Gereau and Gereau (Child support)

[2020] AATA 1029

Gereau and Gereau (Child support) [2020] AATA 1029 (26 March 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/PC017429

APPLICANT:  Mr Gereau

OTHER PARTIES:  Child Support Registrar

Ms Gereau

TRIBUNAL:Member M Martellotta

DECISION DATE:  26 March 2020

DECISION:

The tribunal sets aside the decision under review and substitutes it with the following decision:

a)For the period 1 July  2018 to 30 June 2019 Mr Gereau’s adjusted taxable income is varied to $103,588

b)For the period 1 July  2018 to 30 June 2019 Ms Gereau’s adjusted taxable income is varied to $30,479

c)For the period 1 July 2019 until a terminating event for [Child 2], Mr Gereau’s adjusted taxable income is varied to $60,000

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents - benefits derived from business – adjusted taxable income varied - 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

1. Mr Gereau and Ms Gereau are the parents of two children[1] who are children for the purposes of the administrative assessment of child support subject to this review. Mr Gereau is the parent liable to pay child support.  Ms Gereau is recorded as having 100% care of both children.

   [1] [Child 1] born [August] 2000 – the administrative assessment in his case ended on 21 December 2018.  [Child 2] the other child was born [September] 2003.

2. On 20 September 2018 Mr Gereau lodged a change of assessment application with the Department of Human Services – Child Support (the Department). His application was on the grounds of reason 8A. In response Ms Gereau cross applied on the basis of reason 8B.

3. In terms of the grounds to establish 8A Mr Gereau is required to demonstrate that the parent’s income, property and financial resources make the administrative assessment unfair. To establish 8B Ms Gereau is required to demonstrate that Mr Gereau’s earning capacity makes the administrative assessment unfair.

4. At the time of Mr Gereau’s change of assessment application according to the Department the relevant assessments had been in place:[2]

   ·     For the period 1 January 2018 to 31 August 2018 the assessment was based upon an agreed income of $250,494 for Mr Gereau and Ms Gereau’s derived 2016/17 income of $15,862.

   ·     For the period 1 September 2018 to 21 December 2018 the assessment was based upon an agreed income of $250,494 for Mr Gereau and Ms Gereau’s derived 2017/18 income of $15,184.

   ·     For the period 22 December 2018 to 30 November 2019 the assessment was based upon an agreed income of $250,494 for Mr Gereau and Ms Gereau’s derived 2017/ 18 income of $15,184.[3]

   [2] According to Department records there have been a number of previous change of assessment applications lodged by the parents. The assessments in place at the time of Mr Gereau’s application were the result of an agreed outcome reached by the parents in relation to a change of assessment application determined by the Department on 31 August 2017.

   [3] The child support amount payable decreased as from 22 December 2018 due to [Child 1] ceasing to be a child relevant to the assessment.

5. On 17 December 2018 the Department decided that a ground under reason 8A had been established and departed from the assessment so that as from 1 July 2018 to 30 June 2019 Mr Gereau’s adjusted taxable income (ATI) was varied to $104,000 per annum. Mr Gereau objected to that decision.

6. On objection the Department decided to make a different determination:

   ·     The departure decision dated 31 August 2017 ceased to have effect on 1 July 2018.

   ·     Mr Gereau’s ATI is varied to $103,000 from 1 July 2018 to 30 June 2019.

   ·     Ms Gereau’s ATI is varied to $61,176 from 1 July 2018 to 30 June 2019.

7. Mr Gereau lodged an application seeking independent review by the tribunal. The tribunal convened a telephone directions hearing and issued directions.  On 26 March 2020 Mr Gereau and Ms Gereau participated in a hearing by conference telephone and each gave their evidence under affirmation.  Documents relevant to the issues to be determined had been provided by the Department (539 pages); Mr Gereau (A1–A77) and Ms Gereau (B1–B115).

ISSUES

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

2. Child support legislation is interpreted by the Department with the aid of the Child Support Guide (the Guide). The tribunal is not bound by law to apply the policy as set out in the Guide but provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it.[4]

   [4] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

3. The issues for the tribunal to determine in this case are:

   ·     Does a ground for departure exist? if so,

   ·     Would it be just and equitable as regards the children, the liable parent, and the carer entitled to child support determination to depart from the administrative assessment of child support?

   ·     Is it otherwise proper to make a particular departure determination?

CONSIDERATION

Issue 1 – is there a ground to depart from the administrative assessment?

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act.  The general approach is that the Child Support Registrar (“the Registrar”) will utilise a parent’s ATI as assessed by the Australian Taxation Office (ATO) for the last relevant year of income.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B).  Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and as noted, establishes a three step process.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act.  Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[5]  In this matter the only ground contested at hearing was whether a ground for departure is established pursuant to reason 8A.

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

Mr Gereau

[5] The phrase “special circumstances of the case” is not defined in the Act. However the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC92-279). Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”. 

1. Subparagraph 117(2)(c) (ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Act relating to the 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 because of the income, property and financial resources of either parent.

2. At hearing Mr Gereau submitted that the decision made by the Department in response to his application for change of assessment had incorrectly assessed his income predominately due to the inclusion of a director’s loan.  He told the tribunal that the Department had been advised on a number of occasions by him and his accountant that the inclusion of that amount was wrong. Further he submitted that there had been ‘double dipping’ by the Department because they included income amounts ‘…for which he had already paid tax and child support.’

3. Mr Gereau’s attitude at hearing was that the tribunal should restrict its inquiry to a consideration of only whether or not the Department had made the right decision by including the director’s loan as a financial asset in their assessment of his ATI.  At various points in the hearing Mr Gereau resisted and at times rejected questions put to him by the tribunal on matters examining his income, property and financial resources, on the basis that it was his belief that such inquiries were irrelevant. Mr Gereau’s approach made it difficult at times for the tribunal to obtain a clear explanation of his financial circumstances.[6]

   [6] At one point Mr Gereau stated he was going to withdraw his application but he then decided to continue with the hearing.

4. As noted the decision maker can look beyond the parent’s taxable income when considering an application for a change of assessment. Income, earning capacity, property and financial resources, which do not necessarily form part of a parent’s taxable income, can be added to or excluded from a child support assessment and as such form part of the legitimate and necessary inquiry. In regard to Mr Gereau’s attitude at hearing the tribunal notes authorities regarding the duty of parties to provide full and frank disclosure regarding their financial affairs and that this duty extends to presenting information in a way that can be reasonably and readily understood and examined.[7] It is open to the tribunal to draw adverse inferences from a party’s failure in this regard.

   [7] Humphries & Berry [2008] FMCA fam 409

5. The tribunal was able to ascertain the following information from Mr Gereau:

   a)    He is the sole director and shareholder of [a company].  It is through this structure that he operates his business which he describes as [business activities].

   b)    He is the sole employee of the company apart from a person the company employs to undertake some accounting and bookkeeping.

   c)    Whilst in previous years he has generated a significant income from his employment in effect he has had no work since September 2018 when a contract concluded.  Since then he has only had one small contract which paid about $1600. It is unclear whether any future contracts will be secured.

   d)    In the 2018/19 financial year his income was about $60,000.

   e)    The assessment should reflect his ATI as assessed by the ATO in his personal 2018/19 income tax return.

   f)     A director’s loan paid to him from the company on 20 September 2018 into his personal account should not be viewed as a financial resource relevant to the assessment.

   g)    Since there has been a downturn in his business he has nil income.  He relies upon his partner for financial support and has had to change his lifestyle.

   h)    He has not sought to make a claim for income support as he chooses not to do so.

6. In attempting to clarify the circumstances of the director’s loan paid by the company to Mr Gereau, and in response to questions asked by the tribunal, Mr Gereau stated that:

   a)It was not relevant if that loan was used for personal or company purposes, it may have been used to pay his home mortgage but it may not have been.

   b)He cannot say if the director’s loan was documented and he could not say if the amount was repaid to the company.  He does not know why  loan information would not have been provided in the company’s tax returns for the relevant financial year[8]

   [8] The company 17/18 and 18/19 returns do not record director’s loans at item 8N of those returns.

7. The tribunal noted correspondence provided by Mr Gereau’s accountant [Ms A]. In a letter dated 12 November 2018 she advised the Department that in terms of Mr Gereau’s 2018/19 year all surplus income from the company after expenses goes to Mr Gereau as wages and none are held by the company.  On this basis his declared wages to the ATO will be $60,290 and this will be his total income.

8. In a later letter, his accountant advised the Department  Mr Gereau declares all profit from the company as wages but has not always taken all that money from the company bank account so as to leave a cash flow to meet running expenses – this is described as a director’s loan.  Mr Gereau has been reimbursed this money to meet personal expenses and as the director’s loan has been declared as income to the ATO in the past then if that amount is added to his 2018/19 income it constitutes ‘double dipping’.[9]

   [9] ibid

9. At hearing Mr Gereau confirmed that he retained financial assets in the company bank account as a backup. He said that although he has not been generating an income through the company since September 2018 he would currently hold about $40,000 in the company account which he can access from time to time as required and at his discretion.

10. As the tribunal understands it, Mr Gereau submits that the director’s loan in issue is not an additional financial resource from which he benefits from over and above the wages he received in 2018/19 but forms part of his declared personal income.  The tribunal asked Mr Gereau if he could explain or clarify aspects of the financial statements for [the Company] in order to assist the tribunal in reaching a clearer understanding of his submission.  Mr Gereau was unable to assist other than to assert that in effect he considers any financial assets held by [the Company] to be his own personal assets and he could choose how, when and for what purpose to access those funds.

11. The 2018/19 profit and loss statement shows that the company had income sales (operating revenue) of $73,111. From this the company expenses included a range of line items including Mr Gereau’s wages of $63,890. This left the company with an operating profit/loss (- $4,541). Retained profits from the beginning of financial year totalled $50,856 which less the loss left a retained profit of $43,315. The notes to the financial statements state that this profit is earned after charging as an expense the director’s salary of $60,290 (this is the gross amount declared in Mr Gereau’s 2018/19 personal income tax return.

12. From what the tribunal can ascertain the retained profit is money held by the company after the payment of Mr Gereau’s wages by the company. This is consistent with the accountant’s subsequent description of how a cash flow is left in the company accounts to meet Mr Gereau’s personal expenses. On this basis they do not appear to form part of Mr Gereau’s income earned from the company but appear as a cash asset of the company available to be drawn down by Mr Gereau.

13. Bank statements obtained by the Department show and the tribunal finds that in the period 1 July 2018 to 28 September 2018 Mr Gereau transferred $77,250 from the company account into his personal account. These transfers were described as wages. This is an amount greater than the gross income of $60,290 as stated in the 2018/19 personal income tax return.

14. The tribunal also finds that in addition to these payments on 20 September 2018 Mr Gereau also transferred into his personal account an amount of $26,488 described as a director’s loan.  At the conclusion of that transaction the company’s bank balance was reduced to $50,101.50. The tribunal notes that this director’s loan was paid to Mr Gereau after the date he said that income from contracts remuneration being paid to the company had ceased.

15. Mr Gereau’s personal banks statements show and the tribunal finds that on the 20 September 2018 Mr Gereau made a number of transfers from his personal account to pay for credit cards as well as $4000 into a personal overdraft and $55,000 into his home loan.

16. According to authorities a financial resource refers to something that is not property but from which a financial benefit is or may be gained.  The term is to be broadly defined and refers to any financial benefit that would enhance the capacity of a parent to provide a proper level of support for their children.  The tribunal is satisfied that the director’s loan drawn by Mr Gereau is a financial resource from which he gained a financial benefit and that the loan was an amount received in addition to the wages paid to him by the company.

17. It is a long established principle of law that when a person conducts their business or profession through an intermediary such as a company it is proper to lift the corporate veil to determine the value of the entity to that person.[10] These principles have been affirmed by the Family Court,[11] with regard to the determination of a parent’s income for child support purposes and in these cases, effective control of the businesses was found to rest with the person conducting the business and generating the income and not the intermediary. 

    [10] See in particular Stein (1986) FLC 91-779 and Ashton (1986) FLC 91-777. In Ashton, the Court stated that “this Court is not bound by formalities designed to obtain advantages and protection for the husband who stands in reality in the position of the owner.” 

    [11] In cases such as Carey (1994) FLC 92-489.

18. It appears to the tribunal that based upon its findings of fact, it not appropriate to rely upon the income tax return as assessed by the ATO.  Rather in assessing the components which should be utilised in the assessment this should include the payments identified as wages totalling $77,250 less an amount for deductions. The tribunal notes that in his last tax return Mr Gereau claimed minimal work related deductions of $150. Utilising this figure would result in an amount of $77,100.

19. In addition to the wages received from the company, Mr Gereau also received a ‘director’s loan’ of $26,488 which was used by him to pay down various personal debts including his mortgage. The tribunal is satisfied that this loan is a financial resource available to Mr Gereau which is relevant in determining the ATI for child support purposes.

20. The tribunal concluded that Mr Gereau has an ATI of $103,588 relevant to the child support assessment.

Ms Gereau

1. Ms Gereau has in the last financial year commenced a business, [Business name]. She operates this business as a sole trader.  She has since completed the first relevant return in 2018/19. According to her financial statements she made sales of $65,517 and less her expenses had a net profit of $15,057.  She said as part of setting up the business she received a New Enterprise Incentive Scheme payment.  Her personal return shows a 2018/19 taxable income of $29,479.

2. Ms Gereau said that in terms of the business expenses for items such as the motor car and telephone and internet a proportion of about 10% of those items would be for personal use. She also said that the line item for depreciation in the financial statements was a book entry.

3. The tribunal was satisfied that the income tax return and financial statements provided by Ms Gereau painted an accurate picture of her financial circumstances.  As noted in the Guide:[12]

   A parent may be involved in a business as a sole trader in the person's name or under a registered business name. A parent who operates a business as a sole trader is personally liable for all business debts and entitled to all business profits, is required to declare all income from the business in their personal tax return, and is responsible for any tax payable on the business income. A sole trader may or may not pay themselves a wage from the business. Alternatively, they may take drawings whereby goods or money are withdrawn from the business profit for personal purposes.

   A business may be able to deduct certain expenses from income for tax purposes and as a result legitimately may have a reduced income or may even run at a loss. These deductible expenses can result in a child support assessment that does not take into account the full financial resources available to the parent. In these cases, assessing child support on the basis of taxable income can result in an unjust and inequitable level of child support.

   Expenses partly for business purposes & partly for private purposes

   Where an expense is partly business and partly private the expenses must be apportioned for taxation purposes. Parents who are self-employed or who operate a business might claim expenses that may otherwise be considered private as a legitimate income tax deduction. Examples include the fixed-costs component of telephone expenses such as the rental and connection fees, home office expenses or motor vehicle expenses. These deductions are generally not available to parents who derive income solely from salary and wages.

   [12] 2.6.14

1. In this case tribunal considered that as Ms Gereau derives personal benefit from some of the costs paid by the business (such as the car, phone and internet) an adjustment of $1000 should be made to accommodate this in the ATI relevant to the assessment. In her case the relevant income is $30,479.

2. As noted at the time Mr Gereau made his application for a change in assessment, the Department had been utilising an agreed ATI of $250,494 for Mr Gereau and a derived 2016/17 income of $15,862 for Ms Gereau.

3. In this matter the tribunal has concluded that the appropriate amount to be utilised in the assessment (which takes into account each of the parties’ relevant income, financial resources and property) is $103,588 for Mr Gereau and $30,479 for Ms Gereau. Utilising these amounts in the assessment would result in a significant change in the level of child support payable by Mr Gereau.[13]

   [13] Mr Gereau’s annual liability decreases from $42,324 per annum to $22,032 per annum for the period both children are of the assessment and decreases from $27,970 to $16,942 for the period that there is only one child of the assessment.

4. For this reason, the tribunal concludes that a ground of departure exists because in the special circumstances of the case, application of the provisions of the Act relating to the 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 children because of the income, property and financial resources of Mr Gereau and Ms Gereau.

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

1. As the tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the tribunal is to consider whether it is just and equitable as regards the children and the parental parties to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act.  This in turn requires the tribunal to consider the matters set out in subsection 117(4) of the Act: which is discussed in the following paragraphs.[14]

Proper needs of the children

[14] The tribunal notes the Federal Magistrates Court case of Tyagi & Meares [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4) the section need not be ‘slavishly followed, each of the relevant factors listed in … should be considered’.

1. In determining the proper needs of the children it is necessary to have regard at a broad level to the manner in which the children are being, and in which the parents expect the children to be, cared for, educated or trained, and also any other needs of the children. There was no evidence presented in this regard and the tribunal was satisfied that this was not a relevant consideration.

Income, earning capacity, property and financial resources of the children

1. In having regard to the income, earning capacity, property and financial resources of the children the tribunal must disregard any entitlement of the children or the carer entitled to child support to an income tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act).

2. There was no evidence presented to the tribunal that the children have any income or unused earning capacity that needs to be taken into account in the child support assessment and as such the tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

Other party receiving money, goods and property for the benefit of the children

1. Neither party made submissions in this regard nor as such the tribunal concludes there is no basis for any adjustment pursuant to this consideration.

The income, property and financial resources of each parent who is a party to the proceeding

1. In this matter the tribunal has concluded that the appropriate amount to be utilised in the assessment (which takes into account each of the party’s relevant income, financial resources and property) is $103,588 for Mr Gereau and $30,479 for Ms Gereau.

2. According to his Statement of Financial Circumstances Mr Gereau describes himself as unemployed.  He and his partner own their home which is subject to a $50,000 joint mortgage. He has personal savings of $5,000 and the company has cash assets of $43,000. He estimates that his weekly expenditure is about $200. He says that as he is without income his partner pays for those costs.

3. The tribunal noted that according to personal and company bank statements for the period July 2019 to January 2020 Mr Gereau is still managing to meet regular payments on his personal and joint credit cards. Purchases on his personal credit card show a continued level of discretionary spending (regular lottery purchases of $100 per transaction, dining expenses of between $100-$250 per transaction and home improvement and landscaping purchases of over $4,000).  Mr Gereau stated that these purchases were justified as he needed to keep busy at home given he was without work.

4. Mr Gereau’s personal bank account for the period July 2019 to January 2020 shows a debit balance of $29,461. Most of the debits from this account in the period July 2019 to January 2020 were used to pay joint and personal credit cards.  Mr Gereau also operates a $30,000 overdraft account which he says is used to cover the household costs and to pay back credit cards. Payments into that account are made from his partner’s wages and Mr Gereau also transferred an amount of $11,000 from his own personal account.

5. The tribunal asked Mr Gereau whether the income support he receives from his partner; his ability to meet costs drawn from the company accounts as well as the overdraft facility should be regarded as relevant financial resources for the purposes of the assessment. Mr Gereau discounted this question. 

6. Bank statements for the period July 2019 to January 2020 also demonstrate that Mr Gereau has been able to use the company credit card and bank account to pay for items such as car repairs, telephone and internet costs. The tribunal asked Mr Gereau given that the company has not traded since September 2018 what proportion of these costs were personal as opposed to business.  Mr Gereau did not provide any clear explanation.

7. Whilst Mr Gereau is currently unemployed the tribunal is satisfied on the evidence that he has been able to maintain a particular lifestyle which is supported by his partner’s income and by his access to a personal overdraft facility as well as access to cash assets held by the company.  At a minimum this means that Mr Gereau has access to the following financial resources; $200 per week paid by his partner to cover his weekly expenses ($10,400 per annum) access to cash assets held by the company ($40,000) and access to his share of the household’s overdraft($15,000) a total of $65,400.

8. In relation to Ms Gereau, she advised that until recently (due to the COVID-19 crisis) she was operating her business which has had to close down but she is confident that it will re-open.  Her current source of income from the business has ceased but she is exploring Government assistance available to small businesses.

9. According to her Statement of Financial Circumstances she owns her primary place of residence which is subject to a $193,000 mortgage for which she is solely responsible. She has access to a small overdraft facility (under $5,000). She lives with her adult [child] and dependent [child].  She estimates that the total household expense is about $1,200 per week. The tribunal notes that she receives board payments of $310 per week and that some of the listed household expenses include vehicle and telephone and internet costs that were met by the business when operating.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the 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 because of the earning capacity of either parent (subparagraph 117(2)(c)(ib)).  Whilst Ms Gereau raised this as a ground in her cross application no submissions were made on this aspect at hearing.

2. Subsection 117(7B) of the Act provides:

   (7B)         In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a) one or more of the following applies:

   (i)  the parent does not work despite ample opportunity to do so;

   (ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii) the parent has changed his or her occupation, industry or working pattern; and

   (b) the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i)  the parent's caring responsibilities; or

   (ii) the parent's state of health; and

   (c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child

3. Whilst it is apparent that Mr Gereau’s pattern of work has changed in that since September 2018 he says he has not been able to secure another contract.   Mr Gereau stated that he does not tender for work but the organisation that he used to contract with has not had any further work for him. Any future work at this point in time appears unclear.

4. On the basis of the available evidence the tribunal was satisfied that Mr Gereau’s change in working pattern is not motivated by a motivation to affect the administrative assessment. For this reason the tribunal concluded that there was no basis for any adjustment pursuant to this consideration.

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain

1. The tribunal is satisfied taking into account the relevant costs of self-support utilised in the assessments and based upon evidence provided at hearing that  neither party has extraordinary costs of self-support that are relevant to the assessment.

Any hardship that would be caused

1. As noted the tribunal can vary the rate of child support payable or it can vary some of the variables that are used in the administrative formula.  In this matter the tribunal came to the same conclusion as reached by the Department namely that Mr Gereau’s ATI as utilised in the administrative assessments is not an accurate reflection of his income and financial resources available to him.

2. The tribunal is proposing to make a determination which sets Mr Gereau’s ATI at $103,588 and Ms Gereau’s ATI at $30,479 for the period commencing 1 July 2018 to 30 June 2019 and to thereafter set Mr Gereau’s ATI at $60,000 for the period commencing 1 July 2019 until a terminating event takes place in relation to [Child 2].

3. This would result in a weekly child support assessment of $422 to the period ending 21 December 2018 and thereafter a weekly rate of $325 to the period ending 30 June 2019.[15]  Utilising an ATI of $60,000 as from 1 July 2019 and otherwise utilising Ms Gereau’s ATI as assessed by the ATO will result in a weekly child support liability for the remaining child of about $154 per week.

   [15] The change reflects that one child ceased to be relevant to the assessment.

4. Mr Gereau told the tribunal that any departure from the administrative assessment would cause him very little hardship. Ms Gereau told the tribunal that securing a reasonable level of child support has been difficult.  She is currently facing a period without income at a time when she is still supporting the youngest child.  She is owed arrears and believes that Mr Gereau could access funds to repay those arrears if he chose to do so.

5. Mr Gereau lodged a change of assessment application on 20 September 2018. The tribunal may not (without the leave of a court) depart from an assessment for a period which is more than 18 months prior to that date. In this matter the tribunal considered it is not appropriate to amend the assessment to any period prior to the beginning of 1 July 2018.

6. As for the duration of the change in assessment the tribunal considered that it is appropriate that the departure apply until a terminating event applies in relation to [Child 2].  In this regard the tribunal notes that since 1 July 2019 Mr Gereau has submitted a nil estimate of income and a subsequent income estimate of $2,299.  Whilst these estimates have since been reconciled with his 2019 return, it appears to the tribunal that given Mr Gereau’s uncertainty of engaging future contracts a departure in these terms provides some stability and certainty until such time that the youngest child ceases to be an assessable child in 2021.[16]

   [16] The tribunal notes that the most recent child support assessment has reconciled  $nil and a  subsequent $2,299 estimate provided by Mr Gereau after 1 July 2019 and instead has utilised his 2019 taxable income of $60,000 and Ms Gereau’s 2019 taxable income of $29, 941 this has resulted in a weekly rate of $154.30.

7. The tribunal notes that according to the Department Mr Gereau had arrears of about $1,411 as of the date of the objection decision. The tribunal is satisfied that whilst Mr Gereau states that he is without income (and in the absence of clearer explanations), that he has access to financial resources which will allow him to repay child support arrears owed as a result of a departure in these terms. As noted he has to date prioritised the use of company cash assets to meet personal costs such as paying down his home mortgage.

8. In terms of capacity to pay ongoing child support liability the tribunal notes that Mr Gereau has very limited weekly expenses. He has access to financial resources of at least $60,000 which means that he has the financial capacity to make child support payments of $154 per week. In this regard the tribunal notes that Mr Gereau whilst unemployed, is, according to recent bank statements, still choosing to make a range of discretionary purchases.  Redirecting those funds to meet his child support liability should not cause him any significant financial hardship.[17]

   [17] In the period July 2019 to January 2020 Mr Gereau spent $1,400 on the purchase of lottery tickets, $4,638 on home garden and related supplies and $593 dining at [a Restaurant].

9. By comparison Ms Gereau has recently seen the temporary closure of her business and may become reliant upon income support payments. Her full-time care of the children meant that she has had greater costs of care. She is owed arrears. In her case the tribunal is satisfied that her taxable income from year to year will properly form the basis of the assessment going forward.

10. The tribunal concluded that for all of the above reasons, in the special circumstances of this case, it was just and equitable to make a departure determination from the administrative assessment issued in accordance with the Act so that:

    a)For the period 1 July 2018 to 30 June 2019 Mr Gereau’s adjusted taxable income is varied to $103,588

    b)For the period 1 July 2018 to 30 June 2019 Ms Gereau’s adjusted taxable income is varied to $30,479

    c)For the period 1 July 2019 until a terminating event for [Child 2], Mr Gereau’s adjusted taxable income is varied to $60,000

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

1. The final step is for the tribunal to determine whether it is ‘otherwise proper’ to make a particular departure determination.  Subsection 117(5) requires the tribunal to take into account whether the proposed departure is proper in the context of public interest and welfare expenditure of the community.  A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should be unnecessarily abrogated to the public welfare system.

2. According to her Statement of Financial Circumstances Ms Gereau is in receipt of family tax benefit and the proposed departure from the administrative assessment may reduce her entitlement to government assistance.  In this case the tribunal finds that the requirements under paragraph 117(5)(a) of the Act are met.  The tribunal concludes that it is otherwise proper to depart from the administrative assessment.

DECISION

The tribunal sets aside the decision under review and substitutes it with the following decision:

a)For the period 1 July 2018 to 30 June 2019 Mr Gereau’s adjusted taxable income is varied to $103,588.

b)For the period 1 July  2018 to 30 June 2019 Ms Gereau’s adjusted taxable income is varied to $30,479

c)For the period 1 July 2019 until a terminating event for [Child 2], Mr Gereau’s adjusted taxable income is varied to $60,000