Watling and Halsey (Child support)

[2021] AATA 3680

Watling and Halsey (Child support) [2021] AATA 3680 (12 July 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC019414

APPLICANT:  Mr Watling

OTHER PARTIES:  Child Support Registrar

Ms Halsey

TRIBUNAL:Member F Staden

DECISION DATE:  12 July 2021

DECISION:

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

• For the period 1 August 2019 until 31 July 2027, Mr Watling’s annual child support liability is increased by $5,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – compensation payment received by liable parent – adjusted taxable income of the liable parent varied - 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

BACKGROUND

1. Mr Watling and Ms Halsey are the separated parents of [Child 1], born 2011, and [Child 2], born 2013 (the children). The children are recorded as being in the greater than primary care (100%) of Ms Halsey since 20 June 2015.

2. There has been a child support assessment for this case from 23 September 2015. Mr Watling is the parent assessed as liable to pay child support. Ms Halsey opted for collection of child support by Services Australia (then Department of Human Services) – Child Support (Child Support) from 26 October 2015.

3. On 13 August 2019, Ms Halsey applied for a change of assessment on the basis that the child support assessment did not correctly reflect Mr Watling’s income, property and financial resources (Reason 8A). She subsequently provided material in relation to Mr Watling’s receipt of a lump sum compensation payment.

4. There are no previous change of assessment decisions in this case. The relevant child support assessments here were:

   ·     For the period 1 July 2019 to 31 August 2019, Mr Watling’s annual child support liability was $8,320 based on Mr Watling’s 2017/18 adjusted taxable income of $59,299 and Ms Halsey’s 2017/18 adjusted taxable income of $29,374;

   ·     For the period 1 September 2019 to 15 September 2019, Mr Watling’s annual child support liability was $456 based on Mr Watling’s 2018/19 adjusted taxable income of $26,940 and Ms Halsey’s 2018/19 adjusted taxable income of $57,191;

   ·     For the period 16 September 2019 to 16 September 2019, Mr Watling’s annual child support liability was $435 based on Mr Watling’s 2018/19 adjusted taxable income of $26,940 and Ms Halsey’s 2018/19 adjusted taxable income of $57,191 (the minimum amount was reduced because Mr Watling’s other liable child was noted on the assessment);

   ·     For the period 17 September 2019 to 14 October 2019, Mr Watling’s annual child support liability was $427 based on Mr Watling’s 2019/20 income estimate of $nil and Ms Halsey’s 2018/19 adjusted taxable income of $57,191;

   ·     For the period 15 October 2019 to 2 December 2019, Mr Watling was assessed to pay the fixed annual rate of child support of $2,886 ($1,443 per child); and

   ·     For the period 3 December 2019 to 30 June 2020, Mr Watling’s annual child support liability was $2,532 based on Mr Watling’s 2018/19 income estimate of $39,107 and Ms Halsey’s 2018/19 adjusted taxable income of $57,191.

5. On 5 December 2019, a Child Support primary decision maker found Reason 8A established in relation to Mr Watling and changed the assessment as follows: 

   ·     For the period 1 January 2020 to 31 December 2025, Mr Watling’s adjusted taxable income is to be increased by $30,000 per annum.

6. Mr Watling lodged an objection to the 5 December 2019 decision on 22 January 2020. Ms Halsey responded to his objection on 27 February 2020.

7. On 19 March 2020, an objections officer decided to partly allow Mr Watling’s objection. The officer found Reason 8A established in relation to Mr Watling and made the following decision:

   ·     For the period 1 January 2020 to 11 March 2031, Mr Watling’s adjusted taxable income is to be increased by $28,765 per annum.

8. On 5 May 2020, Mr Watling applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision. On 8 July 2020, this tribunal, differently constituted, granted Mr Watling an extension of time such that his application could proceed.

9. On 4 September 2020, Mr Watling decided to withdraw his application for review. On 18 September 2020, Ms Halsey requested that the application be reinstated and provided reasons for this. Mr Watling did not respond to a request for submissions as to why reinstatement should not occur. The tribunal, differently constituted, granted Ms Halsey’s reinstatement request on 13 November 2020. Although the reinstatement request was made by Ms Halsey, the application remained that of Mr Watling.

10. On 7 January 2021, a telephone directions hearing was conducted with Mr Watling and Ms Halsey. Directions were issued on that day. Mr Watling did not comply with the directions. Ms Halsey fully complied with the directions.

11. A second telephone directions hearing was held on 4 March 2021. Mr Watling was properly informed of the hearing but did not attend and did not contact the tribunal to explain his non-attendance. Ms Halsey did attend. On 10 March 2021, further directions were issued plus requests for Child Support to obtain evidence in relation to Mr Watling from the Australian Taxation Office, [Bank 1] and [Family Trust 1].

12. On 24 April 2021, Mr Watling contacted the tribunal to update his address. He stated that he had provided some of the requested material after 16 February 2021. A tribunal officer informed Mr Watling that no material had been received and he was asked to resend. No material was received from Mr Watling.

13. On 28 April 2021, Mr Watling informed the tribunal by telephone that Ms Halsey would not be proceeding with her application for review because he had lodged his income tax returns and would be clearing his child support arrears.

14. On 29 April 2021, Ms Halsey informed the tribunal that she had received a child support payment following the assessment of Mr Watling’s 2018/109 income tax return. However, she stated that, as there were still outstanding arrears of around $5,500, she wished to proceed with her application.

15. A hearing was held on 26 May 2021 in Canberra. Mr Watling was properly informed of the hearing but did not attend and did not contact the tribunal to explain his non-attendance. Ms Halsey gave sworn evidence by telephone. The tribunal also had before it papers provided by Child Support (462 pages), Ms Halsey (pages B1 to B98) and material obtained by Child Support in relation to Mr Watling (pages C1 to C221). Copies of these documents were provided to all parties.

16. Relevant aspects of the evidence are referred to in the consideration below.

ISSUES

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under the Child Support (Assessment) Act 1989 (the Assessment Act). The formula used to calculate the rate takes into account factors such as the number of children, the levels of care provided and the income of each parent.

2. Under section 98B of the Assessment Act, a liable parent or a carer receiving child support can apply to the Child Support Registrar for a determination to depart from the administrative assessment. This is known as a change of assessment.

3. Under section 98C of the Assessment Act, the Child Support Registrar, here the tribunal, may change the assessment if the case meets the following three criteria:

   · There is a ground to depart from the assessment (subsection 117(2) of the Assessment Act lists those grounds). Only one ground has to be established for the tribunal to proceed to consider the next criterion (Marsh & Eccles [2008] FMCAfam 1417);

   ·     It is “just and equitable” to make particular changes to the assessment; and

   ·     It is “otherwise proper” to make those changes to the assessment.

Issue 1: Is there a ground to depart from the administrative assessment?

1. Subparagraph 117(2)(c)(ia) of the Assessment Act provides a ground for departure exists where, in the special circumstances of the case, the use of the administrative assessment would result in an unjust and inequitable determination of a parent’s child support liability because the income, property and financial resources of either parent are not properly taken into account.

2. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93, 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.

3. Ms Halsey raised two issues in relation to Mr Watling’s income, property and financial resources: Mr Watling’s compensation payment should be taken into account in the assessment for a period before, as well as after, 1 January 2020 and Mr Watling’s earnings from casual employment are not properly taken into account by the assessment.

Evidence

1. At the 7 January 2021 telephone directions hearing, the tribunal discussed with the parents the financial material which they would each be asked to provide. Mr Watling agreed to provide the following information:

   ·     Completed Statement of Financial Circumstances (SoFC);

   ·     Two recent payslips, showing year-to-date earnings;

   ·     2018/19 and 2019/20 income tax returns for Mr Watling with notices of assessment and all related schedules;

   ·     All bank/financial institution statements, including any mortgage, loan or credit card statements, in Mr Watling’s name and/or joint names or for which Mr Watling is a signatory for the period 26 October 2019 to 31 October 2020;

   ·     A breakdown of how Mr Watling’s [September] 2019 settlement of $1,085,000 was spent (e.g., Medicare repayment, property settlement with Ms Halsey and house deposit) and what remains;

   ·     Any evidence Mr Watling wished to provide about:

   o    the impact of his physical and mental health injuries on his earning capacity and expenses related to the treatment of those conditions;

   o   his financial support of his oldest child under a private child support arrangement; and

   o   the costs involved in his having contact with his children.

2. Despite tribunal follow-up, Mr Watling provided none of the material listed above. Although he stated that he had provided some by email on one occasion, Mr Watling did not resend that information when asked. Mr Watling provided no explanation for his non-compliance, nor for his non-appearance at the second telephone directions hearing and the hearing proper. Given Mr Watling’s failure to provide financial information as requested by the tribunal, the tribunal found it had no choice but to conclude that his actions were deliberate.

3. In Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409, Federal Magistrate Slack dealt with the issue of the disclosure of financial information in child support matters before the former Social Security Appeals Tribunal. His Honour stated that the principle of full and frank disclosure applicable to proceedings in the Family Court was also applicable to proceedings before the tribunal. He stated at [31]:

   In financial proceedings under the Family Law Act, the authorities make it clear that a Court “should not be unduly cautious about making findings in favour of the other party if it is not satisfied that proper disclosure has been made (see Chang & Su (2002) FLC93-117)”. Such principles, in my consideration, have similar application to these matters before the SSAT.

4. Also, in Agrippa & Horton (SSAT Appeal) [2010] FMCAfam 1144, Federal Magistrate Halligan stated at [25]:

   … If the SSAT is satisfied that a parent has made a deliberate non-disclosure of his or her financial circumstances, it should be reasonably robust in assessing the non-disclosing parent’s financial circumstances adversely to that parent and in favour of the other parent. That is not to say that it may arrive at an entirely arbitrary result, but rather that it may draw generous inferences adverse to the non-disclosing party about that party’s financial circumstances.

5. Although hampered by Mr Watling’s failure to respond to the tribunal, there was some evidence available about his financial situation. At the request of the tribunal, Child Support were able to obtain bank statements for Mr Watling’s three known [Bank 1] accounts *9609, *0276 and *1444 (*9609 and *0276 for the period 26 October 2019 to 31 October 2020 and *1444 for the period 13 November 2019 to 31 October 2020). Some earlier bank statements for these accounts were available in the Child Support papers. Child Support additionally obtained Mr Watling’s 2018/19 income tax return (his 2019/20 income tax return was not then available) and a summary of Mr Watling’s earnings for [Business 1] in the period 1 January 2019 to 18 May 2021.

Compensation payment

1. Mr Watling injured [himself] at work [in] April 2013. In 2016, Mr Watling claimed damages in relation to his injury against [Business 2] and [Business 3].

2. [In] April 2019, Mr Watling was awarded $999,506.50 clear of the refund owing under the Workers Compensation and Rehabilitation Act together with Mr Watling’s costs on a standard basis from [March] 2016. The breakdown of the award included $359,856 for past economic loss and $541,424 for loss of economic capacity (assessed over an assumed remaining 28 year working life). [Business 2] lodged an appeal. Of the $999,506.50, $500,000 was to be released to Mr Watling with the remainder staying in his solicitor’s trust account. It appears the funds release did not occur.

3. [In] September 2019, it was agreed that [Business 3], on its own behalf and on behalf of [Business 2], would pay Mr Watling $1,085,000 in settlement of the claim, the proceedings and the appeal. Under the settlement Mr Watling received $874,660, $999,506.50 less $119,440 paid to Medicare and $5,407 paid to Child Support. [Business 3] additionally paid $29,910 to Centrelink and $55,583 to Mr Watling’s solicitor.

4. Mr Watling has previously disputed that he received $874,660 as indicated by the settlement agreement. However, despite various opportunities provided to him, he has not provided any documentation to show the amount of compensation he received nor how he expended that amount. He also failed to appear before the tribunal as directed and so the tribunal was unable to question him about his financial situation.

5. On the evidence before it, the tribunal found that in 2019, even allowing for significant reasonable expenses, such as the $317,000 deposit he paid on a home, Mr Watling acquired a financial resource of around $500,000.

6. The tribunal therefore further found that Mr Watling’s 2018/19 and 2019/20 adjusted taxable incomes of $26,940 and $24,569 respectively do not adequately reflect his income and financial resources for the purposes of child support and that this constitutes a special circumstance in this case. As the application of the administrative assessment would result in an unjust and inequitable determination of financial support for the children, in that Mr Watling would be assessed to pay less child support than warranted on the basis of his income and financial resources, the tribunal found that a ground for departure was established.

7. The issue of whether Mr Watling’s earnings from casual employment are properly taken into account by the assessment is considered below.

Issue 2: Is it just and equitable to depart from the administrative assessment?

1. To decide whether it is just and equitable to depart from the administrative assessment, the tribunal must consider the matters required by subsection 117(4) of the Assessment Act, plus any other matters raised in the change of assessment application.

Duty of a parent to maintain a child/commitments necessary for self-support or the support of anyone else the parent has a duty to maintain

1. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain.

2. Mr Watling and Ms Halsey each have the primary duty to financially support the children. Ms Halsey has no other children.

3. Mr Watling has two other children. The evidence about these children is not clear. Child Support identifies the younger, born 2019, as another child for whom Mr Watling is assessed to pay child support. However, Ms Halsey told the tribunal that this is Mr Watling’s child with his current partner. Mr Watling told the tribunal at the telephone directions hearing that he has a private financial arrangement with the mother of his oldest child. This arrangement is not registered as a private agreement with Child Support. The tribunal provided Mr Watling with an opportunity to provide information about the arrangement, but he did not do so.

4. At the 7 January 2021 telephone directions hearing, neither Ms Halsey nor Mr Watling identified any personal health-related costs or any other unusual self-support expenses they wished the tribunal to consider.

The proper needs of the child

1. In determining the proper needs of a child, it is necessary to consider the manner in which the parents expected the child to be cared for, educated or trained, and any special needs of the child.

2. No special needs costs or education-related costs were identified.

Income, earning capacity, property and financial resources of the children

1. The tribunal found no evidence that the children have access to income, property or financial resources which could be used for their self-support.

The earning capacity of Mr Watling

1. Mr Watling’s earning capacity was significantly impacted by his 2013 [injury]. Since then, his general pattern has been to not work or to work on a casual basis. As this change took place prior to his separation from Ms Halsey, the tribunal found that Mr Watling’s earning capacity is not at issue here.

Mr Watling’s earnings from employment and other income

1. It is undisputed that Mr Watling works on a casual basis for [Business 4], an associated entity of the [Family Trust 1] and [Business 1]. While there is evidence to suggest that [Business 1] has failed to co-operate with Child Support in garnisheeing Mr Watling’s wages, there is nothing to indicate that he is earning more money from the business than is being declared through the taxation system.

2. In a signed 16 July 2019 financial statement presented to the Federal Circuit Court, Mr Watling declared his average weekly earnings to be $1,207 from his casual employment with [Business 1]. This would equate to around $55,500 for a 46-week working year. Mr Watling’s 2018/19 earnings from [Business 1] were about $29,200. The details of his 2019/20 income tax return were not available to the tribunal but, allowing for his usual deductions, the adjusted taxable income amount of $24,569 suggests he earned about $27,000 from [Business 1] in that year, including jobkeeper payments. The fall in Mr Watling’s projected income from [Business 1] appears to be the result of his not working in some periods which was understandable given the COVID-19 situation.

3. Mr Watling’s 2020/21 earnings from [Business 1] will be higher than in the previous two years. His bank statements show him receiving variable weekly net payments from week ending 8 July 2020 to 28 October 2020. Extrapolating and grossing up his average net earnings in that period, suggests that he could earn up to $42,000 in 2020/21. While, given the casual nature of the employment, this amount cannot be assumed, it is roughly in line with Mr Watling’s current 2020/21 income estimate of $40,150.

4. Overall, the tribunal was satisfied that Mr Watling’s income from [Business 1] is taken into account by the usual processes of the administrative assessment.

1. Ms Halsey told the tribunal that she believes Mr Watling is working as [an occupation 1] for his current partner’s [service] business which offers services at the weekend in a variety of locations in Queensland. There is only limited available evidence (essentially some identifiers on payments to Mr Watling shown in his bank statements and Mr Watling’s travel patterns as seen through his bank statements) to support this possibility although it is not an unreasonable supposition. There is no evidence of income from this source in Mr Watling’s income tax returns. Overall, without more reliable information, the tribunal was unable to conclude that Mr Watling received income from work as [an occupation 1].

Income, property and financial resources and earning capacity of Ms Halsey

1. After her separation from Mr Watling, Ms Halsey married. That relationship has now ended and she is currently involved in a difficult property settlement with her ex-partner which includes consideration of the two businesses with which she is involved. Ms Halsey said that there is little or no money at stake; the dispute is largely about division of debts. There are two family homes, with one business secured against each. Ms Halsey’s financial circumstances are further complicated by the impact of the COVID-19 situation which has resulted in both the businesses, [types specified], shutting down for extended periods.

2. Ms Halsey is self-employed. She provided financial information in relation to [one specified] service business, which is solely in her name, [Business 5]. This show only a small profit, less than $3,000 in 2018/19, and a significant loss, around $18,000, in 2019/20. Ms Halsey was unable to provide detailed financial information for  [Business 6] in which she beneficially owns 50% of the shares. This was because the sole director of the company did not consent to release the company’s financial statements. However, the accountant for the company, [named], provided a letter which included the information that [Business 6] made a loss of $357,817 in 2019/20 and that Ms Halsey receives an annual salary from the company of $40,000.

3. Ms Halsey’s individual 2018/19 income tax return situation showed an adjusted taxable income of $57,191. This was essentially her earnings from [Business 5] ($59,034) less allowable deductions. Her 2019/20 income tax return situation showed an adjusted taxable income of $50,035. This consisted of earnings from [Business 5] ($26,600) and [Business 6] ($12,307) plus an additional amount from one or both business ($9,000) less allowable deductions. Ms Halsey is currently being assessed on a 2020/21 income estimate of $40,150.

4. Ms Halsey’s 10 February 2021 SoFC shows no assets of significance and five small debts totalling $16,500 plus an additional $15,000 debt. There was nothing out of the usual in Ms Halsey’s expenses other than the cost of supporting one of the children’s interest in [a named sport]. It is an expensive sport and Ms Halsey said that she has had to limit the number of competitions her child can enter because of the high cost.

5. On 6 December 2019, Ms Halsey and Mr Watling finalised their property settlement by consent. As part of that process Ms Halsey received $110,000 from Mr Watling’s compensation payment. The tribunal put it to Ms Halsey that she had therefore already benefitted from Mr Watling’s compensation payment. Ms Halsey convincingly argued that child support was not a consideration in the determination of the property settlement.

6. Overall, the tribunal found nothing in Ms Halsey’s SoFC and related evidence to indicate that she has access to any income, property or financial resources not being taken into account in the assessment. The tribunal further found no issue in relation to Ms Halsey’s earning capacity.

Direct and indirect costs of providing care for the child incurred by the parent entitled to child support

1. Ms Halsey did not identify any particular costs associated with caring for the children.

What determination should be made taking into account the above factors?

1. The proposed departure determination is that:

   ·     For the period 1 August 2019 until 31 July 2027, Mr Watling’s annual child support liability is increased by $5,000.

2. The start date of 1 August 2019 is earlier than that of other decisions in this matter which used the start date of 1 January 2020. The tribunal chose this date as it is the beginning of the month in which Ms Halsey made her change of assessment application.

3. The end date of the proposed determination is 31 July 2027. The resulting eight-year period reduces the period affected by the determination compared to the objections officer’s decision (11 years which is the end of the assessment) but increases the period determined by the primary decision maker (6 years).

4. In determining the amount by which to increase Mr Watling’s child support liability, the tribunal considered that, allowing for the $110,000 received by Ms Halsey from the property settlement, 10% of the around $400,000 remaining financial resource available to Mr Watling, that is $40,000, was a fair proportion of that amount for him to direct towards child support. The tribunal decided to spread this liability over an eight-year period, a rate of $5,000 a year, so as to allow Ms Halsey a level of certainty in relation to her future child support entitlement while not posing an unreasonable demand on Mr Watling.

Any hardship resulting from the departure determination

1. On 4 May 2021, Mr Watling owed $5,598.36 in child support arrears, plus $505.39 in late payment penalties. The proposed departure determination will increase the amount of the arrears owed by Mr Watling. Mr Watling was given multiple opportunities to provide both Child Support and the tribunal with evidence about his financial situation, including his assets, expenses and liabilities, but chose not to do so. This makes it difficult to consider possible hardship caused by the tribunal’s determination.

2. Nonetheless, on the limited available evidence about Mr Watling’s financial situation, the tribunal was satisfied that Mr Watling has the financial capacity to clear the arrears and meet his ongoing child support commitments without experiencing hardship (for example, by redirecting his discretionary spending, such as the $5,000 he spent on online betting between 1 November 2019 to 31 October 2020, to child support).

Issue 3: Is it otherwise proper to depart from the administrative assessment?

1. The tribunal considered the impact of its proposed determination on the balance of support provided by the parents on one hand and the taxpayer on the other. It is necessary to decide whether this is a proper outcome given that parents have the primary responsibility to support their children.

2. Ms Halsey currently receives family tax benefit for the children. The proposed determination will likely reduce her entitlement, decreasing taxpayer support for the children. Whatever the impact, the tribunal was satisfied that the proposed determination represents the financial circumstances of the parents as well as can be done on the available evidence. The tribunal therefore found that the proposed determination is otherwise proper.

DECISION

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

• For the period 1 August 2019 until 31 July 2027, Mr Watling’s annual child support liability is increased by $5,000.