Mallinson and Springall (Child support)

Case •

[2024] AATA 3237

•

26 July 2024

Mallinson and Springall (Child support) [2024] AATA 3237 (26 July 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2024/MC027469

APPLICANT:  Mr Mallinson

OTHER PARTIES:  Child Support Registrar

Ms Springall

TRIBUNAL:Member R Anderson

DECISION DATE:  26 July 2024

DECISION:

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

·      The ATI of Mr Mallinson is to be varied to $108,000 for the period 2 June 2023 to 31 October 2026.

CATCHWORDS
CHILD SUPPORT – departure from the administrative assessment – income, property and financial resources – father’s adjusted taxable income – former employee of parents’ business now sole trader through different entity – progressive purchases of business equipment and new vehicles – variable business activities and income throughout year – additional financial benefits – drawings, use of vehicles, and personal expenses – over- and under-assessed in earlier periods, and consistently under-assessed in later periods – financial needs of mother and children – father’s current arrears – 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

  1. Mr Mallinson and Ms Springall are the separated parents of [Children 1 and 2]. According to records of Services Australia – Child Support (Child Support), the child support assessment was registered on 10 June 2016. Child Support has been responsible for collection of child support from Mr Mallinson since 21 March 2022.

  2. The child support liability was initially calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act). The calculation was based on the income recorded by each parent in their most recently completed income tax returns, as lodged with the Australian Taxation Office or estimates accepted by Child Support. In the case of Mr Mallinson his adjusted taxable incomes (ATIs) for the period 2 June 2023 to 30 June 2023 and for the 2023/24 financial year were based on estimates.

  3. It is open to either parent to lodge a change of assessment or departure application to depart from the administrative assessment under Part 6A of the Act, if they consider the administrative assessment results in an unfair amount of child support payable by one parent. Ms Springall lodged such an application on 8 June 2023. This application resulted in a delegate of the Child Support Registrar departing from the administrative assessment on 3 October 2023 and varying the ATI of Mr Mallinson to $133,200 for the period 2 June 2023 to 1 June 2025. This was on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources of the parents (Reason 8). The departure decision resulted in Mr Mallinson’s annual child support liability increasing from $1,202 to $16,598.

  4. On 25 October 2023, Mr Mallinson lodged an objection to the decision of 3 October 2023 on the basis that the decision was based on financial information for the wrong business. According to Child Support he provided little evidence in respect of his business operations.

  5. On 29 January 2024, an objections officer decided that:

    ·the ATI of Mr Mallinson is to be varied to $166,269 for the period 2 June 2023 to 1 September 2024;

    ·the ATI of Mr Mallinson is to be varied to $172,753 for the period 2 September 2024 to 1 December 2025; and

    ·the ATI of Mr Mallinson is to be varied to $179,490 for the period 2 December 2025 to 1 March 2027.

  6. The annual rate of child support payable by Mr Mallinson increased as a result of the objections officer’s decision to more than $21,000, reducing to $18,652 following the birth of Mr Mallinson’s relevant dependent child on 27 September 2023.

  7. Mr Mallinson then lodged an application to this Tribunal on 30 January 2024, requesting an independent review of Child Support’s decision.

  8. The directions hearing was conducted by telephone with Mr Mallinson and Ms Springall on 11 June 2024. Following this hearing, directions were made to both parties requiring them to provide further information and documents.

  9. The hearing was held on 23 July 2024. Both parties participated by conference telephone, both parties giving oral evidence to the Tribunal on affirmation. Mr Mallinson did not take up the opportunity to have his accountant provide oral evidence as a witness at the hearing. He told the Tribunal at hearing that his accountant was not available and he was happy to answer the business questions.

  10. The Tribunal considered information in the documents provided by Child Support in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 424, documents lodged by Mr Mallinson numbered A1 to A123 and documents lodged by Ms Springall numbered B1 to B100. Information from Centrelink was also provided to the Tribunal, numbered C1 to C27. All of the documents were provided to all parties prior to the hearing. Both parties confirmed the receipt of all documents to the Tribunal.

  11. On 23 July 2024, the Tribunal decided to defer making a decision in this matter to allow the parties to provide further evidence. Additional information was provided to the Tribunal on 24 July 2024, numbered A124 to A132 and from Ms Springall, numbered B101 to B106. As the information confirmed the discussions at hearing, it was exchanged with the parties for their information and the Tribunal proceeded to make a decision.

ISSUES

  1. When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

    ·      whether a ground exists to depart from the administrative assessment; if so

    ·      whether any proposed departure is fair to Mr Mallinson, Ms Springall and the children; and if so

    ·      whether any proposed departure is fair to the public.

CONSIDERATION

  1. Ms Springall told the Tribunal that she was satisfied with Child Support’s departure decision whereby Mr Mallinson’s ATI was varied to between $166,269 and $179,490. Mr Mallinson contended that Child Support have overstated his ATI. In his view, in respect of the 2021/22 year, he has also been over-assessed as he did not actually receive a trust distribution. He conceded that his ATI is understated in 2022/23 when based on his estimate and/or tax return.

Issue 1 – Does a ground exist to depart from the administrative assessment?

  1. The grounds for departure 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. However, the Tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are “out of the ordinary” and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).

Reasons 8A– the income, property and financial resources of each parent

  1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by Mr Mallinson because of the available income, property and financial resources available to the parents. The Act goes on to state in subsection 117(7A) that the decision maker must have regard to “the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income” and disregard “the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child”.

  2. The Tribunal notes that the respective partners of Mr Mallinson and Ms Springall have no legal duty to contribute to the costs of [the children]. However, Mr Mallinson and Ms Springall have a shared legal duty with their partners to provide for their relevant dependent children, [Miss A] and [Master B], respectively.

  3. It is a well-established principle in the Family Court that the taxable income of a person who is involved in their own business may not be an accurate reflection of their earning capacity, income, benefits and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott (1994) FLC 92-457; Carey and Carey (1994) FLC 92-489). The Tribunal reiterates that the Court has observed on numerous occasions that the Tribunal is not required to undertake a “forensic audit” or major investigation of the financial circumstances of a party (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). Rather, the Tribunal must be satisfied on the balance of probabilities as to the income, property and financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability despite a person conducting their business through an intermediary company or trust. (Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305 and Shearer & Benson (SSAT Appeal) [2011] FMCAfam 623)).

  4. Mr Mallinson gave oral evidence that prior to the commencement of his business on 1 October 2021, he was a full-time salaried employee of his parents’ business, operated through the Mallinson Family Trust. His parents’ business [did a job task] to [clients] in the area. The role of Mr Mallinson was that of [an occupation 1].

  5. From 1 October 2021, Mr Mallinson “took over” his parents’ business, operating through a different entity. It is undisputed that Mr Mallinson is the sole director, secretary and shareholder of [Company] Pty Ltd, the corporate trustee of [the business]. While the profit has historically been distributed to Mr Mallinson, he gave oral evidence that in 2023/24, 50% of the profit will be distributed to his partner and 50% distributed to him, albeit the financial reports provided to the Tribunal record a net loss.

  6. Mr Mallinson gave oral evidence that the initial intention was for the business to lease the assets and operations of his parents’ business for two years and to rent the business premises in [Town] for a two-year period also. After this period he had hoped to be able to access a loan to “buy out” his parents in full. The agreements were before the Tribunal, albeit the rental agreement was unsigned. Mr Mallinson further stated that he had been unable to secure finance and therefore has been purchasing equipment from his parents’ business in stages. They are currently renegotiating a reduced business lease agreement in light of these purchases.

  7. Mr Mallinson told the Tribunal that he paid out $110,000 in cash for [vehicle 1] in June 2023 and more recently obtained finance from [Finance] in the amount of $230,000 to purchase more equipment from his parents’ business and to purchase [vehicle 2] for his partner through the business for $67,990.

  8. In response to a question from the Tribunal, Mr Mallinson initially stated that little has changed in respect of his role in the business. He then went on to state that in addition to [doing a job task] he also pays bills, chases debtors and seeks out new clients. Since May 2023, his partner has taken on the bookkeeping/administrative role that his mother had previously been responsible for. Mr Mallinson’s partner previously worked as [an occupation 2] and is on parental leave. She plans on returning to [occupation 2] one day a week later this month. Mr Mallinson told the Tribunal that his partner prepares the business activity statements each quarter and they generally meet up with their accountant once a year for tax planning purposes. As she works from home, Mr Mallinson stated that his partner has managed to work full-time hours while caring for [Miss A]. He maintains that he and his partner work similar hours and are currently paid an equal salary of $50,000 per annum each.

  9. Mr Mallinson gave oral evidence that since May 2023 his mother continues to assist in the business on occasion and his father continues to assist with [doing a job task] on occasion, albeit the times are minimal. Mr Mallinson further stated that he had been on a full-time salary at his parents’ business regardless of quiet periods. Since taking over, the business cannot afford to continue to pay him in the same way, as it has to meet business lease costs of $63,690 per annum payable to his parents’ family trust and rental costs of $18,900 per annum payable to his parents’ self-managed superannuation fund, which owns the [Town] business premises.

  10. The Tribunal examined the 2021/22 tax return of Mr Mallinson, which recorded gross wages from his parents’ business (ABN 84 319 976 699) for three-quarters of the year ($19,530) and from the business (ABN 90 767 220 274) for the remaining quarter of the year ($51,153), totalling $70,683. This does not reflect a decrease in wages for Mr Mallinson.

  11. In respect of the first year of operations ending on 30 June 2022, the net profit of the business was $146,524. Due to the advantageous tax laws for small business in relation to immediate write-off of business assets, this resulted in only $75,377 of the profit being declared as a distribution to Mr Mallinson on his 2021/22 tax return. After a deduction of $10,000 for a deductible superannuation contribution, his taxable income was recorded as $135,916.

  12. Mr Mallinson maintains that he did not receive any distribution. The unpaid present entitlements account records that Mr Mallinson withdrew $11,055 in 2021/22 and contributed $500. The drawings were used largely to fund his $10,000 additional superannuation contribution. This was not a superannuation guarantee contribution and as such, the Tribunal considers this contribution to be discretionary in nature.

  13. When a parent has the capacity to access funds as a financial resource that are not declared on their tax return, it is appropriate to gross up these amounts to align to a PAYG employee. In this case that requires calculation of the amount that would need to be earned before tax to result in after tax income of $10,555. Using the relevant marginal tax rate of $0.325 and Medicare levy of $0.02, the amount of $10,555 grosses up to a pre-tax amount of $14,196.

  14. In Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39, the Court said about the interpretation of the term “financial resources”:

    “Financial resource” refers to “something which is not property but from which financial benefit is or may be gained”. In light of the objects of the Act, the term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.

  15. According to the finance contract, [vehicle 3] was purchased under finance in late March 2022. Mr Mallinson estimated that his private use is around 30%. As discussed at hearing, the business provides a financial benefit to Mr Mallinson in the form of private use of [vehicle 3]. The running costs include fuel, registration, insurance and service costs. In addition, monthly finance payments are required as set out below, of which 30% represents a benefit provided to Mr Mallinson.

[vehicle 3]

Registration and insurance

$

Service costs

$

 Fuel costs
$ 		Finance payments
$ 		Total costs
$ 		30% benefit of [vehicle 3]
$ 		Grossed up at marginal tax rate and Medicare levy
2021/22
(3 months) 		2,400 - 912 3,733 7,045 2,113 2,842
2022/23 4,100 500 3,650 11,198 19,448 5,834 7,847
2023/24 1,700 1,000 3,650 11,198 19,948 5,984 7,847

  1. Mr Mallinson submitted that he used most of the 2021/22 profit to purchase [vehicle 1] from his parents’ business in June 2023 for $110,000 (including GST). The Tribunal considered the treatment of the funds used to purchase [vehicle 1] and concluded that as the majority of the profits were retained in the business and used for business purposes it is therefore appropriate that his income, financial resources and benefits in respect of 2021/22 do not include the retained profit. The evidence is not before the Tribunal in respect of motor vehicle costs and benefit provided to Mr Mallinson prior to purchase of [vehicle 3]. At the very least his running costs from October 2021 to 31 March 2022 would likely have been met by the business at a similar level to [vehicle 3].

  2. Therefore, the Tribunal estimates the gross income, financial resources and benefits available to Mr Mallinson from all sources in 2021/22 is likely to have approximated $90,000.

  3. The Tribunal examined the 2022/23 tax return of Mr Mallinson, which recorded gross wages from the business of $69,230 and interest earned of $328. Mr Mallinson gave oral evidence that he invested winnings from the poker machines of $18,000. After deductions, his taxable income was $69,414. At 2.6.14 of the Child Support Guide, it states that Reason 8 includes consideration of whether or not it is appropriate to include lump sum payments that are not assessable or exempt from tax, such as gambling wins in a parent’s ATI. In this case, the winnings were initially held in a savings account. However, they have since been contributed to the business to assist with cashflow issues. As such, the Tribunal is not persuaded that it is appropriate to include them in Mr Mallinson’s ATI for 2022/23.

  4. According to the payroll report for the business, wages paid to Mr Mallinson in 2022/23 were $69,230 and in 2023/24 were $46,154. Wages paid to Mr Mallinson’s partner in 2022/23 were $16,569 and in 2023/24 were $50,000. The wages paid to his parents were in line with his oral evidence that his father only assisted when needed and the bookkeeping/admin role transitioned from his mother to his partner in May 2023. Accordingly, there were next to no wages paid to Mr Mallinson’s parents in 2023/24.

  5. Mr Mallinson gave oral evidence that his partner was paid on a casual basis until she commenced salaried employment in July 2023. Given that Mr Mallinson’s partner only commenced work in May 2023, it is difficult to accept that an appropriate remuneration for less than two months’ work in administration could equate to more than $16,000. That is the equivalent of more than $99,000 per annum. Based on her current salary, wages for two months in May and June 2023 are more closely aligned to $8,500, the discrepancy being some $8,000.

  6. Mr Mallinson was unable to comment in relation to his superannuation contributions in 2022/23. Based on his gross wages of $69,230, the required superannuation guarantee employer contribution of 10.5% equates to $7,269. According to his superannuation statement, contributions in 2022/23 were $8,234, an excess contribution of $965.

  7. As set out above, the Tribunal estimates the grossed up benefit provided to Mr Mallinson in 2022/23 through private use of [vehicle 3] to be $7,847. Mr Mallinson has had access to [vehicle 4], also owned by the business (previously owned by his parents’ business) that until recently was driven by his partner and is now left at the [Town] premises, hooked up permanently to a trailer for business use only. His partner now drives [vehicle 2], purchased under finance on 14 June 2024. Mr Mallinson acknowledged that as his partner works from home, the business use of a vehicle driven by his partner would be minimal at around 1%. He estimated annual running costs of [vehicle 2] of registration, insurance, service costs and fuel to approximate $5,500.

  1. Accordingly, based on the estimated running expenses of her current vehicle, the Tribunal finds that the benefit Mr Mallinson has provided to his partner through use of [vehicle 4] at 99% private use equates to around $5,445 (grossed up to $7,323) for 2022/23 and 2023/24.

  2. Mr Mallinson maintains that a benefit for his partner who is a part of the business is not relevant to him. However, Mr Mallinson is the sole person responsible for the business, regardless of who the beneficiaries are. The purchase of [vehicle 2] was not for the purposes of the business and instead requires the business to expend funds that may otherwise be available to Mr Mallinson as income in the form of wages or a distributable profit.

  3. In 2022/23 the distributable accounting profit was $80,534. After adding back the depreciation of $16,009, the net profit is around $96,500. The Tribunal accepts that some of the profit has been retained in the business to meet expenses and that it is appropriate to consider the actual drawings made by Mr Mallinson as a financial resource. The retained profits are also necessary to assist in meeting the principal component of the finance repayments not reflected in the profit and loss statement. The unpaid present entitlements account records that Mr Mallinson withdrew $28,728 in 2022/23, including his private tax liabilities, and made no additional capital contributions. This amount grosses up to a pre-tax amount of around $38,639.

  4. Therefore, the Tribunal estimates the gross income, financial resources and benefits available to Mr Mallinson from all sources in 2022/23 to approximate $132,188.

  5. According to Mr Mallinson’s last payslip for 2023/24 from the business, his gross wages were $46,154. As this is yet to be finalised and Mr Mallinson’s evidence is that he receives an annual salary of $50,000, the Tribunal finds that his wages income for 2023/24 is $50,000. Based on the payroll report and the oral evidence of Mr Mallinson, the Tribunal is satisfied that no additional superannuation contributions have been made in 2023/24.

  6. In respect of his partner’s recorded wages in 2023/24 of $50,000, the Tribunal acknowledges the benefit in wage splitting and accepts that she performs the bookkeeping/admin role for the business. However, it is difficult to accept that she has worked full-time hours throughout the period while having a baby in September 2023 and caring for her at home. Furthermore, she is returning to [occupation 2] one day per week and therefore will no longer have the capacity to work the same number of hours in the business as Mr Mallinson.

  7. The financial statements in respect of 2023/24 have not been prepared by the accountant, nor have the business activity statements. The MYOB-generated reports are prepared by the bookkeeper, Mr Mallinson’s partner. In the absence of more reliable evidence, the Tribunal discussed these documents with Mr Mallinson.

  8. The profit and loss statement recorded a net loss of $86,552. There were significant increases in costs relating to advertising, fuel and professional fees. The Tribunal notes that no depreciation has been recorded. In any event, based on the evidence of Mr Mallinson, all asset purchases have been made under finance, which means that it is not appropriate to include depreciation for child support purposes. As discussed above, earlier profits have been retained in the business and have assisted in meeting ongoing expenses.

  9. The unpaid present entitlements account includes the distribution of profit, drawings and capital contributed by Mr Mallinson. The general ledger account in relation to the unpaid present entitlements of Mr Mallinson for 2023/24 was generated through MYOB and provided to the Tribunal. The account recorded a capital contribution of $28,000 and private expenses and tax paid for Mr Mallinson by the business of almost $35,000. Mr Mallinson gave oral evidence that while the $28,000 was repaid to him in January 2024, he recontributed a further $16,000 in March 2024, which was repaid in May 2024. None of these entries are evident in the general ledger account. Mr Mallinson further stated that last week he and his partner contributed $21,000 and $29,000 from their respective savings accounts to the business because of cashflow issues due to the quiet period of July and August. Based on the historical pattern, one would expect this to be repaid as the business operations increase as the weather improves.

  10. After the hearing Mr Mallinson submitted that the expenses in the general ledger account were not of a private nature, relating to water and toilet paper for the work yard from IGA, entertainment of clients and accommodation in Melbourne while he attended a [Work-related] course. While the Tribunal accepts Mr Mallinson’s submission, the business has also paid his personal tax liabilities, Red Energy electricity bills, holiday costs and other of more than $8,700. The Tribunal is satisfied that personal expenses of at least $32,000 were paid from the business for Mr Mallinson, which included $23,416 of personal tax payments (noting that the June 23 payment made in July is included in the drawings account). This amount grosses up to a pre-tax amount of $43,040.

  11. As discussed above, the benefit for 30% private use of [vehicle 3] to Mr Mallinson in 2023/24 is grossed up to around $7,847. In respect of the 99% private use of [vehicle 4] the Tribunal estimated the benefit provided to Mr Mallinson’s partner in 2023/24 to be grossed up to $7,323.

  12. Overall, noting that the 2023/24 financial information has not been prepared by the accountant and some transactions are missing, the Tribunal is satisfied that the gross income, financial resources and benefits available to Mr Mallinson from all sources in 2023/24 is likely to approximate $108,000.

  13. Going forward, Mr Mallinson told the Tribunal that he does not expect the business operations to change significantly. It is evident that sales are increasing and the cost of purchases is also increasing. While the recent asset purchases have resulted in a decrease in lease payments for the business, the rental continues and the business must also now meet the [Finance] repayments. It is also noteworthy that the benefits from 99% private use of [vehicle 2] for a full year are significant. Mr Mallinson estimated annual running costs of [vehicle 2] to approximate $5,500. In addition, finance payments to [Finance] are $20,779 ($1,731.59 per month). This equates to annual costs for [vehicle 2] of $26,279, of which 99% private use equates to $26,016 (grossed up to $34,991).

  14. Mr Mallinson’s evidence was that the wages are shared between him and his partner at $50,000 each. As Mr Mallinson’s partner is reducing her working hours in the business to four days, it is reasonable that her salary will be reduced, freeing up additional funds in the business which will assist in meeting the higher finance repayments. In addition, the benefits in relation to the 30% private use of [vehicle 3] is estimated at $7,847.

  15. Mr Mallinson told the Tribunal that he is no longer required to pay quarterly instalments towards his personal tax liability. Based on prior years, it is likely that Mr Mallinson will continue to have drawings as a result of some private expenses being paid by the business; however, it is difficult to quantify what that amount will likely be.

  16. Therefore, the Tribunal considers a reasonable estimate of the income, benefits and financial resources available to Mr Mallinson in 2024/25 and going forward to approximate that of 2023/24, being $108,000. The Tribunal also notes the oral evidence of Mr Mallinson that the arrangement with his parents was a verbal and family arrangement and the written agreements provided were a result of the child support process. As such, the Tribunal is not persuaded that his additional costs for the business in respect of leasing are non-negotiable.

  17. The Tribunal then considered the assets and liabilities of Mr Mallinson. According to his Statement of Financial Circumstances, completed by Mr Mallinson on 26 February 2024, and his oral evidence at hearing, his current combined bank balance, after his recent contribution to the business is around $4,500. He also has a personal vehicle valued at $1,500 and household contents of $8,000. Mr Mallinson confirmed that he has no personal liabilities. Therefore, the Tribunal calculates the current net asset base of Mr Mallinson to approximate $14,000.

  18. The Tribunal considered the evidence in relation to Mr Mallinson’s expenses. He told the Tribunal that he and his partner share their rented residence with [Miss A], and with [the children] for part of the time. Mr Mallinson estimated the average weekly costs of the household to be $2,683, of which $1,157 relates to him. After attributing his share of entertainment and holidays, his estimated costs approximate $65,000 per annum. He gave oral evidence that he contributes a bit more than his partner because of the care of [the children], which is currently registered as 35%. The Tribunal is satisfied that the income and financial resources available to Mr Mallinson are sufficient for him to meet his costs of self-support.

  19. It is apparent that Mr Mallinson and his partner manage to meet the weekly household costs, both necessary and discretionary, and there is no evidence to indicate that they have accumulated any personal debt to do so.

  20. In response to a question from the Tribunal, Mr Mallinson stated that all of the family were in good physical health. However, he suffers from ADHD, depression and anxiety. He maintains that the costs for his prescription medication is $393 per week, or $20,436 per annum. The Tribunal queried whether he availed himself of the PBS safety net to which he responded that it does not apply to him as his medicines are not on the PBS. Ms Springall gave oral evidence that she is also suffering from ADHD, depression and anxiety and her prescription medication amounts to $30 per month. Mr Mallinson chose not to elaborate on his medications or provide further information about them.

  21. In respect of Ms Springall, The Tribunal considered her income, financial resources and benefits. As a PAYG employee, her circumstances are more straightforward than those of Mr Mallinson. She is employed as [an occupation 1] on a permanent part-time basis for .8 of the working week. Ms Springall gave oral evidence that due to the problems associated with [Master B]’s autism diagnosis and his expulsion from kindergarten, she is reducing to .6 next month, her partner also reducing his working hours, to enable them to meet the special needs of [Master B]. Ms Springall is currently using her annual leave and trying desperately to find a suitable kindergarten placement for [Master B].

  22. According to her individual tax returns, Ms Springall’s income has consisted solely of her wages and reportable fringe benefits. Relevant work-related expenses are recorded as deductions. The taxable income and reportable fringe benefits in respect of 2021/22 total $50,443. Ms Springall explained that this was an amended tax return because she initially lodged it prior to the reportable fringe benefits being updated. The taxable income in respect of 2022/23 is recorded in her tax return as $48,242. Her 2023 income statement provided after the hearing confirms that no reportable fringe benefits were applicable in 2022/23.

  23. According to the oral evidence of Ms Springall her 2023/24 income statement records a gross income of more than $62,301 and reportable fringe benefits of $17,728. The Tribunal is satisfied that her ATI in 2023/24 will likely exceed $65,000. Ms Springall’s income may decrease in 2024/25 due to her reduction in hours worked to care for the special needs of [Master B]. However, given her extra shift days it may or may not make a significant difference.

  24. Ms Springall is also in receipt of family tax benefit (FTB) Part A. According to Centrelink records her fortnightly payment at the end of June 2024 was $51. Ms Springall gave oral evidence that the FTB payment has increased in July 2024 to $146 per fortnight . This is in respect of all three children. Pursuant to subparagraph 117(7)(b)(ii) of the Act, for child support purposes FTB is not considered to be a part of Ms Springall’s ATI. FTB is an income-tested benefit. FTB is not defined as a tax-free benefit under section 5 of the Act to be included in ATI (paragraph 43(1)(e) of the Act). Therefore, as FTB is not required to be included in the ATI, it is to be disregarded, as clarified at 2.6.17 of the Guide.

  25. Ms Springall confirmed to the Tribunal that she has no other sources of income. Overall, the Tribunal is satisfied that the tax returns of Ms Springall provide an accurate reflection of her available income from all sources. Mr Mallinson did not dispute this observation.

  26. The Tribunal then considered the assets and liabilities of Ms Springall. According to her Statement of Financial Circumstances, completed on 16 February 2024, Ms Springall owns her residence jointly with her partner. The residence is valued at $420,000 and the corresponding mortgage has a current balance of $356,657 and a nil redraw. Ms Springall gave oral evidence that the mortgage is also in joint names. Her other assets consist of minimal cash funds, a motor vehicle valued at $13,000 and her share of household contents of $7,500.

  27. Ms Springall gave oral evidence that she and her partner struggle to meet the weekly household expenses. Her partner works full-time as [an occupation 3]. The arrangement is that his wage meets the mortgage payments and some of the food while her wage meets the bulk of the food costs and household expenses. They run a very tight budget which does not always allow for the costs of the household to be met. Consequently, Ms Springall has relied on Afterpay and Zip Money if unexpected expenses for medical occur or for periods such as Christmas and birthdays. She has used Afterpay to purchase gift cards to meet the costs of groceries. Based on the evidence provided, the outstanding balances on Afterpay and Zip Money currently total $3,543. Ms Springall gave oral evidence that she is trying to pay off her credit card and tries not to use it otherwise. The current balance is $3,256. She further stated that her Centrelink debt in respect of FTB and child care subsidy has been paid off in full after interception of her tax refund. Therefore, the Tribunal calculates the net asset base of Ms Springall to approximate $45,000.

  28. The Tribunal considered the evidence in relation to Ms Springall’s expenses. She told the Tribunal that while the care registered at Child Support for her is 65%, she has had 100% care of [Child 1] more recently. As discussed at hearing, it is the obligation of the parents to advise Child Support of any change in care.

  29. Ms Springall estimated the average weekly costs of the household to be $2,134, or $110,968 per annum, the costs shared between her and her partner for each of them, [the children and Master B]. None of the recorded costs for Ms Springall appear to be out of the ordinary. As discussed above, while she suffers from ADHD, depression and anxiety, she does not incur significant associated costs.

  30. The Tribunal accepts the oral evidence of Ms Springall that no additional contributions have been made to her superannuation fund during the relevant period from 2021/22 to date.

  31. According to the administrative assessment from 1 January 2022 to 1 June 2023, the ATIs of Mr Mallinson and Ms Springall were based on their most recently lodged tax returns. From 2 June 2023 to 30 June 2024, the administrative assessment was based on estimates in respect of Mr Mallinson. In the absence of a departure determination, upon lodgement of Mr Mallinson’s 2023/24 tax return, a reconciliation would occur automatically in respect of the administrative assessment. The corresponding child support liabilities are set out in the table below. When the child support liability is calculated in accordance with the Tribunal’s findings in respect of Mr Mallinson’s ATIs, the Tribunal’s calculations estimate that in the earlier periods he was both over-assessed and under-assessed. However, since 2 June 2023 Mr Mallinson appears to have been consistently under-assessed.

Period Admin Assessment
ATI Mr M
$ 		Admin assessment
ATI Ms S
$ 		Admin assessment
CS Liability
$ 		Tribunal
ATI Mr M
$ 		Tribunal
ATI Ms S
$ 		Tribunal
CS liability
$
01/01/2022 – 31/07/2022 69,085 53,974 6,214 90,000 53,974 9744
01/08/2022 – 01/06/2023 145,916 50,443 18,390 132,188 50,443 16,456
02/06/2023 – 30/06/2023 38,715 50,443 934 132,188 50,443 16,456
01/07/2023 – 31/07/2023 40,207 50,443 1,202 108,000 50,443 12,752
01/08/2023 – 16/09/2023 40,207 48,242 1,254 108,000 48,242 12,872
27/09/2023 – 30/06/2024 40,207 48,242 864 108,000 48,242 10,858

  1. In respect of the period from 1 January 2022 to 1 June 2023, based on the findings above, the Tribunal is not satisfied that special circumstances exist in this case. The Tribunal calculates the discrepancy to be around $5 per week. In the circumstances, the Tribunal does not consider the overall child support liability to 1 June 2023 to be unfair.

  2. In respect of the period commencing 2 June 2023, as can be seen in the table above, the discrepancy is more significant and the Tribunal is satisfied that despite any estimate reconciliation, the ATIs used in the administrative assessment for Mr Mallinson and the application of the administrative assessment would result in an unjust and inequitable level of child support to be provided by him to Ms Springall for the children.

  3. Therefore, the Tribunal finds that special circumstances do exist in this case from 2 June 2023 and is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it fair or “just and equitable” in relation to Mr Mallinson, Ms Springall and the children to make a particular departure determination?

  1. As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is fair as regards the parents and the children 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 have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The Tribunal does not propose to explore every matter in detail but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

  1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Mallinson and Ms Springall have the primary duty to financially support [the children]. Furthermore, Mr Mallinson and Ms Springall have a shared legal duty with their partners to provide for [Miss A and Master B], respectively.

  2. In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). It is common ground that [the children] are generally in good health and have no special needs.

  3. Both children attend a private catholic school, the fees of which are shared equally between the parents. [The children] are in Years 6 and 4, respectively. Mr Mallinson told the Tribunal that he pays for their extra-curricular activities such as netball, football and athletics.

  1. There is no evidence to suggest that the Costs of the Children Table was not a reasonable approximation of the necessary costs of [the children]. Based on the ATIs of the parents for 2023/24, as estimated by the Tribunal, the costs of the children in 2024 are in the vicinity of $22,500 per annum and the Tribunal so finds.

  2. While the Tribunal accepts the oral evidence of Ms Springall in relation to [Master B]’s autism diagnosis, there is no evidence of significant costs being incurred to date. As such, the Tribunal is satisfied that the relevant dependant allowance reflected in the administrative assessment for [Master B and Miss A] is appropriate and so finds.

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

  1. As found earlier in these Reasons for Decision, the income recorded on the tax returns of Mr Mallinson does not accurately reflect the actual income, financial resources and benefits available to him. Rather they are as set out in the table at paragraph 67 above. In contrast, as she is not self-employed, the Tribunal found that the income recorded on the tax returns of Ms Springall do accurately reflect the actual income, financial resources and benefits available to her. As discussed at hearing, given that Ms Springall has the majority care of the children, any changes in her ATI have to be significant before impacting the calculation of child support such that the result is unfair. Furthermore, neither parent has access to a reasonable asset base to assist in meeting their obligations to support the children.

  2. Going forward, the business operations of Mr Mallinson are expected to remain stable and similar to the current position. The Tribunal is satisfied that it is appropriate for Mr Mallinson to continue to have his ATI varied to $108,000. While the circumstances of Ms Springall are likely to change going forward, any changes will be appropriately reflected in her tax returns.

  3. In relation to earning capacity, the Tribunal is satisfied that Mr Mallinson has not reduced his hours to part-time. The Tribunal accepts that there are quieter periods, in particular over winter, and that regular wages cannot always be prioritised over necessary business expenses during such times, However, busier periods help to smooth out the quieter periods. In any event, his role now encompasses additional duties to [occupation 1], as noted above, such as seeking new clients and debt collection. Accordingly, it is not open to the Tribunal to consider making an earning capacity determination under subsection 117(7B) of the Act.

Conclusion

  1. There is no question that Ms Springall requires the assistance of Mr Mallinson to meet the needs of [the children]. As already discussed, Ms Springall often struggles to meet the weekly expenses of her and the children, incurring additional debt to meet the shortfall.

  2. After consideration of the income, resources and benefits available to Mr Mallinson and Ms Springall to meet their respective commitments and the necessary needs of the children, the Tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The Tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the ATI of a parent, or the costs of self-support.

  3. The Tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). In this case, as the Tribunal is satisfied that the administrative assessment to 1 June 2023 produces a fair outcome, the Tribunal considers that an appropriate commencement date for this departure decision is 2 June 2023. It is noteworthy that Ms Springall lodged her application on 8 June 2023, meaning that both parties had been put on notice of the possibility of a change to the child support assessment going forward. In the Tribunal’s view, the administrative assessment from 2 June 2023 results in Mr Mallinson’s child support liability being under-assessed.

  4. Ms Springall gave oral evidence that [Child 1] has been in her sole care for some time now. Given that the registered care may not be accurate and there is a possibility of a change going forward, the Tribunal proposes to depart from the administrative assessment by varying the ATI of Mr Mallinson so as any future changes in care can be allowed for in the administrative formula.

  5. In respect of an end date the Tribunal recognises the stressful nature of a departure application and the desire of the parties not to endure such processes on an annual basis unless it is necessary to do so. Unfortunately, given that Mr Mallinson is self-employed and his ATI does not necessarily reflect his true income, financial resources and benefits, it is likely that future departure applications are both appropriate and necessary for the remainder of the child support assessment. The Tribunal is satisfied that it is reasonable to rely on the current business circumstances of Mr Mallinson for the next few years, noting that the additional costs to finance the purchase of assets will likely negate the reduced costs for leasing the business in the short term. Therefore, the Tribunal proposes to end the departure decision on 31 October 2026. At this time Mr Mallinson will have had the time to prepare the business financial information for the 2025/26 year.

  6. The intention of the legislation is to ensure that children receive a proper level of child support from their parents. This is achieved by ensuring that the parents contribute to the costs of the children in accordance with their capacity. With this in mind, the Tribunal proposes to depart from the administrative assessment as follows:

    ·      The ATI of Mr Mallinson is to be varied to $108,000 for the period 2 June 2023 to 31 October 2026.

  7. The proposed decision results in an annual rate of child support payable by Mr Mallinson in the vicinity of between $16,500 and $11,000 over the relevant departure period. According to Child Support records, Mr Mallinson’s child support arrears at 24 June 2024 were $20,067. The proposed decision will result in a decrease in arrears at 24 June 2024 of more than $8,000. The outstanding balance will approximate $11,700.

  8. Subsection 117(4) of the Act requires the Tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support. Based on the proposed decision and the care currently registered with Child Support of 35% to Mr Mallinson and 65% to Ms Springall for both children, following lodgement of Ms Springall’s 2023/24 tax return, the annual rate of child support payable by Mr Mallinson to Ms Springall in respect of [the children] will approximate $9,800 or $816 per month, increasing to around $10,800 per annum following [Child 1] attaining the age of 13 years in September 2025.

  9. Mr Mallinson told the Tribunal that if his child support liability were to increase beyond $600 per month, or $7,200 per annum, it would be challenging as he is struggling to meet the current payments. In response to a question from the Tribunal he said that the impact of an increased child support liability would mean that the children would miss out on extra-curricular activities, the family would miss out on entertainment and holidays, and he may struggle to meet the costs of his medication. According to his Statement of Financial Circumstances, Mr Mallinson estimated that the family meets discretionary expenses such as entertainment and holiday expenses totalling $160 per week, or almost $700 per month. If one were to attribute 60% to Mr Mallinson, this equates to $420 per month. This is in addition to meeting his existing payment arrangement for child support of $600 per month.

  10. Ms Springall told the Tribunal that in her view an increased child support liability would not cause hardship to Mr Mallinson or the children because given his holidaying and gambling she believes he has the capacity to pay it and he needs to prioritise the needs of [the children].

  11. In the Tribunal’s view, the proposed decision going forward will not cause hardship to either party or the children. It is open to both parties to prioritise their “necessary” costs and those of the children. Given his discretionary spending, the Tribunal is satisfied that Mr Mallinson can manage an additional $200 per month in child support and also negotiate a manageable payment arrangement with Child Support in respect of the reduced arrears.

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

  1. 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.

  2. Ms Springall is in receipt of FTB Part A at close to the base rate. Any change in the child support payable by Mr Mallinson will likely have little impact on her entitlement to FTB Part A in the relevant period. Therefore, the Tribunal considers that it is otherwise proper to make the particular proposed determination.

  3. It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

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

·      The ATI of Mr Mallinson is to be varied to $108,000 for the period 2 June 2023 to 31 October 2026.

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Podmore & Pillai [2011] FMCAfam 952
Frost & Frost & Anor (SSAT Appeal) [2011] FMCAfam 1311
Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305