Campana and Campana (Child support)

[2020] AATA 1408

Campana and Campana (Child support) [2020] AATA 1408 (8 April 2020)

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2019/PC017350

APPLICANT:  Mr Campana

OTHER PARTIES:  Child Support Registrar

Ms Campana

TRIBUNAL:  Member S Hoffman

DECISION DATE:  8 April 2020

DECISION:

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

·     For the period 18 December 2018 to 30 April 2022, Mr Campana’s adjusted taxable income is varied to $172,583

·     For the period 18 December 2018 to 30 June 2019, Ms Campana’s adjusted taxable income is varied to $72,052

·     For the period 1 July 2019 to 30 April 2022, Ms Campana’s adjusted taxable income is varied to $57,366

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – benefits derived from business and trusts – 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 the child support assessment in respect of a daughter aged 16 years old and a son aged 11 years old. The case was first registered on 2 June 2016 with Services Australia – Child Support (the CSA). The CSA started collecting child support from that date. The father pays child support to the mother.

2.On 18 December 2018, the mother lodged an application for a change of assessment with the CSA. At that time, according to the CSA’s records, she was providing 73% of the children’s care and the father was providing 27% of their care. The father was required to pay $5,868 a year in child support based on deemed income for him for 2017/18 of $53,665 and an estimate of income for the mother for 2018/19 of $13,035.

3.On 8 May 2019 a senior case officer from the CSA decided to vary the father’s adjusted taxable income to $215,000 for the period 18 December 2018 to 31 March 2023, and also decided that his adjusted taxable income was to increase annually from 1 July 2020 by the national weighted average of the consumer price index for the preceding March quarter (the original decision).

4.The father objected to the original decision as he disagreed with the adjusted taxable income amount for him and the mother objected as she wanted the decision backdated to the maximum 18 months.

5.On 7 August 2019, an objections officer from the CSA disallowed the objection, and affirmed the original decision.[1]

[1] The objections officer added a clause that would apply if the decision meant that a parent was assessed to pay less than the minimum rate of child support and had less than 14% care of all the children. If that was the case, a rate equivalent to the minimum rate of child support would apply.

6.On 6 September 2019, the father lodged an application for review with the Administrative Appeals Tribunal. A directions hearing was held on 5 February 2020 after which directions were issued. The matter was heard on 8 April 2020. Both parties attended via conference telephone and gave sworn evidence. The father was represented by his lawyer [Representative A] from [a named firm].

7.The tribunal had before it documents provided by the CSA (numbered 1 to 1,574 and 1,575 to 1,606); by the father (numbered A1 to A143); and by the mother (numbered B1 to B40).  Copies of these documents were sent to the parties before the hearing. Both parents said they had received them.

ISSUES

8.The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act). The Act provides for an administrative assessment of child support to be paid. Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:

i.A ground is established; and

ii.It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and

iii.It would be otherwise proper to make a particular determination.

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

10.If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include 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 – Does a ground exist to depart from the administrative assessment?

11.Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the rate of child support because of the income, property and financial resources of either parent.

12.There are certain complexities inherent in this case. The tribunal’s obligation is to pursue the objective of providing a mechanism of review that it fair, just, economical, informal and quick. The Court has observed that the tribunal is accordingly not required to undertake a "forensic audit" or major investigation of the financial circumstances of a party. Rather, the tribunal must be satisfied on the balance of probabilities as to the party's income, property and financial resources.[2]

[2] Morse & Potts [2010] FMCAfam 1305, Shearer & Benson & Anor [2011] FMCAfam 623

What is the father’s income for child support purposes?

13.According to his Statement of Financial Circumstances (SFC) dated 10 October 2019, the father’s usual occupation is as an [occupation]/managing director and he has been employed by [Business 1] for 10 years. He said that he was not degree qualified and his area of expertise was with [a particular service]. In his SFC, he recorded that his weekly income from employment was $1,023 ($51,150 a year).

14.The father’s accountants provided information to the CSA which showed the father is or has been associated with a number of entities as follows:

·     [Business 1]

·     [Business 2]

·     [Business 3]

·     [Business 4]

·     [Business 5]

·     [Business 6]

·     [Business 7]

·     [Trust 1] – unit trust

·     [Business 8]

·     [Trust 2] – unit trust

·     [Trust 3] – discretionary trust

15.The accountants stated that of the [first five named, related] companies, [Business 1] was no longer trading but had not been wound up; [Business 2] and [Business 4] continued to trade but [Business 3] and [Business 5] were dormant. [Business 6] continues to trade, as do the three trusts.

16.[Business 7] and [Business 8] are trustee companies only and are dormant.

17.[Trust 3] owned one third of the shares in [Business 1], [Business 3], [Business 4] and [Business 6]. The father owned one third of the shares in each of the two dormant trustee companies. [Trust 3] owned one third of the units in the two property trusts.

18.The accountants also advised that the father was employed by [Business 2], and he did not hold any shares in that company although he was a director. They wrote that the father does not hold control of any of the entities and to their belief, he does not have control of any of the assets inside the entities. It was submitted that of the 11 entities, the father was a director of 10 of them, and a trustee for one.

19.The financial statements for [Business 2] for 2018/19 show a net operating loss of $36,755 and a net asset position of $248,198. In a letter to the CSA dated 23 June 2019, the father wrote that a client became insolvent and the company had to bear a bad debt of $678,084. At that time, he suggested the loss for 2018/19 would be $349,453. The loss was clearly not as bad as that.

20.The financial statements for [Business 1] for 2018/19 show a net operating profit of $857 and a net asset position of $384,961.

21.The financial statements for [Trust 3] for 2018/19 show a net operating profit of $20,000, which was distributed in full to the father, and a net asset position of $10.

22.The financial statements for [Business 6] for 2018/19 show a net operating loss of $69, and a net asset position of $(12), being a liability of $12.

23.The financial statements for the [Trust 1] for 2018/19 show a net operating profit of $299 and a net asset position of $(83,776), being a liability in that amount.

24.As discussed below in more detail, a Court Order was issued in October 2015 requiring the father to ensure [Business 2] made a weekly payment of $556 the mother. In a letter to the CSA dated 23 June 2019, the father referred to a change in the operating entity from [Business 1] to [Business 2], and that this occurred as a result of accusations made by the mother which were disproven. He wrote that because of these, it was the decision of the majority shareholder to change the operating entity to protect his (the majority shareholder’s) interests. The father wrote that he was offered the position of working director and in this capacity the father accepted all operating liability for the entity.

25.In relation to the foregoing, the objection decision included the following paragraph, which captures some of the complexities of this matter:

Whilst I acknowledge that [the father] is not a shareholder of [Business 2], it is a company that is noted in the Court Orders as having to provide [the mother] with a company vehicle, fuel card and the payment of $556 a week. I find it very hard to accept that a court would make an order that would bind an unrelated third party in a Family Law matter. I would also point out at this point, that the legal ownership of an entity is not critical as [the CSA] can also consider if income is being alienated for child support purposes. Given the above circumstances, it therefore seems likely that when the Court orders (sic), the Court determined that [Business 2] was also a primary resource of [the father]. I would also question why a Director earning $50,000 per annum would accept all operating liability for an entity without some other form of compensation.

26.The tribunal understands that the various company and trust structures have been in place for some years and does not consider they were set up to alienate income for child support purposes. Given the father’s limited shareholding in the companies listed above, the tribunal will focus elsewhere to ascertain an income for him for child support purposes.

27.The father’s 2018/19 tax return recorded his taxable income to be $95,583, made up as follows:

·     Income from employment – managing director [Business 2]      $53,196

·     Allowances, earnings, tips, director’s fees etc [Business 2]       $15,000

·     Dividends (franked $50, franking credit $21)  $      71

·     Franked distributions from trusts  [Trust 3]  $27,586

28.In addition, the father’s employer has made payments to the father characterised as loans. Copies of the [Business 2] general ledger were provided for accounts named ‘Loan – [to Mr Campana]’ and ‘[Mr Campana] personal expenses ‘.

29.The opening balance as at 1 July 2018 for Loan – [to Mr Campana] was $78,452.20. Three amounts totalling $7,617.54 were posted to the account, resulting in a closing balance as at 30 June 2019 of $86,069.94.

30.The opening balance as at 1 July 2018 for [Mr Campana] personal expenses was nil. A net amount of $53,490.36 was posted to the account during the year, resulting in a closing balance as at 30 June 2019 of $53,490.36. The postings for the year for both accounts total $61,107. [Representative A] identified two mispostings, and said the correct figure was $59,560, which the tribunal accepts.

31.There is what appears to be a journal transferring $61,107 from the father’s personal accounts to an account titled ‘Loan [named] Trust’. (This may be a mistake and should be a reference to [Trust 3].)

32.The tribunal notes that the description against the journal entry reads ‘Reallocate [Mr Campana] personal expenses to [number] to drawing account.’ The closing balance on the account named Loan [named] Trust as at 30 June 2019 was $128,637.69.

33.The father said that he spent the money that was posted to the loan and personal expenses accounts on personal expenditure including on the children, such as clothes, or going for dinner, and that it was covered by a Division 7A agreement.

34.The father submitted Division 7A Excluded Loan Agreements dated 15 May 2018 and 15 May 2019 between [Business 2] as the lender and [Trust 3] as the borrower. In brief, these set out that each unsecured loan must be repaid in full with interest within seven years of the loan being made unless it is converted to a secured loan for a cumulative term not exceeding 25 years. Each secured loan must be repaid in full with interest within 25 years unless converted to an unsecured loan in which case the terms for unsecured loans apply.

35.A written submission prepared by [Representative A] and dated 13 March 2020 referred to the father’s tax return for 2018/19 which shows his taxable income to be $95,583. It was submitted that “Further income which is payable to the [father] as per his tax return does not reach him in cash. Further monies are used…to make minimum repayments for the Division 7A loan…”.

36.As recorded above, the financial statements for [Trust 3] for 2018/19 show that $20,000 was distributed to the father that year. The same amount was also distributed to him in 2017/18. The father may well have used these amounts to make repayments against the Division 7A loan. The tribunal is required to consider the income, property and financial resources available to the parents. That the father could access $59,560 during the financial year to cover his personal expenses as he has done, and a further $20,000 to be offset against a loan, means that he has financial resources over and above other wage-earners on equivalent pay. These borrowings are different in character to, for example, a person taking out a bank loan. They are from an employer and in the father’s case, as is usually the situation with Division 7A loans, were treated as Division 7A loans because of his association with a company, namely [Business 2]. The father said that he used to be a shareholder in another of the [first five named] companies. As recorded above, through [Trust 3], he continues to have an interest in [those] companies and remains a director of them.

37.The tribunal is satisfied it would be unreasonable to disregard both the loans made to the father during the year, and the components of the father’s taxable income that are not paid to him in cash. These are financial resources available to him.

38.According to his SFC, the father has a Division 7A loan balance of $356,713. As the father said he is required to repay $20,000 a year of the outstanding loan amount, and the general ledger accounts show that he borrowed $59,560 during 2018/19, the tribunal is satisfied that $40,000 a year reflects the financial resources available to the father by virtue of his ability to borrow money in this fashion from the business and associated entities.

39.Given section 34A of the Act, which says the CSA Registrar must make a child support assessment when a new tax figure is available, the tribunal considers it appropriate to use the father’s taxable income as a starting point to arrive at an income figure that adequately reflects his income, property and financial resources for the purposes of child support.

40.In addition to the entities listed above, there is [Business 7]. The father is one of four directors. Of the 150 shares issued, the father holds 50 of them. It was submitted that these were held on trust in [Trust 3], such that the father and the mother each had an equal share.[3]

[3] The tribunal notes that the written submission states that 50 of 150 shares is equivalent to 30% of the shares which is incorrect; they represent 33.3% of the shares. This discrepancy is immaterial in relation to this review. 

41.This company owns three properties each valued at $600,000. A commercial loan facility of $1,430,000 from [a named] bank is secured against the three properties. The mother said that as far as she understood, she and the father had equal interests in these properties. It was submitted that the value of each of their interests was $190,500. Given the parents’ interests are of equal value, the tribunal will not consider these further as far as their incomes for child support purposes are concerned.

42.Two of the properties are tenanted by unrelated parties and the rental income from these properties are recorded in the financial statements for the [Trust 1], which recorded a net operating profit of $299 for 2018/19, which is immaterial.

43.The father lives in the third property. He does not pay rent or any of the usual costs such as gas, electricity, water or telephone. The other shareholder in [Business 7] is [Ms A]. [Mr A] is a director. [This family] are shareholders and/or directors in some of the other entities in which the father has or had an interest. The mother said that [Mr A] is the children’s godfather. This suggests that there has been a longstanding business and personal relationship between the father in particular and [this family].

44.In documents provided to the CSA to support her change of assessment application,[4] the mother stated that before separation, they (meaning her, the father and the children) had lived in a house in [Suburb 1] for seven years at no cost. She also stated “I had always understood that the house, the cars, the private schools were all part of the pay [Mr Campana] received for his work with [Mr Campana] (sic) and the company”.

[4] Page 280 of the CA documents

45.The tribunal finds that the free accommodation is a benefit the father receives because of his business interests. Median rents in Perth have been $350 a week ($18,200) for the last three years.[5] On top of that a person would normally pay for the cost of utilities. The tribunal will only take account of the rent which, grossed up, is equivalent to a benefit of about $27,000.

[5] Perth Now (2020) Perth Rents Rise accessed 10 April 2020 at align="left">46.The father said that he is required to travel a lot for his work and when he is interstate, he is provided with accommodation and transport. As this is work-related, the tribunal will not consider these costs further. However the father has a vehicle when in Perth which he uses for personal as well as business reasons. He said he used it to make a round trip of about [distance] every other week to see the youngest child. He confirmed that all the vehicle costs including fuel costs are paid for by his employer. Both parents drive cars that are provided by the business. (The ownership of the mother’s car was transferred from the business to her in about November 2019 as set out below.) Company records show that the fringe benefit value of the mother’s car, a [Brand 1], was $8,439.93 in 2018/19. The father’s fuel costs are paid by the business for personal as well as business use. The tribunal will value the motor vehicle benefit to the father at $10,000 a year, taking $8,440 as an appropriate starting point, and adding to that $1,560 a year ($30 a week) in respect of fuel costs for personal use. The tribunal notes that the father estimated that the round trip to see his son every other week cost $90 in petrol.

47.The tribunal therefore assesses the father’s income for child support purposes to be $172,583 a year ($95,583 + $40,000+ $27,000 + $10,000).

What is the mother’s income for child support purposes?

48.The mother’s taxable income for 2018/19 was $31,216. This included $1,218 from employment as [an occupation 1], $15,145 from newstart allowance and $14,686 withdrawn from two superannuation funds.

49.The father submitted a [Business 1] fringe benefit tax return for 2018/19 in relation to the [Brand 1] which was made available to the mother for her use. According to the return, the fringe benefit value to her was $8,439.93.

50.It was submitted that the father essentially reimburses the company for this cost as it is offset against his loan account. There is a debit entry of $8,439.93 in the [Business 1] general ledger loan account called [Trust 3], the balance of which was $183,167 as at 30 June 2019.

51.The father also submitted a PAYG payment summary for 2018/19 from [Business 1] showing the company paid the mother gross pay of $32,396 less tax of $3,484, giving net pay of $28,912. The weekly equivalent is $556.

52.The mother’s position is that this amount is spousal maintenance. She agreed that although there are Court Orders in relation to this regular payment, there were no written orders or agreements explicitly stating that this was spousal maintenance. She said that it was discussed between the lawyers and in this regard, referred to a letter from her lawyer, [Lawyer A]. A letter dated 14 November 2019 from [Lawyer A] addressed to ‘To whom it may concern’ refers to the payment of $556 a week being discussed as being spousal maintenance. He also wrote that the Court Orders were issued as a response to his application for spousal maintenance for the mother. He further wrote that there was no discussion at the time that this payment was a payment of wages.

53.According to clause 8 of the Court Orders made [in] October 2015 by the Family Court of Western Australia, “Commencing 22 October 2015 the Respondent do all things necessary to ensure the Applicant receives the sum of $556 every Thursday from [Business 2]”.[6]

[6] See page B26

54.Further Court proceedings in 2017 recorded that matters in dispute included “current financial arrangements in the payment of a wage from the company [Business 1] to the applicant mother or spousal maintenance.”[7] It appears from the written submission dated 13 March 2020 that since 2017, there has been little or no progress towards a property settlement between the parents.

[7] See Page 289 of the documents

55.The mother said that prior to the parents separating, $1,112 was paid into a joint account and she took half. The father said that the payment was always regarded as a wage, it had never been applied for or been court ordered. He said it was a benefit from a company that does not operate anymore, which was why [Business 2] had taken over the requirement for the payment to be made.

56.The objection decision refers to an email from the father to the mother dated 27 June 2018 which stated “I have to work, I have no choice, it pays for your spousal maintenance”.

57.The tribunal is not prepared to make a finding as to whether the weekly payment of $556, which has been paid to the mother for more than five years, is spousal maintenance or not as it considers it to be a matter for the Court to resolve. It also notes that the Court Orders required the father to ensure that the mother could continue to use the [Brand 1 car], and that he was to pay, or cause to be paid, the car registration and insurance for [that car].

58.While not being prepared to make a finding as to the nature of these payments, due to the ambiguity around them, the tribunal is satisfied that the payments of $556 a week and those associated with the car should be factored into the mother’s income for the purpose of child support as they represent a financial resource and property available to her.

59.According to the written submission dated 13 March 2020, the company has paid about $46,674 a year on behalf the mother, including traffic fines, superannuation, tax due on the net payment of $556 a week and fringe benefits tax. It was submitted that about five months previously (say, November 2019) the Australian Taxation Office required back payment of the fringe benefit tax of approximately $38,000, after which the car was transferred into the mother’s name. The documents include notices issued April 2016 and September 2017 to do with traffic-related offences, which precede the period relevant to this review. As for superannuation, the tribunal has not taken into account superannuation paid on behalf of the father with regard to his income for child support purposes. There is no reason to do so and there is no reason to do so in relation to the mother.

60.That a [named] company has been paying these costs since late 2015, and there have been compensating entries to the father’s loan account, is not a matter for the tribunal to resolve through the child support system some four years later.

61.The tribunal considers that $72,052 adequately reflect the mother’s income, property and financial resources for 2018/19. It is made up of her 2018/19 taxable income of $31,216 plus $32,396 (the grossed up amount from which she is paid $556 a week), and $8,440 being the benefit to her of being provided with a car.  

62.As already noted, the mother’s 2018/19 taxable income included $14,686 that she withdrew from her superannuation funds. In relation to her income from 1 July 2019, the tribunal will disregard the superannuation as it is not a payment she receives regularly. It considers that an income of $57,366 ($72,052 - $14,686) adequately reflects her income, property and financial resources from 1 July 2019.

How does the administrative assessment compare with an assessment of child support using the tribunal’s income figures for the parents?

63.When the mother lodged her application for a change of assessment on 18 December 2018, the father was required to pay $5,588 a year in child support based on his 2017/18 deemed income of $53,665 and the mother’s 2018/19 income estimate of $13,035.

64.These figures are based on both children being in the mother’s care 73% of the time, as was the case in December 2018.

65.Using incomes of $172,583 for the father and $72,052 for the mother results in a child support liability of $19,978 a year. (The tribunal would stress that because of the complexity of the child support formula, its calculations of rates of child support are just estimates.)

66.Given the difference between the father being required to pay $5,588 a year compared with $19,978 a year, the tribunal is satisfied that in the special circumstances of this case, the administrative assessment does result in an unjust and inequitable rate of child support, and that a ground for departure from the administrative assessment has been established pursuant to subparagraph 117(2)(c)(ia) of the Act.

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

67.As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother 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 a variety of factors, as set out in subsection 117(4) of the Act.[8]

[8] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi and Meares (SSAT Appeal) [2008] FMCAfam 886.

68.Section 3 of the Act makes it clear that parents have the primary duty to maintain their children, 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. In this case the father and the mother have the primary duty to financially support the children. 

Income, property and financial resources – the father

69.In addition to the information already set out, in his SFC the father recorded total outgoings of $1,097 a week ($382 plus $715) and that his income was $1,023 a week. The form was filled in before the change in care from 16 December 2019. He recorded child support payments of $112 a week ($5,824 a year) which was less than he was assessed to pay according to the CSA change of assessment decisions. As a result of these he was required to pay about $574 a week ($29,972 a year). The father is also required, as a result of the Court Order, to pay for the daughter’s school fees. He allowed $125 a week ($6,500 a year) for education expenses.

70.The father acknowledged in the SFC that his income figure did not include the value of non-cash benefits he received through his employment.

71.The father listed assets totalling $7,352 made up of cash at bank of $752, shares in [two named businesses], valued at $1,600 and household contents valued at $5,000.  He recorded $102,781 in his superannuation fund.

72.As for liabilities, the father wrote that he had borrowed $14,000 from his mother. He said that he was paying her back at the rate of $50 a week. He recorded HECS and Student Financial Supplement Scheme debts totalling $20,308 and, as already noted, he has a Division 7A loan balance of $356,713 which he said has to be repaid, and he has seven years in which to do so.

73.The father recorded other financial resources of $148,019. He explained this figure as being the value of his interest via [Trust 3] in [Business 1] ($148,000) and [Business 6] ($19), based on financial statements for 2017/18.

74.The father said that when he is required to travel interstate for work, his daughter travels with him and her travel costs are also paid for by his employer. This is another benefit to the father but as the daughter has only recently started to live with the father, and there are currently general restrictions on travelling because of the coronavirus, the tribunal will not consider this benefit any further.

75.There was nothing else of particular note in the father’s SFC. The father said that his mother lent him the money to pay for [Representative A’s] services for this child support matter.

76.According to the written submission dated 13 March 2020, the father’s arrears of child support were then about $22,000.

Income, property and financial resources – the mother

77.In addition to information already noted, according to her SFC dated 23 September 2019, the mother has $15 in her bank account. She valued her household contents at $3,500 and has $51,456 in her superannuation account.

78.Based on her SFC, the mother’s income including family tax benefit (FTB), child support of $125 a week and the regular payments of $556 totalled $1,135 a week which was just enough to cover her outgoings of $1,125 a week.

79.The mother’s main regular expense was $450 a week in rent. She allowed $120 a week to cover utilities including telephone, $70 a week on petrol and car maintenance, and $55 a week for each person for food. The father observed that the amount allowed for petrol - $50 a week – seemed too high.

80.The SFC was filled in while the daughter was in her care for 73% of the time. Now the daughter is in the father’s 100% care, the mother said her FTB has reduced by about $150 a week. The costs of food and other expenses will have reduced as well with one less person in the house.

81.The mother listed a number of debts, including $17,022 owed to [a finance company] for a personal loan, $4,161 owed in credit card debts, $3,000 owed to her mother and $36,000 owed to her lawyer [Lawyer A].

Other issues pertaining to the parents’ incomes, property and financial resources

82.Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met. These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.

83.The tribunal is satisfied that the father has continued to work full-time in the same job he has had for 10 years, and it need not consider this provision further in relation to him.

84.The father has variously claimed that the mother has undeclared income from [occupation 1] jobs and that she has the capacity to work and earn more than she does.

85.Emails were submitted[9] from the mother to the father where she refers to having an interview and working part-time. These are dated January 2018 and therefore relate to a period before the change of assessment was lodged. The mother’s tax return for 2018/19 did include some income from employment which she said was from [an occupation 1] job.

[9] Pages 1214 on

86.The mother’s income in recent years has been variable. Her taxable income was $32,396 in 2014/15, $11,416 in 2015/16, $60,537 in 2016/17, $50,923 in 2017/18 and $31,216 in 2018/19. Her tax return for 2014/15 includes gross pay of $32,396 from [Business 1]. According to the original decision, it appears that her taxable income for 2016/17 and 2017/18 included the same amount paid by [Business 1] or [Business 2] although the mother has not been employed by them. That payment is not included in her taxable income as per her tax return for 2018/19 although [Business 2] issued a PAYG summary for that amount. The mother told the CSA that this matter is being investigated by the Australian Taxation Office.

87.The mother said her ability to work was affected by what had been happening at home. She said that the daughter had been struggling with anxiety and depression and sometimes she, the mother, had to go and collect her from school in [another town]. The father did not accept this on the basis that the daughter could make her own way home. The mother said that she has been doing work for the dole. She told the CSA that she was not working, as at that time, Centrelink had granted her a medical exemption from looking for work.

88.During 2018/19 and previous years, the mother was providing 73% care for both children. Changes to her income, especially if she was earning less than the self-support amount, would not have had much, if any effect on the rate of child support. The tribunal was not satisfied the mother has made changes to her work arrangements in the period relevant to this review, and that if she did, that they were substantially motivated by the effect they might have on the rate of child support.

89.The tribunal concludes that it is not open to it to make an earning capacity determination in respect of either parent, and need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.

90.The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act). There was no evidence before the tribunal specific to this provision and it will not consider it further.

High costs involved in enabling a parent to care for a child

91.Subsections 117(2B) and (2C) of the Act set out the criteria as to whether or not costs enabling a parent to care for the children can be taken into account in a child support assessment.

92.If a parent has at least regular care of a child (14%), as does the father, then only travel costs that enable the parent to spend time with, or communicate with, the child are relevant. These costs can only be taken into account if they are more than 5% of the person’s adjusted taxable income.

93.The father was seeking a change to the assessment in respect of costs associated with him travelling from Perth to [another town] every other weekend to see the son. He confirmed that because his vehicle costs were fully covered by the business, he had no out of pocket expenses in this regard. As he personally incurred no costs, the tribunal was satisfied it need not consider this provision any further.

Costs related to the children

94.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 they may have (subsection 117(6) of the Act).

95.The older child attends a private school. The issue of school fees was addressed in the Court Orders made in October 2015 such that the father pay or cause to be paid the private school fees. The parents agreed that they did not want the tribunal to consider the issue of school fees. As noted above, the father included $125 a week for education expenses.

96.As the father does not pay any accommodation costs, these costs for the children were not included in his SFC. The mother only apportioned to the children a few of the expenses she listed in her SFC. She did not do so for costs such as rent and utilities, for example, even though a component of these costs applied to the children. The tribunal therefore had incomplete evidence regarding the actual costs of the children and concluded that using the “Costs of the Children Table” is reasonable in the circumstances of this case for the other costs (apart from education expenses) related to the children.[10] 

[10] Clause 1 of Schedule 1 to the Act. The table is available at the Department of Social Services website, accessed 11 April 2020 at align="left">Hardship

97.The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[11] in this respect:

This requires the Court to balance the “hardship” which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.

[11] [1991] FamCA 93

98.The tribunal is of the view that the mother’s financial circumstances are more precarious than the father’s. He works full time, he does not pay any accommodation costs and in addition to his weekly pay, he has access to the loan accounts and other benefits as discussed earlier.

99.The mother rents in the private market and is currently in receipt of Centrelink payments as well as the payment of $556 a week. She has a number of debts. She accessed her superannuation in 2018/19 which is only permitted in very limited circumstances, including being in financial hardship.

100.The tribunal’s decision will affect the rate of child support and reduce the father’s arrears of about $22,000 as follows.

101.From 18 December 2018 (when the change of assessment application was lodged) for about a year, the father was assessed to pay about $29,000 a year.

102.For the approximately four-month period from mid-December 2019 to mid-April 2020, the CSA assessment was about $15,000 a year or $5,000 for four months. The child support liability for the 16-month period was therefore about $34,000.

103.The tribunal will split the 16-month period into three to estimate the effect of the arrears; from about 1 January 2019 to 30 June 2019; 1 July 2019 to 30 December 2019; and four months to April 2019.

104.Using the tribunal’s figures for the parents’ incomes, for the first period the child support liability is about $19,978 a year, based on the father’s income of $172,583 and the mother’s income of $72,052. The liability is therefore $9,989 for six months.

105.For the second period the child support liability is about $22,148 a year, based on the father’s income of $172,583 and the mother’s income of $57,366. The liability is therefore $11,074 for six months.

106.For the third period (when the father is providing 100% care of the daughter) the child support liability is about $7,600 a year, based on the father’s income of $172,583 and the mother’s income of $57,366. The liability is therefore $2,533 for four months.

107.Using the tribunal’s figures, the liability over the 16-month period is about $23,596 ($9,989 + $11,074 + $2,533) compared with $34,000 for the same period, which represents a reduction in the father’s child support liability of $10,404, which leads to a reduction in the from about $22,000 to about $11,596.

108.The tribunal would stress its figures are only estimates because it has approximated each of the three periods in its calculation; the complexity of the child support formula; changes to the rate of child support during the period under review; plus the timing of when monthly liabilities arise and payments are made.

109.As for ongoing assessments, the father will be required to pay about $7,600 a year or $146 a week, which is about $34 a week more than he has been paying in recent months. (He has not been paying the assessed amount.) The tribunal is satisfied that the father has the capacity to pay this amount. It is also satisfied that he had the capacity to pay the higher liabilities of up to about $22,148 a year or $426 a week before the change in care in December 2019 because of the financial resources available to him, already discussed at some length, which are far more than his weekly pay.

110.According to the submission of 13 March 2020, from his gross pay of $1,023 a week, the applicant receives $643 after tax. On the basis that he can access $60,000 a year from the business which he said he uses to cover personal expenses, the father has access to a further $1,153 a week, amounting to $1,796 in total cash available to him on a weekly basis. The submission refers to the self-support amount which is currently $25,038 a year. That amount assumes a person has to pay for their own accommodation costs which is not the situation for the father; he pays no rent or mortgage or utility costs. The tribunal is satisfied the father has the capacity to pay a child support liability of up to $426 a week.

111.As noted the father receives a $20,000 a year distribution which he uses to repay $20,000 a year from the business loan, so that does not affect the cash available to him.

112.Based on the mother’s SFC, she will have to manage on a restricted budget as her FTB has reduced since December 2019 although her expenses will also reduce as the daughter is now in the father’s 100% care. Payment of the arrears of child support due to her will assist her financially.

Any other relevant matters

113.The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).

114.The tribunal notes that the father was required to pay, or cause to be paid, the private school fees. It is unclear whether these are paid by the business, by the father from his pay, or from amounts treated as loans to him by the business.

115.As observed earlier, there are complexities in this particular case, some of which are unusual. The tribunal is satisfied that on the balance of probabilities it has arrived at an appropriate income figure to reflect each party's income, property and financial resources, and is satisfied that its determination has struck a balance that is just and equitable to the children and the parents.

116.The tribunal has started its determination from 18 December 2018 as that is the date the mother lodged her application for a change of assessment. She requested the change of assessment was backdated 18 months. She said that she had thought about lodging an application before then but was worried how the father would react.

117.The tribunal notes that the objection decision recorded that the CSA had discussed the change of assessment option with the mother on several occasions between August 2016 and December 2018. It is in keeping with the usual practice of the CSA and the tribunal to use the date of lodgement as the start date of a departure determination as the other parent should be able to rely on the assessment notices issued, until a change of assessment process has been started, unless there is good reason to use another start date for the change. The tribunal is not satisfied that the mother’s explanation justifies backdating the change of assessment to a date earlier than the date she lodged her application for a change of assessment.

118.The tribunal asked the father if he anticipated changes to his income because of the impact of coronavirus, and he said no. The tribunal has decided to use 30 April 2022 as the end-date of its determination to give the parents some certainty for the next two years.  

119.It is open to either parent to apply for a change of assessment if their circumstances change before this determination ends.

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

120.The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.

121.The mother is in receipt of family tax benefit. The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.

DECISION

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

·For the period 18 December 2018 to 30 April 2022, the father’s adjusted taxable income is varied to $172,583

·For the period 18 December 2018 to 30 June 2019, the mother’s adjusted taxable income is varied to $72,052

·For the period 1 July 2019 to 30 April 2022, the mother’s adjusted taxable income is varied to $57,366