Dewing and Leatherwood (Child support) - [2021] AATA 1973

Dewing and Leatherwood (Child support) [2021] AATA 1973 (14 May 2021)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2020/MC020149
APPLICANT:  Mr Dewing
OTHER PARTIES:  Child Support Registrar
Ms Leatherwood

TRIBUNAL:Member R Anderson
DECISION DATE: 14 May 2021
DECISION:

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

The adjusted taxable income of Mr Dewing in respect of the period 1 January 2019 to 31 December 2020 is varied to $100,000 per annum;
The adjusted taxable income of Mr Dewing in respect of the period 1 January 2021 to 31 December 2022 is varied to $110,000 per annum; and
The adjusted taxable income of Ms Leatherwood in respect of the period 1 January 2019 to 31 December 2022 is varied to $80,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – business and trust resources – a ground for departure established based on the financial resources of both parents – decision to depart – 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 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

According to Services Australia - Child Support (the Agency), Mr Dewing and Ms Leatherwood are recorded as the parents of [the child]. The child support assessment was registered on 25 March 2011, following the birth of [the child]. The Agency has been responsible for the collection of child support from Mr Dewing since that time and Ms Leatherwood is attributed with 100% care of [the child].
It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Child Support (Assessment) Act 1989 (the Act) if they consider the administrative assessment results in an unfair amount of child support payable by one parent. Since 2015, when [the child] commenced his primary schooling at a private school, numerous departure decisions have been in effect. The most recent departure decision was made by a delegate of the child support registrar on 20 April 2017. The decision was to increase the annual rate of child support payable by Mr Dewing by $5,504 in respect of the 2017 calendar year and by $5,724 in respect of the 2018 calendar year. The increased rate of child support represented a 50% contribution by Mr Dewing to the private school fees of [the child].
At 1 January 2019 the administrative assessment reverted to being calculated on the basis of the most recently lodged tax returns of both parties with no adjustment in respect of private school fees. Ms Leatherwood lodged a fresh departure application on 22 May 2019 on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Dewing (Reason 8A) and that the costs to maintain [the child] were significantly impacted by costs incurred in respect of an orthodontic retainer and eyeglasses (Reason 2). During the period of consideration by the Agency, Ms Leatherwood requested consideration of the fact that the costs of [the child] were significantly impacted by the costs she incurs in educating him in the manner expected by both parents (Reason 3).
Mr Dewing lodged a cross-application on the basis that the administrative assessment produced an unfair outcome due to the income, earning capacity, property and financial resources available to [the child] (Reason 4), the income, property and financial resources available to Ms Leatherwood (Reason 8A), his reduced capacity to provide for [the child] because of his legal duty to maintain another person or child (Reason 9) and his reduced capacity to provide for [the child] because of his responsibility to provide for a ‘resident child’ (Reason 10).
On 19 September 2019, a delegate of the child support registrar found that a ground was established in respect of Reasons 2 and 3 and decided to increase the annual rate of child support payable by Mr Dewing to reflect a 50% contribution to the private school fees of [the child] and his dental and optometry costs.
On 27 July 2020 an extension of time was granted for Mr Dewing to lodge an objection to the decision of 19 September 2019. Subsequently, on 28 October 2020, an objections officer decided that a ground was established in relation to Reason 2 (for the 2020 calendar year) and Reason 3 in respect of the 2019, 2020, 2021 and 2022 calendar years and made the following decision:
·In the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Dewing is increased by $8,940;
·In the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Dewing is increased by $9,648;
·In the period 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Dewing is increased by $10,771; and
·In the period 1 January 2022 to 31 December 2022 the annual rate of child support payable by Mr Dewing is increased by $11,566.
Mr Dewing lodged an application to this tribunal on 30 October 2020, requesting an independent review of the Agency’s decision. The directions hearing was conducted by telephone with Mr Dewing and Ms Leatherwood on 2 January 2021. Following this hearing, directions were made to both parties requiring them to provide further information and documents.
On 16 March 2021, the tribunal received a reschedule request from the applicant’s representative, [Ms A] of [Law firm], for a period of three months, on the basis of an application filed with the Federal Circuit Court of Australia in relation to parentage of [the child]. Given the possibility of significant delays in the court proceedings and the tribunal’s objective of providing a mechanism of review that is fair, just, economical and quick, the tribunal refused the reschedule request and proceeded to hearing. The tribunal proceeded with the review on the assumption that Mr Dewing was the biological father of [the child], acknowledging that this may be found to be incorrect following the upcoming court proceedings. Pending the outcome of the court proceedings, this decision may or may not be applicable.
The hearing was held on 30 March 2021. Both parties participated by conference telephone and gave oral evidence on affirmation. Mr Dewing was represented by [Ms A] of [Law firm] and [Mr B] of Counsel. Prior to hearing, Ms Leatherwood decided not to proceed with the attendance of her authorised legal representative. The tribunal also received oral evidence from [Mr C] of [Accountancy firm 1], Mr Dewing’s accountant, assisted by [Ms D]. Oral evidence was also received from [Mr E] of [Accountancy firm 2], Ms Leatherwood’s accountant.
The tribunal considered information in the documents provided by the Agency in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 329, documents lodged by Mr Dewing numbered A1 to A209, documents lodged by Ms Leatherwood numbered B1 to B155 and information from the Agency and Centrelink numbered C1 to C7. All of the documents were provided to all parties prior to the hearing and all parties confirmed receipt of such documents.
On 31 March 2021, the tribunal decided to defer making a decision in this matter, in order to allow additional time for Mr Dewing and Ms Leatherwood to provide further information. Documents numbered A210 to A244 received from Mr Dewing after the hearing were sent to the parties for comment. Further information received from Ms Leatherwood after the hearing numbered B156 to B347 was also sent to the parties for comment. Further information from Mr Dewing, numbered A245 to A246 was sent to the parties for information only as the tribunal determined that no new information was provided in these documents and consequently no further comment was required.
On 12 May 2021, Ms Leatherwood requested permission for legal representation, different to the previously authorised representative, to lodge submissions. On the same day, Ms Leatherwood then lodged her submission. In view of Ms Leatherwood previously removing her legal representative from the proceedings and having lodged her submission, on 13 May 2021 the tribunal decided to refuse her request. The tribunal was also cognisant of the tribunal’s objective of providing a mechanism of review that is fair, just, economical and quick. The documents received from Ms Leatherwood numbered B348 to B352 were sent to the parties for information only as the tribunal determined that no new information was provided in these documents and consequently no further comment was required. The tribunal then proceeded to make a decision.

ISSUES

When calculation of the rate of child support is based on the usual administrative formula it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:
·         whether a ground exists to depart from the administrative assessment; and if so
·         whether any proposed departure is fair to Mr Dewing, Ms Leatherwood and [the child]; and if so
·         whether any proposed departure is fair to the public.

CONSIDERATION

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

Mr Dewing confirmed at hearing, as did [Mr B] in a written submission after the hearing, that he was no longer pursuing a ground in respect of Reasons 4 and 10.
The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words ‘in the special circumstances of the case’. The meaning of this expression is not defined in the Act. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).
Ms Leatherwood told the tribunal that she agrees with the decision of the Agency. In response to a question from the tribunal, Mr Dewing stated that he does not dispute that the administrative assessment, based on the income recorded on his annual tax returns, does not produce a fair outcome. However, he maintains that the current assessment is unfair, as he also wants to provide for his other children.

Reason 3 - Costs related to the child’s care, training or education in the manner expected by the child’s parents

Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents.
In this case there is no dispute that [the child] commenced his education at kindergarten level at [a Grammar School] in 2015. Ms Leatherwood maintains that Mr Dewing enrolled [the child] at [the School] and has the capacity to contribute to the associated costs. The tribunal notes at the outset the case of Mee and Ferguson [1986] FamCA 3 where it was stated that where a parent has agreed to the child attending a private school then that person is ‘liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to continue to do so’. The Court went on to state that ‘the mere fact that a parent can afford to pay private school fees is not in itself a reason for imposing that liability’.
Mr Dewing denies playing any part in the decision to send [the child] to [the School]. He told the tribunal that he made it clear to Ms Leatherwood prior to the enrolment at [the School] that while he was happy to accept Ms Leatherwood sending [the child] to whatever school she chose, he would not be contributing to the fees. None of his other children attended a private school and Mr Dewing maintains that in his view there was no reason for [the child] to either. He further stated that final court orders, by consent, on 28 August 2013 gave sole parenting rights to Ms Leatherwood. In response to a question from the tribunal, Ms Leatherwood stated that there was limited discussion initially and was on the basis that the area was growing and the need to make applications to schools for [the child]. She had no recollection of any discussions in 2015 following [the child]’s commencement at [the School].
Ms Leatherwood provided evidence after the hearing that Mr Dewing’s other children attended a Catholic school and he contributed equally to the costs in accordance with a written child support agreement. In the case of Wild and Ballard (1997) FLC 92-771, it was made clear that it was the type of education expected by both parents rather than any particular school intended by the parents. There is a significant distinction between a Catholic school education and a private education at a school of the calibre of [the School]. Furthermore, an agreement by Mr Dewing to contribute to the education of his other children 10 years prior was made under different circumstances. Clearly, the expectations of a parent can change over time depending on their circumstances (Dobbins & Devlin & Anor (SSAT Appeal) [2014] FCCA 1274), in particular their financial circumstances. Mr Dewing’s oral evidence in respect of a decline in his business profits around 2014 was not disputed.
The ‘Application for Admission’ form was before the tribunal, signed by both parents and stamped 20 September 2010 as the date of receipt of the registration fee in the amount of $110. At this time [the child] was three months old. At hearing Mr Dewing denied that it was his signature on the document.
A further ‘Position Acceptance’ document in respect of kindergarten entry in 2015 was provided after the hearing. The document was signed by both parties, agreeing to pay all fees. Ms Leatherwood maintains that both parties signed the form in front of the director in 2014. Both signatures were clearly dated by Ms Leatherwood’s hand on 31 August 2014. Furthermore, the signatures on the ‘Application for Admission’ and ‘Position Acceptance’ differ significantly in respect of Mr Dewing. It is difficult to accept that the signatures are from the same hand.
An email from [the School] to Mr Dewing, dated 31 July 2014 and provided after the hearing confirms an appointment on 18 August 2014 between Mr Dewing and the Director of Kindergarten in relation to [the child]’s commencement in the kindergarten program in 2015. [Mr B] submitted that Mr Dewing attending the appointment with [the child] at that time would have been a contravention of the final Family Law Act order.
The ‘Application for Admission’ form also stamps the date of 2 September 2014 as the date of receipt of advance fees in the amount of $4,000. At hearing Ms Leatherwood stated that she could not recall how the $110 was paid. In submissions after the hearing she stated that it was paid by cheque from Mr Dewing’s business. No supporting evidence was before the tribunal. Ms Leatherwood confirmed that she paid the advance fees of $4,000.
An email between [the School] and Mr Dewing on 17 September 2015 records Mr Dewing as refusing to endorse any financial commitment to [the child]’s school fees, his name is to be removed from all records and dealings with the school and he ‘will not be held responsible for [school] fees.’ Ms Leatherwood’s response to [the School] on 22 September 2015 was to accept full responsibility for 100% of [the child]’s school fees.
The tribunal considered the evidence before it and concluded that it is possible that Mr Dewing signed one of the forms and he may or may not have attended the school prior to [the child]’s commencement. There is no evidence as to who paid the registration fee in 2010 and it is undisputed that Mr Dewing has not paid any portion of the school fees to [the School].
In the case of R & R (No. 1) [2002] FMCAfam 153 (R & R) the facts are similar. The father signed the enrolment form at the request of the Mother thereby enabling the children to attend the private school of the Mother’s choice. While it was undisputed in R & R that there was no discussion in relation to the payment of school fees, the tribunal accepts the oral evidence of Ms Leatherwood that discussions in 2010 were limited. The email evidence in September of [the child]’s first year at [the School] undeniably supports the oral evidence of Mr Dewing that he had no intention of contributing to the school fees in respect of [the child].
In R & R, Bryant CFM did not accept that the Father signing an enrolment form and not taking active steps to prevent enrolment at the private school of choice of the Mother created any type of mutual expectation that the child would be educated privately and that he would be responsible for the fees. After careful consideration of all of the evidence of both parties, the tribunal is not satisfied that there was a mutual expectation held by Mr Dewing and Ms Leatherwood that [the child] be educated privately and therefore no obligation on Mr Dewing to contribute to the associated private school fees.
Therefore, the tribunal finds that the ground at subparagraph 117(2)(b)(ii) of the Act is not established.

Reason 8A – the income, property and financial resources of each parent

Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by either parent because of the available income, property and financial resources available to them. The Act goes on to state in subsection 117(7A) that the decision maker must have regard to ‘the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income’ and disregard ‘the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child’.
In this case both parties are self-employed. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott (1994) FLC 92-457; Carey and Carey (1994) FLC 92-489).
Furthermore, as discussed with the parties, the role of the tribunal is not to conduct a forensic audit (Podmore & Pillai (SSAT Appeal) [2011] FMCAfam 952 and Frost and Frost (SSAT Appeal) [2011] FMCAfam 1311). Rather, it must be satisfied on the balance of probabilities as to the income, property and financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.
Mr Dewing gave oral evidence that he commenced operating [Business 1, product 1] through [Company name] (the Company) in 2004. He was and remains the sole director and shareholder. He went on to explain that he expanded the business into [Product 2] in 2006, trading under the name of [Trading name]. He later branched out into [Business 2] around 2011 which resulted in large losses that have continued to impact on his ability to meet his current liabilities. Since 2014 he has concentrated solely on the [Product 2] business, providing largely to wholesale and a small retail outlet.

The tribunal examined various financial reports, tax returns and business activity statements provided in respect of the Company throughout the 2017/2018, 2018/2019, 2019/2020 financial years and 1 July 2020 to date. In respect of the impact of COVID-19, Mr Dewing asserted that the business was adversely affected by the closure of [buyers]. However, it was evident from the profit and loss statements that total sales have continued to increase. According to the business activity statements in respect of the September 2020 and December 2020 quarters, the sales are on track to exceed $6,000,000 in 2020/2021.
The net profit at 30 June 2019 was recorded at $151,366. At 30 June 2020 it had reduced to a net loss of $181,824, which appears to be largely due to increased purchases. At 30 March 2021, the interim profit and loss statement recorded a net profit of $203,929 and at 6 April 2021, the interim profit and loss statement recorded a net profit of $58,309, the latter annualising to around $75,000. It is noteworthy that salaries and wages have increased over 100% in comparison to the 2019/2020 year. The tribunal acknowledges that the interim reports had not been fully reconciled.
[Mr C] gave oral evidence that accounts receivable reduced by over $240,000 in the 2019/2020 year, which accounted for the level of cash held in the Company at year-end of some $142,000. Mr Dewing told the tribunal that the business is improving and he is slowly getting on top of outstanding liabilities with suppliers.
Mr Dewing confirmed that in excess of $50,000 has been repaid to his sister since 1 July 2020 in relation to a loan she made to the Company several years ago in respect of the [Business] operations.
According to his Statement of Financial Circumstances, Mr Dewing estimated his weekly income to be $600, or $31,200 per annum. The tribunal observed his 2018/2019 and 2019/2020 tax returns that record his gross wages (including jobkeeper) of $28,496 and $26,372 respectively.
Contrary to Mr Dewing’s initial oral evidence, [Mr C] confirmed to the tribunal that the Company received jobkeeper in respect of four employees, including Mr Dewing, from April 2020 until late September 2020. In addition, the Company received a cashflow boost of $10,000 and a further payment after 1 July 2020 of just under $9,000. According to the ATO, jobkeeper payments at the fortnightly rate of $1,500 were paid to eligible employees from 30 March 2020 to 28 September 2020. This means that Mr Dewing received wages of at least $39,000 per annum during this period.
In respect of motor vehicles held in the name of the Company, Mr Dewing and [Mr C] confirmed that there are two [Vehicles] that are used solely for the business and are currently under finance. [Vehicle 3] is also under finance and is used solely by Mr Dewing’s wife for private purposes. Mr Dewing drives [Vehicle 4], which is no longer under finance. Mr Dewing estimated his private use of [Vehicle 4] to be 30%.
In response to questions from the tribunal, [Mr C] stated that the utility, rates and rent expenses are limited only to the business premises in [Suburb 1], while the interest expense is limited to the relevant portion of the motor vehicle finance repayments. Mr Dewing confirmed that the Company pays for his mobile phone and the two landlines at the business premises.
In respect of benefits, in Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39, the Court interpreted ‘financial resources’ as:
something which is not property but from which financial benefit is or may be gained. In light of the objects of the Act, the term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.
Given his role, the tribunal is satisfied that any benefit received by Mr Dewing through use of the mobile phone is negligible.
Clearly, Mr Dewing has received benefits in respect of [Vehicle 3] provided to [Ms F] and his private use of [Vehicle 4]. Mr Dewing estimated the weekly fuel costs for [Vehicle 3] and [Vehicle 4] at $125 and $75 per week. In the absence of more detailed information, as there are four vehicles in the Company, the tribunal considers it appropriate to attribute 25% of the registration, insurance and repairs and maintenance costs to [Vehicle 3] and [Vehicle 4]. According to the finance information provided, the annual payments for [Vehicle 3] are $14,625.
As set out in the table below, the tribunal is satisfied that Mr Dewing has received an annual benefit in respect of the motor vehicles in the vicinity of $26,329.

Vehicle	Fuel	Registration and Insurance	Repairs and Maintenance	Finance repayments	Total benefit
[Vehicle 3] at 100%	3,900	1,118	3,385	14,625	23,028
[Vehicle 4] at 30%	1,950	335.40	1,015.50	0	3,300.90

According to the 2018/2019 and 2019/2020 balance sheets, the shareholders’ loan account (later known as loans to directors) records an increase in funds loaned to the Company in excess of $150,000, albeit part of the loan to Mr Dewing’s sister was incorrectly included. [Mr C] gave oral evidence that the credit balance was due largely to clearing account offsets and accounting adjustments. He confirmed that the loan account transactions consisted of numerous private transactions that were unrelated to the business such as [Gambling provider 1], meals and travel. Mr Dewing was unable to explain the transaction on 5 June 2020 of an electronic transfer to the business in the amount of $37,000. However, he told the tribunal that he has not contributed to the business for a number of years.
After the hearing the general ledger account of the loan to directors was provided to the tribunal for the period 1 July 2020 to 30 March 2021. It was evident that until 30 December 2020, the loan account is predominantly used for Mr Dewing’s gambling hobby. In the period from 1 July 2020 to 30 March 2021, the balance sheet and general ledger account reflect a repayment of the loan to Mr Dewing of $46,214, noting that gambling winnings were also deposited into the directors loan account.
Given the historical pattern and no submission of explanation, the tribunal concludes that a reconciliation is yet to be completed for the period 1 January 2021 to 30 March 2021. There is no reason why such a pattern of gambling did not occur in prior years and has not continued to occur. It is also reasonable to conclude that the $37,000 transfer in June 2020 was likely in respect of gambling winnings.
The tribunal accepts the written evidence of Mr Dewing, that at 30 June 2020, he held a balance in his [superannuation] account of $43,460. The tribunal is satisfied that no personal or employer contributions have been made by Mr Dewing in recent times.
According to his Statement of Financial Circumstances, Mr Dewing owns a property in [Suburb 2] where his mother resides, valued at $420,000. However, according to a title search conducted by the tribunal, he has no such ownership. Mr Dewing was previously unaware of this and told the tribunal that when the property was subdivided a new home was built for him and his mother to reside in. The mortgage was taken out by Mr Dewing for this purpose.
The title search confirmed Mr Dewing’s 50% ownership of a [Suburb 3] property with [Ms F]. According to the council rates notice, the capital improved value is $620,000. While Mr Dewing asserts that he makes no contribution to the mortgage, this does not negate his legal ownership in the property. In addition, Mr Dewing has household contents valued at $5,000 and negligible funds in his private bank account.
Mr Dewing provided statements from [Bank 1] in respect of mortgages on the [Suburb 2] and the [Suburb 3] properties. The loan in respect of the [Suburb 2] property is in his sole name and had an outstanding balance at 1 January 2021 of $248,656. The repayments are made at $350 per week. The statement at 1 January 2021 records an available redraw in the amount of $47,105, which reflects two and a half years of repayments.
It is noteworthy that the [Bank 1] statements of Mr Dewing’s personal account do not reflect payments to the mortgage. Mr Dewing was unable to explain how he estimated his weekly income at $600 per week yet his bank statements reflected a weekly deposit of $383.
The [Bank 1] mortgage in respect of the [Suburb 3] property is in joint names. The most recent statement provided records an outstanding balance at 1 January 2020 in the amount of $577,056. While the weekly repayments are $800 per week, Mr Dewing contends that these are met solely by [Ms F] and he makes no contribution.
Given that Mr Dewing has no legal title to the [Suburb 2] property and sole liability for the mortgage, overall, he clearly has a negative asset base.
The courts have made it clear that in assessing whether a ground is established in respect of Reason 8, a change in income is not necessarily sufficient consideration. The tribunal must also consider the person’s commitments to be met by that income before being in a position to determine whether or not the resulting child support liability is fair (Ross & McDermott [1998] FamCA 134).
Mr Dewing gave oral evidence that he separated from [Ms F] last year. He still spends a few days per week at the [Suburb 3] residence with negligible contributions to the household. Otherwise he shares his time between his mother’s residence in [Suburb 2] and at the homes of various friends. He is generally in good health.
In respect of commitments, according to his Statement of Financial Circumstances, his average weekly costs approximate $781, annualising to $40,612. It is noteworthy that this amount includes discretionary expenses of $50 per week for entertainment, $31 per week for the council rates in respect of his mother’s property and $25 per week for his father’s [Pay tv]. Based on the loans from director account the entertainment costs of Mr Dewing in respect of [Gambling provider 1] and [Gambling provider 2] alone clearly exceed $50 per week, as recorded on the Statement of Financial Circumstances.
In response to a question from the tribunal, Mr Dewing stated that there are times when he struggles to meet the weekly expenses. The tribunal noted that he currently has some two and a half years of prepaid mortgage repayments. He also meets a significant level of discretionary spending in respect of gambling and expenses for his mother and father. The tribunal acknowledges the moral obligation Mr Dewing may feel. However, such expenses cannot be prioritised over his legal obligation to contribute to the ‘necessary’ costs of [the child]. The tribunal does not accept that Mr Dewing struggles to meet his weekly “necessary” expenses.
On balance and based on the wages received by Mr Dewing in 2019/2020, the benefit he receives from private use of motor vehicles and the drawings from the Company used largely for gambling purposes; overall, the tribunal is satisfied that Mr Dewing has had access to income, benefits and financial resources in the 2019/2020 year of at least $100,000 and finds accordingly. The tribunal is also satisfied that this financial position has continued to improve and will likely continue to do so in 2021/2022.
The tribunal then turned to the financial circumstances of Ms Leatherwood. She gave oral evidence that she commenced her business operations in 2011, [doing a task] for [Company]. [A trust] (the Trust) was established on 27 April 2011, trading under the name of [Trading name], which is the corporate trustee of the Trust. Ms Leatherwood confirmed that she is the sole director and shareholder of [Corporate trustee] and the appointor of the Trust.
In 2014, the business operations expanded into [Business 3] after working on a project with [a Local] Council. Ms Leatherwood told the tribunal that this business has virtually ceased over the last year due to COVID-19 and [the child]’s sporting commitments on the weekends and she concentrates on the [tasks]. She further stated that in earlier years she provided a small amount of [services] and has also done [events]. It is noteworthy that Ms Leatherwood purchased [Vehicle 5] and [accessories] under finance in May/June 2019 for $53,245.
According to her Statement of Financial Circumstances, Ms Leatherwood estimated her weekly income to be $600, or $31,200 per annum. The tribunal observed her 2018/2019 and 2019/2020 tax returns that record her gross income at approximately $15,000.
The tribunal examined various financial reports, tax returns and business activity statements provided in respect of the Trust throughout the 2017/2018, 2018/2019, and 2019/2020 years. A profit and loss statement to 24 February 2021 indicates that sales are on track to approximate those in 2019/2020.
The net loss at 30 June 2019 was recorded at $7,340. At 30 June 2020 the net loss had increased to $85,378. This was largely due to increased depreciation and [Vehicle 5] expenses, including in excess of $28,000 on lease payments in respect of the [specialised part of Vehicle 5] construction.
Ms Leatherwood gave oral evidence that she works approximately 30 hours per week. [Mr E] confirmed that she was in receipt of jobkeeper from May 2020 to the end of September 2020. In addition, the Trust received jobkeeper in respect of four employees, including her adult son ([Mr H]) and the cashflow boost. [Mr H] works full-time hours as [an Occupation].
[Mr E] confirmed that Ms Leatherwood does not have separate business premises and consequently rent, electricity and water are claimed as a business expense. The tribunal accepts his oral evidence that home office costs relate to small equipment items required for office purposes for the business operations. Ms Leatherwood gave oral evidence that telephone costs represent her mobile phone only. Given that Ms Leatherwood only works 30 hours per week, there is likely a private use component, albeit minimal.
In response to a question from the tribunal, Ms Leatherwood stated that she completes all of the administration tasks from home and all of the [Vehicle 5] related operations occur away from the residence. Based on her declared weekly rent of $500, it appears that the proportion of business use is recorded at around 85%. The tribunal does not accept that for child support purposes this is appropriate. Such benefits are not available to a normal PAYG employee and represent a benefit to Ms Leatherwood in respect of rent of over $20,000 per annum.
Based on her estimated gas and electricity of $6,500 per annum, it appears that 85% has also been claimed as an expense of the Trust. As Ms Leatherwood works school hours of 30 hours per week, it is difficult to accept that 85% is appropriate in respect of electricity costs associated with the Trust. In the tribunal’s view, a more appropriate percentage based on her hours worked would be in the vicinity of 18% (30/168 hours per week). Therefore, the tribunal calculates the benefit received to approximate $4,375.
Ms Leatherwood gave oral evidence that the motor vehicles in the Trust include [Vehicle 6], [Vehicle 5] and [specialised part] construction, [Vehicle 7], driven by Ms Leatherwood and [Vehicle 8], driven by [Mr H], both of which are owned outright by the Trust. [Vehicle 6] and [Vehicle 5] are both under chattel mortgage finance.
[Mr E] confirmed that motor vehicle costs exclude all costs relating to [Vehicle 5]. Therefore, they are limited to [Vehicle 6], [Vehicle 7] and [Vehicle 8]. Ms Leatherwood estimated her private use of [Vehicle 7] to be 50%. It is not possible to dissect the costs associated with [Vehicle 7] and [Vehicle 8] with precision from the profit and loss statement. However, the tribunal notes the fringe benefit contribution of $4,870 in the profit and loss statement. As a [kind of vehicle], [Vehicle 8] is exempt from fringe benefits. Therefore, the tribunal is satisfied that the contribution is in respect of [Vehicle 7] and reasonably accounts for the private use by Ms Leatherwood.
Ms Leatherwood explained to the tribunal that she travelled with [the child] on numerous occasions to various destinations including Cairns and Sydney, to investigate permit opportunities for [Vehicle 5]. Ms Leatherwood stated that the costs were higher because [the child] accompanied her. In response to a question from the tribunal, Ms Leatherwood stated that she currently has only one permit in respect of the [Local] Shire. In the tribunal’s view the travel costs of approximately $16,000 per annum represent a benefit in meeting costs for meals and accommodation while on vacation and clearly represent a benefit.
According to the 2018/2019 and 2019/2020 balance sheets, the related entity loan, which is in relation to Ms Leatherwood, records an increase in funds loaned to the Trust in 2019/2020 of $62,605. The general ledger account of the related entity loan provided after the hearing records private expenses of Ms Leatherwood, amongst others, in respect of life insurance, private health insurance and [school] fees. The drawings overall in 2019/2020 exceed $27,000. While Ms Leatherwood stated that the [Credit] card is a business credit card, it was not recorded on the balance sheet of the Trust. Statements received after the hearing show it is held in the name of Ms Leatherwood. It is also evident that various other private expenses are also recorded.
Ms Leatherwood told the tribunal that she reimburses the Trust for the school fees and that she withdrew funds from her [Bank 2] mortgage to do so; and also, to provide additional funds to the Trust. She further stated that she received an inheritance of approximately $92,000 in 2011/2012 that she deposited into the mortgage. This has since represented a financial resource to Ms Leatherwood and based on her oral evidence, continues to do so. Ms Leatherwood struggled to answer questions in respect of the loan and additional funds available to redraw.
Ms Leatherwood did not comply with the tribunal’s directions prior to the hearing to provide the [Bank 2] mortgage statements. The [investment account] bank statement was provided which showed the weekly repayments to the mortgage of $446, which are met from the rental income rreceived. At hearing Ms Leatherwood stated that the [Bank 2] mortgage statements would be provided after the hearing. No such information was received, despite the issue being raised in several submissions from Mr Dewing’s legal team that were exchanged with Ms Leatherwood.
It was made clear to all parties at the directions hearing that they have an obligation to provide financial information as directed and failure to comply with the directions may result in adverse inferences and findings being drawn by the tribunal. The courts have made it clear that the tribunal need not be unduly cautious in doing so, nor is the tribunal under an obligation to exercise its powers of information gathering in every circumstance (Conway & Child Support Registrar & Clivery (SSAT Appeal) (No.2) [2008] FMCAfam 985 and Humphries and Berry (SSAT Appeal) [2008] FMCAfam 409). The tribunal concludes that to have the ability to drawdown on the loan at will, on the balance of probabilities it is likely that Ms Leatherwood has built up a significant redraw balance, as the deposits into the Trust in 2019/2020 were over $89,000.
While it is difficult to be precise without viewing the [Bank 2] mortgage statements; overall, the tribunal is satisfied that Ms Leatherwood has had access to income, benefits and financial resources in the 2019/2020 year in the vicinity of $80,000, including directors’ fees and benefits through the expensing of rent, electricity, travel and drawings. In the absence of evidence to show otherwise in respect of Ms Leatherwood’s ability to access drawings through the provision of funds from other sources such as a redraw on the [Bank 2] loan/inheritance funds and access to superannuation, the tribunal is also satisfied that this financial position has continued in the 2020/2021 year and will likely continue into 2021/2022. It is also noteworthy that as Ms Leatherwood has 100% care of [the child], the child support liability is not impacted significantly (less than $10 per week) by increased income of $20,000 or so.

According to Centrelink information, Ms Leatherwood is in receipt of family tax benefit parts A and B in the amount of $187 per fortnight, in addition to rent assistance of almost $65. Ms Leatherwood has also been in receipt of the economic support payments in April 2020, July 2020 and December 2020, totalling $1,750.
Pursuant to subparagraph 117(7)(b)(ii) of the Act, for child support purposes FTB is not considered to be a part of Ms Leatherwood’s adjusted taxable income. FTB is an income-tested benefit. FTB is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act). Therefore, as FTB is not required to be included in adjusted taxable income, it is to be disregarded, as clarified at 2.6.17 of the Child Support Guide.
The tribunal accepts the written evidence of Ms Leatherwood, that at 31 March 2021, she held a balance in her [personal superannuation account] of $83,260. It was evident that no personal or employer contributions have been made in respect of Ms Leatherwood in the relevant period. Furthermore, Ms Leatherwood withdrew $10,000 in April 2020 and again in July 2020 through the Early Release of Super program on account of COVID-19.
According to her Statement of Financial Circumstances, Ms Leatherwood’s assets consist of an investment property in [Suburb 4], valued at $700,000 and household contents of $40,000. She confirmed to the tribunal that her only liability is the mortgage corresponding to her investment property in the amount of $250,000. As noted above, no supporting evidence in the form of bank statements were provided. Based on the oral evidence of Ms Leatherwood, the tribunal calculates her asset base to approximate $490,000.
In respect of commitments, according to her Statement of Financial Circumstances, Ms Leatherwood’s average weekly costs approximate $792. However, it was apparent that expenses met by the Trust such as telephone and rental expenses were included. In addition, Ms Leatherwood stated that her weekly rent is $500 and not $400, as recorded. Furthermore, none of the household costs had been attributed to [the child] or to [Mr H]. There is no evidence before the tribunal to suggest that the self-support amount used in the administrative formula is not appropriate in respect of Ms Leatherwood. The self-support amount in 2020 was $25,575 and in 2021 it is $26,319. It appears that discretionary spending on vacations, entertainment, life insurance and private health are largely met by the Trust.
In the period from 1 January 2019, Mr Dewing has been consistently assessed on an adjusted taxable income of less than $30,000. Since 1 March 2019, Ms Leatherwood has been consistently assessed on an adjusted taxable income below the relevant self-support amount. After allowing for Mr Dewing’s relevant dependent children (discussed later in these Reasons For Decision), the administrative assessment calculates a child support liability payable by Mr Dewing in respect of [the child] in 2019 of around $500, reducing to the minimum annual rate in 2021 of $446.
Based on the findings of the tribunal above in respect of the income, benefits and financial resources available to Mr Dewing and Ms Leatherwood, the tribunal calculates the child support liability payable by Mr Dewing is likely more in the vicinity of between $8,000 and $9,000 per annum in the relevant period.
While the period will be discussed later in these Reasons for Decision, for the reasons outlined above, the tribunal finds that special circumstances do exist in this case in respect of the income, benefits and financial resources available to Mr Dewing and Ms Leatherwood, in that the administrative assessment results in an unfair outcome. As such, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Dewing, Ms Leatherwood and [the child] to make a particular departure determination?

As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Dewing and Ms Leatherwood have the primary duty to financially support [the child]. Mr Dewing told the tribunal that he has a legal duty since his birth on 4 November 2019 to share the costs in respect of [Child I] with [Ms F] and also for [Child J] with a previous partner. As discussed at hearing, the onus is on Mr Dewing to advise the Agency in respect of his relevant dependent children. [Ms F] has no duty to contribute to the costs of [the child], nor does Mr Dewing have any legal duty to contribute to the costs of [Ms F]’s son, [Child K].
Mr Dewing estimated the weekly costs he incurs in respect of [Child I] and [Child J] to be $50 each. While evidence received after the hearing suggests that the Agency has since been notified of [Child I] being a relevant dependant child, there was no submission in regard to [Child J]. In any event, considering the financial resources of Mr Dewing, the tribunal is satisfied that $100 per week does not create special circumstances.
Ms Leatherwood told the tribunal that she shares her rented residence with [the child] and her adult son, [Mr H]. Ms Leatherwood has sole care of [the child]. In response to a question from the tribunal, Ms Leatherwood stated that [Mr H] resides in the garage and makes no contribution to the household. As discussed at hearing, Ms Leatherwood has no legal duty to contribute to his ‘necessary’ costs.
In determining the proper needs of [the child], it is necessary to have regard to the manner in which he is being, and in which the parents expected him to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). The tribunal found earlier in these Reasons for Decision that there was no mutual expectation that [the child] attend a private school. Nevertheless, Ms Leatherwood continues to meet annual tuition fees of around $18,000 using the business credit card and apparently later reimburses the Trust from the [Bank 2] mortgage.
Ms Leatherwood gave oral evidence that with the exception of [the child]’s dental needs, her and [the child] are generally in good health. The dental plan invoice from September 2018 was in the amount of $1,364. Ms Leatherwood gave oral evidence that [the child] has a breathing problem due to allergies and therefore required a plate to expand the upper part of his mouth. She was adamant that the treatment was not for cosmetic reasons. Despite directions to do so, Ms Leatherwood provided no written evidence from a professional dentist or orthodontist setting out a detailed diagnosis in respect of [the child] or the necessity for treatment and the consequences if not treated accordingly. The letter from [Orthodontists] merely stated that the treatment for [the child] was now completed, he continued to wear a night-time retainer and required bi-monthly reviews at a cost of $150. The letter also indicated the likely requirement for braces at a later date. After the hearing, Ms Leatherwood provided a statement from [an Insurance company], dated 10 November 2020, that recorded a benefit paid in the previous 12-month period in respect of [the child]’s dental treatment of $225. No further evidence in respect of [the child]’s dental treatment was provided.
As pointed out at hearing, in respect of eyeglasses, the only invoice before the tribunal was in relation to October 2018 in the amount of $210. After the hearing a further invoice was provided from optical provider, [Optometrists], dated 6 April 2021 in the amount of $309. The tribunal accepts that [the child] requires prescription glasses at an average annual cost of $200 to $300.
In the absence of further evidence, the tribunal is not satisfied that the dental treatment was necessary. In respect of costs for eyeglasses, based on the Tribunal’s estimates of the income, benefits and financial resources of Mr Dewing and Ms Leatherwood, the Costs of the Children Table estimates the annual ‘necessary’ costs of [the child] to be $16,140. The eyeglasses costs represent less than 2% of his overall costs. It also represents 0.5% of Ms Leatherwood’s available income, benefits and financial resources. As such, the tribunal is not satisfied that $200 to $300 per annum creates ‘special circumstances’.
In response to a question by the tribunal as to how Ms Leatherwood meets the weekly expenses, including the [School] fees of almost $70,000, Ms Leatherwood stated that she is fortunate in that the business pays for some of them and she also draws down from the [Bank 2] loan. As already noted, the [Bank 2] mortgage statements were not provided to support Ms Leatherwood’s assertions. In addition, Ms Leatherwood stated that she has also accessed $20,000 from her superannuation, as noted above.
According to her Statement of Financial Circumstances, Ms Leatherwood estimates the average weekly costs of [the child] to be $550, including discretionary costs for activities of $100 per week and private education costs of $340 per week. Mr Dewing gave oral evidence that he does not see [the child] and therefore incurs no expenses, other than the assessed child support. Therefore, the tribunal calculates the weekly ‘necessary’ expenses of [the child], as estimated by Ms Leatherwood to be $210, or $10,920, albeit this does not include household costs such as rent and utilities. The tribunal is satisfied that no special circumstances exist in respect of the needs of [the child].

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

Subsection 117(7A) of the Act provides that the decision maker must have regard to ‘the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income’ and disregard ‘the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child’.
The tribunal found earlier that Mr Dewing likely has access to income, benefits and financial resources in the vicinity of $100,000 per annum and that Ms Leatherwood likely has access to income, benefits and financial resources in the vicinity of $80,000 per annum. While Mr Dewing has a less favourable asset base, it appears that both parties have ready access to available funds to redraw from their respective loans due to the accumulation of excess repayments. The obligation to provide for the needs of [the child] must be prioritised over making excess payments on a loan.
There is no evidence before the tribunal to suggest that the business operations of either party is deteriorating and concludes that each party will likely continue to have the ability to meet their own costs of self-support and also contribute to the ‘necessary’ costs of [the child] without difficulty.

Conclusion

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

100.The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). In this case, the tribunal proposes to commence the departure decision at 1 January 2019, the day after the previous departure decision ended.
101.In relation to an end period, the tribunal is cognisant of the preference of the parties for a degree of certainty going forward. As noted above, there is no evidence to indicate that either business is declining, or that the circumstances of either party are likely to change significantly in the foreseeable future. However, the tribunal acknowledges that based on the information available, while the Company is likely to see a steady improvement in its financial position, the Trust is likely to improve at a slower rate. The tribunal proposes to end the departure decision at 31 December 2022. At this time the 2021/2022 financial circumstances of the parties will be available for scrutiny. Unfortunately, in circumstances where one or both parties are self-employed, it is difficult to escape the necessity for ongoing change of assessment applications.
102.The tribunal is satisfied that the financial circumstances in the period 1 January 2019 to 30 June 2019 were at least comparable to the 2019/2020 year. The tribunal proposes to vary the adjusted taxable incomes of Mr Dewing and Ms Leatherwood to $100,000 per annum and $80,000 per annum respectively for the period 1 January 2019 to 31 December 2020. In the period 1 January 2021 to 31 December 2022, the tribunal proposes to vary the adjusted taxable incomes of Mr Dewing and Ms Leatherwood to $110,000 per annum and $80,000 per annum respectively. This results in an annual rate of child support payable by Mr Dewing of between $170 and $190 per week, assuming a relevant dependent child allowance in respect of [Child I] in the administrative assessment.
103.According to Agency records, Mr Dewing had an outstanding child support liability at 5 November 2020 of $11,596. The proposed decision will result in a reduction in the arrears of Mr Dewing. Any further payments made by Mr Dewing in the meantime will further reduce the arrears.
104.Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.
105.Mr Dewing conceded that Ms Leatherwood and [the child] would incur hardship if his child support liability were to remain based on the administrative assessment in the vicinity of the minimum annual rate. Ms Leatherwood agreed. However, he contended that the current rate results in hardship for him. Given the level of discretionary spending of Mr Dewing and the option of paying no mortgage repayments for two and a half years, the tribunal is satisfied that he need not incur hardship. The mortgage repayments alone free up $350 per week. It is open to Mr Dewing to prioritise his ‘necessary’ costs of self-support and the ‘necessary’ costs of [Child I] and [Child J]. It is also open to Ms Leatherwood to prioritise the ‘necessary’ costs of [the child].

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

106.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.
107.According to Centrelink records, Ms Leatherwood is in receipt of family tax benefit Part A and Part B. Her taxable income is well below the threshold at which the maximum rate of FTB Part A begins to reduce. However, this decision may impact on her entitlement to FTB Part A as a result of the increased child maintenance income. As a single parent, the child support liability has no impact on her entitlement to FTB Part B. Therefore, the tribunal is satisfied that it is otherwise proper to make the particular proposed determination.
108.It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based. In particular, in respect of the business operations of both parties.

DECISION

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

The adjusted taxable income of Mr Dewing in respect of the period 1 January 2019 to 31 December 2020 is varied to $100,000 per annum;
The adjusted taxable income of Mr Dewing in respect of the period 1 January 2021 to 31 December 2022 is varied to $110,000 per annum; and
The adjusted taxable income of Ms Leatherwood in respect of the period 1 January 2019 to 31 December 2022 is varied to $80,000 per annum.