Artliff and Varey (Child support)

[2018] AATA 5034

Artliff and Varey (Child support) [2018] AATA 5034 (6 December 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC014750 & 2018/SC014765

APPLICANTS:  Dr Artliff

Dr Varey

OTHER PARTIES:  Child Support Registrar

Dr Varey

Dr Artliff

TRIBUNAL:Member A Schiwy

DECISION DATE:  6 December 2018

DECISION:

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

·       For the period 4 May 2017 to 30 June 2017, Dr Artliff’s adjusted taxable income is varied to $125,048 and Dr Varey’s adjusted taxable income is varied to nil;

·       For the period 1 July 2017 to 30 June 2018, Dr Artliff’s adjusted taxable income is varied to $131,970 and Dr Varey’s adjusted taxable income is varied to $91,412; and

·       For the period 1 July 2018 to 31 December 2019, Dr Artliff’s adjusted taxable income is varied to $140,000 and Dr Varey’s adjusted taxable income is varied to $120,000.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of each parent – businesses operated through companies – claim of reduced income due to training course – 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 application for review is about the amount of child support payable by Dr Artliff to Dr Varey and whether a departure should be made from the child support formula assessment.

2. Dr Artliff and Dr Varey are the parents of [Child 1] (born in [2016]).  A child support case was registered in May 2017.  The Department of Human Services (‘Child Support’) has recorded that Dr Varey has 100% care of [Child 1], and Dr Artliff is the parent liable to pay child support. 

3. The administrative assessments for child support have been assessed as follows:

   ·For the period 4 May 2017 to 30 September 2017, Dr Artliff is assessed to pay child support of $19,544 based on 2015-16 adjusted taxable incomes of $335,317 for Dr Artliff and $64,885 for Dr Varey.

   ·For the period 1 October 2017 to 31 December 2018, Dr Artliff is assessed to pay child support of $10,570 based on 2016-17 adjusted taxable incomes of $91,446 for Dr Artliff and $35,054 for Dr Varey.

   ·For the period 1 May 2019 to 30 November 2019, Dr Artliff is assessed to pay child support of $8,882 based on a 2017-18 adjusted taxable income of $79,672 for Dr Artliff and provisional income of $35,860 for Dr Varey.

4. On 11 June 2017, Dr Varey applied to Child Support for an increase to the assessed rate of child support on the ground that in the special circumstances of this case, the administrative assessment results in an unjust and inequitable level of child support because of the special needs of [Child 1], and Dr Artliff’s income, property, financial resources and earning capacity. She later included costs of child care.  Dr Artliff ‘cross applied’ on the basis of the special needs of [Child 1], payments he made for the benefit of [Child 1], his expenses for self-support, and Dr Varey’s income, property, financial resources and earning capacity.

5. On 28 March 2018, a Child Support case officer, a delegate of the Child Support Registrar, considered the departure application and decided that there was a ground to depart from the administrative assessment.  The officer decided to make the following departure determination:

   ·For the period 4 May 2017 to 30 April 2019, Dr Artliff’s adjusted taxable income is varied to $110,000;

   ·For the period 4 May 2017 to 30 June 2017, Dr Varey’s adjusted taxable income is varied to $35,054; and

   ·For the period 1 July 2017 to 30 April 2019, Dr Varey’s adjusted taxable income is varied to $100,000 (child support liability of $11,010).

6. On 1 May 2018, Dr Artliff objected to this decision and on 13 July 2018, the objections officer decided to disallow the objection.

7. On 29 July 2018 Dr Varey lodged an application for a review with the Administrative Appeals Tribunal (the tribunal) seeking review of the decision of Child Support (2018/SC014765).  On 7 August 2018 Dr Artliff also applied for a review (2018/SC014750).

8. Prior to the hearing of the application for review, directions were issued to both Dr Artliff and Dr Varey to provide the tribunal with specified documents. Dr Artliff provided the tribunal with documents (A1-160) and Dr Varey provided the tribunal with documents (folios B1 to B285). Both parties were provided with a copy. The tribunal and the parties also had access to the statement and documents provided by Child Support under subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975 (folios 1 to 842).

9. The matter was heard on 6 December 2018. Both Dr Artliff and Dr Varey attended the hearing by conference telephone and gave evidence on affirmation.  Dr Artliff’s accountant, [Mr A], also gave evidence to the tribunal.  Immediately after the hearing, both parties submitted further evidence as discussed during the hearing (A161 to A187 and B286 to B440).  Copies of these documents will be sent out with this decision.

ISSUES

1. The statutory provisions relevant to this review are found in the Child Support (Assessment) Act 1989 (the Assessment Act). The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula, which takes into account such factors as the number of children, the level of care provided, the income of each parent and the costs of the children.

2. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the 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. In the first instance, a ground for departure from an administrative assessment must be established. The grounds are set out in subsection 117(2) of the Assessment Act. If satisfied that:

   ·a ground or grounds exist (step one); and

   ·that it would be just and equitable (step two); and

   ·otherwise proper to make a particular determination (step three);

   the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable and/or the adjusted taxable income of a parent.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

1. Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Assessment Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the children because of the income, property and financial resources and earning capacity of either parent.

2. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 (Gyselman) the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

Background

1. Dr Artliff and Dr Varey are both [Occupation 1].  Dr Artliff qualified in 2002 and Dr Varey in 2010.

2. They were living in [Country 1] before coming to Australia to live in April 2015.  They worked for brief periods in [other cities] before settling in [Suburb 1] [City 1]in October 2015.

3. The [Suburb 1] [clinic] is managed by [Company 1].  In return for the [facilities], staff, marketing, administration and materials, [Company 1] take 65% of the [clinic]’s gross earnings.  They provide [a] monthly invoice setting out how much their total fees were for the month and the net payment to them after [Company 1]’s fee.

4. When they signed up with the clinic, [Company 1] paid Dr Artliff $220,000 ($200,000 plus GST of $20,000) on the basis that he would work there for six years.  They paid Dr Varey (who is less experienced) $110,000 ($100,000 plus $10,000 GST) on the basis that she would work there for five years.

5. The financial records provided show that both parties had the payment from [Company 1] paid to themselves (and treated as loans from their respective companies) and are amortising the lump sum over several years as income (discussed in more detail below).

6. The parties received the lump sums in October 2015, prior to their separation.  The lump sum payments are clearly a financial resource available to them at that time and presumably will have been taken into account as part of their marital property settlement.  The tribunal decided that the amount of amortised income included in their subsequent tax returns was not actually income available to them in those years.

Self-employment income and companies

1. Both parties run their [businesses] through private companies.

2. It is a long established principle of law when a person conducts their business through an intermediary, such as a company or trust, that it is proper to lift the corporate veil to determine the value of the company or trust to that person (see in particular Stein and Stein (1986) FLC 91-779 and Ashton and Ashton (1986) FLC 91-777).

3. It is also a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources (DJM and JLM [1998] FamCA 97; Scott and Scott [1994] FamCA 12; Carey and Carey [1994] FamCA 74. When summarised, these cases establish that a ground for departure may be established where self-employed people are able to derive additional benefits from their businesses, and also have greater control over the structure of their finances than a PAYG employee.

4. The tribunal took this case law into account in reaching its conclusions.

Income and financial resources – Dr Artliff

1. Dr Artliff runs his business through a company, [Company 3] Pty Ltd ([Company 3]). 

2. Dr Artliff’s taxable income in recent years has been:

   ·2015-16    $335,717 amended to $131,775 on 7 August 2018

   ·2016-17    $  90,446 amended to $140,653 on 7 August 2018

   ·2017-18    $  79,672.

3. The amendments relate to the lump sum payment from [Company 1].  He originally included the entire lump sum incentive payment as income.  His current accountant prepared new accounts and excluded the lump sum payment as income and included an amortised amount as income in subsequent years.  The tribunal reviewed the financial accounts for [Company 3] for the last three financial years (as amended).  The accounts show that the advance payment from [Company 1] was paid by [Company 3] to Dr Artliff (treated as a loan to Dr Artliff).

4. A summary of the financial information obtained in the accounts is as follows:

2015-16	2016-17	2017-18
Gross fees	$281,185	$613,890	$542,764
Net of amortised income*	$272,935 ($8,250)	$573,557 ($40,333)	$502,430 ($40,333)
Net of [Company 1] fee	$108,040	$198,362	$173,395
Interest	N/A	N/A	$10,502
Directors fees	$100,432	$140,645	$80,000
Other expenses	$15,858	$98,050	$93,422
Profit	$50,809
Increase in loan to Dr Artliff	$192,190	$5,968	$47,993
Increase in [BANK 1] loan	N/A	$71,353	($16,982)

*The amount included as amortised income was calculated from the ‘Advance payments – [Company 1]’ balances in the Balance Sheet.

1. It is clear from the accounts that Dr Artliff’s taxable income is equivalent to his director’s fees from [Company 3] after allowing a small amount for deductions.

2. The expenses claimed by [Company 3] include the following:

2015-16	2016-17	2017-18
Total expenses	$15,858	$98,050	$93,422
Motor vehicle	Nil	$4,404	$6,406
Motor vehicle depreciation	Nil	$15,359 (100% business usage claimed)	Nil
Staff amenities	$7,655	$7,795	$8,467
Training	Nil	$52,240	$32,516
Travel, accom, conference	$422	$5,717	$10,809

1. Motor vehicle:  Given that Dr Artliff claimed 100% of his motor vehicle depreciation, the tribunal assumed that the expenses claimed represent 100% of his costs.  Dr Artliff stated that he travelled to [City 1] to attend the courses he has been undertaking.  However he has also stated that he uses his car extensively to visit his son.  The tribunal found that Dr Artliff uses his car privately and an estimate of his business usage (predominantly travel to attend training) is 30%. 

2. Depreciation:  Child support legislation is interpreted by the Department with the aid of the Child Support Guide.  The tribunal is not bound by law to apply the policy as set out in the Guide, but, provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it (see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] AATA 179. In chapter 2.6.14 of the Guide the following is included to which the tribunal has had regard:

   Depreciation

   Depreciation represents the loss or expense attributed to the use of business property or equipment. It is an entry in the business account that is not necessarily an expense that is actually incurred by the business. The aim of depreciation is to spread the cost of a capital asset (e.g. motor vehicle, plant and equipment, machinery, building) over the period of its useful life, with a portion of the cost being expensed each financial year.

   A claim for depreciation can mean that a parent has financial resources available to them that are not necessarily reflected in their taxable income or the resources of the business. In cases that involve depreciation, the Registrar will determine whether receiving a benefit through claiming depreciation expenses results in a parent having greater financial resources or income than his or her taxable income would indicate. The Registrar will consider a parent’s complete financial situation including the business’ overall financial position and the individual circumstances of the case.

3. The tribunal found that the depreciation expense should not reduce Dr Artliff’s income for the purposes of determining his available income for child support purposes.

4. Staff amenities:  [Mr A] explained that this was for food (groceries) and takeaway/restaurant meals.  He said [Company 3], as Dr Artliff’s employer, was legally required to provide a meal allowance to Dr Artliff when he worked overtime or travelled.  The tribunal did not accept that all of these costs should reduce Dr Artliff’s income for child support purposes; they are essentially private in nature and [Company 3] does not pay Dr Artliff in accordance with an award.  Given Dr Artliff had to travel to [City 1] and [City 2] to undertake training, the tribunal decided that an amount of $1,500 per annum was a reasonable amount to cover additional costs when travelling.

5. Training and travel:  Dr Artliff undertook two [courses] in [City 1] and [City 2] and these costs include tuition fees ($28,000 and $47,500), travel and accommodation.  [Company 3] borrowed from [BANK 1] to pay for the courses and is claiming the interest on those loans as an expense.  The tribunal was satisfied that these expenses were legitimate costs of the business.

6. Income from training courses:  A number of deposits were made to Dr Artliff’s personal account that appeared to be income.  From July 2017 to December 2017 a total of $42,344 was deposited.  Dr Artliff explained that his training courses required him to undertake treatment on patients.  He would offer treatment at a substantially reduced price.  The patients would meet their own travel costs.  [Mr A] stated that this income was not included in the gross fees for [Company 3].  Dr Artliff said he incurred costs for some of the materials used (some were provided as part of the course) and the fees he received were merely reimbursement of his expenses; that is, he did not make any profit from these patients.  Dr Artliff was asked to show what payments from his personal account were for materials.  He pointed out [Company 2] as being one of his suppliers.  The tribunal went through the withdrawals from the account and there were payments to [various businesses] totalling $12,300.  The tribunal accepted that these were legitimate costs associated with the treatment.  The tribunal found that Dr Artliff received net payments of $30,044 and this was income available to him during 2017-18.

7. The following is a summary of income for child support purposes for the last two financial years, as found by the tribunal:

2016-17	2017-18
Fees net of amortised income and [Company 1] fee	$198,362	$173,395
Interest income	N/A	$10,502
Less Expenses	$98,050	$93,422
Add back MV 70%	$3,082	$4,484
Add back MV Depreciation	$15,359	N/A
Add back staff amenities	$6,295	$6,967
Add in private patients income	N/A	$30,044
Net income	$125,048	$131,970
Taxable income declared	$140,653	$79,672

1. The tribunal noted that Dr Artliff’s income from [Company 1] decreased in 2017-18, but it would appear that for six months he was heavily involved with his training course, given the deposits made to his personal account from patients used for training (July to December 2017) and this may have reduced his availability.

2. Dr Artliff discussed the training he undertook and how he is now qualified to do[a certain procedure].  He found the lecturer in [City 1] to be highly skilled and is currently undertaking the course again, for free, in return for assisting with teaching.  The tribunal asked Dr Artliff if he expects his income to increase due to his increased expertise.  He said that was the plan, but he is unable to carry out this work due to not being able to work in [City 1] as Dr Varey is inflexible about visiting times with their child.  He also said his work has suffered as he has been under extreme stress for the last two years (relating to tax debts, child support and issues with Dr Varey including child visitation issues).  He does not want to live too far from [Child 1].  He said that during the last six months, in particular, he has been so physically stressed that it would not be safe for him to undertake the advanced techniques that he has learned.

3. Dr Artliff said his hours have been cut back at the clinic from six days a week to three days a week.  Dr Artliff provided a letter from [Company 1] dated 10 October 2018 that states:

   We would like to consolidate your hours at [Suburb 1] as you are working 6 days but your appointment booking percentage is 66%.  This is not cost effective for us and it also doesn’t make sense to have your book open for 6 days.  Particularly when book and patients are cancelled at the last minute and large portions of your day are blocked off. … We request that your appointment book is opened for only 40 hours per week from 22 October 2018. … If we do not hear from you, the hours will be consolidated to 40 hours on Monday, Tuesday, Wednesday and Saturday.

4. It was put to Dr Artliff that it appeared he had made himself unavailable during the six days (blocking out time) and he denied this saying that [Company 1] were lying about this aspect and just using it as an excuse.  He said he doesn’t take holidays but has been tied up with court, lawyers and training.  He noted that patients make and cancel bookings online, resulting in increased cancellation rates.  He is currently working from 9.00 am to 7.00 pm Mondays, 9.00 am to 5.00 pm Tuesdays, 9.00 am to 7.00 pm Wednesdays and some Saturdays.

1. Dr Artliff’s income from [Company 1] did decrease by about 12% in 2017-18 but as discussed earlier, he was studying during this time.  The income was relatively even throughout the year.   For the first three months of the current financial year, he was paid $24,800 and income in September 2018 was significantly less.  Extrapolated over a year, the gross payments would be $99,200, a large reduction.

2. The tribunal was not convinced that Dr Artliff’s reduction in income was due to circumstances beyond his control or that [Company 1] were lying about him blocking out his availability for bookings.  The tribunal found that it is more likely than not that Dr Artliff has deliberately reduced his hours in recent months.  The tribunal was satisfied that he has the capacity to earn at least as much as he did in 2017-2018 and most likely he could increase that income now that he has become more highly qualified.  He lives [close to] a city and there appears to be no impediment to him obtaining work.

3. Dr Artliff is also claiming he is in significant financial hardship and he is about to be evicted from his residence due to non-payment of rent ($360 per week) and he has had his electricity cut off due to non-payment. 

4. Since he commenced working [in] October 2015, he has drawn directors fees and loans from the company (including the $200,000 incentive fee) of $567,228 from October 2015 to June 2018; approximately three years.

5. His statement of financial circumstances discloses no significant assets.  Mr Artliff has tax liabilities (associated with his level of income) and appears to have an arrangement in place to repay arrears.  (The ATO paid $79,512 to [Company 3] in January 2018 and according to the balance sheet, the current liability is $13,972 which would relate to the profit made in 2018.) 

6. After allowing for tax payments it is difficult to understand how Mr Artliff has spent the $567,228.

7. The tribunal questioned Dr Artliff about a number of significant payments made from his personal account to ‘[Ms B]’ during the 2017-18 financial year.  He made 14 payments totalling $87,100.  He also received six transfers from an [BANK 2] account totalling $17,500; a net amount of $69,600.  Dr Artliff said the payments are to his [relative] [Ms B].  [Ms B] lent him money when he was in [Country 1] and when he came out to Australia.  He provided a bank statement from the [BANK 2] account to show it was in [Ms B]’s name.  Unfortunately the copy provided was illegible but the tribunal accepts that it was in her name.  When asked how much he borrowed, he said it was equivalent to AUD75,000.  Dr Varey disputed that [Ms B] provided so much financial support. 

8. Dr Artliff has only around $1,000 in his bank accounts as at 30 June 2018.  Given the large amount of cash (drawings of $567,227) he has had available and no evidence of any significant assets being purchased, the tribunal decided that it was more likely than not that Dr Artliff has been transferring his excess funds to an [BANK 2] account (in his [relative]’s name).  Even if he had repaid a loan of $75,000 and met his tax liabilities he would still have a lot left over to meet his expenses.  This is not inferring he has made more money than discussed above; but it is very likely he has a significant sum on deposit in the [BANK 2] account.  The tribunal does not accept he is in financial hardship.

9. The tribunal found that since the child support case was registered Dr Artliff has earned the following annual income:

   ·4 May 2017 to 30 June 2017                   $125,048

   ·1 July 2017 to 30 June 2018                   $131,970.

10. The tribunal also found that Dr Artliff’s likely income, despite having a recent reduction, from 1 July 2018 is $140,000.  This takes into account that he has finished his formal training (and associated costs) and is more highly qualified.

Income and financial resources – Dr Varey

1. Dr Varey’s taxable incomes in recent years have been:

   ·2015-16    $64,885

   ·2016-17    $35,054

   ·2017-18    $62,668.

2. Dr Varey used to run her business through [Company 4] Pty Ltd (‘[Company 4]’).

3. Dr Varey’s contract with [Company 1] was terminated [in] July [2017]. In the letter notifying her of her termination, [Company 1] demanded repayment of the $100,000 lump sum payment. Dr Varey is disputing the need to repay the amount and is also claiming damages. The legal dispute has not yet been finalised.

4. After leaving the [Suburb 1] clinic, Dr Varey worked as a locum at three clinics, initially as a sole trader, and then through her company.  In around June 2018 she purchased a [clinic] for around $300,000.  She borrowed $305,000 for this purpose and has been running the new [business].  The business commenced in July 2018.

5. Information taken from financial accounts is as follows:

2015-16 [Company 4]	2016-17 [Company 4]	2017-18 [Company 4]	2017-18 Sole Trader	Total 2017-18
Interest	N/A	$30	$702	N/A	N/A
Gross income	$153,845	$54,240 (on maternity leave)	$103,856 (locum and [Company 1])	$99,668	$203,524
Net of amortised income from [Company 1]	$138,886	$14,240	$103,856	$99,668	$203,524
Net of [Company 1] fee/other fee	$48,610	$8,234	$85,977	$86,120	$172,097
Salary to Dr Varey	$51,504	$24,553	Nil	N/A	Nil
Expenses	$12,066	$23,711	$47,360	$37,012	$84,372
Loan to Dr Varey	$85,457	($84,687)	($21,037)	N/A	($21,037)

1. During the hearing, Dr Artliff queried whether Dr Varey had returned all her income and also whether she was claiming withdrawals from her account referenced as ‘wages’.  After reviewing the deposits to her accounts, private and business, the tribunal was satisfied that all income had been declared. After reviewing the financial accounts, the tribunal was satisfied that drawings referenced as wages were actually wages and not claimed as an expense.

2. The expenses claimed include:

2015-16	2016-17	2017-18
Training	$3,512	$14,810	$13,635
Travel	Nil	Nil	$4,256
Legal fees	N/A	N/A	$11,960
Motor vehicle	Nil	Nil	$3,973

1. The training and travel was for courses undertaken in [City 1] and include course fees, petrol and accommodation.  Dr Varey also claimed motor vehicle expenses of $3,973 stating it was 80% of her total costs.  Given the nature of her work and her claim for petrol included in travel, the tribunal did not accept that she would have significant motor vehicle costs and found that only $1,000 related to business travel.  The legal fees related to the ongoing dispute with [Company 1].

2. The following is a summary of income for child support purposes for the last two financial years, as found by the tribunal:

2016-17	2017-18
Fees net of amortised income and management fees	$8,234	$172,097
Interest	$30	$702
Expenses	$23,711	$84,372
Add back motor vehicle	N/A	$2,973
Personal interest	$1,017	$12 (est)
Net income	($14,430)	$91,412
Taxable income	$35,860	$62,668

1. Dr Varey is now working full time and has her own practice.  It is too early to know how profitable the business will be however the tribunal assumes she will be able to make a higher income than she made in 2017-18 when she was working as a locum.  Dr Varey said she was hopeful of earning around $100,000; however the tribunal considered this to be too conservative.  The tribunal found that her likely income from 1 July 2018 is $120,000.

2. Dr Artliff has accused Dr Varey of being dishonest in her dealings with Child Support and her financial records.  He said she signed an application on 11 June 2017 stating she only had one bank account with $2,500, no car and was paying $300 per month for petrol.  He said that she did have a car and had $85,000 in her bank account, she had many bank accounts, and she lived where she worked and would have minimal petrol costs. 

3. Dr Varey stated that she had inadvertently omitted the car and said she had purchased a car a few years ago (currently valued at around $6,000).  She has several bank accounts.  Her [specified] account had $70,631 as at 15 May 2017 but had reduced to $2,196 by 11 June 2017 (the account disclosed in her application).    The reduction of nearly $78,000 was partly due to transfers to other accounts of nearly $38,000.  Her [other] account had $24,827 as at 11 June 2017.  Her other accounts were provided from 1 July 2017 (as directed) so it is not possible to determine the balances at 11 June 2017.  The tribunal agreed that Dr Varey had not given full disclosure of her assets to Child Support when she made her application.  Having said that, after reviewing Dr Varey’s bank statements and financial accounts, the tribunal was satisfied that there is no ‘hidden’ income or assets that Dr Varey has not disclosed to the tribunal.

Summary

1. The administrative assessments based on the parties’ taxable incomes (as amended) result in a child support liability of $15,136 to 30 September 2017 and then decreasing to $8,933.  The child support liability based on the incomes as found by the tribunal are as follows:

   ·4 May 2017 to 30 June 2017       $15,006

   ·1 July 2017 to 30 June 2018       $13,439

   ·1 July 2018 onwards                   $12,089

2. The difference in child support payable is significant from 1 July 2017 onwards and the tribunal was therefore satisfied that there are special circumstances in this case and finds that the ground for departure in subparagraph 117(2)(c)(ia) does exist in relation to the income and financial resources of Dr Artliff and Dr Varey 

3. As a ground for departure has been established, the tribunal then considered whether or not it would be just and equitable to make a departure determination.

Issue 2 – Would it be just and equitable to make a particular departure determination?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to make a particular departure determination. In doing so, the tribunal must have regard to a number of matters in subsections 117(4) to (9) of the Assessment Act. In summary, this requires consideration of the parents’ duty to support the children, the income, assets and financial resources of the children and of the parents, the children’s proper needs and the self-support costs of either parent. The tribunal is not limited to exploring these parameters and is required to consider the global circumstances (Gyselman).

2. The tribunal had regard to the evidence which was presented, including the evidence which has been discussed above. This evidence is further considered below.

The duty to maintain the child

1. Dr Varey and Dr Artliff each have a duty to maintain the child. Further, the tribunal notes the statements contained in sections 3 and 4 of the Assessment Act to the following effect:

   ·       Parents of a child have a primary duty to maintain the child and this has a priority over all commitments of the parent other than commitments necessary for self-support;

   ·       The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards;

   ·       The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.

Proper needs of the child and the income, property, financial resources and earning capacity of the child

1. There was no evidence that [Child 1] currently has significant independent income or resources.

2. Apart from medical expenses, there was no evidence presented to the tribunal that [Child 1] has anything other than the usual expenses and needs of a child his age, expenses that are dealt with in the administrative assessment and addressed in the Costs of the Children Table. [Child 1] was born with a [medical] condition and is required to take regular medication.  The cost of his prescriptions is around $35 to $40 per month and he has irregular check-ups with the specialist.  He has also seen [a specialist] at a cost of $165.  The tribunal decided that [Child 1]’s medical costs were not significant.

Income, property, financial resources and earning capacity of each parent

Dr Artliff’s income, property, financial resources and earning capacity

1. Dr Artliff’s income and financial resources has been discussed above. 

2. Dr Artliff stated in his Statement of Financial Circumstances that he spends $1,309 per week on household expenses.  This figure includes $100 per week for education; however these costs are paid for by the company and have been taken into account in determining his income.  It also includes $350 per week for food; Dr Artliff said he eats takeaway a lot due to travelling (for work and to visit [Child 1]).  The tribunal still found this to be a very high figure and considered at least $100 of this to be discretionary.  Other discretionary costs were books and entertainment of $60 per week.  This would leave non-discretionary spending to be around $1,050 per week and income tax.  His declared income was around $140,000 in 2016-17 and around $80,000 in 2017-18.  This would give a tax liability of $800 per week and $400 per week respectively.  This leaves him with between $43,800 and $64,600 from his current income for child support, outstanding liabilities and discretionary spending.

3. Dr Artliff included $130 per week petrol costs in his weekly living costs, noting that he was travelling 1,000 km per month to see [Child 1] and now around 480 km per month.  Dr Artliff’s car expenses would be higher than normal; however they are not considered significant in the context of his income. 

4. [Company 3] owes around $50,000 to [BANK 1] and is repaying this at the rate of around $1,300 per month.  There are also outstanding tax and accounting fees of around $24,000.  The tribunal did not consider these liabilities significant in the context of Dr Artliff’s income.

5. As discussed earlier, the tribunal has found that Dr Artliff has been transferring money to another account and it is unknown how much he has invested.

Dr Varey’s circumstances

1. Dr Varey’s income has been discussed above. 

2. She has now purchased a [practice] and her cash assets are low and her company has significant debt (loan of around $300,000).  However this has provided her with a valuable asset to generate income.

3. She listed $5,000 for jewellery in her statement of financial circumstances.  Dr Artliff said she was misleading about this as he bought her jewellery for around $20,000.  The tribunal was satisfied that the current value of the jewellery would be significantly less and in any case the jewellery is not considered to be a significant source of financial resources for Dr Varey.

4. In her Statement of Financial Circumstances, Dr Varey stated that she spends around $1,200 per week on household expenses (some figures were difficult to read).  This includes $400 for food and $350 for rent.  Her [relative] is living with her and looks after [Child 1].  In return she provides him with board.  The weekly figure includes $100 per week for holidays and $20 for gifts and entertaining, which is considered discretionary.  She also listed $15,000 for education but this is included in her business expenses.  The tribunal concluded her non-discretionary spending was $1,080 per week.  She will also have income tax expenses (based on $120,000 this would be around $650 per week). 

5. Dr Varey also has child care expenses.  Her net costs are $53 per week for one day.  She has recently increased this to two days.

6. The tribunal concluded that Dr Varey would have around $24,500 per annum from her current income for discretionary spending

Necessary commitments to support themselves

1. The self-support amount used in the administrative assessment is approximately $24,500. On the documentary evidence available to the tribunal, including the Statement of Financial Circumstance completed by both parties, the tribunal was satisfied that both Dr Varey and Dr Artliff have sufficient funds at their disposal to meet their necessary commitments.

Hardship that would be caused to the parents and the child

1. Considering his discretionary income, the tribunal considers Dr Artliff would not suffer financial hardship if required to pay $260 per week in child support (reducing to around $230 per week on current incomes).

2. Dr Varey is also on a good income and is currently not suffering any financial hardship despite incurring the majority of [Child 1]’s expenses.

3. The proposed change in the child support assessment, however, will ensure that both Dr Artliff and Dr Varey share in the costs of caring for the child at a level commensurate with their resources.

4. After consideration of all of the factors in subsection 117(4), the tribunal is satisfied that it is just and equitable to depart from the administrative assessment. Having regard to all of the evidence, the tribunal considered that the decision under review should be set aside and a decision made vary the parties adjusted taxable incomes as follows:

   ·From 4 May 2017 to 30 June 2017, Dr Artliff’s adjusted taxable income is varied to $125,048 and Dr Varey’s adjusted taxable income is varied to nil;

   ·From 1 July 2017 to 30 June 2018, Dr Artliff’s adjusted taxable income is varied to $131,970 and Dr Varey’s adjusted taxable income is varied to $91,412; and

   ·From 1 July 2018, Dr Artliff’s adjusted taxable income is varied to $140,000 and Dr Varey’s adjusted taxable income is varied to $120,000.

5. The tribunal then considered what an appropriate start and end date would be for a departure determination.

6. The child support case commenced on 4 May 2017 and Dr Varey lodged her application on 11 June 2017.  Given this very soon after the case was registered, the tribunal decided it would be appropriate to commence from 4 May 2017.

7. The tribunal decided that the departure determination should not beyond 31 December 2019.  Both Dr Artliff and Dr Varey’s incomes are uncertain at the moment.  By 31 December 2019, their incomes for 2018-19 should be established.  

8. In the event that either party’s circumstances change during the assessment period, they have the opportunity to lodge a further change of assessment application. The tribunal considers these dates to be in the best interests of the child and the parents as they promote certainty and consistency for those concerned.

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

1. The final step for the tribunal to undertake is to determine whether it is ‘otherwise proper’ to make a particular departure determination (subsection 117(5) of the Assessment Act). 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 relegated to the public welfare system when the parents themselves have the capacity to maintain their children. Dr Varey is eligible for family assistance. The proposed departure determination may decrease Dr Varey’s entitlement to family assistance but will reflect the parties’ real capacities to support the child. The tribunal concludes that it is otherwise proper to depart from the administrative assessment.

DECISION

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

·       For the period 4 May 2017 to 30 June 2017, Dr Artliff’s adjusted taxable income is varied to $125,048 and Dr Varey’s adjusted taxable income is varied to nil;

·       For the period 1 July 2017 to 30 June 2018, Dr Artliff’s adjusted taxable income is varied to $131,970 and Dr Varey’s adjusted taxable income is varied to $91,412; and

·       For the period 1 July 2018 to 31 December 2019, Dr Artliff’s adjusted taxable income is varied to $140,000 and Dr Varey’s adjusted taxable income is varied to $120,000.