Sellman and Jessop (Child support)
[2025] ARTA 1600
•24 February 2025
Sellman and Jessop (Child support) [2025] ARTA 1600 (24 February 2025)
Applicant/s: Mr Sellman
Respondent: Child Support Registrar
Other Parties: Ms Jessop
Tribunal Number: 2024/AC028560
Tribunal: Senior Member M Kennedy
Place:Adelaide
Date:24 February 2025
Decision:
The Tribunal sets aside the decision under review and in substitution decides the objection is allowed so as to determine, pursuant to section 98S of the Child Support (Assessment) Act 1989 as follows:
1)From 1 January 2024 to the end of the child support case in respect of [their child], Mr Sellman’s adjusted taxable income is set at $84,000.
2)From 1 June 2024 to the end of the child support case in respect of [their child], Ms Jessop’s adjusted taxable income is set at $94,600.
3)From 1 January 2024 to 31 December 2024 Mr Sellman’s annual rate of child support is increased by an additional $7,328 on account of private school fees.
4)From 1 January 2024 to 31 December 2024 Mr Sellman’s annual rate of child support is increased by an additional $2,236 on account of Ms Jessop’s out of pocket expenses discussed at the Administrative Review Tribunal hearing
5)From 1 January 2025 to 31 December 2025 Mr Sellman’s annual rate of child support is increased by an additional $7,710 on account of private school fees
6)From 1 January 2026 to 31 December 2026 Mr Sellman’s annual rate of child support is increased by an additional $7,710 on account of private school fees.
7)From 1 January 2027 to 31 December 2027 Mr Sellman’s annual rate of child support is increased by an additional $6,100 on account of private school fees.
CATCHWORDS
CHILD SUPPORT – departure from the administrative assessment – adjusted taxable income – father’s inheritance and sole control of partnership previously shared with his father – costs of maintaining child – education in manner expected by parents – private school fees – health treatment – volatility of father’s income and legitimate financial management measures – farm management deposits and cash reserves – mother’s new business – decision under review set aside and substituted
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.
Statement of Reasons
Mr Sellman and Ms Jessop are the parents of three children aged 17 ([June] 2008), 15 ([September] 2009) and 13 ([April] 2012), in respect of whom a child support assessment has been in place since 26 September 2017. The parents share in the care of the children, with Mr Sellman having 33% care and Ms Jessop 67%.
On 30 November 2023, Ms Jessop applied for a departure from the administrative assessment of child support (i.e. a change of assessment). At that time, the administrative assessment of child support was affected by a previous departure determination that had set Mr Sellman’s adjusted taxable income at $120,000 until 31 December 2023, and increased the annual rate of child support by a further $5536 until 31 December 2023[1].
[1] An increase to the annual rate of a further $3420 had also applied for the period 1 October 2022 to 30 September 2023
At the time of Ms Jessop’s application for a departure determination, Mr Sellman was assessed to pay an annual rate of child support of $25,807.
By the time the decision was made on Ms Jessop’s application on 29 April 2024 however, the departure determination had ceased and Mr Sellman was assessed to pay an annual rate of child support of $12,864 based on his provisional 2022/23 adjusted taxable income of $86,355 and Ms Jessop’s 2022/23 adjusted taxable income of $281[2].
[2] Mr Sellman’s provisional adjusted taxable income was replaced with his actual adjusted taxable income for 2022/23 on 15 May 2024, by which time the departure determination discussed below were operative, and resulted in an adjusted taxable income (increased by departure determination) of $20,808 based on his actual adjusted taxable income of $11,808 – see paragraph 12 below.
In her application, Ms Jessop relied on the grounds known as Reason 3 and Reason 8.
Essentially, and as to Reason 8, Ms Jessop asserted that Mr Sellman had inherited significant financial resources and his earnings had increased on account of him taking sole control of the partnership he had previously shared with his late father. Ms Jessop also identified the costs of schooling that had previously been the subject of change of assessment decisions.
Mr Sellman opposed any change to the assessment, arguing that his late father’s share of profits from the partnership would go to his estate, suggesting he might retire and suggesting that earlier departure determination decisions incorrectly identified his income and financial resources. Mr Sellman argued that his taxable income should be used for the calculation of his child support liability. Mr Sellman was invited to provide financial information including financial statements for the business but did not do so.
On 29 April 2024, a delegate of the Child Support Registrar decided to allow Ms Jessop’s application and departed from the administrative assessment of child support by increasing Mr Sellman’s adjusted taxable income by $9000 p.a. for the period 1 January 2024 to 31 December 2026, and increasing the rate of child support by $7,278 for the period 1 January 2024 to 31 December 2025, then $7933 for the period 1 January 2025 to 31 December 2026 and then by $8,238 for the period 1 January 2026 to 31 December 2026. The latter three departures were to take into account school fees.
As to the departure to increase adjusted taxable income, the delegate accessed records from the Australian Taxation Office demonstrating that Mr Sellman had been in a business partnership with his late father, and in 2021-22 the partnership had a net profit of $265,260, of which $168,354 was distributed to him. The delegate noted that Mr Sellman’s personal tax return recorded supplemental income of $82,840.[3] The delegate further identified that Business Activity Statements for the business for the 2023 calendar year showed sales of $127,938.
[3] Mr Sellman’s personal income taxation return shows that an $80,000 Farm Management Deposit was made, but this issue was not further addressed by the delegate.
The delegate decided that it would be reasonable to conclude that Mr Sellman would be entitled to 100% of the business net profits moving forward, and extrapolated from the BAS and analysis of the profit margin in the previous partnership taxation return that net income was likely to be $63,969 although contrary to the earlier remark the delegate had made, concluded that Mr Sellman would be entitled to half only. The delegate concluded on this basis that Mr Sellman’s taxable income would be a fair representation of his net business income. The delegate speculated however that Mr Sellman may have access to benefits such as use of motor vehicles, phones and internet which should be considered a personal benefit, allocating a value to these benefits of $5000. The delegate added a further $4000 to take account of depreciation, although the business partnership taxation return disclosed $44,000 in depreciation. The reasoning was not elaborated upon. The delegate ultimately decided to depart from the administrative assessment in respect of Mr Sellman’s adjusted taxable income by increasing it by $9,000 per annum.
As to the increases to take into account school fees, the delegate noted Mr Sellman had not made representations in that regard, and allowed an increase of 50% of the updated school fee information.
Mr Sellman objected to this decision on 5 June 2024, arguing that his income was significantly lower than estimated (referring to the departure determination), and provided a Notice of Assessment showing taxable income of $11,808 for 2022/23.
On objection, the objection officer undertook a detailed analysis of Mr Sellman’s and the partnership’s tax returns. Ultimately, the objections officer found an average income value of $51,607, and compared that amount to the amount of $120,000, which had been the amount of adjusted taxable income that applied to the assessment at the time of the application, by way of departure determination. On this basis, the objections officer found the assessment unfair, also finding that the income currently used in the assessment (which at the time of the objection officer’s decision was $11,808) was unfair.
However, the objection officer identified that as Mr Sellman was assessed at three times the fixed annual rate (i.e. for three children), his adjusted taxable income would need to be fixed at higher than $52,700 for there to be any significant change to the assessment.
Noting that Mr Sellman had not objected to the previous change of assessment decision and other matters, the objection officer decided not to disturb the previous objection decision that had set Mr Sellman’s income at $120,000 until 31 December 2023. Similarly, having regard to the observations about the effect of the fixed annual rate, the objection officer decided not to set an adjusted taxable income figure for Mr Sellman going forward. The objection officer retained the departure determinations in relation to education costs, with a minor adjustment.
Mr Sellman applied to the Administrative Appeals Tribunal for review on 11 September 2024.
On 14 October 2024, the Administrative Appeals Tribunal was abolished and the Administrative Review Tribunal commenced operations. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review that were not finalised by the Administrative Appeals Tribunal before 14 October 2024 were taken to be applications for review to the Administrative Review Tribunal (hereafter the Tribunal). The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed.
Mr Sellman and Ms Jessop participated in a telephone directions hearing on 24 February 2025. A hearing listed for 29 April 2025 was rescheduled due to circumstances beyond the parties’ and Tribunal’s control and relisted for 24 June 2025.
Both parties essentially complied with the directions made on 24 February 2025, although Mr Sellman did not provide financial statements of the business for 2023/2024 in the form prepared by his accountant. Instead, Mr Sellman has provided income tax returns for the business that show some profit and loss information, and profit and loss information for the 2024 calendar year. I consider that the information provided in this regard is nonetheless adequate. I also issued further directions to Mr Sellman to provide account statements showing Farm Management Deposit transactions, and Mr Sellman produced that material at the commencement of the hearing.
The documents before the Tribunal therefore consist of 523 pages of Services Australia’s ‘T Documents’ and ‘Supplementary T Documents’, Mr Sellman’s documents marked A1 to A61 and Ms Jessop’s documents marked B1 to B42
Legislative Framework
The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the taxable income of each parent.
Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Child Support Registrar (the Registrar) in writing, requesting a departure from the administrative assessment in relation to a child.
Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more grounds under subsection 117(2) of the Act exist, and that it would be just, equitable and otherwise proper to make a particular determination.
The issues for me to determine in this case are therefore:
·Whether one or more of the grounds for departure referred to in subsection 117(2) of the Act exists; and, if so
·Whether it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and otherwise proper; to make a particular determination to depart from the administrative assessment of child support.
There is a ground to depart from the administrative assessment of child support.
Mr Sellman confirmed at the telephone directions hearing that he does not take issue with the departure determination in respect of school fees. In this regard, I note that a number of previous departure determinations had increased the annual rate of child support by amounts intended to account for Mr Sellman’s contribution to school fees without objection by Mr Sellman.
At the hearing, Mr Sellman expressed a preference for having been able to establish arrangements directly with the school himself, mentioning that the school had previously been unwilling to provide information about the fee liability so he could pay his share although that situation had recently changed. Mr Sellman did not however object to his contribution towards private schooling being arranged through the child support system even though he would have preferred to attend to it directly.
In establishing the ground known as Reason 3 therefore, I can be succinct. As to the ground known as Reason 3, subparagraph 117(2)(b)(ii) of the Act provides that the ground will be established if, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being educated in the manner that was expected by his or her parents.
The children attend [School] in [Town]. Given Mr Sellman’s position in respect of private schooling, there is no issue that the children are attending that school and are being educated in the manner expected by their parents.
Relying on the tax invoice / statement of account provided by Ms Jessop, I find that in the 2024 year tuition fees for all three children (combined) were $14,655 after a sibling discount was applied. This amount corrects an error in the objection officer’s calculation that did not identify differential tuition fees between middle and senior school. In 2025, the combined tuition fees after sibling discount are $15,420 as one child has moved from middle school into senior school and the fees have risen slightly.
Ms Jessop has provided evidence that she has met those costs through instalments.
These fees are very substantial, representing by way of illustration an amount well in excess of the administrative assessment of child support before any departures are made.
I am satisfied therefore that the costs of maintaining the children are significantly affected because the children are being educated in the manner that was expected by their parents. I am further satisfied that the extent of the costs, by reference to the administrative assessment of child support, and indeed in any event, amount to special circumstances. The provisions of subparagraph 117(2)(b)(ii) of the Act are satisfied and the ground known as reason 3 is established.
A just, equitable and otherwise proper departure
As I am satisfied that there is at least one ground to depart from the administrative assessment of child support, the next step is to consider whether it is just, equitable and otherwise proper to depart from the assessment.
In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Act:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:(i)to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and(ii)to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and(iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
An assessment against all of these matters permits consideration of the other matters raised by Mr Sellman and Ms Jessop.
I am mindful of, and take into account, the nature of the duty of a parent to maintain a child as stated in section 3 of the Act. The parents of a child have the primary duty to maintain the child, and the duty of a parent to maintain a child is not of lower priority than the duty of the parent to maintain any other child or person, has priority over all commitments of the parent other than commitments necessary to enable the parent to support themselves and any other child or person the parent has a duty to maintain, and is not affected by the duty of any other person to maintain the child; or any entitlement of the child or another person to an income tested pension, allowance or benefit.
As to the proper needs of the children, in establishing the ground I recognise the substantial costs associated with them being educated in the manner expected by their parents, as set out above. In that regard, both Ms Jessop and Mr Sellman propose that they will meet half the private education costs each.
Proper needs of the children
Ms Jessop asks that I take into account other expenses addressing the proper needs of the children as follows:
January 2025
Out of pocket fees anaesthetist (tonsillectomy)
$613.50
January 2025
Out of pocket fees surgeon (tonsillectomy)
$812.55 + $145.85
January 2025
Private hospital admission
$2,537.55
November 2020 to 20 March 2024
Physiotherapy
(itemised)Total: $3,352.50
30 June 2023
ACL testing
$200
Proposed
Orthodontic treatment
$8600
In her evidence, Ms Jessop explained that she did not have private health insurance coverage to assist with these expenses. She had taken out private health insurance when it was recommended by her son’s [sport] club, but in relation to his tonsillectomy procedure she discovered at the last minute that she remained subject to a waiting period. Ms Jessop explained that she had to make a decision on the spot to meet the costs of the private hospital herself so the surgery could proceed, and it was important for her son’s [sport] plans for the year for the surgery to proceed as planned rather than wait.
In relation to the physiotherapy, I noted that the claimed expenses related to periods prior to her application for a change of assessment. Ms Jessop explained that at that time she was able to meet the expenses with the child support that was being paid, but was having difficulty doing so when the annual rate dropped.
In relation to the orthodontic treatment, Ms Jessop confirmed that the treatment had not yet commenced but was planned for September. She had not yet identified whether private health insurance would meet some of the costs. Ms Jessop explained that the treatment was not purely cosmetic as it was required to correct occlusion, and tooth extraction had already been undertaken.
Mr Sellman did not object to contributing to these expenses, but drew attention to a term of a court order of 6 December 2018 that required he be notified of serious illness or injury etc. Mr Sellman expressed a preference for being notified of such expenses and being able to contribute his share at the time they are incurred rather than the child support assessment being used.
Mr Sellman also pointed out that he had met the costs of physiotherapy visits when his son was in his care, a point Ms Jessop accepted although she considered this only happened on a few occasions.
Ms Jessop also raised a range of other expenses she faces in maintaining the children. She explained that her sons are playing [sport] at a high level, and she faces costs in transporting them to training, buying boots, meeting gym fees and paying for massages. She explained that the boys are all big and very expensive to feed. Mr Sellman mentioned that he had also purchased [sport] boots for the boys.
In light of Mr Sellman’s position, I consider that it would be appropriate to incorporate a contribution towards the out-of-pocket medical expenses, including the private hospital admission, and the physiotherapy expenses that have been incurred since the most recent application for a change of assessment.
The orthodontic expenses are more problematic because they have not yet been incurred and the extent, if any, of any private health insurance rebate for the treatment is unknown. I note also that the fees can be met by instalment. I will return to this problem in settling on a just equitable and otherwise proper departure determination.
As to the other expenses mentioned by Ms Jessop, and as discussed at the hearing, I do not consider that expenses of the nature discussed are sufficiently significant or out of the ordinary to justify any further specific provision in the child support assessment. The expenses are furthermore not the subject of specific documentary evidence.
Income, earning capacity, property and financial resources of the child
Mr Sellman mentioned that some of the children have part time jobs, and he pays them for working on his farm. They also have their own bank accounts with some savings. However, both parents accept that the children do not have sufficient income, property or financial resources to attend to their own maintenance, and are reliant on their parents for their support.
Income, earning capacity, property, financial resources and earning capacity of Mr Sellman
In his evidence Mr Sellman confirmed that he works [on] his own agricultural property, and has always undertaken this work. The farming operations were conducted through a partnership entity. Mr Sellman explained that the partnership had once included Ms Jessop, himself and his late father in equal shares, but he had taken on Ms Jessop’s interest in the partnership after separation.
The most recent financial records for the business show that activities such as [produce] sales, cartage, [stock] sales, hay sales and other contracting and [produce] work are undertaken through the business, and this corroborates Mr Sellman’s evidence in that regard in response to Ms Jessop’s concerns that not all remunerative activities were captured in the financial records. The financial records demonstrate to my satisfaction that all remunerative activities undertaken by Mr Sellman are undertaken through the partnership.
Mr Sellman’s father passed away [in] June 2023. Ms Jessop has provided evidence that Mr Sellman is essentially the sole beneficiary of his late father’s estate (after some cash gifts to the children), and probate has been granted over the estate. Although I recognise that during the period in which an estate is being settled there are likely to be some restrictions over the use and control of assets and income of an estate, I proceed on the basis that at material times (for example after the date of the application for a change of assessment) the financial resources of the business partnership, its income and assets, are wholly subject to Mr Sellman’s control.
In understanding Mr Sellman’s financial resources, an analysis of the available financial information for the business partnership and Mr Sellman’s personal taxation returns show three things of particular significance. First, the farming operations, and in particular the [produce] aspects, have been volatile. Second, various legitimate measures available to Mr Sellman to prudently manage his farming business have had the effect of substantially reducing his taxable income, or at least permitting him to exercise significant control over his taxable income, and thirdly, the partnership holds substantial cash reserves.
It is convenient to tabulate the information from the various taxation returns as follows:
Partnership tax return – total net income
2020/21
271,528
2021/22
264,214
2022/23
-49131
2023/24
39,106
Taxable income in Mr Sellman’s personal tax returns:
2021/22
83,354
2022/23
11,808
2023/24
52,555
As to my first observation, Mr Sellman confirmed that the price of [produce] has been volatile. Noting that the financial performance of the business changed from a $264,214 profit in 2012/22 to a $49,131 loss in 2022/23, Mr Sellman explained that he attributes this to the imposition of punitive tariffs on Australian [product 1] by [named country] at that time, and a collapse in the [produce] market. Mr Sellman said that he sells his [produce] each year at the market price, and does not, for example, have long term contracts. Mr Sellman recalled allowing [produce] to [go to waste] during this period because it was uneconomical to harvest. Furthermore, Mr Sellman explained that even though the tariffs have been removed, there is now a [product 1] glut. Prices have not recovered to 2021/22 levels, and he considers that the financial performance of the business in 2023/24 is indicative of likely future performance over the next few years.
In response to my question noting that the loss-making year coincided with his father passing away, Mr Sellman confirmed that in terms of the performance of the business, it was the collapse in the [produce] price that caused the loss and not any other circumstances. Mr Sellman explained that his late father had largely been a silent partner in the business by that time.
I accept Mr Sellman’s evidence regarding the circumstances of the business, noting again that an analysis of the financial information available tends to corroborate that the business is largely a [produce] business, sales fell sharply in 2021/22, and the adverse impact of the punitive tariffs on sales of [product 1] to [named country]. Publicly available information reminds me that in late 2020, [named country] imposed punitive tariffs [on] exports of Australian [product 1], with those tariffs removed only from [Month Year].
The volatility in the performance of Mr Sellman’s business is a challenge in quantifying the value of the financial resource it represents for child support purposes.
As to my second observation, further analysis of the taxation returns show that income and losses from the partnership have been distributed unevenly to Mr Sellman and to his late father and then to his late father’s estate. Mr Semler told me that he did not believe there to be any document requiring a particular share of distributions, but as mentioned above, Mr Sellman explained that the partnership had previously distributed equally on the basis of three partners, and he had taken on Ms Jessop’s share. The statement of distributions in the taxation return does not quite match a 2:1 distribution but it is close.
In 2020/21 (for example, recognising that it pre-dates very substantially the application for the change of assessment), the partnership had net income of $271,528. Distributions were $173,155 to Mr Sellman, and $107,213 to Mr Sellman’s father.
In 2021/22 (again for example only), the partnership had net income of $264,214 distributions were $168,354 to Mr Sellman and $104,860 to Mr Sellman’s father.
The difference between the amount of the distribution to Mr Sellman in that year, again by way of example, and his taxable income of $83,354 is explained primarily by Mr Sellman depositing funds as a Farm Management Deposit. His tax return shows a deposit of $80,000 in this regard.
Farm Management Deposits, generally speaking, provide for primary producers to reserve cash during years of good profitability for use in years of lower profitability. Deposits are tax deductible, meaning that primary producers are not adversely impacted by higher marginal tax rates during profitable years. Withdrawals become taxable income in the year that the withdrawal is made.
While the legitimate purpose of Farm Management Deposits in the agricultural sector can be easily seen and understood, the use of Farm management Deposits can impact on the utility of adjusted taxable income as a means of fairly quantifying a parent’s financial capacity to contribute to the maintenance of their children through the administrative assessment of child support. Essentially, and by no means suggesting that Mr Sellman has made use of Farm Management Deposits for this purpose, a large deposit in a profitable year will reduce adjusted taxable income and therefore the child support assessment. Similarly, there is no obligation on a person to withdraw cash from Farm Management Deposits in less profitable years to maintain previous taxable income levels, particularly if expenses can be met from other sources, such as cash reserves, that are not then reflected in a person’s taxable income. Accruing large reserves of cash in Farm Management Deposits while lowering adjusted taxable income and therefore a child support liability can produce an outcome that is unjust and inequitable.
More recently, in 2023/24, Mr Sellman converted his fixed Farm Management Deposit to an at-call Farm Management Deposit account. The movement of these funds is recorded in his personal taxation return, which shows a Farm Management Deposit of $180,000 and a Farm Management ‘Repayment’ (i.e. a withdrawal) of $200,000, resulting in an increase to Mr Sellman’s taxable income in that year of $20,000. The statements provided by Mr Sellman at the commencement of the hearing show that $200,000 was placed in a term deposit on 9 November 2024, a few days before a withdrawal of $150,000. The net effect of these transactions, for example, would be to lower his taxable income by $50,000.
Mr Sellman’s legitimate use of Farm Management Deposits renders the use of his adjusted taxable income as a measure of his financial capacity to contribute to the maintenance of the children quite inaccurate, even recognising the purpose of Farm Management Deposits for primary producers. In identifying and quantifying Mr Sellman’s financial resources, I consider it is necessary for me to adopt a method that accounts for these deposits in some equitable way. I note in this regard that the personal taxation returns available to me record net deposits into Farm Management Deposits of $20,000 between 2012/22 and 2023/24. Mr Sellman told me that his late father did not deposit funds into Farm Management Deposits and the estate does not hold any Farm Management Deposits.
Generally speaking, Mr Sellman has demonstrated a willingness to deposit large sums in Farm Management Deposits, but has exercised conservative caution in withdrawing from those reserves in lean years. The statements provided at the commencement of the hearing record that $230,000 is held in Farm Management Deposits by Mr Sellman. I recognise that balance has therefore been accrued over a much longer period than the records before me can track.
Finally, as to my third observation about Mr Sellman’s and the businesses financial affairs, I note that the business hold large reserves of cash other than in Farm Management Deposits (which are held by Mr Sellman personally).
Services Australia required the [Bank] to disclose balances of accounts associated with Mr Sellman on 19 March 2024. An online business cash account had a balance on that date of $260,696.23. Mr Sellman accessed his banking records and told me that the current balance of the account is $203,000. A business classic account had a balance of $9,904, and Mr Sellman told me the current balance is in the order of $9,000.
An administrative assessment of child support would rely on an adjusted taxable income of $11,808 based on Mr Sellman’s 2022/23 personal income tax return until shortly after his 2023/24 personal income taxation return was lodged when his adjusted taxable income would be $52,555. I consider that Mr Sellman’s financial resources as a whole, noting that from 17 June 2023 the financial resources of the business may be treated as subject to Mr Sellman’s sole control are not adequately reflected in these adjusted taxable income figures. In that regard, I take into account both the net income or loss of the business, but also its reserves in the form of Farm Management Deposits and cash deposits. Without adjustment in that regard, the child support assessment would be unjust and equitable.
None of these observations are to suggest that it is not appropriate for an agricultural business to hold Farm Management Deposits or cash reserves. The opposite is true having regard to the evidence of the volatility in the financial performance of the business. Nor is it to suggest that the entirety of these financial resources should be applied to child support. However, I remain mindful of the nature of the duty of a parent to maintain a child, and that it is higher than other legitimate priorities such as maintaining cash reserves in businesses subject to volatility.
In discussing an appropriate methodology to quantify the financial resources available to Mr Sellman, I raised the possibility of averaging information available pertaining to income. Generally speaking, I understood Mr Sellman to recognise that averaging information available about income may be an appropriate response to the volatility in the performance of his business.
The question then arises as to what income figures to use. For the reasons expressed above, I do not think Mr Sellman’s adjusted taxable income figures provide a reliable quantification of the value of the financial resources available to him through the business. I consider that the business taxation returns provide information more reflective of the true extent of the financial resources available to Mr Sellman. I recognise that prior to June 2023 the partnership income would have been distributed to Mr Sellman and his father, but as a source of data to quantify the value of the financial resource presented by the business going forward, I have considered the income of the partnership and disregarded the distributions.
Further as to the method that I consider fair and most likely to be reflective of future circumstances, I consider it appropriate to disregard the partnership income from 2020/21. I consider that the existence of the Farm Management Deposits, generally speaking, mean that I should not wholly disregard the information that shows the farm is capable of operating substantially more profitably than it is at present. By way of illustration, averaging the income of the partnership for the four financial years available to me (that is, 2020/21, 2021/22, 2022/23 and 2023/24, I identify average income of $131,429. I consider this amount too high having regard to the 2023/24 income for the partnership, even taking into account the availability of the Farm Management Deposit balance. Excluding the income from 2020/21, the average is $84,730. Reflecting on that figure, I note for example that Mr Sellman’s actual adjusted taxable income for 2023/24 was $52,555, and so drawing on approximately $30,000 of the Farm Management Deposit would produce approximately the same amount. Coincidentally, it is also similar to the provisional taxable income initially used for 2022/23 before Mr Sellman lodged his taxation return producing the adjusted taxable income of $11,808. Noting that Mr Sellman deposited $80,000 into a Farm Management Deposit in 2021/22, during a ‘good’ year taken into account in this averaging process, I consider that quantifying an average income of $84,000 as representative of the value of the financial resource available to Mr Sellman through the business is fair and accurate.
Income, earning capacity, property, financial resources and earning capacity of Ms Jessop
Ms Jessop purchased a [business] as a going concern and commenced trading on 1 June 2024, having worked in the business on a voluntary basis to learn the ropes prior to making the purchase. Prior to that, Ms Jessop explained that she had undertaken some employment elsewhere in administrative roles. Mr Sellman expressed concern that Ms Jessop may not have been volunteering at the business, but I have no evidence to contradict Ms Jessop’s sworn evidence in this regard.
The business operates through a corporate structure. Ms Jessop is the director of the company ([Company name]) and owns 90% of the shares. Responding to Mr Sellman’s concerns as to how the purchase of the business was financed, Ms Jessop confirmed her parents had assisted her and she obtained a business loan. The bank had required her parents to own 10% of the business. Ms Jessop explained that her parents, and father in particular, work in the business but do not currently draw an income. It is intended that in the future they will draw an income or share in profits in some proportionate way, but there are no firm arrangements.
As to the financial performance of the business, Ms Jessop has provided a profit and loss statement for the first six months of the business’ operations. Ms Jessop was unable to say whether the first six months trading would be representative of the business’ financial performance, but the business was not necessarily seasonal. Net profit for that period was $31,812.93. The expenses include her own salary, which is not a regular amount each week. A payslip concluding at the end of the third quarter of 22024/25 shows a $31,110 year to date. I extrapolate therefore that her annual wages drawn from the business will be in the order of $41,480. Adding that figure to double the net profit shown in the first six months of trading shows a potential value of the business as a financial resource to Ms Jessop of $105,104pa. Recognising that Ms Jessop has 90% ownership of the business suggests that an annual income amount of $94,600 may be appropriately representative of the value of the business as a financial resource to her. I accept Ms Jessop’s contentions however that it is very early days, and furthermore recognise that as a supplier of [product 2], her trade is likely to have been impacted in unusual ways by the severe drought [affecting] both demand and cost of sales. Nonetheless, on the evidence available I consider quantifying the financial resources available to Ms Jessop from her new business in terms of an income of $94,600pa is reflective of the evidence.
In relation to both Mr Sellman and Ms Jessop, I have examined their statements of financial circumstances as lodged with the Tribunal, and have identified no other matters pertaining to their income, property or financial resources that needs to be addressed.
Similarly, I have also considered whether the evidence of Mr Sellman’s and Ms Jessop’s income earning activities over recent times indicates that further assessment of earning capacity is justified. However, noting that Mr Sellman has not made any changes to his industry or working pattern, and Ms Jessop has increased her income substantially by commencing in her new business, I consider that the criteria in subsection 117(7B)(a) of the Act would not be satisfied. These criteria must be satisfied before determining that a parent’s earning capacity is greater than is reflected in his or her income.
Ms Jessop has pointed to certain expenses incurred by Mr Sellman, such as holidays and expensive gifts for the children that she considered were inconsistent with the taxable income that had been used in the child support assessment. I accept that Mr Sellman’s adjusted taxable income, in 2022/23 in particular, was well below subsistence levels and can understand Ms Jessop’s concerns in this regard. However, as can be seen from the analysis above Mr Sellman, through the business, has access to substantially greater financial resources that his adjusted taxable income for 2022/23 reflects, including substantial cash reserves. Furthermore, in response to Ms Jessop’s concerns in this regard, Mr Sellman also provided evidence demonstrating he had received a gift from another estate, which by inference I understand he may have applied towards purchasing holidays and gifts for his children.
As explained to the parties, my preference where possible is to quantify the financial resources available to parents who operate businesses from reliable financial records of the businesses rather than drawing inferences from aspects of personal lifestyle that may be inconsistent with reported taxable income. At the conclusion of my analysis in this regard, I am confident to adopt that usual course in the case of Mr Sellman and Ms Jessop.
Similarly, while it is possible that business entities can meet personal expenses that wage-earning parents would need to meet from after-tax salary, identifying and quantifying such items in this matter seems to be to be highly speculative and, in my view, less reliable than the analysis I have undertaken. Both parents operate businesses, and it is likely that both parents may benefit to some extent by their business entities providing some level of personal benefit to them.
Commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support themselves or other people.
Neither parent identified any commitments for their own self support that they considered out of the ordinary.
The direct and indirect costs incurred by the carer entitled to child support in providing care for the child.
As considered above, Ms Jessop has raised a range of various costs she has incurred in providing care for the children, and I have taken those matters into account.
Assessment
Having regard to the analysis set out above, I consider a just, equitable and otherwise proper departure will take into account the findings I have made quantifying each parent’s financial resources through their respective businesses, and then adding additional amounts for private school fees and some of the additional expenses discussed under ‘proper needs of the children’.
First however, I have considered from when any departure should commence. As was found by the objection officer, I agree that it is not appropriate to disturb the departure determinations previously in place that ceased from 31 December 2023. I will therefore take into account the circumstances and expenses that pertain to the period commencing from 1 January 2024.
For the purposes of this assessment, I have undertaken calculations that reflect fixing Mr Sellman’s adjusted taxable income at $84,000 from 1 January 2024, and Ms Jessop’s adjusted taxable income at $94,000 from 1 June 2024. This produces an annual rate of child support for the periods:
1 January 2024 to 23 April 2024[4]
$12,354
24 April 2024 to 31 May 2024
$13,410
1 June 2024 onwards[5]
Approx. $8,175
[4] Mr Sellman and Ms Jessop’s youngest child turns 13 [in] April 2024, and the child support formula (cost of the child) component recognises the increasing cost of raising older children by increasing when a child turns 13
[5] Subject to minor variation as statistics influencing components of the child support formula will change.
To take into account the private school costs, I would then add an additional amount of child support of $7,328 for the period 1 January 2024 to 31 December 2024, and $7,710 from 1 January 2025 to 31 December 2025.
As discussed with the parties at the hearing, to provide some prospect of durability of this outcome, I propose to extend any departure to the end of the child support case for their second eldest son, which will be either on 31 August 2027 or approximately 10 December 2027 if their son remains in secondary education, subject to whether an application to extend the case is appropriate or granted.
I will add the same amount for school fees in 2026, and then reduce it to reflect, in broad terms, two children in the school in 2027 instead of three: $6100.
Turning to the additional expenses the subject of consideration above, I consider it is appropriate to account for all but the orthodontic expenses as a single additional amount to be added to the annual rate of child support for the period 1 January 2024 to 31 December 2024, essentially so they may be addressed by way of arrears. In this regard, I restate my observation about the cash reserves held by Mr Sellman through his business and Farm Management Deposits.
For the physiotherapy expenses, I have calculated a total amount of $162.50 that pertain to expenses incurred after 1 January 2024. In disregarding earlier expenses, I note that Ms Jessop’s evidence was that she had not raised those matters previously as she was able to meet those expenses from the higher underlying rate of child support she was paid, and I do not consider therefore it is appropriate to go back beyond that date.
Mr Sellman’s 50% share of the identified expenses (other than orthodontic expenses and with the adjustment to physiotherapy expenses) is $2,236.
As mentioned above, the orthodontic expenses are problematic because they have not yet been incurred, may not necessarily be met by Ms Jessop as a lump sum, and may attract a private health insurance rebate. Furthermore, I note that the terms offered by the orthodontist include a discount for upfront payment in full, and instalments over different timeframes.
On balance, I have decided that I will not incorporate a component for the orthodontic treatment into the departure determination given uncertainty around these variables. I note at the hearing that Mr Sellman expressed a willingness to contribute and also a preference to be consulted about such matters over reliance on the child support assessment to make his contribution. As I am unable to be certain how much the orthodontic treatment will cost or how the costs will be met by Ms Jessop, an opportunity is presented for Ms Jessop to communicate with Mr Sellman, perhaps in writing, for the equal contribution towards orthodontic expenses discussed at hearing to be reimbursed.
If those arrangements cannot be settled outside the child support assessment, the parties should be aware that section 98J of the Act makes provision for subsequent change of assessment application in changed circumstances to be considered.
This analysis leads me to identify the following proposed annual rates of child support from 1 January 2024 until the end of the case in respect of [the child], and the end of that calendar year in relation to private school fees:
Annual Rate
Provision for school fees
Proper needs expenses
1 January 2024 to 23 April 2024
$12,354
$7,328
$2,236
24 April 2024 to 31 May 2024[6]
$13,410
-
-
1 June 2024 to 31 December 2024
$8,175
-
-
1 January 2025 to 31 December 2025
$7,974
$7,710
-
1 January 2026 to 31 December 2026[7]
$7,974
$7,710
-
1 January 2027 to 31 December 2027[8]
$7,078
$6100
-
[6] Mr Sellman and Ms Jessop’s youngest child turns 13 [in] April 2024, and the child support formula (cost of the child) component recognises the increasing cost of raising older children by increasing when a child turns 13
[7] These calculations are approximate as certain statistical components of the child support formula for 2026 are not yet known. The calculations are based on a child support period commencing in 2025, and do not account for the child support case for the eldest child ending on either his 18th birthday or the end of secondary schooling for the year.
[8] These calculations are approximate as certain statistical components of the child support formula are not known. The calculations are based on a child support period commencing in 2025, and do not account for the child support case for the middle child ending on either his 18th birthday or the end of secondary schooling for the year.
I have reflected on the proposed departures that will produce the child support liabilities over time as set out in the table above. I note that the annual rate identified above is substantially higher than the rate produced by Mr Sellman’s adjusted taxable income of $11,808 for 2022/23 that would otherwise form the basis of the administrative assessment of child support.
I think that the proposed changes are just and equitable however having regard to my analysis of his financial circumstances and the other matters provided for in subsection 117(4) of the Act. It is not appropriate for Mr Sellman’s underlying rate of child support to be the fixed annual rate in light of the analysis I have applied. To the extent that this decision creates arrears in respect of the 2024 calendar year and 2025 to date in that regard, I am satisfied that the creation of those arrears will not place Mr Sellman in undue hardship having regard to the cash reserves available to him. I am satisfied that the proposed departure determinations are just and equitable in respect of Mr Sellman.
I am also satisfied that the proposed departure determinations are just and equitable in respect of Ms Jessop. Her entitlement to child support will decrease in recognition of the financial resources now available to her through her new business, and it is appropriate in my view that the reduction commence when the business commenced trading. I have taken into account all of the matters provided for in subsection 117(4) in respect of Ms Jessop.
In respect of the children, I consider that the overall rate of child support and the additional amounts for their private education is sufficient, and just and equitable in respect of them.
I must determine whether the proposed departure determination(s) are otherwise proper. Subsection 117(5) of the Act requires that I consider the nature of the duty to maintain a child and that it is the parents of a child who have the primary duty to maintain the child, and the effect of making the order on any entitlement of (relevantly) the carer entitled to child support on an income tested benefit.
I predict the initial increase to Mr Sellman’s child support liability may have the effect of reducing Ms Jessop’s entitlement to family assistance, noting she is in receipt of that benefit and the operation of the maintenance income test. However, I consider that impact is proper having regard to my analysis of the parties’ respective financial resources.
I will therefore make departure determinations pursuant to section 98S of the Act as follows:
1)From 1 January 2024 to the end of the child support case in respect of [the child], Mr Sellman’s adjusted taxable income is set at $84,000.
2)From 1 June 2024 to the end of the child support case in respect of [the child], Ms Jessop’s adjusted taxable income is set at $94,600.
3)From 1 January 2024 to 31 December 2024 Mr Sellman’s annual rate of child support is increased by an additional $7,328 on account of private school fees.
4)From 1 January 2024 to 31 December 2024 Mr Sellman’s annual rate of child support is increased by an additional $2,236 on account of Ms Jessop’s out of pocket expenses discussed at the Administrative Review Tribunal hearing
5)From 1 January 2025 to 31 December 2025 Mr Sellman’s annual rate of child support is increased by an additional $7,710 on account of private school fees
6)From 1 January 2026 to 31 December 2026 Mr Sellman’s annual rate of child support is increased by an additional $7,710 on account of private school fees.
7)From 1 January 2027 to 31 December 2027 Mr Sellman’s annual rate of child support is increased by an additional $6,100 on account of private school fees.
Date(s) of hearing: Tuesday, 24 June 2025
0
0
0