R and F
[2003] FMCAfam 6
•15 January 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| R & F | [2003] FMCAfam 6 |
| CHILD SUPPORT – Child support agreement discharged – departure from child support assessments – husband’s child support income. Child Support (Assessment) Act 1989, ss.4(3), 95(2) 117, 117(2)(c), 117(2)(c)(I), 117(4), 117(5) Wild & Ballard [1997] FLC 92-771 |
| Applicant: | D J R |
| Respondent: | S L F |
| File No: | DGM 2192 of 2002 |
| Delivered on: | 15 January 2003 |
| Delivered at: | Melbourne |
| Hearing Date: | 13 January 2003 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr Atkinson |
| Solicitors for the Applicant: | Goddard Elliott |
| Counsel for the Respondent: | Ms Buchanan |
| Solicitors for the Respondent: | Ms S F |
ORDERS
That the child support agreement entered into between the husband and wife dated 17 July 2001 be discharged as from 30 June 2002.
That the child support assessments for the period 16 July 2002 to 20 June 2003 in respect of the child E S F born 28 June 2000 be departed from.
That for the period 16 July 2002 and for each relevant child support period thereafter:
(a)the husband's child support income be fixed at $81,000 per annum in the financial year 2000-2003;
(b)thereafter at $81,000 per annum or the amount of his taxable income in the relevant income year from the 2003 financial year onwards, whichever is the greater;
(c)that otherwise child support be assessed by the child support registrar in accordance with the provisions of the Child Support (Assessment) Act for administrative assessment of child support.
That the child support registrar be requested to make the necessary adjustments to the child support register to give effect to this order.
That the husband continue to pay private health cover for E at no less than the current rate.
That the application otherwise be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
DGM 2192 of 2002
| D J R |
Applicant
And
| S L F |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter involves an application by the applicant husband in relation to a child support agreement entered into by the parties on 17 July 2001. The child support agreement is in relation to the child of the parties E S F-R born 28 June 2000. The husband relies upon an amended application filed 1 November 2002 and the documents relied upon by each of the parties was identified by them at the commencement of the proceedings.
The orders sought by the husband are that the child support agreement be discharged from the date of his change of employment or the date of the application and from that date to 30 June 2003 he pay child support at the rate of $200 per week. From 30 June 2003 he seeks that child support be assessed in accordance with the administrative provisions for assessment of child support contained in the Child Support (Assessment) Act,(“the Act”). He also proposes to continue to pay private health insurance cover for E at no less than the existing rate as provided in the agreement.
Background
The parties were married on 5 December 1998 and separated on
30 January 2000. There is one child E , who is aged two and a half. The husband is 36 and the wife is 39. The current child support liability arises from an agreement made between the parties on 17 July 2001. The agreement was made at about the same time as the parties negotiated a property settlement and orders were made in the Family Court of Australia on 16 August 2001 for property, spousal maintenance and some parenting issues.
The amount required by the agreement was a payment of $1389.33 per month or $321.62 per week from 15 July 2001. That amount was to be increased in accordance with the child support inflation factor in each year. The husband also agreed to pay for private health insurance at the current rate and to provide the wife with details of that cover.
It is common ground that at the time the agreement was entered into the husband was working for D L and had a salary package in the previous year of about $169,000 which included a base salary and commission. The relevant assessment from which it is sought to depart is the assessment for the period 6 July 2002 to 20 June 2003 which provides for a monthly payment of $1450.92. The previous assessment which dates from 15 July 2001 to 16 July 2002 provides for a payment in accordance with the agreement to which I have referred.
The basis for the exercise of jurisdiction in this matter is that the parties are seeking to depart from the provisions of a child support agreement and the only way in which that can be done, other than by agreement, is by application to a court exercising jurisdiction under the act.
The legislative basis for the husband's application is that the husband asserts that under section 117(2)(c)(i) of the Act, in the special circumstances of the case application of the provisions of the Act relating to administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided because of the income earning capacity, property and financial resources of the husband. In short, his case is that he has now changed his employment, that he is not able to earn the sum or anything like it that he was earning at the time that the agreement was entered into, and having regard to his expenses and necessary commitments a continuation of child support in accordance with the agreement which provides the basis for the assessment, would be inequitable.
The Law
The law governing the application is to be found in the Child Support (Assessment) Act. The obligation to pay child support is created by the provisions of the act. Section 3 contains the obligation that parents maintain their children, and each of the objects of the act are found in section 4 and are to be borne in mind when deciding an application. Section 4(3) of the act recognises the desirability of parents reaching agreement for the financial support of their children. The act includes provisions that provide a scheme for the implementation of consent arrangements. Part 6 Division 3 contains the provisions that relate to applications to the Child Support Registrar for acceptance of a child support agreement executed in accordance with the terms of Divisions 1 and Part 2 of the Act. Once accepted, the liability to pay child support arises where child support was not already payable pursuant to an administrative assessment. Provisions contained in the child support agreement for periodic payments have effect, for the purposes of Part 5, as if they were an order made by consent by a court under Division 4 of Part 7 (see section 95(2)).
An application to vary a child support agreement must be determined in accordance with the provisions of section 117 of the Act (see Wild & Ballard [1997] FLC 92-771). When considering an application for departure pursuant to section 117 of the Act the court must engage in a three-stage process described in Gyselman & Gyselman (1992) FLC 92-279. Those three steps are as follows:
a)the requirement by the court to be satisfied that in the special circumstances of the case one of the grounds for departure in section 117 has been established;
b)in determining whether to make an order under this division the court is required to consider whether it would be just and equitable as regards to the child, the carer entitled to child support and the liable parent to make a particular order (see section 117(4));
c)in determining to make an order, whether it would otherwise be proper to make a particular order under this division (see section 117(5)) the court must have regard to the fact that it is a primary duty of the parents to maintain their children and the effect that the making of an order would have upon any entitlement of the child or carer to an income-tested pension, allowance or benefit.
In considering whether it is just and equitable to make an order the court must have regard to:
a)the nature and duty of the parent to maintain a child;
b)the proper needs of the child;
c)the income-earning capacity, property and financial resources of the child and each of the parents;
d)the commitments of each parent necessary to support themselves and any other person to whom they have a duty; and
e)any hardship that would be caused to the child, the carer or the liable person or any person the liable parent is due to support by the making or refusal to make the order.
Proper needs of E
In relation to the proper needs of the child, the wife sets out in her financial statement the expenditure that she indicated she made on E each week. That expenditure came to $289. No significant attack upon that expenditure was made, albeit that there were some submissions made in relation to some of the division of expenses between the wife and the child. Notwithstanding the child is two and a half, the husband concedes that in the context of the standard of living of the parties and their expectations for her the expenditure, whilst perhaps not in the exact sum that he contends for, is not unreasonable and that she is entitled to be maintained at a reasonable level.
In my view, some of the expenses are overweighted in favour of the child, in particular electricity, clothing and telephone. I find, having regard to both matters, that the proper needs of the child on a weekly basis are $269 per week.
Husband’s financial position
I turn now to the husband's financial position and under this consideration also include my findings in relation to any contested matters. On 11 September 2001 the husband ceased working for D L. The wife contended that this was a voluntary cessation of his employment. I am not satisfied on the evidence that this was so. It is common ground that he was paid to 22 November 2001. He commenced work for his current employer I ITG C as a computer sales consultant on 23 November 2002. He asserts that his package is $75,000 per annum and thus the continuation of child support based on a significantly higher income is unjust and inequitable.
The husband produced his tax return at the hearing for 2001-2002 financial year. His taxable income for that year was $124,685. However, his income included $52,292 relating to the net profit on sale of shares, some of which tax was payable during the relevant period. As the shares were taken into account in the property proceedings it would, in my view, not be reasonable to include that amount in his income for that year for the purposes of the child support income. Without the shares, however, his child support income was approximately $100,000 for the 2001-2002 financial year. In that year his income was both from D and I.
It is only in the following financial year, that is 2002-2003, however, that the effect of his changed income position will be a significant factor.
Having heard the evidence I am satisfied that the husband's current income is $75,000 which includes a car allowance and in addition his employer pays superannuation which amounts to about 8 per cent of his salary, including the car allowance. The wife contended that the husband would be entitled to commission on sales which would significantly inflate his income. The husband was employed originally by I with a view to bringing to them some of the clients with whom he had previously worked at D L. His evidence was that has not occurred, but in any event, there has been a refocus of the business plan for I and they are now not concentrating on the larger accounts. Accordingly, the husband will be operating in a different environment.
His income will include commissions provided that he achieves a particular level of sales. Targets have been set fairly high and the evidence from Mr K who is from the company which employs the husband is that about 50 per cent of the computer salespersons achieve the target which would entitle them to a commission. The maximum commission the husband could receive is $50,000 and if he achieves his target, then depending upon what he achieves he could receive part of that. Given that the evidence is that only 50 per cent of employees reach their target, I am not able to find on the balance of probabilities that the husband will have commission available to him as part of his income.
The husband has dealt with his shares which were mostly in D L but also into technology dotcom companies since the child support agreement was made. The shares were held in a USA account and the arrangement for the acquisition of the shares was a margin lending arrangement. The husband has been able to sell and draw down funds from the account using the security of other shares from time to time. Some of that share trading is reflected in his tax return for the 2001-2002 year. Some of the sales reflected in that return, however, were involuntary sales in the sense that when the security margin was reached by the shares falling in value, then a sale of those shares was required.
The actual amounts received by him were $80,000 received last year and used as a deposit on his present home at Y and $120,000 which he received recently. The latter sum was used as to $88,000 which he put into the mortgage secured over the property at Y at the B of M and $32,000 used to repay credit card liabilities. He has tax liabilities arising from share sales in the current financial year. The liabilities are likely to be $13,000 due on 3 March and $45,000 due on 3 April the following year. He will use the mortgage to draw down, if necessary, to fund these payments.
The husband and his present wife E W have purchased a property at Yellingbo for $400,000. The deposit of $80,000 came from the husband and they borrowed $320,000. Following the sale of the husband's property in B he contributed a further $160,000 and his wife put in between $25,000 and $30,000. Although this sum would have reduced the mortgage down to $240,000, they drew down further funds to do repairs on the property. As at the date of the application in October the amount owing on the mortgage was $313,330. As a result of the recent payment made into the mortgage account it is now $224,000.
However, the husband may have to use that fund to pay his tax and the mortgage payments are fixed at the rate originally borrowed and do not reduce if payments are made into the account. The Y property is currently worth approximately $440,000. It is a jointly owned property and the mortgage is a joint liability. I note the husband has contributed about $240,000 compared to his wife's contribution of between $25,000 and $30,000. The husband's present wife was employed earning $601 per week. She ceased her employment, however, and has now been self-employed for over a year. She is doing photography and breeding horses. These activities are not yet profitable, however, she pays the A V account. The husband has attributed 50 per cent of most of the household expenses, including the mortgage, to her in his financial statement.
In view of her income earning capacity and choice of current lifestyle it would not be reasonable for the husband to be responsible for more than 50 per cent of the household costs, including the mortgage, or for any of her personal expenses because she has an income earning capacity. However, the husband in relation to the assertion of what his necessary expenditure is has in fact attributed 50 per cent of the expenses to her. The husband's wife also has a property in which there is approximately $40,000 equity which is negatively geared. The husband has contributed most of the funds for the purchase of their house, notwithstanding that his wife has a 50 per cent interest. However, he has split the liability with her so that there is no detriment in relation to his monthly liability.
The equity in their Y property may have been greater if the wife did not have a joint interest, but the effect on the husband's outgoings is a sharing of the liability.
I find that the husband's income is $1442 per week. He pays tax of $461 leaving $981. I find his fixed commitments to be: 50 per cent of the mortgage which is $218 a week, half of the rates at $11 per week, half the insurance $18 per week, hire purchase on the car of $246, health insurance of $30 which is a total of $523. That leaves him $458. I take into account that the husband is able to claim a deduction of 74 per cent of his motor vehicle expenses of $10,000 which, having regard to his effective marginal tax rate, would give him about another $64 per week. That would provide with about $522 per week.
Given that his car expenses are $252 and his other necessary expenses, including food, it is obvious, in my view, that the husband cannot pay what he was previously paying or anything like the previously agreed sum.
The Wife’s financial position
I now turn to the wife's financial position. The wife's income is by way of a pension. She previously worked in the IT industry but has not worked since E 's birth, except in circumstances which I will refer to shortly. Prior to leaving the workforce her last job was for a significantly less salary than her previous one. Since that time she has been out of the workforce with a commensurate loss of experience, contacts, and up-to-date knowledge. The only job that she has had since E 's birth is a telemarketing job which she had for four months last year in July, August, September and October. She worked three days a week and during that period earned a total of $6120.
Her evidence is that the job was to some extent an experiment to see how E would cope with her working, that it did not work, that E was clingy and she has now formed the view that it is not in E 's interest at this stage for her to go out to work even on a part-time basis.
Even if she was able to work on a part-time basis, however, she is not likely to earn anything like the threshold which would at least under the administrative provisions of the act affect the amount that the husband would have to pay. Her income is accordingly made up of family allowance of $64 a week and the single parent pension of $214 per week. She is entitled to a child care subsidy which she is not at the moment utilising.
Has a ground been established?
I now consider in light of the evidence whether the husband has established a ground under section 117 and in particular under section 117(2)(c)(i). The husband's income has reduced from a package of $169,000 to a package of $75,000 plus superannuation. Counsel for the wife correctly submits that I have to take into account when considering whether a ground has been established simply more than a change in the husband's immediate income and refers to the decision of the Full Court in Ross v McDermott. I accept that I have to take into account both the husband's reduction in income and the husband's necessary expenses as well in determining whether the husband satisfies section 117(2)(c)(i).
In this case, however, I am so satisfied and I have already referred to the fact that when the husband's fixed expenses are deducted and he is then required to meet other expenses such as car and basic living, his necessary commitments are such that with the reduction in his income it would be unjust and inequitable to continue to apply the provisions of the child support agreement. I am satisfied that he has established a ground.
There were two periods in which the husband has sought to have the child support reduced. I am not satisfied that there are special circumstances which relate to the financial year 2001-2002. The husband's tax return indicates that in that financial year his taxable income, excluding the shares, was approximately $100,000. There is a relatively small difference between the income amount to which the payment he agreed to make equates and his taxable income. In that period he has also had access to other funds. I am not satisfied that any special circumstances exist prior to 30 June 2002. However, I am satisfied that since that time he has established a ground under section 117(2)(c)(i).
Is it just and equitable?
The next question I have to consider under the Act is whether it is just and equitable as regard to the liable parent, the carer and the child to depart from the existing provisions. I have regard to the objects of the act which are that each of the parties is responsible for provision of support for their children. The husband's annual income is $75,000 which includes his motor vehicle allowance. He also has superannuation. In my view, the amount of the superannuation which he receives should be added onto his salary package to produce a figure because if the administrative provisions were to apply it would be reasonable, in my view, for the total package to be considered normally superannuation would form part of taxable income. The amount he says he receives is a total of $5980 per annum which is in round figures when added to the $75,081 per annum. If I deduct the self-support component from that, and apply the consecutive formula then the amount that the husband would be required to pay on a weekly basis is $240 or $12,480 per annum.
Having regard to E 's needs and having regard to the modest capacity of the wife to contribute to her support, I am satisfied that that would be a reasonable payment for the husband to make. I take into account in coming to that conclusion the expenses that he has as well. He has to meet his own living expenses, but he has some flexibility in that respect. He can, for example, draw down on the mortgage, an account into which he has recently placed significant funds and he is sharing his expenses with his present wife. In my view, it is just and equitable as regards to the liable parent, the carer and the child for the husband to pay child support on an income of $81,000.
Is it otherwise proper?
I am also satisfied that it is otherwise proper in terms of section 117(5) for that order to be made. Whilst it is less than the existing assessment and the agreement, nevertheless it is a sum which in all the circumstances, in my view, is appropriate and although less than the existing amount is one beyond which the husband would not be able to provide. I am satisfied, therefore, that the provisions of section 117(5) are met.
In making the orders I have considered the question of the husband's commission in the event that he achieves his target. It seems to me that rather than leaving the position so that the parties would have to either go back to the agency and seek a review or, if dissatisfied, return to court, it would be preferable to factor into orders a provision whereby the husband pays child support on an income fixed at $81,000 or his taxable income, whichever is the greater. I propose to make an order which will fix the income amount and otherwise leave it to the agency to assess the amount.
The provision for the potential variation should not occur until at least the 2002-2003 tax year because I have already taken account of the husband's income tax for the year ended 30 June 2002.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 21 January 2003
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