Berkowitz and Berkowitz (Child support)

[2020] AATA 1487

Berkowitz and Berkowitz (Child support) [2020] AATA 1487 (25 February 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017160

APPLICANT:  Mr Berkowitz

OTHER PARTIES:  Ms Berkowitz

Child Support Registrar

TRIBUNAL:  P Jensen, Presiding Member

P Ranson, Member

DECISION DATE:  25 February 2020

DECISION:

The decision under review is varied so that Mr Berkowitz’s adjusted taxable income is varied to $191,000 per annum from 26 September 2018 to 31 December 2022.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business - income from family trust - decision under review varied

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

Introduction

1. Mr Berkowitz and Ms Berkowitz are the parents of [Child 1] who was born in 2009, [Child 2] who was born in 2011 and [Child 3] who was born in 2014. A child support case was registered with the Department of Human Services – Child Support (“the CSA”) from 26 September 2018. Mr Berkowitz has been recorded as providing 21% care to the children from 26 September 2018 and 33% care to the children from 31 January 2019. Ms Berkowitz has been recorded as providing the balance of care.

2. 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 of the children. From 26 September 2018 the administrative assessment was based on Mr Berkowitz’s 2017-18 adjusted taxable income of $32,654 and Ms Berkowitz’s 2017-18 provisional income of $9,000, and Mr Berkowitz was required to pay $1,668 per annum in child support. The subsequent change in care did not affect the administratively assessed rate of child support payable.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Berkowitz lodged a departure application on 29 November 2019. The CSA granted her application and varied Mr Berkowitz’s rate of child support payable to $30,000 per annum from 26 October 2018 to 31 December 2020. Mr Berkowitz objected to that decision. An objections officer allowed his objection and varied his adjusted taxable income to $191,000 per annum from 26 November 2018 to 31 December 2021. He was consequently required to pay approximately $31,200 per annum in child support. He applied to the Tribunal for further review. A directions hearing was conducted on 6 December 2019 and a full hearing was conducted on 25 February 2020. At the full hearing, Mr Berkowitz and Ms Berkowitz gave sworn evidence by conference phone, as did one of Mr Berkowitz’s accountants, [Mr A], of [Accountancy company].

4. 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

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to as Reason 8, provide 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; or

   (ib)because of the earning capacity of either parent; …

2. Mr Berkowitz and Ms Berkowitz were the directors and shareholders of Berkowitz Investments Pty Ltd (ACN [Number 1]) (“Berkowitz Investments”), which is the trustee of the Berkowitz Family Trust (ABN [Number]). Mr Berkowitz and Ms Berkowitz were beneficiaries of the Berkowitz Family Trust. Until 30 June 2019, Berkowitz Investments operated a business, [Business name] (“the Business”).

3. Mr Berkowitz and Ms Berkowitz separated in February 2017. The Federal Circuit Court made consent orders concerning Mr Berkowitz’s and Ms Berkowitz’s property settlement on 20 September 2018. Ms Berkowitz ceased to be a director, and Mr Berkowitz became the sole director, of Berkowitz Investments. Ms Berkowitz ceased to be a beneficiary, and Mr Berkowitz became the sole primary beneficiary, of the Berkowitz Family Trust.

4. By contract dated 9 November 2018, Berkowitz Investments in its capacity as trustee of the Berkowitz Family Trust sold a portion of the Business, referred to as pre-identified business to business customers, to an arm’s-length purchaser for $400,000. Settlement occurred on 1 March 2019. Mr Berkowitz stated that it sold the “profitable part of the business”.

5. In April 2019, Berkowitz Investments employed Mr Berkowitz’s partner, [Ms B]. She took unpaid leave from her employment with [Employer] to commence her employment with Berkowitz Investments.

6. In June 2019, on the advice of [Mr A] of [Accountancy company], [Financial company], and a number of solicitors, a completely new corporate structure was established including [Company name] (ACN [Number 2]) (“[the Company]”). On 1 July 2019, Berkowitz Investments sold the remainder of the Business, being the goodwill, stock, plant and equipment and the assumption of unidentified liabilities, to [the Company]. [Mr A] advised the amount ascribed to goodwill was $50,000. Mr Berkowitz stated that the remainder of the Business was sold so that he could continue to earn an income, and he was appointed as a director of [the Company] to provide continuity for customers and suppliers. He also stated that the Business was at risk because of legal action instigated by Ms Berkowitz.

7. Mr Berkowitz’s and [Ms B’s] relationships to [the Company] and other related legal entities will be discussed shortly. For now, it is sufficient to note that the sale resulted in a dilution of Mr Berkowitz’s legal control of the Business. Nevertheless, Mr Berkowitz candidly stated the following:

   ·   In March 2018, he lodged an affidavit in the Federal Circuit Court in which he stated that his income was $3,675 per week, which equates to $191,625 per annum. Berkowitz Investments could have paid that income to him, but it was preferable for tax purposes to distribute that income approximately equally between himself and Ms Berkowitz, and they each received approximately $80,000 per annum. (There is no dispute that Ms Berkowitz had not been actively involved in the Business since at least 2010.)

   ·   Since the sale of the Business to [the Company], the income of approximately $191,625 per annum has remained available, and it has been preferable for tax purposes to distribute that income approximately equally between himself and [Ms B], and they have each received approximately $80,000 per annum.

   ·   In the current proceedings, it would be appropriate for the Tribunal to vary his adjusted taxable income to his wage of $80,000 per annum plus the value of his personal use of a car and phone which are provided by [the Company].

8. Mr Berkowitz’s position in respect of these proceedings is not entirely clear. On one view, he has acknowledged that approximately $191,625 per annum has remained available to him at all relevant times, and continues to remain available to him, even though decisions have been made at times to split that income between himself and Ms Berkowitz, and later between himself and [Ms B]. On that view, Mr Berkowitz’s adjusted taxable income should be varied to approximately $191,625 per annum for child support purposes.

9. On another view, it is appropriate to acknowledge that [Ms B] started contributing to the Business in April 2019, and that she should be remunerated accordingly. As noted earlier, Mr Berkowitz operated the Business for at least a decade prior to [Ms B’s] involvement; he is the driving force behind the Business. Prior to [Ms B] taking unpaid leave from her employment with [Employer], she was earning approximately $76,374 per annum[1] as [an Occupation 1]. The Tribunal considers that to be the best evidence of the commercial value of her services. During the six months following the sale of the Business, i.e. July to December 2019, [the Company] paid Mr Berkowitz wages of $57,135 (which equates to $114,270 per annum) and it paid [Ms B] wages of $69,469 (which equates to $138,938 per annum).[2] Their combined wages during that six-month period equate to $253,208 per annum. However, if Mr Berkowitz had employed [Ms B] on her existing salary, and he had paid himself the balance of the $253,208 per annum, he would have paid himself $176,832 per annum, which is generally similar to $191,625 per annum. In that scenario, regardless of what he ultimately decided to pay [Ms B], the fact would have remained that he could have paid himself $191,625 per annum, or thereabouts; that income would have been a financial resource available to him, even if he elected to not receive it. On that view, once again, Mr Berkowitz’s adjusted taxable income should be varied to approximately $191,625 per annum for child support purposes

   [1][Ms B] earned $60,262.76 during the 288 days from 1 July 2018 to 14 April 2019: see page A157 of the hearing papers. $60,262.76 / 288 x 365 = $76,374.

   [2]See the payroll records commencing at page A171 of the hearing papers.

10. On yet another view, Mr Berkowitz submitted, in effect, that following his decision to sell the Business to [the Company], he was no longer receiving, and was no longer entitled to receive, the income of approximately $191,625 per annum that had previously been available to him. Viewing Mr Berkowitz’s evidence as a whole, that appears to have been, at least at times, the substance of his evidence, and the Tribunal will proceed on that basis. Mr Berkowitz’s decision to sell the Business, and his consequential change in circumstances, raises the question as to whether he can, and should, be assessed on his earning capacity.

11. The Tribunal can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) of the Act are satisfied. That subsection states:

    In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

    (a)one or more of the following applies:

    (i)the parent does not work despite ample opportunity to do so;

    (ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

    (iii)the parent has changed his or her occupation, industry or working pattern; and

    (b)the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

    (i)the parent's caring responsibilities; or

    (ii)  the parent's state of health; and

    (c)  the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

12. Immediately prior to the sale of the Business, Mr Berkowitz was the sole director and sole shareholder of Berkowitz Investments, which is the trustee of the Berkowitz Family Trust, and he was the sole primary beneficiary of that trust. At a practical level, his working pattern was that of someone who was effectively self-employed.

13. As a result of the sale, [the Company] owned the Business. The corporate structure surrounding [the Company] is set out in Appendix A to these Reasons for Decision. After the sale, Mr Berkowitz’s working pattern was no longer that of someone who was effectively self-employed; his efforts (and [Ms B’s] efforts) affected the financial positions of the legal entities in which they both had an interest. At a practical level, his working pattern was that of someone who was effectively in a joint venture. Subparagraph 117(7B)(a)(iii) is satisfied, and therefore paragraph 117(7B)(a) is satisfied.

14. There is no suggestion that the decision to sell the Business to [the Company] was justified on the basis of Mr Berkowitz’s caring responsibilities or his state of health. Paragraph 117(7B)(b) is satisfied.

15. Mr Berkowitz said he decided to sell the Business to [the Company] so that he could continue to have an income. However, as he later acknowledged, an income of approximately $191,625 per annum had remained available to him up until the date of sale. The Tribunal does not accept his evidence as to why he decided to sell the Business to [the Company].

16. [The Company]’s balance sheet as at 31 December 2019 indicates that [Ms B] lent $123,211 to [the Company], which raised the possibility (although Mr Berkowitz did not suggest it) that [Ms B] had the financial capacity, and Mr Berkowitz did not have the financial capacity, to fund [the Company] and its operation of the Business. However, during the hearing, Mr Berkowitz stated that he lent [Ms B] $12,500 + $94,000 = $106,500: page A27 of the hearing papers. [Ms B’s] loan of $123,211 to [the Company] needs to be viewed in that context.

17. As an aside, but on a similar note, [Ms B] recently bought a house for $990,000. On Mr Berkowitz’s evidence, she is the sole owner of the house. He estimated that she contributed approximately $70,000 of her own money to the purchase price. He stated that he lent a further $175,000 to her so that her deposit was at least 20% of the purchase price, i.e. it was at least $198,000, so that she was not required to obtain mortgage insurance. Mr Berkowitz’s loan of $175,000 constituted the bulk of the required deposit. Mr Berkowitz indicated that there were no specific terms associated with his loan, and he agreed that it was essentially an interest-free at-call loan, i.e. no interest is being charged or payable and there is no time frame for repayment either in whole or in part. Mr Berkowitz stated that he is a guarantor of [Ms B’s] home loan. [Ms B’s] minimum home loan repayments are $740 per week. Mr Berkowitz is paying rent of $500 per week to live in [Ms B’s] home despite him having provided the bulk of the deposit for the purchase. Mr Berkowitz said there was “no reason” why they did not buy the house together.

18. [Mr A] gave a different and multi-faceted explanation as to why, on the advice of the team of accountants and solicitors, Mr Berkowitz decided to sell the Business to [the Company]. First, he said the new corporate structure provided access to research and development (“R&D”) tax credits that were not available to the previous corporate structure involving a family discretionary trust. The Tribunal asked whether simple changes to the previous corporate structure could have achieved the same result. He said he did not know. He was specifically asked whether the same result could have been achieved by acquiring a new company, owned by the Berkowitz Family Trust, and used for R&D purposes. Again, he said he did not know. In the Tribunal’s opinion, the R&D tax credits to which [Mr A] was referring could have been accessed via simple changes to the existing corporate structure.[3] In any event, when asked if there were any current or proposed R&D activities, [Mr A] said there were none at this stage, which suggested that the need to establish a company for that purpose was presumptive.

    [3]Occasionally, it is desirable to state the Members’ professions prior to their appointments to the Tribunal, because it has a bearing on their ability to assess the evidence of an expert witness such as [Mr A]. This is one of those occasions. Prior to their appointments, Member Jensen was a barrister and Member Ranson was an accountant.

19. Second, he said the new corporate structure provided superior asset protection. He was asked to provide reasons for that conclusion, but, with respect, he was unable to do so.

20. Third, he stated that the new corporate structure was adopted because “they wanted something clean and transparent”. Again, with respect, the new corporate structure cannot fairly be described as cleaner or more transparent than the old corporate structure with the addition of one or more companies.  

21. The Tribunal questioned Mr Berkowitz and [Mr A] at length as to why Mr Berkowitz decided to sell the Business to [the Company]. None of their answers, whether considered individually or collectively, demonstrated that it was not a major purpose of that decision to affect Mr Berkowitz’s rate of child support payable. Paragraph 117(7B)(c) is satisfied.

22. The requirements of subsection 117(7B) are satisfied. The Tribunal can have regard to Mr Berkowitz’s earning capacity, and the circumstances of the case make it appropriate to do so. The Tribunal accepts Mr Berkowitz’s direct evidence that an income of approximately $191,625 per annum was available to him prior to his sale of the Business. The Tribunal considers that evidence to be the best evidence of his earning capacity.

23. When Ms Berkowitz lodged her departure application, the administrative assessment was based on Mr Berkowitz’s 2017-18 adjusted taxable income of $32,654. As he acknowledged during the hearing, he had an available income of approximately $191,625 per annum from the Business. Further, he had an earning capacity of approximately $191,625 per annum, and it is appropriate to assess him on that earning capacity from when he sold the Business. The discrepancy between $32,654 per annum and approximately $191,625 per annum, and the consequential rates of child support payable pursuant to those different incomes, constitutes special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. Reason 8 is established.

24. For the sake of completeness, it is worth noting two further matters.

25. First, Mr Berkowitz stated in March 2018 that his income was approximately $191,625 per annum. His 2017-18 adjusted taxable income, as assessed by the Australian Taxation Office (“the ATO”), was $32,654 (and his previous two adjusted taxable incomes were both $0). There appears to be little correlation between his actual income and financial resources, and his adjusted taxable incomes as assessed by the ATO.  

26. Second, one would have ordinarily expected to have been able to determinate Mr Berkowitz’s income and financial resources from an analysis of the financial statements of the legal entities in which he was involved, but that analysis, which the Tribunal undertook, proved to be unhelpful.

27. In 2017-18 the Berkowitz Family Trust received revenue of $7,626,535, it incurred expenses of $7,695,456, and it made a loss of $68,921.[4] Mr Berkowitz’s 2017-18 payment summary from the Berkowitz Family Trust shows that he received remuneration of $27,280. According to the 2017‑18 balance sheet of the Berkowitz Family Trust, he took drawings that year of $176,869.

    [4]There are slight discrepancies in the figures, depending on how one approaches the problem, but nothing turns on those discrepancies.

28. In 2018-19 the Berkowitz Family Trust received revenue of $6,905,293, it incurred expenses of $7,119,522, and it made a loss of $214,229. According to Mr Berkowitz’s individual tax return, he received wages from the Berkowitz Family Trust of $61,025. According to the 2018-19 balance sheet of the Berkowitz Family Trust, he took drawings that year of $186,204.

1. On 5 August 2019, [Mr A] wrote:

   As of 30 June 2019, Berkowitz Investments Pty Ltd as trustee for the Berkowitz Family Trust sold its business to [the Company]. The Berkowitz Family Trust is thus no longer trading, and it is intending to vest the trust the next 12 months.

2. That appeared to address what appeared to be an unsustainable position: the ongoing drawing of large sums of money from an unprofitable business. At the hearing, the Tribunal questioned [Mr A] about the details of the intended vesting, such as how Berkowitz Investments intended to repay the debt of $355,882 due by the Berkowitz Family Trust to Mr Berkowitz’s father, [Mr C], or the debt of $537,000 due by the Berkowitz Family Trust to [the Company]. Equally importantly, there appeared to be no plan to address the debt of $666,221 due by Mr Berkowitz to the Berkowitz Family Trust, being his overdrawn beneficiary’s loan account. [Mr A] stated that he had never turned his mind to those issues. Further, he stated that Berkowitz Investments was no longer intending to vest the Berkowitz Family Trust. Instead, he said it would rent unidentified plant and equipment to [the Company] without then identifying the commercial arrangement for that rental. This, he stated, was to enable the accumulated tax losses in the Berkowitz Family Trust to be utilised.

3. The Tribunal then asked whether [Mr A] could provide a copy of the contract of sale of the Business to [the Company]. He replied that the solicitors were still drafting the document. It is difficult to accept that the parties to the sale had agreed on the terms of the sale prior to the sale, but the parties’ solicitors were still drafting the contract of sale some eight months later.

4. During the first six months of 2019-20, [the Company] received revenue of $2,794,520, it incurred costs of $2,960,254, and it made a loss of $165,734. During the same six months, it received a loan from [Mr C] of $88,000 and a loan from [Ms B] of $123,211 (which needs to be viewed in the context that during the same six months, Mr Berkowitz lent $175,000 + $106,500 = $281,500 to [Ms B]). It will be recalled that during those same six months, [the Company] paid Mr Berkowitz and [Ms B] combined wages which annualise to $253,208 per annum.

5. The relevant financial statements show ongoing injections and extractions of large sums of money to and from the companies that have operated the Business. It is tempting to conclude that, assuming the financial statements accurately reflect the financial reality, that process is unsustainable. The history of the matter suggests otherwise. In any event, since Mr Berkowitz’s decision to sell the Business to [the Company], the actual income and financial resources available to him are no longer the issue; it is appropriate to assess him on the basis of his earning capacity.

Just and equitable

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

2. Mr Berkowitz’s household consists of himself, the three children, [Ms B] and her two children from a previous relationship. [The Company] provides him with a car and a phone. He makes a contribution towards the car’s running costs. Given the very broad nature of the evidence concerning Mr Berkowitz’s previous income, and his consequential earning capacity, the Tribunal does not consider it necessary to quantify the value of the provision of the car and phone. Mr Berkowitz stated that he has no significant personal debts (thereby overlooking his child support debt). He agreed that his household expenses are unremarkable.

3. Ms Berkowitz receives parenting payment and family tax benefit. At different times she has also earned income by cleaning houses, working for a few hours per week at the children’s school, and selling nutritional supplements.

4. She stated at the directions hearing that she would be “lucky to clean three houses per week”, and she stopped cleaning houses “three to four months ago”; i.e. around August or September 2019. She was directed to provide the bank account statements from 1 March 2019 to 30 September 2019 of what she referred to as her “main” bank account. She provided bank account statements for the period from 26 June 2019 to 30 September 2019. At the full hearing she claimed, in effect, that she had misunderstood the written directions.

5. Mr Berkowitz provided a video of Ms Berkowitz stating on 23 May 2019:

   To be fair, though, I clean house. So look on average I might clean three or four houses a week. So I am being totally honest I do clean for a living part time.

6. At the hearing, she acknowledged making that statement, but stated it was in fact false. She said she cleaned houses from November 2018 to May 2019. She initially said she cleaned an average of two houses per week, and later said she cleaned an average of one to two houses per week.

7. She provided a payment summary which showed that she earned $1,798 during the period from 21 January 2019 to 30 June 2019 through her employment with the children’s school.

8. She stated that she earned $4,159 during the period from 29 April 2019 to 18 February 2020 through a nutritional marketing scheme, but she did not provide any documentation in respect of those earnings.

9. She provided a 2018-19 payment summary from Centrelink which showed that she received $19,990 in parenting payment. Parenting payment is income-tested. She said she reported all her earnings to Centrelink.

10. There were a number of aspects of Ms Berkowitz’s evidence that were unsatisfactory. However, the evidence suggests that her earnings are nevertheless very modest. The Tribunal is also mindful that one of the variables in the administrative assessment formula is a self-support amount, which is currently $25,575  per annum. If a person’s income is equal to or less than the self-support amount, they are considered to have a negligible capacity to financially contribute to the costs of the children. The evidence suggests that Ms Berkowitz’s income is approximately the self-support amount.

11. Ms Berkowitz’s household consists of herself and the three children. She lives in rented accommodation. She is undertaking full-time study to become [an Occupation 2]. She has no debts. She agreed that her current household expenses are unremarkable. However, she provided evidence concerning the child care expenses that she incurred until the end of January 2020. The Tribunal analysed that evidence during the course of the full hearing. Neither parent disputed that she incurred $3,288 per annum in out-of-pocket child care expenses during the period from 12 October 2018 to 27 January 2020. Ms Berkowitz sought a contribution from Mr Berkowitz. Mr Berkowitz disputed Ms Berkowitz’s need for child care.

12. Some cases allow for precise calculations of the parents’ incomes and financial resources. This is not one of those cases. As noted earlier, the evidence concerning Mr Berkowitz’s income, and his consequential earning capacity, is very broad. However, what is ultimately required is a decision concerning the rate of child support payable that is just and equitable (and otherwise proper). In the Tribunal’s opinion, varying Mr Berkowitz’s adjusted taxable income to $191,000 per annum, and not making any adjustment to that figure on the basis of the benefits that he received from Berkowitz Investments and continues to receive from [the Company], and not varying Ms Berkowitz’s adjusted taxable income on the basis of her intermittent receipt of very modest incomes, achieves that result. Mr Berkowitz has been required to pay child support on that basis since 26 November 2018 pursuant to the objections officer’s decision. Mr Berkowitz’s rate of child support payable since 26 November 2018 has been approximately $31,200 per annum. That is a relatively high rate of child support payable, and it is also important to keep in mind that Mr Berkowitz is also meeting a significant portion of the children’s costs directly via his care of the children. The Tribunal does not consider it appropriate to vary Mr Berkowitz’s rate of child support payable on the basis of Ms Berkowitz’s previous out-of-pocket child care costs.

13. However, the Tribunal notes that Ms Berkowitz applied to register a child support case on 26 September 2018. On 9 November 2018 the CSA registered the case with effect from 26 September 2018. Ms Berkowitz contacted the CSA on 13 November 2018 about applying to have Mr Berkowitz’s income varied. She completed a departure application on 23 November 2018 and she lodged that application on 29 November 2018. She very promptly disputed the administrative assessment that was based on Mr Berkowitz’s 2017-18 adjusted taxable income of $32,654, and it is appropriate to make a departure decision with effect from 26 September 2018. Doing so will increase Mr Berkowitz’s child support arrears by approximately $5,000. As at 7 February 2020 he owed child support arrears of approximately $15,000. The evidence suggests that he has the capacity to pay his current rate of child support payable and those increased arrears. The proposed decision will be just and equitable.

14. Even if Mr Berkowitz did not have the capacity to pay that rate of child support and those child support arrears, any resultant financial hardship would have to be viewed in the context of his election to lend $106,500 + $175,000 = $281,500 to [Ms B] during the first six months of the current financial year. Any resultant financial hardship, if it existed, would not make the Tribunal’s decision unjust or inequitable.

15. Mr Berkowitz’s previous adjusted taxable incomes, as assessed by the ATO, have borne little correlation with his actual income and financial resources, or his earning capacity. The corporate structure behind [the Company] seems designed, in part, to hinder any future enquiries into the true extent of Mr Berkowitz’s income and financial circumstances. It is desirable to make a departure decision with a significant prospective effect. It is appropriate to make a departure decision with effect until 31 December 2022.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Ms Berkowitz receives family tax benefit in respect of her care of the children. Increasing Mr Berkowitz’s rate of child support payable vis-à-vis the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result will be otherwise proper.

DECISION

The decision under review is varied so that Mr Berkowitz’s adjusted taxable income is varied to $191,000 per annum from 26 September 2018 to 31 December 2022.

Appendix A

[Mr Berkowitz (Mr Berk)] and [Ms B]
Corporate structure from 1 July 2019