Basnall and Basnall (Child support) - [2025] ARTA 937

Basnall and Basnall (Child support) [2025] ARTA 937 (17 April 2025)

Applicant:Mrs Basnall
Respondent: Child Support Registrar
Other Party: Mr Basnall

Tribunal Number: 2024/SC028389
Tribunal:General Member P Jensen
Place:Brisbane
Date of Decision: 17 April 2025
Decision:

The decision under review is set aside and, in substitution, Mr Basnall’s adjusted taxable income is varied to $135,000 per annum from 29 August 2023 to 31 December 2027.

CATCHWORDS
CHILD SUPPORT – departure determination – father’s adjusted taxable income – delay in providing documentation as directed – undisclosed cash-in-hand income – accountant’s letter – unjust and inequitable determination of child support payable – 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 omitted from this decision and replaced with generic information pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.

Statement of Reasons

Introduction

Mrs Basnall and Mr Basnall are the parents of [Child 1] who was born in 2014 and [Child 2] who was born in 2016. A child support case was registered with Services Australia – Child Support (“Child Support”) from 29 August 2023. Mrs Basnall has been recorded as providing 100% care for both children since the case was registered.
The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 29 August 2023, the administrative assessment was based on Mrs Basnall’s 2022–23 adjusted taxable income of $52,329 and Mr Basnall’s 2022–23 adjusted taxable income of $12,888. Mr Basnall was assessed to pay what is called the fixed annual rate of child support, which was $3,264 per annum. As the Child Support Guide notes at chapter 2.4.11: “The Registrar will make a FAR assessment where a liable parent has a low [adjusted taxable income] but did not receive income support payments during the last relevant year of income.”
The Act also provides for a departure from the administrative assessment in certain circumstances. On 30 November 2023, Mrs Basnall lodged a departure application. An original decision-maker granted the application and varied Mr Basnall’s adjusted taxable income to $75,000 per annum from 30 November 2023 to 29 November 2025. Mr Basnall objected to that decision. An objections officer varied the decision so that Mr Basnall’s adjusted taxable income was varied to $50,000 per annum from 30 November 2023 to 29 November 2025. Mrs Basnall applied to the Tribunal for further review. I conducted a directions hearing on 5 March 2025 and a substantive hearing on 16 April 2025.
Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:
(i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and
(ii)... 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; …

A ground for departure

Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:
that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia)because of the income, property and financial resources of either parent; …
Mr Basnall’s income and financial resources have been the primary focus of Mrs Basnall’s departure application. According to the original decision-maker’s notes, Mr Basnall was asked on 15 March 2024 to provide bank account statements but he did not do so: pages 234 and 464 of the hearing papers. According to the objections officer’s notes, Mr Basnall was asked on 30 May 2024 and 2 June 2024 to provide medical certificates for any period of incapacity since 29 August 2023, a profit and loss statement for [Company 1 Pty Ltd] and other documentation, but he did not do so: pages 501, 521, 563 and 564 of the hearing papers. On 10 March 2025, I directed Mr Basnall to provide the following by 2 April 2025:
·         A completed Tribunal Statement of Financial Circumstances.
·         Mr Basnall’s tax returns and notices of assessment for 2021–22, 2022–23 and 2023–24.
·         [Company 2] Pty Ltd’s financial statements (including its profit and loss statements and balance sheets) and tax returns for 2021–22, 2022–23 and   2023–24.
·         [Company 1] Pty Ltd’s financial statements (including its profit and loss statements and balance sheets) and tax returns for 2021–22, 2022–23 and   2023–24.
·         Bank account statements from 1 October 2024 to 31 December 2024 of all bank accounts to which Mr Basnall was a signatory.
Mr Basnall did not comply with the Directions by the due date. On 14 April 2025 he applied for an extension of time in which to comply with the Directions. (It will be recalled that the matter was listed for a substantive hearing on 16 April 2025.) He was told to comply immediately. On 15 April 2025 he applied to have the hearing adjourned. The application was refused. At approximately 3:38 pm on 15 April 2025 he provided 176 pages in partial compliance with the Directions. The documentation was collated and paginated and certain private information was redacted. I received a copy and Mrs Basnall received a copy of Mr Basnall’s documentation shortly before the substantive hearing commenced at 10:00 am on 16 April 2025. I noted that Mrs Basnall could apply for an adjournment. Alternatively, the hearing could proceed as scheduled and if, at the end of the day’s hearing, Mrs Basnall believed she had been disadvantaged by Mr Basnall’s delay, she could raise her concern and I would consider what steps needed to be taken to address her concern. She indicated her preference for proceeding with the hearing as scheduled. At the end of the day’s hearing she did not raise any concerns about any possible disadvantage that she may have suffered from Mr Basnall’s delay. On my assessment of the evidence, she did not suffer any disadvantage.
Mr Basnall said he worked as [an occupation 1] until 2023. He said that more recently he has worked as [an occupation 2] and in [work sector].
Mr Basnall’s 2020–21 and 2021–22 adjusted taxable incomes were $76,793 and $78,872. Mrs Basnall said the parents separated in July 2023. Mr Basnall said they separated around November 2023. Mr Basnall’s 2022–23 and 2023–24 taxable incomes were $12,888 and $7,882.
Mr Basnall has been involved in a number of businesses. It is sufficient for present purposes to focus on [Company 1] which runs [Business]. Mr Basnall confirmed that he has always been, and remains, the sole director and shareholder of [Company 1].
I asked Mr Basnall about his savings around July 2023. He said he had about $40,000 in savings which was borrowed money. (He later referred to a debt to [Credit service provider] of $49,372 and he said he had been referring to that loan: see page B166 of the hearing papers.) He said he also had a payout from his previous employment which may have been about $12,000. He said he also had some cash: “roughly a few thousand.” He later referred to also borrowing $100,000 from one friend, [Mr A], and $150,000 from another friend. He said he had not borrowed any more money since around July 2023.
Mr Basnall was directed to provide [Company 1’s] financial statements. He provided financial statements for [Business]. He did not provide financial statements for any other business that may have been operated by [Company 1]. I infer that [Company 1’s] only business has been [Business], and its financial statements are effectively [Company 1’s] financial statements.
[Company 1’s] financial statements were prepared by [Accountants], accountants and advisors. [Mr A] is a director of [Accountants].
According to [Company 1’s] 2022–23 financial statements, it generated revenue of $40,339 and made a loss of $60. As at 30 June 2023, it owned plant and equipment worth $303,277. Mr Basnall explained that the business commenced trading on 20 June 2023. [Company 1’s] primary liability was a “directors loan” of $336,063. Mr Basnall appeared to be unaware that he had lent such a large sum to [Company 1], but in response to a series of questions, he said his loan of $336,063 included the $100,000 and the $150,000 that he had borrowed from his friends.
According to [Company 1’s] 2023–24 financial statements, it generated revenue of $1,007,032 and made a pre-depreciation loss of $69,912. With depreciation, the loss was $182,528. [Company 1’s] expenses included wages but Mr Basnall said he did not receive any wages from [Company 1] during 2023–24. It will be recalled that his 2023–24 taxable income was $7,882. I had directed him to provide his tax return for 2023–24, which may have shed more light on the matter, but he only provided his notice of assessment.
As at 30 June 2024, the balance of Mr Basnall’s loan to [Company 1] had increased to $608,964. Mr Basnall was unable to explain how, according to [Company 1’s] financial statements, he had lent it an additional $608,964 - $336,063 = $272,901 during 2023–24.
Mr Basnall said he previously earned approximately $1,000 per month doing “cash jobs” and he did not declare the income. He added, “I don’t do that anymore.”
Mrs Basnall said that prior to their separation, Mr Basnall received “a hell of a lot of cash” that he did not declare. She said she had seen the cash. She said Mr Basnall and [Mr A] and others were business partners. She said they received cash payments and [Mr A]’s wife divided up the money.
Mr Basnall said Mrs Basnall’s evidence was incorrect, but he acknowledged that “takings” were brought home, and some employees were paid in cash because they were students, and some suppliers were paid in cash.
Mr Basnall said he had not repaid the $100,000 and $150,000 to his friends. I referred him to his Statement of Financial Circumstances which he completed on 15 April 2025. His listed liabilities did not include the $100,000 and $150,000. He said he did not include them because they are not documented. He said difficulties arose during the parents’ legal proceedings when he stated that he owed undocumented loans and he did not want similar difficulties to arise in the current proceedings. Mr Basnall was required to list his liabilities. He was not at liberty to omit some liabilities (assuming they actually exist) because he believed that listing them would cause some difficulties.
Mrs Basnall provided evidence to Child Support which suggested that Mr Basnall’s income was more than he had disclosed. On the day before the Tribunal’s substantive hearing, Mr Basnall provided evidence in response to Mrs Basnall’s evidence.
On 16 August 2022, [Mr B], business manager at [Financial services provider], sent an email to Mr Basnall as follows (at page B172 of the hearing papers):
Hi Mr Basnall,
Please see attached.
Forward to your accountant for completion and return to me.
Please note income declared $135,000.
The email attached a template letter: page B171 of the hearing papers. Mrs Basnall provided the first page of what appears to be a two-page letter from [Accountants]: page 59 of the hearing papers. There does not appear to be any dispute that [Mr A] was the author of the letter. [Mr A] appears to have transposed the content of the template letter to an [Accountants’] letter and added the relevant detail. [Mr A] stated that he was a practising accountant, a member of the Institute of Public Accountants, and Mr Basnall’s accountant. He also stated that:
·I am aware the [B]orrower has stated a current taxable income of $135,000.
·I know the Borrower’s income and expenditure and based on that knowledge and my understanding of the Borrower’s financial position believe this stated income is accurate.
·I have reviewed the Borrower’s previous and current business earnings and advise these are consistent with the above.
At the hearing, Mr Basnall said his income had not been $135,000 per annum. He said his broker had asked him to obtain a letter from his accountant stating that his income was $135,000 per annum and he ([Mr B]) had provided the template for that purpose. On Mr Basnall’s account of events, [Mr B] and [Mr A] knew that his income was not $135,000 per annum but they nevertheless assisted Mr Basnall in deceiving a financial institution. At the hearing, Mr Basnall appeared to be under the impression that [Mr B]’s email proved that he ([Mr B]) knew that Mr Basnall’s income was not $135,000 per annum. In my opinion, the email is consistent with [Mr B] reiterating the key information provided by Mr Basnall, namely his statement of his income. As for [Mr A]’s letter, it speaks for itself. Further, on Mrs Basnall’s account of events, [Mr A] knew of Mr Basnall’s undisclosed cash-in-hand income, and consequently his capacity to make loan repayments. I consider Mr Basnall’s statement that his income was $135,000 per annum to be the best evidence of his actual income. I find that that income was essentially undisclosed cash-in-hand income. There is no reliable evidence of any changes in Mr Basnall’s income, although it is worth repeating that, according to other evidence provided by Mr Basnall, he lent an additional $272,901 to [Company 1] during 2023–24 despite having no apparent capacity to do so. Doing the best I can in the circumstances, I find that Mr Basnall’s income and financial resources were, and are, fairly reflected for child support purposes in an adjusted taxable income of $135,000 per annum. When Mrs Basnall lodged her departure application, the administrative assessment was based, in part, on Mr Basnall’s 2022–23 adjusted taxable income of $12,888. The difference in those adjusted taxable incomes constitutes special circumstances such that the application of the administrative assessment resulted in an unjust and inequitable determination of child support payable. Reason 8 is established.

Just and equitable

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 needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.
Mrs Basnall is employed as [an occupation 3]. She also receives parenting payment and family tax benefit. Her 2022–23 and 2023–24 adjusted taxable incomes were $52,329 and $55,956. She expects to earn a similar adjusted taxable income during 2024–25. She owns her home and has an associated home loan. Her household consists of herself and the two children. Mrs Basnall’s financial circumstances are unremarkable and there was no suggestion that her adjusted taxable income should be varied for child support purposes.
Mr Basnall said he lives in rented accommodation with his brother. His debts to the Australian Taxation Office include a PAYGW Director Penalty of $41,322 and a GST Director Penalty of $24,926: page B35 of the hearing papers. Meanwhile, Mr Basnall bought a [Vehicle] which he valued at $50,000: page B4 of the hearing papers. He said [Company 1] pays the associated car finance payments. Mr Basnall does not pay all his debts as they fall due. It does not automatically follow that he lacks the capacity to do so. He estimated that his household expenses total approximately $500 per week, which equates to $26,000 per annum. His income is approximately $135,000 per annum. He has ample capacity to contribute to the children’s costs.
On 29 August 2023, Mrs Basnall applied to register a child support case. On 18 September 2023, Child Support decided to register a child support case with effect from 29 August 2023. On 24 October 2023, Mrs Basnall contacted Child Support about lodging a departure application; she promptly took steps to dispute the administrative assessment. She informed Child Support that Mr Basnall “earns cash in hand which is not counting as taxable income.” Child Support responded (at page 43 of the hearing papers, with minor typographical errors in the original):
Advised her that she can apply for the [change of assessment] if she has the evidence to prove that she said i have his bank statement which shows that he has earned more than the taxable income.
In fact, Mrs Basnall had a right to apply for a departure application even if she did not have evidence to support her application. Child Support has been granted certain powers to assist it in its own investigations. In any event, Mrs Basnall lodged her departure application on 30 November 2023. She promptly disputed the administrative assessment of child support payable. It is appropriate to make a departure decision with effect from 29 August 2023.
Mr Basnall’s adjusted taxable income will be varied to $135,000 per annum.
During the substantive hearing, Mr Basnall said he is in the process of transferring [Company 1] to the friends who lent him $100,000 and $150,000. Regardless of any future formal changes to the legal relationships between himself, his friends and the various companies and businesses in which they are involved, I consider it likely that Mr Basnall will continue to receive undisclosed cash-in-hand. It is appropriate to make a departure decision with significant prospective effect. Mr Basnall’s adjusted taxable income will be varied until 31 December 2027.
For completeness, I note that Mr Basnall stated that his income was $135,000 per annum and I have found that he continues to receive that income. However, he is not taxed accordingly. It is arguable that his income should be grossed-up to approximately $195,000 per annum for child support purposes. However, Mrs Basnall did not seek such an adjustment and I am mindful that my decision will increase Mr Basnall’s child support arrears by approximately $30,700 and my decision will apply for a number of years. It will require him to pay a current rate of child support of approximately $23,600 per annum. Viewing those circumstances as a whole, the proposed decision will be just and equitable.

Otherwise proper

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.
Mrs Basnall receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Basnall will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

The decision under review is set aside and, in substitution, Mr Basnall’s adjusted taxable income is varied to $135,000 per annum from 29 August 2023 to 31 December 2027.