Hopson and Firmin (Child support)

Hopson and Firmin (Child support) [2020] AATA 6124 (30 October 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2020/SC019175
APPLICANT:  Mr Hopson
OTHER PARTIES:  Child Support Registrar
Ms Firmin

TRIBUNAL:Member M Kennedy
DECISION DATE: 30 October 2020
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to determine:

To vary Mr Hopson’s annual rate of child support to $15,500pa from 1 September 2017 to 31 March 2020;
To vary Mr Hopson’s annual rate of child support to $4000pa from 1 April 2020 to 30 September 2020;
To vary Mr Hopson’s adjusted taxable income to $110,000pa from 1 October 2020 to 30 June 2023.

CATCHWORDS

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

Mr Hopson and Ms Firmin are the parents of [Child 1] (6), in respect of whom a child support assessment, collectible by the Department, has been in place since 29 May 2017. [Child 1] is in Ms Firmin’s 100% care, and has been at all material times.
Under that assessment, and prior to the departure determination (change of assessment decision) the subject of this review, Mr Hopson was assessed to pay:
·$21,765pa for the period 29 May 2017 and 31 October 2017, based on his adjusted taxable income for 2015/2016 of $202,562 and Miss Firmin’s adjusted taxable income for 2015/2016 of $26,973.
·$12,497pa for the period 1 November 2017 to 31 August 2018 based on his 2016/2017 adjusted taxable income for 2016/2017 of $107,225 and Miss Firmin’s adjusted taxable income for 2016/2017 of $36,330.
·The fixed annual rate of $1,416pa from 1 September 2018 to 30 November 2019 based on his adjusted taxable income for 2017/2018 of $12,736, and then his estimate (from 3 September 2018) of nil, and Miss Firmin’s adjusted taxable income for 2017/2018 of $41,520.
Mr Hopson applied for a change of assessment in special circumstances on 1 March 2019. Mr Hopson’s application (at C72) identified Reason 5 as the reason why he was making such an application, but in explaining his reasons further in the application form raised matters primarily applicable to Reason 8.
Essentially, Mr Hopson stated that his child support liability had been calculated on an income that incorporated capital gains from the sale of assets during his relationship with Miss Firmin between 2015 and 2018 and did not reflect his financial means at the time he was required to pay. In this way, Mr Hopson argued that the child support assessment was unjust or inequitable based on his income and financial resources. Mr Hopson also provided evidence of his payment of pre-school fees for [Child 1].
Miss Firmin opposed any change to the assessment, essentially asserting that Mr Hopson’s financial resources were greater than had been disclosed or were evident from his taxable income. Miss Firmin made assertions regarding Mr Hopson’s lifestyle that were inconsistent with his stated financial position.
On 6 August 2019, the Child Support Registrar’s delegate decided that reason 8 had been established and changed the assessment, although in a way adverse to Mr Hopson.
The Child Support Registrar’s delegate observed that no change to the assessment could be made prior to 2 September 2017 in the absence of a court granting leave to make such a change prior to 18 months before the date of the application. The Child Support Registrar’s delegate had investigated Mr Hopson’s financial circumstances and identified related entities, substantial loans, rental income, and deposits into bank accounts that were not consistent with the nil income estimate Mr Hopson had made on 3 September 2018. The Child Support Registrar’s delegate observed personal spending on credit cards (and payments towards the credit cards), loans and deposits into controlled entities in excess of $150,000 during the period between 3 September 2018 (when the nil estimate was lodged) and 5 June 2019. The Child Support Registrar’s delegate observed that this was neither consistent with his estimate of nil, nor his taxable income of $12,736 for 2017/2018.
The Child Support Registrar’s delegate calculated the income Mr Hopson would need to meet his living expenses, and took into account the average income earned in Australia by persons in his occupation, ultimately varying Mr Hopson’s income for the child support assessment to $179,400 for the period 3 September 2018 to 2 September 2021.
Mr Hopson objected to that decision on 3 September 2019.
On objection, the objection officer was not satisfied that Mr Hopson’s production of financial records for controlled entities could be reconciled with Mr Hopson’s capacity to reduce his liabilities, obtain further assets, deposit cash into transaction and business accounts, or finance the lifestyle reflected in his expenditure. The objection officer maintained the income amount to be used to calculate Mr Hopson’s child support liability for the period 1 September 2018 to 31 August 2021 to $179,400, but also increased Miss Firmin’s income for the period 1 September 2018 to 30 September 2019 based on updated taxation return information. The objection decision is dated 9 January 2020.
Mr Hopson applied to the Tribunal for review on 31 March 2020. On 2 June 2020 the Tribunal (differently constituted) granted Mr Hopson an extension of time to proceed.
[In] May 2020, the Federal Circuit Court sequestrated Mr Hopson’s estate under the Bankruptcy Act 1966 on application from his family lawyers as creditors. The Court appointed a trustee in bankruptcy.
Mr Hopson informed the Tribunal of this significant development at the telephone directions hearing on 17 August 2020. I directed Mr Hopson to produce various documents pertaining to his bankruptcy and other financial records pertaining to his income from self-employment and corroborating his case regarding capital gains forming part of his high income in earlier periods.
Subsequently to that, I ordered Mr Hopson’s Trustee in bankruptcy, [named], to produce information and documentation pertaining to the bankruptcy and Mr Hopson’s financial affairs. The Trustee complied with the Tribunal’s statutory notice on 1 December 2020.
A hearing that commenced on 11 March 2021 could not proceed as the parties had either not collected or did not have in their possession the extensive Tribunal papers. The hearing resumed on 26 March 2021, and continued to completion on 29 March 2021.
The Tribunal has before it Tribunal papers marked 1 to 1047 provided by the Child Support Registrar (referred to herein as C1-C1047), documents provided by the applicant mark A1 to A457, documents provided by Ms Firmin marked B1-B11 and documents obtained by the Tribunal from the Trustee in Bankruptcy marked D1 to D155.

LEGISLATIVE FRAMEWORK

The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the taxable income of each parent.
Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Child Support Registrar (the Registrar) in writing, requesting a departure from the administrative assessment in relation to a child.
Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more grounds under subsection 117(2) of the Act exist, and that it would be just, equitable and otherwise proper to make a particular determination.
The issues for me to determine in this case are therefore:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Act exists; and, if so
· Whether it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and otherwise proper; to make a particular determination to depart from the administrative assessment of child support.
Restriction on application of any departure
A significant issue in this matter is the statutory limitation on retrospective application of any determination. I recognise that Mr Hopson was initially motivated to apply for a change of assessment because he considered his taxable income was not a just and equitable measure of his financial capacity because it included substantial capital gains amounts from the sale of properties in previous years.
Mr Hopson applied for a change of assessment on 1 March 2019. Subsection 98S(3B) of the Act provides that the Child Support Registrar (and now the Tribunal) may only make a determination in respect of a day in a child support period that is more than 18 months earlier than the day Mr Hopson made his application if a court has granted leave under section 112 of the Act. The court has not granted leave in this matter, and so it is not open to the Tribunal to make any changes to Mr Hopson’s child support liability for periods prior to 1 September 2017.
As explained to Mr Hopson in discussing this issue, the prolonged process in having the change of assessment application dealt with by the Department at the primary decision making level, and at objection, and then by the Tribunal to this point (including the need to consider Mr Hopson’s application for an extension of time), does not affect the restriction on the application of any departure determination. It is the date of the original application to the Department (1 March 2019) that has this effect.
As mentioned above, Mr Hopson’s child support liability was calculated on his comparatively high 2015-2016 adjusted taxable income until 31 October 2017. It is indeed clear that Mr Hopson’s adjusted taxable income for 2015-2016 was affected by a substantial capital gain component (C150 question 18: $330,047).
From 1 November 2017, Mr Hopson’s child support liability was calculated taking into account his 2016/2017 adjusted taxable income. This figure also incorporated a capital gain, although not as substantial as in the previous year (C157 question 18: $198,189.)
The extent to which I can make determinations in respect of Mr Hopson’s child support liability to take into account his concerns regarding the application of capital gains into his income is limited accordingly.

CONSIDERATION

There is a ground to depart from the administrative assessment of child support.

As to Reason 8, subparagraph 117(2)(c)(ia) of the Act provides that, in the special circumstances of the case, a ground for a departure determination may be established if application of the legislative provisions relating to administrative assessment ‘result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of either parent.

Mr Hopson’s income and financial resources

General observations

Generally speaking, and like other decision makers before me, I have had difficulty in forming a clear picture of Mr Hopson’s financial capacity through the relevant period, both before and after his bankruptcy. There are indicators in the Tribunal papers that Mr Hopson was meeting personal expenses and servicing debts during periods prior to his bankruptcy that well exceeded his taxable income as declared from 2017 onwards, and well exceeded his income from employment as declared for periods prior to that.
I accept, in general terms, Mr Hopson’s submissions during the hearing that the fact of his bankruptcy tends to demonstrate that his liabilities ultimately did outpace his financial resources, or capacity to access the financial resources of others.
The Child Support Registrar and the objections officer had legitimately resorted to an approach of identifying as best it could Mr Hopson’s expenses and then ‘grossing up’ that amount to identify a taxable income needed to service such expenditure. In circumstances where I can see that Mr Hopson has subsequently been bankrupted, I must explore alternative approaches to quantifying Mr Hopson’s capacity to maintain his child based on the evidence available to me. To put this another way, ‘grossing up’ expenditure that I now know was driving Mr [Hopson] rapidly towards personal insolvency is not an appropriate way to calculate a child support liability.
Having made that observation however, my conclusions about Mr Hopson’s financial capacity to maintain his child are not reached with any degree of certainty given the complexity and opaqueness of Mr Hopson’s financial arrangements prior to his bankruptcy.
I also observed during aspects of my questioning of Mr Hopson about his income property and financial resources a tendency to answer questions in a way designed to alienate himself from property and financial resources in a way that was at times misleading. For example, Mr Hopson’s evidence concerning access and use of funds in the [Bank 1] account named ‘[Trust 1]’ was of concern in that initially Mr Hopson denied having direct access to the account, and then conceded that he did when pressed with the particulars of certain transactions that made his position untenable. Another example was in relation to an assertion from Miss Firmin that he was observed driving a new motor vehicle. Mr Hopson had answered a direct question put to him by me about operating a motor vehicle by denying that he did so, but on further questioning confirmed a motor vehicle was operated through his wholly controlled company, and that he had accessed another vehicle rented by his new partner. I do not have a high degree of confidence that Mr Hopson has fully and frankly disclosed his complex financial circumstances.
After the bankruptcy however, I accept that circumstances have become a little clearer. Income generating assets either held by Mr Hopson or controlled by him, albeit purportedly alienated from him, have been sequestrated and either sold or are in the process of being sold. I am however reluctant to accept Mr Hopson’s estimate of his income as provided to the Trustee and subsequently to me.
Entities and financial structures
Mr Hopson was and is associated with a number of entities and purported financial structures. An analysis of these structures and arrangements do not however guide me to an accurate quantification of Mr Hopson’s income or financial resources, other than to note that perhaps the discussion below concerning ‘[Trust 1]’ provides a partial explanation of where Mr Hopson had previously sourced funds to service his living expenses and liabilities that had previously been viewed as unexplained.
The Trustee in Bankruptcy has provided the Tribunal with a ‘Report to Creditors’ dated 18 August 2020 (D74). An earlier iteration of 14 July 2020 was made available to the Tribunal in the supplementary C Documents at C955.
The initial report to creditors identified that Mr Hopson was associated with two companies: [Business 1] and [Business 2]. The Trustee in bankruptcy observed in July 2020 that each of those entities was heavily indebted to Mr Hopson and were themselves likely to be insolvent.
The Tribunal has the 2017/2018 financial statements for [Business 1] (C652) The financial statements reflect the observations made by the Trustee.
Mr Hopson told the Tribunal that he now works as [an occupation 1], and subcontracts through that entity. He has done so since he ceased his last paid employment with [Employer 1] in 2018/2019. The Tribunal has the company’s 2018/2019 taxation return at A187 which shows a profit of $92,692 based on income of $102,975 and expenses of $10,283 inclusive of $7,105 depreciation.
Mr Hopson was given permission to provide a copy of the company’s 2019/2020 financial statements and taxation return to the Tribunal after the hearing on 26 March 2021 (A441-A457). Earlier provision of these documents appeared to have been overlooked. Although Mr Hopson provided the document that day, it was not available to me at the resumed hearing and I have examined it subsequently. Ms Firmin commented on the taxable income component disclosed during the hearing and did not wish to comment on the document further. In the course of the hearing, noting the use Mr Hopson made of the company for his sub-contracting work, I queried whether the profit from this entity might be a reliable indicator of Mr Hopson’s income and potential future income from his subcontracting work. In this regard, in 2019/2020 the company generated a profit of $60,508 after sales (which I take to be Mr Hopson’s subcontracted labour) of $63,239. I note that the COVID-19 pandemic, and particular the initial impact of the event in Australia between March and June 2020 may well have affected Mr Hopson’s work and sales as a subcontractor. Assuming that work was affected from March of 2020, the sales were essentially tracking a similar path to sales in the previous financial year.
Mr Hopson’s statement of affairs to his Trustee in Bankruptcy (D38) disclosed that he had earned $50,000 from self-employment in the 12 months before he completed the statement and would earn $50,000 in the next 12 months in salary, wages, commissions or bonuses. I understand however that Mr Hopson accounts for the resources he draws from [Business 1] as repayments of the debt the company owes him.
In relation to the estimates Mr Hopson has made regarding his income from employment, I do not consider those estimates themselves to be inherently reliable long term. I note they are essentially coincident with the amount of income Mr Hopson may earn before contributing to his bankrupt estate, and match neither his capacity to earn income as an employee through [Employer 1] previously, or the operating profit of [Business 1] in 2018/2019.
As mentioned above, Mr Hopson was employed by [Employer 1]. I accept he has no association with that entity other than as a former employee and subcontractor. Mr Hopson told me that his annual salary for that employment was $110,000pa. Mr Hopson’s taxation returns for 17/18 (C120) and 18/19 (A164) disclose gross payments from that employer of $36,246. Mr Hopson told me that he only worked for [Employer 1] for a period of approximately 10 months. In this regard, I explored deposits made into the bank account #7184 for [Business 1] that appeared to correspond with an annual rate of payment of approximately $124,800 (C3480-C349). Mr Hopson responded to my concerns regarding this discrepancy between his evidence, his taxation return and the bank account he controlled by explaining that while he commenced as an employee for [Employer 1], the arrangements were changed to one of subcontracting, for which he was paid a higher rate and included GST. I accept that this explanation cogently addresses the discrepancy I have identified.
[Business 2] is the corporate trustee for [Trust 2]. The Tribunal has the financial statements for the trust for 2017/2018. The financial statements corroborate the observations of the Trustee in Bankruptcy that the entity is heavily indebted to Mr Hopson and likely to be insolvent. I do not view that entity as amounting to a financial resource for Mr Hopson.

The Trustee in Bankruptcy observed in his July 2020 report that Mr Hopson was a beneficiary of the ‘[Trust 1]’.
A trust deed of 18 February 2015 purports to create a discretionary trust.The trustee of the ‘[Trust 1]’ purports to be Ms Hopson, Mr Hopson’s mother. It was further observed by the Trustee in bankruptcy that between 18 February 2015 and 7 February 2017 Mr Hopson purported to transfer assets to the [Trust 1] by way of gift.
Document A348 is described as a ‘Deed of Gift’ where Mr Hopson gifts his equity in four items of real property and two motor vehicles to Ms Hopson ‘in her capacity as trustee of the [Trust 1]’. On the same day, Mr Hopson entered into an ‘equitable mortgage’ with Ms Hopson ‘in her capacity as trustee of the [Trust 1]’ to provide security for an unspecified sum of monies to be lent to him, interest free, from time to time in the future. The equitable mortgage was expressed to be subject to existing first mortgages over the real property, so afforded no practical security.
Document A437 is a statutory declaration of Ms Hopson. In it she states that she is the trustee of the [Trust 1], and that the trust does not hold any assets of any kind now or in the past. She states that her capacity as trustee was to manage rental income for properties at [Town 1] and at [Town 2]. With that income she would pay expenses for the properties, but usually there was not enough to meet all the obligations entirely.
Later in her statutory declaration, Ms Hopson says that as she was concerned about how Mr Hopson would repay loans she had made to him, he gifted her his rental income. Ms Hopson states that on 20 February 2016 she agreed to lend Mr Hopson up to $450,000 at 8% interest. Ms Hopson states that she deposited funds into ‘the trust account’, which Mr Hopson used to meet all his obligations and living expenses, and Mr Hopson would pay her back from rental income and employment.
I received oral evidence from Ms Hopson. Her evidence did not assist me. She told me that Mr Hopson had assisted her to prepare her statutory declaration, and I perceived that she had limited understanding about the nature and purpose of the transactions that created the trust. She has maintained that the trust did not own property despite the deed of gift. She maintained that she operated the [Bank 1] account referred to below. I do not accept this aspect of her evidence. I think that Mr Hopson operated that account and accessed the funds in that account as he pleased.
I have had regard to the content of the document at A13. It purports to reconcile the amount of loans advanced to Mr Hopson from Ms Hopson pursuant to the loan agreement of 20 February 2016. It concludes that an amount of $561,164.32 was lent to Mr Hopson as at the date of his bankruptcy.
The ‘trust account’ to which Ms Hopson refers is a [Bank 1] account at A21 and onwards. It shows rental receipts from ‘[Business 3]’, transactions purporting to be loan advances ‘from Mum’, cash deposits, and unexplained deposits (raised at hearing by Ms Firmin) concerning ‘[Property 1]’. Expenses include some marked as ‘loan Mum’. Mr Hopson suspected that some transactions that had been partially redacted by the Tribunal Registry were likely to be deposits from his sister and not his mother.
Other expenses are notable as to their personal nature. Funds were accessed in the account in [a named country] while Mr Hopson was on holiday there.
The use of the [Bank 1] account is highly irregular if its purpose was to be an account operated by a trustee of a discretionary trust. Mr Hopson ultimately conceded that he did access the account directly through a bank card, but this was not before the implausibility of his initial evidence that he did not access the account was put to him in light of the nature of some of the transactions.
It is not possible to pick apart the transactions in that account. Some of the deposits are wholly unexplained (the ‘[Property 1]’ notations) despite multiple opportunities being given to Mr Hopson to provide an explanation. The account appears to me to be an exercise in the purported alienation of income and financial resources, rather than any attempt to provide Ms Hopson with security for funds she had advanced to her son, or to regularise a genuine loan arrangement.
Property
The Trustee in Bankruptcy identified that Mr Hopson personally had an interest in a property at [Town 1] that was valued at $1.68 million and mortgaged in the amount of $726,787.46 as at 14 July 2020.
The Trustee in bankruptcy reported that enquiries made of tenants residing in a granny flat at the [Town 1] property had paid Mr Hopson cash in hand rent in the amount of $1600 per month for some three years (D2 – 1(b)(ii)). Mr Hopson denied this at the hearing, but I found his explanation as to the circumstances behind the tenant living in the property apparently rent-free was unconvincing. I reject Mr Hopson’s evidence in this regard and infer that the information conveyed to the Tribunal by the Trustee in bankruptcy is accurate. I consider that Mr Hopson did receive cash in hand rent from a granny flat at [Town 1], and am not satisfied it has been disclosed elsewhere in the financial records before me. Up to the point of Mr Hopson’s bankruptcy (when I assume the Trustee in Bankruptcy regularised these arrangements and required rent to be paid to the bankrupt estate) that the value of this income would have been in the order of $19,200pa.
Another dwelling at the [Town 1] property was leased under documented residential tenancy agreements. Rent was paid to Ms Hopson at the rate of $550 per week. I have seen corresponding deposits into the [Bank 1] ‘[Trust 1]’ account from the managing agent. As indicated above, I view that as primarily an exercise in the purported alienation of that income.
The [Town 1] property was sequestrated in Mr Hopson’s bankruptcy. I consider the property provided Mr Hopson with income prior to his bankruptcy that Mr Hopson had purported to alienate through his mother, but this ceased at the point of his bankruptcy when the property became part of his bankrupt estate. I recognise that Mr Hopson would have faced expenses in relation to the [Town 1] property prior to his bankruptcy.
I understand the [Town 1] property was sold by the Trustee in bankruptcy on 20 February 2020.
Mr Hopson jointly owns a property at [Town 2] with his mother. The tenancy agreement identifies Mr Hopson as the sole lessor of the property. I can see rent payments from the managing agent being paid into the [Bank 1] “[Trust 1]’ account in prior years. Rent for that property under the most recent tenancy agreement was $800 per week. Document A433 is correspondence from the Trustee’s solicitors to Ms Hopson concerning the [Town 2] property. The correspondence mentions that the tenant will be vacating the property on 15 March 2021 and seeks an offer from Ms Hopson to purchase Mr Hopson’s share, or alternatively foreshadows that the Trustee may seek court orders to sell the entire property.
I am concerned that the ownership arrangements and the destination of rent instalments of the [Town 2] property, together with all the circumstances I have discussed above, tends to suggest that there is a degree of alienation of property and income in respect of the [Town 2] property also. However, I also recognise that the [Town 2] property would have also incurred expenses, primarily finance expenses.
Mr Hopson told me that the mortgage on the properties had not been paid since his bankruptcy and interest has capitalised.
I asked Mr Hopson about what had happened to the properties purportedly gifted to his mother in her purported capacity as the trustee of the [Trust 1]. Mr Hopson told me that the properties had been sold in years prior to the child support assessment commencing. I note that Ms Firmin had some limited knowledge about some of the properties. Mr Hopson told me that the proceeds of the sales had been used to retire debt and finance other properties. I am unable to track or trace these proceeds with any precision.
Returning to Mr Hopson’s primary motivation in applying for a change of assessment; that is, to address the unfairness he perceives in his taxable income incorporating capital gains from the earlier sale of real estate, I do not think it is appropriate to merely deduct capital gains from Mr Hopson’s taxable income for the limited period of time in the child support assessment where the higher taxable income affected by capital gains has been used under the administrative assessment. The reason I have formed this view relates to Mr Hopson’s use of the funds in the account pertaining to the ‘[Trust 1]’, where it appears that some of the proceeds of the sale of the real estate purportedly gifted to the trustee of the [Trust 1] was made available to Mr Hopson.

Quantifying Mr Hopson’s income, property and financial resources

As mentioned above, I have found Mr Hopson’s financial arrangements prior to his bankruptcy to be complex and opaque, and not amenable to clear or precise quantification.
I have mentioned above that I am concerned not to quantify Mr Hopson’s financial resources for the purpose of calculating his child support liability based on his expenditure in circumstances where it is now apparent that the expenditure was driving Mr Hopson towards insolvency. The child support liability will survive Mr Hopson’s bankruptcy. I direct no criticism towards the Department or objection officer in this regard however, as at the time earlier decision makers were confounded by Mr Hopson’s financial affairs as I have been, it was not then known that he would be bankrupted in early 2020.
A better way now open to me, in my view, is to focus on the aspects of the financial evidence available to me from which it is tolerably clear how much income Mr Hopson earned from his personal exertions. To this I would add the cash income I have found Mr Hopson received that I am not otherwise satisfied was accounted for elsewhere.
I accept Mr Hopson’s evidence (in general terms) that he was able to earn income from employment or subcontracting through [Employer 1] in the order of $110,000pa to $128,000pa. This pertains closely enough to the commencement of the child support assessment and the period within that assessment that is within scope of this review. To this amount, I add the cash rent Mr Hopson received from the tenant at the granny flat (rejecting Mr Hopson’s denial in this regard) in the order of $19,200pa. I consider Mr Hopson had an apparent income from personal exertion and cash rent in the order of at least $129,200pa to $147,200 pa from these sources. My finding in this regard relates to the period from 1 September 2017 to the 2018/2019 financial year, when the profit of [Business 1] was made up of sales to [Employer 1] for Mr Hopson as a subcontractor.
I accept that Mr Hopson ceased working for [Employer 1] in the 2018/2019 financial year, but as he received income from his personal exertion into that corporate structure, I consider that the profit of that company for the financial year in question reflects the financial resources available to him for the purposes of calculating a child support liability in arrears for that year. To take into account that Mr Hopson did not work for [Employer 1] for the entirety of the financial year, I settle on the lower range of my quantification of his income, which accords with the profit recorded in the financial statements for that financial year.
In light of all the evidence, and taking a broad axe, I quantify Mr Hopson’s income and financial resources in the order of at least $129,200pa for the period September 2017 to 30 June 2019.
From 1 July 2019 until the date of Mr Hopson’s bankruptcy, I consider the profit of [Business 1] in the previous financial year continues to be apt. The profit in 2019/2020 is indeed lower, but this reflects the change in circumstances in about March 2020 of the onset of the COVID-19 pandemic. This point in time also approximately corresponds with Mr Hopson’s bankruptcy.
I continue to quantify Mr Hopson income and financial resources in the order of at least $129,200pa (including the profit from his subcontracting activities and the cash rent I have found he received from the granny flat at [Town 1]) until 1 April 2020, approximate to the sequestration of Mr Hopson’s estate. From 1 April 2020, I would remove the cash payments of rent from my quantification of Mr Hopson’s income and financial resources. I would quantify Mr Hopson’s income and financial resources in the order of $100,000 to $110,000pa from 1 April 2020, but for the intervening circumstances of the COVID-19 pandemic. This figure I note accords with Mr Hopson’s salary as an employee for [Employer 1], and also previous sales of [Business 1] in 2018/2019.
I am mindful that from March/April 2020 it is realistic to assume that Mr Hopson’s income from personal exertion was reduced due to the circumstances of the COVID-19 pandemic for a period of time. I do not have a basis in the evidence to identify what effect the pandemic had on Mr Hopson’s earnings and when or if the earnings have returned to the rate they were at prior to the pandemic’s commencement. I will take this into account in identifying a just equitable and otherwise proper departure.
Returning to the requirements to establish the ground, I note that my findings quantifying Mr Hopson’s income and financial resources are substantially different to the adjusted taxable income that applied to the child support calculation from 1 September 2017, including Mr Hopson’s estimate of nil from 3 September 2018.
To demonstrate, if I were to substitute my findings quantifying Mr Hopson’s income and financial resources at $129,200pa for the period 3 September 2018 to March of 2019, the annual rate of child support (with all other components of the formula unchanged) would be $14,900pa.
When compared to the rate produced by the administrative provisions of the Act (Mr Hopson’s adjusted taxable income and then his estimate of nil), which was the fixed annual rate of $1,416, I consider that the rate produced by the administrative assessment is manifestly unjust and inequitable having regard to my findings as to Mr Hopson’s income and financial resources.
I consider the extent of the discrepancy between the rate produced by applying my findings arising out of my analysis of Mr Hopson’s financial circumstances and the rate produced by the administrative provisions is so great that it amounts to special circumstances. I find that in the special circumstances of the case, application of the legislative provisions relating to administrative assessment results in an unjust and inequitable determination of the level of financial support to be provided by Mr Hopson due to his income and financial resources. I find the ground is established.

A just, equitable and otherwise proper departure

As I am satisfied that there is at least one ground to depart from the administrative assessment of child support, the next step is to consider whether it is just, equitable and otherwise proper to depart from the assessment. In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Act:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)         the proper needs of the child; and
(c)         the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da)       the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)       himself or herself; or
(ii)       any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)         any hardship that would be caused:
(i)       to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)        to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
As I explained to the parents at the hearing, I am to approach this task on the basis that a duty that a parent has to maintain their children has a priority over all other commitments of the parent other than commitments necessary to support other children and themselves: section 3 of the Act.
Neither parent raised any further matters for consideration regarding the income, property and earning capacity of the child, or commitments for their own self-support.
As to the proper needs of the child, I have taken into account that Mr Hopson has agitated the issue of his payment of pre-school fees. On analysis at the hearing however, I have observed that these payments relate to periods pre-dating the commencement of the child support assessment and predating the period that is within the scope of the Tribunal to make a determination.
At the conclusion of the hearing, Mr Hopson also mentioned contributing to speech pathology expenses for [Child 1]. I have no corroborating evidence to demonstrate the contribution. There is a degree of dispute between the parents as to the cost and duration of the treatments. I will however take into account that Mr Hopson has made a contribution towards meeting [Child 1’s] particular needs relating to speech pathology, but I am unable to be precise in calculating the value of this contribution in the absence of evidence.
Ms Firmin mentioned that she incurs some additional expense in providing [Child 1] with a reduced gluten diet. I do not consider however that the additional expense in this regard needs to be reflected in any further adjustment to the child support assessment.
As to Ms Firmin’s income, property and financial resources, Ms Firmin confirmed that she is a salaried employee for a [type of business]. Ms Firmin does not have any interest or association with companies, trusts or business structures. She is up to date with her taxation returns. Mr Hopson drew attention to a large deposit appearing in a bank account statement of Ms Firmin that he had access to in years prior to the commencement of the child support assessment. I accept Ms Firmin’s evidence that this was a gift from family due to her financial hardship arising out of Mr Hopson’s not contributing to [Child 1’s] maintenance. I do not view that gif at that time as a material financial resource in the circumstances.
I consider that reliance on the administrative provisions of the Act for quantifying Ms Firmin’s financial capacity to contribute to the maintenance of [Child 1] is accurate, just and equitable.
I have examined the statements of financial circumstances prepared by both parents in considering their self-support expenses and the direct and indirect costs incurred in providing care for [Child 1]. I appreciate that Mr Hopson’s circumstances have changed in a way not reflected in his statement as he has re-partnered and his partner has children in her care. I do not view these changes as relevant however in circumstances where I am considering the child support assessment mainly in arrears, and the children are not legally dependant on Mr Hopson, whereas [Child 1] is. I observed Ms Firmin’s household expenditure to be unremarkable having regard to her circumstances.
I note that Ms Firmin is in receipt of family assistance payments.
I have taken into account the matters provided for in section 117(4) of the Act. Having done so, I do not consider that adjustment beyond making determinations reflecting my analysis and findings concerning Mr Hopson’s income and financial resources is warranted. To the extent that I accept that Mr Hopson has contributed to meeting unusual need of [Child 1] in speech pathology, I have taken this into account in settling on a substantially reduced and nominal income figure for the period of 6 months from Mr Hopson’s bankruptcy to account for Mr Hopson’s assertion that his income was reduced due to the COVID-19 pandemic.

For the period 1 September 2017 to 1 April 2020, I will fix Mr Hopson’s annual rate of child support at $15,500pa. This rate approximates the rate calculated as if Mr Hopson’s adjusted taxable income was $129,200 throughout that period. Variations In Ms Firmin’s adjusted taxable income would have limited impact on the annual rate of child support during the period, and I have settled on a round figure at the higher range to reflect Ms Firmin’s low income in 2017.
From 1 April 2020, I have considered using the Male Total Average Weekly Earnings statistical figure, but view that figure as too low having regard to the financial performance of [variant of Business 1] and Mr Hopson’s own estimate of his earnings provided to the Trustee in Bankruptcy in respect of that period. Instead, for a period of 6 months from the commencement of the quarter in which Mr Hopson was declared bankrupt, I will use Mr Hopson’s estimate of his income of $50,000pa, and round the annual rate of assessment produce accordingly up to an annual rate of $4000. This determination is intended to reflect both that Mr Hopson’s income may well have reduced due to the circumstances of the COVID-19 pandemic, and also my acceptance that he has contributed to an extent to unusual special needs for [Child 1’s] speech pathology.
From 1 October 2020, I will fix Mr Hopson’s adjusted taxable income at $110,000pa, as I consider this figure reflects the income he has previously generated as an employee and subcontractor, albeit as a subcontractor the income has been received into a corporate structure so that it is not reflected in his personal taxable income. Fixing Mr Hopson’s adjusted taxable income in this way will allow the other components of the formula to operate to adapt to changes in circumstances, including to any change to Ms Firmin’s adjusted taxable income. I note that from 1 October 2020 the annual rate of child support will be $11,771 based on my variation of Mr Hopson’s adjusted taxable income to $110,000pa and Ms Firmin’s adjusted taxable income for 2019/2020 of $76,485.
I consider it appropriate to provide some level of certainty to the Department and the parents in this complex matter. I will maintain the departure determination in that form until 30 June 2023, by which time Mr Hopson’s bankruptcy is likely to have concluded and financial statements will become available in the event a further application for a change of assessment is made.
Finally, I have taken into account Ms Firmin’s receipt of family assistance. I consider it otherwise proper that the child support assessment reflect my findings as to Mr Hopson’s financial resources, and the family assistance payments to Ms Firmin be adjusted accordingly.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to determine:

To vary Mr Hopson’s annual rate of child support to $15,500pa from 1 September 2017 to 31 March 2020;
To vary Mr Hopson’s annual rate of child support to $4000pa from 1 April 2020 to 30 September 2020;
To vary Mr Hopson’s adjusted taxable income to $110,000pa from 1 October 2020 to 30 June 2023.

[2020] AATA 6124

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Statutory Construction

Remedies

Appeal

Procedural Fairness