Wise and Wise (Child support)

[2019] AATA 5135

Wise and Wise (Child support) [2019] AATA 5135 (15 July 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/AC015901

APPLICANT:  Mr Wise

OTHER PARTIES:  Child Support Registrar

Ms Wise

TRIBUNAL:Member Y Webb

DECISION DATE:  15 July 2019

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the child support assessment should be varied as follows:

·from 1 October 2018 to 30 June 2019 Mr Wise’s adjusted taxable income is varied to $46,000; and
 

·from 1 July 2019 to 30 June 2020 Mr Wise’s adjusted taxable income is varied to $87,000; and

·from 1 October 2018 to 30 June 2019 Ms Wise’s adjusted taxable income is varied to $57,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established based on the incomes of both parents – decision to depart - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. This review relates to the issue of child support regarding the child of Ms Wise and Mr Wise.  The child is now 14 years old and is in the 100% care of Ms Wise.

2. The child support case commenced on 23 April 2009 and was registered for collection on 6 February 2014. 

3. On 4 September 2018, Mr Wise applied to the Child Support Agency for a change to the administrative assessment.  He initially cited Reasons 8A and 8B but Mr Wise later modified his claim to include Reason 5.

4. Ms Wise cross-applied on the basis of Reasons 8A, 8B and 3.  Ms Wise later advised the Tribunal that she no longer wished to pursue Reason 3.

5. At the time of the application for a change to the assessment there was a departure decision in place.  That decision, made on 4 June 2018, was that for the period 12 April 2018 to 28 February 2019 Mr Wise’s adjusted taxable income was to be increased by $9,713 and Ms Wise’s adjusted taxable income was to be varied to $39,000.  The result of this decision was that when Mr Wise lodged his new application for a change to the assessment on 4 September 2018, Mr Wise’s annual rate of child support payable was $7,314 based on his 2016/2017 adjusted taxable income of $56,276 (which included the increase of $9,713 as determined in the existing change of assessment decision of 4 June 2018) and on Ms Wise’s adjusted taxable income of $39,000.  Had Mr Wise not applied for a change to the assessment (or Ms Wise), Mr Wise’s annual child support liability would have dropped to $1,314 for the period 1 October 2018 to 28 February 2019 based on a 2017/2018 adjusted taxable income of $30,247 (including the $9,713 as determined in the existing change of assessment decision of 4 June 2018) and on Ms Wise’s adjusted taxable income of $39,000.  From 1 March 2019 Mr Wise’s annual child support liability would have decreased to $427 per year. 

6. However, as a result of Mr Wise’s application for a new change to the assessment and Ms Wise’s cross-application, a delegate of the Registrar decided on 22 November 2018 that a new change of assessment decision should be made and determined that for the period 1 October 2018 until the child ceased to be an eligible child of the assessment, Mr Wise’s adjusted taxable income should be varied to $75,000 per annum increased by CPI each year commencing from 1 December 2019.

7. On 17 December 2018 Mr Wise objected to that decision.

8. On 22 January 2019 an objections officer disallowed Mr Wise’s objection.

9. On 11 February 2019 Mr Wise requested review by the Administrative Appeals Tribunal (“the Tribunal”). A telephone directions hearing was conducted on 30 May 2019.

10. Mr Wise and Ms Wise attended the hearing by way of a telephone conference on 11 July 2019.

11. Mr Wise gave sworn evidence and Ms Wise gave evidence on affirmation.

12. A decision was deferred pending the receipt of further payroll information from both parties. 

13. On 15 July 2019 the Tribunal reconvened and made its decision.

ISSUES

1. The central issues for the Tribunal to determine in this case are:

   · Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (Assessment Act) exists; and if so,

   ·       Whether it would be:

   (a)   just and equitable as regards the children, the liable parent, and the carer entitled to child support; and

   (b)   otherwise proper;

   to make a particular determination to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

1. The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule.  The Tribunal had regard to all of this evidence, and refers specifically to particular items in this statement of reasons.

CONSIDERATION

The child support law

1. The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act.  This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.

3. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act (section 98B).  Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 14 above.

4. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and that a ground or grounds exist 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 Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.

5. The phrase “special circumstances of the case” is not defined in the Assessment Act.  In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:

   Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.

   Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases.

   [1] (1992) 15 Fam LR 219

6. Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision. 

Does a ground or grounds exist to depart from the administrative formula assessment?

1. In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing, prior to the hearing and post the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency.

Reason 8A

1. The legislative ground corresponding to Mr Wise’s application and Ms Wise’s cross-application in relation to Reason 8A is set out in subparagraph 117(2)(c)(ia) of the Assessment Act.  The test is whether:

   in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to 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: [paragraph 117(2)(c)]

   …

   (ia) because of the income, property and financial resources of either parent; or …

2. To establish Reason 8A in relation to either parent’s income, property or financial resources it is necessary to show that there are special circumstances establishing that the income used in the assessment makes the child support assessment unfair.

3. Mr Wise is seeking that his income in the assessment be decreased so that it reflects his taxable income as assessed by the Australian Taxation Office. His application for a change to the assessment stated that he is seeking this change from 1 July 2018 to 30 June 2019.

4. Ms Wise, in her cross-application stated that she believes that Mr Wise can afford more than he is paying in child support.  She asserted that he has two rental properties and rents out three plus rooms in his home and that between his business and personal property he uses all of the assets and expenses to reduce his income.  She stated that she was seeking an increase the annual rate of child support to $10,000 per year from 1 October 2018 until 30 June 2020.

Mr Wise’s contentions and evidence in relation to Reason 8A

1. Mr Wise contended that his income has markedly decreased in recent years.  He did not dispute that he is the sole director and shareholder of [name deleted] (“the company”) and that up until 1 July 2019 he was working full-time in his own business.

2. Mr Wise provided the 2017/2018  Financial Statements for the company and these showed that the total gross business income was $106,677 and his total business expenses were $106,431 resulting in a net profit of $246 for the 2017/2018 financial year.

3. Mr Wise was adamant that the availability of work has markedly decreased over the last couple of years.  He stated that this was due to a downturn in the economic conditions in [a city].  He stated that he decided to be the sole worker in the business from 2018 because there was not much work and he wanted to concentrate on reducing the company’s debt to its credit card.[2]

   [2] A9

4. Mr Wise submitted that in the period 1 July 2018 to 6 June 2019, the company had paid him $23,000.[3] 

   [3] A37

5. He provided a NAB statement dated 26 January 2019 to 24 May 2019[4] which showed that Mr Wise had received a total of $11,000 from the company over this four month period. 

   [4] A39-A41

6. However Mr Wise objected to this being annualised to $33,000, asserting that while the company did pay him $11,000 in the period 26 January 2019 to 24 May 2019, this was not indicative of his income over the whole 2018/2019 year. He submitted that income from the company for the whole year would more accurately be ascertained by adding a little more (to notionally cover the whole financial year) to the $23,000 which he claimed he received in the period 1 July 2018 to 6 June 2019.

7. The bank statement that Mr Wise provided also showed that he received a total of $2,100 from [Company 1] (these amounts from [Company 1] being in relation to insurance payments during a period when Mr Wise was incapacitated for work due to [Injury 1] he incurred on 1 December 2018).  Mr Wise told the Tribunal that he actually received a total of $5,400 from [Company 1] in total for his [Injury 1].

8. In addition to the income from the company and from [Company 1] Mr Wise advised that he has had one boarder at his home who pays rent of $210 per week.  He admitted that he used to have two boarders but the other boarder left in June 2018 and since that time he has had only one boarder.  Mr Wise’s advised that there is no written agreement with the boarder and he could leave at any time.  No payment records were provided although Mr Wise in his submission claimed that he has received gross income of $10,290 for the year.  Mr Wise stated that he estimates that the costs of the boarder are approximately $30 per week and therefore that the net income from the boarder is approximately $180 per week ($9,360 per year).

9. Furthermore Mr Wise stated that he and Ms Wise jointly owned two investment properties.  One has recently sold for $238,000.  Prior to the sale this property (“[Property 1]”) was being rented at approximately $380 per week[5] according to the Federal Circuit Court of Australia decision of 8 November 2018.  This was corroborated by a NAB statement for the period 26 January 2019 to 25 March 2019 which showed the rental income from the tenant of $760 per fortnight.[6]  Mr Wise stated that the gross rental income from this property for the period 1 July 2018 to 6 June 2019 was $14,400 as the rental ceased at the end of March 2019 with the property selling shortly afterwards.  Mr Wise stated that the property sold for an amount well below the expected sale price of $310,000.  He stated that because the sale of the property is instrumental in the property settlement between Ms Wise and him, the proceeds have not yet been distributed and the home loans have to continue to be paid.

   [5] A23

   [6] A51

10. In relation to the other investment property (“[Property 2]”) this is currently being rented at $769 per week according to the Federal Circuit Court of Australia decision of 8 November 2018[7] and confirmed by Mr Wise at the hearing.  Mr Wise stated that for the period 1 July 2018 to 6 June 2019 the gross rental income from this property was $31,042.  He advised that this property was going on the market for sale by the end of July 2019.  He stated that it would go on the market with a sale price of $430,000 but he was not expecting that it would sell at that price.  He referred to the Federal Circuit Court orders of 8 November 2018 which require that the parties accept a price which is up to 10% less than $430,000.  If it doesn’t sell, it must go to auction and eventually he and Ms Wise would be obliged to accept the highest bidder. 

    [7] A23

11. Mr Wise emphasised that 50% of the rental income and expenses were Ms Wise’s albeit that he managed the properties, using the rental income to pay expenses associated with the properties including the loan repayments pertaining to the properties.

12. Mr Wise explained that there are two home loans associated not only with the two investment properties but also with his residence at [Property 3].  It is difficult to separate the repayments on [Property 3] from the repayments for the two investment properties because while he is the sole owner of the [Property 3] the two home loans are owed by Mr Wise and Ms Wise.  Hence, while Mr Wise has been managing the rental properties and paying the two loans with income received from the rental properties, Ms Wise is entitled to half of the income from the rental properties and to claim half of the expenses in her tax return. She is also jointly responsible for the home loan repayments.  Mr Wise stated that in the 2017/2018 financial year he has paid $14,958 from his personal funds towards the home loan repayments.  He stated that he did take some money out of company funds in repayment of the home loans although he said that he has also had to rely heavily on his credit cards to contribute to the home loan repayments.  Mr Wise stated that the monthly home loan repayments are currently $2,564 for home loan one and $1,958 for home loan two: a total of approximately $4,522 per month.  Mr Wise provided the home loan bank statements for the period March to June 2019 which confirmed that the monthly repayments accorded with Mr Wise’s evidence.[8]

    [8] A59-A60

13. Mr Wise stated that the rent from the two rental properties did not cover the loan repayments and all of the expenses on the rental properties.  While there are now only expenses associated with [Property 2], the two home loan repayments are still payable.  Mr Wise stated that it could take months before the property settlement is finalised and in the meantime the home loans have to be paid. 

14. Mr Wise advised that he has obtained new employment which commenced on 1 July 2019.  It is a position of [Occupation 1] for the [Employer 1].  His gross salary is $92,000 per year although he stated that he will be taking three weeks leave without pay to travel overseas reducing his salary in the 2019/2020 year to approximately $87,000 per annum.  The position is full-time and ongoing.

15. Mr Wise stated that he applied for the position because his self-employment through his company was not making enough money.  He advised that the company has been “parked” because to continue to carry on his own business would be a conflict of interest.  He is now only able to do voluntary [work] for friends and family.  He stated that the company still has some loose ends to finalise and so there may still be some finalising business activity for one more quarter.  After that the company will become inactive and he will be personally responsible for running his vehicle and will no longer be able to claim those expenses and his phone expenses against the business.

16. Mr Wise strongly contended (leaving aside that his new job pays a gross salary of $92,000 per year) that his income over the last couple of years has been nowhere near $75,000 per year (as determined by the original decision maker and objections officer) and that from 2016/2017 his taxable income should be used in the assessment.

Ms Wise’s contentions and evidence in relation to Reason 8A

1. In relation to her income Ms Wise confirmed that she is a wage and salary earner.  In December 2018 she relocated from the Northern Territory to New South Wales.  When she lived in the Northern Territory she worked for [Employer 2].  That position was casual and her hours of work fluctuated.  After she relocated to New South Wales she continued to undertake some work for [Employer 2].  Ms Wise stated that she recently received a Payment Summary for the 2018/2019 year from [Employer 2] and this confirmed that she earned $38,097 for the year.  She provided a copy of her Payment Summary to the Tribunal.[9]

   [9] B12

2. Since relocating to New South Wales Ms Wise has been working on a full-time permanent basis for [Employer 3] earning an annual gross salary of $56,000 per year.  Ms Wise provided a payslip confirming her employment and salary rate dated 30 April 2019.[10]

   [10] B11

3. Ms Wise advised that she commenced the new employment with [Employer 3] in February 2019.  She estimates that in the financial year 2018/2019 she has earned a total gross amount of approximately $50,000 in relation to her employment with both [Employer 2] and [Employer 3].

4. Ms Wise agreed that she shared the ownership of [Property 1] and [Property 2] with Mr Wise and that she was entitled to half of the income from the two rental properties and to claim deductions for 50% of the expenses relating to these properties through her income tax return.  She agreed that she was 50% responsible for the repayment of the home loans associated with these two properties. She agreed that Mr Wise was managing those properties, collecting rent and repaying the home loans.  She agreed that [Property 3] was solely owned by Mr Wise but she highlighted the complexities of the home loans which related to that property as well as the two rental properties.  Ms Wise pointed out that although Mr Wise claimed that he could not afford to repay the home loans and that the net income from the rental properties did not fully cover the home loan costs, the home loan repayments were not in arrears.

1. Ms Wise agreed that [Property 1] had recently been sold and she did not dispute the sale price of $238,000 as advised by Mr Wise.  She also did not dispute that [Property 2] was being prepared for imminent sale.  She agreed that the Federal Circuit Court had made property orders in relation to the division of the assets pool but she stated that she was not hopeful that she would receive anything when the property settlement is eventually finalised.

2. In her original cross-application Ms Wise asserted that Mr Wise received an inheritance of $180,000 and she believed that he was earning more money through his company than he was declaring.  She considered that he could afford more than the $109 per month in child support that he had been assessed to pay as at October 2018.

The Tribunal’s consideration

1. The Tribunal found it difficult to precisely ascertain Mr Wise’s income and expenditure.  He provided a lot of information but some of it was unsupported by documentary evidence.  Notwithstanding, the Tribunal found Mr Wise to be generally genuine and credible in his statements regarding his finances.  The Tribunal finds that despite his frustration at being asked questions about his financial circumstances, he genuinely tried to provide accurate answers. The Tribunal found Ms Wise to be genuine in all of her responses and the Tribunal has no hesitation in accepting her evidence as credible and sincere.

2. In considering Mr Wise’s income the Tribunal is satisfied that since 1 July 2019 Mr Wise’s is no longer operating his business ([Company 1]) other than the business activities needed to finalise his company affairs.  The Tribunal is satisfied that from 1 July 2019 Mr Wise is not providing [work] other than to his employer [Employer 1] because it accepts the conflict of interest issues which would otherwise arise.  The Tribunal also accepts that in his new employment Mr Wise’s salary is $92,000 per year but that in the 2019/2020 year he will actually earn a gross salary of approximately $87,000 due to arranged leave without pay for three weeks that his employer has approved.

3. Mr Wise provided a payslip[11] confirming his employment with [Employer 1] and the Tribunal finds that the payslip confirms that the position is permanent and full-time and pays $92,405 per year or $3,542.68 per fortnight. (The Tribunal acknowledges that Mr Wise has only been employed since 1 July 2019 and therefore that the first payslip confirms payment for less than a fortnight.)

   [11] A89

4. In relation to his income from work in the 2018/2019 year Mr Wise asserted that for just over 11 months he had been paid $23,000 by the company.[12]  The Tribunal finds that this equates to approximately $25,000 over a full year.  The bank statements which Mr Wise provided show that in the four month period from 26 January 2019 to 24 May 2019 the company paid him $11,000[13] which equates to $33,000 over a full year if annualised.  However, Mr Wise claimed that these four months were not indicative of amounts paid to him over the full year.  The Tribunal accepts that this may be the case as he was incapacitated for work due to a [Injury 1] between 1 December 2018 and February 2019 and during that period the Tribunal finds, as evidenced by his bank statements and Mr Wise’s evidence at the hearing that he received a total of $5,400 from [Company 1] insurance[14].  On balance, and taking a broad and approximate approach in the absence of full verification, the Tribunal finds that Mr Wise’s income from work for the company in the 2018/2019 year was approximately $25,000 as he advised.  With his [Company 1] payments of $5,400 the Tribunal finds that his income from work/insurance for the 2018/2019 year was approximately $30,400 gross.

   [12] A37

   [13] A39-A41

   [14] A39

5. The Tribunal considered the 2017/2018 Financial Statements and the 2017/2018 company tax return copies of which were included within the Child Support Agency papers.[15]  These showed that the total income of the company was $106,677 and the total expenses were $106,431 resulting in a small profit of $246.  However, Mr Wise’s expenses included depreciation of plant and equipment and also depreciation of motor vehicles to a total value of $4,349. Depreciation expenses do not actually decrease the amount of income available to Mr Wise and so represents a financial resource to him.  Likewise, because he was operating a business Mr Wise was able to claim expenses for his motor vehicles and phone through the business.  While he was able to use the vehicles and phone for private use, he obtained the benefit of claiming these expenses as a deduction through the business rather than from his net income.  While the Tribunal accepts that Mr Wise predominantly used the vehicles and phone for business purposes there was inevitably some private use.  It is difficult to ascribe a value to the private use of the vehicle and the phone with any precision but taking a broad approximate approach the Tribunal finds that the personal financial benefit (or financial resource) from the vehicle and phone was approximately 20% of the amount claimed as an expense of the business.  In the 2017/2018 year the total motor vehicle expenses claimed against the business were $14,699 (excluding depreciation) and the phone expenses claimed were $3,217, a total of $17,916.  20% of this amount is $3,583.  Together with the $4,349 claimed for depreciation this represents a financial resource to Mr Wise of approximately $7,932 and the Tribunal so finds.  The Tribunal acknowledges that understandably Mr Wise has not yet lodged the company tax return or obtained the Financial Statements of the company for the 2018/2019 year but the Tribunal has presumed Mr Wise’s expenses for 2018/2019 as being similar to his expenses for the 2017/2018 year.

   [15] C1: pages 194-200 and 259-272

6. In addition, Mr Wise agreed that he received income from a boarder of $210 per week gross and $180 per week net.  The Tribunal accepts that there is no paperwork proving these payments but Mr Wise was consistent in his statements about these funds and the Tribunal accepts Mr Wise’s statements regarding the income received from his boarder.  Over a year the Tribunal accepts that Mr Wise’s gross income from the boarder is approximately $10,290.  Together with his income from working and from [Company 1] insurance ($30,400) and the financial resource in relation to the depreciation/private use of the motor vehicles and phone ($7,932) this adds up to a gross income of $48,622 in the 2018/2019 year.

7. In relation to Mr Wise’s income from the two investment properties he jointly owns with Ms Wise, the Tribunal acknowledges that one of the investment properties has recently sold well below expected market rates.  It was not disputed by Mr Wise and Ms Wise that the property sold for $238,000 rather than the listed price of $310,000.  The Tribunal accepts that this has had no effect on the home loan repayments and which are a joint liability of Mr Wise and Ms Wise.  The Tribunal accepts that the property which has sold is tied up in the settlement process and while it remains unfinalised the home loan repayments remain payable.

8. The Tribunal accepts that until [Property 1] sold it was rented at $380 per week and that these funds are no longer available to contribute to the home loan repayments.  It was not disputed that Ms Wise has not made any additional contributions to the home loan repayments since at least the beginning of 2016 although it is also not disputed that Ms Wise’s share of the rental income has been applied to the home loan repayments.

9. Mr Wise’s too has contributed to the home loan repayments by applying his 50% share of the rental income.  The Tribunal considered the 2017/2018 income tax returns of Mr Wise and Ms Wise in relation to the profit (if any) derived from the renting of the two properties in that year.  Mr Wise’s income tax return showed that gross rental income was $24,710 and expenses and capital works deductions resulted in a net rental property loss of -$20,534.[16]  In the previous financial year (2016/2017) Mr Wise’s income tax return showed a net rental property loss of $4,800.[17]  The Tribunal accepts that these figures may include additional expenditure by Mr Wise on the upkeep of the rental properties as Ms Wise’s 2017/2018 income tax return shows a net profit of $3,082 from the two rental properties[18]after the deduction of expenses whereas Mr Wise’s income tax return shows a net rental property loss.  Notwithstanding, the Tribunal is satisfied that Mr Wise derived no net income from the rental properties and it acknowledges that net property losses are “added back” for child support purposes and cannot be deducted from his income.

   [16] C1: page 176

   [17] C1: page 207

   [18] C1: page182

10. Mr Wise submitted that the loan repayments totalled $44,987 for the whole of the 2018/2019 year and that the total rental income was $45,482 in the 2018/2019 year.  At the same time Mr Wise claimed that he had contributed $14,958 (due to the shortfall in rental income) to the service the loans in the 2018/2019 year.  There may be a discrepancy in these figures but the Tribunal acknowledges that there were also significant expenses associated with the upkeep, costs and maintenance of rental properties (in addition to the repaying the loans).

11. Hence, the Tribunal finds that Mr Wise’s income – on an approximate basis – for the 2018/2019 year was $46,000 (taking into account that he derived no profit from the rental properties and with expenses deducted from the income he received from his boarder and with a further modest amount for other deductions).  

12. While Mr Wise urged the Tribunal to decide that the child support assessment should be calculated based solely on his taxable income as advised by the Australian Taxation Office the Tribunal does not consider that Mr Wise’s 2017/2018 taxable income of $20,534 accurately reflects the income and financial resources available to him.  The Tribunal has taken what it considers to be a conservative approach to Mr Wise’s income and financial resources and finds that in the 2018/2019 year he had access to income of approximately $46,000 in the 2018/2019 year.

13. The Tribunal is satisfied that there are special circumstances and that Mr Wise’s income and financial resources are significantly higher than would be the case if his 2017/2018 taxable income was used in the assessment or if the departure decision made on 4 June 2018 was to run to its conclusion on 28 February 2019.

14. The Tribunal therefore finds that Reason 8A has been established in relation to Mr Wise’s income, property and financial resources.

15. In relation to the claim that Reason 8B is also relevant in this case and possibly Reason 5, the approach of the Federal Circuit Court of Australia in these cases has been to limit the analysis about particular grounds once it was evident that one had been established, and to thereafter focus on the “just and equitable” considerations.  The Tribunal adopts that approach in its reasoning in this matter. 

Would it be just and equitable to depart from the administrative assessment?

1. Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain.  The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.

2. Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment.  The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act.  This requires an assessment of the duty of the parents towards the children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents, self-support commitments and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.

3. In considering these issues, the Full Family Court, in the case of Gyselman, stated that:

   However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section [117] (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).

4. Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:

The proper needs of the child

1. In determining the proper needs of the child, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the child to be cared for, educated and trained as well as a consideration of any special needs of the child.

2. Ms Wise stated that she has been advised that the child may need braces in future and she is aware that these are costly.  However, she agreed that she has not as yet incurred any orthodontic costs or been provided with a written estimate of those costs.  In addition Ms Wise stated that the child incurs costs associated with sporting activities. 

3. The Tribunal considers it premature at this time to factor orthodontic costs into this decision in the absence of a firm quote for this treatment and confirmation from the orthodontist that the treatment is necessary rather than cosmetic. In addition, while the Tribunal accepts that there are significant costs associated with the child’s sporting activities, these are an expense commonly incurred by teenagers and are expected – unless there is a compelling reason to view the expense as very significant- to be factored into the child support administrative formula. 

Ms Wise’s income, property, financial resources and earning capacity

1. In relation to Ms Wise’s income, property and financial resources she provided recent payslips relating to her employment with [Employer 2] and her recent employment (commencing in February 2019) with [Employer 3].[19]  She also provided a copy of her 2018/2019 Payment Summary from [Employer 2].[20]  This confirmed that in the 2018/2019 year Ms Wise earned $38,097 (gross) from this employer.  Her payslip from [Employer 3] showed that up to 30 April 2019 Ms Wise had earned $11,271.80.  By the end of June 2019 Ms Wise would have earned a total of $20,605 from [Employer 3] according to her payslip which confirms that her monthly gross salary is $4,666.67.  This position is a full-time permanent position with an annual gross salary of $56,000 per year.  The Tribunal therefore finds that in the 2018/2019 year Ms Wise’s income from her two employers totalled approximately $58,702.

   [19] B13 and B11

   [20] B12

2. In addition, Ms Wise’s income tax return for the 2017/2018 year confirms that she received net rental income of $3,082.  While Ms Wise understandably has not yet lodged her income tax return for the 2018/2019 year, this will most likely show a reduction in her net rental income given that [Property 1] sold before the end of the 2018/2019 year and she is no longer receiving rental income from that property.  The Tribunal considers that due to the reduction in rental income for the 2018/2019 year Ms Wise’s rental income may be insignificant and the Tribunal does not consider it would be just and equitable to add any amount to Ms Wise’s income due to the uncertainty of any net rental income in the 2018/2019 year.  Hence, the Tribunal is satisfied that in the last financial year (2018/2019) Ms Wise’s gross income was approximately $57,000 allowing for modest deductions.  The Tribunal also finds that in the current financial year (2019/2020) Ms Wise will earn approximately $56,000 gross from her full-time position with [Employer 3].  After tax of approximately $10,872 per annum (as evidenced in her payslip), Ms Wise has net income available to her of approximately $45,128 from her employment.  The legislation requires that any family tax benefit be disregarded and otherwise Ms Wise is dependent on child support payments from Mr Wise.

3. In relation to expenses, Ms Wise declared that she has a small loan of $2,529 but large credit card debts totalling $67,000 with minimum repayments of $375 per week (approximately $19,500 per year), private health insurance of $50.53 per week ($2,627 per year) and household expenses of $1,255 per week ($65,260 per week).  All of these expenses total approximately $87,387 which is well in excess of Ms Wise’s income.  However, Ms Wise’s financial circumstances may improve once the property settlement is finalised.

4. As Ms Wise is working full-time and even prior to 2019 was working on a regular, consistent basis the Tribunal is satisfied that Ms Wise is exercising her full earning capacity.

Mr Wise’s income, property, financial resources and earning capacity

1. Mr Wise’s income, property and financial resources have been addressed above at length.  The Tribunal has found that Mr Wise has had access to income of $46,000 (allowing for modest deductions) in the 2018/2019 year from multiple sources with his income increasing thereafter due to his new employment.  The Tribunal has found that in the 2019/2020 year it is expected that Mr Wise’s income will be $87,000 and thereafter that it will be approximately $90,000 based on the information included in his provided payslip.  In addition, once the property settlement is finalised, Mr Wise’s cash position may significantly improve.

2. The Tribunal considered Mr Wise’s other expenses apart from those already considered in relation to the investment properties and the boarder’s expenses.  He provided a Statement of Financial Circumstances which shows that his household expenses are modest totalling only $474 per week.  However, Mr Wise conceded that his household expenses will increase from 1 July 2019 because, with the business inactive, he will no longer be able to claim motor vehicle and phone expenses as deductions against the business income but will need to pay these from his net income (to the extent that they are for personal use).  It would be expected that this would add an approximate amount per week of at least $150 to Mr Wise’s total household expenses, taking those to approximately $624 per week or $32,448 per year. 

3. Apart from his child support liability he has significant credit card debts.  Mr Wise provided a Westpac bank statement showing that he has credit card debts of $26,500 and another of $15,987[21] as well as a NAB credit card debt of approximately $13,700,[22] a total of approximately $56,187.  The minimum monthly repayments on these credit card debts total approximately $1,700 as evidenced by the bank statements provided by Mr Wise[23].  This equates to minimum weekly payments of approximately $428.  Even if Mr Wise’s credit card repayments reduced over time, he still has very significant credit card debts which will be more affordable now that he has obtained employment and is to be paid $87,000 (gross) in the 2019/2020 year (a net amount of approximately $65,430 after tax and Medicare levy) and $90,000 (gross) in the 2020/2021 year (a net amount of approximately $67,400 after tax and the Medicare levy).[24]

   [21] A71 and A77

   [22] A48

   [23] A85 and A71 and A48

   [24] >

   The Tribunal accepts that borrowing money through a credit card is not a financial resource. In Farrens and Farrens [2010] FMCAfam 325 the Court stated:

   The fact that a party is able to draw down on a credit line (thereby increasing the debt level) should be treated cautiously and would not ordinarily be regarded as a financial resource available to meet child support obligations.  To do so opens up the prospect of, for example, credit card capacity being used for child support assessments and in my consideration, it was not the intention of the Assessment Act that the capacity of a parent to increase their debt level should be a factor that would ordinarily be taken into account in the assessment of their capacity to contribute to child support.

1. In view of Mr Wise’s income in the 2018/2019 year and the extent of his credit card debt in the 2018/2019 year, the Tribunal accepts that it would be just and equitable if Mr Wise paid a lower amount of child support throughout the 2018/2019 year than in subsequent years.  Nevertheless, it would be unfair and inequitable if a payer of child support could avoid their child support obligations by spending large amounts on credit and then preference the credit card repayments above their primary obligation to support their child.

2. The Tribunal also notes that Mr Wise received an inheritance of $178,000 in two payments in 2016 and 2017 and that has all been expended on debts, a boat and repayments on the home loans.[25]  It was not denied by Mr Wise that some of these funds were spent on a holiday.  In view of the obligations Mr Wise has to support his child, he could have chosen to retain some of the inheritance for that purpose but chose not to do so.

   [25] A24 – Federal Circuit Court reasons at para 53

3. The Tribunal is mindful, however, that the property settlement between Mr Wise and Ms Wise is not yet finalised and that once both of the rental properties are sold, both Mr and Ms Wise’s may be in an improved financial position (at least in terms of cash assets).

4. Mr Wise contended that the property orders (which are yet to be implemented) make provision for a lump sum payment of child support for the benefit of the child and therefore that this should be taken into account under Reason 5 in determining his liability to pay child support.  Lump sum or non-periodic maintenance orders may be made by a court under section 13A and 124 of the Assessment Act but the orders have to state how they affect the child support payable under the assessment.  The court order at paragraph 89 states:

   the wife is likely to have the bulk of the responsibility, financial and otherwise, for the care of the child of the parties for at least another 5 years and possibly more if she continues to tertiary study.  Having regard to that and the current modest child support assessment, in my view, an appropriate adjustment is a further 3% of the non-superannuation assets…

5. The Tribunal interprets the phrase “having regard to that and the current modest child support assessment” as intending the 3% adjustment to be over and above any child support payable under an assessment.  It is not clear what the court considers as “modest”.  If the court considered that the rate of child support that was payable before the departure determination was modest, it could be argued that any departure from the administrative assessment should take into account the extra 3% of non-superannuation assets.  However, this is not clear in the court’s decision.  It is unclear what the court intended or whether the court would have decreased the lump sum if a significant increase in the child support assessment was decided.  In view of the lack of clarity regarding the court orders and the fact that the orders have not yet been implemented and that the parties have been granted liberty to apply, the Tribunal considers that it would be just and equitable to make a departure decision and to disregard a claim under Reason 5.

6. In relation to Mr Wise’s earning capacity, there is no dispute that Mr Wise has been and continues to work full-time.  He has had a period of incapacity between December 2018 and February 2019 and this had some effect on his income.  The Tribunal finds that Mr Wise has not changed his occupation, industry or working pattern and that he is exercising his full earning capacity.

Necessary commitments to support themselves or others

1. The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children.  This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans.  In Mee and Ferguson[26] the Full Court of the Family Court stated at paragraph 128:

   Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.

   [26] [1986] FamCA3.

2. Neither Ms Wise nor Mr Wise raised any issues in relation to self-support and the Tribunal finds accordingly.

The income, earning capacity, property and financial resources of the child

1. Both parents agreed that the child has no income, earning capacity or property.  The Tribunal finds that the child is wholly dependent on her parents for financial support.

Any hardship to either parent or the children by the making of, or refusal to make, an order

1. Ms Wise told the Tribunal that she and the child would suffer hardship if Mr Wise paid only a small amount of child support.  She stated that the child is involved in many sporting activities which are expensive but from which the child derives a lot of enjoyment and skills.  She stated that her mother (the child’s grandmother) already assists with the costs of horse riding and it would be difficult to manage without that assistance.  If Mr Wise did not pay a reasonable amount of child support the child would have to cease participating in some of her sporting activities and Ms Wise would find it very difficult to afford health insurance (which benefits the child) and to update the child’s computer which she needs for school.

2. Mr Wise stated that he is concerned that if his liability for child support increases above a reasonable level, his financial circumstances will rapidly deteriorate even further.  He stated that he already is $6,000 in debt with child support and is already struggling to pay the home loans. 

Proposed determination

1. The Tribunal has carefully considered the extent to which Mr Wise should contribute in support of the child.  The Tribunal proposes to vary the adjusted taxable income of Mr Wise to $46,000 from 1 October 2018 (being just after both parties had lodged their applications for a change to the assessment) and to $87,000 from 1 July 2019 to 30 June 2020.  Thereafter, as Mr Wise is now a wage and salary earner, the calculation of his child support should revert to the administrative formula assessment based on his taxable income.

2. The Tribunal also proposes to vary Ms Wise’s adjusted taxable income to $57,000 from 1 October 2018 until 30 June 2019 but thereafter Ms Wise’s income will also revert to being calculated according to the administrative formula assessment.

3. In all of the circumstances, therefore the Tribunal proposes that the child support assessment should be varied as follows:

   ·from 1 October 2018 to 30 June 2019 Mr Wise’s adjusted taxable income is varied to $46,000 per annum; and
    

   ·from 1 July 2019 to 30 June 2020 Mr Wise’s adjusted taxable income is varied to $87,000 per annum; and
   
   

   ·for the period 1 October 2018 to 30 June 2019 Ms Wise’s adjusted taxable income is varied to $57,000 per annum.

4. The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents.

5. The Tribunal’s proposed determination will mean that in the period 1 October 2018 to 30 June 2019 the child support payable by Mr Wise will be approximately $4,869 per year or $405 per month.  From 1 July 2019 to 30 June 2020 the child support payable by Mr Wise will be approximately $12,636 per year or $1,053 per month.  Please note that these calculations are approximate only.

Is it otherwise proper to depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment.  Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

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

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

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

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

2. In determining whether it would be “otherwise proper” to make a particular order under the Assessment Act, the Tribunal must have regard to the matters stated in subsection 117(5) of the Assessment Act.  Paragraph 117(5)(a) of the Assessment Act reflects the fact that the Assessment Act clearly states (in section 3) that it is the primary duty of the parents to support the child. That duty should not be abandoned to the social security system.

3. The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman).  It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system.  The Tribunal is satisfied that Ms Wise needs financial assistance for the financial support of the child and that Mr Wise is able and can afford to contribute to those costs.

4. Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income tested benefit such as family tax benefit. 

5. Ms Wise confirmed that she is aware of the impact of child support payments on that benefit. 

100.Hence, the Tribunal concludes that it is proper to make the determination which it has proposed and to depart from the administrative assessment.

DECISION

101.The Tribunal sets aside the decision under review and, in substitution, decides that the child support assessment should be varied as follows:

·from 1 October 2018 to 30 June 2019 Mr Wise’s adjusted taxable income is varied to $46,000; and
 

·from 1 July 2019 to 30 June 2020 Mr Wise’s adjusted taxable income is varied to $87,000; and

·from 1 October 2018 to 30 June 2019 Ms Wise’s adjusted taxable income is varied to $57,000.

SCHEDULE

List of Exhibits

1. Department of Human Services – Child Support Agency marked as C exhibits:

   ·     CSA’s large bundle of 340 pages marked as exhibit – C1

2. Mr Wise has provided the following documents marked as A exhibits:

   ·     A1–A9                Statement of Financial Circumstances

   ·     A10-A12               Bank Statements

   ·     A13–A35              Decision of Federal Circuit Court of Australia of 8 November 2018

   ·     A36  Cover email

   ·     A37  Written submission

   ·     A38-A56               Bank Statements

   ·     A57  Business Activity Statement Jan-Mar 2019

   ·     A58-88                Bank Statements

   ·     A89  Recent payslip   from [Employer 1]                  

3. Ms Wise has provided the following documents marked as B exhibits:

   ·     B1–B10                Statement of Financial Circumstances

   ·     B11  Recent payslip – [Employer 3]

   ·     B12  Payment summary 2018/2019

   ·     B13  Payslip from [Employer 2]