Larkin and Vinton (Child support)

Larkin and Vinton (Child support) [2018] AATA 4902 (6 December 2018)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2018/SC014458
APPLICANT:  Mr Larkin
OTHER PARTIES:  Child Support Registrar
Ms Vinton

TRIBUNAL:Member Y Webb
DECISION DATE: 06 December 2018
DECISION:

The Tribunal sets aside the decision under review and substitutes its decision that from 1 January 2018 until a terminating event occurs for both children, the annual rate of child support payable by Mr Larkin is varied to $7,000.

CATCHWORDS

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

This review relates to the issue of child support regarding the children of Mr Larkin and Ms Vinton. One of the children turned 18 years old [in] November 2018. This child is, according to the Department of Human Services (Child Support Agency), in the 100% care of Mr Larkin. The younger child is 17 years old and is, for child support purposes, in the 87% care of Ms Vinton.
The child support case commenced on 22 January 2007 and child support has been collectable by the Child Support Agency since that date.
On 27 December 2017, Mr Larkin applied to the Child Support Agency for a change to the administrative formula assessment on the basis of Reason 8A.
At the time that Mr Larkin applied for a change to the assessment his child support liability was $13,249 per annum based on an adjusted taxable income of $23,562 for Ms Vinton and an adjusted taxable income of $120,000 for Mr Larkin until a terminating event occurred as determined by the Administrative Appeals Tribunal in its decision of 18 October 2016.
A delegate of the Registrar of the Child Support Agency, [named], made a decision on 6 April 2018. She determined that Reason 8A had been established. She varied Mr Larkin’s adjusted taxable income to $60,000 per year from 2 January 2018 until both children cease to be eligible children of the assessment. This decision decreased the annual rate of child support payable from $13,249 to $5,198.
Mr Larkin and also Ms Vinton objected to that decision and on 26 June 2018 an objections officer allowed the objections, set aside [the delegate’s] decision and decided, in accordance with section 98F of the Child Support (Assessment) Act 1989 that there were no grounds to change the assessment. The result of that decision was that the assessment reverted back to the decision of the Administrative Appeals Tribunal of 18 October 2016 which was that until a terminating event occurred, Mr Larkin’s adjusted taxable income would be varied to $120,000 per annum.
On 29 June 2018 Mr Larkin applied to the Administrative Appeals Tribunal (the Tribunal) for review.
He attended the hearing on 6 December 2018 by way of a telephone conference and gave sworn evidence.
Ms Vinton also attended the hearing by way of a telephone conference and gave sworn evidence.
Mr Larkin’s accountant, [Accountant A] ([of Business 1]), was granted permission to attend a portion of the hearing as a witness for Mr Larkin for the purpose of summarising Mr Larkin’s financial affairs, including the [Superannuation Fund] and clarifying the structure of Mr Larkin’s business interests. [Accountant A] was also granted permission to provide written submissions on Mr Larkin’s behalf. [Accountant A] provided a letter dated 12 November 2018 confirming the accuracy and veracity of the financial statements and taxation returns which he has prepared on behalf of Mr Larkin and the [Corporate Group].[1] [Accountant A] attended the hearing by way of a telephone conference and gave sworn evidence.

ISSUES

[1] A50

The central issues for the Tribunal to determine in this case are:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (the Assessment Act) exists; and if so,
·       Whether it would be:
(a)   just and equitable as regards the children, the liable parent and the carer entitled to child support; and
(b)   otherwise proper;
to make a particular determination to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

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

CONSIDERATION

The child support law

The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.
The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 11 above.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words ‘in the special circumstances of the case’. Therefore, when considering whether any of the grounds exist in this case, the Tribunal must be satisfied that there are ‘special circumstances’ in the case. If satisfied that there are ‘special circumstances’ and that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.
The phrase ‘special circumstances of the case’ is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[2] the Full Court of the Family Court of Australia held that:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words ‘in the special circumstances of the case’.
Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.
[2] (1991) 15 Fam LR 219.
Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

Does a ground or do grounds exist to depart from the administrative formula assessment?

In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents in relation to Mr Larkin’s contention that special circumstances exist which warrant a change to the assessment.
The legislative ground corresponding to Mr Larkin’s application in relation to Reason 8A is set out in subparagraph 117(2)(c)(ia) of the Assessment Act. The test is whether:
in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child: [paragraph 117(2)(c)]
…
(ia) because of the income, property and financial resources of either parent; or …
To establish Reason 8A in relation to Mr Larkin’s income, property or financial resources it is necessary to show that there are special circumstances establishing that the income used in the assessment makes the child support assessment unfair.
Mr Larkin is seeking that his income in the assessment be decreased to $36,879 for the period 1 July 2016 to 31 December 2017; this comprises his taxable income according to his income tax return for the 2016/2017 year plus the net loss from his residential investment property.
Ms Vinton did not provide a written response to Mr Larkin’s application but she verbally responded to the Child Support Agency. Essentially, she contended that Mr Larkin has access to more income, property and financial resources than he is declaring.

Mr Larkin’s contentions and evidence in relation to Reason 8A

Mr Larkin stated that his employment in the [named] industry concluded on 19 June 2017. He worked for [Employer 1] in the period 24 April 2017 to 19 June 2017 and was paid a gross termination payment of $12,938 at the conclusion of his employment. His total income from [Employer 1] including the termination payment was $36,539 (gross). Income tax totalling $10,453 was deducted.[3]
[3] C1: 277–278
Prior to that period Mr Larkin was working on a consultancy basis for [Employer 2] and [Employer 3] but that work had come to an end.
On 25 June 2018 the Child Support Agency records state that Mr Larkin said that he was looking for work but he did not have the qualifications as all the companies were looking for [a specific qualification].[4]
[4] C1: 476
The Child Support Agency records show that on 8 February 2018 Mr Larkin stated that he was actively looking for [specified] roles with a number of [industry] companies. He stated the fact that he was not degree-qualified hampered the difficulties he was experiencing in obtaining employment.[5]
[5] C1: 318
Mr Larkin stated to the Tribunal that he would like to get back into working in the [named] industry. His area of expertise is in [specific services]. However, most [employers] only employ one person in that role and without university qualifications and at his age and in his state of health it is very difficult to obtain [such a] position. Mr Larkin stated that he does not believe that he would now pass the necessary medical assessment for the work. He provided two letters from his general practitioner (one dated 4 September 2018 and one 25 October 2018) regarding his health status.[6]
[6] A48 and A49
In addition, Mr Larkin stated that his father is in very poor health and he devotes a lot of time to caring for him.
In response to the Child Support Agency’s queries regarding contracting work which he was previously doing for [Employer 2] and [Employer 3] Mr Larkin advised that those contracts came to an end in 2016 and he stated that he is no longer doing any consultancy work.[7] Mr Larkin also advised that the deposit of an amount of $13,859.72 deposited into his [Bank 1] account on 1 August 2017 (described as “wages”) was his final payment from [Employer 1] which took a long time to be paid.[8]
[7] C1: 305
[8] C1: 305
Mr Larkin told the Tribunal that he had not lodged an income tax return for the 2017/2018 year.. He stated that his taxable income for the 2016/2017 year had been corrected from $36,879 to $33,899 and that his taxable income for the 2017/2018 year had been corrected from $9,532 to $489. Mr Larkin did not provide any proof of correction.
Mr Larkin stated that his only income is from his rental property which he rents at $300 per fortnight to his brother.[9]
[9] A2
Mr Larkin stated that the [Corporate Group] is in its infancy and that he is relying on his wife to support him financially. He stated that the business is not making much of a profit and that it does not generate enough profit to support paying him a wage.
Mr Larkin advised the Child Support Agency on 25 June 2018 that the business is run by his wife. Child Support Agency records show that Mr Larkin asserted that the business belongs to his wife and he had no control over the business.[10]
[10] C1: 476
Mr Larkin asserted that he is not drawing any funds from the company. He stated that any profit the company makes is being reinvested in stock. He stated that his wife is paying his child support liability because he does not have the funds to do so. He stated that his wife is an accountant; she works full-time at [an agency] and she runs the Corporate Group outside of business hours. She is the main contact for the business with overseas suppliers.
In relation to an amount of $90,802.43 deposited into [a Bank 2] account in the names of Mr Larkin and an unrelated third party Mr Larkin told the Tribunal that this was an insurance payout to the Corporate Group and to the previous owner of the premises for hail damage to the company premises.[11] He advised that the damage occurred during the settlement period of the sale of the premises and that is the reason that the payment was paid to both the seller and the purchaser. He provided a copy of the Release Deed.[12]
[11] C1: 322
[12] C1: 320
Mr Larkin stated that the Corporate Group’s premises were purchased in January 2017 by the (Superannuation Fund) for approximately $350,000.[13] [Accountant A] told the Tribunal that the premises were purchased with a significant deposit from funds within the Superannuation Fund and by borrowing the rest of the money. Mr Larkin stated that a real estate valuation of the property was made and it was determined that the market rate for rental of the premises was $990 per week (including GST). Mr Larkin confirmed at the hearing that these moneys are paid into the Superannuation Fund. [Accountant A] stated that the regulatory rules regarding self-managed superannuation funds are very strict and that it is important that rent is paid at market rates.
[13] C1: 371
In addition, a portion of the premises was sub-leased by the Corporate Group to a third party for $350 per week plus GST. [Accountant A] told the Tribunal that the sub-lease was now on a month by month basis.
[Accountant A] confirmed in his undated letter received by the Child Support Agency on 26 March 2018 that the Corporate Group prepaid rent for the business premises by 11.6 weeks (at a cost of $10,440) “because of its projected liquidity position and the need not to breach rental conditions”.[14]
[14] C1: 374
In relation to a payment to [Mr A] of $30,000 on 20 December 2017 Mr Larkin stated that that was paid from [Ms A’s] personal [Bank 3] account but the moneys were transferred into the [Bank 3] account from the business account. Mr Larkin provided a copy of the [Bank 3] transfer and also the bank transactions in the Corporate Group’s Online Business Cash Account with [Bank 2].
Mr Larkin stated that to date an amount of $40,000 has been paid to [Mr A] and an amount of $220,000 is still owed to [Mr A].[15] He stated that the decision by the Department of Immigration and Border Protection to refuse to grant [Mr A] a visa is currently under appeal.
[15] A17
In summary, Mr Larkin submitted that there have been significant changes in his circumstances:
·His taxable income has substantially decreased.
·He has a medical condition which requires ongoing monitoring and prevents him from working away from proximity to his general practitioner.
·His age and fitness would not allow him to pass the necessary medical assessment for work in the [named] industry.
·His father is in very poor health and he assists in his care.

Ms Vinton’s contentions and evidence in relation to Reason 8A

Ms Vinton’s main contentions are that Mr Larkin has income, property and financial resources which he has failed to disclose in full.
Ms Vinton referred to her suspicions regarding numerous ABNs and bank accounts associated with Mr Larkin. She believes he also has more shares than he has disclosed and she thinks he may own an additional property.
Ms Vinton stated that the shop for the business is full of stock and she has seen advertisements on Facebook advertising items to sell such as [products listed].[16]
[16] B docs
Ms Vinton stated that she believes there are many cash transactions. She also does not understand how the business can afford to pay [Mr A] $30,000 but it cannot afford to pay Mr Larkin a wage.
Ms Vinton asserted that Mr Larkin could easily obtain employment in the area of his expertise in view of his contacts and experience.

The Tribunal’s consideration

Mr Larkin and his wife are the directors and shareholders of the Corporate Group and of all of the corporations within the Corporate Group. They are both members of the self-managed Superannuation Fund. The business is described in its advertising as an [industry] specialist and the Tribunal accepts [Accountant A’s] description of the activities of the Corporate Group as “[trading] out of [Country 1] to Australia in [specified industry] equipment and other items and a supplier of services to the [named] industry in [consulting]”. The Tribunal finds that the Corporate Group commenced operation in July 2015 and in the 2015/2016 year it made a small profit (after tax) of $7,359.73.
In relation to Mr Larkin’s business interests [Accountant A’s] letter of 30 January 2018[17] (prepared in response to a notice issued under section 161 of the Child Support (Assessment) Act 1989) explained the structure of the business affairs of Mr Larkin and his wife. His letter explained that Mr Larkin and [Ms A] are both directors of the [Corporate Group] and that [Ms A] is the major shareholder with Mr Larkin a minor shareholder. Mr Larkin and his wife also have involvement in a number of other companies: the [Investment] Trust with a company trustee: [the Nominees]. [Accountant A] confirmed that this entity has never been active. In addition Mr Larkin and his wife are the members of the [Superannuation Fund] with a company trustee: [the Nominees]. This has operated since 2011. In addition Mr Larkin and his wife are the directors of [the Nominees]. This entity does not trade and is a trustee company only. In addition Mr Larkin and his wife are directors of [a second nominees business] which also does not trade and is a trustee company only.
[17] C1: 183–186
[Accountant A] stated that Mr Larkin holds the position of director of all of the above-named corporations. He also told the Tribunal that Mr Larkin has not received any moneys either as an employee or as a contractor or director during the 2016/2017 year or in the 2017/2018 year. The Tribunal accepts [Accountant A’s] explanation of the business structure of the Corporate Group and his further explanation as above.
[Accountant A] listed Mr Larkin’s assets (as at 30 January 2018) as:
·[Bank 2] Account   $260
·[Bank 2] Account  $2,097 (in trust for father)
·[Bank 2] Cash investment account                   $90
·[Bank 1] offset loan  $2,900
·[Property 1]  $130,000 (rented to family member)
·[Property 2]  $300,000 (residential home)
·[Company 1] Shares  $1,500
·[Company 2] shares  $44,800
[Accountant A] listed Mr Larkin’s liabilities as:
·[Bank 1] loans $295,000
The Tribunal accepts the accuracy of Mr Larkin’s assets and liabilities as described above. [Accountant A] confirmed that Mr Larkin has not received any distributions from partnerships or trusts in the last three years. [Accountant A] confirmed that no moneys had been paid to any director or shareholder of the Corporate Group. The Tribunal accepts [Accountant A’s] statements regarding these matters.

[Accountant A] stated that one of the difficulties in relation to the profitability of the business is that their business consultant in [Country 1], [Mr A], has not been able to obtain a visa to come to work in Australia. [Accountant A] stated that without [Mr A] the business can’t expand.
The Tribunal accepts that Mr Larkin currently works predominantly as [an occupation 1] for the Corporate Group and the evidence shows that he is also involved in selling materials of various kinds which the Tribunal accepts have been sourced from [Country 1]. It is not possible to ascertain other tasks that Mr Larkin undertakes for the Corporate Group but on his own admission he spends significant time at the business premises as [an occupation 1] and “contributing to the shop”.[18]
[18] C1: 67
The Tribunal accepts [Accountant A’s] statements that Mr Larkin has not been employed for remuneration by the Corporate Group and nor has he worked in the capacity of a contractor to the business. It also accepts that he has not received any directors’ fees or any trust distributions since the Corporate Group commenced operation.
Furthermore, the Tribunal finds that Mr Larkin has not worked as an employee or a contractor for any external organisations since his employment ended with [Employer 1] in June 2017. The Tribunal finds, based on the letter from [Employer 1] provided to the Child Support Agency dated 19 January 2018, that Mr Larkin’s employment ended on 19 June 2017 when he did not successfully pass the probationary period. He was paid a gross employment termination payment of $12,938.[19]
[19] C1: 278–279
Mr Larkin’s income tax return for the 2016/2017 year records that he had a taxable income of $36,879 (which Mr Larkin has asserted has been corrected to $33,899). In the 2017/2018 year he asserted that his taxable income was corrected to $489 from an original amount of $9,532. The Tribunal has insufficient evidence to ascertain whether the corrections are accurate for child support purposes or not.
The Tribunal considered the Financial Statements of the Corporate Group for the 2016/2017 and 2017/2018 years and the income tax returns for the same years. In relation to the 2016/2017 year the Trading Account shows purchases of $300,414.38 and in the 2017/2018 year purchases of $65,079.65. In the 2016/2017 year the Corporate Group’s gross profit from trading was $68,363.60 and in the 2017/2018 year the gross profit was $68,864.61. The profit and loss statements show that the total income of the Corporate Group in 2016/2017 was $76,576.07 and in 2017/2018 it was $88,699.42. After expenses the net profit of the Corporate Group was a loss of $2,037.20 in the 2016/2017 year and a profit of $15,925.53 in the 2017/2018 year. The notes to the Financial Statements state that the net profit of the Corporate Group after providing for income tax was $12,248.43 in the 2017/2018 year and a loss of $2,037.20 in the 2016/2017 year.
It appears that currently the business is not particularly profitable. Mr Larkin provided documents confirming that the Department of Immigration and Border Protection had refused a visa for [Mr A] – the intended [specified operations] Manager – because the sponsoring Corporate Group was assessed to have insufficient financial capacity to provide the nominee with full-time employment for at least two years[20] either at a salary of $68,754 or $75,000 (both salaries having been proposed by the Corporate Group).[21] However, Mr Larkin advised in his written submission that that decision is being appealed. Presumably that means that the financial state of the Corporate Group has improved.[22]
[20] A39
[21] A39
[22] A17
Despite not succeeding in obtaining a visa to work in Australia for the Corporate Group the Tribunal is satisfied that [Mr A] undertakes work for the Corporate Group from his base in [Country 1]. In his written submission Mr Larkin asserted that [Mr A] is owed money for stock, travel expenses and meeting coordination in the order of $220,000. Mr Larkin also stated that to date an amount of $40,000 has been paid to [Mr A].[23] There appears to be a complex transaction whereby an amount of $30,000 was paid to [Mr A] through the online business cash account of the Corporate Group in December 2017.[24] It is difficult to know whether this is connected to a $30,000 transfer to [Mr A] from what appears to be Mr Larkin’s wife’s [Bank 3] account on 20 December 2017[25] or whether it is part of the $40,000 paid to [Mr A] as Mr Larkin contends. Despite the Tribunal’s efforts it was difficult to know exactly what was being paid or had been paid to [Mr A]. When the Tribunal queried why [Mr A] would invest more than $220,000 in the business with very little evidence of repayment and when he was neither a director nor a shareholder, Mr Larkin told the Tribunal that [Mr A] “is not short of money”. The Financial Statements of the Corporate Group state that in the 2017/2018 year [Mr A’s] “[Country 1] Agent Fees” were $20,000 but as the loans to the [Country 1] Agent are stated to be $295,949 in 2017 and that they had been reduced to $255,209 in 2018[26] the Tribunal is reasonably satisfied that [Mr A] was paid at least $40,000 in the 2017/2018 year.
[23] A17
[24] C1: 149
[25] C1: 366
[26] A66
When the Tribunal asked Mr Larkin where the money came from to pay funds to [Mr A] or to fund his son’s [overseas project] Mr Larkin stated that it came from his wife’s personal savings. However, the Tribunal is not convinced that Mr Larkin and his wife would persist with the business activities of the Corporate Group for such a lengthy period of time in circumstances where the business is continually propped up by Mr Larkin’s wife’s personal savings. The Tribunal notes that this is not a criticism of [Accountant A’s] preparation of the Corporate Group’s Financial Statements but rather of the somewhat puzzling evidence which informed them. The Tribunal found [Accountant A] to be a reliable witness: professional and credible in his statements to the Tribunal and the Tribunal has no hesitation in accepting his statements to the Tribunal. His input into the Tribunal proceedings was helpful and constructive.
In relation to the business activities of the Superannuation Fund, the Tribunal accepts, as explained by [Accountant A], that the Corporate Group’s business premises was purchased by the Superannuation Fund. Mr Larkin advised that the purchase price was approximately $350,000.[27] This was financed using some of the Superannuation Fund’s own funds and the remainder by borrowings. The Superannuation Fund obtained a rental appraisal of $990 per week (including GST) and this is the amount that the Corporate Group pays the Superannuation Fund for rent of the business premises. The Tribunal accepts that the regulatory rules which apply to self-managed superannuation funds are strict and that it is important that the rental payments are in accordance with market rates. Mr Larkin provided a Deed of Commercial Lease confirming the lease payments of $900 per week (exclusive of GST).[28] The Tribunal finds that these funds are paid directly to the Superannuation Fund and that they are not available for other purposes. Notwithstanding the regulation requirements, the use of the Superannuation Fund as the purchaser of the property has the potential to provide substantial profit to the Superannuation Fund (and hence to Mr Larkin) as it is most unlikely that the bank loan taken out by the Superannuation Fund would require repayments of $900 per week.
[27] C1: 371
[28] C1: 326
In addition, it transpired that an amount of $32,569.09 was paid into the Superannuation Fund for a six-month period. It is evident that the original decision maker queried this amount and why it was considerably higher than six months’ rent at $900 per week. [Accountant A] responded that “the company prepaid rent by 11.6 weeks representing $10,440 because of its projected liquidity position and the need not to breach rental conditions”.[29] The 2017/2018 income tax return for the Corporate Group shows that rent expenses were $36,178.[30] This is also reflected in the Financial Statements for the 2017/2018 year.[31] This amount does not appear to tally with the expected yearly rent of around $46,000 (exclusive of GST).
[29] C1: 374
[30] A74
[31] A58
In addition to the main lease for the business premises there is also a sub-lease whereby the Corporate Group rents out a portion of the premises to an unrelated third party. The weekly rent is $350 (exclusive of GST) or $18,200 per year plus an amount for utilities. A copy of the sub-lease was provided.[32] Mr Larkin stated that the sub-lease rental payments are also being paid into the Superannuation Fund.[33] However, [Accountant A] confirmed that this is not a legal requirement and the funds could be paid into the Corporate Group’s business accounts rather than directly to the Superannuation Fund. Indeed, according to the Financial Statements for the 2016/2017 and the 2017/2018 years, the rent of $8,400 and $18,200 respectively (presumably for the sub-lease) are listed as income to the Corporate Group. The Tribunal finds therefore that this amount is not being paid into the Superannuation Fund but into the Corporate Group’s business accounts. The Tribunal accepts [Accountant A’s] statement that the sub-lease rental is now a month by month arrangement.
[32] C1: 327
[33] A20
The Tribunal queried the amount of $90,802.40 which was the balance in the Corporate Group’s [Bank 2] Cheque Account.[34] However, it is satisfied that this relates to the insurance payout for hail damage as described in the Form of Release and as claimed by Mr Larkin. It is also satisfied that the parties to the Deed have agreed that all moneys will be “used for the sole purpose of repairing buildings” at the business premises.[35]
[34] C1: 138
[35] C: 320
In considering all of the circumstances of Mr Larkin’s financial affairs, the Tribunal is satisfied that there are some financial resources available to him which have not been, but ought to be taken into account for child support purposes.
Mr Larkin has agreed that he receives $150 per week rent from his brother who tenants Mr Larkin’s residential investment property. This totals $7,800 per year.
In addition, [Accountant A’s] letter of 30 January 2018 states that Mr Larkin owns shares to the value of $46,300. This is a financial resource available to Mr Larkin and he could sell some of his shares in order to meet his child support liabilities.
In addition, the Corporate Group has the ability to control the expenses of the company. While the Tribunal accepts that Mr Larkin’s income is currently low it considers it unlikely that he has no income at all (over and above the $150 per week which he receives from the investment property) or that the Corporate Group could not prioritise the timing of its expense payments to ensure that Mr Larkin could make drawings from the Corporate Group’s income for the purpose of meeting his child support obligations. The same could be said for the cost of sales. The Tribunal acknowledges that this may mean that some of the purchases for the business are delayed but the payment of child support must be prioritised in view of Mr Larkin’s primary duty to financially support his children. Likewise, if the Corporate Group can afford to pay [Mr A] $40,000 in the last year the Tribunal considers it could have allocated some of those funds to Mr Larkin so that he could meet his child support obligations.
Notwithstanding that the Tribunal is unconvinced that the Corporate Group could not have organised its finances in a way that would have increased Mr Larkin’s capacity to pay a reasonable level of child support, the Tribunal does not consider that he has income available of $120,000 per year as determined by the AAT decision in 2016 and which remains in place following the decision of the objections officer. This income of $120,000 per annum together with Ms Vinton’s adjusted taxable income of $23,562 resulted in a child support liability for Mr Larkin of approximately $13,249. In the Tribunal’s view Mr Larkin’s circumstances now are markedly different from his circumstances in 2016 when the AAT made its decision. At that time, the Corporate Group’s [business] activities were in their infancy and Mr Larkin’s income was being derived mainly from the consulting work which he undertook. However, the Tribunal has found that the consulting work came to an end in 2016 and since that time Mr Larkin has not undertaken consultancy work. The Tribunal is satisfied that Mr Larkin’s income has substantially changed since the decision of the AAT was made in 2016.
In considering Ms Vinton’s income and financial circumstances, she is dependent on a Centrelink income support payment which she supplements with a very small income from [her employer] of $42.90 per week. Her total weekly income is approximately $610 exclusive of child support paid by Mr Larkin. Ms Vinton has significant disabilities which the Tribunal accepts prevent her from increasing her work capacity. Ms Vinton provided a letter from her general practitioner dated 8 November 2018 certifying that Ms Vinton has multiple health conditions which impact on her ability to work. The Tribunal accepts that this is the case.
In relation to her financial circumstances Ms Vinton owns her own home but there is a mortgage over the home of approximately $57,000. Ms Vinton is repaying that loan at $200 per fortnight. In addition Ms Vinton has two credit cards and she advised that she owes a total of approximately $6,000. She is repaying this at approximately $37 per week.
In relation to her household expenditure this is modest and unremarkable. Ms Vinton has estimated this to be approximately $631 per week. She has very modest savings of less than $600.
The Tribunal accepts all of this information in relation to Ms Vinton’s financial circumstances. Ms Vinton made numerous allegations regarding Mr Larkin’s circumstances. However, in the absence of supporting evidence the Tribunal declines to pursue these assertions.
Taking into account Mr Larkin’s financial circumstances and Ms Vinton’s the Tribunal notes that for Mr Larkin the income currently used in the assessment is $120,000. Based on the above information regarding Mr Larkin’s financial circumstances the Tribunal is satisfied that Mr Larkin’s income has significantly decreased and therefore that special circumstances exist which make the current child support assessment unfair.
The Tribunal concludes that Reason 8A has been established.

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

Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or to support another child that the parent has a legal duty to maintain. The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.
Having found a reason to depart from the administrative formula assessment, the Tribunal must consider whether it is just and equitable to do so. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of: the duty of the parents towards the child; the proper needs of the child; any income, earning capacity and financial resources of the child; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the child) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues, the Full Court of the Family Court in the case of Gyselman, stated that:
some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section [117] (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).
Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:

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

The Tribunal has already covered at length the issue of Mr Larkin’s and Ms Vinton’s income, property and financial resources.
In relation to earning capacity the Tribunal has found that Ms Vinton is exercising her full earning capacity given the extent of her disabilities and the Tribunal accepts that there has been no change to her employment arrangements for many years.
In relation to Mr Larkin’s earning capacity the Tribunal gave serious consideration to whether he is exercising his full earning capacity. The legislation is strict in relation to the factors which are to be taken into consideration in determining whether a parent is not exercising their full earning capacity. Subsection 117(7B) of the Assessment Act states:
(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.
There is no doubt that Mr Larkin has changed his working pattern and perhaps to some extent his occupation (although it is difficult to ascertain with precision what work activities Mr Larkin is actually performing for the Corporate Group). He was employed by [Employer 1] for a short time between April and June 2017 and prior to that he undertook significant consultancy work. This has all ended. In relation to the most recent employment at [Employer 1] this concluded at the employer’s initiative, not Mr Larkin’s. It is not entirely clear at whose initiative the consulting work concluded but the available evidence seems to indicate that that was not at Mr Larkin’s initiative[36] either as [Employer 3] appears not to have elected to continue their working relationship with Mr Larkin and the email to [Employer 2] confirms that the work for that firm has concluded.[37] For these reasons the Tribunal is not persuaded that Mr Larkin has voluntarily changed his working arrangements. Hence, the Tribunal is unable to further consider whether he has failed to exercise his full earning capacity.
[36] C1: 314
[37] C1: 315

The income, earning capacity, property and financial resources of the children

The children are currently aged 18 and 17. Mr Larkin advised that the younger child has approximately $1,500 of savings. The parents advised that both children earn a small amount of money from casual jobs in addition to their schooling. The oldest child works at [a business] on a casual basis. The Tribunal is satisfied that, during the periods when the children were (or are) school students, the children had or have no significant income or financial resources of their own to the extent that it impacted or impacts on the administrative assessment. The Tribunal has had regard to the reasoning of the Full Court of the Family Court in Mee and Ferguson[38] which states:
it would, in ordinary circumstances be unreasonable to expect that pocket money and other small sources of income derived from paper rounds and casual work after school and the like ought to be taken into account in diminishing the financial responsibility of the parents for the needs of that child.
The Tribunal adopts that reasoning in this case.
[38] (1986) FLC 91-716; [1986] FamCA 3.

The proper needs of the children

In determining the proper needs of the children, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the child.
Ms Vinton told the Tribunal that their younger child needs special shoes which cost approximately $270 a pair due to a long-term foot problem. He needs new shoes every few months. He also regularly sees a podiatrist at a cost of $55 to $60 per consultation. The Tribunal accepts that the younger child’s foot issues result in a regular ongoing cost for Ms Vinton and takes that into account in its consideration of a just and equitable amount of child support payable by Mr Larkin.

Necessary commitments to support themselves or others

The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson[39] the Full Court of the Family Court stated at paragraph 128:
Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.
[39] (1986) FLC 91-716; [1986] FamCA 3.
Mr Larkin did not claim any out of the ordinary self-support expenses. Ms Vinton referred to the expense of private health insurance which she needs because of her high medical needs. While this is not an expense which can be taken into account directly through the child support process, the Tribunal acknowledges that Ms Vinton’s financial circumstances are very tight.

Any hardship that would be caused to the child or the carer parent or to the liable parent by the making of, or refusal to make, an order

Ms Vinton contended she is seeking a regular amount of child support to cover the day-to-day and regular costs of the children. She referred to the expense associated with clothing, shoes and food for the children. She referred to the clothing which the younger child needed for work experience and how she had to buy work pants and required shirts. She explained that Mr Larkin supplied these items and then charged her for them. Ms Vinton told the Tribunal that she had to borrow money from Centrelink to afford a school excursion for the younger child. She stated that she has a lot of debt and it is difficult to make ends meet. Ms Vinton referred to the ongoing costs to which she reasonably wants a contribution. The Tribunal accepts Ms Vinton’s statements regarding the above matters.
Mr Larkin contended that he could not afford an unrealistic amount of child support, especially as he is now receiving no wage. He stated that he is struggling financially and is dependent on his wife for all household expenses and for the payment of his child support.

The Tribunal’s proposed determination

In considering all of these factors the Tribunal is mindful that at the time of Mr Larkin’s application for a change to the administrative assessment, the child support liability was being calculated on the basis of an income of $120,000 for Mr Larkin. The Tribunal has found that there were special circumstances due to Mr Larkin’s financial circumstances having declined since 2016 resulting in an unfair child support assessment.
However, the Tribunal is mindful that Mr Larkin and his wife are directors and shareholders of the Corporate Group and although Mr Larkin asserts that he is not earning any income from the business the Tribunal is satisfied that being self-employed provides Mr Larkin with opportunities to access financial benefits which he would not be available to him if he was a wage and salary earner for an external employer. The Tribunal is able to take into account not only profits from the Corporate Group, but Mr Larkin’s ability to draw funds from the business through adjusting its expenses and costs of sales. The Tribunal in this case acknowledges that it has very limited information about Mr Larkin’s wife’s finances and the extent to which these are intertwined with the business affairs of the Corporate Group. Mr Larkin tended, in his evidence, in response to queries about where the funds came from for certain items such as the payments to [Mr A], to assert that his wife paid for these from her own personal savings. While it may be the case that his wife used her personal savings it is not clear, from the financial statements of the Corporate Group whether this is the case or not.
In addition, as stated above, Mr Larkin does receive rental income from his residential investment property of $7,800 per year and he owns approximately $46,000 worth of shares quite separate to his involvement with the Corporate Group which despite its relatively modest success still received trading income of $185,131 in the 2017/2018 year.[40]
[40] A57
The Tribunal therefore proposes to set aside the decision by the Administrative Appeals Tribunal of 18 October 2016 from 1 January 2018 and to vary the annual rate of child support payable by Mr Larkin to $7,000 until both children cease to be eligible children of the assessment. The Tribunal is satisfied that this amount is manageable for Mr Larkin.
In relation to the start date of the departure determination the Tribunal has taken into consideration the date of Mr Larkin’s application for a change to the assessment and does not consider there are compelling grounds to make a retrospective determination. Hence, the Tribunal proposes that its departure determination will commence from 1 January 2018.
The Tribunal is satisfied that its proposed decision is fair and affordable and that it is just and equitable in all of the circumstances.

Is it otherwise proper to depart from the administrative assessment?

The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

100.In determining whether it would be “otherwise proper” to make a particular order under this provision, the Tribunal must have regard to the matters stated in subsection 117(5) of the Assessment Act. Paragraph 117(5)(a) of the Assessment Act reflects the fact that the Assessment Act clearly states (in section 3) that it is the primary duty of the parents to support their children.
101.The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children. The Tribunal is satisfied that Ms Vinton needs financial assistance for the children and that Mr Larkin is able to provide financial support.
102.Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of or entitlement to any income tested pension, allowance or benefit. Ms Vinton is in receipt of disability support pension and this is a payment which is unaffected by maintenance payments such as child support.
103.Ms Vinton is also receiving family tax benefit and is aware of the impact of child support payments on that benefit.
104.The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.
DECISION

SCHEDULE

List of exhibits

Department of Human Services – Child Support Agency
· CSA’s large bundle of 529 pages marked as exhibit C1
Mr Larkin has provided the following documents marked as A exhibits:
·     A1–A10                Statement of Financial Circumstances
·     A11  Covering email
·     A12–A27              Written submissions
·     A28–A40              Decision in relation to visa application and related documents
·     A41–A47              [Bank 1] statements
·     A48–A49              Letters from Mr Larkin’s general practitioner
·     A50  Letter from [Accountant A]
·     A51–A71              Financial Statements 2018 for [the Corporate Group]
·     A72–A82              Taxation return 2018 for [the Corporate Group]
Ms Vinton has provided the following documents marked as B exhibits:
·     B1–B10                Statement of Financial Circumstances
·     B12  Letter from Ms Vinton’s general practitioner
·     B13–B15              Written submissions
·     B16–B18              Advertisements to sell goods
·     B19  [Bank 2] statement
·     B20  Cover page
·     B21  Receipt
·     B22  Information relating to the [Superannuation Fund]
·     B23  Photo
·     B24  Further information relating to the [Superannuation Fund]
·     B25  Cover page
·     B26  Letter from Ms Vinton
·     B27–B31              Bank statements
·     B32–B33              LinkedIn information

[2018] AATA 4902

6 December 2018

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Statutory Construction

Remedies