Rood and Rood (Child support) - [2023] AATA 3409

Rood and Rood (Child support) [2023] AATA 3409 (8 September 2023)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/SC025812
APPLICANT:  Mr Rood
OTHER PARTIES:  Child Support Registrar
Ms Rood

TRIBUNAL:Senior Member D Benk
DECISION DATE: 08 September 2023
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides:

· From 1 October 2021 to 31 December 2022, Mr Rood’s annual rate of child support is to be assessed at $4,662 per annum.
· From 1 January 2023 to 30 September 2024, Mr Rood’s annual rate of child support is to be assessed at $5,200 per annum.

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 set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

Mr Rood and Ms Rood are the parents of [the child], born on 6 September 2010. Mr Rood has 27% care of [the child] and at the time of this decision his child support liability was up to date.
This matter has a long and unnecessarily complicated history. To make the complex simple, as the Tribunal understands it, child support liability had been set by a previous departure application which assessed Mr Rood as having an adjusted taxable income of $88,690 between 1 October 2021 and 31 December 2022. Simply put, that decision imposed a liability on Mr Rood to pay child support of $4,662 per annum.
Once that departure expired, liability was assessed with reference to the ordinary administrative assessment, that is a formula that takes into account the adjusted taxable income as reported to the Australian Taxation Office (ATO), the level of care, the age of the child, and any other relevant dependent children amongst other variables. In this case, the administrative assessment applied a default income of $84,140 for Mr Rood, resulting in an annual rate of $4,144.
Then as the Tribunal understands it, Ms Rood applied for an extension of time to object to the previous departure application. That extension of time was granted and following multiple internal reviews, the original departure was set aside on 25 February 2023 and an adjusted taxable income of $110,000 was set for Mr Rood commencing from 1 October 2021 to 31 December 2024. This resulted in a new annual rate of $6,654 and arrears of $2,740.
Mr Rood now seeks a review of that decision maintaining that he has never earned $110,000 per annum and the decision to depart and further backdate the assessment is unfair and unjust in the circumstances of his case. The matter was listed for a telephone directions hearing at which time a case management strategy was…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Rood and Rood (Child support)

Details

AGLC: Rood and Rood (Child support) [2023] AATA 3409
Case: [2023] AATA 3409
Decision Date: 8 September 2023

CaseChat Overview and Summary

This matter concerned a dispute between Mr Rood and Ms Rood regarding child support assessments. The primary issue before the Tribunal was whether to depart from the administrative assessment of Mr Rood's child support liability, based on his income, property, and financial resources.

The court was required to determine if Mr Rood's taxable income accurately reflected his earning capacity and financial resources for child support purposes, and if not, whether a departure from the administrative assessment was warranted. Specifically, the Tribunal had to consider whether certain expenses paid from Mr Rood's company account, such as legal fees and entertainment costs, should be added back to his income, and whether non-cash benefits derived from his self-employment, like depreciation and personal use of a company vehicle, should be factored into his financial resources.

The Tribunal applied the principle that the taxable income of a self-employed individual may not always be a true reflection of their financial capacity. It noted that while the Tribunal's role is not to conduct a forensic audit, it must assess available evidence to determine a fair child support liability. The Tribunal found that Mr Rood's company had paid significant personal legal fees, and that non-cash benefits and other deductions increased his cash flow beyond his declared taxable income. Consequently, the Tribunal determined that the ground for departure under subparagraph 117(2)(c)(ia) of the Act had been established due to the impact of these circumstances on Mr Rood's financial resources, which were conservatively estimated to be more than $90,000 per annum for the 2022 financial year.

The Tribunal set aside the previous departure decision and substituted its own. It ordered that Mr Rood's child support liability be assessed with reference to his adjusted financial resources, which were found to be significantly higher than his declared taxable income, resulting in a substantial difference in the child support liability.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

The evidence confirmed that this was initially thought to be a good investment, a pyramid scheme selling [products]. The evidence was that this was a lot of effort for little return. Mr Rood’s partner still uses the products but there is no selling involved and certainly no profit from which child support could be paid from. In summary, Mr Rood believes the administrative assessment is correct and any child support assessment should be assessed with reference to his taxable income. Mr Rood also indicated that he does not dispute Ms Rood’s taxable income figure and said that he would like an assessment set into the future to avoid the stress associated with the child support and Tribunal process. Ms Rood said that Mr Rood’s evidence should be taken with a grain of salt. Particularly his written submissions stated that he never mixed personal expenses with his business expenses however careful analysis of his company bank accounts reveals that he has paid legal fees for the family court proceedings (over $16,000) out of his company account, paid various ‘entertainment costs’ and these should be added back as this increases his cash flow. She also testified that by running his own business he has benefits that she as a PAYG employee does not have. In short, Ms Rood asked for careful review of Mr Rood’s accounts as his lifestyle including holidays and expenditure for their daughter is out of kilter with his alleged taxable income. She maintained that the decision of the objections officer is appropriate and should not be changed. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott (1994) FLC 92-457; Carey and Carey (1994) FLC 92-489). As discussed with the parties, the role of the Tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost & Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it, the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability. The previous departure and administrative assessment assessed the adjusted taxable income to vary between $84,000 and $86,000 approximately. This is consistent with the 2022 taxation return but not the 2023 taxation return where the income significantly reduced. The personal taxable income does not factor non-cash benefits such as depreciation, personal use of the company vehicle and various other legal taxation deductions which increase Mr Rood’s case flow, conservatively increasing his income and financial resources to more than $90,000 per annum at least for the 2022 financial year. The Tribunal also cannot ignore that Mr Rood has paid legal expenses out of his company account. He testified in reply that these were adjusted in the company accounts against his personal drawings but this is not evident on the information before the Tribunal. To not apply the full extent of financial resources from his self-employment venture would result in an inaccurate representation of the total level of funds available to Mr Rood. The add back of depreciation, retained profits and other business and non business expenses results in a greater level of financial resources than that reflected in the administrative assessment which results in a significant difference in child support liability to approximately $90,000 over each financial year. The Tribunal acknowledges that the taxable income in 2023 was less but it cannot ignore that the company has paid much of the personal legal fees. The Tribunal finds that these circumstances are special (as they are not available to PAYG employees) and due to their impact on any child support liability (more than $1,000 to $1,500 per annum) the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Rood’s income, property and financial resources. However, such departure is not automatic.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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