Polmans and Polmans (Child support)

[2021] AATA 5037

Polmans and Polmans (Child support) [2021] AATA 5037 (17 November 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC021728

APPLICANT:  Ms Polmans

OTHER PARTIES:  Child Support Registrar

Mr Polmans

TRIBUNAL:  Member P Jensen

DECISION DATE:  17 November 2021

DECISION:

The decision under review is set aside and, in substitution:

• from 29 May 2020 to 31 December 2021, Ms Polmans’ adjusted taxable income is varied to $44,659 per annum;

• from 29 May 2020 to 31 December 2022, Mr Polmans’ adjusted taxable income is varied to $98,881 per annum;

• from 1 July 2020 to 31 December 2020, Mr Polmans’ rate of child support payable is increased by $7,237 per annum;

• from 1 January 2021 to 31 December 2021, Mr Polmans’ rate of child support payable is increased by $7,462 per annum; and

• from 1 January 2022 to 31 December 2022, Mr Polmans’ rate of child support payable is increased by $7,800 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – financial resources of parents – business income available to 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

Introduction

1. Ms Polmans and Mr Polmans are the parents of [Child 1] who was born in 2013 and [Child 2] who was born in 2015. A child support case was registered from 29 May 2020 with what is commonly called the Child Support Agency or CSA. Ms Polmans has been recorded as providing 72% care and Mr Polmans has been recorded as providing 28% care for the children.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 29 May 2020 the administrative assessment was based on an adjusted taxable income for Mr Polmans of $51,151 per annum (which was effectively a default income given that he had not lodged his individual tax returns for a number of years) and Ms Polmans’ 2019-20 adjusted taxable income of $25,886. Mr Polmans was assessed to pay $4,648 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Polmans lodged a departure application on 15 September 2020. An original decision-maker granted her application and made a departure decision. Mr Polmans objected to that decision. An objections officer allowed his objection and substituted a decision to vary Mr Polmans’s adjusted taxable income to $98,881 per annum from 29 May 2020 to 31 October 2022. Ms Polmans applied to the Tribunal for further review. I conducted a directions hearing on 30 September 2021 and a full hearing on 5 November 2021. Ms Polmans and Mr Polmans gave sworn evidence by conference phone. Ms Polmans was represented by [Ms A]. 

4. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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; …

A ground for departure

1. Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:

that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

…   

(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents …

1. In late 2018, both parents signed enrolment forms for the children to attend [School 1] which is a private school. The children were subsequently attended that school. At the start of 2020, [Child 1] was in Year 1 and [Child 2] was in Prep. There is no dispute that while they were attending that school they were being educated in the manner that was expected by the parents.

2. Ms Polmans unilaterally transferred the children to [School 2] from the start of Term 3 of 2020. [School 2] is also a private school. A question arises as to whether the children continued to be educated in the manner that was expected by the parents. The transfer occurred because Mr Polmans stopped paying [School 1] fees. On his account of events, he did not have the financial capacity to keep paying the fees.

3. In February 2021, Mr Polmans stated:[1]

   Ms Polmans argues that it is the wish of both parents that the children attend private school. I have always supported private school when I was in a position to fund it. Due to [matters that have affected my finances] I am no longer in a position to support private school …

   [1]Page 318 of the hearing papers.

4. At the hearing, Mr Polmans reiterated that he had always intended the children to receive a private school education, but their attendance at such a school was always subject to him being able to afford it. That evidence suggests, and I find, that he expected the children to receive a private school education. Whether he can contribute to the associated costs is a separate issue which is discussed below.

5. At the hearing, Mr Polmans also stated, apparently for the first time, that he did not agree with [School 2]’s “methods of teaching” which he considered “left of centre”. Ms Polmans disagreed. She stated that [School 2] follows the prescribed government curriculum. In the absence of any further evidence from Mr Polmans concerning the particular manner in which the children are being educated at [School 2], I find that they are receiving a private school education in accordance with the parents’ past expectations.

6. Both parents agreed that [School 2]’s 2020 tuition fees for the children were $5,100 + $5,100 - $550 (sibling discount) = $9,650 per annum, and that annual rate of fees was incurred during the second half of 2020.

7. Both parents agreed that the 2021 tuition fees are $5,250 + $5,250 - $550 = $9,950.

8. In 2022, [Child 1] will be in Year 3 and [Child 2] will be in Year 2. Tuition fees increased by $150 per annum across all Years from 2020 to 2021 and the sibling discount did not change, and that is the best evidence of the likely changes in 2022. Year 2 and Year 3 fall into different price brackets.[2] The tuition fees in 2022 are likely to be ($5,400 + $150) + ($5,250 + $150) - $550 = $10,400.

   [2]Pages A35 and A38 of the hearing papers.

9. Both parents also agreed that Mr Polmans had not been making a contribution towards those fees (but he has been contributing to their general educational expenses via his payment of child support). Ms Polmans stated, and I accept, that her parents are lending her money to pay the fees and she will repay that debt when she is able to do so (but at a practical level, Ms Polmans’ parents make the payments directly to the school).

10. In summary, the children are being educated in the manner that was expected by the parents and the associated tuition fees significantly affect the costs of maintaining the children. Mr Polmans is not directly contributing to those private school tuition fees. Those circumstances as a whole constitute special circumstances. Reason 3 is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Polmans runs a [business] as a sole trader. According to her 2020-21 tax return the business generated revenue of $20,880 and incurred expenses of $2,222, leaving a profit of $18,658. She also receives parenting payment which is a taxable income support payment. Her 2020-21 adjusted taxable income was $44,659. Mr Polmans did not dispute Ms Polmans’ reported profit from her business. There is no suggestion that she earns any undisclosed income.

3. Ms Polmans recently purchased a house. She said the purchase price was $640,000. She said she contributed $300,000 from her savings and she obtained an interest-free loan from her parents for the balance. She said she and her parents calculated that she could afford to repay $340 per week and she is making those payments. The household consists of Ms Polmans and the children.

4. Ms Polmans provided a detailed chronology of her accommodation over the past few years. It included living with her parents, purchasing and selling a townhouse (which she said she was unable to keep due to its high ongoing costs) and renting. I do not consider it necessary to recount that chronology here. The important point is that she has ongoing accommodation costs and those costs are unremarkable. Ms Polmans’ income and financial resources are fairly reflected for child support purposes in an adjusted taxable income of $44,659 per annum.

5. In 2011, Mr Polmans and a business partner, [Mr B], purchased a [business 1], [Business name 1], via [Investment Group], of which they were the directors and shareholders. The [business 1] was in Melbourne. Mr Polmans and Ms Polmans were living together in Melbourne at the time. [Mr B] ceased his involvement in the company and the business in or around 2013. The CSA obtained the company’s 2017-18 tax return. In that financial year it generated revenue of $2,909,951, incurred expenses of $2,654,933 and made a profit of $255,018. However, its non-deductible expenses totalled $223,268. Also, depreciation was $96,609 and it incurred “other deductible expenses” of $74,145. On that analysis, its reported a “taxable / net income” in its tax return of $307,532.[3]

   [3]Page 235 of the hearing papers.

6. The parents separated in 2018. In or around July 2018, Ms Polmans moved to the Gold Coast, where her parents live, and she started living with them. Mr Polmans said [Investment Group] was sold in August 2018 for $2,500,000. He said that when the company was sold, he was its sole director and shareholder. Mr Polmans moved to the Gold Coast in or around September 2018.

7. More recently, Mr Polmans has been involved in a [business 2] on the Gold Coast. The [business 2] is called [Business name 2]. On Mr Polmans’ account of events he is a mere employee and his father, [Mr C],[4] owns the [business 2] via a corporate structure. In discussing those arrangements and Mr Polmans’ and [Mr C] previous involvement in the [industry], Mr Polmans said that [Mr C] “bought out” [Mr B]’s interest in [Investment Group] in or around 2013 and they, i.e. Mr Polmans and [Mr C], co‑managed [Business name 1], together with duty managers who were employees. Mr Polmans said the business had about 26 employees in total. If Mr Polmans and [Mr C] had in fact been co‑owners of [Investment Group], I consider it unlikely that Mr Polmans would have initially stated that he was its sole director and shareholder when he sold the company for $2,500,000. It is also worth noting that on Mr Polmans’ account of events he managed [Business name 1] with duty managers, while [Mr C] “was kind of the handyman”; Mr Polmans said [Mr C] had previously been [an Occupation].

   [4]To stress a point that has the potential for confusion, the applicant is Mr [Given name] Polmans and his father is [Mr Alternative spelling of given name C].

8. It appears that Mr Polmans registered [Company] in April 2018.[5] It subsequently became the trustee of [a] Trust. Mr Polmans said that occurred in or around March 2019 when he transferred [Company] to [Mr C] and he ceased to be a director or shareholder of [Company]. He said he has never been a beneficiary of [the] Trust. [Company] registered the business name [Business name 2] in March 2019.[6] Mr Polmans said [Mr C] started the actual [business 2] in March 2019.

   [5]Page 184 of the hearing papers.

   [6]Page 53 of the hearing papers.

9. Ms Polmans provided a copy of an article in the September 2019 edition of [Publication] in which Mr Polmans was interviewed.[7] At the hearing, Mr Polmans explained that the comments that he made during the interview were of a promotional nature and they needed to be understood in that context, i.e., on his account of events, he had exaggerated and embellished. The article included a number of quotes from Mr Polmans:

   ·    But [Mr Polmans] says he found his true calling 15 years ago. “The [business 1s] I have created have been amazing, it has been really rewarding.” However, the sunnier states were calling, and Polmans moved to the Gold Coast, searching for a new [business] to nurse back into greatness.

   ·    “I’ve been doing 90 hours a week since I bought [Business name 2].”

   ·    Polmans shopped around carefully before choosing the [business]. “When I was looking for somewhere to buy, there were a few options on the table.”

   ·    “If you are understaffed, you can’t give the service that people want, and they will write about it immediately! But if you are overstaffed, you can’t make money. It’s the balance that every owner-operator of any business will face.”

   ·    “The people that work for me are like family.”

   ·    “When I purchased this place, …”

   ·    “When you buy a [business], you have to spend weeks and months, living it and breathing it …”

   [7]Pages 216 to 218 of the hearing papers.

10. On or about 12 April 2020, Mr Polmans sent a text message to Ms Polmans in which he stated: “I haven’t had a day off work in 41 days”.[8]

    [8]Page A81 of the hearing papers.

11. Mr Polmans received a payment summary from [Company] for 2019-20. According to that document, it paid him wages of $16,823 and allowances of $9,750. His 2019-20 adjusted taxable income was $26,574.

12. Mr Polmans stated that, as an employee of [Company], his only remuneration was the wages and allowances that he received. He said he did not receive cash-in-hand. He said he did not receive a share of [Company]’s profit. He acknowledged that his wages were paid into his [Bank 1] account with an account number ending #1603. For example, he received a credit of $640.00 on 21 April 2020 with the following details: “FROM [Bank 2] [Business name 2]”.[9] The hearing papers contain bank account statements for that account from 29 November 2019. From at least 29 November 2019 to 20 April 2020, Mr Polmans did not receive any deposits into that account in respect of [Business name 2]. When that was put to Mr Polmans, he stated that he was not paid during that period: “The business was sort of going under very rapidly and was in debt and it couldn’t afford to give me anything at that time.” In response to further questions, Mr Polmans confirmed that, on his account of events, he worked for at least five months without receiving any remuneration. That account of events is inconsistent with any suggestion that his relationship to [Company] was merely one of employee and employer. I do not accept Mr Polmans’ evidence on that issue. More generally, I find that Mr Polmans has not disclosed the true nature of his commercial relationship with [Company], [Business name 2] and [Mr C]. However, the obvious inference to be drawn from Mr Polmans’ statements concerning his ownership of the business, his management of the business and the work that he was putting into the business while not receiving a regular wage, is that, regardless of the legal structure created by Mr Polmans and [Mr C], Mr Polmans was the entrepreneurial force behind the business, he was generating its revenue and, in all likelihood, he was receiving its profit. I find accordingly.

    [9]Page 726 of the hearing papers.

13. Mr Polmans has not fully and frankly disclosed the extent of his income and financial resources, but findings of fact must nevertheless be made, doing the best one can in the circumstances. The objections officer faced a similar difficulty. She concluded:[10]

    Without the business’s tax returns, it is difficult to determine the extent of the financial resources available to Mr Polmans by way of operating the business. However, I am require to make a decision regardless, based on the information available to me.

    I am satisfied that the BAS for the first half of 2020-21 is the most accurate information on which to base my decision. If the business was to continue at the same rate for the remainder of the financial year, the total business income would be $898,918.

    The ATO small business benchmarks state a [business 3] with a turnover between $500,001 and $2,000,000 should expect total expenses to equate to 86% - 93% of the total turnover, with the average being 89%. Applying the average to the total turnover of $898,918 results in a total business profit of $98,881.

    [10]Page 15 of the hearing papers.

14. I referred Mr Polmans to that passage. He did not take issue with any particular figure; he disagreed with the methodology generally, adding: “It’s not written by someone that understands or has worked in the industry, that’s for sure.”

15. It is worth adding that Mr Polmans stated during the hearing that while the business is called a [business 2], “it’s more of a [business 3].”

16. In the absence of more reliable evidence, I consider the objections officer’s approach to be an appropriate method of calculating Mr Polmans’ income and financial resources. I find that his income and financial resources are fairly reflected in an adjusted taxable income of approximately $98,881 per annum. That figure suggests a degree of precision that is not possible given the state of the evidence. However, the important point is that varying his adjusted taxable income to that figure, and making some other variations, will result in a fair rate of child support payable.

17. Mr Polmans completed a Statement of Financial Circumstances on 28 June 2021. However, I do not consider it to be a reliable statement of his financial position.

1. The parents agree that [Child 1] suffers from at least one significant medical condition. On 23 September 2021, [Dr D], paediatric gastroenterologist, stated:[11]

   [Child 1] has seen a number of different practitioners and has tried various remedies, supplements, dietary modifications without any significant improvement. Her mother remains quite concerned around an underlying cause.

   [11]Page A27 of the hearing papers.

2. At the directions hearing on 30 September 2021, Ms Polmans said she incurred a number of out-of-pocket expenses in respect of [Child 1]’s condition. Mr Polmans said he also incurred some out-of-pocket expenses. I suggested, and both parents agreed, that compliance with the following directions would fairly reflect their respective ongoing costs:

   -evidence of the regular out-of-pocket costs [each parent] incurred (such as the costs of supplements) in respect of [Child 1]’s medical condition during the sample period from 1 April 2021 to 30 June 2021;

   - evidence of the irregular out-of-pocket costs [each parent] incurred (such as the costs of medical specialists’ appointments) in respect of [Child 1]’s medical condition during the sample period from 1 July 2020 to 30 June 2021; …

3. I issued written directions in those terms. The written directions also stated that a party could apply in writing for a variation of the directions. None of the parties made such an application. Ms Polmans and Mr Polmans did not provide evidence of the relevant costs they incurred during the sample periods.

4. Ms Polmans provided a schedule of the regular costs she incurred during the three-month period from August to October 2021 and the irregular costs she incurred during the four-month period from July to October 2021. There are errors in her calculations and they were discussed during the hearing.

1. I asked Ms Polmans why she had not provided evidence of the regular out-of-pocket costs she incurred during the period from 1 April 2021 to 30 June 2021. She said she did not incur any regular costs during that period, but she has recently resumed incurring regular costs. The main costs were specific foods and homeopathic products. Ms Polmans explained that when [Child 1] first became ill she had taken her to various doctors but they had been unable to cure her and they ultimately concluded that the condition would have to run its course and [Child 1] was likely to continue to experience symptoms for a further two or three years, and it was in that context that Ms Polmans started exploring other possible treatments. Mr Polmans added that he had suffered from a similar condition for a number of years when he was young and “my tummy just sort of repaired itself.” He said that when [Child 1] became ill he attend doctors’ appointments with Ms Polmans and [Child 2] and he contributed to the costs of various prescribed treatments, but the doctors ultimately concluded that the condition would have to run its course and he does not agree with the alternative treatments that Ms Polmans is currently pursuing.

2. It is understandable that Ms Polmans has pursued alternative treatments for [Child 1], but given the doctors’ expert opinions, I do not consider it appropriate to vary Mr Polmans’ rate of child support payable on the basis of costs that Ms Polmans has elected to incur in pursuing those alternative treatments.

3. The child support case commenced on 29 May 2020. The parents were notified of the decision to register a child support case via correspondence dated 1 June 2020. Ms Polmans lodged her departure application and numerous supporting documents on 1 September 2020. It is appropriate to make a departure decision with effect from 29 May 2020.

4. Mr Polmans adjusted taxable income will be varied to $98,881 per annum from 29 May 2020 to 31 December 2022. Ms Polmans adjusted taxable income will be varied to $44,659 per annum from 29 May 2020 to 31 December 2021, after which the administrative assessment will automatically use her 2020-21 adjusted taxable income of $44,659.

5. Given the disparity in the parents’ incomes it is appropriate to require Mr Polmans to make a greater contribution towards the children’s tuition fees. His rate of child support payable will be increased by three quarters of the fees, which equates to:

   ·    $9,650 x 0.75 = $7,237 per annum during the second half of 2020;

   ·    $9,950 x 0.75 = $7,462 per annum during 2021; and

   ·    $10,400 x 0.75 = $7,800 per annum during 2022.

6. The proposed decision will increase Mr Polmans’ child support arrears by approximately $7,700.[12] It will require him to pay a current rate of child support of approximately $11,690 + $7,462 = $19,200 per annum. I am satisfied that he has the capacity to pay those arrears and that rate of child support. The proposed decision will be just and equitable.

   [12]I have taken into account that Mr Polmans was required to pay $17,038 per annum in child support during the period from 29 May 2020 to 12 July 2020 but the objections officer’s decision only required him to pay $13,106 per annum. It appears that the objections officer’s decision was not properly implemented: page 699 of the hearing papers.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

2. Ms Polmans receives family tax benefit in respect of the children. Changing the child support payable by Mr Polmans will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

The decision under review is set aside and, in substitution:

• from 29 May 2020 to 31 December 2021, Ms Polmans’ adjusted taxable income is varied to $44,659 per annum;

• from 29 May 2020 to 31 December 2022, Mr Polmans adjusted taxable income is varied to $98,881 per annum;

• from 1 July 2020 to 31 December 2020, Mr Polmans’ rate of child support payable is increased by $7,237 per annum;

• from 1 January 2021 to 31 December 2021, Mr Polmans’ rate of child support payable is increased by $7,462 per annum; and

• from 1 January 2022 to 31 December 2022, Mr Polmans’ rate of child support payable is increased by $7,800 per annum.