Muarken and Ayache (Child support)

[2024] AATA 2532

Muarken and Ayache (Child support) [2024] AATA 2532 (13 May 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/PC026968

APPLICANT:  Mr Muarken

OTHER PARTIES:  Child Support Registrar

Ms Ayache

TRIBUNAL:Member S Irvine

DECISION DATE:  13 May 2024

DECISION:

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

For the period 21 November 2022 to 30 June 2023 the adjusted taxable income for Mr Muarken is varied to $65,681;

For the period 1 July 2023 to 30 November 2024 the adjusted taxable income for Mr Muarken is varied to $93,360;

For the period 1 December 2022 to 30 November 2024 the annual rate of child support payable by Mr Muarken is increased by $1,536 in respect of special needs for [Child 1].

CATCHWORDS

CHILD SUPPORT – departure determination – ground for departure – special circumstances – financial resources – cost of maintaining the children – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

1. Mr Muarken and Ms Ayache are the parents of [Child 2] (born January 2007) and [Child 1] (born October 2008). A child support assessment for the children commenced on 27 September 2019. Mr Muarken is assessed as liable to pay child support to Ms Ayache. Care of the children is reflected in the assessment as 100% to Ms Ayache.

2. On 18 October 2022 Services Australia – Child Support (Child Support) issued a notice of assessment for a child support period commencing on 1 September 2022. Pursuant to that assessment, Mr Muarken was required to pay an annual rate of child support of $1,650, based on Mr Muarken’s 2021/2022 adjusted taxable income of $33,071 and Ms Ayache’s 2021/2022 adjusted taxable income of $136,613.  

3. On 21 November 2022 Ms Ayache made an application for a departure determination, seeking an increase in child support payments due to the special needs of the children, and due to Mr Muarken’s income, assets and financial resources. Mr Muarken did not agree that there should be a change to the administrative assessment.

4. On 15 May 2023 a Child Support decision-maker decided to depart from the formula assessment and made the following decision:

   ·     In the period 1 November 2022 to 31 December 2024 Mr Muarken’s adjusted taxable income was set at $74,464; and

   ·     In the period 1 May 2023 to 30 April 2024 the annual rate of child support otherwise payable by Mr Muarken was increased by $3,840.

   This resulted in a child support assessment under which Mr Muarken was required to pay an annual rate of child support of $12,178 in the period from 1 November 2022 to 30 April 2023, and an annual rate of child support of $16,018 in the period from 1 May 2023 to 30 November 2023.

5. On 15 June 2023 Mr Muarken objected to the decision, stating that the income set in the decision was too high, and resulted in a rate of child support that he could not afford to pay.

6. On 30 July 2023 a Child Support objections officer partly allowed the objection. The objections officer set aside the decision made on 15 May 2023 and replaced it with the following decision:

   ·In the period 1 February 2023 to 31 January 2025 Mr Muarken’s adjusted taxable income was set at $99,812; and

   ·In the period 1 February 2023 to 31 January 2025 the annual rate of child support otherwise payable by Mr Muarken was increased by $1,536.

   As a result of that decision, according to the most recent notices of assessment issued by Child Support, Mr Muarken is required to pay an annual rate of child support of $19,094 in the period from 1 February 2023 to 31 August 2023, and an annual rate of $18,940 in the period from 1 September 2023 to 30 November 2024.

7. On 14 September 2023 Mr Muarken applied to this Tribunal for a review of the objection decision. A hearing into Mr Muarken’s application was held on 13 May 2024. Mr Muarken and Ms Ayache attended by telephone and gave sworn evidence.

8. I had before me the statement and documents provided by Child Support pursuant to subsection 37(1) of the Administrative Appeals Tribunal Act 1975, numbered 1–653, and documents provided by Mr Muarken (marked A1 to A143) and by Ms Ayache (marked B1 to B49) as a result of written directions issued on 2 April 2024. All of those documents were sent to the parties prior to the hearing. I also had before me a written submission provided to the Tribunal by Mr Muarken on 8 May 2024 and a written submission provided to the Tribunal by Ms Ayache on the day of the hearing. A copy of those submissions is attached to this decision.

9. During the hearing, I also heard sworn evidence from [Mrs A], who is the bookkeeper who has prepared the business accounts for Mr Muarken’s business.

LEGISLATIVE FRAMEWORK AND ISSUES

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula, which takes into account factors such as the number and age of children, the level of care provided by each parent and the income of each parent. Either the liable parent or the carer entitled to child support may apply to the Child Support Registrar (the Registrar) for a determination to depart from the formula assessment under Part 6A of the Act (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the assessment and establishes a three-step process. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied that a ground for departure exists and that it is just and equitable and otherwise proper to make a particular departure determination.

3. Subsection 98C(3) of Act provides that subsections 117(4) to (9) of the Act apply, and the Tribunal must consider these when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

4. The issues which arise in this case are:

5. whether a ground exists to depart from the administrative assessment; and if so

6. whether any proposed departure is just and equitable as regards the children, Mr Muarken and Ms Ayache; and

7. whether any proposed departure is otherwise proper.

CONSIDERATION

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

1. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Act. 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 any of the determinations prescribed in section 98S of the Act.

2. In the legislation, each ground for departure is prefaced by the words “in the special circumstances of the case”. When considering whether one or more grounds exist, the Tribunal must be satisfied that there are “special circumstances” in the case. The phrase “special circumstances of the case” is not defined in the legislation. The Family Court in the decision in Gyselman and Gyselman (1992) FLC 92–279, stated that the phrase:

   is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.

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

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

2. The adjusted taxable income used for Mr Muarken in the child support assessment for the period commencing 1 September 2022 is, in accordance with the provisions of the Act, based on his 2021/22 taxable income of $33,071. I note that a new child support period commenced in this child support case on 1 September 2023, and the adjusted taxable income that would ordinarily be used in the assessment from that date would be Mr Muarken’s 2022/23 taxable income, which is $60,781.

1. It is not disputed that in the 2021/22 financial year Mr Muarken had a taxable income of $33,071, and in the 2022/23 financial year he had a taxable income of $60,781. According to the 2022/23 income tax return submitted by Mr Muarken, his 2022/23 taxable income is composed of the net earnings from his business in the amount of $60,756, plus a small amount of bank interest.

2. Mr Muarken explained that he works as a self-employed [occupation 1]. He operated his business under a company structure until 2019, when he and Ms Ayache separated. Mr Muarken said he was advised by the company’s accountant to “moth ball” the company at that time until he and Ms Ayache reached a settlement on their joint assets. As a property settlement has now been reached, Mr Muarken explained the company structure was reinstated in April this year.

3. According to the profit and loss statement provided to the Tribunal, and to Mr Muarken’s 2022/23 tax return which he also provided, Mr Muarken’s business generated a net profit of $60,756 in the 2022/23 financial year. Mr Muarken also provided a profit and loss statement for the period 1 July 2023 to 31 March 2024, which shows a net profit for that period of $71,163.

4. Mr Muarken’s evidence, and also the evidence of [Mrs A], is that while the business operated as a sole proprietorship Mr Muarken would manage his personal expenses by way of drawings from the business. Mr Muarken explained that he would generally transfer funds from the business bank account into his personal accounts, and this would be accounted for as “owner’s drawings” in the business accounts. He said that on occasion he did spend money directly from the business account on a personal expense, but that expenditure was also accounted for as owner’s drawings. [Mrs A] gave evidence that in the 2022/23 financial year Mr Muarken drew a total of $40,079.90 from the business for his personal use.

5. It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott and Scott [1994] FLC 92–457; Carey and Carey [1994] FLC 92–489). In particular, it is not unusual that a person who runs a business may benefit from personal use of business assets, including motor vehicles, computers and mobile phones.

6. Mr Muarken’s evidence is that he uses his business vehicle and his mobile phone for both business and personal use. He said that he doesn’t know how this is accounted for but he thinks that 20% of the total costs are attributed to his owner’s drawings. [Mrs A’s] evidence was that Mr Muarken’s personal use of the business motor vehicle was attributed to his owner’s drawings, but the mobile phone is accounted as 100% for business use. [Mrs A] said that the motor vehicle usage is attributed to the owner’s drawings at the end of the financial year when the final accounts are prepared.

7. I have considered the business expenses claimed in Mr Muarken’s 2022/23 tax return. The total amount of business expenses claimed for the year is $46,717. The major expenses are material and supplies and motor vehicle costs. The remainder of the expenses claimed are not remarkable. I note that there are no claims for depreciation.

8. I am satisfied that in the 2022/23 financial year Mr Muarken’s income from his business was $60,756. According to the business worksheet in Mr Muarken’s 2022/23 tax return the business incurred motor vehicle costs of $16,776 and telephone costs of $388 in that year. I am satisfied that 20% of those costs should be attributed to Mr Muarken’s personal usage. Grossed up in accordance with Mr Muarken’s marginal tax rate, that equates to an additional benefit to Mr Muarken of approximately $5,080, and I am satisfied that amount should be added to his adjusted taxable income for the 2022/23 financial year. This will result in an adjusted taxable income for Mr Muarken in the 2022/23 financial year of $65,861.

9. In relation to the current financial year, Mr Muarken and [Mrs A] gave evidence that in the period from 1 July 2023 to 31 March 2024 the net earnings of the business stand at $71,162. [Mrs A’s] evidence that these are unaudited figures and so can really only be considered to be an estimate, as the final financial position will not be known until the end of the financial year. [Mrs A] also explained that income is not evenly spread through the year, and can fluctuate significantly from month to month.

10. Mr Muarken and [Mrs A] gave evidence that since 1 April 2024 the business has operated under a company structure. From 17 April 2024 Mr Muarken has drawn a regular salary from the company in the amount of $1,710 per week (equivalent to an annual salary of $88,920). [Mrs A] said that the company profit for the month of April 2024 (on preliminary figures) stands at $1,600, noting that this takes into account the fact that Mr Muarken is now drawing a regular salary. [Mrs A’s] evidence was that the $1,600 is only a preliminary figure and there may be some costs that haven’t been factored in. [Mrs A] also said that she has not yet discussed with Mr Muarken what will happen with any net profit the company makes at the end of the financial year, but [Mrs A] said it is likely that any additional profit will either be retained in the business or paid to Mr Muarken as a bonus at the end of the financial year.

11. [Mrs A] said that in the 2023/24 year, up to 17 April 2024, Mr Muarken drew approximately $70,000 from the business for his personal use. From 17 April there will be no further owner’s drawings, as Mr Muarken is now drawing a salary from the company.

12. Mr Muarken provided bank statements from his business and personal bank accounts covering the period from 1 July 2023 to 31 March 2024, which disclose transfers from his business account to personal accounts, and some other payments that appear to be personal expenditure including regular payments for pet insurance among other payments. An analysis of those transfers appears to disclose drawings on that account for Mr Muarken’s personal use of approximately $69,100, which is broadly consistent with [Mrs A’s] evidence that Mr Muarken had drawn approximately $70,000 in the period to 18 April 2024. In the absence of final income and expense figures for the business, I am satisfied that Mr Muarken had financial resources available to him to meet his personal expenses of $70,000. I am satisfied that a portion of those drawings has been set aside by Mr Muarken in a personal bank account to pay tax liabilities. I note that financial resources of $70,000 over the period from 1 July 2023 to 18 April 2024, a period of approximately 42 weeks, equates to an average weekly income of $1,667 per week or an income of $86,684 per year.

13. A profit of $71,162 to 31 March 2024 equates to an average monthly profit of $7,906 per month. For the period 1 April 2024 to 30 June 2024 the overall company profit will be less, taking into account that Mr Muarken now draws a wage from the business. However, I am satisfied that in addition to the weekly wage that he draws, Mr Muarken will also have control of, and access to, any net profit the company makes. I am satisfied that it is reasonable to find that Mr Muarken has access to financial resources in the 2023/24 financial year equivalent to at least $90,000.  

14. According to the profit and loss statement for the period 1 July 2023 to 31 March 2024 provided by Mr Muarken, the business incurred motor vehicle costs of $11,175 and telephone costs of $200 in that nine-month period. I am satisfied that 20% of those costs should be attributed to Mr Muarken’s personal usage. Grossed up in accordance with Mr Muarken’s marginal tax rate, that equates to an additional benefit to Mr Muarken of approximately $280 per month, or $3,360 over the year, and I am satisfied that amount should be added to his adjusted taxable income for the 2023/24 financial year. This will result in an adjusted taxable income for Mr Muarken in the 2023/24 financial year of $93,360.

15. I am satisfied that in both the 2022/23 and 2023/24 financial years Mr Muarken’s drawings from the business has been less than the profit made by the business. On that basis I am satisfied that it is more appropriate to assess his adjusted taxable income on the net profit of the business plus any additional benefits he obtains from the business in the form of personal use of his car and mobile telephone, rather than on his drawings from the business.

16. Incomes of $65,861 in the 2022/23 financial year, and at least $93,360 across the 2023/24 financial year are significantly higher than the incomes that would ordinarily be used for Mr Muarken in the child support assessment under the provisions of the Act, being $33,071 in the period commencing 1 September 2022 and $60,781 in the period commencing 1 September 2023. I am satisfied on that basis that special circumstances do exist in this case, and that the administrative assessment results in an unfair outcome. I find that a ground for departure is established pursuant to subparagraph 117(2)(c)(ia) of the Act.

17. Ms Ayache has also raised a question as to Mr Muarken’s earning capacity. Subsection 117(7B) of the Act provides that a determination that a parent’s earning capacity is greater than is reflected in his or her income may only be made if:

    (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.

18. Mr Muarken told me that since he and Ms Ayache separated in 2020 he has struggled with mental health problems, and during some years he did work less than he had previously because of his mental health issues, and that this was reflected in his lower taxable incomes particularly in the 2020 and 2021 financial years. However, his evidence is that more recently his mental health has improved and he said that in the 2022/23 financial year he was working as much as he was able to, according to the work that was available. He said that in the 2022/23 he was generally working six days per week and generally working about eight hours per day.

1. I note that Mr Muarken’s income in the 2022/23 year of $60,781 was higher than the taxable incomes declared by Mr Muarken since at least the 2018/19 financial year. There is no evidence before me to suggest that Mr Muarken was working a reduced number of hours compared to the normal number of hours per week that constitutes full-time work for his occupation of [occupation 1]. There is also no evidence before me suggesting that Mr Muarken has not worked despite ample opportunity to do so, or that he has changed his occupation, industry or working pattern. On that basis, I am satisfied that I am not able to make a determination that Mr Muarken has earning capacity that is greater than is reflected in this income.

Is it just and equitable to make a particular departure determination?

1. As I am satisfied that there is a ground to depart from the administrative assessment of child support, I must next consider whether it is fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This requires me to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, including the needs of the children, the assets, liabilities, income and commitments of both parents, and any hardship that would be caused by departing or not departing from the formula assessment. I do not propose to discuss every one of those factors in detail, but will discuss those I consider pertinent to this application (Gyselman).

The needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parent other than commitments necessary for self-support or the support of another person the parent has a duty to maintain.

2. In determining the proper needs of [Child 2] and [Child 1] it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs of each of the children (subsection 117(6) of the Act). Ms Ayache gave evidence that the children are attending a public high school in Perth. During his first year at the school [Child 2] was boarding, but when [Child 1] was also accepted into the school Ms Ayache made the decision to move to Perth to be closer to the school. The parents agreed that [Child 1] is receiving necessary orthodontic treatment, and Ms Ayache’s evidence is that the total cost of that treatment is approximately $7,680 as outlined in the account from [Orthodontist A] that was submitted by Ms Ayache to Child Support. Mr Muarken did not dispute that cost. I note that [Child 2] has [a specified allergy], and some costs are incurred in respect of that condition. Child Support, in their decisions, estimated that the costs associated with [Child 2’s] condition are around $355 per year, and Ms Ayache’s evidence at the hearing is that she did not disagree with that estimate.

3. In her statement of financial circumstances Ms Ayache listed total weekly household expenses of $2,930. The statement of financial circumstances does not list separate expenses for the children. At the hearing, Ms Ayache said that some of the expenses have increased. In particular, food and grocery costs have increased and she estimated her weekly grocery bill to be between $380 and $450 per week. Her rent is now $900 per week, having increased by 27% since she moved in two years ago. She has estimated a cost of $150 per week for medical, dental and optical costs, and this takes into account payments for [Child 1’s] orthodontic treatment and also costs associated with [Child 2’s] EpiPens and desensitisation program, as well as Ms Ayache’s own medical needs. Ms Ayache has estimated education expenses for the children at $150 per week and children’s activities of $65 per week. There are no discretionary expenses such as entertainment, hobbies or books and magazines. Taking into account a portion of general household costs including rent, groceries and household supplies, utilities, telephone, vehicle expenses including petrol, clothing and shoes and medical expenses, as well as the amounts listed for education expenses and children’s activities, I calculate that the weekly expenses incurred by Ms Ayache for [Child 2] and [Child 1] to be approximately $1,140, or approximately $59,280 per year.

4. Mr Muarken has not listed any expenses for [Child 2] and [Child 1] in his statement of financial circumstances. However, in his submissions he did outline a number of costs that he says he has paid for the children since 2020. Relevantly to this review, Mr Muarken said that he has incurred the following costs for the children (in addition to child support paid):

   ·in the 2022 calendar year $2,064 for bike parts, dental costs for [Child 2], pocket money, [sport and music], equating to an average of approximately $39 per week;

   ·in the 2023 calendar year $3,727 for school fees, pocket money, [dentist and sports], uber rides and bus fares, equating to an average of approximately $71 per week;

   ·in the 2024 calendar year-to-date $1,886 for pocket money, [[sport], driving lessons, uber rides and bus fares, equating to an average of approximately $94 per week (noting this includes pocket money of $10 per week for each child).

5. Ms Ayache also said at the hearing that she expected there may be further costs associated with [Child 1’s] orthodontic treatment in the near future, but at the time of the hearing she had not yet had confirmation of necessary additional treatment or costs.

6. In considering the proper needs of the children, the Tribunal may also have regard to published guidelines as to the needs and the costs of children as used in the administrative assessment (Eades and Cadell (SSAT appeal) [2009] FMCAfam 275). I have considered the Costs of Children Table. The administrative formula calculates the cost for two children aged over 13 with the combined child support income of Mr Muarken and Ms Ayache to be approximately $43,000 per year (based on an adjusted taxable income for Mr Muarken of $93,360 and Ms Ayache’s adjusted taxable income for the 2021/22 financial year of $136,613). In addition it is acknowledged that both children have some additional medical costs, and in particular there are necessary expenses of $7,680 in relation to [Child 1’s] orthodontic treatment.

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

1. As I have noted, I am satisfied that Mr Muarken has income and financial resources available to him which exceed the income reflected in the formula assessments. I have found that the financial resources available to Mr Muarken in the 2022/23 financial year are equal to approximately $65,861, and the financial resources available to Mr Muarken in the 2023/24 financial year are equal to approximately $93,360. It is difficult to accurately predict what income and financial resources may be available to Mr Muarken in the future. Mr Muarken’s evidence is that in recent months he has been working excessive hours to enable him to meet the child support liability, and that that level of work is unsustainable in the longer term. However, Mr Muarken has recently made the decision to pay himself a salary of $86,684 in the new company structure, suggesting that he expects the company’s capacity to pay him at that level to continue in the immediate future.

2. In his statement of financial circumstances Mr Muarken has listed average weekly expenses for himself of $357. At the hearing Mr Muarken said that he shares a home with his partner, and the expenses listed in his statement of financial circumstances represents his share of the household expenses. He has listed other personal expenditure of $1,248.36 per week, made up of income tax of $825, insurance of $15.36 and child support payments of $408.83. He lists assets of $240,183, including funds in bank accounts totalling $234,183. His total liabilities are $62,150 comprising unpaid tax amounts and a business loan of $51,000. At the hearing Mr Muarken said the loan has now been paid off from his personal funds, which he loaned to the business to repay the loan.

3. I note that, taking into account the income set out by Mr Muarken in his statement of financial circumstances of $1,760 per week, and his total weekly expenses of $1,605, Mr Muarken has excess income of at least $155 per week, even after he has paid the currently assessed child support liability of $353.10 per week.

4. In her submissions to the Tribunal Ms Ayache stated that she believed Mr Muarken was paying a minimal amount of rent on his property due to a ‘work for rent’ private arrangement whereby Mr Muarken carries out property maintenance and building works on the property he rents for four hours per week, which Ms Ayache calculated to be equivalent to approximately $15,000 per year. Mr Muarken denied any such arrangement. His evidence is that he and his partner live in a very run-down property. Mr Muarken said he does have a low rent because of the run-down state of the property, and when he first moved in the rent was a bit lower and he did do some work on the property to try to bring it up to a liveable standard. Initially he and his partner paid rent of $400 per month for the property. The rent has now increased to $500 per month. Mr Muarken said he is no longer carrying out any work on the property as he no longer has time, but the rent is still relatively low due to the condition of the property. I am not satisfied that there is any evidence that Mr Muarken’s work on the rental property represents a significant financial resource that needs to be taken into account for the purposes of the child support assessment.

5. Ms Ayache said in her submissions to the Tribunal that Mr Muarken is the co-founder of a company called [Business 1], which operates as a not-for-profit entity, and that Mr Muarken received payments from that company. She detailed an amount of $190 that she says was received by Mr Muarken on 27 January 2024. Mr Muarken’s evidence is that he does not receive any significant income from [Business 1], and there is no evidence before me to suggest that he does.

6. Ms Ayache also alleged in her submissions to the Tribunal and at the hearing that Mr Muarken and his partner have owned a property in [Town 1] since the beginning of 2023 and are intending to build on that property. She said she was aware of that because she had been told by a member of the [Town 2] community, and because her brother had been informed by a third party that Mr Muarken had requested some planning work on the property. At the hearing Mr Muarken said that the property in question was purchased by his partner and he does not have any legal interest in the property. The only improvements they have done to that property is to put in a rainwater tank and some trees. Mr Muarken said that at the moment he can’t afford to build or buy a house, so for the moment he expects to continue renting. There is no evidence before me showing that Mr Muarken has any interest in a property in [Town 1], and I am unable to make any finding that Mr Muarken has any assets or financial resources other than the ones previously described in these reasons for decision.

7. The financial circumstances of Ms Ayache are more predictable. Ms Ayache is a PAYG employee. In the 2022/23 financial year she received taxable income from her employer of $119,154 and she also had a reportable fringe benefit amount of $17,000. In addition Ms Ayache has a rental property from which she received a taxable profit of $29,059 in the 2022/23 financial year, from a gross rent of $45,100. An adjusted taxable income for the purposes of the child support formula is the total of the person’s taxable income plus the components set out in subsection 43(1) of the Act, which includes the person’s reportable fringe benefits total for the year of income. I am satisfied that, taking into account the components set out in subsection 43(1), the adjusted taxable income for Ms Ayache for the 2022/23 financial year is $154,374.

8. Ms Ayache’s payslips indicate that Ms Ayache is employed on a full-time salary of $125,260 per year. Until 24 March 2024 she received a taxable amount per fortnight of $4,577.63 (plus an amount of leave loading in the fortnights ended 10 March and 24 March), and received a salary sacrificed amount of $345.45 per fortnight. Beginning in the fortnight ending 7 April 2024 Ms Ayache’s taxable amount decreased to $4,411.64 and her salary sacrificed amount increased to $520.44. At the hearing Ms Ayache explained that the change to her salary sacrifice arrangement is because she has added a meals card to her salary package, and this will be an ongoing change. Based on that evidence, I am satisfied that the taxable income and reportable fringe benefits amount that Ms Ayache will receive in the 2023/24 financial year will not be significantly different to the amount she received in the 2022/23 financial year.

9. She also confirmed that she still owns the property she is renting out, and it is currently rented out at $950 per week. She has mortgage repayments on that property, she currently pays $830 per week, and the minimum repayments she is required to make are $3,285 per month. Although I note that Ms Ayache’s gross rental receipts in the 2023/24 financial year may be slightly higher than in the 2022/23 financial year, recent interest rate rises mean that her costs are also higher.

10. In her statement of financial circumstances Ms Ayache lists weekly household expenses of $2,930 which are for the entire household, which comprises herself and the two children. She also lists other personal expenditure of $909 per week comprising income tax, life insurance and health insurance. She lists assets of $932,200, consisting of a home valued at $900,000, funds in a bank account of $4,200, as well as a motor vehicle and household contents. Her total liabilities are $485,853 comprising a mortgage on the home of $475,153 and an unpaid income tax amount. I note the expenses listed by Ms Ayache exceed her declared income, even taking into account the child support of $353.10 per week. As Ms Ayache does not disclose any debt other than the mortgage on her home, I will conclude that Ms Ayache is able to meet her weekly expenses from the income she currently has available to her. I also note that there appears to be at least some small amount of discretionary expense that Ms Ayache is able to meet – for example her evidence is that her minimum mortgage repayments are $3,285 per month (which equates to $39,420 per year) but she is currently paying $830 per week or $43,160 per year.

11. Nevertheless, it is clearly the case that Ms Ayache incurs significant costs in caring for [Child 2] and [Child 1], and Mr Muarken shares the legal duty to maintain the children and should contribute to the costs of maintaining the children according to his capacity. Ms Ayache stated at the hearing that she believes the current level of child support as set in the objection decision is a reasonable contribution to the costs of raising the children, and any reduction in that amount would have a significant effect on her ability to meet the costs of raising the children. Mr Muarken stated that although he has been able to meet the child support liability set by the objections officer he has only been able to do so by increasing his workload to an unsustainable level, and he feels that a child support liability of $1,000 per month would be a more reasonable amount for him to contribute in accordance with his capacity.

Conclusion

1. After consideration of the income, resources, and necessary expenses of Mr Muarken and Ms Ayache, and the needs of the children including the costs associated with [Child 1’s] orthodontic treatment, I consider it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act.

2. Taking into account the incomes I have found Mr Muarken had income and financial resources equivalent to an adjusted taxable income of $65,861 per year in the 2022/23 financial year and $93,360 in the 2023/24 financial year. According to my calculations, varying Mr Muarken’s adjusted taxable income to $65,861 in the 2022/23 financial year, without any other changes, would result in an annual rate of child support to be paid by Mr Muarken of approximately $10,094. Varying Mr Muarken’s adjusted taxable income to $93,360 in the 2023/24 financial year, without any other changes, would result in an annual rate of child support to be paid by Mr Muarken of approximately $16,270 up to 1 August 2023, and approximately $15,568 from 1 August 2023.

3. In addition, I am satisfied that it is reasonable for Mr Muarken to contribute to [Child 1’s] orthodontic costs. Taking into account the relative incomes of the parents I am satisfied that it is reasonable for Mr Muarken to contribute 40% of those costs, or a total amount of $3,072.

4. Ms Ayache originally made her application for a departure from the assessment on 21 November 2022. Pursuant to subsection 98S(3B) the Tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which an application for a departure was made. There are no other legislative provisions governing the period that a departure should cover.

5. It is generally recognised that in ordinary circumstances parents are entitled to make financial decisions relying on the accuracy of the child support assessment that has been made by Child Support. According to the documents provided by Child Support, Mr Muarken was first notified of Ms Ayache’s application on 3 February 2023. The more than two-month delay between Ms Ayache making her application and Mr Muarken being advised of it was not the fault of either parent. In the circumstances, and in particular taking into account that at the time Ms Ayache made her application Mr Muarken was assessed to pay child support on the basis of an income that was much lower than his actual income, I consider it reasonable to vary the child support assessment with effect from the day Ms Ayache made her application on 21 November 2022.

6. I consider that it is reasonable to vary the adjusted taxable incomes for Mr Muarken to $65,681 for the period from 21 November 2022 to 30 June 2023, and to $93,360 for the period from 1 July 2023 to 30 November 2024, which is the end of the current child support period. After 30 November 2024 the assessment should be based on the actual adjusted taxable income for the 2023/24 financial year for both parents. I also consider that it is reasonable to increase the annual rate of child support otherwise payable by Mr Muarken by $1,536 for the period 1 December 2022 to 30 November 2024, to take account of [Child 1’s] special needs.

7. The effect of my decision is that the overall rate of child support payable by Mr Muarken will decrease slightly from the child support payable as a result of the objection decision. If, as Mr Muarken said in the hearing, Mr Muarken is up to date with his child support liability this may mean that in the short-term there will be a small overpayment to Ms Ayache. I am satisfied that any short-term adjustment will not cause hardship to Ms Ayache and the children.

8. The ongoing rate of child support payable by Mr Muarken will be approximately $1,425 per month (noting that the actual rate of child support payable will be calculated by Child Support). This is significantly higher than the rate of child support that would be payable if there were no departure from the formula assessment, but it is approximately $150 per month lower than the rate set by the objections officer. While I note that Mr Muarken’s submission is that he considered a rate of around $1,000 per month would be reasonable, I am satisfied that Mr Muarken has capacity to contribute to the costs of the children at a rate of $1,428 per month, and it will not cause him hardship. I consider it is a reasonable amount for Mr Muarken to contribute to the costs of the children, including [Child 1’s] special needs as calculated in this decision, given the relative incomes of the parents, and I am satisfied that it is just and equitable between the parents and the children.

Is it otherwise proper to make a particular departure determination?

1. The requirement to consider whether a departure would be otherwise proper is set out in subsection 117(5) of the Act. It is necessary to consider the effect, if any, that a departure from the administrative assessment would have on entitlements to any income tested pension, allowance or benefit of the carer entitled to child support. Parents, rather than the community, have the primary duty to maintain their children.

2. I am satisfied that neither parent is receiving family tax benefit for the children, so any decision as to a departure determination will have no impact on either parent’s income tested pension, allowance or benefit.

3. I am therefore satisfied that the departure determination is otherwise proper.

DECISION

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

For the period 21 November 2022 to 30 June 2023 the adjusted taxable income for Mr Muarken is varied to $65,681;

For the period 1 July 2023 to 30 November 2024 the adjusted taxable income for Mr Muarken is varied to $93,360;

For the period 1 December 2022 to 30 November 2024 the annual rate of child support payable by Mr Muarken is increased by $1,536 in respect of special needs for [Child 1].