Bright and Roden (Child support)

[2018] AATA 528

Bright and Roden (Child support) [2018] AATA 528 (18 January 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/HC012372

APPLICANT:  Mr Bright

OTHER PARTIES:  Child Support Registrar

Miss Roden

TRIBUNAL:Senior Member R Ellis

DECISION DATE:  18 January 2018

DECISION:

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

·      For the period from 13 September 2016 to 30 June 2017 Mr Bright’s adjusted taxable income is varied to $74,559;

·      For the period from 1 July 2017 to 31 December 2018 Mr Bright’s adjusted taxable income is varied to $50,000.

Catchwords

Child Support – Departure determination – Income and financial resources of parents – Business income – Decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. This review is about whether or not there should be a departure from the administrative assessment of child support.

2. Mr Bright and Miss Roden are the parents of [Child 1] (born April 2013) and there has been a child support assessment in place since 16 February 2016 with collection by the Department of Human Services, Child Support (the Child Support Agency) since 23 May 2016.  Mr Bright is the parent liable to pay child support under the assessment.

3. For the period from 20 July 2016 to 31 August 2016 the annual rate of child support under the assessment was $3,716 based on an income estimate of $52,142 for Mr Bright and a derived income of $Nil for Miss Roden.  For the period from 1 September 2016 to 30 June 2017 the annual rate of child support was to remain unchanged.

4. On 13 September 2016 Miss Roden applied to the Child Support Agency for a departure from the administrative assessment of child support on the basis of Mr Bright’s income, property or financial resources (commonly known as Reason 8A).  Mr Bright cross applied on the basis of the high cost of spending time with, or communicating with, the child (Reason 1); because the assessment was unfair due to payments or property he made to the child or Miss Roden or another person for the benefit of the child (Reason 5); and the high cost of child care (Reason 6).

5. On 18 January 2017 the Child Support Agency made a departure determination setting the adjusted taxable income for Mr Bright at $140,000 from 13 September 2016 to 12 December 2017 and at $142,940 from 13 December 2017 to 12 March 2019 (the original decision).

6. On 9 March 2017 Mr Bright lodged an objection to the original decision.  On 8 August 2017 the Child Support Agency allowed the objection in part so that:

   ·for the period from 13 September 2016 to 6 June 2017 Mr Bright’s adjusted taxable income was set at $140,000;

   ·for the period from 7 June 2017 to 31 August 2017 the annual rate of child support payable was set at $5,200;

   ·for the period from 1 September 2017 to 30 June 2018 Mr Bright’s adjusted taxable income is set at $142,800;

   ·for the period from 1 July 2018 to 30 June 2019 Mr Bright’s adjusted taxable income is set at $145,656;

   ·for the period from 1 July 2019 to 30 June 2020 Mr Bright’s adjusted taxable income is set at $148,912;

   ·for the period from 1 July 2020 to 30 June 2021 Mr Bright’s adjusted taxable income is set at $151,540 (the objection decision).

7. On 23 August 2017 Mr Bright applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).

8. A telephone directions hearing was held on 1 November 2017. Both Mr Bright and Miss Roden attended by conference telephone. Prior to the telephone directions hearing the Child Support Agency provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (638 pages).

9. Mr Bright and Miss Roden were directed to provide further information to the Tribunal and both complied.

10. A hearing was held on 16 January 2018.  Both Mr Bright and Miss Roden gave evidence on affirmation by conference telephone.  The Tribunal received documents folioed A1 to A130 from Mr Bright and B1 to B48 from Miss Roden which were the documents requested at the telephone directions hearing. These were distributed to the parties prior to the hearing.  Additional documents were also received from the Child Support Agency (pages 639-656).

11. At the telephone directions hearing and at the commencement of the hearing the Tribunal clarified with Mr Bright the reasons for his application.  Mr Bright said his two main concerns related to the amount of income used to calculate his child support and ensuring a true assessment of the income he was earning.  He acknowledged the Child Support Agency had not established any of the three grounds he sought under his cross application and he just wanted to focus on the income he was earning.  Miss Roden said she was simply seeking a fair amount of child support based on Mr Bright’s true earnings.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Agency for a determination to depart from the administrative assessment (section 98B).

4. Section 98C provides that the Child Support Agency may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this Tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and

   ·if so, whether it is just and equitable to make a particular departure determination; and

   ·if so, whether it is otherwise proper to make a particular departure determination.

5. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.

6. 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, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held:

   as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.

7. In Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the Tribunal is satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act.

9. The range of determinations which can be made includes variations to the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – is there a ground for departure?

1. A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property or financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

2. The administrative assessment in place prior to Miss Roden’s application for a change of assessment was based on a 2016-17 income estimate for Mr Bright of $52,142 and a 2015-16 adjusted taxable income for Miss Roden of $4,967.

3. Information provided to the Tribunal by Mr Bright in the form of his Australian Taxation Office (ATO) assessment shows his taxable income for 2014/15 as $6,740 and for 2015/16 as $1,100.  At this time Mr Bright was [an occupation] and ran his own businesses called [Business 1] and [Business 2].

4. In response to the Tribunal’s directions Mr Bright provided detailed financial information relating to [Business 1] including the company tax returns for 2014/15, 2015/16 and 2016/17 as well as his individual tax return for 2016/17.

5. In relation to [Business 1] the Tribunal finds that:

   ·Mr Bright was a director of [Business 1] and the company was deregistered in late 2016 with its ABN status cancelled from 1 November 2017;

   ·Company income was $744,242 in 2014/15, $652,843 in 2015/16 and $145,569 in 2016/17;

   ·Company expenses totalled $744,042 in 2014/15, $373,699 in 2015/16 and $145,186 in 2016/17; and

   ·Company depreciation expenses in 2016/17 were $15,530 including $14,840 for a [Car 1].

6. In relation to Mr Bright’s individual tax return for 2016/17 the Tribunal finds:

   ·Total income of $54,843 comprising income of $22,000 from [Business 1], $7,823 from [Business 3] and $28,520 from [Business 2] and a net rental loss of $3,500;

   ·Total deductions of $3,624 including ATO interest of $3,475;

   ·A primary production loss claimed of $28,580 and a non-primary production loss claimed of $11,462;

   ·Taxable income of $11,177; and

   ·Total business income for [Business 2] of $42,039 and total expenses of $13,519 including for [specified services] and depreciation.

7. Mr Bright also provided the Tribunal with a completed Statement of Financial Circumstances dated 8 September 2017.  Mr Bright states the following:

   ·His total average weekly income is $511 ($431 from his [Business 1] salary and $80 from rent on [his Property 1]);

   ·His total weekly household expenditure is $1,310;

   ·His employer is [Business 3]  with both [Business 1] and [Business 2] no longer operating;

   ·His 50 per cent share of the [Property 1] is valued at $94,000 and his share of the mortgage is $93,000;

   ·He owns two motor vehicles valued at an estimated $60,000 (2012 [Car 1]) and $8,000 (2011 [Car 2]) with $61,000 owed to [a lending company] for the [Car 1];

   ·He owns [number] horses valued at $8,000;

   ·His two superannuation funds have a gross value of $237,643; and

   ·He has a [Bank] Credit Card with an estimated $28,000 owing (this amount is confirmed by separate letter from the [Bank] dated 19 August 2017 stating the overdue amount is $29,688.38).

8. Additional evidence provided by Mr Bright to the Tribunal shows [Business 1] had a debt to the ATO of $110,893.27 as at 10 November 2017.  Mr Bright said this was incurred during the time he was using company profits to support Miss Roden and [Child 1] as well as his family in [City 1].  He said this included the period the Court ordered him to pay all of Miss Roden’s household expenses as well as child support which he simply could not afford.

9. The Tribunal also notes Mr Bright had a personal tax debt to the ATO of $44,837.32 as at 1 September 2017.  Mr Bright said the ATO had chosen not to pursue this debt as he had agreed to work with them on paying the outstanding [Business 1] tax debt.  Mr Bright said this was evidence of the mess he was now in.

10. The Tribunal discussed with Mr Bright the operations of [Business 1].  Mr Bright told the Tribunal his company had a contract with [Export Agency 1] sourcing the [products] they required for the export market.  He said he would purchase the [products] on behalf of [Export Agency 1]  and be paid $4.00-$6.00 per [product] depending on the location of the [products].  He said [Export Agency 1]  was the only exporter he purchased [products] for and [Business 1] had no other contracts.

11. Mr Bright explained that company income equated approximately to the number of [products] he purchased multiplied by the $4.00-$6.00 he received for each [Export Agency 1].  He said company expenses comprised mostly the cost of contractors he employed to assist him in sourcing the [products] and fulfilling his contact.  Other costs included the usual expenses expected for running such a business plus the travel and accommodation costs of the [product] selectors which was expensive.  These were the international clients who purchased the [products] from [Export Agency 1]  and it was his responsibility to pay for their costs as well.

12. Mr Bright said he was usually left with approximately $1.00 [per product] in his pocket and it was this money he used to maintain his family in [City 1] as well as Miss Roden and [Child 1].  In good years he did earn approximately $140,000 for himself.  He said this was how he paid the costs of supporting two families.  Mr Bright told the Tribunal he accepted he was earning good money then and supporting Miss Roden and [Child 1] accordingly but that was in the past.  He said by the time the child support assessment commenced in 2016 the business had started to go downhill and then he lost his contract with [Export Agency 1].  He pointed out that in 2016/17, company income had fallen to approximately $145,000 and after taking out the cost of the contractors and other expenses he was earning approximately $50,000.

13. Miss Roden said Mr Bright was a very wealthy man who had been earning an extremely high income.  She said the timing of his financial difficulties was very convenient given the child support he was supposed to pay.  She also found it difficult to accept that someone with Mr Bright’s experience and connections in the industry could no longer find work.

14. The Tribunal questioned Mr Bright about the loss of the [Export Agency 1]  contract.  He said he had made a number of mistakes including misleading [Export Agency 1]  about sending [products] to the wrong [place] and then trying to cover it up.  The Tribunal notes in evidence provided by the Child Support Agency a letter dated 13 July 2017 from the General Manager of [Export Agency 1]  stating the [business] contract issued to [Business 1] was terminated as at 30 November 2016.  He added that it was difficult to get work at the moment because his reputation in the industry had been damaged as a result of losing the [Export Agency 1]  contract.

15. Miss Roden told the Tribunal that Mr Bright had contracts with other providers including [two named companies] but Mr Bright denied this and reiterated his only contract had been with [Export Agency 1].  She said Mr Bright was still on the [Export Agency 1]  website and his brother worked for [Export Agency 1].  She said Mr Bright often made things up and had previously admitted to lying in affidavits and was a constant liar.  She also said that during court proceedings in December 2016 Mr Bright had offered to pay all her bills, rent and other expenses if she stayed in [City 1].  She said this indicated Mr Bright had more money than he was admitting to.  She said Mr Bright was deliberately claiming unemployment to punish her as she and her son were granted permission to leave Australia for [Country 1].

16. In response Mr Bright admitted he had lied about a number of things to hide [Child 1] from his family and friends.  He said he was desperate to keep Miss Roden and [Child 1] in [City 1] and did not want them to return to [Country 1].  He said he would never have been able to pay the bills he had offered to pay.  He had even hoped he could convince [Export Agency 1]  to reinstate his [business] contract but could not.

17. The Tribunal also asked Mr Bright about his current income and his relationship with [Business 3].  He said [Business 3] was set up by his wife and son as they could not survive on his wife’s income after he lost the [Export Agency 1]  contract.  He said the company paid him a very small salary but this was used to cover his car repayments, his telephone expenses, his proportion of the rent and other living expenses. 

18. Miss Roden pointed out that in conversation with the Child Support Agency Mr Bright admitted that his accountant had provided him with advice to shut down his companies and start a new company with his wife as the sole director.  She said this was why [Business 3] had been established.  She said his son was a [student] and worked as [an occupation 1] for [an agency] and could not possibly find time to work for [Business 3].

19. The Tribunal asked Mr Bright about the operations of [Business 3].  He said the company was different to [Business 1] as it did not purchase [products] on behalf of [exporters] but operated two steps down the chain.  He said [Business 3] marketed [products] on behalf of the owners and worked on a commission basis in competition with other agents like [two named companies].  He said his wife and [son did most of the marketing and there were no other employees.  He said his son studied on-line and worked shifts so he had time to help out at [Business 3].  He said [Business 3] had no relationship with [Export Agency 1].

20. The Tribunal questioned Mr Bright about the depth of his involvement in [Business 3] and he said the company was originally set up through the relationships his wife had with other [business people] and did not rely solely on his expertise.  He reiterated that after knowledge of his affair with Miss Roden became public and losing the [Export Agency 1]  contract his reputation in the industry had been destroyed.

21. The circumstances where a reduction of a parent's taxable income by alienation of personal services income or other income is known as income alienation.  This can result in an artificially reduced or increased child support liability.  In this case Mrs Bright has established a business which relies, in part, on the expertise and skills of Mr Bright but Mr Bright is paid a minimal income from the business.  Mr Bright has admitted he received advice from his accountant to set up a new business with his wife as the sole director and in this instance both Mrs Bright and Mr Bright’s son are directors.

22. Although not bound by policy as set out in the Department of Human Services Child Support Guide the Federal Court has held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation.  In this case, in relation to alienation of income, the Guide states at 2.6.14:

    Generally, income is alienated when the income generated or derived by a person is attributed to others and, consequently, reduces the first person's taxable income. Personal services income, or income derived through personal exertion, can be defined as income that an individual earns predominantly as a direct reward for their personal efforts. Personal services income paid to a company, trust or partnership is also alienation of income.

    If a parent is involved in alienation of his or her personal services income, this may indicate that he or she has additional income or financial resources that make the current child support assessment unjust and inequitable (CSA Act section 117(2)(c)(ia)).

    In determining whether personal services income has been alienated through a company, trust or partnership, the Registrar will consider the following factors:

    ·the nature of the parent's activities,

    ·the extent to which the income depends upon the parent's own skill and judgment,

    ·the extent to which the company's assets, or trust's assets, are used to derive the income,

    ·the number of employees and others engaged in the income-producing activity,

    ·the time at which the company, trust or partnership was established, and

    ·any other relevant matters.

23. The Tribunal notes in evidence provided by Mr Bright a statutory declaration from Mrs Bright dated 25 November 2017.  It states Mrs Bright established [Business 3] in November 2016 with her son as “a means to gain financial independence and provide an income to support myself and our children” and because Mr Bright was “financially and emotionally overwhelmed” and “unable to provide any financial assistance to me or towards payment of the debts incurred.”  The Tribunal also notes in evidence provided by Mr Bright an Australian Securities and Investments Commission (ASIC) record showing [Business 3] was registered as a company on 10 November 2016.

1. The statutory declaration provided by Mrs Bright goes on to state that Mr Bright is a casual employee with no set hours and [Business 3] pays him for essential payments such as his car loan, car insurance and telephone.  A letter from a firm of accountants to [Business 3] dated 5 December 2017 states that wages paid to Mr Bright were “for his expertise and experience relating to the [products] industry, in an administrative capacity” and were not paid to his bank account “but were paid directly to creditors”.  The Tribunal also notes this is the same accounting firm used by Mr Bright’s companies.

2. A 2016/17 company tax return for [Business 3] provided by Mr Bright shows total income of $96,444 and total expenses of $98,375.  A general ledger extract for [Business 3]  for the period from January 2017 to June 2017 shows a sum of $7,258.19 paid for motor vehicle and telephone expenses under the heading ‘[Mr Bright] Wages – Pd Expenses’.

3. Miss Roden said she was very frustrated with the process and had already highlighted in court how Mr Bright had tried to hide his money.  She said Mr Bright was involved with another company called [Business 4] which was also in the [same products] business. She provided evidence in the form of media coverage including [media] article dated [in] 2017 relating to the demand for cheaper [specified product] in [Country 2] and the business strategy [Business 4] has to meet that demand.  The article quotes Mr Bright as [representative] of [Business 4].  In addition she said Mr Bright had a large number of horses and was paid for his involvement in [a sporting event].  Furthermore Mr Bright’s wife had opened a [business] in May 2017 called [Business 5] and she believed this had been paid for by Mr Bright.  Miss Roden said the timing of the opening of these two businesses and her leaving Australia was very coincidental.

4. The Tribunal notes in evidence provided by Miss Roden an ASIC extract showing that [Business 5] was registered [in] June 2017.  Mr Bright said he had no financial involvement in his wife’s [business] and this was paid for by her family.  The Tribunal notes in evidence provided by Mr Bright a statutory declaration dated 25 November 2017 from Mrs Bright’s sister [named].  It states [she] has made several monetary loans to Mrs Bright totalling approximately $40,000 “after becoming aware of my sister Mrs Bright’s financial circumstances”.

5. The Tribunal is not satisfied, however, that the only direct financial benefit Mr Bright receives from [Business 3] is his salary.  Mrs Bright owns and operates a [business].  Mr Bright’s son is a student and has a job of his own.  Mr Bright, on the other hand, has considerable expertise in the [products] business and has time to focus on [Business 3].  For Mr Bright to be working at [Business 3] in an administrative capacity only does not pass the pub test.  Without further information on the expenses of [Business 3], however, it is difficult to ascertain the exact extent of any other benefit Mr Bright does receive from [Business 3].

6. Mr Bright responded to the other matters raised by Miss Roden by saying he was involved with [Business 4] but was not earning anything from the company.  He said he was working on the [Business 4] idea and hoped it would one day be successful.  He drew the attention of the Tribunal to evidence in the form of a letter from a Director of [an accounting company], the accountants and tax agents to [Business 4].  The letter, dated 6 December 2017, states Mr Bright has no equity interest in [Business 4] and is not a director.  It also states [Business 4] “did not make any sales and no revenue has been received” as at the date of the letter.  The Tribunal also notes, however, that [Business 3] is a shareholder in [Business 4].

7. In relation to his [sporting] activities Mr Bright informed the Tribunal he owned [number] horses and said this was a hobby.  He said he was involved in [a number of sporting events] a year around [City 1] and was required to be a member of the [professional] association in order to compete.  He said while he did earn some prize money the costs of maintaining the horses exceeded the prize money.  He said he charged about $3,000 [for each event] and after paying wages, the cost of feeding the animals and other expenses he made a profit of about $5,000 in total.

8. Miss Roden also raised concerns about the land owned by Mr Bright and Mrs Bright in [their region] as well as the property at [Property 2] which she said had been sold in February 2017.

9. Mr Bright told the Tribunal the house he was living in was being rented from a couple who were going through a divorce and he had never owned this property.  He said the other land they did have was a five acre block of land which was sold in early 2017 and his share was used to help pay his debts.  He said he earned no other income and his wife and son were paying his rent as well as helping with his living costs.  He said there was no family home and he owned no other property or assets of significance.

10. Both Mr Bright and Miss Roden raised a number of other matters during the course of the hearing which the Tribunal did not consider were directly relevant to the matter under consideration.

11. The Tribunal notes that in both the original decision and the objection decision the Child Support Agency set Mr Bright’s income at $140,000 being the amount he initially estimated in February 2016.  Mr Bright has explained this was based on his 2014-15 income when his company was performing well before he lost his contract with [Export Agency 1].

12. The Tribunal acknowledges there are certain advantages in being self-employed which are not generally available to salary and wage earners.  Such advantages may include being able to write off personal expenses against the business, reducing personal tax liability as a result of the way the business is structured and being able to claim business expenses which offer a parent some personal gain.  In such cases, assessing child support on the basis of taxable income only can result in an unjust and inequitable level of child support.

13. While this may be quite legitimate for tax purposes, the Family Court has found that such practices may not properly reflect the true financial resources or capacity of a person to contribute to the financial support of their children and may therefore be ignored.  For example, in Voss & Child Support Registrar (SSAT Appeal) [2009] FMCAfam 1296, the Court commented on the common situation of a self-employed person's taxable income not corresponding with his or her income or financial resources for child support purposes:

    There is a body of cases where simple reference to a person's tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn't properly reflect the realistic capacity of the person to provide financial support for their children.

14. For the purposes of assessing child support at the time Miss Roden applied to the Child Support Agency for a departure to the administrative assessment on 13 September 2016, the Tribunal finds Mr Bright’s income to be $74,559. 

15. The Tribunal has arrived at this figure in the following manner:

Amount ($)	Description
11,177	Taxable income for 2016/17.
28,580	Primary production loss claimed in 2016/17.  These represent losses carried forward from previous financial years and are relevant for taxation purposes only.  They should be considered as additional funds available for child support.
11,462	Non-primary production loss claimed in 2016/17.  As above.
3,500	Net rental loss on investment property at [Property 1] claimed in 2016/17.  These are legitimate losses for taxation purposes only.
14,840	Depreciation claimed on [Car 1] in 2016/17.  This represents, for taxation purposes, the loss or expense attributed to the use of business property or equipment.  A claim for depreciation can mean a parent operating their own business has additional cash in hand which can be considered as a financial resource available to them with regard to child support.
5,000	Total income from [sporting events].  Although a hobby for Mr Bright it represents income for the purposes of child support.

1. The Tribunal considers an income of $74,559 to be a fair reflection of Mr Bright’s income at that time.

2. This income is significantly higher than the income estimate for Mr Bright of $52,142 which was applied to the assessment when Miss Roden applied for a change of assessment.  When Mr Bright’s and Miss Roden’s respective incomes are applied in the child support formula, Mr Bright’s child support liability increases by approximately $2,900.

3. The Tribunal finds this to be significantly more than his liability under the administrative assessment and determines there are special circumstances and application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by Mr Bright in respect of the child.

4. On this basis the Tribunal finds there is a ground for departure from the administrative assessment.

Issue 2 – is it just or equitable to make a particular determination?

1. As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent, and the carer entitled to child support 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 consider the matters discussed below,[1] which are as set out in subsection 117(4) of the Act:

   [1] The Tribunal is required to give “overt consideration” to relevant factors listed in section 117(4) of the Act: Tyagi & Meares [2008] FMCAfam 886.

   (4)  In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (a)  the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b)  the proper needs of the child; and

   (c)  the income, earning capacity, property and financial resources of the child; and

   (d)  the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)  the earning capacity of each parent who is a party to the proceeding; and

   (e)  the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)  himself or herself; or

   (ii)  any other child or another person that the person has a duty to maintain; and

   (f)  the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)  any hardship that would be caused:

   (i)  to:

   (A)  the child; or

   (B)  the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)  to:

   (A)  the liable parent; or

   (B)  any other child or another person that the liable parent has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

The nature of the duty of a parent to maintain a child (as stated in section 3 of the Act)

1. Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments.

2. In this case Mr Bright has a relevant dependent child.  The Tribunal has taken this into account in making its assessment.

The proper needs of the child

1. In relation to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).

2. The Tribunal was not made aware that the parents expected [Child 1] to be cared for, educated or trained in a particular way or that [Child 1] had any special needs. The Tribunal determined it did not need to further amend its assessment to take in the needs of the child.

The income, earning capacity, property and financial resources of the child

1. The Tribunal is satisfied this is not relevant in the assessment.

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

1. The Tribunal has already considered in detail Mr Bright’s income, property and financial resources.

2. Miss Roden told the Tribunal she was struggling and Mr Bright had not paid anything towards [Child 1] in almost a year.  The Tribunal notes in evidence provided by Miss Roden that she is employed part-time as [an occupation] at [an employer].  Three separate payslips provided by Miss Roden show she earns between GBP950-1,150 net a month which equates to approximately A$26,400 a year. Miss Roden said she was seeking to reduce her work hours to 23 per week from January 2018 because [Child 1] was due to start at his new school.

3. Miss Roden provided the Tribunal with a statement of financial circumstances dated 28 November 2017.  It shows total weekly expenses of GBP574.50.  In addition to her salary, Miss Roden receives government benefits totalling approximately GBP149 a week.  Miss Roden has total assets, including a motor vehicle, valued at GBP1,500 and liabilities of GBP700 including an overdraft on her bank account.

4. Mr Bright did not raise any concerns about the Department’s assessment of Miss Roden’s income. He was solely concerned with the way his income had been assessed.

5. The Tribunal is satisfied that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met in this case.

Any hardship that would be caused

1. Mr Bright provided evidence that he has outstanding debts to the ATO and other debts which he currently has no capacity to pay.  The Tribunal finds his current income includes the salary he receives from [Business 3], rental income from his share of a property and earnings from [sporting events].  This would total approximately $17,000 per annum.

2. Based on the information provided at hearing the Tribunal is of the opinion that Mr Bright is likely to have a level of income that is higher than $17,000 per annum given his involvement in [Business 3].  Mr Bright even stated in conversation with the Child Support Agency that he had considered employment as a truck driver or labourer and could earn in the vicinity of $50,000 to $60,000 per annum.  Given his debt situation, it is unlikely Mr Bright would be earning only $17,000 per annum and finds a more reasonable salary level in light of likely income alienation in connection with [Business 3] to be $50,000 per annum.

3. Miss Roden, on the other hand, has expenses which exceed her current income and has also stated she has not received any child support from Mr Bright for some time.  The Tribunal is of the view Miss Roden leads a very modest lifestyle and is focussed on the need to support [Child 1].

4. The Tribunal proposes to make the following determination:

   ·For the period from 13 September 2016 to 30 June 2017 Mr Bright’s adjusted taxable income is varied to $74,559;

   ·For the period from 1 July 2017 to 31 December 2018 Mr Bright’s adjusted taxable income is varied to $50,000.

5. The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act).  As the child support assessment has only been in place since 16 February 2016 this would be the earliest date open to the Tribunal from which to make a determination.

6. The Tribunal must determine whether it is just and equitable to backdate the determination at all (that is, prior to the change of assessment application date).

7. The Tribunal makes the following findings:

   ·Miss Roden lodged a change of assessment application on 13 September 2016;

   ·Mr Bright was given the opportunity to provide detailed financial information in relation to his businesses to the Child Support Agency but did not;

   ·A departure determination was made on 18 January 2017 and Mr Bright objected to that determination but again did not provide detailed financial information in relation to his businesses; and

   ·The objection decision was made on 8 August 2017 and Mr Bright then sought a review by the Tribunal.

8. Neither parent raised the issue of backdating the assessment during the hearing process.  On balance the Tribunal is of the broad view that retrospectively changing entitlements should be avoided without compelling reasons.  In this case, in the absence of evidence about why the determination should be backdated, the Tribunal finds it just and equitable to commence the departure determination from 13 September 2016 and not from an earlier date.

9. The Tribunal also considered the decisions made by the Child Support Agency during the original decision and the objection decision to apply an income of $140,000 to Mr Bright.

10. The Tribunal accepts Mr Bright’s testimony that his business has collapsed since he lost the [Export Agency 1]  [products] contract.  The Tribunal is of the view, however, that Mr Bright is receiving a greater financial benefit from [Business 3] than just his current salary from that company.

11. The Tribunal finds that, for the purposes of child support, Mr Bright’s adjusted taxable annual income is $74,559 for the period from 13 September 2016 to 30 June 2017 and $50,000 for the period from 1 July 2017 to 31 December 2018. 

12. The Tribunal does not believe its decision will cause Miss Roden or [Child 1] any hardship.

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. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for children to be primarily supported by their parents rather than by government assistance. The Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.

2. As Miss Roden is currently living in [Country 1], any change that occurs as a result of the Tribunal’s decision will not impact the taxpayer in this instance.  The Tribunal is satisfied the change of assessment is otherwise proper in the terms of the Act.

DECISION

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

·      For the period from 13 September 2016 to 30 June 2017 Mr Bright’s adjusted taxable income is varied to $74,559;

·      For the period from 1 July 2017 to 31 December 2018 Mr Bright’s adjusted taxable income is varied to $50,000.