Mitackis and Mitackis (Child support) - [2024] AATA 2900

Mitackis and Mitackis (Child support) [2024] AATA 2900 (26 June 2024)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/BC026807
APPLICANT:  Ms Mitackis
OTHER PARTIES:  Child Support Registrar
Mr Mitackis

TRIBUNAL:Senior Member S De Bono
DECISION DATE: 26 June 2024
DECISION:

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

For the period 21 March 2022 to 30 June 2025 Mr Mitackis’ adjusted taxable income (ATI) is set at $73,000.
For the period 21 March 2022 to 30 June 2023 Ms Mitackis’ ATI is set at $55,958.
For the period 1 July 2023 to 30 June 2025 Ms Mitackis’ ATI is set at $49,251.

The decision of the objections officer in relation to the school fees for [Child 2] remains in place.

CATCHWORDS

CHILD SUPPORT – departure application – high costs of education and income, property and financial resources – costs of one child’s private primary school education significant – no mutual intention for children’s secondary schooling – no mutual intention for ’s schooling – father’s TPI and invalidity payments affected by Federal Court decision – repayments from business investment and inconsistent rent payments – decision under review set aside and substituted

REASONS FOR DECISION

BACKGROUND

The issue to be considered in this application is whether there is a reason to change the administrative assessment of child support and, if so, whether it is just and equitable and otherwise proper to do so.
Ms Mitackis and Mr Mitackis are the parents of [Children 1 and 2]. [Child 1] was recorded as being in Ms Mitackis’ 67% care and Mr Mitackis’ 33% care, [Child 2] was recorded as being in Ms Mitackis’ 87% care and Mr Mitackis’ 13% care. The current care determination has the children being in Ms Mitackis’ 100% care; for [Child 2] this applied from 22 August 2023 and for [Child 1] a new care determination applied from 1 January 2023 with the care recorded as 87% care to Ms Mitackis and 13% care to Mr Mitackis. There has been a registered child support assessment in place from 13 September 2018. Mr Mitackis is the parent liable to pay child support. Services Australia (Child Support) has collected child support from the start of the administrative assessment.
Prior to the departure application lodged by Mr Mitackis on 25 January 2022, the administrative assessment of child support in place was set by a delegate on 18 October 2019 as follows:
·         For the period 23 May 2019 to 31 December 2019, Mr Mitackis’ adjusted taxable income (ATI) is set at $66,480.
·         For the period 1 January 2020 to 30 June 2020, Mr Mitackis’ ATI is set at $67,145.
·         For the period 1 July 2020 to 31 December 2020, Mr Mitackis’ ATI is set at $67,816.
·         For the period 23 May 2019 to 31 December 2019, the annual rate of child support is increased by $1,314 per annum.
·         For the period 1 January 2020 to 31 December 2020, the annual rate is increased by $1,380 per annum.
·         For the period 1 January 2021 to 31 December 2021, the annual rate is increased by $1,449 per annum.
·         For the period 1 January 2022 to 31 December 2022, the annual rate is increased by $1,521 per annum.
·         For the period 1 November 2021 to 31 December 2021, Mr Mitackis was assessed to pay an annual rate of child support of $5,273 ($3,824 +$1,449 tuition fees). This assessment was based on a 2020/2021 assessed ATI of $42,250 for Mr Mitackis, and a 2020/2021 assessed ATI of $32,064 for Ms Mitackis.
·         For the period 1 January 2022 to 31 December 2022 Mr Mitackis was assessed to pay an annual rate of child support of $5,345 based on 2020/2021 ATI of $42,250 for Mr Mitackis and 2020/2021 ATI of $32,064 for Ms Mitackis. This included Mr Mitackis’ contribution to [Child 2’s] school fees of $1,521.
Ms Mitackis lodged a departure application (otherwise known as a change of assessment) on the basis of Reason 3 – the high costs of education for the child and Reason 8A – the income, property and financial resources of the parents.
On 24 June 2022 a delegate of the Registrar established Reason 3 and Reason 8A and the administrative assessment was changed as follows:
·      The remaining portion of the delegate’s decision of 18 October 2019 remains unchanged. That is, for the period 1 January 2022 to 31 December 2022 the annual rate is increased by $1,521, representing a contribution to [the children’s] school fees.
·      For the period 1 July 2022 to 30 June 2023 Mr Mitackis’ ATI is set at $65,388.
·      For the period 1 July 2023 to 30 June 2024 Mr Mitackis’ ATI is set at $66,696.
·      For the period 1 July 2024 to 30 June 2025 Mr Mitackis’ ATI is set at $68,030.
On 9 June 2023 Ms Mitackis was granted an extension of time by Child Support to lodge an objection to the decision of the delegate. On 29 August 2023 an objections officer allowed Ms Mitackis’ objection and departed from the administrative assessment as follows:
·      For the period of 1 January 2023 to 31 December 2024 the annual rate of child support payable by Mr Mitackis is increased by $1,158 which is Mr Mitackis’ contribution to [Child 2’s] private school education.
·      For the period 21 March 2022 to 24 May 2023 the ATI of Mr Mitackis is set at $60,080.
·      For the period 25 May 2023 to 30 June 2026 Mr Mitackis’ ATI is set at $62,940 and adjusted annually commencing on 1 July 2024 by the CS inflation factor.
On 2 August 2023 Ms Mitackis sought further review with the Social Services and Child Support Division of the Tribunal. Mr Mitackis indicated he did not which to participate in the hearing; he remained a party to the proceedings but did not attend the hearing. Directions were issued to Ms Mitackis 10 January 2024. The Tribunal also issued directions to Child Support on 17 January 2024. Child Support complied with these directions on 23 February 2024 (C1-C226). On 1 March 2024 a telephone hearing was held in which Mr Mitackis gave evidence under affirmation. The Tribunal considered the documents and information provided to both parties prior to the hearing, as well as the oral evidence of Ms Mitackis.[1] The Tribunal deferred its decision to consider the additional information and to see if further information was forthcoming from CSC. The Tribunal reconvened to make its decision on 7 May 2023. Relevant aspects of the material and evidence will be referred to in the Tribunal’s Reasons for Decision.

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975, subsection 37(1) Statement and Documents provided by Child Support numbered 1 to 630, Ms Mitackis’ documents numbered A1–A19 and Child Support submissions numbered C1-C222.

The legislative framework

The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act.
Section 98C of the Assessment Act establishes a three-step process to be satisfied: that there is a ground for departure; that it is just and equitable to depart; and that it is otherwise proper to make a departure determination. Once satisfied, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

Is there a reason to depart from the administrative assessment of child support?

Reason 3 – [Child 2’s] education

The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Subparagraph 117(2)(b)(ii) of the Assessment Act – commonly referred to as “Reason 3”– states as follows:
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected: …
(ii) because the child is being cared for, educated or trained in a manner that was expected by his or her parents.
The term “significantly affected” is not defined in the Assessment Act. While referring to this term in the context of Reason 3, in Potter & Burbage (SSAT Appeal) [2010] FMCAfam 1009, Riethmuller FM stated that when considering whether the costs of maintaining the child are “significantly affected” because the child is being educated in the manner that was expected by the parents, it is necessary to take into account not only the rate of child support but also the income of the parents.
Ms Mitackis said both parents had agreed to enrolling the children at [School] in [Suburb] which is a primary school from Prep to Year 6. The schedule of school fees shows the following:

Year	2022	2024[2]
Tuition fees annually	1 child	$1,615	$1,714
Resource Levy (per annum)	$440	$510
Activity Levy	$408	$525
iPad Levy	$180	$140
Capital Levy	$700	$750
Technology Levy	$440	$440
Parents and Friends (P & E) Levy	$40	$40
Total	$3,823	$4,119

[2] type="1">

The total cost of fees and levies for [Child 2] in Year 6 is $4,119. Ms Mitackis explained that [Child 2] had to repeat Year 5 last year and is currently in Year 6. As Mr Mitackis did not want to participate in the hearing the Tribunal had regard to the information he provided to the objections officer. Mr Mitackis agreed that for the children’s primary school education they would be educated at [School]. But Mr Mitackis had not signed the enrolment forms for secondary school. The objections officer writes in their Details of Objection Decision the following: [3]

In discussion of the application, Mr Mitackis stated when the decision was made to enrol the children at [School, Suburb], his circumstances were different. He indicated he did not oppose the children attending the school; however it is no longer within his financial capacity to contribute to the fees. In regards to [Child 1] attending secondary school in 2023, he advised he refused to sign the application form Ms Mitackis sent him as he cannot afford the fees. He clarified there is no joint intention for private secondary schooling.
[3] Page 13 of subsection 37(1) of the statement and documents.

The Tribunal is satisfied that [Child 2] is being educated in a manner intended by both parents. The Tribunal concludes that the costs of [Child 2’s] private school education is significant when compared with the cost of the child. The cost of [Child 2] based on the administrative assessment worked out on the basis of Mr Mitackis’ ATI for the 2020/2021 financial year of $42,250 for Mr Mitackis and Ms Mitackis’ 2020/2021 ATI of $32,064 for the 2020/2021 financial year is $2,304.[4] The cost of [Child 2’s] school fees are more than 50% of the cost of the child. The Tribunal is satisfied that the costs of school fees significantly affect the costs of maintaining [Child 2]. Accordingly, a ground provided for in subparagraph 117(2)(b)(ii) is established.

[4] This was worked out using the 2024 Child Support Calculator.

Would departure from the administrative assessment be just and equitable?

Having found that special circumstances exist such that the administrative assessment has resulted in an unjust and inequitable result, so a ground for departure is established in relation to subparagraph 117(2)(b)(ii) (Reason 3) of the Assessment Act, the next step for the Tribunal is to consider whether it is just and equitable to depart from the administrative assessment.
In deciding whether it is just and equitable, the Tribunal had regard to the matters set out in subsection 117(4) of the Assessment Act. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child over all commitments of the parents other than commitments necessary for self-support or the support of another person to whom they have a duty.

The proper needs of [the children]

In relation to the proper needs of the child, regard must be had 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 (subsection 117(6) of the Assessment Act).
Ms Mitackis said that neither children have any special needs and the education costs for [Child 2] is considered under Reason 3. As there was no mutual intent in relation to [Child 1’s] education, Ms Mitackis is meeting all expenses in relation to this. [Child 1] is a referee for [sport] on the weekends and earns about $40 weekly. But otherwise, Ms Mitackis confirmed that neither child has any income or assets of their own.
In considering the proper needs of the children Ms Mitackis did not identify further costs in addition to the costs of education that could be considered out of the ordinary. Ms Mitackis indicated weekly costs for the children’s activities to be $32.

The income, property and financial resources of Ms Mitackis

Ms Mitackis said she currently self-employed, she owns a vacation apartment, and she manages two other vacation rental properties owned by third parties. She maintains the premises including the management and cleaning of all three properties.
Ms Mitackis’ tax return for the financial year ending 30 June 2022 shows a taxable income of $39,339, from a business income of $76,337.[5] Ms Mitackis confirmed this was from her own rental property and the rental properties she manages. Business income reductions included depreciation expenses of $257, motor vehicle expenses of $2,835 and other expenses of $33,238. The net income from the business is $39,450 minus other work-related expenses of $3,165.[6]
[5] A10 of Ms Mitackis’ submissions.
[6] A12–A13 of Ms Mitackis’ submissions.
Ms Mitackis’ tax return for the financial year ending 30 June 2023 shows a taxable income of $32,238 from a business income of $80,447;[7] with total business expenses being $48,364 which includes interest $9,143, depreciation $90, motor vehicle expenses $4,086, repairs and maintenance $1,009, and all other expenses being $34,036.[8]
[7] A17 of Ms Mitackis’ submissions.
[8] A17 of Ms Mitackis’ submissions.
Ms Mitackis said she owns the home she lives in and has an outstanding home loan on this property of $43,000. She has a home loan on her vacation property with an outstanding home loan of $207,000.[9] On her Statement of Financial Circumstances (SOFC) Ms Mitackis indicates weekly gross income of $1,323 which includes family tax benefit (FTB) of $270 weekly. Excluding FTB, Ms Mitackis has indicated her weekly income is $1,053 or $68,796 annually.[10] She values her own home at $700,000 and the investment/vacation property at $300,000.[11] Ms Mitackis indicates $86,361 in superannuation and said she has not made any additional contributions to her superannuation for the 2022 and 2023 financial years.[12] Ms Mitackis’ tax returns for those periods confirm this. Ms Mitackis indicates liabilities of $253,300.[13] Ms Mitackis indicates average weekly household expenses to be $1,181 weekly or $61,412 annually.[14]
[9] A5 of Ms Mitackis’ submissions.
[10] A1-A2 of Ms Mitackis’ submissions.
[11] A4 of Ms Mitackis’ submissions.
[12] A5 of Ms Mitackis’ submissions.
[13] A6 of Ms Mitackis’ submissions.
[14] A8 of Ms Mitackis’ submissions.
Ms Mitackis said she does not have a legal duty to support anyone else. Ms Mitackis said her SOFC is an accurate reflection of her financial situation.

The income, property and financial resources of Mr Mitackis

Ms Mitackis’ submission was that Mr Mitackis’ income and financial resources were not adequately reflected in his ATI because he has access to income in addition to his [Employer] payments. Ms Mitackis also submitted that Mr Mitackis’ ATI reported from the ATO did not adequately reflect his ATI because of the decision of the Federal Court in Commissioner of Taxation v Douglas (Douglas) meant Mr Mitackis now has a higher net income as a result of the Douglas decision.[15]
[15] [2020] FCAFC 2020.
Ms Mitackis was also of the view that any assessment should take into account extra income Mr Mitackis received as a result of the Douglas decision, as well as income from his businesses. Submissions from Child Support provided a summary of the Douglas decision:
3. …found (amongst other things) that certain invalidity pension payments for veterans were superannuation lump sums, and not superannuation income stream benefits. The invalidity benefits being characterised as “superannuation lump sums” rather than “superannuation income stream benefits” meant the veterans concerned received a greater tax concession. Therefore, this decision financially benefitted relevant veterans who would (other things being equal):
a.continue to receive the same overall income and financial resources,
b.pay less or no tax on their superannuation benefits, and
c.receive significant tax refunds for previous periods in which they had paid marginal tax rates on their relevant superannuation benefits.
4. For child support purposes, the Douglas decision may reduce a veterans ‘adjusted taxable income (ATI) as worked out under section 43 of the … Assessment Act, for past current and future periods.
5. For such a veteran payer, who paid their assessed child support, the Douglas decision would likely result in a retrospective ATI education and an ‘overpayment’ debt owing to them and a corresponding ‘carers debt’ owed by the payee…. Normally, the Registrar would then be required to collect this carer’s debt from the payee, and reimburse it as owed to the veteran payer.
6. However, the Australian Government took action and implemented ‘the Douglas Policy’ as explained in the attached Registrar’s policy document and as similarly published by the Department of Social Services (DSS), ‘to make sure parents are not financially worse off as a result’ of the Douglas decision.
In applying the Douglas decision to departure determinations, Child Support policy provides:[16]
Decision makers should avoid making any retrospective amendments to an assessment (unless there are other independent of any Douglas remediation).
· A COA decision for a past period should generally exclude any Douglas decision impacts on taxable income and child support assessments that have been remitted through act of grace payments.
· As a result of the Douglas decision, veterans will, in most cases have lower ATI’s into the future (than they otherwise would have but for the Douglas decision) and will therefore have a lower child support obligation than their real financial circumstances would indicate. Therefore, it would be reasonable for the Registrar to prospectively consider the full breadth of a veteran’s financial circumstances (except for the act of grace payment) to determine the parent’s financial capacity to support their child(ren) in the COA process. (emphasis added)
….
16. Therefore, the Registrar respectfully submits that it is the Registrar’s Douglas policy to generally avoid making retrospective, backdated COA determinations, in cases already remediated by an act of grace payment and where there are no other relevant section 117(2) departure determinations.
17. However, in this case (as the other party was in arrears when the Douglas decision was implemented) there was no section 69B carers debt nor waiver of this debt and action of grace remediation ….
18. As reflected in the Order dated 18 January 2018 (and see T528), the decision maker decided backdating the requested COA only because of the Douglas policy and that this could have placed the other party in a position of financial hardship. It is not clear if all the section 117(2) were properly considered.
[16] C4–C5 of the Registrar’s submissions.
Ms Mitackis also wanted any change of assessment decision to be backdated to 1 February 2021 when Mr Mitackis’ ATI was amended.
As Mr Mitackis elected not to participate in the hearing the Tribunal had regard to the decision of the objections officer, the subsection 37(1) statement and documents, Ms Mitackis’ submissions and the submissions from Child Support.

Mr Mitackis’ tax return for the financial year ending 30 June 2022 shows Mr Mitackis received $24,886 from [Employer] (the lump sum superannuation amount); of this amount $11,888 was the untaxed component and $4,791 taxed and a tax-free pension of $9,799. Mr Mitackis’ ATI for the financial year ending 30 June 2022 is $47,312.[17]
[17] C18–C20
The Tribunal requested Child Support to obtain bank statements from the [Bank] for the period 1 June 2021 to 30 July 2023. The [Bank] account in Mr Mitackis’ name, ending in account number 2487, shows Mr Mitackis receives two payments, one which is a Total Permanent Incapacity Payment (TPI) which is a regular fortnightly payment as well as lump sum payment form his superannuation which is an invalidity payment paid in instalments (usually fortnightly). Payments into Mr Mitackis’ bank account for the period shows his TPI payments totalled $34,163.70 and his superannuation invalidity pension payments totalled $30,833.90. These payments paid into Mr Mitackis’ bank account totalled $64,997.60 net for the period 1 July 2021 to 30 June 2022.[18]
[18] C66–C128 of Child Support’s submissions.
For the period 1 July 2022 to 29 November 2022 the [Bank] ending in account number 2487 shows TPI payments totalling $19,018.20 and superannuation lump sum invalidity payments totalling $23,494.20.[19] Mr Mitackis has now closed this [bank] account.
[19] C131-C146 of Child Support’s submissions.
The Tribunal notes that Mr Mitackis had credits of $86,235.89 into his account for the period 1 July 2021 to 30 June 2022, subtracting his TPI and invalidity pension payments there was an additional $21,238.29 deposited into Mr Mitackis’ account for this period. Ms Mitackis said Mr Mitackis is also involved in two businesses; [Company 1] and [Business]. Mr Mitackis’ involvement with [Company 2] remains unclear.
In relation to [Company 1] the Tribunal is satisfied based on the information from the CEO of [Company 1] that Mr Mitackis has invested about $80,000 in the development of this business, and that some repayments have been made to Mr Mitackis. The Tribunal notes that the following repayments were made to Mr Mitackis on 24 February 2022 of $1,139.72.[20]
[20] C110 of Child Support’s submissions.
Of these deposits the Tribunal has subtracted the following amounts as it is satisfied that Mr Mitackis has had repayments of the loan from [Company 1] as well as the amounts deposited, as refunds from the ATO in 2022 likely as a result of the Douglas decision:

Deposits
Deposits for the period 1 July 2021 to 30 June 2022[21]	$86,235.90
Minus TPD and pension payments	$64,997.60
Minus ATO tax refunds	$12,181.06
Minus repayment from [Company 1]	$1,139.72
Total	$7,917.52

[21] C66–C128 of Child Support’s submissions.

In relation to these companies Mr Mitackis told the objections officer that he is not allowed to work more than eight hours a week to remain on TPI payments. The objections officer writes that Mr Mitackis stated:
·The company of which he is recorded as director from April 2022 is a profit for purpose community engagement organisation. When he received funds in property settlement, he purchased a [vehicle]. He began taking [specified people] out to [Location] for free to make them happy. It helped him with his PTSD. With COVID and the resulting increase in the price of fuel, he had to sell the [vehicle]. He used some of the funds to purchase products, which he sells under the profit for purpose company. He sits at shows / markets and talks to people; it is akin to a [charity] stand where the public might purchase something for the benefit of [specified people] and their families. He has given funds to [a community project] and to victims of the Brisbane floods. He produces a Podcast, which is available on Spotify, to assist family members of [specified people]. He does not keep particular records of income in to the organisation and donations out; although he would have copies of social media posts where recipients thank him for donations. Some of the sales go to purchasing more product to continue the venture. He has been commended by [Employer] for the work he is doing. His website [URL] will provide all the information required in respect of his business being a profit for purpose organisation.
·The company/ies of which he is recorded as director from 18 June 2021 is in debt of around $200,000. He took on the role of director to help the owner, whose former business partner had entered into debts without his knowledge. Mr Mitackis states he had become a friend of the owner originally as a customer of the business. He was unaware of his liability for the debt of the company before agreeing to become a director. He had loaned $80,000 from his property settlement funds to the company to purchase a container load of product. He has not yet been repaid his loan. The company cannot sell its products overseas until the associated company (which holds the intellectual property of the business) is out of debt.
The objections officer does not identify the companies by name but based on the information before it, the Tribunal is satisfied that Mr Mitackis is the director of [Company 3] and [Company 1]. In relation to [Business] the Tribunal notes from the website [Name] that Mr Mitackis states that 20% of the business profits will go to QLD RSL and 10% will be donated to Cairns Community in support of anyone suffering from mental health issues.[22]
[22] [URL]
In relation to Mr Mitackis’ statements to the objections officer the Tribunal accepts he sold the [vehicle] which he purchased using the funds from the property settlement. The Tribunal notes that Mr Mitackis received $15,500 into his CBA account on 9 May 2021 which was for the sale of the [vehicle].[23]
[23] C53 of Child Support’s submissions.
Mr Mitackis received a tax refund as a result of the Douglas decision on 3 February 2022 of $6,238.21 and on 16 February 2022 of $5,945.75. The Tribunal is unclear about the reason for the second refund and what year that relates to but accepts it is likely to be for 2021 financial year and is also a refund as a result of the Douglas decision.[24]
[24] C105 and C108 of Child Support’s submissions.
Ms Mitackis was also of the view that Mr Mitackis is receiving rent from [specified people] whom he allows to stay with him. In response to this during the objections process Mr Mitackis said:[25]
In relation to having a boarder / renting a room in his home, this is not correct; he has, on occasion, let a few [specified people] stay for 2-3 nights if they were in need whilst he helped them sort accommodation.
[25] Page 14 of the subsection 37(1) statement and documents.
Mr Mitackis’ bank statements for the period 1 July 2021 to 9 February 2022 shows transfers from [Mr A] for rent paid during the period 13 July 2021 to 9 February 2022 which shows ad hoc weekly payments of $160 per week for rent. The last payment was received for the period 9 February 2022 to 23 February 2022.[26] There was also regular amounts paid by [Mr B] totalling $1,580 initially on a fortnightly basis from 16 July 2021 to 13 March 2022, but from 28 September 2021 these payments became irregular and cease from 13 March 2022.[27]
[26] C67-C106 of Child Support’s submission.
[27] C67-C106 of Child Support’s submission.
The Tribunal notes many of the rental payments included repayments for incidentals that Mr Mitackis seems to have paid for and then been reimbursed for. The Tribunal will not treat these amounts as income notwithstanding that some of these funds appear to be rent paid by [Mr A and Mr B], this is because there was no consistency to the payments made to Mr Mitackis. There was no other evidence before the Tribunal that supported Ms Mitackis’ view that Mr Mitackis’ was renting a room to third parties on a regular basis, and if he was, that he was being paid for this. The Tribunal is satisfied based on the evidence before it that Mr Mitackis’ is not making a profit from having people sharing the house with him on the occasions that he does this. The Tribunal accepts Mr Mitackis’ statement made to the objections officer in relation to this.

Conclusion

The result of the Douglas decision means that Mr Mitackis’ TPI payments are treated as superannuation lump sum payments and taxed at 15%. His invalidity pension has a tax-free component, which for the financial year ending 2022 was $9,799. The Tribunal is satisfied that Mr Mitackis receives a net income of around $64,997.60 which are his TPI payments and his pension. Bank statements show both an increase in TPI and pension payments which seem to be indexed, as the amounts paid to Mr Mitackis show an increase from 2021 to 2022. The Tribunal is satisfied that setting Mr Mitackis’ income to $73,000 would not cause hardship to Mr Mitackis because this amount on balance more accurately reflects his financial resources.
Ms Mitackis also indicates business expenses of $33,238 for the financial year ending 2022 and $34,036 for the financial year ending 2023. She indicates weekly expenses of $1,181 (or $61,412) annually, with a weekly income of $1,323, which includes family assistance and child support. She indicates an income from the business of $850 weekly (or $44,200 annually). The Tribunal is satisfied that Ms Mitackis’ personal exertion in managing the properties would probably account for 50% of any deductions.
The Tribunal is satisfied that Ms Mitackis’ ATI also does not reflect the financial resources available to her given that Ms Mitackis already has deductions for specific business expenses. The amounts of $33,238 and $34,026 for the 2022 and 2023 financial year represent other business expenses which are not identified. Deductions have already occurred for interest, motor vehicle running costs, depreciation and repairs.
The Tribunal considered whether business deductions for Ms Mitackis are reasonable in the circumstances when considering the issues of just and equitable (see paragraph 21 of these Reasons). In Voss & Child Support Registrar & Anor (SSAT Appeal),[28] the Court commented on the common situation of a self-employed person’s taxable income not corresponding with their income or financial resources for child support purposes:
…where simple reference to a person's tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn't properly reflect the realistic capacity of the person to provide financial support for their children.
[28] [2009] FMCAfam 1296.
The courts have also concluded that a “forensic audit” or major investigation of the financial circumstances of a party is not required to be undertaken. Rather, there must be satisfaction on the balance of probabilities as to the party’s income, property and financial resources of either parent.[29]
[29] See for example Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305.
The Tribunal accepts that a proportion of the business deductions represent a financial resource available to Ms Mitackis, particularly given she indicates annual expenses above her ATI. Accordingly, the Tribunal accepts in the absence of further information that 50% of the business expenses are a financial resource available to Ms Mitackis. For the financial year ending in 2022 this represents $16,619. For the financial year ending in 2023 this represents $17,013. The Tribunal has determined that 50% is reasonable given Ms Mitackis indicates personal expenses of $61,412 annually. The Tribunal has come to this conclusion because following expenses, Ms Mitackis’ personal exertion is what is used to manage the properties.
Accordingly, the Tribunal is satisfied that Ms Mitackis’ ATI is more accurately reflected as $55,958 ($39,339 plus $16,619) for the financial year ending 2022, and $49,251 ($32,238 plus $17,013) for the financial year ending 2023.
For the financial year ending 2023 bank statements show that Mr Mitackis received a total of $64,997.60 in pension payments and TPI combined. He also received deposits totalling $7,917.52 which the Tribunal has treated as an additional financial resource available to Mr Mitackis. On balance the Tribunal accepts on balance this represents profit from the business to Mr Mitackis.
For the financial year ending 2024 Mr Mitackis has received $13,677.60 pension payments and $13,465.70 in TPI for the period 1 July 2023 to 29 November 2023. It is likely Mr Mitackis will receive TPI and pension payments totalling about $65,153.80 in the 2023/2024 financial year. On balance the Tribunal accepts that Mr Mitackis’ financial resources for the 2023 financial year was equivalent to an income of around $73,000 and is likely to be similar for the 2024 financial year (see Table in paragraph 35 of these Reasons).
The Tribunal will commence the assessment on the same date as determined by the objections officer, this is because Child Support had a policy that no person would be worse off as a result of the Douglas decision. In general Child Support has found that decision makers should apply the following principles when considering retrospective assessments following the Douglas decision:[30]
….
·Any tax refunds associated with a Douglas income (nothing that these refunds are significantly higher than what we would consider standard refunds) should not be taken into account as a financial resource, and/or considered in determining the parent’s financial capacity.
In ordinary circumstances, Services Australia does not consider a tax refund as a special circumstance that makes a parent’s child support assessment unfair and so would not make a change of assessment on this basis a alone. A refund that results from the Douglas decision (regardless of the quantum) should not be considered differently, that is, should not be considered a financial resource.
·Decision Makers should avoid making any retrospective assessments (unless there are other circumstances independent of any Douglas remediation).
oCOA decision for a past period should generally exclude any Douglas decision impacts on taxable income and child support assessment which have been remediated through an act of grace payment.
oAs a result of the Douglas decision, veterans will, in most cases, have lower ATIs into the future (than they otherwise would have but for the Douglas decision) and will therefore have a lower child support obligation than their real financial circumstances would indicate. Therefore, it would be reasonable for the Registrar to prospectively consider the full breadth of a veteran’s financial circumstances (except for the act of grace payment) to determine the parent’s financial capacity to support their child(ren) in a COA process.
[30] C13 of Child Support’s submissions.
The Tribunal considered when the departure determination should commence given the particular circumstance of the case and the submissions received from Child Support and has determined that the departure determination period set by the objections officer is correct. This is because in accordance with the policy directions in relation the Douglas decision, neither parent should be worse off as a result of this decision.
However, the Tribunal sets aside the objections officer’s decision as follows:
·For the period 21 March 2022 to 30 June 2025 Mr Mitackis’ ATI is set at $73,000.
·For the period 21 March 2022 to 30 June 2023 Ms Mitackis’ ATI is set at $55,958.
·For the period 1 July 2023 to 30 June 2025 Ms Mitackis’ ATI is set at $49,251.
The decision of the objections officer in relation to the school fees for [Child 2] remains in place.

Would there be resulting hardship from a departure from the administrative assessment?

Subsection 117(4) of the Assessment Act requires the Tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the parents have a duty to support.
The Tribunal finds that, based on the evidence and information provided to Child Support and the Tribunal, it is unlikely that either parent will experience hardship from this departure determination. This is because there is evidence that Mr Mitackis receives some small payments from conducting his business but these are likely be in the vicinity of $7,900 annually and this doesn’t take into account the costs associated with the purchase of goods for his business. The annual costs of sales in the benchmark for clothing are around 78% annually.[31] Any additional income derived by Mr Mitackis from the business activities are likely to be minimal.
[31]>
The decision of the Tribunal will leave the decision of the objections officer in relation to [Child 2’s] school fees in place. Setting Mr Mitackis’ income to $73,000 and increasing Ms Mitackis’ income will increase Mr Mitackis’ child support payments from around $5,300 annually when compared with the administrative assessment in place and y increase the annual amount of child support set by the objections officer from $9,000 annually to around $12,000 annually for the departure period.
The Tribunal is satisfied that Mr Mitackis’ income from his TPI and veteran’s pension is higher than reflected in this tax return and this will be the case on an ongoing basis. The Tribunal is also satisfied that the decision will not cause hardship for either Mr Mitackis, Ms Mitackis or the children because the decision more adequately reflects the financial resources available to both parents.

Is it otherwise proper to make a particular departure determination?

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 Assessment Act. Subsection 117(5) of the Assessment Act sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. Subsection 117(5) focuses on the balance of support carried between the parents on the one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Assessment Act indicates that the Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support. The Tribunal is satisfied that the decision more accurately reflects the income and financial resources of both parents.
The Tribunal notes that it is open to either party to lodge further change of assessment applications should 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 as follows:

For the period 21 March 2022 to 30 June 2025 Mr Mitackis’ ATI is set at $73,000.
For the period 21 March 2022 to 30 June 2023 Ms Mitackis’ ATI is set at $55,958.
For the period 1 July 2023 to 30 June 2025 Ms Mitackis’ ATI is set at $49,251.

The decision of the objections officer in relation to the school fees for [Child 2] remains in place.