Sidney and Stoate
[2009] FMCAfam 119
•18 February 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SIDNEY & STOATE | [2009] FMCAfam 119 |
| CHILD SUPPORT – Administrative assessment – departure application by father for four periods and mother for two periods – question of court’s jurisdiction – father’s financial position – earning capacity – inadequate evidence – father’s application dismissed – mother’s application granted. |
Child Support (Assessment) Act 1989 (Cth), ss.3, 4, 99(1), 111, 112, 114, 116(1B) (as it was prior to 1 January 2007), 117, 118(2B), 121
Child Support (Registration and Collection) Act 1988 (Cth), Part VIIA
Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 (Cth) (Act No. 146 of 2006), s.2, schedules 3 and 4
In the Marriage of Gyselman (1992) FLC 92-279
In the Marriage of Hides and Hatton (1997) 21 Fam LR 855; FLC 92-759
| Applicant: | MR SIDNEY |
| Respondent: | MS STOATE |
| File No: | SYM 7215 of 2006 |
| Hearing dates: | 22 April, 26 June & 27 August 2008 |
| Date of Last Submission: | 27 August 2008 |
| Judgment of: | Sexton FM |
| Delivered at: | Sydney |
| Delivered on: | 18 February 2009 |
REPRESENTATION
| Applicant: | In person. |
| Legal Representative for the Respondent: | Swaab Attorneys |
THE COURT ORDERS THAT:
The father’s application for departure from the Child Support Assessment for the four periods between 1 July 2004 and 31 December 2006 be dismissed.
Pursuant to section 117 of the Child Support (Assessment) Act1989, there be a departure from the administrative assessment of child support payable by the father for the child [X] born in 1997 as follows:
(a)For the period 1 January 2007 to 30 June 2008, the father’s adjusted child support income amount be set at $80,000 per annum.
(b)For the period 1 July 2008 to 31 December 2010, the father’s adjusted child support income amount be set at $90,000 per annum.
The mother’s application for costs be adjourned to 10.00a.m. on
29 April 2009.All exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
IT IS NOTED that publication of this judgment under the pseudonym Sidney & Stoate is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 7215 of 2006
| MR SIDNEY |
Applicant
And
| MS STOATE |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern child support. The parties are the parents of one child, [X], now aged 11 years. The parties separated one month before [X] was born. [X] has always lived with her mother and has never spent time with the father. There are no parenting orders.
The parties have been involved in previous litigation and their relationship is acrimonious. In 1997, just before the birth of [X], the mother alleged the father assaulted her and the father was criminally charged. According to the mother, the father was convicted of assault in the Local Court, but was acquitted on appeal. On 2 April 1998, interim consent orders were made in the Family Court at Sydney in relation to spouse maintenance, providing for the father to pay the mother spousal maintenance of $300 per week[1]. The father concedes he did not comply with this order[2]. On enforcement, the father was required to make a payment to the mother in excess of $7,000. In March 1999, by consent, the court ordered that, on the payment by the father of $30,000, the spouse maintenance order of April 1998 be discharged[3]. In October 1998, the father paid the mother a lump sum of $30,300.00, by way of property and one week’s spouse maintenance.
[1] Attachment G of mother’s affidavit sworn October 2007
[2] Annexure C of father’s affidavit sworn February 2007
[3] Annexure H of mother’s affidavit sworn October 2007
On 10 May 2006, the Child Support Registrar commenced enforcement proceedings against the father for arrears of child support. At that time, the father owed $30,353.67 in arrears and late payment penalties. Those proceedings are pending.
In these proceedings, the father seeks a departure order for 4 child support assessment periods between 1 July 2004 and 31 December 2006. The father claims the Child Support Agency have not taken into account his ongoing health problems during these periods or the deterioration in his financial circumstances as a result of a downturn in his medical practice. The mother seeks an order that the father’s application be dismissed and seeks a departure order for two child support assessment periods between 1 January 2007 and, at the earliest, 31 December 2009. Each party claims, in relation to the periods from which that party seeks a departure order, that the current assessment results in an unjust and inequitable determination of the level of child support to be provided by the father for [X] because of the father’s income, property, financial resources, and earning capacity.
The father is 55 and the mother is 50. After living together for approximately 18 months, the parties married in May 1997, separated on 31 August 1997 and divorced on 27 April 2000. [X] was born in September 1997. Neither party has another partner or any other children.
The father is a general practitioner employed by a company [B] Medical Clinic Pty Ltd (the company) of which he is the sole director and shareholder. The father established the company on 5 November 1997, approximately 2 months after the parties’ separation. According to his accountant, Mr V, the father incorporated to minimise his tax[4]. The father lives in his own property at [L], where he has also conducted his medical practice since early 2004. Prior to moving his residence to [L], the father rented a home in [D]. The mother is employed in casual clerical/secretarial work by [S] Computer Services Pty Ltd, a company of which she is the sole director and shareholder.
[4] Letter dated 17 August 2001 from Mr V – Annexure U to mother’s affidavit sworn April 2008
Neither party was represented on the first day of hearing, but on the second and third days of hearing, the mother was represented by
Mr Serisier, solicitor. The father remained unrepresented throughout the hearing. The father sought to rely on affidavits of Dr J, a friend and colleague, his accountant, Mr V and a psychiatrist, Dr S. Mr V and Dr S were required for cross examination by the respondent, but on the 3 separate days of hearing over a period of 3 months, neither Mr V nor Dr S made himself available for cross-examination, either in person or by telephone.
Each party relied on their own affidavit material and each had filed a Financial Statement. According to the dates on the front of his Financial Statement, the father filed the Statement on 5 February 2007 but signed the Statement under oath 4 days later, on 9 February 2007. No issue was taken by the mother’s representative, and I have therefore assumed the Financial Statement was sworn on or just prior to
5 February 2007.
Substantial portions of each party’s affidavit evidence was not in admissible form and I spent considerable time on the first day of hearing ascertaining the parts of the evidence each would rely on.
I explained to the parties the court’s task in proceedings of this kind. Prior to the second day of hearing, the mother, by then represented, filed an affidavit objecting to parts of the father’s evidence. However, I was not invited by either party to make formal rulings on the admissibility of evidence.
Child support background
The parties have a lengthy history of dispute at the Child Support Agency. On 10 October 1997, the mother’s application was lodged at the Child Support Agency and the father’s liability was registered for collection by the Agency[5]. On 27 April 1998, the mother applied for a change of assessment on the basis of the father’s financial position. The mother’s application was successful and the father’s child support income for the period 1 April 1998 to 30 June 2000 was increased to $85,000, and for the period 1 July 1998 to 30 June 2000, to $100,000.
[5] Exhibit 2
In July 2003, the mother’s further application for Change of Assessment, on the basis of the father’s financial position, was decided in the mother’s favour. Senior Case Officer Turton assessed the father’s liability at $14,917.00 per annum for the period 1 July 2004 to 30 September 2004, and the father’s child support income amount was set at $100,000. For the period 1 October 2004 to 30 September 2005, the father’s child support income amount was set at $105,000 and his child support liability assessed at $15,817 per annum. For the period
1 October 2005to 30 September 2006, the father’s liability was assessed at $15,661 per annum.
On 12 September 2005, the father applied for a change of assessment seeking to have his assessment reduced to ‘nil’ for the period 1 July 2001 onwards. At the date of the Part 6A decision, on 16 January 2006, the father had $24,081.66 in arrears. On that date, Senior Case Officer Tobin found that the father suffered a medical condition affecting his earning capacity and therefore varied the assessment. Mr Tobin reports the father telling him he had reduced his working hours to approximately 30 hours a week and “he also indicated that his business was adversely affected by larger medical practices opening in his local area and taking away his patients.” [6] For the period 1 September 2005 to 31 December 2006, the father’s child support income was reduced to $75,000 p.a. which Mr Tobin considered “a conservative estimate” of the father’s earning capacity, and his child support liability was reduced to $11,077 per annum[7].
[6] At page 6 of exhibit 2
[7] Exhibit 2
In March 2006, both the mother and the father lodged an objection to the January 2006 decision. The father sought to have his child support liability based on his most recent taxable income of $17,250. The mother sought a reinstatement of the father’s original assessment at $15,661 per annum. On 28 July 2006, each party’s objection was disallowed in a decision of Senior Case Officer Tobin under Part 6B of the Assessment Act (in force at the time)[8] and the original Part 6A decision was affirmed. Mr Tobin noted that this was the 5th change of assessment application the Agency had determined.
[8] Exhibit 1
Jurisdiction
A question arises as to whether this court has jurisdiction to hear each party’s application for departure which includes the question of whether this court can make orders in relation to assessment periods dating back to 1 July 2004.
Jurisdiction is conferred on this court by s.99(1) of the Child Support (Assessment) Act 1989. Division 4 of Part 7 of that Act governs departure proceedings. Division 4 of Part 7 was substantially amended by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 (Act No. 146 of 2006), parts of which commenced operation on 1 January 2007. Section 115 was repealed and section 116 amended as provided in Items 17 and 18 of Schedule 4 of the Amending Act. Sections 111, 112 and 118(2B), (which deal with the 18 month rule for departure applications) were inserted by Items 14 and 19 of the Amending Act to come into operation on 1 January 2007. Item 42 in Part 2 of Schedule 4 of the Amendment Act states that the amendments made by Items 14, 17, 18 and 19 of Schedule 4 apply to s.116 applications made after the commencement of Item 42, that is, after 1 January 2007 (s 2 of the Amending Act) even if the application relates to a decision made before 1 January 2007 under Part 6A.
On the second day of hearing, when Mr Serisier first appeared for the mother, he submitted that the court did not have jurisdiction to hear the father’s departure application as a result of the 2006 amending legislation. Mr Serisier submitted the father should have applied to the Social Security Appeals Tribunal for review of the Child Support Agency’s objection decision within 28 days of that decision, in accordance with the new Part VIIA of the Child Support (Registration and Collection) Act 1988. In response to this submission, I expressed my view that this court does have jurisdiction because the decision on the objection to the change of assessment decision was made in July 2006, before Part VIIA commenced. Item 77 of Part 2 of Schedule 3 of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 (No 146, 2006) provides that the amendments outlined in Item 69 of Schedule 3 (which relate to SSAT reviews) apply in relation to a decision made by the Child Support Registrar under s.83(1) or s.87(1) (s.87(1) being a decision made on a party’s objection) of the Child Support (Registration and Collection) Act 1988 after the commencement of this Item, being 1 January 2007.
In the present case, the s.87(1) decision of the Registrar was made in July 2006, before the commencement of Item 77 on 1 January 2007. As the internal review process in the Agency was therefore completed before 1 January 2007, the amendments relating to the SSAT review procedure, do not apply in this case. The parties’ only option in relation to review of the objection decision is to apply to the Court under sections 115 and 116 of the Assessment Act as they existed prior to
1 January 2007 in accordance with Item 77(3) of the Amending Act.
Under the provisions which applied before 1 January 2007, the court has a discretion under section 116(1B) of the Child Support (Assessment) Act 1989 as to whether or not to grant leave to hear an application for a child support period which has not been the subject of an application for change of assessment and objection, if the person is party to an application pending in a court, and the court is satisfied it would be in the interests of both parties for the court to consider, at the same time as it hears that application, whether an order should be made under this Division. In the present case, in the exercise of that discretion, given the length of time this matter has been pending, and given the nature and extent of the financial material filed, I am satisfied it is in the interests of both parties for the court to deal with the departure applications of the mother at the same time as the court hears all the departure applications of the father, to which the mother is a party. Neither party objected to this course.
The relevant law in child support proceedings
Section 3 of the Child Support (Assessment) Act 1989 contains the obligation that parents have a primary duty to maintain their children. Section 4 provides that the principal object of the Act is to ensure that children receive a proper level of financial support from their parents. Sections 114 and 121 identify that the further objects of Divisions 4 and 5 of Part VII include:
a)that the children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
b)that parents share equitably in the support of their children.
[9] (1992) FLC 92-279
As already noted, the provisions relating to departure from administrative assessment in special circumstances are set out in Division 4 of Part 7 of the Act. The Full Court of the Family Court
In the Marriage of Gyselman[9]set out a three step process that courts must follow in determining an application for a departure order under s.117. The first step is whether one or more of the threshold grounds in s.117(2) is established. If a ground is established, the next step is whether it is just and equitable within the meaning of s.117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s.117(5) to make a particular order.
In the Marriage of Hides and Hatton[10] the Full Court held that it is necessary for the Court to undertake the three stage process described in Gyselman for each child support year in respect of which departure is sought. Further, the Full Court also said that regard may be had to the current circumstances of the parties:
By this we mean that not only must the judge apply the three stage process under section 117(2), (4) and (5) in relation to the circumstances of the parties as they existed in the child support year in question, but also in relation to the present circumstances of the parties (if at all relevant). For example, it may well be necessary in a particular case in addition to considering the circumstances of the parties in the past child support year in question, also to consider the present capacity of the payer to meet a new assessment, and/or the impact on a payee of any credit in the payer’s favour which might be created by a departure from an assessment for an earlier child support year.
[10] (1997) 21 Fam LR 855; FLC 92-759
Each party’s application
As already noted, the father seeks to depart from the administrative assessments of child support for four periods. The father seeks an order that his liability be assessed on the basis of his taxable income as declared in his taxation returns. The father claims he has suffered anxiety and depression during the relevant periods and continues to suffer from those health problems. He says that his depression and anxiety limits his earning capacity to the level of his taxable incomes. The father’s position in relation to the four periods is as follows:
i)1 July 2004 to 30 September 2004. The father’s liability was assessed at $1239.75 per month during this period. The father seeks an order that he pay $57 per month which he says would be the assessment based on his taxable income as set out in his taxation return.
ii)1 October 2004 to 31 August 2005. The father’s liability was assessed at $1,314.75 per month during this period. The father seeks an order that he pay $57 per month which he says is the assessment based on his taxable income as set out in his taxation return.
iii)1 September 2005 to 30 September 2005. The father’s liability was assessed at $15,661.00 per annum or $1,305.00 a month. Following the father’s Change of Assessment Application of 12 September 2005, his liability was reduced to $11,077 per annum for the period 1 September 2005 to 31 December 2006. Following an objection by both parties, this decision was affirmed. The father seeks an order that his liability be set at $49.42 per month during this period which he says is the assessment based on his taxable income as set out in his taxation return.
iv)1 October 2005 to 31 December 2006. The father’s child support income was set at $75,000 per annum during this period. The father seeks an order that his liability be set at $49.42 per month which he says is the assessment based on his taxable income as set out in his taxation return.
The mother asks that the father’s application be dismissed. In addition, the mother asks the court to order a departure from the administrative assessments of child support for two further periods:
i)1 January 2007 to 30 June 2008. She seeks an order that the husband’s child support income amount be set at $80,000 per annum.
ii)1 July 2008 to 31 December 2009 (later if possible). She seeks an order that the husband’s adjusted income amount be set at $90,000 per annum.
Special circumstances – has the applicant father shown a ground for departure?
The Court will not interfere with the administrative assessment unless it is satisfied there are “special circumstances”; that is, that there is something out of the ordinary in the facts of the particular case. The onus is on the applicant father to establish a ground for departure.
The father claims his financial circumstances have prevented him from meeting his child support liability as assessed during each of the child support periods from which he seeks a departure order. He says his taxable income is accurately recorded in his taxation returns and is significantly less than the child support income amounts assessed for him by the Agency. The father asks the court to assess his child support liability in each period on the basis of the taxable incomes recorded in his taxation returns in the relevant periods.
While the father does not specify, I am satisfied the father relies on s.117(2)(a)(iii)(A) and s.117(2)(c)(ia) and (ib) of the Child Support (Assessment) Act 1989, to establish a ground for departure, as these are the subparagraphs of s.117(2) which refer to a party’s financial position.
Section 117(2)(a)(iii)(A) provides:
(a)That in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of commitments of the parent necessary to support: (A) himself or herself.
Sections 117(2)(c)(ia) and (ib) provide:
(c)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; or
(ib)because of the earning capacity of either parent.
It is necessary to examine the father’s income, property and financial resources in each of the child support assessment periods from which he seeks a departure order [periods between 1 July 2004 and
31 December 2006] as well as his earning capacity during each of the subject periods. In order to make findings about his financial circumstances in these four periods, I have also found it relevant to consider the evidence in relation to the father’s financial position in the period between 1998 to 2004.
The father told the court on a number of occasions in cross-examination that he could not explain numbers of particulars in his taxation returns, the company’s taxation returns and the company’s financial statements, because he left these matters to his accountant, Mr V. As already noted, the father did not have Mr V available for cross-examination.
Father’s financial position between 1998 and 1 July 2004
The father says he worked full time (approximately 40 hours a week) as a general medical practitioner from 1979 until approximately November 2001, when he substantially reduced his working hours to approximately 15 hours a week. Sometime during that period, the father says he ceased employing staff in the practice. The father does not produce a wages book for the company and does not specify when that change occurred. However, in March 1998 Dr J, whom the father says was (and remains) his sole treating general practitioner, made this statement about the father’s practice[11]:
He manages a substantial professional workload, in a solo general practice, with no back up, involving Acute Industrial Trauma
[11] Annexure B of father’s affidavit sworn February 2007
In late 1997, the father established [B] Medical Clinic Pty Ltd through which he thereafter operated his medical practice. The father opened a National Australia Bank account in the name of his company and from that time, apart from loan and credit card accounts, did not maintain an account in his own name. The father says he draws funds from the company account to meet business expenses, and to meet personal expenses. The father does not draw a regular salary. The father says at the end of each financial year, his accountant calculates his taxable income by analysing and categorising his expenses as business or private. The father’s “wage” is calculated at the end of this process. The father does not provide records which identify those expenses which are business and those which are personal. He does not provide records of his cash drawings or cash receipts into the practice. The father says he receives some cash from patients when a patient does not hold a medicare card but does not explain how that cash is accounted for in the company records. The father says he relies on his accountant to prepare his business activity statements, his taxation returns and the company’s taxation returns, and assumes those records are accurate.
Some company financial statements were available for the 1998-2004 period and the father was cross examined on those accounts. I am not satisfied that all expenses claimed as company expenses were legitimately claimed which reflects adversely on the father’s credit. In particular, in the 1998 financial year, the company’s profit and loss statement shows a net loss to the company of $31,398.92. Included in the expenses of $133,668 are accountancy fees of $15,000 and legal expenses of $33,192[12]. In cross-examination, the father concedes that the legal expenses claimed were probably those incurred in the criminal proceedings in 1997/8 when he defended a charge of assault against the mother. He could not recall any company legal expenses in that year. The father could not adequately explain why his legal expenses in the criminal proceedings would have been claimed as a deductible expense by the company. In relation to the claimed accountancy fees of $15,000, the father concedes that he had retained his accountant to prepare 10 overdue personal taxation returns which he had failed to lodge since 1988, and those fees are likely to have been charged for that service. The father could not explain how those fees could legitimately be claimed as a deductible company expense in the 1998 year.
[12] Annexure C of mother’s affidavit sworn October 2007
Between the 1998 and 2004 financial years, the company’s gross incomes were as follows: $102,269 in 1998; $145,782 in 1999[13], $148,045.00 in 2000[14]; $122,265 in 2001[15]; $101,172.00 in 2002[16]; $108,203 in 2003[17]; and $95,267 in 2004. During this 6 year period, the father’s child support liability fluctuated between $143.42 a month and $1,454.92 a month based on child support incomes varying between $18,569 and $108,732 per annum[18], the liability being significantly lower when based on taxable income than when set by change of assessment. It is noteworthy that the father claims at hearing to have reduced his working hours from full time to 10-15 hours a week in approximately October/November 2001, and that the father sought to vary his liability to ‘nil’ from 1 July 2001 in his change of assessment application of September 2005. I find his position at odds with the company’s gross income figures in the relevant period.
[13] Annexure E of father’s affidavit sworn February 2007
[14] Annexure E of father’s affidavit sworn February 2007
[15] Annexure E of father’s affidavit sworn February 2007
[16] Annexure E of father’s affidavit sworn February 2007
[17] Annexure E of father’s affidavit sworn February 2007
[18] Attachment O to mother’s affidavit sworn October 2007
It is common ground that the father did not pay his child support liability during the 1998-2004 period in accordance with the assessments. He therefore accrued significant arrears and penalties. In May 2004, the father says he paid arrears of nearly $116,000 to the Agency by selling his investment property at [R]. The mother says the figure was $85,408 as the Agency waived the accrued penalties. To explain the arrears, the father says he could not meet his obligation to pay spouse maintenance as well as his obligation to pay child support, although concedes that he was aware of his child support obligations when he signed the consent terms in relation to spouse maintenance. I do not accept that the father’s obligation to pay spouse maintenance prevented him from meeting his child support obligations until the time he discharged his arrears in 2004, nor do I accept his assertion that the family law proceedings went on for a number of years. As noted earlier, the father’s obligation to pay spouse maintenance ended in March 1999 when the periodic spouse maintenance order was discharged.
Father’s financial position between 1 July 2004 and 30 September 2004.
The father’s liability for child support during this period was assessed at $1,239.75 per month, based on a child support income amount of $100,000, set by a change of assessment decision[19]. The father seeks an order that he pay $57 per month during this period which he says would be the assessment based on his actual taxable income during that period.
[19] Attachment O to mother’s affidavit sworn October 2007
Under s.117(2)(a)(iii)A, the onus is on the father to satisfy the court that his capacity to provide support is reduced because of his commitment to support himself. The father’s application under this subsection must fail as he does not adduce evidence of his necessary expenses during this period.
Under s.117(2)(c)(ia) the onus is on the father to satisfy the court that an application of the current assessment would result in an unjust and inequitable determination of the level of financial support to be provided by him for [X] because of his income, property and financial resources, including his earning capacity.
The father provides his taxation returns, the company taxation returns and the company’s financial statements for the relevant period but does not persuade me that the income figures disclosed in those documents reflect his actual income, upon which his child support income should be calculated. He is unable to explain the figures in the documents, repeatedly deferring to his accountant, yet does not have his accountant available to give evidence at hearing. In addition, I find the father fails to discharge the onus on him to prove that he cannot derive additional income from assets held by him. Therefore the father’s application under s.117(2)(c)(ia) must also fail. My reasons follow.
The father’s income. In the financial year ending 30 June 2004, the company’s gross income was $95,191[20]. The father’s Notice of Assessment for the 2004 financial year states that he earned an income of $36,533. According to the company’s financial statements, the company expenses in that financial year included funds which I am satisfied would have been available to the father and should be added back for the purposes of calculating child support income. These include, but are not limited to, depreciation expenses of $897, directors’ salaries of $10,000, fines and penalties of $4,180 (for late lodgement of business activity statements), rent of $22,100, wages of $30,750. On the total of these figures I am satisfied the father had a minimum of $67,927 available to him in that financial year for private use, and in addition, benefited personally from other claimed company expenses, including telephone. Also, as the father was unable to clarify whether the company held other funds to which he was personally entitled, including shareholders funds and loan funds, I am unable to make a finding as to whether there was additional income available to the father from the company in that year.
[20] Annexure E of father’s affidavit sworn February 2007
In the year ending June 2005, the accounts show the company earned gross fees of $38,071 and incurred expenditure of $38,325. The father’s taxation return discloses a taxable income of $17,250[21]. In that year, the company accounts do not list ‘rent’ as an expense, although there is no dispute that the company continued to use the premises owned by the father to operate the business and any rental income would have been part of the father’s income. The accounts include expenses for depreciation, motor vehicle, telephone, repairs and maintenance which may have benefited the father personally[22]. The father is unable to explain what is meant by the figure of $24,213 in shareholders’ funds in the company’s taxation return.
[21] Annexure G of father’s affidavit sworn February 2007
[22] Exhibit 3
The father is unable to clarify another apparent anomaly in his income position. I accept Mr Serisier’s submission that as at September 2004, the father’s NAB bank statements show the father was paying $861 a fortnight from the company account[23] to one of his NAB loan accounts [ending in [4]] as well as $458 a fortnight[24] to another of his NAB loan accounts [ending in [1]]. This amounts to $34,294 in loan repayments on two loans if paid over a full year, only $3,777 less than the company’s total income as disclosed, accounting for no other expenses in that year. I also accept the submission that the repayment of $458 a fortnight exceeds the interest payment each month of between $400 and $448 a month showing that the repayment figure was higher than the figure required to keep the facility in order.
[23] 14 September 2004 – 28 September 2004
[24] 20 September 2004 and 4 October 2004
Assets and liabilities. The father does not adduce evidence of his asset and liability position as at July 2004 and the evidence about the disclosed assets does not assist his case. The father acknowledges banking $54,564.20 to his company account on 27 May 2004, being the net proceeds of sale, after payment of child support arrears, of his investment property at [R][25]. As a result of that deposit, on 1 June 2004, the father held $55,903.38 in his company account[26]. At the end of September 2004, the father held $12,000 in his company account. Expenditure of $44,000 in a 3 month period[27] for what the father says were usual expenses, does not satisfy me the only income available to the father in the 2005 financial year was a gross amount of $17,250, as claimed.
[25] Attachment S of mother’s affidavit sworn October 2007
[26] Annexure R of mother’s affidavit sworn April 2008
[27] Annexure O of mother’s affidavit sworn April 2008
Section 117(7A) of the Act provides that in having regard to the income, property and financial resources of a parent, the court must:
(a)have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing income; and
(b)disregard:
(i)the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them;
(ii)any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
The father owns a property at [L]. According to a market appraisal dated 25 January 2007[28] the property consists of two freestanding terraces which have been extensively modified to be used as a doctor’s surgery of 3 consulting rooms, a large reception area and associated storage areas. Its estimated value at that time was $900,000 - $1,000,000.00 and if separated, each terrace could be sold for $500,000-$550,000. Its estimated lease value “in one line” at that time as commercial premises was $27,000 - $36,000 per annum. The agent said:
This is a highly desirable mixed zone property in a prime location. There is a consistent high level of demand for this type of property in this particular location.
[28] Annexure I of father’s affidavit sworn February 2007
The father does not persuade me that he cannot make arrangements to derive income from the [L] property after 1 July 2004. Firstly, until the 2004 financial year, as earlier noted, the father receives rental income from the company for its use of the property. The company continues to use the [L] property after 1 July 2004, yet does not disclose rental expenses in its accounts. Secondly, it is common ground that the father’s premises at [L] comprise a number of medical rooms, none of which he tenanted after 1 July 2004. The mother’s unchallenged evidence is that professional rooms can be rented on a 4 hours sessional basis. In 1996, the father used to rent out rooms for a day or so a week and earn $350 a week. Although the father claims that his limited practice does not provide a viable referral base for other practitioners, he does not dispute the mother’s claim that the practitioners who have rented space in the past have had their own patients and not relied on referrals from the father.
The father’s financial position in the period 1 October 2004 to 31 August 2005.
The father’s child support liability for this period is assessed at $1,314.75 a month based on his child support income amount of $105,000 (set by change of assessment) and the mother’s excess child support income of $8,801.00[29]. The father seeks an order that he pay $57 per month which he says would be the assessment if based on his taxable income as set out in his taxation return.
[29] Attachment O of mother’s affidavit sworn October 2007
The father does not adduce evidence as to his commitments necessary to support himself during this period. His application for departure based on s.117(2)(a)(iii)A must therefore fail.
The father provides his taxation returns, the company taxation returns and the company’s financial statements for the relevant period but as for the first subject period, does not persuade me that the income figures disclosed in those documents reflect his actual income, upon which his child support income should be calculated. He is unable to explain the figures in the documents and does not satisfy me that he cannot derive income from the [L] property. I therefore find his application under s.117(2)(c)(ia) also fails. I set out my reasons.
The father’s income. I have already evaluated the evidence available as to the father’s income in the 2005 financial year and for reasons already given, I am unable to make findings as to the amount of income available to the father from the company in that year.
In the 2006 financial year[30], the father was assessed for taxation on an income of $25,666. The company taxation return discloses company income of $54,103 and expenses of $51,907[31]. The father does not establish that some of these expenses including home office expenses of $10,151, office expenses of $1,145, depreciation expenses of $916, repairs and maintenance of $1,839, telephone of $2,265 wages of $26,000, payment to “associated persons” $28,340, would not have benefited him on a personal basis. He cannot categorise these expenses, because he says it is his practice to ask his accountant to undertake this task from credit card records and other documents he gives him at the end of the financial year. Again in the 2006 financial year, the company does not disclose rental payments which would have been income available to the father[32]. Without being in a position to reach a conclusion about the father’s income position, I accept the mother’s counsel’s contention that the father’s available income in that financial year would have been significantly higher than the income of $25,666 declared in his income tax return[33].
[30] Exhibit 9
[31] Exhibit 8
[32] Exhibit 4
[33] Exhibit 9
For the reasons already given, the father does not satisfy me he did not have the capacity to derive additional income by renting rooms in the [L] property during this period.
Assets and liabilities. The father adduces no specific evidence as to his asset position during this period.
The father’s financial position in the period 1 September 2005 to 30 September 2005.
The father was assessed to pay $15,661.00 per annum or $1,305.00 a month during this period. Following the father’s Change of Assessment Application of 12 September 2005, the amount of child support payable by him was reduced to $11,077 per annum for the period
1 September 2005to 31 December 2006. Following an objection by both parties, this decision was affirmed. The father seeks an order that he pay $49.42 per month during this period which he says is the assessment based on his taxable income as set out in his taxation return.
I have earlier had regard to the evidence adduced by the father in relation to this period. I am not satisfied the father has discharged the onus on him to establish a basis for departure during this period under either of the subparagraphs of s.117(2) relied on.
The father’s financial position in the period 1 October 2005 to 31 December 2006.
The father’s child support income was set at $75,000 per annum for this period, by a change of assessment decision, and the father’s liability was calculated at $923.08 a month. The father seeks an order that he pay $49.42 per month which he says is the assessment based on his taxable income as set out in his taxation return.
The father does not adduce evidence as to his commitments necessary to support himself during this period. His application for departure based on s.117(2)(a)(iii)A must therefore fail.
I find his application under s.117(2)(c)(ia) must also fail. I set out my reasons.
The father’s income. I have already noted that I am unable to ascertain the father’s available income during the 2006 financial year on the evidence available, but am satisfied it is well in excess of the income disclosed in the father’s taxation return for the 2006 financial year. In relation to the 2007 financial year, half of which falls in this child support assessment period, the father says taxation returns have not, as yet, been prepared for the company or for him personally. The father deposes to a gross income of $505 a week in his Financial Statement sworn in early February 2007. His business activity statements for the 2007 financial year disclose “wages” of $15,340 in the period 1 July 2006 to 31 December 2006[34]. This is equivalent to an average income of $590 a week if the whole of that figure is attributed to the father’s wages. The father does not explain how he arrives at the figure of $505 a week, or $26,260 a year, in his Financial Statement.
[34] Exhibit 10
In his application for change of assessment dated 12 September 2005, the father says he has a mortgage loan balance of $156,953.00. In his sworn Financial Statement of February 2007, that mortgage balance has reduced to $136,325. He has therefore reduced his loan balance by more than $20,000 in a period of 16 months. During that period, the father has paid $2,638 a month in repayments[35] well in excess of the minimum amount repayable. In December 2006, the final month of this child support assessment period, the father applied to the National Australia Bank for an increase in his loan of $2,596.30. By that date, the father had received the decision from the Child Support Agency that his child support income had been set at $75,000 for that period. Despite this, the father agreed to repayments of $1,729.27 a month on that mortgage loan. I am not satisfied these arrangements are consistent with an income of $26,260 as deposed to in the father’s Financial Statement. It is also noteworthy that the father told the objections officer at hearing in July 2006 that he was only working 15 hours a week, so would be unable to generate the level of referrals to make it worthwhile for other practitioners to rent space from him at [L]. The objections officer noted that the father reported that he had regular expenses of over $60,000 a year which would require a gross weekly income of at least $80,000 a year[36]. In his Financial Statement sworn in February 2007, the father deposes to weekly expenses of $1,244.00 or $64,688 per annum. In his affidavit sworn in April 2008, father says the $524 a week included in his Financial Statement as his weekly mortgage repayment should not have been included in his Financial Statement as a personal expense, but as a company expense. The father does not file an amended Financial Statement. The father says he believes his mortgage repayment expense is treated by his accountant as a rental payment to him but cannot explain why it is not reflected in the company accounts. I find the father’s evidence about this arrangement inadequate to satisfy me it is not an expense he meets personally I agree with the objections officer, who agreed with Senior Case Officer Tobin, that an income amount of $75,000 may be a conservative estimate.
[35] Exhibit 13
[36] Exhibit 2
Assets and liabilities. The father set out his assets, liabilities and financial resources as at February 2007 in his Financial Statement filed on 5 February 2007. He deposes to owning assets and liabilities as follows:
i)A property at [L] with a value of $950,000.00, subject to one mortgage of $136,325.00 and another of $70,000;
ii)Bank account proceeds of $1,200.00;
iii)Motor vehicle with a value of $3,750.00;
iv)Shares in [B] Medical Clinic P/L with a value of $1,500;
v)Household contents with a value of $2,000.
vi)Superannuation of $21,000;
vii)Unpaid taxation ($4,414.00);
viii)Overdraft NAB ($30,000.00);
ix)Visa card debt ($46,400.00);
x)CBA mastercard debt ($8,300.00); and
xi)Personal loans from friends and outstanding bills ($31,000.00).
I am not satisfied all these figures are accurate. On 5 February 2007, the company bank account had a balance of $3,370 and medicare benefits of nearly $3,000 were deposited two days later[37]. In the company accounts, there is an entry for shareholders funds of $22,338L. The father is unable to explain this entry[38]. The father does not explain how he calculated a figure of $1,500 for his shares in the company. I find the value of the father’s interest in the company is likely to be higher than the figure disclosed.
[37] Exhibit 13
[38] See exhibit 4 – financial statements of company
In relation to his credit card debts, the father does not adduce copies of all credit card statements to show the items which make up the debts. The mother claims many of the expenses are claimed by the father as company expenses deductible to the company. The mother claims the father maintains his credit card debt at a high level to give the impression that he cannot pay his accounts when the company is in a position to meet some of these expenses.
As I am unable to make findings as to the father’s actual overall income and expenses in any of the child support periods from which he seeks to depart, and I am unable to make findings as to the father’s net asset position and to income he could derive from those assets, I am not satisfied the father has established a ground for departure on the basis of his income, property and financial resources.
The father’s earning capacity in the period 1 July 2004 to
31 December 2006
The father also relies on s.117(2)(c)(ib) as a ground for departure from each of the 4 child support assessment periods earlier identified which requires an analysis of s.117(7B) of the Assessment Act. The father asks the court to accept that he has been unable to earn an income greater than the income disclosed in his taxation returns during each of the subject periods because of the depression and anxiety he has suffered since the time of his separation in 1997. He says the situation is ongoing. Although the father claims to have suffered from depression and anxiety since 1997, he says he did not reduce his working hours from full time to part-time until the end of 2001, and says that he does not believe his condition affected his earnings until approximately 2003/4. As already noted, the father’s company received fees in excess of $100,000 per annum until the financial year ending 2004, and then the fees were not much under that figure. This included the period in which the father claims to have been involved in family law proceedings and criminal proceedings.
The father also says that his practice income was affected by the opening of a new medical centre in the area in 2000 and in 2003. In his affidavit sworn in April 2008, the father says a large medical centre was established in 2000 with 6 doctors, several specialists, nurses, a dentist and a physiotherapist and that as a consequence, a large number of his patients moved to this practice and he lost his corporate work. The father also refers in other evidence to a new medical centre being established in 2003. The father told SCO Tobin at the change of assessment hearing in 2005 that “…his business was adversely affected by larger medical practices opening in his local area and taking away his patients.[39]” I am in no doubt that it is part of the father’s case that the opening of at least one other medical centre in the vicinity of his practice impacted on the viability of his practice.
[39] At page 6 of Exhibit 2
Section 117(7B) of the Assessment Act provides that:
In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a)one or more of the following applies:
(i)the parent does not work despite ample opportunity to do so;
(ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per work that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii)the parent has changed his or her occupation, industry or working pattern; and
(b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i)the parent’s caring responsibilities; or
(ii)the parent’s state of health; and
(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
I am satisfied that s.117 (7B)(a) applies in that the father acknowledges changing his work pattern from full time to part-time work, and acknowledges reducing his working hours to below the normal number of hours that constitutes full time work for a medical practitioner.
The question next arises under s.117(7B)(b) as to whether or not the father’s decision to reduce his hours was justified on the basis of either his caring responsibilities or his state of health. The father does not claim any caring responsibilities. He claims his decision to reduce his working hours was and continues to be justified on the basis of his state of health. I am not persuaded the father has discharged the onus on him to prove the link between his decision to reduce his hours and his state of health.
The father has not consulted a psychiatrist on a regular basis to treat or manage his depression during the subject periods and the father does not provide a detailed medical assessment of his condition, or its impact on his earning capacity during each of the relevant periods.
I have therefore considered the evidence available on this issue for the whole of the period 1 July 2004 until the present, rather than for each of the 4 individual child support assessment periods from which the father seeks a departure order and for each of the 2 periods from which the mother seeks a departure order.
The father says he first consulted a psychiatrist, Dr F in 1997 and has since been under medical care for anxiety and depression. The father relies on the evidence of Dr J, whom, he says, is the only general practitioner he has consulted since his separation in 1997, and only for counselling and support. Dr J regards himself as a friend of the father of over 30 years standing. Dr J has been in a medico-legal/general practice for over 40 years. He deposes to having been Chairman and Committee member of the NSW Royal Australian College of General Practitioners accreditation committee and to being a current member of the College Faculty Board. Dr J says the father suffered from a “profound depressive reaction” from the time of the marriage breakdown. He describes his current symptoms as profound depression with de-motivation, “sadness, a lack of energy, loss of sleep and loss of the ability to function”.
The father says he has consulted two other psychiatrists since 1997:
Dr W and Dr S. Of the psychiatrists he has consulted, only Dr S has sworn an affidavit in these proceedings. Dr S, despite being required, did not attend the hearing for cross-examination.. There is no evidence before me as to how frequently the father consulted either Dr W or
Dr S.
In cross-examination by the mother, before she was represented, Dr J says he has had a professional association with the father since the early 80’s and because of professional educational and social activities, he used to see the father 30-40 times a year prior to being consulted by him professionally in 1997 when his marriage broke down. Since then, the father has consulted him perhaps 2-3 times a year, sometimes face to face, sometimes by phone. Dr J provides the father with supportive counselling and has never treated the father for any other medical condition. Dr J has provided the father with his referrals to psychiatrists. In addition to his consultations, the father says he chats with Dr J at medical meetings.
By letter dated 25 March 1998 Dr J wrote to Mr John Hertz, solicitor, and said the father was suffering from “acute anxiety depression.” Dr J sets out the circumstances contributing to his depression including the stress of a marital separation, dealing with criminal proceedings and completing “private and business financial documents for court”.
I concluded from Dr J’s evidence that he had formed the view the father’s depression resulted from the circumstances of his separation and what followed. Dr J does not comment on whether the father’s failure to lodge taxation returns for a period of the 10 years before 1998[40] is related to any psychiatric condition the father may have suffered during those years.
[40] Annexure DD of mother’s affidavit of April 2008
While Dr J and the father both allege the mother’s conduct was a significant cause of the father’s depression, the father acknowledges the emotional impact on him between 1999 and 2001 of his father’s illness and death, and the death of his best friend shortly afterwards. The father says he was dealing with a number of problems: the breakdown of his marriage, the mother’s allegations against him of violence which he believes threatened his right to practise medicine and the mother’s denial of his opportunity to be a father to his young daughter. He says:
The toll on my health was enormous, I was suffering from poor sleep, insomnia, depressed mood, anxiety and chronic fatigue. I was very despondent and had pervasive feelings of sadness of not being able to have a family, feelings of betrayal by my partner.
In June 1999, the father says he suffered an anxiety attack causing him to be charged with failing to give a breath test. He claims he could not produce enough air for a proper reading when stopped for a Random Breath Test.
On 1 July 2001, Dr J states that the father has a:
…severe anxiety depressive condition central to which is a state of denial and procrastination causing him to neglect his business responsibilities… associated with his depression is impairment of concentration and loss of sleep with fatigue…all these factors have also led to taxation returns difficulty.
In August 2001, Dr S writes that the father “is improving”… and “needs more time to arrange his… affairs.”[41] Dr S does not provide a further written opinion for several years.
[41] Annexure H of father’s affidavit sworn February 2007
On 2 September 2005, Dr J prepared a report on the father, annexed to Dr J’s affidavit, stating the father had consulted him on 25 and
30 August 2005. Dr J states:
Dr Sidney has Post Traumatic Stress disorder with marked Chronic Depression.
Dr J states that the father’s difficulties stem from:
…a brief but acrimonious breakup of a relationship. ..Child Support Agency, spousal maintenance, vexatious spurious criminal proceedings and multiple legal and court actions have markedly impinged on Dr Sidney’s physical, emotional and financial resources.
In his letter to Dr S, psychiatrist, dated 15 January 2007, annexed to
Dr J’s affidavit, Dr J states:
Dr Sidney still suffers depression with de-motivation with practice limping along. You know the vexatious effects of his former wife, on his lifestyle and performance.
After examination on 5 February 2007, Dr S provides an opinion to the Child Support Agency that the father suffers “chronic major depressive syndrome with anxiety” with “depressed mood”, “amotivational”, “hypersomnia” “low energy” “poor concentration”. However, he says the father is able to work 3-4 hours a day 5 days a week. He says he expects the father to improve with further treatment. He states that he examined the father on 5 February 2007 and that he has been unfit for full time work for a period of 6 years from 3 August 2001 until 5 February 2007. He does not comment on the progress of his condition during that period, the treatment he provided during that period, or comment on the father’s prognosis.
On 28 February 2008, Dr S tells the Child Support Agency the father has “chronic Major Depressive Episode with anxiety” and can work 10-15 hours a week or at 25% capacity. He then states he has been unfit for work from 15 June 2007 until 28 February 2008[42].
[42] Annexure C and D of mother’s affidavit sworn April 2008
In his affidavit of March 2008, Dr J deposes to the father “suffering from Chronic Major Depression with Anxiety – Recurrent.” He states in a letter to the Court of 28 February 2008 that the father:
requires ongoing supportive and motivating counselling which I have been providing over the recent several years…Dr Sidney suffers a marked depressive illness characterised by melancholic pervasive sadness with severe downturn in quality of life and work motivation…I have visited his medical practice. The premises and surgery reflect his profound depression. It also indicates that it is depleted. …In my personal opinion, I believe that he is only capable of working a few hours each afternoon.
Dr J was unable to say whether or not the father was treating patients appropriately, but says a general practitioner suffering from depression, may be able to perform the “general run of things” expected by a medical practitioner. At the end of 2005 the Senior Case Officer at the Child Support Agency noted Dr J’s statements that the father had not lost his professional, diagnostic and practising abilities[43]. Dr J says the father’s condition has not improved since he started counselling him
7-8 years ago but is likely to improve when this litigation has been finalised.
[43] Exhibit 2
I am not convinced Dr J’s evidence is objective. He acknowledges his long friendship with the father and his high regard for him. He does not hide the strong sense of injustice he feels for the father. It was evident when the mother questioned him, that he had a low opinion of her. Dr J acknowledges he is not a specialist psychiatrist and suggested some questions about the father’s health should more appropriately be answered by the father’s treating specialist, Dr S. As Dr S did not give evidence, I am not satisfied the medical evidence is sufficient to base the findings the father asks the court to make.
I also find the evidence about the father’s history of depression/anxiety contradictory. On the one hand, the father deposes to his depression and anxiety affecting his concentration from 1997 making it “very difficult to attend to the varying needs of my patients and the administration of the practice” and Dr J states in 1998 that the father’s depression was “profound”. On the other hand the father says he did not stop working to full capacity until the end of 2001. The father also says his depression did not affect his earning capacity until approximately 2003/4 which is reasonably consistent with the company’s gross income figures between 1998 and 2004. But in his affidavit sworn on 3 April 2008 the father deposes to having been unable to practise more than 2-3 hours each weekday afternoon as a result of “fatigue, hypersomnia and loss of motivation” since he changed to part-time employment in late 2001.
This medical condition has affected many aspects of my life. It has affected my capacity to work and earn income and my quality of life. … I am only able to generate the income that I declare each year.
For these reasons, I am satisfied s.117(7B)(b) does apply in this case.
I am satisfied that the father’s decision to reduce his number of hours of work is not justified on the basis of either his caring responsibilities or his state of health.
I must next consider whether the father has demonstrated that it was not a major purpose of his decision to change his working pattern during that period, to affect the administrative assessment of child support in relation to the child.
I am not satisfied the father has succeeded on this requirement.
Since shortly after the time the mother applied for a child support assessment, over 11 years ago, the father has accrued arrears of child support. Although I was not provided a complete child support transaction statement, it is common ground that by the time the father sold his investment property in May 2004, the father owed arrears and penalties of approximately $116,000 and that arrears have accrued again since then. On 12 September 2005, the father applied for a change of assessment seeking to have his assessment reduced to ‘nil’ for the period 1 July 2001 onwards. At the date of decision, on
16 January 2006, the father owed $24,081.66 in arrears. Mr Tobin reports the father telling him he had reduced his working hours to approximately 30 hours a week, whereas at hearing, he claims to have reduced his hours to 10-15 hours a week.
I also have regard to the following facts and findings:
a)The father has failed to adduce clear cogent evidence as to his personal income during the relevant periods as he is obliged to do in a case of this kind. His decision to combine his practice income and expenses with his private income and expenses from the time his child support liability commenced, has obscured his true financial position, and made it difficult to ascertain the actual income he has had available to him each year.
b)As already noted, I am not satisfied the father has chosen to derive income to the extent available to him, from his assets.
c)I am not satisfied the father has frankly disclosed his true financial position and if this results from his own financial inexperience, he has not ensured the availability of his accountant to explain his position.
d)The father has not prioritised payment of child support above his other financial obligations. For example, he has chosen to reduce his debt capital at a rate not required by the bank and he has chosen to incur high credit card interest when money has been available to reduce credit card debt.
e)As noted by the Senior Case Officer who heard the change of assessment application, a medical practitioner has the potential to earn an income well above average weekly earnings, whether in private practice or as an employee. Even if the father has suffered from depression, Dr J and Dr S say the father retains his capacity to work as a doctor. I do not accept the father has made reasonable attempts to arrange a working life to accommodate his condition while also maximising his income. Apart from spending one week in a medical centre, he has made no effort to obtain other employment as a general practitioner.
f)I am not satisfied the father’s stated wish to pay child support at a reasonable level can be reconciled with his decision to persist working in a business he claims is unviable.
As a result of these findings, I find the father has not demonstrated that it was not a major purpose of his decision to change his work pattern to affect the administrative assessment of child support. In accordance with the provisions of s.117(7B) of the Act, I am therefore persuaded that the father’s earning capacity is greater than is reflected in his income during all the periods from which he seeks a departure order.
As the father has failed to establish a threshold ground for departure,
I have dismissed his application.
Special circumstances – has the respondent mother established a ground for departure?
The mother relies on s.117(2)(c)(ia) and (ib) of the Assessment Act - the father’s income, property, financial resources and earning capacity - when seeking to depart from the child support assessments for the period 1 January 2007 to 30 June 2008 and from 1 July 2008 to
31 December 2009 or later.
The father’s child support liability for the period 1 January 2007 to
31 March 2008is $165.33 a month, based on a child support income of the father of $25,666, (05/06 taxable income) and a child support income of the mother of $2,424[44]. The father’s child support liability for the period 1 April 2008 to 30 June 2009 is $178.17 a month, based on a child support income of $27,257 for the father and a child support income for the mother of $2,574.
[44] Annexure 5 of mother’s affidavit sworn 16 May 2008
Given the nature of the available evidence as to the father’s financial position in the period after 1 January 2007, and the minor differences in the father’s child support incomes relied on by the Agency in the two periods, I decided to assess the evidence related to both periods together, rather than extracting the evidence as it relates to each period.
Father’s financial position from 1 January 2007 to date
As noted earlier, as a result of the paucity of his evidence, I am unable to make a finding as to the actual income available to the father in the 2006 financial year. In relation to the 2007 and 2008 financial years, the father has not lodged his personal taxation returns or his company taxation returns for either period. The company’s business activity statements for the 2007 year[45] disclose gross fees to the company of $59,973 in that year and wages of $30,000. The business activity statements for the first 3 quarters of the 2008 financial year disclose gross fees of $48,942 and wages of zero[46]. As I have already concluded in relation to earlier assessment periods, I am unable to assess how much of the company’s gross income is available to the father for his personal use in those financial years. In addition, I am satisfied it is open to the father to derive a greater income by tenanting his [L] property.
[45] Exhibit 10
[46] Exhibit 11
The father says he has accounts including loan and credit card accounts as follows (including last 4 digits of account numbers):
i)NAB company account [0956];
ii)NAB home loan account [[4]];
iii)NAB home loan account [[1]];
iv)NAB gold visa account [8269];
v)NAB overdraft account no [[5]];
vi)Commonwealth Mastercard account; and
vii)HSBC credit card account.
The father confirms that all loan payments are paid from funds in the company account.
Mr Serisier prepared a helpful analysis of the father’s bank account statements tendered in the proceedings, which he provided to the court and to the father in the form of written submissions. In summary,
Mr Serisier submits that the father’s bank records disclose that for the financial years 2006 to 2008, the father required a personal income of between $80,000 and $100,000 per annum to meet his personal expenses. Counsel submits that given the father’s liabilities did not increase in this period and the father provides no credible explanation as to how he has met the shortfall between his income and expenditure, the income the father has disclosed during those financial years cannot be accurate.
Mr Serisier submits, and I accept[47], that the National Australia Bank account statements for the father’s company show that the total of the income received and banked by the company between 22 December 2006 and 21 April 2008, from the Health Commission (on my calculation, an amount of approximately $90,568.25) is greater than the income disclosed for the company in the business activity statements for the last 2 periods of the 2007 financial year and the first 3 periods of the 2008 financial year [a total amount of $82,773][48] and this does not include cheque and cash amounts or Tax Office refunds banked by the company in the same period, an amount of $6,460.18. While I am unable to make a finding as to the father’s income in either the 2007 or 2008 financial years, I am not persuaded it is as low as disclosed by the father in his BAS statements.
[47] Exhibit 6 (2)
[48] Exhibits 10 and 11
In relation to the father’s outgoings from 1 January 2007 to date,
I accept the following facts, which were substantially unchallenged by the father:
a)On 19 December 2006, the father owed the National Australia Bank $56,633.92[49]. The father borrowed $2,596.30 which increased the loan to $59,230.22. The father agreed to repay the whole of the loan between 9 December 2006 and 24 January 2010 by increasing his repayments.
b)Between 5 January 2007 and 27 June 2008, the father’s NAB Visa card balance increased by $4,806.27[50]. Over this 18 month period, the monthly statements show the father approximately $60,000 on that credit card including interest.
c)Between 1 January 2007 and 30 June 2008, the father reduced the balance of his loan account no [4] by $23,050.43[51]. At the same time, he reduced the balance of his loan account no [1] by $7,909.71. During the same period the debt on account no [5] increased by only $2,095[52].
d)Between January 2007 and June 2008, the company paid $19,473.77 to his NAB visa account; $18,320 to loan account no [1]; $34,440 to loan account no [4] and $16,220 to the overdraft account no [5], a total of $88,453.77.
e)In addition, between January 2007 and 30 June 2008, he paid $2,457 to his Commonwealth Mastercard[53].
f)The father must meet his superannuation payments, his taxation payments and his day to day expenses.
[49] Exhibit 6
[50] Exhibit 12
[51] Exhibit 13
[52] Exhibits 6 and 13
[53] Exhibit 5
In cross examination, the father agrees with Mr Serisier that the company is paying his personal debt. He could not explain how that arrangement was legitimate for taxation purposes. While there may be good accounting reasons for arranging his affairs as he does, the obligation was on the father to explain his financial arrangements.
He has not done so.
I am satisfied the father’s income has been well in excess of the income upon which his child support assessments were based after 1 January 2007. I am also satisfied, that as for earlier periods, the father has the capacity to derive additional income by renting out rooms in his property at [L].
I have already made findings in relation to the father’s earning capacity in the period 1 July 2004 to 31 December 2006. I am not persuaded anything has changed in the period after 1 January 2007. I am satisfied the father has a greater earning capacity than he chooses to exercise.
I find the mother has established a ground for departure for the period
1 January 2007to date under s.117(2)(c)(ia) and (ib). I am satisfied in the special circumstances of the case, an administrative assessment of child support would result in an unjust and inequitable determination of the level of support to be provided by the father because of his actual income and his capacity to derive and earn more income. I have decided the father has a present actual income in excess of $60,000 per annum and has the capacity to earn substantially more. Child support for the period after 1 January 2007 is presently assessed on an income of $25,666. Thus the income on which the current assessment is based, and was based after 1 January 2007, bears no relationship to the past or future income of the father.
Is it just and equitable or otherwise proper to make an order for departure?
In determining whether it would be just and equitable to make an order departing from an existing assessment or agreement, the court is required, under s.117(4), to have regard to the following matters:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)himself or herself; or
(ii)any other child or another person that the person has a duty to maintain; and
(f)direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support:
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
The thrust of the child support scheme is to base the assessment of a child support liability on the income, earning capacity and financial resources of the parties, to have the parties meet that liability equitably as between themselves, and to have eligible children share in the financial fate of their parents. The essence of these criteria is to find a fair balance between the parents of the financial burden of the children’s support.
The mother is the sole employee of her own company which offers secretarial/administrative services. She charges $30 an hour for her services, which she says is top of the range and earns additional cash by doing market research in focus groups. Her working hours vary according to demand. Although she earned under $100 in the 2007 financial year, because of her poor health, she presently earns approximately $20,000 per annum. In cross-examination by the father, the mother says she worked as a business analyst with [omitted] for $60 an hour before [X] was born, 11 years ago. She denied the father’s suggestion that she could work in that role again. She says she has not retained her skills, has lost her connections in the industry and could not manage a 12 hour day as a single parent. I accept her evidence.
The mother lives in her own home with [X] and owns 9 investment properties, all of which are highly negatively geared. She says she purchased 4 of the properties in the last 5 years. She claims to have been tired of being so financially stretched, so when St George Bank offered ‘no document’ loans, she took out a line of credit secured by her home and bought the investment properties on 100% or 120% credit to make money. She services the loans by drawing down on the line of credit and when her earnings are insufficient to support herself and [X], she draws funds for day to day expenses from the same source. She deposes to that loan increasing from $570,486 to $608,480 between 1 May 2007 and 1 May 2008 as she used the funds to meet the shortfall of $740 a week between income and expenses.
The mother sets out her financial position in her Financial Statement sworn 16 May 2008. She deposes to a gross income of $3,548 a week made up as follows:
a. Rental income from investment properties
b. Interest
c. Business income from own company
d. Family allowance (Centrelink)
e. Child support
f. Income from ASGARD investment
$3,232.00
$60.00
$58.00
$119.00
$38.00
$41.00
The mother deposes to her mother meeting private school fees for [X] of $346.00 a week. She deposes to weekly personal expenses of $4,288.00 for herself and [X] made up of:
a. Superannuation
b. Mortgage repayments to St George
c. Rates and Levies
d. Other mortgage repayments
e. Other rates and levies
f. Life insurance premiums
g. Minimum credit card payments
h. Day to day expenses
$38.00
$1,025.00
$35.00
$1,929.00
$691.00
$5.00
$10.00
$555.00
The mother deposes to superannuation with a value of $125,000 and assets with a total value of $3,676,905.00 comprising:
a. Residential property
b. Investment properties
c. Bank proceeds St George
d. AMP account
e. Shares
f. Insurance policy
g. Shares in own company
h. Household contents
i. Other personal property
$1,200,000.00
$2,305,000.00
$3,774.00
$101.00
$137,000.00
$15,030.00
$13,000.00
$2,000.00
$1,000.00
The mother deposes to liabilities with a total value of $1,948,119 comprising:
a. Home loan
b. Mortgages on investment properties
c. Overpayment Centrelink
$610,000.00
$1,337,699.00
$420.00
The father did not challenge the content of the mother’s Financial Statement, including the expenses deposed to for [X]. Child support is primarily an income-based formula. The mother has a low income. She depends on her mother to meet [X]’s private school fees. The mother is increasing borrowings to meet the shortfall between her income and expenses. I accept she needs every dollar she can have from the father towards child support. While she has substantial real estate holdings, the mother faces a likely downturn in the property market and a consequent decrease in the value of her assets. It is not appropriate, in my view, in the circumstances of this case to expect the mother to continue to draw on capital intended to provide for her future.
The proper needs of the child are to be seen in the context of the background facts. The father has never lived with the child and provides the mother with no relief from her full time care. The father did not challenge the mother’s claim that she has suffered poor health at times which has affected her ability to earn income and may do so again in the future. The father did not challenge the mother’s assertion that she spends an estimated $363 a week for [X]’s living expenses, as well as $346 a week for her school fees, presently paid by her mother. I am satisfied the wife’s estimate of [X]’s day to day expenses are a reasonable reflection of the proper needs of the child in the context of this case. Presently, she cannot afford those expenses and is drawing on her line of credit.
I find the mother is unlikely, in the foreseeable future, to have an income earning capacity similar or approaching that of the father. The mother is likely to continue in part-time work given the father’s lack of support for [X]. The mother has raised [X] alone and is likely to be required to do so until [X] is independent.
If a departure order is not granted, the likely hardship to the mother is that she will continue to increase her borrowings until it becomes necessary to sell assets. Even on the order the mother seeks, the mother will be eroding capital to some extent to meet expenses.
In determining whether it would be otherwise proper to make an order departing from an existing assessment or agreement, the court is required under s.117(5) to have regard to the following matters:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(c)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The effect of any order on the mother’s centrelink benefits did not feature in the submissions of either party.
The orders which I propose would increase the mother’s income for the purposes of any means test which may apply to the benefits she currently receives from Centrelink. By definition, that could only result in a reduction in those benefits and therefore a reduction in the extent to which the responsibility for the support of the subject child is borne by the taxpayer.
I am satisfied that a departure order would be otherwise proper.
I propose to make an order in the terms sought by the mother for the period 1 January 2007 to 30 June 2008, and 1 July 2008 to
31 December 2009, that the adjusted income amount for the father be set at $80,000 per annum for the first period, and $90,000 for the second.
The mother sought an order for a period beyond 31 December 2009.
I find the mother’s application reasonable. There is no evidence that the father’s circumstances are likely to change significantly in the foreseeable future, with the exception of Dr J’s prediction that the father’s mental health is likely to improve with the finalisation of these proceedings. In the absence of a registered agreement, an administrative assessment will revert to the rate assessed on the father’s taxable income, as adjusted, as evidenced by his tax return. The formula will not then accommodate what I have found to be the true financial circumstances of the father. However, the child support scheme is based on the regular review of liability to ensure the objects of the scheme are met by reference to the changing circumstances of the payer, the payee and the subject child. The parties’ financial circumstances may significantly change in the years to come and I find it likely the needs of [X] will increase as she gets older. I have decided those changes should be accommodated by the Registrar when [X] is 13 years old. I have therefore decided the orders will extend until
31 December 2010.
I certify that the preceding one hundred and twenty-five (125) paragraphs are a true copy of the reasons for judgment of Sexton FM.
Associate: Skye Owen
Date: 18 February 2009
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