Nihill and Nihill (Child support)

[2021] AATA 2289

Nihill and Nihill (Child support) [2021] AATA 2289 (2 June 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/AC020239

APPLICANT:  Mr Nihill

OTHER PARTIES:  Ms Nihill

Child Support Registrar

TRIBUNAL:  Member S Cullimore

DECISION DATE:  2 June 2021

DECISION:

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• For the period from 1 November 2018 to 31 October 2022 the adjusted taxable income of Mr Nihill is fixed at $40,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – paying parent’s true financial resources difficult to ascertain - 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. The following background matters are drawn from the files of Services Australia – Child Support (“the CSA”) and are not in dispute. The Tribunal finds each matter as a fact.

2. The case was registered on 27 June 2012 and has been Registrar Collect since then.

3. The parents have two children, twins, now aged 14.

4. On 5 September 2019 Ms Nihill applied for a change of assessment.[1]

   [1] C50

5. On 5 February 2020 a delegate of the CSA made a departure determination fixing the adjusted taxable income (“ATI”) of Mr Nihill at $72,864 pa from 1 September 2019 to the end of the child support case, which will be November 2024.

6. This produced an annual rate of child support of $6,640 after 2 November 2019.[2]

   [2] C379

7. On 2 June 2020 Mr Nihill objected to that departure determination.[3]

   [3] He was given an extension of time to object: C515.

8. On 19 October 2020 an objections officer “part allowed” his objection and made a different departure determination, fixing the ATI of Mr Nihill at $85,908 for the period from 1 September 2019 to 31 August 2022.

9. The resulting annual rate of child support was initially $8,470.[4]

   [4] C14

10.  Care was 50/50 equal care until 28 January 2021.[5]

[5] C1014

11.  Care is now 79% to Ms Nihill and 21% to Mr Nihill and his child support liability is currently $13,052 pa.[6]

[6] C1026

12.  Care proceedings are currently before a Court.[7]

[7] See B108

13.  On 13 November 2020 Mr Nihill applied for further review by this Tribunal of the objection decision. 

DOCUMENTARY EVIDENCE AND HEARING

14.The Tribunal had before it the original bundle of documents provided by the CSA. These documents are referred to as C1 to C1,009.

15.Supplementary documents from the CSA were marked C1,010 onwards.

1. Directions were made by the Tribunal on 24 March 2021 concerning the production of further documents by the parents.

2. The hearing was on 19 May 2021.

3. The parents were given the opportunity to provide further written submissions.

4. Documents received from Mr Nihill (in total) were marked A1 to A114.

5. Documents received from Ms Nihill (in total) were marked B1 to B135.

6. The Tribunal made this decision on 2 June 2021.

CONSIDERATION

The relevant law

22.Child support is usually based upon “administrative assessments”. These normally use the ATIs of the parents for the financial year ending before the start of the relevant child support period.

23.Part 6A of the Child Support (Assessment) Act1989 (“the Assessment Act”) sets out certain circumstances in which the Registrar, on application by a parent, may depart from the administrative assessment, or in other words, change in some way the manner of working out the child support liability of the payer.

24.The central issues for a decision maker to determine in any COA matter mirror the three steps in the process which are set out in section 98B of the Assessment Act.

25.They are:

whether one, or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exists; and if so

whether it would be:

(A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

(B)otherwise proper;

to make a particular determination to depart from the administrative assessment of child support.

26.Under subsection 117(2) of the Assessment Act, a decision maker is required to consider whether, "in the special circumstances of the case", the normal administrative assessment of child support is unjust or inequitable because of various factual scenarios (the so - called “grounds for departure”).

27.These factual matters (grounds) cover such matters as “the income property and financial resources of either parent” (this is called “Reason 8A”: see below).

28.The “special circumstances” which must be present in the case of each Reason must tend to justify or support a departure determination being made. Those circumstances must also be separate and discrete matters from the factual matters which make up the “grounds” for departure. Decision makers often confuse this issue by stating that the grounds themselves constitute the special circumstances.

29. For the second step, subsections 117(4) to (9) (inclusive) of the Assessment Act then require the decision maker to consider the “just and equitable factors” before making a particular departure determination.

30.  These factors include the income, property and financial resources of each parent; the earning capacity of the parents; the costs of providing care to the children; the necessary living expenses of the parents; and any hardship that would be caused to either parent or the children by the making of (or refusal to make) any particular change of assessment decision.

31. If satisfied that it is appropriate to do so, the Registrar may then make any of the forms of departure determination allowed by section 98S of the Assessment Act.

32.  These include but are not limited to fixing a parent’s ATI at a figure in excess of that used in an administrative assessment, as has happened to date in this matter, or fixing an annual rate of child support.

33.The Tribunal is empowered to make a departure determination in this matter with effect from a date 18 months before the COA application was lodged: subsection 98S(3B) of the Assessment Act. This would be 5 March 2018 here.

34.  Courts exercising a supervisory role over this Tribunal in change of assessment matters have laid down some general principles of relevance to this matter.

35.  In various cases the Court has said that the rationale of a departure determination is that it should reflect as far as possible the actual financial circumstances of the parents: it is a “bespoke” or “tailored” approach to the fixing of child support, rather than the general “one size fits all” application of the normal formula.

36.  In the case known as Eades & Cadell [2009] FMCAfam 275, the Court stated that, after fixing the ATI of a party via a change of assessment, the Tribunal could not simply incorporate that figure into the child support formula without having regard to such factors as the payer’s expenses and liabilities and the level of hardship that would be caused to the parties and children by taking that step. In other words, the relevant just and equitable factors must always be considered before the departure determination is made.

The relevant “administrative assessments” in this case

37.Before 31 October 2018 the administrative assessment was that Mr Nihill should pay Ms Nihill child support of $2,886 pa.[8]

[8] See C368

38.From 1 November 2018 the case “reversed” and the assessment under the formula was that Ms Nihill should pay Mr Nihill child support of $254 pa. That figure was based upon the parents 2017/18 ATIs of $26,644 for Ms Nihill and $7,119 for Mr Nihill.[9]

[9] C32

39.Her liability then increased to $306 pa after 8 June 2019.[10]

[10] C35

40.From 1 December 2019 onwards it became $320 pa.

41.Those figures were based upon 50/50 equal shared care.

42.Using the parents’ 2019/20 taxable incomes of $36,988 and $26,651, and based on 50/50 equal shared care of two children over 13, the outcome would be that Mr Nihill would pay Ms Nihill $1,514 pa (79% care to Ms Nihill would produce $2,336 pa). This rate would have applied from say 1 October 2020.

43.The Tribunal must consider whether there should be any change in this matter from the above assessments.

IS THERE A GROUND FOR DEPARTURE?

44.The Tribunal has concluded that the evidence and the submissions of the parents raises principally Reason 8A (the income, property and financial resources of either of the parents).

Reason 8A

45.Reason 8A is contained in subparagraph 117(2)(c)(ia) of the Assessment Act as follows:

“…in the special circumstances of the case, 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……

…

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

46.The test requires the Tribunal to consider the level of child support as determined by the “administrative assessments”, set out above, on the one hand, and the “income, property and financial resources” of either parent on the other hand, and decide whether the result is in common parlance “unfair” (strictly, “unjust and inequitable”).

47.This Reason presupposes that the level of child support could be “unfairly” low or “unfairly” high, in a particular case.

48.Extensive evidence was supplied by each parent on the topic of the income property and financial resources of the other. The Tribunal has disregarded or given very little weight to the vast majority of this evidence, most of which was related to past periods of time, and/or was purely contentious or argumentative in nature.

49.In particular, the Tribunal has disregarded the evidence produced to it by Ms Nihill from the [Bank 1] loan file for the loan which Mr Nihill took out in 2015 (see B53 onwards) as that information is now out of date and does not assist in determining what the true income of Mr Nihill might now be.

50.From all of the evidence before it, the Tribunal finds the following material facts concerning the income, property and financial resources of Mr Nihill:

·He lives in rented accommodation and pays $500 per week in rent;

·He owned a property at [Suburb 1] which was sold on 30 October 2020 for $765,000;

·The bank received $618,227.26;[11]

[11] A98

·He repaid $89,000 to family members who had lent him money;[12]

[12] A99

·He paid off business creditors owed about $18,000;

·He received only $16,233.07 net from the sale;[13]

[13] A99

·He owns a property at [Town 1] which has a capital value of $169,000;[14]

[14] A33

·There is no mortgage over it;

·There is a shed, but no house, on the block, and so it has no commercial rental value;

·His income and other benefits are derived from a [service] business in Adelaide;

·The business is run through a trust structure (the [named] Family Trust);

·Mr Nihill is the sole trustee and sole beneficiary;

·The trust distributes its net income (profit) to Mr Nihill;

·According to the tax returns of the trust:

oIn 2017/18 the gross income was $54,197 and the net profit was $7,119;[15]

[15] C919

oIn 2018/19 the gross income was $153,821 and the net profit was $16,700;[16]

[16] C924

oIn 2019/20 the gross income was $115,092, $6,000 was received in jobkeeper payments, and net profit was $38,275;[17]

[17] A13

·His 2017/18 taxable income was $6,954: C903;

·His 2018/19 taxable income was $12,461: C909;

·His 2019/20 taxable income was $36,988;[18]

[18] A47

·He has banked with both [Bank 1] and [Bank 2], having several different accounts with each bank;

·He consistently withdrew money each month from the trust’s [Bank 2] business account ending #5646;

·This was happening from at least April 2018 onwards;[19]

[19] See generally at C590 to C602

·The amounts were usually $3,200 per month;

·This continued to at least June 2019 (see C591);

·In the period 1 July 2020 to 30 September 2020, the gross sales of the business were declared for BAS purposes as $8,545;[20]

[20] A29

·For 1 October 2020 to 31 December 2020 they were declared as $11,000;[21]

[21] A25

·He formerly received family tax benefit (FTB), but this ceased in January 2021;

·Jobkeeper payments were made to the trust for the period from March 2020 onwards;

·He currently has debts of $10,900 to the ATO for GST and also owes them income tax of $11,445.71;[22]

[22] A6

·He still owes family members about $9,000;[23]

[23] A34

·He has credit card debts of about $15,000;[24]

[24] A6

·He owes the school for 50% of the children’s school fees, and the school has taken out debt recovery proceedings against him.

51.From all of the evidence before it, the Tribunal finds the following material facts concerning the income, property and financial resources of Ms Nihill:

·She does not own any real estate, but lives in a property belonging to her father;

·Since October 2019 she has worked as a casual [occupation 1] for two employers;

·She receives varying amounts of jobseeker allowance;

·She receives carer allowance (“CDA”) for the two children, in total $263.80 pf;

·She also receives FTB of $544.46 pf;

·Her 2018/19 ATI was $27,238;

·Her 2019/20 taxable income was $26,651: see B120;

·One or both of the children have access to the NDIS scheme: see B116.

52.The Tribunal then considered the child support position of Mr Nihill under the recent administrative assessments (see above) as against the income property and financial resources of the parents, as outlined above.

53.The outcome produced by the formula was that after 1 November 2018 Ms Nihill was the payer of child support (of about $300 pa) to Mr Nihill. This would have continued to the lodgement of his 2019/20 tax return, when he would have been liable to pay her about $1,500 to $2,000 pa.

54.The Tribunal has considered all of the evidence and in particular the tax returns and the bank statements in the CSA file for the trust’s [Bank 2] business account #5646, which clearly show regular and consistent drawings by him of usually $3,200 per month from at least April 2018 onwards. Further, his taxable income for 2019/20 was $36,988. These matters are based upon reliable documentary evidence. Everything else is conjecture.

55.The Tribunal finds that from 1 November 2018 (when the case “reversed”) Mr Nihill had available to him income and financial resources totalling at least $38,400 pa. This is significantly higher than the formula amount used at that time of just over $7,000 pa.

56.The Tribunal accepts that it is likely that the turnover of the business has dropped since the onset of the COVID-19 situation in March 2020, and quite possibly also because of his health, but he had the benefit of jobkeeper payments from March 2020 to March 2021. These payments over that period of one year would have totalled about $30,000, or about $600 pw, on average.

57.The Tribunal also finds that Mr Nihill does not have the “capacity to derive income” - or any more than a nominal net income - from the [Town 1] property: see paragraph 117(7A)(a) of the Assessment Act.

58.The Tribunal therefore finds that the formula outcomes which applied or would have applied since 1 November 2018 are unfair because of Mr Nihill’s true income and financial resources, principally because he and not Ms Nihill should have been the payer of child support since that date.

59.The Tribunal finds that the ground contained in Reason 8A is made out.

60.“Special circumstances” exist because of the business structure Mr Nihill has adopted (a trust) and his use of multiple bank accounts with two different banks, which makes his true financial position very hard to ascertain.

61.Reason 8A is established.

62.There is no need to consider any other “Reason”.

The just and equitable factors

1. The Tribunal must consider whether it is “just and equitable” to both parents and the children to depart from the administrative assessment in any particular way.

2. The factors to be taken into account are set out in section 117(4) of the Assessment Act, as follows:

   (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.

3. Subsection 117(9) of the Assessment Act states that the subsection 117(4) factors “do not limit other matters to which the [Tribunal] may have regard”.

4. In determining whether it would be just and equitable to make a departure determination, the Tribunal “must have regard to” the factors specified in subsection 117(4). Whilst the section need not be slavishly followed, each of the factors listed in s.117(4) relevant to this matter should be considered.

Income and other amounts received by Ms Nihill

67.The Tribunal finds that her income from employment is around the level of her 2019/20 taxable income, namely about $26,000 pa gross.

68.She receives jobseeker allowance, of varying amounts, depending upon fortnightly income, plus FTB and CDA.

69.The Tribunal must in assessing her income property and financial resources “disregard” the “entitlement” of Ms Nihill to payments of jobseeker allowance and FTB, as they are income tested benefits or allowances.[25]

[25] Subparagraph 117(7A)(b)(ii) of the Assessment Act

70.CDA however is not an income tested allowance. It can be taken into account. That comes to about $6,500 pa and is a significant contribution by the taxpayer to the costs of care of the children. The Tribunal attached some but not a great deal of weight to this matter.

71.The Tribunal finds that she has no other income, property or financial resources which would influence this decision.

72.Further, the Tribunal must in deciding this matter “disregard” the income property and financial resources of any “partner” of Ms Nihill - unless there are some special and very unusual circumstances which justify doing so.[26]

[26] Subparagraph 117(7A)(b)(i) of the Assessment Act.

73.Whether she is partnered, as Mr Nihill has consistently alleged, to a man called [Mr A], is very problematic. There is some clear evidence that she is partnered to him. She herself described him as her “partner”. However, given that it is only in very rare circumstances where the Tribunal can consider the income, property and financial resources of any “partner”, in any event, the Tribunal specifically makes no finding whether or not she is partnered to [Mr A] for Centrelink and/or child support purposes.

Costs of providing care

74.The parents have had until recently equal shared care of the two children.

75.Doing the best it can on her evidence, the Tribunal finds that the reasonable costs of care of Ms Nihill for the children come to about $225–$250 pw, based upon 50/50 shared care. At present, based upon her having 71% care, those costs are about $290 pw (this excludes private tuition fees which are dealt with via court orders).[27]

[27] See B118

76.Mr Nihill is also incurring significant costs of care, which were likely to be of similar amounts to the above when care was 50/50.

Mr Nihill’s income, expenses and capacity to pay

77.The Tribunal notes its finding above that Mr Nihill’s income for child support purposes is at least $38,400 pa and is probably somewhere in the region of $40,000 pa.

78.His outgoings and household expenses are somewhere in the region of $800 pw–$900 pw. His rent alone is $500 pw.

79.He has paid off significant personal and business debts since October 2020, from the house sale, but appears still to be borrowing money from his family to pay his ongoing living expenses.

80.He is currently making child support payments of just under $1,000 pcm, including paying off arrears. He did not give any clear explanation of how he was funding those payments.

81.The Tribunal is satisfied from what payments he is currently making that he has the capacity to pay ongoing child support of a level much more commensurate with his recent levels of income and financial resources. He is also able to keep reducing his arrears.

Hardship

82.With regard to hardship (paragraph 117(4)(g)) the Tribunal must consider this factor with reference to both of the parties and the children. 

83.The requirement is to “weigh or balance the hardship” that the making of, or refusal to make, the determination would cause to the carer entitled to child support, and to the payer, and to the children.

84.Mr Nihill is now about $20,000 in arrears (see C1,044). He has a long history of arrears, and was in arrears over $10,000 when the change of assessment application was lodged.

85.He is currently making payments at a rate of just under $1,000 pcm (C1,044).

86.Both parents face substantial ongoing costs relating to the children as they grow into their teenage years and Ms Nihill needs as much financial support from him as Mr Nihill can reasonably give.

87.Reducing arrears which are based on over assessing his income will not cause hardship to Ms Nihill or the children. They should never have been incurred.

88.On balancing the hardship, the Tribunal finds that the proposed decision will not cause undue hardship to either parent or the children.

Proposed departure determination

89.The Tribunal considered that any departure determination should take specific account various matters, set out below.

90.The Tribunal noted that the children are now 14.

91.The Tribunal believes that Mr Nihill has been substantially over assessed by fixing an ATI of $85,908. That figure is unrealistically high. It was based upon “grossing up” his declared living expenses, as deposed to by him in an affidavit in May 2020, of $1,243 pw. This grossing up is a very unreliable method of fixing a person’s ATI, and needs to be set aside. Some kind of forensic analysis of the evidence of his actual income has to be undertaken, however problematic, and that is what the Tribunal has tried to do.

92.The Tribunal proposes a much lower figure for his ATI of $40,000. That figure may be conservative, but is based upon what little reliable documentary evidence there is on this issue, namely the tax returns and the bank statements.

93.The annual rate of child support fixed by the formula, as a guide, for a payer with an ATI of $40,000 and a payee with an ATI of $26,000, with two children over 13, care being 50/50 is about $1,984. Based on 21% care to the payer, that will produce an annual rate of $3,016.

94.He has arrears now of about $20,000 and is currently paying off his liability at just under $1,000 pcm. He will now be the payer of child support from 1 November 2018, but his liability to Ms Nihill will be substantially lower than under the objection decision. The intention of this decision is to significantly reduce his arrears, in net terms, but he will still have past arrears to pay off.

95.Fixing a new ATI will also allow for past and future care changes to be reflected in the formula. Even a modest level of care such as 21% to Mr Nihill for both children would have a significant effect on his child support liability.

96.Further, a reasonably extended departure period until 31 October 2022 seems to the Tribunal to be an appropriate outcome, giving some certainty to the parents and allowing them to plan and budget, going into the future. It will also enable the parents’ 2020/21 and 2021/22 tax returns to be lodged.

97.Accordingly, the Tribunal proposes to now fix the adjusted taxable income of Mr Nihill at $40,000 from 1 November 2018 to 31 October 2022.

Is it otherwise proper to further depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. 

2. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a)   ….

   (b)   the effect that the making of the [decision] would have on:

   (i)    any entitlement of … 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 .. the carer entitled to child support.

3. The Tribunal notes that Ms Nihill receives ongoing FTB, as a single person. A decrease in child support would normally lead to an increase in the rate of FTB.

4. It may be that if she is partnered for Centrelink purposes she has no entitlement to FTB at all.

5. On the other hand, her FTB entitlements are currently based on the “child support received” method and so changing the liability of Mr Nihill may have no impact at all on her ongoing FTB.

6. The matter is complex, but in any event the Tribunal believes that it is otherwise proper to depart from the administrative assessment in the way set out in this decision.

DECISION

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• For the period from 1 November 2018 to 31 October 2022 the adjusted taxable income of Mr Nihill is fixed at $40,000.