Whitfield and Gray (Child support)

Whitfield and Gray (Child support) [2020] AATA 1028 (7 February 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/PC017390
APPLICANT:  Mr Whitfield
OTHER PARTIES:  Child Support Registrar
Ms Gray

TRIBUNAL:Member S Brakespeare
DECISION DATE: 7 February 2020
DECISION:

The decision under review is varied so that there is a departure determination in the following terms:

for the period 31 May 2019 to 28 February 2020 Mr Whitfield’s adjusted taxable income is varied to $206,232.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – redundancy payment – 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 removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

Mr Whitfield is the parent liable to pay child support to Ms Gray in respect of their children [Child 1] who is seven and [Child 2] who is five.
On 22 January 2019 Mr Whitfield applied for a change of assessment on the grounds of Ms Gray’s income, property and financial resources and on her earning capacity. Ms Gray applied on the basis of Mr Whitfield’s income, property and financial resources and earning capacity.
The administrative assessment that was in place prior to the application being made was:

For the period 1 September 2018 to 30 May 2019 Mr Whitfield was required to pay an annual rate of child support of $26,572. The liability was based on Mr Whitfield’s adjusted taxable income for 2017/18 of $240,035 and Ms Gray’s adjusted taxable income for that same year of $21,315. The assessment was also based Mr Whitfield having 14% care of the children and Ms Gray having 86% care of the children.

Before a decision was made on the changes of assessment application the administrative assessment that was in place changed to the following:
·         For the period 31 May 2019 to 30 June 2019 Mr Whitfield was required to pay an annual rate of child support of $2,832 (the fixed annual rate) based on his estimate of $0 for the 2018/19 financial year. Ms Gray’s adjusted taxable income remained the same as in the previous assessment.
·         For the period 1 July 2019 to 30 November 2019 Mr Whitfield was required to pay an annual rate of child support of $2,832 (the fixed annual rate) based on his estimate of $0 for the 2019/20 financial year. Ms Gray’s adjusted taxable income remained the same as in the previous assessment.
·         (From 31 July 2019 the assessment is based on Mr Whitfield having 26% care of the children and Ms Gray having 74% care of the children; however this does not result in a change to the cost percentage which, at all times was 24% for Mr Whitfield and 76% for Ms Gray.)
On 8 July 2019 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):
· For the period 31 May 2019 to 10 June 2020 Mr Whitfield’s adjusted taxable income amount is varied to $206,282.
· For the period 20 June 2019 to 31 May 2020 Ms Gray’s adjusted taxable income is varied to $35,176.
Mr Whitfield lodged an objection to the original decision.
On 2 September 2019 an objections officer partly allowed the objection and made a departure determination in the following terms (the objection decision):
· For the period 31 May 2019 to 24 June 2020 Mr Whitfield’s adjusted taxable income is varied to $206,232.
· For the period 7 December 2018 to 30 November 2019 Ms Gray’s adjusted taxable income is varied to $36,446.
Mr Whitfield lodged an application for review of the objection decision with the tribunal on 12 September 2019. A hearing was held on 7 February 2020. Mr Whitfield and Ms Gray both attended the hearing and gave sworn evidence to the tribunal. The Child Support Agency provided the tribunal and the parties with bundles of documents totalling 1135 pages. The parties also provided documents to the tribunal; the documents from Mr Whitfield have been numbered A1 to A132. The documents from Ms Gray have been numbered B1 to be B14. The tribunal exchanged these extra documents with the parties prior to the hearing.
Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

The statutory provisions relevant to these reviews are contained in the Child Support (Assessment) Act 1989 (the Act).
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.
Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three-step process such that the issues for determination by this tribunal are:
·         whether a ground is established to depart from the administrative assessment of child support; and
·         if so, whether it is just and equitable to make a particular departure determination; and
·         if so, whether it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held:
as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.
Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If the tribunal is satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Act.
The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

A ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).
At the time of the change of assessment application Mr Whitfield was required to pay an annual rate of child support of $26,572. The liability was based on Mr Whitfield’s adjusted taxable income for 2017/18 of $240,035 and Ms Gray’s adjusted taxable income for that same year of $21,315.
In his change of assessment application Mr Whitfield stated that he had been ordered to pay spousal maintenance to Ms Gray and he did not have the capacity to pay spousal maintenance and the assessed child support amount as well.
The tribunal finds that orders of the Magistrates Court dated 30 November 2018 (the Orders) provided at paragraph 7 that Mr Whitfield was to pay Ms Gray by way of interim spousal maintenance the amount of $300 per week commencing from the Friday following the date of the Orders. The tribunal finds that Ms Gray’s income from that point in time had increased by $15,600 per annum, taking her income to $36,915. When this amount is added to her assessed income Mr Whitfield’s liability reduces by $1,812 per annum from 7 December 2018. The tribunal does not find that, at that point that that reduction is significant enough to constitute a special circumstance, given Mr Whitfield’s gross income at that point in time of $240,035.
Mr Whitfield was made redundant on 17 May 2019. On 30 May 2019 he received a gross redundancy payment of $225,702. On 31 May 2019 he provided an estimate of $0 to the Child Support Agency and advised his year to date income was $402,562. Mr Whitfield’s child support was set at the fixed annual rate of $2,832.
Ms Gray lodged a change of assessment application on 19 June 2019 based on Mr Whitfield’s income property and financial resources; but with particular reference to the net redundancy payment of $168,655.60 and what she considered to be a history of avoiding child support and wasteful and excessive spending undertaken to avoid his child support obligations.
Mr Whitfield advised in his objection that he had made the following payments using his redundancy payment:
·         $35,000 to his parents to pay out his car loan and for living expenses;
·         $13,000 to pay out his [Bank 1] credit card:
·         $30,000 to pay out [credit] card;
·         [Bank 1] personal loan for legal fees $28,200;
·         $40,000 in partial settlement of a loan from his parents for legal fees;
·         $3,000 costs order (Court);
·         $1,000 car insurance;
·         $13,000 rent in advance for 26 weeks;
·         $3,055, being child support due to 30 June 2019;
·         $1,000 toward an operation for one of the children.
Mr Whitfield told the tribunal that he had ensured that he had followed all the correct procedures in lodging a nil estimate for child support. At the time he had advised that his year-to-date income was $402,562.00 and the Child Support Agency had assessed him on that amount. When he put the $0 estimate in he was assessed at the fixed annual rate and believed that would be his ongoing rate until his business, which he commenced after redundancy, had started earning an income.
Mr Whitfield said that the Child Support Agency had never advised him that he should not pay out all of his debts and he thought it appropriate to do so given he was unsure when he would work again. For the same reason he paid his rent 26 weeks in advance. Mr Whitfield said that he is still in front with his rent for perhaps a few more weeks. He said that he has lived at the same premises for a number of years and was tied into a 12-month lease.
Ms Gray told the tribunal that it was her view that Mr Whitfield had deliberately expended his redundancy monies as quickly as possible so that he could show the court during property settlement proceedings that he had no savings.
She said there was no requirement for him to pay out his car loan, pay off his credit card debts in full or to repay monies owed to his father. She said that Mr Whitfield’s father has admitted in court proceedings that he had not requested repayment at the time and did not require repayment at the time. Ms Gray said Mr Whitfield has failed to put the needs of the children first.
The tribunal finds that the redundancy received by Mr Whitfield is income that should be taken into account in the child support assessment. As the authorised review officer calculated, the redundancy was based on Mr Whitfield’s weekly wage of $3,966.00 or approximately $566.77 per day and therefore the total gross lump sum payment is equivalent to Mr Whitfield continuing to receive his normal salary for approximately a further period of 391 days (to 24 June 2020). Whilst Mr Whitfield believes that the Child Support Agency adjusted his child support payments to reflect his income of $402,562.00, the tribunal finds that is not the case. When year-to-date income is provided as part of the assessment process, it is for the purpose of reconciling the income for the estimate period, and not prior to the estimate period. This reconciliation occurs once the relevant income tax returns have been lodged.
The tribunal finds that when the gross redundancy payment is taken into account Mr Whitfield would be liable to pay child support of approximately $26,400 per annum from 31 May 2019 to 24 June 2020, which is significantly in excess of his assessed liability from 31 May 2019 of $2,832.
The tribunal is satisfied that there are special circumstances which mean that the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the Mr Whitfield for the child because of the income, property and financial resources of Mr Whitfield.
The tribunal finds that the ground for departure under subparagraph 117(2)(c)(ia) of the Act has been satisfied.

Issue 2 – Is it just and equitable to make a particular determination?

As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below[1], which are as set out in subsection 117(4) of the Act:
[1] The tribunal is required to give “overt consideration” to relevant factors listed in section 117(4) of the Act Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(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; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
In having regard to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act). The tribunal finds that there are no extra costs to be taken into account in respect of the children’s needs and therefore it is appropriate to calculate the costs of their needs by reference to Costs of the Children Table.[2]
[2] Provided for in section 155 of the Act.
The tribunal finds that the children have no income, earning capacity, property and financial resources that should be taken into account for the purposes of child support.
The tribunal has found that Mr Whitfield’s redundancy payment represents income for a period of 391 days (56 weeks) from 31 May 2019. His net pay was approximately $168,655 which gave him a net income in the vicinity of $3,011 per week.
In his Statement of Financial Circumstances Mr Whitfield stated that his income was limited to rent assistance of $80 per week. His only assets were his motor vehicle (valued at $32,000) household contents ($8,000) and savings ($2,500). He also noted some superannuation funds which the tribunal disregarded given they are not accessible assets. At hearing Mr Whitfield said that he has no savings or income, other than the rent assistance, and he is waiting for his newstart allowance claim to be assessed.
In her Statement of Financial Circumstances Ms Gray indicated that she received dividends of $287 from her shareholding in the [Unit Trust 1], which is a unit trust that owns a commercial property. Her other income is $18 per week interest, as well as income from parenting payment and FTB. She stated she is receiving nil child support. Her spousal maintenance of $300 per week appears to have ceased at the time of property settlement. Ms Gray completed the Statement of Financial Circumstances after property settlement and she indicted that she has savings of $417,733 in a mortgage offset account (with the interest offsetting interest on the money borrowed for the [Unit Trust 1]) and a further $50,000 in a savings account. These funds were as a result of the sale of the family home in 2016, and she said they were given to her in the property settlement as it was her funds that were used for the initial home purchase. The value for her share of the [Unit Trust 1] is $205,000; however she owes $307,915 on her investment loan. She also holds share in publicly listed companies to the value of about $7,000. Ms Gray acknowledged that she had made some poor investment decisions.
Mr Whitfield and Ms Gray both suggested that the earning capacity provisions[3] applied to the other parent. The tribunal does not find this to be the case. Mr Whitfield is not working due to redundancy and it appears that he has been applying unsuccessfully for jobs. He also has started his own business which does not appear to be generating any revenue. He said he has recently applied for newstart allowance. The tribunal does not find that Mr Whitfield has ample opportunity to work.
[3] The factors that must be met for the tribunal to make an earning capacity determination are set out in subsection 117(7b) of the Act.
Ms Gray has not worked for several years and is in receipt of parenting payment. She said she ceased full-time work after the birth of her first child and only returned to work briefly on a part-time basis before the second child was born. She said that her caring responsibilities, along with the numerous court appointments prevented her from working and the tribunal accepts that to be the case. She said it is her intention to return to the workforce soon.
With respect to the parenting payment income received by Ms Gray, subparagraph 117(7A)(b)(ii) of the Act provides that any entitlement of the child or the carer entitled to child support, income-tested pension, allowance or benefit must be disregarded in having regard to the income, property and financial resources of a parent of the child. The tribunal therefore finds that Ms Gray’s income cannot include her parenting payment and only includes the spousal maintenance of $15,000 (annualised) and interest which equates to about $936 per annum. This is less than the self-support amount that is included in the child support formula. The dividend income is less than the mortgage interest and therefore is not included as Ms Gray’s adjusted taxable income.
In considering the commitments of Mr Whitfield the tribunal noted his assertion that he is unable to pay his bills, let alone the child support and does not know what to do. His is living on credit cards and that he has had to borrow money from his family to meet his commitments. He also said that he has incurred significant legal bills including a costs order that is due and payable in the next few weeks. He has no capacity to pay and is contemplating bankruptcy. He acknowledged however that his rent is still paid in advance.

Ms Gray said that Mr Whitfield has not paid any child support since 22 August 2019. However, she said an analysis of his bank accounts indicate that his discretionary spending exceeded his child support assessment of $479 per week yet he failed to make any attempt to pay child support. She said that the costs order came about because of his continued pursuit of her in the courts.
With respect to her commitments Ms Gray told the tribunal that she owes her parents $130,000 for legal fees. She said that Mr Whitfield has fought her at every turn incurring significant and unnecessary costs for both of them. At the time of separation the children were aged one and three and she had to sell the family home and move in with her parents. She was not able to use the money from the sale of the home until she received it via property settlement in September 2019. At one stage the dividend income from the loan relating to [Unit Trust 1] was not enough to cover the loan repayments and she also borrowed this money from her parents. From 28 July 2019 her repayments on the [Bank 2] Loan increased from $1,838.53 per month to $2048.70 per month. Ms Gray said it is very difficult to sell her shareholding in the [Unit Trust 1].
The tribunal proposes to make a departure determination in the following terms:
· For the period 31 May 2019 to 28 February 2020 Mr Whitfield’s adjusted taxable income is varied to $206,232.
The tribunal finds that having disregarded Ms Gray’s income parenting payment income as required by subparagraph 117(7A)(b)(ii) of the Act there is no reason to disturb the amount of income used for her in the administrative assessment, as it is below the self-support amount allowed under the administrative assessment. The proposed determination means that Mr Whitfield will be required to pay a child support liability of approximately $26,600 per annum (or $511 per week) to Ms Gray.
The tribunal must consider any hardship that might arise for the children; the carer entitled to receive child support or the liable parent from the proposed determination
The tribunal does not find that the children or Ms Gray will suffer hardship under the proposed determination as Ms Gray has significant liquid funds arising from the property settlement. Whilst she has to make payments toward the loan on her investment property, such commitments do not take precedence over the needs of the children.
The tribunal finds that Mr Whitfield was reckless in the manner in which he disposed of his redundancy. The tribunal also notes that Mr Whitfield signed a new rental agreement of $500 per week after he had been made redundant, and then proceeded to prepay his lease for a significant period going forward, yet only paid his (reduced) child support obligations up until 30 June 2019. He ensured that all of his other debts were paid (car, credit cards etc.) when it was not necessary to do so.
As at 22 January 2020 Mr Whitfield had child support arrears of $10,752.71(based on the objection decision) and these are likely to increase further as he will continue to be required to pay approximately $511 per week until the proposed determination ends on 28 February 2020. It may take some time for Mr Whitfield to clear those arrears but the tribunal does not find them to be too onerous. To continue the determination to 10 June 2020, as the objection decision did, would in the tribunal’s view cause Mr Whitfield excessive hardship given his limited income and assets and his current reliance on loans from family to meet the necessities of living.
The tribunal notes that both parties still have significant debt to their respective families arising from their legal expenses; however the tribunal does not find that those loans take precedence over the needs of the children.
Despite the fact that Mr Whitfield has acted in a reckless manner with the regard to the disposal of his redundancy payment the tribunal must strike a balance taking into account his current lack of assets and income, and Ms Gray’s significant assets which include a large amount of liquid funds that can be used to support the children.
The tribunal finds the proposed determination to be just and equitable.

Issue 3 – Is it otherwise proper to make a particular departure determination?

The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.
The tribunal finds Ms Gray is receiving family tax benefit. The proposed determination is likely to reduce her entitlement to that payment thereby moving the costs of caring for the children to the parents and reducing the burden on the public purse. The tribunal finds the proposed determination to be otherwise proper.

DECISION

The decision under review is varied so that there is a departure determination in the following terms:

for the period 31 May 2019 to 28 February 2020 Mr Whitfield’s adjusted taxable income is varied to $206,232.

[2020] AATA 1028

7 February 2020

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Family Law

Administrative Law

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Statutory Construction

Judicial Review

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