Latest / Reflect Reclaim & Liberate - with Sallyanne Hartnell / Guest Episode: David Gale - Child Support, Financial Agreements & Divorce When You Own A Business with David Gale

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Guest Episode: David Gale - Child Support, Financial Agreements & Divorce When You Own A Business with David Gale · Reflect Reclaim & Liberate - with Sallyanne Hartnell

• 0:07
  SPEAKER_00: Welcome to Reflect, Reclaim and Liberate, the podcast.
• 0:12
  SPEAKER_00: Finding the space for all of you in life and love.
• 0:15
  SPEAKER_00: I'm your host, Sally Ann Hartnell, and this podcast is for anyone wanting to reclaim and liberate themselves in their relationships and their life.
• 0:25
  SPEAKER_00: Wherever you are on your relationship journey, these conversations meet you right there.
• 0:30
  SPEAKER_00: In soulful, deeply supportive DNMs with me and interviews with other gorgeous humans.
• 0:36
  SPEAKER_00: Moving you from where you are to where you most want to be.
• 0:40
  SPEAKER_00: A life and love completely aligned with your deepest desires to have it all on your own terms.
• 0:47
  SPEAKER_00: If you're seeking a relationship and a life that lights up all of you, you're in the right place.
• 0:54
  SPEAKER_00: I'd also like to acknowledge that this podcast is recorded on the traditional lands of the Wuradri people and pay my respects to elders past, present, and emerging, and acknowledge them as the original storytellers of this land.
• 1:09
  SPEAKER_00: Welcome back to another episode of Reflect, Reclaim and Liberate.
• 1:12
  SPEAKER_00: And today I'm excited to welcome David Gale to the podcast.
• 1:16
  SPEAKER_00: David is a lawyer and accredited specialist in family law.
• 1:20
  SPEAKER_00: He's the director of unsurprisingly named Gale Family Law, which is a boutique family law practice in Melbourne.
• 1:28
  SPEAKER_00: He's also a little bit of a TikTok sensation.
• 1:30
  SPEAKER_00: So if you want to seek him out on TikTok, you can find him at Family Lawyer.
• 1:36
  SPEAKER_00: This is actually the first part of a two-part series.
• 1:41
  SPEAKER_00: The conversation with David was quite a lengthy one, so I've split it into two to make it a little more digestible for you.
• 1:49
  SPEAKER_00: So here's part one with part two dropping next week.
• 1:53
  SPEAKER_00: I hope you enjoy this conversation with David.
• 1:56
  SPEAKER_00: Hi David and welcome to the podcast.
• 1:59
  SPEAKER_01: Hi Sally, how are you going?
• 2:01
  SPEAKER_00: Yeah, great, thanks.
• 2:02
  SPEAKER_00: Thank you so much for joining us and sharing what I think will be a pretty interesting conversation.
• 2:08
  SPEAKER_00: Um let's kick off.
• 2:09
  SPEAKER_00: I wanted just to ask you to give us a little bit of info about you, what you do, and always the most interesting part of that, I think, is why, why you do what you do, why you've chosen to do this work.
• 2:22
  unknown: All right.
• 2:22
  SPEAKER_01: Thanks, Sally.
• 2:23
  SPEAKER_01: And yeah, firstly, thanks for having me on this podcast.
• 2:25
  SPEAKER_01: It's a real pleasure.
• 2:26
  SPEAKER_01: I'm really looking forward to our chat.
• 2:28
  SPEAKER_01: Uh, so the short version is I'm a lawyer and an accredited specialist in family law.
• 2:34
  SPEAKER_01: I'm the director of my own law practice, Gale Family Law, which I started exactly four months ago, actually, uh, based in Melbourne.
• 2:42
  SPEAKER_01: So I help people going through divorce or separation navigate the legal aspects of separation, uh, especially financial settlements and children's arrangements.
• 2:52
  SPEAKER_01: I also help people study new relationships make financial agreements or prenups.
• 2:58
  SPEAKER_01: The model motto of my practice is lawyers should solve problems, not create them.
• 3:03
  SPEAKER_01: And my particular focus is on helping people resolve their case in a sensible way so they can move on with their lives without unnecessary cost delay and stress.
• 3:13
  SPEAKER_00: Yeah, I love I love your business's motto.
• 3:16
  SPEAKER_00: I absolutely love it.
• 3:17
  SPEAKER_00: Sorry, I interrupted you.
• 3:18
  SPEAKER_00: Oh, that's funny.
• 3:19
  SPEAKER_01: Yeah, when I came up, when that came into my mind, it really just clicked.
• 3:23
  SPEAKER_01: And everyone I like my my mentors who I mentioned it to, they just said, wow, yeah, run with that.
• 3:28
  SPEAKER_01: So, and that to me really hits home what I what I do.
• 3:32
  SPEAKER_01: Uh, the why is a bit of a long story, but the short version is, and I can expand if you'd like, I'd always wanted to be a lawyer from a young age and ended up studying law.
• 3:43
  SPEAKER_01: And I fell into family law.
• 3:45
  SPEAKER_01: I never studied it at university, but I ended up doing work experience with a leading family law firm in Tasmania where I used to live.
• 3:54
  SPEAKER_01: And as soon as I did that, I really loved it.
• 3:58
  SPEAKER_01: And I guess what I like about family law is that it is inherently people focused.
• 4:03
  SPEAKER_01: So I did some work experience at a commercial firm and found that quite dry because it was mostly focused on businesses and documents, but family law is inherently focused on people, but also draws on other areas of law like commercial law, property law, criminal law.
• 4:19
  SPEAKER_01: Uh, and I suppose the other thing that really interests me is that it requires very deep thinking.
• 4:26
  SPEAKER_01: So strategic thinking and big picture thinking, because a lot of family law is not a zero-sum game, and it goes beyond the mere legal issues.
• 4:36
  SPEAKER_01: It's also an area that's not a static area where you're confined to looking at past conduct like criminal.
• 4:43
  SPEAKER_01: You it's really a dynamic.
• 4:44
  SPEAKER_01: Children are alive and situations are changing, financial circumstances are changing, and that is all factored into the way a family law case plays out.
• 4:53
  SPEAKER_01: So I find navigating that and helping my clients through that kind of mess and untangling that mess and hopefully getting them out the other side very uh rewarding.
• 5:04
  SPEAKER_00: It's not dissimilar, it's not unlike why I'm why I'm in it too.
• 5:08
  SPEAKER_00: Um yeah, it's it's the real human component of what is, yeah, it's a legal and financial issue for sure, but it's the humanity in the in the middle of it that really interests and draws me in supporting supporting real real humans through something that is so can be so difficult.
• 5:28
  SPEAKER_00: Yeah.
• 5:29
  SPEAKER_00: I'm interested too, David, if you would outline for us what you see as the role of a family lawyer.
• 5:37
  SPEAKER_00: And I'm thinking here what it is as well as what it's not.
• 5:41
  SPEAKER_00: Um, yeah, many people, and you know, certainly a lot of my clients are really fearful of an initial contact or connection with a family lawyer since the story we've all been told through the media, through friends, through family, you know, that contacting a lawyer automatically means you tipped into high conflict, nasty divorce story that's going to end up in court.
• 6:02
  SPEAKER_00: So, what are your thoughts on that?
• 6:04
  SPEAKER_00: And what do you see is the real role of a family lawyer?
• 6:10
  SPEAKER_01: Well, that's a that's a great question.
• 6:12
  SPEAKER_01: So I guess firstly, I try to get myself out there.
• 6:16
  SPEAKER_01: So uh this is the second podcast I've done and I've got another one in the pipeline.
• 6:21
  SPEAKER_01: I also have a TikTok channel, which is at Family Lawyer, where I make informative videos, and I really try to put an approachable face on Family Lawyer and clients who approach me who've seen those often say, Oh, it's great we got to break the ice by seeing what you're like uh before we met you, because it can be quite intimidating, especially if you've never dealt with a lawyer before, other than say, doing your conveyancing or a will.
• 6:44
  SPEAKER_01: And there are a lot of horror stories out there.
• 6:47
  SPEAKER_01: Going back to what we do and what we don't, it's probably important to clarify that because this is often a misunderstanding.
• 6:54
  SPEAKER_01: So we generally don't do wills or estate matters.
• 6:57
  SPEAKER_01: So if someone passes away that some some family lawyers do have expertise in that, or they work in firms that do, but that is that area of wills and estates is actually a completely separate issue.
• 7:08
  SPEAKER_01: It's state law.
• 7:10
  SPEAKER_01: And when we talk about family law, we're really talking about divorce, separation, and also the start of a relationship, for example, during a prenup.
• 7:19
  SPEAKER_01: I would I would sort of explain in terms of what we do.
• 7:22
  SPEAKER_01: I would look at there's three main types of case that I see myself dealing with.
• 7:27
  SPEAKER_01: And this kind of explains what I do and almost a different hat so I do wear in different cases because I do believe that different approaches are needed in different cases.
• 7:35
  SPEAKER_01: So at one end of the spectrum, we have what I'd call an amicable kind of case where the parties after separation are amicable or at least want to have a cooperative co-parenting arrangement or you know, a dignified end to their relationship.
• 7:52
  SPEAKER_01: And very often they've either reached an agreement already about their settlement or are very close to.
• 7:58
  SPEAKER_01: And in that case, the role of the lawyer really is to help them or help a lawyer can only act for one of the parties.
• 8:04
  SPEAKER_01: Each party should get their own lawyer.
• 8:06
  SPEAKER_01: But the role of the lawyer is to help their client document that settlement, usually documenting it in a binding way, and also giving them advice to reality test whether the settlement is uh appropriate and any risks that might be uh unknown to the client as part of that settlement, particularly like there can be tax consequences in complex financial settlements.
• 8:29
  SPEAKER_01: So, really, it's a transaction at that point in time.
• 8:32
  SPEAKER_01: And lawyers who are family lawyers, I think, should really see those kind of cases as a transaction, a bit like the sale of a business or the sale of a home when it's a financial settlement, where there's not so much a dispute, but rather the parties are working towards an agreed goal.
• 8:48
  SPEAKER_01: The next kind of type of subset of cases is what I would call strained, where things are certainly not amicable, but at the same time, it's not highly acrimonious.
• 8:59
  SPEAKER_01: And the parties do we they may not be talking to each other.
• 9:02
  SPEAKER_01: It may be very difficult to think about their settlement, but they do genuinely wish to resolve the matter in a way that keeps them out of court, that keeps the children from going through a stressful process, and that you know is ultimately is ultimately fair.
• 9:20
  SPEAKER_01: And in those cases, I think the role of a family lawyer is to help the client firstly understand where they stand.
• 9:28
  SPEAKER_01: And that's not just their rights, but also their obligations, and also the various options that they have to resolve the case, which is you know well beyond just using lawyers or going to court.
• 9:43
  SPEAKER_01: It includes things like mediation, uh, other kinds of negotiation, collaborative uh processes.
• 9:50
  SPEAKER_01: So in those cases, I think the role of the lawyer really is to try to help the client get to a point where they can reach an out-of-court settlement that, as I said, lets them move on with their lives in a dignified way, where they're protected and where it is an overall fair outcome or commercially sensible outcome.
• 10:14
  SPEAKER_01: Then we've got the third category of cases, which are really the acrimonious cases.
• 10:17
  SPEAKER_01: And this is where either the parties, due to their personalities or what they're experiencing, are just uh in in a dispute, basically.
• 10:29
  SPEAKER_01: And I said that can be due to their personalities, it can be due to the you know uh emotional issues that they're facing.
• 10:35
  SPEAKER_01: It can also be due to real factual issues in dispute.
• 10:39
  SPEAKER_01: For example, if there are allegations of family violence, allegations of child abuse, allegations of significant non-disclosure of assets or other kind of, I guess, malevolent behaviour.
• 10:51
  SPEAKER_01: And in these cases, the role of the lawyer, if it really is a case like that, is to be a real advocate for their client and to help take take actions to help protect their client's interests, which sometimes involves going to court.
• 11:04
  SPEAKER_01: We still do resolve these cases often without court proceedings, uh, but sometimes uh when things are very serious, a more legalistic approach is needed.
• 11:17
  SPEAKER_00: I didn't preface that I was going to ask this question, so I'm just letting you know.
• 11:22
  SPEAKER_00: What's your favorite kind of case to deal with?
• 11:25
  SPEAKER_01: I like the mid, like I like the middle category, the kind of strained category.
• 11:30
  SPEAKER_01: And the reason for that is I think that's where lawyers can make the biggest difference.
• 11:34
  SPEAKER_01: Because in the amicable cases, sure, I like taking those two, and some lawyers really delay those cases.
• 11:40
  SPEAKER_01: I think they need to be dealt with quickly.
• 11:42
  SPEAKER_01: The acrimonious cases uh can be quite stressful to deal with, but the strained, the ones where things are strained and borderline, the lawyer can be the real, or both the lawyers can be that real tipping point between this turning into a dispute that ends up in court, where the parties spend lots and lots of money, takes years to resolve and it's very stressful for everyone, versus a case where there is a settlement reached in a shorter period of time.
• 12:07
  SPEAKER_01: And I like being that tipping point.
• 12:10
  SPEAKER_01: And there's two sides to that as well.
• 12:13
  SPEAKER_01: A lot of people think a lawyer's role is to advocate to the other side, but equally part of our job is actually advocating to our own client and persuading our own client, because sometimes, unfortunately, family law disputes happen because people have unrealistic expectations.
• 12:29
  SPEAKER_01: And unfortunately, this comes back to your first question about people are scared to see family lawyers.
• 12:35
  SPEAKER_01: Unfortunately, there is truth in some people seeing lawyers and that actually escalating the case unnecessarily.
• 12:43
  SPEAKER_01: Whereas there are other lawyers who are more settlement focused, problem-solving focused, less adversarial, who will uh try to de-escalate rather than escalate a case.
• 12:54
  SPEAKER_00: Yep, absolutely.
• 12:55
  SPEAKER_00: And choosing a lawyer, there's another podcast episode on on or two actually on how to choose a lawyer.
• 13:01
  SPEAKER_00: Choosing someone who is supportive of the way you want your divorce to or your separation to be managed and to proceed is really, really important.
• 13:11
  SPEAKER_00: So yeah, I like that you're on TikTok.
• 13:14
  SPEAKER_00: I like that you're on TikTok so people can actually see and connect and hear and and that you're on the podcast so people can see and connect, or not say they can hear and connect with you.
• 13:22
  SPEAKER_00: I think it's really, really important to choose all sorts of professionals in divorce, but particularly your family lawyer, choose them on a almost values-based um choose someone who is aligned with the values that you hold and how you want your divorce to proceed.
• 13:42
  SPEAKER_00: If you want high conflict, choose the bulldog by all means.
• 13:45
  SPEAKER_00: But if you'd rather settle out of court, yeah.
• 13:48
  SPEAKER_01: I agree.
• 13:49
  SPEAKER_01: As a I guess a secret, it was really a secret, but clients tend to be attracted to the lawyers who share their value.
• 13:56
  SPEAKER_01: And if they are misaligned, very often you'll find that they they leave that lawyer because they're often not following advice, or they feel they feel that lawyers not fighting for them.
• 14:06
  SPEAKER_01: Sometimes that is code for they're not uh following uh their advice, or sometimes they actually feel the opposite that this lawyer is actually not listening to me because I don't want to take a purely legalistic or aggressive approach.
• 14:19
  SPEAKER_00: That's really interesting.
• 14:20
  SPEAKER_00: And I I can reflect from my personal experience, our divorces is long, long done and dusted.
• 14:27
  SPEAKER_00: But even the family lawyer that I chose in the end, I was the one saying, no, we're not pushing for more here.
• 14:35
  SPEAKER_00: We're not, I want to be able to stand with this, the father of my children, with this man, um, you know, in the future at uh at kids' events, et cetera, et cetera.
• 14:45
  SPEAKER_00: So I was at I was advocating on my behalf to tone things down.
• 14:49
  SPEAKER_00: And she was actually trying to ramp it up or indicating that you know we could push harder, we could go harder.
• 14:55
  SPEAKER_00: So I I think there's a lot more choice on the in terms of the family lawyer market these days than there was back then.
• 15:02
  SPEAKER_00: There are collaborative practitioners, there are more or less adversarial processes, which I think is fabulous.
• 15:09
  SPEAKER_01: Absolutely.
• 15:10
  SPEAKER_00: Yeah.
• 15:11
  SPEAKER_00: All right, I want to move on because I have actually I sent this out.
• 15:16
  SPEAKER_00: I've sent out to my community that you were coming on to the podcast, and a few of them did come back to me privately and and ask me to ask specific questions.
• 15:26
  SPEAKER_00: So I wanted to talk about child support.
• 15:28
  SPEAKER_00: Let's just go um really simple.
• 15:31
  SPEAKER_00: How does it work?
• 15:32
  SPEAKER_00: How's it calculated, and who pays what?
• 15:36
  SPEAKER_00: Sure.
• 15:37
  SPEAKER_01: So, firstly, a write out, which is that child support is very complicated and technical.
• 15:42
  SPEAKER_01: So I I'll give a helicopter view, it's obviously general information, but it's best that people consult a lawyer and get advice about your own case before a line on anything.
• 15:52
  SPEAKER_01: But as just as a really big picture view, the starting point with child support is that parents can actually, before we even talk about Services Australia or assessments of child support, the starting point really is that it's open to parents to make their own arrangements between themselves for payment of child support.
• 16:11
  SPEAKER_01: And that can be great, obviously if it happens with a quality of bargaining power, get some legal advice, check the child support estimator on the Services Australia website, which can give an indication of what an assessment might be.
• 16:26
  SPEAKER_01: And obviously, when cases where people are not under any kind of pressure, but that can that can actually work.
• 16:31
  SPEAKER_01: And parents can do that either informally in a non-binding way where they have agreed to you know how to uh pay child support.
• 16:41
  SPEAKER_01: And I've seen some amazing uh things put in place by parents.
• 16:45
  SPEAKER_01: So I've seen parents who have like a Google Excel sheet where they you know put in the expenses that they've paid and they square off each week, and or they have joint bank accounts where they contribute agreed amounts, either equal amounts or in different proportions.
• 17:00
  SPEAKER_01: And that can certainly work very well.
• 17:03
  SPEAKER_01: So often lawyers will just jump straight to our assessment of child support, but it's important to say that these arrangements can actually work as well when there is a spirit of cooperation.
• 17:15
  SPEAKER_01: Parental agreements can also be uh formalized as a child support agreement.
• 17:19
  SPEAKER_01: There's two kinds a limited agreement.
• 17:22
  SPEAKER_01: I won't talk about those because it's a bit complicated.
• 17:24
  SPEAKER_01: But the usual type is a binding child support agreement.
• 17:28
  SPEAKER_01: To be binding, it needs to meet a number of requirements, including that each party has their own lawyer who gives them independent advice and issues a statement of advice.
• 17:38
  SPEAKER_01: Yeah.
• 17:38
  SPEAKER_01: So you can't just wrap this up on a napkin.
• 17:41
  SPEAKER_01: But a binding child support agreement can be a really good option in some cases, and that can deal with both the what we call periodic payments of child support, which is like a weekly or fortnightly or monthly amount as agreed.
• 17:52
  SPEAKER_01: And it can also deal with what we call non-periodic expenses, which are things like school fees, out-of-pocket medical costs.
• 17:59
  SPEAKER_01: So the starting point there is if I'm talking to a client, is you know, do we do we look at uh and having the child support arrangements agreed by consent?
• 18:11
  SPEAKER_01: The next level down is the parents can apply, and they have everyone has a right to apply for an administrative assessment of child support from Services Australia.
• 18:20
  SPEAKER_01: And in that case, Services Australia will uh get information from the parents about the uh the care arrangements for the children and the parents' uh taxable incomes.
• 18:34
  SPEAKER_01: And there's a formula that is set in legislation, and the formula basically spits out a payment from one parent to the other, and that is uh a you know, you need to pay that if you've been assessed.
• 18:48
  SPEAKER_01: So generally speaking, that formula takes into account the income difference between the parents and also the level of care.
• 18:58
  SPEAKER_01: And there are also some ways to apply to if if the formula is unfair in your particular circumstances, and there are special circumstances, there can also be, in some cases, grounds to apply for a change of assessment.
• 19:14
  SPEAKER_01: This happens when there are special circumstances where one of 10 separate reasons are met and where it's just inequitable for Services Australia to change the assessment.
• 19:24
  SPEAKER_01: So there is a bit of a safety net for cases where this formula applied to a particular family results in an unfair outcome within certain limits.
• 19:35
  SPEAKER_01: Um yeah, so it's important to note just one thing I like to say to people when talking about child support, because it's very controversial, is that, and you know, a lot of people do not like the system, is that the old system was this if you wanted maintenance, you had to apply to the court for an order, which meant that the applicant had to file a court application, they needed lawyers, they needed to file documents with their financial circumstances attaching their bank statements.
• 20:03
  SPEAKER_01: And the other party who was um the respondent would need to also file those documents.
• 20:09
  SPEAKER_01: And if there was no agreement, a court would have to actually have a trial to work out how much child support is payable, and it was how long is the chancellor's foot.
• 20:17
  SPEAKER_01: There was no formula, it was simply whatever the court thinks is fair.
• 20:21
  SPEAKER_01: And guess what?
• 20:22
  SPEAKER_01: That's not the end of the story.
• 20:23
  SPEAKER_01: If something changed, if a parent's income went up or down and they couldn't agree, they'll have to go back to the court for a variation of child support.
• 20:31
  SPEAKER_01: So the idea of this formula that so many people dislike, and I understand it can be there can be some real issues with it.
• 20:40
  SPEAKER_01: One of the underlying principles is that it does provide a level of certainty where people can just apply to Services Australia, they don't have to go through court, and it's it there's a basic formula that gives them a level of certainty.
• 20:54
  SPEAKER_01: This is the amount of child support you will receive or have to pay without having to go through a long process.
• 20:59
  SPEAKER_00: Yeah.
• 21:00
  SPEAKER_00: It's still um, as you said, it's controversial, it's disliked.
• 21:04
  SPEAKER_00: It it is um better than the alternate, the previous alternative, but I think there's still there's definitely still room to move.
• 21:12
  SPEAKER_00: Um in terms of in terms of improving the system, but we go with it for now, hey.
• 21:19
  SPEAKER_00: Um something else that comes up with my clients on uh I would say a semi-regular sort of basis, and I'm gonna pose it as a question to you, um actually two questions.
• 21:33
  SPEAKER_00: Is the parent receiving who receives child support therefore responsible for paying all child related costs?
• 21:43
  SPEAKER_00: And the flip side of that, does the parent who pays the child support have any say over how that money is spent?
• 21:50
  SPEAKER_01: All right.
• 21:51
  SPEAKER_01: Yeah, these are the sort of questions that often come up, and they're often really real pain points too.
• 21:55
  SPEAKER_01: The second I can answer the second one very quickly.
• 21:57
  SPEAKER_01: The parent who pays child support does not Generally, have say in how the money is spent.
• 22:03
  SPEAKER_01: There is something called a non-agency payment.
• 22:05
  SPEAKER_01: And that means that if the paying parent pays an expense and it's agreed between the parents, keynote they're agreed, and that is child support, that can be credited as child support.
• 22:18
  SPEAKER_01: If there is no agreement, so say the payer pays an expense and it's not agreed to be child support, there is a limited, there are limited circumstances where they can credit that as child support.
• 22:31
  SPEAKER_01: It's called a non-agency payment.
• 22:32
  SPEAKER_01: And there is a list of different payments that is set out in the regulations when that apply.
• 22:39
  SPEAKER_01: And there are some other criteria in including that the person paying the child support has to have less than 14% care.
• 22:47
  SPEAKER_01: So it only applies when there's less than 14% care.
• 22:50
  SPEAKER_01: And they can only credit up to 30% of their total child support payments.
• 22:56
  SPEAKER_01: So putting that aside, though, the money that they pay to the receiving party, they can't dictate how that is spent.
• 23:04
  SPEAKER_01: And this comes to the issue that, not issue, but the fact that child support is not so much about who pays what.
• 23:12
  SPEAKER_01: It's more about adjusting the incomes of the parents with the idea that children should have a similar standard of living with both of their parents.
• 23:22
  SPEAKER_01: So, to your other question about whether or not the person receiving child support has to pay all the expenses.
• 23:32
  SPEAKER_01: This is actually fairly complicated and controversial, and there is conflicting information on different lawyers' websites about this.
• 23:41
  SPEAKER_01: I have a very particular view, but I do encourage people to get their own advice about their own circumstances.
• 23:46
  SPEAKER_01: So what I say, and this is fairly lengthy explanation, if you don't mind, I can I can go through.
• 23:52
  SPEAKER_00: Go for it.
• 23:53
  SPEAKER_01: But I feel it's necessary because if you give a high-level explanation, there's always more questions and misunderstandings.
• 24:01
  SPEAKER_00: Yeah.
• 24:02
  SPEAKER_01: So as I said, there's nothing in child support law that says the person receiving the child support has to pay anything.
• 24:09
  SPEAKER_01: If there was, if that was in the law, this would be a very short question.
• 24:14
  SPEAKER_01: At the same time, there is nothing in the child support law to say that if the receiving parent incurs a cost, that they can compel the other party to reimburse them for some rule of that.
• 24:30
  SPEAKER_01: So there's a bit of a gap there.
• 24:33
  SPEAKER_01: Now we need to also understand the assumptions that underlie the child support formula, and these are actually different when there's a soul care situation and when there is uh when both parents have care.
• 24:48
  SPEAKER_01: So when a parent has soul care of a child or at least has 86% or more care, it's very difficult to compel, and let's say the other party's paying the child support, it is very, very difficult to compel them to pay anything more towards the costs of the child, even though in reality the child support might actually not physically be enough to pay those expenses.
• 25:15
  SPEAKER_01: This is because when you look at the formula assessment, there is no reduction in the child support paid on the basis that the paying parent is contributing by having care of the child.
• 25:27
  SPEAKER_01: I'll come back to this, but when they have more than 14% care, their child support is actually reduced by an amount to take into account that they are presumed to be contributing to the care of the children.
• 25:41
  SPEAKER_01: In these cases as well, as I said, whether soul care or less than 14% care for the pain party, there is some capacity for them to claim non-agency payments as well.
• 25:51
  SPEAKER_01: In this situation, so whether soul care or 86% or more care, there are three main ways to compel the pain parent to contribute child support.
• 26:03
  SPEAKER_01: However, these do not unfortunately apply in every case.
• 26:07
  SPEAKER_01: The first way is if there are grounds for a change of assessment application.
• 26:11
  SPEAKER_01: And I mentioned before, there needs to be special circumstances, there needs to be one of the specified 10 reasons for a change of assessment, and the Services Australia needs to be satisfied that it's just an equitable to change the assessment.
• 26:26
  SPEAKER_01: So the classic example of this are private school fees.
• 26:30
  SPEAKER_01: Very often, if both parents signed the enrolment form for a private school or it was intended the child would be privately educated and the child attends a private school, and assuming that the financial circumstances of the paying party are enough to contribute to that, very often there'd be very good grounds for a change of assessment for child support to be increased to take into account the fact that if the receiving party is the one actually paying that child support.
• 26:59
  SPEAKER_01: So that's option one.
• 27:00
  SPEAKER_01: Is there a grounds for a change of assessment?
• 27:03
  SPEAKER_01: Option two is can we make a binding child support agreement to cover this off?
• 27:10
  SPEAKER_01: And this is very often this happens at the same time as a financial settlement.
• 27:16
  SPEAKER_01: So if I'm working with a client, we're doing a financial settlement, I'll always have the conversation about child support, what the intention is, and sort of foreseeing potentially future arguments.
• 27:25
  SPEAKER_01: Like, is the child going to be privately schooled?
• 27:27
  SPEAKER_01: Are they going to have out-of-pocket, are they going to have orthodontic expenses, private health insurance, computers?
• 27:34
  SPEAKER_01: And if my client thinks that might be an issue, we will very often have as part of the financial settlement a proposal that we enter into a binding child support agreement at the same time.
• 27:46
  SPEAKER_01: And there can be incentive for the other party to do so because it's a package deal.
• 27:50
  SPEAKER_01: Whereas once the financial settlement's done and dusted, there may not be as much incentive for them to sign a binding child support agreement.
• 27:56
  SPEAKER_00: Yeah.
• 27:57
  SPEAKER_01: And it can be mutually beneficial, especially if there are businesses or someone's income fluctuates a lot.
• 28:03
  SPEAKER_01: It can give certainty to both parties, avoid future arguments.
• 28:06
  SPEAKER_01: Yeah, 100%.
• 28:08
  SPEAKER_01: And then I said there were three main ways.
• 28:10
  SPEAKER_01: The third way is if the paying parent is legally liable to pay the expense.
• 28:14
  SPEAKER_01: For example, let's say they've signed the enrollment form with the private school as a liable party.
• 28:23
  SPEAKER_01: The private school may well be able to enforce uh payment of the school fees against the paying parent directly because they've signed a contract.
• 28:33
  SPEAKER_01: So that comes back to the point about you know, child support doesn't dictate who who pays what, but each parent is generally liable to pay for expenses that they've incurred unless you can find a way to compel the parent otherwise.
• 28:49
  SPEAKER_01: So sometimes that is an option as well.
• 28:53
  SPEAKER_01: But unfortunately, I have seen cases where once that happens, the paying parent tries to get out of those by, you know, for example, trying to take their name off the school enrollment.
• 29:06
  SPEAKER_01: And that's when a change of assessment might be needed.
• 29:08
  SPEAKER_00: Yeah.
• 29:09
  SPEAKER_00: Uh and of course, the I was gonna say the best way, the easiest path is if both parents can actually agree.
• 29:17
  SPEAKER_00: And it's not a few get a couple over the line early and get and get agreement on what what is who's paying for what and how it's going to work.
• 29:29
  SPEAKER_00: Um, yeah, it's better for everybody.
• 29:32
  SPEAKER_01: Absolutely.
• 29:33
  SPEAKER_01: And the thing with child support is that it can really be ongoing until the children are 18 if if there are issues.
• 29:40
  SPEAKER_01: And that is really unfortunate.
• 29:41
  SPEAKER_01: And I think it's something that a conversation that more lawyers need to have with their clients.
• 29:46
  SPEAKER_01: Now, I did say that there was a difference between soul care or 86% plus versus when both parents have care of the children.
• 29:55
  SPEAKER_01: So when both parents have care of the children, so the paying parent has at least 14% or more than 14% care, there is actually a reduction in the paying parent's child support.
• 30:07
  SPEAKER_01: And you can normally see this on a child support assessment, it's something called the cost percentage.
• 30:11
  SPEAKER_01: And the child support is actually reduced on the basis that they're presumed to be contributing to the costs of the child by having them in their care.
• 30:18
  SPEAKER_01: And so, as a simple example, when you've got a 50-50 care arrangement or even slightly off 50-50, the cost percentage is actually 50-50.
• 30:29
  SPEAKER_01: So in that case, my view is that it's very reasonable for the parents to divide those out-of-pocket costs equally.
• 30:39
  SPEAKER_01: Some of them often go and agree to a different percentage.
• 30:42
  SPEAKER_01: They may, for example, if one parents on a high income, quite often that parent, in cases I see where people are acting sensibly, will agree to pay more, even all of those costs.
• 30:51
  SPEAKER_01: And often, if that's the case, we document the end of binding child support agreement.
• 30:56
  SPEAKER_01: But here's an analogy with say the fifth, and this is works really easily with the 50-50 care arrangement.
• 31:02
  SPEAKER_01: Let's say we've got a 50-50 care arrangement, and one parent is marginally ahead on their income their life.
• 31:08
  SPEAKER_01: One earns 50,000 a year and one earns$51,000 a year, and they're paying the minimum rate of child support for the child, which I don't know off the top of my head, it might be$400 and something dollars a year.
• 31:18
  SPEAKER_01: It's a nominal amount.
• 31:29
  SPEAKER_01: You know, everything else.
• 31:31
  SPEAKER_01: It's also the other analogy is if you've got, again, the 50-50 care arrangement, the paying parent is not sending an invoice to the other parent for the groceries and the electricity bill when the children are in their care.
• 31:45
  SPEAKER_01: They're paying those costs.
• 31:47
  SPEAKER_01: So the things like school fees, books, etc., well, they don't really, they travel with that, they're not really apportionable to either parent's household.
• 31:56
  SPEAKER_01: They're just costs for the children.
• 31:58
  SPEAKER_01: So I think the logic that when they're again, when the children are living with both parents, the logic that some people have, the argument that some people make that the receiving parent has to pay everything, just it's just not logical.
• 32:13
  SPEAKER_01: It's not, but it does happen.
• 32:15
  SPEAKER_01: I see it.
• 32:16
  SPEAKER_01: It does happen.
• 32:16
  SPEAKER_01: And then we come back to the issue that about comp how we can we compel, and this is the difficulty because we can't compel the other, the paying parent to pay more unless, as I said, those main exceptions, change of assessment, binding child support agreement, or if they're already liable in the contract to the, for example, the school or the orthodontist.
• 32:40
  SPEAKER_01: And so very often there's a situation where unfortunately the paying party is acting in a child-focused way.
• 32:47
  SPEAKER_01: So they are actually incurring these expenses, but they're not being reimbursed.
• 32:52
  SPEAKER_01: Prevention's better than cure.
• 32:54
  SPEAKER_01: And I think at the at the moment, having this conversation with the lawyer when doing the financial settlement is probably the best option rather than trying to work this out down the track.
• 33:07
  SPEAKER_00: And as you said, circumstances change, people change, things change.
• 33:12
  SPEAKER_00: So getting it sorted as a as a done deal with the financial settlement is actually a smart move.
• 33:17
  SPEAKER_00: Something else that I see with my clients, um, and that is when one party owns a business or the couple own the business, but let's just say one party owns a business, self-employed, and is legally, legally minimizing their taxable income.
• 33:37
  SPEAKER_00: Yep.
• 33:38
  SPEAKER_00: And that has a direct impact on child support calculations.
• 33:43
  SPEAKER_00: Um, we sort of touched on it, but what would be your advice in that situation?
• 33:47
  SPEAKER_01: Yeah, so if we're if we're before, if we're doing a financial settlement, look at doing a buy-in child support agreement.
• 33:53
  SPEAKER_01: If we're after financial settlement, or if they won't sign a bind-in child support agreement with with a you know reasonable amount of child support, then change of assessment.
• 34:03
  SPEAKER_01: So change of assessment, I believe it's reason eight, and reason eight is something like the child support assessment is unfair because of the parents, the the paying parent, one of the parents, could be either parent, actually, they're not just income but earning capacity.
• 34:17
  SPEAKER_01: And there is something called the child support guide.
• 34:20
  SPEAKER_01: And if people Google child support guide, this is uh it's a on a government website, it's an extensive guide about child support, and it's a very useful reference.
• 34:30
  SPEAKER_01: If you look at, if you Google something like child support guide, change of assessment reason eight, there is extensive information about how child support deals with cases where there are businesses.
• 34:42
  SPEAKER_01: And child support, and when I say child support, I'm talking about Services Australia, can look at the business and look at the way, and as you said, it can be a legitimate legal arrangement where tax is minimized.
• 34:54
  SPEAKER_01: Profit can be retained in the company, or it could be distributed using a trust to maybe the paying partner's new partner or to other adult children or to other people.
• 35:05
  SPEAKER_01: And child support can actually look at the big picture and actually work out, for example, what that parent's reasonable earning capacity is or what would be a reasonable amount to attribute to the as their child support income having regard to the income generated by their business and the choices made by that parent to minimize the taxable income.
• 35:30
  SPEAKER_01: So I would recommend that people too often I hear people making that.
• 35:34
  SPEAKER_01: I don't know, change of assessment application is not necessarily a really simple process.
• 35:40
  SPEAKER_01: However, I think more people should be looking at that option.
• 35:45
  SPEAKER_00: Yeah.
• 35:45
  SPEAKER_00: And again, we circle right back.
• 35:47
  SPEAKER_00: And if if you can get it sorted between the two of you without the need for services Australia and document it and have it binding, fabulous.
• 35:56
  SPEAKER_00: Yeah.
• 35:57
  SPEAKER_00: But it's not always the case.
• 35:58
  SPEAKER_00: It's not always the case.
• 35:59
  SPEAKER_00: Absolutely.
• 36:00
  SPEAKER_01: And it can be win-win for you know the pain party too, because very often, you know, if they're not, if this this is not a case where there's any malevolence, they it can be in their interest to have the certainty too that okay, this is how I'm I can now choose to distribute income to myself.
• 36:18
  SPEAKER_01: And there's other things, for example, where say they sell an investment property and they make a capital gain, that can be added to their income too.
• 36:25
  SPEAKER_01: So it can be a real win-win that we lock in the rate of child support at this amount.
• 36:29
  SPEAKER_01: There can be things built into the agreement like unemployment clauses or different triggers for different circumstances, or it can simply be up, this is a flat rate.
• 36:38
  SPEAKER_01: And it can be a real win-win.
• 36:40
  SPEAKER_01: So sometimes the receiving party thinks, oh, they will never they will never agree to that, but well, sometimes they actually will.
• 36:49
  SPEAKER_00: Yeah, and sometimes it's surprising what people can actually come up with when it's presented as a win-win.
• 36:55
  SPEAKER_00: That's right.
• 36:57
  SPEAKER_00: You and I have spoken privately, we've spoken off offline about some of the more complex financial settlements, you know, families where there are businesses or family trusts.
• 37:09
  SPEAKER_00: And I'm wondering if you can share for the listeners a little bit about how these more complex financial settlements are dealt with during divorce.
• 37:19
  SPEAKER_00: And I know it's going to be global, big picture.
• 37:22
  SPEAKER_00: Um, and we will always say, get your own legal advice for your unique circumstances.
• 37:28
  SPEAKER_00: So yeah, sure.
• 37:29
  SPEAKER_01: Look, I can go as deep as you like on this because as you know, this is complex financial settlements, uh, is my area of interest and expertise.
• 37:36
  SPEAKER_01: And I'm doing a presentation for a solicitor's network soon about business valuations in family law.
• 37:42
  SPEAKER_01: So I'll just keep this very helicopter level, but feel free to ask and we can dive into some of the topics.
• 37:48
  SPEAKER_01: So maybe some of the key myths are important to bust.
• 37:52
  SPEAKER_01: So often when there's a business, there is a myth that, oh, the business is not worth anything because it's simply either the business owner by themselves or there are employees, but if the business owner left, then there'd be no goodwill.
• 38:06
  SPEAKER_01: And that's that's actually just not not correct.
• 38:09
  SPEAKER_01: And if obviously it's a very small business, that might be correct.
• 38:14
  SPEAKER_01: But if the business is of any size and it's profitable, very often the business is valued on the basis that you know what it would be sold for if there was a will-in buyer.
• 38:26
  SPEAKER_01: And as we know, when someone does sell a business, uh, very often there are commercial arrangements in place for them to you know transfer the goodwill over, stay on in the company and everything like that.
• 38:37
  SPEAKER_01: So very often these businesses are actually valued based on their profit, or in some cases, if they own assets based on the assets that they hold.
• 38:46
  SPEAKER_01: And it's very important, I think, if the business is of any size to get it professionally valued as part of the settlement.
• 38:54
  SPEAKER_01: And a valuation for family law purposes is actually quite different to a valuation for other purposes, such as tax purposes, if you're transferring assets or you're selling a business.
• 39:06
  SPEAKER_01: There are some, particularly when there are loan accounts involved.
• 39:10
  SPEAKER_01: I won't go into the details of that, but it actually can actually be a different calculation.
• 39:16
  SPEAKER_01: And if you are getting a business valued, you need to really have a valuer who is has expertise.
• 39:23
  SPEAKER_01: They're normally a chartered accountant, a forensic accountant, and they have expertise in family law valuations.
• 39:28
  SPEAKER_01: And it's ideal that you have a lawyer who understands the process to engage a business valuer to do that.
• 39:36
  SPEAKER_01: And without that information, then we're really just guessing what the business is worth, if anything.
• 39:43
  SPEAKER_01: And getting a back of the envelope calculation from the business's accountant is not an independent valuation, it's not a professional valuation, and it's in some cases parties do rely on them, but it is risky.
• 39:57
  SPEAKER_01: So that's the first thing I'd say.
• 39:59
  SPEAKER_01: Businesses, uh, there's a lot of myths about them, but they are included in the general asset pool if they have value.
• 40:05
  SPEAKER_01: So I'll give you an example.
• 40:06
  SPEAKER_01: Let's say we have a business worth a million dollars that's been valued at one million dollars, and we have a home without a mortgage that's worth a million dollars.
• 40:15
  SPEAKER_01: A 50-50 split could be one party keeping the business and one party keeping the home.
• 40:21
  SPEAKER_01: So it's it's not excluded.
• 40:23
  SPEAKER_01: There are myths about, oh, you know, they keep the business because it's theirs.
• 40:26
  SPEAKER_01: It's like, no, it's actually included.
• 40:27
  SPEAKER_00: Yeah.
• 40:28
  SPEAKER_00: Similar myths about superannuation.
• 40:30
  SPEAKER_00: You know, you keep yours, I keep mine.
• 40:32
  SPEAKER_01: And look, there can be tax.
• 40:34
  SPEAKER_01: Tax is probably the next thing I'd say.
• 40:35
  SPEAKER_01: And with that simple example of the business worth a million and a home, sometimes they're not equal because they could be tax.
• 40:41
  SPEAKER_01: The business could be pregnant with kind with tax, and that sometimes is factored in.
• 40:45
  SPEAKER_01: Yeah.
• 40:46
  SPEAKER_01: But when we've got business structures, sometimes one of both of the spouses will actually have director will be a director or shareholder of the companies or corporate trustees of the trusts or trustees of the trust.
• 41:00
  SPEAKER_01: And they may actually be not playing an active role during the relationship.
• 41:04
  SPEAKER_01: They may be in that capacity for tax reasons or asset protection reasons.
• 41:08
  SPEAKER_01: And so, as part of the settlement, it's very important to understand the business structure and make sure that the business is restructured as part of the financial settlement.
• 41:20
  SPEAKER_01: That can incur tax, and there are some tax concessions that can occur if the uh settlement is formalized.
• 41:28
  SPEAKER_01: And I think later you might ask me about how we formalise a settlement, can be a financial agreement or consent orders, but there is some tax relief, not complete tax relief in all cases that can be available.
• 41:38
  SPEAKER_01: So that's the other thing.
• 41:39
  SPEAKER_01: And I've had cases where people have messed this up by transferring businesses and had tax issues which they could have avoided.
• 41:47
  SPEAKER_01: So again, it's really important to get specialized advice.
• 41:53
  SPEAKER_01: That's right.
• 41:54
  SPEAKER_01: We're often liaising with the accountants and even the financial advisors in those cases, sometimes tax experts.
• 42:00
  SPEAKER_01: You know, a recent case I had, you know, the just the law, just the bill from the accountants was in the five figures, you know, for specialist tax advice and was more than a lot of people would spend on their total legal cost because it's that this is a multi-million dollar kind of case.
• 42:15
  SPEAKER_01: And, you know, it's it's part of the cost of, I guess, the transaction.
• 42:19
  SPEAKER_01: But some of these cases are very, very complicated.
• 42:21
  SPEAKER_01: And the accounting and tax advice is sometimes more important than the legal advice.
• 42:26
  SPEAKER_00: Yeah.
• 42:27
  unknown: Yeah.
• 42:28
  SPEAKER_01: The other myth is about trusts, because some people and even some accountants think, oh, if it's in a trust, it doesn't, it's not included in the financial settlement.
• 42:37
  SPEAKER_01: And there is a legitimate role for trusts in uh tax reduction, get advice from your accountant, obviously, and also for asset protection, particularly against third-party creditors, again, get advice from a specialist in that area.
• 42:53
  SPEAKER_01: But when it comes to separating with partner, the family law courts have quite wide-ranging powers to, in uh some cases, include property owned by a trust or on trust in the assets that are divided up.
• 43:09
  SPEAKER_01: And the main test for that is what's called the control test.
• 43:12
  SPEAKER_01: So if one of the parties, the spouses, has control of that trust and can control the trust to distribute its assets, very often that trust will be included.
• 43:26
  SPEAKER_01: So, for example, if that party is what's called the appointor and can choose who the trustee is, or if that party is the trustee of the trust, uh, very often, particularly if that trust was the assets of that trust have come from the relationship.
• 43:40
  SPEAKER_01: You know, they've just been they've been accumulated by the parties during the relationship, and it's really their money, but they put it into a trust and for asset protection and tax reasons.
• 43:50
  SPEAKER_01: It's a little bit of a different situation where this is Uncle Joe or Auntie Sally's trust, and the party is a beneficiary of that trust.
• 43:58
  SPEAKER_01: In that case, it may not be an asset as such, it may be something called a financial resource.
• 44:04
  SPEAKER_01: But again, get advice and uh don't just Google this one.
• 44:10
  SPEAKER_00: In fact, don't Google lots of stuff, just get specialist advice, I always say.
• 44:16
  SPEAKER_00: Google Gale Family Law.
• 44:20
  SPEAKER_00: I hope you've enjoyed this first part of the conversation I shared with David Gale.
• 44:25
  SPEAKER_00: I will put all the links to connecting with David in the show notes.
• 44:29
  SPEAKER_00: Also, in the show notes, you will find a link to a VIP sign-up page for my new offering.
• 44:36
  SPEAKER_00: I'm running a live masterclass on the one thing you can do to heal your relationship patterns.
• 44:44
  SPEAKER_00: So if you want to be in that and you want to be on the VIP list, click through the link in the show notes to for all the details.
• 44:52
  SPEAKER_00: I would absolutely love to see you in there.
• 44:55
  SPEAKER_00: Bye for now.
• 44:56
  SPEAKER_00: I'm Sally Ann Hartnell, Relationship Coach, and you've been listening to Reflect, Reclaim, and Liberate.
• 45:02
  SPEAKER_00: You can follow me on Instagram at Reflect Coaching.
• 45:06
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• 45:10
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• 45:22
  SPEAKER_00: And I hope you'll join me next time for another episode of Reclaim, Reclaim and Liberate.
• 45:28
  SPEAKER_00: Until then.