Schultz and Schultz (Child support)

[2019] AATA 5207

Schultz and Schultz (Child support) [2019] AATA 5207 (17 September 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC016040

APPLICANT:  Mr  Schultz

OTHER PARTIES:  Ms Schultz

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  17 September 2019

DECISION:

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

• from 5 September 2018 to 31 December 2023, Mr Schultz’s adjusted taxable income is varied to $224,150 per annum;

• from 5 September 2018 to 16 September 2019, Mr Schultz’s rate of child support payable is decreased by $25,000 per annum; and

• from 17 September 2019 to 30 April 2022, Mr Schultz’s rate of child support payable is increased by $2,517 per annum on account of the costs associated with a child’s special needs.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from businesses - 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 Schultz and Ms Schultz are the parents of [Child 1] who was born in 2004, [a child] who was born in 2005, [another child] who was born in 2007, and [another child] who was born in 2010. A child support case was registered with the Department of Human Services – Child Support (“the CSA”) in 2012.

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. A change in care occurred on 4 August 2018, and from that date the administrative assessment was based on Mr Schultz’s  0% care and Ms Schultz’s 100% care of the four children, Mr Schultz’s provisional income of $14,562 and Ms Schultz’s provisional income of $19,499 (because neither parent had lodged their tax return for the relevant year of income). Mr Schultz was required to pay what is called a fixed annual rate of child support, which was $4,248 per annum: see generally 2.4.11 of the Child Support Guide.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Schultz lodged a departure application on 5 September 2018. An original decision maker granted her application and made a departure decision. Mr Schultz objected to that decision. An objections officer allowed his objection and varied his adjusted taxable income to $224,150 per annum and Ms Schultz’s adjusted taxable income to $42,899 per annum from 5 September 2018 to 30 November 2020. Mr Schultz applied to the Tribunal for further review. I conducted a directions hearing on 2 August 2019 and a full hearing on 17 September 2019. Mr Schultz and Ms Schultz attended the full hearing in person. Mr Schultz was represented by [Mr A], solicitor, of [Law Firm 1].

4. 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. Mr Schultz is involved in a number of businesses via his involvement in a number of companies and trusts. The objections officer’s Reasons for Decision included the following:

   In the absence of up-to-date company and trust financial statements and a detailed explanation from Mr Schultz about his business operations, I find it would be difficult to calculate his income, property and financial resources based on the performances of his businesses. Instead, for the purposes of this decision, I will calculate Mr Schultz’s income, property and financial resources based on the deposits he is receiving into his bank accounts.

3. The objections officer concluded that Mr Schultz’s income and financial resources were fairly reflected for child support purposes in an adjusted taxable income of $224,150 per annum. Prior to the directions hearing, both parents were provided with copies of the primary documentation upon which the objections officer’s decision was based. During the directions hearing, Ms Schultz stated that she agreed with the objections officer’s conclusion concerning Mr Schultz’s income and financial resources. Mr Schultz sought further time in which to consult with his solicitors on the issue. I issued Directions which included the following:

   If Mr Schultz disputes the objections officer’s finding that his income and financial resources are fairly reflected for child support purposes in an adjusted taxable income of $224,150 per annum, he is to provide the following evidence …

4. Mr Schultz’s solicitors subsequently provided written submissions which included the following:

   For the purposes of this review, the Father does not challenge the finding in relation to his available financial resources.

5. Based on the evidence before the Tribunal and the parents’ submissions, I agree with the objections officer’s conclusion concerning Mr Schultz’s income and financial resources for child support purposes. When Ms Schultz lodged her departure application, the administrative assessment was based, in part, on Mr Schultz’s provisional income of $14,562 per annum. It transpired that his 2017-18 adjusted taxable income was $27,231. The difference between those incomes and the extent of Mr Schultz’s income and financial resources, as fairly reflected in an adjusted taxable income of $224,150 per annum, constitutes special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. 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.

2. On 2 June 2015 the Federal Circuit Court made consent orders (“the Court Orders”) which included the following:

   FINAL PROPERTY ORDERS

   Spousal Maintenance

   17.Subject to Order 18 below, commencing from on or before Wednesday 3rd June, 2015 the Husband shall pay to the Wife on account of s spousal maintenance [sic] the sum of $450.00 per week.

   18. That the amount of spousal maintenance payable by the Husband per Order 17 above shall reduce by $112.50 per week as each of the children attains the age of 18 years.

   Property

   …

   NOTATION

   A.The parties undertake to do all things necessary to register a nil Child Support Agreement within 21 days of these Orders.

3. In the proceedings that culminated in the Court Orders, Mr Schultz was represented by [Mr B] of counsel and [Mr C], solicitor, of [Law Firm 1], and Ms Schultz was represented by [Mr D], [Occupation 1], of [a law firm]. [Mr C] gave evidence during the full hearing before me. He stated that he sent a proposed binding child support agreement for a nil rate of child support payable to [Mr D] to be signed by Ms Schultz, and he did not receive a response from [Mr D]. The parents did not enter into a binding child support agreement.

4. On 8 August 2018, Ms Schultz contacted the CSA and it noted:

   Why is Ms Schultz applying for Child Support Collection?

   * Ms Schultz has said that the parents have had a spousal maintenance agreement however no child support agreement and just through [sic] that the spousal maintenance was child support. She did not realize that she should be getting child support on top and therefore the other parent has never paid her child support.

5. At all relevant times, Ms Schultz has been in receipt of newstart allowance. She said she had not been in paid employment since before the parents separated. The objections officer varied Ms Schultz’s adjusted taxable income to $42,899 per annum on the basis that her relevant income for child support purposes consisted of her income support payments and her Court-ordered spousal maintenance.

6. Mr Schultz’s primary submission was that the Court-ordered spousal maintenance was in fact child support, and it was therefore unfair to require him to pay both the Court-ordered spousal maintenance and child support payable pursuant to the Act. Ms Schultz maintained that the Court-ordered spousal maintenance was in fact spousal maintenance.

7. [Mr A] provided various authorities concerning the correct construction of court orders. I note, in particular, Watanabe & Watanabe [2009] FMCAfam 671, which in turn refers to Constructing Undertakings and Court Orders (2008) 82 ALJ 82. [Mr C] provided a written statement with annexures concerning the negotiations that led to the Court Orders. Put simply, Ms Schultz initially proposed that Mr Schultz pay $480 per week in child support and $120 per week in spousal maintenance, and Mr Schultz initially proposed that he pay $400 per week in child support (and no spousal maintenance).

8. [Mr C] also stated:

   I recall both [Mr B] and [Mr D] explaining to [the Court] the reason for the notation at the end of the orders was that given the Court was unable to make a child support order in the FCC Proceedings the spousal maintenance order, coupled with the notation regarding “nil” child support, gave the effect that $450 per week would be the total payment payable by [Mr Schultz] to [Ms Schultz] be it spousal maintenance or child support.

9. This case raises a number of potentially difficult legal issues. However, at the end of the hearing, both parents submitted that if Mr Schultz’s adjusted taxable income were varied to $224,150 per annum, and the rate of child support payable were varied in certain ways, which are discussed below, then it would be just and equitable to credit certain payments that Mr Schultz made to Ms Schultz pursuant to the Court Order against his child support liability. I agree with the parents’ submissions on that issue.

10. Both parents were invited to make submissions as to when any new departure decision should take effect. Neither parent did so. Ms Schultz lodged her departure application on 5 September 2018. That is when she formally disputed the administrative assessment. It is appropriate to make a new departure decision with effect from 5 September 2018.

11. For the reasons stated above, Mr Schultz’s adjusted taxable income will be varied to $224,150 per annum. Ms Schultz’s income is fairly reflected for child support purposes in her adjusted taxable incomes as assessed by the Australian Taxation Office from time to time.

12. Mr Schultz provided the CSA with a list of payments he said he deposited into Ms Schultz’s bank account up to and including 3 December 2018: page 384 of the hearing papers. Broadly speaking, during the period from 5 September 2018 to 3 December 2018, he claimed to have made weekly transfers of $572.73. I referred Ms Schultz to that page. She replied that she had not brought her hearing papers to the hearing. She confirmed at the directions hearing that she had received the hearing papers. She disputed Mr Schultz’s evidence concerning the payments. She said Mr Schultz has always made irregular payments that, on average, equate to $450 per week. She did not provide any documentary evidence in support of that statement, notwithstanding the opportunity to do so prior to the hearing. She later conceded that Mr Schultz’s evidence might be correct. On balance, I accept Mr Schultz’s evidence on that issue. There is no dispute that since 3 December 2018, or thereabouts, he has been paying, on average, $450 per week. The payments from 5 September 2018 to 16 September 2019 total (12 x $572.73) + (1 x $500.00) + (41 x $450.00) = $25,822. Mr Schultz made other payments to Ms Schultz, but he stressed that they were gifts.

13. The children attend [a school]. There is no dispute that Mr Schultz paid the school fees up to and including Term 1 of 2019. There is no dispute that the school has been issuing separate invoices to each parent concerning the school fees from Term 2 of 2019. Mr Schultz is paying half the school fees. Ms Schultz receives a bursary in respect of her half of the school fees. I sought to confirm my understanding of the invoice that she provided. She appeared reluctant to engage with that document, but confirmed that the bursary reduces her portion of the school fees to $957.50 per term. She submitted that there should be no adjustment to the rate of child support payable on the basis of her contribution to the children’s school fees.

14. [Child 1] commenced a course of orthodontic treatment in December 2018. There is no dispute that she requires that treatment. Ms Schultz provided a statement of past and future payments pursuant to a payment plan which will end in April 2022. The treatment will cost $1,000 + 28 x $200 = $6,600. Ms Schultz stated, and Mr Schultz did not dispute, that she is not entitled to a rebate from her private health insurer in respect of those costs.

15. [Child 1] suffers from [a medical condition]. There is no dispute that she requires treatment, but Ms Schultz organises [treatment], and Mr Schultz does not agree that she requires that treatment. I directed Ms Schultz to provide evidence establishing whether [Child 1] requires [treatment], and evidence establishing the costs she incurs in respect of that treatment, by 30 August 2019, and I also referred her to 2.6.8 of the Child Support Guide — “The Special Needs of the Child”. On the afternoon before the day of the hearing, Ms Schultz sent an email to the Tribunal registry in which she stated that a [medical professional] had “refused to reply with any correspondence on the matter.” She also provided a summary of the [invoices] and her payments. At the hearing she explained that she did not provide the documentation to the Tribunal (and in turn, Mr Schultz) earlier because she is disorganised. In response to my questions, she said [Child 1] receives [treatment] at least weekly. I noted that the summary she provided suggested that she received treatment on 1 February 2019, and did not receive treatment again until 5 June 2019. Ms Schultz agreed with that observation, but maintained that [Child 1] received treatment at least weekly. She then said the longest break in treatment during the period from February to June 2019 was three to four weeks (thereby contradicting her earlier statements that [Child 1] receives treatment at least weekly). The documentary evidence that Ms Schultz has provided suggests that her out-of-pocket costs in respect of [Child 1’s] irregular [treatment] is approximately $675 per annum. As noted earlier, she has not provided medical evidence to establish that [Child 1] needs the treatment. Further, the ordinary administrative assessment of child support payable is based on the ordinary costs of the child, which includes a component for ordinary medical expenses. I do not consider it appropriate to vary the rate of child support payable on account of Ms Schultz’s out-of-pocket costs in respect of [Child 1’s]  [treatment].

16. Both parents were invited to make submissions as to the duration of any new departure decision. Ms Schultz submitted, in effect, that it would be appropriate to make a departure decision of longer duration given the potential for Mr Schultz to provide unreliable evidence concerning his income and financial resources. [Mr A] submitted it would be appropriate to make a departure decision of shorter duration because Mr Schultz’s financial resources might change, and the CSA is well equipped to undertake extensive investigations into Mr Schultz’s financial resources if need be. I agree that the CSA has that capacity, but it does not automatically follow that the preferable course is to require it to expend public money undertaking such investigations, and to require Ms Schultz to participate in more departure applications than otherwise necessary. Mr Schultz’s 2016-17 and 2017-18 adjusted taxable incomes were $14,235 and $27,231 respectively, and it is likely that Ms Schultz will lodge another departure application shortly before my departure decision ends, because it is likely that Mr Schultz’s adjusted taxable incomes as assessed by the Australian Taxation Office will continue to not fully reflect the extent of his income and financial resources for child support purposes. In the current proceedings, he did not fully and frankly disclose the extent of the financial resources to the CSA or the Tribunal. Of particular note are his answers to my questions during the directions hearing concerning [a company]. He stated that he is the sole director and a shareholder of that company, and it is actively trading, but he could not indicate how it earns its revenue. To ensure that there had not been a misunderstanding, I questioned Mr Schultz further about how the company earns its revenue, and he maintained that he was unable to indicate in any way how it earns its revenue. I do not accept his inherently improbable evidence on that issue. More generally, the history of the matter suggests that Mr Schultz will continue to fail to fully and frankly disclose the extent of his income and financial resources. Making a departure decision of longer duration will not prevent Mr Schultz from lodging another departure application while my departure decision is in force if there is a significant change in circumstances that makes my decision unfair, but it is appropriate to effectively place the onus on Mr Schultz to establish that my decision has become unfair. It is appropriate to vary his adjusted taxable income until 31 December 2023.

17. The period from 5 September 2018 to 16 September 2019 is 377 days. To recognise Mr Schultz’s payments to Ms Schultz during that period pursuant to the Court Order, his rate of child support payable will be decreased by $25,822 / 377 x 365 = $25,000 per annum. At the hearing, both parents stated that Mr Schultz currently owes more than $30,000 in child support arrears. The proposed decision will not place Mr Schultz in credit.

18. In light of the parents’ respective incomes and financial resources, and Ms Schultz’s submission that it would be appropriate to require her to continue to contribute approximately $957.50 x 4 = $3,830 per annum towards the children’s school fees, I consider it appropriate for Mr Schultz to effectively pay for [Child 1’s] orthodontic treatment. For simplicity, that cost will be apportioned over the 957 days from 17 September 2019 to 30 April 2022. $6,600 / 957 x 365 = $2,517 per annum. Ms Schultz receives family tax benefit, and it is appropriate to note that that increase is in respect of the costs associated with the special needs of a child: see the definitions of “maintenance income” and “disability expenses maintenance” in sections 3 and 19 of the A New Tax System (Family Assistance) Act 1999.

19. Ms Schultz lives in rented accommodation. Her household consists of herself and the four children. She has minimal savings. She is not in paid employment and receives newstart allowance. Apart from the matters mentioned above, her household expenses, and the children’s expenses, are unremarkable. Mr Schultz lives in rented accommodation. He said the household consists of himself and the children when they visit. His statement of household expenses suggests that he lives relatively frugally. There is no dispute that Ms Schultz requires significant financial assistance from Mr Schultz to help her meet the children’s costs, and Mr Schultz has the capacity to provide significant financial assistance. The proposed decision will require him to pay a current rate of child support of approximately $50,700 per annum, plus the outstanding arrears. He has the capacity to do so, and it is appropriate that he do so. The proposed decision 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.

2. Ms Schultz receives family tax benefit in respect of the children. Increasing the child support payable by Mr Schultz vis-à-vis the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

Other observations

1. At the end of the hearing, the parents were largely in agreement as to the departure decision that should be made. However, it had taken them approximately a year to reach that point.

2. At the end of the hearing, it appeared that Mr Schultz intended to continue making payments directly to Ms Schultz and have the payments credited as non-agency payments pursuant to section 71 of the Child Support (Registration and Collection) Act 1988. Doing so will require both parents to be in regular contact with the CSA, and will run the risk of a dispute arising in respect of each individual payment. Given the history of the matter, Mr Schultz may wish to make his child support payments directly to the CSA, but that is a matter for him.

3. While Orders 17 and 18 of the Court Orders and Notation A to the Court Orders remain in force, they will remain a potential source of further dispute between the parents. At the end of the hearing, it appeared that both parents were amenable to the idea of jointing applying to the Court to have those Orders and that Notation revoked, but that is a matter for them.

DECISION

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

• from 5 September 2018 to 31 December 2023, Mr Schultz’s adjusted taxable income is varied to $224,150 per annum;

• from 5 September 2018 to 16 September 2019, Mr Schultz’s rate of child support payable is decreased by $25,000 per annum; and

• from 17 September 2019 to 30 April 2022, Mr Schultz’s rate of child support payable is increased by $2,517 per annum on account of the costs associated with a child’s special needs.