his work pattern or work capacity. The Tribunal accepted that Mr Millward changed his work pattern some years ago but accepted that this occurred due to his caring responsibilities for, at that time, two children. The Tribunal is not satisfied, however that Mr Millward’s care responsibilities since early 2019, required him to work only part-time: [Child 1] is 15 years old, and attends after school care.

3. In order to make a determination that Mr Millward should be assessed on his earning capacity the Tribunal has to find that he either reduced his working hours below full-time or changed industries or occupation and that that change was not justified by caring responsibilities or health. Mr Millward was required to demonstrate that it was not a major purpose of his change to part-time employment to affect the child support assessment.  

4. The Tribunal was unable to find that Mr Millward had recently reduced his work hours or changed industries. He has worked part-time for a number of years and stated that the change was due to increased child caring responsibilities he had after the separation. The Tribunal is not satisfied that Mr Millward’s income should be assessed based on his earning capacity for a number of reasons, including the evidence that Mr Millward commenced working part-time as a result of childcare responsibility. Although that responsibility has changed since then, he has not made any further changes that would affect the child support assessment in his favour. That is, the Tribunal cannot find that there is a recent change that would allow a determination to be made that Mr Millward should be assessed on his earning capacity.

Does the adjusted taxable income properly reflect Mr Millward’s income, assets or financial resources.

1. When the Registrar sought information from Mr Millward about his income and assets, he provided bank statements for an account in the name of [Business 1] which showed his regular income payments from [Employer 1]. His claim was that all of his income was paid into that account and thus all his expenses were met by money deposited into this account. Examining the bank statement prior to late 2019 shows that Mr Millward used the account almost exclusively to pay utilities and other bills and the withdrawals of the account show little evidence of it being used to pay for miscellaneous household costs, such a food, clothing or household items. Mr Millward told the Registrar that he had no relevant expenses other than those reflected in his accounts as all his and his son’s meals were prepared by his mother.

2. At the hearing Mr Millward no longer made any claim that he incurred no food costs, rather he presented his most recent bank statements which, from about November 2019, show regular expenditure at bakeries, take away shops, restaurants and petrol stations. He agreed that the change in pattern of expenditure which is plainly visible in his bank statements was deliberate as he is now conscious that it was in his interest to have all his spending documented. He said rather than withdrawing and using cash to pay for expenses he now used his card to pay everything.  

3. Mr Millward provided all bank statements which he claimed contained the totality of almost all of his income and expenses. He stated that his mother had provided him with money to pay for legal costs in relation to family law and the civil proceedings which he was required to repay once his case settled.

4. The Tribunal reviewed bank statements for two [Bank 1] accounts operated by Mr Millward in the period from 1 December 2017 to 14 February 2020. From 2017 to 2019 Mr Millward said he used only one account, [Bank 1] Account #4667, registered under the name [Business 1], for all income and spending. He continues to operate the account despite no longer owning the business and as at April 2020 still had a balance of some $3,000 in the account. On 16 August 2019 he opened an account in his own name with [Bank 1] ending in #8685 and from 30 August 2019 all his wages were paid into this account. No further deposits were made into account #4667 though the remaining balance has been used to pay bills from time to time.

5. Deposits into Mr Millward’s accounts were from wages, child support payments and items such as Medicare refunds. There were no other deposits which suggested a clear source of additional income from, for example, another employer. Mr Millward confirmed that each bank account was used primarily for personal expenditure and that he intended to close account #4667 shortly.

6. As he himself admitted, the spending pattern in Mr Millward’s new personal [Bank 1] account from November 2019 was markedly different than the pattern in the old account: [Business 1] account was used almost exclusively for bills paid directly to service providers, including telephone companies, councils, Services NSW rates, Sydney Water, electricity and insurance companies. In two years, there were less than 10 transactions for daily living costs, such as for food, groceries or petrol. In some months there were few transactions and no withdrawals, allowing the account balance to increase some $5,000 between December 2018 to April 2019. Over a period of 23 months there were only six cash withdrawals.  The spending pattern by Mr Millward at that time showed about $24,000 spent over 12 months from September 2018 to August 2019.

7. His new [Bank 1] account, from late October 2019, shows regular and almost daily patterns of payments made at bakeries, supermarkets, fast food outlets, take away food restaurants, petrol stations and a gym. There appear to be fewer utility and rates bills. Since November 2019 Mr Millward has also transferred $70 per week to [Child 1] as pocket money.

1. Mr Millward acknowledged that in the past he used to spend money mostly in cash from sums he withdrew from the bank, but following the objection decision he had changed his spending pattern to demonstrate that he had the usual expenses for living which he was able to meet from his wages.

2. The bank statements do not show expenses such as legal expenses being met. Mr Millward stated legal fees he has already paid were paid by his mother. When asked whether he was given cash or transferred money directly from his account he stated he could not recall. Mr Millward stated that the $24,000 he received from [Mr A] was paid directly to his mother in repayment of money he borrowed from her in the past. He then used some of his mother’s money again to pay other legal fees.

3. Mr Millward’s account of his spending at the hearing was inconsistent with his previous claims to the Child Support Registrar that he incurred no food costs because he ate at his mother’s home. No such assertion was made at the hearing, rather Mr Millward claimed he had used money he had withdrawn in cash. The Tribunal found Mr Millward’s evidence on this point vague and was not persuaded that the cash amounts withdrawn from his first account would have allowed him to engage in the pattern of personal spending now evidenced by his accounts. The Tribunal notes that at the same time as personal expenditure there appeared to be fewer utility and other regular bills paid through the accounts.

4. The Tribunal found that in a period of 15 weeks from 1 November 2019 to 14 February 2020 Mr Millward spent $4,500 on personal expenditure (such as or food and groceries, and not including rates and other regular bills). This equates to a rate of about $16,500 per year. This spending has not been previously reflected in his bank account. Furthermore, some expenditure that one may expect to see in most households, such as for clothes and shoes are not reflected in the expenses. While Mr Millward claims that all of [Child 1’s] clothes were purchased for him by his maternal grandmother, the Tribunal found this unlikely.

5. Tribunal is not satisfied that all of Mr Millward’s financial resources are properly reflected either by his tax return or the money deposited into his bank accounts nor that Mr Millward provided full and frank disclosure of his financial circumstances to the Child Support Registrar. Adding the likely food and grocery cost to Mr Millward’s utility and other bills, the Tribunal estimates that Mr Millward’s demonstrated expenses are around $40,000 per year or based on the marginal tax rate, a grossed-up amount of approximately $53,000 per year. The Tribunal is satisfied this is best estimate of the true income and financial resources available to Mr Millward.

6. At the time the application for departure was made by Ms Millward, the administrative assessment from 1 January 2019 was based on Mr Millward’s 2018/19 adjusted taxable income of $18,960.  Given that the income and financial resources of Mr Millward are around $53,000 the formula assessment results in an unjust and inequitable determination of child support. The Tribunal is satisfied that in the special circumstances of this case, there is a ground to depart from the administrative assessment of child support pursuant to paragraph 117(2)(c)(ia) of the Act.

Issue 2 – Would a departure from the administrative assessment be just and equitable?

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 to depart from the assessment having regard to the matters set out in subsection 117(4) of the Act which include, consideration of the following matters:

   (a)      the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b)     the proper needs of the child; and

   (c)      the income, earning capacity, property and financial resources of the child; and

   (d)the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)    the earning capacity of each parent who is a party to the proceeding; and

   (e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)        himself or herself; or

   (ii)any other child or another person that the person has a duty to maintain; and

   (f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)any hardship that would be caused:

   (i)      to

   (A)    the child; or

   (B)    the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)     to:

   (A)    the liable parent; or

   (B)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; and

   (iii)to any resident child of the parent (see subsection 10) by the making of, or the refusal to make, the order.

Mr Millward’s income, property financial resources

1. As noted above, the Tribunal finds that Mr Millward’s taxable income is not reflective of his true capacity to maintain himself and his children.

2. The objection officer had determined that Mr Millward’s self-support amount should be reduced on the basis that he had no expenses for housing or food. However, as noted above, the Tribunal found that Mr Millward paid the usual expenses for gas, power, water and rates, and the Tribunal was able to deduce other regular costs of living from his recent bank statements. He does not pay a mortgage, having been gifted a home by his mother. However, the home of itself is not an ongoing source of income.

3. Based on the information available the Tribunal is reasonably satisfied that Mr Millward’s income, property and financial resources are appropriately reflected by an annual level of income of $53,000

Ms Millward’s income, property and financial resources

1. Ms Millward owns her home and has a small amount owing, secured by a mortgage, because she borrowed some money to pay for legal costs. She repays the loan of around $24,000 at the rate of $96 per month. There is no evidence of any other special costs or expenses she must meet.

Primary duty to support the children

1. Section 3 of the Act provides that parents have a primary duty to support their children. That duty has priority over all other commitments except those the parent must meet to support himself or herself or another person they have a duty to support.

The children’s needs

1. Neither [Child 2] nor [Child 1] have any special needs.

2. [Child 1] attends a Catholic school. However, since 2017 he has not been required to pay school fees under a special grant obtained by Mr Millward. [Child 2] is likely to start private school in 2021 but it is not yet clear what, if any, school fees will arise. At present there are no additional costs in relation to the children which could not be met under the administrative assessment.

The children’s income, property, financial resources and earning capacity

1. There is no evidence that either of the children have sufficient income, property or financial resources that would allow them to meet their costs of living.

Ms Millward’s income, property and financial resources and necessary commitments

1. Ms Millward’s ATI for 2018/19 was $43,996. The Tribunal finds that Ms Millward’s income, property and resources are properly reflected by her ATI. There is no evidence that she is unable to meet her necessary commitments.

Mr Millward’ income, property and financial resources and necessary commitments

1. Mr Millward’s Statement of Financial Circumstances indicates that he is able to meet his necessary commitments and has the means to meet his child support obligation.

Terms and period of departure

1. The Tribunal finds it just and equitable to depart from the administrative assessment by varying Mr Millward’s adjusted taxable income to $53,000.  

2. The Tribunal also considered if Mr Millward’s self-support amount should be reduced because he has no rental or mortgage costs. The self-support amount is an amount that is deducted from the parent's adjusted taxable income for their own support. It includes basic costs of food, costs of accommodation, clothing, household essentials etc. As previously found, Mr Millward does not have any rental or mortgage costs. However, Ms Millward is in a similar position – while she has a mortgage on her home for payment of legal expenses, she does not have significantly greater accommodation costs than Mr Millward. The Tribunal finds that neither Mr nor Ms Millward’s self-support amount should be reduced to reflect that they have lower than usual accommodation costs.

3. Making a departure determination setting Mr Millward’s adjusted taxable income at $53,000 will result in an annual rate of child support of approximately $1,200 payable by him to Ms Millward.

4. The Tribunal is satisfied the departure determination will not cause hardship to either Mr Millward or Ms Millward.

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

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Varying Mr Millward’s income on which child-support is calculated from that used in the administrative assessment, based on his income and financial resources which are not reflected in the administrative assessment, and varying his self-support amount, will result in an appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

The Tribunal sets aside the decision under review and, substitutes a decision to depart from the child support assessment by:

·      Varying the adjusted taxable income of Mr Millward to $53,000 for the period 1 January 2019 to 31 December 2020.