Maguire and Nicoll (Child support)

Maguire and Nicoll (Child support) [2024] AATA 2311 (18 April 2024)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/BC027019
APPLICANT:  Ms Maguire
OTHER PARTIES:  Child Support Registrar
Mr Nicoll

TRIBUNAL:Member Y Webb
DECISION DATE: 18 April 2024
DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that:

· for the period 14 March 2023 to 31 December 2025 Mr Nicoll’s adjusted taxable income is varied to $57,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – particulars of the administrative assessment – special circumstances – conditions to not apply adjusted taxable income – unjust and inequitable determination – changing the income to higher amounts – decisions 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 relates to the issue of child support regarding the children of Ms Maguire and Mr Nicoll (“the children”). They have two children now aged 13 and 11. Services Australia – Child Support (“Child Support”) records reflect that since 16 April 2021 the children have been in the 50/50 care of the parents (administratively calculated as 51% care by Ms Maguire and 49% care by Mr Nicoll). The child support case commenced on 17 May 2017 has been collectable by Child Support since 14 March 2023 when Mr Nicoll applied to Child Support requesting it to collect child support from Ms Maguire.
On 20 June 2023 Ms Maguire applied to Child Support for a change to the administrative assessment on the basis of Reasons 5, 8A and 8B. At the telephone directions hearing and confirmed at the hearing Ms Maguire advised that she was only pursuing Reasons 8A and 8B and the matter proceeded on that basis.
At the time of Ms Maguire’s application for a change to the assessment, and in the period 1 November 2022 to 31 August 2023 Ms Maguire was assessed, under the administrative formula assessment, to pay an annual rate of child support of $4,166. This was based on Ms Maguire’s adjusted taxable income for the 2021/2022 financial year of $61,781 and Mr Nicoll’s adjusted taxable income for the 2021/2022 financial year of $15,324.
On 22 August 2023 a delegate of the Registrar decided that Reason 8A had been established in relation to Mr Nicoll’s income and financial resources but that no other Reason had been established. The decision maker changed the assessment by varying Mr Nicoll’s adjusted taxable income to $50,000 per annum for the period 20 June 2023 to 30 November 2025.
On 1 September 2023 Ms Maguire objected to that decision.
On 31 October 2023 her objection was partly allowed. The objections officer also found that Reason 8A had been established but no other Reason. The objections officer set aside the original decision concluding that Mr Nicoll’s adjusted taxable income should be varied to $50,000 per annum but decided that this income amount should apply from 14 March 2023 to 31 December 2025. That decision reduced Ms Maguire’s child support liability to approximately $1,396 per annum from 14 March 2023; $1,134 from 1 September 2023; and $1,252 from 14 October 2023 to 30 November 2024. The objections officer’s decision resulted in a child support credit in favour of Ms Maguire of approximately $740.
On 7 November 2023 Ms Maguire requested a review by the Administrative Appeals Tribunal (“the Tribunal”).
A telephone directions hearing was held on 7 March 2024 with both parents.
The hearing took place on 18 April 2024. Both parents gave evidence on affirmation.

ISSUES

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 child, 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 these 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 10 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 a ground exists 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),[1] 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.
[1] (1992) FLC 92-279
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”.
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, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.

Does a ground or 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 extensive information contained within the documentation provided by Child Support as well as the additional documentation provided by the parents and the oral evidence provided at the hearing.

Reason 8A

The legislative grounds in relation to Reason 8A are 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.
To establish Reason 8A it is necessary to show that there are special circumstances and that either Mr Nicoll’s or Ms Maguire’s income, property and financial resources used in the assessment make the child support assessment unfair.

Mr Nicoll’s income, property and financial resources

Mr Nicoll is self-employed in [industry 1]. He is a sole trader. He has no employees. He derives income from two sources: his own [occupation 1 work] for which he invoices the venues and as a [manager 1] arranging [occupation 1s] to [work] at various venues. He explained that in relation to the [management] aspect, he invoices the venue for the [occupation 1s] he arranges, the venue pays him, he retains his [management] fee and the [occupation 1s] invoice Mr Nicoll for their portion of the overall fee.

Ms Maguire’s submissions

Ms Maguire contended that Mr Nicoll is earning more money than he is declaring. She stated that he uses money from his business for personal use. She asserted that he lives a lifestyle which is not consistent with his stated income. Ms Maguire stated that Mr Nicoll went on holidays to [Location 1] in February 2023 which included car hire. Also, she stated that in recent times he went to Sydney and [City 1] for holidays. She stated that Mr Nicoll dresses in designer clothes and buys expensive clothes and shoes for the children. She also asserted that he engages in expensive activities with the children.[2]
[2] CS papers pages 107 to 108 and page 336
Ms Maguire referred to Mr Nicoll stating to her in an email of 13 February 2023 that he “had 20K and I will spend it to get what’s due”. The Child Support papers disclose that Mr Nicoll sent Ms Maguire a screenshot of one of his [Bank 1] accounts showing a balance of $6,033.25.[3]
[3] CS papers pages 109-110
Ms Maguire also asserted that Mr Nicoll bought a new [Computer 1] on 5 May 2023 and a new [Phone 1] (with the phone alone costing in excess of $1,900). She stated that he bought school shoes for the younger child costing $150 as well as a new [brand] school bag. He also bought Lego to the value of $300 for the child’s birthday. She stated that Mr Nicoll was also paying for [sport] lessons for the children.
Ms Maguire asserted that [in] March 2024 Mr Nicoll took the younger child on a helicopter joy ride. She also asserted that [in] March 2024 Mr Nicoll took the younger child out for breakfast, movie and plaza shopping. She stated that he bought himself and the child new skateboards. She asserted that the cost of the skateboards was approximately $165 each.[4]
[4] A11 to A12
Ms Maguire contended that in 2023 Mr Nicoll was planning a trip to [Country 1] with the children. She stated that in the dispute around that issue Mr Nicoll stated in an email to her of 12 February 2023:
We [Mr Nicoll and his partner] think you are jealous because I am able to provide this opportunity for them [the children] and you can’t. Get over it.[5]
Ms Maguire contended that this statement was inconsistent with Mr Nicoll’s asserted low income.
[5] A45
In addition, Ms Maguire stated that Mr Nicoll bought a new [brand] camera with external flash and zoom lens attachment which was observable at the elder child’s birthday. She estimated that it cost “upward of approximately $1,200”.[6]
[6] A46
At the hearing Ms Maguire stated that Mr Nicoll recently bought a new TV and projector and other expensive equipment. She believes he must have more money than he is declaring.
Ms Maguire also asserted that Mr Nicoll (and his partner and her children) took the younger child on holiday to New South Wales between 13 January 2024 and 18 January 2024. She stated that Mr Nicoll rented a 3-bedroom Airbnb house and she believes that he claims business expenses to reduce his income for child support purposes.[7]
[7] A46 and A51
Ms Maguire also submitted that it was evident from Mr Nicoll’s [Bank 1] statements that he has used this business account on weekends when he had the care of the children. She asserted that he spent money on restaurants, [and specified retailers]. She submitted that would not be feasible on such a low income. She referred to Mr Nicoll spending $5,146.40 at [Retailer 1] on the day he bought a new [Phone 1] and [Computer 1]. She asserted that if the business is declaring such a low income, how it is possible to afford such expensive technology. She also referred to a purchase from [Retailer 2] of $847 which coincided with him buying the children a PlayStation 5.[8]
[8] A46 to A47
In summary Ms Maguire contended that Mr Nicoll is declaring a low income which does not reflect his lifestyle and spending capacity.

Mr Nicoll’s submissions

Mr Nicoll asserted that his work as [an occupation 1] is restricted to mostly Friday, Saturday and Sunday nights due to the nature of the work.[9] There are not many [work sessions] available at other times. Mr Nicoll submitted that his [manager 1] work occupies most of Monday to Friday between the hours of 9 am to 5 pm. Mr Nicoll stated that there is a lot of administration involved in the [manager 1] work. He stated that he is occupied with his [occupation 1 work] and with his [manager 1] work on a full-time basis.[10]
[9] CS papers page 375
[10] CS papers page 376
Mr Nicoll stated that he is working on a small profit margin. He stated that he had recently received a back payment of family tax benefit from Centrelink which allowed him to clear his “mounting debt”.
He denied that he had spent funds unnecessarily. He agreed that he purchased a new [Computer 1]. He stated that this replaced a previous laptop which wasn’t working correctly and had a cracked screen. He denied that he bought expensive items for the children and he stated that he only eats out on special occasions.[11]
[11] CS papers – page 377
Mr Nicoll agreed that he went with his partner and younger child to New South Wales for a holiday in January 2024. He stated that his partner paid for that holiday. He agreed that he went on a holiday to [City 1] with his partner and younger child very recently but he stated that his brother paid for that holiday. He did not deny that in 2023 he had also holidayed in Sydney and [Location 1]. He stated that he never had the funds for the proposed holiday with the children to [Country 1].
At the hearing and in his Statement of Financial Circumstances, Mr Nicoll stated that he believes his sole trader/business income is approximately $700 per week. He stated that due to caring for the children he is realistically only able to work as [an occupation] every second weekend. He stated that he typically [works] at three [work sessions] a fortnight and earns a gross fortnightly amount of $900 (average of $450 per week) plus approximately $250 per week from the [manager 1] work. Mr Nicoll advised that the fee he retains in relation to the [manager 1] work is typically $50 per [session]. At the hearing Mr Nicoll stated that he is trying to build his [manager 1] work. It has been heavily affected by COVID. He used to work with eight venues but after COVID, that reduced to two and currently he has work with three or four venues.
Mr Nicoll provided a Centrelink Income Statement. This shows that as at 19 March 2024 he is no longer receiving Centrelink jobseeker payments or income support payments. He is receiving family tax benefit and rent assistance which are not counted as income for child support purposes. Mr Nicoll could not recall exactly when he ceased receiving Centrelink jobseeker payments but he stated that he thought it was around a year ago.
In the 2021/2022 financial year Mr Nicoll’s (amended) income tax return showed he received income of $3,296 as a sales assistant employee, $10,462 in Centrelink jobseeker payments, $2 of interest and gross small business income of $59,030. His total gross income was $72,790. He declared total expenses of $57,127 leaving net income from the business of $1,903. Hence, his income tax return calculated that his adjusted taxable income for the 2021/2022 financial year (after the deduction of $339 for his accountant’s fee) was $15,324.[12]
[12] B13; B38-B51
A breakdown of his sole trader expenses in the 2021/2022 disclosed:
·     payments to subcontractors $31,175
·     depreciation $7,919
·     motor vehicle expenses $3,600
·     advertising and promotion $2,841
·     internet $805
·     computer software $144
·     [uniforms] $399
·     sundry meals and entertainment $2,102
·     [equipment 1] $222
·     printing and stationery $969
·     telephone – wireless $300
·     travel and accommodation $1,601
·     subscriptions and publications $450
·     repairs $302
·     postage $15
·     unspecified $4,283.[13]
[13] B37 to B51
In relation to Mr Nicoll’s financial circumstances in the 2022/2023 financial year, he advised at the telephone directions hearing that he has not yet lodged his income tax return for that year. However, prior to the hearing he provided an undated lodgement declaration which stated that his taxable income in the 2022/2023 financial year was $22,780.[14] In addition, he provided a profit and loss statement, generated by his own software package, which stated that his gross income in the 2022/2023 financial year was $140,480; his payments to subcontractors were $94,268.18 and his operating expenses were $37,179.61 leaving a net income of $9,032.21.[15]
[14] B12
[15] CS papers – pages 369 to 370
A breakdown of his (unofficial) expenses in the 2022/2023 financial year disclosed (ignoring cents):
·     advertising and promotion $3,777
·     computer – hardware $10,829
·     computer – internet $756
·     computer – software $135
·     [uniforms] – $865
·     [repairs and maintenance] $816
·     meals and entertainment $1,310
·     [equipment 1] $3,650
·     [equipment 2] $9,244
·     office supplies $865
·     postage and delivery $86
·     public liability insurance $69
·     tax preparation $373
·     telephone – wireless $216
·     travel expenses and accommodation $4,083.[16]
[16] CS papers pages 369 to 370
In relation to these operating expenses in the 2022/2023 financial year Mr Nicoll claimed that they totalled $37,179.61 and that the payments to subcontractors were $94,268.18. He claimed that his gross income was $140,480 and therefore that his net profit was $9,032.21. He stated that he had reinvested in the business and upgraded and replaced a lot of his [equipment 2], including his [specified] equipment and a lot of computer hardware. He stated that he has also spent a lot on marketing, web domains, websites, a professional email address, social media, advertising and [technical assistants]. He stated that the purpose of all of this expenditure is to build the business and maintain an income.[17]
[17] CS papers -page 379
In relation to the current financial year (2023/2024) Mr Nicoll provided a profit and loss statement, generated by his own software package, which stated that his gross income for the period 1 July 2023 to 31 March 2024 was $106,979.24; his payments to subcontractors were $76,861.23 and his operating expenses were $16,784.06 leaving a net income of $13,333.95.[18] Annualised this would result in net income for the 2023/2024 financial year of approximately $17,778.
[18] B11
A breakdown of his current (unofficial) expenses in the 2023/2024 financial year (to date) disclosed (ignoring cents):
·advertising $6,568
·bank fees $28
·entertainment $1,539
·general expenses $570
·[equipment 2] $4,730
·office expenses $841
·printing and stationery $5
·repairs and maintenance $887
·subscriptions $456
·telephone and internet $672
·travel – national $483.

The Child Support papers include [Bank 1] statements for the period 18 March 2023 to 8 August 2023[19] and Mr Nicoll provided [Bank 1] statements for the period 18 December 2023 to 18 March 2024.[20] The Child Support papers also include three [Bank 2] statements for the period 23 May 2023 to 23 August 2023 two of which are joint accounts and one account ending in 9298 which is Mr Nicoll’s account.[21] In addition, Mr Nicoll provided [Bank 2] statements for the period 18 December 2023 to 18 March 2024.[22]

Tribunal’s consideration

[19] CS papers pages 220 to 233

[20] B15 to B21 and B52 to B53

[21] CS papers pages 298 to 332

[22] B23 to B34

Mr Nicoll’s income is difficult to establish with precision. While the Tribunal accepts that his business income (and in the 2021/2022 financial year his jobseeker payments and wages) is deposited into his [Bank 1] account ending in 2567, it is unclear exactly what he earns from his work after the payments to subcontractors have been made. The Tribunal considered the income tax return for the 2021/2022 financial year and this helpfully confirmed that he received jobseeker payments of $10,462 and wages of $3,296. However, in relation to the business income and expenses the Tribunal was not persuaded that the specified expenses in particular were reliable. For example, one of the expense items of $4,283, was applied as an expense without any description of what the expense was in relation to. In addition, it is difficult to see how Mr Nicoll receives sufficient income to meet even his basic costs of living if so much of his income is used to fund his high expenses.
The Tribunal is not satisfied that Mr Nicoll’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 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. 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.
The Tribunal considered the profit and loss statements provided by Mr Nicoll. When the Tribunal queried the nature of some of the items and the high costs of the items in the profit and loss statement Mr Nicoll appeared to struggle to explain a number of the expenses and the high costs attributed to various items. In addition, there was no indication whether or not expenses such as telephone, internet and computer included a component for private use.
The Tribunal is satisfied Mr Nicoll meets some of his personal costs through his business. In addition, although depreciation is a legitimate expense for taxation purposes, it is not an actual expense incurred until such time as the equipment depreciated is replaced. It is for this reason that depreciation can be considered a resource available to business owners. The Tribunal believes that such personal benefits available to Mr Nicoll through his business are a financial resource that should be regarded as income for the purposes of child support. Expenses accepted for child support purposes must not only be legitimate they must be essential and have a greater priority than the support of children.
The Tribunal considered Mr Nicoll’s [Bank 1] and [Bank 2] statements. The [Bank 1] (business) statements appear to clearly show credits from multiple venues. They also show debits to multiple persons (presumably other [occupation 1s], as Mr Nicoll explained). There are a number of debits which appear to be of a personal nature, for example supermarkets and restaurants, a payment to [a named airline] in February 2024 of $454.17 and a payment to [Retailer 2] of $847 on 17 July 2023. There are several payments via PayPal each for several hundred dollars. There are a couple of payments to the Australian Taxation Office. There appear to be fortnightly drawings from his [Bank 1] business account of $1,275 described as “living expenses”. There are multiple debits to Mr Nicoll (2 X $100 on 22 May 2023; $2,100 on 1 June 2023; $100 on 5 June 2023; $100 on 15 June 2023; $100 on 22 June 2023). There are internet transfers of $200, $220, $300, $300, $200 on 26 June 2023; 3 X $200 on 6 December 2023; $1,000 on 27 December 2023; $300 on 22 January 2024; $800 to Mr Nicoll on 23 January 2024; internet transfers of $300 on 29 January 2024; $300 on 30 January 2024; $500 to Mr Nicoll on 6 February 2024; internet transfer of $300 on 7 February 2024; $300 and $1,000 (to Mr Nicoll) on 20 February 2024; and a cash withdrawal of $1,000 on 13 March 2024. These drawings (excluding the “living expenses”) to Mr Nicoll total approximately $10,220 and relate only to a 7-month period: 18 March 2023 to 18 July 2023 and also 18 December 2023 to 18 March 2024. If this amount was annualised the drawings would total approximately $17,520. The “living expenses” of $1,275 drawn every fortnight would total $33,150 over a year. Together with the other drawings, annualised to $17,520, the total drawings over a 12-month period would be approximately $50,670 ($33,150 +$17,520) and the Tribunal so finds.
The calculation of Mr Nicoll’s income it is very approximate. While the bank statements show the amounts being debited and credited and a brief description of the transactions, it is not always possible to track into which bank account the drawings/withdrawals are going. In addition, if Mr Nicoll was equated to a wage and salary earner he would need to earn a gross amount of approximately $60,900 to receive the net amount of $50,670.
The Tribunal accepts that determining Mr Nicoll’s income is an approximation. The Tribunal is satisfied that calculating his expenditure as detailed above is more accurate and is preferable to relying on his income tax returns. In all of the circumstances and erring on the side of caution given the approximate nature of the calculations the Tribunal is satisfied that the income available to Mr Nicoll is at least $57,000.
This amount is significantly higher than Mr Nicoll’s 2021/2022 taxable income of $15,324 or the 2022/2023 deemed income of $15,876 or the income of $13,333 (annualised to $17,778) as detailed in his profit and loss statement for part of the current financial year.
Given the disparity between the Tribunal’s calculated income figure and the income used in the assessment the Tribunal is satisfied that special circumstances exist. The Tribunal is also satisfied that the child support assessment is unfair because Mr Nicoll has a greater capacity to contribute to the financial support of his children than the current assessment indicates.
The Tribunal finds that Reason 8A has been established in relation to Mr Nicoll’s income and financial resources.
In relation to the claim that Reason 8B (in relation to Mr Nicoll’s earning capacity) is also relevant in this case the approach of the Federal Circuit Court of Australia has been to limit the analysis about particular grounds once it was evident that one had been established, and to thereafter focus on the “just and equitable” considerations. The Tribunal adopts that approach in its reasoning in this matter and will consider Mr Nicoll’s earning capacity in that context.

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 any other child or another person 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 for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. 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 children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues the Full Family Court in the case of Gyselman stated that:
However, some of the matters listed in sub-section [117](4) may overlap with matters already considered under sub-section (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 aspects of subsection 117(4) of the Assessment Act set out in the following paragraphs.

The proper needs of the children

In determining the proper needs of the children, subsection 117(6) of the Assessment 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 children.
There is no dispute that the children are being educated at a government school and the Tribunal so finds. There was no information before the Tribunal which suggested that the costs associated with the children’s education significantly surpassed the usual education costs. Both parents confirmed that the children did not have any special needs.

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

In relation to the income, property and financial resources of the children, both parents advised at the hearing that the children did not have any significant income, property, financial resources or earning capacity. After the hearing Mr Nicoll emailed that he believes the elder child has been working at a [business 1]. The Tribunal notes that the elder child is 13 years old and is still a full-time school student.
In relation to children working on a casual basis the Tribunal has had regard to the reasoning of the Full Court of the Family Court in Mee and Ferguson[23] which stated:
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.
[23] (1986) FLC 91-716; [1986] FamCA 3
The Tribunal adopts that reasoning in this case and finds that the children’s income, earning capacity, property or financial resources are not significant and that the children are wholly dependent on their parents for their financial support.

Mr Nicoll’s income, property, financial resources and expenses

Mr Nicoll’s income and financial resources have been covered at length above and the Tribunal has found he had access to income and financial resources of approximately $57,000 per annum. Mr Nicoll has a superannuation balance of approximately $1,170. He owns a motor vehicle: a 2014 [brand 1] which he valued at approximately $18,000. He declared modest savings of approximately $1,000. He valued his household contents at approximately $5,000.[24]
[24] B4 to B5
In relation to his household expenses Mr Nicoll detailed these in his Statement of Financial Circumstances. His rent payment of $438 per week is his largest expense. All of his other expenses are unremarkable. He advised that his weekly household expenses total $793 (which annualises to approximately $41,200).

Mr Nicoll’s earning capacity

Ms Maguire contended that Mr Nicoll is capable of earning more than he states he is earning. The earning capacity provisions are difficult to satisfy. There are three criteria, all of which must be satisfied. 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.
In relation to criterion one, Mr Nicoll is working as [an occupation 1] and a [manager 1]. He has been self-employed for many years and certainly since separation. There is no evidence that he has reduced his hours of work from full time to part time or that he has changed his occupation, industry or working pattern. Mr Nicoll advised – and the Tribunal accepts – that his business suffered as a result of COVID. He told the Tribunal that the last 12 months were challenging but now his business circumstances are looking better. Ms Maguire believes that Mr Nicoll has a higher earning capacity than he declares. However, the Tribunal is not persuaded that the first criterion of the three-stage test has been satisfied as Mr Nicoll’s work has always been undertaken on a flexible basis in terms of hours of work and the working pattern. The Tribunal therefore finds that Mr Nicoll does not have an unexercised earning capacity.

Ms Maguire’s income, property, financial resources and expenses

Ms Maguire is [occupation 2]. She is employed by [Employer 1] at [Worksite 1] for 34 weeks of the year. In addition, she is self-employed as a sole trader providing [specified] services to [Employer 2] for 36 weeks of the year. She is currently working three days a week at [Worksite 1] and two days a week at [Employer 2].[25]
[25] A9
Ms Maguire provided a Statement of Financial Circumstances and payslips in relation to her employment. She calculated that in relation to her employment at [Worksite 1] she earns a gross amount of $698 per week.[26] She arrived at this figure by taking her average fortnightly payslip of $2,137.48 X 17 weeks (to calculate 34 weeks) and divided by 52 weeks = $698.79 per week.[27]
[26] A3
[27] A9
Ms Maguire provided a copy of her income tax return for the 2022/2023 financial year, her profit and loss statement for her sole trader work in the period 1 July 2023 to 24 March 2024; amounts paid to Ms Maguire and their frequency by [Employer 2] and payment advice confirmations sent to Ms Maguire by [Employer 2]. Ms Maguire invoices [Employer 2] for her services. In the past she explained she invoiced once per school term but currently she invoices every fortnight to assist with her cash flow.[28]
[28] A18 to A21
Ms Maguire explained that in relation to her weekly income from the sole trader work at [Employer 2] her methodology for calculating a weekly income is to add all of the invoiced amounts for Terms 1, 2, 3,and 4, and to subtract her expenses. She then divides this figure by 52 to obtain a weekly income amount.
The Tribunal notes that Ms Maguire is also paid as a sole trader for occasional work as [an occupation 3] for [an agency 1].
In the 2021/2022 financial year Ms Maguire’s Notice of Assessment confirmed that her taxable income was $61,781.
Ms Maguire provided her income tax return for the 2022/2023 financial year. This reflects her income from employment, interest and her sole trader work as well as her deductions for the preparation of her tax return and expenses associated with her sole trader work. The Tribunal finds that these were modest and reasonable. The Tribunal is satisfied that Ms Maguire’s taxable income in the 2022/2023 financial year was accurately calculated to be $59,538.
Ms Maguire’s profit and loss statement for the period 1 July 2023 to 24 March 2024 shows that she claims 70% of her phone and internet use and 50% of her monthly subscription as business expenses and the remainder as private use. Ms Maguire provided. The Tribunal is satisfied that the expenses claimed are modest and reasonable.
The Tribunal accepts all of Ms Maguire statements about her income and how it is calculated. It is satisfied that the documentation regarding her income from employment and sole trader work is reflected in the [Bank 3] statements which Ms Maguire provided.[29]
[29][29] A30 to A43
In her Statement of Financial Circumstances Ms Maguire declared household contents of $20,000 and the value of her [equipment 3] (essential to her work) as $10,000. She valued her motor vehicle at $11,000. She declared superannuation totalling $7,409 and modest savings of less than $1,000. In relation to expenses Ms Maguire advised her credit card debt is approximately $10,900 and her minimum monthly repayments are $310. In addition, she owes approximately $4,600 on her car loan. In relation to her household expenses Ms Maguire advised that she shares the rent and food costs with her partner and at times other household costs but that she pays all of the costs specific to the children. This would tend to indicate that the weekly expenses for herself and the children total approximately $1,108 per week. Annualised, this equates to $57,616 a year.[30]
[30] A4 to A8

Ms Maguire’s earning capacity

Ms Maguire is working five days a week. There is no evidence that Ms Maguire has, since separation, reduced her hours of work or that she has changed her occupation, industry or working pattern. Therefore the Tribunal finds that she does not have an unexercised earning capacity. Hence, the earning capacity provisions are not applicable.

Necessary commitments to support themselves

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[31] 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.
[31] [1986] FamCA3

Both Mr Nicoll and Ms Maguire confirmed that they had no out of the ordinary self-support expenses and the Tribunal so finds.

Direct and indirect costs incurred by the carer parent

Neither Mr Nicoll nor Ms Maguire referred to any child care costs and neither parent raised any issues in that regard.

Any hardship to either parent or the children by the making of, or refusal to make, an order

Ms Maguire advised that if the Tribunal refused to change the administrative formula assessment “it would cripple me financially”. She stated that she was really struggling financially and cannot afford to pay child support especially if it was based on Mr Nicoll’s low taxable income as assessed by the Australian Taxation Office. Ms Maguire stated that her rent is “ridiculous” but there is little she can do about it. She has so many expenses that she feels like she “can’t afford anything”. She stated that she had to borrow money to pay child support. If the child support administrative formula assessment was not changed it would cause her hardship.
Mr Nicoll stated that his business is not very profitable but he thinks “things will get better”. He stated that if the child support payments he received decreased that would not cause him hardship. He stated that in the last 12 months things were financially difficult and he needed the child support but “not so much now”.

Proposed determination

The Tribunal has carefully considered the evidence provided and the statements and contentions of both parents.
It is difficult to determine Mr Nicoll’s income with certainty but the Tribunal has found that in recent times and continuing he has access to an income of approximately $57,000 per annum as detailed above. The Tribunal therefore considers it fair and equitable to change the assessment by varying Mr Nicoll’s income to this level.
The Tribunal proposes that Ms Maguire’s adjusted taxable income continue to be calculated according to her income as assessed by the Australian Taxation Office as this provides accurate and reliable information regarding her income.
In considering the duration of the change to the assessment the Tribunal proposes to vary Mr Nicoll’s adjusted taxable income to $57,000 from 14 March 2023 (that being the date from which Mr Nicoll requested Child Support to collect child support on his behalf) to 31 December 2025. The Tribunal does not propose to extend the change to the assessment for a longer period into the future because it is mindful that any significant increase in Mr Nicoll’s financial position should be reflected in the child support assessment as soon as reasonably possible.
The Tribunal considers it would be just and equitable to depart from the administrative formula assessment for this period because given the nature of Mr Nicoll’s business it is unlikely that his income tax return will be an accurate reflection of his financial situation now and into the future.
This proposed determination will result in a child support liability of approximately $566 per annum for Ms Maguire in the period 14 March 2023 to 31 August 2023; and approximately $300 per annum in the period 1 September 2023 to 13 October 2023; and approximately $332 per annum in the period 14 October 2023 to 30 November 2024. These figures are calculated on the parents having 50/50 care of the children.
The Tribunal emphasises that these rate calculations are very approximate as they are affected by any changes to the parents’ care percentages as well as Ms Maguire’s future income.
The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents. It also provides a level of certainty and stability to both parents.

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.
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 left to the public welfare system when the parents themselves have the capacity to maintain their children.
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 entitlement to any income-tested pension, allowance or benefit.
Mr Nicoll advised that he is receiving family tax benefit and the amount received may be affected by the change to the child support payments. For instance, a decrease in the child support entitlement may increase the rate of family tax benefit and therefore the extent to which the community will be supporting the children. In all of the circumstances this is proper.

100.The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.
DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that:

· for the period 14 March 2023 to 31 December 2025 Mr Nicoll’s adjusted taxable income is varied to $57,000 per annum.

List of Exhibits

Services Australia – Child Support marked as C exhibits:
· Child Support’s large bundle of 475 pages marked as section 37(1) documents
Ms Maguire has provided the following documents marked as A exhibits:
·     A1–A10                Statement of Financial Circumstances
·     A11–A12              Written submission
·     A13-A16               Payslips
·     A17   Calculation of sole trader income
·     A18-A19               Profit and Loss statement and payments received
·     A20-A21               Payment advices from client
·     A22-A29               Income tax return 2022/2023
·     A30-A44               Bank statements
·     A45-A52               Written submission and emails between parents
Mr Nicoll has provided the following documents marked as B exhibits:
·     B1-B10                Statement of Financial Circumstances
·     B11  Profit and loss statement
·     B12–B14              Electronic lodgement declaration 2022 and 2023
·     B15–B34              Bank statements
·     B35–B36              Centrelink income statement
·     B37  Bank statement
·     B38-B51               Income tax return 2021/2022
·     B52 -B53              Bank statement

[2024] AATA 2311

18 April 2024

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Statutory Construction

Remedies

Judicial Review