Obeid and Obeid (Child support)

[2019] AATA 6620

Obeid and Obeid (Child support) [2019] AATA 6620 (9 December 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC016852

APPLICANT:  Mr Obeid

OTHER PARTIES:  Child Support Registrar

Ms Obeid

TRIBUNAL:Member J D'Arcy

DECISION DATE:  9 December 2019

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period 18 September 2018 to 10 October 2019 Mr Obeid’s child support liability will be assessed on the adjusted taxable income of $154,742. Thereafter, Mr Obeid’s child support liability will be assessed on his and Ms Obeid’s adjusted taxable incomes as determined from their income tax assessments.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from share holdings - 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. Mr Obeid is seeking a review of the decision by the Department Human Services – Child Support (Child Support) to assess his child support liability on an adjusted taxable income of $147,738 for the period 18 September 2018 to 17 September 2019.

2. Mr Obeid and Ms Obeid are the parents of [Child 1] born in April 2012 and twins, [Child 2] and [Child 3] born in December 2013. [In] November 2019 Child Support made a decision about the care of the children and assessed Mr Obeid as having 39% care of the children from 22 November 2018 and Ms Obeid as having 61% care of the children.

3. [In] November 2018 Ms Obeid applied for a change of assessment of child support under Reason 8A (Mr Obeid’s income, earnings and financial resources). Mr Obeid cross-applied under Reason 5 (money, goods or property received for the benefit of the children).

4. At that time Mr Obeid had been assessed to pay an annual rate of child support of $17,151 for the period 12 September 2018 to 21 November 2018 and $14,964 for the period 22 November 2018 to 30 June 2019 based on his provisional income of $120,000 and a 2018/2019 income estimate of $50,109 for Ms Obeid.

5. [In] March 2019 a Child Support decision maker refused to change the assessment because a reason had not been established.

6. Ms Obeid objected to this decision and [in] June 2019 the objection was allowed so that for the period 18 September 2018 to 17 September 2019, Mr Obeid’s adjusted taxable income was set at $147,738, resulting in an increase in child support payable from $17,151 to $22,282 from 18 September 2018 to 21 November 2018 and an increase of $14,964 to $19,596 from 22 November 2018.

7. On 1 July 2019 Mr Obeid lodged an application for review with the Administrative Appeals Tribunal (the tribunal).

8. Directions were issued on 22 October 2019.

9. On 9 December 2019 the tribunal discussed the application for review with Mr Obeid and Ms Obeid by telephone.

10. The following material was available to the tribunal and the parties: subsection 37(1) of the Administrative Appeals Tribunal Act 1975 statement and documents numbered 1 to 531, additional documents A1 to A333 from Mr Obeid and additional documents B1 to B23 from Ms Obeid.

11. After the hearing Ms Obeid provided additional material to the tribunal – a recent payslip, a response to the application for review and letters from Mr Obeid’s solicitor and his mother’s solicitor dated August 2018.

12. The tribunal did not exchange these documents with Mr Obeid because he would have had access to the solicitors’ letters, the payslip was consistent with the Statement of Financial Circumstances provided by Ms Obeid and the information contained in her response was covered adequately by her in the hearing.

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the tribunal standing in place of the Registrar, must consider:

   (i)   Whether a ground for departure exists; and

   (ii) Whether it is just and equitable as regards the child, the liable parent, and the carer entitled to child support to change the administrative assessment, having regard to the matters set out in subsection 117(4) of the Assessment Act; and

   (iii)   Whether it is otherwise proper to change the administrative assessment of child support.

2. The grounds for departure from an administrative assessment of child support are covered by subsection 117(2) of the Assessment Act. The relevant reasons in this case are:

   ·      Reason 5 – In the special circumstances of the case, an application relating to an 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 children money, goods or property were provided to the benefit of the children.

   ·      Reason 8 – In the special circumstances of the case, an application relating to an 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 children because of income, property and financial resources of either parent – Reason 8A (subparagraph 117(2)(c)(ia)); or because of the earning capacity of either parent – Reason 8B (subparagraph 117(2)(c)(ib)).

CONSIDERATION

Does a ground for departure exist?

Reason 5 – the provision of money, goods or property for the benefit of the children

1. Mr Obeid submitted that Ms Obeid and the children had the benefit of living in the former family home at a time when he had to pay $915 per week in rent for a less attractive property. Ms Obeid received rent from the granny flat of between $14,000 and $15,000 and was only paying $100 a week to remain in the house. He estimated that there was a $40,000 difference in their living costs as a result of this arrangement and that this amount should be considered as a benefit to the children because of the stability provided to them in remaining in the family home.

2. Mr Obeid further explained that the parties have agreed on consent orders which will be ratified by the Family Court [in] December 2019, following the recent sale of the property. In his view not all of the liabilities had been included in the consent orders. However, to finalise the property settlement expeditiously, he was not prepared to raise what he thought was a $60,000 debt owed to him by Ms Obeid, which included the $40,000 referred to above.

3. However, he now wished to have the amount of $40,000 considered under Reason 5.

4. There was no evidence before the tribunal that any of the liabilities incurred by Mr Obeid in having to rent a house while Ms Obeid remained in the house was a payment in lieu of child support.

5. According to the evidence given by the parties, the former marital home has been sold and consent orders agreed to concerning the division of the assets. It was open to Mr Obeid to raise the issue of liabilities or a discrepancy in living costs caused by Ms Obeid and the children remaining in the former matrimonial home in the property settlement negotiations. On his evidence he chose not to do so, to ensure that the process was expedited.

6. The Family Court is the most appropriate venue to deal with the matters Mr Obeid has raised about outstanding liabilities. He has chosen not to do so to ensure that the settlement goes ahead [in] December 2019 and to avoid any further legal costs.

7. The tribunal found it was not open to Mr Obeid now to attempt to reopen the property settlement issues in the context of the child support assessment.

8. Mr Obeid has not established any special circumstances to demonstrate that he has paid or transferred money or property for the benefit of the children. Reason 5 is not established.

Reason 8 – income, property and financial resources of the parties

1. Ms Obeid has submitted that Mr Obeid’s adjusted taxable income is $251,667 made up of the following components:

   ·    Annual salary from Mr Obeid’s payslip                     $119,450

   ·    Share dividends from [Company 1]    $132,217 ($92,550 grossed up)

2. Ms Obeid submitted that there has been a history of share dealings between Mr Obeid and his mother in the past which was subsequently reversed in the process of the Family Court negotiations and the proceeds were placed in the marital asset pool. She rejected Mr Obeid’s response that he has since sold his shares to his mother for $300,000 because she was aware of Mrs Obeid’s financial circumstances and she would not have had the funds to purchase the shares. She added that while she was married to Mr Obeid and not working he would transfer his dividends to her and her taxable income was in the vicinity of $100,000 each year. He is able to nominate a person to receive the dividends and he has nominated his mother to receive them.

3. On the basis of the past history of share dealings between Mr Obeid and his mother, Ms Obeid requested the tribunal to impute to Mr Obeid the shareholders’ dividend payment of $132,217 for the 2018/2019 financial year.

4. Mr Obeid acknowledged that both he and Ms Obeid received dividends of $30,000 from [Company 1] which he considered to be a partial property settlement. He has recently sold 2,500 shares to his mother for $298,900 to enable him to purchase property after the property settlement is finalised. His only income comprises his annual earnings of $119,000, according to his payslip.

5. On the evidence available to the tribunal, the tribunal makes the following findings:

   ·      During the parties’ relationship Mr Obeid purchased shares in [Company 1], the company for which he works as [an Occupation 1]. The shares were held in his former wife’s name.

   ·      The Constitution of [Company 1] states that only full-time employees of [Company 1] have the right to own shares in [Company 1]. However, shares may be held by one nominee for a full-time employee (according to the letter from Mrs Obeid’s solicitor in August 2018).

   ·      Ms Obeid’s shares were transferred to the company [Company 2] as trustee for the discretionary trust, [Trust name].

   ·      Mr Obeid is a Director of [Company 2] and his mother, Mrs Obeid was a Director and Secretary of [Company 2].

   ·      Consideration for the proposed share transfer to [Company 2] was paid on [in] May 2018 in the sum of $208,943 deposited directly into the parties’ joint home loan account by Mrs Obeid.

   ·      [In] February 2018 a dividend of $31,500 was transferred to [Company 2] bank account and then transferred to Mrs Obeid [in] May 2018.

   ·      The amount of $30,000 was paid to Mr Obeid from his mother and when this transfer was discovered in the course of the property settlement proceedings, an equivalent amount was transferred to Ms Obeid.

   ·      Ms Obeid declared the amount as income and Mr Obeid considered that it was a prepayment of the property settlement and did not declare it as income.

   ·      At a conciliation conference [in] March 2019 it was agreed to reverse the sale of the shares to Mrs Obeid.

   ·      The balance sheet dated [August] 2019 prepared by [a] Registrar of the Family Court shows that the value of Mr Obeid’s shares to be $298,800.

   ·      According to a share purchase agreement dated [October] 2019 Mrs Obeid has purchased 2,500 of shares in [Company 1] for $298,800. A [Bank] customer receipt and Mr Obeid’s [Bank] bank statement show a deposit of $298,800 [later in] October 2019.

   ·      The shareholders’ dividend statements for [Company 1] for 30 June 2018 show total dividend payments of $47,500 to Ms Obeid and $31,500 with a franking credit of $13,500 to [Company 2] ATF [Trust name]. The shareholders dividend statement for 30 June 2019 shows a total dividend of $92,550 paid to [Company 2] ATF [Trust name].

   ·      There is no evidence that the legal ownership of shares was passed to Mrs Obeid when she deposited the amount of $208,943 directly into the parties’ joint home loan account and Mr Obeid acknowledged at the time that he had been slow in effecting the legal transfer and that no legal transfer took place at that time. By contrast, her recent share purchase has been documented by a share purchase agreement. Arguably, prior to [October] 2019 Mrs Obeid was the beneficial owner of the shares while Mr Obeid remained the legal owner of the shares.

   ·      Dividend payments of $31,500 [in] February 2018, $29,400 [in] July 2018, $29,400 [in] August 2018 and $33,750 [in] February 2019 were made from [Company 2]. A letter from Mrs Obeid’s solicitor, [Law firm], [in] February 2019 notes that she purchased an additional 400 shares in October 2018 at a cost of $47,808. The tribunal concludes that as legal owner of the shares Mr Obeid is entitled to dividend payments of $76,242.

   ·      In 2019 the financial resources available to Mr Obeid comprised his annual earnings of $110,000 (reduced from $119,450 for reasonable tax deductions) plus $44,742 ($29,400 + $29,400 + $33,750 - $47,808); that is, $154,742. Therefore, for the period under review from 18 September 2018 to 17 September 2019 the financial resources available to Mr Obeid are $154,742.

6. Prior to the change of assessment application Mr Obeid was assessed on a provisional income of $120,000. His available financial resources in the period under review create the special circumstances to establish Reason 8. The tribunal also finds that using a provisional income of $120,000 during a period when Mr Obeid was receiving dividends would produce an unjust and inequitable level of child support considering Ms Obeid’s relatively low income for the same period. Her income estimate for the period was $50,109 derived from her earnings as a casual [Occupation 2]. During that period there was no evidence that she had access to any other financial resources or income.

7. From [October] 2019 Mr Obeid will no longer have access to any dividends given that his mother has since purchased the shares.

Is it just and equitable to depart from the administrative assessment, having regard to the following matters set out in subsection 117(4) of the Assessment Act?

1. In considering this issue the tribunal must have regard to the matters stated below:

   (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.

2. Both Mr Obeid and Ms Obeid updated their Statement of Financial Circumstances for the hearing. However, their assets and liabilities will change significantly after [December] 2019 when the consent orders are ratified.

3. Comparatively Mr Obeid is in a much stronger financial position than Ms Obeid. He is a senior [Occupation 1] and to date has received a salary and dividends. He clearly has a much higher earning capacity than Ms Obeid, considering his professional background.

4. Ms Obeid is [an Occupation 2] and works on a casual contract basis across three [workplaces]. She has recently been advised that one of her contracts will not be renewed. She estimates her average weekly income at $1,415 compared to Mr Obeid’s average weekly income of $2,291. She has 61% of care for children and covers all of their education fees, sporting costs, school and sports uniforms and excursions. Her expenses, which are reasonable for a family of four persons, are $2,138 per week and well exceeds her income. She has an outstanding loan to her father of $25,780 and owes around $11,000 in legal expenses.

5. The tribunal was satisfied that it was just and equitable to change the assessment of child support based on the assessment of Mr Obeid’s available financial resources.

6. Considering the contract for the sale of shares to Mrs Obeid for the documented amount of $298,800 and, as Mr Obeid is no longer the legal owner of the shares, there is no basis on which to assess the financial resources available to him after [October] 2019, in the absence of any evidence that he will continue to receive dividends from the company of which he is a director.

7. The tribunal therefore decided to assess his child support liability on the basis of his adjusted taxable income of $154,742 from 18 September 2018 to 10 October 2019 and thereafter his child support liability will be based on his adjusted taxable income as determined by his income tax return.

8. Although his child support liability will increase the tribunal found that he would not experience any hardship given that he has now re-partnered and some of his expenses may be overstated. In addition, he has stated that he spends $14,040 a year on holidays and entertainment, which are discretionary expenses and secondary to his child support responsibilities.

Is it otherwise proper to make a change to the administrative assessment of child support?

1. Subsection 117(5) requires the tribunal to take into consideration the following matters:

   (a)   the nature of the duty of a 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 the 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 the child or the carer entitled to child support.

2. Ms Obeid is currently not receiving payment of family tax benefit. So the cost to the community will not reduce due to the increase in Mr Obeid’s child support liability.   

3. However, given Mr Obeid’s duty to support his children according to his means the tribunal considered it was otherwise proper to change the assessment of child support.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that for the period 18 September 2018 to 10 October 2019 Mr Obeid’s child support liability will be assessed on the adjusted taxable income of $154,742. Thereafter, Mr Obeid’s child support liability will be assessed on his adjusted taxable income as determined from his income tax assessment.