Potter and Jarrett (Child support)

[2019] AATA 96

Potter and Jarrett (Child support) [2019] AATA 96 (3 January 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC014435

APPLICANT:  Mr Potter

OTHER PARTIES:  Child Support Registrar

Miss Jarrett

TRIBUNAL:Member R Anderson

DECISION DATE:  03 January 2019

DECISION:

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

• The adjusted taxable income of Mr Potter is varied to $96,000 per annum in respect of the period 1 July 2017 to 31 December 2019.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - business income - 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

1. Mr Potter and Miss Jarrett are the parents of [Child 1].  According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 6 January 2005, within a few weeks of [Child 1]’s birth. The Department has been responsible for the collection of child support from Mr Potter since commencement of the assessment, Miss Jarrett being the sole carer of [Child 1]. 

2. The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act).  The calculation is based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department. As the income recorded on the 2015/2016 and 2016/2017 tax returns of Mr Potter was less than the self-support amount used in the assessment for those respective years, he was assessed to pay child support at the minimum annual rate of $414 per annum and $420 per annum respectively.

3. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Child Support (Assessment) Act 1989 (the Act) if they consider the administrative assessment results in an unfair amount of child support payable by one parent. Miss Jarrett lodged such an application on 28 August 2017 on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Potter (Reason 8).

4. On 10 October 2017, a delegate of the child support registrar found that a ground was established and decided to vary the adjusted taxable income of Mr Potter to $80,000 per annum in respect of the period 28 August 2017 to 31 January 2020. 

5. On 26 October 2017, Mr Potter lodged an objection to the decision of 10 October 2017. Subsequently, an objections officer decided to partly allow Mr Potter’s objection on 8 January 2018.  However, the decision was not favourable to Mr Potter, the objections officer deciding to vary his adjusted taxable income to $90,000 for the period 28 August 2017 until a terminating event occurs in respect of the child support assessment relating to [Child 1].  

6. Mr Potter subsequently lodged an application to this tribunal for an extension of time to request an independent review of the Department’s decision.  An extension of time was granted to Mr Potter by a differently constituted tribunal on 24 April 2018.

7. The directions hearing was conducted by telephone with Mr Potter and Miss Jarrett on 20 November 2018. Following this hearing, directions were made to both parties requiring them to provide further information and documents.

8. The hearing was held on 3 January 2019. Both parties participated by conference telephone and gave oral evidence on affirmation.  The tribunal also received oral evidence on affirmation by conference telephone from Mr Potter’s current wife, Mrs [A], in her role as administration officer/bookkeeper of [Company 1]. The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 277, documents lodged by Mr Potter numbered A1 to A186 and documents lodged by Miss Jarrett numbered B1 to B24. All of the documents were provided to all parties prior to the hearing.

ISSUES

1. W

   hen calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number

   
   

   of children, the level of care provided, the costs of the children, the costs of self-support

   
   

   of each parent and the income of each parent. Section 98C of the Act allows for a

   
   

   decision-maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

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

   ·         whether any proposed departure is fair to Mr Potter, Miss Jarrett and [Child 1]; and if so

   ·         whether any proposed departure is fair to the public.

CONSIDERATION

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

1. The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are “out of the ordinary” and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC
   90-433).

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

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by Mr Potter because of the available income, property and financial resources available to either parent. The Act goes on to state in subsection 117(7A) that the decision-maker must have regard to “the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income” and disregard “the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child”. Clearly, Mrs [A] has no legal duty to provide for [Child 1].

2. Given that Miss Jarrett is a PAYG employee whereby her financial circumstances are very transparent, it is the financial circumstances of Mr Potter who is self-employed through a corporate structure which is the more central issue in this case. Mr Potter gave oral evidence that he is a qualified [Occupation 1] and commenced sub-contracting as a [Occupation 2] on a 10-year contract with [Company 2] through [Company 1] in 2009. Mr Potter is the sole director and shareholder of [Company 1].

3. 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 v Scott [1994] FLC 92-457; Carey v Carey [1994] FLC 92-489). As discussed with the parties, the role of the tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.

4. While Mr Potter provided the [Company 1] tax returns in respect of the 2015/2016, 2016/2017 and 2017/2018 years, as directed, no financial statements were provided other than an MYOB generated profit and loss statement and balance sheet in respect of the 2017/2018 year.  Mr Potter confirmed that this was provided to him by his accountant.  The tribunal pointed out that a balance sheet consisting of two items being “[Equipment] Purchase” of $151,300 and “Trade creditors” of equal value was not a satisfactory balance sheet.  In particular when it is very clear from the [Company 1] bank statements that there is a bank balance, private expenses are paid directly from [Company 1] and the [equipment] and [Vehicle 1] are both financed in the [Company 1] name. As such, the tribunal did not consider the accountant prepared documents to be reliable.  For this reason the tribunal did not consider the unavailability of Mr Potter’s accountant for the hearing to be an issue.

5. Therefore, the tribunal proposed to consider the financial information in the spreadsheets prepared for the accountant by Mrs [A] for each of the relevant years.  Mr Potter and Mrs [A] confirmed to the tribunal that all income and expenses of [Company 1] were recorded in these spreadsheets with the exception of the fuel tax credits received.  However, these amounts were evident in the business activity statements and on the [Company 1] tax returns for each of the relevant years.

6. It was evident that the income has continued to increase in the 2015/2016, 2016/2017 and 2017/2018 years.  However, the income appears to have reduced in the latter months of 2018.  Mr Potter explained that this was due to a change in [worksite].  He further stated that he does not consider overall that there will be a significant change in the 2018/2019 year.  Mr Potter went on to state that the contract with [Company 2] is due to expire in October 2019.  At this point he is unsure whether or not it will be renewed and if so, he is expecting that he will be required to purchase [new equipment].  In response to a question from the tribunal Mr Potter stated that such a purchase would be on finance, resulting in the monthly payments increasing from $828 to more like $2,500.

7. It was evident that wages were paid to Mr Potter and Mrs [A].  The tribunal noted that given 100% of [Company 1]’s income is derived through [Mr Potter's work output], for child support purposes, it is difficult to accept that it is reasonable for Mrs [A] to receive an equal or higher wage than he.  Mr Potter told the tribunal that his hours vary from week to week, averaging 40–45 hours while Mrs [A] averages 25–30 hours per week, on occasion reaching 40 hours. 

8. Mr Potter told the tribunal that the administrative role performed by his wife is essential for him to be able to operate through [Company 1]. While the tribunal accepts that Mrs [A] completes the bookwork, liaises with the accountant and pays the [Company 1] expenses, the tribunal does not accept that it would take her more than three days per week to complete such tasks. Mrs [A] does not hold any formal bookkeeping qualifications.  However, she has had office experience.  According to payscale.com, the average hourly rate for a bookkeeper is $27.23.  As such, the tribunal is satisfied that an appropriate wage would be in the vicinity of $32,000 per annum.  Incidentally, this is slightly more than the wages declared in the 2017/2018 year. It is noteworthy that Mrs [A] is an employee of [Company 1].  She is not a shareholder, and as such, has no entitlement to any part of the profits.  Furthermore, given the oral evidence of Mrs [A] that no superannuation has been paid for at least the last three years, the tribunal does not consider it appropriate to allow for such an expense, noting that this is also the case in accordance with income tax legislation.

9. The remaining expenses were largely unremarkable.  As both the [equipment] and [Vehicle 1] are financed and the intention is to finance future purchases, the tribunal does not consider it necessary to allow for depreciation. Rather, the tribunal will allow for the monthly payments in their entirety, rather than only the interest component.

10. Mrs [A] gave oral evidence that with the exception of the diesel fuel, all other expenses were recorded inclusive of GST.  It is clear that Mr Potter receives a benefit through private use of [Vehicle 1], the associated costs of which are fully met by [Company 1].  In response to a question from the tribunal, Mr Potter estimated the private use of [Vehicle 1] to approximate 20%–40%.  Mrs [A] estimated the private use in respect of the internet costs to be 50%.  She further stated that as she has a private mobile phone, the mobile phone costs expensed through [Company 1] being largely business related.

11. Mrs [A] told the tribunal that the wages actually paid to her and Mr Potter vary according to what is left after the expenses have been paid.  The tribunal observed that this was after both [Company 1] and private expenses were met from the [Company 1] bank account.  This fact was not disputed.  As such, the tribunal does not consider the declared wages to be an accurate reflection of the actual resources available to [Mr Potter and Mrs A] from [Company 1].  Rather, it is an amount determined by the accountant at year-end to obtain the most tax-advantaged position. This procedure is not uncommon.

12. Therefore, the tribunal calculates the benefits and financial resources available to Mr Potter from [Company 1] to be as follows:

2015/2016 $	2016/2017 $	2017/2018 $
Income	165,930	182,622	196,668
Fuel tax credits	3,054	3,094	2,525
Less Total recorded expenses	(142,885)	(139,763)	(153,723)
Add back GST refunded (estimate/as per BAS 17/18)	5,261	5,002	6,424
Add back wages	59,457	56,772	67,992
Add back superannuation	5,511	5,340	6,456
Less wages to Mrs [A]	(32,000)	(32,000)	(32,000)
Net profit available to Mr Potter	64,328	81,067	94,342
Benefit from 30% use of [Vehicle 1]	4,908	4,469	3,260
Benefit from 50% use of internet	480	401	300
Benefits and resources attributable to Mr Potter from [Company 1]	69,716	85,937	97,902

1. After allowing for various work-related expenses not recorded in the spreadsheets such as tools and laundering expenses, the tribunal estimates the financial resources available to Mr Potter in the 2015/2016, 2016/2017 and 2017/2018 years to approximate $67,000, $84,000 and $96,000 respectively.  Given the conclusions above, the tribunal is satisfied that the tax returns as lodged by Mr Potter do not provide an accurate indication of his available financial resources.

2. The tribunal accepts the written evidence of Mr Potter, that at 30 June 2018, he held a balance in his [superannuation account] in the vicinity of $84,781. The tribunal is satisfied that no personal or employer contributions have been made by Mr Potter in recent times.

3. According to his Statement of Financial Circumstances, Mr Potter has very few assets other than an old [vehicle], some household contents and a small bank balance, totalling $11,670.  He further stated that he has no liabilities other than child support.  Clearly, he has no asset base to draw upon.

4. Mr Potter gave oral evidence that Mrs [A] owns the home in which they live, in addition to an investment property. As such, she meets the mortgage through her own means of around $400 per week. However, the tribunal is cognisant of the fact that the earnings of Mr Potter flow through to contribute to all household-related costs. He confirmed to the tribunal that the wages are paid into a joint account from which household expenses are met.

5. The courts have made it clear that in assessing whether a ground is established in respect of Reason 8, a change in income is not necessarily sufficient consideration.  The tribunal must also consider the person’s commitments to be met by that income before being in a position to determine whether or not the resulting child support liability is fair (Ross & McDermott [1998] FamCA 134).

6. In respect of commitments, according to his Statement of Financial Circumstances, the total average weekly costs in respect of the household total $1,237, annualising to $64,324. It is noteworthy that this amount includes minimal discretionary expenses. After adjustment for the mortgage costs attributable to Mr Potter and his relevant dependent children, the average weekly expenses of Mr Potter approximate $386 or just over $20,000 per annum.  According to his 2017/2018 tax return, Mr Potter incurs income tax of approximately $30 per week. Mr Potter told the tribunal that he and his family are all in good health and there are no special circumstances in relation to his relevant dependent children. Based on Mr Potter’s estimates of his average weekly expenses and the tribunal’s findings above in respect of the available financial resources, it is clear that he has the capacity to comfortably meet his commitments and those of the household. 

7. Miss Jarrett commenced employment with [Company 3] as [Occupation 3] over four years ago. It was evident from her payslips that she receives a pre-tax benefit towards the costs of [Vehicle 2] in the amount of $243.66 per fortnight, or $6,335 per annum.  This has occurred since commencement of the package in September 2016.  It is also evident that this benefit is not reportable on her tax return.  According to her 2017/2018 income tax return, her available income from wages and bank interest earned after expenses was $130,846.  According to Departmental records, the net income recorded on the 2015/2016, 2016/2017 and 2017/2018 tax returns of Miss Jarrett was $123,435, $130,132 and $130,846 respectively.  The 2017/2018 year was later amended to $130,283. The tribunal notes that the pre-tax benefit in respect of [Vehicle 2] was also absent in the 2016/2017 year.  However, given that Miss Jarrett is the sole carer of [Child 1], the impact of the absence of $6,335 per annum from her income used in the administrative formula is negligible at around $2 to $3 per week.

8. Miss Jarrett gave oral evidence that, going forward, her position is secure and she expects no significant change in her circumstances. The tribunal is satisfied that the annual tax returns as lodged by Miss Jarrett with the ATO will provide an accurate reflection of her available income from all sources, as they have done in the past. The tribunal notes that Miss Jarrett has no entitlement to family tax benefit in respect of [Child 1].

9. The tribunal accepts the written evidence of Miss Jarrett, that at 30 June 2018, she held a balance in her [superannuation] account of $145,775. The tribunal is satisfied that no personal contributions have been made by Miss Jarrett in recent times.

10. The tribunal considered the assets and liabilities of Miss Jarrett, who shares her residence with [Child 1] and her 27-year-old daughter.  According to her Statement of Financial Circumstances and council rates notice, the combined value of the land and building is approximately $386,000 with a corresponding mortgage at 28 November 2018 of $381,558. Her other assets consist of the financed [Vehicle 2], the net value being negligible, bank balance ($540), household contents ($25,000) and trailer and caravan ($3,500).  In addition, Miss Jarrett has a personal [loan] of around $19,000.  She further stated that her outstanding credit card debt is now at $9,000, following costs incurred in respect of fencing and the garden in her new residence.  Therefore, the tribunal calculates the net asset base of Miss Jarrett to approximate $5,000 and finds accordingly.

11. In respect of Miss Jarrett’s expenses, after attribution of the mortgage, house-related costs and holidays to other members of the household, she estimated the average weekly expenses of the household to be $1,407, of which approximately $732 is related to her.  This included discretionary spending of $110 for entertainment, holidays, gifts and private health insurance premiums. However, she also pays additional funds into the mortgage of $35 per fortnight.  Therefore, the tribunal calculates the average weekly “necessary” expenses of Miss Jarrett to approximate $605, annualising to almost $31,500.  The tribunal notes that the self-support amount used in the administrative formula in the 2018 year is $24,535. According to her payslips, Miss Jarrett incurs income tax at the rate of approximately $800 per week.

1. In response to a question from the tribunal, Miss Jarrett stated that despite her daughter working part-time and earning approximately $400 per week, she does not receive any contribution from her towards the costs of the household. She went on to explain her daughter’s [addiction] and [medical condition].  Miss Jarrett told the tribunal that her daughter is not in receipt of any Government assistance. The tribunal accepts the oral evidence of Miss Jarrett in respect of the difficult circumstances in dealing with her daughter.  Regardless, it is evident that Miss Jarrett has the financial capacity to meet the “necessary” expenses of the household.

2. Neither party raised the issue of earning capacity.  As both parties work full-time hours and have not recently changed their occupations or working patterns, the tribunal is satisfied that none of the criteria under subsection 117(7B) of the Act are relevant in this case.

3. Mr Potter acknowledged from the outset that an annual child support rate of $420 per annum in respect of [Child 1] is unfair.  He further stated that he has simply paid what he was assessed to pay in the past with no further thought. Based on the tribunal’s findings above in respect of the financial resources and benefits available to Mr Potter, the annual child support liability of Mr Potter is more in the vicinity of $5,000 to $8,500 throughout the 2015/2016, 2016/2017 and 2017/2018 years.  He has clearly been well under-assessed, a fact which is undisputed.  It is noteworthy that this has been the case for many years. However, prior to 28 August 2017, no change of assessment application was lodged.  This is discussed later in these reasons for decision.

4. Therefore, the tribunal finds that special circumstances do exist in this case, in that the administrative assessment results in an unfair outcome.  As such, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it fair or “just and equitable” in relation to Mr Potter, Miss Jarrett and [Child 1] to make a particular departure determination?

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

The needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Potter and Miss Jarrett have the primary duty to financially support [Child 1], while Mr Potter also has a legal duty to support his three relevant dependent children together with Mrs [A].

2. In determining the proper needs of [Child 1], it is necessary to have regard to the manner in which he is being, and in which the parents expected him to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). Miss Jarrett gave oral evidence that [Child 1] is in good health and has no special needs.  He is currently attending a Government secondary school, about to commence in Year 9.  According to her Statement of Financial Circumstances and after attribution of the mortgage, Miss Jarrett estimates the average weekly costs of [Child 1] to be $426, including discretionary costs for entertainment, holidays and private health insurance premiums of approximately $75. As Mr Potter has no contact with [Child 1], his costs are limited to the child support assessment.  Therefore, the tribunal calculates the weekly “necessary” expenses of [Child 1], as estimated by Miss Jarrett, to be $351, or approximately $18,252 per annum.

3. 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). The tribunal turned to the Costs of Children Table. The administrative formula calculates the maximum cost for one child 13 years and over with the combined child support income of the parents of almost $159,000 (based on combined adjusted taxable incomes of $226,283 as estimated by this tribunal in respect of the 2017/2018 year) to approximate $25,500 per annum. This is less than the amount estimated by Miss Jarrett, indicating that her spending is less than extravagant.

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

1. As found earlier in these Reasons for Decision, the tribunal is satisfied that Mr Potter has income, financial resources and benefits available to him which far exceed that which is recorded in his annual tax returns.  The tribunal found that the financial resources and benefits available to Mr Potter in the 2015/2016, 2016/2017 and 2017/2018 years approximated $67,000, $84,000 and $96,000 respectively. Going forward, this is unlikely to vary before October 2019. The tribunal accepts that at this time it is impossible to predict the financial circumstances in respect of Mr Potter, given his hope and reliance on a renewed contract with [Company 2]. In contrast, the financial circumstances of Miss Jarrett are secure and predictable; the tribunal is satisfied that her annual tax returns are a fair estimate of her available financial resources. 

Conclusion

1. As already noted, there was no dispute that a child support assessment at the minimum annual rate of just over $400 was an unfair outcome. After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Potter and Miss Jarrett and the needs of [Child 1], the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support.

2. The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). Miss Jarrett expressed her desire for a departure decision to be backdated as far as possible, given the many years that Mr Potter has been under-assessed.  She further submitted that this also occurred during years where her income was at a much lower level.  Mr Potter had no comment in respect of a start-date.

3. Mr Potter expressed his concern if a decision was to extend too far into the future, due to the uncertainty surrounding renewal of his current contract with [Company 2].  The tribunal also recognises the stressful nature of a change of assessment application and the desire of the parties not to endure such processes on an annual basis unless it is necessary to do so.  As discussed at hearing, it is an unfortunate fact that while Mr Potter continues to earn an income through [Company 1], while it is a legitimate arrangement, a change of assessment process will likely be required on a regular basis.  Therefore, the tribunal proposes to end the departure decision at 31 December 2019.  At this point in time the future of Mr Potter will be more certain.

4. The tribunal considered varying the adjusted taxable income of Mr Potter from the child support period commencing 1 August 2016 to 30 June 2017 to $84,000 per annum and from 1 July 2017 to 31 December 2019 to $96,000 per annum.  In respect of Miss Jarrett, for the reasons discussed above, the tribunal does not consider it necessary to vary her adjusted taxable income.  Furthermore, historically she has always lodged her tax return in a timely manner. The proposed decision results in an annual rate of child support payable by Mr Potter of approximately $6,000 to 30 June 2017, then $6,800 until the 13^th birthday of [Child 1], at which time the annual rate of child support payable by Mr Potter increases to approximately $8,500, or $163 per week.

5. According to Departmental records, Mr Potter had outstanding child support arrears at 13 December 2018 of $6,573, including interest of $310. Mr Potter maintains that since that time in excess of $1,300 has been deducted directly from his payments by [Company 2].  The proposed decision will result in additional arrears at 13 December 2018 of almost $8,000.  The tribunal accepts the oral evidence of Miss Jarrett that she attempted on numerous occasions prior to 28 August 2017 to have the child support assessment looked into.  However, as discussed at hearing, both parties are entitled to make financial decisions while relying on the accuracy of the child support assessment, unless otherwise put on notice as to the possibility of a change.  It was not until Miss Jarrett submitted her departure application on 28 August 2017 that Mr Potter had knowledge of a possible change to his child support liability. 

6. The tribunal acknowledges the years of underpayment by Mr Potter, yet also recognises that he has three other children to support and has made financial decisions over the past few years on the basis of his assessed child support liability. As such, the tribunal does not consider it fair that Mr Potter be left with additional arrears relating to the period prior to lodgement of the departure application of around $5,500.  There is no evidence before the tribunal to suggest that he has an asset base to draw upon.

7. Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.

8. While Mr Potter told the tribunal that a child support liability greater than $420 would not cause him hardship, he also stated that a similar rate to that imposed by the Department would result in a reduction in things like the children’s activities and make education costs such as iPads difficult.

9. Miss Jarrett stated that as Mr Potter has maintained payments of no more than $50 per month, any increase in the rate of child support payable to her for [Child 1] will ease her financial position.  As with Mr Potter, Miss Jarrett has little asset base from which to draw upon to assist in maintaining [Child 1]. She further stated that while she does not wish to place Mr Potter in a difficult financial position, [Child 1] deserves his support in the same way as his three relevant dependent children.

10. In the tribunal’s view, while neither party has experienced hardship as a result of the administrative assessment, clearly Mr Potter has been significantly under-assessed for a number of years and enjoyed a more comfortable financial position than Miss Jarrett in the earlier years.  However, the issue is about the obligation of both parents to contribute to [Child 1]’s “necessary” costs in accordance with their capacity.  It is clear that Miss Jarrett is currently in a superior position in respect of her income and financial resources.  However, her asset base is negligible and she clearly requires the assistance of Mr Potter. Based on the financial resources available to Mr Potter from [Company 1], the “necessary” and discretionary costs of the entire household as estimated by Mr Potter can be comfortably met with a weekly excess of approximately $450.

11. The tribunal considers it appropriate to commence the departure decision at 1 July 2017, which will result in additional arrears of approximately $2,800.  While the discretionary expenses of the Potter household are not excessive, based on the weekly surplus of approximately $450 and Mr Potter’s costs of self-support falling below the amount used in the administrative assessment, the tribunal is satisfied that he has the capacity to maintain the child support payments, going forward, in the vicinity of $167 per week, in addition to negotiating a manageable payment arrangement with the Department to meet the outstanding arrears of around $8,000. 

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

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination.

2. In this case, as neither party is in receipt of any Government benefits, the tribunal is satisfied that it is otherwise proper to make the particular proposed determination.

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

DECISION

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

• The adjusted taxable income of Mr Potter is varied to $96,000 per annum in respect of the period 1 July 2017 to 31 December 2019.