Riehle and Cundall (Child support)

Riehle and Cundall (Child support) [2022] AATA 5048 (7 December 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/AC023050
APPLICANT:  Mr Riehle
OTHER PARTIES:  Child Support Registrar
Ms Cundall

TRIBUNAL:Member Y Webb
DECISION DATE: 07 December 2022
DECISION:

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

·for the period 1 July 2021 to 31 August 2021 Mr Riehle’s adjusted taxable income is varied to $166,916 per annum; and
·for the period 1 September 2021 to 31 March 2022 Mr Riehle’s adjusted taxable income is varied to $130,620 per annum; and
·for the period 1 April 2022 to 28 February 2023 Mr Riehle’s adjusted taxable income is varied to $284,384; and
·for the period 1 March 2023 to 31 December 2024 Mr Riehle’s adjusted taxable income is varied to $232,384.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart - decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

This review relates to the issue of child support regarding the children of Mr Riehle and Ms Cundall (“the children”). The children are aged 7 and 5. The Child Support Agency records reflect that currently (and since December 2021) the children have been in the 79% care of Ms Cundall and 21% care of Mr Riehle and that prior to that time the children were in the 86% care of Ms Cundall and 14% care of Mr Riehle.
The child support case was first registered by the Child Support Agency on 31 August 2017 and has been collectable by the Child Support Agency since 12 May 2021.
On 21 June 2021 Ms Cundall applied to the Child Support Agency for a change to the administrative assessment on the basis of Reasons 2, 8A and 8B. At the telephone directions hearing held on 28 June 2022 - and confirmed at the hearing itself - Ms Cundall stated that she was no longer pursuing Reason 2 and the matter proceeded on the basis that the Reasons in issue were Reasons 8A and 8B.
At the time of Ms Cundall’s application for a change to the assessment, Mr Riehle was assessed under the administrative formula assessment to pay an annual rate of child support of $9,770. This was based on Mr Riehle’s adjusted taxable income for the 2019/2020 financial year of $79,794 and Ms Cundall’s 2019/2020 provisional income of $24,000.
On 6 October 2021 a delegate of the Registrar decided that Reasons 2, 8A and 8B had been established. The delegate decided to change the assessment as follows:
For the period 21 June 2021 to 28 February 2023 Mr Riehle’s adjusted taxable income is varied to $150,000 per annum;
For the period 1 March 2023 to 31 May 2024 Mr Riehle’s adjusted taxable income is varied to $153,750;
For the period 1 June 2024 to 31 August 2025 Mr Riehle’s adjusted taxable income is varied to $157,600;
For the period 1 September 2021 to 31 August 2022 the annual rate of child support payable by Mr Riehle is increased by $839 in relation to the eldest child’s special needs (dental surgery).
From 1 September 2025 the normal administrative provisions of the Child Support (Assessment) Act 1989 (the Assessment Act) will apply
This decision resulted in an increase in Mr Riehle’s child support liability to between approximately $20,800 per annum and $21,600 per annum with arrears of approximately $3,546.
On 30 October 2021 Mr Riehle objected to that decision.
On 22 December 2021 his objection was allowed but the decision was less favourable to him than the original decision. The objections officer determined that Reasons 2 and 8A had been established but that Reason 8B had not. The objections officer set aside the original decision and decided:
For the period 1 July 2021 to 11 November 2021 Mr Riehle’s adjusted taxable income is varied to $290,060;
For the period 12 November 2021 to 31 December 2022 Mr Riehle’s adjusted taxable income is varied to $223,060;
For the period 1 January 2023 to 30 June 2024 Mr Riehle’ s adjusted taxable income of $223,060 is adjusted by the relevant Child Support Inflation Factor;
For the period 1 July 2021 to 30 June 2022 the annual rate of child support payable by Mr Riehle is increased by $1,258.
This decision resulted in an increase in the initial rate payable to approximately $29,712 with arrears of approximately $3,200 when adjusted from the assessment in place.
On 4 January 2022 Mr Riehle requested review by the Administrative Appeals Tribunal (“the Tribunal”). He stated that the objections officer’s decision has put him into financial hardship.
A telephone directions hearing was held on 28 June 2022 with both parents.
The hearing took place on 1 December 2022 and both parents gave evidence on affirmation.
Following the hearing the Tribunal deferred making a decision pending Mr Riehle clarifying aspects of his income. His response was provided to Ms Cundall for her possible response. She responded on 5 December 2022. The Tribunal made its decision on 7 December 2022.

ISSUES

The central issues for the Tribunal to determine in this case are:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exist; and if so,
·      Whether it would be:
(a)   just and equitable as regards the children, the liable parent, and the carer entitled to child support; and
(b)   otherwise proper
to make a particular determination to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule. The Tribunal had regard to all of this evidence, and refers specifically to particular items in this Statement of Reasons.

CONSIDERATION

The child support law

The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.
A parent 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 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 13 above.
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 for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and 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. Section 98S sets out a range of determinations that may be made under the departure provisions.
The phrase “special circumstances of the case” is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.
Whilst it is not possible to define with precision the meaning of that term, as a generality it 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.
[1] (1992) FLC 92-279
Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.

Does a ground or grounds exist to depart from the administrative formula assessment?

In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents prior to the hearing.

Reason 8A

The legislative grounds corresponding to Ms Cundall’s application in relation to Reason 8A are set out in subparagraph 117(2)(c)(ia) of the Assessment Act. The test is whether:
in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child: [paragraph 117(2)(c)]
(ia) because of the income, property and financial resources of either parent; …
To establish this ground it is necessary to show that either Mr Riehle’s or Ms Cundall’s income, property or financial resources used in the assessment make the child support assessment unfair.

Mr Riehle’s income, property and financial resources

Mr Riehle is associated with three companies: [Company 1] of which he is the sole director and sole secretary and one of two shareholders; [Company 2] of which he is one of two directors, the sole secretary and one of two shareholders; and [Company 3] of which he is the sole director, secretary and shareholder. Mr Riehle advised that the only active company is [Company 1] (“the Company”). He provided a letter from his accountant, [named], which confirmed that [Company 2] and [Company 3] do not trade[2]. The Tribunal accepts this statement from Mr Riehle’s accountant as accurate.
[2] A35
Mr Riehle provided Financial Statements of the Company for the year ended 30 June 2021 and 30 June 2022. These show that the Company’s profitability has substantially increased since the 2019/2020 financial year. For example, the profit before taxation of the Company in the year ended 30 June 2020 was $57,335[3]; in the year ended 30 June 2021 it was $311,729[4] and in the year ended 30 June 2022 it was $788,626[5]. After tax the net profit for the year ended 30 June 2020 is not entirely clear from the Financial Statements – although the total equity in the Company in that financial year was only $2,502[6] but the net profit after tax for the year ended 30 June 2021 was $291,606[7] and for the year ended 30 June 2022 was $512,815[8].
[3] C1-page 213
[4] C1-page 213
[5] A24
[6] C1-page 217
[7] A24
[8] A24
Mr Riehle told the Tribunal that although he is a director and shareholder of the Company he was not directly working for the Company until April 2022. His father was running the Company. He stated that at least since 2020 he has been working as an employee for an unrelated business – [Company 4]. He denied that he was a director or shareholder or that he had any connection to [Company 4] other than he was an employee of that business. The Tribunal accepts his statements in that regard. Within the C1 papers are statements of [Credit Union 1] pertaining to Mr Riehle’s finances. These statements show that at least since 2020 [Company 4] was paying Mr Riehle on a fortnightly basis and the Tribunal accepts that he was an employee of [Company 4]. In 2020 and until August 2021 his net fortnightly wage was approximately $2,589.54[9] (approximately $88,296 (gross) per annum) but from approximately August 2021 the credit union statements show that his net fortnightly wage decreased to $1,676[10]. Mr Riehle contended that this decrease in his wage occurred because [Company 4] reduced his hours of work to two days a week from August 2021 as its building project was nearing completion. The Tribunal accepts his evidence about his working arrangements from August 2021. Hence the Tribunal finds that in the 2020/2021 year Mr Riehle was working full-time for [Company 4] earning a gross income of approximately $88,296 per annum. However, from approximately August 2021 his hours of work were reduced to two days a week and he was paid approximately $2,000 (gross) per fortnight ($52,000 per annum).
[9] C1-page 332-363
[10] C1-page 368-374 and 440-446
The Tribunal also accepts his statements that since approximately April 2022 he has been working for the Company earning $130,000 per annum in dividends paid monthly. Mr Riehle stated that he is the [specified role] of a major commercial building project (“[Project 1]”) in the CBD. He advised that this is a new project and the Company’s first large commercial project. Mr Riehle provided the Profit and Loss Statement of the Company for the 2021/2022 financial year. This was divided into Profit and Loss Statements for the in-house contracts of the Company, which Mr Riehle stated referred to the side of the Company business which Mr Riehle’s father operated relating mainly to [Task 1], [Task 2] and smaller jobs. The in-house side of the Company generated a net profit after tax of $119,059 in the 2021/2022 financial year. The net profit after tax for [Project 1] was $393,756 in the 2021/2022 financial year. Hence the consolidated Profit and Loss Statement showed a net profit after tax for the Company of $512,815 in the 2021/2022 financial year[11].
[11] A24
In relation to Mr Riehle’s income it is evident from the payslips Mr Riehle provided for May 2022 to July 2022[12] and from the credit union statements[13] that he continued to be paid $2,000 (gross) a fortnight ($1,676 (net) per fortnight) from [Company 4] at least up to November 2022[14]. Following the hearing the Tribunal asked Mr Riehle to clarify whether, since April 2022 he has been paid $130,000 per annum by the Company plus $1,676 (net) per fortnight by [Company 4]. Mr Riehle responded that there have been some delays in the completion of the [Company 4] project due to poor weather and supply issues, so he has temporarily stayed with them on a part-time basis to finish off the project. He stated that the project was due to be finished in April 2022 but that it is now expected to be completed in January/February 2023 all going well. Ms Cundall responded that she had always believed that Mr Riehle was working for two organisations.
[12] A30-A32
[13] C3-pages 524-526
[14] C2-pages 501-526
In relation to his income from the Company of $130,000 per annum Mr Riehle stated that this income will be paid as dividends from the Company to him. He stated that he is paid monthly by the Company but agreed that he does not receive a payslip as he is not an employee of the Company. He stated that the dividends will be accounted for in the Financial Statements at the end of the financial year.
Mr Riehle also explained that since it was purchased in 2020 he has had the benefit of [a] motor vehicle. There is a $100,000 loan associated with this vehicle. The vehicle is registered in his name but the Company has been paying the loan repayments which are $338.85 per week (approximately $17,620 per annum). The loan is in the name of the Company. Mr Riehle advised that he pays for some of the fuel but he and his father both at times use the vehicle for work purposes as well as personally so some of the maintenance and fuel costs are met by the Company. The Company pays registration and Mr Riehle pays comprehensive insurance costs. Mr Riehle also stated that the Company owns a [specified make] car which Mr Riehle’s father uses as a work car. However, he stated that the Company is intending to sell the [car] and replace it with a utility in keeping with his father’s wishes.
Mr Riehle stated that he does not receive any other significant benefits from the Company as he pays for his own mobile phone and his wife pays for the home internet. The Tribunal accepts his statements in that regard. Hence the Tribunal finds that he receives benefits from the Company by way of [the] vehicle equivalent to approximately $17,620 per annum.
The Tribunal is satisfied therefore that since April 2022 and continuing Mr Riehle has been remunerated by the Company at $130,000 per year and in addition, he has continued to be paid $2,000 (gross) per fortnight by [Company 4] plus motor vehicle benefits of $17,620 per year.
The Tribunal accepts that profits of the Company in the year ended 30 June 2021 were not distributed to shareholders. The retained profits were $244,422 as detailed in the Balance Sheet of the Company[15]. Mr Riehle told the Tribunal that the reason why the profits were retained in the Company was because the Company needed to maintain funds to cover unexpected costs such as increasing insurance premiums and the possibility of payment shortfalls. He stated that the construction industry is financially risky and that a missed payment could be financially disastrous. Therefore, it is important to retain the profits in the Company especially when the Company is only starting to be financially viable. He didn’t consider it was wise to take a portion of the profits especially as the Company had no retained profits from the previous year ended 30 June 2020.
[15] C1-page 217
In relation to the 2021/2022 financial year the consolidated profit and loss statement shows that the profits after tax were $512,815[16]. These profits were also retained in the Company and not distributed. Mr Riehle stated that the building construction industry is very risky. Already the Company has had to pay out for insurance for [Project 1], which was far higher than he anticipated. He stated that it is very important to have a good cash flow to meet any unexpected costs. The [Project 1] is not due for completion until 2024 and he won’t know whether the project has been profitable until it is completed. It is too risky to distribute the profits of the Company at this time.
[16] A24
The Tribunal acknowledges that there were valid reasons why Mr Riehle did not take any of the profits in the year ended 30 June 2021 when the Company’s finances had just started to improve and in the year ended 30 June 2022 when it was branching out into commercial building construction with [Project 1]. It acknowledges that the more profitable the Company, the more Mr Riehle is able to provide for his children. However, his commitment to the Company cannot take precedence over his obligations to financially support his children. As one of two shareholders, his share of the profits was approximately $122,000 in the 2020/2021 financial year and approximately $256,407 in the 2021/2022 financial year. (Mr Riehle advised that in fact there are two “informal” additional shareholders – apart from Mr Riehle and his father – but currently these additional people are not legal shareholders).
The Tribunal is satisfied that at least in the period leading up to August 2021 Mr Riehle was working full-time for [Company 4] earning $88,296 (gross) per annum. He had the benefit of his [vehicle]; a benefit equivalent to $17,620 ($338.85 per week) (a total income therefore of $105,916). He also had access to the Company profits of approximately $122,000 .

From August 2021 the Tribunal accepts that Mr Riehle’s hours of work were reduced to two days a week by [Company 4]. It paid him $2,000 gross per fortnight: $52,000 per annum. That remains the case in relation to [Company 4] and Mr Riehle advised that he expects that to continue until January or February 2023. That means that from August 2021 to February 2023 Mr Riehle will be paid $52,000 per year from [Company 4] plus (from April 2022) dividends totalling $130,000 per annum from the Company in addition to $17,620 in benefits for the [vehicle]. Furthermore, the dividends are taxed more favourably than would be the case if Mr Riehle was being paid $130,000 gross per year as an employee. Dividends paid out of profits are subject to company tax. Therefore shareholders are not taxed again on the profits; instead they receive a rebate for the tax paid by the Company on profits distributed as dividends. These “franked dividends” have a franking credit attached to them. Hence, a shareholder receiving dividends totalling $130,000 per year is considerably better off than an employee earning $130,000 (gross). An employee (wage and salary earner) earning $130,000 per annum would only receive a net income of approximately $94,500 per annum whereas Mr Riehle will have the benefit of the whole $130,000. An employee would have to earn approximately $185,000 (gross) to receive $130,000 net per annum. This means that in terms comparable to a wage and salary earner (an employee) from April 2022 to February 2023 Mr Riehle is earning $185,000 (grossed up from $130,000) + $52,000 ([Company 4] gross salary) + $17,620 (vehicle benefit) = $254,620 per annum.
Once the [Company 4] salary ceases Mr Riehle will be earning $185,000 (grossed up from $130,000) + $17,620 (vehicle benefit) = $202,620 per annum.
There is also the issue of the profits which the Tribunal has addressed later in these Reasons.
Mr Riehle owns no real estate. He is the registered owner of the [vehicle]. He values his household contents at $30,000 and he owns a boat which he values at $3,000[17]. He has modest savings of approximately $3,000 according to his credit union statements as at November 2022[18].
[17] A7
[18] C3 – pages 523 and 526
At the time that Ms Cundall applied for a change to the assessment the income used in the assessment for Mr Riehle was his 2019/2020 adjusted taxable income of $79,794 per annum, which resulted in a child support liability of $9,770. However, the Tribunal is satisfied that his actual income was well in excess of $79,794 as detailed above. This makes the child support assessment unfair as Mr Riehle has a greater capacity to support his children than is reflected in the child support administrative formula assessment.
There exists such a significant disparity between the income used in the assessment and Mr Riehle’s actual income that it creates a special circumstance. The Tribunal is also satisfied that it renders the child support assessment unjust.
The Tribunal finds that Reason 8A is established in relation to Mr Riehle’s income.
In relation to the claim that Reason 8B (in relation to Mr Riehle’s earning capacity) is also relevant in this case the approach of the Federal Circuit Court of Australia has been to limit the analysis about particular grounds once it was evident that one had been established, and to thereafter focus on the “just and equitable” considerations. The Tribunal adopts that approach in its reasoning in this matter and will consider Mr Riehle’s earning capacity in that context.

Would it be just and equitable to depart from the administrative assessment?

Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of the duty of the parents towards their children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues, the Full Family Court, in the case of Gyselman, stated that:
However, some of the matters listed in sub-section [117](4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).
Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act.

The proper needs of the children

In determining the proper needs of the children, subsection 117(6) of the Assessment Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the children.
Both parents agreed that they have an agreement to share the costs of the children’s private school fees. However, Mr Riehle asserted that he had paid more than 50% of the school fees for last year and that he was waiting to see what was owed for this year before paying his half for this year.
Ms Cundall explained that the younger child has significant disabilities and while she receives funding from the NDIS for four types of therapies each week these funds do not cover all of her requirements such as transport to and from the required therapies. However, Ms Cundall stated that she was not seeking any adjustment to the child support liability in relation to the child’s special needs.
The parents did not raise any other issues regarding the proper needs of the children.

The income, earning capacity, property and financial resources of the children

Both Ms Cundall and Mr Riehle advised, and the Tribunal accepts, that the children have no income, property or financial resources of their own and the Tribunal finds that the children are wholly dependent on their parents for financial support.

Mr Riehle’s income, property, financial resources, expenses and earning capacity

Mr Riehle’s income, property and financial resources have been extensively covered above. In relation to expenses he initially declared in his Statement of Financial Circumstances in January 2022 that his household expenses totalled approximately $1,978 per week which annualises to approximately $102,800 per annum. However, he clarified at the hearing that during the period when he was working only two days a week for [Company 4], he had to reduce his household expenditure especially on holidays, food and household supplies. He also relied more heavily on his wife’s income and on his overdraft to afford the household expenses. The Tribunal accepts that household expenses of approximately $100,000 per annum in addition to income tax of approximately $324 per week ($16,848 per annum) as well as child support payments of approximately $28,000 per annum (as they were in January 2022 when the Statement of Financial Circumstances was completed) are inconsistent with Mr Riehle’s claimed income of $52,000 per annum at that time. The extent of Mr Riehle’s expenses (albeit that they may have been reduced from the amounts stated in the Statement of Financial Circumstances) does tend to suggest that he was drawing on additional financial resources although the Tribunal accepts that his wife was possibly contributing to the household expenses and he was also relying to some extent on his overdraft to cover his expenses.
In relation to Mr Riehle’s earning capacity the earning capacity provisions are difficult to satisfy. There are three criteria, all of which must be satisfied. Subsection 117(7B) of the Assessment Act states:
(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(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.
In August 2021 Mr Riehle’s employment with [Company 4] – which was previously full-time – was altered by [Company 4] to part-time employment of two days a week. This led to a significant decrease in his income. However, the Tribunal is satisfied that this reduction in time occurred at the instigation of [Company 4] and not at the initiative of Mr Riehle. In those circumstances the Tribunal is not persuaded that the first requirement has been met that “the parent has reduced the number of hours per week of his or her employment”. Even if the first requirement was satisfied the Tribunal is not persuaded that Mr Riehle’s major purpose in reducing his hours was to affect the administrative assessment of his child support for the children, especially as the Tribunal has found that his income has substantially increased since April 2022. Hence, the Tribunal finds that Mr Riehle’s earning capacity is not an issue in this matter.

Ms Cundall’s income, property, financial resources, expenses and earning capacity

As at 21 June 2021 when Ms Cundall applied for a change to the assessment she was being assessed on her 2019/2020 provisional income of $24,000. Ms Cundall provided payslips which showed that she is employed for 21 hours per fortnight at $23.0769 per hour. Each fortnight she receives a total of $522.42 which comprises ordinary earnings of $484.62 and a car allowance of $37.80. Annually, she earns approximately $13,582 per annum from her employment. However, Ms Cundall’s employment only commenced in early 2022. Centrelink payments supplement her income. She receives carer payment which is approximately $858 per fortnight and carer allowance which is $130 per fortnight. In addition Ms Cundall receives family tax benefit of approximately $360 per fortnight for the children which cannot be taken into account as income for child support purposes. In addition, she receives child support from the father of her two eldest children as well as child support from Mr Riehle for the two children of this assessment. In the 2020/2021 financial year the Child Support Agency records confirm that Ms Cundall’s income for child support purposes was $23,686 per annum and in the 2021/2022 financial year it was $22,822. The Tribunal accepts all of Ms Cundall’s statements regarding her income.
In relation to property Ms Curnow owns her own home (subject to a mortgage). She estimated that her home is valued at approximately $450,000 and she owes approximately $335,000 on her mortgage which she is repaying at the rate of $425 per week.
She owns a 2015 car which she valued at approximately $15,000 and home contents which she valued at approximately $50,000. She declared modest savings of less than $200.
In relation to expenses she emphasised that these varied from week to week depending on what she could afford. Her household expenses totalled approximately $1,562 (approximately $81,000 per annum) although the Tribunal accepts that the expenses fluctuate as Ms Cundall stated. Not surprisingly her largest expenses were food and mortgage payments. The Tribunal finds that Ms Cundall’s expenses are unremarkable and consistent with her care of the children.
In relation to earning capacity, Ms Cundall commenced paid employment in early 2022 following a period when she was wholly dependent on Centrelink for her income. In those circumstances it cannot be said that she has reduced her hours of work, changed her occupation or doesn’t work despite ample opportunity to do so. Hence, earning capacity is not an issue in Ms Cundall’s case.

Necessary commitments to support themselves or others

The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered ‘necessary’ expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson[19] the Full Court of the Family Court stated at paragraph 128:
Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one’s cloth to meet that commitment during the years when it applies.
[19] [1986] FamCA 3.
Neither Mr Riehle nor Ms Cundall raised any issues at this time in relation to self-support and the Tribunal finds accordingly.

Any direct or indirect costs incurred by the carer entitled to child support in providing care for the children

Ms Cundall advised that she is unable to increase her employment because of her ongoing and frequent commitments to caring for the younger child with special needs. Ms Cundall explained that she is only able to work on the days that the child attends kindergarten (two days per week) and that on the other days of the week she is a full-time carer for the child in addition to transporting the child to multiple therapies (for which the child receives NDIS funding). The Tribunal accepts that Ms Cundall’s employment is restricted by her caring responsibilities and that she incurs an indirect cost in providing the necessary care for the child.
Mr Riehle stated that he believed that Ms Cundall was working more hours than she was declaring. However, there is no evidence to support that assertion and the Tribunal would expect to see additional hours reflected in her payslips if that was the case. The Tribunal accepts Ms Cundall’s evidence and the payslips as accurate.

Any hardship to either parent or the children by the making of, or refusal to make, an order

Mr Riehle stated that if the Tribunal decided to change the assessment to the extent that the objections officer did, this would cause him significant hardship. He stated that the only way he could pay a child support liability of that magnitude would be if his partner supported him financially. He stated that the large commercial building project which the Company is currently undertaking ([Project 1]) and for which he is the [specified role] is financially risky. He does not know whether it will turn out to be profitable. He cannot take money out of the Company as he chooses.
Ms Cundall stated that her finances are very tight. She lives from week to week. The costs of living are escalating and increasing interest rates affect her mortgage payments. She finds it very hard to budget partly because Mr Riehle’s child support payments are sporadic and for seemingly random amounts. Ms Cundall told the Tribunal that she would be in financial hardship if the Tribunal refused to change the assessment.

Proposed determination

The Tribunal has carefully considered the evidence provided and the statements and submissions of both parents.
The Tribunal is satisfied that at least in the period leading up to August 2021 Mr Riehle was working full-time for [Company 4] earning approximately $88,296 (gross) per annum. He had the benefit of his [vehicle]; a benefit equivalent to $17,620 ($338.85 per week) (a total income therefore of $105,916). He also had access to the Company profits of approximately $122,000 (his share). The Tribunal acknowledges that Mr Riehle, as the sole director, did not distribute those profits taking into account what he considered were the best interests of the Company. Nevertheless, his portion of the profits were a financial resource available to him even though he did not distribute or access them. Hence, the Tribunal considers that a portion of the profits should be attributed to him for child support purposes. Taking into account that the Tribunal accepts that Mr Riehle did not actually access the profits and the reasons why he did not do so, the Tribunal considers that it would be just and equitable to attribute Mr Riehle with 50% of his share of the profits in the 2020/2021 financial year: an amount of $61,000. Hence the Tribunal proposes that in the period 1 July 2021 to 31 August 2021 Mr Riehle’s adjusted taxable income be varied to $166,916 per annum ($88,296 + $17,620 + $61,000). The Tribunal proposes the start of the change of assessment should be 1 July 2021 as this is a convenient start of a financial year and is within days of Ms Cundall’s application on 21 June 2021.
From 1 September 2021 until 31 March 2022 the Tribunal has found that Mr Riehle was earning $52,000 per annum from [Company 4]; $17,620 in benefits for the [vehicle] and a percentage of his portion of profits from the 2020/2021 financial year of $61,000 for the reasons stated above. Hence the Tribunal proposes to vary Mr Riehle’s adjusted taxable income in the period 1 September 2021 to 31 March 2022 to $130,620 per annum.
From 1 April 2022 to 28 February 2023 the Tribunal has found that Mr Riehle was earning $52,000 per annum from [Company 4], dividend payments totalling $130,000 per annum but grossed up to $185,000 plus $17,620 in benefits for the [vehicle]. In addition, the Tribunal considers it would be appropriate to attribute Mr Riehle with a portion of the profits of the Company in the 2021/2022 financial year. However, the Tribunal considers it would fair and just to attribute 50% of his share of the profit of the Company inhouse work ($29,764) because the Tribunal accepts Mr Riehle’s statements that the financial state of [Project 1] is too unpredictable to access or distribute any profits and also that it would not be in the Company’s best interest to distribute or access all of his own share of the profits. Hence the Tribunal proposes that in the period 1 April 2022 to 28 February 2023 Mr Riehle’s adjusted taxable income be varied to $284,384.
Once the [Company 4] salary ceases the Tribunal has found that Mr Riehle will be earning $185,000 (grossed up from $130,000) from the Company plus $17,620 (vehicle benefit) = $202,620 per annum. In addition, as detailed above the Tribunal considers that it is fair that a share of the profits at least are attributed to Mr Riehle. The Tribunal is mindful that if Mr Riehle is not accessing the profits that his capacity to afford the child support liability is affected. The proposal to attribute a share of some of the profits (an amount of $29,764) is a means of balancing the extent to which the children should benefit from the profits of the Company while taking into account that while Mr Riehle’s child support liability is calculated partly on the profits of the Company, he has decided to retain the profits in the Company as a cautious, financial decision. Hence, the Tribunal proposes that from 1 March 2023 Mr Riehle’s adjusted taxable income should be varied to $232,384 ($185,000 + $17,620 + $29,764).

In relation to the duration of its decision the Tribunal proposes to end the departure on 31 December 2024. The Tribunal considers this date is fair and equitable and provides some certainty for a reasonable period to both parents. The Tribunal does not propose to extend the change to the assessment for a longer period because it is mindful that any improvements in Mr Riehle’s financial position should be reflected in the child support assessment as soon as possible.
The impact of the Tribunal’s proposed determination is that from 1 July 2021 and taking into account the care arrangements at that time Mr Riehle’s child support liability will be approximately $23,000 per annum. The liability will decrease in the period September 2021 to March 2022 to approximately $17,900 per annum; increase to approximately $29,000 per annum in the period April 2022 to March 2023 and decrease to approximately $27,000 per annum thereafter. The Tribunal emphasises that these figures are very approximate as they are affected by the parents’ care percentages, both parents’ other children as well as Ms Cundall’s future income.
The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents.

Is it otherwise proper to depart from the administrative assessment?

The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system when the parents themselves have the capacity to maintain their children.
The Tribunal is satisfied that Ms Cundall needs financial assistance to support the children and that Mr Riehle has the capacity to contribute to those costs.
Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income-tested pension, allowance or benefit.
Ms Cundall is receiving family tax benefit and she confirmed that she is aware of the impact of child support payments on that benefit.
The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

DECISION

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

·for the period 1 July 2021 to 31 August 2021 Mr Riehle’s adjusted taxable income is varied to $166,916 per annum; and
·for the period 1 September 2021 to 31 March 2022 Mr Riehle’s adjusted taxable income is varied to $130,620 per annum; and
·for the period 1 April 2022 to 28 February 2023 Mr Riehle’s adjusted taxable income is varied to $284,384; and
·for the period 1 March 2023 to 31 December 2024 Mr Riehle’s adjusted taxable income is varied to $232,384.

SCHEDULE – List of Exhibits

Child Support Agency marked as C exhibits:
·     CSA’s large bundle of 496 pages marked as exhibit – C1
·     CSA’s smaller bundle pages 497 to 514 – marked as exhibit C2
·     CSA’s smaller bundle pages 515 to 532 – marked as exhibit C3
Mr Riehle has provided the following documents marked as A exhibits:
·     A1-A9                 Statement of Financial Circumstances
·     A10-A11               Written submission
·     A12-A13               BAS December 2021 quarter
·     A14-A24               Profit and Loss and Trading Statements – [Company 1] - 2021/2022
·     A25-A27               BAS June 2022 quarter
·     A28-A29    `         BAS March 2022 quarter
·     A30-A33               Payslips – [Company 4]
·     A34  Cover email
·     A35   Accountant’s letter
Ms Cundall has provided the following documents marked as B exhibits:
·     B1   Payslip from employer
·     B2-B10                Statement of Financial Circumstances
·     B11-B12               Payslips from employer

[2022] AATA 5048

7 December 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Statutory Construction

Remedies