Bligh and Thornton (Child support)

[2019] AATA 3835

Bligh and Thornton (Child support) [2019] AATA 3835 (26 June 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC014896

APPLICANT:  Mr Bligh

OTHER PARTIES:  Child Support Registrar

Ms Thornton

TRIBUNAL:Member R Anderson

DECISION DATE:  26 June 2019

DECISION:

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

• The child support liability payable by Mr Bligh is varied to $2,832 per annum in respect of the period 15 May 2017 to 10 September 2017;

• The child support liability payable by Mr Bligh is varied to $7,614 per annum in respect of the period 11 September 2017 to 30 June 2018;

• The child support liability payable by Mr Bligh is varied to $7,792 per annum in respect of the period 1 July 2018 to 3 November 2018;

• The child support liability payable by Ms Thornton is varied to $427 per annum in respect of the period 4 November 2018 to 31 December 2019;

• The adjusted taxable income of Mr Bligh is varied to $57,000 per annum in respect of the period 1 January 2020 to 31 October 2020 and

The adjusted taxable income of Ms Thornton is varied to $38,000 per annum in respect of the period 1 January 2020 to 31 October 2020.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of both parents – residency of liable parent – ground for departure established – 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. Mr Bligh and Ms Thornton are the parents of [Child 1] and [Child 2].  According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 16 May 2016. However, it was not until 15 May 2017 that the Department became responsible for the collection of child support from Mr Bligh.

2. The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act). The administrative assessment is generally based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department.

3. According to departmental records, as Mr Bligh had not lodged an income tax return his adjusted taxable income used in the administrative assessment was based on two thirds of the male total average weekly earnings (MTAWE) as set by the Australian statistician, which for a child support period commencing in 2016 was $47,504 per annum, commencing in 2017 was $48,308 per annum and commencing in 2018 was $49,071 per annum. Ms Thornton’s adjusted taxable income has consistently fallen below the self-support amount.  Based on Ms Thornton’s sole care of the children, the annual rate of child support payable by Mr Bligh was calculated at around $5,800. 

4. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act if they consider the administrative assessment results in an unfair amount of child support payable by one parent.  Ms Thornton lodged such an application in March 2018, on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Bligh (Reason 8).

5. On 11 May 2018, a delegate of the child support registrar found that a ground was established and decided to vary the adjusted taxable income of Mr Bligh to $90,600 per annum for the period 6 March 2018 to 28 February 2020.  In addition, the self-support amount used in the administrative assessment in respect of Mr Bligh was to increase by $18,200 per annum for the same period to account for Mr Bligh’s claim that as a temporary resident he has no entitlement to receive the tax-free threshold. 

6. Mr Bligh lodged an objection in June 2018, cross applying on the basis of Reasons 1, 3, 5 and 7. On 1 August 2018 an objections officer found that no ground was established other than in respect of the income, property and financial resources of Mr Bligh and disallowed the objection.

7. On 27 August 2018, Mr Bligh lodged an application to this tribunal for an independent review of the Department’s decision.  The directions hearing was conducted by telephone with both parties on 12 March 2019.  Mr Bligh confirmed that he was only pursuing a ground in relation to the earning capacity, income, property and financial resources of the parties.  Following this hearing, directions were made to both parties requiring them to provide further information and documents. The hearing was held on 28 May 2019. Both parties participated by conference telephone and gave oral evidence on affirmation. 

8. The tribunal considered information in the documents numbered 1 to 716 provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975, documents lodged by Mr Bligh numbered A1 to A63, documents lodged by Ms Thornton numbered B1 to B9 and further documents from Centrelink numbered D1 to D7. 

9. All of the documents were provided to all parties prior to the hearing. However, it came to light at the hearing that Ms Thornton was yet to receive all of those documents due to a change of address not being advised. Consequently, the tribunal decided to defer making a decision in this matter in order to allow time for Ms Thornton to receive and peruse the documents that were before the tribunal and to provide a response to the information contained therein. Following the hearing, Ms Thornton and Mr Bligh provided further evidence, numbered B10 to B58 and A64 to A99 respectively.  Further information was also received from Centrelink, numbered D8 to D13.  All of the additional information was sent to the parties for comment.  As no further comment was received, the tribunal proceeded to make a decision on 26 June 2018.

ISSUES

1. When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

   ·         whether a ground exists to depart from the administrative assessment; and if so

   ·         whether any proposed departure is fair to Mr Bligh, Ms Thornton, [Child 1] and [Child 2]; and if so

   ·         whether any proposed departure is fair to the public.

CONSIDERATION

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

1. The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words ‘in the special circumstances of the case’. The meaning of this expression is not defined in the Act. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).

Reasons 8A and 8B – the earning capacity, income, property and financial resources of each parent

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by either parent because of the available income, property and financial resources available to them. The Act goes on to state in subsection 117(7A) that the decision maker must have regard to ‘the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income’ and disregard ‘the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child’.

2. It is noteworthy that [in] November 2018 in the Family Court of Australia at Melbourne, consent orders resulted in Mr Bligh having sole care of [Child 1] and [Child 2], with Ms Thornton spending supervised time with the girls one to two times per week.  Consequently, Ms Thornton became the parent liable to pay child support to Mr Bligh in respect of [Child 1] and [Child 2] for the period commencing 4 November 2018. The Department is responsible for collection of child support from Ms Thornton.

3. Mr Bligh submitted that based on the expenses of Ms Thornton, he does not accept that her income is as little as she states it is.  Furthermore, he raised the issue of the incorrect treatment by the Department in respect of his foreign properties. He maintains that his annual income tax returns, as lodged with the ATO, are an accurate reflection of his available income and financial resources, acknowledging that losses incurred in respect of his foreign investment properties are considered to be discretionary spending and therefore do not reduce his taxable income for child support purposes. However, Mr Bligh is yet to lodge an Australian tax return.

4. Mr Bligh gave oral evidence that at the time of the birth of [Child 1] and [Child 2] he was working as a fly-in fly-out worker, returning to Australia on alternate months on a tourist visa to spend time with his family.  Following the separation of Mr Bligh and Ms Thornton, the employment of Mr Bligh was terminated in September/October 2016. As a tourist visa did not allow him to be employed, he faced a period of unemployment before securing a temporary de facto visa through his partner at the time, which allowed him to seek employment.  Following the hearing, Mr Bligh confirmed that he held a [temporary Partner] visa from [June] 2017 to [October] 2017, following which he was granted a bridging visa while awaiting the outcome of his application for a [skilled] visa. Mr Bligh told the tribunal that he was granted the [skilled] visa from 16 April 2018, which is a permanent resident visa.

5. The tribunal is satisfied that Mr Bligh was permitted to work in Australia under both the [temporary Partner] and the [skilled] visas.  Mr Bligh maintains that while on a temporary visa he is not eligible to take advantage of the tax-free threshold.  As he has not yet lodged his 2017/2018 tax return, the Tribunal does not have the benefit of verifying such an assertion. At hearing the tribunal questioned Mr Bligh’s assertion based on its understanding that a migration visa does not determine one’s residency for tax purposes in Australia and therefore does not dictate taxation treatment. 

6. The tribunal undertook its own research into the taxation circumstances of Mr Bligh. While the tribunal agrees that Mr Bligh is eligible to be treated as a temporary resident for tax purposes and receive certain concessions, on the best evidence before it the tribunal understands that there is an additional step involved to determine if Mr Bligh is also an Australian resident for tax purposes.  Contrary to Mr Bligh’s submission, based on the tribunal’s research, it appears that it is only if you are also defined as a non-resident of Australia for tax purposes that you are liable to pay tax on every dollar earned and not receive the benefit of the tax-free threshold.  The definition of 'Australian resident', as defined in section 995-1 of the Income Tax assessment Act 1997 references the definition in the Income Tax Assessment Act 1936. Subsection 6(1) of the Income Tax Assessment Act 1936 defines, relevantly, a resident of Australia as follows:

   resident or resident of Australia means:

   (a)  a person, other than a company, who resides in Australia and includes a person:

   (i)  whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

   (ii)  who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; …

7. Further guidance in respect of the word “reside” is provided in taxation ruling TR98/17. Of particular note is clause 16 of the ruling which states that, “A migrant who comes to Australia intending to reside here permanently is a resident from arrival.” Mr Bligh had purchased property in Australia and in October 2017 lodged an application for a permanent visa. Mr Bligh commenced employment as a permanent full-time employee with [employer name] on 11 September 2017 as [an occupation 1].

8. It is not uncommon for a taxpayer to be a temporary visa holder in the eyes of the Department of Home Affairs, yet a resident for tax purposes.  The ATO makes it clear that one can hold a temporary visa and be considered a temporary resident, while also being an Australian resident for tax purposes.  This is despite not being considered an Australian resident under social security legislation.  The fact that as a temporary resident Mr Bligh may not be required to declare certain foreign income in his Australian tax return is not relevant to this review, as the tribunal is concerned with all income, property and financial resources available to the parties from sources both within and outside of Australia.

9. Given the circumstances of Mr Bligh as outlined above, in the tribunal’s view it would be difficult for Mr Bligh to justify that he was not an Australian resident for tax purposes while holding the [temporary Partner] visa.  As such, he has an entitlement to receive the benefit of the tax-free threshold. Based on his 2016/2017 and 2017/2018 [Country 1] income tax returns, Mr Bligh advised that he was not a [Country 1] resident.  Although Australia’s residency tests are not necessarily affected by the taxpayer’s residency status in any other country, this also supports a likely residency status for tax purposes in Australia as one must be a resident for tax purposes somewhere. 

10. Prior to 15 May 2017, the Department was not responsible for collection of child support and therefore has no authority in respect of collection from Mr Bligh.  Prior to commencing full-time employment in September 2017, Mr Bligh was unemployed while in Australia.  He clearly had access to financial resources to enable him to meet his expenses.  Had he submitted a tax return, the tribunal is satisfied that Mr Bligh would be assessed at a minimum on the annual rate of $2,780 and $2,832 during the 2017 and 2018 years and finds accordingly. 

11. While Mr Bligh is yet to complete his 2017/2018 income tax return, according to his 2017/2018 PAYG Summary his gross wages were $47,505 for the period 11 September 2017 to 30 June 2018, annualising to $59,178.  According to his payslip in respect of the fortnight ending 3 February 2019, his annual salary is $55,000.  Mr Bligh gave oral evidence that he received a performance bonus and other small bonuses which result in his annual wages exceeding $55,000 and he agreed with the tribunal’s observation that it would more than likely exceed $60,000 in the 2018/2019 year.  It was evident from the payslips that no pre-tax deductions existed.

12. Mr Bligh’s contract records the requirement for him to travel.  With no other evidence to observe, the tribunal is satisfied that it is appropriate to allow the amount of $3,300 per annum, based on the kilometre allowance allowed by the Commissioner of Taxation. Therefore, the tribunal finds that the estimated annualised income sourced in Australia by Mr Bligh in the 2017/2018 year is $55,878 and in the 2018/2019 year is $57,000.

13. Going forward, Mr Bligh gave oral evidence that the security of his employment is unknown as the company appears to be struggling.  Regardless, the tribunal is satisfied that given he is now a permanent Australian resident for tax purposes that his future annual tax returns as lodged with the ATO will provide an accurate indication of the income available to Mr Bligh from all sources, including bonuses and finds accordingly. As a permanent resident, Mr Bligh’s 2018/2019 tax return will be required to include worldwide income, net investment losses being added back for child support purposes.

14. According to Centrelink information, Mr Bligh has been entitled to family tax benefit in respect of [Child 2] and [Child 1] since 5 January 2019.  It is evident that he has chosen to receive his entitlement at year-end, following lodgement of his tax return.  As an income-tested benefit, it is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act). Consequently, for child support purposes, it is not considered to be a part of Mr Bligh’s adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).

15. Mr Bligh owns seven investment properties in [Country 1]. A letter from [Firm 1] Chartered Accountants in [Country 1] dated 3 May 2018 was before the tribunal.  The letter noted the significant decline in rental income since the 2015/2016 year in the vicinity of 30% as a result of the decline in the [related] industry and an oversupply of rental accommodation.  Furthermore, despite a profit being recorded in the 2016/2017 and 2017/2018 years, after allowing for the principal component of the mortgage repayments, the investment properties incurred a net loss in the 2017/2018 year ending 31 March 2018 of [currency]13,916.  The letter forecast the net loss in the 2018/2019 year, ending 31 March 2019 to approximate [currency]19,000.  As discussed above, such losses are considered to be discretionary and therefore do not reduce the income and financial resources available to Mr Bligh for child support purposes.

16. The tribunal considered the assets and liabilities of Mr Bligh.  According to the valuations at recent court proceedings in April 2019 and his Statement of Financial Circumstances, the combined bank account balances of Mr Bligh total $3,859, including balances in accounts held in [Country 1], [an two other countries]. The tribunal is satisfied that any interest earned on Mr Bligh’s accounts is minimal and has little or no impact on the child support assessment, the funds being largely exhausted to meet discretionary investment costs and his own living expenses during the period of unemployment.

17. The final property order made in the Family Court of Australia at Melbourne [in] May 2019 awarded Mr Bligh the balance of the joint [Bank 1] offset account of just over $88,000. Based on the agreed valuations at recent court proceedings, the [Property 1] awarded to Mr Bligh is valued at $1,300,000 with a corresponding mortgage of $318,992.  Mr Bligh’s investment properties in [Country 1] are valued at $2,190,772 with corresponding mortgages of $743,339. In addition, his [Car 1] is valued at $19,400 and household contents at $3,500.

18. Mr Bligh told the tribunal that he proposes to retain the property at [Property 1] and therefore needs to pay Ms Thornton the sum of $320,000. In response to a question from the tribunal, Mr Bligh stated that he will borrow from his parents in the first instance and sell what is necessary of his investment properties to make the payment in accordance with the final property order. Apart from loans from his parents in the vicinity of $200,000, Mr Bligh has no other liabilities.  Based on Mr Bligh’s evidence the loans are as a result of discretionary costs relating to his investment properties. Therefore, the tribunal calculates the net assets of Mr Bligh after payment of $320,000 to Ms Thornton to exceed $2,200,000 and finds accordingly.

1. The tribunal accepts the valuations submitted at the recent court proceedings in April 2019 that Mr Bligh holds a balance in his [named] superannuation account of $4,845 and $98,773 in [another account].   The tribunal is satisfied that no personal contributions have been made by Mr Bligh in recent times.

2. Mr Bligh told the tribunal that since 4 November 2018 he has had sole care of the children, as ordered by the Family Court of Australia at Melbourne [in] November 2018 and reflected in the child support register. Consequently, his estimate of average weekly expenses of the household as completed in October 2018 is inaccurate.  He told the tribunal that rent is now $420 per week and food approximately $150 per week. In addition, he estimates the education costs of the children to be $58 per week. Private health insurance premiums at $90 per week are considered to be discretionary costs.  Based on his oral evidence, the estimated “necessary” household expenses for him and the children approximate $40,000 per annum.  In response to a question from the tribunal, Mr Bligh stated that he manages to meet the weekly expenses of the household, however, he has had the assistance of his mother since late November 2018 who in addition to assisting with the care of [Child 2] and [Child 1], also contributes to the daily costs of the household.

3. While he foresees the future to be more difficult, Mr Bligh gave oral evidence that he has the capacity to rearrange his financial affairs such that he can meet the necessary expenses of him and the children.  He also noted that it may be necessary for him to reduce his working hours going forward in order to meet his caring responsibilities for the children. The tribunal notes that the administrative assessment allows for Mr Bligh to lodge an estimate of his income if it was to reduce by more than 15%. The administrative assessment also provides for an automatic reconciliation following lodgement of the relevant income tax return. 

4. Mr Bligh told the tribunal that he and the girls are in good health and that there are no special circumstances in relation to the needs of him, [Child 2] or [Child 1].  Therefore, the tribunal is satisfied that the costs allowed for in the administrative formula are fair.

5. The tribunal considered the financial circumstances of Ms Thornton.  She told the tribunal that she commenced contract work with [Employer 1] in early 2017, using her sole trader business.  She further stated that the invoices in the Department’s file are an accurate indication of her earnings. Ms Thornton is yet to lodge her 2017/2018 tax return.  According to [Bank 1] bank statements in respect of the period 8 March 2017 to 8 March 2018, unexplained deposits totalled $1,740.50.  Ms Thornton provided invoices to the Department in respect of her contracting work for the period 14 July 2017 to 8 June 2018.  The invoices totalled $2,158.25.

6. Ms Thornton was in receipt of parenting payment (single) pension (PPS) from 3 October 2017. Based on Centrelink information provided to the tribunal, it is evident that Ms Thornton was in receipt of a PPS pension at almost the maximum rate, totalling $15,104 in the period 3 October 2017 to 30 June 2018.  In order to be eligible for this rate of payment, Ms Thornton’s income from employment would need to be below $6,000 per annum. Therefore, the tribunal finds that Ms Thornton’s income from all sources in the 2017/2018 year is less than the self-support amount in the 2018 year of $24,535.

7. Mr Bligh made it clear that he considers Ms Thornton to be in receipt of undeclared income through [specified] work on a cash basis.  However, there is no evidence before the tribunal to prove that this is the case, nor is it the role of this tribunal to conduct a forensic audit in regard to her financial circumstances (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). He further submitted that Ms Thornton receives ongoing funds from her father’s deceased estate. Ms Thornton denied that she is the beneficiary of any part of her father’s deceased estate. While Ms Thornton may well receive assistance on occasion from her mother, there is no question that Mr Bligh has received significant ongoing assistance from his parents to assist him in meeting the shortfall on his investment properties in [Country 1]. It is apparent that both parties have received financial assistance from their parents and may well do in the future also. However, their parents have no legal duty to provide for them or [Child 2] and [Child 1] and there is no obligation for any assistance to continue. As such, the tribunal is satisfied that financial assistance received by either party from their respective parents bears little consideration in this case.

8. Regardless, the fact remains that during the period in which Ms Thornton had sole care of the children, based on Mr Bligh’s annualised income in the 2017/2018 year of $55,878 as discussed above, even if Ms Thornton were to receive income of $50,000 per annum, the impact on the child support liability payable by Mr Bligh would be negligible at around $2 per week.

9. In contrast, the adjusted taxable income used in the administrative assessment in respect of Mr Bligh at 1 September 2017 was $48,308, being two thirds of the 2017 MTAWE, increasing to $49,071 from 1 May 2018, based on two thirds of the 2018 MTAWE. The discrepancy when compared to the tribunal’s findings in respect of his actual income of $55,878 results in Mr Bligh being well under-assessed for child support in the period commencing 11 September 2017.

10. Prior to Ms Thornton being attributed with 0% care of the children from 4 November 2018, she continued to be in receipt of PPS at almost the maximum rate. According to Centrelink information in the period 1 July 2018 to 9 November 2018, Ms Thornton received $7,673. Ms Thornton then transferred from PPS to newstart allowance on 16 November 2018, receiving $3,971 in the period 20 November 2018 to 23 April 2019.  As such, the tribunal accepts that her annualised earnings from all sources remained closely aligned to the self-support amount in the 2019 year of $25,035 in the period 1 July 2018 to 23 April 2019.

11. Ms Thornton commenced employment at [Employer 2] in April 2019.  Following the hearing, provision of Ms Thornton’s contract of employment clarified that she was employed on a casual basis.  While Mr Bligh questioned the legitimacy of the contract given that no schedule was provided, her most recent payslips were before the tribunal.  The payslips clearly recorded her year-to-date gross earnings from 29 April 2019 to 26 May 2019 at $1,176, which annualises to $15,330. 

12. Ms Thornton gave oral evidence that she ceased receipt of newstart allowance when she commenced her position at [Employer 2], which is evidenced by Centrelink records received by the tribunal after the hearing.  It is noteworthy that if Ms Thornton were to resume an entitlement to newstart allowance in the future, it would be adjusted accordingly, based on her fortnightly wage earnings.  The tribunal is satisfied that her earnings from [Employer 2] and payments from Centrelink will likely remain below $25,035 in the period 24 April 2019 to 30 June 2019. 

13. As found earlier in these reasons for decision, the tribunal is satisfied that the available income sourced in Australia by Mr Bligh will approach $57,000 in the 2018/2019 year.  As observed above, while Ms Thornton’s income remains below the self-support amount it has a negligible effect on the child support assessment.  Conversely, the increased income of Mr Bligh has a significant impact on the assessment to 3 November 2018, prior to Mr Bligh being attributed with 100% care of [Child 2] and [Child 1].  The tribunal calculates the impact on the child support assessment from 11 September 2018 to 3 November 2018 to be an under-assessment of Mr Bligh of over $2,100.

14. In the period commencing 4 November 2018, the roles are reversed and Ms Thornton becomes the liable parent in respect of the child support assessment.  Given his level of care, the discrepancy in the income used for Mr Bligh in the administrative assessment will have no impact on the child support liability payable by Ms Thornton.  Furthermore, in the period where Ms Thornton was in receipt of newstart allowance and her income remained below $25,035, her child support liability will remain at the minimum annual rate of $427, with no impact on the administrative assessment. 

15. In the period commencing 24 April 2019, based on Ms Thornton’s oral evidence and Centrelink records, she is no longer entitled to receive newstart allowance due to her earnings.  In addition to the casual earnings from [Employer 2], Ms Thornton is currently seeking additional part-time work to supplement her income.  She told the tribunal that she had initially mistakenly understood that her hours would be full-time at [Employer 2].  In order to no longer have eligibility for newstart allowance, Ms Thornton’s earnings from employment as a single person with no dependent children must be in excess of $27,815 per annum ($1,069.84 per fortnight). 

16. According to Centrelink information, Ms Thornton was in receipt of family tax benefit parts A and B until 4 November 2018.  As discussed in respect of Mr Bligh, for child support purposes, family tax benefit is not considered to be a part of Ms Thornton’s adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).

17. The tribunal accepts the oral evidence of Ms Thornton that until commencing with [Employer 2], she had no superannuation account. She has since opened [a superannuation account] to accept the employer contributions.  The tribunal is satisfied that no personal contributions have been made by Ms Thornton in recent times.

18. The tribunal considered the assets and liabilities of Ms Thornton. According to her Statement of Financial Circumstances and oral evidence, her assets consist of a combined bank balance in [Bank 2] and [Bank 1] of approximately $910 and household contents of $900.  According to the valuations submitted for recent court proceedings, her [Car 2] is valued at $23,000. Following the hearing, Ms Thornton provided evidence of outstanding legal fees in excess of $88,000, which she submitted have now exceeded $100,000.  While she currently has a negative asset base, following actioning of the final property order in September 2019, Ms Thornton will have no liabilities.

19. After adjusting for lower rental, as advised by Ms Thornton, her estimated average weekly “necessary” expenses are now $486, or $25,272, closely aligned to the self-support amount in the 2019 year.  Ms Thornton gave oral evidence that she also incurs significant costs in relation to supervised contact with the children at $163 per session one to two times per week, which at this point in time is ongoing and represents a significant cost that is “out of the ordinary”.  Medical evidence in the form of a letter from [Psychiatrist A], dated 10 April 2019 recorded Ms Thornton as suffering from an adjustment disorder in need of ongoing support from a psychologist. In response to a question from the tribunal Ms Thornton stated that she is not on any prescription medication and her out-of-pocket costs to consult with her psychologist are around $110 per month.  She further stated that since reducing her rent she is currently able to meet her weekly expenses, albeit not without difficulty.

20. Based on the tribunal’s findings above, it is evident that while Mr Bligh may have been over-assessed in the period 15 May 2017 to 10 September 2017, the rate of his under-assessment from 11 September 2017 is far more, resulting in an overall under-assessment between 15 May 2017 and 3 November 2018 of almost $1,500.

21. In regard to the period commencing 4 November 2018, the tribunal is satisfied that prior to commencement at [Employer 2] in late April 2019, Ms Thornton’s available income and financial resources has remained below the self-support amount, reliant on Centrelink benefits and casual contract employment. Consequently, the child support liability at the minimum annual rate is appropriate and the tribunal finds accordingly. 

22. Commencing on 23 April 2019, Ms Thornton is no longer eligible to receive newstart allowance.  Based on her weekly expenses, the tribunal concludes that she will likely be in receipt of income in the vicinity of $35,000 to $40,000 per annum going forward. The tribunal finds Mr Bligh’s assertion that Ms Thornton is earning between $60,000 and $70,000 per annum to be unrealistically inflated.

23. The tribunal considered whether overall, the administrative assessment created an unfair outcome.  Had Mr Bligh lodged his 2017/2018 tax return in a timely manner it is unlikely that this would be the case. However, going forward, use of the tax returns of the parties as lodged with the ATO in the last relevant tax year, means that it is the 2017/2018 year that will apply in the 2018/2019 year.  The tribunal finds that this will not produce a fair outcome as it will not reflect the increased level of earnings in respect of Ms Thornton.  

24. While the period will be discussed later in these reasons for decision, for the reasons outlined above, the tribunal finds that special circumstances do exist in this case, in that the administrative assessment results in an unfair outcome.  As such, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Bligh, Ms Thornton, [Child 1] and [Child 2] 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 fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Bligh and Ms Thornton have the primary duty to financially support [Child 1] and [Child 2].

2. In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). There is no dispute that the children are in good health.  Furthermore, there is no evidence before the tribunal to suggest that special circumstances exist in respect of the children’s needs.

3. It is noteworthy that the administrative formula calculates the maximum cost for two children under 13 years with the combined child support income of the parents of almost $48,000 (based on combined adjusted taxable incomes of $95,000 as estimated by this tribunal in the period commencing 26 April 2019), to approximate $11,400 per annum. 

The earning capacity, income, property and financial resources and commitments of each parent

1. As found earlier in these Reasons for Decision, the tribunal is satisfied that Mr Bligh has had access to income in the vicinity of $55,878 per annum in the period 11 September 2017 to 30 June 2018 and $57,000 per annum in the 2018/2019 year.  The tribunal also concluded earlier that it is open to Mr Bligh to receive the benefit of the tax-free threshold.  In any event, in the alternative, if Mr Bligh declares himself as a non-resident for tax purposes, he clearly has sufficient financial resources such that he would not incur hardship, as he himself stated at hearing. Mr Bligh holds a significant level of assets in the vicinity of $2,200,000, largely in overseas investment properties.

2. The tribunal also found earlier that Ms Thornton’s income and financial resources prior to commencing employment at [Employer 2] remained below the self-support amount.  Going forward, the tribunal estimates her income to approximate $35,000 to $40,000.  While Ms Thornton’s assets are currently negligible, following finalisation of property settlement orders and finalisation of outstanding legal fees she will have over $200,000 in cash. It is noteworthy that Ms Thornton owns no property. 

Conclusion

1. After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Bligh and Ms Thornton and the needs of the children, the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support.

2. Clearly, Ms Thornton required the assistance of Mr Bligh to meet the costs of the children while in her sole care.  While Mr Bligh is currently able to meet the “necessary” costs of him and the children, this does not negate the obligation of Ms Thornton to contribute to the costs of [Child 1] and [Child 2] in accordance with her capacity. 

3. The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)).  In this case the tribunal considers it is limited by the date upon which the Department became responsible for collection of child support, being 15 May 2017. 

4. Following the hearing, Mr Bligh submitted that he has concerns in regard to the possibility of an endless cycle of dispute in relation to child support and sought a decision until the children turn 18 years of age.  Unfortunately, the issues raised by Mr Bligh in respect of possible future childcare costs incurred by himself, possible further self-employment income of Ms Thornton and concerns over the treatment of his overseas investment properties are all issues that need to be addressed through the change of assessment application process.  Without a degree of certainty, it is not open to the tribunal to make a decision into the future in relation to such issues. The tribunal further notes that taxation treatment in the future of the sale of some or all of the investment properties of Mr Bligh will also likely require a change of assessment application. In addition, the tribunal is cognisant of the increased costs of self-support in relation to Ms Thornton in respect of the supervised access with the children, which creates special circumstances. Following cessation of supervised care, Ms Thornton’s capacity to pay child support will clearly increase, albeit there is no clear timeframe as yet. 

5. In the normal run of events, the tribunal is satisfied that following a timely lodgement of the 2019/2020 tax returns of the parties, that the administrative assessment will then result in a just and equitable outcome in respect of the calculation of a child support liability payable by Ms Thornton to Mr Bligh in respect of the children.  The administrative assessment has the capability of adjusting the child support liability payable by either parent in accordance with any variations in care of the children and also has the capability through the estimate process of accounting for future reduced hours of work, as indicated by Mr Bligh as a possibility due to caring responsibilities when his mother returns to [Country 1].  The tribunal is also cognisant of the preference of the parties for some degree of certainty for a period in relation to the child support liability.

1. Therefore, the tribunal proposes to vary the rate of child support payable by Mr Bligh to Ms Thornton in the period 15 May 2017 to 10 September 2017 to $2,832 and to $7,614 in respect of the period 11 September 2017 to 30 June 2018.  For the period commencing 1 July 2018 to 3 November 2018, the tribunal proposes to set the annual rate of child support payable by Mr Bligh to $7,792. 

2. Commencing on 4 November 2018, when Ms Thornton becomes the parent liable to pay child support to Mr Bligh in respect of the children the administrative assessment results in Ms Thornton being liable to pay child support at the minimum annual rate of $427.

3. The tribunal considered the significant costs of supervised care and the overall financial circumstances of Ms Thornton as discussed above. At present there is no indication as to how long the supervised care will continue. The tribunal acknowledges that Mr Bligh is meeting the majority of the costs of the children, yet it is also cognisant of the significant discrepancy in assets of the parties, even following payment to Ms Thornton as a result of property settlement.  Therefore, the tribunal proposes to set the minimum annual rate as the child support liability payable by Ms Thornton to Mr Bligh in respect of the children until 31 December 2019.  If supervised care continues at that time, a change of assessment application will be required to decide if a departure is warranted based on the financial circumstances of the parties at that time. 

4. From 1 January 2020, the tribunal proposes to vary the adjusted taxable incomes of Mr Bligh and Ms Thornton to $57,000 and $38,000 respectively to 31 October 2020, whereby both parties have ample opportunity to complete and lodge their 2019/2020 tax returns. This results in an ongoing child support liability for Ms Thornton of approximately $3,200 per annum. 

5. The proposed decision will result in a decrease in the child support liability payable by Mr Bligh to 3 November 2018 when compared with the departure decision currently in place of around $2,000.  As Ms Thornton is yet to pay child support, her liability to date being offset against the arrears of Mr Bligh, this decision will result in Ms Thornton’s liability to 30 June 2019 approximating $280.  As Mr Bligh is the sole carer of the children, it is appropriate that he receive the benefit of such a refund. 

6. Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.

7. Mr Bligh told the tribunal that he does not consider Ms Thornton to be in hardship as he continues to maintain that she has access to significant funds from her parents and is shortly to receive $320,000 from him in accordance with property settlement orders. It is noteworthy that the property settlement was in respect of assets with no expectation of a requirement for them to necessarily be expended for everyday “necessary” costs. Furthermore, both parties had the benefit of a partial property settlement payment in excess of $100,000 each to assist with legal fees. Ms Thornton gave oral evidence that she has no savings and child support in excess of the minimum annual rate will cause her hardship.  She further stated that as Mr Bligh is able to meet his expenses, she does not consider that he or the children would experience hardship if the child support liability were to remain at the minimum annual rate.

8. Based on an annual income of $57,000, the tribunal is satisfied that Mr Bligh has the financial capacity to meet his own “necessary” expenses and those of the children, without drawing upon his asset base.  The tribunal is also cognisant of the fact that the tax withheld from Mr Bligh’s regular gross wages should now be significantly less and following lodgement of his 2018/2019 tax return he will receive his family tax benefit entitlement as a lump sum. 

9. The tribunal is satisfied that Ms Thornton has the ability to improve her financial position in the future.  In her present position, it is open to her to negotiate a payment arrangement with the Department such that she is able to meet the supervised care payments, meet the overpayment amount owing Mr Bligh and continue to meet current ongoing child support in the amount of less than $8 per week.

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

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be ‘otherwise proper’ to make a departure determination.

2. In this case Ms Thornton was in receipt of family tax benefit Part A and Part B at the maximum rate.  Given her low taxable income, the change in the child support liability payable by Mr Bligh will have no impact on her family tax benefit entitlements. 

3. Mr Bligh will likely be in receipt of family tax benefit Part A at between the maximum rate and the base rate.  Any increase in the child support payable by Ms Thornton will serve only to reduce his entitlement to family tax benefit Part A.  Based on his current earnings, while Mr Bligh is a single parent, he will likely be entitled to the maximum rate of family tax benefit Part B, which will not be impacted by an increase in the child support liability payable by Ms Thornton in January 2020.  Consequently, there is no cost to the public purse and the tribunal considers that it is otherwise proper to make the particular proposed determination.

4. It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based. In particular, in respect of the supervised care commitments of Ms Thornton and her overall financial circumstances.

DECISION

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

• The child support liability payable by Mr Bligh is varied to $2,832 per annum in respect of the period 15 May 2017 to 10 September 2017;

• The child support liability payable by Mr Bligh is varied to $7,614 per annum in respect of the period 11 September 2017 to 30 June 2018;

• The child support liability payable by Mr Bligh is varied to $7,792 per annum in respect of the period 1 July 2018 to 3 November 2018;

• The child support liability payable by Ms Thornton is varied to $427 per annum in respect of the period 4 November 2018 to 31 December 2019;

• The adjusted taxable income of Mr Bligh is varied to $57,000 per annum in respect of the period 1 January 2020 to 31 October 2020 and

• The adjusted taxable income of Ms Thornton is varied to $38,000 per annum in respect of the period 1 January 2020 to 31 October 2020.