Wang and Wagner (Child support)

[2020] AATA 2035

Wang and Wagner (Child support) [2020] AATA 2035 (12 May 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC017578

APPLICANT:  Mr Wang

OTHER PARTIES:  Child Support Registrar

Ms Wagner

TRIBUNAL:Member M Kennedy

DECISION DATE:  12 May 2020

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to refuse to depart from the administrative assessment of child support.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – application of legislative provisions relating to administrative assessment do not result in an unjust and inequitable determination of child support – 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 omitted 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

1. Mr Wang and Miss Wagner are the parents of [Child 1], in respect of whom a child support assessment is in place.  Mr Wang and Miss Wagner share equally in caring for [Child 1].

2. Prior to the application ultimately giving rise to this review, child support in respect of [Child 1] was calculated on the basis of Miss Wagner’s estimated adjusted taxable income of $123,896 for 2018 and 2019, and Mr Wang’s adjusted taxable income of $25,223.  I note that during the hearing that Miss Wagner suggested that her estimated income may be the product of a clerical or administrative error at the Department in recording her estimate, but I have not explored that further in these proceedings other than to note it is substantially higher that her actual adjusted taxable income for 2018/2019 and that her income from employment appears to be otherwise fairly constant and regular.  In any event, based on those figures, Miss Wagner was assessed to pay $5,613pa in child support to Mr Wang from 23 January 2019.

3. From 1 July 2019, Miss Wagner was assessed to pay $1,867pa in light of her adjusted taxable income for 2017/2018 of $55,642.  That assessment took into account a multi-case allowance which was withdrawn from 7 September 2019, when the assessment increased to $2,586pa. 

4. On 11 May 2019, Miss Wagner applied for a change to the administrative assessment of child support on the basis of Reason 8.  On 12 July 2019, the Registrar decided to vary Miss Wagner’s adjusted taxable income to $123,896 from 1 July 2019.  The rationale for this variation is not fully explained but appears to be based on the disparity between Miss Wagner’s 2017/2018 taxable income and her estimate.  If Miss Wagner’s estimate the previous year was the product of an administrative error, then the change of assessment decision perpetuated it.  In relation to Mr Wang’s income, the Registrar set it at $38,160pa from 11 May 2019 after annualising income evident in three months’ worth of bank accounts, grossing the deposits up and identifying a $300pa difference in the annual rate of child support when compared to relying on Mr Wang’s adjusted taxable income.

5. Miss Wagner objected on 19 July 2019, as did Mr Wang on 25 July 2019.  On 1 October 2019, the objections officer varied Mr Wang’s adjusted taxable income to $77,000 from 11 May 2019 to 30 June 2021, reduced his self-support amount to $13,000, and then set Miss Wagner’s adjusted taxable income at $99,000 from 1 July 2019 to 30 November 2020.  The objections officer essentially adopted a similar approach in identifying deposits into Mr Wang’s bank accounts, albeit in respect of longer periods, and further observed that Mr Wang’s partner appeared to meet most of his living expenses.  The objections officer declined to make a decision based on earning capacity. For Miss Wagner, the objections officer considered that payroll information in respect of Miss Wagner demonstrated income of $99,000pa, and considered it appropriate to use that figure rather than her adjusted taxable income from 2017/2018.

6. Mr Wang applied to the Tribunal for review on 8 October 2019.  The parties substantially complied with directions issued at a telephone directions hearing and provided further documentary evidence as to their financial circumstances.

LEGISLATIVE FRAMEWORK

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the income of each parent.

2. Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Child Support Registrar (the Registrar) in writing, requesting a departure from the administrative assessment in relation to a child.

3. Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more grounds under subsection 117(2) of the Act exist, and that it would be just, equitable and otherwise proper to make a particular determination.

4. The issues for me to determine in this case are therefore:

   · Whether one or more of the grounds for departure referred to in subsection 117(2) of the Act exists; and, if so

   ·      Whether it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and otherwise proper; to make a particular determination to depart from the administrative assessment of child support.

CONSIDERATION

Is there a ground to depart from the administrative assessment of child support?

1. As to Reason 8, subparagraphs 117(2)(c)(ia) and (ib) provide that, in the special circumstances of the case, a ground for a departure determination may be established if application of the legislative provisions relating to administrative assessment ‘result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of either parent, or the earning capacity of either parent.

2. In her application, Miss Wagner raised all aspects of that ground in respect of Mr Wang’s income, property, financial resources and earning capacity.

Mr Wang’s income, property and financial resources

1. Mr Wang has disclosed that he is [self-employed]. Mr Wang is [an Occupation 1]and occasionally also[does Occupation 1 work].  Mr Wang gave sworn evidence that all income from this activity is accounted for in his profit and loss statement.

2. Mr Wang undertakes [specified] work for his domestic partner who has interests in [properties] personally and through her superannuation fund.  Mr Wang also undertakes paid work at the direction of his partner, [in] preparing documents for her work.

3. The Tribunal papers contain a statutory declaration of Ms [A] (T309).  Ms [A] explains a situation regarding a loan she made to Mr Wang, but it is unnecessary to elaborate on that issue further as Miss Wagner accepted that the existence and legitimacy of any such loan was not relevant to these proceedings.  Ms [A] further deposes that she pays Mr Wang to [provide specified services for] a [property]. The property is owned by Ms [A]’s superannuation fund.  Exhibit A22 is a statement of contractor payments made by [Company 1], the superannuation trustee company, to Mr Wang corroborating Ms [A]’s evidence in this regard.

4. Ms [A] further deposes that she pays Mr Wang to assist her in preparing records relating to her work in the order of about $200 per week.

5. Ms [A] deposes that she is the sole owner of a [property], and the sole owner through her self-managed superannuation [fund].  A further property at [Town 1] is Ms [A]’s and Mr Wang’s residence.  Ms [A] states that she meets all the outgoings for the properties and provides holidays, access to a credit card, and almost all other conceivable expenses for Mr Wang.

6. Mr Wang produced at my direction a profit and loss statement (A14) for his sole trading activities.  It incorporates income from all his remunerative activities, including the income from Ms [A] and her superannuation fund.  I note that the profit and loss statement has formed the basis for Mr Wang’s 2018/2019 taxation return.  After expenses, Mr Wang’s taxable income was $16,017 in 2018/2019.  In 2017/2018 I note it was $25,223.

7. As to the identified business expenses, Mr Wang explained that the expenses primarily related to the [Occupation 1 work] he undertook and demonstrated this by pointing out where those expenses are incurred in his bank statements.  A particularly large expense “supplies and materials” pertains to [materials] required for [Occupation 1 work].

8. Noting the approach of the primary decision maker and the objections officer, I required Mr Wang to spend some time in his evidence addressing the receipt of deposits into his two bank accounts.  One account (“business one”) is used for his [business], and the other account (“choice”) receives deposits from Ms [A] and her superannuation fund.  Neither account clearly quarantines business expense from personal expenses.  Mr Wang was able to demonstrate the receipt of deposits for various areas of his work, and also identify expense transactions for his [work].  Mr Wang pointed to a number of deposits that were not income from his work and were for reimbursement for expenses he incurred in maintaining Ms [A]’s properties.  In this regard, Mr Wang has expressed the grievance that the approach of the objections officer was to include credits into his account that did not amount to income (and there are some examples of this) and to ‘gross up’ the income received into his account, even though the income was received before expenses.

9. It is unsurprising that Miss Wagner is concerned by Mr Wang’s domestic partner being the ultimate source of a substantial proportion of Mr Wang’s low income.  It appears that Mr Wang furthermore enjoys a substantially higher standard of living than his taxable income would provide for.  However, I am unable to identify any income or financial resources of Mr Wang that are not adequately documented and corroborated in the evidence before me.  It is clear that Mr Wang does not have an interest in real estate owned by Ms [A], other than perhaps his residential home, and payments Ms [A] makes to Mr Wang for remunerative services are documented and accounted for.  I accept that it would be possible to quibble with some aspects of Mr Wang’s business expenditure in circumstances where Ms [A] has deposed to meeting expenses associated with motor vehicles (for example), but even if certain expenses were added back, this would not take Mr Wang’s taxable income above the self-support amount.

10. As to Miss Wagner’s concerns that aspects of Mr Wang’s lifestyle are inconsistent with his very low income, the simple explanation is the one that is openly offered by Mr Wang and Ms [A]. I accept that Ms [A] meets almost all of Mr Wang’s personal expenses so that Mr Wang can maintain a lifestyle beyond his personal means, on a very low personal income.

11. Circumstances where a parent’s living expenses are supported by a new partner do not demonstrate that there is an an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of either parent. This is because, pursuant to paragraph 117(7A)(b) of the Act, in having regard to the income, property and financial resources of a parent of a child, I must disregard income, property and financial resources of a person who does not have a duty to maintain the child, unless in the special circumstances of the case it is appropriate to have regard to them. Ms [A] does not have a duty to maintain [Child 1]. The evidence demonstrates a clear demarcation between Ms [A]’s property and income, and Mr Wang’s. There are no special circumstances to justify taking Ms [A]’s own income, property or financial resources into account. I consider it would be an error to find a financial resource in Ms [A]’s meeting of household expenditure either by varying adjusted taxable income or reducing the self-support amount. The effect of either action is the same, as it would reflect taking into account the income, property and financial resources of a person who does not have a duty to maintain [Child 1] so as to reduce Miss Wagner’s obligation to maintain [Child 1] in accordance with her financial capacity to do so as calculated under the ordinary administrative provisions of the Act.

12. Having required Mr Wang to produce further corroborating evidence about his income, and tested that evidence with Mr Wang in the hearing, I am satisfied to accept that Mr Wang’s taxable income through his profit and loss statement and taxation return is an accurate measure of his financial capacity to contribute to the maintenance of [Child 1].  In reaching this finding, I disregard Ms [A]’s income, property and financial resources.

Mr Wang’s earning capacity.

1. Miss Wagner asked that I also consider finding that the ordinary child support formula would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Wang he liable parent’ due to his earning capacity.

2. The Act provides for regard to be had to a parent’s earning capacity only if certain criteria are satisfied: section 117(7B) of the Act. It is not sufficient the speculate that a parent could earn more than they do, even cogently, to proceed on the basis of earning capacity.

3. Section 117(7B) of the Act provides that I may determine that the parent’s earning capacity is greater than is reflected in his or her income only if satisfied that:

   (a) one or more of the following applies:

   (i) the parent does not work despite ample opportunity to do so;

   (ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii) the parent has changed his or her occupation, industry or working pattern; and

   (b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i) the parent’s caring responsibilities; or

   (ii) the parent’s state of health; and

   (c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

4. The objection officer observed that the first criterion was not established in an earlier change of assessment process in 2017, and the correctness of that decision was not challenged then. The objection officer considered it was therefore not open for him to reconsider that question. The basis for the objection officer’s approach in that regard does not however apply to the Tribunal now. I have considered the terms of section 117(7B) on the merits of the evidence before me.

5. The objection officer does however observe that at the time of the previous decision (in 2017) Mr Wang was self-employed, having lost his job in 2016.  As I understand it, Mr Wang had previously operated his own business but been declared bankrupt, and this affected his capacity to hold necessary licenses.

6. Nonetheless, it is not possible to say that Mr Wang does not work despite ample opportunity to do so in circumstances where he does work.  I do not understand there has been a material change to the number of hours Mr Wang has worked in recent years, and so I am not satisfied to say that he has relevantly reduced the number of hours per week of his employment.

7. Similarly, to the extent that Mr Wang has changed his occupation, industry or working pattern from what it was when he earned a much higher income many years ago (accepting Miss Wagner’s evidence in that regard), this appears to have been the consequence of bankruptcy in substantial part.  Furthermore, and in any event, in responding to this issue at hearing, Mr Wang relied on his share caring role as justifying his decision not to seek full-time employment in the same industry.  Miss Wagner points out that she works full time and also undertakes the same shared caring role. 

8. In my view, it cannot be said that Mr Wang has relevantly changed his occupation, industry or working pattern in circumstances where his remunerative activities have been relatively unchanged for some years.  Even if regard should be had to Mr Wang’s remunerative arrangements from many years previously, I am satisfied that the changes to those arrangements were brought about by bankruptcy and a greater caring role.  In this way, I would find that Mr Wang’s decision to change his working pattern is justified by his caring responsibilities, and Mr Wang is also able to demonstrate that the change to his previous more remunerative employment was not motivated to affect child support.

9. I do not consider that the criteria are satisfied to permit me to have regard to earning capacity.

10. I am not satisfied that application of the legislative provisions relating to administrative assessment result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of Mr Wang, or the earning capacity of Mr Wang.

11. As such, I am not satisfied that a ground to depart from the administrative assessment of child support is established.  In these circumstances the application must be refused.

Other matters

1. I am concerned by observations made by previous decision makers in relation to the estimate Miss Wagner is purported to have lodged in respect of 2018/2019, and the document at T410 where Miss Wagner recounts a conversation with an officer at the Department who identified an apparent administrative error in processing her estimate. 

2. In these proceedings I have evidence to demonstrate that Miss Wagner did not earn income of $123,896 in 2018/2019 as the purported estimate predicted.   I can see no cogent basis on which Miss Wagner would have intentionally lodged an estimate of income so much higher than her actual regular [income].  Miss Wagner’s concern that the estimate may be the product of an administrative error has considerable force.

3. I am unable to correct any injustice in that regard through a departure determination in the absence of a ground being established.

4. The Registrar enjoys wide powers to correct errors, if indeed it is accepted that the estimate has been incorrectly taken. Miss Wagner should request that the Registrar consider whether such a correction to the child support register be made in all the circumstances. The Registrar’s capacity to correct an administrative error (if satisfied one has been made) satisfies me that correcting such an error is not an appropriate use of the departure provisions of the Act in itself.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to refuse to depart from the administrative assessment of child support.