Quill and Jordan (Child support)

[2023] AATA 2167

Quill and Jordan (Child support) [2023] AATA 2167 (29 May 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/MC024247

APPLICANT:  Mr Quill

OTHER PARTIES:  Child Support Registrar

Ms Jordan

TRIBUNAL:Senior Member S De Bono

DECISION DATE:  29 May 2023

DECISION:

The decision of the objections officer is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart – 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. The issue to be determined in this application is whether there exists a reason to change the administrative assessment of child support and, if so, whether it is just and equitable and otherwise proper to do so.

1. Mr Quill and Ms Jordan are the parents of [Child 1], [Child 2] and [Child 3]. [Child 1] and [Child 3] are in Ms Jordan’s 73% care and Mr Quill’s 27% care. [Child 2] is recorded as being in Mr Quill’s 73% care and Ms Jordan’s 27% care. There has been a registered child support assessment in place since 4 November 2011. Collection by Services Australia (Child Support) commenced on 7 September 2021. Mr Quill is the parent liable to pay child support.

1. The administrative assessment in place prior to the applications for a change of assessment was as follows:

   ·For the period 1 April 2021 to 26 September 2021, Mr Quill was assessed to pay Ms Jordan an annual rate of child support of $14,037. This assessment was based upon Mr Quill’s 2019/2020 adjusted taxable income of $101,867 and Ms Jordan’s 2019/2020 adjusted taxable income of $14,107.

   ·For the period 27 September 2021 to 30 September 2021, Mr Quill was assessed to pay Ms Jordan an annual rate of child support of $1,050. This assessment was based upon Mr Quill’s 2021/2022 income estimate of $31,790 and Ms Jordan’s 2019/2020 adjusted taxable income of $14,107.

   ·For the period 1 October 2021 to 20 January 2022, Mr Quill was assessed to pay an annual rate of $1,050. This rate was based on Mr Quill’s 2021/2022 income estimate of $31,790 and Ms Jordan’s 2020/2021 adjusted taxable income of $16,070.

   ·For the period 21 January 2022 to 30 June 2022, Mr Quill was assessed to pay an annual rate of child support of $1,140. This rate was based on Mr Quill’s 2021/2022 income estimate of $31,790 and Ms Jordan’s 2020/2021 adjusted taxable income of $16,070. The change was as a result of [Child 3] turning 13 years of age.

1. On 22 October 2021 Ms Jordan applied for a change of assessment on the basis of Reason 2, Reason 3, Reason 8A and Reason 8B. On 17 January 2022 Mr Quill cross applied on the basis of Reason 8A, Reason 8B, Reason 9 and Reason 10.

1. On 17 February 2022 Child Support made the decision to depart from the administrative assessment and found Reason 8A established. The administrative assessment was replaced with the following:

   ·     For the period 27 September 2021 to 31 December 2023, Mr Quill’s adjusted taxable income is set at $102,500.

2. On 18 March 2022 Mr Quill lodged an objection to this decision and on 6 June 2022 an objections officer determined Reason 8A was established and made the decision to set aside the change of assessment and replaced it with the following:

·     For the period 27 September 2021 until 31 December 2023, Mr Quill’s income is set to $127,339.

1. On 12 July 2022 Mr Quill sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). Directions were issued to both parties on 25 November 2022. On 12 January 2023 a telephone hearing was held in which Ms Jordan and Mr Quill both gave evidence under affirmation. Post-hearing directions were issued to both parties on 18 January 2023 and on 28 April 2023. The tribunal deferred its decision and reconvened on 29 May 2023. The tribunal considered the documents and information provided by both parties prior to the hearing,[1] as well as the oral evidence of Ms Jordan and Mr Quill. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s Reasons for Decision.

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975, subsection 37(1) and section 38AA Statement and Documents provided by the Agency numbered 1 to 424; Mr Quill’s documents numbered A1 to A50; and Ms Jordan’s documents numbered B1 to B56.

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act.

1. Section 98C of the Assessment Act establishes a three-step process to be satisfied: that there is a ground for departure; that it is just and equitable to depart; and that it is otherwise proper to make a departure determination. Once satisfied, the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

The grounds for departure

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

2. The grounds for departure were discussed with Mr Quill and Ms Jordan and the relevant grounds for Ms Jordan remained:

   ·     Reason 2, Reason 8A and 8B.

   For Mr Quill the relevant grounds remained:

   ·     Reason 8A and 8B.

Reason 2 – the special needs of the child

1. Subparagraph 117(2)(b)(ia) of the Assessment Act – commonly referred to as “Reason 2” states as follows: “(b) that in the special circumstances of the case, the costs of maintaining the child are significantly affected… (ia) because of the special needs of the child”.

2. In Gyselman v Gyselman [1992] FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. The term “special needs” is not defined in the Act. In the matter of Lightfoot and Hampson (1996) 20 Fam LR 69, the Full Family Court stated that needs are ‘special’ if they are necessary or desirable for that child’s welfare and outside the normal needs of a child that is catered for within the formula.

3. Ms Jordan said Mr Quill has not contributed to the orthodontic treatment for [Child 2]. Ms Jordan said she and Mr Quill do not talk. Mr Quill did not dispute that [Child 2] requires orthodontic treatment but he was not consulted on the costs of treatment and Ms Jordan did not discuss this with him. Mr Quill also said Ms Jordan has private health insurance for [Child 2] and he was not sure about the out-of-pocket costs incurred by Ms Jordan.

4. Evidence provided by Ms Jordan shows she consented to orthodontic treatment for [Child 2] on 7 March 2022, this was not signed by Mr Quill.[2] Ms Jordan indicated on her financial statement that [Child 2]’s orthodontic treatment has cost $8,865.[3] In relation to the cost of orthodontic treatment Ms Jordan has been paying the cost in monthly instalments of $280. On 17 November 2022 Ms Jordan had paid $1,680 with a remaining balance of $5,040 to be paid.[4] Ms Jordan also paid $2,145 on 2 May 2022,[5] and $130 for the initial consultation on 14 February 2022.[6] The tribunal is satisfied that the total cost for [Child 2]’s orthodontics is $8,995. Ms Jordan also paid for dental work required prior to the orthodontic treatment totalling $487.20 which was the out-of-pocket costs for Ms Jordan after the health fund rebate.[7] Ms Jordan said she did not receive any health fund rebate for [Child 2]’s orthodontics. The tribunal is satisfied that the total cost for [Child 2]’s orthodontics including teeth removal is $9,382.20.

   [2] B15.

   [3] B6.

   [4] B18.

   [5] B19.

   [6] B21

   [7] B22.

5. Payslips before the tribunal show Ms Jordan works flexible part-time hours. The pay rate is $56,000 which Ms Jordan is paid pro rata. Ms Jordan indicated on her Statement of Financial Circumstances (SOFC) that she earns approximately $732 weekly which is an income of about $38,000, this income amount is supported by Ms Jordan’s payslips before the tribunal.[8] The cost of [Child 2]’s orthodontics represents 25% of Ms Jordan’s gross annual income at that time.

   [8] B1, B9–B12.

6. The tribunal is satisfied that, in the special circumstances of the case, the costs of maintaining [Child 2] are significantly affected because of his special needs, the orthodontic treatment, are outside the normal needs of a child. The tribunal is satisfied that a ground for departure in accordance with subparagraph 117(2)(b)(ia) of the Assessment Act is established; which is a departure determination on the basis of Reason 2.

Would departure from the administrative assessment of child support be just and equitable?

1. Having found that special circumstances exist such that the administrative assessment of child support resulted in an unjust and inequitable result for Ms Jordan, a ground for departure is established in relation to subparagraph 117(2)(b)(ia) of the Assessment Act (Reason 2). The next step for the tribunal to consider is whether it is just and equitable to depart from the administrative assessment.

2. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child, and this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person to whom they have a duty. In deciding whether it is just and equitable, the tribunal had regard to the matters set out in subsection 117(4).

Mr Quill’s income, property and financial resources

1. Mr Quill disagreed with the change of assessment which set his income at $127,339 for the period 27 September 2021 until 31 December 2023. He submitted that this was not an accurate reflection of his actual income for the period.

2. Mr Quill operates a business, [name deleted] (the company). Mr Quill is a full-time [occupation] and has operated his own business for about seven years. Mr Quill said his business suffered a downturn during the COVID-19 pandemic because his business operated on a face-to-face basis which could not occur during the pandemic. Mr Quill said clients were reluctant to have face-to-face contact even during periods that were not subject to lockdowns in Victoria, and as a result clients cancelled [specified] policies which had a flow-on effect in relation to Mr Quill’s business.

3. Mr Quill said he is the sole director of the company and there exists no other beneficiaries. Mr Quill said during COVID-19 his business suffered a 70% drop in income. Mr Quill said in order to support himself and his business during this period he applied for business grants from the Federal and Victorian Governments. A review of the financial statements for the company shows the following:

Financial year	Total income for the company	Other income	Total income	Business expenses	Profit loss before taxation	Net profit after tax	Dividends paid	Retained earnings
2019/2020	$118,859	$10,000 Business support fund $6,000 jobkeeper payment	$134,860	$125,921	$8,939	$8,939	-	$41,936
2020/2021	$101,848	$20,000 Business support fund $3,000 jobkeeper payment	$124,848	$83,646	$41,202	$41,202	$18,500	$64,738
2021/2022	$110,842	Nil	$110,842	$112,821	(1,979)	(4,524)	-	$60,196

1. The financial statements for the company for the year ending 30 June 2022 show a total income for the company as $110,842 with wages paid to Mr Quill of $67,000. This was an increase from the financial year ending 30 June 2021 which shows the company business income of $101,848 with wages paid to Mr Quill of $46,500. However, during the 2020/2021 financial year Mr Quill received $3,000 in jobkeeper payments from the Federal Government and $20,000 from the Victorian Business Support Fund.[9] Information from Mr Quill’s accountant explains that the $20,000 from the Victorian Business Support Fund was paid in the 2020/2021 financial year but recorded on the financial statements for the 2021/2022 financial year,[10] the tribunal was unclear why this was the case. In the financial year ending 2020/2021 Mr Quill was paid a dividend of $18,500 from the company.[11] The total income of the company was $124,848 for the 2020/2021 financial year and $110,842 for the 2021/2022 financial year.

   [9] A13.

   [10] A50.

   [11] A14.

2. Following operation costs of the business totalled $83,646 for the 2021/2022 financial year and $112,821 for the 2021/2022 financial year representing a profit for the 2020/2021 financial year of $41,202 and a loss of $1,979 for the 2021/2022 financial year.[12]

   [12] A13.

3. The retained earnings for the company increased from the 2019/2020 financial year to the 2020/2021 financial year by $22,802, this was likely increased by the capital gains event in the 2019/2020 financial year of $20,196,[13] there was no information before the tribunal about the origin of this capital gain.

   [13] Page 183 of the hearing papers.

4. In the 2020/2021 financial year the company’s retained earnings were $64,738. This decreased by $4,542 from the 2020/2021 financial year to the 2021/2022 financial year from $64,738.[14] Mr Quill said he had to withdraw retained profits from the company for the 2021/2022 financial year due to financial hardship. The profit and loss statements for the company confirmed Mr Quill’s submission to the tribunal that the company operated at a loss for the 2021/2022 financial year.

   [14] A15.

5. The tribunal notes the following from the company’s 2021/2022 tax return and the profit and loss statements for the company:

Financial year	Salary and wages paid to Mr Quill	Government payments	Payment to associated persons	Directors’ loans
2019/2020	$86,158[15]
2020/2021	$46,500[16]	$3,000[17]	$72,598[18]
2021/2022	$67,000[19]	$20,000[20]	$70,200[21]	$77,909[22]

[15] 289 of the hearing papers.

[16] A13.

[17] A13 jobkeeper received.

[18] A18.

[19] A13.

[20] Victorian Government payment.

[21] A31.

[22] A31.

1. In the 2020/2021 financial year Mr Quill was paid $23,000 in government subsidies, while this is not assessable income it is a financial resource that is available to Mr Quill during the 2020/2021 financial year. The profit and loss statements for the company show that Mr Quill was paid $67,000 in wages for the 2021/2022 financial year and there was a payment to an associated person of $70,200; in the profit and loss statement this is shown as payments to “suppliers and employees”.[23] The tribunal did not ask about this but as Mr Quill is a [occupation], does not have employees and does not have suppliers, the tribunal is satisfied that this amount is likely to be the funds Mr Quill said he withdrew from the company.

   [23] A20.

2. In relation to the directors’ loans to the business the tribunal asked for further information, the accountant wrote “the loans are payable to the company by the Director. These loans remain outstanding”. While the loans are not taxable they could be viewed as a financial resource which Mr Quill has used for his own benefit. During the hearing Mr Quill said these were loans made to him for which he is repaying the company over time. The tribunal did not determine that these were a financial resource available to Mr Quill because the loans increased from the 2020/2021 to 2021/2022 financial year indicating Mr Quill has been unable to repay these at present.[24]

   [24] A18.

3. Mr Quill said he purchased vehicles and he thought the depreciation schedules for the 2020/2021 and 2021/2022 financial years were most likely depreciation of those vehicles and maybe home office expenses. In relation to the vehicles Mr Quill said both have loans against them. Only one vehicle is used for the business and the other is solely for family use. All the expenses for the vehicles are run through the business.

4. The profit and loss statement for the 2021/2022 financial year shows motor vehicle expenses of $7,262.[25] The tribunal is satisfied that one vehicle is solely used for personal use so the financial benefit available to Mr Quill is half of the costs of vehicle expenses, this being $3,631.

   [25] A13.

5. Ms Jordan’s submission to the tribunal, and to Child Support, was that Mr Quill had available to him income and financial resources which were not included in the administrative assessment of child support.

6. In terms of Mr Quill’ SOFC Mr Quill indicated his weekly income was $1,250 weekly or $65,000 annually. This amount reflects the income Mr Quill pays himself from the business.[26] He owns his home with his wife and he estimates the current value to be $400,000 which is his 50% share with his share of the outstanding balance on the home loan of $87,500. Mr Quill also owns a property [for] which he estimates his share to be $150,000 with an outstanding loan of $148,500 which is his share of the loan, the land is vacant land.[27] Mr Quill indicates his share of liabilities to be $241,268.[28]

   [26] A1.

   [27] A5.

   [28] A6.

7. Mr Quill indicates total household expenditure of $1,346 weekly or $69,992 annually. The combined loans are $24,120 yearly which Mr Quill indicates are shared between himself and his wife.[29] Mr Quill indicated motor vehicle costs totalling $85 a week (or $4,420 annually) but as both vehicles are run through the business this is not a personal cost to Mr Quill. Mr Quill also indicated $120 for school fees weekly (or $6,240 annually). Ms Jordan said the school costs are shared 50/50 and at present the children attend a ‘semi private’ Catholic school and the school fees are currently in arrears. The tribunal is satisfied that Mr Quill has not changed his work or working hours.

   [29] A8.

8. In examining Mr Quill’s income, property and financial resources the tribunal is satisfied that he has had the following income and financial resources available to him in the 2021/2022 financial year:

Financial year	Wages	Payment to associated persons	Car expenses added back in	Total
2021/2022	$67,000	$70,200	$3,631	$140,831

1. Setting Mr Quill’s income at $140,831 means that Mr Quill would be assessed to pay child support to Ms Jordan of approximately $13,472. The tribunal concludes it would be just and equitable to depart from the administrative assessment of child support as this increased assessment is a more accurate assessment of Mr Quill’s income and financial resources. The departure determination also allows Ms Jordan to receive higher payments in child support offsetting the cost of [Child 2]’s orthodontic treatment she has incurred.

2. The decision of the objections officer determined Mr Quill would be assessed to pay an annual rate of child support of $13,362. The decision of the tribunal does not vary the decision of the objections officer and the tribunal is satisfied that the decision of the objections officer is a fairer assessment of Mr Quill’s income and financial resources.

Ms Jordan’s income, property and financial resources

1. Ms Jordan said she works part time for [a company] in customer service, [but] she works from home. Ms Jordan said she had a baby in 2019 and took maternity leave in 2019 and was paid parental leave payments. She resumed her normal 22.5 hours a week work in 2022. The tribunal is satisfied Ms Jordan has not changed her working pattern or industry apart from taking maternity leave in 2019. Ms Jordan said she now works 30 hours a week and she recently increased her hours from 22.5 hours to 30 hours weekly. Ms Jordan said she has been working for [this company] since 2016. Ms Jordan said she thinks her base salary will be $1,764 fortnightly or $47,000 on an ongoing basis following the increase in her hours. She said at times she works public holidays and sometimes she works overtime so this may mean her annual income is more than $47,000 going forward. As Ms Jordan has increased her working hours the tribunal is satisfied that she has not reduced her working hours to impact the assessment of child support.

1. Ms Jordan indicated on her SOFC that her weekly income is $732 which is $38,064 annually but said as she has increased her hours of work this has changed. Ms Jordan said she has a 50% share in the home she owns with the value of her share being $450,000.[30] The outstanding balance of her share of the home loan is $187,238[31] and the mortgage has a redraw facility of $187,238.[32] As the redraw in the home loan is the same as the outstanding balance Ms Jordan does not have a liability for the home loan at present. The SOFC shows that Ms Jordan has limited expenses and it seems the majority of her expenses are met by her partner.[33]

   [30] B4.

   [31] B5.

   [32] B5.

   [33] B8.

2. Given that Ms Jordan indicates expenses of $76 weekly or $3,952 annually, ordinarily the tribunal may make a decision to reduce Ms Jordan’s self-support amount to below $27,508. But as Mr Quill has not contributed to the cost of [Child 2]’s orthodontic treatment the tribunal will leave the self-support amount as is, this recognises the costs Ms Jordan has borne in relation to this expense.

Conclusion

1. The tribunal concludes it would be just and equitable to make a departure determination from the administrative assessment and as noted by the tribunal above, the tribunal affirms the decision of the objections officer.

Would there be resulting hardship from a departure from the administrative assessment?

1. Subsection 117(4) of the Assessment Act requires the tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support.

2. The tribunal finds that, based on the evidence and information provided to Child Support and to the tribunal, it is unlikely that either parent will experience hardship from this departure determination. Mr Quill has included $3,631 in motor vehicles costs which are costs he does not incur personally but are borne by the company.  Additionally, the tribunal is satisfied on balance that Mr Quill has access to an additional $70,200 which is a financial resource available to Mr Quill.

3. The tribunal also notes Mr Quill was not against contributing to [Child 2]’s orthodontic treatment but wanted further information about this. [Child 2] now has braces and Ms Jordan has been paying the cost of this in instalments. The tribunal is satisfied that it is appropriate that the costs for [Child 2]’s orthodontic treatment are shared between the parents. The increase in Mr Quill’s child support liability as a result of the objections officer’s decision means Mr Quill will contribute indirectly to meeting his share of these costs. The tribunal is also satisfied that the departure determination by the objections officer more accurately reflects Mr Quill’s income and financial resources for the period.

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 Assessment Act. Subsection 117(5) of the Assessment Act sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on the 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. Paragraph 117(5)(b) of the Assessment Act means that 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. The tribunal has concluded that it is otherwise proper in the circumstances to depart from the administrative assessment.

2. The tribunal notes that it is open to either party to lodge further change of assessment applications should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

The decision of the objections officer is affirmed.