Wall and Wall (Child support)

[2018] AATA 526

Wall and Wall (Child support) [2018] AATA 526 (13 February 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/CC012163

APPLICANT:  Mr Wall

OTHER PARTIES:  Mrs Wall

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  13 February 2018

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides to vary Mr Wall’s rate of child support payable to $4,379 per annum from 11 December 2016 to 30 June 2017.

CATCHWORDS
Child support – Departure determination – Costs of education for the child – Income and financial resources of parents – Business 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

Introduction

1. Mr Wall and Mrs Wall are the parents of [Child 1] who was born in 2004 and [Child 2] who was born in 2013. A child support case was registered in June 2014. Since December 2015, Mr Wall has been recorded as providing 14% care to [Child 2], and Mrs Wall has been recorded as providing 100% care to [Child 1] and 86% care to [Child 2].

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children.

3. The Act also provides for the making of child support agreements. On 4 September 2014 the parents entered into a limited child support agreement whereby Mr Wall would pay the administratively assessed rate of child support payable plus one half of certain expenses, including the children’s school fees and extracurricular activity expenses.

4. From 10 June 2016, Mr Wall lodged estimates of income of $0 which resulted in him being required to pay what is called the fixed annual rate of child support. He was required to pay $2,746 per annum in child support.

5. On 11 December 2016, Mr Wall successfully applied to not be required to pay the fixed annual rate of child support. He was administratively assessed to pay $0 per annum in child support, subject to any reassessment that might occur once his 2016-17 adjusted taxable income became known. (It transpired that his 2016-17 adjusted taxable income was $142.)

6. The Act also provides for a departure from the administrative assessment in certain circumstances. On 2 February 2017, Mrs Wall lodged a departure application with the Department of Human Services – Child Support (“the CSA”). The CSA decided to refuse her application. Both parents objected to that decision. An objections officer granted their applications and made a departure decision which effectively required Mr Wall to pay the fixed annual rate of child support payable from 11 December 2016 to 30 June 2017 and also pay half [Child 1]’s private school fees from 1 January 2017 to 31 December 2018. Mr Wall sought further review by this Tribunal. I conducted a telephone directions hearing on 28 November 2017. I conducted a full hearing on 13 February 2018. Mr Wall attended the full hearing in person and Mrs Wall attended by conference phone. In making my decision I have taken into account the sworn evidence of Mr Wall and Mrs Wall as well as the documentation that was provided by the CSA, Mr Wall and Mrs Wall prior to the hearing. After the hearing, Mr Wall provided further written submissions and unsigned draft agreements concerning companies in which he is involved. After having regard to subsection 30(1) of the Child Support Review Directions, I decided not to take into account Mr Wall’s post-hearing documentation.

7. Subsection 98C(1) of the Act relevantly provides that a decision to depart from the administrative assessment may be made if:

   (b)the [decision-maker] is satisfied:

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

   (ii)... it would be:

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

   (B)otherwise proper;

   to make a particular determination under this Part …

A ground for departure

1. Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents …

2. [Child 1] received her primary school education at [School 1] which is a private school. As noted earlier, after the parents separated they agreed to each pay half the school fees, and that occurred.

3. [Child 1] commenced her secondary school education in 2017 at [School 2], which is also a private school. Mr Wall submitted that he had not expected [Child 1] to receive a private secondary school education.

4. At the hearing, Mrs Wall said that in 2012, she and Mr Wall applied to enrol [Child 1] at [School 3] for her secondary school education. Mr Wall said he had a recollection of Mrs Wall making that application; he said he was not involved in the process. The application was not successful.

5. Both parents agreed that in 2014 they applied to enrol [Child 1] at [School 4] to receive her secondary school education. Mr Wall said he paid a deposit of approximately $1,000 after he and Mrs Wall had inspected the school. Mr Wall and Mrs Wall separated shortly thereafter.

6. In September 2014 the parents entered into a limited child support agreement. The agreement defines the term “private school fees” but that term is not otherwise used in the agreement. The agreement states, in part:

   4.2.1The liable parent shall pay direct to the school at which each of the children are enrolled as agreed between the parents in writing, one-half of the school fees and shall pay same within 7 days of the receipt of the invoice for same.

7. Mr Wall stated that a draft of point 4.2.1 included the term “private school fees”. On 2 August 2014 he sent an email to his solicitor which relevantly stated:

   Point 4.2.1 Please remove the word ‘private’ to cover the hopefully unlikely situation where the children might attend a public school.

8. On 12 February 2016, Mr Wall sent an email to Mrs Wall in which he alluded to experiencing some financial difficulties and concluded:

   But based on my current status, I request that we don’t commit to any extracurricular activities for the children requiring joint payment [pursuant to the limited child support agreement] in the immediate future. I am able to borrow sufficient to cover half [Child 1]’s school fees for next year, so that won’t be at risk.

9. On 29 April 2016, both parents signed [Child 1]’s [School 2] enrolment application form. At the full hearing, Mrs Wall stated that [School 2]’s fees are significantly less than [School 4]’s fees.

10. Mr Wall’s 2015-16 adjusted taxable income was $134,678. He became unemployed in June 2016.

11. The parents have never signed an enrolment application form for [Child 1] to attend a public school.

12. Mr Wall provided the Tribunal with extensive written submissions. He said the [School 2] enrolment application form that he signed was blank and Mrs Wall completed the details in his absence. I did not consider it necessary to hear from Mrs Wall on that issue. There is no suggestion that Mr Wall did not know what he was signing. Mr Wall also stated, in effect, that he had felt compelled to sign the form because Mrs Wall had adopted an uncompromising position and he was “still uneasy and guilty at the suggestion that I might cause our daughter anxiety” if he did not sign the form. Again, I did not consider it necessary to hear from Mrs Wall on that issue. Mr Wall may have signed the enrolment form reluctantly, but that is beside the point. Mr Wall also stated that he had always entertained the possibility that [Child 1] might attend a public school, as evidenced by his email dated 2 August 2014. However, having an expectation that a child will receive a private school education is a less stringent legal test than having absolute certainty that a child will receive a private school education. I note that Mr Wall also stated that the children attending a public school was a “hopefully unlikely situation”. Further, he was prepared to borrow money to ensure that he could contribute to [Child 1]’s 2017 school fees. That appears to be a clear reference to private school fees. Finally, Mr Wall stated, in effect, that his expectations were always contingent on his and Mrs Wall’s financial circumstances. The parents’ financial capacity to provide [Child 1] with a private school education is not an issue that arises under Reason 3. If Reason 3 is established, the issue of the parents’ capacity to provide [Child 1] with a private school education then arises under sub-subparagraph 98C(1)(b)(ii)(A) of the Act.

13. It is abundantly clear from the evidence set out above, and in particular the parents’ signed application to enrol [Child 1] at [School 2], that [Child 1] is being educated in a manner that the parents expected.

14. [Child 1]’s tuition fees at [School 2] for terms 1 and 2 of 2017 were $2,559. Those fees significantly affected the costs of maintaining her during that period. Mr Wall contributed only $375 towards those fees. Those circumstances constitute special circumstances. Reason 3 is established in respect of the tuition fees for terms 1 and 2 of 2017. [School 2] has not imposed tuition fees from term 3 of 2017, and I will return to that issue later.

15. [School 2] also imposes miscellaneous fees, such as a P&F levy and an IT levy, as do most private and public schools. The administrative assessment formula incorporates the general costs of children, including such general school expenses. Those fees do not constitute special circumstances.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their 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.

2. Mr Wall’s income and financial resources were a major focus of the hearing. Unfortunately, Mr Wall has not always been as forthcoming with relevant information as one might have hoped.

3. Mr Wall is the director of [a group of companies]. The group of companies was involved in the provision of [business services]. Mr Wall stated, in effect, that the group of companies collapsed in mid-2016. He said [Company 1] was placed in voluntary administration in June 2016. An eSearch extract in respect of [Company 2] states: “strike-off action in progress”. Mr Wall did not provide any correspondence from any third party, such as the administrator appointed in respect of [Company 1], confirming the state of affairs of the group of companies. Nevertheless, Mr Wall’s bank account statements, his efforts to obtain other employment, and the employment he has subsequently obtained, provide some circumstantial evidence in support of his oral evidence that the group of companies collapsed.

4. Mr Wall provided screenshots from Seek which summarised his online employment applications from 23 May 2016. He was regularly applying for other [jobs]. He also applied for a number of jobs in [a certain] industry.

5. In January 2017, while still looking for other work, Mr Wall started the process of becoming an [Occupation 1]. He was [in this role] from February to April 2017, at which point he concluded that being an [Occupation 1] was not profitable. His bank account statements show his receipt of income from [his employer]. Mrs Wall queried whether being an [Occupation 1] could be [unprofitable]. In the absence of any other evidence on point, I accept Mr Wall’s evidence that, having spent some months as an [Occupation 1], he concluded that he was unable to make a profit from that activity.

6. Mr Wall stated that he also started [trading] in approximately February 2017. He said he made approximately $1,500 during 2016-17, which he said he reported in his tax return, and he has made approximately $4,500 during 2017-18. He provided a screenshot that showed that he had some funds in a foreign exchange trading account. He offered to provide further evidence if it would assist.

7. Mr Wall stated that he obtained some consultancy work in July 2017 and he performed that work via a company that had been incorporated prior to the parents’ separation: [Company 3]. Bank account statements showed its receipt of income. He calculated that it received revenue of $17,934 and incurred no expenses during the six months from July to December 2017.

8. At the directions hearing, Mrs Wall stated that Mr Wall and his partner were setting up a [business]. Mr Wall said he did not have a partner and he was helping a friend. The bar in question is [Business 1]. After the directions hearing, Mrs Wall obtained an ASIC extract for [Business 1]. Mr Wall had omitted to disclose that the company was registered in October 2016 and it had issued two ordinary shares: one to [Company 3] and one to [Ms A], who is the person Mr Wall referred to as his friend. On 18 July 2017, [Company 3] transferred its share to [Ms A] for nil consideration. At the full hearing, Mr Wall once again described [Ms A] as a friend. In response to further questions, Mr Wall said she was a very close and trusted friend, but not his girlfriend or partner. In response to further evidence from Mrs Wall, Mr Wall acknowledged that [Ms A] “stays over [at my house] from time to time”, and she sometimes brings her dog with her when she stays over, and “from time to time we’ve been in a romantic relationship”.

9. Mr Wall’s evidence at the full hearing concerning [Business 1] can be summarised as follows. He and [Ms A] had planned to own and operate the business together. He arranged for the registration of the company through which the business would be run. It was intended that he and [Ms A] would each make equal financial contributions to the company. [Ms A] initially worked on business concepts and the like. When the time arrived to fund the business (which was July 2017), he was unable to make a financial contribution because he had been unable to obtain well-remunerated employment over the preceding financial year. In fairness to [Ms A], he transferred [Company 3]’s share in the company to [Ms A] so she could obtain finance elsewhere. It is his understanding that [Ms A]’s family provided that finance. I noted that [Ms A] held her original share, and now she holds both shares, on trust. Mr Wall said he is not a trustee or beneficiary of that (unidentified) trust and, more generally, he does not have any direct or indirect financial interest in [Business 1]. However, he did help in the initial set-up of the bar, and in November 2017 he undertook unpaid work experience, and since 24 December 2017 he has been employed by [Business 1] on a part-time casual basis. He said he earned $1,125 net and $1,196 net during his two most recent fortnights, which equates to approximately $35,000 gross per annum.

10. As I explained to Mr Wall and Mrs Wall during the hearing, the evidence referred to above might raise a suspicion that Mr Wall is also receiving an undisclosed income through his relationship with [Ms A] and [Business 1]. However, decision-makers are required to making findings of fact on the balance of probabilities, based on the available evidence, and a mere suspicion does not satisfy that test. There is nothing inherently improbable in Mr Wall’s evidence that he had expected to obtain well-remunerated employment during 2016-17 which would have allowed him to make a significant financial contribution to his and [Ms A]’s proposed business, but that did not occur, and in the absence of such well-remunerated employment, he assisted [Ms A] in setting up her business and he later commenced paid employment with [Business 1]. On balance, I accept Mr Wall’s evidence on those issues.

11. In summary, I accept Mr Wall’s evidence that he had a minimal income during 2016-17 and he has been earning a modest income during 2017-18.

12. Mrs Wall submitted that Mr Wall should be assessed on his earning capacity. A decision-maker can only have regard to a parent’s earning capacity for the purposes of sub‑subparagraph 98C(1)(b)(ii)(A) of the Act if certain requirements are satisfied: paragraph 117(4)(da) and subsection 117(7B) of the Act. One of those requirements, as it applies to Mr Wall’s circumstances, is that his cessation of well-remunerated employment, or his periods of unemployment, or his changes in employment, were for a major purpose of reducing his rate of child support payable: paragraph 117(7B)(c). For the reasons set out above, I find that the cessation of his well‑remunerated employment was the result of the collapse of the [group] of companies, and he was actively looking for employment when he was unemployed, and the changes in his employment were for the purpose of accepting available employment. I find that those changes were not for a major purpose of affecting the rate of child support payable. It follows that I cannot have regard to Mr Wall’s earning capacity.

13. In or around August 2016, Mr Wall sold his home for approximately $710,000 and purchased a new home for approximately $460,000. He said the sale and purchase allowed him to repay some debts, spend approximately $30,000 on renovations to his new home, and reduce his home loan repayments. He completed a Statement of Financial Circumstances in July 2017. Broadly speaking, his income is spent on his modest ongoing weekly expenses.

14. Mrs Wall is employed on a part-time basis as a [occupation]. Her 2016-17 adjusted taxable income was $59,774. There is no dispute that her income and financial resources are fairly reflected for child support purposes in her adjusted taxable income. Mr Wall acknowledged at the directions hearing that the requirements of subsection 117(7B) of the Act were not satisfied in respect of Mrs Wall. She completed a Statement of Financial Circumstances in August 2017. She owns her home and is repaying a home loan. She has modest savings. Broadly speaking, her income is spent on her ongoing weekly expenses.

15. Mr Wall was administratively assessed to pay a nil rate of child support from 11 December 2016 to 30 June 2017. However, he was able to meet his ongoing expenses during that period, including his home loan repayments. In March 2017 he completed a response to Mrs Wall’s departure application and he claimed to have very modest expenses. However, his bank account statements show that during April and May 2017 his listed discretionary spending equated to approximately $2,500 per annum (and the details of that discretional spending were discussed with Mr Wall during the full hearing). Mr Wall was required to pay the fixed annual rate of child support payable prior to 11 December 2016 and that rate was $2,746 per annum. Given Mr Wall’s spending throughout 2016-17, and having regard to the evidence of his discretionary spending, it is appropriate that he also make a modest contribution of $2,746 per annum towards the children’s day-to-day costs while they were in Mrs Wall’s care.

16. Mr Wall provided an estimate of income of $0 from 1 July 2017, and an estimate of income of $42,131 per annum from 5 July 2017, and an estimate of income of $33,972 per annum from 24 August 2017. They appear to be reasonable estimates of income. It is likely that Mr Wall’s 2017-18 adjusted taxable income will fairly reflect his income and financial resources for child support purposes for that financial year. Also, his rates of child support payable in respect of that financial year will be increased if it transpires that his actual income exceeded his estimates of income. For those reasons, I will not vary Mr Wall’s adjusted taxable income for 2017‑18.

1. As noted earlier, [Child 1]’s tuition fees at [School 2] for terms 1 and 2 of 2017 were $2,559 and Mr Wall contributed $375 towards those fees. In light of the evidence of Mr Wall’s discretionary spending around that time, it is appropriate that he pay half those fees. He should pay $2,559 / 2 - $375 = $904.

2. Mrs Wall applied to [School 2] to have [Child 1]’s tuition fees waived from term 3 of 2017 on the basis of her ongoing financial hardship, and in particular the fact that Mr Wall was not contributing to those fees. One might have expected the school to consider waiving those fees once Mrs Wall had taken all reasonable steps to have Mr Wall contribute to those fees, and the school might have taken that approach. In May 2017 the CSA decided that Reason 3 was established but Mr Wall did not have the financial capacity to contribute to [Child 1]’s tuition fees. It is not clear when the school decided to waive the fees. In July 2017 an objections officer required Mr Wall to contribute to the fees but the school continued to waive the fees. Mrs Wall said that if the Tribunal also required Mr Wall to contribute to the fees the school would impose the fees. Mrs Wall effectively invited the Tribunal to create a liability and then require Mr Wall to contribute to that liability. I do not consider it appropriate for the Tribunal to intervene in that manner. The school elected not to impose the fees, even when there was a departure decision which required Mr Wall to contribute to those fees, and it would not be appropriate in the circumstances of this case to require Mr Wall to contribute to a cost that is not being incurred.

3. In summary, it is appropriate to require Mr Wall to pay a base rate of $2,746 per annum in child support from 11 December 2016 to 30 June 2017, which is a period of 202 days, and also require him to pay $904 in respect of terms 1 and 2 of 2017. For simplicity, I will increase Mr Wall’s base rate of child support payable by $904 / 202 x 365 = $1,633 per annum during those 202 days. 

4. Varying Mr Wall’s rate of child support payable to $4,379 per annum from 11 December 2016 to 30 June 2017 will decrease his child support arrears by approximately $3,200. He currently owes child support arrears of approximately $5,300. The decision will not place him in credit.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

2. Mrs Wall receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Wall will result in an appropriate apportionment of financial responsibility between the parents and the community.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides to vary Mr Wall’s rate of child support payable to $4,379 per annum from 11 December 2016 to 30 June 2017.