Pollock and Campbell (Child support)

[2020] AATA 5120

Pollock and Campbell (Child support) [2020] AATA 5120 (21 October 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/PC019070

APPLICANT:  Mr Pollock

OTHER PARTIES:  Child Support Registrar

Ms Campbell

TRIBUNAL:Member S Brakespeare

DECISION DATE:  21 October 2020

DECISION:

The decision under review is varied so that there is a departure determination in the following terms:

·for the period 1 December 2019 to 30 November 2022 the adjusted taxable income for Mr Pollock is varied to $92,554;

·for the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Pollock will be increased by $1,692;

·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will increase by $2,395;

·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will be increased by $2,060.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – costs of special needs – cost of maintaining the children are significantly affected – financial resources of the liable parent – 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 Pollock is a parent liable to pay child support to Ms Campbell in respect of their children [Child 1], who is 13 and [Child 2], who is 12.

2. On 28 November 2019 Ms Campbell lodged an application for a change of assessment (a departure determination) based on multiple grounds.

3. At the time of the application Mr Pollock was assessed to pay an annual rate of child support of $3,818 for the child support period commencing 1 December 2019. The assessment was based on Mr Pollock’s 2018/19 provisional income of $46,733 and Ms Campbell’s 2018/19 adjusted taxable income of $42,575. For the child support period 6 February 2020 to 8 September 2020 Mr Pollock was assessed to pay an annual rate of $4,360. The increase was due to [Child 1] turning 13.

4. On 30 January 2020 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):

   ·the adjusted taxable income of Mr Pollock is varied to $94,000 for the period 1 December 2019 to 30 November 2022.

5. Ms Campbell lodged an objection to the original decision. On 6 May 2020 the objection was allowed in part and the objections officer made the following departure determination (the objection decision):

   ·for the period 1 December 2019 to 30 November 2022 the adjusted taxable income for Mr Pollock is varied to $94,000;

   ·for the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Pollock will be increased by $1,692 [Child 1’s school fees];

   ·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will increase by $2,395 [Child 1’s school fees];

   ·the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will be increased by $2,060 [for Child 1’s special needs].

6. Mr Pollock lodged an application for review of the objection decision with the tribunal. A directions hearing was held on 19 August 2020. Mr Pollock and Ms Campbell both participated by conference telephone and the parties subsequently complied with the directions that had been issued.

7. A hearing was held on 25 September 2020. Mr Pollock and Ms Campbell both gave evidence on affirmation to the tribunal via conference telephone. Mr Pollock had been granted permission to have his legal representative [Representative A] attend the hearing to give oral submissions. Whilst [Representative A] attended the hearing via telephone, he did not provide any oral submissions to the tribunal.

8. The Child Support Agency provided the tribunal and the parties with bundles of paper relevant to the review (461 pages in total). The tribunal gathered further documents from the parties; Mr Pollock’s documents were folioed A1 to A73 and Ms Campbell’s documents folioed B1 to B16. A copy of these documents was exchanged with the parties prior to the hearing. After hearing the tribunal directed Mr Pollock to provide further information. Mr Pollock provided documents folioed A74 to A82. The extra documents were sent to Ms Campbell for comment; however, no response was received from her.

9. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

1. The statutory provisions relevant to these reviews are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).

4. Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three-step process such that the issues for determination by this tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and if so

   ·whether it is just and equitable to make a particular departure determination; and if so

   ·whether it is otherwise proper to make a particular departure determination.

5. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.

6. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman and Gyselman (1992) FLC 92-279 has held:

   as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.

7. Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the tribunal is satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Act.

9. The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

1. Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents. 

2. [Child 1] attends [College 1]. The total fees payable for [Child 1] at [College 1] were $3,385 in 2019 and $4,791 and 2020. Whilst the fee statements from [College 1] indicate that both parents are liable for the fees, it is Ms Campbell who has paid the fees. (The fees noted above are what was payable after a concession had been applied.)

3. Ms Campbell contended that the only reason [Child 1] started attending [College 1] was that Mr Pollock had backed her into a corner by refusing to allow her to enrol [Child 1] into a public school. When she asked Mr Pollock to contribute one half of the school fees he indicated that he preferred that she apply through the Child Support Agency.

4. Initially during the hearing, Mr Pollock told the tribunal that it was never his intention for [Child 1] to be educated privately and that he was happy for him to attend a high school. During the hearing Mr Pollock changed his evidence, acknowledging that it was his desire for [Child 1] to attend [College 1]. He said, however, that when he made that decision he thought that his mother would pay the school fees as she had previously paid the children’s school fees. However, things have changed; his mother has not paid the school fees and he doesn’t have the capacity to pay the school fees.

5. In deciding this matter, the tribunal needs to consider the type of education intended by both parents for the children, rather than any particular school intended by the parents (Wild and Ballard (1997) FLC 92-771). The tribunal will also need to consider and determine whether both parents expected the children to be educated privately. The fact that a payer can afford to pay the fees is not in itself a reason for imposing a liability to contribute to school fees (Mee and Ferguson (1986) FLC 91-716).

6. The tribunal is satisfied that Mr Pollock did intend for [Child 1] to be educated at [College 1]. Ms Campbell acquiesced with that choice by enrolling [Child 1] in the school. The cost of the fees significantly affects the costs of maintaining [Child 1], as the 2020 fees are more than the child support payable to Ms Campbell for both children.

7. The tribunal finds that the ground for departure is satisfied as the costs of maintaining [Child 1] are significantly affected because he is being educated in a manner that was expected by his parents.

8. Whether a parent subsequently has capacity to contribute to the fees is a matter that is considered in deciding what is it just and equitable determination to make.

Issue 2 – Is it just and equitable to make a particular determination?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below[1], which are as set out in subsection 117(4) of the Act:

   [1] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act re Tyagi & Meares [2008] FMCAfam 886

   (4)  In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (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; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. In having regard to the proper needs of the child, regard must be had 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 Act).

3. The tribunal has found that [Child 1] is being educated in the manner intended by the parents and the cost of his education was $3,385 in 2019 and $4,791 and 2020. Ms Campbell has paid the education costs and requests that 50% of those costs be added to Mr Pollock’s child support liability.

4. With respect of special needs for [Child 1], both parents agreed that [Child 1] has special needs and that the out-of-pocket cost of those needs ($4,121 for 2020) should be allocated equally between the parents. As Ms Campbell has borne those costs, an amount of $2,060 is to be added to Mr Pollock’s child support liability.

5. The tribunal finds that that is appropriate to add these extra to the ordinary costs of the children’s needs as calculated the costs by reference to Costs of the Children Table.[2]

   [2] Provided for in section 155 of the Act.

6. One of the grounds of departure put forward by Ms Campbell was in respect of Mr Pollock’s income property and financial resources. She disagreed with the income amount used in the administrative assessment (a provisional 2018/19 income of $46,733 at the time of application). Mr Pollock has since lodged his 2018/19 individual income tax return and has been assessed at an adjusted taxable income of $38,238.

7. Mr Pollock runs his own business, a [service] business. In Voss & Child Support Registrar & Anor (SSAT Appeal) [2009] FMCAfam 1296, the Court commented on the common situation of a self-employed person’s taxable income not corresponding with their income or financial resources for child support purposes: 

   There is a body of cases where simple reference to a person’s tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn’t properly reflect the realistic capacity of the person to provide financial support for their children.

8. Mr Pollock told the tribunal that in general he pays himself a salary of $1,000 per week from his business. However, he may draw less if the business account balance is such that that the full amount might cause cash flow issues. Mr Pollock advised the tribunal that he had previously lent money to the business and in 2018/19 his taxable income was less as some of his salary was recorded as a loan repayment. The tribunal noted that the balance sheet for the business indicates that the unsecured loan from Mr Pollock reduced from $32,957 in 2018 to $18,682 in 2019.  Mr Pollock also provided the tribunal with a copy of the general ledger entries for that loan for 2018/19 and 2019/20. The general ledger for 2019/20 indicates that the loan has been reduced by a further $4,429. The tribunal asked Mr Pollock to explain the nature of ledger account credit entries noted as “interest expenses”. Mr Pollock’s accountant wrote that the some of the funds Mr Pollock injected into the business over the years had come from personal loans he had taken with [Bank 1] and therefore some of the interest for that loan was charged to the business.

9. Mr Pollock told the tribunal that since the start of the 2020 calendar year the business has been in a position to again pay him a salary of $1,000 per week. He calculated his gross salary to be $1,280 ($66,560 per annum) and this is the amount he has recorded in his Statement of Financial Circumstances.

10. The financial statements indicate that the business had a total profit for the 2018/19 year of $7,460. The profit was not distributed. The profit reduced the accumulated losses of the business to $193,507.

11. The tribunal further noted that the balance sheet for the business for 2018/19 indicated that an unsecured loan to Mr Pollock’s sister was reduced by $24,356 and a loan to another associate was reduced by $22,500 in that period.  The tribunal directed Mr Pollock to provide further written submissions and supporting documentation regarding the payments to associates, as it was not clear to the tribunal where the funds came from to repay these loans.  

12. Mr Pollock’s accountant provided the following explanation to the tribunal:

    ·The loan from [Ms A] was provided to repay the [Bank 1] Overdraft in the 2018 financial year. As you had personal property issued as guarantee against the overdraft, this meant that you weren’t previous able to refinance your [Bank 1] Personal Loans to [Bank 1]. Once the Overdraft was paid off and the [Bank 1] Loan refinanced, this provided you a reduced repayment on these personal loans, better cashflow and a loan interest rate that what [Bank 1] was offering. The loan was the repaid to [Ms A] from available cash flow;

    ·The loan from [Ms B] was previously provided a number of years ago to assist in ATO debt repayment. This loan has been repaid via personal expenses relating to [Ms B] paid on the Business Visa Card and/or available funds from the business.

13. Extracts from the General Ledger were also provided.

14. The tribunal is satisfied that the income available to Mr Pollock for the purpose of the child support assessment is higher than the amount declared in his income tax returns and higher than the grossed up amount of $66,560.

15. The tribunal decided that income that should be used to assess Mr Pollock’s child support liability is $92,554, made up of the following components:  taxable income of $38,238, loan repayments to associates of $46,856 and undistributed profit of $7,460. The tribunal finds that this amount is a fair reflection of the funds Mr Pollock is generating from his business. The fact that he then used some of those funds to repay the loans to associates should not, in the tribunal’s view, reduce the income used to calculate the assessment.

16. Mr Pollock’s owns two properties; the home in which he lives and 50% of a property in [Town 1] (50% share). Mr Pollock said that the property in [Town 1] was purchased when he and Ms Campbell were together. He was unable to afford the repayments on his own but selling it was likely to result in a substantial loss. His sister therefore bought 50% of the property from him. Mr Pollock said that he has a mortgage which is secured against both his home and the second property. Mr Pollock said that the second property does not produce an income; he acknowledged that it includes a house that is untenanted.  The tribunal notes that reference to this second property had been made in previous considerations by the Child Support Agency of departure applications. It has generally been referred to as a hobby farm. There is also an indication in the papers that Mr Pollock’s sister receives or has received some income from running livestock on the property. Mr Pollock also stated he has a share portfolio in publicly listed companies valued at about $7,500.

17. Ms Campbell is currently being assessed on an income of $42,575, being her 2018/19 adjusted taxable income. Ms Campbell’s income is derived from being a part-time employee with [employer name]; she has been employed there for more than 28 years. Apart from child support payments, Ms Campbell’s only other source of income is family tax benefit (which is specifically excluded from being included for the purpose of child support assessment by subparagraph 117(7A)(b)(ii) of the Act).

18. Ms Campbell’s only asset of significance is the home in which she lives. It has a small mortgage. Ms Campbell provided evidence that her mother has loaned her $240,000 to reduce the mortgage on the property; that amount is repayable to her mother’s estate upon her death. Ms Campbell said that she has a number of siblings who are likely to be beneficiaries of the estate and it is unknown as to how much of that debt would be offset by her share of the estate. Ms Campbell acknowledged that she is not currently required to repay any of the loan. Ms Campbell also has one-third ownership of a parcel of shares in an unlisted company. She said that she has never received any dividends and is unlikely to.  She is unable to sell them.

1. The tribunal proposes to make a departure determination in the following terms:

   ·for the period 1 December 2019 to 30 November 2022 the adjusted taxable income for Mr Pollock is varied to $92,554;

   ·for the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Pollock will be increased by $1,692 [[Child 1’s] school fees];

   ·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will increase by $2,395 [[Child 1’s] school fees];

   ·the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will be increased by $2,060 [for [Child 1’s] special needs]

1. The proposed assessment will result in a monthly child support liability for Mr Pollock of approximately $280 from 1 December 2019, increasing to $365 from 6 February 2020 and then reducing to $271 per week from 1 January 2021 (after the removal of the additional amounts for [Child 1’s] school fees and special needs).

2. In his Statement of Financial Circumstances Mr Pollock noted that his average weekly expenses total $997. The child support formula provides a self-support amount of $481 for a parent. Based on that calculation the tribunal is satisfied that Mr Pollock has sufficient income to pay for his self-support needs and the rate of child support payable under the proposed determination. The tribunal notes that Mr Pollock is required to make mortgage repayments of $369 per week which are attributable to the loan for the hobby farm.  The tribunal does not find that a commitment to a non-income producing asset is a necessary commitment that should take precedence over a person’s obligation to support their children. The tribunal is satisfied that Mr Pollock has capacity to pay the proposed amount of child support.

3. In her Statement of Financial Circumstances Ms Campbell indicated that her income including her family tax benefit and child support payments, only just cover her expenses. She stated that she uses her mortgage redraw account to cover any unexpected costs.

4. The tribunal finds that a failure to make the proposed determination would cause Ms Campbell a degree of hardship, as her income from employment is insufficient to cover her self-support needs and the costs of the children.

5. The tribunal finds the proposed determination to be just and equitable.

Issue 3 – 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 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. It focuses on the balance of support carried between the parents on 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. 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.

2. Ms Campbell is in receipt of family tax benefit in respect of the children. The proposed determination is likely to reduce her entitlement to that payment. As such an outcome shifts the burden of supporting the children from the taxpayer to the parents and the proposed determination is otherwise proper.

DECISION

The decision under review is varied so that there is a departure determination in the following terms:

·for the period 1 December 2019 to 30 November 2022 the adjusted taxable income for Mr Pollock is varied to $92,554;

·for the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Pollock will be increased by $1,692;

·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will increase by $2,395;

·for the period 1 January 2020 to 31 December 2020 Mr Pollock’s annual rate of child support will be increased by $2,060.