Derick and Derick (Child support)

[2021] AATA 2905

Derick and Derick (Child support) [2021] AATA 2905 (1 July 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/AC020819

APPLICANT:  Mr Derick

OTHER PARTIES:  Child Support Registrar

Ms Derick

TRIBUNAL:Member Y Webb

DECISION DATE:  01 July 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

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

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information 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 relates to the issue of child support regarding the two children of Mr Derick and Ms Derick. The children are now aged 13 and 12.  Services Australia (“Child Support Agency”) records the children are in the 56% care of Ms Derick and the 44% care of Mr Derick.

2. The child support case was first registered by the Child Support Agency on 25 November 2013 and has been collectable by the Agency since that date.

3. On 14 September 2020, Mr Derick applied to the Child Support Agency for a change to the administrative assessment on the basis of Reason 8A. 

4. At the time of Mr Derick’s application for a change to the assessment a previous change of assessment decision was still in place; that was a decision of the objections officer [A] made on 25 February 2019.  Objections officer [A] decided that for the period 1 September 2018 to 30 June 2020 Mr Derick’s adjusted taxable income would be varied to $58,854 per annum and for the period 1 July 2020 to 31 August 2021 Mr Derick’s adjusted taxable income would be varied to $61,797. 

5. This meant that for the period 1 September 2020 to 31 August 2021 the annual rate of child support payable by Mr Derick was $2,982 per annum based on the income set by the change of assessment decision of $61,797 and Ms Derick’s 2019/2020 adjusted taxable income of $47,085.

6. On 10 November 2020 the original decision maker decided to end objections officer [A]’s decision on 9 November 2020 and for the period 10 November 2020 to 30 November 2021 to vary Mr Derick’s adjusted taxable income to $171,173.

7. Mr Derick objected to that decision and on 15 January 2021 an objections officer set aside the original decision maker’s decision and decided to end objections officer [A]’s decision on 27 April 2020 and for the period 28 April 2020 to 27 April 2021 to vary Mr Derick’s adjusted taxable income to $142,137 and that from 28 April 2021 to 30 September 2021 Mr Derick’s adjusted taxable income should be varied to $46,000 per annum.

8. On 17 February 2021 Mr Derick requested a review by the Administrative Appeals Tribunal (“the Tribunal”).  A telephone directions hearing was conducted with both parents on 18 May 2021.

9. Mr Derick and Ms Derick attended the hearing by way of a telephone conference on 1 July 2021 and both gave sworn evidence. 

DOCUMENTARY EVIDENCE

1. The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule.  The Tribunal had regard to all of this evidence, and refers specifically to particular items in this Statement of Reasons.

ISSUES

1. The central issues for the Tribunal to determine in this case are:

   · Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (the Assessment Act) exists; and if so,

   ·      Whether it would be:

   (a)   just and equitable as regards the children, the liable parent, and the carer entitled to child support; and

   (b)   otherwise proper

   to make a particular determination to depart from the administrative assessment of child support.

CONSIDERATION

The child support law

1. The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.

3. A parent may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 11 above.

4. Section 98J of the Assessment Act is applicable in this case. This provides that a person who has made an application for a change of assessment is not precluded from making a subsequent application for a change of assessment if because of circumstances existing at the time of the subsequent application there are grounds from departing from the administrative assessment.

5. As observed by the Family Court in Ignacio v Ignacio [2016] FamCA 50 at [106]:

   The Assessment Act (s 98J) is not so broad as to enable parties to engage in child support assessment departure disputes whenever they feel inclined, irrespective of surrounding circumstances. Multiple departure applications are possible, but subsequent departure applications are only permitted when the circumstances at the time the subsequent application is made warrant it.

6. The question for the Tribunal therefore is whether the application is grounded by circumstances existing at the time the (subsequent) application was made. That point in time was 14 September 2020. If the ground is established by reference to the time the subsequent application was made the Tribunal will then have the usual discretion to take into account all the matters provided for in subsection 117(2) of the Assessment Act, including the discretion to apply any new determinations retrospectively up to 18 months prior to the date of the subsequent application and indefinitely into the future. Before the Tribunal can consider this however, it must first be satisfied that a ground is established.

7. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether a ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and that a ground or grounds exist 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 Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.

8. The phrase “special circumstances of the case” is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:

   Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.

   Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases.

   [1] (1992) FLC 92-279

9. Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.

Is a ground established in respect of circumstances existing at the time of the subsequent application?

1. In considering whether a ground or grounds exist which justify departing from the administrative assessment currently in place, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents.

Reason 8A

1. The legislative ground corresponding to Mr Derick’s application in relation to Reason 8A is set out in subparagraph 117(2)(c)(ia) of the Assessment Act. The test is whether:

   in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child: [paragraph 117(2)(c)]

   …

   (ia) because of the income, property and financial resources of either parent; or …

2. To establish Reason 8A in relation to either parent’s income, property or financial resources it is necessary to show that there are special circumstances establishing that the income used in the assessment makes the child support assessment unfair and unjust.  

3. In relation to the requirement that there had been a significant change in the circumstances of either party Mr Derick contended, when he made his application of 14 September 2020, that a number of changes in his circumstances were special and justified a change to the assessment.

4. Mr Derick stated in his application that he had been assessed on the basis of his business growing when the [industry] had slowed and his income had declined.  He stated that COVID-19 had had a detrimental impact on his business income.  In addition the [party] to whom he contracted for many years no longer has enough work available for him.  Previously, 95% of his work was for this [party].  Most significant was his sale of his investment property in the 2019/2020 financial year.  He received a one-off net capital gain of $124,757.  He stated that this did not reflect his true taxable income in that financial year.  Mr Derick stated that his notice of assessment for the year ended 30 June 2020 showed his taxable income to be $165,569 but this was only because his taxable income included the net capital gains of $124,757.  He stated that in the 2020/2021 financial year he anticipated that his taxable income would be approximately $46,000[2]. 

   [2] C1-page 90

5. In relation to his occupation, Mr Derick has been a self-employed [Occupation] since 1990.  He operates as a sole trader in his business “[Name]” (“the business”).  In the past Mr Derick has operated his business through a trust structure.  However, his accountant ([Mr B] from [Tax accountants]) provided a letter to the Child Support Agency dated 13 October 2020.  He confirmed that the [the business] ceased operating on 30 June 2019 and that since that time Mr Derick has operated as a sole trader[3].  The Tribunal accepts the statements from Mr Derick’s accountant.

   [3] C1-page 166

6. In relation to the asserted decline in his income, the Tribunal considered Mr Derick’s income tax return for the 2018/2019 and 2019/2020 financial years.  In the 2018/2019 financial year his income was $45,150; his net rental property loss (relating to his investment property) was $2,250 and his reportable superannuation was $1,000[4].  The Child Support Agency calculated his adjusted taxable income to be $48,400 (adding back his net investment property loss and the superannuation).  The Tribunal accepts that income tax return as accurate. 

   [4] C1-pages 178-186

7. In the 2018/2019 year Mr Derick was still operating his business through the trust and the trust tax return for the 2018/2019 financial year showed that the total business income was $69,814 and that the total expenses were $21,615.  These expenses included $4,649 cost of sales with the balance of expenses being motor vehicle expenses of $6,277, repairs of $66, accountancy fees of $1,645 and modest other business expenses including phone expenses of $578, tool replacements of $1,008 and insurance of $519.  The trust tax return shows net income from the business of $48,199[5].

   [5] C1-pages 194-204

8. This was a decline on Mr Derick’s net income from the business in the 2017/2018 financial year which showed total business income of $73,584, expenses of $19,819 and a net business income of $53,765[6].

   [6] C1-pages 205-214

9. In the 2019/2020 financial year when Mr Derick was operating as a sole trader. In his income tax return for the 2019/2020 financial year, he declared his income from the business was $67,802, his business expenses were $21,400 and his net business income was $46,402[7].  Again, although the expenses were relatively modest Mr Derick’s income declined when compared with the two previous financial years and the Tribunal so finds.

   [7] C1-page 278

10. In relation to the reasons for that decline Mr Derick stated at the hearing that his age and health had contributed to his declining income.  Mr Derick did not provide any compelling medical evidence but the Tribunal accepts his statements that as a [Age]-year-old with a long history of heavy, manual labour his health has been adversely affected by his work to some extent.

11. In addition Mr Derick stated that he had been contracting to one [party] for more than 20 years and obtained 95% of his work from this one source.  However, the [party] no longer contracts with Mr Derick and he has had to try to find work from other customers and contractors.  He stated that there is a lot of competition for work; he now has more small jobs and there are some days when he has no work at all.

12. Ms Derick responded that Mr Derick has tried to reduce his income so that he does not have to pay any or much child support.  She does not think the children are being appropriately supported when they are in her care.  She stated that the living standards for the children at her home and at Mr Derick’s home are very different.  Her home is cold and needs many repairs.  She has tried to provide a basic room for the eldest daughter but she has no funds to afford to do these necessary home repairs and improvements.

13. In relation to his current income Mr Derick declared in his Statement of Financial Circumstances that his average weekly income is approximately $900 gross[8].  Annualised this is approximately $46,800 per annum.  He told the Child Support Agency that his current income was approximately $46,000 per annum[9]. The Tribunal considered Mr Derick’s bank statements and his expenditure.  The bank statements would appear to support Mr Derick’s estimation of his income of approximately $46,000 per annum.  This is just slightly below his confirmed business income of $46,402 in 2019/2020.

    [8]A3

    [9] C1-page 115

14. In relation to the capital gains issue, Mr Derick explained that he had owned an investment property since 1992.  He stated that after the separation of he and Ms Derick was finalised he retained the marital home but with a $550,000 mortgage.  He stated that, while he used the rent from the investment property to assist with the repayment of the mortgage on his home, he found it increasingly difficult to keep up with the mortgage payments especially in recent years with his income reducing. He decided to sell the investment property and reduce his mortgage on his home by depositing the proceeds into the home loan. 

15. He sold the investment property in April 2020 for $411,000.  He discharged the mortgages associated with the investment property and deposited $80,392 into his home loan on his home and after payments of the usual expenses and charges the balance available at settlement to Mr Derick was $65,521.19[10](from which sum there was tax payable relating to the capital gains).  Mr Derick provided a copy of his current home loan repayments showing an opening balance of $277,053.03[11] and a closing balance of $195,303.75 as at July 2020.  The statement also shows repayments required of $1,011.56 per month[12]. The sale of the investment property resulted in a net capital gain of $124,757 (as declared in his 2019/2020 income tax return[13]). 

    [10] C1-pages 262-263

    [11] C1-page 264

    [12] C1-page 264

    [13] C1-page 104

16. Mr Derick advised the Tribunal that he was informed more than once by the Child Support Agency that the net capital gain on the sale of his investment property would be disregarded and not included in the child support assessment.          

17. There is no dispute that Mr Derick sold the investment property which he owned and this resulted in the net capital gain of $124,757 in the 2019/2020 financial year.  The Tribunal agrees with original decision maker and the objections officer that the profit from the sale of the property should be considered as income for child support purposes.  The Tribunal considered the actual profit to Mr Derick to be the balance at settlement after payments of all fees, taxes and charges and, in addition, minus the loans which were discharged.  This was an amount of $65,521.19[14] .  However, this balance included an amount of $80,392.50 which was paid off his home loan mortgage.  Had he not reduced his home mortgage by that amount, the balance at settlement would have been $145,913.69 ($65,521.19 + $80,392.50).  The Tribunal accepts that he paid the applicable tax to the Australian Taxation Office of $49,776.44 which reduced his available funds to $96,137.25 ($145,913.69 - $49,776.44). (The Tribunal notes that Mr Derick’s Notice of Assessment for the 2019/2020 year shows tax payable of $48,184.40 rather than $49,776.44 as he indicated[15].  However, the Tribunal accepts Mr Derick’s figure as it differs only slightly from the Notice of Assessment and the Tribunal accepts that there may be an explanation for the discrepancy.)

    [14] C1-page 261-262

    [15] C1-page 265

18. While Mr Derick chose to reduce his home mortgage by $80,392.50 these were funds over which he had control along with the remaining $15,744.75. The Tribunal accepts that Mr Derick honestly believed that the net capital gains (or any portion) would not be included in his income.  However, there is no valid reason to exclude from his income in the 2019/2020 financial year the portion over which he had control and discretion.

19. When $96,137.25 is added to his income derived from his self-employment in that year of $46,000 this means that Mr Derick had total available income of approximately $142,137 (ignoring cents) and the Tribunal so finds.

20. If that (more accurate) amount of income was used in the assessment with Ms Derick’s 2018/2019 income of $45,614 his child support liability would be approximately $12,474 per annum (prior to the eldest child turning 13 years old).  This is such a significant difference that the Tribunal finds it creates a special circumstance.

21. The Tribunal also finds that because Mr Derick’s income in the 2019/2020 financial year was considerably higher than the income used in the assessment, the assessment would be unjust and inequitable in terms of the financial support of the children.

22. Hence the Tribunal finds that Reason 8A has been established.

Would it be just and equitable to depart from the administrative assessment?

1. Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain. The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.

1. Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of the duty of the parents towards the children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents, self-support commitments and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.

2. In considering these issues, the Full Family Court, in the case of Gyselman, stated that:

   However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section [117] (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).

Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act.

The proper needs of the children

1. In determining the proper needs of the children, subsection 117(6) of the Assessment Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the children.

2. The parents agreed that the children did not have any special needs or any other proper needs which the Tribunal needed to specifically consider.  The Tribunal does not consider that there are any special costs associated with the proper needs of the children that it needs to take into account in the child support assessment.

The income, property and financial resources of the children

1. Both parents agreed that the children did not have any income, property and financial resources of their own.  The Tribunal is satisfied that the children have no income, property or financial resources of any significance of their own and are dependent on their parents for financial support.

Mr Derick’s income, property, financial resources, expenses and earning capacity

1. Mr Derick’s income, property and financial resources have been covered at length above.  He provided a Statement of Financial Circumstances which confirmed that his home, which he owns 100%, is valued at approximately $780,000.  He has increased his equity in the home by depositing a lump sum of $80,392.50 into his mortgage from the proceeds of the sale of the investment property.  This reduced the balance of his home loan from $277,053.03 to $195,3030.73[16] and obviously resulted in Mr Derick increasing the equity in his home.

   [16] C1-page 264

2. In terms of other financial resources, Mr Derick declared savings of approximately $3,000.  He owns two vehicles: an old [Vehicle 1], which is worth very little and which he uses full-time in the business and a [Vehicle 2] which he uses partly for business and partly for personal use.  That vehicle he estimated is worth approximately $12,000.  He valued his home contents at approximately $20,000 and he holds superannuation of approximately $93,000.

3. Ms Derick asserted that Mr Derick was working for “cash” and therefore that his income was much higher than he claimed[17].  Mr Derick denied this was the case.  The Tribunal has insufficient evidence to establish that Mr Derick is operating in the “cash economy” and that he receives cash payments which are not recorded in the business accounts.

   [17] B16

4. In relation to his expenses Mr Derick stated that he is still paying off the personal loan on [Vehicle 2].  On his application to change the assessment Mr Derick declared that his repayments are approximately $3,800 per year ($73 per week) with $12,800 outstanding on the loan.  He provided a loan statement as at 30 June 2020 which showed that the amount owing on the loan at that time was $12,814.60[18].  He stated that he pays income tax of approximately $110 per week ($5,720 per annum) and his weekly household expenses are approximately $686 ($35,672 per annum).  However, it appears that some of the household expenses relating to phone and motor vehicles are already being claimed as expenses of the business and therefore cannot be claimed again.  Reducing the household expenses to approximately $636 per week results in household annual expenditure of approximately $33,072.  Therefore his total expenses are approximately $42,592 per year, exclusive of child support.  The Tribunal is satisfied that in the 2019/2020 year when Mr Derick’s income (for child support purposes) was $142,137 that it would be fair and equitable to increase Mr Derick’s child support liability in keeping with his increased income in that year.

   [18] C1-page 105

5. In relation to earning capacity these provisions are very difficult to satisfy.  In Mr Derick’s case he has been working in his [business] since 1990 and has not changed his occupation or significantly changed his working hours.  With his 44% care of the children he stated, and the Tribunal accepts, that he takes time away from work for parts of the school holidays and also on some other days to care for the children.  This has been a long-standing arrangement.  He has flexible working hours due to his self-employment.  In all of the circumstances the Tribunal is satisfied that Mr Derick is exercising his earning capacity.

Ms Derick’s income, property, financial resources, earning capacity and expenses

1. Ms Derick provided a Statement of Financial Circumstances. She has been employed by [Employer] on a part time basis for 21 years.  She declared her income from employment to be approximately $912 per week (gross) or $47,424 per annum.  Ms Derick provided payslips to verify her income and these confirmed that her annual salary is $47,602.40[19].  Ms Derick has no other income other than family tax benefit (which is not counted as income for child support purposes) and child support from Mr Derick.

   [19] B14-B15

2. Ms Derick owns her home which she valued at $300,000[20].  It is subject to a mortgage on which she owes approximately $211,014[21]. She holds superannuation of approximately $99,439, a car which she valued at $8,000 and household contents of approximately $5,000. She had approximately $4,000 in savings as at February 2021.

   [20] B16

   [21] B5

3. In relation to her expenses Ms Derick stated that she now owes approximately $500 on her credit card and $1,500 on her Zip Pay card.  She uses Afterpay on a frequent basis.  She pays income tax of $131 per week.  In relation to her household expenses she estimated these to be approximately $1,112 per week ($57,824 per annum).  These were unremarkable and reasonable but demonstrate that Ms Derick’s expenses exceed her income.

4. In relation to her earning capacity Ms Derick has been working in long-term, regular employment since separation and in recent years she advised that her working hours have increased.  The Tribunal accepts all of Ms Derick’s statements regarding her employment and her income and finds that she is exercising her earning capacity.

Necessary commitments to support themselves or others

1. The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children.  This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities, and some loans.  In Mee and Ferguson[22] the Full Court of the Family Court stated at paragraph 128:

   Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.

   [22] [1986] FamCA3.

2. Neither Mr Derick nor Ms Derick raised any issues in relation to self-support and the Tribunal finds accordingly.

Any hardship to either parent or the children by the making of, or refusal to make, an order

1. In relation to hardship Ms Derick stated that she and the children are living “week to week” and that it is very difficult to find the money for the children’s activities.  In addition she stated that their home is desperately in need of repair and maintenance but she does not have the money to fund it.  She stated that her home is very cold and damp and she struggles to afford heating or to undertake any maintenance on the property.  She stated that her child support payments have recently dropped to $52.67 a month from $248.50 per month when the capital gains were taken into account in the assessment.  She cannot afford to improve their standard of living in her current financial circumstances[23].

   [23] B16

2. Mr Derick stated that his income is approximately $46,000 per year.  He stated that he also lives “week to week”.  He has jobs to do on the house but he can’t afford to do them.  His work [vehicle] needs a new engine but he cannot afford that.  He is finding it more difficult physically to do the heavy manual work which his job requires.

3. It would cause him hardship to pay child support when the capital gains from the investment property are taken into account in the child support assessment as he no longer has those funds.  He does not believe he can redraw the money he put into his home mortgage because at his age it is unlikely that the bank would allow it. 

Proposed determination

1. The Tribunal has carefully considered the evidence provided and the statements and submissions of both parents.

2. The Tribunal proposes to factor the relevant portion of the net capital gains which Mr Derick incurred when he sold his investment property in April 2020 for a 12-month period.  The Tribunal proposes to end the decision – made on 25 February 2019 by objections officer [A] – on 27 April 2020.

3. While the Tribunal acknowledges that Mr Derick honestly believed that selling his investment property would not have any effect on his income for child support purposes the Tribunal finds that there is no valid reason why the net capital gain should not be factored into the child support assessment. 

4. The Tribunal has calculated that the amount which was available to Mr Derick before he deposited $80,392.50 into his home mortgage loan (and after discharging the mortgage on the investment property, paying all fees and charges and paying the applicable tax) was $96,137.25.  When added to his income from his self-employment of $46,000 the Tribunal has found that his income in the 2019/2020 year was $142,137 (ignoring cents).

5. Hence the Tribunal proposes to vary Mr Derick’s income to $142,137 from 28 April 2020 (being the date of settlement of the sale of the investment property) to 27 April 2021. Thereafter, from 28 April 2021 to 30 September 2021 the Tribunal proposes to vary Mr Derick’s income to $46,000 per annum.

6. Mr Derick stated that, if there was a change made to the assessment, he favoured that departure ended on 30 September 2021 as the objections officer decided.  However, Ms Derick favoured changing the assessment for a much lengthier period.  However, as the Tribunal has found that currently Mr Derick’s income is $46,000 per year and this appears to be very close to his actual income from employment in the 2019/2020 year the Tribunal proposes that the assessment reverts to the formula administrative assessment from 1 October 2021.

7. These proposals would result in a rate of child support of $12,474 (when Mr Derick’s income is $142,137, Ms Derick’s 2018/2019 adjusted taxable income of $45,614 is used in the calculation and when the eldest child is less than 13 years old) and increasing to an annual rate of $13,764 when the eldest child turns 13.  From 1 September 2020 when Ms Derick’s 2019/2020 income of $47,085 is used in the assessment, the annual rate of child support payable would be approximately $13,648.

8. Thereafter from 28 April 2021 to 30 September 2021 the annual rate of child support payable would decrease to approximately $632 per annum.  This is because the capital gains would no longer be factored into Mr Derick’s income; the parents’ incomes would only differ to a small degree and the parents have shared care (56% to Ms Derick and 44% to Mr Derick).

9. The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents.

Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)   the effect that the making of the order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

2. The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system when the parents themselves have the capacity to maintain their children.

3. The Tribunal is satisfied that Ms Derick needs financial assistance to support the children  and that it is proper that when Mr Derick’s income increased that he paid a higher rate of child support for the applicable period.

4. Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income tested pension, allowance or benefit.

5. Ms Derick is receiving family tax benefit and she confirmed that she is aware of the impact of child support payments on that benefit.

6. The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

7. As the Tribunal agrees with the decision of the objections officer the Tribunal affirms the decision under review.

DECISION

The decision under review is affirmed.

SCHEDULE

List of Exhibits

1. Services Australia – Child Support Agency marked as C exhibits:

   ·     CSA’s large bundle of 385 pages marked as exhibit – C1

2. Mr Derick has provided the following documents marked as A exhibits:

   ·     A1  Cover sheet

   ·     A2-A9                 Statement of Financial Circumstances

   ·     A10  Cover sheet

   ·     A11-A14               Business Activity Statements

   ·     A15   Cover sheet

   ·     A16   Written submission

3. Ms Derick has provided the following documents marked as B exhibits:

   ·     B1-B10                Statement of Financial Circumstances

   ·     B11   Cover sheet

   ·     B12-B13               (Blank)

   ·     B14-B15               Payslips

   ·     B16  Written submission