Pullman and Fitzsimons (Child support)

Pullman and Fitzsimons (Child support) [2022] AATA 4983 (15 September 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/MC023615
APPLICANT:  Ms Pullman
OTHER PARTIES:  Child Support Registrar
Mr Fitzsimons

TRIBUNAL:Member T Hamilton-Noy
DECISION DATE: 15 September 2022
DECISION:

The Tribunal sets aside the decision under review and substitutes its decision that the amount of child support payable for the period from 15 September 2022 to 1 April 2024 is varied such that Ms Pullman is to pay nil child support for this period.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – costs of orthodontic costs – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

Ms Pullman and Mr Fitzsimons are the separated parents of two children, [Child 1] and [Child 2]. A case has been registered with Services Australia – the Child Support Agency (the Agency) since 24 October 2017 and child support has been collectable by the Agency since 23 July 2018. Ms Pullman is the payer of child support in this matter and Mr Fitzsimons the payee.
The relevant administrative assessments of child support in this case were as follows:
·   For the period 1 January 2021 to 27 June 2021, Ms Pullman was to pay $5,732 per annum, based on her 2019/2020 adjusted taxable income of $74,119 and Mr Fitzsimons’s 2019/2020 provisional income of $25,910;
·   For the period 28 June 2021 to 31 December 2021, Ms Pullman was to pay $5,776 per annum, based on her 2019/2020 adjusted taxable income of $74,119 and Mr Fitzsimons’s 2019/2020 adjusted taxable income of $25,396;
·   For the period 1 January 2022 to 26 August 2022, Ms Pullman was to pay $8,992 per annum, based on her 2020/2021 adjusted taxable income of $103,480 and Mr Fitzsimons’s 2020/2021 adjusted taxable income of $26,107.
On 8 September 2021, Ms Pullman made a departure application on the basis of the parents’ income, property and financial resources (called “Reason 8A” by the Agency) and on the basis of Mr Fitzsimons’s earning capacity (called “Reason 8B” by the Agency).
On 13 December 2021, an employee of the Agency made a decision that a ground was established to depart from the administrative assessments of child support. The employee of the Agency decided to vary Ms Pullman’s adjusted taxable income to $100,000 per annum for the period 8 September 2021 to 31 December 2021 and to vary Mr Fitzsimons’s adjusted taxable income to $80,000 per annum for the period 8 September 2021 to 7 September 2023.
On 11 January 2022, Mr Fitzsimons lodged an objection to this decision.
On 23 March 2022, an objections officer of the Agency allowed the objection and decided to make a departure determination and to vary Ms Pullman’s adjusted taxable income to $103,480 for the period 8 September 2021 to 31 December 2021 and to vary Mr Fitzsimons’s adjusted taxable income to $35,396 for the period 8 September 2021 to 31 October 2023.
On 1 April 2022, Ms Pullman made an application to the Administrative Appeals Tribunal for an independent review of the Agency’s decision.
A directions hearing was conducted with the parties on 21 July 2022, which both parties participated in by MS Teams audio. Following the directions hearing the Tribunal issued directions to the parties for the provision of further documents. Both parties provided further documents to the Tribunal in response to the directions issued.
The hearing was conducted on 8 September 2022 by MS Teams audio. At the hearing the Tribunal had before it documents provided by the Agency (1 to 558), documents provided by Ms Pullman (A1 to A280) and documents provided by Mr Fitzsimons (B1 to B56). Copies of all documents were provided to the parties prior to the hearing and they confirmed receipt of the documents with the Tribunal. Following the hearing the Tribunal deferred to consider the law. The Tribunal proceeded to make a decision in this matter on 15 September 2022.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in the place of the Registrar, must be satisfied that:
(i)there is a ground to depart from the administrative assessment of child support;
(ii)it is just and equitable to depart; and
(iii)it is otherwise proper to depart.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.
If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

CONSIDERATION

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

The Tribunal notes that Ms Pullman raised two grounds in her departure application to the Agency, relating to the income, property, financial resources and earning capacity of Mr Fitzsimons. At the directions hearing, Ms Pullman sought that the Tribunal also consider costs she was incurring in relation to [Child 1]’s braces, [Child 2]’s child care costs, both children’s attendance at a psychologist, and the range of expenses she was incurring for the children over and above the child support she was required to pay.
Given the primary issue between the parties in the Agency review proceedings related to the income, property and financial resources of the parents, the Tribunal considered this ground first.
Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure is established where, in the special circumstances of the case, application in relation to the child of the provisions of the Assessment Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for a child, because of the income, property and financial resources of either parent. In considering this ground, the Tribunal is required to consider the respective financial position of both of the parents to the assessment, to determine whether application of the Assessment Act results in an unfair determination of child support to be paid.
The Tribunal notes that the legislation refers to “income, property and financial resources” rather than taxable income. In Voss & Child Support Registrar & Anor (SSAT Appeal) [2009] FMCAfam 1296, the Court commented on the situation of a self-employed person’s taxable income not corresponding with his or her income or financial resources for child support purposes as follows:
There is a body of cases 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.
In Shearer & Benson & Another (SSAT Appeal) [2011] FMCAfam 623, the Court similarly noted that:
…when a person conducts their business through an intermediary company or trust, it is proper to lift the corporate veil to that person with regard to the determination of a parent’s income for child support purposes.
The Tribunal, in considering the relevant matters in this case, has also had regard to the matter of Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39, where the Court discussed the term “financial resources” and stated that:
“Financial resource” refers to something which is not property but from which financial benefit is or may be gained. In light of the objects of the Act, the term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.
When considering the evidence in relation to this ground, the Tribunal has also had regard to the Child Support Guide, at 2.6.14. While not binding on the Tribunal, the Tribunal considered it provided some guidance in interpreting the relevant evidence in this matter. This section of the Guide states, in relevant part, that:

A child support assessment is generally calculated using the parents' most recent taxable income. Where, in the special circumstances of the case, a parent's current income is not adequately reflected in the child support assessment (whether it is more or less than the income used), an application may be considered under this reason.
…..
The Registrar can be satisfied that there are special circumstances if one parent has substantial property or financial resources that have not been properly taken into account in the child support assessment (Ross and McDermott (1998) FLC 98-003).
Although a parent's most recent taxable income is used in the child support formula, the Registrar can look beyond the parent's taxable income when considering an application for a change of assessment. Income, earning capacity, property and financial resources which do not necessarily form part of a parent's taxable income can be added to or excluded from a child support assessment (Carey and Carey (1994) FLC 92-489).
….
However, there is a range of circumstances that may form the basis of an application under this reason. It may be that a parent:
·          has substantial property but a small child support income amount
·          has legitimately arranged their financial affairs to minimise tax
·          receives income which is not assessable or is exempt from tax, or
·          received a lump sum payment that is not included in the child support income amount.
…………

Low income from a family business

A parent who receives a low taxable income from a family business may have access to additional financial resources, or alternatively they may have an additional earning capacity.
In determining the parent's financial resources, the Registrar may consider the following factors:
·          past or current ability to maintain a particular lifestyle and acquire assets
·          identification of additional benefits obtained from the business
·          whether or not the business has been structured to minimise a parent's income including: the degree of control which the parent has over the business or the person who is entitled to the profits of the business, or whether income splitting is occurring, and
·          the person who actually does the work of the business.
The Registrar may determine that a parent's income is greater or lower than the amount upon which they have been assessed. Alternatively, the Registrar may decide that the parent's financial resources give the parent a greater capacity to contribute to the financial support of the child than is indicated by the assessment.

Alienation of income & a 'corporate veil'

A reduction of a parent's taxable income by alienation of personal services income or other income will result in an artificially reduced or increased child support liability.
Generally, income is alienated when the income generated or derived by a person is attributed to others and, consequently, reduces the first person's taxable income. Personal services income, or income derived through personal exertion, can be defined as income that an individual earns predominantly as a direct reward for their personal efforts. Personal services income paid to a company, trust or partnership is also alienation of income.
If a parent is involved in alienation of their personal services income, this may indicate that they have additional income or financial resources that make the current child support assessment unjust and inequitable (CSA Act section 117(2)(c)(ia)).
The ATO has a published view in respect of the taxation consequences of arrangements that seek to alienate a person's taxable income. The ATO may make decisions concerning these arrangements for the purposes of taxation legislation and may have regard to the principles outlined in their publications. The Registrar may consider these principles in deciding whether such arrangements exist but can make a different decision about how they should be treated for the purposes of the child support legislation.
Many of the concepts relating to alienation are based on the term 'personal services income'.
Some common examples of income from personal services are:
·          salary and wages
·          income derived by a professional person who practises on their own account without professional assistance
·          income payable under a contract where the payment under the contract relates wholly or principally to the labour of the person concerned, and
·          income derived by a professional sportsperson or entertainer through the exercise of their particular skills.
Where personal services income is included in the taxable income of people other than the person who earned it the ATO considers that the tax avoidance provisions apply to cancel any tax benefits (Income Tax Assessment Act 1936 Part IV). If the ATO is satisfied that such an arrangement was entered into primarily, or predominantly, to avoid liability for income tax by the means of the splitting of income, then the arrangement will be ineffective for income tax purposes. The tax benefit arising out of the arrangements will be removed.

Where incorporation does not reduce personal income

In certain circumstances the ATO accepts that interposing a company, trust or partnership has no adverse taxation effects. For example, the incorporation of a professional practice that does nothing more in relation to income tax than reduce a professional person's income by the amount of an appropriate superannuation cover.
A professional practitioner may operate through a trust structure provided that the trust structure achieves the same result for income tax purposes as an incorporated professional practice. The ATO requires that the professional practitioner be the sole beneficiary of the trust.
The Registrar will have regard to these principles in determining whether such arrangements exist but may make a different decision to that of the ATO about how the arrangements should be treated for the purposes of the parent's child support assessment.

How the Registrar identifies income that is alienated

In determining whether personal services income has been alienated through a company, trust or partnership, the Registrar will consider the following factors:
·          the nature of the parent's activities
·          the extent to which the income depends upon the parent's own skill and judgment
·          the extent to which the company's assets, or trust's assets, are used to derive the income
·          the number of employees and others engaged in the income-producing activity
·          the time at which the company, trust or partnership was established, and
·          any other relevant matters.

The income, property and financial resources of Ms Pullman

Ms Pullman gave evidence to the Tribunal that she is currently employed in a PAYG arrangement on a full-time basis as a [Occupation 1]. She stated that, at the time of separation in 2017, she had been in a permanent part-time position two days per week and that soon after separation she had increased her work hours and had eventually taken over the role of another full-time worker. She gave evidence of having worked in secondments and having worked in a four day per week position while in a postgraduate program for some 12 months. Ms Pullman stated that she had then worked full time for six months until 2021 when she resigned and commenced working at another hospital for two months, while on leave from her usual employer. She stated that she had resigned due to being “burnt out” and that she had returned to her usual employer on a full-time basis. The Tribunal accepted this evidence, which was given in a clear and credible manner, as correct.
The Agency obtained information from the ATO during its decision making process, which indicated that in the 2020/2021 financial year, Ms Pullman’s adjusted taxable income was $103,480. This was made up of wages of $87,137, fringe benefits of $18,302, ‘other income’ of $386 and work-related deductions totalling $2,345. This information was consistent with information Ms Pullman gave in her oral evidence to the Tribunal at hearing, that she receives a salary package from her employer paid in regular amounts into her bank account. When asked about the Agency’s findings about her level of income, property and financial resources, which had included a component relating to fringe benefits paid to her, Ms Pullman stated that she did not dispute the Agency’s findings in relation to her adjusted taxable income.
As to her 2021/2022 income, the Tribunal notes that the Agency contacted Ms Pullman’s current employer, who advised that she works on average 80 hours per fortnight at an hourly rate of $45, equating to $93,600 per annum; that she is entitled to overtime, allowances and fringe benefits; and that her year-to-date earnings up to 14 November 2021 were $25,456 (annualised $67,822). Ms Pullman provided PAYG summaries for the 2021/2022 financial year to the Tribunal, which state that she earned $77,460 from one employer plus reportable fringe benefits of $15,150, and $10,081 from a second employer. Her final payslip from June 2022 from her current employer states her YTD taxable gross earnings were $77,540 and YTD gross was $85,935. The Tribunal finds that Ms Pullman’s total earnings in the 2021/2022 financial year were consistent with her 2020/2021 adjusted taxable income.
Ms Pullman stated that, going forward, her income and employment are stable and that, even were she to change positions, it would be within the same employer and on the same salary level as she is currently earning. Ms Pullman’s Statement of Financial Circumstances, which estimated an average gross weekly income of $1,800, was consistent with the information given by her employer regarding her 2021/2022 level of income. The Tribunal accepts that Ms Pullman’s level of income during the 2022/2023 financial year is likely to be consistent with her earnings in the 2021/2022 financial year.
As to any other income, property or financial resources, Ms Pullman’s Statement of Financial Circumstances states that her home has an estimated value of $415,000, she has just over $5,500 in savings in two bank accounts, her car has an estimated value of $32,000, she has $10,000 in household contents and an amount in superannuation totalling $135,230. Ms Pullman stated that her mortgage is $323,357 and she has a car loan totalling $36,000. The Tribunal finds that none of the property or assets owned by Ms Pullman provides a financial resource to pay for the costs of the children and finds that Ms Pullman’s adjusted taxable income represents her level of income, property and financial resources for child support purposes.

The income, property and financial resources of Mr Fitzsimons

Mr Fitzsimons gave evidence to the Tribunal that he works in the wine industry and is self-employed under a company structure, [Company 1] and that this company was incorporated in February 2018 after he ceased his former PAYG employment. Mr Fitzsimons told the Tribunal that he is the sole director and shareholder of the company and is the only person involved in the business of the company.
As to the financial arrangements involving the company, Mr Fitzsimons stated that he had loaned $200,000 to the company during 2018 and into 2019 after the former matrimonial property was sold. He stated that this amount went into the “main bank account” and then in early 2020 he put the money into shares. The Tribunal asked what amount Mr Fitzsimons used for sharetrading and he stated that there is an “account that goes with that”. As to how much he has in the sharetrading account at present, he stated he has $100,000 in the account. He stated that he had not provided this account to the Tribunal as he “didn’t think about it”. The Tribunal observed the Directions that had been issued (for the provision of both personal and business related bank accounts) and asked why, given the Tribunal was assessing Mr Fitzsimons’s level of income, property and financial resources he had not thought it relevant to provide the Tribunal with a copy of the trading account; the Tribunal asked whether the information was otherwise provided in BAS statements provided to the Tribunal. Mr Fitzsimons stated that the information is not in the BAS statements but is in the end of year financial information, on the basis that any profits on shares will show up as company income. He then stated to the Tribunal that he has “company shares and personal shares” and that the personal shares will be reflected in his bank statements and in his income tax return.
The Tribunal asked about the company shares owned by Mr Fitzsimons and he stated that he owns various shares and they are all transacted through his [Bank 1] account. He stated he had checked the balance and it is $99,719. As to the amount loaned to the company, Mr Fitzsimons then stated that he had lent the company $200,000 and thinks he has taken out $140,000 to live on, and he has sold shares and used this to pay back some of the business loan and used the money to live on.
The Tribunal asked Mr Fitzsimons about the running of the business and he stated it is run from home, from his place of residence and that a section of the house is used for storage and another section for an office. He stated that the rental property is a three bedroom and one living area home and that there is a study space that is not one of the three bedrooms, and an external garage that he stores wine samples, materials, ice buckets, banners and glassware in. Mr Fitzsimons described that typical work for the business includes looking after restaurants, bottle shops and online retailers; he visits customers and shows samples of wine and provides cases of wine to customers. He stated that his former employer, from which he claims he was fired in 2018, is “pretty much everything at the moment” in terms of his work. Mr Fitzsimons stated that he spends 20 to 30 hours per week on the business and that the business was quiet for a period of time during the COVID-19 pandemic, given that 92% of his business is restaurants.
Mr Fitzsimons provided a Profit and Loss Statement for the business for the 2021/2022 financial year and the Tribunal took evidence from him during the hearing about expenses claimed for the business. Mr Fitzsimons’s evidence in relation to these expenses was as follows:
·      Regarding the consulting and accounting costs claimed, Mr Fitzsimons stated that this relates to his accounting fees;
·      Regarding the motor vehicle costs claimed, Mr Fitzsimons stated that the business owns the car and charges him for personal use. He stated that the business purchased the car in June 2020 and its major use is business use. He stated that the car was purchased outright from the money he had loaned to the company, for $23,400. In response to a question by the Tribunal as to whether this was a car he had previously owned, he stated yes, it was originally purchased out of the car allowance he received from his former employer and that the lease for the car ended in 2019. He stated that he does not own another car and uses this for personal use as well. He stated that he kept a logbook for three months and calculated that he is only using the car for 10% private use, such as school drop offs.
·      Mr Fitzsimons stated he is not sure what the office expenses claimed relate to, possibly internet use (the Tribunal noted that there was a separate entry for telephone and internet);
·      Regarding the rent claimed ($8,450), Mr Fitzsimons stated that he had calculated the floor area of his house and the area used for business purposes and the business was taking up 30% of the floor area;
·      Regarding the staff training expenses ($2,836), Mr Fitzsimons stated that these are his education expenses as he is using his university degree for contracts, employment, health and safety and taxation law in his business. As to how a law degree is relevant to a wine sales business, Mr Fitzsimons stated that he is importing wine, there is price fixing and there are intellectual property issues and he is writing contracts to avoid compliance problems;
·      Regarding the storage costs ($1,581), Mr Fitzsimons stated that he has a wine storage facility in [Suburb 1] where he has wine delivered.
The Tribunal asked Mr Fitzsimons about his bank accounts for personal and business use and he gave evidence that he has a personal [Bank 2] account, a personal [Bank 2] credit card, and a [Bank 1] business account. He stated that he also has a share account and a business share account, and another credit card which is “not used”. He stated that he previously had a second [Bank 2] account which was closed some time ago, he can’t remember when but he thinks this year.
In relation to the [Bank 1] business account, the Tribunal noted that the sales of shares reflected in the account for 5 May and 9 May 2022 were not reflected in the BAS statement for that quarter, to which Mr Fitzsimons stated that the sale of the shares owned by the business are paid into the main account and some are taken out for living expenses. They are not income, but rather the business will declare any capital gains as income. The Tribunal asked about a payment from the business account to Mr Fitzsimons from the business account on 13 January 2022 ($5,000) and Mr Fitzsimons stated that these are from shares sold, and an amount is paid to him as a loan repayment.
The Tribunal discussed with Mr Fitzsimons in some detail the possibility of the Tribunal interpreting his “income, property and financial resources” more widely, for child support purposes, than his taxable income, given he appeared to be receiving a financial benefit from the business structure. The Tribunal noted during the hearing that case law guiding the Tribunal’s interpretation of the legislation required the Tribunal to consider financial resources flowing to him from the business. The Tribunal asked why the loan repayments to Mr Fitzsimons from the business would not be treated as an “income, property and financial resource” to him for child support purposes. Mr Fitzsimons stated in response that they are not income; they were an asset within the business; he is allowed to give money to the business and is allowed to repay it. The Tribunal observed that Mr Fitzsimons had been repaid several lots of $5,000 from the business during October 2021, and observed that these amounts appeared to be a financial resource available to Mr Fitzsimons from the business in the 2021/2022 financial year. Mr Fitzsimons stated that this was an asset in the first place. In response to further questions from the Tribunal, Mr Fitzsimons agreed that the money was placed into his personal account and was used for his living expenses.
Mr Fitzsimons stated that his study commitments for his law degree are for 20 to 30 hours per week at the moment which he is due to complete in 2023. He anticipates that into 2023 he will continue running the business and studying part time.
The Tribunal has carefully considered the findings of the Agency in relation to Mr Fitzsimons’s level of income, property and financial resources and has departed from the approach of the Agency for a couple of reasons.
Firstly, the Tribunal finds that Mr Fitzsimons has not provided all details of his financial arrangements to the Tribunal. Mr Fitzsimons was directed by the Tribunal, prior to the hearing, to provide “all bank statements and credit card statements for the business, for the past six months” and “all bank statements and credit card statements in the party’s name and/or joint names for the past 3 months”. Mr Fitzsimons did not provide statements relating to his share trading accounts and, when asked the reasons for this, stated to the Tribunal that he “didn’t think about it”. The Tribunal had difficulty accepting this explanation as plausible given the change of assessment proceedings have had a focus on the parents’ levels of income and financial resources. As Mr Fitzsimons’s evidence unfolded before the Tribunal, it appeared from his evidence that he has both a business-related share trading account and a personal one, and at least one account has a significant amount of funds in it. The Tribunal finds from the evidence before it that Mr Fitzsimons has not complied with the directions of the Tribunal and has not provided full and frank disclosure of his financial arrangements to the Tribunal. The Tribunal finds that Mr Fitzsimons’s level of income, property and financial resources are greater than he has represented to the Tribunal in the documents he provided in response to the Tribunal’s Directions.
Secondly, the Tribunal finds that Mr Fitzsimons is receiving a significant level of financial resources from the business that are not reflected in his taxable income. As noted in some detail above, both case law and the Child Support Guide recognise that, in some circumstances, a parent’s taxable income is not reflective of the actual level of income, property and financial resources that should be recognised for child support purposes. The Tribunal finds from the bank statements before it that Mr Fitzsimons has received the following loan repayments and other financial resources from the business during the 2021/2022 financial year and that the loan repayments are part of the financial resources available to him which (on his own evidence) he is using for regular costs of living:
·The bank statements in the Agency documents (commencing at folio 259) show loan repayments to Mr Fitzsimons of $5,000 each on 22 October 21, 5 October 2021, 14 October 2021, 12 October 2021, 10 October 2021, 9 October 2021, 6 October 2021 and 31 August 2021 (totalling $40,000);
·The Profit and Loss Statement for 2021/2022 states that wages and salaries paid amounts to $22,000. Based on Mr Fitzsimons’s evidence that he is the only person involved in the business (that there are no subcontractors etc), the Tribunal finds this is a payment made to him;
·In the “B” documents provided by Mr Fitzsimons to the Tribunal, his bank statements show that $5,000 in loan repayments were made to him on each of 13 January 2022, 28 February 2022, 10 May 2022, 11 May 2022 and 19 May 2022 (totalling $25,000);
The Tribunal finds that, based on these amounts, Mr Fitzsimons is receiving a minimum amount of $87,000 directly from the business. The Tribunal notes that the bank statements in the Agency documents and those provided by Mr Fitzsimons do not cover the full 2021/2022 financial year and that there may have been other amounts paid to Mr Fitzsimons as loan repayments during the missing period which increase the benefits flowing to him from the business. The Tribunal further notes indirect benefits flowing to Mr Fitzsimons from the business, such as the business’s payment of Mr Fitzsimons’s law degree in circumstances where there is a questionable link to him working in wine sales, and the purchase by the business of Mr Fitzsimons’s former privately-owned car. While any finding made by the Tribunal to set Mr Fitzsimons on an adjusted taxable income of $87,000 rather than a higher amount may be seen as overly beneficial to Mr Fitzsimons, the Tribunal is mindful that it is not required to conduct a forensic examination of each party’s financial circumstances but rather to consider the overall circumstances of the parties that allow a finding regarding each party’s capacity to provide for the children of the assessment. The Tribunal is also mindful of its obligations under the Administrative Appeals Tribunal Act 1975 to provide a mechanism of review that is informal and quick, and has considered that further delay in this matter to obtain further bank statements may undermine these objectives.
The Tribunal notes that the administrative assessment for the period 28 June 2021 to 31 December 2021 used Mr Fitzsimons’s 2019/2020 adjusted taxable income of $25,396 and the assessment for the period 1 January 2022 to 26 August 2022 used Mr Fitzsimons’s 2020/2021 provisional income of $26,107. The Tribunal finds that these amounts significantly understate Mr Fitzsimons’s level of income, property and financial resources available to him in these periods. The Tribunal finds that the use of Ms Pullman’s adjusted taxable income of $103,480 more appropriately represents her level of income, property and financial resources in these periods.
If the parties were set on adjusted taxable incomes of $103,480 (for Ms Pullman) and $87,000 (for Mr Fitzsimons), the amount of child support required to be paid by Ms Pullman would reduce to $1,790 per annum for the child support assessments commencing in 2021 and to $1,802 per annum for the child support assessment commencing in 2022. These amounts are a significant reduction from the amounts required to be paid under the administrative assessments of child support.
The Tribunal finds that the difference between the amounts required to be paid under the administrative assessments of child support and the amounts that would be required to be paid if the parties’ actual levels of income, property and financial resources are used, creates special circumstances in this case. The Tribunal finds that application in relation to the children of the provisions of the Assessment Act relating to the administrative assessment of child support results in an unjust and inequitable determination of the level of financial support to be provided by Ms Pullman for the children, because of both parties’ levels of income, property and financial resources. The ground for departure is established in this case.

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

As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Assessment Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Assessment Act. In addition to the income, property and financial resources of the parents, already considered above in some detail above, the Tribunal also took the following matters into consideration:

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

There was no evidence before the Tribunal that the children have access to any other income, property or financial resources from which to support themselves and the Tribunal finds accordingly. The children are entirely reliant on their parents to meet all of their needs and their parents have a duty under the Assessment Act to ensure that the children receive a proper level of support from each parent.

The proper needs of the children

Subsection 117(6) of the Assessment Act states that in having regard to the proper needs of the child, the court must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child.
Ms Pullman gave evidence to the Tribunal at the hearing that [Child 1] is undergoing orthodontic work which she has solely incurred costs for, in the form of an initial deposit and ongoing monthly payments. The Tribunal asked Ms Pullman to comment on the indication in the dental evidence she had provided, that the treatment was being provided for crowding and an overbite and some functional issues, and asked whether she had had a discussion with the orthodontist about the implications of [Child 1] not receiving the orthodontic treatment. Ms Pullman stated that she is unsure of the severity of [Child 1] not having the treatment but that her bite couldn’t be left as it is as she was in pain for some 12 months; she stated that the pain was in the teeth and she is unsure whether it was in the jaw as well, and that [Child 1] was taking pain relief medication including Nurofen and Panadol for the pain, a couple of times a week on average. Ms Pullman stated that she had had consultations with a dentist and orthodontist prior to COVID-19 and been told to wait for [Child 1]’s baby teeth to fall out, following which there was pain from overcrowding and a recommendation for [Child 1] to pursue orthodontic treatment. She agreed that she had paid an amount of $1,650 on 9 February 2022 and that she had ongoing monthly costs of $237 for a 24 month period, which had commenced on 1 April 2022.
Ms Pullman also gave evidence that [Child 1] has attended a psychologist and paediatrician for chronic sleep issues which she has also covered the costs of. She stated that she had taken [Child 1] to her GP initially, who had identified anxiety and possible autistic traits and had initiated a Mental Health Care Plan for [Child 1]. Ms Pullman stated that she had taken [Child 1] to a psychologist who was unable to see her without Mr Fitzsimons’s consent, which had not been given. She stated that, in the absence of this consent, her only avenue was to attend a paediatrician which she had done, and her GP had put her on melatonin. She noted that the paediatrician the week prior to the Tribunal hearing had recommended a psychologist. As to the costs of the various attendances, Ms Pullman stated that these related to her not being paid as she was required to take annual leave, and of [Child 1]’s medication costing $50 per script. She stated there had been no out-of-pocket costs for attendance at the paediatrician and that no further psychology costs are anticipated as she cannot make an appointment without Mr Fitzsimons’s consent. She stated that [Child 2] is attending a counsellor through school and that the school is covering the costs of this.
In responding to this evidence, Mr Fitzsimons questioned the effectiveness of melatonin and stated that a number of things had been suggested for [Child 1] aside from psychological counselling. He stated that he had spoken to the paediatrician who said early indications are that [Child 1] has anxiety rather than autism. The Tribunal asked, if [Child 1] is likely to have anxiety, what out-of-pocket costs Mr Fitzsimons anticipated would be incurred to manage this. He stated in response that psychology is one of the options but is likely to be expensive and that there are things that can be done to help her.
In response to Ms Pullman’s evidence about [Child 1]’s orthodontic costs Mr Fitzsimons stated, “I’m conflicted” and that his finances are under “extreme pressure at the moment”. He stated that he had agreed to contribute to these costs in 2021 but that things had become difficult for him.

The Tribunal accepted the evidence given by Ms Pullman at the hearing regarding [Child 1]’s orthodontic treatment, which was given clearly and was consistent with the documents provided to the Tribunal. The Tribunal finds that [Child 1] is undergoing orthodontic treatment due to crowding in her mouth which was causing pain to her over a 12 month period and had the potential to cause longer-term functional issues. The Tribunal finds that Ms Pullman has covered all costs of orthodontic treatment to date, which has included an initial payment of $1,650 on 9 February 2022 and ongoing monthly payments of $237 from 1 April 2022 which are anticipated to last for a 24-month period.
The Tribunal finds that there are no ongoing costs for [Child 1] to attend a psychologist or counsellor on the basis that Mr Fitzsimons has not given consent for [Child 1] to attend counselling. The Tribunal finds that there are no ongoing costs for [Child 2] to attend a counsellor as [Child 2]’s school is covering these costs. The Tribunal finds that any melatonin costs do not significantly increase the costs Ms Pullman is incurring for the children.

The earning capacity of Ms Pullman

Subsection 117(7B) of the Assessment Act requires the Tribunal to consider the following matters in determining that a parent’s earning capacity is greater than is reflected in his or her income used in the administrative assessment:
·   Whether the parent:
oIs not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i)); and/or
oHas reduced their weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii)); and/or
oHas changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
·   If the parent’s decision about his/her work arrangements is not justified by either his/her caring responsibilities (subparagraph 117(7B)(b)(i)) or his/her state of health (subparagraph 117(7B)(b)(ii)); and
·   If the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).
As noted above, Ms Pullman gave evidence to the Tribunal at the hearing that she had returned to her long-term employer in 2021 after two months with another employer. The Tribunal notes Ms Pullman’s evidence, which it accepts, that she is employed as a [Occupation 1] and that her changes to her employment arrangements occurred within the context of the COVID-19 pandemic, and at a time at which she states she was “burnt out”. The Tribunal accepted this evidence as reasonable, given Ms Pullman’s type of employment and the wider context within which she was conducting her employment in 2021, and finds that it was not a major purpose of Ms Pullman’s decision to make changes to her work arrangements in 2021 to affect the administrative assessment of child support. It is not open to the Tribunal to make an earning capacity determination in respect of Ms Pullman’s employment arrangements in 2021.
Ms Pullman also gave evidence to the Tribunal that, in what appears to have been around 2020, she had worked four days per week while undertaking a postgraduate program. Given the reasons for Ms Pullman’s temporary reduction from full-time work, the Tribunal was satisfied that it was not a major purpose of Ms Pullman’s decision to work four days per week while undertaking further studies to affect the administrative assessment of child support. It is not open to the Tribunal to make an earning capacity determination in respect of Ms Pullman’s four-day-per-week working arrangements while undertaking a postgraduate program.

The earning capacity of Mr Fitzsimons

The Tribunal finds that Mr Fitzsimons has been self-employed under a company structure since February 2018. While the Tribunal has some doubts around the arrangements under the company structure, as set out above (and in particular, some doubts about Mr Fitzsimons’s former employer having “sacked” him but then, immediately upon incorporation, having been his largest source of income for the company since that time), the Tribunal considers it is not appropriate to make an earning capacity determination in respect of Mr Fitzsimons’s circumstances for two reasons.
Firstly, the company structure has been in place for over four years now. The Tribunal has no jurisdiction to vary any child support more than 18 months before a departure determination was made and considers it inappropriate to make findings about decisions around work arrangements that were made over four years ago. In so finding, the Tribunal notes that the parties have had an opportunity to apply for a departure determination on this ground since the child support case was registered, which would have allowed for an examination of these matters at a time commensurate to Mr Fitzsimons’s decision to commence working under a company structure.
Secondly, the Tribunal is not necessarily satisfied, given its findings above about Mr Fitzsimons’s level of income and financial resources flowing to him from the company structure, that his income has significantly reduced for child support purposes from what he was earning as an employee.
For these reasons, the Tribunal considers it cannot make an earning capacity determination in respect of Mr Fitzsimons’s circumstances in this matter.

The necessary commitments of Ms Pullman

Ms Pullman’s Statement of Financial Circumstances states that she has estimated weekly household expenses for herself and the two children (with each parent being reflected as providing 50% care of the children) of $1,370 per week. The largest amounts each week relate to food ($250), mortgage ($250), clothing and shoes ($100), children’s activities ($100) and education expenses ($100).
The Tribunal noted during the hearing that Ms Pullman had provided a range of other invoices to the Tribunal for its consideration.The Tribunal asked Ms Pullman for submissions about the relevance of these at the hearing and she stated that they are costs not shared by the other parent and that these put a lot of pressure on her over and above the child support she is required to pay to Mr Fitzsimons. She stated that she is regularly paying $20 to school activities for [Child 2] and another $20 regularly for [Child 1], that [Child 2]’s [Sport 1] membership costs $330 and training costs $45 and that [Child 1] has been attending [Sport 2]. She stated that she has covered the cost of school uniforms and school shoes and that she is paying “a couple of hundred a month easily” on top of child support to meet the children’s extra needs. The Tribunal accepted from the evidence before it that the receipts provided by Ms Pullman represent costs she has made towards the children’s needs. The Tribunal accepted that the estimated weekly household expenses of $1,370 are an appropriate representation of ongoing costs for the household.

The necessary commitments of Mr Fitzsimons

Mr Fitzsimons’s Statement of Financial Circumstances states that he incurs estimated weekly household expenses of $808. Of these amounts, $100 relates to food, $350 to rent/mortgage and $100 to education ($80 for himself and $20 for the children). In the absence of any evidence to the contrary, the Tribunal accepted these are an appropriate representation of ongoing costs for Mr Fitzsimons and the children.
Mr Fitzsimons stated, in response to Ms Pullman’s evidence about the costs she was incurring for the children, that he is also paying for the children’s costs. He pointed to transactions in his bank statements to [Sport 2] and [a] uniform shop. The Tribunal accepted that these transactions represented costs Mr Fitzsimons has incurred for the children of the assessment.

The direct and indirect costs incurred by Mr Fitzsimons in providing care for the two children

The Tribunal noted that the legislation requires the Tribunal to consider any direct and indirect costs incurred by the carer entitled to child support in providing care for the child. The Tribunal finds that Mr Fitzsimons is working and studying the equivalent of a full-time basis and finds that Mr Fitzsimons is not foregoing any income in order to provide care to the children.

Hardship

Paragraph 117(4)(g) of the Assessment Act requires the Tribunal to consider any hardship that would be caused to Ms Pullman, Mr Fitzsimons, the two children of the assessment and any child or other person that the parties have a duty to support, by the making of, or the refusal to make, a departure determination. The Tribunal finds that neither parent has a duty to support another child or other person.
Ms Pullman stated to the Tribunal that she is paying $300 per fortnight in child support but is meeting most of the cost of the children herself. The Tribunal accepted this submission as correct, on the basis of the orthodontic invoices provided by Ms Pullman to the Tribunal in addition to other invoices provided by Ms Pullman.
Mr Fitzsimons stated to the Tribunal that any changes to the child support amount payable to him will wipe out his savings even further.

Other – child care costs

The Tribunal notes that Ms Pullman sought that the costs of child care be considered by the Tribunal as one of the grounds for departure raised. While not included specifically as a factor in subsection 117(4) of the Assessment Act, the Tribunal notes that subsection 117(4) sets out the factors that the Tribunal “must” have regard to and is therefore not exhaustive. The ground for departure in relation to child care costs is set out in subparagraph 117(2)(b)(ib) of the Assessment Act. Subsections 117(3A) and (3B) then provide that the ground is only established where the costs are incurred by a parent or non-parent carer, where a child is younger than 12 at the start of the child support period, and where they total more than 5% of a parent’s adjusted taxable income for a child support period. The Tribunal considered that these requirements also provide guidance when considering whether to place weight on any child care costs in considering the range of “just and equitable” criteria.
Ms Pullman told the Tribunal that from the beginning of the year she had used after school care for [Child 2] as she works full-time and that, in the last couple of months, due to other significant costs she was incurring for the children, [Child 2] is no longer attending after school care. The Tribunal observed that it could not see that the costs incurred were a significant proportion of Ms Pullman’s income, to which she stated that [Child 2] had been attending four to five days per week.
The Tribunal took Ms Pullman through the child care invoices she had provided in response to the Tribunal’s directions, which indicated the following out-of-pocket costs:
·$21.56 for the period 31 January 2022 to 13 February 2022 (A111);
·$43.11 for the period 14 February 2022 to 27 February 2022 (A114);
·$33.16 for the period 28 February 2022 to 13 March 2022 (A117);
·$43.11 for the period 14 March 2022 to 27 March 2022 (A120);
·$32.34 for the period 28 March 2022 to 10 April 2022 (A123);
·$56.88 for the period 11 April 2022 to 24 April 2022 (A126);
·$0 for the period 25 April 2022 to 8 May 2022 (A129);
·$25 for the period 9 May 2022 to 22 May 2022 (A135);
·$87.67 for the period 23 May 2022 to 5 June 2022 (A138).
Ms Pullman agreed that these correctly represented her out of pocket costs in the period in question, and stated that it was “disappointing” that these were considered by the Tribunal to be less than 5% of her income as they were amounts she had had to pay on top of all other expenses for the children.
The Tribunal finds from the evidence before it that, between 31 January 2022 and 5 June 2022, Ms Pullman has incurred child care costs of $342.83.

What is the proposed departure determination in this case?

The Tribunal finds on the evidence before it that the administrative assessments of child support do not reflect either parent’s level of income, property and financial resources. In particular, the Tribunal notes its findings, above, regarding Mr Fitzsimons’s noncompliance with the disclosure requirements before the Tribunal and its conservative estimate (in the absence of full bank accounts or any findings about other benefits flowing indirectly to Mr Fitzsimons from the business structure) of a level of financial resources from the business in the amount of $87,000 per annum. The use of a significantly lower income for Mr Fitzsimons has resulted in an inflated and, in the Tribunal’s view, unfair amount of child support to be paid by Ms Pullman to Mr Fitzsimons for the two children.
In addition to this, Ms Pullman has incurred significant expenses for necessary orthodontic expenses for [Child 1], in the form of a substantial initial payment and ongoing monthly expenses. Mr Fitzsimons has not, to date, made any contribution to these necessary expenses.
Taking into account these findings, the Tribunal considers it appropriate to vary child support for a period of time to reflect the costs Ms Pullman is incurring over and above the child support she has been paying to Mr Fitzsimons, and to reflect a more appropriate level of income for each parent. The Tribunal considers it appropriate that, going forward from the date of this decision until 1 April 2024 (being the end of the 24 month period in which Ms Pullman is required to make regular payments towards [Child 1]’s orthodontic costs), child support should be varied such that Ms Pullman is to pay nil child support to Mr Fitzsimons. The purpose of varying child support to nil is to reflect the amount of child support that would be payable if the parents’ actual levels of income, property and financial resources are used in the assessment of child support, minus the significant contribution Ms Pullman is making towards [Child 1]’s orthodontic expenses over a prolonged period of time. Given Mr Fitzsimons’s nondisclosure of his complete financial circumstances to the Tribunal, the Tribunal is not persuaded that making a decision in this manner would cause significant financial hardship to him. Given Ms Pullman’s level of financial support to the two children, the Tribunal finds that refusing to make a departure determination would cause a level of financial hardship to her.
The Tribunal has considered backdating this decision to the time at which Ms Pullman made the change of departure application, however, is reluctant to cause an overpayment situation to Mr Fitzsimons in this matter on top of the effect the Tribunal’s decision will have. The varying of child support for a period of time going forward is intended to provide some financial relief to Ms Pullman from her disproportionate contribution towards the children’s needs, in particular, towards [Child 1]’s orthodontic treatment.
The Tribunal finds that costs of melatonin, past psychology attendance and child care are minor within the overall context of the overall costs of the two children. The Tribunal does not intend to further vary child support payable to reflect any of these costs.
Taking into account all of these findings, the Tribunal considers it appropriate to vary child support payable under paragraph 98S(1)(a) of the Assessment Act and to make a departure determination that Ms Pullman is to pay no child support to Mr Fitzsimons for the period 15 September 2022 to 1 April 2024.

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

The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Mr Fitzsimons receives a small amount of family tax benefit and the Tribunal decided that any departure determination made by the Tribunal is likely to have only minimal impact on the public purse. The Tribunal therefore concluded that it is also otherwise proper to make the proposed departure determination.

DECISION

[2022] AATA 4983

15 September 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Judicial Review

Jurisdiction

Statutory Construction

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