Seedsman and Keysor (Child support)

[2021] AATA 694

Seedsman and Keysor (Child support) [2021] AATA 694 (28 January 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC019692

APPLICANT:  Mr Seedsman

OTHER PARTIES:  Child Support Registrar

Ms Keysor

TRIBUNAL:Member K Dordevic

DECISION DATE:  28 January 2021

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period:

·     1 April 2019 to 31 December 2025 Mr Seedsman’s annual rate of child support is varied to $13,000; and

·     Mr Seedsman’s annual rate of child support is increased by $566 during the period 1 January 2020 to 31 December 2020.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – benefits derived from business – 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 omitted 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. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the 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.

2. This case was registered with the Department of Human Services – Child Support (now Services Australia) on 10 May 2010 and has been collectable since 26 August 2010. The parties are the parents of one child, who is recorded as being in the mother’s 100% care.

3. On 22 March 2016 a senior case officer determined that for the period 1 January 2016 to 31 March 2019 the father’s adjusted taxable income was varied to $72,412. The father’s objection to that decision was allowed on 17 June 2016, whereby his adjusted taxable income was varied to $121,120 for the period 1 January 2016 to 31 March 2019.

4. The mother lodged a change of assessment application on 3 April 2019. On 19 July 2019 a senior case officer determined that for the period 1 April 2019 to 31 March 2023 the father’s adjusted taxable income is varied to $208,731.

5. The father sought a review of that decision on 23 December 2019. An application for an extension of time in which to lodge his objection was refused by Services Australia.  On 3 March 2020 the father requested a review of that decision with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). His extension of time application was granted on 15 April 2020. On 16 July 2020 an objections officer partly allowed the objection, determining the father’s adjusted taxable income is varied to $124,697.

6. On 18 August 2020 the father sought further review with the tribunal. A directions hearing was held on 30 November 2020 and directions were issued, requiring compliance by 8 January 2021.

7. The tribunal heard the matter on 28 January 2021. The mother and father appeared by conference telephone. The father was represented by [Solicitor A]. The Child Support Registrar was not represented at the hearing. The tribunal has considered the sworn evidence of the mother and father. The tribunal also considered the documentation provided by Child Support (folios 1–371), the father (folios A1–A151) and the mother (folios B1–B37).

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

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

   (ii)that 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 …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And if so,

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act provide grounds for departure if the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either party’s income, property, financial resources and earning capacity.

2. At the time that the mother lodged the departure application under review, the father was assessed to pay an annual rate of child support of $2,177 on the basis of the parties’ 2017 adjusted taxable incomes: $37,341 (the father) and $21,424 (the mother).

3. The mother asserts that the father’s adjusted taxable income does not accurately reflect his capacity to support the child. In particular, she asserts that the father holds interests in [Business 1] and [Business 2] that provide him with undeclared financial resources.

4. The tribunal makes the following findings. The father was co-director of [Business 1] with his brother and ceased to be an office holder on 6 March 2012. The father was the sole director and shareholder of [Business 2], registered in 2008. The father was the sole director until 28 February 2012, when he resigned from the position. He was again appointed director on 9 May 2012 and ceased his directorship on 21 June 2016. His elder son [Son A] (aged 18 years at the time and enrolled as a full-time student) became the director. The father transferred all his shares to his elder son on the same day for no consideration.

5. It was submitted that the father’s decision to resign his directorship and transfer his shares to his elder son was a family decision, made after a deterioration in his mental health and increasing reliance on alcohol to manage his insomnia. There were concerns that the father may have not been able to meet his legal obligations as a director. The tribunal was of the view that the father was unable to satisfactorily account for the reason why his son could not manage the company and he remain the sole shareholder: “I just said to give it to him”. Apparently the cost of employing a manager would have been prohibitive. As to the reason his elder son was appointed as director and manager, at a time when he was also studying full-time, the father explained that the son had worked in the business from a young age and would attend when his studies permitted. The father stressed that his son was studying [a course] at university. The tribunal notes that the elder son completed his studies and now works full-time in the business.

6. The father stated that from 2015 he was unable to perform his work tasks. He saw his general practitioner, who provided him with counselling and also prescribed sedatives and blood pressure medications. He understands that this general practitioner is still practising, but he has not consulted with him for at least two years. He was amenable to approaching this practitioner to provide medical evidence from this time; he had not considered this necessary prior to hearing. The tribunal notes that the father was directed to provide medical reports or other documentation that impacted on his capacity to earn income from June 2016.

7. There is in evidence a letter from [Dr A], general practitioner, dated 14 January 2021. [Dr A] stated that he has known the father for two years. The father consulted with him on 30 April 2020, advising that he suffered from insomnia. At this consultation [Dr A] observed that the father “appeared depressed” and “distraught”.  The father first raised his mental health on 5 November 2020, stating that he has felt depressed and experienced other symptoms for some years and requested a mental health referral. He was referred to counselling with [Psychologist A], registered psychologist. Pharmaceutical intervention was not deemed appropriate.

8. [Psychologist A] authored a report dated 5 January 2021, prepared following sessions on 19 and 26 November and 4 January 2021. The father was diagnosed with adjustment disorder with associated symptoms of depression and anxiety triggered by stress. It was noted that the father had responded positively to intervention, testing indicating that there was a marked decrease in his depression, anxiety and stress symptoms to moderate levels. On the basis of the history provided by the father [Psychologist A] determined that there are strong indications that his symptoms of depression and anxiety caused a severe disruption to his ability to work from June 2016. [Psychologist A] concluded that the father is gradually recovering and is capable of only working up to two days per week as an advisor to [Business 2]. [Psychologist A] expects that, should the father continue to respond positively to interventions, normal work duties may be resumed gradually.  

18.In the tribunal’s view, [Psychologist A’s] report is problematic. The report was created at the father’s request for the purposes of demonstrating his limited earning capacity before this tribunal. [Psychologist A’s] report does not merely report his assessment of the father’s mental health, but also borders on advocating his position regarding his earning capacity. He also stated that the father developed his depression as a result of “false allegations and undue demands imposed” by the mother, again solely based on the father’s testimony. [Psychologist A] makes a finding regarding the father’s capacity to work from June 2016, despite only having three sessions of assessment and therapy with the father, the first of which occurred on 19 November 2020. It is apparent that his conclusion is solely based on the father’s testimony. The tribunal gives little weight to [Psychologist A’s] statements regarding the father’s mental health from June 2016 to October 2020.

19.The tribunal carefully considered the senior case officer decisions dated 22 March 2016 and 19 June 2017 and the objection decision dated 17 June 2016. There is no indication in any of these decisions that the father asserted that his health necessitated a change to his work arrangements or to the [Business 2’s] company structure. In fact, the objection decision of June 2016 refers to the father’s submission that “he is very busy working in the business”.  The 2017 decision notes that the father advised that his wife was in charge of [Business 2] and that his nominated representative advised Child Support on 2 March 2017 that the decision to change the company structure and transfer ownership was “because he had too many debts and the more he earned, the more he paid”. 

20.Given the tribunal’s assessment of [Psychologist A’s] evidence, and noting the absence of contemporaneous medical reports and conflicting statements made by the father since June 2016, the tribunal is not persuaded that the father’s mental health condition made it necessary for him to resign his directorship or transfer ownership of [Business 2]. The tribunal concludes that the arrangements put in place were a sham, enacted with the purposes of affecting the administrative assessment.

21.The father’s 2019 and 2020 adjusted taxable incomes were $29,307 and $29,433 respectively. The payslips in evidence indicate that the father is currently in receipt of jobkeeper payment and he receives these payments in cash. Examination of the father’s bank accounts suggest that he has access to additional financial resources not reflected in his taxable income and that what income is available to him is primarily for discretionary spending only. There is no evidence in any of his accounts that he meets any utilities, mortgage repayments or other household costs. The father did not dispute the tribunal’s characterisation of significant discretionary spending evidence in his personal accounts, including regular attendance at local clubs and hotels.

22.The father was unable to provide much insight into deposits made into his bank statements. By way of example, he could not account for a deposit of $600 made on 18 November 2019 with the descriptor “[Name] Rent Pmt” or $600 deposited on 21 December 2019 with the descriptor “[Name] Fund Tfr”. He confirmed that life insurance policy payments were historically paid on his behalf by [Business 2], but could not confirm whether he still holds the policy or the regular payments from the [Business 2] account indicating the ongoing payments related to his or his wife’s policy. He could not comment on payments made from the [Business 2] account dated 18 November 2019 and 13 January 2020 with the descriptor “[Applicant] Personal Tax”. He was adamant that the credit card held in his name was actually a company credit card, suggesting that it was an oversight that this was not transferred to the company name. This, he suggested, would satisfactorily explain with [Business 2] transferred $15,500 to his credit card between 18 November 2019 and 9 January 2020. The father also stressed that child support payments made directly to Child Support from [Business 2’s] accounts were taken from his wage in the relevant period. There are no payslips in evidence to corroborate the father’s claim on this point. The father is also the account holder of a [Bank 1] account #[number] into which regular payments were made entitled “[Applicant name] Foxtel pymnt”, as well as an online deposit entitled “[Son A] wages” and another cash deposit. At hearing the father stated that this was a company account and he cannot account for why it is in his name.

23.It is difficult to ascertain with certainty the income and financial resources available to the father. The most recent [Business 2] company tax return in evidence relates to the 2019 financial year. It indicates that it had total income of $549,482 and expenses of $549,407 and a net profit of $75. Payments to associated persons of $54,100 are noted. In the absence of documentary evidence to the contrary, and given the unexplained deposits into the father’s accounts outlined above, the tribunal is satisfied that the payment to associated persons was a financial resource available to him. The tribunal is also satisfied that the depreciation expenses of $42,812 was not retained or used for equipment replacement. There is a claimed rental expense of $23,503; given the business is operated out of the father’s home, is likely to represent a personal benefit available to him. It is also probable that the father’s personal motor vehicle, utility and telephone expenses are met by the business. This would indicate that in the 2019 financial year the father had income and financial resources conservatively estimated to be in the vicinity of $149,797 (2019 adjusted taxable income $29,307 + depreciation $42,812 + rental expense $23,503 + payment to associated persons $54,100 + net profit $75).

1. At the time the mother lodged her departure application the father was liable to pay $2,177 in child support per annum. Application of income and financial resources of $149,797 to the administrative assessment would result in an increase of his child support liability to $17,793 per annum. As the father’s income and financial resources are not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The tribunal therefore concludes that the ground provided for in subparagraph 117(2)(c)(ia) of the Act 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 child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. In her Statement of Financial Circumstances dated 30 August 2020 the mother declares that she is not in receipt of any income or salary. At hearing the mother declared that she was in receipt of carer allowance in respect of the care she provides her mother. She declares savings of $4.68 and a motor vehicle valued at $4,000. She reports personal loans totalling $1,300. Her personal expenditure is nil per week and household expenses are $1,265. About $310 of these expenses relate to her necessary costs in caring for the child. She reports that she is generally in good health, notwithstanding the fact that she recently consulted a psychologist due to her mental health. In the tribunal’s view the mother was unable to satisfactorily account at hearing for her decision not to engage in paid work, apparently on the basis of her caring responsibilities towards her mother and child. Given the child’s age, the tribunal is not persuaded that her caring responsibilities prohibit her from engaging in paid work. The tribunal is of the view that the mother has an unexercised earning capacity given the age of the child. However, given her limited workforce experience and absence from the workforce for many years any departure from the assessment on this basis would have a limited impact on the administrative assessment.

3. The child attends public school and has no out of the ordinary expenses, with the exception of his medical needs. The tribunal accepts the medical evidence that the child suffers from asthma and requires medications to manage this condition. However, the tribunal is not persuaded that the child’s Ventolin costs render the assessment unfair. The child is also required to attend speech therapy. There is in evidence a speech pathology report following assessments dated 9 and 17 March 2020. [A named] speech pathologist determined that the child has moderate expressive and receptive language difficulties. It was recommended that he commence individual therapy sessions. The mother was unable to provide a coherent account of what the child’s ongoing speech therapy needs or his current eligibility for care plans, though the tribunal accepts that her impecunious circumstances prevent the child attending regularly. It is noted that the father stated that he would contribute 50% to this cost on an ongoing basis if provided with a speech therapy invoice.

4. The speech therapy invoices in evidence dated 26 September 2019, 27 February 2020, 9 March 2020, 23 July 2020, 5 and 19 December 2020 totalling $875.40. It is apparent that Medicare benefits were claimed for two of these sessions. Without the benefit of documentary evidence, the tribunal calculates that a rebate of $60 each session was available to the mother. This indicates that the mother’s out of pocket expenses were about $755. Given the apparent discrepancy between the parents’ income and financial resources, the tribunal considered it appropriate that the father meet 75% of this cost: $566. It is appropriate that the father’s annual rate for the 2020 calendar year is increased to meet this expense already incurred by the mother.

5. The father completed his Statement of Financial Circumstances on 15 September 2020. He declares $574 in weekly wages. His assets are a half share in the marital home valued at $300,000 (encumbered with a mortgage of $185,000), savings of $2,000, household contents valued at $25,000 and $80,000 in superannuation. and credit card liabilities totalling $15,000. Apart from his mortgage, his only other liability is an unpaid income tax of $1,865. He declares weekly personal expenditure of $52 (excluding child support) and his share of necessary household expenses is $395.

6. The tribunal is not satisfied that it is either just or equitable that the father’s child support liability be calculated on the basis of his taxable income; clearly, he has income and financial resources that are not reflected in his income tax return. It is difficult to determine with any precision his actual income and financial resources, given the artifice of [Business 2] company arrangements, the income and expenses evident in the bank statements and the father’s Statement of Financial Circumstances.

1. The tribunal has already found that the 2019 [Business 2] company return indicates that the father’s income and financial resources in that period were in the vicinity of $149,797. The tribunal put to the father at hearing that his declaration regarding his income and expenses would indicate that he has capacity to contribute at least $120 per week towards the child’s costs. He indicated that this would not place him in a situation of hardship. The tribunal is of the view that the father has capacity to contribute $250 per week towards the child’s costs. To find otherwise would mean that the mother disproportionately bears the child’s costs.

2. The tribunal concludes that it is just and equitable that the father’s income and financial resources indicate that he has capacity to contribute $13,000 towards the child’s costs on an annual basis. The tribunal is satisfied that it is appropriate to backdate the departure period to 1 April 2019, the date from which the previous departure period ended. This aspect of the decision will have the effect of reducing the father’s arrears by about $3,100 (taking into his account the increase to his annual rate in respect of the child’s speech therapy costs). As at 2 September 2020 the father was $21,469 in arrears. Thus, the reduction will not place the mother in a situation of overpayment.

3. The tribunal considers that the available evidence indicates that it is unlikely that the father’s income and financial resources will be accurately reflected by his taxable income into the foreseeable future. The tribunal concludes that the father has the capacity to meet a liability of $13,000 until at least 31 December 2025. The tribunal is of the view that his ongoing liability is not onerous given his income and financial resources. This determination will provide certainty to the parties and minimise the need for repeat proceedings.

4. The tribunal is satisfied that the administrative assessment is unfair given the father’s income and financial resources and the child’s special needs. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it just and equitable to depart from the administrative assessment.

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. The mother receives family tax benefit in respect of the child. Changing the child support payable by the father may affect the mother’s rate of family tax benefit, depending on how Centrelink treats the increase in the administratively assessed rate of child support. As there has been an increase to the annual rate on the basis of the child’s special needs, Centrelink may determine that this increase in the child support payable should be excluded from the maintenance income amount. It is open to the mother to provide a copy of this decision to Centrelink so it may determine if the increase in the rate of child support payable should be excluded from the maintenance income amount used to calculate her entitlement to family tax benefit. 

3. The determination is otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that for the period:

·     1 April 2019 to 31 December 2025 Mr Seedsman’s annual rate of child support is varied to $13,000; and

·     Mr Seedsman’s annual rate of child support is increased by $566 during the period 1 January 2020 to 31 December 2020.