Salter and Salter (Child support)

[2018] AATA 1725

Salter and Salter (Child support) [2018] AATA 1725 (16 April 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/AC012214

APPLICANT:  Mr Salter

OTHER PARTIES:  Child Support Registrar

Mrs Salter

TRIBUNAL:Member K Millar

DECISION DATE:  16 April 2018

DECISION:

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

• For the period 1 April 2017 to 9 April 2018 Mr Salter’s adjusted taxable income varied to $60,000.

• For the period 1 April 2017 to 31 December 2017, the annual rate is increased by $1,595.

• For the period 1 January 2018 to 31 December 2018, the annual rate is increased by $1,675. 

CATCHWORDS
Child support – Departure determination – Costs of private education – Mutual intent – Income, property and financial resources of parents - Business income - 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 Salter and Mrs Salter are the parents of [Child 1] and [Child 2], who are in the care of Mrs Salter.  [Child 1] is 13 years old and [Child 2] is 11. 

2. The amount of child support Mr Salter pays has been the subject of previous applications by Mrs Salter to depart from the administrative assessment, particularly in relation to school fees and Mr Salter’s income, property and financial resources.  Applications regarding departure from the administrative assessment have previously been before the Social Security Appeals Tribunal in 2010 and in 2012.    

3. [Child 1] and [Child 2] attend [a] College, and Mrs Salter has applied for an increase to the amount of child support paid by Mr Salter because of costs associated with their education.  She also seeks an increase as she states Mr Salter’s income, property and financial resources are not properly reflected in his adjusted taxable income.  Mrs Salter states she has the care and support of her step-daughter together with her husband, and this means that her ability to support [Child 1] and [Child 2] is reduced.

4. Mr Salter opposes an increase, and disputes that he intended the children to attend a private school.  Mr Salter is [an occupation] and has operated his business as a sole trader.  He says that he is no longer able to work as a [an occupation] due to problems with his shoulders, hands and elbows.  

5. Mrs Salter applied for the departure from the administrative assessment on 9 December 2016.  A senior case office found that there was a mutual intention for [Child 1] to be educated in a private school and increased the annual rate of child support by amounts estimated to be half of the school fees.  The annual rate of child support was increased to reflect half of the school fees for [Child 1], resulting in an additional increase to the child support payable by $1,595 in the period 1 April 2017 to 31 December 2017, $1,675 per annum for the period 1 January 2018 to 31 December 2018 and $1,759 per annum for the period 1 January 2019 to 31 December 2019. 

6. The senior case officer also found that Mr Salter’s adjusted taxable income did not reflect his actual income, and set Mr Salter’s adjusted taxable income at $60,000 for the period 1 April 2017 to 31 December 2019. 

7. Mr Salter objected to this decision and his objection was disallowed.  Mr Salter has applied to this Tribunal for a review of the decision. 

CONDUCT OF THE PARTIES

1. Following the first hearing, matters were raised about the circumstances of both parties, specifically that Mrs Salter had an income or financial resources from part of a business that was previously run by her father from breeding [animals], that [Child 1] had funds held by the Public Trustee, and that payment for school fees were not being met by Mrs Salter.  In relation to Mr Salter, he said at hearing he had a new job but had not brought anything to the hearing that showed his employment conditions or wages.  He also said he had invoices issued by him when working as a sole trader and records of expenses for the 2016/2017 financial year that he could provide to the Tribunal.

2. Further directions were issued by the Tribunal for each of the parties to provide further documents and information.

3. Mr Salter provided his contract for employment and a payslip as required, but then provided a later submission hat he was no longer working for this employer and had applied for newstart allowance. Mr Salter was directed to provide invoices for his business that he said at the first hearing existed and what would establish his income from the business.  He failed to do so, and said this was because he had separated from his current wife and could not find the paperwork.

4. Mrs Salter was issued with various directions, with which she partially complied.  Mrs Salter did not provide copies of her bank account statements as directed or receipts for the payment of school fees.  She said she was not willing to provide bank account statements as she considered that information had been shared with Mr Salter’s current wife in breach of confidentiality orders.  She said she did not provide receipts for school fees as she considered providing invoices was sufficient, and because the school would not issue receipts until the fees were paid in full.

5. I was not convinced by either party’s explanation for the failure to comply with the directions of the Tribunal, and find I cannot rely on oral evidence of either party that could have been supported by documentation had the parents provided documents as directed.  

6. There is considerable animosity between the parties, and a will on both sides to descend into a level of detail in disputing the veracity of the other party that ultimately does not reflect well on either party.

7. This is partly explained by the circumstance where Mr Salter’s current wife, from whom he now says he is separated, was previously married to Mrs Salter’s brother.  This means that matters that affect this case also affect the child support payable for the children of the relationship between Mr Salter’s current wife and Mrs Salter’s brother.  In her submissions Mrs Salter states she assists her brother with paperwork in relation to his child support case and states that his ex-wife (Mr Salter’s current wife) claims to pay half her expenses herself on earnings of $10,000 per year.   

8. Mrs Salter states Mr Salter reconciled with his wife in February 2018, however at hearing Mr Salter said he has separated from her. 

CONSIDERATION

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

2. The rate of child support is usually based on an administrative assessment under Part 5 of the Act. The rate is calculated according to a statutory formula that takes into account factors such as the number of children, the level of care provided and the income of each parent.

3. Mrs Salter applied to depart from the administrative assessment on 9 December 2016.  The child support period at that point was the period 1 July 2016 to 30 September 2017.  Up to 31 December 2016, the amount of child support payable by Mr Salter was calculated in accordance with a previous departure from the administrative assessment, which set his adjusted taxable income at $40,000. 

4. From the time this ceased, Mr Salter is liable to pay child support based on an adjusted taxable income of $39,976, based on his 2015/2016 taxable income.

5. A parent or a carer can apply to the Child Support Registrar under section 98B of the Act for a decision to depart from the administrative assessment under Part 6A of the Act. To change the administrative assessment of child support, Mrs Salter must show matters set out in section 98C of the Act, being:

   · There is one or more of the grounds for departure from the administrative assessment listed in subsection 117(2) of the Act; and

   ·       It is just and equitable to depart from the administrative assessment; and

   · That it is otherwise proper to depart from the administrative assessment (section 98C of the Act).

6. Each of these matters was considered in turn. 

Is there a ground to depart from the administrative assessment?

Mr Salter’s income, property and financial resources

1. A ground for departing from the administrative assessment may be established where, in the special circumstances of the case, the application of the provisions of the 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 (subparagraph 117(2)(c)(ia) of the Act).

2. Mr Salter state he operates his business as a sole trader, and the business activity statements provided are in his name. 

3. At the hearing, Mr Salter said he had secured new employment but had not brought with him payslips or his employment contract.  The contract provided after the hearing shows an income of $70,000 per annum.  

4. Mr Salter said that he has injuries from working in the building trade, and was previously managing to continue this business by employing a contractor, however, by February 2017 he no longer had work for him.  He has had to take on lighter duties from February 2017.  Mr Salter said this was evidenced by his business activity statements.  He said his tax return has been prepared but he did not provide it.  He estimates that his income in 2016/2017 will be approximately $35,000.  His bank account statements show he returned to do further work for AOL. 

5. On being asked how he was meeting expenses such as food, as these do not appear in his bank account statements, he said that his wife pays these expenses from her account.  Mr Salter’s accounts do show payments for rent and utilities.  They also show payments for insurance, his [worker’s] licence and repayments to [car] finance which he says are for his work vehicle. 

6. There are amounts deposited to his account from [Company 1].  Mr Salter said he contracted for[Company 1] for eight to nine [years].  He was paid either by [Company 1] or by the client to construct the [goods].  He said as his ability to undertake this work decreased he was doing site checks and lighter duties. 

7. Mr Salter said his work duties changed in December 2016.  He went to work for [Company 2] doing [work], and worked there in March and April 2017.  He said his bank accounts would show income from [Company 1], [Company 2] and [Company 3].

8. Mr Salter said he does not do other jobs or advertise his services.  He gave evidence that he does not work for cash and does not have any role in a company or trust or own any real property. 

9. He said the costs incurred in running his business are for [certain materials] and [Company 1] supplies other materials.  His costs in running the business are for the [insurances], [vehicle] and tools. 

10. Mr Salter did not provide the invoices as requested.  I have no reason to doubt the calculations undertaken by the senior case officer and objections officer that show Mr Salter has a gross income of $157,000 over a 12-month period.  From this deductions for business expenses must be made.  Mr Salter has the benefit of the use of a vehicle and telephone as a part of running his business.

11. In looking at whether a ground is established, I consider that the time of application is the time at which this should be considered, as further changes to circumstances are more properly the subject of a new application.  Changes to circumstances from the date the application was made may guide what the particular determination should be. 

12. In the absence of a departure, Mr Salter’s income would be approximately $40,000 per annum. 

13. Mr Salter provided copies of BAS statements for the 2017 financial year, but did not provide his tax return, or further information on his income and expenses for the 2017 financial year.  His income and expenses as shown in his BAS are set out in the table below.

Quarter	Sales	Purchases	Sales less purchases
July – Sept 2016	35,216	8,025	27,191
Oct – Dec 2016	50,727	18,054	32,673
Jan – Mar 2017	26,690	8,017	18,673
Apr – Jun 2017	19,093	8,284	10,809

1. The total of sales less purchases for the 2017 financial year is $89,346.  His credit card does not show any increase in debt and his account remains in a small surplus. 

2. Mr Salter provided a letter from his accountant stating that his 2016 and 2017 income will be substantially less due to his elbow and shoulder injuries and general downturn in the industry.  I place little weight on this letter as it is preferable to rely on his tax returns and bank accounts as the source documents.

3. Mr Salter also provided letters from his general practitioner from January and April 2017 showing he has problems with his elbows, chronic back pain and [problems] with his shoulder.  This letter states he cannot work full time and is only able to cope with intermittent light [jobs.].  His bank account statements show regular withdrawals marked contractor payments, and I accept he has been required to employ a contractor to assist him in the period October 2016 to March 2017 at a cost of approximately $12,000.  This would reduce the net amount from the BAS to approximately $77,000.

4. While I accept that Mr Salter has medical problems, the income shown in his bank account statements and BAS shows that he has continued to generate an income and the lack of debt shows this continues to meet his expenses.  Mr Salter has failed to provide additional information that would assist in calculating his income. 

5. The information available to me about his income shows it is greater than that reflected in his taxable income of $39,976, and is more likely to be the order of $60,000 having made allowance for other tax deductions.  This would result in a significant change to the level of child support he pays.

6. There have also been changes to Mr Salter’s income in the course of these proceedings.  He was employed by [Company 4] on an annual income of $70,000 and a car allowance of $5,000, however that employment ceased 23 March 2018.  He states he is subject to legal proceedings and may be incarcerated in October following a trial. 

7. In the special circumstances of this case, where Mr Salter’s income is not properly reflected in his taxable income, I consider the application of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support he provides for [Child 1] and [Child 2], and find a ground for departing from the administrative assessment exists.

8. A ground for departure may be established where, in the special circumstances of the case, application of the provisions of the 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 (subparagraph 117(2)(c)(ia) of the Act).

School fees

1. Mrs Salter applied for an increase due to the children’s school fees. This relates to the ground in subparagraph 117(2)(b)(ii) of the Act to depart from the administrative assessment. This states that in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents.

2. This gives rise to three issues in this case: whether Mrs Salter’s costs in maintaining the school the children are significantly affected because of the school fees; whether the children are being educated in a manner expected by the parents; and whether there are special circumstances.

3. Both children attend [the same] College.  Mrs Salter provided an invoice for school fees that shows the base fee for each child in 2017 was $3,690 and in 2018 is $3,785, with a sibling discount for [Child 2] of $1,200.  Mrs Salter would be eligible for a school card discount.   The invoices do not show any balance brought forward, from which I infer that the school fees for the previous year were paid. 

4. Mrs Salter stated at the hearing that she had had to rely on the good will and contributions from the community to meet the costs of school fees.  She was directed to provide receipts for payments of school fees, but states these do not exist.  She did not provide all of her bank accounts to show how these fees were being paid, although there are deductions from one account for school fees. 

5. It has twice been found by the Social Security Appeals Tribunal that the intention of the parties was that [Child 1] was to receive a private education on the basis of Mr Salter signing an enrolment form.  Mr Salter states it was not his intention that [Child 1] attend a private school, and that he was told by Mrs Salter he would net see the children until he signed an enrolment form for [Child 1] to attend the early learning centre.  He said he always attended a public school and if the parties were still married the children would attend a public school. 

6. Mr Salter has repeatedly said he did not intend [Child 1] to attend a private school.  This is a difficult position to maintain when he conceded this point early in the child support case, as shown in the decision of the Social Security Appeals Tribunal in 2010. 

7. Ultimately, Mr Salter have signed an enrolment form, and I accept that at that time the parents intended [Child 1] to attend [the] College.  I am not satisfied this is the case for [Child 2].

8. This results in a cost to Mrs Salter that is significant in the context of her receiving a disability support pension and amounts to special circumstances. It follows that this ground for departing from the administrative assessment is established.   

Is it just and equitable to depart from the administrative assessment?

1. As I have found that a ground to depart from the administrative assessment has been established, I must then consider the factors in subsection 117(4) to determine if it is just and equitable to make a particular determination. 

The nature of the duty of a parent to maintain a child

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case Mr Salter and Mrs Salter have the responsibility to maintain the children and this has priority over all commitments other than necessary commitments.

The proper needs of the children

1. The proper needs of the children include any special needs of the child and the manner in which the child is being, and the parents expected to be, educated or trained (subsection 117(6) of the Act).

2. The manner in which the children are being educated has already been considered.  Mrs Salter states [Child 1] has [a medical condition] and [Child 2] has been diagnosed with [a] disorder.  She also says that she has also incurred medical costs for the children due to a [medical procedure] for [Child 2].  She estimates her out of pocket medical costs for the children as $600 per year. 

The income, property and financial resources of the children

1. [Child 1] has received a compensation payment in the past.  This is held by the Public Trustee, and the terms on which they are held include that the funds cannot be released to [Child 1] until she is 18 years of age.  As these funds are not currently available to her, they cannot be used to support herself.

1. Mr Salter raised the issue of funds held for the children for [Child 2] of $2,000 and for [Child 1] of $3,000 which he says were from his grandfather.  Mrs Salter states these have been transferred to another account.

2. There is nothing else before me to show the children have funds from which they can support themselves. I am not satisfied on the information before me that the children have income, property or financial resources they could use to support themselves. 

Mrs Salter’s income, property and financial resources

1. Mrs Salter has complicated financial affairs.  Her primary source of income is a disability support pension.  She trades in “[goods]” which are [for] pets; this business was transferred to her after her father left his [previous] business.  She states this does not make any money.  She also sells items on Gumtree and sells [other animals].  Mrs Salter said the use of the sales on Gumtree would not accurately reflect her income as she also sells items for other family members. 

2. Mrs Salter also has a business called “[Name] Pty Ltd”, which she says has been registered but has never traded.  Mrs Salter describes the company concept as providing online verification services, and says the company has never traded and has a loss from legal fees.  She said she loaned $40,000 to this company, and said both that this was accumulated money she held from the sale of cars and loans from her father which she then repaid him from her mortgage.  Mrs Salter says that funds were received from two other investors and there is legal action on foot for the investors to have the money returned as she did not commence trading when it was agreed.  The 2016 tax return for[the company] shows a loss of $26,887 and debt of over $91,000.  The financial statements for [the company] shows it owes Mrs Salter $54,169. 

3. Mrs Salter has five accounts with the ANZ, including two residential investment property accounts which she says she uses to fund the mortgage for the house in which she lives.  She has eight National Australia Bank accounts.  Mrs Salter has selectively provided statements for her accounts, and only to the degree where she considers this supports her argument. 

4. As a result, it is not possible to obtain a comprehensive picture of her financial affairs.  However nor is it possible to show that her income is significantly different from her income from Centrelink.   Mr Salter submits Mrs Salter’s expenditure as shown by reviews of restaurants does not support her oral evidence of financial hardship in needing to obtain assistance with food from charitable organisations, however I do not consider there is significant evidence that her expenditure exceeds her income. 

The earning capacity of each parent

1. To be satisfied that a parent’s earning capacity is greater than is reflected in his or her income for the purposes of the Act, I must be satisfied that one of the following applies:

   ·       He or she does not work despite ample opportunity to do so;

   ·       He or she 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;

   ·       He or she has changed his or her occupation, industry or working pattern (paragraph 117(7B)(a)).

2. Mr Salter stated for the first time at the hearing that he had obtained a job outside his industry due to his elbow and shoulder problems.  He did not bring any payslips or a contact to the hearing to show his income.  After the hearing he provided a contract from [Company 4] with a commencement date of 8 February 2018.  The contract states he has an annual salary of $70,000 with a car allowance of $5,000 per annum.  The contract states it is subject to a probation period of three months.

3. Mr Salter later advised his employment ceased, and provided a letter dated 23 March 2018 stating his employment ceased on that date.  He says he has now claimed newstart allowance. 

4. Mr Salter has changed his occupation and his hours of work. 

5. This means I am required to consider whether this change is justified on the basis of his health or caring possibilities.  He has a letter from his doctor supporting his claim that this is because of problems he has with his elbows and shoulders, and I accept this is because of his state of health. 

The necessary commitments of each parent

1. Mr Salter’s statement of financial circumstances does not show any expenses that are out of the ordinary, and I find he has normal household expenses.  Mr Salter states he is separated from his wife which is a change to his circumstances, however I have little before me to establish this separation or the effect on his financial affairs.  This would be relevant to whether he can share his costs of living with another person.   

2. Mrs Salter has higher weekly household expenses, which reflect her care of the children, and also do not show anything out of the ordinary. 

Direct and indirect costs incurred by the carer entitled to child support

69. In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care (subsection 117(8) of the Act).

1. Mrs Salter is on disability support pension, and says she had been on this payment for a long period of time, and this does not apply. 

Hardship to the parents or to the children

1. Mr Salter states the effect of the current assessment is that he has more pressure on everyday living.  He wants to be able to purchase a house and accumulate a deposit.  

2. Mrs Salter says that she may have to look at selling her house to meet the school fees.  She said her financial conditions are dire and she relies on her church community. 

Other relevant factors

1. Mr Salter states he has ceased his contact with [Company 1], and then was a full time employee and is now unemployed. He provided an employment contract and a letter stating he has ceased employment.  He has provided medical information to show that he suffers from conditions that affect his ability to work, however it is unclear the extent to which this is currently the case.

2. Mrs Salter has only provided selected information on her complex financial circumstances.  There is a source of income from selling [animals] on Gumtree.  While she is highly dismissive of this as a source of income, it is also unclear the extent to which this is a source of income to her and her extended family.  

Conclusion – just and equitable factors

1. Having considered the factors in subsection 117(4), in the unusual circumstances of this particular case where Mr Salter’s income has changed and I consider it necessary to allow some flexibility in assessing the level of child support to reflect this change, I consider it just and equitable to set Mr Salter’s adjusted taxable income at $60,000 for the period from the date the application was made to the date of this decision.  From the date of this decision it will then revert to the adjusted taxable income specified by the formula.  This will allow Mr Salter to lodge an estimate of his income, if this is necessary, which will be reconciled at a later date.

2. I also consider it just and equitable to add the cost of half of [Child 1’s] school fees to the assessment.  I have carefully considered whether the costs of the school fees should be added to the cost of the children in the formula, however ultimately concluded it is better to provide some certainty to Mrs Salter about how the school fees will be met to the end of 2018.

3. This means that Mr Salter’s annual rate of child support will be increased by $1,595 for the period 1 April 2017 to 31 December 2017 and by $1,675 for the period 1 January 2018 to 31 December 2018. 

4. Ultimately, when compared with the decision of the objections officer, this means that the departure to the administrative assessment on the basis of Mr Salter’s income, property and financial resources ends on 9 April 2018 and the assessment reverts to using his taxable income from this date.  The addition of half the school fees to his child support liability remains in place to the end of this calendar year. 

Is it otherwise proper to make a particular departure determination?

79. 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 Act.

80. Subsection 117(5) of the Act sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.

1. Mrs Salter receives a disability support pension and family tax benefit and increasing the rate of child support will reduce the burden on the taxpayer.

DECISION

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

·       For the period 1 April 2017 to 9 April 2018 Mr Salter’s adjusted taxable income is varied to $60,000.

·       For the period 1 April 2017 to 31 December 2017, the annual rate is increased by $1,595.

·       For the period 1 January 2018 to 31 December 2018, the annual rate is increased by $1,675.