Wickers and Ganson (Child support)
[2019] AATA 434
•29 January 2019
Wickers and Ganson (Child support) [2019] AATA 434 (29 January 2019)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2018/MC014334
APPLICANT: Mr Wickers
OTHER PARTIES: Child Support Registrar
Ms Ganson
TRIBUNAL:Member R Anderson
DECISION DATE: 29 January 2019
DECISION:
The tribunal sets aside the decision under review and, in substitution, decides that:
The annual rate of child support payable by Mr Wickers in respect of the period 1 June 2017 to 31 August 2017 is varied to $14,900;
The annual rate of child support payable by Mr Wickers in respect of the period 1 September 2017 to 25 May 2018 is varied to $7,300;
The annual rate of child support payable by Mr Wickers in respect of the period 26 May 2018 to 30 June 2019 is varied to $5,700;
The adjusted taxable income of Mr Wickers is varied to $55,900 in respect of the period 1 July 2019 to 30 June 2020 and
The adjusted taxable income of Mr Wickers is varied to $57,800 in respect of the period 1 July 2020 until a terminating event occurs in respect of the child support assessment of [Child 3].
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources – income from operation of business with current partner – payment of personal expenses from business account – discretionary spending – carer parent depleting capital from property settlement - adult children – 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 Wickers and Ms Ganson are the parents of [Child 1], [Child 2] and [Child 3]. According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 22 August 2000. However, it was not until 13 April 2011 that the Department became responsible for the collection of child support from Mr Wickers. It is evident that the child support assessment ceased in February 2013, recommencing on 28 November 2015. At the time of hearing only [Child 3] remained a child of the assessment, [Child 1] ceasing [in] April 2016 and [Child 2] [in] May 2018 following their 18th birthdays.
The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act). The calculation is based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department.
In the period commencing 28 November 2015, the adjusted taxable incomes of both parties fell below the self-support amount used in the administrative formula of $23,610. Consequently, Mr Wickers was assessed to pay child support at the fixed annual rate of $4,056 in respect of all three children ($1,352 per child), reducing to $2,704 in respect of [Child 2] and [Child 3] from [April] 2016. On 26 November 2016, the Department accepted an estimate from Mr Wickers of $2,523 per annum for the remainder of the 2016/2017 financial year. Furthermore, the Department also accepted Mr Wickers’s application to reduce his child support liability from the fixed annual rate to the minimum annual rate in respect of the same period. This resulted in his child support liability reducing to $414 per annum.
It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act if they consider the administrative assessment results in an unfair amount of child support payable by one parent. Ms Ganson lodged such an application on 8 June 2017 on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Wickers (Reason 8). This was largely due to his involvement in [a] business (the Business).
On 5 August 2017, a delegate of the child support registrar found that a ground was established and decided to vary the adjusted taxable income of Mr Wickers to $54,600 per annum in respect of the period 18 April 2016 to 17 April 2019.
On 2 January 2018, Mr Wickers lodged an application for an extension of time to object to the decision of 5 August 2017, which was subsequently refused. On 4 April 2018, a differently constituted tribunal granted Mr Wickers’s request for an extension of time to lodge an objection to the decision of 5 August 2017. Subsequently, an objections officer decided to disallow Mr Wickers’s objection on 28 May 2018.
Mr Wickers then lodged an application to this tribunal for an independent review of the Department’s decision on 15 June 2018. The directions hearing was conducted by telephone with Mr Wickers and Ms Ganson on 4 December 2018. The tribunal was assisted by an interpreter in the Mandarin language. Following this hearing, directions were made to both parties requiring them to provide further information and documents.
The hearing was held on 29 January 2019. Both parties participated by conference telephone and gave oral evidence on affirmation. The tribunal was assisted by an interpreter in the Mandarin language. The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 412, documents lodged by Mr Wickers numbered A1 to A235 and documents lodged by Ms Ganson numbered B1 to B39. Further information from Centrelink was received by the tribunal, numbered D1 to D7. All of the documents were provided to all parties prior to the hearing.
ISSUES
When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:
· whether a ground exists to depart from the administrative assessment; and if so
· whether any proposed departure is fair to Mr Wickers, Ms Ganson and the children; and if so
· whether any proposed departure is fair to the public.
CONSIDERATION
Issue 1 – Does a ground exist to depart from the administrative assessment?
The grounds for departure 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. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).
Reasons 8A and 8B – the earning capacity, income, property and financial resources of each parent
Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by Mr Wickers because of the available income, property and financial resources available to either parent. The Act goes on to state in subsection 117(7A) that the decision maker must have regard to ‘the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income’ and disregard ‘the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child’. Clearly, the wife of Mr Wickers, [Ms A], has no legal duty to provide for [Child 1], [Child 2] or [Child 3], while Mr Wickers has a legal duty to provide for his relevant dependant son of almost seven years of age.
As Ms Ganson has been reliant on Centrelink benefits since before the recommencement of the child support assessment in late November 2015, her financial circumstances are transparent and lack complexity. In response to a question from the tribunal, Ms Ganson stated that she suffers from mental health issues and as such is exempt from the activity test in respect of the eligibility requirements for newstart allowance. It is evident from Departmental records that her adjusted taxable income has remained below the relevant self-support amount since re-commencement of the child support assessment in November 2015. This is despite ATO general interest income and/or expenses.
According to Centrelink records, Ms Ganson is currently in receipt of family tax benefit Part A and Part B in respect of [Child 2] and [Child 3] at the maximum rate of almost $492 per fortnight. For child support purposes, as family tax benefit is an income-tested benefit, it is not considered to be a part of her adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act). Furthermore, family tax benefit is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act).
The tribunal accepts the written evidence of Ms Ganson, that at 30 June 2018 she held a balance in her [superannuation account] of $342,199. This amount is as a result of final property settlement orders. The tribunal is satisfied that no personal contributions have been made by Ms Ganson in recent times.
The tribunal considered the assets and liabilities of Ms Ganson, who shares her rented residence with [Child 1], [Child 2] and [Child 3]. According to her Statement of Financial Circumstances, Ms Ganson’s assets are limited to a 2006 [vehicle] ($5,000) and household contents ($6,000). While Ms Ganson gave oral evidence that she holds minimal funds in the bank, she further stated that her savings are held in [Child 1]’s name due to her gambling issues. In response to a question from the tribunal, Ms Ganson stated that the original amount of around $212,000 was received as a result of property settlement. It has since reduced to $20,000. Ms Ganson has no liabilities. Therefore, the tribunal calculates the net asset base of Ms Ganson for child support purposes to approximate $31,000 and finds accordingly.
In respect of Ms Ganson’s expenses, she estimated the average weekly expenses of the household to be $1,395, or $72,540 per annum, of which discretionary costs in respect of entertainment and gifts are $70. Ms Ganson has apportioned $75 per week to herself. The tribunal notes that rent and household-related costs, amongst others, have not been apportioned across all members of the household. Overall, there is nothing in the expenses of Ms Ganson that appear to be unusual or that indicate her expenses would exceed the self-support amount used in the administrative formula, which in the 2018 year is $24,535.
In response to a question from the tribunal, Ms Ganson stated that her savings have enabled her to meet the expenses of her and the children to date. While she prepaid the rent 12 months in advance last year, come February 2019 she will have to revert to monthly payments at $540, as she has insufficient funds to pay in advance.
Ms Ganson told the tribunal that [Child 1] has three years of study remaining before completing her [studies]. She is in receipt of youth allowance, of which she contributes 70% to the household costs. [Child 2] is about to commence his first year at university and will also be in receipt of youth allowance from March 2019. Similarly, he too will contribute 70% of his benefits to the costs of the household. Ms Ganson further stated that upon commencement at university he will cease his [part-time employment]. Based on the current basic rate of youth allowance in respect of students aged between 18 and 24 years who live at home, the tribunal calculates the contribution to household costs by [Child 1] and [Child 2] to approximate $400 per fortnight or $10,400 per annum.
Based on Ms Ganson’s fortnightly newstart allowance, family tax benefit payments and the contribution by [Child 1] and [Child 2], it is clear that Ms Ganson has a significant shortfall. Clearly her savings are insufficient to meet such a shortfall in the coming year. Ms Ganson told the tribunal that her only option will be to borrow from others.
Mr Wickers gave oral evidence that he had previously owned a [business]. In mid-2013 his current wife, [Ms A], opened the Business in [Suburb 1] as a sole trader. Mr Wickers gave oral evidence that both he and [Ms A] worked full-time in the Business prior to a car accident in August 2015. Mr Wickers gave oral evidence that he sustained an injury to [Body Part 1] while his wife has had memory issues. Furthermore, both were in receipt of TAC payments until the end of 2016.
The tribunal examined the 2015/2016, 2016/2017 and 2017/2018 income tax returns of Mr Wickers. His sole source of income in the 2015/2016 year consisted of TAC payments of $35,616. In the 2016/2017 year his income consisted of TAC payments to December 2016 of $22,067, wages from the Business of $3,850 and wages from [Company 1] of $6,650. Mr Wickers told the tribunal that around May/June of 2017 he commenced at [Company 1], as [Occupation 1]. He further stated that after three months he did not continue, as he was requested to increase his hours beyond 30 per week. According to the loan application submitted to [a named credit provider] in September 2017, Mr Wickers’s annual salary as [Occupation 1] was $85,800. This corresponds to the total income he received in the three-month period between May/June 2017 and August/September 2017 of $22,469. Other income in respect of the 2017/2018 year was wages from the Business of $7,100.
It is also evident from the tax returns of Mr Wickers that he owns an investment property in [Suburb 2]. Mr Wickers gave oral evidence that he commenced renting out a second investment property in [Suburb 3] in July 2018. While the rent covers the mortgage repayments of both properties, given other corresponding expenses, the net result in the 2017/2018 year was a loss of $3,179. For child support purposes, net investment losses are added back and therefore have no impact on the child support liability. What is of note is the ability of Mr Wickers to meet the additional expenses each year. Furthermore, he pays $445 per annum in addition to the required payments on the [Suburb 3 property] investment loan. The tribunal notes that this exceeds the minimum annual rate which Mr Wickers submitted he was struggling to meet.
It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott v Scott [1994] FLC 92-457; Carey v Carey [1994] FLC 92-489). In this case, Mr Wickers is employed by his wife, who is the legal owner of the Business., operating it as a sole trader. As discussed with the parties, the role of the tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.
In response to a question from the tribunal, Mr Wickers stated that since the accident, they have employed [other employees] while he and [Ms A] share the cashier duties in the Business. He submitted that he spends up to 20 hours per week at the Business, while [Ms A] generally exceeds 20 hours per week. In addition, Mr Wickers completes the bookkeeping to provide to the accountant on a quarterly basis for preparation of the business activity statements.
The tribunal notes with some concern the oral evidence of Mr Wickers that he relies on ‘his memory and his heart’ to advise the accountant of the income received in the Business. In contrast, the expenses are supported by receipts. Irrespective of the legal ownership of the Business, Mr Wickers agreed with the tribunal’s observation that he and [Ms A] appear to share the operational duties. While Mr Wickers considers a 40/60 split between him and his wife to be fair, in the tribunal’s view, a 50/50 split is more accurate.
The majority of the expenses were unremarkable. In response to a question from the tribunal as to where the superannuation expense in the profit and loss statement was deposited, Mr Wickers stated that his superannuation has not and will not likely be paid in the future, as he is ‘family’. After excluding the wages paid to Mr Wickers and the corresponding superannuation, the tribunal calculates the net profit available to Mr Wickers and [Ms A] from the Business in the 2016/2017 and 2017/2018 years to approximate $23,900 and $27,700 respectively. Based on the business activity statements in respect of the 2016/2017 year after deducting expenses that are GST-free such as rates and superannuation, the net profit approximates $31,600.
In addition, Mr Wickers estimated the private use of the two motor vehicles used in the Business to be 50% and acknowledged that his mobile phone is also paid for by the Business, providing a financial benefit to Mr Wickers. A further benefit received from the Business is goods for own use, as itemised in the profit and loss at approximately $3,500 per annum.
Given the method of accounting for revenue, the tribunal is hesitant to rely on the profit and loss statements as recorded on [Ms A]’s income tax returns. Given the unreliability of the profit and loss statements of the Business, the tribunal turned to the Business bank statements and evidence in relation to the costs that are met in respect of the household of Mr Wickers, [Ms A] and their son as a basis to determine the financial resources available to Mr Wickers.
It is evident that every few days close to the entire balance in the Business account is transferred to the offset account. There is no evidence of deposits other than via eftpos. As noted above, the tribunal is not persuaded that 100% of the takings from the Business are accurately accounted for. The offset account is used to pay monthly wages to Mr Wickers and [Ms A] totalling $3,393 ($40,716 per annum), the monthly credit card balance and regular ATM cash withdrawals. The cash withdrawals totalled almost $5,000 in the quarter ending 30 June 2017 and $23,402 in the period 5 July 2018 to 5 December 2018. The tribunal calculates this to average out to annual cash withdrawals of approximately $38,000.
Based on Mr Wickers’s credit card statements in the periods 21 March 2017 to 20 June 2017 and 21 June 2018 to 5 December 2018, his payments average out to an annualised amount of $46,500. Mr Wickers gave oral evidence that he uses the credit card for business expenses also so as to maximise his points. While the tribunal accepts that this is the case, there are also a significant amount of private expenses, many in relation to discretionary costs such as vacations, private health cover, pharmacy, home utilities, supermarkets close to home, restaurants, education costs and [entertainment] at $39 per fortnight.
Mr Wickers estimated the average weekly household expenses to be $894, annualising to $46,500. It is noteworthy that no costs were recorded for entertainment, education or holidays, despite such costs being met throughout the year via the credit card. Nor were the household private health insurance premiums recorded, which according to credit card statements are $242.50 per month or $2,910 per annum.
Based on the 2017/2018 rental statement in respect of the [Suburb 2] property, Mr Wickers received $12,153 of rental distributions. The corresponding mortgage repayments were $19,655, meaning that Mr Wickers managed to meet the shortfall of approximately $7,500, in addition to expenses for rates, water and insurance of $2,314, totalling $9,814. Mr Wickers gave oral evidence that he expects the [Suburb 3] property to make a small profit after meeting all of the expenses. The average weekly expenses met by Mr Wickers and [Ms A] clearly well exceed $46,500.
The wages and cash withdrawals from the offset account and private expenses such as land tax that are met directly from the offset account total in excess of $80,000 per annum. In addition, a significant amount of private expenses are also met through the offset account paying off the monthly credit card balance. It is impossible to know with accuracy what proportion of the credit card expenses are related to the Business. Allowing conservatively for 50% being attributed to private expenses, this approximates $23,000.
Given that Mr Wickers and [Ms A] share the operation of the Business, which is essentially their only source of income since September 2017, the tribunal is satisfied that a reasonable indication of the financial resources available to Mr Wickers is represented by 50% of the total financial resources that are available to meet the necessary and discretionary costs of the Wickers household. In addition, in the tribunal’s view benefits received by Mr Wickers and [Ms A] from the Business, as discussed above, would likely exceed $5,000. Therefore, the tribunal calculates the financial resources and benefits available to Mr Wickers in the period commencing 1 September 2017 to approximate $54,000 [($80,000 + $23,000 + $5,000)/2]. There is no evidence before the tribunal to suggest that the expenses were likely any different in the period prior to 31 May 2017. During this period, Mr Wickers and [Ms A] were assisted to meet the household expenses by TAC payments.
In the period 1 June 2017 to 31 August 2017, Mr Wickers was in receipt of gross wages from [Company 1] of approximately $85,800 per annum. One would expect his entitlement from the Business to be considerably less during this time while working a 30-hour week at [Company 1].
According to Centrelink records, Mr Wickers is currently in receipt of family tax benefit Part A and Part B in respect of his son with [Ms A] at the rate of $225 per fortnight. For the reasons discussed in paragraph 13 above, for child support purposes, family tax benefit is not considered to be a part of his adjusted taxable income.
The tribunal accepts the written evidence of Mr Wickers, that at 13 December 2018, he held a balance in his [superannuation account] of $347,686. The tribunal is satisfied that no personal or employer contributions have been made by Mr Wickers in recent times.
According to his Statement of Financial Circumstances, Mr Wickers’s assets consist of three properties, two of which he holds sole ownership are investment properties in [Suburb 2] and [Suburb 3], valued at $550,000 and $650,000 respectively ($1,200,000). The corresponding mortgages after allowing for the offset account balances approximate $658,000. Ownership of the third property in [Suburb 4] is shared with [Ms A] and valued at $1,500,000. The corresponding mortgage is $984,184. Mr Wickers gave oral evidence that since purchasing the property in September 2017, the monthly mortgage payments have been met by extending one of the mortgages. It is noteworthy that all three mortgages are in joint names.
Other assets consist of cash savings in the vicinity of $6,500, a [vehicle] valued at $10,000 and household contents estimated at $5,000. Mr Wickers has no other liabilities. Therefore, the tribunal calculates his net assets to approximate $1,079,316 and finds accordingly.
Mr Wickers told the tribunal that aside from his lingering [Body Part 1] injury, he and his family are all in good health and there are no special circumstances in relation to his relevant dependent son. Mr Wickers maintains that his [injury] prevents him from any heavy duties and therefore he is no longer able to work as a [Occupation 2]. The most recent TAC medical certificate, valid until 2 January 2018, states that Mr Wickers’s working capacity is limited to four hours per day for three days per week. It is evident that Mr Wickers has worked in excess of 12 hours per week for a number of years.
Neither party raised the issue of earning capacity. Given the medical diagnoses of each party, the tribunal is satisfied that none of the criteria under subsection 117(7B) of the Act are relevant in this case.
Ms Ganson told the tribunal that she was satisfied with the Department’s decision. In contrast, Mr Wickers told the tribunal that while the minimum annual rate may not seem fair, he is unable to afford anything more and is struggling to support himself. The tribunal finds this surprising given the level of discretionary and investment spending of Mr Wickers.
Based on the tribunal’s findings above in respect of the financial resources and benefits available to Mr Wickers from the Business, his annual child support liability exceeds $7,100 per annum, reducing to around $5,700 per annum following [Child 2] no longer being a child of the assessment. In respect of the three-month period 1 June 2017 to 31 August 2017 when Mr Wickers was employed by [Company 1], the child support liability is in the vicinity of $14,900 per annum. He has clearly been well under-assessed at $420 per annum. It is noteworthy that this has been the case since re-commencement of the child support assessment in late November 2015. However, prior to 8 June 2017, no change of assessment application was lodged. This is discussed later in these reasons for decision.
Therefore, the tribunal finds that special circumstances do exist in this case, in that the administrative assessment results in an unfair outcome. As such, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.
Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Wickers, Ms Ganson and the children to make a particular departure 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 fair as regards the parents and the children 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 have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).
The needs of the children
Section 3 of the 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 (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Wickers and Ms Ganson have the primary duty to financially support the children, while Mr Wickers also has a legal duty to support his relevant dependent son together with [Ms A].
In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). Ms Ganson gave oral evidence that while the children are generally in good health, [Child 1] is on life-time [medication for specified medical condition] and [Child 3] receives counselling at school. [Child 1] has a healthcare card and there is no evidence before the tribunal to suggest that any of the children have special needs that result in significant costs that impact the overall costs of the children.
[Child 1] ceased to be a child of the assessment in April 2016. As a full-time university student, she is in receipt of youth allowance. [Child 2] ceased to be a child of the assessment in May 2018. He too will be in receipt of youth allowance in the next few months. In the meantime, Ms Ganson has continued to receive family tax benefit for [Child 2].
In accordance with the Act, both parents' liability towards [Child 1] and [Child 2] have now ceased. However, in the case of Carlson & Acuff & Anor (SSAT Appeal) [2010] FMCAfam 677, Riethmuller FM notes that section 66L of the Family Law Act1975 regulates the circumstances when a parent's duty to maintain a child over 18 years of age would be enforced, and opined that where a child is in full- time education they would fall squarely within paragraph 66L(1)(a) of the Family Law Act1975. Riethmuller FM further noted the real question became the amount of the obligation, in light of the parents' expectations about whether the child should contribute to the household expenses. In this case both [Child 1] and [Child 2] will make a significant contribution to the household costs. As such, the tribunal does not consider that special circumstances exist in this case. Ms Ganson gave oral evidence that she is incurring higher costs for [Child 1] for things such as makeup and entertainment. Such costs are discretionary. It is open to [Child 1] and [Child 2] to find part-time work, as many university students do, in order to meet their discretionary expenses.
[Child 3] is about to commence Year 10 at school. The Statement of Financial Circumstances completed by Ms Ganson did not apportion rent and household costs to the children. Furthermore, Ms Ganson acknowledged that some of the figures, such as clothing were not accurate. As Mr Wickers has no contact with the children, his costs are limited to the child support assessment. In considering the proper needs of the children, the tribunal may also have regard to published guidelines as to the needs and the costs of children as used in the administrative assessment (Eades and Cadell (SSAT appeal) [2009] FMCAfam 275). The tribunal turned to the Costs of Children Table for guidance. The administrative formula calculates the maximum cost for two children 13 years and over with the combined child support income of the parents of almost $24,772 (based on combined adjusted taxable incomes of $77,339 as estimated by this tribunal in the period commencing 1 September 2017), to approximate $7,184 per annum. From 26 May 2018, the administrative formula calculates the maximum cost for one child 13 years and over to approach $5,700. In contrast, during the three-month period of Mr Wickers’s employment with [Company 1], the administrative formula calculates the maximum annual cost for two children 13 years and over to be almost $14,900.
The earning capacity, income, property and financial resources and commitments of each parent
As found earlier in these Reasons for Decision, the tribunal is satisfied that Mr Wickers has income, financial resources and benefits available to him which far exceed that which is recorded in his annual tax returns. The tribunal found that the financial resources and benefits available to him in the period 28 November 2015 to 31 May 2017 and in the period from 1 September 2017 to date approximated $54,000 while the financial resources were more in the vicinity of $86,000 in the three-month period 1 June 2017 to 31 August 2017. Going forward, neither parent is expecting any significant change in their circumstances. While Mr Wickers gave oral evidence that he plans to sell the [Suburb 3] property in order to manage the mortgage on his [Suburb 4] residence, this will have little impact on his income for child support purposes as Mr Wickers gave oral evidence that the [Suburb 3] property was close to neutrally geared.
Conclusion
After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Wickers and Ms Ganson and the needs of [Child 1], [Child 2] and [Child 3] over the respective relevant periods, the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support. There is no question that Mr Wickers is in a superior financial position to Ms Ganson. As such, she is in need of assistance from Mr Wickers, in accordance with his capacity, to meet the needs of the children.
The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). Ms Ganson expressed her satisfaction with the Department’s decision to commence the departure from [April] 2016 ([Child 1]’s 18th birthday), despite Ms Ganson not lodging her application until June 2017. In response to a question from the tribunal, Ms Ganson told the tribunal that the delay in lodgement of the form sent to her in November 2016 was due to her mental health issues and Mr Wickers’s history of non-payment. However Departmental records indicate that Mr Wickers paid his assessed child support regularly until late 2016 and again from May 2017 to the departure decision of 5 August 2017.
Furthermore, it is well documented that parents should be entitled to make financial decisions while relying on the accuracy of the child support assessment, unless otherwise put on notice as to the possibility of a change. It was not until Ms Ganson submitted her departure application on 8 June 2017 that Mr Wickers had knowledge of a possible change to his child support liability. The tribunal considers 1 June 2017 to be an appropriate start-date for a departure decision. Both parties expressed their desire for a departure decision to extend until a terminating event occurs for child support purposes in respect of [Child 3], being March 2021. This will avoid the need for lengthy and complex reviews going forward. The tribunal concurs.
The tribunal proposes to set an annual rate of child support payable by Mr Wickers of $14,900 in respect of the period 1 June 2017 to 31 August 2017 and an annual rate of $7,300 in respect of the period 1 September 2017 to 25 May 2018, the day before [Child 2] ceased to be a child of the assessment. Commencing 26 May 2018, it is only [Child 3] who remains a child of the assessment. The tribunal proposes to set an annual rate of child support payable by Mr Wickers in respect of the period 26 May 2018 to 30 June 2019 at $5,700. Based on Mr Wickers’s 50% share of the increase in overall profit from the Business in the 2016/2017 and 2017/2018 years, the tribunal proposes to vary the adjusted taxable income of Mr Wickers to $55,900 in the period 1 July 2019 to 30 June 2020 and vary the adjusted taxable income of Mr Wickers to $57,800 from 1 July 2020 until a terminating event occurs in respect of the child support assessment of [Child 3].
According to Departmental records, Mr Wickers had outstanding child support arrears at 31 December 2018 of $14,558. The proposed decision will result in a decrease in the arrears at 31 December 2018 of approximately $5,700, largely due to the period 18 April 2016 to 31 May 2017 and his employment period at [Company 1].
Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.
Given his discretionary spending on investment properties, entertainment, holidays and private health insurance to name a few, the tribunal does not accept Mr Wickers’s oral evidence that a child support liability greater than $420 per annum will cause him hardship. In addition, Mr Wickers has considerable equity in his two investment properties. In the case of Hampson & Bailey [2013] FCCA 1004 it was noted that ‘contributions by parents to the support of children is not based solely on the income of the parent but also on property and financial resources as income capacity.’ Given his discretionary spending, the tribunal is satisfied that Mr Wickers has the capacity to maintain the child support payments going forward in the vicinity of $109 per week. It is open to Mr Wickers to arrange his financial circumstances such that he has the ability to meet his child support obligations, in addition to negotiating a manageable payment arrangement with the Department to meet the outstanding arrears at 31 December 2018 of around $8,800 and to meet the needs of him and his current family.
While to date Ms Ganson has managed her expenses while drawing down on the funds she received from property settlement, these funds will be exhausted before the end of October 2019 in meeting her rental expenses alone. The tribunal is satisfied that Ms Ganson and the children will indeed suffer hardship if Mr Wickers’s annual child support liability remains at the minimum annual rate of $426 or even the fixed annual rate of $1,416.
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.
Ms Ganson is currently in receipt of family tax benefit Part A and Part B at the maximum rate. As a sole parent, a change in the child support payable by Mr Wickers will have no impact on her entitlement to family tax benefit Part B. In respect of family tax benefit Part A, given that Ms Ganson’s income is well below the threshold at which family tax benefit is reduced from the maximum rate, an increase in the child support payable by Mr Wickers will likely have no impact on the rate of family tax benefit Part A payable to Ms Ganson. Therefore, the tribunal considers that it is otherwise proper to make the particular proposed determination.
It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.
DECISION
The tribunal sets aside the decision under review and, in substitution, decides that:
The annual rate of child support payable by Mr Wickers in respect of the period 1 June 2017 to 31 August 2017 is varied to $14,900;
The annual rate of child support payable by Mr Wickers in respect of the period 1 September 2017 to 25 May 2018 is varied to $7,300;
The annual rate of child support payable by Mr Wickers in respect of the period 26 May 2018 to 30 June 2019 is varied to $5,700;
The adjusted taxable income of Mr Wickers is varied to $55,900 in respect of the period 1 July 2019 to 30 June 2020 and
The adjusted taxable income of Mr Wickers is varied to $57,800 in respect of the period 1 July 2020 until a terminating event occurs in respect of the child support assessment of [Child 3].
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