Taybourne and Taybourne (Child support)

[2024] AATA 4124

Taybourne and Taybourne (Child support) [2024] AATA 4124 (27 August 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2024/MC027604

APPLICANT:  Mr Taybourne

OTHER PARTIES:  Child Support Registrar

Ms Taybourne

TRIBUNAL:  Member P Jensen

DECISION DATE:  27 August 2024

DECISION:

The objections officer’s decision dated 14 February 2024 is varied with effect from 11 October 2023, so that:

• from 11 October 2023 to 26 November 2023, Mr Taybourne’s rate of child support payable is varied to $7,735 per annum; and

• from 27 November 2023 until the occurrence of a child support terminating event, the rate of child support payable between the parents is varied to nil.

CATCHWORDS

CHILD SUPPORT – child support agreement – departure determination – income, property and financial resources – business’s payments to father and current wife – smaller payment to father and larger payment to current wife – uncertainty about father’s income and financial resources, and mother’s period of unemployment – later variation to nil agreed – decision under review varied

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

REASONS FOR DECISION

Introduction

1. Mr Taybourne and Ms Taybourne are the parents of [the child] who was born in 2009. A child support case was registered with Services Australia – Child Support (Child Support) in 2016.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the child. From 1 March 2023 the administrative assessment was based on Mr Taybourne’s 2021–22 adjusted taxable income of $37,285, Ms Taybourne’s 2021–22 adjusted taxable income of $119,238, Mr Taybourne’s 86% care and Ms Taybourne’s 14% care for [the child]. Ms Taybourne was assessed to pay $13,835 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Taybourne lodged a departure application on 30 March 2023. An original decision-maker granted the application and varied Mr Taybourne’s adjusted taxable income to $133,000 per annum from 30 March 2023 to 31 October 2024, and to $136,990 per annum from 1 November 2024 to 31 October 2025. Mr Taybourne objected to that decision. An objections officer set aside the decision and varied Mr Taybourne’s adjusted taxable income to $109,000 per annum from 30 March 2023 to 30 March 2026. Mr Taybourne applied to the Tribunal for further review. I conducted a directions hearing on 9 July 2024 and a substantive hearing on 27 August 2024. Mr Taybourne, Ms Taybourne and Mr Taybourne’s wife, Mrs Taybourne, gave sworn evidence during the substantive hearing via MS Teams. With Mrs Taybourne’s consent, I refer to her during the hearing as [Given name], in order to avoid any confusion, and I will continue to do so in these written reasons [redacted as ‘Ms A’].

4. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

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

   (ii)... it would be:

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

   (B)otherwise proper;

   to make a particular determination under this Part; …

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

…

(ia)because of the income, property and financial resources of either parent; …

1. Mr Taybourne is [an activity participant]. He ran a business as a sole trader selling [activity-related products]. At the start of 2022–23, [Company] Pty Ltd (the Company) took over the operation of the business. Mr Taybourne and [Ms A] are the directors and shareholders of the Company. Two profit and loss statements were provided for 2022–23: pages 386 and 420 of the hearing papers. According to one statement, the Company made a loss of $13,699. According to the other, it made a loss of $24,092. Both statements record payments to “associated persons” of $104,010. The associated persons were Mr Taybourne and [Ms A]. According to Mr Taybourne’s tax return, he was paid $32,010 (which is 30% of $104,010). [Ms A] was paid the other 70%.

2. On 6 November 2023, [Ms A] informed Child Support that she is paid 60% of the business income for tax purposes: page 358 of the hearing papers. Child Support concluded that most the Company’s financial resources should be attributed to Mr Taybourne. [Ms A] submitted that she should be recognised “as a fair 50% director”: page A63 of the hearing papers. Mr Taybourne and [Ms A] provided evidence of her involvement in the business. Mr Taybourne also provided witness statements from third parties concerning [Ms A]’s involvement in the business. If that evidence were accepted, it would be appropriate to attribute $104,000 x 50% = $52,000 to Mr Taybourne. When Ms Taybourne lodged her departure application in March 2023, the administrative assessment was based on Mr Taybourne’s 2021–22 adjusted taxable income of $37,285 per annum. There are reasons to believe that Mr Taybourne’s income and financial resources would be fairly reflected in an adjusted taxable income that is higher than $52,000 per annum, but even if $52,000 per annum were appropriate, it would follow that the use of $37,285 per annum, and the consequent rate of child support payable, would be unjust and inequitable. Those circumstances as a whole constitute special circumstances. Reason 8 is established in respect of Mr Taybourne.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their child. Regard must be had to a variety of factors such as the needs of the child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula. Each case must be assessed on its particular facts.

2. As noted earlier, Ms Taybourne lodged her departure application in March 2023. The matter has been on foot for approximately one and a half years. The hearing papers have swollen to over 1,000 pages. Some issues have fallen by the wayside and others have come into sharper focus. At the start of the substantive hearing, and again at the end of the substantive hearing, both parents agreed that any new decision should vary the rate of child support payable from 27 August 2024 to nil. The issue in dispute was the child support payable from 30 March 2023 to 26 August 2024. Mr Taybourne noted that the objections officer’s decision had required him to pay a high rate of child support from 11 October 2023. Ms Taybourne noted that she had been required to pay a high rate of child support from 30 March 2023 to 10 October 2023. To understand the issue properly, it is necessary to describe the assessments with some detail: see pages 550 to 553 and 572, 573 and 873 of the hearing papers:

   Period  F’s ATI           M’s ATI       F’s care            c.s. payable

   30/03/23 – 19/07/23         $109,000          $119,238            86%      M pays $9,035/yr

   20/07/23 – 16/08/23         $109,000          $119,238            65%      M pays $8,764/yr

   17/08/23 – 14/09/23         $109,000          $119,238            58%      M pays $4,962/yr

   15/09/23 – 10/10/23         $109,000          $119,238            50%      M pays $1,974/yr

   11/10/23 – 30/06/24         $109,000      est $20,909            50%       F pays $7,735/yr

   01/07/24 – 26/08/24         $109,000      est $80,195            50%       F pays $1,508/yr

   Legend / Explanation

   “F’s ATI” is father’s adjusted taxable income.

   “M’s ATI” is mother’s adjusted taxable income.

   “F’s care” is Mr Taybourne’s recorded care. Ms Taybourne has always been recorded as providing the balance of care.

   The objections officer varied Mr Taybourne’s adjusted taxable income to $109,000 per annum from 30 March 2023.

   The administrative assessment used Ms Taybourne’s 2021–22 adjusted taxable income of $119,238 from 30 March 2023 to 10 November 2023.

   Ms Taybourne provided an estimate of income of $20,909 per annum from 11 October 2023.

   Ms Taybourne provided an estimate of income of $80,195 per annum from 1 July 2024.

3. From 30 March 2023 to 10 October 2023, Ms Taybourne was assessed to pay approximately $3,979 in child support. From 11 October 2023 to 26 August 2024, Mr Taybourne was assessed to pay approximately $5,830 in child support.

4. One difficulty in this matter is the uncertainty concerning Mr Taybourne’s income and financial resources. Another difficulty is the fact that Ms Taybourne was unemployed from 10 October 2023 and she lodged an estimate of income of $20,909 per annum on 11 October 2023, and she returned to paid employment on 27 November 2023 but she continued to be assessed on her estimate of income of $20,909 per annum until 30 June 2024. I will deal with Mr Taybourne’s income and financial resources first.

5. According to one of the Company’s profit and loss statements for 2022–23 (on page A20 of the hearing papers), it generated revenue of $679,525, incurred expenses of $692,686 and made a loss of $13,161. Its expenses included wages to Mr Taybourne and [Ms A] that totalled $104,010. It could be argued that the wages should be apportioned equally and Mr Taybourne’s income and financial resources should be reflected in an adjusted taxable income of ($104,010 - $13,699) / 2 = $45,155 per annum.

6. According to the Company’s profit and loss statement for 2023–24 (which is also on page A20 of the hearing papers), it generated revenue of $614,262, incurred expenses of $705,777 and made a loss of $91,515. Its expenses included wages to Mr Taybourne and [Ms A] that totalled $50,500. According to that document, even if the Company had not paid any wages to Mr Taybourne and [Ms A], it would have made a loss. When I made that observation, [Ms A] explained that the Company’s larger loss in 2023-24 was partly attributable to its increased spending on advertising. I noted that the Company’s advertising expenses had decreased from $159,588 in 2022–23 to $110,070 in  2023–24.

7. Child Support obtained copies of the Company’s bank account statements. The original decision-maker calculated that the Company spent about $7,659 in July 2022 and about $8,242 in August 2022 on personal expenses for Mr Taybourne and [Ms A]. The calculation was necessarily imprecise. Some expenses that appeared to be personal might have been business-related. Conversely, the original decision-maker did not include numerous transactions with opaque transaction details. In any event, [Ms A] explained during the substantive hearing that the Company had paid for personal expenses and she had recorded them as drawings but not personal income. She said the Company had subsequently retained an accountant who had fixed her ([Ms A]’s) mistake and the Australian Taxation Office (ATO) had raised a significant tax debt.

8. In March 2024, Mr Taybourne completed a Statement of Financial Circumstances. He acknowledged that [Ms A] had helped him complete the document. It was clear that he did not manage the household’s finances. For example, he said, and I accept, that he did not know the household’s rent. In separate exchanges with Mr Taybourne and Renee, I noted that Mr Taybourne had listed wages of $1,000 per week and additional income from the Company of $654 per week (which equates to approximately $86,000 per annum) and he had listed [Ms A]’s income as $2,346 per week (which equates to approximately $122,000 per annum). Mr Taybourne and [Ms A] each separately said that the figures “looked right”. [Ms A] explained that they were each receiving about $86,000 per annum via the Company, and she was receiving other income such as carer payment and child support. I noted that it was very difficult to reconcile the Company’s 2023–24 profit and loss statement (which indicated that the Company had paid them a combined sum of $50,500 and made a loss of $91,515) and Mr Taybourne’s Statement of Financial Circumstances that they completed in March 2024 (which indicated that the Company paid them a combined sum of approximately $86,000 x 2 = $172,000 per annum). I am not persuaded that Mr Taybourne and [Ms A] have provided reliable evidence concerning Mr Taybourne’s income and financial resources. I hasten to add that I am not suggesting that either of them was dishonest. I was left with the impression that Mr Taybourne relied on [Ms A] to attend to the Company’s and the household’s finances, and he genuinely did not know his own financial circumstances, and [Ms A] had done her best to disclose their financial circumstances, but, with respect, she did not have a clear understanding of their financial circumstances. The evidence does not allow me to accurately calculate Mr Taybourne’s financial circumstances. Nevertheless, I am satisfied that it is more than Mr Taybourne’s adjusted taxable income as assessed by the ATO. Mr Taybourne’s Statement of Financial Circumstances suggests that his income and financial resources might fairly be reflected for child support purposes in an adjusted taxable income of approximately $86,000 per annum, and that appears to be correct. I am fortified in that view by Ms Taybourne’s acknowledgement that a current child support assessment of nil would be fair. Her acknowledgement was based on her assessment of the evidence, the fact that each parent is providing 50% care for [the child], and Ms Taybourne estimates her own income to be $80,195 per annum.

9. Mr Taybourne sought a variation to the objections officer’s decision with effect from 11 October 2023, when he became the payer of child support. Ms Taybourne sought a variation from 27 August 2024, with no retrospective adjustment. She noted that while Mr Taybourne had been assessed to pay a significant amount of child support from 11 October 2023, she had been assessed to pay a significant amount of child support from 30 March 2023 to 10 October 2023. I calculated that she had been assessed to pay $5,830 during that period. However, the assessment during that period was based on Mr Taybourne having an adjusted taxable income of $109,000 per annum, which would appear to be at the higher end of the range of his possible incomes. Ms Taybourne was required to pay a high rate of child support because, for most of that period, Mr Taybourne was providing most of the care. The assessments from 30 March 2023 to 10 October 2023 pursuant to the objections officer’s decision were fair.

10. Ms Taybourne provided payment summaries for 2023–24. She was employed until 9 October 2023. She was unemployed from 10 October 2023 to 26 November 2023. She lodged an estimate of income of $20,909 per annum from 11 October 2023. That income was less than what is called the self-support amount, which is the amount considered necessary for self-support and from which a parent has a minimal capacity to contribute to a child’s costs. Mr Taybourne was assessed to pay $7,735 per annum in child support during the 47 days from 11 October 2023 to 26 November 2023. He was required to pay approximately $996 in child support during that period. I consider that to be appropriate in the circumstances.

11. Ms Taybourne commenced employment on 27 November 2023. She earned $14,875.50 during the period from 27 November 2023 to 23 February 2024. She started employment with her current employer on 26 February 2024. She earned $34,871.81 during the period from 27 November 2023 to 30 June 2024. She earned a total of $49,747.31 during the 217 days from 27 November 2023 to 30 June 2024 which equates to an average rate of income of approximately $83,676 per annum. In other words, over that period, her average income was similar to her current income. As noted earlier, the parents’ current circumstances make it appropriate to vary the rate of child support payable to nil. I consider it appropriate to vary the rate of child support payable from 27 November 2023 to nil.

12. Ms Taybourne opposed a retrospective adjustment to the rate of child support payable. However, she provided an estimate of income from 11 October 2023, and in the ordinary course, the rate of child support payable from 11 October 2023 to 30 June 2024 would be reassessed once the ATO has assessed her 2023–24 adjusted taxable income. There is no dispute that from 27 November 2023, her estimate was an underestimate.

13. Ms Taybourne also receives a small scholarship and she incurs some tax-deductible expenses. Ms Taybourne and Mr Taybourne were agreeable to me proceeding on the basis that the amounts would be similar and they would offset each other.

14. Ms Taybourne lives in rented accommodation. Her household consists of herself and [the child]. She is [an occupation] and she is also undertaking tertiary study. In March 2024 her liquid assets totalled approximately $51,000. She had no significant debts.

15. Mr Taybourne lives in rented accommodation. His household consists of himself, [Ms A], [the child] and three other children. According to his Statement of Financial Circumstances he had savings of approximately $1,900 and no debts.

16. Each parent effectively indicated during the hearing that they had the financial capacity to meet [the child]’s expenses while he was in their care. They also indicated a desire to finalise the issue of child support. Ms Taybourne has been assessed on her estimates of income since 11 October 2023. Setting the rate of child support payable from 11 October 2023 will prevent future reassessments when the ATO assessed her 2023–24 and 2024–25 adjusted taxable incomes. I will vary Mr Taybourne’s rate of child support payable from 11 October 2023 to 26 November 2023 to $7,735 per annum (which was the rate payable pursuant to the objections officer’s decision, subject to the estimate reconciliation). Varying the rate of child support payable between the parents from 27 November 2023 to nil will decrease Mr Taybourne’s child support liability by approximately $4,800. He currently owes arrears of approximately $3,200 and Ms Taybourne has a child support credit of approximately $600. I am satisfied that Ms Taybourne has the capacity to pay the difference and it is appropriate to require her to do so. The child support case will probably end when [the child] turns 18 on 3 October 2027. It is appropriate to vary the rate of child support payable until the end of the child support case. As matters currently stand, the proposed decision will be just and equitable. If there is a subsequent and significant change in circumstances, such as a significant change in care, either parent can lodge another departure application.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Ms Taybourne receives family tax benefit in respect of [the child]. It may be that [Ms A] (and therefore Mr Taybourne’s household) also receives family tax benefit in respect of [the child]. Changing the child support payable will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

The objections officer’s decision dated 14 February 2024 is varied with effect from 11 October 2023, so that:

• from 11 October 2023 to 26 November 2023, Mr Taybourne’s rate of child support payable is varied to $7,735 per annum; and

• from 27 November 2023 until the occurrence of a child support terminating event, the rate of child support payable between the parents is varied to nil.