Tang and Tang (Child support)

[2018] AATA 4651

Tang and Tang (Child support) [2018] AATA 4651 (22 October 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC013835

APPLICANT:  Mr Tang

OTHER PARTIES:  Child Support Registrar

Ms Tang

TRIBUNAL:Member T Bubutievski

DECISION DATE:  22 October 2018

DECISION:

The decision under review is set aside. 

For the period 22 August 2017 to 30 June 2018, Mr Tang’s adjusted child support income is set at $30,000 per annum;

For the period 1 July 2018 to 31 December 2018, Mr Tang’s adjusted child support income is set at $38,000 per annum.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of parents – business income – ground for departure established – 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

1. Mr Tang and Ms Tang are the parents of two children, [Child 1] and [Child 2]. The case is registered with the Department of Human Services (Child Support) (the Department) for collection.

2. Mr Tang was assessed to pay child support at an annual rate of $10,829 based on a change of assessment decision, which set his adjusted taxable income at $65,000 and increased his child support by $1,260 per annum for the period 1 July 2017 to 31 October 2017 in respect of [Child 2’s] special needs, when on 11 September 2017 Mr Tang applied for a reduction to the assessment on the basis that he was no longer employed, but in a partnership.

3. The application was considered by a Departmental delegate of the Child Support Registrar on 9 October 2017, who decided that as Mr Tang had not provided any financial documents to allow the decision to be changed, and the net expenses declared in his application were $58,240, which would require a gross income similar to that being used in the assessment, there was no reason established to change the assessment.

4. Mr Tang objected to this decision.  On 21 November 2017 the decision was reconsidered by a Departmental objections officer who found that being a start-up business, Mr Tang’s income was likely to be less than seemed to be indicated by the available financial statements, but would still be like the income he was previously earning. As his 2016 taxable income was $69,285, the objections officer set Mr Tang’s adjusted taxable income at $69,285 for the period 10 November 2017 to 9 January 2019.

5. On 21 February 2018, Mr Tang made an application for review by the Social Services and Child Support Division of this tribunal. The tribunal held a telephone directions hearing on 1 August 2018. The tribunal made written directions, with which the parties complied.

6. The matter was heard by the tribunal on 6 September 2018. Mr Tang and Ms Tang attended the hearing by telephone. They both gave sworn evidence. The Child Support Registrar did not seek leave to appear. Both parties and the tribunal had access to documents numbered 1 to 283 from the Department, and documents A1 to A42 and B1 to B12 from the parties.

ISSUES

1. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. In order to depart from the administrative assessment the Registrar, and the tribunal standing in place of the Registrar, must be satisfied:

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

   (ii)that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)      otherwise proper;

   to make a particular determination under this Part;

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act.

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

Issue 1 – Does a ground exist to depart from the administrative assessment?

Does a ground exist to depart from the administrative assessment under Reason 8?

1. Mr Tang sought a departure from the administrative assessment on the ground that his income has reduced due to a change in his employment circumstances and so his income and financial resources are not correctly reflected in the assessment. This is the ground reflected in subparagraph 117(2)(c)(ia) of the Assessment Act.

2. Mr Tang said that he had previously been employed by a company which manufactured and installed [products]. The business manager for the company was winding down and Mr Tang said that all the staff were looking at leaving in the next one to two years. He started up another business, which is a partnership. He said that he told the business manager about that and the business manager was fine with it and offered them subcontracting work. When the owner found out, he didn’t like it at all, and Mr Tang found himself fired. He ceased employment [in] August 2017.

3. Mr Tang said that he had hoped that they would have had more time to set up the business because they did not have a customer base, manufacturers or a retail presence at the time he found himself without a job. The business is mobile, and is all done from the vans. Mr Tang said that he thought that child support should be based on the actual salary he takes from the business, plus a little bit extra for personal use. He said that it is not possible to pay the amount of child support that has been assessed on the income he has. He said that he has been open about his financial position. He provided payslips showing an annual salary of $35,048, with current weekly earnings of $674 gross. The tribunal noted that the documents presented show that he and his business partner did not commence being able to take wages from the business until November 2017. Mr Tang said that he and his business partner take the same amount of income from the business. His 2018 PAYG Summary says that he received gross payments of $22,204 from [a company] in the 2018 financial year.

4. The tribunal queried some of the information on the business activity statements (BAS). Mr Tang said that they do not get much retail work, it is mainly working through builders. As would be expected, awnings are seasonal, and they tend to get a lot more work leading up to Christmas than they do afterwards. Mr Tang said that business is now steady, but they need to grow it a lot. They need a lot of money in the bank to buy supplies, and they are going over their 30-day terms with some suppliers.

5. The BAS for the July to September 2017 quarter shows total sales of $8,631. For October to December 2017 sales were $47,945; for January to March 2018 they were $32,661 and April to June 2018 total sales were $69,252, giving gross income from sales for the year of $158,489. The first quarter was obviously a start-up period, and while there is some seasonal variation in the income it appears that gross income from sales of around $180,000 per annum is not unreasonable. Of course, that takes into account no expenses of the business and also that the income generated from the business must be shared equally between the two partners.

6. The tribunal asked why it appears to now have three sets of books for the same period which have different amounts for some expenses and income. Mr Tang said that as first time business owners they enter the data into Xero, but they do not always get it right. The accountant then looks at it and makes adjustments. Mr Tang said that they have had to change their BAS twice due to errors. On this basis, the tribunal decided to accept the third set of books presented to it as the most correct.

7. The tribunal asked Mr Tang about the large superannuation expense in June 2018. Mr Tang said that they had not been making their superannuation payments and had to make extra. The tribunal noted that the superannuation payments made in the rest of the period corresponded to the incomes and the reason for this was not clear. In June 2018 the Xero books show wages and salaries of $5,392, and superannuation of $4,091. Each of the previous months show superannuation paid at the statutory rate.

8. The tribunal asked about the office expenses. Mr Tang said that the whole business was run from the vans and there really would not be much in the way of office expenses. This only accounts for around $396 of expenses. The tribunal asked about the high telephone and internet expenses. Mr Tang said that the business is run on their mobile phones. He did not know how much of his home internet was for the business. Mr Tang said that he would not use his home internet for the business very much, just to do a bit of accounting. Ms Tang said that she is aware that the children have access to internet streaming services at Mr Tang’s house, so in her view the internet expense would be personal.

9. The accounts for the business show the bulk of expenses to be materials and supplies, salaries, motor vehicle expenses, and telephone and internet costs. These are all reasonable expenses for the type of business Mr Tang is engaged in and do not appear to be unduly excessive. There is around $50 of entertainment expenses, which would not take priority over child support and there does appear to be some personal use component of the vehicle and the telephone/internet expenses. The financial statements presented to the tribunal show that the business operated at a loss in the 2018 financial year of around $10,709, apparently due to its slow start and relatively high overheads.

10. The objections officer contacted Mr Tang’s accountant who advised that from November 2017 the partners in the business earned $500 per week each and the business is also paying Mr Tang’s mobile phone $40 per month, internet of $60 per month and $100 per week in fuel. Given the nature of his work it is likely that his mobile phone and fuel bills are primarily business-related.

11. The tribunal asked about personal use of the work vehicles. Mr Tang said that he was previously partnered and they used his partner’s car for personal trips, but now he is using the van, which would mean a small amount of personal use.

12. Ms Tang said that Mr Tang has a boat, which he used [and] that he has to pay to moor, and that she felt his lifestyle was not in keeping with the sort of income he disclosed. Mr Tang said that he and his partner bought an old sailboat on e-bay for about $1,000 about three years ago. He said that it was a ‘mooring minder’, which is an old boat which is used to mind a mooring for a better boat. He said that mooring was around $300 per year and the boat needed a lot of repair. He said that he and his partner spent New Year’s Eve on the boat, but that was at the mooring. It would not be sufficiently seaworthy to sail to the harbour. Ms Tang said that she disagreed about the condition of the boat. She said that Mr Tang seems to do a lot of leisurely things for himself and is always in designer clothes while she feels that she and the children are struggling. The tribunal looked at pictures of the boat on Mr Tang’s Facebook page. It is a small craft and appears relatively well maintained, but the tribunal has no reason to dispute Mr Tang’s valuation of the boat and does not consider it adds anything to his ability to pay child support.

13. Mr Tang said that his 2017 taxable income was about $76,000. The Department shows his 2017 taxable income to have been $76,619. Mr Tang said that his current income is about $22,000 in wages plus whatever extra he may be able to take from the business.

14. Mr Tang said that he has been unable to meet his financial commitments on his business income, and provided a disconnection warning for his electricity account for arrears of $681.83, arrears of rent $2,460, and a credit card bill of $4,094.30. Mr Tang said that he is no longer behind in his rent but he still owes electricity. He has borrowed nearly $4,000 from family, which helped to clear the rental arrears. As at 22 August 2018 the Department shows Mr Tang to be $9,492.16 behind in his child support commitments. The Statement of Financial Circumstances he provided to the tribunal allows for food, rent, and electricity only, amounting to $616.80 per week. There is also a credit card payment of $20.50 per week and child support of $12 per week. This equates to net expenses of $649.30 per week. Mr Tang also has the benefit of some telephone, internet and fuel expenses being paid for by the business to the tune of $200 per month. Allowing for the bulk of the telephone and fuel expenses to be legitimately work-related, the tribunal is satisfied that this gives Mr Tang a financial benefit of approximately $20 per week. Even so, his income and expenses are modest and there has been no profit generated by the business from which he can increase his income at present.

15. On the evidence, the tribunal is satisfied that Mr Tang genuinely became unemployed and that as a result he has had a substantial reduction in his income for a short period of time while he establishes his own business.

16. Nonetheless, the tribunal is satisfied that the wage Mr Tang takes from this business does not fully represent his benefits from self-employment. The Family Court has established the principle that in the case of self-employed parents, their taxable income may not be an accurate reflection of their earning capacity and financial resources. Several cases in particular have examined this issue closely, including Scott v Scott (1994) FLC 92– 457, and Carey v Carey (1994) FLC 92–489. The Courts consider that self-employed people are able to derive benefits from their business in addition to wages, such as the payment of personal use expenses and expenses which may be allowable for income tax purposes but which do not take priority over child support. These include things like depreciation, the personal use component of business expenses and discretionary business expenses such as entertainment and donations. In financial matters like the present matter, the tribunal is not required to undertake a major audit or investigation into the affairs of the parties, but only needs to be reasonably satisfied, on the balance of probabilities, about the state of their income, property and financial resources.

17. The tribunal is satisfied that Mr Tang took income from [a business] of $22,200 between 22 August 2017 and 30 June 2018; that he also derived additional personal benefits from the company of around $1,040 per annum; that he may have received an extra superannuation benefit; that the bulk of the expenses of the business were reasonable; and that his income is presently higher than this (his current salary $35,048 per annum in addition to personal benefits), and is likely to further increase. Nonetheless, his income is far less than the income being used in the child support assessment at present, being $69,285.

18. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 (Gyselman) the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. The tribunal was satisfied that in the context of Ms Tang’s relatively limited income and the total child support assessment at the time of the change of assessment establishes special circumstances such that the child support assessment could be amended to take them into account. The tribunal finds this ground established. As a ground is established, the tribunal must also consider whether it is just and equitable, and otherwise proper, to change the assessment.

Issue 2 – Would departure from the administrative assessment be just and equitable?

1. As the tribunal is satisfied that a ground has been established to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable, the tribunal must have regard to the following matters set out in subsection 117(4) of the Assessment Act:

   (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, property and financial resources of each parent who is a   party to the proceeding; and

   (da)the earning capacity 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)the 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; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The tribunal only has to consider the factors set out in subsection 117(4) of the Assessment Act to the extent they are relevant in any particular case (see Gyselman).

3. Mr Tang’s circumstances are as set out above. The tribunal accepts the 2018 financial year was a difficult one for his business, but that it is now established and Mr Tang’s income circumstances are likely to change.

4. Ms Tang is also on an extremely limited income, being primarily reliant upon Centrelink benefits for the support of herself and the children, although she does bring in between $125 and $187.50 per fortnight from a very small amount of casual work. She is clearly struggling financially and is in need of as much child support as Mr Tang can reasonably be expected to pay to her.

5. Ms Tang said that [Child 2] is extremely sick with mental health issues and is unable to leave the house. He constantly wants to end his life and she has a big mental health support team assisting her through the public health system. He also has [other medical conditions]. She does have a health care card for him, so his medication only costs $7 for each thing, but it is changing constantly. He sees a paediatrician every few months and there is a gap fee of $150 each time. Due to [Child 2’s] medical condition, Ms Tang is unable to work much and only does about two hours each week.

1. Under child support law, payments received from the government for the support of children are not included in a person’s child support income. The tribunal notes that Ms Tang does not appear to have lodged an income tax return but the Department shows her Centrelink income as $15,685 for the 2018 financial year. Allowing for her to earn approximately $140 per fortnight gives her a total income of $19,325 on which to support three people and meet [Child 2’s] special needs. It was apparent to the tribunal that both parents are struggling at present, but that Ms Tang and the children are in greater need than Mr Tang.

2. Mr Tang alleged that Ms Tang receives financial support from her partner. Ms Tang said that she does have a partner but he rents separately and does not provide her with financial support. Under the law, Ms Tang’s partner has no duty to support Mr Tang’s children, so any support he may provide to Ms Tang is not relevant to the child support assessment unless it would substantially change their standard of living. There is no evidence that this is the case.

3. Assessing Mr Tang on his actual income until the end of the 2018 financial year would result in a minimum assessment of child support of $420 per annum for the period 22 August 2017 to 30 June 2018. This would be disastrous for the children, particularly taking into account [Child 2’s] special needs. Although the cost of this to Ms Tang is probably only in the order of around $1,000 per annum, in the context of her extremely limited income that is a great deal of money. For this reason, the tribunal has decided to set Mr Tang’s adjusted child support income of $30,000 for the period 22 August 2017 to 30 June 2018 with the knowledge that this will create an annual rate of child support payable by him which makes a contribution both to the upkeep and support of the children and to [Child 2’s] additional expenses. The effect of this decision will more or less extinguish his existing child support arrears for that period. The tribunal understands that this is not the outcome Ms Tang is hoping for.

4. The business is improving. Mr Tang’s current salary is $35,048 per annum, and he also has those additional benefits of at least $1,040 per annum, probably more, and the likelihood of additional superannuation. Mr Tang’s evidence to the tribunal is that the business is now stable, but they do still need to do more work on expansion. Hopefully this will generate greater financial rewards for him and the children. In the meantime, it is reasonable to allow him some further re-establishment time. Using the same reasoning in relation to income and special needs, the tribunal also considers it would be correct to set his adjusted child support income at $38,000 per annum from 1 July 2018 until 31 December 2008. The business does appear to be growing relatively rapidly, and the children should not be left behind. This decision is intended to give Mr Tang some breathing space during his re-establishment period, while still providing support for the children and [Child 2’s] special needs, and no more.

5. Mr Tang must be aware that he has a positive legal obligation to financially support his children to the fullest extent of his capacity. This obligation falls only to Mr Tang and Ms Tang. It does not fall on either of their partners or the taxpaying public.

6. The tribunal is satisfied that it would be appropriate in this case to change the decision, as long as it is otherwise proper to do so.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the tribunal is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the tribunal to take into consideration the nature of the duty of a parent to maintain a child, and the effect that any change to the assessment would have on the rate of any Centrelink benefits being received by the parties or the children.

2. The child support law recognises that each parent has a primary duty to maintain their children. In the case that they cannot, the government may assist in the form of family assistance payments. Ms Tang does receive family assistance payments and this decision will increase the rate of these payments and so allow the burden of supporting the children to fall more on the public purse for a relatively short period of time. The tribunal is satisfied that a departure from the assessment will better reflect the financial resources that have been available to the parents and ensure that the level of financial support provided by the parents for the children is determined according to their capacity to provide that support. It is therefore otherwise proper to depart from the administrative assessment in this matter. 

DECISION

The decision under review is set aside. 

For the period 22 August 2017 to 30 June 2018, Mr Tang’s adjusted child support income is set at $30,000 per annum;

For the period 1 July 2018 to 31 December 2018, Mr Tang’s adjusted child support income is set at $38,000 per annum.