Warner and Weiss (Child support)

[2022] AATA 643

Warner and Weiss (Child support) [2022] AATA 643 (9 February 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC022126

APPLICANT:  Mr Warner

OTHER PARTIES:  Child Support Registrar

Ms Weiss

TRIBUNAL:Member J D'Arcy

DECISION DATE:  9 February 2022

DECISION:

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

• from 4 January 2021 to 13 March 2022 Mr Warner’s adjusted taxable income is set at $60,000; and

• from 14 March 2022 to 31 October 2023 Mr Warner’s adjusted taxable income is set at $62,400.

CATCHWORDS

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

1. Mr Warner is seeking a review of a decision made by Services Australia (Child Support) to increase the amount of child support payable by him.

2. Mr Warner and Ms Weiss are the parents of three children - [Child 1] born in August 2003 (now 18 years and no longer a child of the assessment), [Child 2] born in March 2006 and [Child 3] born in January 2009. The children are in the sole care of Ms Weiss. The most recent child support case commenced on 5 January 2010 and child support is collectible.

3. In 2017 Ms Weiss’s application for a change of assessment of child support resulted in Mr Warner’s adjusted taxable income being set at $57,576 for the period 24 May 2017 to 31 October 2020. He was liable to pay child support of $9,441 per year based on his adjusted taxable income of $57,576 and Ms Weiss’s 2019/2020 adjusted taxable income of $25,202. 

4. For the period 1 November 2020 to 26 August 2021, Mr Warner was assessed to pay $443 per annum (the child support minimum annual rate) based on his 2019/2020 adjusted taxable income of $4,065 and Ms Weiss’s 2019/2020 adjusted taxable income of $25,202.

5. On 4 January 2021, Ms Weiss applied for a change to the assessment under Reason 8A. On 15 April 2021 a decision-maker found Reason 8A established and changed the assessment so that for the period 4 January 2021 to 31 December 2023, Mr Warner’s adjusted taxable income amount was set at $60,000. Mr Warner objected to this decision and on 11 August 2021 the objection was disallowed.

6. Mr Warner has lodged an application for review against this decision with the Administrative Appeals Tribunal (the tribunal).

7. A directions hearing was held on 24 November 2021. On 9 February 2022 a hearing was held with Mr Warner and Ms Weiss by telephone.

8. The following material was available to the tribunal and the parties: the subsection 37(1) of the Administrative Appeals Tribunal Act 1975, statement and documents numbered 1 to 335 and additional documents provided by the parties - A1 to A89 from Mr Warner and B1 to B40 from Ms Weiss.

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the tribunal standing in place of the Registrar, must consider:

   (i)whether a ground for departure exists; and

   (ii)whether it is just and equitable as regards the child, the liable parent, and the carer entitled to child support to change the administrative assessment, having regard to the matters set out in subsection 117(4) of the Assessment Act; and

   (iii)whether it is otherwise proper to change the administrative assessment of child support.

2. The grounds for departure from an administrative assessment of child support are covered by subsection 117(2) of the Assessment Act. The relevant reason in this case is:

   ·     Reason 8A - That in the special circumstances of the case, an application relating to an administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support because of the income, property and financial resources of either parent; or because of the earning capacity of either parent, subparagraphs 117(2)(b)(ia) and (ib).

3. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

CONSIDERATION

Does a ground for departure exist under Reason 8A?

1. In her application to change the assessment Ms Weiss made the following assertions:

   [Mr Warner] owns property in two locations ([Suburb 1] and [Suburb 2]) and a number of vehicles and equipment. He has a very high work capacity. The vehicles include [specified make, model, and year], model cars ([specified model]), two jet skis, one dirt bike. He also supplies expensive presents and large amounts of money contributions to our three children at all times of the year.

2. In the hearing Ms Weiss acknowledged that Mr Warner did not own and had never owned a property in [Suburb 2]. According to the children, “a while back”, maybe 2020, he owned jet skis. In 2017 he owned two [sports cars of specified make and model]. When they were in court in 2017 Mr Warner provided a loan agreement which indicated an income of $60,000.

3. Mr Warner advised the tribunal that he owned a property in [Suburb 1] which he sold [in] May 2020 for $210,000. On the same day he purchased a property at [Suburb 3] for $90,000. He has never owned a property in [Suburb 2]. He was advised by Centrelink that the amount of $120,000 (being the difference between the sale price of the [Suburb 1] property and the purchase price of the [Suburb 3] property) had to be spent on his property within a 12-month period.

4. Mr Warner kept some of that money in cash to cover property and living expenses. He explained that internet coverage was very poor where he lived (he had to drive 40 minutes to find reception for the telephone hearing) and so cash payments were made for goods and services in his area, rather than using credit cards because of the inability to use credit card devices. He maintained that he used sale proceeds of $120,000 to cover living expenses and expenditure on his property. He had additional funds from the sale of [Equipment 1] about three months ago (November 2021) for $9,000 and [Equipment 2] 10 months ago (April 2021) for $20,000. He also sold a fridge for $750 and sold a tool trailer to his friend, [Mr A], for $7,500 in 2019/2020. [Mr A] has been paying for the trailer over time. Mr Warner has used his cash reserves for a variety of reasons including paying off his credit card, living expenses and gifts for the children. He had retained the sale proceeds from the equipment in cash.

5. Mr Warner no longer has a [vehicle of specified year, make, and model]. Approximately six weeks ago, he traded in the vehicle for a [vehicle of different make] and, under a  “no doc loan”, he is making weekly repayments of $137 for the next seven years. He needs a reliable vehicle because he lives out of town. He has a quad bike but no longer has any of the other recreational vehicles referred to by Ms Weiss.

6. Mr Warner stated that he last worked in his own business, [Business 1], in 2018 or 2019. The business is no longer trading. From the cessation of his business until March 2020 he lived off cash that he had retained, referring to a much earlier windfall of $450,000 on poker machines (as stated in the 2017 decision).

7. In March 2020 Mr Warner commenced to receive jobseeker payments.

8. Mr Warner advised that he has been medically cleared to work having battled depression, anxiety and alcoholism. He had previously provided medical certificates in support of those conditions.

9. Mr Warner is commencing new employment in the near future with [Company 1], a Queensland-based company which provides [specified] services, among other services. He obtained a job through [Company 2], an employment service provider. The date of commencing work and his expected income is unknown at this time because he still has to complete 19 hours of unpaid on-the-job training at a worksite close to his home or within a reasonable drive. The standard rate of pay is $30 an hour for a 40-hour week. He may earn more depending on the availability of shift work.

The tribunal’s findings

1. The information on which Ms Weiss was relying for a change of assessment of child support appears to be based on historical material relating to the 2017 decision.

2. Mr Warner provided up-to-date bank and credit card statements and information about the source and use of cash.

3. On 20 May 2020 the net proceeds of sale of the [Suburb 1] property of $109,988 were deposited into Mr Warner’s [Bank 1] account. On 1 July 2020 the balance of his savings account was $93,067. By 29 June 2021 his account balance was $929. In the 2020/2021 financial year Mr Warner had access to financial resources of $92,138, in addition to $20,000 cash from the sale of his [Equipment 2] and undisclosed cash reserves, which he referred to as the balance of his winnings, discussed in the 2017 decision.

4. Mr Warner provided copies of his [Bank 1] Loan Rate Mastercard statements. In the period from 16 November 2020 to 5 November 2021 an amount of $34,400 in cash payments were made against the credit card and from June 2021 the balance of his [Bank 1] account averaged around $1,200 at any one time.

5. Mr Warner told the tribunal that the cash payments made against the credit card came from his cash reserves which he kept at home and which included the proceeds from the sale of his equipment.

6. The amount of $34,400 does not include an amount of $8,500 which Mr Warner explained was repayment by a friend for a mower purchased on Mr Warner’s card. The tribunal accepts that the payment on 22 February 2021 was made by a friend who had used his credit card a few days previously to purchase a mower. His friend had expected to receive some payments before he made the mower purchase but those payments were only made to him in the days after his friend had used Mr Warner’s credit card.

7. Between 1 November 2020 and 26 August 2021 Mr Warner was being assessed on an adjusted taxable income of $4,065 and paying the minimum annual rate of child support. Although he stated that he was continuing to pay a higher rate of child support, the Child Support records show monthly payments of $51.30 in 2021. In late 2020 and in 2021 Mr Warner was able to pay $34,400 against his Mastercard debt and also pay $703.25 per month ($8,439 per year) on the lease of his [vehicle] when he was only receiving jobseeker payments and random amounts from friends who were allegedly repaying monies to him or a friend who was staying with him and contributing towards the utilities bills.

8. Mr Warner maintained that Centrelink had advised him that he had 12 months to spend the net proceeds of sale of the [Suburb 1] on the [Suburb 3] property. He did not provide any evidence of the funds he used to improve the property.

9. Subsection 1118(1B) of the Social Security Act 1991 deals with assets which are exempt from the calculation of the rate of a person’s income support benefit after they have sold a property. Sub-paragraph 1118(1B)(c)(i) states that the proceeds of sale of a principal home are exempt for 12 months if the person intends to apply the proceeds of sale to build, repair or renovate another residence, intended to be the principal home. So, while this exemption allowed Mr Warner to receive jobseeker allowance, the exemption is not relevant for child support purposes and those funds represented financial resources available to him to support his children.

10. The tribunal notes that Mr Warner did not disclose his cash reserves to Centrelink. His income statement dated 9 December 2021 shows recorded cash of $2,916.

11. The tribunal concludes that Mr Warner had access to considerable financial resources, from the sale of a property and plant and equipment, while he was being assessed on an adjusted income of $4,065 and his access to those financial resources constitute the special circumstances that would make the administrative assessment of child support unfair and thus establish Reason 8A.

Is it just and equitable to depart from the administrative assessment, having regard to the following matters set out in subsection 117(4) of the Assessment Act?

32.In considering this issue the tribunal must have regard to the matters stated below:

(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and

(b) the proper needs of the child; and

(c) the income, earning capacity, property and financial resources of the child; and

(d) the income, property and financial resources of each parent who is a party to the proceeding; and

(da) the earning capacity of each parent who is a party to the proceeding; and

(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

(i) himself or herself; or

(ii) any other child or another person that the person has a duty to maintain; and

(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

(g) any hardship that would be caused:

(i) to:

(A) the child; or

(B) the carer entitled to child support; by the making of, or the refusal to make, the                   order; and

(ii) to:

(A) the liable parent; or

(B) any other child or another person that the liable parent has a duty to support;

by the making of, or the refusal to make, the order.

1. The tribunal accepts that Mr Warner and Ms Weiss have a duty to maintain their children.

2. According to Ms Weiss’s evidence, the children do not have any special needs or health concerns which have resulted in any additional expenditure. They do not have any income or financial resources which would affect the assessment. Ms Weiss meets all of their education costs, which amounts to around $1,200 for [Child 2] and [Child 3] in the current school year.

3. Mr Warner’s Statement of Financial Circumstances indicates that he receives jobseeker payments of $300 per week. His home is valued at $90,000; he has bank deposits of $1,000; a vehicle under lease; and a [specified make] motor vehicle valued at $3,500. He estimates the value of his household contents at $5,000. His liabilities include a credit card debt of $23,500 and a personal loan of $5,600. His estimated weekly expenditure is $196.

4. Ms Weiss’s Statement of Financial Circumstances indicates that she works part-time as a [Occupation 1] earning $710 a week. She receives family tax benefit of $600 per week and currently receives weekly child support payments of $12.80 from Mr Warner. She has a bank balance of $635, a motor vehicle valued at $4,000 and household contents of $10,000. She does not have any credit card liabilities. Her expenses, which appear to be very reasonable for a family of four persons, are $1,395 per week. She is not able to meet her current expenses on her available income.

5. A comparison of Mr Warner’s and Ms Weiss’s financial positions indicates that Mr Warner is clearly in a much stronger financial position. He has a higher level of assets, and a higher earning capacity which will be realised in the weeks to come. He has undisclosed cash reserves which have allowed him to pay over $8,000 per year on a leased vehicle and to pay $34,400 against his credit card when receiving a jobseeker payment.

6. The tribunal is required to consider any hardship that would be caused to the parties by the orders made. Ms Weiss requires all the financial assistance that she can obtain to raise the children on a part-time income and with the current limited financial assistance provided by Mr Warner. It is clear that the amount of $12.80 is an insubstantial contribution towards payment of the children’s expenses.

7. The tribunal accepted Mr Warner’s submission that the most recent change of assessment of child support had been based on outdated information dating from 2017. However, the tribunal found that he was not a credible witness and he did not readily offer information about his financial situation, leaving it open to the tribunal to attempt to estimate the financial resources available to him in 2020/2021.

8. A decision maker faces significant difficulties when the paying parent has a history of earning relatively low taxable incomes and yet is able to support a lifestyle inconsistent with those incomes, which is the case in Mr Warner’s matter.

9. From January 2021 until 5 November 2021 Mr Warner paid $18,400 against his credit card. He made monthly lease payments of $703.20 and yet his bank account balances do not support such a high rate of expenditure, leading to the conclusion that he still had undisclosed cash reserves – the proceeds of the sale of plant and equipment amounting to $37,250. He also referred to cash from a gambling windfall.

10. Mr Warner is soon to commence full-time employment. He advised that he is likely to work a 40-hour week at a rate of $30 per hour. He may receive a higher rate of payment if he works shift work. He is therefore likely to earn a minimum income of $62,400 per year.

11. Given the disparity between Mr Warner’s and Ms Weiss’s income and financial resources, the tribunal finds that the administrative assessment does not properly reflect the financial resources available to Mr Warner to support his children. It is therefore just and equitable to increase his child support liability based on the tribunal’s calculations of Mr Warner’s available financial resources.

12. In the 2020/2021 financial year Mr Warner had access to financial resources of $92,138 from the net proceeds of sale of property and $20,000 from the sale of a [Equipment 2]. In November 2021 he had access to a further $9,000 from the sale of plant and equipment. In addition, he was receiving jobseeker payments.

13. From 4 January 2021 to 31 December 2023 Mr Warner has been assessed on an adjusted taxable income of $60,000 based, in part, on the findings made in the 2017 change of assessment decision.

14. The tribunal found no reason to change this assessment but for different reasons than those relied on in 2017. The amount of $120,000 had been exempt from Mr Warner’s Centrelink assets assessment for the purpose of improving his property. There is some evidence of monies spent on improvements in Mr Warner’s accounts but, by his own admission, goods and services were mainly paid in cash. He did not provide any evidence about the cost of property improvements. He is soon to commence work and his estimated minimum earnings are in the vicinity of $60,000. Ms Weiss’s expectations have been linked to child support based on an adjusted taxable income of $60,000. The tribunal also recognised his high levels of debt with a credit card debt of $23,500 and a personal loan of $5,600 (according to his Statement of Financial Circumstances) and arrears of child support of  $8,560.92 on 16 January 2022. Creating further arrears of child support when he is not yet employed could create financial hardship for Mr Warner and reduce his ability to pay any child support.

15. Therefore, it is reasonable to set Mr Warner’s adjusted taxable income at $60,000, which is broadly in line with his current earning capacity.

16. From 4 January 2021 (the date of the change of assessment application) until 13 March 2022 (an estimate of the date on which Mr Warner will commence work) Mr Warner’s adjusted taxable income is set at $60,000.

17. From 14 March 2022 to 31 October 2023 Mr Warner’s adjusted taxable income is increased to $62,400, which is his current estimate of earnings from his new employment. By 31 October 2023 he should have completed his income tax return for 2022/2023 which can then be used in an administrative assessment of child support.

1. If Mr Warner’s earnings fall below $62,400 per year, it is open to him to lodge a further application for change of assessment of child support.

Is it otherwise proper to make a change the administrative assessment of child support?

1. Subsection 117(5) requires the tribunal to take into consideration the following matters:

   (a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)       the effect that the making of the order would have on:

   (i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

2. An increase in child support payable by Mr Warner will reduce the cost to the community because the rate of family tax benefit payable to Ms Weiss will reduce.

3. In these circumstances the tribunal therefore decided it was otherwise proper to change the assessment of child support.

DECISION

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

• from 4 January 2021 to 13 March 2022 Mr Warner’s adjusted taxable income is set at $60,000; and

• from 14 March 2022 to 31 October 2023 Mr Warner’s adjusted taxable income is set at $62,400.