Pecci and Deacon (Child support)

[2018] AATA 4349

Pecci and Deacon (Child support) [2018] AATA 4349 (10 October 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/AC014559

APPLICANT:  Mr Pecci

OTHER PARTIES:  Child Support Registrar

Ms Deacon

TRIBUNAL:Member M Kennedy

DECISION DATE:  10 October 2018

DECISION:

The decision under review is affirmed.

CATCHWORDS
CHILD SUPPORT – departure determination – earning capacity of parent – change of industry or occupation from business owner to employee – whether affecting the child support assessment a major purpose of decision – no ground for departure – decision under review affirmed

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

1. Mr Pecci and Ms Deacon are the parents of [Child 1] and [Child 2] in respect of whom a child support assessment is in place. [Child 1] and [Child 2] are in the shared care of their parents. Under the current child-support assessment Mr Pecci has a liability to pay child support of $3708 per annum to Ms Deacon, based on Mr Pecci’s adjusted taxable income for 2016 2017 of $55,054 and Ms Deacon’s adjusted taxable income for 2016 and 2017 of $22,903.

2. Mr Pecci applied for a change of assessment on 28 September 2017. Mr Pecci’s application was refused on 24 March 2018 as a ground to depart from the administrative assessment was found not to be established. Mr Pecci objected to this decision, but an objection officer disallowed the objection on 21 June 2018.

3. Mr Pecci applied to the Tribunal for review on 11 July 2018.

Procedural matters

1. For completeness I record that on his application Mr Pecci requested that he be represented in the Tribunal by [Representative A] of [named agency]. At a directions hearing on 5 September 2018 I refused permission for [Representative A] to represent Mr Pecci in these proceedings.  I explained to Mr Pecci that my understanding was that [Representative A] was not an admitted legal practitioner in this state, and I was disinclined to permit a lay advocate to participate in child-support proceedings.  I indicated that I would consider favourably any subsequent request for Mr Pecci to be represented by an admitted legal practitioner, or any information indicating that [Representative A] was an admitted legal practitioner, but no such request or information was forthcoming.

2. At the directions hearing Mr Pecci also explained that he did not wish to participate in the proceedings in such a way that required direct contact either in person or by telephone with Ms Deacon. Mr Pecci relied on medical evidence to support his contention that doing so would cause him significant distress.  At the directions hearing I suggested that in these circumstances it may be desirable for the review to be undertaken on the papers, and I could formulate directions to allow this to happen in an orderly fashion. Mr Pecci agreed to this approach.

3. Separately, I spoke with Ms Deacon who also agreed that proceeding with the review on the papers would be acceptable to her.

4. To ensure that the parties’ opportunity to appear before the Tribunal and give evidence was preserved, and despite the directions I put in place for the review to proceed on the papers, I preserved liberty for each party to apply in writing to request to appear at the hearing in person if their views changed in this regard. No such request was received from either party. The matter has therefore proceeded on the papers.

5. While this approach has many benefits for parties who do not wish to appear in person or by telephone at the Tribunal, or as in this case engage on any level with the other parent, the approach also carries with it some disadvantages. In particular I lose the opportunity to manage the expectations of the parties as to what outcomes are possible from the review and restrict the receipt of irrelevant evidence or submissions.

6. Decisions made by the Registrar may be reviewed in the Tribunal. Decisions made by the Tribunal may be challenged in the courts on the basis of legal error.  Subsequent applications for a change to the administrative assessment do not provide a substitute for applications for review of the Registrar’s decisions or for challenges to lawfulness of Tribunal decisions.  I mention these matters because Mr Pecci has previously made an application for a change of assessment on essentially identical grounds and relying on the same evidence on 3 November 2015 and that decision was refused.  Mr Pecci did not seek review of that decision.  Nonetheless I will consider Mr Pecci’s application on its merits, but am conscious that even if Mr Pecci were successful in that regard restrictions on the period to which any change of assessment determination can apply would be engaged.

ISSUES

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the income of each parent.

2. Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Registrar in writing, requesting a departure from the administrative assessment in relation to a child.

3. Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more grounds under subsection 117(2) of the Act exist, and that it would be just and equitable and otherwise proper to make a particular determination.

4. The Tribunal may make a departure determination to cover periods up to 18 months prior to the date of the application for a change of assessment.

5. The issues for me to determine in this case are therefore:

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

   ·       Whether it would be just and equitable as regards the child, the liable parent and the carer entitled to child support, and otherwise proper, to make a particular determination to depart from the administrative assessment of child support.

CONSIDERATION

Is there a ground to depart from the administrative assessment of child support?

1. Only one ground has been raised in this application for a change of assessment by Mr Pecci. Mr Pecci has identified the ground referred to by the Registrar as reason 8B as the ground in issue. Mr Pecci elaborates in an accompanying letter to his application form that he considers Ms Deacon had run a profitable [business] business in 2011 and 2012 and ought to be assessed for child support based on the income she earned from that business at that time.

2. Subparagraph 117(2)(c)(ib) of the Act provides that, in the special circumstances of the case, a ground for a departure determination may be established if application of the legislative provisions relating to administrative assessment results in an unjust and inequitable determination of the level of financial support to be provided by the liable parent due to the earning capacity of either parent.

3. I may determine that the parent’s earning capacity is greater than is reflected in his or her income only if satisfied that:

   (a) one or more of the following applies:

   (i) the parent does not work despite ample opportunity to do so;

   (ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii) the parent has changed his or her occupation, industry or working pattern; and

   (b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i) the parent’s caring responsibilities; or

   (ii) the parent’s state of health; and

   (c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

   (Subsection 117(7B) of the Assessment Act; emphasis added.)

4. I will refer to each of these sub-paragraphs as criteria, although I am conscious that subsection 117(7B) does not form a code per se.  Satisfying subsection 117(7B) of the Act is however a pre-requisite to consider a departure on the grounds of earning capacity.

5. As to the first criterion, in his written submissions, Mr Pecci takes issue with the conclusion of the objection officer in the decision of 21 June 2018 to the effect that she was not satisfied that Ms Deacon had reduced hours or changed  working patterns or industry such that the first criterion could be satisfied. Mr Pecci notes a contradiction in this conclusion with conclusions reached by the primary decision maker on 24 March 2018 and the earlier primary decision maker of 11 January 2016.  In this regard Mr Pecci’s submissions appear to confuse the identity of the decision-maker of 21 June 2018 (the objection officer) with the identity of the decision-maker of the primary decision of 24 March 2018 ([named]).  In any event it is correct to note that the primary decision makers and the objection officer have reach different conclusions about whether the first criterion in subsection 117(7B) is met.  The primary decision makers accepted that Ms Deacon had changed the nature of her employment since the 2013 2014 financial year and that she is no longer operating a [business].

6. I have considered carefully the point at time in which a comparison is to be made about a parents occupation, industry or working pattern.  In this regard, I note that the objection officer decided that the comparison should be made between the present and the previous application, noting there had been no material change in Ms Deacon’s working arrangements since then.  Mr Pecci asks that the Tribunal consider a comparison with a much earlier time.

7. In Waites & Lawson (SSAT Appeal) [2011] FMCAfam 42 (21 January 2011), the following remarks were made:

   …

   18. The other important issue is a temporal one: when is the relevant time for the change. It can not be the case that the change has to have occurred in the particular child support period, otherwise an assessment on earning capacity would only last, at most, for 15 months. To restrict the change to the commencement of the child support assessment would mean that those who did not immediately seek a CSA assessment may be locked out by s.117(7B) because the payer changed their working pattern between separation and assessment. Indeed, even to limit the time to a time after the birth of the child would mean that in some cases, where children are born to parents not in a relationship, a payer could avoid their responsibilities by changing their working pattern before the birth.
   19. The section must be viewed in context. It does not set out a code for earning capacity decisions, rather it simply imposes restrictions on cases that would otherwise come within the meaning of ‘income earning capacity’. Had parliament wished to add a temporal limit to the restrictions it could easily have done so. When one recognises that reasonable temporal limits, judged by the circumstances of the particular case, are implicit in the way in which the concept of ‘income earning capacity’ has developed it is not surprising that parliament would not have legislated any artificial limit in the section.

8. It is clear therefore that there is no chronological restriction provided for in the legislation to limit when any change to a person’s occupation, industry or working pattern may be irrelevant – even if it is a change that took place prior to the commencement of the child support assessment.  In this case, the issue is more complex because as noted by the objection officer Mr Pecci had previously been unsuccessful in establishing this ground.  I have adopted the most generous interpretation to Mr Pecci.

9. Mr Pecci argues that Ms Deacon had a company ‘[named]’ from early to mid-2002.  That company operated a [business] called ‘[Business 1]’. The evidence of the parties now before the Tribunal is the same in that [Business 1] was closed in 2014, about 1 year post separation, and after the commencement of the child support case.

10. The evidence of the parties in relation to the financial performance of the business and the decision to close the business will be addressed later. 

11. It is sufficient for the first criterion to note that the Courts have held that there is no chronological limitation as to when a change to a person’s occupation, industry or working pattern for these purposes has taken place, and to note that Ms Deacon states in her submissions that she has changed her industry (B15 at point 5 of the page).

12. For these reasons, I am satisfied that the criterion at subsection 117(7B)(a)(iii) of the Act is established.

13. This of itself is insufficient to meet the preconditions for having regard to ‘earning capacity’.

14. I turn to the second criterion.  That criterion is satisfied (relevantly) where a parent’s decision to change occupation or industry is not justified on the basis of the parent’s caring responsibilities or the parent’s state of health.

15. In relation to this criterion, Mr Pecci points to earlier findings of decision makers to the effect that Ms Deacon has not raised any issues in relation to her capacity to work having changed due to any health issues or caring responsibilities. 

16. Ms Deacon’s submission on this criterion is that she works when she has the children and when she does not have the children.  Ms Deacon refers to a more recent medical issue ([an injury]) that has had an impact on her ability to work as [an occupation] and reduced her income.

17. In that regard, it is clear that medical evidence now before the Tribunal justifies a temporary reduction in Ms Deacon’s capacity to work on medical grounds, but I recognise this is not the issue that has brought Mr Pecci to the Tribunal, and is also a temporary matter.

18. In relation to this second criterion, I find that Ms Deacon’s decision to change her industry or occupation by closing [Business 1] is not justified on the basis of her caring responsibilities or her health.  Indeed, I do not understand Ms Deacon ever to have argued that there was any such justification.

19. From 15 April 2018 when Ms Deacon [suffered an injury], I accept that any decision not to work or reduce her hours of work is medically justified.  Little turn on this however, as Ms Deacon has provided evidence demonstrating that she has continued to work at a lower capacity and has made a successful claim for an injury benefit. 

20. As to the third criterion, I must consider whether Ms Deacon has demonstrated that it was not a major purpose of a decision to (relevantly) change industry, occupation or working pattern to affect the administrative assessment of child support.

21. Mr Pecci contends as to Ms Deacon’s motive that she did wish to impact on child support assessments.  In this regard, he points to an increasing profit in the business from 2008 to 2013, and the closure of the business taking place after the child support assessment commenced.  In this regard, Mr Pecci explains that if one were to assume that Ms Deacon had income from the business of $80,000, then the consequential child support assessment would demonstrate the motivation to close the business.

22. Mr Pecci alleges that Ms Deacon’s continued involvement in another [productive] activities for some time thereafter indicates involvement in a cash business ‘under the radar  from the ATO and Child Support’, and I should not place any reliance on unsupported statements from her.

23. Mr Pecci also points out that Ms Deacon would be able to live comfortably when she commenced living with her new partner in light of that person’s income.

24. Mr Pecci goes on to make other allegations regarding Ms Deacon’s conduct and the alleged impact on him.  As these allegation are immaterial to the legal question I must consider in this application, I have disregarded that evidence, and disregarded Ms Deacon’s responses engaging with those allegations..

25. In relevant response, Ms Deacon contends that she closed [Business 1] after receiving advice from her bookkeeper and accountant.  She states that she closed the business owing debts of $70,000 in taxation and superannuation.  Ms Deacon states that despite closing the business, she is now working and earning more than she did in 2013.

26. Ms Deacon states that financial records regarding the financial performance of [Business 1] relied upon by Mr Pecci  are not indicative of the financial resources available to her as the records do not show her wages [‘drawings’], taxation obligations and superannuation payments.  Ms Deacon states that financial records are incomplete. 

27. Ms Deacon relies on her previous taxable income to demonstrate that she is earning more in her current position than as a business owner, and that this is inconsistent with the contention that she is reducing her hours and work commitments in spite of child support payments.

28. Mr Pecci has had an opportunity to reply to Ms Deacon’s submissions and evidence.  I have had regard to his response. 

29. Mr Pecci contends that Ms Deacon’s bookkeeper was her brother in law, and there is no evidence provided of an outstanding amount owed to the taxation office.  Mr Pecci contends that Ms Deacon could have secured a position in the same industry (i.e. managing a [business]).  Mr Pecci’s remaining contentions take issue with irrelevant matters or assertions made by Ms Deacon, or are about his own personal circumstances, that are not relevant to this particular question.

30. I have considered the relevant evidence and contentions of the parties carefully.  I have noted that it is indeed the case that there is no direct evidence of taxation or other debts owed by the business justifying its closure on financial grounds.  I have further noted that these problems affecting the business were not mentioned in Ms Deacon’s affidavit of 10 February 2015 at B37, although problems with the taxation office are mentioned in respect of an earlier period.  However, I recognise that a decision to close a business is likely to have many factors including financial performance, debts, the nature of the business and also significantly changed personal circumstances of the operator of the business.

31. The question for me is essentially whether it has been demonstrated that manipulating the child support assessment was not a major purpose of the corresponding change to Ms Deacon’s decision to change her occupation or industry.  On this particular matter, Ms Deacon’s contention to the effect that her taxable income is higher now than it was when she operated the business is established by the evidence (See T Docs f.139). 

32. I note that in the decision of 11 January 2016, the decision maker mentions that Ms Deacon’s taxable income in 2010/2011 was nil, in 2011/2012 it was $4,258 and in 2012/2013 it was $5400. 

33. Records in the Tribunal papers at T139 show that taxable income was $16,052 in 2013/2014 and $2030 in the financial years around the point at which the business closed.  In 2015/2016 Ms Deacon’s taxable income was lower than in 2013/2014, but higher than in 2014/2015.

34. Furthermore, and by way of fortifying my view that the objective evidence of Ms Deacon’s income over time is simply inconsistent with the proposition that it was a major purpose of her change to working arrangements to affect the child support assessment, I note that concealing financial resources for child support is typically attempted through business structures rather than transitioning to become a PAYG salary earner, and Ms Deacon has done the opposite.

1. Overall, I have found Ms Deacon’s contention that she did not change her industry or occupation to affect the child support assessment is supported by the objective fact of her increased taxable income as a result of that change is persuasive.  I am positively satisfied that it was not a major purpose of Ms Deacon’s decision to close her business and leave her occupation/industry as a proprietor of a [business] and take up other employment to affect the administrative assessment of child support.  I find that Ms Deacon has demonstrated this to be the case.

2. The criterion at paragraph 117(7B)(c) is not established, and the preconditions for having regard to the earning capacity of Ms Deacon as a ground to depart from the administrative assessment is not established.

3. It follows that the requirements of subparagraph 117(2)(c)(ia) are not established, and this is the only ground agitated on the evidence.

4. As no ground to depart from the administrative assessment is established, the application for a change of assessment must be refused: section 98F of the Act.

5. I will therefore affirm the decision under review.

Other matter

1. In his written submissions, Mr Pecci submits that he and Ms Deacon should have a Binding Child Support Agreement with terms that neither party pay child support, the cancellation of any child support debt and the return of funds disbursed, and the removal of the Child Support Agency from any further action in this matter.  Ms Deacon, in her written response indicates she has no interest in any such agreement being made.

2. Such an outcome as proposed by Mr Pecci is well beyond the power of the Tribunal in conducting a review.  As the name suggests, a Binding Child Support Agreement is an agreement to be reached by parties.  The Tribunal has no role in considering or brokering such an agreement.

DECISION

The decision under review is affirmed.