Sidney and Brackman (Child support)
[2024] AATA 798
•29 February 2024
Sidney and Brackman (Child support) [2024] AATA 798 (29 February 2024)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2023/PC026658
APPLICANT: Mr Sidney
OTHER PARTIES: Child Support Registrar
Ms Brackman
TRIBUNAL:Senior Member R Ellis
DECISION DATE: 29 February 2024
DECISION:
The Tribunal sets aside the decision under review and, in substitution, decides that:
for the period from 5 May 2023 to 30 June 2023 the adjusted taxable income of Mr Sidney is varied to $125,484; and
for the period from 1 July 2023 to 31 March 2025 the adjusted taxable income of Mr Sidney is varied to $84,034.
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of the parents – school fees - a ground for departure established – decision to depart - decision under review set aside and substituted
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.
REASONS FOR DECISION
BACKGROUND
This review is about whether or not there should be a departure from the administrative assessment of child support.
Mr Sidney and Ms Brackman are the parents of [Child 1] (born October 2014), [Child 2] (born January 2017) and [Child 3] (born May 2019). There has been a child support assessment in place since 5 March 2022 and Mr Sidney is the liable parent under the assessment.
The following administrative assessments are under consideration:
· for the period from 1 September 2022 to 4 May 2023 Mr Sidney was assessed to pay an annual rate of $26,391 based on a 2021-22 adjusted taxable income of $127,755 for Mr Sidney and a 2021-22 adjusted taxable income for Ms Brackman of $18,593;
· for the period from 5 May 2023 to 30 June 2023 Mr Sidney was assessed to pay an annual rate of $9,609 based on a 2022-23 estimated adjusted taxable income of $62,649 for Mr Sidney and a 2021-22 adjusted taxable income for Ms Brackman of $18,593; and
· for the period from 1 July 2023 to 31 October 2023 Mr Sidney was assessed to pay an annual rate of $26,391 based on a 2021-22 adjusted taxable income of $127,755 for Mr Sidney and a 2021-22 adjusted taxable income for Ms Brackman of $18,593.
On 31 January 2023 Ms Brackman applied to Services Australia – Child Support (Child Support) for a change to the assessment on the basis of the special needs of the child (the ground more commonly known as Reason 2), the high costs of caring for, educating or training the child (Reason 3) and a parent’s income, property and financial resources or earning capacity (Reasons 8A and 8B).
On 16 May 2023 Child Support made the decision to change the assessment (the original decision) so that:
· for the period from 5 March 2022 to 31 August 2022 the income for Mr Sidney will be set to $199,183;
· for the period from 1 September 2022 to 31 October 2023 the income for Mr Sidney will be set to $371,851;
· for the period from 1 November 2023 to 31 October 2025 the income for Mr Sidney is set at $206,913; and
· for the period from 1 January 2023 to 31 December 2023 the annual rate payable by Mr Sidney will be increased by $3,439.
On 2 June 2023 Mr Sidney objected to this decision and on 1 August 2023 Child Support allowed the objection in part and made the decision to change the assessment (the objection decision) so that:
· for the period from 5 March 2022 to 31 December 2024 the adjusted taxable income of Mr Sidney is set at $128,000;
· for the period from 1 January 2023 to 31 December 2023 the annual rate of child support otherwise payable by Mr Sidney is increased by $4,025; and
· for the period from 1 January 2024 to 31 December 2024 the annual rate of child support otherwise payable by Mr Sidney is increased by $4,226.
On 24 August 2023 Mr Sidney applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).
A directions hearing was held on 21 November 2023. Mr Sidney and Ms Brackman attended by Microsoft Teams audio. Prior to the directions hearing Child Support provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (2,213 pages).
Mr Sidney and Ms Brackman were directed by the Tribunal to provide further information. Mr Sidney complied to the satisfaction of the Tribunal. Ms Brackman partly complied.
A hearing was held on 8 February 2024. Mr Sidney and Ms Brackman gave evidence on affirmation by Microsoft Teams audio. Prior to the hearing the Tribunal received documents folioed A1 to A280 from Mr Sidney and B1 to B27 from Ms Brackman and these were distributed to the parties.
At the directions hearing and at commencement of the hearing the Tribunal sought clarification from Mr Sidney and Ms Brackman as to the reasons for their concerns. Mr Sidney said he disagreed with the assessment of his income made by Child Support and was seeking a fair decision based on his current financial circumstances. Mr Sidney added there was no mutual intention between the parents for the children to be educated at private schools. Ms Brackman said Mr Sidney was earning a higher income than that reflected in the administrative assessment and she was seeking a fair amount of child support for the children. Ms Brackman said she was seeking a contribution from Mr Sidney towards the cost of private schooling for [Child 1], [Child 2] and [Child 3] as well as [Child 1] and [Child 2]’s special needs.
During the hearing the Tribunal agreed Mr Sidney could provide further evidence related to his health condition. This was received on 9 February 2024 (A281–A282) and 16 February 2024 (A283–A290) and copies were sent to Ms Brackman for her review. Additional written comments were received from Ms Brackman on 26 February 2024 (B28–B32).
ISSUES
The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.
Under Part 6A of the Act, the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and establishes a three-step process such that the issues for determination by this Tribunal are:
· whether or not a ground is established to depart from the administrative assessment of child support; and if so,
· whether or not it is just and equitable to make a particular departure determination; and if so,
· whether or not it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held that:
as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.
In Philippe and Philippe (1978) FLC 90-433 the court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act.
The range of determinations which can be made includes variations to the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.
CONSIDERATION
In circumstances where more than one ground for departure is put forward, the Tribunal need only be satisfied that one ground is established before going on to determine whether or not a particular determination is just and equitable and otherwise proper.
Issue 1 – Is there a ground for departure?
A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).
Mr Sidney told the Tribunal he was not currently working having left his role at [Company 1] around 16 May 2023. Mr Sidney said he had established [Company 1] in 2020 with a friend, [Mr A], to develop and manufacture a [product] for the building industry. Mr Sidney said he was eventually forced to sell his interest as he did not have the capital to continue investing but [Mr A] maintained his employment in a [specified] role as a favour. Mr Sidney said unfortunately the business could not afford to keep paying him a salary as it was not generating sufficient revenue. Mr Sidney added he had also been struggling due to stress associated with Family Court matters and was no longer able to work as required.
Mr Sidney said in addition to his salary [Company 1] had allowed him to live rent free in a property as well as meeting other expenses including his mobile phone and child support payments. Mr Sidney said he continued to live in the property for a few months after leaving [Company 1] and then moved in with his partner. Mr Sidney said he still had the mobile phone but [Company 1] was no longer paying his child support. Mr Sidney added that [Mr A] continued to help him meet his living expenses.
The Tribunal notes in evidence from Child Support the value of the rent being met by [Company 1], as initially confirmed by Mr Sidney, was $500 per week while the monthly mobile phone payments were $110. Child Support also determined that for the period from July 2022 to March 2023 [Company 1] paid child support totalling $5,754.
In response to directions Mr Sidney provided the Tribunal with a copy of his 2022-23 individual tax return. It shows total income of $61,872 being his salary from [Company 1]. After allowing for work-related deductions of $4,022 Mr Sidney had a taxable income of $57,850 in 2022-23. The Tribunal notes in evidence from Child Support a copy of his 2021-22 individual tax return which shows a taxable income of $127,755 comprised of his salary from [Company 1] of $87,426 and total supplement income from a trust of $45,041 less work-related deductions of $4,712.
Mr Sidney told the Tribunal his salary at [Company 1] had declined because he was working less hours, again, due to stress. Mr Sidney explained he was frequently absent from work due to Family Court as well as various other issues associated with his separation. Mr Sidney added that he also suffered from an existing injury sustained in a car accident which restricted his ability to perform certain tasks.
The Tribunal notes in evidence an email exchange between Mr Sidney and [Mr A] relating to his performance at work and his shares in [Company 1]. In the exchange, dated 3 March 2022 and 4 March 2022, Mr Sidney states he understands his current salary may change “to reflect the actual hours worked” and [Mr A] also concludes that Mr Sidney will also “forfeit his shares”.
Mr Sidney told the Tribunal that due to his ongoing poor mental health he was not currently looking for work. He said he was surviving with financial assistance from [Mr A] and his parents. Mr Sidney added he was unlikely to work again as an [Occupation 1], which was his trade, due to his other injury. He said he was not even certain he still had a current licence in order to undertake such work.
Mr Sidney also provided the Tribunal with a Statement of Financial Circumstances received 15 September 2023. Mr Sidney declares total average weekly expenses of $426. The majority of this amount is made up of food and motor vehicle expenses. There are no expenses listed for rent or telephone. Mr Sidney has no personal expenditure. Mr Sidney states he has total assets valued at approximately $26,487 including a [motor vehicle] valued at $22,000. His liabilities total approximately $684,994 including his share of a company tax debt being $300,000, a loan from his parents of $220,000 and other personal liabilities. Mr Sidney declares superannuation of $143,233. Mr Sidney said he was not currently repaying his loans.
Mr Sidney said he had also been associated with a number of other companies including [Company 2], [Company 3] and [Company 4] but these were in financial difficulty or no longer trading and were not providing him with any additional income. Mr Sidney added that his shareholding in these companies had been held in either [Trust 1] or [Trust 2] but neither trust was now active.
The Tribunal notes in evidence a letter from [Mr B] of [Accounting Firm 1] dated 19 April 2022 explaining the structure of a number of the entities in which Mr Sidney has an interest. [Accounting Firm 1] acts as tax agent for Mr Sidney. The letter states:
· [Company 2] is the main trading entity, however, Mr Sidney has been removed as a director due to a dispute about the operation of the business and loans to directors. The 2021 financial year was the first time the company made a profit. It had assets of $1.2 million including $500,000 of related party loans as well as liabilities of $1.4 million and would have “minimal” value;
· [Company 3] is the asset holding entity for [Company 2] and once held more than 20 vehicles. All vehicles except one have been sold in the last 24 months and it holds no other assets;
· [Trust 2] owned the commercial property from which [Company 2] operated and this was recently sold for $1.2 million. The profit after repayment of the initial loan was distributed to the three owners and will be reflected as a capital gains tax event payable directly to Mr Sidney. Other than legacy cash in the bank held for tax purposes it holds no other assets; and
· [Trust 1] is the holding entity for the family assets and business interests. There have been payments made into this entity following the sale of a unit which made a capital gain of $175,000 and a yard used by [Company 2] which made a capital gain of $429,000. The capital gain for the unit will receive a discount leaving a taxable gain of $87,500 and the capital gain for the yard will also receive discounts leaving an expected taxable gain of $35,750.
Mr Sidney told the Tribunal that [Company 5] was the corporate trustee of [Trust 1] and he was the sole director and shareholder of [Company 5]. Mr Sidney said [Trust 1] no longer held any assets of real value but he could not afford to have up-to-date accounts prepared for the trust. Mr Sidney said the [Trust 1] generated little or no income in 2022-23.
In response to directions Mr Sidney provided the Tribunal with a copy of the 2021-22 tax return for the [Trust 1] which he said was the most recent financial information available. It shows a total income of the trust of $116,599. The worksheets in the tax return show the assets as at 30 June 2022 include shares in [Company 2], shares in [Company 3] and a small amount of cash. Mr Sidney also provided copies of bank statements for [Company 5] for the period from 12 May 2022 to 10 November 2023. These show an opening balance of $56,897.47 and a closing balance of $2.83. During the period from 1 July 2022 to 30 June 2023 Mr Sidney withdrew funds in the form of director’s loans or general loans totalling $26,220. He made no withdrawals from this account after 3 March 2023.
Mr Sidney said that [Company 6] was the corporate trustee of [Trust 2] which, as explained by his accountant, once held a commercial property. Mr Sidney said he was no longer a director or shareholder of [Company 6] and he understood it had been wound up.
In response to directions Mr Sidney provided the Tribunal with a copy of the 2021-22 tax return for the [Trust 2]. It shows total income of $207,902 which includes a net capital gain from the sale of real estate of $193,204. After allowing for tax losses the total net income of [Trust 2] was $166,867. Distributions were made to the three shareholders including [Trust 1]. The worksheets show no assets as at 30 June 2022.
Mr Sidney told the Tribunal he established [Company 2] with a business partner in 2016 but ceased being a director in July 2020. Mr Sidney said he remained one of two equal shareholders with his shareholding held in the [Trust 1]. He said the trust had never received a dividend and he did not expect a dividend to be paid in the near future. Mr Sidney added that he was unaware of the value of this shareholding and had been unable to get a copy of up-to-date financial statements for [Company 2].
Mr Sidney said that [Company 3] was once the holding entity for machinery which was hired back to [Company 2]. Mr Sidney said he had been a director of [Company3] and he believed the [Trust 1] was one of three shareholders. Mr Sidney added that [Company 3] had not traded since 30 June 2020 and was in the process of being wound up.
In response to directions Mr Sidney provided the Tribunal with a copy of the 2019-20 tax return for [Company 3]. It shows the company made a taxable loss of $74,296 in 2019-20. Total assets, being primarily motor vehicles, plant and equipment, were valued at $734,210 and total liabilities, mainly hire purchase liabilities, were $710,218. Mr Sidney also provided copies of bank statements for [Company 3] for the period from 12 May 2022 to 10 November 2023. These show an opening balance of $8,531.64 and a closing balance of minus $27.77. During the period from 1 July 2022 to 30 June 2023 Mr Sidney withdrew funds in the form of director’s loans or general loans totalling $8,340. He made no withdrawals from this account after 20 April 2023.
The Tribunal notes in evidence an Australian Securities and Investments Commission (ASIC) extract dated 17 January 2023 which confirms Mr Sidney ceased as a director of [Company 2] on 22 July 2020. A further ASIC extract dated 9 May 2023 states that [Company 3] is the subject of strike-off action.
Mr Sidney said although he established [Company 1] with [Mr A] and was a shareholder it was [Mr A] who invested the majority of funds into the business. Mr Sidney said initially there were five shareholders in [Company 1] but the others exited around the same time he did which left [Mr A] as the sole shareholder. Mr Sidney said his shares held no value and he received no consideration for the shares. Mr Sidney said [Company 4] was a shelf company set up to hold the intellectual property for [Company 1] and had no value as far as he was aware.
The Tribunal notes in evidence an ASIC extract dated 15 March 2022 showing Mr Sidney ceased being a director of [Company 1] and [Company 4] on 8 March 2022. His shares in both entities, held in [Company 5], were transferred on the same date. There is no evidence before the Tribunal to indicate Mr Sidney was paid for his shareholdings in either [Company 1] or [Company 4].
Ms Brackman told the Tribunal it was her view Mr Sidney may still be working. Ms Brackman made the point that it was difficult to determine with certainty the true income and financial resources available to Mr Sidney because he had not completed recent tax returns for the entities in which he held an interest. Ms Brackman added Mr Sidney had transferred his shareholdings in [Company 1] and [Company 4] for no payment only a few weeks after they separated and she believed this was done to reduce his income. Ms Brackman said it was her view these shares held some value in light of previous transactions involving shares in [Company 1]. Ms Brackman said she felt the shares in [Company 2] also held some value.
In reply, Mr Sidney reiterated his shares in [Company 1] and [Company 4] had been transferred for no consideration. Mr Sidney said he had actually offered to transfer any shareholdings in the various entities he was associated with to Ms Brackman during property settlement but she had refused. Mr Sidney pointed to a letter from the chartered accounting firm [Accounting Firm 2], acting for [Company 1], which he said was written just before the parents separated.
In response to directions Mr Sidney provided a letter from [Accounting 2] dated 2 February 2022. The letter states, relevantly, that [Company 1] started trading in January 2021 and performed well in the June 2021 year with the balance sheet reflecting a net asset position of $18,000. The letter concludes that this is the “current value of the company”. The Tribunal also notes a sealed copy of a Minute of Final Consent Orders handed down in the Family Court relating to property settlement between the parents. The consent orders, dated 9 January 2023, state that Mr Sidney does not have any interest in [Company 1] or [Company 4] and agrees he will not receive any interest in these entities in the future and Ms Brackman has “entered this agreement on this basis”.
Ms Brackman has argued that Mr Sidney is also receiving benefits through his association with various other entities but that it is impossible to determine the level of such benefits as up-to-date financial information has not been provided. It is not the role of the Tribunal to carry out a forensic audit or major investigation of the financial circumstances of the parents. Rather, the Tribunal must undertake a review which is primarily economical as well as quick and be satisfied, on the balance of probabilities, as to each party’s income, property and financial resources (section 2A of the Administrative Appeals Tribunal Act 1975 and Tanner & Dalton (SSAT Appeal) [2012] FMCAfam 732).
The Tribunal finds that Mr Sidney had an adjusted taxable income of $57,850 in 2022-23. While Mr Sidney did receive additional income from a trust in 2021-22 this was not the case in 2022-23. The Tribunal is nonetheless not satisfied that Mr Sidney’s true income and financial resources are adequately reflected by his taxable income alone.
It is clear from the evidence provided that the entities with which Mr Sidney has been associated are in financial difficulty and no longer trading. This includes [Trust 1] and [Trust 2]. [Company 3] is in the process of being wound up. The Tribunal is satisfied, based on this evidence, the shares in [Company 2] held in the [Trust 1] have little realisable value. Mr Sidney ceased being a shareholder of [Company 1] and [Company 4] on 8 March 2022 and this was acknowledged by Ms Brackman in consent orders relating to property settlement. Mr Sidney has, however, been receiving personal benefits through his employment at [Company 1] including accommodation, telephone and child support payments. Mr Sidney was also in receipt of director’s loans from both [Company 5] and [Company 3] in 2022-23 which were an additional financial resource.
In such circumstances assessing child support on the basis of taxable income only would result in an unjust and inequitable outcome.
The Tribunal finds that Mr Sidney would be more fairly assessed as if he had an adjusted taxable income of approximately $125,484 in 2022-23. The Tribunal has calculated this figure by adding to his taxable income of $57,850 amounts of $26,000 for rent, telephone of $1,320, child support payments made of $5,754 as well as a total of $34,560 taken from [Company 5] and [Company 3] in 2022-23.
The Tribunal considers $125,484 to be a fair reflection of the income, property and financial resources available to Mr Sidney for the purposes of child support in 2022-23. The Tribunal acknowledges Mr Sidney stopped working at [Company 1] from around 16 May 2023 and will address this further when considering whether or not it is just and equitable to make a particular determination.
The Tribunal also considered the income, property and financial resources of Ms Brackman.
Ms Brackman told the Tribunal she started work with her current employer on 8 May 2023 and it was a full-time role. Ms Brackman said prior to this she was not working and had relied on government benefits to meet her expenses.
In response to directions Ms Brackman provided the Tribunal with a copy of her individual tax return for 2022-23. It shows an adjusted taxable income of $41,625 with gross payments of $7,927 coming from one employer. As Ms Brackman started working on 8 May 2023 this would mean her salary on commencement was approximately $53,580 per annum ($7,927 / 54 days in the period from 8 May 2023 to 30 June 2023 x 365).
Ms Brackman said she was promoted to a higher role in September 2023 and her salary had increased to approximately $90,000 per annum.
The Tribunal notes in evidence a payslip from her employer for the pay period ending 14 January 2024. It shows a gross year-to-date income of $48,832.96 which would equal approximately $90,020 on an annualised basis.
Ms Brackman also provided the Tribunal with a Statement of Financial Circumstances received on 27 September 2023. Ms Brackman is receiving, in addition to her salary, family tax benefit of approximately $193 per week and carer allowance of $72 per week. Ms Brackman declares total average weekly expenses of $1,165 including $150 for education expenses which she said was for a course she was studying. There are no education expenses listed for the children. Her total personal expenditure is approximately $472 per week. Ms Brackman has assets totalling approximately $10,000 and liabilities of approximately $159,428 being for legal fees. Ms Brackman has superannuation of $170,000.
The Tribunal finds that Ms Brackman had an adjusted taxable income of $41,625 in 2022-23 and this is an accurate representation of the income, property and financial resources available to her for the purposes of child support. On 8 May 2023 Ms Brackman started work on a salary of approximately $53,580 and this increased to approximately $90,000 from September 2023.
The administrative assessment in place at the time Ms Brackman made her application for a change on 31 January 2023 was based on a 2021-22 adjusted taxable income of $127,755 for Mr Sidney. From 5 May 2023, however, Mr Sidney was being assessed on his estimate of income of $62,649. The Tribunal has found that Mr Sidney would be more fairly assessed as if he had an adjusted taxable income of approximately $125,484 in 2022-23. When this amount is applied in the child support formula the annual rate of child support payable by Mr Sidney would be approximately $25,821. The Tribunal notes that using the 2022-23 adjusted taxable income of $41,625 for Ms Brackman in the assessment instead of her 2021-22 adjusted taxable income makes little difference to the amount of child support Mr Sidney would be assessed to pay.
The Tribunal finds an annual rate of $25,821 to be significantly more than his liability under the administrative assessment. The Tribunal is satisfied that special circumstances exist and the application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by Mr Sidney. On this basis the Tribunal finds there is a ground for departure from the administrative assessment.
Issue 2 – Is it just or equitable to make a particular determination?
As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether or not it is just and equitable as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider the matters discussed below,[1] which are as set out in subsection 117(4) of the Act:
[1] The Tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares(SSAT Appeal) [2008] FMCAfam 886.
(4)In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(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.
The nature of the duty of a parent to maintain a child (as stated in section 3 of the Act)
Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments. In this case the parents have a duty to support [Child 1], [Child 2] and [Child 3].
The Tribunal was not made aware that either parent has a legal responsibility to any other child or person.
The proper needs of the child
In relation to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).
Ms Brackman told the Tribunal that [Child 1], [Child 2] and [Child 3] attended [School 1] and had started at the beginning of the 2023 school year. Ms Brackman said in 2023 [Child 1] was in Year 3, [Child 2] in Year 1 and [Child 3] was in kindergarten.
Ms Brackman said the parents had agreed prior to separation that the children would be educated in the private school system. Ms Brackman said [Child 1], [Child 2] and [Child 3] were initially enrolled to attend [School 2] in [Suburb 1] but were later enrolled at [School 3]. Ms Brackman explained that although [Child 1] and [Child 2] attended [School 3] in 2022 she had moved the children to [School 1] because the fees were cheaper and more comparable to the fees at [School 2]. Ms Brackman added that since the parents separated in February 2022 Mr Sidney had refused to meet any of the cost of private school fees for the children.
The Tribunal notes in evidence from Child Support an enrolment form for [Child 2] to attend [School 2] signed by both parents on 3 July 2020, an enrolment form for [Child 1] to attend [School 2] signed by both parents on 23 July 2020 and an enrolment form for [Child 3] to attend [School 2] signed by both parents on 13 May 2021. The Tribunal further notes in evidence confirmations of enrolment for the three children also signed by both parents.
Ms Brackman pointed out that when she moved the children from [School 2] to [School 3], Mr Sidney had sought orders to have the children returned to [School 2]. She said this clearly indicated Mr Sidney wanted the children educated at [School 2] which was a private school.
Ms Brackman did not provide the Tribunal with statements of school fees and receipts for the payment of school fees for the children to attend [School 1] in 2023 as directed. Ms Brackman said she considered it fair for her and Mr Sidney to share equally in the cost as they had both wanted them to be educated privately. Ms Brackman said the fees for the final term at [School 1] in 2023 remained unpaid and she still had outstanding fees to pay at [School 3].
The Tribunal notes in evidence a fees and charges schedule for [School 1] for 2023. It shows tuition fees for a Year 3 student of $4,000, for a Year 1 student of $3,400 (less a 20 per cent sibling discount) and for a kindergarten student of $1,900 (less a 30 per cent sibling discount). The Tribunal further notes in evidence a fee statement from [School 3] dated 25 October 2022 showing an outstanding balance relating to costs for [Child 1] and [Child 2] of $3,439.50.
Mr Sidney told the Tribunal it was never his intention for the children to be educated privately and he could no longer afford private school fees. Mr Sidney said he was happy for the children to attend a public school and, at most, only be educated privately in their high school years. Mr Sidney said he had never paid private school fees and it was his understanding Ms Brackman’ mother had always met this cost. Mr Sidney acknowledged he had sought court orders to have the children returned to [School 2] but this was more because he wanted them returned to his care. Mr Sidney said, furthermore, Ms Brackman had forged his signature on the enrolment forms.
The Tribunal notes in evidence a forensic report undertaken by a forensic document examiner and dated 24 July 2023. The report examines the signatures of Mr Sidney on three school enrolment forms and compares them to specimen signatures. The report notes that “limitations exist in the comparison process as a result of the low reproduction quality of the questioned documents and signatures”. It concludes:
In my opinion, the evidence supports that the questioned signatures are not natural signatures completed by the specimen writer.
No opinion can be expressed as to whether the questioned signatures have been completed by the specimen writer with dissimilarities being intentionally introduced or completed by a writer other than the specimen writer as a simulation of the specimen writer’s signature model.
The ability to provide an authorship opinion may be possible on supply of the original questioned signatures, or potentially a high quality reproduction of those signatures.
The Tribunal placed little weight on this report given the limitations set out in the findings. Rather than being natural signatures it is possible they may have been inputted electronically by Mr Sidney. The Tribunal also gave greater consideration to the fact Mr Sidney sought to have the children returned to [School 2] which strongly suggests he did want them to continue their education in the private system.
The Tribunal finds there was a mutual expectation between the parents that [Child 1], [Child 2] and [Child 3] be educated at private schools.
Ms Brackman has not provided the Tribunal with evidence she is meeting the cost of tuition fees for [Child 1], [Child 2] and [Child 3] to attend [School 1]. The Tribunal notes in the objection decision the objections officer also raised concerns that Ms Brackman did not provide school account statements showing the applicable charges and payments made for fees in 2023. The Tribunal cannot be satisfied Ms Brackman is meeting these costs and that the costs of maintaining the children are, therefore, significantly affected. This matter will not be considered further. While Ms Brackman has provided a statement from [School 3] for outstanding fees in 2022 this was for a period prior to her application for a change of assessment. The Tribunal will not consider these costs further.
Ms Brackman told the Tribunal that [Child 1] and [Child 2] also had special needs. Ms Brackman said [Child 1] was autistic and received funding support from the National Disability Insurance Scheme (NDIS) which covered most of his medical expenses. Ms Brackman said [Child 1] was also required to see a paediatric specialist. She said this cost was not met by the NDIS and nor were his medication expenses. She said [Child 1] attended the specialist four times in 2023 but was unlikely to continue going as she could not afford the cost. Ms Brackman said [Child 2] had a prominent lisp and was assessed by [named therapy service] before being referred for ongoing speech and occupational therapy. Ms Brackman said [Child 2] attended three sessions in 2022 but was no longer receiving treatment as she could not afford the cost.
In response to directions Ms Brackman provided the Tribunal with four receipts from [named medical clinic] for [Child 1] attending [Dr C] in 2023. The total expense met by Ms Brackman after Medicare rebates was $814.
The Tribunal finds that both [Child 1] and [Child 2] have special needs. Ms Brackman has acknowledged that the majority of costs associated with [Child 1]’s special needs are met through the NDIS. Although Ms Brackman is incurring additional costs for [Child 1] associated with his special needs, the Tribunal notes that Ms Brackman is also in receipt of a carer allowance of approximately $3,765 per annum. This is a non-taxable supplementary payment in recognition of the additional costs associated with caring for someone who requires daily support. The Tribunal is satisfied Ms Brackman’ ability to maintain [Child 1] is not impacted by his special needs and will not consider these costs further. While [Child 2] did attend speech therapy in 2022 these visits were not frequent and are not ongoing. As they were incurred prior to Ms Brackman applying for a change of assessment the Tribunal will not consider these costs further.
The Tribunal is satisfied it is appropriate to calculate the costs of the children’s needs by reference to the Costs of the Children Table (provided for in Schedule 1 to the Act).
The income, earning capacity, property and financial resources of the child
The Tribunal is satisfied that [Child 1], [Child 2] and [Child 3] have no income, earning capacity, property and financial resources which should be taken into account for the purpose of child support.
The income, property, financial resources and earning capacity of each parent
The Tribunal has already considered in detail the income, property and financial resources of both parents.
Ms Brackman told the Tribunal that Mr Sidney had deliberately reduced his income and then left his job at [Company 1] to reduce his child support liability.
In order to establish that Mr Sidney’s earning capacity might be greater than that reflected in the child support assessment and render the assessment unfair, all three compulsory criteria set out in subsection 117(7B) of the Act must be satisfied. Those three criteria are:
(a) one or more of the following applies:
·the parent does not work despite ample opportunity to do so (subparagraph 117(7B)(a)(i));
·the parent has reduced the number of hours per week of their 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 (subparagraph 117(7B)(a)(ii));
·the parent has changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
(b) the parent’s decision not to work, to reduce the number of hours, or to change their occupation, industry or working pattern is not justified on the basis of:
·the parent’s caring responsibilities (subparagraph 117(7B)(b)(i)); or
·the parent’s state of health (subparagraph 117(7B)(b)(ii)); and
(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child (paragraph 117(7B)(c)).
Mr Sidney told the Tribunal he did reduce his hours of work at [Company 1] only because of stress associated with Family Court matters. Mr Sidney said he then left [Company 1] primarily because he could no longer focus at work and his friend, [Mr A], could not afford to keep paying him a salary. Mr Sidney reiterated this decision was not related to child support. Mr Sidney also pointed out he was unable to work as an [Occupation 1] and was restricted in the work he could do due to his prior injury. He referred to medical assessments in relation to this injury.
The Tribunal notes in evidence a number of payslips for Mr Sidney for his employment at [Company 1]. The payslip for the weekly pay period ending 23 March 2022 shows Mr Sidney was working ordinary hours of 40 hours per week on an annual salary of $125,000. The payslip for the weekly pay period ending 30 March 2022 shows Mr Sidney working ordinary hours of 20 hours per week on an annual salary of $125,000.
The Tribunal further notes in evidence a detailed assessment report from consultant orthopaedic surgeon [Dr D] undertaken at the request of the Insurance Commission of Western Australia. The report, dated 9 May 2022, states that Mr Sidney has the capacity to work full-time in his role which involved construction product duties but he should avoid lifting heavy weights. The report states Mr Sidney is fit for work and requires no vocational rehabilitation. His condition was considered stabilised. In relation to his ability to compete in the open workforce the report states, “there are some neck symptoms in particular which could make it more difficult for him getting alternate work outside of his current workplace”. A further medical assessment undertaken by neurosurgeon [Mr E] dated 31 October 2022 concludes that Mr Sidney is considered unfit to work as an [Occupation 1] but can work full-time in light duties.
Mr Sidney told the Tribunal he could not afford a specialist to deal with his neck injury and was currently seeing a psychologist. Mr Sidney said he was not looking for work and had attempted to apply for government income support but found the process onerous.
Following the hearing Mr Sidney provided the Tribunal with a referral from his GP to psychologist [Mr F]. The referral, dated 16 February 2024, is for six counselling sessions under a mental health care plan.
The Tribunal notes in evidence a record of a conversation between Mr Sidney and the original decision maker on 8 May 2023 in relation to the change of assessment. During discussion about the medical evidence he had provided to Child Support the original decision maker pointed out that Mr Sidney met all three criteria to establish a ground for departure on the basis of earning capacity. Mr Sidney is recorded as stating he “will just get another medical certificate to say he can’t work so he doesn’t have to pay anymore”. When the original decision maker informed Mr Sidney he was on record as admitting he would avoid paying child support by obtaining a medical certificate, Mr Sidney is then recorded as stating he “will leave his employer if the assessment is increased”.
Mr Sidney has acknowledged he moved from full-time employment at [Company 1] to part-time employment. Based on the evidence provided this took place around 24 March 2022. Mr Sidney then left [Company 1] on 16 May 2023. As Mr Sidney reduced the number of hours he worked per week to below full-time employment and then ceased working the Tribunal finds the first criterion is met.
Mr Sidney submits that he reduced his hours of work due to stress primarily associated with Family Court and other issues related to his separation. Mr Sidney also told the Tribunal he left [Company 1] because of his poor mental health and the business was no longer able to pay him. The Tribunal accepts that Mr Sidney is unable to work as an [Occupation 1], however, he continued working at [Company 1] until leaving on 16 May 2023. While Mr Sidney may be seeing a psychologist there is nothing in the medical evidence to confirm that he is incapable of working due to the state of his mental health. There is no information available to indicate [Company 1] is in financial difficulty and unable to pay its employees. The Tribunal finds the decisions Mr Sidney made to work part-time and then leave employment cannot be justified by his state of health. Mr Sidney has not claimed these decisions relate at all to his caring responsibilities. The second criterion is, therefore, met.
The intent of the legislation in relation to earning capacity is primarily to guard against a situation where a parent has deliberately reduced their income and this has had a significant effect on the child support assessment. In relation to the third criterion the courts have held that the onus of proving “a major purpose” for the decision about a change in working arrangements was not to affect child support rests on the person who made the choice. According to records from Child Support the assessment was initially registered on 16 April 2022 but then backdated to 5 March 2022. Mr Sidney moved from full-time to part-time employment on 24 March 2022. Mr Sidney was advised by the original decision maker on 8 May 2023 that he met the criteria for a change of assessment on the basis of his earning capacity. During the course of this conversation with the original decision maker it is recorded that Mr Sidney said he would leave his employment if the assessment was increased. The original decision, which increased the annual rate of child support, was made on 16 May 2023 and Mr Sidney left [Company 1] on 16 May 2023.
The Tribunal is satisfied that affecting the child support assessment was a major purpose, or one of the most important factors, behind the decision Mr Sidney made to reduce his hours of work and then leave his employment at [Company 1]. The third criterion is also met.
As the earning capacity criteria set out in subsection 117(7B) of the Act are met the Tribunal is satisfied that Mr Sidney has an earning capacity higher than that reflected in the child support assessment.
Mr Sidney had an adjusted taxable income of $127,755 in 2021-22. This was comprised of his salary from [Company 1] of $87,426 and total supplement income from a trust of $45,041 less work-related deductions of $4,712. In 2022-23 he was also receiving additional benefits from [Company 1] and taking funds from other entities. This has since ceased, however, Mr Sidney has said that [Company 1] continues to pay his mobile telephone costs.
The Tribunal is satisfied that Mr Sidney has a demonstrated earning capacity of approximately $84,034 (his salary plus mobile expenses less work-related deductions). The Tribunal finds it just and equitable to apply this demonstrated earning capacity from 1 July 2023 which is a few weeks after Mr Sidney ceased working at [Company 1].
When the child support case was first registered Ms Brackman was not working. She has since commenced full-time employment. The Tribunal is satisfied the earning capacity criteria are not met for Ms Brackman in this case.
Any hardship that would be caused
The Tribunal has found that Mr Sidney would be more fairly assessed as if he had an adjusted taxable income of approximately $125,484 in 2022-23. Mr Sidney lists total estimated household expenditure of $22,152 and no personal expenditure.
100.Mr Sidney told the Tribunal he had no lifestyle and was borrowing money from his parents to get by. Mr Sidney has also said his friend, [Mr A], is meeting many of his expenses.
101.At the time Ms Brackman made her application for a change of assessment on 31 January 2023 she was being assessed on her 2021-22 adjusted taxable income of $18,593. The Tribunal has found that Ms Brackman had an adjusted taxable income of $41,625 in 2022-23 but started work on a salary of approximately $53,580 from 8 May 2023. This has since increased to approximately $90,000 from September 2023. Ms Brackman is also in receipt of family tax benefit payments of approximately $10,036 per annum although this is not assessed for the purposes of child support. Ms Brackman has total average household expenditure of $60,580 and personal expenditure of $24,544.
102.Ms Brackman told the Tribunal that all she earned went towards meeting expenses for the children. Ms Brackman added that she worked for her children.
103.As previously noted when using the 2022-23 adjusted taxable income of $41,625 for Ms Brackman in the assessment instead of her 2021-22 adjusted taxable income there is little difference to the amount of child support Mr Sidney would be assessed to pay. Even when using an income of $90,000 for Ms Brackman there is no significant impact on the assessment given the current care levels of the children. The Tribunal is satisfied Ms Brackman is fairly assessed under the usual administrative process.
104.The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act). The Tribunal must decide whether or not it is just and equitable to backdate the determination.
105.Ms Brackman applied for a change of assessment on 31 January 2023 and requested a change from 14 April 2022. At this time Mr Sidney was being assessed on his 2021-22 adjusted taxable income of $127,755 and had been from 1 September 2022. Mr Sidney lodged an estimate of income of $62,649 on 5 May 2023.
106.The Tribunal is of the broad view that retrospectively changing entitlements should be avoided without compelling reasons. The parents have a right to rely upon the assessment in place at the time. As there was nothing preventing Ms Brackman from applying sooner, the Tribunal finds it just and equitable to commence the departure determination from 5 May 2023, being the date Mr Sidney lodged his estimate, rather than an earlier date.
107.Having considered the interests of both parents, the Tribunal proposes to make the following determination:
· for the period from 5 May 2023 to 30 June 2023 the adjusted taxable income of Mr Sidney is varied to $125,484; and
· for the period from 1 July 2023 to 31 March 2025 the adjusted taxable income of Mr Sidney is varied to $84,034.
108.While no adjustment has been made for the cost of [Child 1], [Child 2] and [Child 3] attending [School 1] the Tribunal cannot be satisfied this will cause Ms Brackman any hardship given no evidence was provided that she was actually meeting this cost. Should Ms Brackman provide evidence of these costs and payments made, there is no reason she could not make a new change of assessment application in relation to this matter.
109.Under the administrative assessment in place at the time Ms Brackman initiated the change of assessment Mr Sidney was assessed to pay an annual rate of $26,391, falling to $9,609 from 5 May 2023. In keeping with the decision of the Tribunal, as previously calculated, the annual rate of child support Mr Sidney is liable to pay is approximately $25,821 from 5 May 2023. This falls to approximately $15,219 from 1 July 2023 when using the income of $84,034 for Mr Sidney as determined by the Tribunal.
110.The annual rates of child support referred to above arising from the decision of the Tribunal should be regarded as estimates only due to the complexity of the child support formula.
111.The Tribunal has varied the income of Mr Sidney until 31 March 2025. This provides the parents with some certainty about the level of child support for [Child 1], [Child 2] and [Child 3] without being so far into the future as to render the decision out of touch with Mr Sidney’s financial circumstances.
112.While the decision of the Tribunal will result in additional child support payable by Mr Sidney when compared to the administrative assessment, the Tribunal is satisfied this will not cause him hardship. The Tribunal also finds the proposed determination will not cause hardship to Ms Brackman or the children and is just and equitable.
Issue 3 – Is it otherwise proper to make a particular determination?
113.The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be otherwise proper to make a departure determination. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for children to be primarily supported by their parents rather than by government assistance. The Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.
114.Ms Brackman is in receipt of family assistance. The increase in child support entitlements as set out in this decision when compared to the administrative assessment may decrease the extent to which the community will be supporting the children. The Tribunal is satisfied this is otherwise proper as its determination will result in an appropriate apportionment of financial responsibility between the parents and the taxpayer.
DECISION
The Tribunal sets aside the decision under review and, in substitution, decides that:
for the period from 5 May 2023 to 30 June 2023 the adjusted taxable income of Mr Sidney is varied to $125,484; and
for the period from 1 July 2023 to 31 March 2025 the adjusted taxable income of Mr Sidney is varied to $84,034.
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