Maltby and Gotts (Child support)

[2022] AATA 4001

Maltby and Gotts (Child support) [2022] AATA 4001 (3 October 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC023432

APPLICANT:  Mr Maltby

OTHER PARTIES:  Child Support Registrar

Ms Gotts

TRIBUNAL:Senior Member K Dordevic, Presiding

Member A Beckett

Member D Tucker

DECISION DATE:  3 October 2022

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that for the period:

• 19 February 2021 to 31 December 2025 Mr Maltby’s adjusted taxable income is varied to $150,000 per annum;

• 1 January to 31 December 2021 Mr Maltby’s annual liability is increased by $8,700; and

• 1 January 2022 to 31 December 2025 Mr Maltby’s annual liability is increased by $5,400.

CATCHWORDS

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

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

REASONS FOR DECISION

1. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.

2. Mr Maltby (the father) and Ms Gotts (the mother) are the parents of five children. This case was registered with Services Australia – Child Support (the Agency) on 28 February 2011 and was collectable from 10 May 2019. The eldest child ceased to be an eligible child of the assessment in 2019 and the second eldest child [in] February 2022.  At all relevant times the children are recorded as being in the mother’s sole care.

3. The father lodged a departure application on 19 February 2021. The mother lodged a cross-application on 21 April 2021.

4. On 8 September 2021 a senior case officer varied the father’s adjusted taxable income to $150,000 per annum for the period 21 April 2021 to 30 September 2025.

5. On 24 September 2021 the father lodged an objection to that decision. On 8 February 2022 an objections officer partly allowed the objection, varying the father’s adjusted taxable income to $105,000 per annum for the period 21 April 2021 to 31 May 2024. 

6. On 8 March 2022 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was held on 1 July 2022. Directions were issued on the same day requiring compliance by 8 August 2022.

7. On 6 July 2022 the tribunal issued notices, pursuant to section 95H of the Child Support (Registration and Collection) Act 1988, requesting that:

   ·[Ms A], [Employer 1], provide the tribunal with a statement by 28 July 2022, with all corresponding documentation, regarding the terms of the father’s employment, including his total remuneration package, sign-up or relocation inducements, allowances and employee share schemes. 

   ·[Ms B], Director, [Employer 2] provide, by 28 July 2022, the following information:

   o    The 2020 and 2021 and partial 2022 financial year statements (including income tax returns, balance sheets and profit and loss statements) for [Employer 2];

   o    A statement (with supporting documentation) regarding all payments, loans, disbursements and distributions made during the period 1 July 2021 to 31 May 2022 to Mr Maltby either from her personally or from any company of which she was a director, shareholder or office bearer; and

   o    A summary statement outlining her work experience, employment history (including current work arrangements) and relevant qualifications.

8. On 6 July 2022 the father provided the tribunal with an application for a “Request for a Stay Order” dated the same day. The tribunal notified the father by email on 7 July 2022 that the tribunal does not issue stay orders (and referred him to subsection 41(2) of the Administrative Appeals Tribunal Act 1975) and advised that he should seek legal advice regarding his purported stay application.

9. On 7 July 2022 the tribunal issued notices requesting that the Child Support Registrar exercise the Registrar’s powers under section 161 of the Child Support (Assessment) Act 1989 or section 120 of the Child Support (Registration and Collection) Act 1988 to obtain the information and/or documents listed below: 

   ·     Request that ASIC conduct:

   (a)  A search of all entities of which Mr Maltby is an office holder and provide current and historical information including shareholders and company office holders;

   (b)  A company search of [Business 1] and provide current and historical information including shareholders and company office holders;

   (c)   A search of all entities of which Ms Gotts is an office holder and provide current and historical information including shareholders and company office holders; and

   (d)  A company search of [Business 2] and provide current and historical information including shareholders and company office holders.

   ·     Request that the ATO provide the 2019, 2020 and 2021 financial year income tax returns for [Business 1] and any other company of which Mr Maltby is an office holder and the 2019, 2020 and 2021 financial year income tax returns for [Business 2] and any other company of which Ms Gotts is an office holder.

10. On 25 July 2022 [Ms A], [Employer 1] provided the information as requested (marked folio D2).

11. On 27 July 2022 [Ms B] requested an extension of time in which to comply with the above notice. Her request was granted; [Ms B] was required to provide the additional information on the date she nominated, being 12 August 2022. She provided this information on 12 August 2022 (marked folios D3 to D67).

12. The father lodged a request to vary the directions issued by the tribunal on 3 August 2022.

13. The tribunal advised the father by email on 3 August 2022 that his request to amend the directions was refused. The father made further requests on 6 and 7 July 2022 being:

    a)    that the direction requesting all bank statements for the period 1 July 2021 to 30 June 2022 be replaced with a request to provide his 2022 income tax return;

    b)    that the relevant assessment period be confined to 18 September 2021 (and not before) and namely removal of all references to the 2019 financial year; and

    c)    reasons why his request to vary the directions was refused, including an explanation as to why the presiding member determined that the directions were fair.

14. On 10 August 2022 the tribunal determined that the father had only partially complied with the directions as he had not complied with directions 1.5.2, 1.5.3, 1.5.4 and 1.5.6. The tribunal issued a partial non-compliance/show cause letter, which included the text:

    The tribunal acknowledges receipt of your emails requesting a variation to the directions and in response to the tribunal refusing that request. The tribunal will not entertain any further requests to amend the directions. Directions do not constitute a decision, so the tribunal is not required to provide reasons under the relevant legislation. The tribunal wants to take the opportunity to stress that the directions remain in place and the tribunal may draw an adverse inference against an applicant for failure to comply with directions.

15. The hearing took place on 31 August 2022 at 10AM AEST. The father and mother appeared by MS Teams audio. The tribunal also considered the documentation provided by Child Support (folios 1 to 731), the father (folios A1 to A128) and the mother (folios B1 to B256), from ASIC and the ATO (C1 to C34) and [Employer 1] and Ms [Ms B] (D1 to D67). At 12:15PM on the day of the hearing the father advised that, due to his work commitments, he could no longer participate in the hearing. Ms Gotts continued to provide her oral testimony in the father’s absence. The matter was deferred to allow sufficient time for the father to provide submissions and evidence regarding the children’s education costs.

16. Post hearing directions were issued on 1 September 2022, which stated that the father must provide by close of business on 14 September 2022:

    ·    A statement regarding whether he and Ms Gotts are jointly and severally liable for [Child 1’s] secondary Catholic school costs and [Child 2] and [Child 3’s] primary Catholic school costs;

    ·    A statement regarding what (if any) payments he has made towards the children’s primary and secondary Catholic school costs during the period 1 January 2020 to 31 August 2022, with corroborating documentation attached; and

    ·    A submission regarding whether [Child 4] and [Child 2] are currently being educated in the manner that was expected by him, with particular reference to there being no dispute that [Child 5] and [Child 1] were being educated at a systemic Catholic secondary school in the manner expected by the parents, and an explanation as to the reason/s and timing of his changed expectations regarding [Child 4] and [Child 2’s] secondary schooling.

17. The mother provided submissions and supporting documentation to the tribunal on 13 September 2022 (marked folios B257 to B273).

18. The father provided a response to the post hearing direction, including submissions and supporting documentation, on 14 September 2022 (marked folios A129 to A177).

19. These documents were exchanged between the parents, who were advised that they were at liberty to provide submissions relating to those documents by close of business on 26 September 2022.

20. The father and mother both provided their responses on 27 September 2022.

21. After considering the additional evidence provided by the parents the tribunal reached its decision on 3 October 2022.

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and

   (ii)that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And if so,

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act provide grounds for departure if the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either party’s income, property, financial resources or earning capacity. The central issue in this matter is whether the administrative assessment accurately reflects the father’s income, financial resources and earning capacity.

2. From 1 July 2020 the father was assessed to pay $32,672 in child support based on the parents’ 2019 adjusted taxable incomes of $183,139 (the father) and $105,107 (the mother). This changed on 11 August 2020 after the father lodged an estimate for the 2021 financial year of $37,125, whereby his liability reduced to $3,472 per annum. This reduced again to $3,316 from 1 October 2020 to 3 August 2021. From 4 August to 31 December 2021 the father’s liability decreased to $443, based on his 2022 estimate of $26,759 and the mother’s 2020 adjusted taxable income.

3. The father lodged his departure application on 19 February 2021. At hearing he explained that he did so as the administrative assessment was unfair as his taxable incomes reflect his financial capacity to support the children. He went on to explain that his company [Business 1] “went broke” and an external administrator was appointed in June 2020. He had a brief period of no income and then commenced part-time employment for a company, [Employer 2]. He was “bullied” by the Agency to state the company was his and into providing the financial statements for [Employer 2]; he could not provide such documents as it was not his company. His circumstances changed again on 4 July 2022, when he secured full-time employment.

4. The tribunal makes the following findings. [Business 1] was deregistered [in] March 2021. The father was a director and shareholder of [Business 1] from 19 October 2017 to 28 April 2020; from the date of his resignation from the directorship until deregistration his wife, [Ms B] (the wife) was the sole director of [Business 1]. The company was placed into voluntary liquidation on 10 June 2020 (at folios A34 to A35) and was deregistered [in] March 2021 (at folios C7 to C10).

5. On 27 May 2021 the Agency records indicate that the father advised that he had placed [Business 1] into voluntary liquidation due to a downturn in business (at folio 376). At hearing the father reported that due to mismanagement and timesheet fraud that he became aware that he could not pay his creditors. He tried to turn the company around but could not, due to COVID-19 lockdowns where building inspections could not take place. [Business 1] simply “ran out of money”. He lost his job as did everyone else employed at [Business 1]; it was “very disappointing” that the business had to fold. He could not recall the events that led to his wife replacing his as director of [Business 1]. The tribunal notes that in his written response to the directions the father declared that he was unable to provide the 2020 financial statements for [Business 1] as a liquidator was appointed (at folio A18).

6. The wife is the sole director and shareholder of [Employer 2], which was established as [Employer 2] on 7 May 2020. The father stressed that [Employer 2] is a [firm] which is concerned with [type 1] reports where there are no legislative, regulatory or policy requirements that mandate the qualifications of those permitted to undertake [type 1] reports; that is, anyone can undertake the work. Therefore, his wife is the director of [Employer 2] and he is a mere employee. The discussion between himself and his wife was that she would run that business as he did not “want to do it again and she wanted to do it”. In recognition of his part-time work he received a wage of $37,000 per annum. The Australian Taxation Office (ATO) advised the Agency that the father is listed as an employee of [Employer 2] from June 2020.

7. The father and wife’s [online] profiles (at folios 331 to 335) describe the father as the [professional position 1] at [Employer 2] and the wife as the personal assistant to [his position]. The wife provided a resume (at folios D65 to D67) where she described herself as a personal assistant at [Employer 2], responsible for reception, accounts, payroll, and preparation of [type 1] reports amongst other duties. The father testified that the [online] profiles in evidence were “in error”, though may have portrayed his and his wife’s involvement in the business for “marketing purposes”. In any event, all enquiries should be directed to his wife as he did not want to speak on her behalf.

8. The father was adamant that [Employer 2’s] income was “absolutely not” generated largely from his knowledge, expertise and qualifications. He reiterated that the guidelines for [their specialty service] do not require any qualifications. His wife would prepare reports, [specified duties] and analysis, write reports as well as data input and filing. The tribunal put to the father the question why he was employed by the company, given that his wife was able to undertake its core business. He responded by stating “she wanted others to assist her”, she did not have any [specified] skills and also required support in undertaking site inspections.

9. The father was unable to provide a satisfactory explanation for the disconnect between his testimony, his wife’s written submissions and the documentary evidence before the tribunal in respect of the positions held by himself and his wife at [Employer 2]. The tribunal formed the view that it would be imprudent to accept the father’s testimony without corroborating documentary evidence to substantiate his assertions. The father’s failure to make a full and frank disclosure is unsatisfactory and leaves him open to adverse inferences being drawn: Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409. The tribunal formed the view that it would be imprudent to accept the father’s testimony without documentary evidence to substantiate his assertions.

10. Having considered all of the evidence the tribunal finds that the commercial arrangement in place between the father and his wife is a sham: Waites & Lawson [2010] FMCAfam 42. The tribunal is satisfied that it is the father’s professional skills, experience and qualifications that generates a large part of [Employer 2’s] income. The wife’s resume contradicts the father’s testimony at hearing but is consistent with the [online] profiles in evidence. The father holds [professional] qualifications. The wife does not. It was only in July 2019 that the wife first worked in the [relevant] industry, in the father’s company in an administrative role. The father has not provided a plausible or consistent explanation as to why [Employer 2] was established in his wife’s name. The tribunal concludes that the wife’s involvement in the business is secondary to that of the father and that the legal arrangements operate predominantly as a vehicle to reduce the father’s income tax and child support liability. Thus, the tribunal finds that all the income generated by the business is through the father’s efforts.

11. The Family Court has established the principle that in the case of self-employed parents, their taxable income may not be an accurate reflection of their earning capacity and financial resources. Several cases in particular have examined this issue closely, including Scott and Scott (1994) FLC 92-457 and Carey and Carey (1994) FLC 92-489. The Courts consider that self-employed people are able to derive additional benefits from their business in addition to wages. They also have greater control over the structure of their finances than an employee receiving salary or wages, and so may be able to use the income of the business in ways other than paying wages. Expenses and deductions which may be legitimate for tax purposes may not be considered to take precedence over child support obligations. Under child support law, other than the basic expenses necessary for self-support there are very few expenses which take precedence over the support of children. There is considerable divergence between the taxation system, which is intended to provide general support for many, and the child support system, which is intended to provide specific support for the children of relationships.

12. The wife provided the 2020 to 2022 financial statements for [Employer 2]. These demonstrate that in the 2020 and 2021 financial years net profits were $23,101, $19,041 with a loss of $11,153 reported in the 2022 financial year. The tribunal is satisfied that the majority of the net profits were a financial resource available to the father.

13. The wife, in compliance with the tribunal’s notice, provided a summary of all transfers made from [Employer 2] accounts to her and the father’s joint account with descriptors including “Fuel Re-imbursement”, “expenses claim” and weekly transfers of “Commercial Rent” of $300, noting that the father testified that the office operated from one of the four bedrooms in his (and his wife’s) rental property for which they were paying $550 per week. The father testified that this arrangement changed when two undergraduates were employed in mid-2020 so another office was secured. The tribunal commented that the 2021 financial statements indicate that the second office was secured for less than $6,000 per annum. The father stated that he could not provide any clarification, as this was something his wife managed.

1. The profit and loss statements in evidence included motor vehicle expenses, subscriptions, light meals, legal expenses, depreciation and telephone expenses which may represent financial resources available to the father that are not represented in his taxable income. The father was asked about these expenses, but he could not provide any explanation nor could he comment on whether [Business 1] incurred similar expenses. In particular, the father could not recall any legal action that would relate to the declared legal expense of $16,915, some two years after the company was formed. The [Employer 2] bank statements suggest that the father’s child support payments were paid directly from its accounts, though no corresponding deductions are noted on his payslips, notwithstanding the fact that payslips are for different periods than the bank statements. The tribunal also notes that shareholder loans totalling $3,850 were made during the period 1 July 2021 to 17 March 2022. 

2. In cases such as these, the tribunal is not required to conduct a forensic accounting exercise. It is required to be satisfied, on the balance of probabilities, that it is more likely than not that a person has income or financial resources at a particular level. The tribunal is satisfied that the father’s available income and financial resources from [Employer 2] are in excess of those reflected by his declared wage from the company. The [Employer 2] financial statements indicate that the father (and his wife) derive personal benefits from [Employer 2] not reflected in their taxable income. Certainly, he is provided with a motor vehicle. His personal bank accounts in evidence suggests that his mobile and utility expenses may also be met by the business; he certainly does not meet these costs from his own bank accounts. Whilst it is difficult to quantify the benefits in the absence of a full and frank disclosure, the tribunal estimates these to be in the vicinity of about $25,000. The discretionary spending evident in his [Bank 1] account into which his wage is deposited supports this conclusion. The account indicates that the account is primarily used to meet his discretionary spending, usually alcohol and some takeaway.

3. The tribunal next evaluated whether the father should be assessed with respect to his earning capacity. In order for a person to be assessed in accordance with their earning capacity rather than their actual income, the three tests set out in subsection 117(7B) of the Act must be satisfied:

   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.

4. Historically the father was a director of his own company. He then changed his work arrangements and at the time of lodging his application was a PAYG employee of his wife’s company. He reduced the numbers of hours of his employment to below full-time load. By the father’s own evidence he has reduced his work hours considerably and changed his working pattern. Subparagraphs 117(7B)(a)(ii) and (iii) of the Act are satisfied.

5. The father submits that the change to his working arrangements and reduction to part-time work was justified on the basis of his state of health. He provided a mental health assessment dated 19 May 2021 which documents presenting issues as “anxiety and restlessness” (at folio 484) and a provisional diagnosis of depression and anxiety disorder was made (at folio 487). The mental state examination (at folio 485) found that in all aspects his presentation was normal. The plan referred him to psychological therapy with a review to take place in August 2021. Attached to the report (at folio 489) the father advised in writing that his psychologist advised that he would provide a report in August 2021; there is no such report in evidence. However, there is an email from [a named] registered psychologist, dated 1 June 2021 (at folio A1) in which he advised the father that he had attached information regarding “distress tolerance skills” and he recommended excluding a physical reason for his chest pains.

6. The father reported that he had six psychological sessions but these did not assist his mental health. Additionally, the fees were prohibitive and so he could not continue with treatment.  He did not recall receiving a Medicare rebate, despite the mental health plan in place. The tribunal put to him that during the same period there was significant discretionary spending (at A50 to A53) that would indicate that he could in fact afford the treatment. He responded “I don’t think so” but did not wish to elaborate.

7. The father testified that he was “too shaken up” to work full time as he did not “want to go back to a full-time arrangement” after the appointment of an administrator as he was not “capable of returning to full-time work and I really didn’t want to. I was devasted and I wanted a break”. Furthermore, [Employer 2] was a start-up the business and so could not afford to employ him on a full-time basis. Later [Employer 2] employed two other part-time employees; he did not increase his hours to full-time as “I wasn’t ready” as his wife could “barely keep me in the office before I, there were occasions there, where I would break down and leave. I couldn’t do more than the hours that I was doing”. He states that he initially worked two days a week and then reduced to one day a week.  His limited income exacerbated his poor mental health. He accepted that the medical evidence was not sufficient to support his contention that his health prevented him from working, but he thought that it would assist in rebutting the third element of the test.

8. Given the dearth of medical evidence, the tribunal is not persuaded that the change to the father’s work arrangements and part-time work was justified on the basis of his health.  The father does not submit that his caring responsibilities warranted the changes to his work arrangements. Thus, paragraph 117(7B)(b) of the Act is satisfied.

9. The father’s historical adjusted taxable incomes and income estimates tell the story of rapidly decreasing income. The tribunal was not satisfied that the change in his earning capacity was necessitated by his health. It also does not explain why [Employer 2] was incorporated under only his wife’s name or his limited income. The father has not persuaded the tribunal that it was not a major purpose of his decision to affect the administrative assessment. paragraph 117(7B)(c) of the Act is established.

10. At the time the father lodged his application he was the parent liable to pay an annual rate of child support of $3,316. Application of his past earning capacity of $183,139 would increase the father’s annual rate by a factor of 10.

11. As the father’s income, financial resources and earning capacity is not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The tribunal therefore concludes that the ground provided for in subparagraphs 117(2)(c)(ia) and (ib) of the Act are established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula assessment.

2. The tribunal finds that the mother’s 2020 and 2021 adjusted taxable incomes are $108,822 and $115,348 respectively. The payslips in evidence indicate that the mother’s 2022 gross annual salary was $131,094. The mother provided a Statement of Financial Circumstances dated 4 April 2022. The tribunal finds that she works on a permanent full-time basis as a manager in [an agency 1], earning $2,512 gross per week. The tribunal notes that this declaration is consistent with the payslips in evidence. Her assets include her home valued at $950,000, savings of $796, a life insurance policy valued at $1,500,000, two motor vehicles valued at $3,000, household contents valued at $150,000 and superannuation of $184,769. She lists liabilities including the home mortgage of $540,000, a personal loan of $7,000, a Centrelink debt of $796, business tax liability of $4,200 for [Business 2]. She reports her personal expenses are $1,234 per week and household expenses are $2,080 per week of which $1,573 relate to the care of the children. The mother declares that she has an interest in a sole-trading enterprise, [Business 3], valued at $0, which she states has yet to commence trading. The tribunal notes that the mother has suggested that given her poor mental health she may seek alternate, lower paying, full-time work. However, as at the date of hearing she remains employed on a full-time basis with her [agency 1] employer.

3. The tribunal finds that the mother was the sole director and shareholder of [Business 2], which was registered on 19 November 2018. The ATO records indicate that the company recorded losses of $4,044 and $280 in the 2019 and 2021 financial years and a profit of $4,022 in the 2020 financial year. The tribunal accepts the mother’s testimony that the business ceased trading when she gained full-time employment with [Agency 2] in July 2019. The tribunal accepts that the business was closed in April 2021, after the mother cleared an outstanding tax liability. The tribunal reached this conclusion with the benefit of a corroborating statement from [Mr A], Accountant, [from Business 4], dated 21 March 2022 (at folio B75).  The tribunal also accepts the mother’s statement (at B79) that she registered [Business 3] in January 2022 with the aim of increasing her income by operating as a sole trader. There is no evidence to suggest that the mother has undertaken any sole trading activity as at the date of hearing. The tribunal also accepts her testimony that her current full-time employment and caring responsibilities prohibit her from undertaking such work presently. Apart from the father’s assertions, there is no evidence before the tribunal that would lead to the conclusion that the mother’s adjusted taxable income does not accurately reflect her income, financial resources and earning capacity.

4. The mother submits that the father should be liable to contribute towards the third child’s orthodontic costs. The tribunal finds this child’s orthodontic treatment commenced on 13 September 2022 with payments totalling $9,800 payable in instalments from that date until 1 July 2024. Certainly, such a cost (representing over 8% of the mother’s 2021 income) significantly affects her costs in maintaining the children. However, the tribunal was not persuaded that this child’s orthodontic treatment constitutes a special need. This term is not defined in the Act. In the matter of Lightfoot and Hampson (1996) 20 Fam LR 69, the Full Family Court stated that needs are ‘special’ if they are necessary or desirable for that child’s welfare and outside the normal needs of a child that is catered for within the formula. In Gyselman and Gyselman [1992] FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. The tribunal had regard to the evidence provided by [Orthodontist A from] [Health Service 1] (at folios B260 to B262) and is not persuaded that the application of orthodontic appliances was essential or necessary for the middle child’s welfare. Notwithstanding the fact that the child is self-conscious about her two front teeth and there is some evidence of mild crowding, the tribunal formed the view that the orthodontic treatment was cosmetic rather than essential. It is on this basis that the tribunal concludes that it would not be just and equitable to depart from the administrative assessment on the basis of the high costs associated with [Child 4’s] orthodontic appliances.

5. In her cross-application the mother has sought a contribution from the father towards the children’s school fees, and specifically the third and fourth children’s secondary school costs. For the sake of brevity the tribunal shall refer to these children as “the middle children”. The mother seeks a 50% contribution from the father in respect of the middle children’s secondary school fees.

6. The tribunal makes the following findings. All five children of the parents attended a Catholic primary school, with both parents completing the enrolment applications and acceptance forms. Post separation both the mother and father signed secondary school enrolment and acceptance forms for the two older children (who are no longer subject to the administrative assessment) to attend [School 1], a systemic Catholic secondary school (the school). The father does not dispute that he has not contributed towards their second son’s education costs since 2020 and he has not contributed at all to the middle children’s attendance at the school. The parents both submit that they are jointly and severally liable for the second child’s school fees, and the two younger children’s primary school fees and that the mother alone is liable to pay the middle children’s secondary school costs. Given the parents’ consistent testimony, which is corroborated by the school invoices in evidence, the tribunal finds accordingly.

7. The mother has provided evidence of emails between she and the father dated 3 September 2019 (at folios B241 to B242). In summary, these emails indicate that the father contacted the mother in respect of the third child’s high school enrolment, due to take place in 2020. He requested that the mother compete a statutory declaration advising that she is aware that the child was to attend [Anglican School 1] and that she would not be responsible for the payment of fees. The father went on to state that it is his intention that the younger two children would also commence [Anglican School 1] in Year 7. In a subsequent email the father stated that [Anglican School 1] is the “best school around and close to our home” and that the fees were $16,000 per annum and the mother may “like to contribute” to the cost. He also advised that an enrolment application form had already been submitted to [Anglican School 1] and would be followed shortly by an enrolment interview. The father did not deny his authorship of these emails at hearing or in his written submissions and so the tribunal accepts they evidence his changed view in regard to the three younger children’s secondary schooling.

8. At hearing the father testified that it was never his intention that the children attend Catholic schools. In any event, they were enrolled at Catholic schools but he “lost heart” with the school when his access to [an education program] was removed in July 2020. As he never signed the middle children’s enrolment application or acceptance forms he therefore should not be held to be liable for any of their costs associated with their attendance at the school.

9. In response to the post-hearing directions, the father made the following submissions in respect of the middle children’s secondary schooling (at folios A129 to A130):

   C – [Child 4] is not currently being educated in the manner that is expected by myself. [Child 2] is not currently being educated in the manner that is expected by myself. The education of [Child 5] and [Child 1] is not relevant to [Child 4], [Child 2] or [Child 3]. Each of my children are their own individuals with their own needs and for the purposes of child support each child Is not required to be educated at the same school as their elder sibling. The circumstances at the time at which [Child 5] and [Child 1] each commenced secondary school were very different.

   I did not (and now), will not consent to [Child 4], [Child 2] or [Child 3] being educated in a Catholic school as it is not the manner I expect for my children. In particular, my reasons are as follows:

   1. I could not (and cannot) afford the fees. This is evident in the months lead-up to my
   company being liquidated (June 2020) when my income decreased over time to zero. Over

   the next two years (until July 2022) my income was still too low to afford catholic school

   fees. Moving forward refer to Reasons 2, 3 &4.

   2. I am a devote (sic) Anglican - I am not of Catholic faith. I am opposed to the Catholic religion, its

   various beliefs and practices. I am opposed to the Catholic education system including it’s
   faith-based education, behaviour standards and mass service requirements.

   3. There are better schools closer to the children’s residence. The children have quality public
   schools much closer by than the catholic schools. There is no need to send the children to a

   catholic school that is significantly further away. [Four named schools] are 1.3km, 2.9km, 2.6km and 6.4km away respectively. For comparison, [School 2] and [School 1] catholic schools are 12km from the children’s residence. Further, the reason Ms. Gotts wants each child to attend [School 1] is that this is the school she attended. In continuing to send the children to the catholic school. Ms. Gotts is acting selfishly, not making decisions in the best interest of the children and she needs to ‘live within her means’.

   4. History of misconduct at [School 1]. In July 2020, Ms. Gotts manipulated her [relative] (a teacher at the school and a person that I have no relationship with) to tamper with the school records and remove my access to [Child 4’s] academic performance. I attach the subsequent letter from the Principal.

10. The question of private schooling has been considered by the Full Court of the Family Court in Mee and Ferguson (1986) FLC 91-716. The principle that emerged is that where a parent has agreed to a child attending private school, that parent is liable to contribute to the fees so long and to the extent that they have a reasonable financial capacity to do so.

11. In the matter of Mabry & Mabry & Anor (SSAT Appeal) [2010] FMCAfam 388 the Court held (at paragraphs 78–81):

    78.     ... The first step is to determine whether the child is ‘being ... educated ... in the manner that was expected by his or her parents.’ The simplest method of proof of the parent’s expectations is to look to the past conduct of the parents, often evidenced by the child attending a particular school before separation. However, this is not the only method of proof of the expectations of the parents.

    79.     Significantly, lack of agreement as to the specific school does not mean that the parents lack the expectation that the child will attend a private school of a particular category, for example a Catholic school. In this case the first three children did attend Catholic schools, and the youngest was attending a Catholic primary school. It is clear that the parents expected their children to receive a Catholic education. In this case it is clear that the parties intended their children to have a private education at Catholic schools whose fees are at the modest end of the range of fees for private schools. As the first three children attended a boy’s school, a different school had to be chosen for the youngest child as a result of differences in gender. Quite rightly, no one suggested that differences in gender are in any way relevant whether the youngest child should receive an equivalent education.

    80.     Whether the fees can be met (and the proportions in which the parents must contribute), must be determined having regard to the parents’ actual financial positions, is a matter to consider under ‘just and equitable’. [Tribunal’s emphasis]

1. The tribunal is satisfied that the parents’ long held the view that their children would attend systemic Catholic primary and secondary schools evidenced by their enrolment of the children in such schools pre and post separation. The documentary evidence suggests that in 2019 the father changed his view in that he no longer supported the three younger children’s attendance at systemic Catholic schools. Instead, the father sought to have the three younger children attend an Anglican school with considerably higher costs which he was willing to meet in full. Since the mother’s cross-application the father has maintained that he cannot afford to contribute to the three younger children’s private secondary school costs.

2. On balance, the tribunal has formed the view that the parents had a clear expectation that all the children, including the three younger children, would receive secondary education outside the public system; that is, that they would receive a private secondary education. There was a long-held view that the children would be educated at systemic Catholic schools. The father has given evidence that his expectation had changed in part because he had become disillusioned with the particular Catholic secondary school, and in part because he could no longer afford private school fees. In relation to the particular school, his objection to a specific school does not negate the general expectation that the children be educated privately, as evidenced by his 2019 emails outlined above. The tribunal is satisfied that the middle children, by attending the school from Year 7, are being educated in the manner that was expected by their parents.  

3. The tribunal had regard to the proper needs of the children. There is no evidence to suggest that any of the children have access to income or financial resources that would render the administrative assessment unjust or unfair. There is also no evidence tendered by either parent to suggest that either parent has received money, goods or property for the benefit of the children that would render the administrative assessment unfair or unjust though each parent asserted that the grandparents meet the children’s costs. In the absence of evidence to support their assertions, the tribunal was not so persuaded. The tribunal finds that the children are generally in good health, and apart from the orthodontic costs and some psychological counselling, they have no costs that are out of the ordinary.

4. Before determining the father’s capacity to contribute to the children’s private education costs, the tribunal analysed the evidence before it regarding his income and financial resources.

5. In his Statement of Financial Circumstances form dated 23 March 2022 the father reports that he is [a professional position 1] for the company, where he has worked for nearly two years on a permanent basis. He declares wages of $355.77 per week and investment income of $290 per week in respect of his investment property. He declares that his wife is in receipt of weekly income of $711.54. He reports savings of $3,000, a property valued at $490,000, a motor vehicle valued at $10,000, a motorbike valued at $40,000, household contents valued at $5,000 and superannuation valued at $150,000. He reports his personal liabilities include a mortgage of $270,000 and a credit card liability of $13,500. He also reports personal expenses of $200 per week, being his credit card repayments and weekly household expenses of $837.50, of which his portion is $400.

6. The tribunal finds on the basis of a statement from [Employer 1] that the father was employed by them on a full-time basis from 4 July 2022. His total remuneration package is $150,000 per annum, in addition to an annual regional allowance of $18,000. After taking into account the father’s evidence regarding his regional allowance, and the likely additional costs he would incur in living remotely, the tribunal is satisfied that it would not be appropriate to amend his adjusted taxable income on the basis of this additional allowance.

7. The tribunal concludes that the father’s income and financial resources are most accurately reflected by an adjusted taxable income of $150,000, which is some $36,000 less than his 2019 adjusted taxable income, but consistent with his current income. In the tribunal’s view varying the father’s adjusted taxable income on this basis reflects the most reasonable conclusion to be drawn on the available evidence. Whilst it is possible that this may underestimate the father’s true financial position before he secured full-time arms-length employment with [Employer 1], any further increase in his adjusted taxable income would have a minimal impact on his assessed liability.

8. The tribunal next considered from what date it is appropriate to vary the father’s income and financial resources. The father has submitted that it is appropriate to depart from the administrative assessment from 1 July 2020 (at folio A160), though on a different basis than the tribunal has determined. The mother lodged her cross application in April 2021. On balance, the tribunal concludes that it is appropriate to depart from the assessment from 19 February 2021, the date the father lodged his departure application, and not before. This will increase the father’s current arrears (being $21,566.51 as at 8 February 2022) by about $16,000. The tribunal is satisfied that this will not place him in a position of undue hardship given his income and financial resources. Furthermore, these funds are necessary for the mother to adequately provide for the children. To find otherwise would result in a disproportionate amount of the children’s costs being borne by the mother.

9. The father has not lodged an income tax return since the 2019 financial year. The tribunal is of the view that the father’s income and financial resources will not be accurately reflected by his taxable income into the foreseeable future. The mother requests that this tribunal depart from the assessment until the youngest child turns 18 years of age, being [in] December 2028. The tribunal is not persuaded that it is appropriate to vary the assessment for such a long period. However, in a context of protracted disputes between the parents, the tribunal is satisfied it is appropriate to provide some certainty to the parties and minimise the need for repeat proceedings. Therefore, the tribunal has determined that it is both just and equitable to vary the father’s adjusted taxable income to $150,000 until 31 December 2025, being the year that the third child will likely complete her secondary schooling. The tribunal notes that this has an additional benefit to the father if he remains in his current employment as his remote living allowance will not form part of his adjusted taxable income. This aspect of the decision will see the father’s annual liability increase from about $21,660 to about $30,000 per annum. The tribunal, having regard to the totality of the children and parents’ circumstances, is satisfied that it is both just and equitable to depart from the assessment on this basis.  

10. The tribunal finds that the father has an outstanding liability to the school in respect of the younger son’s education (2021) in the amount of $4,192 (at folio B84). It is also apparent that he is in arrears in respect of the half share of the two younger children’s primary education costs (at folios B88 to B89) in the amount of $2,118.30. Allowing for similar costs at the school in the 2021 calendar year for the middle child of $2,406 suggests that the costs of educating the four younger children in the 2021 calendar year was $8,716. The tribunal finds that the total compulsory costs of the youngest child’s 2022 Year 6 education was $2,931 (at folio 588). The third and fourth children’s attendance at the school in 2022 were $4,812 and $3,144 (including sibling discount). Thus, the total 2022 education costs for the three younger children was $10,887. The tribunal is satisfied that these costs significantly affect the mother’s costs in maintaining the children, given that they represent 15% of her 2021 adjusted taxable income and 8% of her 2022 gross income.

11. The tribunal next turned its mind to the father’s financial capacity to contribute to those costs. In reaching its conclusion, the tribunal took into account the spreadsheet prepared by the father (at folio A159) which indicates that he made modest weekly payments towards the children’s primary and secondary schools during the 2020 calendar year. The tribunal also notes that the father’s assertion that his expectation changed because he could not afford the fees appears to be contradicted by his previous proposal that the three younger children attend a more expensive Anglican school at his expense as well as the findings made in respect of his income, financial resources and earning capacity.

12. In situations such as these, the tribunal may determine a parent’s contribution to private education costs based on a percentage of their relative incomes and financial resources. In this situation, this would result in the father contributing to more than half of the children’s education expenses. However, in a context where the mother has only sought a 50% contribution from the father in respect of the children’s education costs, the tribunal finds that it just and equitable in this case that each parent contributes equally to the compulsory private education costs.

13. Thus, the tribunal finds it appropriate to increase the father’s annual rate of child support for the period 1 January to 31 December 2021 by $8,700 and for the period 1 January 2022 to 31 December 2025 by $5,400. This includes a contribution by the father to the youngest child’s secondary school costs from 2023. This will minimise the need for repeat proceedings. Whilst it is likely that the school fees will increase in the 2023 to 2025 calendar years, the tribunal is satisfied that the mother can absorb any increases given the father’s ongoing child support liability and her own income. The tribunal is satisfied that, given the funds available to meet the father’s discretionary spending and his income and financial resources more generally, the arrears created by this aspect of the decision ($13,200) will not cause him undue hardship.

14. The tribunal is satisfied that the administrative assessment is unfair given the father’s income, earning capacity and financial resources and because of the costs in educating the children in the manner expected by the parents. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it is just and equitable to depart from the administrative assessment.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents, rather than the community, have the primary duty to maintain a child. Neither the mother nor father are in receipt of income-tested benefits. Departing from the administrative assessment will have no impact on the apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that for the period:

• 19 February 2021 to 31 December 2025 Mr Maltby’s adjusted taxable income is varied to $150,000 per annum;

• 1 January to 31 December 2021 Mr Maltby’s annual liability is increased by $8,700; and

• 1 January 2022 to 31 December 2025 Mr Maltby’s annual liability is increased by $5,400.