Xander and Haage (Child support)

[2020] AATA 3667

Xander and Haage (Child support) [2020] AATA 3667 (18 June 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC018391

APPLICANT:  Ms Xander

OTHER PARTIES:  Child Support Registrar

Mr Haage

TRIBUNAL:Member K Dordevic

DECISION DATE:  18 June 2020

DECISION:

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

·      for the period 1 January 2019 until a terminating event occurs in respect of the child, Mr Haage’s annual rate of child support is varied to $26,000 per annum; and

·      from 1 January 2019 to 31 December 2019 Mr Haage’s annual rate of child support is increased by $28,000; and

·      from 1 January 2020 until a terminating evident occurs in relation to the child, Mr Haage’s annual rate of child support is increased by $30,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the children are significantly affected – financial resources of both parents – no full and frank disclosure of financial information by the liable parent - 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. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.

2. The mother and the father are the parents of one child, born [in] 2007. The case was registered with the Department of Human Services – Child Support on 28 September 2017 and has been collectable since that date. The child is recorded as being in the mother’s sole care.

3. The mother lodged a departure application on 7 February 2019. On 14 June 2019 a senior case officer determined that from 1 January 2019 to 31 December 2021 the father’s adjusted taxable income is varied to $255,800, the mother’s adjusted taxable income is varied to $57,058 and that the father’s annual rate of child support shall be increased by $28,630. 

4. The father’s objection, lodged on 8 July 2019, was partly allowed on 17 September 2019.  The objection officer determined:

   ·     The father’s adjusted taxable income is varied to:

   §  $255,800 per annum during the period 1 January 2019 to 7 July 2019; and

   §  $146,000 per annum during the period 8 July 2019 to 31 December 2020;

   ·     The mother’s adjusted taxable income is varied to:

   §  $57,058 per annum during the period 1 January 2019 to 7 July 2019;

   §  $67,000 during the period 8 July 2019 to 31 December 2019; and

   §  $30,000 during the period 1 January 2020 to 31 December 2020.

   ·     The father’s annual rate of child support is increased by:

   §  $28,630 during the period 1 January 2019 to 7 July 2019;

   §  $21,165 during the period 8 July 2019 to 31 December 2019; and

   §  $30,567 in the 2020 calendar year.

5. On 7 November 2019 the mother sought further review of the objection decision with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal).

6. A telephone directions hearing was held on 7 May 2020 and directions issued requiring compliance by 1 June 2020. A notice, pursuant to subsection 95J of the Child Support (Registration and Collection) Act 1988 was issued to the Department requesting Australian Transaction Reports and Analysis Centre (Austrac) transaction reports for the period 1 February 2019 to 30 April 2020 regarding the mother and father. A response was received on 12 May 2019.

7. The matter was heard on 18 June 2020. Both parties appeared by conference telephone. The Child Support Registrar was not represented at the hearing. In reaching its decision the tribunal has considered the sworn evidence of the mother and the father. The tribunal also considered the documentation provided by Child Support (folios 1-765), the mother (folios A1-A373) and the father (folios B1-B63). Due to an administrative error, the Austrac documents provided (C1-C192) were not exchanged with the parents and therefore were not taken into evidence. At hearing the father advised that he had not received the additional documents as he was having problems with his mail, but nevertheless elected to proceed. The tribunal advised the mother that the additional documents she had provided on 17 June 2020 were not accepted into evidence as they had not been provided within sufficient time to allow them to be exchanged with the father.

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and

   (ii)that it would be:

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

   (B)otherwise proper;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support, and, if so:

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. Subparagraph 117(2)(b)(ib) of the Act provides a ground for departure when, in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being educated in the manner that was expected by their parents.

2. The child support assessment is intended to cover the costs of raising children which are common to all parents such as public school fees. It is not intended to cover additional expenses such as private school fees or other education costs which are not common.

3. It is not in dispute that the parents determined, prior to separation, that the child would be enrolled and attend [School 1], an independent school. The child was enrolled in the school from [Grade number] and is currently in Year 7, 2020.  The tribunal finds that the child’s attendance at [School 1] was in the manner expected by the parents.

4. The mother also submits that she spends approximately $30,000 per annum in tutoring for the child. She originally engaged tutors to assist the child’s application for opportunity classes and selective high school tests. More recently she has done so as the child wishes to be ranked first in his class for certain subjects. There is no evidence before the tribunal that the father was consulted prior to the child’s enrolment in tutoring nor that he agreed that this was necessary.  The tribunal is not persuaded that the child’s past and ongoing attendance at private tutoring is in the manner expected by the father.

5. The tribunal finds that the tuition fees for a child in Year 6, 2019 was $28,220 per annum, in addition to an education activities charge of $1,820 and a technology levy of $410.  In 2021 the tuition fees for a Year 7 child are $32,150, in addition to an education activities charge of $1,274 and a technology levy of $690. 

6. The tribunal accepts that [School 1’s] 2019 fees and charges for a Year 6 student were $30,450 and the 2020 fees for a Year 7 student are $34,114. The tribunal concludes that, in the special circumstances of the case, the mother’s costs of maintaining the child are significantly affected because the child is being educated in the manner expected by his parents. Therefore, the ground provided for in subparagraph 117(2)(b)(ib) of the Act is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the parties’ respective earning capacities, the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula assessment.

2. At the time that the mother lodged the change of assessment application the father was liable to pay $15,450 per annum, based upon the parents’ 2018 adjusted taxable incomes of $128,749 (the father) and $22,058 (the mother).

3. The tribunal finds that the mother’s taxable income was $15,980. In her Statement of Financial Circumstances, dated 21 February 2020, the mother declares gross weekly income of $290.95 from newstart allowance. She reports savings of $1,646, her half share of the former martial home and an investment property valued at $512,000, a car valued at $10,000, household contents valued at $3,000 and nil superannuation. She reports a half share of the property mortgages of $485,378, a personal loan from her mother of $60,000 and an outstanding education loan of $14,012. She reports personal expenditure of $544 and household expenses of $2,593. At least $550 of her expenses appear to relate to her costs in caring for the child (excluding the child’s education costs). The mother states that she has some [specified medical] problems and the child suffers from [a medical issue]. There is no evidence that there are significant costs associated with their medical conditions

4. There is no evidence that the mother is in receipt of income or financial resources that are not reflected in her income tax returns. The tribunal is not persuaded that transfers from the child’s maternal grandmother to the mother, apparently to fund the ongoing Family Court matters, are a financial resource available to her for the support of the child. The father does not press that the mother has an unused earning capacity.

5. The parents agree that the child is in good health. Apart from his education costs he has no out of the ordinary expenses. There is no evidence that the child is in receipt of independent income or financial resources and the tribunal finds accordingly.

6. In his undated Statement of Financial Circumstances the father states that he is not in receipt of any wages and salary and receives no benefit from [Business 1]. He reports a half share interest in the former marital home, which he values at $1,300,000 and a property in [a named suburb] valued at $24,500. He also reports a 5% share in a property valued at $700,000; his mother holds the remaining 95% interest. He reports no savings, nil household and other property, his interest in [Business 1] as $550 and a motor vehicle valued at $8,000. He has superannuation of $72,500, monthly mortgage repayments of $6,500 (including $2,700, which indicates that he makes the full repayments on the investment property mortgage) and other liabilities totalling $51,331. His personal expenditure is nil and he declares household expenditure of $1,065, of which $385 relates to another adult. The father reports that he is in good health.

7. The father’s 2016 to 2019 taxable incomes are $104,926, $157,355, $128,749 and $49,549 respectively. He is [an occupation 1]. As the tribunal understands it, at the time the mother lodged her application he operated as a sole trader and worked exclusively with [Business 2]. Information from the Australian Taxation Office indicated that in 2017 and 2018 the father reported income of $339,211 and $268,628, expenses of $231,854 and $195,224 and net profits of $107,354 and $73,399 respectively. The father is also sole director and shareholder of [Business 1]. His sister is the sole director and shareholder of [Business 3] Pty Ltd; the company was registered [in] May 2018.

8. On 20 May 2019 Child Support contacted by telephone the father’s employer who advised that the father had not received any commissions since May 2019 as there had been a significant downturn in sales. In his submissions to Child Support the father stated that he no longer receives commissions from [Business 2] and instead receives a monthly salary. On 31 March 2020 [Ms A from] [Business 2], stated that the father resigned from his position as a [specified role] at [Business 2] on 29 November 2019 and his last day of employment was 20 December 2019. It is noted that the father provided a [Business 1] bank statement which indicates that on 4 February 2020 $5,041.66 was deposited into the account from [Business 2], with the descriptor “Commission Jan20”. The father maintains that he is unemployed and that he resigned from [Business 2] as he was not confident that he would meet set KPI’s and the market and [related] business had deteriorated.

9. The mother contends that the father’s income is in the vicinity of $600,000 per annum, but he has negotiated with his employer to have his commission paid directly to his mother and sister. She submits that the father’s mother is a frail octogenarian and his sister has been unemployed for about 20 years and is in receipt of income support payments. She stressed that in the 2016 financial year she and the father together [conducted sales] which are due [for completion] in the next 12 months; therefore, his income will increase dramatically in the next 12 months.

10. The mother provided bank statements (in her possession after she issued subpoenas during the parents’ property settlement) held by the father’s mother, [Business 3] and [Business 1]. The tribunal makes the following findings. During the period 21 October 2016 to 31 March 2017 [Business 2] deposited $177,100.59 into an account held by the father’s mother, and a further $205,800 into the same account during the period 1 February to 9 August 2019. At hearing the father stated that on some occasions he would transfer funds to his mother as she recommended sales to him.

11. During the period 30 August 2018 to 31 May 2019 [Business 2] transferred $80,137.15 to [Business 1]. The tribunal does not have the benefit of [Business 1] financial statements for the 2018 or 2019 financial years as the father failed to provide these, despite being directed to do so.

12. [Business 3’s] registered address is identical to that listed as the father’s personal bank statements.  The tribunal finds that during the period 1 June 2018 to 6 June 2019 [Business 2] deposited $214,255.50 into [Business 3’s] bank account; cheques totalling $180,754.5 were also deposited into the account, in addition to cash deposits of $235,000.

13. The father stated at hearing that he is not at all associated with [Business 3]. He explained that his sister refers clients to him and that he then pays her part of the commissions he earns; she is a sub-agent. When asked why she would not deal with [Business 2] directly he stated that this is a strategy engaged in by [Business 2] which gives agents more bargaining power. He also stated, in contradiction to this, that sub-agents are expensive to engage. When asked to describe the relationship between [Business 2] and [Business 3] he replied “we co-operate with each other”. He did provide the [Business 3] profit and loss statement for the 2019 financial year which indicates that commissions totalling $170,000 were paid. He denies that he was in receipt of any income from [Business 3] during that same period.

14. The father has not provided a clear, consistent or credible narrative regarding his involvement with [Business 2] or his association with [Business 3]. In the absence of evidence to the contrary, the tribunal formed the view that this is an artificial arrangement whereby his sister holds the offices of director and shareholder, but the day to day operation of the business, as well as all of the income generation, appears to be the product of the father’s work alone. [Business 3] appears to primarily derive its income from the father’s personal exertion, skills, expertise and reputation. The only reasonable conclusion to be drawn is that this is a vehicle to reduce his child support liability.

15. Directions were issued dictating that the father must provide all bank statements for the period 1 January to 31 March 2020 in his name, or to which he is a signatory or in which he holds an equitable interest. He was also directed to disclose all his real property holdings. The tribunal made this request as it is well accepted principle that parents who have a company have the ability to structure their affairs so as to minimise their income: Carey and Carey (1994) FLC 92-489. At hearing the father confirmed that he did not fully comply with the directions, apparently he did not fully understand what was required of him. The provision of a full and frank disclosure of all his bank statements and real estate assets by the father would have provided a clearer indication of his income and financial resources. His failure to make a full and frank disclosure is unsatisfactory and leaves him open to adverse inferences being drawn: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 209. A failure to make proper disclosure about income and financial resources allows the tribunal to accept what evidence there may be with more confidence than would otherwise have been the case: Thomas & Harry(SSAT Appeal) [2010] FMCAfam 310.

16. It is difficult to establish with any certainty the father’s income and financial resources given the arrangements that appear to be in place with [Business 2], his mother and sister. Nevertheless, the tribunal is satisfied that the father obtains undeclared income and financial resources from [Business 3] and [Business 1] (not least by commissions paid by [Business 2] and income from other sources) which are not reflected in his taxable income. The mother has also provided evidence that the father has a legal interest in two properties that he has not disclosed to the tribunal; a parent’s property and assets can be considered in deciding the appropriate rate of child support to be paid: Abela and Abela (1995) FLC 92-528. His failure to disclose his assets means that the tribunal is unclear whether they produce an income stream, or whether the father is able to restructure his financial affairs to ensure that they do.

17. The financial evidence indicates that the father has a greater capacity to meet the child’s costs than his income tax return and submissions suggest. However, it is difficult to quantify this financial resource, without a forensic examination of his financial arrangements and a full and frank disclosure. The tribunal considers that the available evidence indicates that the father has the capacity to contribute at least $500 per week towards the child’s costs ($26,000 per annum). Given the tribunal’s conclusion regarding the father’s income and financial resources, it is satisfied that he has capacity to meet his annual liability and this will not place him in a situation of hardship. Furthermore, these funds are necessary for the mother to adequately provide for the child.

18. The tribunal has determined that it is appropriate to amend the father’s annual rate from 1 January 2019 (the date from which the previous departure application expired) until a terminating event occurs in relation to the child (being November 2025 at the latest). The period of departure is appropriate in the circumstances, given that it is unlikely that the father’s income and financial resources will be reflected in his adjusted taxable income into the future. Furthermore, this will create certainty for the parents and avoid repeat proceedings. The decision will create arrears of about $15,000. The tribunal is satisfied that the father has capacity to meet these arrears and this will not place him in a situation of undue hardship.

19. The tribunal next considered what, if any contribution the father should make towards the child’s education costs. The Full Family Court determined in the matter of Mee and Ferguson [1986] FamCA 3 that where there is agreement as to a school a child attends, a parent is liable to contribute “so long as and to the extent that he or she has a reasonable financial capacity to continue to do so”. The tribunal is of the view that certainly the father has capacity to meet the child’s private school fees. The mother states that at this time her capacity is limited, but she is confident that at the conclusion of the Family Court proceedings she will secure work and will be able to contribute to these costs.

1. As outlined above, the 2019 fees and charges for a Year 6 student were $30,450 and the 2020 fees for a Year 7 student are $34,114. It is appropriate that the father contribute $28,000 towards the child’s education costs in the 2019 calendar year and $30,000 in the 2020 calendar year. It is apparent that there is an increase of about 5% per annum in school and other levies at [School 1]. Given the mother’s evidence that she anticipates an improvement in her financial position, and taking into account the father’s ongoing child support liability, the tribunal is of the view that the father’s annual rate shall be increased by $30,000 per annum to reflect his contribution towards the child’s school fees until a terminating event occurs in relation to the child. This aspect of the tribunal’s decision will create arrears of about $5,000.

2. The tribunal is satisfied that the administrative assessment is unfair given the parents’ income and financial resources, as well as the cost of educating the child in the manner expected by their parents. After due consideration of all the factors outlined in subsection 117(4) of the Act, the tribunal is satisfied that it is just and equitable to depart from the administrative assessment of child support.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. The mother is in receipt of family tax benefit in respect of the children. Departing from the administrative assessment will maintain the current apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

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

·      for the period 1 January 2019 until a terminating event occurs in respect of the child, Mr Haage’s annual rate of child support is varied to $26,000 per annum; and

·      from 1 January 2019 to 31 December 2019 Mr Haage’s annual rate of child support is increased by $28,000; and

·      from 1 January 2020 until a terminating evident occurs in relation to the child, Mr Haage’s annual rate of child support is increased by $30,000 per annum.