Moschino and Kenzo (Child support)

[2018] AATA 2285

Moschino and Kenzo (Child support) [2018] AATA 2285 (25 May 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/MC013073

APPLICANT:  Ms Moschino

OTHER PARTIES:  Child Support Registrar

Mr Kenzo

TRIBUNAL:Member P Glass

DECISION DATE:  25 May 2018

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that from 1 July 2017 to 30 June 2019, Mr Kenzo’s adjusted taxable income is varied to $114,639 per annum.

CATCHWORDS

Child support – Departure determination – Proper needs of the children – Income and financial resources of parents – 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. Ms Moschino and Mr Kenzo are the parents of [Child 1] and [Child 2]. Mr Kenzo is the parent liable to pay child support.

2. On 12 July 2017, Ms Moschino applied to the Department of Human Services – Child Support (the Department) for a change to the administrative assessment of child support on the basis that the assessment does not correctly reflect the parents’ income, property and/or financial resources (Reason 8A) and the assessment does not correctly reflect the parents’ earning capacity (Reason 8B).

3. On 8 August 2017, Mr Kenzo also applied to the Department for a change to the administrative assessment of child support on the basis that he has out of the ordinary, necessary expenses to support himself (Reason 7), the assessment does not correctly reflect the parents’ income, property and/or financial resources (Reason 8A) and the assessment does not correctly reflect the parents’ earning capacity (Reason 8B).

4. On 5 September 2017, a decision-maker at the Department found that Reason 8A was established in both parents’ applications. For the period from 1 July 2017 to 31 March 2019, Ms Moschino’s adjusted taxable income was set at $78,000 per annum and Mr Kenzo’s adjusted taxable income was set at $135,200 per annum.

5. On 29 September 2017, both Ms Moschino and Mr Kenzo objected to the Department’s decision. On 24 November 2017, those objections were partly allowed. An objections officer set the annual rate of child support payable by Mr Kenzo at $21,928 from 1 July to 21 September 2017, $14,104 from 22 September to 31 October 2017 and $16,500 from 1 November 2017 to 30 September 2018.

6. On 8 December 2017, Ms Moschino applied to the Administrative Appeals Tribunal (the Tribunal) for an independent review of the objections officer’s decision. That application was heard on 24 May 2018. Ms Moschino and Mr Kenzo appeared by telephone and gave evidence on affirmation. The Department did not participate in the hearing.

7. The Tribunal received into evidence the following documents:

   · Documents produced by the Department pursuant to subsection 37(1) of the Administrative Appeals Tribunal Act 1975, marked 1 to 698 (Exhibit 1);

   ·       Documents received from Ms Moschino and subsequently marked A1 to A264 (Exhibit 2); and

   ·       Documents received from Mr Kenzo and subsequently marked B1 to B394 (Exhibit 3).

8. The issues to be determined are:

   ·       Whether a ground for departure from the administrative assessment of child support is established; and

   ·       If so, what rate of child support should be paid by Mr Kenzo.

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) Act 1989 (the Act). Pursuant to section 98C of the Act, the administrative assessment may be departed from upon satisfaction of three matters:

   a.one, or more than one, of the grounds for departure set out in subsection 117(2) of the Act exists; and

   b.it would be:

   i.just and equitable as regards the child, the liable parent and the carer entitled to child support; and

   ii.otherwise proper to do so.

GROUND FOR DEPARTURE

1. The first relevant ground for departure applies if, in the special circumstances of the case, the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Kenzo for the children because of the parents’ income, property and financial resources (subparagraph 117(2)(c)(ia) of the Act).

2. At the time Ms Moschino applied to the Department for a change to the administrative assessment of child support, its rate was being assessed on the basis of an estimated adjusted taxable income for Mr Kenzo of $60,120 and provisional adjusted taxable income for Ms Moschino of $6,032.

3. Mr Kenzo works at a [business] owned by his brother. His current partner also works at the [business]. In the financial year ending 30 June 2017, his adjusted taxable income was $114,639.[1] In the previous financial year, his adjusted taxable income was $120,118.[2] In the preceding three financial years, his taxable income ranged from $104,920 to $165,646.[3]

   [1] Exhibit 1, page 677 and Exhibit 3, pages B17 and B26.

   [2] Exhibit 1, page 677 and Exhibit 3, pages B18 and B20.

   [3] Exhibit 1, page 677.

4. In June 2017, Mr Kenzo’s income reduced.[4] In evidence is a doctor’s letter certifying that he then suffered from a [medical condition] causing severe pain and reducing his work capacity to 10 hours per week.[5] Although Ms Moschino alleged that the author of that report was a friend of Mr Kenzo’s brother, I am not satisfied that such a relationship would cause [the named doctor] to falsify a medical certificate. According to his payslips, Mr Kenzo worked 19 hours per week from July to October 2017.[6] His hours then increased to 22 hours for three weeks,[7] 25 hours for one week[8], 28 hours for the following three weeks,[9] 30 hours until mid-January 2018[10] and then 32 hours per week.[11] He was paid pro-rata at an annual salary of $130,000, currently equating to approximately $109,500 per annum.

   [4] Exhibit 3, page B334.

   [5] Exhibit 3, page B308.

   [6] Exhibit 3, pages B349 to B362.

   [7] Exhibit 3, pages B363 to B365.

   [8] Exhibit 3, page B366.

   [9] Exhibit 3, pages B367 to B369

   [10] Exhibit 3, pages B370 to B378.

   [11] Exhibit 3, pages B379 to B386.

5. Mr Kenzo submits that he should be assessed to pay child support based on his income. I reject that submission in circumstances where he gave evidence that his lifestyle was unchanged during the period when his income was reduced. He stated in December 2017 he was incurring weekly expenses of $2,048,[12] or approximately $106,500 per annum. He gave evidence that in addition to those expenses he also contributes $190 per month to [a scholarships] fund.

   [12] Exhibit 3, pages B8 and B9.

6. Mr Kenzo has had access to financial resources which he has used to fund his living expenses when his income reduced. He did not pay rent in July and August 2017.[13] He gave evidence that his partner paid his rent for him. He claims to have rental expenses of $440 per week.[14] The benefit he received from his partner at that time is a resource of in excess of $22,000 per annum. Although he gave evidence that he pays for fuel by cash or on card, he could not identify any credit card transactions prior to December 2017 that related to fuel purchases. He then asserted that his partner also pays for his fuel costs. He also receives the benefit of a mobile phone paid for by his brother’s business at between $95 and $110 per month.  

   [13] Exhibit 3, pages B335 and B336.

   [14] Exhibit 3, page B9.

7. Mr Kenzo submits that it is unfair that he be assessed to pay child support on his previous earnings during a period of time when he was sick. I reject that submission in circumstances where he has now returned to almost full-time work, he did not alter his standard of living on account of his reduced income, and has received financial support from his partner.

8. I find the administrative assessment of child support results in an unjust and inequitable determination of the level of financial support to be provided by Mr Kenzo because of the income and financial resources he has had available to him. A ground for departure is established.

JUST AND EQUITABLE

1. In determining whether it is just and equitable as regards the children, Ms Moschino, and Mr Kenzo to depart from the administrative assessment, the Tribunal has regard to the matters prescribed in subsection 117(4) of the Act. Ms Moschino and Mr Kenzo have the primary duty to maintain their children.

2. Ms Moschino sought that I change the rate of child support payable by Mr Kenzo from January 2016. She asserts that to be the time when changes occurred, including her ceasing to be listed as an employee at the [business]. I reject her submission that I should backdate any change to the assessment of child support in circumstances where she also gave evidence of receiving support in addition to child support payments from Mr Kenzo totalling $50,000 in 2016.

3. Child support is ordinarily assessed by reference to income. However, objects of the Act include ensuring that the level of financial support provided by Mr Kenzo is determined according to his capacity to do so and that the children share in the standard of living of both of their parents.[15] I find that it is appropriate for the children to share in Mr Kenzo’s chosen standard of living, supported by financial resources to which he has had access. Given his evidence that his standard of living was unchanged after the reduction in his work hours in June 2017, I find it is just and equitable to treat his income as equivalent to his income for the financial year ending 30 June 2017. Given that his reduced income will result in a reduction in the administrative assessment both in the financial years ending 30 June 2018 and 30 June 2019, I will vary his income to that amount for both years. If there is a subsequent change to Mr Kenzo’s circumstances, he is not prevented from making a further application for a departure from the assessment of child support.[16]

   [15] Child Support (Assessment) Act 1989 section 4(2).

   [16] Child Support (Assessment) Act 1989 section 98J.

4. Mr Kenzo received $455,000 as a result of a property settlement with Ms Moschino in mid-2017. The remainder of approximately $400,000 of those funds is currently held by his brother and distributed to him as and when required. He estimates his motor vehicle to be worth $19,000, his contents to be worth $15,000,[17] and his shares to be worth approximately US$129.[18] He estimates his superannuation interests to be worth approximately $190,000.[19] His only liability is a credit card, which he gave evidence has a current balance of approximately $200. The property and financial resources available to Mr Kenzo mean that any increase in the amount of child support payable in the financial year ending 30 June 2018 will not cause him hardship.

   [17] Exhibit 3, pages B5 to B6.

   [18] Exhibit 3, page B393.

   [19] Exhibit 3, page B6.

5. Ms Moschino has a term deposit of $648,201,[20] other bank savings of approximately $7,000,[21] a motor vehicle she estimates to be worth $20,000 and superannuation interests of $245,441.[22] Her only liability is a credit card with a balance of approximately $9,500.[23]

   [20] Exhibit 2, page A64,

   [21] Exhibit 2, page A148.

   [22] Exhibit 2, pages A7 to A8.

   [23] Exhibit 2, page A258.

6. Ms Moschino is in receipt of government benefits totalling $599 per fortnight. She commenced part-time work on 15 January 2018 for which she is paid $3,397 per month or $40,763 per annum.[24] She lists weekly expenses totalling $2,192.[25] She gave evidence that she meets the shortfall between her income and her expenses from her savings. Although she gave evidence that the children have out of the ordinary medical requirements, she lists her weekly medical expenses for both herself and the children as $40.[26] I do not consider those costs to be unusual such that justice and equity requires them to be given particular consideration. I note Mr Kenzo’s evidence that he maintains private health insurance for the children.

OTHERWISE PROPER

[24] Exhibit 2, pages A39 to A40.

[25] Exhibit 2, page A

[26] Exhibit 2, page A11.

1. In determining whether a departure from the administrative assessment is otherwise proper, the Tribunal has regard to the matters prescribed in subsection 117(5) of the Act. It is necessary to consider the effect of any such departure on entitlements to income-tested pensions, allowances and benefits. Parents, rather than the community, have the primary duty to maintain the children.

2. Ms Moschino receives family tax benefit. Any increase to the child support payable by Mr Kenzo will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

3. I find that it is just and equitable as regards to the children, Ms Moschino and Mr Kenzo, and otherwise proper to depart from the administrative assessment of child support so as to vary Mr Kenzo’s income to $114,639 from 1 July 2017 to 30 June 2019.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that from 1 July 2017 to 30 June 2019, Mr Kenzo’s adjusted taxable income is varied to $114,639 per annum.