Randall and Randall (Child support)

Randall and Randall (Child support) [2018] AATA 1733 (10 April 2018)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2017/SC012244
APPLICANT:  Mrs Randall
OTHER PARTIES:  Child Support Registrar
Mr Randall

TRIBUNAL:Member W Kennedy
DECISION DATE: 10 April 2018
DECISION:

The Tribunal sets aside the decision under review and, in substitution, varies Mrs Randall’s adjusted taxable income to $109,199.00 and Mr Randall’s adjusted taxable income to $49,022.00, both for the period from 9 January 2017 to 31 January 2019.

CATCHWORDS
Child Support – Departure determination – Income and financial resources of parents – Business income – Period of departure - 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 removed 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

This review concerns an application for a departure from the formula assessment of child support. Mr Randall and Mrs Randall are the parents of three children. Two of the children, being [Child 1], who was born in May 2000 and [Child 2], who was born in April 2006 are children of the child support assessment. There has been a child support assessment in place for the children made by the Child Support Agency of the Department of Human Services (the Department) since 25 May 2015. At the time that he applied to the Department for a departure from the formula assessment the assessment was based on Mr Randall having above primary care of the children.
On 19 December 2016 Mr Randall advised the Department that he intended applying for a departure from the formula assessment of child support based on Reason 8A (the income, property and financial resources of one or both of the parents), stating that Mrs Randall’s income is greater than the income disclosed on her income tax return. On 9 January 2017 Mr Randall lodged his application. On the form he indicated that he was applying on the basis of Reason 8A and also Reason 8B (the earning capacity of one or both of the parents).
At the time of Mr Randall’s application Mrs Randall was required to pay Mr Randall $9,072.00 per annum, that amount being based on Mr Randall’s adjusted taxable income (ATI) of $7,371.00 and Mrs Randall’s ATI of $57,985.00.
On 19 April 2017 a delegate of the Child Support Registrar considered Mr Randall’s departure application and decided that Reason 8A had been established. The delegate decided to set Mrs Randall’s ATI at $82,472.00 for the period from 9 January 2017 to 31 December 2017 and $83,645.00 for the period from 1 January 2018 to 31 March 2019.
On 12 May 2017 Mrs Randall lodged an objection to that decision, claiming that the basis of the decision setting her income was incorrect. On 17 July 2017 a Department objections officer decided to set aside the decision of 19 April 2017 and to set Mrs Randall’s ATI at $95,000.00 for the period from 9 January 2017 to 31 January 2019.
On 1 August 2017 Mrs Randall lodged an application for a review of the decision of the Department with this Tribunal. The Tribunal had access to the statement and documents provided by the Department. The documents are at folios 1 to 248 of the hearing papers and were provided to the parents in advance of the hearing.
Following a telephone directions hearing the Tribunal directed Mr Randall and Mrs Randall to provide completed Statements of Financial Circumstances (SOFC) and other documentation. The documents provided by Mrs Randall are at folios A1 to A212 of the hearing papers. The documents provided by Mr Randall are at folios B1 to B14 of the hearing papers. The matter was heard and determined in [a particular Australian city] on 10 April 2018. Mrs Randall attended the hearing by telephone and gave her oral evidence under an affirmation. At the commencement of the hearing Mrs Randall acknowledged that the decision of the Tribunal could be adverse and elected to proceed with the application. Mr Randall failed to make himself available for the hearing. The Child Support Registrar was not represented at the hearing.

CONSIDERATION
The legislative framework and issues for the Tribunal to determine

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 Act). This requires the application of a statutory formula which takes into account factors such as the number and ages of the children, the level of care provided and the income of each parent.
The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act. Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process for considering applications to do so. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:
·     that one, or more than one, of the grounds for departure referred to in subsection 117(2) of the Act exists; and
·     that it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
·     that it would be otherwise proper to make a particular determination.
The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Each of the grounds, which for administrative purposes are referred to as reasons, require that special circumstances be established. The term ‘special circumstances’ is not defined in the Act. In Gyselman v Gyselman [1991] FamCA 93 the Full Court of the 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.
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 must make one of the determinations prescribed in section 98S of the Act. These include varying the annual rate of child support payable or a parent’s ATI.

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

The Tribunal’s first task is to determine whether a ground for departure from the administrative assessment can be established. In his application to the Department Mr Randall said that he wished for a departure from the administrative assessment on the ground that the assessment does not correctly reflect one or both parents’ income, property and/or financial resources. In particular Mr Randall said that Mrs Randall’s income tax return does not properly reflect the income, property and financial resources available to her. This ground for departure, which is known as reason 8A for administrative purposes, is set out at subparagraph 117(2)(c)(ia) of the Act:
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(ia) because of the income, property and financial resources of either parent; or
…
At the hearing Mrs Randall said that she is the sole owner of [Company 1]. She said that [Company 1] operates [from] two permanent locations and from a number of “visiting” locations. All of the premises are rented. [Company 1] has a small number of employees in addition to Mrs Randall.
The Tribunal first considered the SOFC (folios A1 to A9) provided by Mrs Randall. In her SOFC Mrs Randall states that her only income is the salary paid to her by [Company 1], which she states is $1,050.00 per week. Mrs Randall states in her SOFC that she pays $710.00 per week in child support but at the hearing she confirmed that the $710.00 is the assessed amount rather than what she pays. Adjusting for that amount, Mrs Randall’s weekly expenses total $1,620.00, meaning that her expenses exceed her income by $570.00 per week. The Tribunal notes that despite this shortfall Mrs Randall claims in her SOFC that she has no expenses for telephones, council rates, clothing, insurance, hobbies, entertainment, chemists, repairs, hairdressing or toiletries. At the hearing Mrs Randall said that she puts aside amounts for those expenses but that they are very small. She said that many of the expenses are properly met by the company.
Mrs Randall has provided copies of her personal bank account statements for one account for the period from 9 June 2017 to 6 December 2017 (folios A159 to A166) and for a further bank account for the period from 16 October 2017 to 21 December 2017 (folios A156 to A158). The Tribunal notes that the bank account statements cover a slightly different period to the period nominated in the Tribunal’s directions. Although some of the bank account statements provided by Mrs Randall are partially unintelligible the Tribunal has been able to reconstruct them. The bank account statements show very few transactions, other than Mrs Randall’s wages being deposited and then being immediately withdrawn, usually on the same day, through an ATM. The Tribunal notes that the wage deposits are all for $850.00, being her salary after income tax is withheld, as indicated on Mrs Randall’s SOFC. The Tribunal also notes that [Company 1] has transferred other amounts into Mrs Randall’s bank account. These other transfers are considered below. At the hearing Mrs Randall said that she likes to deal in cash for her personal expenses, so she withdraws her salary in cash and puts aside specific amounts for particular expenses. She said that she keeps money in cash in a safe. When asked about how she pays child support and utility accounts Mrs Randall said that she goes to the post office with cash.
Mrs Randall provided personal credit card statements for the period from 4 September 2017 to 2 January 2018 (folios A176 to A190). The Tribunal notes that Mrs Randall has only provided credit card statements for a four month period rather than for the six month period directed by the Tribunal. At the hearing Mrs Randall said that this was because she had changed credit cards and that she could not access the statements for the old card.
During the four month period covered by the credit card statements Mrs Randall made purchases totalling $3,854.73. The purchases are unexceptional, being mostly in the nature of personal expenses, many of which Mrs Randall made no allowance for in her SOFC. The credit card statements show six credit vouchers, with a total value of $848.83 were credited to the account. Other than the credit vouchers the only significant payment into the credit card account during the period covered by the statements was $2,815.00 made on 17 October 2017. The payment came from Mrs Randall’s personal bank account (folio A165), but made use of funds transferred the previous day from [Company 1] (folio A81). At the hearing Mrs Randall said that the transfer from [Company 1] to her personal bank account was in order to reimburse her for conference expenditure. Mrs Randall drew the Tribunal’s attention to a payment of $3,146.34 to [Company 1] from “[Payer]” on 16 October 2017 (folio A80), which was used to fund the transfer to Mrs Randall’s bank account. When asked by the Tribunal to identify the expenditure that was being reimbursed Mrs Randall said that it would have been made prior to the period covered by the credit card statements.
A similar transaction took place in July 2017. On 17 July 2017 [Company 1] transferred $3,637.47 from the business account (folio A64) to Mrs Randall’s personal account (folio A160). The next day the same amount was transferred to Mrs Randall’s credit card account. The relevant credit card statement was not made available to the Tribunal despite the Tribunal’s direction to Mrs Randall that it be provided, however the initiating account (folio A160) shows that the payment was directed to a credit card account. At the hearing Mrs Randall did not dispute the transaction, reiterating that any such payments would have been for reimbursement of her expenses for attending conferences. She said that if she had been able to access statements from her previous credit card it would show her original expenditure on conference expenses. The Tribunal has difficulty with this explanation for the following reasons:
·     the first credit card statement provided shows an opening balance of $3,020.89 (folio A176), meaning that the credit card had been in use prior to the period covered by the statement;
·     the payment made from Mrs Randall’s account to the credit card account on 18 July 2017 was made to a credit card with the same branding, suggesting that even if she had changed actual cards, she had not changed credit providers and the statements should still have been available to her;
·     the four month period covered by the credit card statements does not show any expenditure that is clearly business related yet all of the payments have been made through the transfer of funds from [Company 1];
·     [Company 1] operates a credit card account (folios A105 to A119) and it would seem to make much more sense for Mrs Randall to use that credit card if she was incurring business related expenses.
The Tribunal concludes that Mrs Randall’s private credit card account is routinely paid by [Company 1].
Although the credit card account shows normal private expenditure there is no expenditure on council or water rates, no payments on utilities and no child support payments. At the hearing Mrs Randall said that she pays these expenses in cash or through post office transfers. She said that she does this because her mother used to do it. She said that it also has the virtue of preventing the Department from garnisheeing her bank account. The documentation shows that Mrs Randall withdraws her salary payments in cash immediately. The Tribunal considered whether this is a subterfuge designed to disguise Mrs Randall’s income or expenditure but concluded that it is no more than an unconventional practice.
Mrs Randall has provided a summary personal income tax return for the 2016/17 financial year (folios A32 to A36). This shows salary payments of $55,114.00, consistent with her SOFC. It also shows net rental income of $15,851.00 (after interest deductions of $10,539.00). This latter income is not shown on Mrs Randall’s SOFC. At the hearing Mrs Randall said that the rental income is from the property that she and Mr Randall own in [Suburb 1]. The property is rented to [Company 1]. It is apparent that on her tax return Mrs Randall declares half of the amount paid by [Company 1] as income and also that she claims half of the interest on the loan secured against the property as a deduction.
It is well established that the taxable income of a person who is self-employed may not be an accurate reflection of their financial resources. For instance, in Carey v Carey (1994) FLC 92-489 the Family Court observed:
The legislation however realises that, whilst the simplest method of calculating child support is to use existing taxation records, the use of taxable income as the sole basis for child support could lead to some inequities and injustices. For a start, the financial position of many members of the community is not accurately reflected in their taxable income; either they manage to evade or avoid their taxation liabilities or they can so structure their affairs so that they are capital rich and income poor.
This and other cases establish that a ground for departure from the administrative assessment may be established because self-employed persons are able to derive additional personal benefits through their business structures, and also have greater control over the structure of their finances than does a salaried employee. This is demonstrated above by [Company 1] paying Mrs Randall’s credit card accounts.
An examination of the [Company 1] bank and credit card accounts shows normal business-related expenditure. The accounts also show expenses that are met by [Company 1] that could be interpreted as displacing expenditure that Mrs Randall, were she simply a salaried employee, would have to meet from her pay. These include council fees, utility payments, many meals and other expenditure items.
Payments against the line of credit secured over the marital property are met by [Company 1] as are the payments of the loan used to purchase the [Suburb 1] property. Both of these transactions may be entirely legitimate as the line of credit could have been used to finance the start-up and the payments of the loan for the [Suburb 1] property may be properly characterised as rent for the use of the property by [Company 1] (see below). However all of these transactions require some further consideration.
The Tribunal proceeded to examine the documentation provided by Mrs Randall in relation to [Company 1]. The documentation before the Tribunal is:
·     Rent appraisal of the property in [Suburb 1] owned by Mrs Randall and rented from her by [Company 1] (folio 156)
·     Company valuation (folios 31 to 62)
·     Rent ledgers (folios A16 to A18)
·     Profit and Loss Statement (PL) for 2015/16 (folios 168 to 172)
·     Financial Statements for 2016/17 (folios A19 to A29)
·     Profit and Loss Statement for 1 July 2017 to 7 March 2018 (folios A193 to A194)
·     Income Tax Return for 2016/17 (folios A38 to A42)
·     [Bank] account …8791 statements for 18 April 2017 to 16 February 2018 (folios A45 to A97)
·     [Bank] account …4305 statements for 20 March 17 to 26 October 2017 (folios A99 to A103)
·     [Credit] card account …020 statements for 18 April 2017 to 15 February 2018 (folios A105 to A119)
·     [Business] Loan account …6688 statements for 15 November 2016 to 15 November 2017 (folios A121 to A124)
·     [Line] of Credit account …4866 statements for 24 May 2017 to 23 Feb 2018 (folios A125-A130)
·     [Bank] A/c …3227 statements for 1 July 2017 to 31 December 2017 (folios A131 to A141)
The financial statements for 2016/17 (folios A19 to A29) provide the most complete statement of the business’ status. The Tribunal notes that the accounts provided to the Tribunal are unsigned, however at the hearing Mrs Randall stated that they are accurate. They show that in the 2016/17 financial year [Company 1] had gross sales of $819,216.00 and that the gross profit from trading amounted to $490,530.00. These figures were slightly down on the previous year. After expenses of $507,465.00, [Company 1] produced a net loss of $14,446.00, compared with a profit of $34,567.00 in the previous year.
Many of the expenses claimed in the financial statements are consistent with the expected normal business expenses. The Tribunal focussed its attention on those expenses that could deliver some personal benefit to Mrs Randall and which therefore might be considered as a financial resource available to Mrs Randall. These include:
·     Depreciation ($15,158.00)
·     Motor Vehicle Expenses ($5,561.00)
·     Rent ($95,833.00)
·     Superannuation ($47,276.00)
·     Telephone and Internet ($14,710.00)
·     Travelling Expenses ($6,779.00)
The financial statements do not include a depreciation schedule however the balance sheet shows that at 30 June 2017 [Company 1] had property, plant and equipment valued to $38,726.00 (folio A22). At the hearing Mrs Randall said that property owned by [Company 1] consisted of a car, computers and telephones and other equipment. Although she said that it owned the property in [Suburb 1] that is incorrect as it is part of the property settlement between Mr and Mrs Randall and, with the finalisation of the property settlement, becomes the property of Mrs Randall.

Mrs Randall has previously said that the motor vehicle expenses are entirely legitimate as she has to travel between the various business premises. At the hearing Mrs Randall acknowledged that she does not own a car and that the car owned by the business is used by her to meet her private transportation needs.
The rent expense is relevant because [Company 1] rents premises in [Suburb 1] from Mrs Randall. The Tribunal notes that pending a property settlement under which the premises in [Suburb 1] are to be transferred to her sole ownership, Mrs and Mr Randall are joint owners of the property. However throughout the period under review Mrs Randall has dealt with the premises as though she is the sole owner (other than on her personal income tax return). She meets all the outgoings (whether directly or through [Company 1]) and the rent goes from [Company 1] directly to the loan account. Under these circumstances the Tribunal has determined that insofar as operating cashflow is concerned it is appropriate to treat the premises in [Suburb 1] as belonging to Mrs Randall throughout the period under review.
Although payments of $1,015.00 per week are shown in the accounts as rent the payments are in fact repayments of the loan that was used to purchase the property (folio 157). The fact that the rent paid by [Company 1] goes directly to Mrs Randall’s loan account is of no concern to the Tribunal. However the quantum of the payment is of interest as it may indicate that she is being paid a non-commercial rent. The premises consist of [particular characteristics]. It is in a secondary commercial area and is zoned B4 (mixed use). Mrs Randall has provided a “rental appraisal” dated 8 April 2016 from a local real estate agent, which states that the property could rent for between $700.00 and $750.00 per week (folio 156). In contrast, on 9 May 2016 a professional valuer estimated the rental value at $500.00 per week (folio 72).
The Tribunal notes that at the date of the hearing there were [a number of similar sized] houses for rent in [Suburb 1]. The rentals being asked vary between $340.00 and $485.00 per week. The Tribunal notes that the business rents other premises around the [area]. The rentals paid vary between $119.95 per week (folio A17) and $409.99 per week (folio A18). At the hearing Mrs Randall pointed out that in some cases it is only a room in a clinic that is rented and thus a comparison of rents may not be of much value. The Tribunal has decided that it is appropriate to rely on the professional valuer’s conclusion over the opinion of the real estate agent, particularly as the real estate agent’s opinion appears to be at odds with rents asked for similar properties in the area.
The Tribunal finds that the maximum commercial rent for the [Suburb 1] premises is $500.00 per week and that the balance of the rent, being $515.00 per week, or $26,780.00 per annum, represents a financial resource available to Mrs Randall. At the hearing Mrs Randall said that the property settlement will be finalised very shortly and that she is in the process of refinancing the [Suburb 1] premises. She said that this will reduce the “rent” paid by [Company 1] to $500.00 to $600.00 per week. This refinancing is not of particular relevance to the Tribunal’s findings because any resource freed from “rent” will reduce the resource available to Mrs Randall through that avenue but increase by the same amount the resource available to Mrs Randall through her sole ownership of the company.
Superannuation expenses in 2016/17 amounted to the equivalent of 23.6% of the wages paid by [Company 1]. The superannuation guarantee legislation requires employers to pay 9.5% of an employee’s wage into a superannuation fund. As the total wages paid by [Company 1] in 2016/17 totalled $200,504.00 the superannuation liability came to $19,047.88 (including the liability in respect of Mrs Randall). [Company 1] actually paid $47,276.00 in superannuation. At the hearing Mrs Randall was unable to explain why the superannuation expense was so high. The Tribunal considers that the excess, being $28,228.12, is a financial resource available to Mrs Randall.
Telephone and internet expenses amounted to $14,710.00 in 2016/17. At the hearing Mrs Randall said that [Company 1] maintains a website and internet connections at its various premises. She said that she does not have a private internet connection or a private telephone and that the business meets all of her private expenses in this regard.
Travel expenses amounted to $6,779.00 in 2016/17. At the hearing Mrs Randall said that she has to travel between the various business locations and that she sometimes found it more convenient to stay overnight.
After careful consideration of all the evidence before it the Tribunal decided that an appreciation of the financial resources available to Mrs Randall could be established by adding to her salary the following items:
·     The net loss of [Company 1] of $14,446.00 on the basis that the business belongs entirely to Mrs Randall and that a loss incurred by the business reduces the financial resources available to her;
·     Half of the amount of depreciation, being $7,579.00, on the basis that this is a provision rather than an expense. While recognising that some provision for equipment replacement is necessary it finds that $15,158.00, being some 40% of the capital value of the equipment owned by [Company 1], is excessive;
·     Half of the motor vehicle expenses, being $2,780.50, on the basis that Mrs Randall meets none of her private motor vehicle expenses from her personal resources;
·     Rent expenses of $26,780.00, that being the amount above a commercial rate of rent paid by [Company 1] to Mrs Randall;
·     An amount of $28,228.12, being the amount available for payment into Mrs Randall’s superannuation account above the 9.5% of her wages provided for under the superannuation guarantee legislation;
·     One-quarter of the telephone and internet expenses, being $3,677.50, on the basis that Mrs Randall meets none of her private telephone and internet expenses from her personal resources.
The Tribunal considered whether to include some proportion of the travelling expenses. However the Tribunal decided that the evidence that this expense is personal is not sufficiently conclusive. The Tribunal also considered whether to make further allowance for the fact that Mrs Randall’s private credit card account is paid by [Company 1] but decided that there was a possibility of “doubling up”. It therefore decided to give Mrs Randall the benefit of the doubt and not make any further provision.
Taking into account that the amounts described above leads to the conclusion that Mrs Randall has available to her the following financial resources:
·Salary  $54,600.00
·[Company 1] Loss           -$14,446.00
·Depreciation  $7,579.00
·MV Expenses                  $2,780.50
·Excess Rent  $26,780.00
·Excess Superannuation   $28,228.12
·Telephone/Internet          $3,677.50
TOTAL  $109,199.12
At the time that Mr Randall applied for a departure from the formula assessment of child support the assessment was based on an ATI for Mrs Randall of $57,985.00. The Tribunal finds that the circumstances under which Mrs Randall’s financial resources are not taken fully into account in the formula assessment are special. It also finds that the lower assessment is a result that is unjust and inequitable in the circumstances. This establishes a ground to depart from the formula assessment of child support under subparagraph 117(2)(c)(ia) of the Act in relation to Mr Randall’s financial resources.

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

Mr Randall also sought a departure from the administrative assessment on the ground that Mrs Randall’s earning capacity is not reflected in the formula assessment. This ground, known as Reason 8B for administrative purposes, is set out in subparagraph 117(2)(c)(ib) of the Act:
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ib) because of the earning capacity of either parent; or

…

Subsection 117(7B) of the Act provides:
(7B)In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i)the parent does not work despite ample opportunity to do so;
(ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii)the parent has changed his or her occupation, industry or working pattern; and
(b) the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i)the parent's caring responsibilities; or
(ii)the parent's state of health; and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
At the hearing Mrs Randall said that she continues to work full-time in the same occupation. The documentary evidence supports her evidence in this regard and as there is no contrary documentary evidence the Tribunal finds that paragraph 117(7B)(a) of the Act is not satisfied and it is not open to the Tribunal to make a finding as to Mrs Randall’s earning capacity.
The Tribunal finds that there are no special circumstances that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ib) of the Act.

Issue two – Would departure from the administrative assessment be just and equitable?

Relevant law and evidence

As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable the Tribunal had regard to the following matters set out in subsection 117(4) of the Act:
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection 10) by the making of, or the refusal to make, the order.
The Tribunal considered the evidence provided by the parties, including the documents and SOFC form that each party provided to the Tribunal as well as the documents provided by the Department. As Mr Randall did not make himself available for the hearing the Tribunal was unable to take oral evidence from him, however the Tribunal took into account the oral evidence provided by Mrs Randall.

Assessment of evidence, findings of fact and application of the law

Section 3 of the Act states and the Tribunal accepts that it is the duty of both parents to financially support their children and that the children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute.

The children’s needs

Paragraph 117(4)(b) of the Act requires the Tribunal to consider the proper needs of the children. The Tribunal has done this in accordance with the legislation under which this determination is made. At the hearing Mrs Randall said that the children were healthy and have no special or unusual needs.

The children’s incomes and earning capacities

Both children are full-time students however [Child 1] is working part-time while she completes school. At the hearing Mrs Randall was unable to say how much she earned. In his SOFC Mr Randall did not indicate that [Child 1] had any income. The Tribunal concludes that neither child has income that needs to be taken into account in the child support assessment.

The income, property and financial resources and earning capacity of Mrs Randall and her necessary commitments

Mrs Randall’s financial circumstances were closely examined by the Tribunal. The Tribunal’s findings have been described above. The Tribunal has found that Mrs Randall has available income, property and financial resources that need to be taken into account in the child support assessment amounting to $109,199.12 per annum. In considering the appropriate ATI for Mrs Randall, in accordance with section 156 of the Act, the Tribunal rounds the figure up to $109,199.00.
Mrs Randall is the owner of a successful company from which she derives considerable financial benefit, well in excess of the salary paid to her by [Company 1]. In terms of assets she owns the property at [Suburb 1], which has been valued at $500,000.00. At the hearing Mrs Randall said that the company is valued at $369,000.00.
At the hearing Mrs Randall did not identify any financial commitments that were unusual or out of the ordinary. The Tribunal finds that Mrs Randall has sufficient income, property and financial resources to meet her necessary commitments.

The income, property and financial resources and earning capacity of Mr Randall and his necessary commitments

Prior to the hearing Mr Randall was directed by the Tribunal to provide:

Evidence that Mr Randall was not required to lodge an income tax return for the 2015/16 and 2016/17 financial year,
Statements for all bank accounts which Mr Randall is authorised to use for the period from 1 July 2017 to 31 December 2017,
Statements for all credit/debit card account which Mr Randall is authorised to use for the period from 1 July 2017 to 31 December 2017.

In response Mr Randall has provided, in addition to a SOFC, an income tax estimate for the 2015/16 financial year and a bank account statement for the period from 1 July 2017 to 31 December 2017. As Mr Randall did not make himself available for the hearing the Tribunal was unable to ask him to explain why he had failed to fully respond to the Tribunal’s directions or to question him about the documentation he had provided.
In his SOFC Mr Randall states that his only income is the $380.00 per week that he receives in child support from Mrs Randall. From this he meets his own expenses and the expenses relating to the children who live with him. At the hearing Mrs Randall said that up until October 2017 [Child 2], [Child 1] and their son, who is now an adult, were living with Mr Randall but that since October 2017 [Child 2] had moved in with Mrs Randall. Mrs Randall said that she thought that their adult son does not work, although the Tribunal notes that in his SOFC Mr Randall states that the son earns $200.00 per week. Thus Mr Randall has been responsible for meeting the expenses of himself, another adult and two children with the only other contribution being the $200.00 per week that his adult son earns.
In his SOFC Mr Randall states that his weekly expenses amount to $623.00, meaning that his expenses exceed his income by $243.00 per week. However he has included in his expenses nothing for many routine requirements and only minimal amounts for other normal requirements. The Tribunal is not satisfied that Mr Randall has provided an accurate picture of his financial circumstances in his SOFC. The Tribunal finds that his expenses far exceed the amount that he has stated in his SOFC.
The bank account statement provided by Mr Randall shows a deposit of $195,000.00 on 6 July 2017 followed by a $170,000.00 withdrawal on 12 July 2017. The bank account shows further large withdrawals of $8,000.00 on 19 July 2017, $9,000.00 on 26 July 2017 and $8,000.00 on 11 August 2017. Smaller withdrawals, mostly of $300.00 and $400.00 continue until 24 October 2017. There are relatively few purchases made through the bank account. It is not apparent that any of the expenses identified in Mr Randall’s SOFC are met through the use of this bank account. On the other hand the bank account does show purchases made at [a particular hotel] ($633.36), Hertz ($236.47) and Ticketek ($207.60), none of which are accounted for the by expenditure identified in Mr Randall’s SOFC.
At the directions hearing Mr Randall said that he had not lodged income tax returns for many years. He was unable to recall when he had last lodged a tax return. The Tribunal accordingly directed Mr Randall to provide a statement from the Australian Taxation Office (the ATO) or from his accountant confirming that he was not required to lodge income tax returns in 2015/16 and 2016/17. In response Mr Randall provided an income tax estimate for the 2015/16 year which shows that his declared income is low enough for him to not pay income tax. The Tribunal notes that this is only an estimate prepared by his accountant. It is not an income tax return and it is not a statement from the ATO. However the Tribunal notes that the Department has used taxable incomes of $7,371.00 for 2015/16, $25,264.00 for 2014/15 and $57,058.00 for 2013/14. In all cases the source of this information is recorded as being the ATO (folio 200).
The Tribunal finds that irrespective of his taxable income Mr Randall has access to financial resources that allow him to meet the expenses of himself, his adult son and his two other children as well as the capacity to meet discretionary expenses as disclosed by his bank account.
The Tribunal has considerable difficulty in establishing the financial resources available to Mr Randall because he has failed to fully cooperate with the Tribunal. Mr Randall did not fully satisfy the directions of the Tribunal and also failed to make himself available for the hearing. As a result the Tribunal was unable to obtain oral evidence from him. At the hearing Mrs Randall was reluctant to provide any information about Mr Randall’s affairs, stating only that he was inclined to provide extravagant gifts to their children, for instance on return from his overseas travel.
In arriving at a finding the Tribunal has considered the provisions of section 58 of Act:
Determination by the Registrar of a parent's adjusted taxable income
(1)     This section applies if a parent is to be assessed in respect of the costs of a child in                 relation to a child support period and either of the following apply:
(a) the parent's taxable income for the last relevant year of income in relation to the period has not been assessed under an Income Tax Assessment Act;
   (b)     the Registrar is unable to ascertain whether or not the parent's taxable income   for that year has been so assessed.
          Information or document in the possession of the Registrar etc.
(2)     If:
   (a)     the Registrar or the Commissioner of Taxation has information (whether oral or   written) or a document in his or her possession; and
   (b)     either:
(i)      an amount is specified in that information or document as the parent's   adjusted taxable income for the last relevant year of income; or
(ii)      that information or document allows the amount of the parent's adjusted   taxable income for the last relevant year of income to be worked out; and
   (c)     the Registrar is satisfied that the specified amount, or the amount so worked out,   is a reasonable approximation of the parent's adjusted taxable income for that   year;
  the Registrar may determine that the specified amount, or the amount so worked out, is             the parent's adjusted taxable income for that year.
          Parent's taxable income assessed for the previous year of income
          (3) If:
   (a)     the parent's taxable income for a year of income has been assessed under an   Income Tax Assessment Act ; and
   (b)     that year (the previous year) is the year of income before the last relevant year   of income;
          the Registrar may determine that the parent's adjusted taxable income for the last relevant year    of income is the amount worked out by multiplying the parent's adjusted taxable income for the          previous year by the ATI indexation factor.
          Parent's taxable income assessed for an earlier year of income
(4)     If:
(a) the parent's taxable income for the previous year has not been assessed under an Income Tax Assessment Act; but
   (b)     the parent's taxable income for an earlier year of income has been so assessed;
          the Registrar may determine that the parent's adjusted taxable income for the last relevant year    of income is the greater of the following amounts:
   (c)     the amount worked out by multiplying the parent's adjusted taxable income for   the earlier year of income (or, if the parent's taxable income has been so   assessed for more than one earlier year of income, the most recent of those   years) by the ATI indexation factor;
   (d)     the amount that is equal to two-thirds of the annualised MTAWE figure for the   relevant June quarter in relation to the child support period.

Other circumstances

(5)     If:
   (a)     subsections (2), (3) and (4) do not apply in relation to the parent; or
   (b)     the Registrar decides not to make a determination in relation to the parent under   one of those subsections;

the Registrar may determine that the parent's adjusted taxable income for the last relevant year of income is an amount that is at least two-thirds of the annualised MTAWE figure for the relevant June quarter in relation to the child support period.

As Mr Randall’s last year of income has not been assessed under the Income Tax Assessment Act 1936 (the Assessment Act), subsection 58(1) of the Act may be applied. Subsections 58(2) or (3) may be relevant because there is evidence of Mr Randall’s income being previously assessed under the Assessment Act. The subsections do not use mandatory language and the Tribunal may choose to not apply them. Based on all of the evidence before it, particularly Mr Randall’s failure to cooperate with the Tribunal, the fact that he has not accessed income support, that he has apparently provided support for four persons, that he has the capacity to meet discretionary expenses (including overseas travel), and that he received an unexplained payment of $195,000.00 on 6 July 2017 the Tribunal finds that his previous tax returns are not an adequate basis for assessing his income, property and financial resources. The Tribunal finds that Mr Randall has access to much greater financial resources than are disclosed in his previous tax returns. However the Tribunal is concerned that it has heard no oral evidence from Mr Randall. Although it is entirely Mr Randall’s responsibility to provide oral evidence the Tribunal remains concerned to ensure that its decision is entirely fair to Mr Randall.
In these circumstances the Tribunal has decided that subsection 58(5) of the Act provides some guidance as to a basis for assessing Mr Randall’s income while being fair to both parents. The relevant annualised male total average weekly earnings (MTAWE) figure is $73,606.00 and two-thirds of that figure is $49,021.60. The Tribunal finds that this is a fair and reasonable basis for determining the financial resources available to Mr Randall.

The parents’ duty to support others

At the hearing Mrs Randall said that she has no responsibility to support any person other than her children. Mrs Randall said that as far as she was aware Mr Randall also has no responsibility to support anyone other than his children. There is no evidence before the Tribunal which suggests otherwise.

Hardship

The Tribunal is considering setting Mrs Randall’s ATI at $109,199.00 and Mr Randall’s ATI at $49,022.00. Such a departure from the formula assessment would result in Mrs Randall’s child support liability changing from the $7,371.00 per annum it was at the time of her application to approximately $21,030.00 per annum. This compares with a child support liability of $18,524.00 per annum determined by the objections officer.
At the time that Mr Randall applied for the departure he had care of both children, however Mrs Randall has advised the Department that with effect from 29 October 2017 she had 100% care of [Child 2]. This change would reduce Mrs Randall’s child support liability to approximately $7,471.00 per annum. [Child 1] turns 18 in 2018 and will cease to be a child of the assessment prior to the end of the year. This means that during 2018 the assessment will be reversed and Mr Randall will be required to pay child support to Mrs Randall. The Tribunal calculates that he will be required to pay approximately $4,674.00 per annum.
Taking into account that Mr and Mrs Randall’s primary obligation is to support their children, as well as the income and lifestyle of Mr and Mrs Randall as disclosed by the evidence before it, the Tribunal finds that the decision contemplated by it will not cause hardship to either of the parents.
The child support payable by Mrs Randall under the decision contemplated by the Tribunal should reasonably ensure that Mr Randall is able to meet the reasonable and necessary expenses of the children. The child support assessment will also change so as to appropriately accommodate changes in care.

Terms and period of departure

Mr Randall applied for the change of assessment on 9 January 2017. No reason was provided to backdate the departure. Taking all of the evidence into account and having regard to the matters in subsection 117(4) of the Act, the Tribunal finds that it would be just and equitable and fair to both parents for the ATI calculated for Mrs and Mr Randall to apply from 9 January 2017.
The Tribunal believes that it is desirable for the assessment to be set for a reasonably lengthy period of time in order to ensure predictability for both parents. The Tribunal finds the departure period set by the objections officer to be reasonable in the circumstances and the Tribunal will use the same period, being from 9 January 2017 to 31 January 2019.

Issue three – Is it otherwise proper to depart from the administrative assessment?

The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to depart from the administrative assessment. Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The child support law recognises that each parent has a primary duty to maintain their children. It appears that neither parent receives social welfare benefits of any kind and the decision of the Tribunal will not affect their qualification for benefits. The Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter.

DECISION

[2018] AATA 1733

10 April 2018

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Statutory Construction

Judicial Review

Remedies

Jurisdiction