Salou and Penter (Child support)

[2019] AATA 1693

Salou and Penter (Child support) [2019] AATA 1693 (2 April 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC015071

APPLICANT:  Ms Salou

OTHER PARTIES:  Child Support Registrar

Mr Penter

TRIBUNAL:Member T Hamilton-Noy

DECISION DATE:  2 April 2019

DECISION:

The Tribunal affirms the decision under review.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – benefits derived from business – work-related expenses – earning capacity of both parents – decision affirmed

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. Ms Salou and Mr Penter are the separated parents of [Child 1] and [Child 2].  They have two older children, [Child 3] and [Child 4], who are now over 18 years of age. 

2. A case has been registered with the Department of Human Services (Child Support) since June 2011 and under the assessment Mr Penter was the parent liable to pay child support to Ms Salou.  From 8 November 2017 a second case has been registered with the Department, where Ms Salou is the payer of child support and Mr Penter the payee.

3. The administrative assessment of child support in place at the time a departure application was lodged with the Department was for the period 22 December 2017 to 30 June 2018, where Mr Penter was to pay $955 per annum in child support, based on his 2016/2017 adjusted taxable income of $38,169 and Ms Salou’s 2017/2018 estimate of $26,931.

4. Ms Salou’s estimate was subsequently reconciled and her income was found to be $46,531, which resulted in Ms Salou being required to pay child support of $2,264 per annum.

5. On 9 January 2018 Ms Salou made application to the Department for a departure determination on the basis of the costs of educating the children (called “Reason 3” by the Department), because the administrative assessment of child support was unfair because of Mr Penter’s income, property and financial resources (called “Reason 8A” by the Department) and because of Mr Penter’s earning capacity (called “Reason 8B” by the Department).

6. On 12 April 2018 an employee of the Department found a ground was established to depart from the administrative assessment of child support and made a departure determination that, for the period 1 February 2018 to 31 January 2020, Mr Penter’s adjusted taxable income was varied to $127,000 per annum.

7. Mr Penter lodged an objection to this decision on 21 June 2018.

8. On 24 August 2018 an objections officer of the Department allowed the objection and made a decision to vary the administrative assessment of child support such that, for the period 1 February 2018 to 31 January 2020, neither parent was to pay child support to the other parent.

9. On 20 September 2018, Ms Salou lodged an application with the Administrative Appeals Tribunal for an independent review of the Department’s decision.  A directions hearing was conducted by the Tribunal on 23 January 2019, on which date Ms Salou was contacted by the Tribunal several times on the mobile number she had provided but was unable to be reached.  Mr Penter participated in the directions hearing by telephone.

10. The hearing itself was conducted on 8 March 2019.  At the hearing both parties participated by conference telephone and gave evidence on affirmation.  In hearing the matter the Tribunal had regard to documents provided by the Department numbered 1 to 596, documents provided by Ms Salou numbered A1 to A31 and documents provided by Mr Penter numbered B1 to B212.  Copies of the documents were provided to the parties prior to the hearing and they confirmed receipt of the documents with the Tribunal.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process. The Registrar, and the Tribunal standing in the place of the Registrar, must be satisfied that:

   (i)there is a ground to depart from the administrative assessment of child support;

   (ii)it is just and equitable to depart; and

   (iii)it is otherwise proper to depart.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

4. 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 may make one of the determinations prescribed in section 98S of the Assessment Act.

CONSIDERATION

Issue 1 – Is there a ground established to depart from the administrative assessment of child support?

1. The grounds raised in this case related to the costs of educating the children; and Mr Penter’s income, property, financial resources and earning capacity.  Ms Salou’s primary issue with the Department’s decision was in relation to the level of income, property and financial resources attributed to Mr Penter and the Tribunal therefore considered this ground first.

The income, property and financial resources of the parties

1. Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Assessment Act relating to the 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 because of the income, property and financial resources of either parent. The Tribunal considered each of the parent’s levels of income, property and financial resources under this ground.

Mr Penter

1. The Tribunal found on the evidence before it that Mr Penter has been self-employed on a long-term basis and that he currently works under the trade name [business 1].  The Tribunal accepted that Mr Penter is the sole person involved in the business and that the nature of his business is [specific areas].  There is no company structure and income earned by Mr Penter from the business is reflected in his personal income tax returns each financial year.  Mr Penter described to the Tribunal that he currently works up to 30 hours per week in the business, and some weeks does not perform any hours of work, due to work availability rather than medical or other issues.

2. Ms Salou’s application to the Tribunal was made on the basis of the Department’s findings about Mr Penter’s financial circumstances.  Her oral submissions to the Tribunal at the hearing included that Mr Penter is running a cash business; that he has made $100,000 in capital improvements to his property and purchased a [vehicle] for $100,000; and that he must have hidden bank accounts as his accounts cannot be reconciled.  Ms Salou noted in her submissions to the Tribunal specific amounts being paid into Mr Penter’s various accounts and asserted that money moving between accounts “needs to be looked at”.  Ms Salou submitted that Mr Penter’s income is within the vicinity of $200,000 per annum, based on BAS statements for 2017/2018 which totalled $115,000 and his expenditure which equates to $90,000 per annum.

3. The information provided to the Tribunal by Mr Penter included his individual income tax return for the 2017/2018 financial year.  This income tax return declared total business income of $76,530 and, following work-related deductions, net income of $28,238. The Tribunal accepted that Mr Penter purchased a new [vehicle] around six months ago and that this was a significant expense for the business.  Mr Penter’s evidence to the Tribunal in respect of this was that he had a [model vehicle] for [number] years and purchased a new [vehicle] around six months ago.  As he conducts onsite [tasks] he needed a [vehicle for specific tasks]. The Tribunal accepted this evidence in the absence of any evidence to the contrary.

4. The Department has found that a proportion of the work-related expenses are financial resources available to Mr Penter that should be taken into account for child support purposes.  Mr Penter did not dispute this aspect of the Department’s findings.  Mr Penter gave evidence of owning a [car] which he stated was used privately only.  He stated he has one mobile phone which is used for work and personal calls.  He submitted that he now drives the [vehicle] to any work-related activities.  He was unsure how costs of the mobile phone are proportioned between business and private usage.  He was unsure what the interest payments reflected in his income tax returns were, or how utilities, phone and internet and rates are proportioned.  He was unable to explain a number of cheque deposits into his personal account.  The Tribunal observed that the business account was paying the phone and internet expenses.  The Tribunal concluded from this evidence that Mr Penter derives a level of financial benefit from the structure of his self-employment.

5. As to any other property or financial resources available to Mr Penter, the Tribunal accepted Mr Penter’s evidence, in the absence of clear evidence to the contrary, that he has four bank accounts.  The Tribunal accepted Mr Penter’s evidence about the movement of money between the bank accounts in question and did not consider that these amounts were financial resources over and above Mr Penter’s income and benefits from the business discussed above.

6. The Tribunal accepted that Mr Penter owns two properties, one in [Suburb 1] where he resides and one in [Suburb 2] where he has a shed that he conducts his work in.  Mr Penter stated to the Tribunal that he received the [Suburb 2] property in [a settlement] and purchased the [Suburb 1] property from a [amount] he received from [a third party] in around 2013.  Mr Penter gave evidence of having suffered a [specific] injury due to the highly repetitive nature of his work, which became significant in around 2008.  He has attended [medical professionals] and has [medical procedure 1] every [few] years following [surgery].  The nature of his work has changed to [specific occupation] from another occupation]. Mr Penter estimated the value of the properties to be $570,000 to $650,000 ([Suburb 1]) and $380,000 to $420,000 ([Suburb 2]).

7. In response to submissions made by Ms Salou, Mr Penter gave evidence that he built [on] his property in around 2015, and stated that this was funded from [a third party] payment he received following an [event] in the [a town and Suburb 2]. 

8. The Tribunal noted during the hearing that Mr Penter’s stated expenses, set out in his Statement of Financial Circumstances, were significantly more than his stated income.  Mr Penter stated in response that he has a monthly repayment on the trust of $2,035, $1,200 mortgage on the [Suburb 2] property and $169 repayment on his [Mastercard].  He stated that the weekly estimate on the Statement of Financial Circumstances was prepared as accurately as possible but there was no way he was spending that amount every week.  In the past he has made ends meet by “blowing the Visa out” and redrawing on his home loan.  He also received a $70,000 payout from a “mini cyclone” that [caused damage] on the [Suburb 2] property. 

9. The Tribunal has found on the evidence before it that Mr Penter derives some financial benefit, over and above his adjusted taxable income, from his position of self-employment.  The Department noted that, during the period February 2017 to February 2018, Mr Penter paid a net amount of $12,000 towards his mortgage from the business.  This aspect of the Department’s findings was not disputed by Mr Penter in his evidence to the Tribunal.  Similarly, the attribution of an additional $15,000 per annum benefit from the business, relating to telephone and utility payments and home office expenses, in addition to notional depreciation, were not disputed by Mr Penter in his evidence to the Tribunal.  Taking into account these findings, Mr Penter’s level of income and financial resources in the 2017/2018 financial year was $28,238 net income from his business, $15,000 in financial benefits flowing from the business and $12,000 financial benefit from [other] payments made by the business; this amounts to [amount] per annum.  In addition, Mr Penter has significant real estate interests, holding and using two properties, one as a residence and one for storing and undertaking business activities.

Ms Salou

1. Ms Salou’s Statement of Financial Circumstances stated that she is a [profession] and has been with her current employer for [a number of] years.  She is working part-time and earning an estimated $533 per week on average.  At the hearing Ms Salou stated to the Tribunal that she is currently working two days per fortnight, due to [an illness].  She is taking medication on an “as needs” basis and has been doing so for 12 months; she has been [seeking medical assistance] for [a few] years.

2. The Tribunal noted the Department documents indicated that Ms Salou had reported reducing to two days per week, not per fortnight, and she stated in response “I would have to go back and look”, and that she had “given the Tribunal the correct amount of money”.

3. The Tribunal found Ms Salou to give her evidence in an unclear manner in respect of her current employment arrangements, however, considered that the best evidence before it was that Ms Salou is working part-time and earning $533 per week on average, which equates to $27,716 per annum.

4. The Tribunal noted that the administrative assessment of child support initially used an estimate of income for Ms Salou of $26,931 for the period 22 December 2017 to 30 June 2018.  By the time of the objections officer’s decision Ms Salou’s 2017/2018 adjusted taxable income had been reconciled and found to be $46,530.81.  The Tribunal accepted from information provided by the ATO that Ms Salou’s 2017/2018 adjusted taxable income was $51,110.  Both of these incomes are significantly higher than the estimate lodged by Ms Salou with the Department.

5. The Tribunal noted that Ms Salou disputed the addition of her reportable fringe benefits as part of her adjusted taxable income. However, having regard to the Child Support Guide (as set out at folio 16), the Tribunal found that this approach by the Department was appropriate, and properly considers the income, property and financial resources of Ms Salou required to be considered under this ground.  The Tribunal noted that the Department found that Ms Salou’s level of income, property and financial resources was $41,291, taking into account the reportable fringe benefit rate minus [other] payments.  The Tribunal considered that this appropriately represented Ms Salou’s level of income, property and financial resources in the period under review.

6. The administrative assessments of child support used Mr Penter’s adjusted taxable income of $38,169 and the Tribunal has found that his level of income, property and financial resources is significantly above this amount.  The Tribunal has further found that Ms Salou’s level of income, property and financial resources was also significantly higher than the estimate of income used in the original administrative assessment of child support, in place at the time the departure application was lodged with the Department.

7. The Tribunal considered that the level of income, property and financial resources available to both of the parties establishes special circumstances in this case. The Tribunal found that application of the provisions of the Assessment Act relating to the administrative assessment of child support results in an unjust and inequitable determination of the level of financial support to be provided by Ms Salou to Mr Penter.

8. The ground for departure is established in this case.

Issue 2 – Is it just and equitable to make a departure determination?

1. 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 as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Assessment Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Assessment Act. In addition to the income, property and financial resources of each of the parties, already considered above, the Tribunal also took the following matters into consideration:

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the children

1. The Tribunal accepted from the evidence before it that neither [Child 1] nor [Child 2] has access to any other income, property or financial resources from which to support themselves and that they are reliant on Ms Salou and Mr Penter to meet all of their needs.

The proper needs of the children

1. Subsection 117(6) of the Act states that in having regard to the proper needs of the child, the court must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child.

2. The Tribunal noted that Ms Salou had raised a ground in relation to the children’s schooling in her application to the Department for a departure determination.  However, the Tribunal found on the evidence of the parties that each has been paying 50% of the school fees for [Child 2’s] attendance at [School 1]; and that each is billed 50% of the school fees for [Child 1’s] attendance at [School 2].  The Tribunal did not consider it appropriate to vary any child support payable because of these costs, on the basis that each parent is currently contributing equally to the school fees for both children. 

3. The Tribunal found that the children do not have any other proper needs outside of the ordinary range of needs of children their respective ages.

The earning capacity of Mr Penter

1. Subsection 117(7B) of the Assessment Act requires the Tribunal to consider the following matters in determining that a parent’s earning capacity is greater than is reflected in his or her income used in the administrative assessment:

   ·    Whether the parent:

   oIs not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i));  and/or

   oHas reduced their weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii));  and/or

   oHas changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii));  and

   ·    If the parent’s decision about his/her work arrangements is not justified by either his/her caring responsibilities (subparagraph 117(7B)(b)(i)) or his/her state of health (subparagraph 117(7B)(b)(ii));  and

   ·    If the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).

1. The Tribunal was satisfied that Mr Penter has been self-employed on a long-term basis.  The Tribunal has noted above that Mr Penter is currently working variable hours per week due to availability of work.  However, the Tribunal considered from the evidence before it that the variable hours of Mr Penter’s work have been of a long-term nature, having regard to the BAS statements contained both in the Department documents and provided by Mr Penter to the Tribunal which indicate significantly different amounts being earned across various three-month periods.  The Tribunal noted, however, that despite these variations Mr Penter’s total business income across the last three financial years has been quite consistent (2015/2016 total business income was $81,042; 2016/2017 total business income was $84,916; and 2017/2018 total business income was $76,530).

2. The Tribunal found from this evidence that Mr Penter is currently working; has not, in the relevant period being considered by the Tribunal, reduced his weekly hours of work to below full-time work; and has not, again in the period being considered by the Tribunal, changed his occupation, industry or working pattern. It is not open to the Tribunal to make an earning capacity determination in respect of Mr Penter’s circumstances.

The earning capacity of Ms Salou

1. The Tribunal heard inconsistent evidence from Ms Salou about the reduction of her employment, in terms of how many days per week or fortnight she is currently undertaking.  The Tribunal did find, however, that Ms Salou reduced her weekly hours of work to below full-time work as of late 2017.

2. The Tribunal noted the medical letter contained on the Department documents prepared by [a Doctor] dated 15 December 2017, stating that she is the general practitioner of Ms Salou and understood that she was, at that date, under significant stress which was affecting her health. The report noted [Doctor’s]  recommendation that Ms Salou decrease her hours by half in efforts to maintain her health and that they had discussed working one week on and one week off, which would be appropriate for her needs as at that time.  While Ms Salou appears to be working significantly less than what was anticipated by her GP, the Tribunal considered that it cannot look behind the medical information provided and was satisfied, on balance, that Ms Salou’s change in work arrangements was justified by her health concerns.  It is not open to the Tribunal to make an earning capacity determination in respect of Ms Salou’s circumstances.

The necessary commitments of Ms Salou

1. The Tribunal accepted that Ms Salou has [Child 2] for half of the time and that [Child 1] is currently residing with Mr Penter.  Ms Salou indicated in her Statement of Financial Circumstances that she has estimated weekly household costs of [amount] for herself and [Child 2].  The Tribunal noted that, of this amount, [amount] per week was to repay legal costs.  The Tribunal noted that Ms Salou’s income is insufficient to meet the stated amount of her household expenses.  She has an amount of [amount] owing on a credit card which may, at least in part, explain how she is meeting the current shortfall.  The Tribunal accepted that the amounts indicated on the Statement of Financial Circumstances are a reasonable representation of Ms Salou’s ongoing necessary self-support costs.

The necessary commitments of Mr Penter

1. Mr Penter’s stated household expenses for himself, [Child 1] and [Child 2] for half of the time, were an estimated [amount] per week.  When the discrepancy between his income and stated expenditure was put to him during the hearing, Mr Penter stated the estimated costs may not be accurate and/or incurred each week.  The Tribunal considered that some of the estimated expenses may be over-stated, and also found that Mr Penter’s business is meeting a portion of these costs.

The direct and indirect costs incurred by either party in providing care for the children

1. The Tribunal noted that the legislation requires the Tribunal to consider any direct and indirect costs incurred by either party in providing care for the children.  The Tribunal considered each of the parties in relation to this factor, on the basis that both have been payees of child support during the relevant period.  The Tribunal found that neither parent is foregoing income in order to provide care to the children.

Hardship

1. Paragraph 117(4)(g) of the Act requires the Tribunal to consider any hardship that would be caused to [Child 1] and [Child 2], Ms Salou, Mr Penter and any child or other person that the parties have a duty to support, by the making of, or the refusal to make, a departure determination.

2. Ms Salou submitted to the Tribunal that Mr Penter would not be placed in any hardship if a departure determination were made.  In respect of any hardship to Ms Salou, she stated that her [other payments] is “going behind”.

3. Mr Penter stated that he has not made any superannuation payments since he lost his job at [his previous occupation] in 2010 and he has no spare money. He is giving [Child 1] [amount] each week which would have to stop, and he is buying all of [Child 2’s] uniforms.  He noted that he would be paying for [Child 2’s] braces in the near future.

4. The Tribunal did not find on the evidence before it that either party would suffer significant financial hardship if the Tribunal was to make a departure determination on reasonable terms.

What is the proposed departure determination in this case?

1. The Tribunal noted that Ms Salou’s application in this matter was made on 9 January 2018 and the Tribunal considered it appropriate to commence a departure determination from this date.  The Department has ended the departure determination on 31 January 2020 and, in the circumstances of this particular case, the Tribunal considered it an appropriate approach.

2. The Tribunal noted the care levels for the children provided by each parent, their respective financial positions and level of income, property and financial resources, and their stated expenses, and considered that setting a nil rate of child support for either parent is appropriate in this case.  The Tribunal therefore proposed that a departure determination that for the period 9 January 2018 to 31 January 2020, neither parent is to pay child support to the other parent, is the most appropriate outcome in this case.

Issue 3 – Is it otherwise proper to make a departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Mr Penter receives a small amount of family tax benefit and the Tribunal decided that any departure determination made by the Tribunal is likely to have minimal impact on the public purse. The Tribunal therefore concluded that it is also otherwise proper to make the proposed departure determination.

DECISION

The Tribunal affirms the decision under review.