Vacanti and Saarela (Child support)

[2020] AATA 4393

Vacanti and Saarela (Child support) [2020] AATA 4393 (19 June 2020)

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2020/PC018295

APPLICANT:  Mr Vacanti

OTHER PARTIES:  Child Support Registrar

Ms Saarela

TRIBUNAL:  Member S Hoffman

DECISION DATE:  19 June 2020

DECISION:

The tribunal varies the decision under review as follows:

·     The objection decision under review remains in place until 18 June 2020.

·     From the date of this decision until 30 June 2025, the rate of child support payable by either parent is varied to nil.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – 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.This review is about the child support assessment in respect of twins aged 10 years old. The Department of Human Services – Child Support (the CSA) has been involved in the assessment of child support since 12 January 2012. The CSA started collecting child support from 25 April 2012, at which time the father paid child support to the mother. From 3 February 2016 the mother paid child support to the father.

2.On 5 December 2016 the mother applied for a change of assessment. She was required to pay $1,942 a year to the father. At that time the mother provided 56% of the children’s care and the father provided 44%. The parents’ incomes for 2014/15 were $313,751 (the mother) and $210,208 (the father). An officer from the CSA decided on 6 March 2017 that the rate of child support was nil for the period 1 January 2017 to 31 May 2018. The father objected and an objections officer from the CSA decided on 8 June 2016 that the assessment should revert to the administrative assessment that had been in place, with the mother paying child support to the father.

3.On 7 November 2018 the mother applied for a change of assessment. At that time, according to the CSA’s records, the mother was still providing 56% of the children’s care, and the father was providing 44%. The mother was required to pay $15,034 a year in child support based on her 2017/18 taxable income of $315,280 and the father’s 2017/18 deemed adjusted taxable income of $20,289.

4.There was a change in care such that from 9 May 2019, the mother was recorded as providing 62% care and the father 38% care. The mother’s annual child support liability was reduced to $10,838. The father’s taxable income for 2017/18 was recorded by the CSA from 7 June 2019 as nil. This had no impact on the child support assessment.

5.On 14 August 2019 a senior case officer from the CSA decided to vary the father’s adjusted taxable income to $188,084 for the period 7 November 2018 to 30 June 2021 (the original decision). This meant that the mother was required to pay child support of $3,132 when she had 56% care and the father had 44% care of the children. When her care percentage increased to 62% and the father’s reduced to 38%, the father was required to pay child support to the mother, in the amount of $1,062 a year.

6.The father objected to the original decision and on 3 January 2020, an objections officer from the CSA disallowed the objection. This meant that there was no change to the original decision.

7.On 25 January 2020, the father lodged an application for review with the Administrative Appeals Tribunal (AAT). A directions hearing was held on 22 April 2020 after which directions were issued. The matter was heard on 3 June 2020. Both parties attended via conference telephone and gave sworn evidence. The hearing lasted about 1 hour 56 minutes and the mother left the hearing about 20 minutes before the end.

8.The tribunal had before it documents provided by the CSA (numbered 1 to 534 and 535 to 544); by the father (numbered A1 to A71); and by the mother (numbered B1 to B140).  Copies of these documents were sent to the parties before the hearing. The father submitted an additional three pages (A72 to A74) just prior to the hearing, which were discussed at the hearing. Copies were sent to the mother after the hearing.[1]

[1] These were certificates of title to do with property in [City 1] owned by the father’s father.

9.The mother submitted her tax return and financial statements for 2018/19 (numbered B115 to B140) later than her other submissions and the father said at the hearing he had not received them. It was agreed that the tribunal would defer making its decision to give the father opportunity to receive and peruse the documents and provide a written submission if he so wished. He contacted the AAT on 5 June 2020 to advise that he had received the documents and had no comment to make on them (A75).

10.In the interim (4 June 2020), the mother submitted further documents (B141 to B268), copies of which were sent to the father to comment upon if he wished, within 14 days. The father responded in documents numbered A76 to A80.  The mother made a final submission numbered B269.[2]

[2] These post-hearing submissions were mainly to do with other litigation with which the father is involved.

11.The tribunal made its decision on 19 June 2020.

ISSUES

12.The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act). The Act provides for an administrative assessment of child support to be paid. Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:

i.A ground is established; and

ii.It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and

iii.It would be otherwise proper to make a particular determination.

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

14.If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include variations to the annual rate of child support payable, or to the adjusted taxable incomes of the parents and/or carer, or to other components of the statutory formula used to calculate child support.

CONSIDERATION

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

15.Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the rate of child support because of the income, property and financial resources of either parent.

What is the father’s income for child support purposes?

16.The father is a [Occupation 1]. His taxable income in recent years was $151,079 for 2013/14, $210,208 for 2014/15, $154,826 for 2015/16, $19,833 for 2016/17, nil for 2017/18 and nil for 2018/19.

17.The father said that he was not concerned by the few hundred dollars a year he was assessed to pay in child support as a result of the objection decision, but that he wanted a decision made that reflected his taxable income. When asked why his taxable income was so much lower from 2016/17 compared to previous years, the father said that in 2017 everything went to pieces because of various lawsuits instigated by other people.

18.The father said that prior to that he had been working at two practices owned by other people where he was paid a facility fee; he was not an employee as such. In about 2017 he started his own practice and over time the business has gone from nil turnover to $100,000 a year. He needed a loan from his father to cover the business expenses.

19.The father’s parents live in [Country 1]. In accordance with his late grandfather’s will, a charitable trust, the Vacanti Charitable Trust, was established. The father described it as a type of [trust] of which he was [a] trustee. He wrote on 20 May 2020 that some people led by his uncle, [Mr A], were trying to remove him from this position, and that the matter was before the statutory body in [Country 1] that oversees such trusts.

20.[Mr A]’s son is [Mr B]. The tribunal understands that there is also a dispute and legal proceedings ongoing with [Mr B]. The father wrote that he is involved in litigation with [Mr A] in [Country 3] and may have to attend there to give evidence. The father’s evidence suggested that he was concerned the taxable income used for him in his child support assessment might have a bearing upon this overseas litigation.

21.The father has provided a lot of detail of the family dispute which, it seems, started around 2010. Much of this detail is not relevant to this review. Suffice to say there are legal proceedings in which the father is or was involved, overseas and in Australia. The mother said the father was the applicant in two matters involving her; that is, not all the ongoing cases are to do with the Vacanti family dispute.

22.The tribunal asked the father how much the legal fees were for the litigation he was involved in, and he said between $500,000 to $1,000,000 over three to four years. Later in the hearing he said the legal fees for which he was responsible amounted to about $100,000.

23.The father said that he has been working full-time in recent years made up of part-time work for which he was paid as [an] [Occupation 1], and unpaid work because of his responsibilities as a director of [Business 1] as trustee for Vacanti Family Trust.

24.The mother in her written submission of 20 May 2020 stated that [Business 1] was a company that had vast financial resources. The father submitted a letter from [Director] of [Business 2], Certified Practising Accountants, dated 14 May 2020 which stated that neither entity ([Business 1] or Vacanti Family Trust) has traded or conducted any business affairs since before 2009/10 and therefore no financial accounts or tax returns for either of them have been prepared. That being the case, the tribunal will not consider these entities any further.

25.According to his Statement of Financial Circumstances (SFC) dated 19 February 2020, the father lives in a property which he valued at $1.7 million. Against this he recorded a mortgage of $1.5 million. The father said that this was a loan from his father which had been properly registered as a mortgage. At the direction hearings he said he has not made any repayments since about 2006 or 2007.

26.The father has travelled to [Country 1] with the children so their grandparents can see them. He agreed he had taken holidays overseas but stressed that they were not expensive as he stayed with his parents. The mother provided the CSA with an email dated 6 January 2019 from the father in which he wrote that he was taking the children overseas on a holiday to [Country 3] and [Country 1]. According to the email they would be staying at [a venue] for a few nights and then spending one night at his parents’ home before returning to Perth.

27.The father referred to the objections officer arriving at an adjusted taxable income for him of $188,084. The father said the objections officer had analysed the father’s bank statements and arrived at the figure of $188,084 based on the expenses apparent from the bank statements, but had erred as he (the objections officer) had included business expenses.

28.This was not how the objections officer arrived at the figure of $188,084. In the original decision, there was discussion of expenses identified through the bank statements which amounted to $279,867 annualised. It was decided that analysing deposits into the father’s bank accounts, rather than payments from the bank accounts, was a better approach to ascertaining his income for child support purposes.

29.The objections officer had taken note of deposits into the father’s bank account from ‘[MR C]’ which totalled $81,932.88 over the 159-day period from 12 October 2018 to 19 March 2019. The annualised equivalent of $81,932.88 is $188,084.

30.[Mr C] is the father’s father. The father submitted a loan facility agreement which was dated only as 2020. The tribunal understands this was drawn up for this review. According to this document, the lender has advanced $567,249.25 to the borrower, with the first advance being made on 8 September 2017, and the loan facility terminating on the termination date. The agreement sets out that the repayment commencement date is 31 December 2021 and all monies must be repaid by the repayment date which is a year later. Clause 6.3 allows for the lender to determine from time to time not to enforce their rights.

31.It was not in dispute that the father has covered his living expenses using the loan from his father. He also said that his father has paid some of the legal fees of the matters referred to earlier. The tribunal is satisfied in this case that it is appropriate for the loan to be regarded as a financial resource available to the father, as he has not made any repayments and has relied on the loan from his father since about September 2017 instead of generating an income to cover his living expenses.

32.As noted in the original decision, deposits of $63,069.17 on 22 November 2018 and $3,597 on 21 December 2018 were not included when arriving at the figure of $188,084 as it was apparent from the bank statements that these amounts were used to pay legal expenses.

33.In his SFC the father recorded weekly outgoings totalling $1,978 ($1,581 plus $397). His expenses included the cost of a nanny, gardener and cleaner. This is equivalent to $102,586 a year. In order to cover those expenses, a person would need to be earning pre-tax income of about $177,000. The father also benefits from not paying a rent or mortgage. In light of the foregoing, the tribunal considers that an income figure of $188,084 based on an analysis of bank statements is reasonable.

34.The father said if it is was not possible for him to be assessed on his taxable income of zero, which was what he wanted, then he thought being assessed on an amount of $60,000 to $90,000 a year was about right.[3]

[3] The mother left the hearing about 20 minutes before it finished and was not present when this evidence was given.

35.With regards to his assets, it was submitted that the father has a one third share in two properties in [Country 1]. One is his parents’ home, purchased in 1995. The second was purchased in about 2000 by the father’s parents without any financial input from the father. He has never derived any financial benefit from it, made any financial contribution to it and has never lived in it. The tribunal will not consider these properties any further as it was satisfied that the father cannot derive any financial benefit from them at this time.

36.The mother in a post-hearing submission referred to the father having an interest in a property in [Country 3]. She wrote that he has been paying maintenance costs on this property and is involved in legal action in relation to that property, and that she assumed he owns this property. The tribunal could not locate corroborating evidence in relation to this property and will not consider it further.

37.For reasons already discussed, the tribunal has formed the view that the amount of $188,084 adequately reflects the father’s income, property and financial resources for child support purposes.

What is the mother’s income for child support purposes?

38.The mother is also [an] [Occupation 1], [and] derives her income from her own practice and working for [Employer 1]. Her taxable income was $423,695 for 2015/16, $303,446 for 2016/17, $315,280 for 2017/18 and $355,157 for 2018/19.

39.The father said that he did not have any objections to the mother’s taxable income being used in the child support assessment, subject to him having an opportunity to look at her financial statements and tax return for 2018/19. Having done that shortly after the hearing, the father informed the tribunal he had no comment to make on the mother’s income.

40.The father did suggest that the mother may have benefited from his relatives paying legal fees on her behalf but provided no corroborating evidence. As noted earlier the father referred to legal fees for matters he was involved in costing between $500,000 and $1,000,000. He said that his father covered most of these costs. Deposits from [MR C] to the father that were used to pay legal fees were disregarded when arriving at an income figure for the father. In light of this the tribunal will not consider legal fees in relation to the mother any further.

41.According to her SFC dated 14 February 2020, the mother lives with her de facto partner in a home worth $2.1 million which they jointly own. Her share of the mortgage is $832,603, indicating the total mortgage is about $1.65 million.

42.The mother owns a second property as a sole owner which she valued at $495,000. She recorded a mortgage of $386,915 in relation to this.  

43.The tribunal is satisfied that it is appropriate for the mother’s taxable income figure to be used in the child support assessment.

How does the administrative assessment compare with an assessment of child support using the tribunal’s income figures for the parents?

44.As already recorded, on 7 November 2018 the mother applied for a change of assessment. At that time, she was required to pay $15,034 a year in child support based on her 2017/18 taxable income of $315,280 and the father’s 2017/18 deemed adjusted taxable income of $20,289, and her providing 56% of the children’s care and the father providing 44% of their care.

45.Using incomes of $188,084 for the father and $315,280 for the mother results in a child support liability of $3,132 a year, with the mother being the paying parent. (The tribunal would stress that because of the complexity of the child support formula, its calculations of rates of child support are just estimates.)

46.There was a change in the care percentages from 9 May 2019, such that the mother provided 62% of the care and the father provided 38%. If the father’s income is $20,289, the mother’s child support liability is $10,838. If the father’s income is $188,084, using these care percentages, he becomes the paying parent with an annual child support liability of $1,062 a year.

47.Given the difference between the mother being required to pay $15,034 a year compared with $3,132 (and from 9 May 2019, $10,838 compared with the father paying $1,062) a year, the tribunal is satisfied that in the special circumstances of this case, the administrative assessment does result in an unjust and inequitable rate of child support, and that a ground for departure from the administrative assessment has been established pursuant to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it just and equitable to make a particular departure determination?

48.As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider a variety of factors, as set out in subsection 117(4) of the Act.[4]

[4] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi and Meares (SSAT Appeal) [2008] FMCAfam 886.

49.Section 3 of the Act makes it clear that parents have the primary duty to maintain their children, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case the father and the mother have the primary duty to financially support the children. 

Income, property and financial resources – the father

50.In addition to what has already been discussed, the father said that his practice was building up and he expected his income to increase in future years. In his SFC, he recorded a bank balance of $205. He listed assets which included a [car] worth $8,000, a [second car] worth $3,000, household contents valued at $20,000 and $295,714 in superannuation accounts.

51.In the liabilities section of the SFC, the father recorded $1,500,000 being the outstanding amount on his mortgage, $550,000 owed to his father, and $15,263 owing on his credit card.

52.There was nothing else of particular note in the father’s SFC.

Income, property and financial resources – the father

53.In addition to what has already been recorded, and based on her SFC, the mother has $19,008 in one bank account and $246,279 in another. She owns a [car] which she valued at $38,000, household contents valued at $40,000, jewellery worth $10,000 and has $498,060 in superannuation.

54.The mother recorded liabilities of $5,001 owed on her credit card. She recorded average weekly expenses of $2,104, including mortgage payments of $800. Her total weekly outgoings amounted to $5,625 ($3,521 plus $2,104) against her weekly income of $4,497. The mother did not provide a figure for her de facto’s gross income but the tribunal considers it reasonable to proceed on the basis that once that is factored in, the household income would be sufficient to cover the outgoings.

Other issues pertaining to the parents’ incomes, property and financial resources

55.Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met. These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.

56.The mother has been working full time for many years and given her taxable income over recent years, the tribunal is satisfied it need not consider this provision further in relation to her.

57.In a submission made on 20 May 2020, the mother wrote that at the time of separation and immediately after, the father was working full time as a [junior Occupation 1], and then proceeded to complete [his] training and become a qualified [Occupation 1]. She wrote that he now works part-time and does not earn income as [an] [Occupation 1], this being a reference to his nett income.

58.The mother provided detailed information to do with average weekly hours worked by [Occupation 1] including for those of similar age to the father.

59.The tribunal is satisfied that the father has changed his work pattern. He said that he was working part time as [an] [Occupation 1]. It is also satisfied that he did not make this change because of his own health or his caring responsibilities. He explained the change by reference to the various legal issues he has been pursuing, and the time he has needed to dedicate to them. Further it is apparent from the evidence that the father does not have to work to earn an income because of the financial support he gets from his family, in particular his father.

60.There is no corroborating evidence before the tribunal that the father was substantially motivated to change his work arrangements because of the impact that would have on the rate of child support.

61.The tribunal concludes that it is not open to it to make an earning capacity determination in respect of either parent, and need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.

62.The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act). There is a second child support case involving the father. This is factored into the child support assessment under review.    

Costs related to the children

63.In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs they may have (subsection 117(6) of the Act).

64.There were no submissions made as to specific additional costs related to the children that should be factored into the child support assessment.

65.In his SFC, the father allocated various household costs between him and the children. In filling out her SFC, the mother allocated the costs of food between her, her partner and the children. A total figure only was provided in relation to other day-to-day living costs, such as mortgage and utilities. The tribunal therefore had incomplete evidence regarding the actual costs of the children and concluded that using the “Costs of the Children Table” is reasonable in the circumstances of this case for costs related to the children.[5] 

[5] The Costs of Children Table is available at the Services Australia website, accessed 27 May 2020 at align="left">Hardship

66.The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[6] in this respect:

This requires the Court to balance the “hardship” which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.

[6] [1991] FamCA 93

67.The tribunal is satisfied that neither parent will experience hardship because of the tribunal’s determination. The mother has a good income and the father is well-supported by his family as discussed.

Any other relevant matters

68.The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).

69.In her submission made on 20 May 2020, the mother wrote that the father has never been financially independent from his father and that his family have always ensured that the father “has adequate financial resources to fund his lavish lifestyle.” She contended that because the father does not make any repayments on the loans from his father, these are not genuine loans but are really early payments from his inheritance. She wrote that she was requesting that the father’s financial resources and those of his parents are used in combination to assess the father’s actual financial resources.

70.The father disputed the notion that the loans from his father were an early inheritance.

71.The tribunal does not agree that the father’s financial resources and those of his parents are used in combination for child support purposes as it is the parent that has the primary duty to maintain their children (section 3 of the Act). This duty does not extend to grandparents or current partners, and their incomes are not factored into child support assessments.[7]

[7] The exception to this might be if there was evidence of alienation of income by a parent, which is not so in this review.

72.The tribunal has treated the loans made to the father as a financial resource available to him because he has been using these to live on for a number of years. The tribunal considers that to be just and equitable in this particular case.

73.The father suggested that he might be harmed if the tribunal’s decision was not favourable to him. In his written submission of 20 May 2020, he referred to his cousin [Mr A] threatening him with physical harm in January 2018, and that the mother will assist [Mr A]. He wrote “I have genuine reasons to fear that [the mother] will once again assist [Mr A] in causing me harm”. This was a reference to the father’s claims that the mother had provided documents to [Mr A], which is not something about which this tribunal will make a finding.

74.The tribunal notes that although the father referred to [Mr A] threatening physical harm there was no claim made of actual physical harm. Even if there were, it is the tribunal’s view that would be a matter for other agencies and authorities to address, and not something to be factored into a child support decision.    

75.The father said that it was in the best interests of the children that his child support liability revert to the administrative assessment as that would help the father with the overseas legal proceedings. The tribunal is not satisfied that the overseas legal proceedings will be affected by the tribunal’s determination, and even if they were, that this is something the tribunal should take into account when making its determination. It does not accept that reverting to the administrative assessment was in the best interests of the children. The tribunal rejects this argument.

76.At the directions hearing, the mother spoke about the possibility of a departure decision being backdated to a date earlier than 5 November 2018, which was when she lodged her change of assessment application. She referred to an earlier change of assessment application she made on 5 December 2016 (see paragraph 2) and said she did not pursue that at the time by seeking a review with the AAT, and did not lodge a further change of assessment application until November 2018, because of the stress involved in doing so.

77.This issue was discussed briefly at the directions and substantive hearings, and without further evidence regarding the mother’s ability to proceed with the change of assessment or review processes sooner than she did, the tribunal is satisfied that it is not appropriate in the circumstances to consider periods prior to when she lodged her change of assessment application.

78.The mother expressed her view that it would satisfactory if neither parent paid child support to the other. She is the receiving parent. The father said that for him it was not about the small amount of child support he was paying. Given the parents’ respective incomes and financial resources, and that the assessment was $1,062 a year after the change in care from 1 May 2019, and has been $830 a year since 1 January 2020, the tribunal determines that from the date of this decision, neither parent is required to pay child support to the other.

79.This means that the assessments which resulted from the original and objection decisions remain in place until 18 June 2020, and the tribunal’s determination takes effect from 19 June 2020. This is to minimise any over or underpayments that might arise from the tribunal’s decision.

80.As to the end date of its determination, the tribunal has taken its decision to 30 June 2025 to give the parents some certainty into the future.

81.It is open to either parent to apply for a change of assessment if their circumstances change before this determination ends.

Issue 3 – Is it otherwise proper to make a particular departure determination?

82.The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.

83.Based on their SFCs, neither parent is in receipt of family tax benefit. The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.

DECISION

The tribunal varies the decision under review as follows:

·     The objection decision under review remains in place until 18 June 2020.

·     From the date of this decision until 30 June 2025, the rate of child support payable by either parent is varied to nil.