Savage and Kerr (Child support)

[2019] AATA 5017

Savage and Kerr (Child support) [2019] AATA 5017 (15 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC016406

APPLICANT:  Mr Savage

OTHER PARTIES:  Child Support Registrar

Ms Kerr

TRIBUNAL:Member C Breheny

DECISION DATE:  15 October 2019

DECISION:

The decision under review is set aside and a decision substituted that Mr Savage’s adjusted taxable income is set at $70,000 per annum from 28 June 2018 to 30 June 2023.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business – a ground for departure established – decision to depart - 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. Ms Kerr and Mr Savage are the separated parents of [Child 1], born September 2015. A child support case has been registered with the Department of Human Services – Child Support (the Department) since 14 December 2016 and registered for collection since that date. Child support is payable on the basis that Ms Kerr has 100% care of [Child 1] and Mr Savage was at all relevant times assessed as liable to pay child support to Ms Kerr.

2. There has been a previous change of assessment determination made on 6 May 2017, on application from Ms Kerr, dated 31 January 2017. The decision-maker (DM) determined not to change the administrative assessment in place at the time and indicated that Mr Savage had part-time employment (10 hours per week) with [Employer 1] ([in a position]) and was only earning about $340 per week ($17,680). I note that Mr Savage’s 2016/17 income tax return (folio 85) indicates he earned $32,572 (gross) or $626 per week from [Employer 1] at that time.

3. For the following child support period from 1 September 2017 to 30 June 2018 Mr Savage’s child support liability had been administratively assessed as being $1,487 per annum based on his 2016/17 adjusted taxable income of $32,901 and Ms Kerr’s 2016/17 adjusted taxable income of $15,821.

4. On 28 June 2018, Ms Kerr applied to the Department for another change of assessment on the basis that Mr Savage’s income, property, financial resources and earning capacity were not accurately reflected in the administrative assessment.

5. On 30 June 2018, Mr Savage contacted the Department to lodge an income estimate for 2018/19, stating that he now only worked four hours per week for [Employer 1] and his income was about $100 per week or $5,214 per year. As a result, Mr Savage’s child support liability decreased to the minimum annual rate ($420 per year) from 1 July 2018.

6. On 1 August 2018, [DM]  determined that Mr Savage’s financial resources were greater than previously known and decided to set Mr Savage’s adjusted taxable income at $121,014 for the period 1 July 2018 to 30 June 2024.

7. On 19 September 2018, Mr Savage objected to the decision and on 12 October 2018 an extension of time to lodge the objection was refused. Mr Savage appealed that decision and on 31 January 2019 this Tribunal (differently constituted) granted an extension of time to lodge the objection.

8. On 29 March 2019, an objections officer of the Department decided to partly allow the objection. The objections officer determined that Mr Savage had income and financial resources available to him, which were not reflected in his taxable income and made the administrative assessment unfair. The objections officer decided to set Mr Savage’s adjusted taxable income at $107,000 for the period 28 June 2018 to 30 June 2022.

9. On 26 April 2019, Mr Savage applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for an independent review of the Department’s decision. A hearing into Mr Savage’s application for review was held on 15 October 2019. Both Ms Kerr and Mr Savage attended the hearing by conference telephone and gave evidence on affirmation. A representative of the Child Support Registrar (the Registrar) did not attend the hearing. 

10. I had before me the statement and documents provided by the Department pursuant to subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975, received on 29 May 2019 and 7 October 2019 respectively and numbered 1–413. I also considered additional documents provided by Mr Savage (marked A1–A175) and Ms Kerr (marked B1–B21) as a result of written directions issued on 30 July 2019.

LEGISLATIVE FRAMEWORK AND ISSUES

1. The legislation relevant to this review is contained in the child support law, in particular the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act).

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula, which takes into account factors such as the number of children, the level of care provided and the income of each parent. Either the liable parent or the carer entitled to child support may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C 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 place of the Registrar, must be satisfied that a ground for departure exists and that it is just and equitable and otherwise proper to make a departure determination.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Act. 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 Act.

4. In the legislation, each ground for departure is prefaced by the words, “in the special circumstances of the case”. Therefore, when considering whether one (or more) grounds exists, the Tribunal must be satisfied that there are “special circumstances” in the case. The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92–279 stated 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.

5. Subsection 98C(3) of the Act provides that subsections 117(4) to (9) of the Act apply and the Tribunal must consider these when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

CONSIDERATION

A ground for departure

1. Ms Kerr asked for a departure from the administrative assessment on the basis that the assessment does not correctly reflect the parties’ respective income, property and financial resources (also known as “Reason 8A”).

2. Subparagraph 117(2)(c)(ia) of the Act provides that, in the special circumstances of the case, a ground for departure may be established if application of the legislative provisions relating to an administrative assessment results in an “unjust and inequitable determination of the level of financial support to be provided by the liable parent” due to the income, property and financial resources of either parent.

Mr Savage – income, property and financial resources

1. At the time Ms Kerr lodged her application on 28 June 2018 child support liability was $1,487 per annum, based on Mr Savage’s 2016/17 adjusted taxable income of $32,901. Mr Savage’s liability was about to be reduced to the minimum annual rate from 1 July 2018, based on his low income estimate of $5,214 for 2018/19.

2. Ms Kerr submitted that Mr Savage’s actual earnings are much higher. His income is about $1,500 per week [from]([Employer 2]) and he also has his own [Company 1] (folio 31). Mr Savage agreed in the hearing that he has his own company, [Company 1]), founded in 2017 (folio 94) with the help of relatives, who provided some initial start-up money. I note that Mr Savage’s father and brother are shareholders in the company.

3. Mr Savage said that he is a [Profession 1] and that he was working for [Employer 2] as a [Profession 1], but that contract ceased in late 2018. He sold his [vehicle] in early 2019. His company still exists, but it is inactive. Mr Savage said he now only works as a “[Occupation 2]” (e.g. for [various] companies). Mr Savage explained that he conducts the [Occupation 2] activities under a separate ABN in his own name.

4. Mr Savage submitted that he did not earn the income set by the Department and he provided various income tax returns, Business Activity Statements and bank account statements to support his contention.

   The 2017/18 financial year

   a)    Personal tax return

5. Mr Savage’s personal income tax return for the 2017/18 financial year (folio 191–196) indicates earnings from two sources: $16,186 from [Employer 1] (also known as [details deleted]) and net business income “[details deleted]” of $8,387. Mr Savage’s personal taxable income for 2017/18 was $24,142[1].

   [1] $16,186 ([Employer 1]) + $8,387 (Occupation 2) + $29 (interest) - $460 deductions = $24,142

6. Mr Savage uses a separate ABN “[Mr Savage] sole trader” 8174xxxx852 for his “[Occupation 2]” business. He reported gross income of $23,858 (folio 194) for this business and listed business expenses of $15,471. Quarterly Business Activity Statements (BAS) for this particular business (folios 226–229) however only show total sales of $15,745[2]. There is no explanation for this inconsistency and I am unable to reconcile the difference of $8,113 in apparent business income.

   [2] $3,018 (September 2017) + $5,069 (December 2017) + $3,956 (March 2018) + $3,702 (June 2018)

7. Expenses listed for the business in 2017/18 included $3,659 “contractor/commission expenses” and Mr Savage stated that this was his “salary”. Other expenses were $2,000 depreciation, $1,260 “rent”, $742 interest expenses, plus $7,810 motor vehicle expenses, repairs and other expenses.

   b)    Company tax return

8. As noted, Mr Savage also has another business ([Company 1]). It uses a separate ABN 9561xxxx166 and an ACN 617xxx166. The 2017/18 company tax return (folio A42–A46) reports an annual business income of $65,615 and business expenses of $62,631, resulting in a net profit of $2,984.

9. Quarterly BAS for the company (folio A58–A61) show total sales of $72,177[3], a difference of $6,562 to the income reported in the tax return. Mr Savage could not explain this difference but noted that his accountant was preparing his tax returns and he (Mr Savage) had “no idea” how the company income had been calculated.

   [3] $14,675 (September 2017) + $15,361 (December 2017) + $23,231 (March 2018) + $18,910 (June 2018)

10. Mr Savage’s bank account for 1 April 2018 to 30 June 2018 (the June 2018 quarter) shows “Salary  [Employer 2]” totalling $18,909.71 and I am satisfied that this is the company income as indicated in the BAS for the June 2018 quarter. Mr Savage confirmed that he was working as a [Profession 1] for [Employer 2] at the time.

11. Company expenses included $10,000 “contractor/commission expenses” (Mr Savage’s salary), plus $2,080 for rent, $4,095 interest expenses, $13,025 motor vehicle expenses, $16,153 depreciation and $17,278 repairs/maintenance and other expenses (insurance, road tolls, registration and so on).

12. Mr Savage said that he pays rent for a “secure” garage to look up the [vehicle] overnight, if it still contained [goods]. He noted that the rent was only a “small amount” $40 per week.

13. The company tax return lists [two vehicles], . Mr Savage noted that [Vehicle 1] is used for [Profession 1] and the [other] for his [Occupation 2] business.

    c)    Car loans

14. Mr Savage obtained [both vehicles] using finance. [Vehicle 1] was purchased on 13 April 2017 for a total price of $56,994.60 (including on road costs). Mr Savage entered into a finance agreement with the car dealer (folios 114–138) and I note that although the company ([Company 1]) is listed as “borrower”, the loan is guaranteed by Mr Savage personally. An amount of $42,713 was borrowed over five years with monthly repayments of $955.91 ($11,470.92 per year). Mr Savage stated on the loan application (folio 114) that his monthly net income was $5,000 or $60,000 net per year and that he has capacity to repay the loan.

15. The [other vehicle] was purchased a year later on 27 April 2018 for a total cost of $37,593.60. Mr Savage entered into another finance agreement with a different car dealer (folios129–143). Again, the company is listed as borrower, but Mr Savage personally guaranteed the loan. An amount of $25,850 was borrowed, plus $11,743.60 in interest charges over five years, with monthly repayments of $632.56 or $7,590.72 per annum (folio 142). Mr Savage stated on this loan application that his net monthly income was $6,500 or $78,000 net per year (folio 139).

16. Mr Savage told me that he needed to obtain loans for the vehicles and the income was mentioned by the car dealer, as being appropriate to obtain finance. They told him that they did not need verification of his income, they just “needed the number”. Mr Savage agreed to the income figures being used, but he submitted that they were incorrect and that he did not have this kind of income.

17. I note that both loan agreements are legal documents and Mr Savage declared with his signature that the “information and all supporting documentation given are true and correct” and that “no information has been withheld, undisclosed or falsified” (folio 118 and folio 143). Thus, I am persuaded that Mr Savage is willing to present and use incorrect information to achieve his objectives.

    d)    Conclusion

18. As noted, Mr Savage essentially has two businesses (using separate ABNs), the [Profession 1] business and the “[Occupation 2]” business. It appears that in 2017/18 income for the [Profession 1] business came mainly from [Employer 2].

19. It is unclear when the [Occupation 2] actually commenced. Mr Savage only bought the [other vehicle] in April 2018, but he may have used another vehicle before that date. I note that Mr Savage’s bank account statement for April 2018 to June 2018 (folios A63–A64) shows one “cash” deposit of $4,000 made into his account on 29 May 2018. Mr Savage explained that “cash” deposits represent his income from [Occupation 2] business. I do not have earlier bank account statements, but the June 2018 quarterly BAS for Mr Savage’s “sole trader” business (folio 229) lists sales of $3,702.

20. I have thus concluded that in 2017/18 Mr Savage operated the [Profession 1] business ([Company 1]), the [Occupation 2] business (Savage – sole trader) and also received an income from [Employer 1].

21. As discussed above, the “total sales” listed in the business BAS (for both businesses) and the actual income listed in the income tax returns do not match and Mr Savage provided no explanation for this inconsistency, other than to note that his accountant prepares his tax returns. I will use the business incomes listed in the tax returns as the basis for my calculations.

22. Mr Savage’s total business income in 2017/18 was $89,473[4]. In terms of business expenses listed for [Company 1] I will accept rent expenses of $2,080 (although I note that I do not have supporting documentation for such expense). I also accept interest ($4,095), motor vehicle ($13,025), repairs/maintenance ($2,685) and other expenses, such as registration, tolls, insurance etc ($14,593).

    [4] $65,615 ([Company 1]) + $23,858 ([Mr Savage])

23. I do not accept that business income should be reduced by contractor expenses ($10,000) and depreciation ($16,153) for child support purposes. Whilst these are available deductions for income tax purposes, Mr Savage noted that the “contractor expenses” are his “salary” from the business and it is clear that Mr Savage does not use a “capital replacement account” for example to replace the vehicles in the future. He uses finance/loan contracts. Thus “depreciation” does not represent an “actual payment” made by Mr Savage or the company.

24. Mr Savage suggested that the loan expenses for the [Vehicle 1] may be included in “depreciation”. In 2017/18 Mr Savage paid $11,470.92 in loan repayments for the [Vehicle 1], of that $2,856[5] were interest payments (folio 117).

    [5] $14,281.60 interest over the life of the loan (60 months) = $238 per month x12 = $2,856

25. From Mr Savage’s credit card statements for August, September and October 2018 (folios A67–A93) I have estimated that Mr Savage spends about $650 per month (about $7,800) on fuel, but I am unable to distinguish between fuel used for the [Profession 1] business and fuel used for the [Occupation 2] business.

26. In terms of the [Occupation 2] business expenses, I will also accept $742 interest expenses, $3,859 motor vehicle expenses and $3,951 repairs and other expenses.

27. Mr Savage took another loan for the [other vehicle] in late April 2018. His monthly commitment was $632.56 of which $196[6] was interest. Thus, for two months in 2017/18 Mr Savage’s loan expenses for this car  amounted to $1,265.

    [6] $11,743.60 interest over the life of the loan (60 months) = $196 per month

28. I am thus satisfied that [Company 1] business expenses for “interest” and “motor vehicle costs”, a total of $17,120 and “[Mr Savage]” business expenses for “interest” and “motor vehicle costs”, a total of $4,601 (combined total $21,721) adequately cover loan repayments and estimated fuel costs for both vehicles (a total of $20,536[7]) for 2017/18.

    [7] $11,471 [Vehicle 1] loan + $1,265 [other vehicle] loan + $7,800 estimated fuel cost

29. I do not accept the other business expenses claimed for the [Occupation 2] business, i.e. $3,659 contractor cost and $2,000 depreciation for the same reasons noted above. I also do not accept “rent expenses” of $1,260. Whilst I can understand that a [Vehicle 1] that still contains [goods] may need to be stored in a lock-up garage, I do not see the same need for a car used for [Occupation 2], particularly as the “depreciation worksheet” attached to [Company 1] tax return indicates the [other vehicle] is also partly used for private purposes (folio A46).

30. In summary, Mr Savage’s income from two businesses in 2017/18 was $89,473 and I have accepted total business expenses of $45,030 ($36,478 for [Company 1] and $8,552 for “[Mr Savage]”). Mr Savage’s income from his two businesses was therefore $44,443 in 2017/18. I will deduct a further $1,500, as Mr Savage was liable to pay tax on his business and personal income (folios A45 and 190) and I will “gross up”[8] the remaining amount of $42,943, which results in a gross annual payment of $52,644.

    [8] ato.gov.au/gross pay estimator

31. Mr Savage also received a gross income of $16,186 from [Employer 1] in 2017/18 and had $29 in interest payments (folio 192). I thus find that Mr Savage’s income and financial resources in 2017/18 amounted to $68,859.

    The 2018/19 financial year

32. Mr Savage’s financial position in the 2018/19 financial year is less clear, as I do not have a copy of his 2018/19 personal income tax return.

33. Mr Savage stated that he stopped working for  [Employer 1]as a [Profession 1] in late 2018 and sold the [Vehicle 1] soon after. He is now solely relying on the [Occupation 2] business for income. Mr Savage said that his company, [Company 1], was still registered, but no longer trading.

34. Mr Savage’s bank account statements show that the last payment from [Employer 2] was received on 28 November 2018 (folio A101) and the last “[Vehicle 1] loan debt” repayment was deducted on 20 February 2019 (folio A122). Since December 2018 there have been numerous “cash deposits” into Mr Savage’s bank account and he agreed that these cash deposits were his income from the [Occupation 2] business.

    a)    Company tax return

1. Mr Savage provided a profit/loss statement for [Company 1] for the period 1 July 2018 to 31 March 2019 prepared by his accountant (folio A35). I note the ABN and ACN noted on the statement belong to the company and not to Mr Savage’s [Occupation 2] business (“[Mr Savage]” ABN 8174xxxx852).

2. The profit/loss statement shows total income for the nine-month period of $69,261 and total expenses of $37,500, with a net profit of $31,761. Annualised these figures would result in total income of $92,348, total expenses of $50,000 and net profit of $42,348.

3. Mr Savage also provided a copy of the 2018/19 company tax return for [Company 1] (folios A47–A51). The tax return lists company income of $38,725, expenses totalling $37,516 and a net profit of $1,209. This is a considerable difference to the information provided in the profit/loss statement.

4. Mr Savage suggested that his accountant may have listed income for both the company and the [Occupation 2] business on the profit/loss statement and then separated those figures again for income tax purposes.

5. I note Mr Savage’s bank account statements for 1 July 2018 to 28 November 2018 (last income from [Employer 2] for the[Profession 1] business) show total income received for this business of $30,888.26 (folios A74–A101). The only other deposits into the bank account during that particular period are transfers from another (presumably Mr Savage’s) bank account (xxxxxx6154) of $11,200.

6. As noted, I do not have Mr Savage’s personal income tax return for 2018/19, so I am not able to say, whether or not business income was ultimately divided between [Company 1] and the [Occupation 2] business.

7. For the purposes of this review, I will accept the information provided in the company tax return, however, as for 2017/18, I do not accept certain business expenses claimed for taxation purposes as expenses for child support purposes. These are $10,649 “contractor” expenses (being Mr Savage’s salary) and $17,120 depreciation. Add these to the company profit of $1,209 results in income from the company of $28,978, which is the equivalent of a “grossed up” income of $36,978.

   b)    Personal tax return

8. Departmental records (folio 400) show that Mr Savage’s personal taxable income for 2018/19 was $23,353, although I do not have any further details about this.

9. I note previously that the profit/loss statement provided for 1 July 2018 to 31 March 2019 indicates total income of $69,261. Mr Savage suggested that this was for both businesses. Bank account statements show that from 1 April 2019 to 30 June 2019 Mr Savage received a further $13,819.75 from [Occupation 2] business (folio A160). If Mr Savage’s argument is correct, he would have received a total income of about $83,081 from both businesses in 2018/19.

10. The tax return for [Company 1] notes total income of $38,725 and this would mean that total income from the [Occupation 2] business amounted to $44,356 in 2018/19. As noted, Mr Savage’s taxable income is $23,353, thus he would have claimed a number of business expenses.

11. It appears reasonable to assume that income from Mr Savage’s [Occupation 2] business is accounted for in his personal tax return and, as in the previous financial year, it is probable that there are some business expenses, which I would not accept for child support purposes, e.g. depreciation and contractor expenses and rent expenses. If these particular expense categories are claimed in a similar proportion as in the previous financial year (a total amount of $6,919 out of a business income of $23,858 or about 29%), they would amount to about $12,863 (29% of $44,356). This would mean that Mr Savage’s personal income for 2018/19 could be as high as $36,216.

12. I will note here that Mr Savage told the Department on 30 June 2018, when he lodged his income estimate, that he was working for [Employer 1] four hours per week and earning about $100 per week, resulting in a 2018/19 income estimate of $5,214 (folio 42). Mr Savage’s bank statements show no income from [Employer 1] in that financial year, the last one having been received on 13 June 2018 (folio A65). It thus appears that Mr Savage was not entirely open with the Department when he lodged his income estimate for 2018/19.

    c)    Conclusion

13. Information for the 2018/19 financial year is less detailed than for the previous financial year, but I am persuaded and so find that Mr Savage’s income and financial resources amount to (at least) $60,331 (company income plus personal taxable income) in 2018/19.

14. As noted, there may be further business expenses claimed for [Occupation 2] business, which I would not accept for child support purposes (possibly as high as $12,863) and that would mean Mr Savage’s income and financial resources in 2018/19 could be as high as $73,194 ($60,331 + $12,863).

Mr Savage – earning capacity

1. Ms Kerr stated in her application for change of assessment that Mr Savage works in his businesses as well as on weekends for [Employer 1] (folio 32). She did not claim that Mr Savage had greater earning capacity than he exercised but submitted that he did not declare all of his income. I will thus not consider Mr Savage’s earning capacity further.

Ms Kerr – income, property and financial resources

1. Ms Kerr has been relying on Centrelink payments for the most part. She provided a Centrelink income statement (folio B12), which shows that she was granted parenting payment from 19 November 2016. She also has 100% care of her daughter, [Child 1], and is receiving family tax benefit payments for her.

2. Departmental records show that Ms Kerr’s 2016/17 taxable income was $15,821 and her 2017/18 income was $17,200 (folio 400).

3. Ms Kerr indicated on her Statement of Financial Circumstances (folio B3) that she has been working for “[a company]” as [an employee] on a casual basis for nearly a year, since about early June 2018.

4. Ms Kerr’s 2018/19 income tax return (folios B15–B17) indicates that her taxable income was $37,622, made up of $23,789 from her employment and $14,004 from Government pensions/allowances.

5. Payslips provided by Ms Kerr show that her fortnightly earnings can vary from $378.05 to $597.76 depending on the number of shifts (folios B19–B21).

6. Mr Savage submitted that Ms Kerr had been working “cash in hand” for a number of years (from October 2016 to August 2018) and that she would deposit this cash money into her mother’s bank account, which amounted to savings of $30,000.

7. Ms Kerr acknowledged in her Statement of Financial Circumstances that she has about $10,000 in a saving account (folio B5) and she also acknowledged that she occasionally gets financial assistance from her mother.

8. I note that Ms Kerr lodged her change of assessment application in June 2018 and that is the period of time for my consideration. Funds in another person’s bank account do not constitute conclusive evidence that those funds belong to Ms Kerr and neither do such funds constitute regular earnings for child support purposes.

9. Ms Kerr also has full-time care of [Child 1], thus her income has very little effect on the calculation of Mr Savage’s child support liability. For example, Mr Savage’s original child support liability was $1,487 per annum, based on his 2016/17 taxable income of $32,901 and Ms Kerr’s 2016/17 taxable income of $15,821, even if Ms Kerr’s income were to be increased by $10,000 (cash earnings) to $25,821 in that year, Mr Savage’s child support liability would remain the same ($1,487 per year).

10. As it stands however, I have no evidence that Ms Kerr has any other source of income and I am therefore satisfied that Ms Kerr’s income, property and financial resources are adequately represented by her annual income tax returns.

Ms Kerr – earning capacity

1. Ms Kerr has been relying on Centrelink payments for a number of years. She commenced casual employment in about mid-2018 and she also looks after her now four-year-old daughter. As such I do not consider that Ms Kerr has greater earning capacity than she currently exercises.

Conclusion – income, property, financial resources and earning capacity of both parties

1. When Ms Kerr lodged her departure application on 28 June 2018, the rate of child support was based on Mr Savage’s 2016/17 taxable income of $32,901 and Ms Kerr’s 2016/17 taxable income of $15,821, resulting in a child support liability of $1,487 per annum payable by Mr Savage to Ms Kerr.

2. Whilst I have found that Mr Savage did not have greater earning capacity, I have some concerns that the information provided in Mr Savage’s annual tax returns does not include all of Mr Savage’s financial resources from his two businesses ([Company 1] and [Mr Savage] – sole trader). I have examined the business information provided in some detail and I have concluded that Mr Savage’s taxable income as declared in his annual income tax returns is not a true reflection of his income, property and financial resources.

3. Mr Savage has an obligation to make full and frank disclosure of his financial affairs to assist me to come to the correct or preferable decision.[9]  The onus is on Mr Savage to present his financial affairs and records in a manner that is both transparent and readily understandable.[10]

   [9] Humphries and Berry [2008] FMCAfam 409

   [10] Morse and Potts [2010] FMCAfam 1305

4. I note that Mr Savage submitted all of the information I have requested, but he did not volunteer additional evidence, which may have provided a much clearer picture of his financial circumstances, such as his 2018/19 personal income tax return and bank statements from (at least) one other account (no. xxxxx6154). There is also some inconsistency in the financial information provided for which there was no explanation.

5. Based on the available evidence before me, I am satisfied that Mr Savage’s income and financial resources amounted to about $68,859 in 2017/18 and (at least) $60,331 in 2018/19 and I so find.

6. I have estimated that Mr Savage’s child support liability for [Child 1], if calculated on the basis of his financial resources of $68,859 for 2017/18 and Ms Kerr’s 2017/18 income of $17,200, would be $7,385 per year at the time Ms Kerr lodged her application at the end of the 2017/18 financial year. I find that the difference between this amount and the annual rate of child support ($1,487) determined in the administrative assessment is so great that it gives rise to special circumstances in this particular case. I am therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Savage’s income, property and financial resources.

7. Subparagraph 98C(1)(b)(i) of the Act is satisfied if “one, or more than one” of the grounds for departure are established. Having found one ground for departure established, I will now consider whether it is just and equitable to make a departure determination.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. To do so I must have regard to a number of factors set out in subsection 117(4) of the Act, such as the needs of [Child 1], the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.

Mr Savage

1. Mr Savage’s income, property and financial resources have been discussed in some detail above. I have found that at the time Ms Kerr lodged her application for a change of assessment (in the 2017/18 financial year) Mr Savage’s income, property and financial resources amounted to $68,859.

2. Mr Savage’s Statement of Financial Circumstances (folios A1–A12) lists a weekly income of $846 (or $43,992 per year) and expenses of $821 per week (excluding child support). Mr Savage indicates that he pays tax of $3,900 per year, but the financial information provided does not support this argument. Taxation for the company [Company 1] was $895.20 in 2017/18 (folio A45) and tax on his personal income tax return was $536.18 (folio 190), a total of $1,431.38. In 2018/19 Austral Transport[Company 1] was due for a tax credit of $615.53 (folio A50) and whilst I do not have Mr Savage’s personal income tax return for 2018/19 his declared taxable income ($23,353) was less than his 2017/18 taxable income of $24,142, thus I would expect a lower tax rate. Thus, Mr Savage’s taxation expenses would amount to about $1,400 per annum or ($27 per week).

3. Mr Savage also states that he spends $100 per week repaying a Centrelink and a taxation debt. Mr Savage initially suggested his Centrelink debt was $18,000, but later agreed that the debt was about $5,000 and he also has a tax debt of $5,000. It appears that Mr Savage repays his tax debt at a rate of $25 per week (for example folio A158). It appears that Mr Savage repays the Centrelink debt, via “[an organisation]” at a rate of $20 per fortnight or $10 per week (for example folio A173). Thus, his debt repayments amount to t $35 per week.

4. Mr Savage also listed expenses of $20 per week for holidays/entertainment and based on these deliberations I have estimated that Mr Savage’s expenses amount to about $688 per week. I have also concluded that Mr Savage’s income and financial resources are greater (at least $1,160 per week[11]), I therefore find that Mr Savage is able to meet all of his current expenses.

   [11] 2018/19 income of at least $60,331/52

Ms Kerr

1. Ms Kerr is reliant on Centrelink payments and casual employment. She indicated on her Statement of Financial Circumstances (folio A1–A9) that her average income from employment is about $315 per week. Ms Kerr also receives family assistance and parenting payment for [Child 1] and her total income (excluding child support from Mr Savage) is $811 per week.

2. Ms Kerr noted total expenses of $1,268 per week, including $60 for entertainment, gifts and books. Ms Kerr has no credit cards or loans to repay and I have calculated that Ms Kerr’s total expenses for her and [Child 1], amount to $1,208 per week (including tax on her salary, but excluding $60 per week for gifts, holidays and entertainment). On this basis Ms Kerr has a shortfall of about $397 per week.

3. Ms Kerr noted that she is struggling to meet her expenses and would like Mr Savage to contribute adequately for his daughter.

4. Mr Savage submitted that Ms Kerr is subletting part of her home and thus does not have to pay the full amount of rent and utility bills each week. Ms Kerr’s rent, electricity, water and gas bills amount to $395 per week according to her Statement of Financial Circumstances. Even if I accept Mr Savage’s proposition that another person pays half of these bills (about $197), Ms Kerr would still have a weekly shortfall of about $100. I also note that even if Ms Kerr is able to meet all of her financial commitments, this does not absolve Mr Savage from paying child support for his daughter.

[Child 1]

1. Ms Kerr indicated that general expenses for [Child 1] include $68 for education expenses. She noted that she spends an additional $230 per week on food, clothing, medical and other activities for [Child 1] (excluding amounts for books/entertainment). Thus, her total expenditure for [Child 1] is $298 per week or $15,496 per year. Ms Kerr did not list any other out of the ordinary expenses for [Child 1].

2. [Child 1] is now four years old and she has no income, property or financial resources relevant to my determination.

Otherwise proper  

1. The requirement to consider whether it is “otherwise proper” to depart from the administrative assessment 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 or benefits (subsection 117(5) of the Act).

2. It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children.

3. Ms Kerr is in receipt of family assistance and parenting payments from Centrelink, which are affected by maintenance payments such as child support. Any increase or decrease to child support payable would result in an appropriate increase or decrease in these payments. Such a result would be otherwise proper.

Conclusion

1. Section 98S of the Act describes the determinations that the Registrar, and the Tribunal standing in the shoes of the Registrar, may make if it decides to depart from the administrative assessment. It is open to the Tribunal to set a rate of child support payable or set some of the variables used in the administrative assessment formula (for example, vary one or both parents’ adjusted taxable income).

100.When Ms Kerr lodged her departure application on 28 June 2018, the rate of child support was based on Mr Savage’s 2016/17 taxable income of $3,901 and Ms Kerr’s 2016/17 taxable income of $15,821, resulting in a child support liability of $1,487 per annum payable by Mr Savage to Ms Kerr.

101.Mr Savage lodged an income estimate on 1 July 2018, which reduced his child support liability to the minimum annual rate. He has been paying $20 per week since August 2018 and $24 per week (or $1,248 per annum) since September 2018 (folio 383) and he submits that is all he can afford to pay, given his low taxable income. I note Mr Savage’s outstanding child support arrears amount to $13,959.04 as at 7 October 2019 (folio 411).

102.I have concluded that the evidence Mr Savage provided about his financial circumstances does not appear to support his contentions. He appears to have access to additional financial resources from his businesses that are not reflected in his personal income tax returns.

103.I have found that Mr Savage’s income and financial resources amounted to $68,859 in 2017/18 and, at least, $60,331 in 2018/19, but could be as high as $73,194, given the lack of information about his personal income tax return.

104.I note the objections officer set Mr Savage’s adjusted taxable income at $107,000, essentially this is the “grossed-up” income Mr Savage declared on his car loan application in April 2018. Mr Savage admitted that this was a figure suggested by the car dealer, which did not correspond to the truth.

105.Evidence before me indicates that Mr Savage’s income is higher, but probably not as high as found by the objection officer. I have thus decided to reduce the income amount to $70,000 per annum, as I believe that this is a fairer reflection of Mr Savage’s income and financial resources from his business activities. I have chosen a “middle ground” between his 2017/18 and (higher) 2018/19 financial resources.

106.I have estimated that this would result in a child support liability of about $7,400 per annum or about $142 per week, although the actual amounts will have to be calculated by the Department. My decision will significantly reduce the outstanding child support arrears for Mr Savage, but also means that he will contribute about half of the costs for [Child 1], indicated by Ms Kerr[12]. I am satisfied that Mr Savage has the capacity to pay such an amount, even on the (much lower) income of $846 per week indicated on his Statement of Financial Circumstances.

107.I note that Mr Savage stated in the hearing that he does not communicate well with the Department and “does not tell them everything”, as he does not believe that the Department can make “the right decisions”. As mentioned before, the evidence he provided for the 2017 change of assessment application and for the income estimate lodged in 2018 did not give an accurate picture of his income and financial resources at the time. I am therefore not confident that Mr Savage will accurately inform the Department of any changes in his financial circumstances in the future.

108.I have therefore decided to commence my decision from the date of Ms Kerr’s application (28 June 2018) and end my decision five years later on 30 June 2023. This will provide some certainty for Ms Kerr.

109.I have reached a different conclusion to that of the objections officer and I therefore set aside their decision.

[12] These costs are about $15,496 per year or $298 per week as stated in Ms Kerr’s Statement of Financial Circumstances.

DECISION

The decision under review is set aside and a decision substituted that Mr Savage’s adjusted taxable income is set at $70,000 per annum from 28 June 2018 to 30 June 2023.