Stinson and Gilpin (Child support)

[2018] AATA 2287

Stinson and Gilpin (Child support) [2018] AATA 2287 (24 April 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/CC012399

APPLICANT:  Miss Stinson

OTHER PARTIES:  Child Support Registrar

Mr Gilpin

TRIBUNAL:  Member M Douglas

DECISION DATE:  24 April 2018

DECISION:

The Tribunal sets aside the decision under review and substitutes the decision by:

·         varying the adjusted taxable income for Mr Gilpin to $62,000 for the period 1 January 2017 to 30 June 2017 and to $55,000 for the period 1 July 2017 to 31 December 2018; and

·         varying the costs of the children such that they are increased by $1,747 for the period 1 January 2017 to 31 December 2017 and by $1,344 for the period 1 January 2018 to 31 December 2018.

CATCHWORDS
Child support - Departure determination - Costs of education - Mutual expectation established - Financial resources of parents - Decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988

REASONS FOR DECISION

BACKGROUND

The parties

1. The parties to this proceeding are Mr Gilpin, Miss Stinson and the Child Support Registrar. Mr Gilpin and Miss Stinson are the parents of [Child 1] and [Child 2], in regards to whom the Registrar has made an administrative assessment of child support that obligates Miss Stinson to pay child support for the children to Mr Gilpin.

2. The Registrar acts through the Department of Human Services (the Department), and hereafter the Tribunal's reference to the Department is to be taken as a reference to the Registrar.

The background to the decision being reviewed

1. On 2 November 2016, Miss Stinson applied to the Department under section 98B of the Child Support (Assessment) Act1989 (the Act) for a departure from the provisions of the Act relating to an administrative assessment. The Department describes an application of this type as a "change of assessment" application and the decision it makes on such an application as a "change of assessment" decision, and to avoid confusion the Tribunal shall adopt the same terminology.

2. In support of her change of assessment application, Miss Stinson relied on the ground provided in subparagraph 117(2)(c)(ia) of the Act, which ground the Department describes as reason 8A.

3. Mr Gilpin opposed Miss Stinson’ application and, indeed, made his own change of assessment application on 3 January 2017, relying on the ground provided in subparagraph 117(2)(b)(ii). The Department refers to this ground as reason 3.

4. On 6 February 2017, in response to these applications, the Department made a change of assessment decision that increased Mr Gilpin’s adjusted taxable income to $122,909 for the period 1 January 2017 to 31 January 2019 and increased Miss Stinson’ annual child support assessment by $874.

5. Mr Gilpin objected to that decision and on 1 May 2017, the Department set aside its decision of 6 February 2017 and determined that for the period 1 January 2017 to 31 December 2017 the annual rate of child support payable by Miss Stinson be increased by $847. It is this decision that, on Miss Stinson’ application, the Tribunal is reviewing.

The assessments the subject of the decision being reviewed

1. The relevant assessments of child support in force as at the date the Tribunal heard Miss Stinson’ application required Miss Stinson to pay child support for the children at the annual rates set out in the table below. The Tribunal has included in that table the adjusted taxable incomes of Miss Stinson and Mr Gilpin, with a note indicating the basis by which the income amount was set. Where there is no note, the note in the row above applies.

Period	Miss Stinson’s ATI	Mr Gilpin’s ATI	Annual rate of child support
1 January 2017–31 May 2017	$65,344 2014/15 taxable income	$52,396 2014/15 taxable income	$6,442
1 June 2017–13 September 2017	$72,426 Determined by the Department under section 58 of the Act	$35,265 2015/16 taxable income	$8,696
14 September 2017–31 October 2017	$72,077 2015/16 taxable income	$35,265	$8,635
1 November 2017–31 December 2017	$71,381 2016/17 taxable income	$35,865 Determined by the Department under section 58 of the Act	$8,477
1 January 2018–15 December 2018	$71,381	$35,865	$7,603
16 December 2018–31 January 2019	$71,381	$35,865	$8,409

1. The Tribunal observes that the variation in the annual rate of child support payable by Miss Stinson on 16 December 2018 is due to [Child 2] attaining 13 years of age on that date, and hence the cost of the children for the purpose of the assessment increased on that date in accordance with the Table in schedule 1 of the Act that applies in accordance with section 55G of the Act (cost of children table).

The hearing and the evidence

1. The Tribunal heard Miss Stinson’s application on 24 April 2018. She and Mr Gilpin participated in the hearing by telephone and gave oral evidence. The Registrar did not appear. Both Miss Stinson and Mr Gilpin also provided documents to the Tribunal which have been received into evidence. Miss Stinson’s documents are marked A1–163 and Mr Gilpin’s documents B1–285. The Tribunal has also received into evidence documents the Department provided in accordance with subsection 37(1) of the Administrative Appeals Tribunal Act 1975, which are paginated 1–299.

2. The Tribunal has had regard to this evidence.

RELEVANT LAW AND ISSUES

1. Part 5 of the Act contains the provisions by which the Department assesses the annual rate at which a liable parent is to pay child support to the carer entitled to child support. A liable parent or the carer entitled to child support may, if they believe there are special circumstances, apply to the Department under section 98B of the Act for a determination to depart from the provisions relating to the assessment of child support. The Department, or the Tribunal in the Department's place, if satisfied that the criteria of subsection 98C(1) are met, can make one or more of the determinations listed in subsection 98S(1) so as to depart from the provision of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are:

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

   ii.that it would be:

   a.just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   b.otherwise proper;

   to make a determination (under subsection 98S(1)).

2. The grounds for departure referred to in subsection 98C(2) are those set out in subsection 117(2).

3. In reviewing the Department's decision, the Tribunal must consider whether these criteria are met in this case, and if they are, the Tribunal must then consider what determination or determinations should be made under subsection 98S(1).

CONSIDERATION

Is there a ground to change the assessment?

1. As earlier mentioned, Miss Stinson in her change of assessment application relied on the ground provided in subparagraph 117(2)(c)(ia) of the Act, and Mr Gilpin relied in his application on the ground provided in subparagraph 117(2)(b)(ii). Those provisions of the Act read as follows:

   117(2)(b) that in the special circumstances of the case the costs of maintaining the child are significantly affected:

   ...

   ii.because the child is being cared for, educated or trained in the manner that was expected by his or her parents.

   117(2)(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.

Subparagraph 117(2)(b)(ii)

1. It is not in dispute that prior to and as at the date of their separation the children were attending a local Catholic primary school. The Tribunal infers from that, that as at the date of their separation it was the expectation of both Miss Stinson and Mr Gilpin that both children would be educated at a local Catholic school.

2. The evidence revealed that the annual fee charged by the school for the eldest child is $1,344.00 and for a second child it is $403.20, meaning that the total fees charged by the school if two children attend is $1,747.20. If only one child attends the school the annual fee is $1,344.00.

3. [Child 2] has not attended the school since he concluded his primary education at the end of 2017 and is now enrolled in a local State high school.

4. Miss Stinson’s evidence was that subsequent to her and Mr Gilpin’s separation she came to the view that it was not in the children’s best interest for them to attend the local Catholic school because, in her view, the school was not providing adequately for the children’s educational needs. She contended, in substance, that upon her forming that view, it was no longer her expectation that the children receive their education at a Catholic school.

5. In determining whether this ground for departure exists, the expectation of parents regarding the manner in which their children are to be educated is to be considered by reference to what expectation they had during the course of their relationship: see Murphy & Murphy (Child Support) [2016] AATA 2001 applying In the marriage of Mee & Ferguson (1986) FLC 91-716. In other words, for the purposes of determining whether the ground provided in subparagraph 117(2)(b)(ii) is established, it does not matter that a parent may change their expectation following separation. What is relevant is what the expectation was of the parent prior to separation.

6. Noting that the fees the Catholic school charged were, while both boys were attending the school, of the order of 12% of what the cost of the children table reveals the cost is to care for two children under 13 years of age, and fees the school charged have been, since 1 January 2018 when only [Child 1] has attended the school, of the order of 20% of what cost of care table indicates the cost of his care is, I am satisfied that the cost of maintaining both boys until 31 December 2017 was significantly affected by their being educated in the manner expected by Miss Stinson and Mr Gilpin and that since 1 January 2018 the cost of maintaining [Child 1] has also been significantly affected because he is being educated in the manner expected by both Miss Stinson and Mr Gilpin.

7. It follows that this ground for departure is established.

Subparagraph 117(2)(c)(ia)

1. Miss Stinson’s case based on this ground is, in substance, that Mr Gilpin receives more income through plying his trade as a [occupation] than that reflected in his taxable income. She referred to statements that Mr Gilpin lodged with the Tribunal that Mr Gilpin had received from [Bank 1] with whom he holds a personal account and a business account. She highlighted from those statements that Mr Gilpin makes regular cash withdrawals from automatic teller machines. She also highlighted that Mr Gilpin uses his personal account to pay his mortgage loan, insurance and many other obvious personal expenses. She contended that the total amount of the transactions he makes using his personal account defies his having an income as low as that which has been used as his adjusted taxable income in the child support assessment. She also said that Mr Gilpin has been able to afford to renovate the house in which he resides; take holidays including a holiday to [a certain destination], weekend trips to [City 1] and [City 2] and a cruise; and to rebuild a car that he exhibited at the 2016 Summernats. She submitted that he would not be able to afford to do all this if his income was as low as his adjusted taxable income.

2. Mr Gilpin confirmed that he receives income from contracting out his services as a [occupation]. Until the end of the 2017 financial year he did that in partnership with another unrelated person. He produced the financial statements his accountant had prepared for that partnership for the 2017 financial year as well as the tax return that the partnership had lodged at the Australian Taxation Office for that year. He also produced a copy of his personal tax return he lodged with the Australian Taxation Office for the 2017 financial year.

3. His personal tax return revealed that he received a distribution in the 2017 year of $76,163 from the partnership, but in the calculation of his taxable income he deducted from that amount expenses incurred with respect to his motor vehicle, phone and internet, rubbish removal, materials and tools and income protection insurance, which expenditure amounted to $16,182, such that his taxable income in the 2017 year is likely to be assessed by the Australian Taxation Office as $59,981.

4. The partnership tax return also revealed that its profit, from which the distribution to Mr Gilpin was made, was net of amounts of $3,583 for depreciation and $2,721.68 for entertainment expenses. The financial statements Mr Gilpin’s accountant prepared for the partnership for the 2017 financial year did not indicate that any new plant or equipment had been purchased meaning that the amount claimed by the partnership for depreciation was really a “book” expense rather than an actual expense, thus enabling the partners, including Mr Gilpin, to use the amount claimed for depreciation for their own purposes.

5. In terms of considering what income and resources Mr Gilpin had and now has available to him from which he could contribute to the costs of supporting the children, and hence for the purpose of determining how he and Miss Stinson should share the expenditure associated with their children in a just and equitable manner, it is the Tribunal’s view that any amount claimed for depreciation that is, in effect, a book expense, should be disregarded. This is because this is really money that is available to Mr Gilpin to spend for his own purposes rather than on plant and equipment. Hence, while he was in a partnership, half of the depreciation expense ought to be treated as being a financial resource of Mr Gilpin.

6. Similarly, and bearing in mind too that Mr Gilpin and Miss Stinson have a primary obligation to support their children, which duty has priority over all their commitments other than those necessary for their own support, it seems to the Tribunal that a part of what Mr Gilpin’s partnership claimed for entertainment expenses ought also to be treated as being income available to Mr Gilpin when considering the fairness of the child support assessment. Whilst it seems appropriate to the Tribunal that some money be spent in the conduct of a business on entertainment, for the purpose of assisting with maintaining the client base of the business, in the Tribunal’s view, what was spent by Mr Gilpin’s partnership was high.

7. Mr Gilpin advised that at the start of the current financial year he and his partner dissolved their partnership and he now trades as a sole trader. He said that he needed to rebuild his business and to do that he did not “draw any wages” for the first two months, but instead borrowed $10,000 from his parents to cover his and the children’s living costs. The copies of the statements from the business account he holds with [Bank 1] confirms that was the case in that what was debited from that account revealed no monies were transferred to his personal account in July, only $2,000 was transferred in August, under the description “[Mr Gilpin]’s wages”, $5,000 in October, $4,000 in November and $4,000 in December. Further, his personal accounts reveal an amount of $10,000 was deposited into his account on 18 August by [Mr A], with the transaction description noted as “loan meats”, and which the Tribunal infers represents the loan to Mr Gilpin from his parents.

8. Mr Gilpin stated that the cash withdrawals he makes from his personal account at automatic teller machines are used by him to meet his living expenses and other personal costs, including costs associated with the children and also costs that his parents incur when they mind the children when he is working.

9. Mr Gilpin also confirmed that he rebuilt a car that he inherited from his grandfather for the purpose of showing it at [a] Festival in 2016. He said that the costs he incurred to rebuild the car were met from a personal loan he obtained from [Bank 1].

10. Mr Gilpin also confirmed that he took a holiday on a [Cruise liner’s] cruise approximately 12 months ago but said that his former partner funded the cost of that. He also said that other than that he has not gone on a holiday for five years and that was to [a certain destination]. He says that on occasion he may go to [City 1] and [City 2] on a weekend. He denied that he incurred much by way of expense to do that.

11. The Tribunal accepts his evidence on these matters.

12. The evidence outlined above reveals that in the year ending 30 June 2017 Mr Gilpin’s effective income from his trade as a [occupation] was far greater than that used for him in the child support assessment. Further, the business account he holds with [Bank 1] reveals that from 10 July 2017, on which date he opened the account, to 9 February 2018, comprising 7 months, he transferred under the description “[Mr Gilpin]’s wages” amounts totalling $20,000. Within that time amounts totalling $102,785.74 were credited to the account, which the Tribunal infers is the income Mr Gilpin received from plying his trade as a [occupation]. The statements for the account also reveal $88,209.33 in total was debited from the account, including the amounts transferred under the description “[Mr Gilpin]’s wages”. Hence, over that seven month period, Mr Gilpin’s receipts exceeded his business expenses (ignoring the amounts transferred as “[Mr Gilpin]’s wages”) by $34,576.40. That figure, when extrapolated over an annual period, expands to $59,273.85.

13. The debits from Mr Gilpin’s business account that he has held with [Bank 1] since 10 July 2017 do not reveal expenses in the nature of insurance premiums, accountant’s fees and superannuation contributions, which were expenditures of the partnership when that was current. In the Tribunal’s view, it is appropriate for someone conducting a business as a tradesperson to incur expenditure of this type. But even making some allowance for that, the surplus of Mr Gilpin’s receipts over debits in the first seven months of this financial year is such, in the Tribunal’s view, that Mr Gilpin will in the current financial year have far greater income available to him from the conduct of his trade as a [occupation], than the adjusted taxable income used for him in the child support assessment.

14. In those circumstances, the Tribunal is satisfied that as a consequence of his income the application of the provisions of the Act in relation to an assessment of child support do result in an unjust and inequitable determination of the level of financial support to be provided by Miss Stinson for the children.

15. Accordingly, this ground for departure is established.

Would it be just and equitable to make a determination?

1. The matters the Tribunal must consider when doing this are listed in subsection 117(4) of the Act. Rather than dealing with each matter separately, it is convenient for the Tribunal to group the matters and consider them by reference to the following headings.

Miss Stinson’s circumstances

1. Miss Stinson is employed as a[occupation]. Her weekly income until February this year was $1,368. In February this year she was awarded a wage increase of 1.8%. On the Tribunal’s calculation that means that her annual income this year is likely to correlate with the adjusted taxable income that has been used for her in the assessment of child support.

1. She has all the usual commitments to meet for her support. She has no special needs. She has a debt to Centrelink of $3,350 that she is currently paying. She has no other liabilities of significance. She has no assets of significance. To the extent that the assessment does not take into account Mr Gilpin’s effective income, the Tribunal is satisfied that undue hardship is caused to her.

Mr Gilpin’s circumstances

1. Mr Gilpin’s income has been discussed above. It seems to the Tribunal, based on that discussion, that an appropriate income amount to attribute to him for the year ending 30 June 2017 for the purposes of assessing how he and Miss Stinson should share the cost of their children is $62,000. Since then it seems that an appropriate income figure to use for him is of the order of $55,000, having regard to the fact that he would incur some cost beyond that revealed in his [Bank 1] business account on insurance and superannuation and the like.

2. His statement of financial circumstances that he lodged with the Tribunal reveals that his major asset is the house in which he and the children reside. He has three motor vehicles, all of which he attributes a very modest value. He is indebted to his parents but is not at present repaying that debt. He has a mortgage loan and also a personal loan from [Bank 1], which in his evidence he obtained to refurbish the vehicle he inherited from his grandfather.

3. He does not have any expenses that are out of the ordinary. He does not have any special needs. The Tribunal notes that were he to receive less child support from Miss Stinson then necessarily that would cause him some financial hardship, given that his income is relatively modest.

The children

1. The evidence does not reveal that the children have any special needs. The evidence reveals that the cost of maintaining both children were increased until 31 December 2017 as a consequence of their attending a local Catholic primary school in accordance with the expectation of both Miss Stinson and Mr Gilpin. Since then, the cost of [Child 1] only has been increased as a consequence of his attending a Catholic school. [Child 2], as mentioned above, now attends a local high school.

2. The Tribunal takes into account that Miss Stinson and Mr Gilpin both have a primary obligation to support [Child 1] and [Child 2].

Would it be otherwise proper to change the assessment?

1. In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Miss Stinson and Mr Gilpin and also have regard to whether, and if so how, any determination it makes would affect the entitlement of either Mr Gilpin or the children to an income tested pension, allowance or benefit.

2. The Tribunal understands that neither child receives an income tested pension, allowance or benefit and that irrespective of whatever determination the Tribunal makes, that will remain the case.

3. Mr Gilpin receives family tax benefits. The Tribunal understands that if it were to make a determination departing from the provision of the Act relating to the assessment of child support, such that Mr Gilpin receives lesser child support from Miss Stinson than that which she is currently assessed as liable to pay Mr Gilpin, then there may be an increase in the family tax benefits Mr Gilpin receives. Given the circumstances outlined, the Tribunal considers that would be a proper outcome so long as the reduction in Miss Stinson’s child support obligation is only to a level that accords with her primary obligation to support the children.

What would be a just and equitable and otherwise proper determination to make?

1. In the circumstances, the Tribunal considers that it would be just, equitable and otherwise proper to make the following determinations:

   ·         varying the adjusted taxable income for Mr Gilpin to $62,000 for the period 1 January 2017 to 30 June 2017 and to $55,000 for the period 1 July 2017 to 31 December 2018; and

   ·         varying the costs of the children such that they are increased by $1,747 for the period 1 January 2017 to 31 December 2017 and by $1,344 for the period 1 January 2018 to 31 December 2018.

2. These determinations mean that Miss Stinson’s child support liability will be assessed in accordance with what the Tribunal considers is the real level of income Mr Gilpin has had and will have available to him from his trade as a [occupation], and ensure that each of Miss Stinson and Mr Gilpin contribute to the additional cost associated with both children’s schooling until 31 December 2017 and with [Child 1]’s schooling since then in proportion to their respective incomes.

DECISION

The Tribunal sets aside the decision under review and substitutes the decision by:

·         varying the adjusted taxable income for Mr Gilpin to $62,000 for the period 1 January 2017 to 30 June 2017 and to $55,000 for the period 1 July 2017 to 31 December 2018; and

·         varying the costs of the children such that they are increased by $1,747 for the period 1 January 2017 to 31 December 2017 and by $1,344 for the period 1 January 2018 to 31 December 2018.