Truett and Scinta (Child support)

Truett and Scinta (Child support) [2020] AATA 886 (4 March 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/BC017499
APPLICANT:  Miss Truett
OTHER PARTIES:  Child Support Registrar
Mr Scinta

TRIBUNAL:Senior Member A Freeman
DECISION DATE: 4 March 2020
DECISION:

The decision under review is varied as follows:

For the period from 1 July 2018 until a terminating event occurs, Mr Scinta’s adjusted taxable income is varied to $80,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources and earning capacity of the liable parent – earning capacity criteria met - a ground for departure established – decision to depart - 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

Miss Truett and Mr Scinta are the parents of one child. Miss Truett’s care percentage at the time of the objection decision for the purposes of assessing child support was recorded as 100%.
Miss Truett lodged an application with the Department of Human Services (the Department) on 28 February 2019 seeking a departure from the administrative assessment of child support. At the time of the application, Mr Scinta was liable to pay an annual rate of child support of about $6,709. This was calculated using an adjusted taxable income (ATI) of $60,181 for Mr Scinta and an ATI of $20,017 for Miss Truett.
On 20 June 2019, the Department found that grounds to depart existed and varied Mr Scinta’s ATI to $105,000 for a period from 1 September 2017 until [Child 1] ceased to be an eligible child of the case.
Mr Scinta objected to this decision and on 6 September 2019 an objections officer allowed the objection and varied Mr Scinta’s ATI to $60,181 for a period from 1 September 2017 to 30 June 2018 and to $85,000 for a period from 1 July 2018 until a terminating event occurs.
Both parties sought a further review of this decision although Miss Truett’s application was received first, so she is deemed to be the applicant for the purposes of the review.
Miss Truett submits that Mr Scinta’s ATI does not reflect his true income and financial resources and submits that he has not stopped working since late June 2019. Mr Scinta contends that child support should be assessed based on his true income which is that reflected in his group certificates and the fact that he has been unemployed since 28 June 2019.
The Tribunal hearing was conducted on 4 March 2020. Both parties appeared by conference telephone. In reaching its decision, the Tribunal has considered the sworn evidence given by both parties at the hearing, together with the documentation provided by the Department (exhibit 1), the documentation provided by Miss Truett (exhibit 2) and the documentation provided by Mr Scinta (exhibit 3).

CONSIDERATION

The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable by the liable parent. The Act also provides for a departure from the administrative assessment in certain circumstances.
A departure from an administrative assessment may be made pursuant to section 98C of the Act if the following matters are established:
·         One or more than one of the grounds for departure referred to in subsection 98C(2) exists;[1]
·         A departure is just and equitable as regards the children and each parent;[2] and
·         It is otherwise proper to make a departure decision.[3]

Issue 1 – Grounds for departure

Assessment unfair because of the income, property, or financial resources of either parent

[1] See subparagraph 98C(1)(b)(i).

[2] See sub-subparagraph 98C(1)(b)(ii)(A).

[3] See sub-subparagraph 98C(1)(b)(ii)(B).

Miss Truett’s initial change of assessment application sought a departure from the assessment in place at the time on the grounds that, in the special circumstances of the case, Mr Scinta’s income made the assessment of child support unfair because it was not reflective of his true financial position or his earning capacity.
A ground to depart from the administrative assessment of child support may exist if, in the special circumstances of the case, the application of the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either parent’s income, property and financial resources[4] or the earning capacity of either parent[5].
[4] See subparagraph 117(2)(c)(ia).
[5] See subparagraph 117(1)(c)(ib).
The term “special circumstances” is not defined in the Act. In Gyselman v Gyselman [1992] FLC 92-279, the Full Court of the Family Court determined that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.
There are a range of circumstances that may support the finding that the administrative assessment would result in an unjust or inequitable determination of the level of child support. The calculation of income and financial resources for the purposes of taxation law does not limit the Tribunal’s consideration of the true resources available to a party to child support proceedings and is but one factor to be taken into account in the particular circumstances of the case.
In Ashcroft & Ashcroft (SSAT Appeal) [2008] FMCAfam 1250, the Federal Magistrates Court stated:
Whilst it may be legitimate for citizens to organise their financial affairs to minimise the taxation liability, it has long been recognised that the obligation to provide proper financial support for children is both a moral and legal obligation that all parents must bear to the best of their ability. It is appropriate to examine the financial affairs of parents to ensure their obligation to pay child support is not accorded less priority than obligations other than those reasonably necessary to support the payer.
For the purposes of the Act, a financial resource is something which is not property but from which a financial benefit can be gained.[6]
[6] See Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39 and Walker & Fielding(SSAT Appeal) [2010] FMCAfam 320.
Mr Scinta is currently unemployed. Previously, he had worked for the family business, a [service] company, for a number of years. This came to an end on 28 June 2019 when Mr Scinta resigned from his position.
In his letter of resignation, Mr Scinta stated as follows:
Unfortunately due to a combination of my injuries, physical pain and stress from the recent Child Support change of assessment I find myself no longer able to meet the basic requirements of fulfilling my position. In addition, due to the aforementioned change of assessment outcome estimating my yearly income at more than double my true income, I can no longer afford to hold employment and will be accepting the offered permanent disability pension I previously declined.
Mr Scinta suffered from a workplace injury in 2017 and suffered a 48% whole person impairment as a result. Medical reports provided by Mr Scinta confirm that but for his father continuing to employ him in the family business in a role modified to suit his physical and functional limitations as a result of the injuries, he has poor prospects of attaining suitable employment on the open market due to his physical restrictions and ongoing symptoms.
For the period from December 2018 up until his resignation, bank records show that Mr Scinta was being paid about $2,600 net per fortnight by his employer. Mr Scinta told the Tribunal that part of these payments included some leave entitlements owing to him which were paid over about an 11-month period so as to minimise his taxation liabilities. Whilst this may be the case, it is still extra money being paid to Mr Scinta each fortnight and is a financial resource from which child support could be paid such that it should be taken into account when assessing his income and financial resources.
The amount of $2,600 per fortnight amounts to about $67,600 net per annum. This figured grossed up, amounts to about $80,000 per annum. The Tribunal therefore finds that for the 2018/2019 financial year, Mr Scinta’s income and financial resources was at least $80,000 gross per annum.
Mr Scinta also told the Tribunal that at some point in 2019, perhaps in mid-2019 or possibly earlier, he received a gift from his father in the amount of $330,000 which was intended to represent an early inheritance distribution. As a result of this windfall, Mr Scinta was able to purchase two new cars worth about $44,000 at the time for himself and his wife.
In August 2019, Mr Scinta and his wife purchased an investment property using money available to them as a result of the gift from Mr Scinta’s father. This property has been tenanted since purchase and Mr Scinta receives about $190 per week in rental income. There is no mortgage over this property.
In September 2019, Mr Scinta also received a lump sum payment from WorkCover for his injuries in the amount of $146,930. Mr Scinta transferred the majority of this to his home loan.
Thus, the Tribunal concludes that whilst Mr Scinta has been unemployed since 28 June 2019, he has had access to considerable financial resources.
Miss Truett maintained that the resignation was a sham and that Mr Scinta was still employed by the family business. She told the Tribunal that she and others had seen him at the workplace on numerous occasions wearing a uniform or high-visibility clothing which would suggest he was still employed. She told the Tribunal that she believed he was being paid into an account in another name or was receiving benefits such as cars in lieu of wages. She provided video evidence of what she says is Mr Scinta’s car parked at the business and a statutory declaration from her mother attesting to the fact she had seen Mr Scinta and others in the paddock next to the business in reflective yellow work uniforms.
Mr Scinta told the Tribunal that he often visits the workplace to see his father and he is in the habit of wearing high-visibility clothing but denies continuing to work at the family business.
The Tribunal does not consider that simply because people may have seen Mr Scinta at the business, he is employed there and receiving an income. Tellingly, there is no evidence before the Tribunal of Mr Scinta receiving a wage or payments from the business since 28 June 2019. However, that does not change the fact that Mr Scinta has had access to significant financial resources since late June 2019 which the Tribunal intends to take into account when assessing Mr Scinta’s income and financial resources.
In relation to the issue of whether a ground to depart exists because of the earning capacity of Mr Scinta, under the Act, the Tribunal must be satisfied that:
a)    the parent:
i.is not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i)); and/or
ii.has reduced his/her weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii)); and/or
iii.has changed his/her occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
b)    the parent’s decision about his/her work arrangements is not justified by either his/her caring responsibilities (subparagraph 117(7B)(b)(i)) or his/her state of health (subparagraph 117(7B)(b)(ii)); and
c)    the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).
All three of the above criteria must be met before a departure determination can be made in relation to earning capacity.
It is also necessary to consider whether it would be possible for the parent to increase his or her income by changing work arrangements. That is, work must be available for the parent in his or her area and the parent must have the necessary qualifications and experience to perform that work.
The first criteria to be considered is whether Mr Scinta is not working despite ample opportunity to do so. It is not in contest that Mr Scinta is not working. In a letter dated 1 July 2019, [Mr A], Managing Director of the entity that employed Mr Scinta, confirmed that he ceased employment as at 28 June 2019 but if he was able and chose to, the employer would be happy to arrange a position for him within the business suitable to his physical limitations.
Therefore, on the basis that employment was still potentially open to Mr Scinta as at 1 July 2019, the Tribunal finds that Mr Scinta is not working despite ample opportunity to do so.
The second criteria requires consideration as to whether the decision to cease work was justified by Mr Scinta’s state of health. The Tribunal accepts the expert medical evidence before it that Mr Scinta suffered from significant injuries as a result of a fall in 2017 which have impacted upon his ability to work. However, Mr Scinta was able to continue employment with the family business following an initial period of rehabilitation and whilst his letter of resignation suggests that he ceased employment because of a combination of physical injuries, pain and stress, it would appear that his employer was willing to continue to accommodate him in the workplace beyond 28 June 2019. It is also noted that whilst there was some reference in the medical reports to Mr Scinta suffering from depression and anxiety, he did not seek out any treatment for this, apart from two sessions with a psychologist at the behest of his lawyers at the time. Mr Scinta told the Tribunal that he did not think his mental health was that bad and receiving that kind of treatment was not for him.
Therefore, in the circumstances, the Tribunal concludes that the decision to cease work was not justified by Mr Scinta’s state of health at the relevant time because he had work available to him despite his physical limitations but chose not to continue with it.
Finally, the Tribunal also must consider whether Mr Scinta has demonstrated that a major purpose of the decision to stop working was not to affect the administrative assessment of child support.
This is a rebuttable presumption that the parent who is not working must discharge to the Tribunal’s satisfaction. It is a subjective test and the Tribunal is required to consider what the parent’s purposes were in making the decision about working arrangements. It is not necessary to be satisfied that the parent’s decision was objectively reasonable, but the reasonableness of the decision is a factor that may be taken into account.
Mr Scinta’s evidence was that whilst the change of assessment application initiated by Miss Truett in February 2019 was “the straw that broke the camel’s back” he had been contemplating for a while taking some time off from work at the suggestion of his physician in order to assist with his rehabilitation.
The difficulty for Mr Scinta is that in April 2019, prior to his resignation, he stated in a document provided to the Department in response to Miss Truett’s change of assessment application, the following:
Additionally, I have been informed that I can at any time get a permanent disability pension and leave the workforce altogether. The fact that I have a sentimental investment in the family business and feel a duty to help out in any small way I currently can means that UNTIL NOW I have not considered this an option. I am on light duties, do reduced hours and I am of limited use, however being a family business my father was only too happy to have me back, even in a reduced capacity. However, after speaking with my wife, who is as sick of these constant problems from Miss Truett as I am, we have agreed that if this investigation continues I will simply take the easy course and leave the workforce altogether – the only positive consequence of this is that Miss Truett will then get NOTHING from me which would be poetic justice after all the aggravation she has caused.
The Tribunal considers that this statement by Mr Scinta clearly suggests that up until April 2019 he had not contemplated leaving the workforce and the only reason for that now being considered was because Miss Truett had applied for a change of assessment and Mr Scinta objected to being investigated by the Department. The Tribunal considers the final sentence in the above paragraph clearly demonstrates that a major purpose of the contemplation by Mr Scinta in April 2019 to cease work was to affect the assessment of child support and an inference can be drawn that he held the same state of mind when he resigned in June.
The Tribunal also considers the timing of Mr Scinta’s resignation is telling in this regard. The resignation came eight days after the Department made its initial decision regarding Miss Truett’s change of assessment application which saw Mr Scinta’s income increase for the purposes of assessing child support.
Whilst Mr Scinta provided other reasons that he says contributed to the decision to resign, the Tribunal does not have to be satisfied affecting the assessment of child support was the only purpose for the decision to stop work, just that it was a major purpose. The Tribunal is satisfied, based on the statements made by Mr Scinta in April to the Department and in his resignation letter in June 2019 and the timing of the decision to resign, that affecting the assessment of child support was a major purpose of the decision to resign.
Therefore, the Tribunal is satisfied that all the criteria under subsection 117(7B) of the Act have been met and the Tribunal may then consider whether the assessment of child support is rendered unfair because of Mr Scinta’s earning capacity.
The Tribunal concludes, as demonstrated by the letter from his father dated 1 July 2019, that he could have continued with his employment beyond 28 June 2019 if he chose to do so and had he done so, he would have continued to earn the same amount he had in the 2018/2019 year, being about $80,000 gross per annum. This is consistent with statements made by Mr Scinta to the author of the occupational therapy report dated [in] April 2019, that he was employed in a modified management role doing about 38 hours per week and he earned approximately $60,000 per annum net.[7]
[7] See page B75 of the report under the hand of [Ms A].
The Tribunal notes the evidence before the Tribunal of Mr Scinta in the past producing false documents regarding his income in order to obtain a loan from a bank which demonstrates a propensity for manipulating his income to suit his circumstances. Therefore, the Tribunal considers the evidence of the bank records to be the most reliable evidence before it and will base its decision primarily upon that evidence.
Overall, the Tribunal finds that for the 2018/2019 financial year, Mr Scinta’s income and financial resources is best reflected by a figure of $80,000 gross per annum. The Tribunal also finds that a ground to depart has been established in relation to Mr Scinta’s earning capacity from 29 June 2019 up to 30 October 2019 when the child the subject of the assessment turned 18 years old and the assessment came to an end. The Tribunal finds that Mr Scinta’s earning capacity for that period is also best reflected by a figure of $80,000 gross per annum.
At the time of Miss Truett’s change of assessment application, the ATI for Ms Scinta that was applied to the assessment of child support was $60,181. There is a considerable difference between this figure and the figure of $80,000 per annum determined by the Tribunal above as representing Mr Scinta’s income.

Therefore, the Tribunal considers, in the special circumstances of the case, that Mr Scinta’s income renders the assessment of child support unfair such that a ground to depart has been established.

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

Subsection 117(4) of the Act sets out the criteria that must be considered in determining whether it would be just and equitable as regards the children and the parents to make a departure order. This involves a consideration of the following:
(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)him 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 incurrent 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 by the making of, or the refusal to make, the order.

Miss Truett’s circumstances

Miss Truett is currently unemployed and receives newstart allowance from Centrelink. Her income for the last financial year was $19,989 which was derived solely from government benefits which at that time included a parenting payment.
Since Miss Truett commenced on newstart allowance, she has been required to apply for jobs each month and she has been engaging in some volunteer work in an attempt to expand her resume. She told the Tribunal she would like to find work but is finding it difficult in a small regional area and given she has not held paid employment for some time.
Miss Truett lives with her children in rental accommodation and her average weekly expenses amount to about $753 per week. About $250 of this relates to costs associated with the children.
The child the subject of this assessment turned 18 in October 2019 and as a result the assessment ended. Since the child was about 16 years of age, he has received youth allowance payments, the amount of which depends upon the amount of child support that Mr Scinta pays.
Miss Truett told the Tribunal that the child has suffered from ADHD and a number of other related conditions and disorders since he was about five years old and this has resulted in her time being consumed with dealing with behavioural issues that arose as a result.
Miss Truett does not own any significant assets and her financial resources are limited to Centrelink benefits and child support.

Mr Scinta’s circumstances

Mr Scinta’s financial circumstances have been outlined in some detail above.
Mr Scinta lives with his wife and their child in a home they own which is subject to a mortgage. This mortgage was reduced somewhat by the payment of the lump sum from WorkCover and the gift of money from his father in 2019.
As already mentioned, Mr Scinta and his wife also own an investment property which is currently rented out and earns about $190 per week in rent. There is no mortgage held over this.
Mr Scinta estimates his total weekly household expenses amount to about $1,000 per week, maybe more. He himself pays $600 per week off the mortgage and also pays for a [mobile phone]. Otherwise the remainder of the spending from his personal bank account appears to be discretionary spending.
The mortgage account held over the family home has a redraw facility and Mr Scinta regularly redraws on this account to subsidise his living expenses and discretionary spending.
As noted already in this decision, the Tribunal considers that Mr Scinta has had access to significant financial resources in the past 12 months, despite currently being unemployed.

Consideration of whether a departure is just and equitable

a)Mr Scinta’s income and financial resources

As outlined above, the Tribunal has found that based on the evidence before it, Mr Scinta’s income and financial resources is best reflected by an amount of about $80,000 per annum from 1 July 2018 up until his resignation from employment on 28 June 2019.
Thereafter, the Tribunal has determined that the assessment of child support is rendered unfair because of his earning capacity. Given the evidence before the Tribunal that his employer, but for his resignation, was willing to continue to employ him on similar terms as before, the Tribunal considers that $80,000 per annum is an appropriate reflection of Mr Scinta’s earning capacity following his resignation on 28 June 2019 up to the date the assessment ended, being 29 October 2019. This is consistent with statements made by him to his occupational therapist that he earned about $60,000 net per annum.
The Tribunal also has to consider whether it is just and equitable to depart from the administrative assessment and vary Mr Scinta’s ATI to $80,000 for these periods.
This requires a consideration of Mr Scinta’s capacity to pay child support based on an ATI of $80,000 per annum.
If an ATI of $80,000 for Mr Scinta was applied to the assessment of child support for the period from 1 July 2018 to 29 October 2019, the effect on the assessment would be to increase the annual rate payable from $6,709 to $10,578.
An annual rate of $10,578 amounts to about $203 per week. Mr Scinta’s average weekly expenses amount to at least about $700 per week for phone and mortgage expenses and ranging up to $1,000 per week for the whole household. On an income of $80,000 gross per annum, this amounts to about $1,300 per week net, leaving about $300 per week from which child support can be paid. The Tribunal therefore considers that Mr Scinta has the capacity to pay the rate of child support produced by an ATI of $80,000 per annum.
This finding is supported by the fact that apart from the mortgage and phone expenses, Mr Scinta engages in a large amount of discretionary spending via PayPal and eBay. Furthermore, the Tribunal finds that this capacity to pay has continued despite his employment ending in late June 2019, because of the significant financial resources that he has had available to him in 2019 including those which have given him the ability to purchase two new vehicles and an investment property without having to borrow funds to do so. He also received rental income from the investment property.
The Tribunal therefore finds that it is just and equitable to vary Mr Scinta’s ATI for the purposes of assessing child support to $80,000 from 1 July 2018.

b)Miss Truett’s income and financial resources

Miss Truett is in receipt of newstart allowance and her income has been derived from government allowances for some time. These are appropriately reflected in the assessment of child support already and therefore the Tribunal does not consider it necessary to make any changes to her ATI and there was no contention by Mr Scinta to the contrary.
The Tribunal also considers that Mr Scinta’s income and financial resources are significantly greater than those of Miss Truett who has had the sole care of the child for a considerable period of time and in circumstances where the child has suffered from behavioural disorders which has no doubt been difficult for Miss Truett.

c)The child’s income

The child the subject of the assessment does not work but has been in receipt of youth allowance since he was about 16 years of age. This however is adjusted to take into account any child support paid and pursuant to paragraph 117(7)(b) of the Act, the Tribunal must disregard any entitlement of the child to an income tested allowance such as youth allowance.

d)Length of decision

Miss Truett made her change of assessment application on 28 February 2019. The Tribunal may vary the assessment up 18 months prior to this date without leave of the court if it considers it is just and equitable to do so.
Miss Truett submits that it would be just and equitable to commence the decision from September 2017 because the assessments previously did not reflect Mr Scinta’s true financial position.
Miss Truett previously made a change of assessment application on 15 February 2018 where it was found by the Department that no ground to depart from the administrative assessment was established at that time. Mr Scinta submits that because the Department had already made a decision then, it would be unfair to go back and retrospectively change the assessment now.
The Tribunal has made findings in this review application in relation to Mr Scinta’s income from 1 July 2018 based on the evidence before it. The Tribunal does not consider it appropriate to go back any further in time given there was already a change of assessment process conduct by the Department in early 2018 and neither party exercised their right to object to the decision that resulted from that process. The Tribunal therefore considers it just and equitable to commence its decision to vary Mr Scinta’s ATI to $80,000 from 1 July 2018 and this will end on 29 October 2019, given the child’s age thereafter.
The objection decision the subject to this review involves two parts. The first part of the decision was to vary Mr Scinta’s ATI to $60,181 for the period from 1 September 2017 to 30 June 2018. This ATI was based upon Mr Scinta’s derived income for 2017/2018 as ascertained from Australia Taxation Office documents obtained by the Department and was the ATI that applied at the time of Miss Truett’s change of assessment application. The Tribunal considers it appropriate that this part of the objection decision remain in place as it adequately reflects the financial position of Mr Scinta at that time.

Issue 3 – Otherwise proper

In considering whether a departure is otherwise proper, the Tribunal must take into account subsection 117(5) of the Act which requires the Tribunal to have regard to the nature and duty of a parent to maintain a child and the effect that the making of the order would have on any entitlement of the child or carer entitled to child support to an income-tested pension, allowance or benefit or the rate of any income-tested pension, allowance or benefit payable to the child or the carer.
The child is in receipt of youth allowance. The proposed departure has the effect of increasing in the amount payable by Mr Scinta when compared to the administrative assessment in place at the time of Miss Truett’s change of assessment application and therefore may result in a decrease in youth allowance payments and consequently the cost to the community. The Tribunal therefore considers that the departure proposed is otherwise proper in the circumstances of this case.

DECISION

The decision under review is varied as follows:

For the period from 1 July 2018 until a terminating event occurs, Mr Scinta’s adjusted taxable income is varied to $80,000 per annum.

[2020] AATA 886

4 March 2020

Key Legal Topics

Areas of Law

Family Law

Legal Concepts

Jurisdiction

Remedies

Statutory Construction