Gilson and Gilson (Child support) - [2023] AATA 840

Gilson and Gilson (Child support) [2023] AATA 840 (28 February 2023)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/MC024608
APPLICANT:  Ms Gilson
OTHER PARTIES:  Child Support Registrar
Mr Gilson

REVIEW NUMBER:  2022/MC024650
APPLICANT:  Mr Gilson
OTHER PARTIES:  Child Support Registrar
Ms Gilson

TRIBUNAL:Member M Douglas
DECISION DATE: 28 February 2023
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the annual rate of child support payable by Mr Gilson be varied to:

a)$23,400 for the period 1 January 2022 to 6 April 2022;
b)$15,600 for the period 7 April 2022 to 31 December 2023.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – 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

Ms Gilson and Mr Gilson are the separated parents of [Child 1], [Child 2] and [Child 3]. Assessments of child support have been issued for those children with the first taking effect on 20 May 2021.
Broadly speaking, an assessment of child support is made in accordance with the provisions of Part 5 of the Child Support (Assessment) Act 1989 (the Act). Those provisions prescribe a formula that applies to several variables to work out the amount of child support one parent must pay the other for their children. Those variables include the parents’ taxable incomes from the financial year before the start of the child support period to which the assessment relates, the level of care that each parent provides for their children, the cost of the children and whether a parent supports any children from a separate relationship. Section 98B of the Act permits a parent, if a parent believes there are special circumstances, to apply to Services Australia for a determination to be made to depart from those provisions. Services Australia describes such an application as a “change of assessment application”.
On 20 December 2021 Ms Gilson made such an application. At that time the assessment of child support, which was for the child support period 20 May 2021 to 28 February 2022, obligated Mr Gilson to pay child support to Ms Gilson for the children at an annual rate of $3,378. The assessment was calculated on an adjusted taxable income for Mr Gilson of $43,000 and an adjusted taxable income for Ms Gilson of nil. Mr Gilson’s adjusted taxable income reflected his taxable income for the 2020 financial year.
The assessment for the following child support period commencing 1 March 2022 obligated Mr Gilson to pay child support at an annual rate of $4,321. That was based on Mr Gilson’s adjusted taxable income of $47,900, which reflected his 2021 taxable income and again an adjusted taxable income for Ms Gilson of nil.
On 28 March 2022 Services Australia made a determination in response to Ms Gilson’s application that the adjusted taxable income of Mr Gilson be varied to $325,000 for the period 1 January 2022 to 31 December 2023. Mr Gilson lodged an objection to that determination on 8 May 2022. On 17 August 2022 Services Australia allowed his objection in part and set aside its decision of 28 March 2022 and substituted it with a determination that varied Mr Gilson’s adjusted taxable income to $152,000 for the period 1 January 2022 to 31 December 2023.
Both Mr Gilson and Ms Gilson have applied to the Tribunal for review of that decision. The Tribunal held a Directions Hearing with Mr Gilson and Ms Gilson on 6 December 2022, at which time the Tribunal made directions requiring both of them to produce various documents to the Tribunal for the purpose of providing disclosure of their respective financial circumstances. The Tribunal also directed that any evidence on which each party intended to rely in the Tribunal’s review of Services Australia’s decision of 17 August 2022 was to be produced to the Tribunal by 17 January 2023.
On 28 February 2023 the Tribunal heard the applications that Mr Gilson and Ms Gilson had made for a review of Services Australia’s objection decision. Both Mr Gilson and Ms Gilson participated in that hearing, by phone. Each gave sworn oral evidence at the hearing. Ms Gilson had also produced documents to the Tribunal which were received into evidence and marked A1–A580. Mr Gilson similarly had produced documents to the Tribunal which were also received into evidence and marked B1–B210.
No one from Services Australia participated in the hearing but in accordance with subsections 37(1) and 38AA(1) of the Administrative Appeals Tribunal Act1975, it provided to the Tribunal, and to Ms Gilson and Mr Gilson, a copy of all documents relating to its objection decision.
The Tribunal has taken into account the oral evidence of Mr Gilson and Ms Gilson and also the documentary evidence as just described.
The Tribunal notes that subsequent to the hearing both Mr Gilson and Ms Gilson lodged further documents and written submissions. The Tribunal did not accept those documents nor has it taken the written submissions into account. The reason being is that, as said, a direction was made on 6 December 2022 that required each of them to file by 17 January 2023 any evidence on which they intended to rely. Neither party at the hearing indicated that they sought to tender any further documents into evidence other than those that they had each lodged with the Tribunal before the hearing, namely A1–A580 and B1–B210. Each party had an opportunity at the hearing to give oral evidence on all relevant matters and to make submissions to the Tribunal with respect to their respective cases. In other words each party was able to ventilate fully their respective position at the hearing. An objective of the Tribunal is to provide a mechanism of review that is fair, just, economical, informal and quick. Against the background just outlined, the Tribunal considers that permitting the parties to continue to file further material after the hearing would not accord with that objective.

THE REQUIREMENTS FOR A DEPARTURE FROM AN ASSESSMENT

As mentioned, a parent may, if there are special circumstances, apply to Services Australia under subsection 98B(1) of the Act for a determination to depart from the provisions of the Act relating to an assessment of child support. Services Australia, or the Tribunal in its place, if satisfied that the criteria of subsection 98C(1) are met, can make one or more of the determinations listed in subsection 98S(1) of the Act to depart from the provisions of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are that:
i.A ground for departure exists;
ii.It would be just and equitable as regards the child, the liable parent, and the carer entitled to child support to make a determination [under subsection 98S(1)]; and
iii.It would be otherwise proper to make a determination [under subsection 98S(1)].
The grounds for departure are listed in subsection 117(2) of the Act.
The matters that are to be considered in deciding whether it is just and equitable to make a determination to depart from the provisions of the Act are listed in subsection 117(4) of the Act. Broadly speaking, consideration of those matters ensures that any departure will be fair for both parents and fair for the children.
The matters to be considered regarding the third criterion are listed in subsection 117(5) of the Act, and broadly speaking consideration of those matters ensures that any departure reflects that the parents of a child, rather than the Australian community through the social security system, have primary responsibility for the cost of their children’s care.

CONSIDERATION

Is a ground for departure established?

In her change of assessment application Ms Gilson selected, in support of her application, the grounds for departure listed at subparagraphs 117(2)(b)(i), 117(2)(c)(ia) and 117(2)(c)(ib) of the Act, which Services Australia describes, respectively, as “Reason 1”, “Reason 8A” and “Reason 8B”. It is convenient to deal with the ground for departure listed at subparagraph 117(2)(c)(ia) which read as follows:
“that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia) because of the income, property and financial resources of either parent”
Ms Gilson’s case based on this ground for departure was, in substance, that Mr Gilson’s taxable income from the most recent financial year, which becomes his adjusted taxable income in the assessment of child support in the following child support period, is not an accurate reflection of his earnings. In her change of assessment application she stated that Mr Gilson was [Related occupations 1-3] and that he earned close to $480,000 a year. Her evidence at the hearing was that she had worked in Mr Gilson’s business as his office manager between 2013 and 2018 and it was by virtue of performing her duties in that position that she became aware of Mr Gilson’s income.
Mr Gilson confirmed in his evidence that he conducts a business as [Occupations 1-2], which he does through the median of a company. Until October 2022 the company through which he conducted his practice was [Company name]. Since October 2022 he has conducted his practice through [Business name].
Mr Gilson said that his purpose in changing the company through which he conducts business was merely to have a company with a name that reflects the English translation of his surname. His evidence was that the business that he now conducts through [Business name] is the same that he previously conducted through [Company name].
In evidence is a report [Advisory company] prepared on 31 January 2022 in which it offers its opinion on the valuation of Mr Gilson’s business, which was then being conducted through the company of [Company name]. That report was requested by Mr Gilson’s solicitors and Ms Gilson for the purposes of proceedings between Mr Gilson and Ms Gilson in the Federal Circuit and Family Court of Australia.
That report detailed that Mr Gilson is the sole director and shareholder of [Company name]. The report details that, at the time it was written, [Company name] was used by Mr Gilson to conduct his [business], which then traded under the name of [Business name]. The report detailed that [Company name] had 650 clients, the majority being small or medium business owners. The report detailed that the fees received by [Company name] between 2012 and 2021 varied significantly with a low of $232,000 in 2017 and a peak of $446,000 in 2014, with the average annual fee over that period being $327,000. The report also detailed that [Company name] received COVID subsidies in the 2021 and 2020 years of $61,000 and $28,000 respectively. The report detailed that [Company name]’s revenue was defrayed to the extent of 38% on average to the payment of wages, superannuation and contractors’ costs. The authors of the report considered that the other costs of the business of [Company name], comprising insurance and general office costs, were not unusual in nature or amount.
The most recent tax return and financial statements for [Company name] in evidence are those for the 2021 financial year. Those documents revealed that in that year the gross income of the company, including grants and jobkeeper, amounted to $411,509. The documents revealed that the total expenses of the company amounted to $383,899, resulting in the company achieving a profit of $27,610. The company’s taxable income was however a lower amount of $8,375 as it was able to offset past year tax losses.
Mr Gilson’s personal tax return for the 2021 financial year is also in evidence. That revealed that he had a taxable income in that year of $47,900, comprising $20,000 drawn from [Company name] and $27,900 in jobkeeper payments.
Based on that information only, it would seem that the available income to Mr Gilson to meet his child support obligation and his personal and domestic commitments would be of the order of $75,510 a year, comprising his taxable income and the profit of his company.
Mr Gilson’s evidence at the hearing was to the effect that his business has not improved since the 2021 financial year and, if anything, his business activity has diminished due to the impact of COVID. The implication of that is that he now has less money available to him than the 2021 year to meet his commitments.
Somewhat in contrast to that, Mr Gilson’s evidence was that he has been paying the fees for his and Ms Gilson’s children to attend [School] and also the fees for his daughter from an earlier marriage to attend the same school. His evidence was that in the 2022 academic year those fees amounted to just short of $100,000 and that this year they will be around $120,000. His evidence was that he also pays the mother of his eldest child $100 a week by way of child support. Further, his evidence was that in addition to paying the school fees for his and Ms Gilson’s children’s attendance at [School], he also meets directly the costs of numerous of their other activities. He is able to do this notwithstanding his limited income from his [business].
The Tribunal also observes that he has been able to meet the large amount he pays by way of school fees for his children and also the expenses he says he meets for the children as well as the child support he pays the mother of his eldest child without accumulating debt.
Mr Gilson holds several accounts with [Bank]. The statements for those accounts covering the period February 2022 to February 2023 are in evidence. Mr Gilson also holds a credit card with [Bank], under the name [Account name]. Statements detailing the transactions he made on that credit card account for the period 23 August 2022 to 22 November 2022 are also in evidence.
One account that Mr Gilson holds with [Bank], being that with the account number ending 8604, is a trust account into which [client-related funds] are deposited. As amounts in that account are held by Mr Gilson [for a client-related purpose] the account has no relevance in terms of determining Mr Gilson’s income and financial resources.
The account Mr Gilson holds with [Bank] ending with account number 8612 is used by Mr Gilson for his business. The fees his company receives from its clients are deposited into this account that he deposits and it is from this account that his company meets some of its recurrent expenditure such as payment of wages and payment of rent. In February 2022 the account had an opening balance of $47,139. The balance a year later was $49,214.
Mr Gilson’s [account] ending with account number 8674 had an opening balance of $2,502.16 in February 2022 and had a nil balance in February 2023. His [account] ending with account number 9075 had a nil balance in February 2022 and a balance of $4.90 in February 2023. His [account] ending with account number 6843 had no transactions. Similarly, his account with account number ending 6929 had no transactions.
The statement for his credit card for the month of August 2022 revealed Mr Gilson used the account to pay the cost of transactions amounting to $15,763.73. The statement for September 2022 revealed that he used his credit card to meet the cost of transactions amounting to $11,226.48. The statement of October 2022 revealed Mr Gilson used the card to meet transactions amounting to $12,853 for the month. Mr Gilson’s evidence was that the transactions for which he used his credit card to pay included both business and personal transactions. That is apparent from the content of the statements.
The outstanding balance of Mr Gilson’s credit card was cleared each month by means of a transfer of funds from his account with [Bank] ending 8612.
As said, Mr Gilson has paid the fees for all of his children to attend [School], pay child support to the mother of his eldest child, meet his own personal commitments and pay, according to his evidence, several costs related to his and Ms Gilson’s children, and has done this without accumulating debt. It would seem to be the case that some of his personal expenses are met by his company, given that he uses his credit card to meet both expenses of his company and his own personal expenses and his company clears the debt accumulated on the card each month. In other words, by virtue of his company doing that, it seems that Mr Gilson would be obtaining some personal benefit, over and above the income he draws from his company. But, even bearing that in mind, it seems to the Tribunal that in all likelihood Mr Gilson has not provided full disclosure to it of his financial circumstances. It seems to the Tribunal that it would be unlikely that Mr Gilson would be able to pay the large amount he does for school fees for all his children and meet his other personal expenses, such as his living expenses and child support for his eldest child, on what is a relatively modest income he receives from his company and a modest profit that is available to be drawn by him from his company, without accumulating any debt.
The Tribunal infers, based on that, that Mr Gilson has an undisclosed financial resource available to him that enables him to meet all his commitments.
The Tribunal notes that a person in employment receiving an after tax income of $100,000 a year, which is approximately the amount that Mr Gilson said he paid in school fees in the 2022 financial year, would be receiving a before tax income of $140,400 to achieve that after tax income. A person in employment who receives an after tax income of $120,000, which is the amount Mr Gilson said he is paying in school fees this year, would require a before tax income of $170,560 to achieve that after tax income.
The Tribunal enquired of Mr Gilson during the hearing how it is that he has been able to pay the school fees for his children without accumulating debt, and his response was that he has been telling his clients to “pay up” and that he is living with his mother which means he has lesser expenses for his self-support than other people. That answer, in the Tribunal’s view, is an insufficient explanation from Mr Gilson as to how he has been able to meet the school fees and his living expenses. As said, the Tribunal infers that he has an undisclosed financial resource.
In proceedings before the Tribunal involving child support a parent has a duty to make full and frank disclosure of all their financial circumstances and must do so in a way that is transparent and readily understandable.[1] If a parent does not abide that obligation then the Tribunal can be “reasonably robust in assessing the non-disclosing parent’s financial circumstances adversely to the parent and in favour of the other parent”.[2] It is not the Tribunal’s role to embark upon a “tortuous process of audit” where a parent has failed to provide full and frank disclosure of their financial circumstances in a transparent and accessible way.[3]
[1] Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409 at [26]–[27]; Agrippa & Horton (SSAT Appeal) [2010] FMCAfam 1144 at [24] (Agrippa); Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305 at [79]–[80] (Morse); Archer & Archer & Anor (SSAT Appeal) [2013] FCCA 226 at [71] (Archer)
[2] Archer at [70]; Agrippa at [25]; and Morse at [80]
[3] Morse at [79]

The Tribunal, being reasonably robust in assessing Mr Gilson’s financial circumstances, infers that the income he has available to him through his company, by means of the wage he draws from it and the profit he can draw from it, and the money he has available to him through an undisclosed financial resource is such that he would have available to him moneys of the order of at least $170,560 a year. That is far in excess of his adjusted taxable income that, as said, is set by reference to his assessed taxable income for the financial year that precedes a child support period.
The Tribunal considers that by virtue of that there are special circumstances in this case.
The Tribunal notes that Mr Gilson does not own any property presently. He and Ms Gilson previously owned real estate at [Suburb 1] which they purchased in 2016 and sold in July 2019. They previously resided in that house with the children. A company of which they are both the office holders and shareholders purchased in December 2018 a residential property at [Suburb 2], into which they moved following the sale of the [Suburb 1] property. The purchase of that property was funded from borrowings from financial institutions and from borrowings from Mr Gilson’s mother. The property was sold in April 2021. After discharge of the loans owing to the financial institutions $1.35 million remained, which is presently held in a solicitor’s trust account. As the Tribunal understood the evidence of Ms Gilson that amount will be paid to Mr Gilson’s mother to discharge the company’s debt to her.
The Tribunal is satisfied that an assessment of child support based upon Mr Gilson’s taxable income from the preceding financial year does not represent a fair assessment of what he should contribute to his children’s support, because of the money he has available to him by way of wages from his company, the profit of his company and from his undisclosed financial resource.
Bearing in mind the variance between Mr Gilson’s adjusted taxable income and the money he has available to him by way of wages, profit from his company and money from an undisclosed financial resource, the Tribunal is satisfied that the application of the provisions of the Act relating to the assessment of child support do result in an unjust and inequitable determination of the level of financial support to be provided by Mr Gilson for his and Ms Gilson’s children by virtue of his income and financial resources.

Is it just and equitable to make a determination?

As already said, the matters the Tribunal must take into account when considering whether it is just and equitable to depart from the provisions of the Act with respect to the assessment of child support are listed in subsection 117(4) of the Act. The Tribunal is not required to go slavishly through each of those matters but must have regard to those that are relevant to the particular circumstances of this case and do so in a practical and flexible way.[4]
[4] Gyselman and Gyselman (1992) FLC 92-289; Ross v McDermott (1998) FLC 98-003; and Lawson and Edney [2017] FCWA 77
There is no evidence, and it was not the contention of either Mr Gilson or Ms Gilson, that the children have any special needs. As indicated above all the children attend [School]. They do so in accordance with the expectation of both Mr Gilson and Ms Gilson. Of course it is the proper need of the children that they be educated. Given that both Mr Gilson and Ms Gilson agree that they be educated at their present school, the Tribunal finds that it also is one of their proper needs that they remain at the school at least for the time being. The cost of their education at that school substantially increases the cost of their care. All of that expense is being and has been met by Mr Gilson.
Ms Gilson is not currently employed. Services Australia records that since 7 April 2022, the children have been in her care for 222 nights of the year, which is 61% of the nights of the year. They are otherwise in the care of Mr Gilson. Before 7 April 2022, they were in Ms Gilson’s care all of the time.
The children’s ages range from 4 to 8. Given that, and the time that the children are in Ms Gilson’s care, the Tribunal considers that Ms Gilson would only have limited capacity to earn an income. She is currently dependent upon social security in the form of a parenting payment and family tax benefit.
Her only assets are household contents of which she estimates the value to be $15,000.
Ms Gilson’s evidence was that she resides with her parents, to whom she pays a rent of $450 a week. The other income she receives from social security is applied towards meeting the cost to support herself and the children, when they are in her care, and reimbursing her parents in part for some of the household bills they pay.
Mr Gilson’s financial circumstances have been discussed above. As mentioned there, the Tribunal infers that he would have money available to him through the wages he draws from his company, the profit of that company and an undisclosed financial resource of in excess of $170,000 a year. The precise amount cannot be determined based on the evidence before the Tribunal.
In addition to what was set out above regarding Mr Gilson, the Tribunal notes that Mr Gilson resides with his mother in her house. He uses his mother’s car.
As also noted above, Mr Gilson has a child from his earlier marriage for whom he provides support by way of paying the school fees for that child to attend [School] and paying the child’s mother $100 a week. His duty to support that child ranks equally with his duty to support his and Ms Gilson’s children.
The Tribunal considers that unless a determination were made to depart from the provisions of the Act relating to the assessment of child support so as to increase the amount of child support Mr Gilson must pay for the children based on an assessment using his adjusted taxable income, then undue hardship would be caused to Ms Gilson and the children.
The difficulty that arises in this case is that Mr Gilson’s true financial position is not known, because he has not made full financial disclosure. Further, he is making a substantial direct contribution towards the cost of the children’s care by paying their school fees, which are large, and also meeting other of their costs whilst the children are with him. Further still, he pays the school fees for the child of his earlier marriage as well as paying child support to the mother of that child.
In the circumstances outlined, the Tribunal considers that it would be just and equitable to make a determination to depart from the provisions of the Act with respect to the assessment of child support such that Mr Gilson is required to pay child support at an annual rate of $23,400 for the period 1 January 2022 to 6 April 2022, which converts to $150 a child a week during the period that Ms Gilson had 100% care of the children, and for the period 7 April 2022 to 31 December 2023 at an annual rate of $15,600, which represents $100 per week per child for the time Ms Gilson has 61% care of the children and Mr Gilson 39% care of the children. That latter rate correlates with what he pays for child support for his other child. The determination appropriately weighs, in the Tribunal’s view, the direct contribution that Mr Gilson makes for the children’s support by paying their school fees.
By increasing Mr Gilson’s child support liability he will necessarily be caused some hardship, however the extent of that hardship cannot be precisely determined given that he has not provided full disclosure of his financial circumstances. The Tribunal considers that the hardship that will be caused to Ms Gilson and the children by not making a determination to depart from the provisions of the Act with respect to the assessment of child support that the Tribunal has outlined would outweigh any hardship to Mr Gilson by making that determination.

Is it otherwise proper to change the assessment?

In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Mr Gilson and Ms Gilson, and also have regard to whether, and if so how, any determination it makes would affect the entitlement of Ms Gilson and the children to an income-tested pension, allowance or benefit.
There is no evidence to indicate that any of the children receive an income-tested pension, allowance or benefit and neither party contended that they did. That situation is unlikely to change if the Tribunal were to make the determination it considers it is just and equitable to make.
The Tribunal notes that the determination it considers just and equitable to make will result in Ms Gilson receiving a lesser family tax benefit than she otherwise would under the assessment that utilises Mr Gilson’s taxable income from the most recent financial year. Whilst she will receive a lesser family tax benefit, the reduction will not be as great as the additional child support she will receive from Mr Gilson and hence her position will be overall improved.
The Tribunal notes that absent Mr Gilson paying the school fees for the children, the Tribunal would have determined that it would have been just and equitable for Mr Gilson to pay child support at rates greater than those set out at [54] above. Arguably therefore, the Australian community is subsidising to some extent the private school fees of the children, which at first blush is not otherwise proper. However, and whilst the Tribunal notes that generally speaking children are resilient and likely to cope with a change in their schooling, the Tribunal considers that for that to occur in the short term would cause some hardship to the children and hence, for the time being it is otherwise proper to make the determination that the Tribunal considers it is just and equitable to make.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the annual rate of child support payable by Mr Gilson be varied to:

a)$23,400 for the period 1 January 2022 to 6 April 2022;
b)$15,600 for the period 7 April 2022 to 31 December 2023.