McCouch and Kirkland (Child support)

McCouch and Kirkland (Child support) [2021] AATA 5184 (16 November 2021)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2021/MC021118
APPLICANT:  Ms McCouch
OTHER PARTIES:  Child Support Registrar
Mr Kirkland

TRIBUNAL:Member T Hamilton-Noy
DECISION DATE: 16 November 2021
DECISION:

The Tribunal sets aside the decision under review and substitutes its decision that:

For the period 1 July 2019 to 30 June 2020, Ms McCouch’s adjusted taxable income is varied to $32,707;
For the period 1 July 2019 to 30 June 2020, Mr Kirkland’s adjusted taxable income is $158,000;
For the period 1 July 2020 to 30 June 2021 Ms McCouch’s adjusted taxable income is varied to $52,964 and Mr Kirkland’s adjusted taxable income is varied to $73,188.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established based on the incomes of both parents – 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 removed 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

Ms McCouch and Mr Kirkland are the separated parents of [Child 1] and [Child 2]. A case has been registered with Services Australia – the Child Support Agency (the Agency) since 9 September 2014. Ms McCouch is the payee in this matter and Mr Kirkland the payer.
The administrative assessments of child support in this case were as follows:
· For the period 1 January 2020 to 6 September 2020, Mr Kirkland was to pay $15,938 per annum, based on his adjusted taxable income of $158,000 (as set by a previous change of care decision) and Ms McCouch’s 2018/2019 adjusted taxable income of $19,252;
· For the period 7 September 2020 to 12 September 2020, Mr Kirkland was to pay $19,252 per annum, based on his adjusted taxable income of $158,000 and Ms McCouch’s 2018/2019 adjusted taxable income of $19,252.
On 16 March 2020, Ms McCouch applied for a departure application on the basis of the costs of [Child 2]’s schooling (called ‘Reason 3’ by the Agency).
Mr Kirkland cross-applied based on payments he had made for the children (called ‘Reason 5’ by the Agency), both parents’ levels of income, property and financial resources (called ‘Reason 8A’ by the Agency) and Ms McCouch’s earning capacity (called ‘Reason 8B’ by the Agency).
On 21 August 2020, an employee of the Agency made a decision that grounds to depart from the administrative assessments of child support were established. The employee of the Agency made a decision to vary Ms McCouch’s adjusted taxable income to $158,000 for the period 1 July 2019 to 30 June 2020 and to vary Mr Kirkland’s adjusted taxable income to $39,000 for the period 1 July 2020 to 31 March 2021.
On 29 September 2020, Ms McCouch objected to this decision.
On 11 December 2020, an objections officer of the Agency allowed the objection. The objections officer decided to make a departure determination that:
·For the period 1 July 2019 to 31 March 2020, Ms McCouch’s adjusted taxable income was varied to $105,336;
·For the period 1 April 2020 to 27 September 2020, Ms McCouch’s adjusted taxable income was varied to $39,000;
·For the period 28 September 2020 to 31 October 2020, Ms McCouch’s adjusted taxable income was varied to $31,200;
·For the period 1 July 2020 to 27 September 2020, Mr Kirkland’s adjusted taxable income was varied to $109,921; and
·For the period 28 September 2020 to 31 December 2020, Mr Kirkland’s adjusted taxable income was varied to $102,121.
On 13 January 2021, Ms McCouch lodged an application with the Administrative Appeals Tribunal for an independent review of the Department’s decision. An extension of time for the application to be heard by this Tribunal was granted by the Tribunal (differently constituted).
A directions hearing was conducted on 16 September 2021, which both parties participated in by MS Teams audio. Following the directions hearing the Tribunal issued directions to the parties for the provision of further documents.
The hearing was conducted on 28 October 2021 by MS Teams audio. At the hearing the Tribunal had before it documents provided by the Agency (1 – 1036), documents provided by Ms McCouch (A1 to A103) and documents provided by Mr Kirkland (B1 to B123). The parties both confirmed receipt of all documents with the Tribunal.
Following the hearing, Mr Kirkland sent further information to the Tribunal. This was provided to Ms McCouch, with time to comment on the information. Ms McCouch provided a response which was sent to Mr Kirkland for his information. The Tribunal proceeded to make a decision on all of the information before it on 16 November 2021.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in the place of the Registrar, must be satisfied that:
(i)there is a ground to depart from the administrative assessment of child support;
(ii)it is just and equitable to depart; and
(iii)it is otherwise proper to depart.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the Assessment Act. 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.
If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

CONSIDERATION

Issue 1 – Is there a ground established to depart from the administrative assessment of child support?

The grounds raised in this case related to the education expenses of the children; payments made by Mr Kirkland for the benefit of the children; the income, property and financial resources of both parents; and the earning capacity of Ms McCouch. The Tribunal first considered the ground relating to the education expenses of [Child 1] and [Child 2].

The manner in which the children are being educated

Subparagraph 117(2)(b)(ii) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being cared for, educated or trained in the manner that was expected by their parents.
The Tribunal accepted from the evidence of Ms McCouch that there have been Family Court orders in place providing for each party to pay 50% of the children’s school fees. The Tribunal considered that the existence of the court order establishes that the children were and are being educated in a manner expected by both parents.
The documents before the Tribunal establish that [Child 1]’s school fees for 2020 totalled $8,425 and that [Child 2]’s school fees for 2020 totalled $8,085. The Tribunal accepted the evidence given by both parents that in 2020 Mr Kirkland paid for [Child 1]’s school fees and Ms McCouch paid for [Child 2]’s school fees. The Tribunal notes that the amounts paid by the parents differed by $300 for the total school year.
The Tribunal accepted that in 2021 [Child 1] is 18 years of age and no longer a child of the assessment. The Tribunal accepted that [Child 2] is in year 8 in 2021. The evidence of both of the parents was that total school fees for [Child 2] for 2021 are $9,950, that Ms McCouch had initially paid the school fees but that more recently Mr Kirkland had made payments towards his 50% of the 2021 school fees. Mr Kirkland stated that his intention is to pay the further amount he owes directly to the school. The Tribunal accepted this evidence, which was given in a clear and credible manner.
The Tribunal accepted from the evidence of both of the parents that they have both signed a re-enrolment form for [Child 2] for Year 9 in 2022 and that the school will be billing each of the parents 50% of the school fees going forward. The Tribunal accepted this evidence.
In considering this ground, the Tribunal notes that there has been a change in the arrangements for the school fees since Ms McCouch lodged the departure application, namely that Mr Kirkland has made payments towards the 2021 school fees and that arrangements have been put in place for each parent to be billed 50% of [Child 2]’s school fees going forward into 2022. The Tribunal finds that the total fees payable for [Child 1]’s former schooling, and [Child 2]’s current schooling, are significantly higher than the fees charged by a government school.
The legislative test for this ground is whether, in the special circumstances of the case, the costs of maintaining a child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents. The Tribunal finds that in 2020, the costs of maintaining both [Child 1] and [Child 2] were significantly affected because of their schooling costs and that in 2021 and during 2022 the costs of maintaining [Child 2] will be significantly affected because of the manner in which she is being educated. However, given the school fees were paid by both parents during 2020, that Mr Kirkland has paid, and committed to pay the remainder of, 50% of [Child 2]’s 2021 fees and will pay 50% of [Child 2]’s school fees going forward, the Tribunal does not consider that there are special circumstances established that would make it appropriate for the Tribunal to depart from the administrative assessment of child support. The Tribunal therefore finds that this ground for departure is not established.

The income, property and financial resources of the parents

Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child, because of the income, property and financial resources of either parent.
In determining whether this ground exists, the Tribunal must look at the relative levels of income, property and financial resources of both parents.
Ms McCouch’s income, property and financial resources
The Tribunal accepted Ms McCouch’s evidence that she is self-employed under an ABN structure and trades under the name [Business name 1], which provides [specified] services to the hospitality industry. The Tribunal accepted from the evidence given by Ms McCouch at the hearing that she does not use contractors for her business, that she has a chattel mortgage on a car that is used partly for business purposes and that she does not rent a business premises. The Tribunal accepted that Ms McCouch has been self-employed for 17 years. The Tribunal accepted that Ms McCouch’s self-employment arrangements have been impacted by the COVID-19 pandemic, whereby her main client, [specified], had a significant downturn in trading during the Melbourne lockdowns.
In the 2019/2020 financial year, the Tribunal accepted that Ms McCouch commenced receipt of jobkeeper in March 2020 and that her regular employment through her business reduced as a result of the COVID-19 pandemic. In her personal 2019/2020 income tax return, Ms McCouch declared net business income of $20,686, in addition to government allowances and a small amount paid in dividends. Total business income was $61,081, with total expenses of $40,485 claimed. The Tribunal considered that expenses claimed were reasonable on the information available to the Tribunal. Ms McCouch’s taxable income for 2019/2020 was $32,707.
As to the 2020/2021 financial year, the Tribunal accepted that Ms McCouch commenced a part-time employee position with [Company 1] in late 2020 and that she is currently undertaking 30 to 38 hours per week for the business. The Tribunal accepted Ms McCouch’s evidence that this position is permanent and that she intends to continue working for [Company 1] in the foreseeable future. Ms McCouch’s pay invoices indicate an annual salary of $70,000 and weekly earnings of $1,346 to $1,367. The Tribunal finds that in the approximately six months Ms McCouch worked with [Company 1] in 2020/2021 she earned in the vicinity of $35,000.
Ms McCouch’s profit and loss statement for [Business name 1] for the period July 2020 to June 2021 indicates total income of $33,524.06 (jobkeeper payments totalling $21,350 and fee income totalling $12,174.06). The Tribunal considered expenses claimed to be reasonable, although noted high motor vehicle costs were claimed for 2020/2021 despite Melbourne being in lockdown for a fair proportion of the financial year. Net profit claimed by the business for 2020/2021 was $17,964.59. Taking into account the net profit from the business and Ms McCouch’s earnings from [Company 1], her income during 2020/2021 was within the vicinity of $52,964.
As to her current income, the Tribunal accepted Ms McCouch is working with [Company 1]. Ms McCouch’s Statement of Financial Circumstances states that she is currently earning $1,346 per week from employment, $240 per week from self-employment and $25 in dividends, which the Tribunal notes equates to $83,772 per annum. The Tribunal notes that, as a PAYG employee with [Company 1] and through her work under an ABN, Ms McCouch’s 2021/2022 net income from employment will be reflected in her personal income tax return.
As to any other income, property or financial resources, the Tribunal notes that the Agency has increased Ms McCouch’s income significantly due to an inheritance she received from her mother’s estate. Ms McCouch’s evidence to the Tribunal about the inheritance was that her mother’s property had been sold in early 2019 and that she had received $185,000 from the sale of the property which she had paid onto her mortgage. Ms McCouch gave evidence, which the Tribunal accepted, that she had accessed part of this amount during 2020 after Mr Kirkland had lost work, so that she could assist to meet the children’s needs when Mr Kirkland was unable to contribute to their costs.
The Child Support Guide at 2.6.14 provides that where a parent receives a substantial amount of money, such as a lump sum amount, the lump sum may be taken into account in deciding whether an assessment should be changed. In so assessing, it is necessary to decide whether receiving the money makes the amount of child support payable unjust and inequitable and whether the amount results in one parent being in a better financial position compared to the other parent. The Guide notes, however, that a discrepancy in the parents’ financial positions does not automatically mean there is a reason to change the assessment. The Tribunal is not bound by the policy guide of the Agency. However, in Drake and Minister for Immigration and Ethnic Affairs [1979] 2 ALD 60, the Full Federal Court held that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. The Tribunal considered that the Guide provides relevant considerations for the Tribunal in assessing Ms McCouch’s income, property and financial resources.
The Tribunal finds on the evidence before it that Ms McCouch received the inheritance in the period prior to any departure period being considered by the Tribunal. While the amount has assisted Ms McCouch to pay down her mortgage, given the manner in which it was accessed during 2020 and given the period of time in which it was received, and having regard to the comments in the Guide as set out above, the Tribunal does not consider it appropriate to increase Ms McCouch’s adjusted taxable income in the period under review as a result of an inheritance amount received over two years ago now.
The Tribunal accepted from Ms McCouch’s Statement of Financial Circumstances that she owns a home with an estimated value of $1.3 million on which she has a $302,000 mortgage. Ms McCouch stated she has a small amount of savings, shares totalling $39,000, a motor vehicle valued at $32,000 and household contents totalling $35,000. The None of these assets are financial resources that increase Ms McCouch’s income for child support purposes.
The Tribunal noted that the administrative assessments of child support for periods covering 1 January 2020 to 6 September 2020 used Ms McCouch’s 2018/2019 adjusted taxable income of $19,252. Ms McCouch’s 2019/2020 level of income was higher than this amount, and the Tribunal has found above was $32,707. From 1 July 2020 onwards, Ms McCouch’s level of income was within the vicinity of $52,964, which is notably higher than that used in the administrative assessment of child support.
Mr Kirkland’s income, property and financial resources
Mr Kirkland gave evidence at the hearing that he is self-employed under a company and trust structure, undertaking [specified] services for the commercial sector. Mr Kirkland told the Tribunal that he rents an office in [City 1] where he has his tools and computers and that this is a separate premises from where he lives. The Tribunal accepted this evidence and finds that Mr Kirkland trades under the company structure [Company 2] and that the trust structure through which the company trades is [Trust 1].
The Tribunal accepted that Mr Kirkland receives drawings from the business into his personal [Bank 1] account and that these drawings vary in amount and frequency. The Tribunal accepted that the business operates a separate [Bank 1] account in the name [Company 2]
In his personal income tax return for 2019/2020, Mr Kirkland declared income totalling $124,889, being net non-primary income. Following deductions, his taxable income for 2019/2020 was $120,419. In the Financial Statements for [Trust 1] for 2019/2020, the trust declared total income of $470,229. Of this amount, the beneficiary account statement indicated physical distributions to Mr Kirkland had been made totalling $221,039. The Tribunal discussed this entry with Mr Kirkland during the hearing and noted that it appeared his distributions from the trust were significantly higher than that indicated on his personal income tax return. The Tribunal warned Mr Kirkland that if it relied on this information, it may have the effect of the Tribunal increasing his adjusted taxable income for that period. Mr Kirkland’s evidence in relation to this document was that his previous accountant had not understood the set up of the trust and had not recorded information correctly. He had changed accountants and had asked them to reflect amounts correctly. He asserted he had not actually received that amount of money. In response to questions by the Tribunal, he stated he had not prepared an amended income tax return for the trust for 2019/2020.

Following the hearing, Mr Kirkland provided an email which appears to be from his current accountant, dated 28 October 2021, stating that they had received the beneficiary accounts for the 2020 and 2021 financial years for the trust and that the ‘funds drawn’ account had been used as a clearing account to reconcile the balance sheet as at 30 June 2020. The accountant noted that they had acted for Mr Kirkland and his associated entities since July 2020 and had taken over a prior legacy and financial statements that required ‘considerable review and reconciliation’, which had been done via beneficiary accounts. The accountant stated that they had utilised the balance sheet to ensure the trust profit was accurate and for trust distributions and for the final tax payable at beneficiary level to be true and accurate.
A copy of this information was sent to Ms McCouch and she provided comments on the information to the effect that Mr Kirkland had had a higher income than that originally assessed by the Agency.
The Tribunal notes that, while Mr Kirkland’s accountant asserted that the account had been used as a clearing account, no evidence had been provided to show the transactions were not payments to Mr Kirkland. The Tribunal notes that, for the period 1 January 2020 to 12 September 2020, Mr Kirkland had been assessed by the Agency as having an adjusted taxable income of $158,000, set by a previous change of care decision. In the absence of any more accurate information about the use of the clearing account, the Tribunal was not persuaded that setting Mr Kirkland at this income level is inappropriate or unreasonable.
As to the 2020/2021 financial year, the Tribunal finds from [Trust 1] beneficiary account that Mr Kirkland received physical distributions totalling $73,188. The Tribunal accepts that the reduced distributions for the financial year were due, at least in part, to the COVID-19 pandemic and to Mr Kirkland’s loss of contracts as a result of the COVID-19 pandemic. In the absence of any clearer evidence, or any evidence to the contrary, the Tribunal finds that Mr Kirkland’s level of income and financial resources available to him from the business in 2020/2021 was $73,188.
As to any other income, property or financial resources of Mr Kirkland, the Tribunal accepted Mr Kirkland’s evidence that Ms McCouch had received the matrimonial home in the property settlement and he had received land at [Location 1] in the property settlement which is currently property held in his self-managed superannuation fund. The Tribunal did not consider it appropriate to increase Mr Kirkland’s income for child support purposes as a result of him holding this land, on the basis that to do so would interfere with the financial arrangements agreed upon by the parents at the time of separation. The Tribunal accepted from Mr Kirkland’s Statement of Financial Circumstances that the value of his share of his home is $575,000 over which he has a $572,000 mortgage, he has a small amount of savings, a car valued at $25,000 and household contents totalling $35,000. Mr Kirkland stated the value in his self-managed superannuation fund totals $400,000.
The Tribunal finds that, given the use of an income level for Ms McCouch that was substantially lower than her actual level of income in the period 1 July 2020 to 12 September 2020, application of the provisions of the Assessment Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided for the children, because of the parents’ income, property and financial resources. The Tribunal finds that the discrepancy in Ms McCouch’s level of income and that used in the assessment establishes special circumstances. This ground for departure is established.

`Issue 2 – Is it just and equitable to make a departure determination?

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 just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Assessment Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Assessment Act. In addition to the education costs of the children and the income, property and financial resources of both parents, already considered above, the Tribunal also took the following matters into consideration:

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the children

The Tribunal accepted the evidence of the parties that neither [Child 2] nor [Child 1] (while she was a child in the assessment) has access to any other income, property or financial resources from which to support themselves and that they are reliant on Ms McCouch and Mr Kirkland to meet all of their needs.

The proper needs of the children

Subsection 117(6) of the Assessment Act states that in having regard to the proper needs of the child, the court must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child.
The costs of the children’s schooling have already been considered in detail above. The Tribunal found from the evidence given by the parents that neither [Child 1] nor [Child 2] has any other costs outside of the ordinary range of costs of children their age.

The earning capacity of Ms McCouch

Subsection 117(7B) of the Assessment Act requires the Tribunal to consider the following matters in determining that a parent’s earning capacity is greater than is reflected in his or her income used in the administrative assessment:
·   Whether the parent:
oIs not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i)); and/or
oHas reduced their weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii)); and/or
oHas changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
·   If the parent’s decision about his/her work arrangements is not justified by either his/her caring responsibilities (subparagraph 117(7B)(b)(i)) or his/her state of health (subparagraph117(7B)(b)(ii)); and
·   If the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).
The Tribunal finds that, while Ms McCouch has changed her working pattern, her ongoing weekly income indicates her adjusted taxable income will increase in the current financial year. The Tribunal finds that any changes to Ms McCouch’s work arrangements have not been due to any level of child support payable by Mr Kirkland. The Tribunal finds that it is not open to make an earning capacity determination in respect of Ms McCouch’s circumstances.

The earning capacity of Mr Kirkland

The Tribunal accepted from Kirkland’s evidence that he has been self-employed as a [Occupation 1] for eight years. The Tribunal finds that a reduction in Mr Kirkland’s income during 2020 was due to the effects of the COVID-19 pandemic and was not to affect the administrative assessment of child support. The Tribunal finds that it is not open to make an earning capacity determination in respect of Mr Kirkland’s circumstances.

The necessary commitments of Ms McCouch

The Tribunal notes that the most recent assessments before the Tribunal indicate that [Child 2] is recorded as being in Ms McCouch’s care for 76% of the time. In her Statement of Financial Circumstances, Ms McCouch estimated her weekly household expenses to be $1,171. The Tribunal notes that Ms McCouch’s current level of income is sufficient to meet these expenses but that her reduced income during COVID-19 was not sufficient to meet her stated household expenses.

The necessary commitments of Mr Kirkland

Mr Kirkland’s Statement of Financial Circumstances estimates his weekly household expenses to be $1,026 for himself and $393 per week for children in the household. The Tribunal finds that Mr Kirkland’s current level of income is approximate to these estimated expenses.

The direct and indirect costs incurred by Ms McCouch in providing care for the children

The Tribunal accepted that Ms McCouch has worked part-time since the children were born. However, given the age of the children and Ms McCouch’s current employment arrangements, the Tribunal is not satisfied that Ms McCouch is currently foregoing income in order to provide care to [Child 2].

Hardship

Paragraph 117(4)(g) of the Act requires the Tribunal to consider any hardship that would be caused to [Child 1] (while she was a child of the assessment), [Child 2] or Ms McCouch by the making of, or the refusal to make, a departure determination; and also to consider any hardship that would be caused to Mr Kirkland or any other child or other person that Mr Kirkland has a duty to support, by the making of, or the refusal to make, a departure determination.
Ms McCouch stated to the Tribunal that she struggles and does what she needs to do to meet the needs of the household. She stated she was reliant on child support to pay bills. The Tribunal finds that there would be some hardship to Ms McCouch and to [Child 2] if the Tribunal were to refuse to make a departure determination in this case.
Mr Kirkland acknowledged at the hearing that both he and Ms McCouch had struggled during 2020 due to the COVID-19 pandemic and that they are both now trying to regenerate business income. Mr Kirkland stated he is currently paying $700 and an additional $300 per month to meet arrears of child support and that this is a stretch for him. The Tribunal finds that Mr Kirkland would not suffer significant financial hardship if the Tribunal were to make a departure determination set on a reasonable amount, taking into account his capacity in terms of the current payments he is making.

Other

The Tribunal notes that in his cross-application to the Agency, Mr Kirkland raised a ground in relation to payments made for the children. Mr Kirkland stated to the Tribunal that he has been paying all of [Child 1]’s university fees and that he was withholding payments towards [Child 2]’s school fees ‘to get leverage for [Child 1]’. The Tribunal finds that, now that [Child 1] is no longer a child of the assessment, any payments towards her university fees should not be used as a basis for a variation to the child support payable by Mr Kirkland.

What is the proposed departure determination in this case?

The Tribunal notes that the objections officer has set Ms McCouch on a high level of income from 1 July 2019 because of findings made in relation to an inheritance from her mother’s estate. For the reasons set out above, the Tribunal does not agree that this amount should be reflected as part of Ms McCouch’s adjusted taxable income for child support purposes in the period being considered by the Tribunal. Therefore, while Ms McCouch’s application to the Agency was not made until 16 March 2020, the Tribunal intends to commence the departure determination from 1 July 2019 to avoid Ms McCouch being maintained on that higher level of income for a period of time. The Tribunal considers it appropriate to vary Ms McCouch’s adjusted taxable income from 1 July 2019 to 30 June 2020 to $32,707 to reflect her level of income in that period. For the same period, and again with reference to findings made above, the Tribunal was not persuaded that the variation of Mr Kirkland’s adjusted taxable income from $158,000 to another amount was appropriate, taking into account that this amount was set by a previous change of assessment decision that does not appear to have been appealed by Mr Kirkland, and the doubts the Tribunal has about Mr Kirkland’s explanation of his total drawings in the 2019/2020 financial year.
The Tribunal intends to vary both parents’ adjusted taxable incomes for the 2020/2021 financial year to reflect their actual levels of income in that period. For the period 1 July 2020 to 30 June 2021, the Tribunal intends to vary Ms McCouch’s adjusted taxable income to $52,964 and to vary Mr Kirkland’s adjusted taxable income to $73,188. The intention of this is to more accurately reflect the capacity of each parent to provide for [Child 1] and [Child 2]’s needs.
The Tribunal notes that the Agency has issued further assessments of child support for the period commencing 1 July 2021 (contained in the supplementary Agency documents provided to the Tribunal and to the parties), based on Mr Kirkland’s estimate of income which will be reconciled at the point at which he lodges an income tax return, and Ms McCouch’s 2019/2020 adjusted taxable income. The Tribunal is mindful of Mr Kirkland’s submissions that both parents are recovering financially from the effects of the pandemic. The Tribunal considers that Mr Kirkland’s current level of income is unable to be ascertained with any certainty given this. Ms McCouch’s income is more certain. However, her PAYG employment minus deductions and her work under an ABN minus business related expenses will be reflected in her 2021/2022 tax return at a point at which these can be more accurately assessed. Taking into account all of these factors, the Tribunal finds that it is not just and equitable to depart from the administrative assessment of child support from 1 July 2021 onwards.
The Tribunal has not found it just and equitable to vary any child support payable to reflect schooling costs for [Child 1] and [Child 2] in 2020, or for [Child 2] in 2021 or beyond, for the reasons stated above.

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

The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with subparagraph 98C(1)(b)(ii)(B) of the Assessment Act.
The Tribunal accepted from Ms McCouch’s evidence that she is in receipt of family tax benefit. Any departure determination made by the Tribunal is likely to reduce the impact on the public purse and the Tribunal therefore concluded that it is also otherwise proper to make the proposed departure determination.

DECISION

The Tribunal sets aside the decision under review and substitutes its decision that:

For the period 1 July 2019 to 30 June 2020, Ms McCouch’s adjusted taxable income is varied to $32,707;
For the period 1 July 2019 to 30 June 2020, Mr Kirkland’s adjusted taxable income is $158,000;
For the period 1 July 2020 to 30 June 2021 Ms McCouch’s adjusted taxable income is varied to $52,964 and Mr Kirkland’s adjusted taxable income is varied to $73,188.

[2021] AATA 5184

16 November 2021

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Administrative Law

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