Shearman and Shearman (Child support)
[2024] AATA 3938
•18 July 2024
Shearman and Shearman (Child support) [2024] AATA 3938 (18 July 2024)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2023/BC027033
APPLICANT: Ms Shearman
OTHER PARTIES: Child Support Registrar
Mr Shearman
TRIBUNAL:Member M Martellotta
DECISION DATE: 18 July 2024
DECISION:
The Tribunal sets aside the decision under review and in substitution decides to depart from the administrative assessment so that for the period:
· 6 March 2023 to 30 June 2023 Ms Shearman’s adjusted taxable income is varied to $100,000.
· 1 July 2023 to 1 January 2025 Ms Shearman’s adjusted taxable income is varied to $80,000.
CATCHWORDS
CHILD SUPPORT – change of assessment – a ground for departure exists – changed pattern of work – whether it is otherwise proper to make a particular departure determination – there are special circumstances – income property and financial resources – mother’s adjusted taxable income is varied – decision under review set aside and substituted
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of theChild Support (Registration and Collection) Act 1988.
REASONS FOR DECISION
BACKGROUND
Ms Shearman (the applicant) and Mr Shearman (the second party) are the parents of a child (T) who was born on [date] September 2014 (10 this year). The child is in the parents’ shared care.
According to Child Support records, the case was registered on 27 June 2022 with Child Support collecting. The applicant is the liable parent and is in arrears of $6,289.49.
The second party lodged a change of assessment application on 6 March 2023. He raised five grounds in that application including:
· Reason 2 Special needs of the child.
· Reason 3 High costs of caring for, educating or training the child.
· Reason 5 Money, goods or property received by the payee or child.
· Reason 7 Costs of self-support.
· Reason 8A Income, property and financial resources of the applicant.
· Reason 8B Earning capacity of the applicant.
The second party withdrew all the grounds apart from Reason 8A and proceeded with his application on that sole ground.
The applicant lodged a cross application in which she raised the following grounds:
· Reason 5 Money, goods or property received by the payee or child.
· Reason 8A Income, property and financial resources of the second party.
At the time the above applications were made, the following child support assessments were in place:
| Assessment period | Annual liability $ | Applicant income source | Applicant $ | Second party income source | Second party $ |
| 1 March 2023 –30 June 2023 | 493 | 2022/23 updated ATI estimate | 12,717 | 2021/22 ATI | 19,740 |
| 1 July 2023 – 31 August 2023 | 493 | 2023/24 ATI estimate | 5,214 | 2021/22 ATI | 19,740 |
| 1 September 2023 – 30 June 2024 | 1,632[1] |
[1] Fixed annual rate (FAR)
A Child Support decision maker varied the assessment. In a decision dated 12 September 2023 they decided a ground to depart was found in relation to Reason 8A and the assessment was varied in the following terms:
· From 6 March 2023 to 5 March 2026 the applicant’s adjusted taxable income (ATI) was changed to $100,000.
The applicant objected to the decision on 11 October 2023. An objections officer disallowed the objection. The impact of the decision was that the applicant’s annual rate of child support increased to $5,850.
The applicant lodged an application for review with the Tribunal on 9 November 2023.
The applicant and second party participated at a telephone directions hearing on 20 March 2024. The Tribunal issued directions. A hearing was held on 24 June 2024.[2] The applicant and second party particpated by telephone to provide submissions and evidence. The applicant was assisted by a representative Mr [A][3]. Other evidence provided to the Tribunal included oral evidence of a witness [Mr B], materials contained in the Services Australia hearing papers and supplementary papers (472 pages) and materials provided by the applicant (A1–A275) and by the second party (B1–B71).
[2] The original hearing date was rescheduled due to the applicant lodging relevant financial materials and requesting the appearance of witnesses at late notice.
[3] On 26/6/24 Mr [A] advised he no longer represented the applicant
Post hearing the Tribunal issued further directions. The applicant’s response (A276–A294) to those directions has also been considered. The second party was provided a copy and invited to make submissions. No submissions were received.
ISSUES
The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
Child support legislation is interpreted by Child Support with the aid of the Child Support Guide (the Guide). The Tribunal may be guided by policy but is not bound to follow it.[4] The Federal Court[5] has observed that in the absence of any contrary statutory indication, lawful executive policy enacted to guide the exercise of a statutory power is a relevant factor for the Tribunal to take into account in performing its review task. A lawful approach allows the adoption of appropriate policy as a guide but not so as to control the making of the decision and the Tribunal adopts that approach.
[4] Re Drake and Minister for Immigration and Ethnic Affairs(No 2) (1979) 2 ALD 634.
[5] G v MIBP [2018] FCA 1229.
The issues for the Tribunal to determine in this case are:
· Does a ground for departure exist? if so,
· Would it be just and equitable as regards the child, the liable parent and the carer entitled to child support to depart from the administrative assessment of child support?
· Is it otherwise proper to make a particular departure determination?
CONSIDERATION
Issue 1 – Is there a ground to depart from the administrative assessment?
The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent.
The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (the Registrar) will utilise a parent’s ATI as assessed by the Australian Taxation Office (ATO) for the last relevant year of income.
Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under section 98B of the Act. Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and, as noted, establishes a three-step process.
The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[6] In this matter the only ground contested at hearing was whether a ground for departure is established pursuant to Reason 8A.
[6] The phrase “special circumstances of the case” is not defined in the Act. However, the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC 92–279). Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
Reason 8A – income, property and financial resources of the parties
Applicant’s submissions and evidence
The applicant’s primary position is that the decision to depart from the administrative assessment is unfair as she does not have an ATI of $100,000. The applicant submitted:
a) Her 2022/23 taxable income (ATO assessed) was $45,000 and that going forward due to her medical condition [her] capacity to work longer hours is limited.
b) The second party’s lifestyle does not represent a person whose income is limited to income support payments. He owns a property which she states to be worth over a million and he owns several classic vehicles. She asserts he receives a rental income from renting a shed.[7]
c) If there is a departure it should be in terms which increase the ATI of the second party.
[7] Written submissions at A11
The applicant’s evidence to the Tribunal was as follows:
a) She works and derives her income mainly as a [Occupation 1] in [a] sector.
b) She worked for [various employers].
c) In January 2022 she started working directly for a client. She earned income from that client as a sole trader under her own ABN.
d) In the 2021/22 financial year her taxable income increased because in that year she declared income which included income support payments, casual employee earnings and also income she received as a sole trader.
e) In July 2022 she decided to move from a sole trader business model to a private company [Company 1] Pty Ltd. She was the sole director of that company. She and two other people were the shareholders.
f) In the 2022/23 financial year she worked through [Company 1]. She did not receive a regular salary but received $45,000 described as directors’ fees. She did not work for other [employers] in that financial year and her income decreased. She also was experiencing health issues and was unable to work as many hours. [Company 1] had two clients and the work involved [details deleted].
g) From July 2023 she received a weekly income from [Company 1]. She also received payments from [Company 1] which helped pay for her mortgage and legal costs.
h) From October 2023 [Mr B] became the sole director. She ceased working in any capacity for [Company 1] from about that time.
i) She has been in receipt of jobseeker payments since about February 2024 and has recently resumed working directly for a client. In April 2024 she had surgery.
j) Her intention is to keep working as a sole trader and her income will in effect be made up of any income she earns from her small business and supplemented by income support payments.
The applicant told the Tribunal that her income is fully disclosed in her personal income tax returns. [Company 1] was meeting the costs of her mobile phone and vehicle.
The applicant told the Tribunal she did not really understand the company structure and relied upon advice provided by [Mr B] and her accountant.
In response to evidence provided by the second party, the applicant confirmed that she has recently undertaken renovations to her home which she estimated to cost about $16,000. She said that those costs have been met by [Company 1]. The applicant refuted evidence provided by the second party that she and [Mr B] are in a personal relationship and that they live together. She stated that she and [Mr B] are close friends. His son is living with her and pays board and lodgings. The applicant stated that [Company 1] has paid for the renovations to her home because at some point in the future she and [Mr B] may operate a business from that property.
In response to post-hearing directions, the applicant clarified her evidence. She apologised that she misled or misunderstood that ([Mr B]) never lived here. The applicant stated that [Mr B] and his son live in her home. [Mr B] also provided a written statement which stated that he and the applicant are not in a personal or domestic relationship, but he resides in her home as the applicant experiences anxiety and he and his son provide her with security and safety.
[Mr B] further stated that since he took over as sole director of [Company 1], the applicant offered him an agreement, in which should she experience financial hardship due to her health and be unable to pay her mortgage he would continue to finance the loan and the applicant would reimburse him by selling him a share or all of the property. He has contributed towards renovations of the property which he has mainly personally undertaken, and installation costs were kept to a minimum. [Mr B] provided copies of receipts and invoices reflecting payment of $10,860 between December 2023 and May 2024.
At hearing, the applicant’s representative submitted that the applicant does not have an income of $100,000 and her income relevant to the assessment is that as assessed in her personal income tax returns.
[Mr B] provided oral evidence to the Tribunal as follows:
a) He first met the applicant when he worked as an [occupation].
b) He wanted to change his occupation and in about April 2023 he undertook some unpaid work for [Company 1] to experience working in the [sector].
c) The applicant was accessing funds from [Company 1] to help pay for her mortgage.
d) The business moved over to a new accounting system and from 1 July 2023 the applicant was paid a regular weekly wage.
e) The applicant also received various sums which amounted to about $20,000 which in effect was payment for the transfer of the business into his name.
f) He took over as sole director in October 2023 and shortly after that the applicant ceased working for the company. He cannot really speak to the company finances prior to him taking over as director.
g) The main asset of the company was a motor vehicle which in effect was written off in a motor vehicle accident.
Information contained in the hearing papers and in documents provided by the applicant includes as follows:
a) Copy of her 2021/22 personal income tax return which reflects that in that year her total income was comprised of a combination of business income, employment income and income support payments. Her taxable income as assessed was $107,160.
b) Copy of her 2022/23 personal tax return which declares a taxable income of $44,114 comprised of ‘allowances, earnings, tips director fees’. As noted in the 2023/24 financial year the applicant derived her income as a sole trader but also as the sole director of a private company.
c) Copy of [Company 1]’ profit and loss statement for July 2022 to June 2023:
| Total income | 233,670 |
| Total Expenses | 153,676 |
| Breakdown of significant expenses | 34,972- Business (not identified) 43,680- Depreciation 45,000- Directors Fees |
| Net Earnings | 80,029 |
d) In the 2023/24 financial year the applicant’s income was derived from [Company 1]. The applicant was the sole director of the company until October 2023. After that date she has worked as a sole trader and more recently commenced receiving income support payments.
e) Copy of [Company 1]’ profit and loss statement for July to November 2023:
| Total income | 115,536 |
| Total Expenses | 48,128 |
| Breakdown of significant expenses | 13,213- Business (not identified) 9,025 - Wages |
| Net Earnings | 67,580 |
f) Member register showing that the applicant and two other people are registered as shareholders.
g) Statement provided by the applicant’s accountant which states that the applicant has ceased to have any involvement with [Company 1] as from 13 October 2023 when she resigned as the director. Since then, she has worked as a sole trader. Prior to her resignation she drew a wage from the company. Any company profit was retained for the future growth of the company and to cover payment of a tax debt of about $20,000.
h) Personal bank statements for 2021/22 show receipt of income from various sources consistent with her oral evidence.
i) Personal bank statements for 2022/23 show receipt of income from [specified] services and [Company 2] and also transfers from the business account for [Company 1] (total of $8,587):
Period
Source
Total
Jan 2023
[specified]Services
[Company 2]
1,260
2,665
Feb 2023
[Company 1]
Medical Centre Wages
4,000
662
j) Personal bank statements for 2023/24 show receipt of income from [Mr B] and direct payments from [employers].
Period
Source
Total
August 2023
Shearman
600
Sept – November 2023
[Mr B] (542x10)
5,420
December 2023
[Company 2]
1,340
January 2024
[Company 2] Private invoice
2,453
700
Feb 2024
[Company 2]
[employer]
1,309
751
2,618
In terms of property, the applicant confirmed as stated in her Statement of Financial Circumstances (SOFC) that her main asset is her principal place of residence which she estimates to have a value of about $452,000. Her other main declared asset is superannuation which she estimates has a balance of about $20,000.
The applicant provided a medical statement dated 24 January 2024 which states that due to her current condition it is advisable that she undertake modified workplace activities, but she is otherwise fit to work routinely until the surgery as she feels is appropriate.
Second party’s submissions and evidence
The second party submitted that the applicant has always been a hard worker and he believes that going forward she will have the capacity to make a significant level of income. He submitted that the applicant is in a personal domestic relationship with [Mr B] and that the relationship with [Company 1] since leaving is not at an arm’s-length. He stated that the applicant has recently undertaken renovations at her property which is inconsistent with her evidence that she has a limited income.
In terms of his circumstances, he stated that he previously worked in business but from 2017 his health prevents him from regular employment. He started a small [business], but income is limited by his health. He recently has had surgery. His main source of income is income support payments.
He confirmed that his main asset is his principal place of residence which he values at about $650,000. He said he purchased the land for about $269,000 and transported a property there that he bought for about $72,000. He has been able to pay for ongoing renovations and improvements to the property from a pre-existing bank overdraft and also from the sale of cars from his collection. His other assets include a vintage car and a motorhome. He estimates the value of those items and personal property to be about $63,000. He has a nominal superannuation balance of about $150.
The second party provided evidence of his Centrelink payments and a summary of payments he has received from his small business of about $1,300 in the 2023/24 financial year. He also provided Centrelink medical certificates stating he was unfit for work until May 2024. The certificates report his primary diagnosis is [a medical condition]. A medical letter dated October 2023 refers to the second party being on a wait list for elective surgery.
Analysis of the evidence and findings of fact
The applicant
As noted, the applicant was unable to provide any detailed explanation about the financial accounts of [Company 1] for the period that she was the sole director. The Tribunal also notes that her evidence about the nature of the relationship with [Mr B] who has taken on the role as director of the private company from late October 2023 was inconsistent. Her explanation as to whether there is any ongoing financial relationship between herself and [Company 1] following her resignation was in the Tribunal’s assessment also unclear. At hearing the applicant appeared to be stating that [Company 1] was providing financial resources to her whilst post-hearing submissions suggest that [Mr B] was doing this in a personal capacity as part of an agreement he had reached with the applicant.
For these reasons, on balance, the Tribunal does not attach any significant weight to the evidence provided by the applicant on those aspects. The Tribunal concludes that the evidence which best provides an indication of the applicant’s income, financial resources and property are [Company 1]’ financial statements and the applicant’s bank statements.
In relation to the income, property and financial resources of the applicant, the Tribunal concludes that on the presented evidence, it can make the following findings of fact:
a) She mainly derives her income as a [Occupation 1] in [a] sector.
b) In 2021/22 her taxable income was derived from paid casual employment, income support payments and also business income derived from her providing services as a sole trader. Her taxable income was $107,160.
c) In 2022/23 the applicant continued to work as a sole trader for the first six months of that financial year and then operated her business through the structure of a private company ([Company 1]) of which she was the sole director and one of three shareholders. The business had one to two clients to whom the applicant provided day-to-day care and support.
d) The applicant ceased to be a director of [Company 1] in October 2023. She resumed working as a sole trader and from early 2024 she has commenced receiving income support payments.
e) The applicant has recently had surgery for her medical condition.
f) The applicant’s main asset is her principal place of residence.
Having reviewed the provided financial information and considered the evidence and submissions provided at and post hearing, the Tribunal concludes that for child support purposes, the applicant’s 2021/22 income as reflected in her tax return provides an accurate representation of her income and financial resources relevant to the administrative assessment.
In 2022/23 the applicant was operating her business through a company. She submits that her 2022/23 tax return which shows a taxable income of $45,000 (comprised of director fees) should be utilised in the assessment. The Tribunal however concludes that in that financial year the applicant had access to other income and financial resources not reflected in the return.
The financial statements for the company in that period reflect the deduction of director fees of $45,000. In addition, the company claimed business expenses of $34,972 and depreciation of $43,680. The company also recorded net earnings of $80,029. According to the accountant there was no distribution of the net profit as it was retained for future growth and to meet a tax bill.
As noted in the Guide[8] a parent who is self-employed may be able to legitimately deduct certain expenses for tax purposes. This scenario has also been examined in various authorities. In Voss & Child Support Registrar & Anor,[9] the Court commented on the common situation of a self-employed person’s taxable income not corresponding with his or her income or financial resources for child support purposes:
There is a body of cases where simple reference to a person's tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate taxable income that doesn't properly reflect the realistic capacity of the person to provide financial support for their children.
[8] 2.6.14.
In Shearer & Benson & Anor,[10] the Court said:
when a person conducts their business through an intermediary company or trust, it is proper to lift the corporate veil to that person with regard to the determination of a parent's income for child support purposes…
In Costa & Fairbank,[11] the Court said about the interpretation of the term “financial resources”:
"Financial resource" refers to something which is not property but from which financial benefit is or may be gained. In light of the objects of the Act, the term should be broadly defined and would refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.
As noted by the Guide[12] depreciation is an entry in the business accounts which may be an expense not necessarily incurred by the business. In deciding if a benefit is derived through deprecation, the Registrar will consider the parent’s complete financial situation. The applicant appeared to have limited working knowledge of the company accounts. It appears that the main asset of the business was a motor car.
[12] At 2.6.14.
In relation to undistributed profits the Guide[13] notes:
[13] At 2.6.14.
Income in the form of undistributed profits
A parent or a third person may retain profits in a company, trust or partnership structure instead of distributing the profits to themselves or others. This may have the effect of reducing the parent's taxable income and could mean that the child support assessment is unfair.
In a change of assessment, the Registrar may consider including some or all of the following in the parent's ATI:
·any undistributed profits from, and retained earnings in, a company
·any increase in the parent's partnership capital accounts and/or current accounts from a share of partnership-earned profits, and
·undistributed trust profits if the parent is a beneficiary of the trust or a trustee.
The applicant’s personal bank statements which cover the 2022/23 financial year also show that she received direct payments of about $8,500 from third-party services and also from [Company 1]. It is unclear to the Tribunal whether the payments received from the company ($4,000) formed part of the director fees of $45,000.
On balance and given the available evidence the Tribunal concludes that in 2022/23 the applicant received the following income and financial resources relevant to the assessment: $45,000 in director fees and $4,500 in payments received from third-party providers into her bank account. In addition, the applicant is to be attributed a proportion of the business net profit and also factor in that according to her evidence the company also met the cost of her private use of a mobile phone and car. Allowing for the tax liability, in the Tribunal’s assessment in 2022/23 the applicant also had access to financial resources of about $50,500 derived from operating her business through the structure of a private company.
Overall, the Tribunal concludes the applicant had access to income and financial resources in 2022/23 of about $100,000. The Tribunal notes that this is consistent with her income earned as a sole trader the previous financial year. As the Tribunal understands the applicant stated that her number of clients and work had not dramatically changed from when she was a sole trader, so it is not unreasonable to conclude that she would have derived a similar income in that financial year.
In the 2023/24 financial year, the evidence is that she maintained her directorship of [Company 1] until October 2023. The profit and loss provided for the period July to November 2023 discloses net earnings of $67,580, business expenses of $13,213 and wages of $9,025. The applicant’s personal bank statements show that in the period from September 2023 she received payments of about $15,000. This includes payments of $5,420 from [Mr B].
The Tribunal is left in some doubt as to whether the applicant’s 2023/24 ATO-assessed tax return will reflect an ATI indicative of her actual income and financial resources. The Tribunal has also noted inconsistent submissions and evidence relating to whether the applicant maintained some sort of financial relationship with [Company 1].
On balance, the Tribunal concludes that the applicant would in 2023/24 have had access to income and financial resources of about $80,000. This takes into account a proportion of the net earning and wages as reflected in the company’s profit and loss statement (July – November 2023), income received into her personal bank account as well as financial resources from the company meeting some of her personal expenses.
In terms of property, the Tribunal finds that her main asset is her principal place of residence which she estimates to have a value of about $452,000. Her superannuation balance is about $20,000.
The second party
In relation to the second party, the Tribunal accepts the evidence that since 2017 his income has been limited. The second party provided copies of his 2021/22 and 2022/23 income tax returns. According to the Child Support records his taxable income for the last three years has been consistent. In 2020/21 it was $20,219, in 2021/22 it was $19,870 and in 2022/23 it was $17,870.
The Tribunal has taken into consideration the applicant’s submissions that the second party derives income from renting his shed and his lifestyle is not consistent with his taxable income. However, having reviewed copies of the second party’s bank statements and having had the benefit of testing his evidence at hearing, the Tribunal was satisfied that when considering what income or financial resources are relevant for the purposes of the assessment that these are reflected in his ATO-assessed ATI.
In terms of property, the Tribunal finds that his main asset is his principal place of residence valued at about $650,000. His other assets include a vintage car and a motorhome. The value of those items and personal property is about $63,000. He has a nominal superannuation balance of about $150.
Is a ground to depart established?
In this case the Tribunal concludes that for the relevant child support periods, the applicant’s income, financial resources and property relevant to the assessment in 2021/22 is as reflected in her ATO-assessed tax return of $107,160. In the 2022/23 financial year, the applicant’s ATI is about $100,000 and in 2023/24 about $80,000.
With respect to the second party, the Tribunal concludes that his relevant income, financial resources and property is his ATI as assessed by the ATO.
As noted the assessment in place at the time of the change of assessment utilised the applicant’s income estimate of $12,717 and $5,214 and it also applied a fixed annual rate. If those figures were substituted with the amounts as found by the Tribunal it would result in a significant change in the level of child support payable by the applicant.
For this reason, the Tribunal concludes that a ground for departure exists pursuant to Reason 8A because in the special circumstances of the case, application of the provisions of the Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child.[14]
[14] As noted using an ATI of $100,000 increases the annual child support liability to about $5,850.
As the Tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the Tribunal is to consider whether it is just and equitable as regards the children and the parental parties to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider the matters set out in subsection 117(4) of the Act which are discussed in the following paragraphs.[15]
Issue 2 – Is it just and equitable to make a particular departure determination?
[15] The Tribunal notes the Federal Magistrates Court case of Tyagi & Meares [2008] FMCAfam 886, which directs that in considering the matters set out in subsection 117(4) the section need not be ‘slavishly followed, each of the relevant factors listed … should be considered’.
Duty to maintain the child
Both parents have a duty to maintain the child as is stated in the Act: “parents of a child have a primary duty to maintain the child. The duty has a priority over all commitments of the parent other than commitments necessary for self-support.”[16]
[16] Section 3 of the Act.
Proper needs of the child
In determining the proper needs of the child it is necessary to have regard at a broad level to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and also any other needs of the child. The evidence at hearing was that the child attends a public school. There was no evidence that either parent is incurring costs such that their proper needs affect the cost of maintaining the child.
The income, earning capacity, property and financial resources of the child
In having regard to the income, earning capacity, property and financial resources of the child, the Tribunal must disregard any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act). At hearing, the applicant advised that the child did not have access to any such financial resources. No evidence or submissions were received in this regard and the Tribunal concluded that there was no basis to vary the assessment on this consideration.
Other party receiving money, goods and property for the benefit of the child
There were no submissions or evidence in this regard and the Tribunal concludes there is no basis for any adjustment pursuant to this consideration.
The income, property and financial resources of each parent who is a party to the proceeding
The Tribunal has already made findings with respect to this aspect and does not repeat the evidence and findings. The Tribunal is satisfied, however, that in this matter, this is a relevant consideration in any proposed departure from the administrative assessment.
Earning capacity
When considering this as a factor, the Tribunal must be satisfied that all three compulsory criteria in subsection 117(7B) are satisfied before it determines that a parent’s earning capacity is greater than is reflected in his or her income for the purposes of the Act. Those criteria are:
a) change in a pattern of work demonstrated by:
·the parent not working despite having ample opportunity to do so
·the parent reducing 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
·the parent changing his or her occupation, industry or working pattern.
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:
·the parent’s caring responsibilities
·the parent’s state of health.
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.
Both parents made references to personal health circumstances impacting on their earning capacity. As noted, the applicant has provided evidence that she has decided to return to working as a sole trader and has reduced her hours of work because of health issues. The second party refers to ongoing health issues since 2017 which he says had reduced his earning capacity. Whilst there is evidence that both parties have at various points changed their pattern of work, the Tribunal is satisfied that the requirements identified in paragraphs (b) and (c) are not established.
The Tribunal concludes that earning capacity is not a relevant consideration in making any proposed departure determination.
The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain
According to her SOFC the applicant identified her relevant costs of self-support as being about $600 per week. The second party’s SOFC refers to a figure of about $480. These amounts were not challenged at hearing by either party.
Direct and indirect costs incurred by the carer in providing care for the child
Neither party made submissions on this aspect.
Any hardship that would be caused
The applicant told the Tribunal that the variations in the assessment have caused her financial distress. She said that the departure is in no way an accurate reflection of her income and financial resources. As noted the Tribunal has concluded that the applicant has access to income and financial resources not reflected in her individual income tax returns.
The second party stated that he is on a low income and that the assessment should reflect the applicant’s income and financial resources.
Would it be just and equitable as regards the children, the liable parent and the carer entitled to child support to depart from the administrative assessment of child support?
The Tribunal notes the primary duty of both parents to maintain their child which takes priority over all other commitments other than those required for self-support.
In this matter the Tribunal has concluded that the applicant’s relevant income, financial resources and property are greater than the amounts utilised in the administrative assessment. As noted, the underlying assessment was in the period 1 March to 30 June 2023 utilising the applicant’s updated 2022/23 income estimate of $12,717. The Tribunal has concluded that in that financial year the applicant’s relevant income and financial resources were in the vicinity of $100,000 and in 2023/24 is likely to be in the vicinity of $80,000.
The Tribunal notes that the objection decision currently being implemented varied the administrative assessment so as to utilise an ATI of $100,000 for the period 6 March 2023 until 5 March 2026. The Tribunal proposes that the administrative assessment be varied so that for the period 6 March 2023 to 30 June 2023 her ATI is varied to $100,000 and for the period 1 July 2023 to 1 January 2025 her ATI is varied to $80,000.
The Tribunal considers commencing the variation from the date the application for a change of assessment was made is appropriate as the parties should be allowed to rely upon the assessment to the point in time that they were on notice of a potential departure. Concluding the departure on 1 January 2025 allows for a period of certainty but it also reflects that the applicant on the available evidence appears to have some ongoing financial relationship with [Company 1]. As noted in the Tribunal’s assessment the applicant did not provide a consistent explanation in that regard. On balance, the Tribunal is satisfied that she continues to derive some level of personal financial resource from that entity.
A variation in these terms would mean for part of the departure period, the applicant’s annual liability increases to about $5,800 and for the remaining period an annual liability of about $4,300. This will have the impact of reducing some of her arrears[17] but will also see an increase in the liability from the underlying administrative assessment that was in place at the time of the change of assessment application.
[17] According to the objection decision at the time of that decision the applicant was in arrears of about $6,289.
The Tribunal is satisfied having considered evidence relating to the applicant’s financial circumstances that the applicant has capacity to meet child support in the terms of this departure.
Issue 3 – Would it be otherwise proper to make a particular departure determination?
The final step is for the Tribunal to determine whether it is ‘otherwise proper’ to make a particular departure determination. Subsection 117(5) requires the Tribunal to take into account whether the proposed departure is proper in the context of public interest and welfare expenditure of the community. A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should not be unnecessarily left to the public welfare system.
The Tribunal notes that according to her SOFC, the applicant receives family tax benefit (FTB). The Guide[18] notes the impact on a parent who receives FTB as follows:
A carer entitled to receive child support is able to end an assessment for a child by electing to end the liability from a specified day in the future. However, if the carer or their current partner is receiving or is entitled to receive FTB Part A at more than the base rate and they elect to end the child support assessment, their FTB Part A rate may be reduced to the base rate if they have not been granted an exemption from the maintenance action test (FA Guide 3.1.5.70). The carer should be made aware of this consequence prior to the liability being ended.
[18] At 2.10.2.
According to the evidence the second party is also in receipt of FTB and the proposed departure from the administrative assessment may impact on the entitlement to government assistance. In this case the Tribunal finds that the requirements under paragraph 117(5)(a) of the Act are met. The Tribunal concludes that it is otherwise proper to depart from the administrative assessment.
DECISION
The Tribunal sets aside the decision under review and in substitution decides to depart from the administrative assessment so that for the period:
· 6 March 2023 to 30 June 2023 Ms Shearman’s adjusted taxable income is varied to $100,000.
· 1 July 2023 to 1 January 2025 Ms Shearman’s adjusted taxable income is varied to $80,000.
[9] (SSAT Appeal) [2009] FMCAfam 1296.
[10] (SSAT Appeal) [2011] FMCAfam 623.
[11] (SSAT Appeal) [2010] FMCAfam 39.
Key Legal Topics
Areas of Law
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Family Law
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Administrative Law
Legal Concepts
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Statutory Construction
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Jurisdiction
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Remedies
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Judicial Review
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