Linnell and Lomas (Child support)

Linnell and Lomas (Child support) [2023] AATA 1658 (18 April 2023)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/PC024303
APPLICANT:  Mr Linnell
OTHER PARTIES:  Child Support Registrar
Ms Lomas

TRIBUNAL:Senior Member R Ellis
DECISION DATE: 18 April 2023
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that for the period from 1 July 2022 to 31 October 2024 the adjusted taxable income of [Mr Linnell] is varied to $52,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

This review is about whether or not there should be a departure from the administrative assessment of child support.
Mr Linnell and Ms Lomas are the parents of [Child 1] (born April 2008) and [Child 2] (born September 2010). There has been a child support assessment in place since 28 July 2020 and [Mr Linnell] is currently the liable parent under the assessment.
The following administrative assessments of child support are under consideration:
·     for the period from 10 December 2021 to 19 December 2021 [Mr Linnell] was assessed to pay an annual rate of $19,046 based on an estimated adjusted taxable income of $156,288 for [Mr Linnell] and an estimated adjusted taxable income $45,885 for Ms Lomas;
·     for the period from 20 December 2021 to 11 February 2022 Ms Lomas was assessed to pay an annual rate of $1,712 based on an estimated adjusted taxable income of $0 for [Mr Linnell] and an estimated adjusted taxable income of $45,885 for Ms Lomas;
·     for 12 February 2022 Ms Lomas was assessed to pay an annual rate of $754 based on estimated adjusted taxable income of $0 for [Mr Linnell] and an estimated adjusted taxable income of $34,935 for Ms Lomas;
·     for the period from 13 February 2022 to 27 March 2022 Ms Lomas was assessed to pay an annual rate of $2,450 based on an estimated adjusted taxable income of $0 for [Mr Linnell] and an estimated adjusted taxable income of $54,332 for Ms Lomas; and
·     for the period from 28 March 2022 to 24 May 2022 Ms Lomas was assessed to pay an annual rate of $736 based on an estimated adjusted taxable income of $35,975 for [Mr Linnell] and an estimated adjusted taxable income of $54,332 for Ms Lomas.
On 21 December 2021 Ms Lomas applied to the Child Support Agency for a change of assessment on the basis of a parent’s income, property, financial resources and earning capacity (the grounds commonly referred to as Reasons 8A and 8B).
On 15 February 2022 the Child Support Agency made the decision to refuse to change the assessment under section 98F of the Child Support (Assessment) Act 1989 (the Act) as a ground for departure from the administrative assessment was not established (the original decision).
On 28 March 2022 Ms Lomas objected to this decision and on 27 June 2022 the Child Support Agency allowed the objection and made the decision to change the assessment so that for the period from 21 December 2021 to 31 December 2024 the adjusted taxable income of [Mr Linnell] is set at $65,780 (the objection decision).
On 21 July 2022 [Mr Linnell] applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).
A directions hearing was held on 12 January 2023. [Mr Linnell] and Ms Lomas attended by Microsoft Teams audio. Prior to the directions hearing the Child Support Agency provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (740 pages).
[Mr Linnell] and Ms Lomas were directed by the Tribunal to provide further information and both complied to the satisfaction of the Tribunal.
A hearing was held on 18 April 2023. [Mr Linnell] and Ms Lomas gave evidence on affirmation by Microsoft Teams audio. Prior to the hearing the Tribunal received documents folioed A1 to A105 from [Mr Linnell] and B1 to B89 from Ms Lomas and these were distributed to the parties. Additional documents were also received from the Child Support Agency (pages 741–836).
At the directions hearing and at the commencement of the hearing the Tribunal sought clarification from [Mr Linnell] and Ms Lomas as to the reasons for their concerns. [Mr Linnell] said he was seeking a decision based on his actual income. [Mr Linnell] pointed out that he was now running his own business and no longer working FIFO in [Industry 1]. Ms Lomas said she was seeking a fair amount of child support for [Child 1] and [Child 2] and was satisfied with the objection decision made by the Child Support Agency.

ISSUES

The statutory provisions relevant to this review are contained in the Act.
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.
Under Part 6A of the Act, the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and establishes a three-step process such that the issues for determination by this Tribunal are:
·     whether or not a ground is established to depart from the administrative assessment of child support; and if so,
·     whether or not it is just and equitable to make a particular departure determination; and if so,
·     whether or not it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held that:
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 formula in the ordinary run of cases.
In Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If the Tribunal is satisfied that a ground exists 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 Act.
The range of determinations which can be made includes variations to the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).
[Mr Linnell] told the Tribunal he was self-employed and ran his own [specified services] trading as [Business 1]. [Mr Linnell] said he established the business in around April 2022 and operated under a trust called the [Family Trust 1]. He said the corporate trustee of the trust was [Business 1] and he was the sole director and shareholder of the corporate trustee. [Mr Linnell] said the focus of the business was [specified services] and it was just breaking even after 12 months.
[Mr Linnell] said the business was now meeting its expenses and he hoped to make a small profit in the current financial year. He pointed out that revenue fluctuated from month-to-month and his focus was on growing the business and generating repeat customers.
[Mr Linnell] said he had previously worked in [Industry 1] and running a small business was harder than he thought it would be. [Mr Linnell] added he was currently paying himself around $3,000 per month and any profit would likely go towards repaying a loan of $70,000 he made to the business in order to meet set-up costs including his work van and tools.
Ms Lomas told the Tribunal she believed [Mr Linnell] was using the business to meet many of his personal expenses such as his motor vehicle costs and to maintain his lifestyle. Ms Lomas said [Mr Linnell] also had a large workshop at his place of residence and was likely doing cash jobs. She said [Mr Linnell] was doing this in order to pay less child support.
[Mr Linnell] said all his work was invoiced and a small number of customers did prefer to pay their bills by cash. [Mr Linnell] pointed out that any cash received was deposited in the business bank account as he needed every dollar run through the business in order to meet expenses. [Mr Linnell] said his work vehicle was an enclosed tray-back full of tools which he rarely used for personal reasons as he had another motor vehicle. [Mr Linnell] said he believed all business expenses were legitimate although he left the accounts to his bookkeeper and accountant to manage as his skill was [specified services].
In response to directions [Mr Linnell] provided the Tribunal with a copy of his individual tax return for 2021-22 as well as the tax return for the [Family Trust 1] for 2021-22. [Mr Linnell] also provided financial statements for the [Family Trust 1] for 2021-22 and draft financial statements for the period from 30 June 2022 to 25 January 2023.
According to his individual tax return [Mr Linnell] received total income of $110,275 in 2021-22. This was comprised of salaries from [Client 1] of $57,215, [Client 2] of $27,199 and the [Family Trust 1] of $9,000 as well as dividends from shares totalling $8,170 and a net capital gain on the sale of shares of $8,691. After allowing for minor deductions [Mr Linnell] had a taxable income of $110,095 in 2021-22.
[Mr Linnell] explained that after around 20 years working FIFO in [Industry 1], he decided not to continue his work with [Client 2] and this concluded on 15 December 2021. [Mr Linnell] said the dividends were from shares in [four named companies] which had subsequently been sold and he no longer owned any shares. He said the funds from the sale of the shares were used to set up his business and had been taken into account during property settlement which was recently finalised. [Mr Linnell] added there may be some dividend payments reflected in his income in the current financial year and so he felt his total income might be closer to $38,000 per annum.
The tax return for the [Family Trust 1] for 2021-22 shows total business income of $15,255 and total expenses of $26,826, leaving a loss of $10,671 after income reconciliation adjustments. In relation to the trust the Tribunal also notes the following:
·     the tax return shows wages and salaries of $9,000 paid in 2021-22;
·     the tax return shows other major expenses in 2021-22 included motor vehicle expenses totalling $5,992 (fuel, registration and repairs), depreciation expenses of $3,174, insurance of $2,742, tools of $1,995 and accounting costs of $1,540;
·     the draft profit and loss for the period from 30 June 2022 to 25 January 2023 shows a gross profit of $28,577.11 and total operating expenses of $26,455.73 leaving a net profit of $2,121.38; and
·     the draft profit and loss statement for the period from 30 June 2022 to 25 January 2023 shows major expenses include wages and salaries of $18,500, motor vehicle expense of $1,930.96 (fuel only), accounting expenses of $1,000 and depreciation of $972.01.
In response to directions [Mr Linnell] also provided the Tribunal with bank statements from a business transaction account for the period from 1 July 2022 to 31 December 2022. The statements show numerous deposits of varying amounts from individual customers as well as cash deposits. For the six-month period the deposits total approximately $33,400, however, the Tribunal did not clarify with [Mr Linnell] the nature of each individual deposit.
[Mr Linnell] explained the deposits represented payments for work performed. [Mr Linnell] said he was uncertain how the information in the bank statements was then reflected in the draft accounts as he left this detail to his bookkeeper and accountant.
[Mr Linnell] also provided the Tribunal with a Statement of Financial Circumstances received on 9 August 2022. [Mr Linnell] states his total average weekly expenditure is $650 including $345 for mortgage repayments, $50 for food and $20 in fuel costs. [Mr Linnell] said his mortgage payments had since increased to approximately $415 per week following interest rate rises. [Mr Linnell] has total personal expenditure of approximately $250 per week including $42 in child support. He declares total assets of approximately $922,000 including the family home valued at $740,000, a [vehicle 1] worth $70,000, shares of $26,000 (now sold), the investment in his business of $70,000, lifestyle assets worth $11,000 and household contents. [Mr Linnell] has total liabilities of $273,239 the majority of which is his home mortgage of $266,239. [Mr Linnell] said he had recently borrowed $180,000 from his mother to pay Ms Lomas as part of their property settlement but was not repaying this yet due to his financial circumstances. His superannuation totals $450,000 but [Mr Linnell] said this had halved following property settlement.
The Tribunal finds that [Mr Linnell] had an adjusted taxable income in 2021-22 of $110,095 derived from various sources including his [specified services] business. The business was established around April 2022 and made a loss in its first three months of operation. At the time [Mr Linnell] was paying himself a salary of $3,000 per month and the Tribunal considers it unlikely he was receiving any other significant benefits associated with the operation of his business at that point in time. The Tribunal is satisfied that $110,095 is a fair representation of the income, property and financial resources available to [Mr Linnell] in 2021-22.
[Mr Linnell] has told the Tribunal he continues to pay himself a salary of $3,000 per month. This amount is reflected in the draft financial statements for the period to 25 January 2023. [Mr Linnell] believes he is currently earning around $38,000 per annum and argues he should be assessed for the purposes of child support on this taxable income.
The Tribunal is not satisfied, however, that [Mr Linnell’s] true income and financial resources are accurately reflected by his taxable income alone. There are certain advantages in being self-employed which are not generally available to salary and wage earners. Such advantages may include being able to write off personal expenses against the business, reducing personal tax liability as a result of the way the business is structured and being able to claim business expenses which offer a parent some personal gain.
While this may be quite legitimate for tax purposes, the Family Court has found that such practices may not properly reflect the true financial resources or capacity of a person to contribute to the financial support of their children and may therefore be ignored. For example, in Voss & Child Support Registrar & Anor (SSAT Appeal) [2009] FMCAfam 1296, the Court commented on the common situation of a self-employed person’s taxable income not corresponding with his or her income or financial resources for child support purposes:
There is a body of cases where simple reference to a person's tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn't properly reflect the realistic capacity of the person to provide financial support for their children.
In such cases, assessing child support on the basis of taxable income only can result in an unjust and inequitable level of child support.
Although the Tribunal accepts that [Mr Linnell] is still building his business, the draft profit and loss for the approximate seven-month period ending 25 January 2023 shows that [Business 1] is now making a profit. The bank statements provided also indicate that revenue for 2022-23 will very likely be higher than that currently reflected in the draft accounts. While it is not unusual for there to be a lag between the receipt of income and the posting of that income in the accounts of a business, this nonetheless suggests [Business 1] will return a stronger profit than expected in the current financial year. Although [Mr Linnell] has said he will need to repay his loan used to establish the business, this profit still represents a financial resource available to him for the purposes of child support.
In addition, the Tribunal is satisfied that [Mr Linnell] meets some of his personal costs through his business, for example, motor vehicle expenses. While unlikely to be significant, the availability of such personal benefits to [Mr Linnell] through the business are financial resources that should be regarded as income for the purposes of child support.
Given his business is still in its infancy and only draft accounts are available for part of the 2022-23 financial year it is difficult to determine with any precision the financial resources available to [Mr Linnell] through [Business 1]. The Tribunal notes the objections officer determined an income of $65,780 for [Mr Linnell] being the average annual earnings for [his occupation] as indicated in a jobs and careers website run by the Australian Government. This does not, however, account for the fact that [Mr Linnell] is unlikely to immediately generate such an income from a start-up [specified services] business.
The Tribunal is satisfied that [Mr Linnell] has access to income, property and financial resources equivalent to a person with an adjusted taxable income of approximately $52,000. The Tribunal has calculated this figure by adding to his annual income of $38,000 an additional amount for the profit that [Business 1] will generate in 2022-23 as well as other indirect benefits he receives such as a portion of his motor vehicle expenses. Based on the evidence available, the Tribunal considers this to be a fairer reflection of the financial resources available to [Mr Linnell] in 2022-23 and going forward.
The Tribunal also considered the income, property and financial resources of Ms Lomas.
Ms Lomas told the Tribunal that up until recently she had been employed in a part-time capacity at [Employer 1]. Ms Lomas said she had been made redundant on 31 January 2023 and prior to that had been on maternity leave. Ms Lomas said she had been providing the Child Support Agency with income estimates for some time and had updated her estimate following the redundancy payout she received. Ms Lomas said she now planned to stay home for a few years and raise her son who was less than a year old.
In response to directions Ms Lomas provided the Tribunal with a copy of her individual tax return for 2021-22. It shows a taxable income of $48,466 comprised of gross payments totalling $49,463, paid parental leave of $1,854, government benefits of $1,210 and a small amount of supplementary income less various deductions. After accounting for reportable employer superannuation Ms Lomas had an adjusted taxable income of $49,666 in 2021-22.

Ms Lomas also provided the Tribunal with a Statement of Financial Circumstances received on 7 October 2022. It shows total average weekly income of approximately $963 including her salary and family tax benefit. Her total weekly household expenditure is $1,171 including mortgage repayments of $303, $250 for food and $135 in total motor vehicle expenses. Her total personal expenditure is approximately $100 per week being minimum credit care repayments. Ms Lomas has total assets valued at approximately $503,000 including her family home of $450,000, a [brand 1] motor vehicle valued at $36,000, a [Brand 2 vehicle] valued at $12,000 and household contents of $5,000. She lists total liabilities of approximately $112,343 including the mortgage on her home, legal debts, credit card debts and a personal loan. Ms Lomas said she had subsequently paid off her legal debts and credit cards following property settlement while the remaining funds were in an offset account. Ms Lomas has superannuation of $87,000 but said this had increased following property settlement.
The Tribunal notes that Ms Lomas’s actual income was higher than her estimated income in 2021-22 and this was reconciled by the Child Support Agency on 21 July 2022. Estimates made by Ms Lomas in 2022-23 will also be reconciled against her actual income during the estimate period. If her actual adjusted taxable income is again higher than her estimated income, the assessment will be amended.
The Tribunal is satisfied that, for the purposes of child support, Ms Lomas is fairly assessed under the usual administrative processes.
The administrative assessment in place at the time Ms Lomas made her application for a change of assessment on 21 December 2021 was based on an estimated income of $0 for [Mr Linnell] and an estimated income of $45,885 for Ms Lomas. [Mr Linnell], like Ms Lomas, had elected to make estimates of his income. The Tribunal has found that $110,095 was a fair representation of the income, property and financial resources available to [Mr Linnell] in 2021-22.
From 1 July 2022 [Mr Linnell] was being assessed on his estimated income of $35,975. This is likely to have been based upon the salary of $3,000 per month he was paying himself through his business. The Tribunal has found, however, that [Mr Linnell] has access to income, property and financial resources in 2022-23 equivalent to a person with an adjusted taxable income of approximately $52,000. When this amount is applied in the child support formula, the annual rate of child support payable by [Mr Linnell] would be approximately $4,560.
The Tribunal finds this to be significantly more than his liability under the administrative assessment. The Tribunal is satisfied that special circumstances exist and the application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by [Mr Linnell]. On this basis the Tribunal finds there is a ground for departure from the administrative assessment.

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

As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider the matters discussed below,[1] which are as set out in subsection 117(4) of the Act:
[1] The Tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares(SSAT Appeal) [2008] FMCAfam 886.
(4)In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(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.

The nature of the duty of a parent to maintain a child

Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments.
In this case the parents have a duty to support [Child 1] and [Child 2]. Ms Lomas also has a relevant dependent child. The Tribunal will take this into account under subparagraph 117(4)(e)(ii) of the Act when making its assessment.

The proper needs of the child

In relation to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).
The Tribunal was not made aware that the parents expected [Child 1] and [Child 2] to be cared for, educated or trained in a particular way or that they had any special needs. The Tribunal is satisfied it is therefore appropriate to calculate the costs of their needs by reference to the Costs of the Children Table (provided for in section 155 of the Act).

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

The Tribunal is satisfied the children have no income, earning capacity, property and financial resources which should be taken into account for the purpose of child support.

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

The Tribunal has already considered in detail the income, property and financial resources of both parents.
In her application for a change of assessment Ms Lomas raised the earning capacity of [Mr Linnell]. Ms Lomas stated that [Mr Linnell] quit his FIFO job to avoid paying child support. Ms Lomas also pointed out to the Tribunal that the parents were in dispute regarding property settlement around the time [Mr Linnell] left his role at [Client 2]. [Mr Linnell] told the Tribunal he left FIFO after 20 years because he wanted a change in lifestyle so he could spend more time with his children. [Mr Linnell] said he had long wanted to run his own business and was now able to work around caring for the children.
In order to establish that [Mr Linnell’s] earning capacity might be greater than that reflected in the child support assessment and render the assessment unfair, all three compulsory criteria set out in subsection 117(7B) of the Act must be satisfied. Those three criteria are:
(a)    one or more of the following applies:
·the parent does not work despite ample opportunity to do so (subparagraph 117(7B)(a)(i));
·the parent has reduced the number of hours per week of their 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 (subparagraph 117(7B)(a)(ii));
·the parent has changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
(b)    the parent’s decision not to work, to reduce the number of hours, or to change their occupation, industry or working pattern is not justified on the basis of:
·the parent’s caring responsibilities (subparagraph 117(7B)(b)(i)); or
·the parent’s state of health (subparagraph 117(7B)(b)(ii)); 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 (paragraph 117(7B)(c)).
[Mr Linnell] is currently self-employed and runs his own [specified] businesses. In leaving [Industry 1] he changed his occupation, industry and working pattern. The first criterion is therefore met.
[Mr Linnell] has argued that he stopped working FIFO to spend more time caring for the children. The Tribunal notes that around the time he started his business [Mr Linnell] was having 38 per cent care of [Child 1] and [Child 2] and from 24 November 2022 he was having 42 per cent care.
Even if the Tribunal were to find that [Mr Linnell’s] decision to leave [Industry 1] could not be justified on the basis of his caring responsibilities it is not evident he took this step to impact the child support assessment. There is considerable research relating to the impact of FIFO work on family life and after 20 years in this type of role the Tribunal considers it reasonable for [Mr Linnell] to want to pursue a different career path.
The intent of the legislation in relation to earning capacity is primarily to guard against a situation where a parent has deliberately reduced their income and this has had a significant effect on the child support assessment. It is not designed to assess a parent on their potential earnings or what a parent might be able to do. The courts have held that the onus of proving “a major purpose” for the decision about a change in working arrangements was not to affect child support rests on the person who made the choice. The Tribunal is satisfied that affecting the child support assessment was not a major purpose for [Mr Linnell] no longer working FIFO in [Industry 1].
As all three criteria must be satisfied, it follows that if one is not satisfied, then this ground cannot be considered. The Tribunal finds that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met for [Mr Linnell] in this case.
[Mr Linnell] told the Tribunal that Ms Lomas had recently informed him she was not going back to work for at least five or six years because she was mortgage-free following property settlement. Ms Lomas said she did not deny her financial circumstances had improved as a result of property settlement but the decision not to work was driven by a wish to raise her son just as she had done with [Child 1] and [Child 2] before then returning to work.
Ms Lomas has an infant son. The desire to spend more time raising her child in his early years is not unreasonable. The Tribunal is also satisfied that the earning capacity criteria are not met in relation to Ms Lomas.

Any hardship that would be caused

[Mr Linnell] is self-employed and the Tribunal has found he has access to income, property and financial resources for the purposes of child support of approximately $52,000 per annum. [Mr Linnell] declares total estimated household expenditure of $33,800 per annum but has advised this has since increased to approximately $37,440 with interest rate rises. His annual personal expenditure amounts to $13,000 and this includes an amount for child support of $2,184. [Mr Linnell] told the Tribunal he was going backwards financially and his credit card debt had now increased to around $15,000 as a result.
Ms Lomas is not currently working and relies on government benefits to help meet her expenses. Her average household expenses total $60,892 per annum although this includes mortgage payments of $15,756 which, as she has advised, will reduce following property settlement. Ms Lomas declares total personal expenditure of $5,200 per annum based on credit card debts which she has since paid off.
Ms Lomas told the Tribunal she had a limited lifestyle and did not go out much. Ms Lomas said she was not completely debt-free following property settlement and was facing considerable maintenance costs on her family home which had been rented out until recently. Ms Lomas added that she was now reducing her expenses to meet her new financial circumstances.
The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act). The Tribunal must decide whether or not it is just and equitable to backdate the determination.
Ms Lomas applied for a change of assessment on 21 December 2021. The Tribunal has found that [Mr Linnell] had an adjusted taxable income of $110,095 in 2021-22 which included salaries from his FIFO work and from his business as well as other income. [Mr Linnell] started [Business 1] in around April 2022 and the Tribunal is satisfied that, apart from his salary, he received little other benefit from the business in its first few months of operation. As a result, the Tribunal finds that the income, property and financial resources available to [Mr Linnell] in the period from 21 December 2021 to 30 June 2022 did not render the administrative assessment unjust or inequitable.
As previously noted [Mr Linnell] has been making use of income estimates during 2021-22 and the Tribunal is satisfied it is fair that these be reconciled against his actual income for that financial year. The Tribunal views this approach to be to the advantage of Ms Lomas as, although his income was lumpy, [Mr Linnell] was obviously earning a higher income for the majority of 2021-22 than that from his business alone.
Having considered the interests of both parents the Tribunal proposes to make the following determination:
· for the period from 1 July 2022 to 31 October 2024 the adjusted taxable income of [Mr Linnell] is varied to $52,000.
Under the administrative assessment in place at that time [Mr Linnell] was liable to pay child support of $1,716. As previously calculated, when using the income, property and financial resources available to [Mr Linnell] as determined by the Tribunal the annual rate of child support payable increases to $4,560. The Tribunal notes Ms Lomas is currently being assessed on an estimated income of $24,013. Using this income in the assessment or an income of $0 makes no difference to the amount of child support payable by [Mr Linnell].[2]
[2] These incomes are both below the self-support amount which is the amount deducted from the parent’s adjusted taxable income for their own support.
The Tribunal has varied the income of [Mr Linnell] until 31 October 2024 which provides the parents with some certainty about the level of child support for [Child 1] and [Child 2]. As [Mr Linnell] is self-employed this will also allow time to determine the ongoing performance of his [specified services] business given it is still growing and profit is likely to improve.
The Tribunal is satisfied the proposed determination will not cause hardship to [Mr Linnell], Ms Lomas or the children and is just and equitable.

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

The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be otherwise proper to make a departure determination. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.
Ms Lomas is in receipt of family assistance in respect of the children. The increase in child support entitlements as set out in this decision when compared to the administrative assessment may decrease the extent to which the community will be supporting [Child 1] and [Child 2]. The Tribunal is satisfied this is otherwise proper as its determination will result in an appropriate apportionment of financial responsibility between the parents and the taxpayer.

DECISION

[2023] AATA 1658

18 April 2023

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Remedies

Statutory Construction