Trailler and Calladen (Child support)

[2018] AATA 3077

Trailler and Calladen (Child support) [2018] AATA 3077 (3 July 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/SC012080

APPLICANT:  Mr Trailler

OTHER PARTIES:  Child Support Registrar

Ms Calladen

TRIBUNAL:Member M Douglas

DECISION DATE:  03 July 2018

DECISION:

The decision under review is varied so that the adjusted taxable income that was set for Mr Trailler is changed to $68,796 for the period 10 January 2017 to 31 December 2020.

CATCHWORDS
Child support - Departure determination - High costs of child care - Income, property and financial resources of liable parent - Grounds for departure exist - Adjusted taxable income of liable parent varied - Decision under review varied

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. The Tribunal is reviewing, on Mr Trailler’s application, an objection decision a delegate of the Child Support Registrar made on 15 June 2017.  The Tribunal observes that the Child Support Registrar acts through the Department of Human Services, and in these reasons the Tribunal shall refer to the Registrar as the Department.

2. The Department has issued child support assessments with effect from 2 December 2013 that obligate Mr Trailler to pay child support to Ms Calladen for their four children, [Child 1], [Child 2] and [twins]. Those assessments were initially issued in accordance with the provisions of Part 5 of the Child Support (Assessment) Act1989 (the Act). The objection decision the Department made departed from those provisions in the following ways:

   ·by setting Mr Trailler’s adjusted taxable income at $75,000 from 10 January 2017 to 31 October 2018; and

   ·by increasing the cost of children from how it is worked out under section 55G of the Act by $5,510 for the period 10 January 2017 to 1 February 2018.

3. The objection decision responded to what the Department describes as a “change of assessment” application that Ms Calladen had made under section 98B of the Act.  At the time Ms Calladen made her change of assessment application, the adjusted taxable income used in the assessment for Mr Trailler was $68,796, which had been set by an earlier change of assessment decision the Department had made on 11 March 2014.  The change to the assessment consequent upon the objection decision the Department made that the Tribunal is reviewing therefore resulted in an increase in the annual rate at which Mr Trailler was required to pay child support to Ms Calladen for the children. 

4. The intent behind the Department’s objection decision was, firstly, to set Mr Trailler’s adjusted taxable income at an amount which the delegate considered reflected his real income from plying his trade as a licensed [tradesman] and, secondly, to require Mr Trailler to contribute to costs Ms Calladen had incurred and would continue to incur until 1 February 2018 for the twins to attend child care.

THE HEARING AND THE EVIDENCE

1. The Tribunal heard Mr Trailler’s application on 8 May 2018. He and Ms Calladen participated in the hearing by telephone and each gave oral evidence. The Department did not appear.

2. Mr Trailler and Ms Calladen also provided documents to the Tribunal which have been received into evidence. Mr Trailler’s documents are marked A1-159 and Ms Calladen’s documents are marked B1-3. 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 1-239. Following the hearing the Tribunal requested the Department under section 95J of the Child Support (Registration and Collection) Act 1988 to use its powers to obtain further documents relating to a company named [Company 1].  The Department obtained and provided the Tribunal those documents, which are marked C1-81. 

3. 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 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) to depart from the provisions 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) of the Act.

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

4. In her change of assessment application, Ms Calladen raised issues that required consideration of whether the grounds for departure provided in subparagraphs 117(2)(b)(ib) and 117(2)(c)(ia) of the Act exist, which grounds the Department describes, respectively, as Reasons 6 and 8A. 

CONSIDERATION

Is there a ground to change the assessment?

1. It is convenient to deal separately with each ground for departure raised by Ms Calladen’s change of assessment application.  

Subparagraph 117(2)(b)(ib)

1. This provision of the Act reads as follows:

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

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

2. Subsection 117(3A) of the Act stipulates that the child care costs must be incurred with respect to a child younger than 12 at the start of the child support period and that the costs are incurred by a parent or non-parent carer.  Further, subsection 117(3B) requires, in effect, that for child care costs to be high, the child care costs that have been incurred must be higher than 5% of the adjusted taxable income of the parent who incurred the costs. 

3. There was no controversy from Mr Trailler with respect to the findings that the Department made relating to this matter in the objection decision.  That is to say, there was no controversy from Mr Trailler that the twins were attending child care until 1 February 2018.  The cost Ms Calladen incurred for that, net of the child care benefit and child care rebate she received from the Federal Government, was $5,510.00 a year.  That was in excess of 5% of her child support income amount. 

4. Given that, this ground for departure is established. Indeed, as the Tribunal understood Mr Trailler, he did not cavil with the Department’s finding to same effect.

Subparagraph 117(2)(c)(ia)

1. This provision of the Act read as follows:

   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;

2. Mr Trailler is a licensed [tradesman] by occupation.  Until August 2016 he conducted a business as such as a sole trader.  In August 2016 he sold his equipment to the company named [Company 1] for $11,000.00.  He has since then been an employee of that company.  His evidence was that he works part time for the company earning a wage of around $675.00 a week.  He explained that the reason he works part time is because he has the children every alternate week during school terms between Friday evening and Monday morning and for half of each school holiday period, and this necessitates his driving a round trip of approximately 250 kilometres each time he collects the children or returns them.  That means that on those days when he does that, he cannot work a full day.

3. The office holder and shareholder of [Company 1] is Mr Trailler’s wife.  The business of [Company 1] is providing [trade] services and [other] services.  Mr Trailler’s evidence was that his wife “does all the financials” for the company and does “advertising”.  Mr Trailler said that on occasion his wife “labours for me”.  His evidence was that his wife otherwise has full time employment with [another company].  Mr Trailler’s evidence was that the company also employs other persons with whom he has no personal relationship, other than as fellow employees, and that the company also on occasion uses contract labour.

4. Mr Trailler’s submission to the Tribunal was to the effect that [Company 1] ought not to be treated as his company, but rather his wife’s company, and he ought not to be treated as being able to derive any benefit from that company other than the wage the company pays him.

5. The Tribunal does not accept that submission.  The evidence of Mr Trailler establishes, in the Tribunal’s view, that the company continues to conduct the business that Mr Trailler did as a sole trader prior to transferring his plant and equipment to the company in August 2016.  Essentially, Mr Trailler is now using this company as the intermediary to continue to conduct the business he previously did as a sole trader.  Whilst his wife may assist with clerical work for the company, the Tribunal does not consider that Mr Trailler’s wife has any role, other than menial, in the business that the company is conducting.  As said, in the Tribunal’s view, the company is, in substance, being used by Mr Trailler as a medium through which he now conducts his business.

6. In evidence before the Tribunal is the company’s tax return for the 2017 financial year.  The Tribunal observes from that that its gross assessable income in that year was $195,615.00 but it incurred expenditure amounting to $184,377.00 to result in it achieving a profit of $11,238.00.  As the Tribunal reads the tax return of the company, the income of the company included an amount of $38,442.00 for monies owed to it by persons for whom it had done work but which had not been received as at 30 June 2017.  There may always be a lag between a company rendering an invoice for a service it has undertaken and it collecting payment from the person to whom the invoice was rendered.  Hence, money not collected in one year for work performed will be collected in the next, and so on and so on.  Bearing in mind that, based upon Mr Trailler’s evidence, the company only commenced its operation part way through the 2017 financial year in August 2016, the fact that it had yet to recover $38,442.00 for services it had performed within that prior 11 month period does not indicate, it seems to the Tribunal, that its income will regularly be deflated by that order by slow paying customers. In other words, when considered on an ongoing basis, it seems to the Tribunal that the profit achieved from the company in its first 11 months of operation is a fair basis on which to project what is likely profit will be available in the oncoming years.  The profit that the company achieved in the 11 months of its operation in the 2017 year extrapolates to an annual figure of around $12,260.00.  In the Tribunal’s view, that figure ought to be treated as a financial resource available to Mr Trailler.

7. As the Tribunal understood the evidence, Mr Trailler also obtains other benefits from [Company 1], being the use of its motor vehicle at times for private purposes.  Further, in the current financial year the company purchased a 20 foot bunk combo caravan, using finance from a loan facility it established.  Mr Trailler’s evidence was that the company provides its services in remote areas [and] because of that, oftentimes he and the other employees of the company have to work away for days at a time on remote properties.  He said, prior to the company purchasing the caravan, he and the other employees would pitch a tent and camp.  That is also what occurred when he worked as a sole trader. He is now able to accommodate himself, and the other employees, in the caravan when working on remote properties.  However, Mr Trailler conceded that he also uses the caravan for his private benefit, including holidays. 

8. The fact that Mr Trailler has available to him, through [Company 1], monies other than the wage that company pays to him and the fact that he is able to derive personal benefit through the use of some of the company’s assets, which results in his not having to defray any part of the wage the company pays him on expenditure related to those personal benefits, is such, in the Tribunal’s view, that his financial circumstances and consequent capacity to provide financial support for his children is not accurately reflected in a child support assessment based upon on his taxable income from the preceding income year. 

9. In other words, the Tribunal concludes that an adjusted taxable income for Mr Trailler comprising his taxable income from the last relevant year of income will not, given the manner in which he has now structured his affairs, accurately reflect his financial capacity to pay child support.  In those circumstances the Tribunal is satisfied that special circumstances exist in this case that result in an unfair determination of the level of financial support he is required to pay under the assessment for his children.

10. It follows that this ground for departure is also established.

Is it just and equitable to make a determination?

1. The matters the Tribunal must consider when deciding whether it is just and equitable to make a determination to depart from the provisions of the Act relating to a child support assessment 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.

The children’s circumstances

1. The children have all the usual needs.  There is no evidence that they have any special needs.  As mentioned above, the costs of maintaining the youngest two children were, until 1 February 2018, significantly affected because of high child care costs.

2. There is no evidence that any of the children has income, property or financial resources. 

3. The Tribunal takes into account that, insofar as Mr Trailler is assessed to pay child support for the children based on his taxable income from the last relevant year of income, without regard to the financial resource available to him through [Company 1], then hardship is caused to the children in the sense that they are not able to have the standard of living reflective of that of their parents.

Ms Calladen’s circumstances

1. The Tribunal takes into account that Ms Calladen has a primary duty to support the children, which has priority over all her commitments other than those needed for her self-support.

2. The Tribunal takes into account that she is employed as [an occupation].  She revealed in a statement of financial circumstances that she signed on 5 August 2017 declaring the contents to that to be true, and which at the hearing she said remained true, that her gross income from her employment is around $40,000.00 a year.  She incurs all the normal costs to support herself.  She has no assets of significance and certainly none that would be reasonable for her to sell to provide additional money for her to support the children.

3. The Tribunal also takes into account that, insofar as Mr Trailler is assessed to pay child support for the children based on his taxable income from the last relevant year of income, without regard to the financial resource available to him through [Company 1],  then hardship would be caused to Ms Calladen in that she would have to draw disproportionately on her more frugal resources to ensure the children’s support.  In other words, by refusing to make a determination to depart from the assessment of child support so as to ensure that Mr Trailler’s child support obligation incorporates the financial resource he has available to him, hardship is caused to her.

Mr Trailler’s circumstances

1. Mr Trailler’s circumstances in terms of his income and the financial resource available to him through [Company 1] have been discussed above.

2. In terms of his property, he owns a home jointly with his wife that is subject to a mortgage securing payment of a loan raised to enable the purchase of the home.  His only other asset of significance is a motor vehicle of which he estimates the value to be $4,500.00. 

3. Mr Trailler’s evidence was that he owed his wife $10,000.00 and to satisfy that debt he transferred to her a boat that for insurances purposes he previously declared in 2015 to have a value of $38,000.00 and which subsequent to the transfer of the asset to his wife, was declared in 2017 to have a value of $25,000.00.  In that circumstance, it seems to the Tribunal that Mr Trailler received less than market value for the vessel and, in the Tribunal’s view, Mr Trailler, for the purpose of considering what would be a just and equitable adjustment to make to the assessment of child support, ought to be treated as having received market value for the transfer of the vessel to his wife.  Doing the best it can, the Tribunal considers that he ought to be treated as having received $15,000.00 in addition to amount of his debt to his wife that was retired by the transfer of the vessel to her.

4. The Tribunal takes into account that Mr Trailler has all the normal commitments to meet to support himself.  The Tribunal also takes into account that he has a primary duty to support his children, which duty has priority over all his commitments other than those necessary for his own support.

5. The Tribunal notes that Mr Trailler resides with his wife and her two children from an earlier relationship.  However, Mr Trailler’s wife works full time, as was mentioned above, and would from that income be able to support herself.  Further, she has a private arrangement with the father of her children with respect to his providing financial support to them.  Accordingly, those children do not fall within the definition of resident children within subsection 117(10) of the Act and the Tribunal does not have to have regard to any hardship that may be caused to them by making a determination to depart from the assessment of child support.

What is a just and equitable determination to make?

1. Having regard to the above matters, it seems to the Tribunal that it would be just and equitable to make a determination to increase the cost of the children by $5,510.00 for the period from the date upon which Ms Calladen made her application, which was 10 January 2017, until the day upon which the twins ceased child care.  That will ensure that Mr Trailler and Ms Calladen both contribute towards those costs in accordance with their respective adjusted taxable incomes. 

2. In terms of Mr Trailler’s adjusted taxable income, the Tribunal considers that the evidence does not establish that his financial resources, income and property are such that he ought to be treated as having an adjusted taxable income of greater than his adjusted taxable income at the time that Ms Calladen made her application, which was $68,796.00.  That would only have remained as his adjusted taxable income until 15 October 2017, in accordance with the change of assessment decision the Department made on 11 March 2014.  Thereafter, Mr Trailler’s adjusted taxable income would have reverted to his taxable income from the last relevant year of income which would have been based upon his 2016 taxable income of $6,066.00 which, having regard to the discussion above, would not have been an appropriate income for him by which to calculate his contribution towards the cost of the children’s care.

41.  In the circumstances, the Tribunal considers that a just and equitable determination to make, with respect to departing from the provisions of the Act relating to an assessment of child support, would be to set his adjusted taxable income at $68,796 until 31 December 2020.  It is appropriate in the Tribunal’s view to make that determination beyond the date upon which the assessment was changed by the objection decision, given that an assessment based upon an adjusted taxable income for Mr Trailler comprising his taxable income from the last relevant year of income would result in an unfair determination of the level of financial support to be provided by him for the children.  It seems to the Tribunal that 31 December 2020 would be an appropriate time for the matter to be revisited by the Department, if Mr Trailler or Ms Calladen wish, which either can initiate by making a change of assessment application to the Department.

Is it otherwise proper to change the assessment?

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

43.  Ms Calladen receives a family tax benefit from the Federal Government.  The Tribunal understands as a consequence of the determination that it considers it would be just and equitable to make, which will increase until 1 February 2018 the child support liability of Mr Trailler from that which he would otherwise have been assessed as liable to pay prior to Ms Calladen’s change of assessment application, Ms Calladen’s benefit may be reduced.  Given that she and Mr Trailler have the primary obligation to support the children, and not the Australian community, that would be a proper outcome.

44.  The Tribunal understands that none of the children receives an income tested pension, allowance or benefit and that those circumstances will not change by the making of the determination that it considers to be just and equitable to make.

CLARIFICATION

45.  The decision the Tribunal has made does not affect the objection decision insofar as the objection decision made a determination increasing the cost of children.

DECISION

The decision under review is varied so that the adjusted taxable income that was set for Mr Trailler is changed to $68,796 for the period 10 January 2017 to 31 December 2020.