Wadhwa and Macwan (Child support)

Wadhwa and Macwan (Child support) [2019] AATA 431 (1 February 2019)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2018/BC013608
APPLICANT:  Mr Wadhwa
OTHER PARTIES:  Child Support Registrar
Ms Macwan

TRIBUNAL:Member J Thomson
DECISION DATE: 1 February 2019
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that:

(a)For the period 1 July 2017 to 24 August 2017, Mr Wadhwa’s adjusted taxable income is varied to $40,000;
(b)For the period 25 August 2017 to 2 January 2018, Mr Wadhwa’s adjusted taxable income is varied to $48,000;
(c)For the period 3 January 2018 to 30 June 2018, Mr Wadhwa’s adjusted taxable income is varied to $60,051;
(d)For the period 1 July 2018 to 1 October 2018, Mr Wadhwa’s adjusted taxable income is varied to $100,000; and
(e)For the period 2 October 2018 to 31 October 2019, Mr Wadhwa’s adjusted taxable income is varied to $125,000;
(f)For the period 1 July 2018 to 1 October 2018, Ms Macwan’s adjusted taxable income is varied to $57,174; and
(g)For the period 2 October 2018 to 31 October 2019, Ms Macwan’s adjusted taxable income is varied to $57,174.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – multiple sources of income – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

Mr Wadhwa and Ms Macwan are the parents of [Child 1], born 2006, and[Child 2], born 2007. For the purposes of child support, the parents are recorded as having shared care of the children.
Mr Wadhwa seeks review of an objection decision made by the Department of Human Services – Child Support (the Department) on 13 February 2018. This decision allowed Ms Macwan’s objection to a decision of Department decision [dated] 8 December 2017 refusing Ms Macwan’s application on 26 September 2017 for a change of assessment on the grounds commonly referred to as Reasons 3, 8A and 8B. In substitution, the objections officer decided that for the period 25 August 2017 to 31 October 2019, Mr Wadhwa’s adjusted taxable income should be set at $240,536.
The Tribunal heard the matter on 12 October 2018. Mr Wadhwa attended the hearing in person and gave affirmed evidence. He was represented by his solicitor, Ms [A], who made submissions on his behalf. Ms Macwan attended the hearing by conference telephone and gave affirmed evidence. The Tribunal had before it documents provided by the Department (pages 1 to 894), documents provided by Mr Wadhwa (pages A1 to A68) and documents provided by Ms Macwan (pages B1 to B109).
Mr Wadhwa and his representative did not have copies of pages 880 to 894 of the Department’s documents with them at hearing, but otherwise had copies of the remaining documents, and were content to proceed with the hearing. Ms Macwan had a complete set of documents with her at hearing.
The Department’s documents and the documents provided by Mr Wadhwa and Ms Macwan were admitted into evidence and marked, respectively, Exhibits 1, A and B.
The Tribunal issued directions for the provision of further documents by Mr Wadhwa. He has complied with those directions, and the additional documents and written submissions provided by him have been added to Exhibit A. Copies of those documents have been sent to Ms Macwan for her consideration and response. Ms Macwan’s response to the additional documents and information provided by Mr Wadhwa and her written submissions with respect to her allegations at hearing regarding Mr Wadhwa’s life-style have been added to Exhibit B.
The Tribunal also issued further directions regarding the provision of further documents by Ms Macwan. She has complied with those directions, and the additional documents she provided have been added to Exhibit B. Copies of those documents were sent to Mr Wadhwa for his consideration and response. Mr Wadhwa has not provided a response.

ISSUES

The issues which arise in this case are:
· Mr Wadhwa’s income, property and financial resources available to him for child support purposes.

The Legislative Framework

The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children, and the level of care provided by each parent. Part 6A of the Act allows for a departure from the administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:
·       One, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));
·       A departure is just and equitable as regards the children and each parent (sub-subparagraph 98(1)(b)(ii)(A)); and
·       It is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)).
Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2) of the Act.
If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Registrar may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Grounds for Departure

Subparagraph 117(2)(c)(ia) – commonly referred to as Reason 8 – provides as a ground for departure:
(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; or …
The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislation in subsection 117(2) of the Act must be guided by the qualification that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

CONSIDERATION

In reaching its decision, the Tribunal has considered the affirmed evidence given at hearing by both parents and the submissions made by Ms [A] on behalf of Mr Wadhwa together with the documents admitted into evidence as Exhibits 1, A and B, including the additional documents and written submissions provided by the parties referred to above.
Ms Macwan’s application of 26 September 2017 seeks a change of assessment with respect to Mr Wadhwa’s income, property and financial resources from 25 August 2017. The objections officer’s decision under review deals with the period 25 August 2017 to 31 October 2019.
Mr Wadhwa’s evidence at hearing, and the submissions made on his behalf by his representative, Ms [A] were to the following effect.
Mr Wadhwa is an [Occupation 1] by profession. Until January 2017, he was employed on contract [as] an [Occupation 1] [advisor]. He was retrenched in January 2017 and received a redundancy payment.
He then secured a contract position with [COMPANY 1], as an [advisor], [working] on policies and projects [COMPANY 1] was either investigating on behalf of its clients or considering initiating itself. He secured this contract for an initial period of six months commencing from 6 March 2017, but his contract was subsequently extended for a further three months to 3 October 2017.
As this contract was due to expire on 3 October 2017, he believed his future lay elsewhere. He gave evidence that he had applied for at least four other consulting/advisory role positions with other organisations, and had received overtures from close business associates to establish a new consulting partnership business in his [Occupation 1] advisory field of expertise.
In July 2017, he needed to resolve his future business issues and in fairness to [COMPANY 1], rather than continue to be involved in their project work, he considered it would be in the best interests of all concerned if he terminated his contract with [COMPANY 1] in order to spend time focussing on the development of his own plans for his business future. Accordingly, he tendered his resignation in an email dated 27 July 2017 to the directors of [COMPANY 1], effective from 25 August 2017 (see Exhibit 1, page 148). This email outlines the circumstances in which he considered it appropriate to tender his resignation prematurely.
To the extent that Ms Macwan asserted in her evidence that the motivating reason for Mr Wadhwa’s decision to terminate his contract with [COMPANY 1] was to reduce his income to affect his child support liability, the Tribunal rejects her submissions, and accepts that Mr Wadhwa’s motivation was a desire to improve his business and income earning prospects for the benefit of his family.
[COMPANY 1] provided a letter to the Department dated 18 October 2017 (see Exhibit 1, pages 146 to 160) confirming the date of Mr Wadhwa’s resignation, the terms of his contractual employment from 6 March 2017 until 25 August 2017, the amount of his last salary package [from] 3 July 2017 until 25 August 2017, and the manner in which his salary was paid to his nominated [Bank 1] account [number]. This letter also records that Mr Wadhwa was due to receive a further final success payment for his final project, which would be paid upon the relevant client making payment of [COMPANY 1]’s invoice for Mr Wadhwa’s work on that project.
Mr Wadhwa gave evidence that he received this success payment amounting to [amount] from [COMPANY 1] on 8 May 2018.
At page 168 of Exhibit 1 the Department’s file note of 21 August 2017 records Mr Wadhwa notifying the Department of his resignation from [COMPANY 1], and that from 25 August 2017 he would be unemployed. The Department advised him of his option to provide an income estimate and its particular requirements in that respect, and suggested that he contact the Department again, once he had received his final salary payment from [COMPANY 1].
On 23 August 2017, the Department sent letters to each parent notifying them of a new child-support period from 1 October 2017 to 31 December 2018 (see Exhibit 1, pages 169 to 172), noting that it intended assessing Mr Wadhwa to pay child support of $1,979.17 per month for the period 1 October 2017 to 30 June 2018 based on his 2016/17 provisional income of $217,190, and Ms Macwan’s 2017/18 income estimate of $0, and for the period 1 July 2018 to 31 December 2018 his child support amount would be $1,790.33 per month, based on the same provisional income of $217,190, and Ms Macwan’s 2016/17 taxable income of $37,740.
On 13 September 2017, the Department sent letters to both parents advising them of its acceptance of the income estimate provided by Mr Wadhwa for the 2017/18 financial year, the summary details appended to which reflect Mr Wadhwa providing a year-to-date (1 July 2017 to 24 August 2017) income estimate of $31,923, consistent with [COMPANY 1]’s payroll advice slip at page 152 of Exhibit 1, reflecting Mr Wadhwa’s year-to-date income in that amount for the period 1 July 2017 to 27 August 2017.
However, Mr Wadhwa’s $0 estimate for the remaining estimate period 25 August 2017 to 30 June 2018 does not appear to reflect rental income from his home, flat and cottage on his [Suburb 1] property, or income from the motor vehicle, caravan et cetera storage facility he operated on that property.
Following his resignation from [COMPANY 1] on 27 July 2017, Mr Wadhwa decided to enter into a partnership arrangement with a business colleague, and established the company, [Company 3] [Pty] Ltd ([Company 3]) on 11 August 2017 (see Exhibit 1, pages 324 to 326). Mr Wadhwa gave evidence that he contributed $16,000 seed capital to start the company, and his co-director contributed $4,000.
Between 11 August 2017 and 3 January 2018, Mr Wadhwa said he was engaged in securing project advisory work for [Company 3], and it was not until income from these projects materialised that he was able to draw a salary from [Company 3]. During that period he said he survived on his accumulated earnings from [COMPANY 1], his redundancy [payment], rental and storage income, and credit cards.
By mid-December 2017, Mr Wadhwa said he and his co-director were satisfied that the level of income being generated by [Company 3] was sufficient for them to commence paying themselves directors’ salaries commensurate with the income/cash flow from the business, its overheads, and their contributions to start-up capital. He said they took advice from professional accountants as to the appropriate level of the salaries the business was capable of paying, and based on that advice, resolved that Mr Wadhwa’s initial director’s salary should be set at $50,000 per annum plus superannuation. He said his income was set at a margin of 1.2% above that of his co-director, in recognition of his particular skills and his capital contribution. Accordingly, his co-director’s salary was set at $40,000 per annum plus superannuation.
These arrangements and his other conditions of employment were recorded in a formal letter of appointment issued on [Company 3] letterhead dated 17 December 2017 (see Exhibit A, pages A21 to A33). This document records the commencement date of Mr Wadhwa’s employment is 3 January 2018 and his base salary of $50,000 per annum plus superannuation.
The Tribunal finds that was a reasonable and appropriate salary determination, given [Company 3] had only recently commenced trading.
Mr Wadhwa gave evidence that by April 2018, [Company 3]’s cash flow was improving; it had completed a [project] on which it had been engaged and was employing seven staff members, and Mr Wadhwa’s salary increased to $75,000 per annum. By 1 July 2018, [Company 3]’s performance had improved to the point where it was able to pay Mr Wadhwa a salary of $100,000 per annum, and shortly prior to hearing, he said his salary had increased to $125,000 per annum from 2 October 2018, the level at which he expected it would stay for the foreseeable future.
Coincidentally, Ms Macwan said in evidence that she considered Mr Wadhwa’s income earning capacity was approximately $120,000 to $125,000 per annum. Mr Wadhwa acknowledged at hearing that he was prepared to accept his income for child support purposes being assessed at $125,000 for the 2018/19 financial year.
During the course of the hearing, Ms Macwan made reference to a number of other companies with which Mr Wadhwa is associated, asserting that he derived income from these companies. In particular, she listed the following entities:
1. [COMPANY 4]
[Details of the entity deleted]. Mr Wadhwa confirmed that [Company 3] derives income from this entity, providing advice and preparing [submissions] on behalf of [COMPANY 4], and had rendered invoices to [COMPANY 4] totalling approximately $40,000 for its services. He denied he was an office holder in this entity or that he derives any direct personal financial benefit from this entity. The Tribunal accepts his evidence in this respect.
2. [Company 5] Pty Ltd ([Company 5])
Mr Wadhwa’s evidence was that his company, [Company 3] holds a 35% interest in [Company 5]. He said the company was established in May 2018 and has not yet traded.[Details about Company 5 deleted]. He denied that he or [Company 3] derived any financial benefit from this entity; Ms Macwan acknowledged she had no evidence to suggest otherwise.
3. Wadhwa & Associates Pty Ltd (Wadhwa & Assocs)
Mr Wadhwa’s evidence was that he is a director of Wadhwa & Assocs. The company is the trustee of his family trust and the holder of his share interest in [Company 3] for the purpose of receiving distributable profits from [Company 3] as trustee of his family trust. As no such distributions have been made to date, the company has not received any income from [Company 3].
4. [Company 6]
Mr Wadhwa gave evidence that [COMPANY 6] is the corporate trustee of his self-managed superannuation fund. His evidence was that this is a standard self-managed superannuation fund. Copies of bank statements for its bank account [with] [BANK 2] were provided. Ms Macwan queried three deposits of $150,984.28 on 31 August 2016, $139,832 on 14 March 2017, and $113,024.20 on 20 November 2017 to this bank account.
Mr Wadhwa’s evidence regarding the deposit of $150,984.28 was that it was a rollover from an [BANK 2] [superannuation] investment product styled as an [BANK 2] Investment Savings Bond Policy to which he was contributing, the bank account for which was [BANK 2]. This form of investment was closed down by the Bank in or about August 2016, and the proceeds of the investment fund account transferred into Mr Wadhwa’s [COMPANY 6] via an [BANK 2] Bank cheque no. [deposited] to the [COMPANY 6]’s [BANK 2] Bank account [on] 24 August 2016. Mr Wadhwa’s submission regarding the circumstances of this transfer is set out at page A106 of Exhibit A.
The [BANK 2] Bank informed Mr Wadhwa that it was a requirement that its cheque for the rollover funds of $150,984.28 be deposited into an existing compliant superannuation fund to comply with Federal Government superannuation legislative requirements, and for that reason the funds were remitted to Mr Wadhwa’s [COMPANY 6]. As such, the funds were not available to him for child support purposes.
In a further submission provided by Mr Wadhwa following hearing, he states that he is currently contributing $300 per month to a similar [BANK 2] [superannuation]/term life investment savings Bond policy, the banking account for which is [BANK 2] bank account number [number] (see pages A91 to A93 of Exhibit A). In a later submission provided by Mr Wadhwa following hearing (see Exhibit A, pages A113 to A117), Mr Wadhwa states that, based on the latest unit price governing the value of the investment, the current cash value available as a financial resource is $17,000.
With respect to the deposits of $139,832 and $113,024.20, Mr Wadhwa’s evidence was that these were the proceeds of sale of shares held by the [COMPANY 6]. He provided copies of the relevant share sale certificates at pages A88 and A89 of Exhibit A, and the [COMPANY 6] [BANK 2] bank account [statement] reflecting the deposit of $113,024.20 at page A86 of Exhibit A and a copy of [BANK 2] Trading account statement reflecting both the $113,024.20 and the $139,832 share sale proceeds transfers to Mr Wadhwa’s [COMPANY 6] account referred to above (see Exhibit A page A87).
The Tribunal is satisfied the deposit of these funds to Mr Wadhwa’s [COMPANY 6] bank account is a legitimate and appropriate transaction relating to the administration of his superannuation fund and does not involve funds which would otherwise be available to him for child support purposes as income or otherwise.

Ms Macwan also raised concerns regarding two further withdrawals appearing in his personal [Bank 1] [account]; Mr Wadhwa’s contributions to a [Bank 1] term life policy [account] and a [Company 2 life insurance policy].
Mr Wadhwa gave evidence that the [Bank 1] [Policy] is a term life assurance savings policy to which he contributed monthly premiums amounting to $149, but which have been increased to $153.47 per month since in or about April 2018. Mr Wadhwa said these premiums are paid from his personal [Bank 1] [account], into which his [Company 3] salary is paid. He provided [Bank 1] [account] statements for various periods reflecting his premium contributions to this term life policy, including an annual investment statement reflecting the withdrawal value of policy/ investment as at 9 August 2018 at $2,253.31 (see pages A99 to A103 of Exhibit A).
With respect to the [Company 2 life insurance policy] contributions, Mr Wadhwa gave evidence that he effected this policy for the benefit of his [Company 3] co-director as an assurance against the event of Mr Wadhwa’s untimely demise and the consequential effect on [Company 3]’s income, having regard to the prominent role Mr Wadhwa plays in generating income for that business. He gave evidence that he contributed $124.88 per month from his [BANK 2] credit card account [until] 20 July 2018 when the monthly premium was increased to $149.71. The Tribunal finds there is no financial benefit to Mr Wadhwa arising from this particular investment.
Mr Wadhwa gave evidence that he does not claim these payments as a tax deduction against his income from [Company 3] or otherwise.
Mr Wadhwa provided a summary at page A78 of Exhibit A of the income he derived from the rental of his [Suburb 1] residential house property, the flat and cottage on that property and the charges he makes for the storage of vehicles, caravans etc. on that property. The summary reflects the house was rented at $500 per week from 1 July 2017 to 24 February 2018 (34 weeks), total gross rental of $17,000, the flat was rented at $500 per week from 10 March 2018 to 30 June 2018 (16 weeks), total gross rent of $8,000, and the cottage was rented at $300 per week from 1 July 2017 to 12 May 2018 (32 weeks), total gross rent of $9,600. Storage charges reflected a standard rate of $200 per week over the period 1 July 2017 to 30 June 2018, total gross storage income for that financial year of $10,400, and a combined rental/storage gross income of $45,000.
Ms Macwan challenged Mr Wadhwa’s summary of rental income with respect to the rental properties, reckoning the house rental income at a weekly rental of $850 over the 34-week period, arriving at a total gross rental of $28,900, and suggesting the flat was rented for the whole of the 2017/18 financial year, rather than the short period reflected in Mr Wadhwa’s rental calculation, arriving at a total gross rental for the flat of $26,000. With respect to the cottage, Ms Macwan suggested a higher weekly rental figure of $320 was being commanded, and that the property was rented for the whole of the 2017/18 financial year, resulting in a gross annual rental figure of $16,640, and a combined property rental income of $71,540. She did not challenge Mr Wadhwa’s storage income for the financial year at $10,400.
Mr Wadhwa’s income tax return for the 2017/18 financial year was before the Tribunal at pages A15 to A27 of Exhibit A. It reflects his income from [COMPANY 1] for the 2017/18 financial year at $52,351, his income from [Company 3] at $39,304, and the gross rental and storage income at $45,000. Mr Wadhwa has provided a further written submission responding to Ms Macwan’s allegations regarding the income he has declared with respect to the rental income he received for the house, flat and cottage. This is dealt with later in these reasons.
The Tribunal is satisfied that Mr Wadhwa’s only sources of income were from his employment with [COMPANY 1] until 25 August 2017, [Company 3] from 3 January 2018, and the rental and storage income he received from 1 July 2017 as reflected in his summary at page A78 of Exhibit A.
The Department’s original decision maker and the objections officer did not have the advantage of Mr Wadhwa’s 2017/18 income tax return before them at the time they made their decisions.
The point of comparison with respect to the administrative assessments in place at the time of Ms Macwan’s application for change of assessment on 26 September 2017 for the period 1 July 2017 to 30 June 2018 are set out at page 4 of Exhibit 1 as follows:
(a)   For the period 1 July 2017 to 24 August 2017, Mr Wadhwa was assessed to pay an annual rate of child support of $23,356, based on his 2015/16 adjusted taxable income of $232,764, and Ms Macwan’s 2017/18 income estimate of $0;
(b)   For the period 25 August 2017 to 21 September 2017, the child support assessments were reduced to nil for both parents based on 2017/18 $0 income estimates provided by each parent;
(c)   For the period 22 September 2017 to 30 September 2017, Ms Macwan was assessed to pay an annual rate of child support of $2,486 based on her 2017/18 income estimate of $57,174 and Mr Wadhwa’s 2017/18 income estimate of $0;
(d)   For the period 1 October 2017 to 2 January 2018, Ms Macwan was assessed to pay an annual rate of child support of $2,458 based on her 2017/18 income estimate of $57,174, and Mr Wadhwa’s 2017/18 income estimate of $0; and
(e)   For the period 3 January 2018 to 30 June 2018, Mr Wadhwa was assessed to pay child support at the annual rate of $1,794, based on his 2017/18 income estimate of $50,005, and Ms Macwan’s 2017/18 income estimate of $57,174.
The Tribunal’s analysis of Mr Wadhwa’s income for each of the periods referred to in subparagraphs (a) to (e) in the preceding paragraph reflects the following:
(a)   For the period 1 July 2017 to 24 August 2017:
Income from [COMPANY 1] – year-to-date (1 July 2017 to 24 August 2017 as per Mr Wadhwa’s estimate at page 196 of Exhibit 1) – $31,923
Income from rental/storage (see page A78 of Exhibit A):
House – approximately 8 weeks x $500 per week – $4,000
Flat – not rented in this period – $0
Cottage – approximately 8 weeks x $300 per week – $2,400
Storage – approximately 8 weeks x $200 per week – $1,600
Total income – $39,923
(b)   For the period 25 August 2017 to 21 September 2017:
Income from rental/storage (see page A78 of Exhibit A):
House – approximately 4 weeks x $500 per week – $2,000
Flat – not rented in this period – $0
Cottage – approximately 4 weeks x $300 per week – $1,200
Storage – approximately 4 weeks x $200 per week – $800
Total income – $4,000
(c)   For the period 22 September 2017 to 30 September 2017:
Income from rental/storage (see page A78 of Exhibit A):
House – approximately 1 week x $500 – $500
Flat – not rented in this period – $0
Cottage – approximately 1 week x $300 – $300
Storage – approximately 1 week x $200 – $200
Total income – $1,000
(d)   For the period 1 October 2017 to 2 January 2018:
Income from rental/storage (see page A78 of Exhibit A):
House – approximately 13 weeks x $500 – $6,500
Flat – not rented in this period – $0
Cottage – approximately 13 weeks x $300 – $3,900
Storage – approximately 13 weeks x $200 – $2,600
Total income – $13,000
(e)   For the period 3 January 2018 to 30 June 2018:
Income from [COMPANY 1] – $20,428 ($51,351 gross income for 1 July 2017 to 30 June 2018 reflected in 2017/18 income tax return – $31,923 year-to-date estimate 1 July 2017 to 24 August 2017 = $20,428)
Income from [Company 3] (2017/18 income tax return) – $39,304
Income from rental/storage (see page A78 of Exhibit A):
House – 3 January 2018 to 24 February 2018 – approximately 7 weeks x $500 – $3,500
Flat – 10 March 2018 to 30 June 2018 – approximately 16 weeks x $500 – $8,000
Cottage – 3 January 2018 to 12 May 2018 – approximately 19 weeks x $300 – $5,700
Storage – 3 January 2018 to 30 June 2018 – approximately 26 weeks x $200 – $5,200
Total income – $82,132
The administrative assessment in place for the period 1 July 2017 to 24 August 2017 required Mr Wadhwa to pay child support at the annual rate of $23,356, based on his 2015/16 adjusted taxable income of $232,764. Consequent upon his resignation from [COMPANY 1], effective on 25 August 2017, Mr Wadhwa provided an estimate for his year-to-date income for the period 1 July 2017 to 24 August 2017 of $31,923, which was the income he received from [COMPANY 1] for that period. That estimate did not take into account the rental and storage income the Tribunal has found he received for that period of $8,000 which would have brought his income for that period to $39,923, say, $40,000.
The Tribunal finds the administrative assessment for the period 1 July 2017 to 24 August 2017 at $23,356 per annum, based on Mr Wadhwa’s 2015/16 adjusted taxable income of $232,746, when his actual income for that period was approximately $40,000 makes the assessment unjust and inequitable, and a ground for departure for that period is established.
For the period 25 August 2017 to 21 September 2017, the administrative assessment in place reflected neither parent was assessed to pay child support as they both reported $nil incomes for that period. The Tribunal has found Mr Wadhwa’s rental and storage income for that period was $4,000, annualised to $52,143 ($4,000 / 28 days x 365 = $52,142.85 – rounded up to $52,143). This makes the assessment unjust and inequitable, and a ground for departure is established for that period.
For the period 22 September 2017 to 30 September 2017, the administrative assessment in place required Ms Macwan to pay Mr Wadhwa annual child support of $2,486, based on her 2017/18 income estimate of $57,174, and Mr Wadhwa’s income estimate of $nil. The Tribunal has found he had rental and storage income for that period of $1,000, annualised to $40,555 ($1,000 / 9 days x 365 = $40,555), making the assessment unjust and inequitable, and a ground for departure is established for this period.
For the period 1 October 2017 to 2 January 2018, the administrative assessment in place required Ms Macwan to pay Mr Wadhwa child support at the annual rate of $2,458, based on her 2017/18 adjusted taxable income of $57,174, and Mr Wadhwa’s income estimate for that period of $nil. However, the Tribunal has found he received rental and storage income in that period of $13,000, annualised to $51,021 ($13,000 / 93 days x 365 = $51,021). This makes the assessment for this period unjust and inequitable and a ground for departure is established.
For the period 3 January 2018 to 30 June 2018, the administrative assessment required Mr Wadhwa to pay Ms Macwan child support at the annual rate of $1,794, based on his 2017/18 income estimate of $50,005, and Ms Macwan’s 2017/18 income estimate of $57,174.
The Tribunal had before it Mr Wadhwa’s 2017/18 income tax return, and details of his declared gross and net rental and storage income for that year. He declared gross income of $52,351 from his former employer, [COMPANY 1] for the financial year 1 July 2017 to 30 June 2018. This figure included the year-to-date income of $31,923 he provided to the Department in his income estimate following his resignation from [COMPANY 1], effective from 25 August 2017.
His income from [COMPANY 1] for the period 25 August 2017 to 30 June 2018 would therefore have been $20,428 ($52,351 – $31,923 = $20,428). His declared income from [Company 3] for the period 3 January 2018 to 30 June 2018, evidenced by the PAYG payment summary he provided at page A1 of Exhibit A, was $39,304, and his net rental and storage income was $3,515, which would have brought to account the deductable expenses related to that source of income for the whole of that financial year of $41,485 against the total rental/storage income for the whole year of $45,000.
His total net taxable income for that year, after deductions reflected in his income tax return against his [COMPANY 1], [Company 3], and other income and the $41,485 against the rental/storage income, which the Tribunal accepts as reasonable, would therefore be $60,994, calculated as follows:
[COMPANY 1] gross income (3 January 2018 to 30 June 2018) – $20,428
[Company 3] gross income (3 January 2018 to 30 June 2018) – $39,304
Rental/storage gross income (1 July 2017 to 30 June 2018) – $45,000
Other income (item 24, page A17, Exhibit A) – $943
Total gross income – $105,675
Less deductions ([COMPANY 1]/ [Company 3]/Other income and rental/storage deductions ($3,196 + $41,485) – $44,681
Net Taxable Income – $60,994
As this income is considerably more than the income estimate of $50,005 used in the assessment, the Tribunal finds the assessment unjust and inequitable, and a ground for departure is established for the period 3 January 2018 to 30 June 2018.

Just and Equitable

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

Mr Wadhwa’s Statement of Financial Circumstances

Mr Wadhwa provided a statement of financial circumstances (SFC) dated 12 March 2018 (see pages A69 to A77 of Exhibit A). At hearing, he made the following adjustments:
Item 20: his current bank funds have increased from $2,100 to $7,000;
Item 28: his Public Service superannuation fund has reduced to $115,000 since the trustee allowed him to withdraw $55,000 on the grounds of hardship to discharge outstanding child support arrears and legal fees approximately in or about July/August 2018;
Item 35: his Centrelink liability of $2,000 has been discharged by garnishee;
Item 42: his life insurance premiums with respect to his [Company 2 life insurance policy] increased on 21 July 2018 from $124.88 per month to $149.71 per month, an increase from approximately $20 per week to approximately $37.50 per week.
Mr Wadhwa reported gross average weekly income of $2,942, comprising his weekly income from [Company 3] of $1,442, and rental/storage income of $1,500.
At hearing, Ms Macwan did not challenge Mr Wadhwa’s summary of assets totalling $1,412,000, comprising his [Suburb 1] property and improvements comprising the house, flat and cottage valued at $1,250,000, against a mortgage debt of $1,120,000 (reflecting an equity of $130,000), his [motor] vehicles valued at $30,000, his interest in the [Company 3] business which he valued at $50,000, household contents to a value of $50,000, and a caravan valued at $25,000, nor did she challenge his amended superannuation entitlements totalling $415,000.
Mr Wadhwa’s amended liabilities totalling $1,173,000 comprise mortgage debt of $1,120,000, and credit card debt totalling $53,000. This was not challenged by Ms Macwan. His listed weekly personal expenditure was unremarkable as were his average weekly household expenses totalling $2,906.25.
At the time of hearing, Ms Macwan had not received a copy of Mr Wadhwa’s SFC. The Tribunal arranged for a copy to be provided to her and allowed her a period of 7 days to consider that document and provide responsive submissions, including submissions in relation to her allegations concerning Mr Wadhwa’s travel expenses. Her submissions in that respect have been received and admitted into evidence as part of Exhibit B, pages B110 to B130.
In her responsive submissions, Ms Macwan raised issues regarding deposits to Mr Wadhwa’s [BANK 2] [bank] account in the amounts of $150,984, $139,832, and $113,024.
In his evidence before the Tribunal set out above, Mr Wadhwa provided satisfactory explanations in relation to these deposits (see paragraphs 35 (subparagraph 4), 36 and 38 above).
As regards Ms Macwan’s assertions with respect to the rental income, it is not the Tribunal’s function to conduct a forensic audit of Mr Wadhwa’s financial affairs. In his responsive submissions, Mr Wadhwa asserted Ms Macwan was relying on funds transfers reflected in his bank account which he said did not necessarily reflect rental/storage income, and that the rental/storage income and related expenses are accurately reflected in his 2017/18 income tax return at pages A15 to A27 of Exhibit A. The Tribunal is satisfied he has accurately accounted in his 2017/18 income tax return for any income he received from the rental of the house, flat and cottage, and the storage facilities on his [Suburb 1] property.
The Tribunal has considered Ms Macwan’s submissions regarding the deposits to Mr Wadhwa’s [Bank 1] [account] between September 2016 and May 2018 set out in the schedule she provided at page B123 of Exhibit B. The deposits for the period 9 September 2016 to 6 June 2017 fall outside the period under consideration in the decision under review, and are therefore irrelevant for the purpose of determining Mr Wadhwa’s income and financial resources available for child support for the period 25 August 2017 to 31 October 2019. In any event, he was assessed on an adjusted taxable income for the period 1 July 2017 to 24 August 2017 of $232,764.
With respect to the two deposits of $2,500 on 4 July 2017 and 11 July 2017, and the deposit of $4,500 on 25 July 2017, Mr Wadhwa’s evidence in his written response at page A128 of Exhibit A was that these deposits reflect accumulated rental receipts from his [Suburb 1] rental properties collected by friends while he was overseas during the early part of 2017, which he deposited in bulk on his return.
Mr Wadhwa gave evidence that in or about mid-2017, he entered into a contract to purchase a house in [Town 1] at Ms Macwan’s request to be closer to the schools the children were attending. To fund the purchase, he transferred funds from his credit card facilities (the deposits on 25 July 2017 of $4,500, and $2,500), and borrowed $10,000 on a short-term basis from friends, reflected in the deposit of that amount on 25 July 2017, which was repaid shortly thereafter, when the purchase failed to proceed and the contract was terminated, resulting in the forfeiture of $7,000 of the deposit moneys he had paid.
With respect to the deposit of $3,000 on 1 August 2017, Mr Wadhwa said this reflects a withdrawal he made from his [Bank 1] insurance bond to fund the deposit for the purchase of the [Town 1] house property.
He said the deposits of $5,950 on 18 July 2017 and $3,300 on 13 March 2018 reflect rental income received from his [Suburb 1] rental properties.
With respect to the deposits of $5,000 on 13 December 2017 and 20 February 2018, Mr Wadhwa gave evidence that they represent the repayment of a longstanding $10,000 loan he made to friends [overseas], repaid in two instalments.
As regards Ms Macwan’s submissions with respect to Mr Wadhwa’s travel expenses, the Tribunal accepts Mr Wadhwa’s evidence that his travel to [Country 1] was for personal reasons and an extension of his business-related travel to [Country 2]. Otherwise the Tribunal is not satisfied that Ms Macwan’s evidence suggests Mr Wadhwa’s travel expenditure is unusual, having regard to the nature of his business and his expertise as an [Occupation 1] advisor.

Ms Macwan’s Statement of Financial Circumstances

Ms Macwan provided a SFC dated 16 March 2018. At hearing she made the following adjustments to the statement:
Item 18: She gave evidence that she purchased a residential property on 28 September 2018 for $525,000 utilising the bulk of her savings of $462,000 reflected at Item 20 of her SFC, and borrowed $150,000 from [a financial institution] to complete the purchase. She subsequently provided a copy of correspondence from [the financial institution] confirming the monthly repayments of $686.19 under the mortgage security she provided. Items 20, 29 and the weekly mortgage item in her schedule of household expenses at item 47 were amended accordingly to reflect these changes.
Ms Macwan reported gross average weekly income of $1,221 comprising her salary [of] $1,115, and family tax benefits A and B of $106. She also provided a copy of her written agreement with her father, Mr [Macwan], confirming her obligation to repay the balance of the $25,000 loan he made to Ms Macwan at the rate of $100 per month, interest free (see page B113 of Exhibit B).

She listed average weekly household expenditure of $1,907.
Mr Wadhwa did not challenge Ms Macwan’s SFC as amended, the contents of which was otherwise unremarkable.

Conclusions

Mr Wadhwa acknowledged in the evidence he gave to the Tribunal that his [Company 3] income was increased from 1 July 2018 from $50,000 per annum to $100,000 per annum, and that from 1 October 2018 his income was increased further to $125,000 per annum, the level at which he said he expected his gross income would remain for the foreseeable future.
The Tribunal accepts his declared gross and net rental and storage income for the 2017/18 financial year at $45,000 and $3,515 respectively, and that it will, most likely, increase, now that Mr Wadhwa appears to have established a stable, profitable business partnership, and is able to focus more attention on his business and financial arrangements. However, there can be no certainty of that, and in any event, that relatively small source of income will be reflected in his 2018/19 income tax return and the child support assessment adjusted accordingly in or about October 2019.
The Tribunal has also found Mr Wadhwa has access to two Investment Savings Bond accounts [BANK 2][as] financial resources upon which he could draw for child support purposes.
The Tribunal notes Ms Macwan is currently being assessed for child support purposes on an estimated income of $57,174. Having regard to her gross weekly income disclosed in her SFC at $1,115 (annualised to $57,980), the Tribunal intends varying her adjusted taxable income for the period 1 July 2018 to 31 October 2019 to $57,174, after reasonable allowable deductions.
The Tribunal therefore intends setting aside the decision under review and varying Mr Wadhwa’s adjusted taxable income for the period 1 July 2017 to 24 August 2017 to $40,000. For the period 25 August 2017 to 2 January 2018, the Tribunal will vary Mr Wadhwa’s adjusted taxable income at $48,000 to reflect the rental and storage income he received during that period and to compensate Ms Macwan for the child support she paid during that period when Mr Wadhwa was assessed at a $nil income. This will result in Mr Wadhwa being required to pay Ms Macwan child support at the annual rate of $2,624 for the period 1 July 2017 to 24 August 2017, and $3,886 for the period 25 August 2017 to 2 January 2018.
For the period 3 January 2018 to 30 June 2018, the Tribunal will set aside the income estimate of $50,005 and, in substitution, vary Mr Wadhwa’s adjusted taxable income to $60,051. This will result in Mr Wadhwa being required to pay Ms Macwan child support at the annual rate of $3,746 for that period.
For the period 1 July 2018 to 1 October 2018, the Tribunal intends varying Mr Wadhwa’s adjusted taxable income to $100,000. The Tribunal will also vary Ms Macwan’s adjusted taxable income to $57,174 for that period. This will result in Mr Wadhwa being required to pay Ms Macwan child support at the annual rate of $9,378 for that period.
For the period 2 October 2018 to 31 October 2019, the Tribunal will vary Mr Wadhwa’s adjusted taxable income to $125,000 to reflect his current gross income from [Company 3] of $125,000 and his current net rental and storage income of $3,515, less his current deductions of $3,196. The Tribunal will also vary Ms Macwan’s adjusted taxable income to $57,174 for that period. This will result in Mr Wadhwa being required to pay Ms Macwan child support at the annual rate of $14,148 for that period.
Based on the calculations set out above, the Tribunal considers refusing to make the departures referred to above would cause hardship to Ms Macwan, but in making the departures, neither parent will be caused hardship.

Otherwise Proper

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 their children. Varying the income for Mr Wadhwa on which child support is calculated from that used in the administrative assessment, based on his income and financial resources which are not reflected in the administrative assessment will result in an appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION
The Tribunal sets aside the decision under review and, in substitution, decides that:
(a)For the period 1 July 2017 to 24 August 2017, Mr Wadhwa’s adjusted taxable income is varied to $40,000;
(b)For the period 25 August 2017 to 2 January 2018, Mr Wadhwa’s adjusted taxable income is varied to $48,000;
(c)For the period 3 January 2018 to 30 June 2018, Mr Wadhwa’s adjusted taxable income is varied to $60,051;
(d)For the period 1 July 2018 to 1 October 2018, Mr Wadhwa’s adjusted taxable income is varied to $100,000; and
(e)For the period 2 October 2018 to 31 October 2019, Mr Wadhwa’s adjusted taxable income is varied to $125,000;
(f)For the period 1 July 2018 to 1 October 2018, Ms Macwan’s adjusted taxable income is varied to $57,174; and
(g)For the period 2 October 2018 to 31 October 2019, Ms Macwan’s adjusted taxable income is varied to $57,174.

[2019] AATA 431

1 February 2019

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Remedies