Ottley and Ottley (Child support) - [2021] AATA 3357

Ottley and Ottley (Child support) [2021] AATA 3357 (28 July 2021)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2021/SC020923
APPLICANT:  Mr Ottley
OTHER PARTIES:  Child Support Registrar
Ms Ottley

TRIBUNAL:Member K Dordevic
DECISION DATE: 28 July 2021
DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – whether the liable parent’s assets render the assessment unfair - decision under review affirmed

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

The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.
This application concerns the child support liability of Mr Ottley (the father) payable to Ms Ottley (the mother) in respect of their youngest child. This case was registered with Services Australia – Child Support on 9 December 2019 and has been collectable since that date. The child is recorded as being in the mother’s 86% and the father’s 14% care from the date the assessment was registered.
After an application was lodged by the father on 15 June 2020, on 1 October 2020 a senior case officer refused the application on the basis that no ground was established. The father lodged a timely objection and on 29 January 2021 his objection was disallowed.
On 2 March 2021 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was held on 16 June 2021. The parents both attended the hearing and the father was represented by [Mr A], [Law firm]. Directions were issued, requiring compliance by 9 July 2021. At the father’s request, both parties were given an extension to 14 July 2021 in which to comply.
On 20 July 2021 the mother requested that the matter be rescheduled to allow her to meet with her accountant face to face, noting that she was unable to given the current COVID-19 lockdown measures in place in NSW. Her request was refused after taking into account the tribunal's statutory objectives and that the likelihood that the current COVID-19 lockdown measures would not be lifted in the immediate future.
The hearing took place on 28 July 2021. The father and mother appeared by MS Teams audio. The father was represented by [Mr A]. The Child Support Registrar was not represented at the hearing. A brief adjournment was permitted during the hearing to allow [Mr A] to receive instructions. The tribunal also considered the documentation provided by Child Support (folios 1–528), the father (folios A1–A155) and the mother (folios B1–B290).

ISSUES

The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:
(i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and
(ii)that 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 under this Part …
Therefore, the issues which arise in this case are:
· Does a ground exist for departure from the administrative assessment of child support? And if so,
· Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

Subparagraphs 117(2)(c)(ia) and (ib) of the Act provide grounds for departure, in the special circumstances of the case, if application of the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either parent’s income, earning capacity, property, and financial resources.
At the time the father lodged his departure application he was liable to pay an annual rate of $7,750 in child support for the period 9 December 2019 to 8 March 2021 based on the parents’ 2019 adjusted taxable incomes of $98,880 (the father) and $46,001 (the mother). The mother’s income was made up of $40,480 income from [ Family Trust1], $6,802 in net rental income and $2,734 in gross interest, with deductions of $4,015 in managing her tax affairs. The mother’s 2020 taxable income is made up of $25,192 in gross interest and a trust distribution from [Family trust 1] of $26,929. She also personally holds property located in [Town 1] and [Town 2], both of which are rented out. Her net rental loss of $2,807 was disregarded for the purposes of calculating her 2020 adjusted taxable income.

11.The father’s position can be summarised as follows. The mother’s assets are in the vicinity of $12,000,000. Therefore, her taxable income ($23,818 in 2018 and $52,121 in 2020) does not reflect her capacity to support the child and it follows that his child support liability is unjust and inequitable, warranting a departure from the administrative assessment from 1 December 2019 until a terminating event occurs. It was submitted that the mother’s adjusted taxable income should be varied to at least $350,000, based on the discretionary spending evident in her bank accounts and that $1,500,000 withdrawn from [Family trust 1] provided the mother with a net benefit of $250,000 (tax free) over a six-year period in addition to her annual rental income of $95,000.

The mother’s position is that whilst she has significant assets and a comfortable lifestyle, it is the father’s responsibility to also contribute to the child’s costs. Her assets produce income and this income is reflected in her income tax returns. The father has two unencumbered homes, significant savings and employment income and 52 nights care per annum. She meets all the child’s schooling, extra-curricular and medical expenses. It is only right that the father contributes to the child’s costs.
The mother completed a Statement of Financial Circumstances dated 22 March 2021. She reports rental income of $490 per week in addition to weekly income of $2,257 from [Family trust 1], of which she is the sole trustee and beneficiary. At first view, this declaration would suggest that the mother’s annual income from the trust is $117,364 in addition to rental income of $25,480 (totalling $142,844). However, this declaration appears to blend the mother’s personal income and expenses with that of [Family trust 1]; she also reported weekly personal expenditure of $2,563 in rates, land tax and other investment property expenses, apparently relating to [Family trust 1]’s rental properties and, presumably, the two investment properties held in her own name. The tribunal concludes that the mother’s income declaration is the gross [Family trust 1] and rental income and must be read in conjunction with her declared expenses relating to these properties, which are in the vicinity of $2,463 per week (allowing about $5,200 of the declared rates expense being for her home).
The mother reports in her Statement of Financial Circumstances that her home is valued at $950,000, that she holds other investment properties valued at $6,452,869 in addition to term deposits and other liquid assets of $1,572,205.35. Her motor vehicle is valued at $45,000, she has a horse float valued at $13,000, household contents valued at $50,000 and superannuation of $599,005. Her only liability is her 2020 income tax of $47,480. Her weekly personal expenditure is $1,675 in income tax and credit card payments of $95. Her household expenditure is $4,788 per week, which includes food of $585, household supplies of $300, and the rental property expenses outlined above. The tribunal calculates that at least $561 of these expenses relate to her care of the child, and about $300 are necessary costs in caring for the child (including an allowance for medical expenses). The mother is not employed, and apparently this has been the case for many years. The tribunal is therefore satisfied that the mother has not changed her working pattern in order to affect the administrative assessment.
It is well settled in this jurisdiction that a parent’s property and assets, as well as their income, should be considered when deciding the appropriate rate of child support to be paid: Abela and Abela (1995) FLC 92-568 and Bendeich and Bendeich (1993) FLC 92-355. The [Family trust 1] assets include four townhouses located in [Suburb], which generated gross rental receipts of $84,780 in the 2020 financial year. In 2019 [Family trust 1] held term deposits of $2,031,152, reducing in 2020 to $105,380 (-$1,925,772); its liability to the mother also decreased from $2,474,218.30 to $535,146.23 (-$1,939,072) in the same period. It is not in contention that these drawings primarily represent the transfer of property to the father as part of the parent’s property settlement (noting that the mother’s bank statements indicate that a further $200,000 was transferred to the father on 21 October 2020, when the settlement concluded, suggesting a total transfer of assets in the vicinity of $2,100,000).
It was conceded that whilst the mother may have not directly benefitted from the transfer of the $1,900,000 from [Family trust 1] (given the father was the primary beneficiary of the funds) it should nevertheless be considered as a financial resource available to the mother when quantifying her income and financial resources and then apportioned over a six-year period (presumably as the child is 12 years of age, thus taking it to the conclusion of the administrative assessment). The tribunal is not persuaded that the return of capital from [Family trust 1] can be characterised as income available to the mother. Halligan FM in the matter of Cazet & Faulkner & Anor (SSAT Appeal) [2011] FMCAfam 1157 remarked:
But treating capital receipts as income, in the absence of a basis on which to find that the receipts are in fact income and not capital, is likely to obscure the fundamental difference between income and capital, and lead to error, not least when considering any hardship any proposed departure may cause to either parent or the child (Assessment Act, s.117(4)(g)).
The capital distribution from the trust to the mother was (predominantly) made so that she could satisfy the terms of the parent’s property settlement, by way of transferring assets to the father. The tribunal is not satisfied that there is any basis on which to find that this transfer of capital represents income available to the mother such as to warrant a departure determination, particularly as it is not in dispute that she did not have the use or benefit of these funds, and certainly not to then apportion these funds over the life of the administrative assessment. As a matter of logic, if this was found to be the case, then the receipt of funds from the property settlement by the father should also be characterised as income. The tribunal is not persuaded that the transfer of capital from [Family trust 1] (via the mother) to the father to satisfy the terms of the parent’s property settlement results in an unjust or inequitable determination of the level of financial support provided by the father to the mother. Furthermore, the tribunal is satisfied that the mother’s actual income from her [family trust] and investment property assets is accurately reflected in her adjusted taxable income.
The tribunal next consider what other income and financial resources the mother receives on an ongoing basis. There has been conflicting evidence as to the mother’s involvement in [Family trust 2]. The trustee is [Company]. The tribunal proceeds on the basis that the mother is one of two directors of [Company]. The trust holds undeveloped land at [Town 3]. A market appraisal of the [Town 3] property, dated 30 July 2019, valued the property at $7,500,000. As the tribunal understands it this property was inherited by the mother and her brother in 2004 in equal shares. Following her brother contesting their father’s will, the mother and her brother were estranged and remain so. In an undated, Deed of Family Arrangement (which neither parent challenged as representing the actual arrangements) the mother and her brother noted their intention that the property shall remain in [Family trust 2] until they jointly agree to either dispose or develop the property; until that time it will continue to be maintained for cattle grazing. There is no evidence before the tribunal to indicate that this asset is income-producing.
It was submitted on the father’s behalf that the mother still retains significant influence as joint director of [Company], though no evidence was tendered that there has been a rapprochement between the siblings. The tribunal is satisfied on the basis of the Deed of Family Arrangement that this asset is only realisable in the event that the mother and her brother reach an agreement. Thus, the tribunal is not persuaded that the mother alone may convert the asset into an income producing asset or to dispose of the asset. Furthermore, the tribunal has no doubt that the value of the property would have been already taken into account in the division of the assets as part of the parents’ property settlement. It was submitted at hearing that this fact should not deter the tribunal from finding that this is a financial resource available to the mother and so be reflected in an assessment of her capacity to meet the child’s costs. The tribunal is not so persuaded.
[Family trust 2]’s 2020 Profit and Loss statement records unpaid present entitlements of $1,347,754; the tribunal assumes that the mother is entitled to a half share of this sum ($673,877) and so could at least expect to receive annual interest of $1,483. Amending the administrative assessment on this basis would decrease the father’s liability by about $78 per annum. The tribunal is not satisfied that this alone is a sufficient basis on which to depart from the administrative assessment.
It was submitted that based on the bank statements in evidence for the period 11 January to 30 April 2019, the mother’s expenditure was in the vicinity of $321,000, with deposits amounting to $562,000; when annualised, indicating that the mother’s income is about $1,076,000 per annum. The tribunal’s own calculations are that deposits into the account included $562,075 withdrawn from the mother’s term deposit account and $1,103 in interest. Total withdrawals were about $395,400, including bank cheques totalling $200,050 (recipients unknown), rates of $8,170.90, real estate agent fees of $1,462 and payments to Revenue NSW totalling $63,571.35. The tribunal is not satisfied that this expenditure is indicative of the mother’s income or financial resources; the tribunal has already addressed the distinction between capital and income and the expenditure includes expenses relating to the [Family trust 1] and investment properties.
The mother partially complied with the directions issued by the tribunal to provide all bank statements for the period 1 July 2020 to 31 May 2021 for all accounts. By way of example, in respect of the [Bank account 1] #0448 (which saw withdrawals of $457,000 during the period 26 July 2020 to 25 January 2021) statements for the period 26 January to 31 May 2021 were not provided. The mother provided the statements for the [Bank account 2] #4113 for the period 25 January 2020 to 24 January 2021. The [Bank account 3] #0485 statements for the period 23 October 2020 to 31 May 2021 were only provided. The mother’s failure to make a full and frank disclosure of her financial circumstances is unsatisfactory and leaves her open to adverse inferences being drawn: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409. However, this alone does not amount to a basis on which to depart from the administrative assessment.
The tribunal considered the period 1 February to 31 May 2021; this period was preferable as the parent’s property settlement had concluded and the mother provided complete bank statements for this period. Thus, the tribunal is satisfied that this more accurately represents her usual expenditure. During this period she spent $32,557 in her [Account 3], $51,014 in her [Bank] account and $14,751 on her Mastercard. It is noted that these calculations exclude expenses associated with the rental properties (such as insurance, rates and land tax) totalling $98,322 over this 120-day period. This may indicate that her net income is about $299,000 ($427,231 if grossed up). However, without the benefit of the 2021 [Family trust 1] financial statements, the tribunal is not satisfied that the mother has undisclosed income available. It is possible that her expenditure suggests that she is meeting her and the child’s lifestyle by continuing to withdraw capital from [Family trust 1] or by withdrawing from her term deposits. The tribunal is satisfied that the interest from the mother’s term deposits and liquid assets are accurately reflected in her taxable income. In the absence of other compelling evidence, the tribunal is not persuaded that the mother has income available to her that is not reflected in her taxable income.
The tribunal understands from the parents that their daughter generally enjoys good physical health. She requires glasses, attends a public primary school and will attend a public high school in 2022. She consults with a psychologist to address her anxiety, the cost of which is met by the mother. The child’s discretionary expenses include provision of [activity] at both parents’ homes and participation in [activity] tuition and competitions. The father does not dispute that he does not contribute to any of the child’s schooling or medical costs and that, apart from the provision of accommodation and food when she is in his care, his costs in caring for the child is of a discretionary nature. The parents’ bank statements indicate that the discretionary costs in caring for the child are high, though generally consistent with their respective income, property and financial resources.
The tribunal next considered the father’s income, property and financial resources. The father provided a Statement of Financial Circumstances dated 24 March 2021. He reports that he is self-employed, earning $2,221 gross per week ($115,492 per annum). His unencumbered home and holiday home are valued at $1,650,000 and $1,080,000 respectively. He also holds funds of about $178,676, two motor vehicles valued at $45,000 and he estimates his interest in his business, [Business name], at about $8,000. His household contents are valued at $5,000 and he has a tractor and boat valued at $15,000. His superannuation balance is $226,000 and has no liabilities. He also has an interest in a deceased estate of $121,000. His personal expenses include $558 in income tax, $480 in superannuation and weekly child support payments of $148.55. He declares his weekly expenses are $1,098, of which $350 relate to his care of the child. Of his own expenses, about $580 appear as necessary. The tribunal put to the father that this appears to overstate his costs, given he cares for the child only two days per fortnight. The father explained that the necessary costs in caring for the child are about $60 per fortnight, but that he likes to take her on outings and purchase her clothing and other items.

The father’s 2020 taxable income was $115,903. The tribunal is satisfied that the father’s earning capacity is fully exercised. His income tax return demonstrates that [Business name] received business income of $325,083 and expenses, including depreciation and motor vehicle, were $209,180. He did not agree that the provision of a mobile telephone and a motor vehicle represents a financial resource available to him that is not reflected in his income tax return. Whilst the tribunal is persuaded that the father is likely to receive additional benefits from his business not reflected in his taxable income, varying his adjusted taxable income by $5,000 would only result in an increase of about $500 per annum, which in the context of his and the mother’s income and financial resources is neither just or equitable. At hearing the father stated that he is not willing to rent out his holiday home, as he wants to keep it available for the family at all times.
It is clear that the mother has significant assets and ongoing income generated from those assets. Equally, the father has significant unencumbered assets (though considerably less than the mother) and consistent income. The father gave evidence that his current child support liability of just under $150 per week is too high, given the mother’s financial resources; he is prepared to contribute to the child’s costs, but no more than between $2,500 to $3,000 per annum.
In order to establish a ground under subparagraphs 117(2)(c)(ia) and (ib) of the Act, the tribunal must be satisfied, in the special circumstances of the case, that the administrative assessment would result in an unjust and inequitable determination of the level of financial support by the father. The Family Court has observed that special circumstances refers to something unusual, but also measured against, and in the context of, the administrative formula otherwise applying. The tribunal has carefully considered each parent’s income and financial resources and on balance is not satisfied that the administrative assessment does result in an unfair or unjust liability for the father. It is apparent that the mother’s taxable income accurately reflects her income and financial resources, as does the father’s taxable income.
As outlined above, the father was liable to pay $7,750 per annum during the period 9 December 2019 to 8 March 2021. His current liability, based on the parents’ 2020 adjusted taxable incomes, is $9,045 per annum. The facts of this particular case demonstrate that the father has capacity to meet his past and current liability. The facts also suggest that the mother has the capacity to meet the child’s necessary and discretionary costs in their entirety; however, that the mother can does not negate the father’s obligation to contribute to the child’s costs; that is not the relevant legislative test. The tribunal is not satisfied that application of the provisions of the Act relating to the administrative assessment would in this case result in an unjust and inequitable determination of the level of financial support to be provided by the father.
The tribunal concludes that the grounds provided for in subparagraphs 117(2)(c)(ia) and (ib) of the Act are not established. For all these reasons the decision under review is correct.

DECISION

The decision under review is affirmed.