Sastre and Sastre (Child support)

[2021] AATA 3358

Sastre and Sastre (Child support) [2021] AATA 3358 (28 June 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC020601

APPLICANT:  Mr Sastre

OTHER PARTIES:  Child Support Registrar

Ms Sastre

TRIBUNAL:Member W Budiselik

DECISION DATE:  28 June 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents - benefits derived from business – decision under review 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. Mr Sastre (the father/applicant) and Ms Sastre (the mother) are the parents of three children (born June 2003, March 2005 and September 2007) (the children), who are the subjects of administrative assessments of child support. The children are in the regular care of the father and in the primary care of the mother. A case in respect of the children was registered with Services Australia – Child Support (the Agency) on 18 December 2019. The case is recorded as Agency collect from 11 February 2020.

2. On 8 January 2021, an objections officer from the Agency disallowed an objection made by the father to a decision made by an officer of the Agency on 10 September 2020 such that:

• For the period 27 March 2020 until 8 June 2020, the adjusted taxable income (ATI) for the father is set at $32,850;

• For the period 8 April 2020 until 31 October 2021, the ATI for the mother is set at $80,000.

1. On 11 January 2021, the father lodged an objection to the Agency’s decision with the Administrative Appeals Tribunal (the tribunal).

2. On 13 April 2021, the tribunal conducted a telephone directions hearing (TDH) with the parents.  The purpose of a TDH is to better understand the scope of an applicant’s objection to an Agency decision and the other parent’s response to it, and for the tribunal and the parents to identify documents which might assist in hearing the matter.

3. Prior to the TDH, the Agency sent the parents and the tribunal a bundle of documents taken from its files (folios 1–477). The father said he had received the bundle of documents sent by the Agency. The mother said she had not received the bundle of documents. The tribunal arranged for the Agency to reissue the documents to the mother.

4. At the TDH the father clarified the scope of his objection was the Agency’s decision to set his ATI at $32,850 from 27 March 2020 and not from an earlier date. The father said he believed the Agency had made an error in not setting his ATI at $0 from when the case began, because he had no income from August 2019 until 27 March 2020, other than $10,000, which he said he received in December 2019, which is when he said his businesses failed. The mother said she accepted the father’s income had reduced from the time the companies went into liquidation in February 2020, but that until that time he had continued to withdraw his income (at a rate of $144,000 per annum) from the businesses.

5. The tribunal issued directions following the TDH. These directions placed the onus on the father to provide a set of documents which would set out when his businesses were liquidated and the amount of money he withdrew from the businesses after the child support case was registered and prior to the businesses’ liquidation.

6. The tribunal conducted a hearing into the father’s application on 31 May 2021. Both parents participated in the hearing via teleconference. Prior to the hearing the Agency provided supplementary documents to the tribunal and the parents (folios 478–483). The parents provided bundles of documents consistent with the tribunal’s directions (from the father folios A–A64 and from the mother B1–B5). These documents were exchanged between the parents.

7. The parents confirmed they had received the papers prior to the hearing. The mother said she had read them but did not have them with her. The absence of papers makes a hearing difficult because a party cannot refer to a page reference. The mother explained she did not have the papers with her because she had been delayed in a work meeting. The tribunal proceeded with the hearing notwithstanding the mother did not have the papers with her.

8. On 31 May 2021, the tribunal deferred its decision making to enable the father to provide additional information about his income and information about his current circumstances. The post-hearing documents provided by the father (folios A65–A72) were provided to the mother to comment on them, if she wished.

9. All the documents provided by the parents have been provided to the Agency.

ISSUES

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

2. The tribunal also referred to the Agency’s online Child Support Guide (the Guide). The tribunal is not bound by law to apply the Agency’s policy as set out in the Guide, but provided the policy is consistent with the legislation, it must have regard to it and in the ordinary course, to follow it (Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409) unless there is a cogent reason not to do so (Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634).

3. The three issues to be determined by the tribunal are:

   a)   whether a ground is established to depart from the administrative assessment of child support; and if so,

   b)   whether it is just and equitable to make a particular departure determination; and if so,

   c)   whether it is otherwise proper to make a particular departure determination.

CONSIDERATION

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula which takes account of factors such as the ATI of each parent, the number of children and the level of care provided. A parent’s ATI for a given year is calculated according to a formula that includes a parent’s previous year’s taxable income (see section 43 of the Act).

2. Part 6A of the Act allows for a departure from an administrative assessment. The liable parent or a carer entitled to child support may apply to the Child Support Registrar (the Registrar) for a determination to depart from the child support administrative assessment under Part 6A of the Act.

3. Section 98C of the Act provides that the Registrar (and the tribunal in the Registrar’s place) may make a determination to depart from the administrative assessment if satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination. The tribunal may make one of the determinations set out in section 98S of the Act.

4. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Each ground for departure is prefaced by the words, ‘in the special circumstances of the case’. Therefore, when considering whether a ground exists, the tribunal must be satisfied that there are ‘special circumstances’ in the case. The phrase ‘special circumstances’ is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92-279, held that:

   It is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

Issue 1: Is there a ground for departure?

19.A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property or financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

The father’s income, property or financial resources

20.At the time the father lodged his departure application (also known as a change of assessment application) on 11 June 2020, the relevant administrative assessments of child support were:

·For the period 1 March 2020 to 8 June 2020, the father was required to pay an annual rate of child support of $18,643 based on a provisional 2018/2019 income of $144,174 for the father and the mother’s 2018/2019 provisional income of $127,800;

·For the period 9 June to 9 July 2020, the father was assessed to pay an annual rate of child support of $742, based on his estimated 2020/2021 income of $32,850 and the mother’s 2018/2019 provisional income of $127,800;

·For the period 10 July 2020 until 17 March 2021, the father was assessed to pay an annual rate of child support of $0 based on his estimated 2020/2021 income of $32,850 and the mother’s 2018/2019 provisional income of $127,800.

1. The father’s application for a departure determination, signed on 9 June 2020 and lodged with the Agency on 11 June 2020, was based on the facts that:

   ·his businesses had been liquidated;

   ·his sole income was jobseeker payment;

   ·he was currently a commission-only [Occupation 1] and he had not received any commission since October 2019;

   ·his living costs were in excess of his income.

2. The mother said she accepted from the time the father’s businesses went into liquidation his income reduced to jobseeker payment, but that until the businesses went into liquidation, the father continued to receive payments from the businesses at an annual rate of $144,714.

3. The documents provided by the father following the TDH included documents about the appointment of [Liquidator 1] as liquidators for his two businesses ([Company 1] and [Company 2]) on 19 February 2020 and 6 March 2020, respectively. [Liquidator 1] correspondence set out:

   ·the father was the sole director of the two companies;

   ·[Company 1] acted as trustee of the Trust (formerly known as [Trust 1];

   ·[Liquidator 1] was granted a Court Order on 3 March 2020, to be appointed as joint and several receivers and managers of the property, assets and undertakings of the Trust (refer folio A16);

   ·On 8 April 2020, the receivers sold the ‘[specified business]’ to [Company 3].

4. A letter provided by the father from the [accounting firm] dated 3 June 2020 to the father, providing him information about his bankruptcy.

5. The tribunal found the father’s businesses were effectively in receivership from 3 March 2020 and that the father commenced his bankruptcy on 3 June 2020.

6. The father said he continued to draw money to meet various personal costs from [Company 1] until the receivers took possession.

7. On the basis of the evidence deduced from the father and from the documents provided, the tribunal finds that the father drew $10,000 from his businesses in the period 19 December 2019 to 3 March 2020 and that some of his day-to-day living costs were met by the businesses. The tribunal concluded these costs included rent, motor vehicle and phone costs.

8. The father argued the value he derived from having personal expenses met by the companies should not be considered as a resource for child support purposes because having these expenses met was a benefit associated with owning a company.

9. Chapter 2.6.14 of the Guide provides direction to decision makers about matters to be considered in respect of company directors and sole traders. Among other things it sets out:

   Parents who are self-employed or who operate a business might claim expenses that may otherwise be considered private as a legitimate income tax deduction. Examples include the fixed-costs component of telephone expenses such as the rental and connection fees, home office expenses or motor vehicle expenses. These deductions are generally not available to parents who derive income solely from salary and wages.

   If the Registrar concludes that, as a result of the deductions, the parent has additional income or financial resources that are not taken into account in the child support assessment, a reason to change the assessment may be established.

10. The father failed to advise the Agency he had received a commission for a property he sold for $915,000 ([Address 1] (the [Address 1] property)). The father’s employer’s records showed the father received a commission of $9,732.27 (gross) in the period prior to 1 April 2020. The father said this commission was paid into his ‘[Company 4]’ account.

31.In response to a post-hearing direction, the father provided the tribunal with the details of an [business bank account] statement addressed to [the father], [Company 4]. The [Company 4] account shows a deposit of $8,698.55 made in respect of payment from commission (Invoice 2122) on 6 March 2020.

1. Based on the father’s testimony the tribunal understands the father was a director of [Company 4] until around the time of his personal bankruptcy and then the directorship was transferred to his mother. The father explained the transfer occurred because he could not be a company director while he was in bankruptcy but that the business structure would be able to be transferred back to him after bankruptcy.

2. Since his companies were liquidated the father has been employed by a real estate company. When asked about whether his employer provided him with a vehicle for business purposes, he said it did not. When the tribunal asked him about how he travelled to homes for sales, he said he borrowed a vehicle from a family member.

3. On prompting from the mother and in response to the tribunal’s further questions the father said he had access ‘most of the time’ to a vehicle (a [car make] 4WD) owned by his sister.

4. On further prompting from the mother and in response to the tribunal’s questions, the father said he owned a motorcycle ([year, make, and model]) valued at $18,000 which he was paying off at $300 per month. The father said he had not listed the vehicle as an asset because it is owned by the finance company.

5. The tribunal found the father had adopted a casual attitude with respect to the information he provided to the Agency (for example, not declaring the commission he received in March 2020) and to the tribunal (his failure to declare ownership of the motorcycle).

6. The tribunal concluded the father’s income in the period from 19 December 2019 to 26 March 2020 comprised $10,000 drawn from his businesses, the commission he received for the [Address 1] property on 6 March 2020 ($9,732.27) and the personal expenses met by his businesses prior to them being placed into liquidation (vehicle, phone, rent and sundry expenses). The tribunal estimated the father’s income in the period was approximately $30,000. This is consistent with income for child support purposes annualised to about $109,000. The tribunal notes this income estimate does not include income the father lists he receives from Centrelink in respect of carer allowance.

7. The tribunal appreciates the father is adjusting to a reduced level of income. In the hearing he asserted, ‘You cannot live off $80,000 a year, no matter where you live’.

8. The tribunal finds and the mother does not dispute that the father’s income is significantly less in 2019/2020 that it was in 2018/2019. However, the tribunal does not find the income has reduced as much as the father claims it has.

9. The tribunal issued post-hearing directions to the father about other commissions paid to him by his employer. The father provided his employer’s net commission report which set out the father was paid commissions totalling $42,686.62 in the period 1 July 2020 to 31 March 2021.

10. The tribunal finds a ground to depart from the administrative assessment exists because of the father’s income, property and financial resources.

The mother’s income, property and financial resources

1. The tribunal noted the objection officer’s report assessed the mother’s income based on recent payslips from her employer, [Company 5].

2. The father made the point late in the hearing that the mother benefited from payments from his businesses prior to their liquidation.

3. The objections officer’s decision set the mother’s income at $80,000 from 8 April 2020 (i.e. after the businesses were liquidated) to 31 October 2021 based on her employment income (she commenced employment on 8 April 2020).

4. The tribunal decided this was a reasonable approach to set the mother’s income from that date. The mother’s income for the period prior to 8 April 2020 will be determined by her Australian Taxation Office determined ATI, as the father’s will be for the period prior to him receiving jobkeeper payment.

Issue 2: Is it just and equitable to depart from the administrative assessment?

1. To decide whether it is just and equitable to depart from the administrative assessment, the tribunal must consider the matters required by subsection 117(4) of the Act, plus any other matters raised in the change of assessment application. Factors relevant to the circumstances of this case identified in subsection 117(4) of the Act are now considered in turn.

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.

2. The tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered ‘necessary’ expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson [1986] FamCA 3 (Mee and Ferguson) the Full Court of the Family Court stated at [128]:

   Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one’s cloth to meet that commitment during the years when it applies.

The proper needs of the child

1. In determining the proper needs of the child(ren) it is necessary to consider the manner in which the parents expected the child(ren) to be cared for, educated or trained, and any special needs of the child(ren).

2. Neither parent identified matters to do with the children’s education or special needs that needed to be taken into account in its departure determination.

Income, earning capacity, property and financial resources of the father

51.The father’s income has been dealt with earlier in these Reasons for Decision.

Income, earning capacity, property and financial resources of the mother

52.The mother’s income has been dealt with earlier in these Reasons for Decision.

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support: (i) themself; or (ii) any other child or another person that the person has a duty to maintain

1. Neither parent identified any other child or person they had a duty to maintain.

Hardship resulting from the departure determination

1. The father’s presentation to the tribunal to backdate the objections officer’s decision to a date prior to 27 March 2020 is that in the period from 19 December 2019 to 26 March 2020, his sole income was $10,000. For the Reasons set out above the tribunal has rejected the father’s assertion. It has found in this period his income was about $30,000.

2. The father said he lives with his mother whom he pays $300 per week, when he can afford to do so.

3. The father has use of a vehicle owned by his sister. The father sets out he spends $150 per week on this vehicle. The father owns a motorcycle he says is valued at $18,000 and for which he meets repayments of $300 per month.

4. The father has $100,000 in his self-managed superannuation fund. The tribunal was not advised the father had drawn on the money in the superannuation fund further to a hardship application.

5. In the period 1 July 2020 to 31 March 2021, the father has received recorded sales commissions totalling $42,686.62.  The father also receives Centrelink payments.

6. The mother did not assert she would suffer hardship. She maintained the father drew down money from his businesses until the businesses went into receivership. She said the period since separation had been difficult for both her and the father, but that he had earned more money than she had.

7. The tribunal decided neither parent will suffer hardship if the tribunal affirms the Agency’s decision.

What determination should be made taking into account the above factors?

1. The tribunal has analysed the father’s income for child support purposes for the period from the date of registration (18 December 2019) to the date the father was granted jobkeeper payment.

2. The tribunal determined the father’s income for child support purposes in the period from the time the case was registered (18 December 2019) to the date prior to the father being granted jobkeeper payment (27 March 2021) is the total of the payments he received from his business ($10,000), real estate commission ($9,932.27) and various living expenses met by the companies prior to their liquidation (estimated at $10,000). The tribunal calculated this on a pro rata basis and estimated the father’s annual income in this period from sources other than his social security benefits is about $109,000.

3. The tribunal concluded the father had not provided the Agency with relevant information about his financial circumstances when he lodged his application for a departure determination because he failed to advise the Agency about a commission of over $9,000 he received on 6 March 2020, for the sale of the [Address 1] property. It also seems likely the father did not declare that he was a director of [Company 4], which is the account to where the commission payment was directed.

4. The father did not provide the tribunal with an accurate statement of his financial circumstances. When he completed his Statement of Financial Circumstances which he signed on 28 January 2021, he did not list his ownership of a motorcycle. He also set out his sole income was from unemployment and carer allowance. He did not set out he received commissions for properties settled on 30 September 2020,14 October 2020, 11 November 2020, 17 November 2020 and 14 December 2020. 

5. For the Reasons set out above, the tribunal proposes to affirm the Agency’s decision such that for the period 27 March 2020 to 8 June 2020, the ATI for the father is set at $32,850 and for the period 8 April 2020 until 31 October 2021, the mother’s ATI is set at $80,000.

6. This decision means the father’s income: for the period prior to 27 March 2020, will be set by the application of the administrative formula; the father’s income is set at $32,580 for the period 27 March 2020 to 8 June 2020, on the basis the tribunal is satisfied the father did not have additional income in this period; and, the father’s income estimate from 9 June 2020, is effective.

7. The tribunal reiterates to the father the information provided by the objections officer:

   Mr Sastre lodged an estimate of income for the 2019/20 year on 9 June 2020 however, this can only be taken from the date of notification and not be backdated. …

   From 9 June 2020, the normal administrative provisions will apply to Mr Sastre’s income as this will allow him to advise the agency if and when his income should change.

Issue c: Is it otherwise proper to depart from the administrative assessment?

1. The tribunal considered the impact of its decision on the balance of support provided by the parents on one hand and the taxpayer on the other. It is necessary to decide whether this is a proper outcome given that parents have the primary responsibility to support their children.

2. The tribunal was satisfied that this decision is otherwise proper in the circumstances of the case.

DECISION

The decision under review is affirmed.