Linwood and Traynor (Child support)
[2024] ARTA 423
•18 December 2024
Linwood and Traynor (Child support) [2024] ARTA 423 (18 December 2024)
Applicant:Ms Linwood
Respondent: Child Support Registrar
Other Party: Mr Traynor
Tribunal Number: 2024/MC028066
Tribunal:General Member P Jensen
Place:Brisbane
Date of Decision: 18 December 2024
Decision:
The decision under review is set aside and, in substitution:
from 11 April 2023 to 31 December 2026, Mr Traynor’ adjusted taxable income is varied to $150,000 per annum;
from 1 July 2024 to 30 June 2025, Ms Linwood’s adjusted taxable income is varied to $110,000 per annum; and
from 11 April 2023 to 10 April 2024, Mr Traynor’ rate of child support payable is increased by $4,633 per annum, plus a further $6,085 per annum on account of a child’s special needs, i.e. it is increased by $10,718 per annum.
CATCHWORDS
CHILD SUPPORT – change of assessment – decision to resign was not justified on the
basis of his state of health – special circumstances exist – special needs of one child – just and equitable – earning capacity – mother’s adjusted taxable income is varied – father’s rate of child support payable is increased – 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 pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.
Statement of Reasons
Introduction
Ms Linwood and Mr Traynor are the parents of [Child 1] who was born in 2009 and [Child 2] who was born in 2013. A child support case was most recently registered with Services Australia – Child Support (Child Support) from 30 December 2022. Ms Linwood has been recorded as providing 93% care and Mr Traynor has been recorded as providing 7% care for the children.
The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 30 December 2022 to 10 April 2023, the administrative assessment was based on Ms Linwood’s 2021–22 adjusted taxable income of $107,884 and Mr Traynor’ 2021–22 adjusted taxable income of $149,356. Mr Traynor was assessed to pay $25,664 per annum in child support.
On 11 April 2023, Mr Traynor lodged, and Child Support accepted, an estimate of income of $0. He was assessed to pay what is called the “fixed annual rate” of child support, which was $3,042 per annum. He subsequently provided another estimate of income of $0 from 1 July 2023.
The Act also provides for a departure from the administrative assessment in certain circumstances. On 11 June 2023, Ms Linwood lodged a departure application. An original decision-maker refused the application. Ms Linwood promptly objected to that decision. An objections officer allowed the objection and increased Mr Traynor’ rate of child support payable by $4,633 per annum from 1 February 2023 to 31 January 2024. The decision effectively required him to pay his administratively assessed rate of child support plus a half of the children’s private school fees for 2023.
Ms Linwood belatedly applied to the Tribunal for further review and applied for an extension of time in which to apply for review. The Tribunal, differently constituted, granted Ms Linwood’s extension of time application. I heard the substantive application for review. I conducted a directions hearing on 1 October 2024 and a substantive hearing on 13 December 2024. Ms Linwood and Mr Traynor gave sworn evidence via MS Teams.
Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:
(i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and
(ii)... it would be:
(A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B)otherwise proper;
to make a particular determination under this Part; …
Grounds for departure
Subparagraph 117(2)(b)(ia) of the Act, commonly referred to as Reason 2, provides as a ground for departure:
that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
…
(ia)because of special needs of the child …
[Child 1] is receiving orthodontic treatment. Mr Traynor did not concede that [Child 1] needed the treatment, but he was nevertheless agreeable to paying a half of the associated costs. Ms Linwood provided a letter dated 8 October 2024 from [Child 1]’s orthodontist which summarised [Child 1]’s need for the treatment; he had a special need. Ms Linwood provided evidence of the associated costs. During the hearing, both parents agreed that the associated costs totalled $12,170. Those costs significantly affect the costs of maintaining [Child 1]. Ms Linwood is paying those costs. Those circumstances constitute special circumstances. Reason 2 is established. Mr Traynor was agreeable to paying an additional $6,085 via Child Support.
Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:
that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
…
(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents; …
During the directions hearing both parents explained that [Child 1] was attending a private school and [Child 2] is attending a private school. Both parents agreed that the children’s attendances at the private schools had been in accordance with the parents’ expectations. [Child 1] started attending a public school in mid-2024. Since the start of 2024, each parent has been issued with invoices for a half the children’s private school fees. Mr Traynor was agreeable to paying a half of the children’s private school fees for 2023. Both parents agreed that the objections officer’s decision to increase Mr Traynor’ child support liability by $4,633 achieved that result. There is no dispute that Reason 3 is established.
Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:
that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia)because of the income, property and financial resources of either parent; or
(ib)because of the earning capacity of either parent; …
The Tribunal can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) of the Act are satisfied. That subsection states:
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.
The main issue in this case is Mr Traynor’ income and resources, and whether he can, and should, be assessed on his earning capacity. It is convenient to focus firstly on his earning capacity.
On 23 March 2023, Mr Traynor resigned from his full-time employment with [Company 1] . He had been employed as a “[position]”. More generally, he had worked as a [occupation] for many years. Upon his resignation, he was unemployed. He was not working despite ample opportunity to do so. Further, he had changed his working pattern from full-time employment to being unemployed. Paragraph 117(7B)(a) of the Act is satisfied.
Mr Traynor submitted that his decision to resign was justified on the basis of his state of health, and in particular, his mental health. He was directed to provide “evidence (such as a letter from Mr Traynor’ psychologist) stating the dates on which Mr Traynor attended psychology sessions during 2023”.
Mr Traynor provided a referral dated 13 April 2023 from his general practitioner. The doctor noted that Mr Traynor was “having a few problems with anxiety and stress”. In my opinion, that statement is inconsistent with any suggestion that Mr Traynor’ mental health issues were so severe that they justified him resigning from full-time employment to be unemployed. The doctor also noted (with minor typographical error in the original):
finds he is ditracted all the time and work is suffering as a consequence
That statement is inconsistent with any suggestion that Mr Traynor informed his doctor that he had resigned from full-time employment due to the severity of his mental health issues.
Mr Traynor was given a “GP Mental Health Treatment Plan”. He provided evidence that he attended two sessions with a psychologist, on 13 April 2023 and 19 April 2023. During the substantive hearing, Mr Traynor said he had attended many more sessions but he had only provided the receipts that were “handy on my phone, so let’s go with two.” I consider the documentary evidence to be the more reliable evidence. I find that he only attended two sessions. Further, I find that he did not seek any medical treatment for his “few problems with anxiety and stress” until after he had resigned, and after he had reduced his rate of child support payable by providing Child Support with an estimate of income of $0.
Mr Traynor’ election to not seeking any medical treatment prior to resigning, his doctor’s reference to a “few problems with anxiety and stress”, and his election to only attend two sessions with a psychologist, suggest that he did not have significant mental health issues, and I find accordingly. His decision to resign was not justified on the basis of his state of health.
During the substantive hearing Mr Traynor stated, for the first time, that he had resigned from his full-time employment in order to observe the children play after-school sport from 4:00 pm on Tuesdays, Wednesdays and Thursdays. He said court orders dated 15 January 2023 had prohibited him from providing care, so those times, as well as weekends, were his only opportunities to see the children. He confirmed that he had not been required to work on weekends. He did not provide any evidence from his ex‑employer confirming that his ex-employer had not been agreeable to him leaving work around 4:00 pm on Tuesdays, Wednesdays and Thursdays to see the children. I accept that Mr Traynor wanted to observe the children on weekdays as well as on weekends, but I am not persuaded that his desire to see the children on weekdays justified his decision to resign from his employment. In any event, Mr Traynor agreed that when he was observing the children he was not providing care. It follows that his decision to resign could not have been justified on the basis of his “caring responsibilities”. Paragraph 117(7B)(b) of the Act is satisfied.
Broadly, paragraph 117(7B)(c) of the Act requires me to consider whether Mr Traynor’ decision to resign from full-time employment was for a major purpose of affecting his rate of child support payable. The relevant chronology is as follows:
· On 16 January 2023, Mr Traynor informed Ms Linwood, “I am more than happy to up the current payments to $630 per fortnight [i.e. $16,380 per year] that child support has recommended based on my last year’s income [and Mr Traynor being recorded as providing 14% care, which was not the case].
· On 31 January 2023, Child Support decided to accept Ms Linwood’s application to register a child support case with effect from 30 December 2022. Mr Traynor was assessed to pay $25,950 per annum in child support. Child Support issued assessment notices to both parents.
· On 7 February 2023, Child Support phoned Mr Traynor. Its file note of the conversation includes the following:
Mr Traynor questioned what happens if he doesn’t pay child support – discussed enforcement action.
Mr Traynor questioned what occurs if he quits his job – advised CSA would look at other enforcement actions.
Mr Traynor advised he cannot afford child support, enforcement statement read in full again.
· On 26 February 2023, Mr Traynor’ then-partner, Ms [A], registered [Company 2] Pty Ltd. (During the substantive hearing, Mr Traynor said their relationship ended in June or July 2024.) [Ms A] is the sole director of the company. She is the beneficial owner of a half of the company’s shares and she holds the other half on trust for another entity. Mr Traynor said he did not know the identify of that other entity. He confirmed that at all relevant times, [Ms A] had maintained full-time employment with an unrelated third party.
· On 28 February 2023, [Company 2] Pty Ltd registered [a website] as a business name.
· On 6 March 2023, Child Support issued new assessment notices. Mr Traynor was assessed to pay $26,794 per annum in child support.
· On 15 March 2023, Mr Traynor informed Ms Linwood, “Also just letting you know I am finishing up work so will be free to look after and assist with the kids on most occasions so please let me know if you need me to have them.”
· On 23 March 2023, Mr Traynor resigned.
· On 11 April 2023, Mr Traynor provided Child Support with an estimate of income of $0. His rate of child support payable reduced from $26,794 per annum to $3,042 per annum.
· On 13 April 2023, Mr Traynor visited his general practitioner, obtained a “GP Mental Health Treatment Plan”, and had his first session with a psychologist.
· On 19 April 2023, Mr Traynor had his second session with a psychologist, which was his final session.
· On 5 June 2023, Mr Traynor provided Child Support with an estimate of income of $0 for 2023–24.
· Meanwhile, Ms Linwood provided Child Support with evidence which suggested that Mr Traynor might have been generating revenue for [Company 2] Pty Ltd. Her evidence included [deleted]. At the substantive hearing, Mr Traynor said [details deleted]. The hearing papers included Mr Traynor’ bank account statements with transaction details. I asked Mr Traynor to name his [friends]. He said he could not remember their names. He said he received $500 or $1,000 per sale.
· In May 2024, Ms Linwood provided copies of reviews of the [business]They are positive reviews of the service provided by “Mr Traynor” and “Mr Traynor”. There are no references to Ms [A]. Ms Linwood also provided a copy of an advertisement for [the business]. There is one listed phone number and it is Mr Traynor’.
· In July 2024, Mr Traynor was informed that the Tribunal would be conducting an early case appraisal conference on 20 August 2024. (Ms Linwood had belatedly applied to the Tribunal for an extension of time in which to apply for review of the objections officer’s decision and another Tribunal Member had granted her application.)
· On 6 August 2024, Mr Traynor obtained a referral from another general practitioner whose notes include the following:
Here for a mental health care plan.
Says that he had one a few years ago.
· On 15 August 2024, Mr Traynor registered [Company 2] Pty Ltd. He said he is the sole director and shareholder of the company. It has registered a business name, “[name]”.
It is also worth noting that Mr Traynor was directed to provide his tax returns and payment summaries for 2022–23 and 2023–24, but he failed to do so. At the substantive hearing he apologised for the omissions.
He was also directed to provide:
account statements of all financial accounts to which Mr Traynor was a signatory from 1 August 2024 to 31 October 2024, including savings, loan and credit card accounts, and including accounts to which he was the sole signatory and accounts to which he was a joint signatory
He provided bank account statements for some of the bank accounts in his name to which he was a signatory. When asked about the other accounts, he said they were inactive during the period in question. He did not provide any primary evidence in support of that statement. He confirmed that [Company 2] had a bank account during the period in question. He confirmed that the account was active, but he indicated that the transactions were minimal. When asked why he had not provided statements for that bank account, he said he had believed that the direction did not extend to the company’s bank account statements.
Mr Traynor confirmed that he had received revenue from a house that he made available via Airbnb. He said that he had incurred associated expenses and he spent some of the revenue on his living expenses, and “if some was left over, I’d go on a holiday.” Even on Mr Traynor’ unsubstantiated account of events, the Airbnb enterprise appears to have made a profit. He confirmed that he had not declared the revenue or accounted for the related expenses in his personal tax return. If Mr Traynor had complied with the Tribunal’s directions, it would have been possible to check whether he had declared the income that he claimed he had received from [“friends”].
The chronology of events largely speaks for itself. Mr Traynor was informed that Child Support would be collecting a higher rate of child support than he had offered to pay to Ms Linwood. He queried Child Support’s capacity to collect his child support debt. When informed of its powers, he queried what would happen if he resigned from his employment. He subsequently resigned from his employment and provided Child Support with an estimate of income of $0, which significantly reduced his rate of child support payable. He claimed that he resigned due to the severity of his mental health issues but he had not sought any medical treatment prior to resigning. He consulted a general practitioner after providing his estimate of $0, but it appears that he did not suggest to the doctor that his mental health issues were debilitating and he did not disclose to the doctor that he had recently resigned from his employment. He was given a mental health plan but only attended two sessions with a psychologist. He did not seek any further treatment until approximately one year later, when Ms Linwood once again disputed Mr Traynor’ rate of child support payable. I am satisfied that Mr Traynor resigned for a major purpose of affecting his rate of child support payable. Returning to the wording of paragraph 117(7B)(c) of the Act, Mr Traynor has not demonstrated that it was not a major purpose of his decision to resign to affect the administrative assessment of child support in relation to the children. That paragraph is satisfied.
The requirements of subsection 117(7B) of the Act are satisfied and regard can be had to Mr Traynor’ earning capacity.
The evidence does not clearly identify the extent of Mr Traynor’ income and financial resources. Mr Traynor was directed to provide his tax returns and payment summaries but he did not do so. He provided bank account statements for some of the bank accounts to which he was a signatory, but not others. I infer that he made a profit via Airbnb but he has not accounted for that profit. I do not accept his evidence that he was [doing specified work] on behalf of “friends” whose names he cannot recall. Further, there is no clear evidence of the profit he made from those sales, or the profit that he generated for [Company 2] Pty Ltd (at least some of which may have constituted a financial resource that was available to him), or [Company 2] Pty Ltd’s profit, if any (which might have been apparent if Mr Traynor had complied with his obligation to provide its bank account statements). In an appropriate case I would have issued further directions with a view to obtaining further evidence on those issues and then listing the matter for a second day of hearing. However, I did not consider that necessary in this case. The Tribunal’s objectives include providing an independent mechanism of review that is fair and just and ensures that applications to the Tribunal are resolved as quickly, and with as little formality and expense, as a proper consideration of the matters before the Tribunal permits: section 9 of the Administrative Review Tribunal Act 2024. The evidence allows me to fairly estimate Mr Traynor’ earning capacity and I consider it unlikely that his current income is more than that earning capacity. I can have regard to Mr Traynor’ earning capacity and it is appropriate that I do so. His 2021–22 adjusted taxable income was $149,356. His 2022–23 adjusted taxable income was $203,471 but it included a capital gain. During the hearing I noted, and Mr Traynor did not dispute, that he earned $88,136 during the 204 days that he was employed by [Company 1], which equates to $157,694 per annum. Assuming he incurred some tax-deductible expenses, his earning capacity was approximately $150,000 per annum.
Mr Traynor lodged an estimate of income of $0 from 11 April 2024. In the absence of a departure decision, that estimate would be reconciled against his 2023–24 adjusted taxable income of $20,007, as determined by the Australian Taxation Office. However, that adjusted taxable income does not reflect Mr Traynor’ earning capacity and it is appropriate to have regard to his earning capacity when determining his rate of child support payable. Those circumstances constitute special circumstances that made the administrative assessment unjust and inequitable. Reason 8 is established.
Just and equitable
The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.
The parents recently finalised their property settlement. Mr Traynor completed a Statement of Financial Circumstances on 2 December 2024. He said he was not earning any income but he was receiving approximately $750 per week in interest on his savings of $730,000. He does not own any real estate. He said he does not have any liabilities. He said he is “back living with my mother”.
Ms Linwood’s circumstances are relatively straightforward. She is a [occupation] in full‑time employment. Her 2022–23 adjusted taxable income was $108,652. She said her earnings have not changed significantly but she received a capital gain during 2023–24 and her accountant is preparing her tax return for that financial year. During the directions hearing she said she was starting a second job. During the substantive hearing she said the second job had not materialised due to various obligations, including her caring responsibilities. Mr Traynor initially queried that evidence but later indicated that he did not wish to pursue the issue. In any event, I accept Ms Linwood’s evidence on that issue. She owns her home and is repaying an associated home loan. The household consists of herself and the two children. Her listed household expenses are unremarkable.
From 30 December 2022 to 10 April 2023, Mr Traynor was assessed on his 2021–22 adjusted taxable income of $149,356, which was appropriate. From 11 April 2023 to 30 June 2023 he was assessed on a reconciled estimate of income of $310,795, which took account of his capital gain. From 1 July 2023 he was assessed on his estimate of income of $0 which, in the absence of a departure decision, would be reconciled against his 2023–24 adjusted taxable income of $20,007 in due course. It is appropriate to vary Mr Traynor’ adjusted taxable income to $150,000 per annum from 11 April 2023. Given Mr Traynor’ previous attempts to evade his financial obligations, it is appropriate to vary his income for a significant period of time. It will be varied until 31 December 2026.
Ms Linwood said that her 2023–24 adjusted taxable income would include a capital gain. As matters currently stand, it is not clear when the administrative assessment would start using her 2023–24 adjusted taxable income. I will vary her adjusted taxable income to $110,000 per annum from 1 July 2024 to 30 June 2025 (on the basis that her earnings are likely to increase slightly from year to year). She will have the option of lodging an estimate of income from 1 July 2025.
Mr Traynor agreed to contribute a half of [Child 1]’s orthodontic costs and a half of the children’s 2023 private school fees. Ms Linwood receives family tax benefit. Centrelink will have to decide whether to disregard the increase in the rate of child support payable on account of [Child 1]’s special needs when calculating Ms Linwood’s rate of family tax benefit.
Mr Traynor has savings of approximately $730,000. He has the capacity to immediately contribute a half of [Child 1]’s orthodontic costs and a half of the children’s 2023 private school fees (and he has already contributed to the private school fees via the objections officer’s decision). It is appropriate to immediately create that full liability while Mr Traynor has ample savings. His rate of child support payable will be increased from 11 April 2023 to 10 April 2024 by $4,633 + $6,085 = $10,718 per annum.
As at 22 November 2024, Mr Traynor owed child support arrears of approximately $4,000. The proposed decision will increase his child support liability by approximately $21,000 and it will require him to pay a current rate of child support of approximately $26,000 per annum. He has the capacity to pay those arrears and that rate of child support, and it is appropriate that he do so. The proposed decision will be just and equitable.
Otherwise proper
The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.
Ms Linwood receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Traynor will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.
DECISION
The decision under review is set aside and, in substitution:
from 11 April 2023 to 31 December 2026, Mr Traynor’ adjusted taxable income is varied to $150,000 per annum;
from 1 July 2024 to 30 June 2025, Ms Linwood’s adjusted taxable income is varied to $110,000 per annum; and
from 11 April 2023 to 10 April 2024, Mr Traynor’ rate of child support payable is increased by $4,633 per annum, plus a further $6,085 per annum on account of a child’s special needs, i.e. it is increased by $10,718 per annum.
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