Saffman and Saffman (Child support)

[2019] AATA 1204

Saffman and Saffman (Child support) [2019] AATA 1204 (26 March 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC015455

APPLICANT:  Mr Saffman

OTHER PARTIES:  Child Support Registrar

Ms Saffman

TRIBUNAL:Member M Douglas

DECISION DATE:  26 March 2019

DECISION:

The Tribunal sets aside the decision under review and, in substitution, makes a determination under Part 5 of the Child Support (Assessment) Act 1989 varying the adjusted taxable incomes of Mr Saffman and Ms Saffman for the period 15 May 2018 to 31 March 2020 as follows:

(a)   $102,000 for Mr Saffman;

(b)   $84,000 for Ms Saffman.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business - 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

1. Mr Saffman and Ms Saffman are the parents of [Child 1] and [Child 2].  The children reside equally with Mr Saffman and Ms Saffman, broadly on a week about basis. 

2. The Child Support Registrar has issued administrative assessments of child support for the children, which have had effect since 15 May 2018.  The assessments, as initially issued, required Ms Saffman to pay child support to Mr Saffman at an annual rate of $1,914 until 31 August 2018 and thereafter at an annual rate of $1,056.  For the period to 31 August 2018, the assessment was calculated using adjusted taxable incomes of $76,833 for Ms Saffman and $60,128 for Mr Saffman.  The assessment for the period commencing 1 September 2018 used adjusted taxable incomes of $70,656 for Ms Saffman and $61,511 for Mr Saffman.  

3. On 4 June 2018, Ms Saffman made what the Registrar describes as a “change of assessment” application, being an application under subsection 98B(1) of the Child Support (Assessment) Act1989 (the Act), seeking a determination be made under subsection 98S(1) to depart from the provisions of the Act with respect to the assessment of child support. 

4. A delegate of the Registrar, after hearing from both Mr Saffman and Ms Saffman with respect to Ms Saffman’s change of assessment application, determined that there should be a departure such that Mr Saffman’ adjusted taxable income be set at $155,888 for the period 15 May 2018 to 31 August 2020.  Mr Saffman objected to that decision and on 19 November 2018 another delegate of the Registrar “allowed his objection in part”, setting aside the earlier decision and determining that Mr Saffman’ adjusted taxable income be set at $132,132 for the period 15 May 2018 to 30 November 2019.

5. On 20 November 2018, Mr Saffman applied to the Tribunal for review of the objection decision.

THE HEARING AND THE EVIDENCE

1. The Tribunal heard Mr Saffman’s application on 26 March 2019. He and Ms Saffman participated in the hearing by telephone and each gave affirmed oral evidence.  The Department did not appear.

2. Mr Saffman and Ms Saffman also provided documents to the Tribunal which were received into evidence. Mr Saffman’s documents are marked A1-259 and Ms Saffman’ documents are marked B1-71. 

3. The Tribunal also received into evidence documents the Registrar provided, in accordance with its obligation under subsections 37(1) of the Administrative Appeals Tribunal Act 1975. These are paginated 1-802. 

4. The Tribunal has had regard to this evidence.

RELEVANT LAW AND ISSUES

1. Part 5 of the Act contains the provisions by which the Registrar assesses the annual rate at which a liable parent is to pay child support to the carer entitled to child support. A liable parent or the carer entitled to child support may, if there are special circumstances, apply to the Registrar under subsection 98B(1) of the Act for a determination to depart from the provisions of the Act relating to an assessment of child support. The Registrar, or the Tribunal in the Registrar’s place, if satisfied that the criteria of subsection 98C(1) are met, can make one or more of the determinations listed in subsection 98S(1) to depart from the provisions of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are:

   i.that one, or more than one, of the grounds for departure referred to in subsection (2) exists; and

   ii.that it would be:

   a.just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   b.otherwise proper;

   to make a determination (under subsection 98S(1)).

2. The grounds for departure referred to in subsection 98C(2) are those set out in subsection 117(2) of the Act. The matters that the Tribunal must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of Part 5 are listed in subsection 117(4) of the Act. The matters the Tribunal must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of Part 5 are listed in subsection 117(5) of the Act.

CONSIDERATION

Is a ground for departure established?

1. In her application to the Registrar under subsection 98B(1) of the Act, Ms Saffman relied on the ground for departure provided in subparagraph 117(2)(c)(ia) of the Act, which is referred to in the change of assessment application form as “reason 8A”, and which reads as follows:

   “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”.

2. Ms Saffman’ case as articulated in her change of assessment application form was, in substance, that the adjusted taxable income used for Mr Saffman in the assessment was not reflective of his actual income.  She said he received income from employment as a [Occupation 1] and from a business he conducted as a sole trader and was of a level that resulted in the assessment of her child support obligation being unfair. 

3. Mr Saffman’ confirmed to the Tribunal that he is employed as a [Occupation 1] by [his employer]. He produced to the Tribunal the pay advice that his employer issued to him for the fortnight ending 14 February 2019, which the Tribunal observes is the seventeenth fortnightly pay period of the current financial year.  The payslip revealed that in that particular fortnight he received total gross wages amounting to $3,521.52.  From his gross pay for that fortnight an amount of $12.24, described as non-taxable gross, was deducted as well as $30.28 for “pre-tax deductions” resulting in a “taxable gross” of $3,477 for that fortnight.  The Tribunal observes that figure expands to an annual figure of $90,402.

4. Mr Saffman’s evidence to the Tribunal was that the “pre-tax deductions” relate to an arrangement he has made with his employer in the nature of a salary sacrifice, whereby part of his salary is paid to a third party from whom Mr Saffman leases a vehicle.  In other words, it is a salary sacrifice allowing Mr Saffman to acquire his motor vehicle in a tax effective way. 

5. The year to date figures disclosed in that payslip reveal that Mr Saffman[Saffman]’s gross wages to the end of the seventeenth fortnightly pay period in the current financial year amounted to $61,382.99, from which an amount of $638.52 described as “non-taxable gross” had been deducted as well as the “pre-tax deductions” of $19,961.51 for the salary sacrifice relating Mr Saffman’s motor vehicle, resulting in a taxable gross figure of $40,782.96 in the current financial year to 14 February 2019.  In the Tribunal’s view, extrapolating the year to date figures as advised in Mr Saffman’s payslip for the seventeenth fortnightly pay period of the current financial year provides the most accurate basis upon which to establish his current annual level of earnings from his employment.  In terms of establishing what his present level of remuneration is from his employment it is appropriate to add back the amount that is deducted “pre-tax” for the salary sacrifice by which he has acquired his vehicle.  That forms part of his remuneration.  When that is done, an amount of $60,744.47 is achieved.  That figure extrapolates to an annual figure of $92,903. 

6. Mr Saffman has not lodged his 2018 tax return.  His evidence to the Tribunal was that he has not done so because he cannot afford to pay his accountant and he would not be able to afford to pay any taxes that the Australian Taxation Office might assess he is liable to pay for the 2018 year.  A copy of his 2017 tax return is in evidence (folios 216-222 of the Registrar’s papers).  That return revealed that in the 2017 year Mr Saffman incurred expenses totalling $2,224.00 to enable him to earn his wages from [his employer].  There is an absence of evidence relating to the expenses Mr Saffman has incurred to derive his income from [his employer] since the 2017 year. In the absence of such evidence, the Tribunal infers that Mr Saffman has continued beyond the 2017 year to incur expenses of the order he incurred in the 2017 year.  In other words, the Tribunal considers that his level of income from his employment as a [Occupation 1] with [his employer] is most likely, after allowance is made for expenses incurred, to be in the order of $90,700 a year. 

7. Mr Saffman confirmed that he conducts a business under the name Saffman[Business 1].  His tax return for the 2017 year revealed that his total gross income from conducting that business that year was $22,167, against which he deducted expenses amounting to $32,988 such that he declared a loss in his tax return of $10,821 from his business.  A worksheet that formed part of his tax return revealed that the expenses he incurred in conducting his business included amounts of $506 for accounting fees, $1,200 for insurance, $1,394 for postage and stationery, $24 for protective clothing, $3,300 for motor vehicle costs, $11,376 for equipment maintenance and rent, and $5,064 for training props and consumables. 

8. As said, Mr Saffman has not lodged his 2018 tax return which would have provided a more recent insight into the level of income he is receiving from the conduct of his business and the expenses he incurs to receive that income.  At a directions hearing held many weeks before the hearing, Mr Saffman was directed to provide a spreadsheet to the Tribunal detailing the transactions, as disclosed within his bank statements, that relate to his business.  Mr Saffman abided that direction.  He also provided the bank statements from which he had prepared the spreadsheet. 

9. Ms Saffman’s evidence at the hearing was to the effect that Mr Saffman conducted the same business during the course of their relationship and that he never incurred expenses of the order that he declared in his 2017 tax return relating to the conduct of the business.  She submitted neither the spreadsheet that Mr Saffman produced nor the bank statements upon which it was based revealed that Mr Saffman incurred any expenses in conducting his business.  She submitted to the effect that during their relationship his business was profitable and provided him with substantial income, and not a loss, and that would be the case presently. 

10. Mr Saffman’s evidence at the hearing was that he pays for many of the expenses relating to his business in cash, particularly those for consumables and the cost of renting and maintaining equipment.  He said that he draws out cash from ATMs and uses that cash to pay for those types of expenses. 

11. His bank statements that he produced reveal only one withdrawal from an ATM machine, that being [in] March 2018 in the amount of $200.  His spreadsheet, and the bank statements upon which that was based, reveals that from 1 July 2018 to the end of January 2019, he had received $9,155 in income from his business, which extrapolates to an annual figure of $15,694.  Ms Saffman’s submission to the Tribunal is correct in terms of what Mr Saffman’s spreadsheet and Ms Saffman’s bank statements reveal about business related expenditure. That is to say, they reveal he did not incur any over the time to which they related.

12. The spreadsheet and Mr Saffman’s bank statements, in the Tribunal’s view, provide the best evidence as to what Mr Saffman’s present gross income is from his business.  Hence, the Tribunal considers his gross annual income from the conduct of his business is presently of the order of $15,694. The Tribunal is not satisfied from his evidence that his business has run at a loss, at least in the period since 15 May 2018.  The Tribunal considers that he would incur some expense to conduct his business, such as accountancy fees, insurance premiums and a proportion of his costs relating to maintaining and running his motor vehicle.  The Tribunal is not persuaded by his oral evidence that he pays cash for many of the costs associated with his business.  That is not verified by his statements or any other documentary evidence.

13. Doing the best the Tribunal can on the evidence that is before it, the Tribunal considers that his level of expenditure would be somewhere in the order of $4,000 to $5,000 a year, meaning that Mr Saffman would, in the Tribunal’s view, in all likelihood be achieving a profit from his business of around $10,700 to $11,700 a year.

14. Given that, the Tribunal considers that in terms of considering what income Mr Saffman in all likelihood has at his disposal for the purpose of considering the fairness of the assessment of child support, he ought to be treated as earning $102,000 a year.

15. That is far greater than the adjusted taxable incomes of $60,128 and $61,511 that were used for him in the assessments of child support as earlier outlined. 

16. In determining whether that discrepancy between Mr Saffman’s effective income and his adjusted taxable income results in an unfair determination of the level of assessed child support, it is also appropriate to have regard to Ms Saffman’s income, since an assessment of child support is based on a calculation involving both parents’ incomes.

17. Ms Saffman is employed as a [Occupation 2].  She produced a copy of her payslip for the fortnight ending 7 February 2019, which the Tribunal observes was her sixteenth fortnightly pay period in the current financial year.  That revealed she had received gross earnings to that date of $51,043.78.  She also has entered into an arrangement with her employer whereby she sacrifices part of her salary which is paid to a third party under a lease agreement to enable her to have a vehicle.  The amount that had been paid in that fashion to 7 February 2019 amounted to $5,533.73.  When that is added to her year to date income and that sum then extrapolated over the annual period, an amount of $82,946 is achieved. 

18. The Tribunal considers that Ms Saffman would also incur a similar level of expenditure as that which Mr Saffman does so to be able to earn her income, such that her effective gross income from her employment is of the order of $80,700. 

19. Ms Saffman also leases her residential premises from a friend who allows her a reduced rent in consideration of her undertaking caretaking duties at the property, largely consisting of tending to her friend’s pets.  Ms Saffman’s evidence to the Tribunal was to the effect that the reduction in rent she obtains due to her undertaking these caretaking duties is of the order of $50 to $80 a week.  The Tribunal considers that the reduction in her rent she receives in consideration of her undertaking caretaking duties for her friend is income in kind or, if not that, then her friend ought to be treated as a financial resource for her in the sense that she can depend upon her friend to reduce her rent and thereby save her expense.  That is a relevant factor when considering whether this ground for departure has been established. 

20. Given these matters, the Tribunal is of the view that Ms Saffman’s income ought to be treated as $84,000 a year in the process of considering whether the assessment of child support is unfair on account of Mr Saffman’s income.

21. The discrepancy between Mr Saffman’s effective income and his adjusted taxable income is greater than the discrepancy between Ms Saffman’s effective income and her adjusted taxable income, and the Tribunal is satisfied that the variance is such that the assessment of child support, based on Mr Saffman’s adjusted taxable income at the time Ms Saffman made her change of assessment application, did result in an unjust and inequitable determination of the level of financial support to be provided by Ms Saffman for the children.

22. It follows that a ground for departure is established.

Is it just and equitable to make a determination?

1. As mentioned earlier, the matters the Tribunal must take into account when considering this issue are listed in subsection 117(4) of the Act.  The Tribunal is not required to go slavishly through each of those matters. Insofar as those matters are relevant the Tribunal takes into account the following.

2. The evidence discloses that the children have all the normal needs of children of their respective ages and do not have any special needs.  The children’s ages are such that they do not have an income, earning capacity, property or financial resources.

3. Ms Saffman’s income has been discussed above and the Tribunal has regard to what was said above in terms of deciding whether it is just and equitable to make a determination to depart from the assessment of child support.  Ms Saffman signed a statement of financial circumstances on 10 December 2018.  What she declared in that reveals that she has no assets surplus to her needs that she could readily or that would be reasonable for her to sell.  She has modest liabilities.  She incurs all the normal costs one would expect to ensure she can maintain herself and also provide support for the children when they reside with her. 

4. Mr Saffman’s income has also been discussed above and again the Tribunal will not repeat that detail here but takes it into account when determining whether it is just and equitable to make a determination to depart from the assessment of child support.

5. Mr Saffman also signed a statement of financial circumstances that he provided to the Tribunal, although he did not specify within that the date upon which he signed it.  The detail he provided in that reveals that he does not have any assets surplus to his needs that he could reasonably or readily sell so as to provide further monies for the support of the children.  His liabilities as listed in his statement of financial circumstances comprise a personal loan of $30,000 and credit card debts amounting to $7,500. 

6. Mr Saffman also lodged with the Tribunal several statutory declarations from relatives and friends that revealed that Mr Saffman had borrowed money from them or they had paid debts on behalf of Mr Saffman in recent times.  Mr Saffman however did not list these liabilities in his statement of financial circumstances.  The gist of what the declarants stated in their respective statutory declarations was to the effect that they loaned money to Mr Saffman or paid his debts because he was having difficulty making ends meet.  However, the Tribunal observes from the details Mr Saffman provided in his statement of financial circumstances with respect to his household expenditure, that his expenses comprise entirely normal costs and, given that, and based upon what the Tribunal has found with respect to his income, it seems to the Tribunal that Mr Saffman ought to be able to make ends meet on his income without the need to seek further funds from family and friends. 

1. In the circumstances outlined, the Tribunal considers that it would be just and equitable to make a determination to depart from the provisions of the Act with respect to the assessment of child support such that the parties’ obligations as to how they will provide for their children is based upon what the Tribunal has found is the real income available to them from their income earning activities.  In other words, the Tribunal considers that as from 15 May 2018 it would be just and equitable to depart from the assessment of child support such that Mr Saffman’s adjusted taxable income is $103,000 and Ms Saffman’s adjusted taxable income is $84,000.  The Tribunal considers that departure from the provisions of the Act with respect to the assessment of child support ought to continue until 31 March 2020, by which time Mr Saffman and Ms Saffman ought to have lodged their respective tax returns for the 2019 financial year which will provide further insight into their respective situations.  In the event that the assessment for the period thereafter is, in the view of one or the other, an unfair determination of the level of financial support to be provided by one to the other, then one of them can make a further change of assessment application at that time.

Is it otherwise proper to change the assessment?

1. In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Ms Saffman and Mr Saffman, and also have regard to whether, and if so how, any determination it makes would affect their entitlement or that of the children to an income tested pension, allowance or benefit. 

2. The Tribunal understands that neither child receives an income tested pension, allowance or benefit and that that circumstance will not change whatever determination the Tribunal makes. 

3. Both Ms Saffman and Mr Saffman have disclosed in their respective statements of financial services that they receive family tax benefit from the Commonwealth Government.  The Tribunal understands that the determination it considers it is just and equitable to make might result in a modest adjustment to the rate at which one or the other receives that benefit.  However, having regard to the matters discussed above, and bearing in mind that the primary obligation to support the children rests with them, the Tribunal considers that it would be otherwise proper to make the determination it has found would be just and equitable to make.

DECISION

The Tribunal sets aside the decision under review and, in substitution, makes a determination under Part 5 of the Child Support (Assessment) Act 1989 varying the adjusted taxable incomes of Mr Saffman and Ms Saffmanfor the period 15 May 2018 to 31 March 2020 as follows:

(a)   $102,000 for Mr Saffman;

(b)   $84,000 for Ms Saffman.