Olive and Olive (Child support)

[2018] AATA 3071

Olive and Olive (Child support) [2018] AATA 3071 (22 June 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC013592

APPLICANT:  Mr Olive

OTHER PARTIES:  Child Support Registrar

Ms Olive

TRIBUNAL:Member J Longo

DECISION DATE:  22 June 2018

DECISION:

The decision under review is set aside and, in substitution, the tribunal decides as follows:

·         For the period 6 September 2017 to 30 June 2019, the adjusted taxable income for Mr Olive shall be set at $180,000.

·         For the period 6 September 2017 to 31 December 2017, the adjusted taxable income for Ms Olive shall be set at $87,335.

·         For the period 1 January 2018 to 30 June 2019, the adjusted taxable income for Ms Olive shall be set at $71,344.

CATCHWORDS
Child support - Departure determination - Ground for departure does not exist in relation to necessary commitments for self-support - Ground for departure exists in relation to income, property and financial resources of the liable parent - Decision to depart - Adjusted taxable incomes of both parents varied - 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. The issue to be determined in this application is whether there is a reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.

2. Mr Olive and Ms Olive are the parents of [Child 1] and [Child 2]. Mr Olive is the parent liable to pay child support. The application for child support was registered with the Department of Human Services – Child Support (the Department) from 3 April 2017 and is currently subject to Departmental collection of child support. [Child 1] and [Child 2] are in the sole care of Ms Olive (100%).

3. Prior to the departure application, Mr Olive was assessed to pay an annual rate of child support, from 8 September 2017 to 30 November 2018 of $6,596 based on a 2016/2017 adjusted taxable income of $67,152 and on a provisional income of $43,769 for Ms Olive.

4. Ms Olive applied to the Department for a departure from the administrative assessment on 6 September 2017 on the basis that, in the special circumstances of the case, the administrative assessment of child support was not reflective of Mr Olive’s income, property and financial resources (Reason 8A). Mr Olive disagreed with the departure application and made an application on the basis of Ms Olive’s income, property and financial resources and that he had paid money to a third party for the benefit of the child (Reason 5) and due to necessary costs of self-support (Reason 7).

5. On 17 November 2017 the Department determined to change the administrative assessment as follows:

   ·         For the period 6 September 2017 to 30 November 2018, the adjusted taxable income for Mr Olive shall be set at $193,777.

   ·         For the period 6 September 2017 to 30 November 2018, the adjusted taxable income for Ms Olive shall be set at $72,239.

6. Mr Olive objected to the decision on 24 December 2017. An objections officer of the Department disallowed the objection on 22 February 2018. On 26 February 2018 Mr Olive lodged an application to the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision. Directions for this matter were made for the parties to provide additional information. The application was heard on 22 June 2018. The tribunal considered the documents and information which were provided to the parties prior to the hearing, as well as the oral evidence of Mr Olive and Ms Olive.[1]

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Department numbered 1 to 538; Mr [Olive]’s documents numbered A1 to A202; and Ms [Olive]’s documents numbered B1 to B164.

The 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) Act1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act. Section 98C establishes a three step process to be satisfied: that there is a ground for a departure; that it is just and equitable to depart; and that it is otherwise proper. Once satisfied, the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

Grounds for departure

Reason 7 – Necessary expenses for self-support

1. Mr Olive submitted that his liabilities significantly impact his financial capacity to pay child support for [Child 1] and [Child 2] under sub-subparagraph 117(2)(a)(iii)(A) of the Assessment Act which provides a ground for departure exists where, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of commitments of the parent necessary to enable the parent to support himself or herself.

2. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman v 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. Likewise, in Philippe and Philippe (1978) FLC 90-433 the Court held that ‘special circumstances’ are ‘facts peculiar to the particular case which set it apart from other cases’. The tribunal was guided by these cases in the considerations of this application.

3. The interpretation of what commitments are necessary for self-support was also considered in the case of Gyselman. The Court set out some important principles which the tribunal must take into consideration when determining whether the ground exists:

   ·         The term ‘commitments of the parent necessary to enable the parent to support’ himself means commitments which are reasonably needed for that purpose.

   ·         The use of the word ‘necessary’ is not intended to produce an unrealistically low standard of living for the non-custodian parent.

   ·         It is a matter of the balancing of the competing values, namely the obligation of the absent parent to continue to support his children with, on the other hand, the need for that parent to continue to maintain himself at a reasonable level.

   ·         The obligation of the non-custodian to pay off debts may amount to a commitment necessary for self-support. Whether a particular obligation to pay off a debt should or should not be included within para (a)(iii) depends upon the circumstances of the individual case. It is a matter of judgement and degree in the individual case, bearing in mind in particular that ultimately it is a matter of competing priorities.

4. Mr Olive outlined to the tribunal and the Department the various debts he was repaying. These debts, Mr Olive stated, related to a variety of personal liabilities. Included in these was a $65,000 liability to the Australian Taxation Office (ATO) when he sold shares for the purchase of the matrimonial home. Mr Olive stated that part of this debt has been repaid, although he was unsure as to the amount that was outstanding. The affidavit sworn by Mr Olive in relation to a property application in the Federal Circuit Court of Australia states that the ATO liability is approximately $38,000 as at March 2018. Mr Olive further clarified that the ATO had granted a stay on the repayment of this liability pending the property settlement.

5. Mr Olive also referred to debts he incurred in establishing his own [business]. Mr Olive stated that he initially borrowed $35,000 for this business venture and then borrowed an additional $15,000. In addition, Mr Olive referred to an additional loan incurred which was to consolidate a number of smaller loans relating to the sale of an investment property, credit cards and moving costs. Other debts include personal borrowings from a friend to pay legal costs ($21,000), [a state tribunal] order for outstanding renovation costs ($14,000), utilities arrears ($1,800), accountant debt ($1,700), and a debt to his lawyer ($9,000). Mr Olive confirmed that he is making repayments towards a total of approximately $119,000 in loans, at various rates of repayment. Mr Olive confirmed that he repays $731 per week ($1,462 per fortnight) towards these debts. In regard to these outstanding debts, Mr Olive stated that subject to the property settlement, he may repay all these outstanding amounts once the property settlement has occurred.

6. The tribunal notes that the repayment of the loans varies considerably and some debts may have been repaid. For instance, Mr Olive stated that he is repaying $500 per fortnight towards a $21,000 loan from a friend. In comparison, he pays $837 per month ($386 per fortnight) towards a $37,000 loan to Society One. Mr Olive also stated that he is repaying a $1,700 debt to his accountant at $150 per fortnight, which he commenced repaying earlier this year. Mr Olive was uncertain as to whether this debt had been repaid. Additionally, his $9,000 legal bill is not being paid until the property settlement is finalised. It is clear that some of the rates of repayment are higher than would be the case if they were sourced through commercial lenders, in particular the amounts paid towards the $21,000 and $1,700 debts.

7. Mr Olive’s evidence to the Department was that he had approximately $1,973 in loan repayments each week.[2] These calculations differ considerable to those provided to the tribunal above. The tribunal is not satisfied that the level of indebtedness of Mr Olive is such that it significantly reduces his capacity to provide financial support for [Child 2] and [Child 1].

   [2]Page 7 of Section 37 Documents.

8. In the circumstances, the tribunal is not satisfied that the loans outlined by Mr Olive create circumstances which can be considered special within the context of sub-subparagraph 117(2)(a)(iii)(A) of the Assessment Act. There is nothing uncommon or out of the ordinary in regard to these costs. Furthermore, these debts will be repaid, according to Mr Olive’s evidence, once the property settlement has been finalised. The tribunal therefore finds that the ground under sub-subparagraph 117(2)(a)(iii)(A) is not established.

Reason 8 – Income, property, financial resources

1. Mr Olive also submitted that, 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 him for the children because of Ms Olive’s income, property and financial resources (subparagraph 117(2)(c)(ia) of the Assessment Act). Ms Olive raised the same ground in relation to Mr Olive’s income.

2. In relation to this ground, it is uncontroversial that Mr Olive’s income from employment is higher than the amount used in the administrative assessment. It is also not in dispute that Mr Olive commenced employment with [Company 1] on 27 February 2017. Mr Olive did not dispute his income from employment but stated that his expenses should reduce the income. The tribunal notes that his income from employment stated in his Statement of Financial Circumstances was approximately $3,811 per week ($198,172 per annum). This amount is approximately the same as the payslips provided $7,622.31 per fortnight ($198,180.06).

18.The administrative assessment of child support was based on Mr Olive’s 2016/2017 adjusted taxable income of $67,152. This amount is much lower than Mr Olive’s actual income of $198,180 per annum. On this basis the tribunal is satisfied, in the special circumstances of this case, that Mr Olive’s income is such that using the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Olive for [Child 2] and [Child 1]. Therefore, in the circumstances, the tribunal is persuaded that a ground for departure is established under subparagraph 117(2)(c)(ia) of the Assessment Act.

Other Grounds

19.The tribunal also notes that Ms Olive has sought a departure from the administrative assessment on the basis of her income (Reason 8A). Mr Olive also sought departure on the basis of Ms Olive’s earning capacity. However, the tribunal has already determined that there is a ground to depart from the administrative assessment based on the considerations above. The tribunal will therefore consider the submissions on this issue in the context of whether it is just and equitable and otherwise proper to depart from the administrative assessment.

Would 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, the next step is to consider whether it is just and equitable to depart from the administrative assessment. In deciding whether it is just and equitable, the tribunal had regard to the matters set out in subsection 117(4) of the Assessment Act. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child over all commitments of the parents other than commitments necessary for self-support or the support of another person to which they have a duty.

2. There is no dispute in regard to Mr Olive’s income from employment as discussed above in paragraph 18 in these reasons. Mr Olive stated that the amount should be reduced to allow for his allowable deductions. The tribunal notes that the income used is the gross income and does not allow for any claimed deductions Mr Olive may have in undertaking his employment.

3. In addition, Mr Olive has provided information regarding his assets and liabilities. Mr Olive’s Statement of Financial Circumstances shows that he jointly owns the matrimonial home (value $1,000,000). His only other significant asset is a motor vehicle ($8,000). Mr Olive’s liabilities include the joint mortgage ($727,000) and the loans already discussed above. In addition, he is required to pay spousal maintenance by way of mortgage payments of $400 per week, which he has not been paying. He has superannuation totalling $163,500. Mr Olive’s personal expenses are $2,165 per week (child support, spousal maintenance (which is not being paid) income tax, credit card payments and health insurance). In regard to his household expenses, Mr Olive has indicated that these are around $1,877 per week, not including loan repayments. The loan repayments are listed at $1,100 per week in addition to these expenses. However, the amounts described to the tribunal totalled $731 per week. These expenses include discretionary amounts which are not necessary expenses. Additionally, the rate of repayment of some of the loans is higher than necessarily would be the case were they commercial loans. The tribunal has not accepted that these loan repayments, at their current rate of repayment, should be given priority over Mr Olive’s child support obligations. In particular, the repayment of the $21,000 loan to his friend at $500 per week and the accountant repayments ($150 per fortnight). The tribunal notes Mr Olive’s statement of financial circumstances states he is repaying his lawyer at $500 per week but in his oral evidence he stated that this debt is not being repaid currently pending the property settlement. The tribunal also notes Mr Olive’s statements that the loans will be repaid once a property settlement is reached regarding the matrimonial assets.

4. In relation to Ms Olive, the Statement of Financial Circumstances shows her income as $1,372 per week ($71,344). This is commensurate with her payslips. The tribunal notes that Ms Olive’s income tax return for 2016/2017 shows taxable income after deductions of $87,335. Ms Olive stated that her income is higher due to the sale of shares to repay debts. However, this capital gain only accounts for part of the extra income as it shows her income from employment to have been higher during the financial year. In regard to her assets, she jointly owns the matrimonial home and her motor vehicle ($15,000) which is subject to finance. She has superannuation of approximately $86,400. Ms Olive states her only other liability is for rates, strata fees and building works in the Statement of Financial Circumstances.

5. The tribunal notes Mr Olive’s submissions that Ms Olive has a greater earning capacity than is reflected in her part-time employment. Ms Olive included a letter from the Executive Director of [a section] at [an organisation] which confirms she has been employed on a part-time basis since 2011. As there has been no change in Ms Olive’s pattern of work or type of work since prior to separation, the tribunal is not satisfied that Ms Olive’s earning capacity is greater than indicated.

6. In determining the proper needs of a child, it is necessary to have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Assessment Act). The tribunal has considered the evidence of the parties relating to the needs of the children. Mr Olive stated at the hearing that he pays health insurance for the benefit of the children and this should be taken into account. The tribunal is not satisfied that these payments are unusual or uncommon such that they affect Mr Olive’s ability to pay child support.

7. Subsection 117(4) of the Assessment Act requires the tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support.

8. In relation to both Mr Olive and Ms Olive, the tribunal does not believe either party would experience hardship if a departure determination were to be made. The tribunal finds that Mr Olive is able to afford to pay child support on the basis of his income from employment as discussed above. However, the tribunal agrees that the income taken into account should be reduced to allow for allowable deductions. Any change in child support to reflect this will not cause either parent hardship.

9. The tribunal is satisfied that it is just and equitable to make a departure determination as follows:

   ·         For the period 6 September 2017 to 30 June 2019, the adjusted taxable income for Mr Olive shall be set at $180,000.

   ·         For the period 6 September 2017 to 31 December 2017, the adjusted taxable income for Ms Olive shall be set at $87,335.

   ·         For the period 1 January 2018 to 30 June 2019, the adjusted taxable income for Ms Olive shall be set at $71,344.

10. The above determination is an increase in child support payable from the administrative assessment which was in place prior to the application for a change. The tribunal finds that there should be a change in Ms Olive’s adjusted taxable income to what is reflected in her income tax return, but this should be limited due to her present income being reduced from this amount. The tribunal has carefully considered all of the written and oral evidence and costs regarding the children’s proper needs. The income, resources, benefits and assets together with the commitments and liabilities of both parties were also scrutinised to determine the above departure determination. In considering all of the factors in subsection 117(4) of the Assessment Act, the tribunal has taken the view that neither party will experience hardship as a consequence of this departure determination, based on the above considerations. The assessment will revert to the administrative assessment from 1 July 2019 but it is open to both parties to seek further departure determinations if their circumstances change.

Is it otherwise proper to make a particular departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be ‘otherwise proper’ to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on the one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Assessment Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support. The tribunal has concluded that it is otherwise proper in the circumstances to depart from the administrative assessment.

DECISION

The decision under review is set aside and, in substitution, the tribunal decides as follows:

·         For the period 6 September 2017 to 30 June 2019, the adjusted taxable income for Mr Olive shall be set at $180,000.

·         For the period 6 September 2017 to 31 December 2017, the adjusted taxable income for Ms Olive shall be set at $87,335.

·         For the period 1 January 2018 to 30 June 2019, the adjusted taxable income for Ms Olive shall be set at $71,344.