Saunders and Saunders (Child support)

[2018] AATA 4649

Saunders and Saunders (Child support) [2018] AATA 4649 (14 November 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/BC014822

APPLICANT:  Mr Saunders

OTHER PARTIES:  Ms Saunders

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  14 November 2018

DECISION:

The decision under review is set aside and, in substitution:

• from 1 January 2018 to 31 December 2018, Mr Saunders’ rate of child support payable is varied to $16,500 per annum; and

• from 1 January 2019 to 31 December 2021, Mr Saunders’ rate of child support payable is varied to $9,500 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of parents – ground for departure established – 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

Introduction

1. Mr Saunders and Ms Saunders are the parents of [Child 1] who was born in 2009 and [Child 2] who was born in 2013. A child support case was registered with the Department of Human Services – Child Support (“the CSA”) from 19 January 2016.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances. On 5 March 2018, Mr Saunders lodged a departure application. A senior case officer refused his application. He objected to that decision. An objections officer disallowed his objection. He sought further review by the Tribunal. I conducted a directions hearing on 26 October 2018 and a full hearing on 14 November 2018. Both parents attended the full hearing in person.

3. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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 particular determination under this Part; …

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

   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. To understand why Mr Saunders lodged a departure application in March 2018, it is necessary to recount some of the history of the case. Mr Saunders has been recorded as providing 14% care to the children from the start of the case and 33% care from 25 June 2018. Ms Saunders has been recorded as providing the balance of care. Under the administrative assessment formula, percentages of care that fall with the range of 14% and 34% have the same cost percentage, which is 24%: section 55C of the Act. Put simply, if a parent’s care changes, but the parent continues to be recorded as having between 14% and 34% care, the change in care does not affect the administratively assessed rate of child support payable. At all times, Mr Saunders had been recorded as providing a level of care that equates to a cost percentage of 24%.

3. When the case was registered, the administrative assessment was based on Mr Saunders’ provisional income of $47,504 per annum and Ms Saunders’ provisional income of $102,110 per annum, and neither parent was required to pay child support to the other parent. From 16 August 2016, the administrative assessment was based on Mr Saunders’ provisional income of $47,504 per annum and Ms Saunders’ provisional income of $0, and Mr Saunders was required to pay $4,332 per annum in child support.

4. In July 2016, Ms Saunders lodged a departure application. She submitted that Mr Saunders should be required to pay $31,200 per annum ($600 per week) in child support on the basis that the parents had previously reached an informal agreement in those terms. A senior case officer did not make the departure decision that Ms Saunders had sought. Instead, she varied Mr Saunders’ adjusted taxable income to $161,400 and Ms Saunders’ adjusted taxable income to $95,000, and she reduced Mr Saunders’ rate of child support payable by $8,400 per annum on account of the school fees that he was paying. The departure decision had effect from 1 October 2016. Mr Saunders was required to pay approximately $5,800 per annum in child support.

5. Ms Saunders objected to that decision. In January 2017 an objections officer allowed her objection and varied the senior case officer’s decision from 1 January 2017. From that date until 31 December 2020, Mr Saunders’ rate of child support payable was varied to $31,200 per annum. The objections officer’s Reasons for Decision included the following:

   During the [departure application] process Mr Saunders confirmed that he agreed he would pay Ms Saunders $600 for the support of the children. It was his understanding the amount was his full contribution to the children’s costs and believed he had met or exceeded this amount through payment of school fees, child care costs, two mobile phone plans for the nanny and Ms Saunders, veterinary costs and two motor vehicle maintenance costs.

   ...

   Having considered the information at hand I am satisfied it was the intention of both parents for [Child 1] to be educated in the current manner [at [School 1]]. ...

   ... While it is difficult to ascertain an income amount with any real precision given the lack of financial information for Mr Saunders’ businesses, based on his expenses I am satisfied Mr Saunders would have income / financial resources available to him in excess of $165,000.

   [Varying Mr Saunders’ adjusted taxable income to $165,000 and Ms Saunders’ adjusted taxable income to $95,000] results in an annual rate payable by Mr Saunders of $14,376.

   Ms Saunders is requesting the additional costs of the children in the way of [Child 1’s] school fees and [Child 2’s] child care costs now be considered as Mr Saunders is no longer meeting these costs. ... I calculate the total costs of these fees to be $23,659 [per annum, being $16,800 per annum for school fees and $6,859 per annum for child care fees]. ...

   ...

   Overall, this results in an annual rate payable by Mr Saunders of $29,991. I find this amount is not dissimilar to that referred to by both parents when discussing the overall support Mr Saunders has been providing for the children. ...

   ...

   ... from 1 January 2017, I propose to set the annual rate payable by Mr Saunders at $31,200 ($600 per week), encompassing all of the costs incurred by Ms Saunders for the care of the children, as I cannot be satisfied Mr Saunders will continue to meet the costs going forward. Setting the annual rate payable by Mr Saunders will result in Ms Saunders being responsible in meeting all of the children’s costs including education, and child care fees.

6. On 13 July 2017, Mr Saunders belatedly applied to the Tribunal for review of the objections officer’s decision. (To apply within time, he needed to apply within 28 days of receiving the objections officer’s decision dated 17 January 2017.) He also applied for an extension of time in which to lodge his application for review. On 9 November 2017 this Tribunal, differently constituted, refused his extension of time application. He was informed that he could lodge a new departure application if there had been a significant change in circumstances since the objections officer made her departure decision. He did not lodge a new departure application until 5 March 2018.

7. Mr Saunders stopped paying [Child 1’s] [school] fees after the end of Term 1 of 2017. He has not been paying his assessed rate of child support. According to the most recent information from the CSA, he owes child support arrears of $52,290. Ms Saunders was unable to pay [Child 1’s] ongoing [School 1] fees and she was transferred to [School 2] at the start of Term 2 of 2017. Ms Saunders has not provided [School 2’s] 2017 schedule of fees, but [Child 1’s] is currently in Year 3 and according to [the school]’s 2018 schedule of fees, tuition fees are $1,170 per annum. [School 2’s] 2018 tuition fees for a Year 3 student are $16,540 per annum. There has been a significant change in circumstances since the objections officer made her decision.

8. Ordinarily, the costs associated with a private school education are considered under subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3. However, that subparagraph is concerned with educational costs that significantly affect the costs of maintaining the child, whereas the current case concerns the cessation of such costs.

9. The preferable approach in the current case is to consider whether the administrative assessment (which, for the purposes of Mr Saunders’ departure application, is the objections officer’s decision to vary his rate of child support payable to $31,200 per annum) is an unjust and inequitable determination of child support payable “because of the income, property and financial resources of either parent”.

10. Ms Saunders’ financial circumstances are relatively straightforward. Since the parents’ separation, she has had periods of unemployment and periods of relatively well-paid employment, but on a financial year basis her earnings have been relatively constant. Her 2015-16 to 2017-18 adjusted taxable incomes were $91,315, $105,306 and $89,982 respectively, and she currently earns a wage of $100,000 per annum.

11. In August 2017, Ms Saunders received $149,764 net from the sale of a property. Mr Saunders said the funds were supposed to be held in trust, but Ms Saunders obtained them. It appears that both parents have had some access to some of the matrimonial assets from time to time. For example, Mr Saunders has gambled away some of those assets. There are ongoing proceedings before the Federal Circuit Court that will determine the fair division of the parents’ assets and liabilities.

12. Mr Saunders’ financial circumstances are not straightforward. In fact, towards the end of the hearing I suggested, and Mr Saunders conceded, that the evidence did not allow me to ascertain his previous financial position or his current financial position. It appears that he has had some involvement in property development. On 12 February 2018 the Federal Circuit Court ordered him to provide certain documentation to Ms Saunders within 14 days. He did not comply with those orders. When I spoke to him at the directions hearing he claimed that he had not understood that he had been required to provide the documentation to Ms Saunders within 14 days of the making of the orders. On 10 August 2018 the Court effectively amended its earlier orders. Mr Saunders was ordered to provide certain bank account statements, gambling account statements, individual tax returns, and company financial statements, BAS and tax returns. Given that he should have promptly compiled that documentation, I directed him on 26 October 2018 to provide a copy of that same documentation to the Tribunal. Ms Saunders stressed the need for the provision of Mr Saunders’ gambling account statements. She said she was concerned that there were undisclosed funds being channelled through those accounts. Mr Saunders partially complied with my directions. He provided a large number of bank account statements, but it is not known to what extent he has failed to provide other bank account statements. For example, the Court, and in turn I, directed him to provide the bank account statements of “[bank] account [number] for the period 22 December 2014 to present”. He did not provide those statements. At the full hearing he said he was unaware of that account. He did not provide any documentation in support of that statement. Ms Saunders said she was confident that he had been a signatory to that account, based on her observations prior to the parents’ separation. There is no dispute that he is a client of the [bank]. I suggested, and after much discussion he ultimately conceded, that he could have asked the [bank] to provide a letter stating he had never been a signatory to that account, if in fact that were the case. He said he had not thought to request such a document. I mention that matter because it is an example of what appears to be the fundamental problem in this case: Mr Saunders’ mistaken belief that his unsubstantiated statements concerning the extent of his income and financial circumstances will be automatically accepted as correct.

13. Mr Saunders has not provided financial statements, BAS or tax returns for any of the companies in which he has been involved. He has not provided his individual tax returns, although he has lodged his tax returns for the financial years up to and including 2015-16. He did provide notices of assessment. He claimed that he did not know the difference between a tax return and a notice of assessment. He acknowledged that, quite apart from the Court’s orders and my directions, he had a legal obligation under the taxation legislation to lodge the companies’ tax returns and his individual tax returns for the financial years up to and including 2016-17. He claimed he lacked the funds to do so.

14. Mr Saunders requested some information from [Bookmaker 1]. He has not provided a copy of his request. In response, [Bookmaker 1] emailed him a screenshot of a computer record which contains abbreviations and figures: page A347 of the hearing papers. He acknowledged he did not know what the abbreviations stood for, although he was willing to make an educated guess. I was left with the impression that he had made a perfunctory attempt to obtain his gambling account statements and he had acquiesced to the first (inadequate) response that he received from [Bookmaker]. As best as he could tell, the screenshot indicated that he lost $145,275 - $21,225 = $124,050 during the period from 1 December 2014 to 15 October 2018.

15. Mr Saunders appears to have made a similar perfunctory attempt to obtain his gambling account statements from [Bookmaker 2]. According to a brief response from [Bookmaker 2], he lost an additional $234,124 during the period from 21 November 2016 to 1 November 2018.

16. Mr Saunders has not provided his gambling account statements, and so the question remains as to whether he has disclosed all the sources of the funds that were deposited into those accounts.

17. Mr Saunders has re-partnered with [Ms A]. Ms Saunders submitted that bank account statements showed that Mr Saunders had transferred significant sums of money to [Ms A]. On my reading of the hearing papers, that was not correct. I asked Ms Saunders to refer me to a relevant page. At this point, it is necessary to say a little about the hearing papers. Prior to the directions hearing the CSA provided the Tribunal and the parents with a copy of the relevant documentation in its possession, which I will refer to as the section 37 documentation. That documentation included bank account statements that Mr Saunders had provided to the CSA. At the full hearing, Ms Saunders did not have her copy of the section 37 documentation, but she had another copy of Mr Saunders’ bank account statements. I assume she obtained her copy via the Federal Circuit Court proceedings. Ms Saunders invited to me to look at a number of withdrawals on 9 May 2017 from Mr Saunders’ [bank] account with account number ending #[numbers]. I turned to page 232 of the hearing papers. According to the bank account statement on that page and the following page, Mr Saunders transferred $250.00 + $500.00 + $50.00 + $200.00 + $150.00 + $500.00 + $500.00 + $500.00 + $2,000.00 + $49.92 + $1,400.00 = $6,099.92 during the period from 8 May 2017 to 12 May 2017 to “[Mr B]”. Ms Saunders stated that the bank account statements showed that all those transfers were to “[Ms A]”. I eventually looked at Ms Saunders’ copy of Mr Saunders’ bank account statements. Her equivalent of page 232 has now been added to the hearing papers; it is page B29. The documents are identical apart from the “[Mr B]” / “[Ms A]” difference. Mr Saunders said he could explain the difference. I asked him to explain the difference. He said, “I uploaded the documents to Dropbox and ...”[1] I waited for him to continue with his explanation, but it became apparent that he did not wish to continue. I informed him that while he was generally required to answer my questions, he was not required to answer a question if the answer might reasonably incriminate him in the commission of an offence. He declined to answer my question on that basis.

    [1]I cannot recall the exchange verbatim, but the proceedings were audio recorded.

18. It is important to note that these are civil proceedings and I am required to make findings of fact on the balance of probabilities. These are not criminal proceedings, where the standard of proof is “beyond reasonable doubt”. On the balance of probabilities, I find that Mr Saunders intentionally provided false documentation to the CSA in an attempt to mislead it in respect of his income and financial circumstances. More generally, I found Mr Saunders to be an unreliable witnesses. Further, he conceded that he has not provided documentation that would allow me to ascertain his previous financial position or his current financial position. For the sake of completeness I note that he stated in March 2018 that “I am now unemployed and looking for work and during 2017 my income has been very minimal.” He currently receives newstart allowance.

19. It is also important to note that these proceedings concern the rate of child support payable between the parents; there is no scope, in these proceedings, to penalise a parent for their dishonestly. Ms Saunders is the primary caregiver and it is appropriate that Mr Saunders be required to pay child support to her to assist her in meeting the children’s costs while they are in her care. However, she earns a significant income from which she can also contribute to the children’s costs. Further, Mr Saunders provides a significant level of care and he directly meets the children’s costs while they are in his care.

20. The current administrative assessment requires Mr Saunders to pay $31,200 per annum in child support. Even if his income and financial resources were fairly reflected for child support purposes in an adjusted taxable income of, say, $500,000, an administrative assessment that was also based on Ms Saunders’ adjusted taxable income of $100,000 would result in Mr Saunders being required to pay approximately $26,000 per annum in child support. Notwithstanding all the uncertainty in this case, I am not persuaded that Mr Saunders’ income and financial resources would be fairly reflected for child support purposes in an adjusted taxable income of $500,000. I find that his income and financial resources would be fairly reflected for child support purposes in a lesser amount, and that the current administrative assessment of child support payable is consequently unjust and inequitable. The circumstances of the case as a whole constitute special circumstances. Reason 8 is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

1. Ms Saunders noted the difficulty in trying to suggest what might be just and equitable when the extent of Mr Saunders’ income and financial resources remains unknown. Nevertheless, she very fairly suggested that it would be appropriate to reduce his rate of child support payable given that [Child 1] no longer attends [School 1].

2. Currently, [Child 1] is in Year 3. The difference between [School 1’s] tuition fees and [School 2’s] tuition fees is $15,370 per annum. The basic administrative assessment formula incorporates the ordinary costs of education. It is appropriate to focus on the tuition fees when considering what adjustment should be made to the current administrative assessment of child support payable. [Child 2] attends child care. Ms Saunders provided evidence which suggests that her annual out-of-pocket child care costs are $2,503 x 3 = $7,509 per annum. The objections officer’s decision that was made in January 2017 was based, in part, on Ms Saunders incurring child care and related costs of $6,858 per annum. The difference is $651 per annum.

3. If one were to approach the issue on a purely mathematical basis, one could vary Mr Saunders’ rate of child support payable during 2018 to $31,200 - $15,370 + $651 = $16,481 per annum.

4. In 2019, [Child 2] will also be attending [School 2]. He will not be attending child care. According to [School 2’s] 2019 schedule of fees, the tuition fees for two children will be $1,705. Again, if one were to approach the issue on a purely mathematical basis, one could vary Mr Saunders’ rate of child support payable during 2019 to $31,200 - ($16,540 - $1,705) - $6,858 = $9,507 per annum. A similar approach could be taken in respect of subsequent years while both children continue to attend [School 2’s].

5. Varying Mr Saunders’ rate of child support payable to those rates would suggest a degree of mathematical precision which is simply not possible in this case. Viewing the matter as a whole, it is appropriate to vary Mr Saunders’ rate of child support payable to $16,500 per annum during 2018, and $9,500 per annum thereafter.

6. Mr Saunders submitted that any new departure decision should have effect from early 2017. As noted earlier, he had review rights in respect of the objections officer’s decision that was made in January 2017 and he did not promptly exercise those rights. Further, he could have promptly lodged a new departure application in respect of the change in [Child 1’s] schooling, but he did not do so. Even after this Tribunal, in November 2017, refused his application for an extension of time in which seek review of that objections officer’s decision, and he was told that he could lodge a new departure application with the CSA, he waited a further four months to do so. Ms Saunders was entitled to rely on the administrative assessment that was in force at the time. In my opinion, Mr Saunders has not advanced his position by failing to pay the assessed rate of child support payable. However, Ms Saunders very fairly conceded that Mr Saunders’ rate of child support should be reduced on the basis that [Child 1] is no longer attending [School 1]. In balancing those matters, I consider it appropriate to make a departure decision with effect from 1 January 2018.

7. Ms Saunders submitted that any new departure decision should have significant prospective effect because Mr Saunders’ conduct to date suggests that he will not fully and frankly disclose his income and financial resources in the future. There is obvious force in that submission. [Child 1’s] last year of primary school will be 2021. I consider it appropriate to make a departure decision with effect until 31 December 2021. In the absence of another significant change in circumstances, one would expect the proposed decision to remain in force until that date. However if, for example, there is a significant change in Mr Saunders’ income and financial circumstances such that the proposed decision becomes unfair, he can lodge another departure decision. In such circumstances, it would be for Mr Saunders to demonstrate to the CSA that he had fully and frankly disclosed his income and financial circumstances.

8. The proposed decision will reduce Mr Saunders’ child support arrears but it will not place him in credit. Such a result will be just and equitable.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Ms Saunders receives family tax benefit. Changing the child support payable by Mr Saunders will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

The decision under review is set aside and, in substitution:

• from 1 January 2018 to 31 December 2018, Mr Saunders’ rate of child support payable is varied to $16,500 per annum; and

• from 1 January 2019 to 31 December 2021, Mr Saunders’ rate of child support payable is varied to $9,500 per annum.