Shahadi and Lardon (Child support)

[2019] AATA 695

Shahadi and Lardon (Child support) [2019] AATA 695 (11 March 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC014994

APPLICANT:  Mr Shahadi

OTHER PARTIES:  Ms Lardon

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  11 March 2019

DECISION:

The decision under review is set aside and, in substitution, Ms Lardon’s departure application is refused.

CATCHWORDS

CHILD SUPPORT – departure determination – whether there was a ground for departure - costs of special needs do not significantly affect the cost of maintaining the child – costs of child care do not significantly affect the cost of maintaining the child - financial resources of both parents are fairly represented in the administrative assessment - no ground for departure - application to depart is refused - 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 Shahadi  and Ms Lardon are the parents of [Child 1] who was born in 2013. A child support case was registered with the Department of Human Services - Child Support (“the CSA”) in 2013. Until 8 June 2018, Ms Lardon was recorded as providing 100% care to [Child 1]. Since 8 June 2018, Mr Shahadi  has been recorded as providing 14% care and Ms Lardon has been recorded as providing 86% care.

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 allows a parent to provide an estimate of income and, if accepted, the administrative assessment will be based on that estimate of income, subject to a potential reassessment once the parent’s adjusted taxable income becomes known. From 10 October 2017 the administrative assessment was based on Mr Shahadi ’s estimate of income of $52,492 per annum and Ms Lardon’s 2016-17 adjusted taxable income of $51,533, and Mr Shahadi was required to pay $4,653 per annum in child support. From 11 October 2017 the administrative assessment also took into account Mr Shahadi ’s “relevant dependent”, i.e. his child to his current partner, and he was required to pay $3,896 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. On 3 November 2017, Ms Lardon lodged a departure application. She sought a contribution from Mr Shahadi  towards[Child 1][Child 1]’s speech therapy costs and child care costs. The CSA granted her application. Mr Shahadi  belatedly objected to that decision. The CSA granted his application for an extension of time in which to object. An objections officer allowed his objection and made the following departure decision:

   ·    from 1 January 2018 to 31 December 2019, Mr Shahadi ’s adjusted taxable income is varied to $59,000 per annum; and

   ·    from 1 January 2018 to 31 December 2018, Mr Shahadi ’s rate of child support payable is increased by $3,900 per annum.

4. Mr Shahadi  sought further review by the Tribunal. I conducted a directions hearing on 18 January 2019 and a full hearing on 11 March 2019. Mr Shahadi  was represented by [his] [solicitor].Ms Lardon was self-represented. The hearings were conducted by conference phone.

5. 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; …

Potential grounds for departure

Reason 2

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

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ia)because of special needs of the child …

2. Ms Lardon submitted that [Child 1] had special needs that required speech therapy. Mr Shahadi  disagreed with that submission.

3. A report from [Child 1]’s speech therapist dated 18 July 2018 states, in part:

   On 2 February 2017, a re-assessment was conducted … and [[Child 1]] was found to have a moderate receptive and severe expressive language delay. …

4. That assessment suggests that, as at 2 February 2017, the magnitude of [Child 1]’s language delay was such that he had a special need, and in the absence of any other relevant expert evidence on point, I find accordingly.

5. The report continued:

   [Child 1]’s language skills were again assessed … on 14 February 2018, which revealed his progress over the past year and changing [sic] his diagnosis to age appropriate receptive language skills and a mild expressive language delay.

6. That assessment suggests that, as at 14 February 2018, [Child 1] no longer had a significant language delay and, consequently, he no longer had a special need. It may have been that he would have continued to benefit from ongoing treatment, but that is not the legislative test under subparagraph 117(2)(b)(ia) of the Act.

7. Ms Lardon sought a departure decision from 30 October 2017. She provided receipts of her speech therapy payments from that date. There are four receipts, each of $130.00, in respect of the period prior to 14 February 2018. Ms Lardon said, and I accept, that she was not entitled to any rebates in respect of those payments. 4 x $130.00 = $520.00. In the context of [Child 1]’s general annual costs, a payment of $520.00 towards medical expenses is not a payment that significantly affected the costs of maintaining [Child 1]. Reason 2 is not established.

Reason 6

1. Subparagraph 117(2)(b)(ib) of the Act, commonly referred to as Reason 6, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   ...

   (ib)because of high child care costs in relation to the child: ...

2. Subsection 117(3B) states:

   Child care costs for a parent can only be high for the purposes of subparagraph (2)(b)(ib) if, during a child support period, they total more than 5% of the amount worked out by: 

   (a)dividing the parent's adjusted taxable income for the period by 365; and 

(b)multiplying the quotient by the number of days in the period.

1. Ms Lardon incurred child care costs in respect of [Child 1]. One child support period commenced on 1 August 2017 and ended on 31 July 2018: page 517 of the hearing papers. Ms Lardon’s out-of-pocket child care costs during that period were more than 5% her adjusted taxable income during that period. However, she was on maternity leave until 5 March 2018 and she acknowledged that child care was not necessary until 5 March 2018. She sought a contribution from Mr Shahadi  towards the child care costs that she incurred from 5 March 2018.

2. From 5 March 2018 to 31 July 2018, Ms Lardon’s out-of-pocket child care costs totalled $1,748.52[1] + $360.10[2] = $2,108.62. For that figure to be more than 5% of her adjusted taxable income, her adjusted taxable income would have to be less than $2,108.62 / 0.05 = $42,172 per annum. Her 2016-17 adjusted taxable income was $51,533 (and her amended 2016-17 adjusted taxable income was $48,262), and her 2017-18 adjusted taxable income was $51,282.

   [1]See the relevant entries on page 368 of the hearing papers.

   [2]See the relevant entries on page B64 of the hearing papers.

3. Although Ms Lardon’s child care costs during the child support period from 1 August 2017 to 31 July 2018 were high, the portion of those child care costs that were incurred after she returned to work, and for which she sought a contribution from Mr Shahadi , did not constitute high child care costs. Viewing those circumstances as a whole, they did not constitute special circumstances for the purposes of Reason 6, and Reason 6 is not established in respect of that child care period.

4. The next child care period commenced on 1 August 2018 and is due to end on 31 October 2019: page 517 of the hearing papers. Ms Lardon said [Child 1]’s last day of child care was 1 February 2019. From 1 August 2018 to 31 December 2018, Ms Lardon’s out-of-pocket child care costs were $1,269.07.[3] Her out-of-pocket costs from 1 January 2019 to 1 February 2019 were 2 x 97.05 + 2 x $97.17 = $388.44.[4] Her total child care costs during the child support period will be $1,269.07 + $388.44 = $1,657.51, which will not be more than 5% of her adjusted taxable income. Reason 6 is not established in respect of the current child care period.

   [3]$1,629.17, per page 63B of the hearing papers, minus the relevant entries on page B64 of the hearing papers.

   [4]Page B42 of the hearing papers.

5. For those reasons, Reason 6 is not established.

Reason 8

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. During 2016-17, Mr Shahadi  was employed as[an Occupation 1]. On 11 May 2017, [(“the Company”)] was registered. It purchased a [franchise]. Mr Shahadi  is the sole director and the sole employee of the Company. He is also one of its shareholders. He is effectively self-employed via the Company.

3. On 10 October 2017, Mr Shahadi  provided, and the CSA accepted, an estimate of income of $52,492 per annum.

4. Mr Shahadi  was directed to provide the Company’s 2017-18 financial statements, business activity statements and company tax return. He provided most of that documentation, but he did not provide the Company’s business activity statements for the first and second quarters of 2017-18. He did not provide an explanation as to why he did not provide that documentation.

5. According to the Company’s profit and loss statement, it received revenue (excluding GST) of $119,004 and it incurred expenses of $121,659, and it consequently incurred a loss of $2,655. Its expenses included wages to Mr Shahadi  of $44,000. He did not receive any other remuneration.

6. Mr Shahadi  was also directed to provide the Company’s business activity statements for the first two quarters of 2018-19. He provided its business activity statement for the first quarter. He said the business activity statement for the second quarter had not been lodged. He acknowledged that it was overdue. He stated that the Company’s accountant had not completed the business activity statement “for some reason”. He did not provide any evidence from the Company’s accountant, such as a letter, corroborating Mr Shahadi ’s oral evidence on that issue or providing a meaningful explanation as to why the business activity statement had not been lodged in compliance with the relevant taxation legislation. In summary, Mr Shahadi  was unable to give a satisfactory explanation as to why the Company’s business activity statement for the second quarter of 2018-19 was not lodged within time, and a copy provided to the Tribunal.

7. Mr Shahadi  provided three of the six business activity statements that he was required to provide. According to those statements, the Company’s revenue, excluding GST, was:

   2017-18      Q3      $36,321

   Q4      $34,120

   2018-19      Q1      $39,868

8. I observed that $70,441 of the Company’s 2017-18 revenue of $119,004 was earned during the second half of 2017-18, which suggested that, broadly speaking, its revenue had increased over time. I also noted that the Company’s revenue increased further during the first quarter of 2018‑19, which reinforced the general observation that the Company’s revenue was increasing over time. Mr Shahadi  agreed with that general observation and, at least while Reason 8 was being discussed as a discrete issue in the hearing, he did not seek to qualify that general observation in any way.

9. I questioned Mr Shahadi  about the Company’s expenses. The effect of his evidence was that he does not derive a significant personal benefit from his involvement in the Company apart from his receipt of wages. There is no evidence to the contrary on that issue. Ms Lardon made a broad submission that some of the Company’s or Mr Shahadi ’s work involved undeclared cash in hand. Mr Shahadi  explained that the Company pays a fixed franchise fee as well as a “per lead” fee to the franchisor, but its fees are not based on its revenue. I gather that the franchisor therefore does not have a system in place to audit the Company’s stated revenue.

10. Claims that a parent receives undisclosed cash in hand are easily made and, if correct, they are difficult to prove, but similarly, if they are incorrect, they are difficult to disprove. In the absence of some particular evidence in support of Ms Lardon’s claim that Mr Shahadi  receives undisclosed cash in hand, I am not persuaded that that has occurred, or is occurring.

11. Mr Shahadi  provided a copy of his 2017-18 individual tax return which indicates that his taxable income will be $41,462. He submitted, in effect, that his adjusted taxable income for child support purposes should be varied to that amount. The difficulty with that submission is that Mr Shahadi  has been selective in his compliance with my directions. According to the business activity statements for the third and fourth quarters of 2017-18, he received wages of $25,000 during that period, which equates to $50,000 per annum during that period. As noted earlier, he provided an estimate of income of $52,492 per annum to the CSA on 10 October 2017, based on the evidence that was available to him at that time. That evidence suggests that, at least from 3 November 2017, when Ms Lardon lodged her departure application, the administrative assessment that was based on Mr Shahadi ’s estimate of income of $52,492 per annum, subject to a potential reassessment once his adjusted taxable income became known, did not result in an unjust and inequitable determination of child support payable so far as Mr Shahadi ’s income and financial resources were concerned.

12. From 1 July 2018 the administrative assessment was based, in part, on Mr Shahadi ’s estimate of income of $52,395 per annum, and it would continue to be based on that estimate of income in the absence of a departure decision that varied his adjusted taxable income. At the end of the hearing I suggested that it might be appropriate not to vary Mr Shahadi ’s adjusted taxable income. Mr Shahadi  disagreed with that suggestion and stated, for the first time, that he had not done any paid work for the last three months. I consider it inherently improbable that if that were in fact the case, he would have omitted to disclose that information while I was observing, and he was agreeing, that the documentary evidence that he had provided to the Tribunal indicated that, broadly speaking, the Company’s revenue had been increasing since the Company had been registered. Further, I consider it inherently improbable that if that were in fact the case, Mr Shahadi  would not have provided some corroborative documentary evidence of such a significant change in circumstances, such as bank account statements. I do not accept his evidence on that issue.

13. In the absence of a departure decision, the administrative assessment from 1 July 2018 would be based, in part, on Mr Shahadi ’s estimate of income of $52,395 per annum, subject to a potential reassessment once his 2018-19 adjusted taxable income becomes known, and on the available evidence, and such an administrative assessment would not result in an unjust and inequitable determination of child support payable so far as Mr Shahadi ’s income and financial resources were concerned.

14. In respect of the period prior to 3 November 2017, I note that Mr Shahadi  did not provide the Company’s business activity statements for the first two quarters of 2017-18. In light of Mr Shahadi ’s selective compliance with my directions, I am not persuaded that the administrative assessment prior to 3 November 2017 resulted in an unjust and inequitable determination of child support payable so far as Mr Shahadi ’s income and financial resources are concerned. I also note that Mr Shahadi  did not lodge a departure application during that period. His acquiescence to the administrative assessment during that period does not constitute special circumstances. In summary, Reason 8 is not established in respect of Mr Shahadi ’s income and financial resources.

15. Ms Lardon is employed on a part-time [basis]. During the directions hearing, Mr Shahadi  conceded that Ms Lardon’s income and financial resources were fairly reflected for child support purposes in her adjusted taxable income as assessed by the Australian Taxation Office from time to time. In my opinion, that concession was properly made. Reason 8 is not established in respect of Ms Lardon’s income and financial resources.

16. There are no other potential grounds for departure. Ms Lardon’s departure application must be refused.

DECISION

The decision under review is set aside and, in substitution, Ms Lardon’s departure application is refused.