Prindville and Modesitt (Child support)

[2021] AATA 1286

Prindville and Modesitt (Child support) [2021] AATA 1286 (3 March 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC019774

APPLICANT:  Mr Prindville

OTHER PARTIES:  Child Support Registrar

Ms Modesitt

TRIBUNAL:Member T Bubutievski

DECISION DATE:  03 March 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – no ground for departure established – 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

1. Mr Prindville and Ms Modesitt are the parents of a son for whom child support is payable. The case was registered with the Department of Human Services – Child Support (now known as Services Australia) (the Agency) for collection on 8 May 2017. The annual rate of child support payable by Mr Prindville was determined pursuant to a decision of this Tribunal (differently constituted) dated 20 August 2019, which set Mr Prindville’s adjusted taxable income at $120,000 per annum from 3 August 2017 to 31 December 2023. This was a decision made on the basis of Mr Prindville’s earning capacity, not his actual income.

2. On 17 March 2020 Mr Prindville made an application to the Agency for a change to the child support assessment. On 23 June 2020 an Agency delegate decided to depart from the decision of the Tribunal due to a change in Mr Prindville’s circumstances, namely an injury sustained in December 2019 and subsequent surgery and recovery. The delegate decided that for the period 22 February 2020 to 12 July 2020, the annual rate of child support payable by Mr Prindville would be the fixed annual rate of $1,443 for one child; and for the period 13 July 2020 to 30 September 2020 Mr Prindville’s adjusted taxable income was set at $59,280. The decision of the AAT continued as normal from 1 October 2020.

3. Mr Prindville objected to the decision on 12 July 2020. On 14 August 2020 an Agency objections officer partly allowed the objection and decided that the previous decision of the Tribunal would cease to take effect from 8 December 2019, and that for the period 8 December 2019 to 30 September 2020 the annual rate of child support payable by Mr Prindville would remain at $1,443. The objections officer confirmed that the decision of the AAT would continue as normal from 1 October 2020, and Mr Prindville’s adjusted taxable income would be set at $120,000 until 31 December 2023.

4. On 2 September 2020 Mr Prindville made an application for review by the Social Services and Child Support Division of this Tribunal. The Tribunal held a telephone directions hearing on 1 December 2020 and issued Directions, with which the parties complied.

5. The matter was heard by the Tribunal on 27 January 2021. Mr Prindville and Ms Modesitt both attended the hearing by telephone and gave sworn evidence. The Child Support Registrar did not seek leave to appear. Both parties and the Tribunal had access to documents numbered 1 to 295 from the Agency, and after all submissions, documents A1 to A196 from Mr Prindville and B1 to B26 from Ms Modesitt. Following the hearing the Tribunal deferred the matter and issued further Directions for Mr Prindville to provide more evidence in relation to his current employment and [Business 2]. Ms Modesitt was then given the chance to respond to this additional information. On 3 March 2020 the Tribunal reconvened in the absence of the parties and made a decision.

ISSUES

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

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. In order to depart from the administrative assessment the Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

   (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;

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

4. If satisfied that a ground or grounds exist 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 Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

Issue 1 – Does a ground exist to depart from the administrative assessment?

Does a ground exist to depart from the administrative assessment under Reason 8A?

1. Mr Prindville sought a departure from the administrative assessment on the ground that the assessment of child support does not reflect his income, property and financial resources. This is the ground reflected in subparagraph 117(2)(c)(ia) of the Assessment Act.

2. The Tribunal explained to the parties that it did not have the jurisdiction to review the previous Tribunal decision and that jurisdiction lies with a court with a family law jurisdiction. What the Tribunal can, and must, do in response to this application is consider any changes of circumstances which renders that assessment unjust.

3. Mr Prindville’s usual occupation is as [Occupation 1]. He has in the past operated his own business but ceased this and became an employee in early 2019. The previous Tribunal decision of 20 August 2019 found that Mr Prindville voluntarily reduced his income by ceasing self-employment and becoming an employee. This Tribunal is not at liberty to reconsider that finding in the context of these proceedings, only whether or not Mr Prindville’s income and earning capacity have been affected by intervening circumstances. Mr Prindville confirmed that he “has no interest” in running a business now. He said that he is [age] years old and has an injury and just wants to see out the rest of his working life as an employee, with much less stress. He said that he was never good with the paperwork for the business, which caused it to have a large tax bill.

4. Mr Prindville provided medical evidence to the Agency and the Tribunal which said that he was injured [in] December 2019, sustaining [an injury]. Ms Modesitt said that Mr Prindville had had that injury for many years and had worked with it, but the Tribunal accepts the medical evidence that there was a specific injury on [date] December 2019.

5. Mr Prindville had a surgical repair of that injury [in] February [2020]. In a letter of 18 May 2020 his surgeon advised that recovery from such a procedure may be up to 12 months.

6. Mr Prindville advised that he had been in receipt of jobseeker payments and provided a Centrelink statement advising that as of 15 May 2020 Mr Prindville’s rate of payment was $1,217.57 per fortnight. Mr Prindville denied that he had engaged in any work between December 2019 and November 2020, when he secured a part-time position.

7. A letter from Mr Prindville’s physiotherapist, dated 10 August 2020, advised that Mr Prindville was still progressing in his recovery and was unable to work due to the absence of light duties, not a lack of capacity. It notes that he had made good progress and had minimal pain and 95% function of the damaged [Body part 1] but would require further rehabilitation in respect of his ability to [do Task 1].

8. A letter from Mr Prindville’s surgeon, Dr [A], dated 25 November 2020, says that Mr Prindville has had a [Body part 1] reconstruction and is suitable for less manually intensive tasks and should not engage in [some tasks].

9. A further letter from Mr Prindville’s physiotherapist, [Mr] [B], dated 12 November 2020 says that Mr Prindville has mild intermittent pain and a 15% disability in the [Body part 1]. Mr [B] says that Mr Prindville has control deficits with [specified] tasks and is unlikely to be able to return to work where he is required to [perform Task 1] for a day. Mr Prindville said that he has recovered well, although he cannot [perform Task 1]. He advised that he had a further physiotherapy appointment after the hearing, but he expected that it would be his last.

10. Mr Prindville said that he commenced part-time work for two to three days per week from November 2020 at the rate of $32.50 per hour for an eight-hour day. Mr Prindville said that he did not get payslips, he renders an invoice. The Tribunal requested Mr Prindville to supply the invoices he has rendered. Mr Prindville said that his work has recently increased to four days per week and he hoped that it would become full-time in the next three months. He is paid $1,040 for a four-day week and will earn $1,300 per week for full-time hours. Mr Prindville said that his employer was also prepared to give him five weeks of annual leave each year to cater to his caring responsibilities for their son.

11. Mr Prindville subsequently provided invoices rendered by him totalling $4,357 in the period 3 December 2020 to 29 January 2021.

12. Mr Prindville said that his previous business had not paid its tax and had been left with a tax bill of over $260,000. He and Ms Modesitt were both Directors of the business. Mr Prindville said that as a result of this he went bankrupt. In the process of the bankruptcy the equipment owned by the business, [were] sold off. Mr Prindville provided a Notice of Bankruptcy which states that he was bankrupt from 18 June 2019 and will be discharged on 19 June 2022.

13. Mr Prindville’s taxable income for 2019/20 was $19,330. This was made up of jobseeker payment of $6,588 and self-employment income of $16,769, offset by interest payments to the ATO of $4,029. Gross business income was $32,060, with Mr Prindville claiming depreciation of $5,182 and motor vehicle expenses of $3,170. He also claimed his phone expenses.

14. Mr Prindville’s bank statements show that he was in receipt of jobseeker payment. He also received $10,000 on 28 April 2020. Mr Prindville confirmed that this was a withdrawal from his superannuation. Mr Prindville said that this was the only withdrawal he made. The Tribunal noted a “cash withdrawal” from his account of $11,000 on 1 May 2020. Mr Prindville said that this was the superannuation payment. He said that he paid this to his partner to look after for him as he can be a bit irresponsible with large amounts of money. The Tribunal queried deposits of $480 per week into the joint bank account with his partner. Mr Prindville said that he pays $480 per week for rent, groceries and electricity and his partner was transferring this into the account from his superannuation. Mr Prindville denied that this was employment income or that he had any other bank accounts which had not been disclosed.

15. Mr Prindville had redacted significant portions of his bank statements and said that this was because the expenses related to personal spending that he did not want Ms Modesitt to see. The Tribunal noted that the redactions related to spending rather than income, but the statements themselves do show significant discretionary spending rather than the usual necessary expenses such as rent and utilities. Mr Prindville advised that his partner pays the bulk of these expenses and he just makes his weekly contribution.

16. Ms Modesitt provided information relating to a number of entities, including [Business 1]; [Business 2] and [Business 3]. Ms Prindville provided an ASIC extract showing that [Business 2] commenced on 1 July 2019. She said that it is linked to Mr Prindville’s ABN. The telephone number, which is displayed on Facebook, Google and hipages, is his number. The Facebook and Google pages show Mr Prindville working as a [Occupation 1] and there is a video which describes Mr Prindville as the Master and one of their other sons, C (name deleted for privacy reasons), as the Apprentice. Mr Prindville and C are both wearing [Business 2] shirts. The business is described as having [an experienced] [Occupation 1] with [number] years’ experience. The Tribunal viewed the relevant Facebook page, photos and videos. Ms Modesitt said that the business is clearly Mr Prindville’s business, and he was working in it throughout 2020. Mr Prindville denied receiving any income from the business. Ms Modesitt said that as the issue is Mr Prindville’s earning capacity, not his income, it is irrelevant whether or not he actually derived income, only that he worked and was capable of working and earning an income.

17. Mr Prindville provided a statement from his partner who says that [Business 2] is her business. She is a semi-retired [occupation] and has no experience or history as an [Occupation 1]. She says that she set it up to enable C to complete his apprenticeship and he was the one working in the business. C was previously employed by [a named company] to complete his apprenticeship but he left there and went to another company. After four months with that company the owner decided not to sign C up to do his apprenticeship. C had less than a year to go. Mr Prindville said that [Business 2] was started for C while he was off work, as he had time on his hands. He said that he was happy to do it for his son.

18. Mr Prindville said that he was getting calls for work but he could not work so he would take C to the site and introduce him and then C would do the work. Mr Prindville said that all he did was take calls and introduce C to the clients. He also rang around and found four or five businesses that would take C on to work. In the end, C had two businesses he worked for, one for four days per week and one for one day per week. Mr Prindville said that he was able to act as C’s supervisor for his apprenticeship with the training institute through [Business 2], so he went to [workplaces] and took photos and did the signing off but he did not take a wage and [Business 2] did not pay for anything for him, like his phone or car. Mr Prindville said that [Business 2] did not have its own bank account. His partner would help C with the paperwork. C would invoice the businesses and the money would go straight into C’s bank account. Mr Prindville said that he did not know how much money [Business 2] made or if it had done its tax returns.

19. Mr Prindville said that C is due to complete his apprenticeship on 12 February 2021 and he has a full-time job with an independent company from 1 February 2021. He said that after this [Business 2] would have nothing to do and he did not think that it would operate. “[Business 3]” is also C, and Mr Prindville did not think this would continue either. It was simply a different business name for [Business 2] as someone told C that people did not know what [Occupation 1] do and he might get more jobs if he explained it more simply.

20. Clearly, [Business 2] was a business in which Mr Prindville had significant involvement. It may have been owned by his partner, but it is not her area of expertise and Mr Prindville’s bankruptcy would have prevented him from being the owner. He seems to have operated as the owner by taking calls and bookings, going onsite to introduce C and supervising C’s apprenticeship. He may not have been paid for the work that he did but he was clearly working and had a capacity to do so.

21. The Tribunal requested Mr Prindville provide financial statements for [Business 2]. For 2019/20 [Business 2] had gross income of $17,799.00, plus $6,000 in jobkeeper payments. These were paid to Mr Prindville’s partner as a Director of the business. [Business 2] made a loss of $1,399.63. Claimed expenses include $14,211.64 in motor vehicle expenses and it does appear that [Business 2] paid for some of Mr Prindville’s motor vehicle expenses even though he did not think that it did. For the period July to December 2020 [Business 2] had income of $3,605, plus jobkeeper payments of $18,300. The business also made a loss in that half year.

22. In a statement accompanying the financial documents, Mr Prindville’s partner says the following:

    ….Mr Prindville is not across how I work the business or the accounts. I have kept funds for C from time to time as a savings plan which has helped him to purchase his tars. C and I changed the way we initially intended to operate the business in 2019 partly due to the excessive cost of insurance. We decided that C would not be an employee but a subcontractor, C set up his own public liability insurance as an individual as this was cheaper. As I would be responsible for the tax on any earnings we also decided that [Business 2] would be used only as a vessel for ‘private work’, although initially most went through the business. This changed once C started working for two main contractors. Basically, anything that I sourced would go through [Business 2], anything that C sourced would go directly to him as he has his own ABN….

    …You will see that [Business 2] is not making much money and has no assets. Mr Prindville’s only involvement is to provide guidance to C. I put as many expenses as I can through [Business 2] as this is more tax effective for me….

23. Mr Prindville said that he would like the Tribunal to set his income from when he got his new job in November 2020 at the rate of a four-day week at $1,040. He said that he can no longer work as a [Occupation 1]. His bankruptcy prevents him from owning a business as he has done in the past and he has no desire to own or operate a business now. Essentially, Mr Prindville was asking for a new decision to be made on the basis of his actual income rather than his earning capacity. Mr Prindville said that he doesn’t have the brains to do any other sort of work.

24. Ms Modesitt’s position was that all Mr Prindville cannot do is [Task 1]. She did not think that not [doing Task 1] would prevent him from running his own business again and earning at least $120,000 per annum. She said that the role he played in [Business 2] demonstrated that he would be perfectly capable of running his own business. Even the name of the business is the initials of Mr Prindville and his partner, so she thought that it was obviously Mr Prindville’s business, not their son’s. Being an [Occupation 1] involves a lot more than [Task 1], and Mr Prindville can still do everything else. Ms Modesitt said that Mr Prindville used to work seven days per week and he is now choosing to work less and controlling how much he earns because he does not want to pay child support. Ms Modesitt noted that Mr Prindville’s bank statements show that he paid for the [Business 2] shirts even though his partner says that she paid for them, and he clearly has an interest and a level of control of the business. There is no evidence that he could not work in it as an [Occupation 1] and earn what he used to. She said that the business used to generate a lot more income than that and all the children had the benefit of the lifestyle that income brought the family. Their youngest son is now not having that benefit and Ms Modesitt felt that it was unfair to him.

1. Ms Modesitt was given the opportunity to comment on the additional evidence provided by Mr Prindville following the hearing. She noted that if she had not provided the Tribunal with the information about [Business 2], Mr Prindville would not have done so as he had not mentioned it in his application. The Tribunal notes that he also did not mention it to the Agency or in the objections process, even though the business was clearly up and running by then and Mr Prindville was organising work for C and acting as his supervisor.

2. Ms Modesitt also provided the Tribunal with a statement detailing a number of inconsistencies in the financial evidence provided by Mr Prindville and a copy of a photograph allegedly taken on [date] February 2021, showing a [truck] parked in Mr Prindville’s driveway. In particular, Ms Modesitt says:

   …Ms [C] and Mr Prindville claim [Business 2] was set up solely to allow C to complete his apprenticeship. I continue to question the truthfulness in this for two reasons.

   •In Queensland there are two ways someone can complete an apprenticeship. Either they are employed as an apprentice or they provide evidence to a training organization which shows tasks relevant to the qualification have been performed. Ms [C] has stated that C uses his own ABN and carries out work for [Business 2] as a subcontractor. If this is correct and C has followed the second pathway, then there would be no need for Ms [C] to open a company other than to benefit Mr Prindville in continuing to find a way to reduce his income for Child Support purposes and as an avenue to reducing their taxable income.

   •Over the life of the business $31,239 has been drawn from [Business 2] into both Ms [C]’s personal accounts and the joint account belonging to Ms [C] and Mr Prindville. In addition to this Ms [C] has drawn $7000 from [Business 2] and transferred this amount to her personal superannuation account. In this same timeframe, C has had a meagre $3779 deposited into his account. This would indicate that Mr Prindville and Ms [C] were actually the ones benefiting from [Business 2]…..

   …Mr Prindville’s expenses indicate that he is living a lifestyle which is not in line with the income he claims he earns (such as paying $720 p/week for rent for two people, eating out regularly and buying items which would not be considered a necessity). This clearly indicates that Mr Prindville is willing to put his own elevated lifestyle before the need to contribute to the care of his child.

   I do not dispute the veracity of Mr Prindville’s injury. I do however question his honesty in declaring his inability to return to work or earn an income. Throughout the past year he has continued to have physiotherapy on his [Body part 1] and the reports provided by his physiotherapist state that he has made excellent progress. The physiotherapist felt he would be able to return to reduced duties as early as July 2020. Although his job fell through with [a named company] at that time, he still had the capacity to work. I have added a photograph taken at Mr Prindville’s residence on a Sunday which clearly shows a [named company’s] truck parked. This would indicate that Mr Prindville is also working for this company. Mr Prindville has had a longstanding business relationship with this company so it is not surprising that they would be willing to offer him work. Mr Prindville failed to disclose this at the recent telephone hearing.

   Mr Prindville has the relevant experience in the [Occupation 1] industry to carry out tasks other than just [Task 1] such as [details deleted]. These tasks are still within his ability to perform as they do not require [Task 1]. In this he has the competence to earn a higher rate of pay than that advertised in the examples he continues to submit showing what an [Occupation 1] could earn….

3. The evidence before the Tribunal is that by 10 August 2020 Mr Prindville was medically fit to work. He was also clearly “working” in [Business 2] and performing much the same duties as he would have done as the owner of the business, including subcontracting someone else to do the tasks that he could no longer do or did not have the equipment for. Mr Prindville says that he does not want to continue running a business – he wants to work as an employee. This is entirely up to him, but the fact that he wants to make this particular lifestyle choice does not necessarily affect the amount of child support he should correctly pay. While the Tribunal accepts that Mr Prindville can no longer [perform certain task] as an [Occupation 1], it does not accept that this injury would prevent him from running [Business 2] and earning at least $120,000 per annum. The turnover of his previous business when Mr Prindville and Ms Modesitt were together was significantly higher than this, and both Mr Prindville and Ms Modesitt were able to take income of over $175,000 each in 2014/15. The previous business owned assets not owned by [Business 2], such as [details deleted]. Without these assets [Business 2] would need to hire equipment, which would no doubt increase the expenses and decrease the income, but $120,000 per annum appears achievable. With his partner as the owner, Mr Prindville has the perfect opportunity to do this regardless of his bankrupt status. Instead, [Business 2] is being used as an alienation vehicle to provide his partner, rather than himself, with an income. Mr Prindville continues to be evasive.

4. The Tribunal also had regard to the fact that Mr Prindville provided information that he was requested to provide, but that he did not volunteer any information about the existence of, and his role in, [Business 2] , even though this was relevant information in both the original decision and the objection decision. It was Ms Modesitt who brought this information to the Tribunal. The previous decision of the Tribunal found that Mr Prindville had failed to disclose employment and income; had threatened to reduce his hours of work to reduce his child support liability; and had voluntarily reduced his income by ceasing to be self-employed. Further Mr Prindville also has another interest in keeping his income low – avoiding payments to his trustee in bankruptcy.

5. The Tribunal concludes that the circumstances before it are not so materially different from those before the original Tribunal that any change should be made to the decision. The original decision and the objection decision have allowed Mr Prindville significant relief from his obligations. The Tribunal gave consideration to making an adverse decision and reinstating the original Tribunal decision from an earlier date but could not see that this was necessarily warranted given that Mr Prindville did have a genuinely reduced work capacity for a period of time. On balance, the Tribunal decided that no reason is established in the application and the decision before it must be affirmed.

DECISION

The decision under review is affirmed.