Sitwell and Sitwell (Child support)

Sitwell and Sitwell (Child support) [2021] AATA 2724 (9 June 2021)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2020/BC020327
APPLICANT:  Dr Sitwell
OTHER PARTIES:  Child Support Registrar
Mr Sitwell

TRIBUNAL:Member J Thomson
DECISION:9 June 2021
DECISION:

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

For the period 1 January 2020 to 31 December 2021, Mr Sitwell’s adjusted taxable income is varied to $172,797;
For the period 1 January 2020 to 31 December 2021, Dr Sitwell’s adjusted taxable income is varied to $71,807;
For the period 31 January 2020 to 1 December 2020, Mr Sitwell’s annual rate of child support is increased by $13,260 in recognition of his contribution to the children’s school fees; and
For the period 31 January 2021 to 1 December 2021, Mr Sitwell’s annual rate of child support is increased by $13,260 in recognition of his contribution to the children’s school fees.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – business income – costs of education – 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

Dr Sitwell and Mr Sitwell are the parents of [Child 1], born 2005, [Child 2], born 2009, and [Child 3], born 2014 (the children). Until 3 December 2020, the children are recorded as being in the 100% care of Dr Sitwell. From 4 December 2020, [Child 1] is recorded as being in Dr Sitwell’s 100% care, and [Child 2] and [Child 3] are recorded as being in Mr Sitwell’s 31% care.
On 20 December 2019, Mr Sitwell applied to the Child Support Agency (the Agency) for a change of assessment on the following grounds:
·The costs of maintaining the children are significantly affected by the costs of caring for, educating or training them in the manner intended by both parents (the ground commonly referred to as Reason 3);
·The child support assessment is unfair because he, as the paying parent has given money, goods or property to the children of the assessment, the receiving parent or another person for the benefit of the children (the ground commonly referred to as Reason 5);
·The income, property and financial resources of Dr Sitwell are not accurately reflected in the administrative assessment, making it unjust and inequitable (the ground commonly referred to as Reason 8A); and
·Dr Sitwell’s earning capacity is greater than is reflected in her income for the purposes of child support (the ground commonly referred to as Reason 8B).
Dr Sitwell cross applied on the following grounds;
·That having regard to the proper needs of the children, the costs of maintaining the children are significantly affected by the cost of providing for their special needs (the ground commonly referred to as Reason 2); and
·the costs of maintaining the children are significantly affected by the costs of caring for, educating or training them in the manner intended by both parents (the ground commonly referred to as Reason 3).
The administrative assessment in place at the time of Mr Sitwell’s application on 20 December 2019 required him to pay child support to Dr Sitwell at the annual rate of $31,071. This assessment was based on Mr Sitwell’s 2018/19 adjusted taxable income (ATI) of $135,855, and Dr Sitwell’s 2018/19 ATI of $60,812.
On 7 April 2020, an Agency decision-maker, [Decision maker 1] found Reason 3 was established and changed the assessment to provide that for the period 1 January 2020 until 31 December 2021 the annual rate of child support payable by Mr Sitwell is reduced by $11,804 in recognition of Dr Sitwell’s contribution to the children’s private school fees and charges.
On 26 August 2020, the Agency granted Dr Sitwell’s application for an extension of time in which to object to [Decision maker 1]’s decision of 7 April 2020.
On 30 October 2020, an Agency objections officer partially allowed Dr Sitwell’s objection and set aside [Decision maker 1]’s decision of 7 April 2020, substituting in its place the following decision:
·From 1 January 2020 until 31 December 2021, Dr Sitwell’s ATI is set at $136,788;
·From 1 January 2020 to 20 April 2020 the annual rate of child support payable by Mr Sitwell is reduced by $11,992;
·From 21 April 2020 to 31 March 2021 the annual rate of child support payable by Mr Sitwell is reduced by $5,992; and
·From 1 April 2021 to 31 December 2021, the annual rate of child support payable by Mr Sitwell is reduced by $11,992.
On 26 November 2020, Dr Sitwell applied to the Tribunal for review of the objection decision dated 30 October 2020.
The Tribunal heard the matter on 6 April 2021. Both parents attended the hearing via conference telephone and gave affirmed evidence. The Tribunal had before it documents provided by the Agency (Exhibit 1), documents provided by Dr Sitwell (Exhibit A) and documents provided by Mr Sitwell (Exhibit B). At the direction of the Tribunal, post hearing, both parents provided additional documents, copies of which were provided to the respective parents on 19 April 2021. No responsive comments have been provided by either parent. These documents have been added to each parent’s documents, Exhibits A and B.

ISSUES

The issues which arise in this case are:
a)the incomes, financial resources and property available to each parent for child support purposes; and
b)the level of Mr Sitwell’s contribution to the children’s private school fees and charges.

CONSIDERATION

In reaching its decision, the Tribunal has considered the affirmed evidence given by the parents at the hearing and the documents contained in Exhibits 1, A and B.
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 a liable parent is usually based on an administrative assessment under Part 5 of the Act. A formula is used. It considers variables including each parent’s ATI for the last relevant year of income, the number of children and the level of care provided by each parent. Part 6A of the Act allows for a departure from the administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:
·One, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));
·a departure is just and equitable as regards the children and each parent (sub- subparagraph 98C(1)(b)(ii)(A)); and
·It is otherwise proper to make such a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)).
Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2) of the Act.
If satisfied a ground or grounds exist and it would be just and equitable and otherwise proper to make a determination, the Registrar may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the ATI or the cost percentage of a child.

Grounds for departure

Subparagraph 117(2)(c)(ia) of the Act provides as a ground for departure:
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child…
(ia) because of the income, property and financial resources of either parent…
The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to determine with precision the meaning of that term, 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 legislation in subsection 117(2) must be guided by the qualification that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial position.
Dr Sitwell’s case at the hearing centred on three points:
·Her taxable income is derived from her business entity, [Business 1] Pty Ltd ([Business 1]);
·Mr Sitwell’s Department of Veterans’ Affairs Special Rate Disability Pension (DVA Pension) of approximately $34,000.00 which she asserted was a financial resource available to him for child support purposes, notwithstanding it was treated as a tax-free pension by the Australian Taxation Office (ATO); and
·The apportionment of the parents’ contributions to the school fees and charges for the children relative to their respective incomes and financial resources.
Mr Sitwell’s case at the hearing centred on three points:
·Dr Sitwell’s income and financial resources available to her for child support purposes from her interests in [Business 1] and a unit trust, (the [Trust 1]);
·Her unexercised capacity to earn income in consequence of a change in her work pattern; and
·The recognition of the DVA education allowances paid to Dr Sitwell for the children in the determination of his contribution to the children’s school fees and charges.
Neither parent took issue with the objections officer’s determination of the respective parents’ liability to contribute to the children’s school fees. However, Dr Sitwell expressed the desire that the contributions be considered in light of her submissions regarding the ultimate determination of the respective parents’ taxable incomes and financial resources available to them for child support purposes.

The incomes and financial resources of the parents

Although Mr Sitwell asserted at the hearing that his tax-free DVA Pension was an exempt payment not available for child support purposes pursuant to the provisions of the Act, post hearing, he conceded in an email to the Tribunal registry dated 13 April 2021 that his DVA Pension was a resource available for child support purposes, notwithstanding the tax-free status of that pension for income tax purposes. The Tribunal will have more to say about this later in these Reasons.
Dr Sitwell gave evidence that her primary source of income is derived from the business activities of the company [Business 1] Pty Ltd ([Business 1]), of which she is one of three directors, the other directors being her mother, Ms [A], and Ms [B]. The 36 issued shares in [Business 1] are equally divided (12 shares each) between the three directors’ corporate entities, in Dr Sitwell’s case, [a named company] , Ms [A]’s case, [a named company] , and in Ms [B]’s case, [B] Pty Ltd. An Australian Securities and Investments Commission search obtained by the Tribunal confirmed the accuracy of the above details regarding [Business 1].
Dr Sitwell gave evidence that she is a registered [Occupation 1], [Occupation 2] and [Occupation 3], and provides those services to members of the public as an employee of [Business 1]. Her mother, Ms [A] provides the administrative/managerial services to [Business 1], with the assistance of an office [manager]. Ms [B] is a qualified [Occupation 4] and provides those services to the public as an employee of [Business 1].
[Business 1] also employs [other staff].
Dr Sitwell gave evidence that the [Trust 1] is controlled by a corporate trustee, [TRUSTEE 1] of which she and her mother, Ms [A], are the directors. The holders of the two issued units in the [Trust 1] reflected in the [Trust 1]’s Trust Deed, a copy of which was before the Tribunal as part of Dr Sitwell’s documents, Exhibit A, appear to be the corporate entities of the two employed [Occupation 5 staff].
Dr Sitwell’s evidence at the hearing was that the [Trust 1], whose principal source of income appears to have been from the provision of [Occupation 5] services, provided by qualified [Occupation 5 staff] employed by the Trust, was significantly impacted by the COVID 19 pandemic, forcing the closure of the business for most of the 2020 calendar year. She also confirmed that neither she nor her mother hold any [Occupation 5] qualifications, nor have they derived any income or other financial benefits from the [Trust 1]’s business operations for the 2019/20 or 2020/21 financial years. Mr Sitwell did not challenge Dr Sitwell’s evidence in this regard at the hearing.
Accordingly, the Tribunal will focus its attention on the financial records provided by Dr Sitwell, as part of Exhibits 1 and A, for [Business 1], the principal source of Dr Sitwell’s income and financial resources for the period under consideration in the objection decision, 1 January 2020 to 31 December 2021.
The Tribunal has been provided with copies of the financial statements (profit and loss statements, balance sheets and related income tax returns) for [Business 1] for the financial years 2018/19 and 2019/20 as part of the Agency’s documents, Exhibit 1.
Compliant with the Tribunal’s directions prior to and at the hearing, Dr Sitwell has provided, as part of her documents Exhibit A, copies of her amended 2019/20 income tax return and corresponding assessment notice reflecting her amended taxable income for that year at $54,821, and her [Business 1] payslips for the period 9 February 2021 to 1 March 2021, reflecting her year-to-date income for the 2020/21 financial year, over a period of 244 days, of $47,900, annualised to $71,653.
At the Tribunal’s direction, Dr Sitwell also provided copies of correspondence from her [accountant], dated 2 November 2020 (see Exhibit A, page A11) and 15 April 2021 (see Exhibit A, page A158), respectively clarifying the inclusion of Dr Sitwell’s [Business 1] gross salary for the 2019/20 financial year of $68,992 in the total salary and wages expenses item of $428,727.00 reflected in the profit and loss statement for that year, and the circumstances in which she claimed motor vehicle expenses of $3,400 against her 2019/20 income in her personal income tax return for that financial year (see Exhibit A, page A11).
Coincidentally, the accountant’s correspondence of 15 April 2021 also clarifies the expense item “Contractors (non-salary) – $48,157” recorded in the [TRUSTEE 1] profit and loss statement for the 2019/20 financial year (a matter raised by the Tribunal at the hearing to determine the precise nature of that deduction and whether any part of that item reflected a payment to either Dr Sitwell or Ms [A]). The Tribunal is satisfied that this expense item reflects that the payment of $48,157 was a legitimate business expense paid to the respective corporate entities of the two contracted [Occupation 5 staff] employed in the [TRUSTEE 1] ([and] that neither Dr Sitwell nor Ms [A] derived any benefit from that payment.
An analysis of the 2019/20 financial year profit and loss statement for [Business 1] reflects gross income of $1,526,081. Included in that figure are two non-taxable items of income comprising an ATO cash flow boost of $49,588 and a disaster grant of $25,000 provided by the local authority, totalling $74,588, paid to the company following water damage sustained to [its] premises as a result of a cyclone which ravaged the area in that financial year.
Dr Sitwell’s accountants have deducted these two items from the net profit after the expenses reflected in the company’s profit and loss statement for that year on the basis that those items were non-taxable. However, the Tribunal considers these amounts a financial resource from which Dr Sitwell ultimately derived a financial benefit in terms of the net cash receipts of [Business 1] for that year, and accordingly, the amount of $74,588 will be added back to [Business 1]’s gross profit for that financial year for the purpose of determining her one third share of the benefit of those payments.
The Tribunal is also satisfied, by reference to [Business 1]’s wages and salaries summary for the 2019/20 financial year, provided to the Tribunal by Dr Sitwell as part of Exhibit A, that the item “contractors (non-salary) – $466,435” represents salaries paid to the contracted [staff] engaged by [Business 1], and that her salary, reflected in her income tax return for the 2019/20 financial year in the amount of $68,992, is included in the separate item, “wages – $428,727”.
The Tribunal considers the remaining expense items reflected in the profit and loss statement for that year unremarkable and the total expenses of $1,393,184, reflected in the statement, reasonable, having regard to the nature of the business.
Notably, no motor vehicle expenses are claimed, consistent with Dr Sitwell’s evidence that the business does not own any motor vehicles, and that the vehicle which she uses for her home visits as a [Occupation 1] and [Occupation 3] is her personal vehicle for which she claims motor vehicle expenses against her income from her salary and profit distributions from the [Business 1] . The Tribunal is also satisfied these expenses are claimed on the standard ATO accepted “business use” log book kilometre basis, and there is no evidence of Dr Sitwell deriving any personal financial benefit as a consequence of the motor vehicle expenses she claimed against her personal income in her 2019/20 amended income tax return.
Dr Sitwell’s accountant’s explanatory letter of 2 November 2020 reflects company tax of $15,425 payable on the [Business 1]’s taxable profit for the 2019/20 financial year of $132,897, excluding the non-taxable cash injections totalling $74,588 referred to above, resulting in a net distributable profit of $117,472, of which Dr Sitwell’s one third share is $39,157.
The Tribunal has scrutinised the financial statements provided by Dr Sitwell for the [Trust 1] business for the 2019/20 financial year and is satisfied they are an accurate reflection of the financial performance of that business. The Tribunal was also satisfied that neither Dr Sitwell nor her mother, Ms [A] have derived any financial benefit from that business, and that the net loss of $50,834 sustained by that business reflected in its financial reports is a genuine business loss.
Mr Sitwell did not challenge the financial evidence provided by Dr Sitwell reflecting the [Trust 1]’s net loss situation for the 2018/19 and 2019/20 financial years, or that neither Dr Sitwell nor her mother, Ms [A], as directors and shareholders in [TRUSTEE 1], received any income or other financial benefit from these entities for the 2018/19 or 2019/20 financial years.
Accordingly, the Tribunal considers it is appropriate that Dr Sitwell’s half share of the [Trust 1] loss amounting to $25,417 for the 2019/20 financial year should be brought to account in determining her 2019/20 taxable income as shown in the table below:

Year ended 30 June 2020	[Business 1]	[TRUSTEE 1]
Net profit as per Profit & Loss Account	A	132,897	(50,834)
Less: Tax adjustments
Cash Boost (non-assessable)	49,588	10,000
Disaster Grant (non-assessable)	25,000	0
Tax losses brought forward	2,214	0
Taxable income/(loss)	56,095	(60,834)
Tax payable	B	15,425	0
Net profit/(loss) after tax	A - B	117,472	(50,834)
Ownership interest – Dr Sitwell	33%	50%
Dr Sitwell’s share of after-tax net profit	$39,157	$(25,417)

Her amended income tax return for the 2019/20 financial year, prepared by her accountants, and her ATO notice of amended assessment for that year were before the Tribunal (see Exhibit A, pages A12 to A26), reflecting her gross income of $68,992 from [Business 1] referred to above. The Tribunal has scrutinised her deductions, including the motor vehicle expenses of $3,400 referred to above, and considers them reasonable and allowable.
The Tribunal notes that Dr Sitwell reported employer superannuation contributions of $3,400 in her 2019/20 income tax return. The Tribunal considers this deduction an alienation of income for tax purposes, and a resource which would otherwise be available to Dr Sitwell for child support purposes. The Tribunal will therefore add back this amount to her gross income of $68,992.
Together with her share of the [Business 1] 2019/20 financial year distributable profit of $39,157 and allowing for her share of the [Trust 1] loss of $25,417, the Tribunal finds her ATI for the 2019/20 financial year was $71,961. The methodology used in this calculation is reflected in the table set out below:

Year ended 30 June 2020	$
Taxable income	54,821
Reportable superannuation contribution	3,400
Share of profit – [Business 1]	39,157
Share of loss – RFD	(25,417)
Dr Sitwell’s adjusted income	$71,961

Returning to Mr Sitwell’s income and financial resources available to him for child support purposes, his evidence at the hearing was that his DVA Pension for the 2019/20 financial year was approximately $34,000.00. His Statement of Financial Circumstances (SOFC) dated 17 December 2020 reported his average gross weekly income at $2,667.70, annualised to $138,720.40, which approximates his 2019/20 income of $137,886.00 recorded in the objection decision at page 15 of Exhibit 1 as the income upon which he is currently being assessed in the administrative assessment.
The Tribunal has found that the DVA tax exempt pension Mr Sitwell said he received in the 2019/20 financial year was a financial resource available to him for child support purposes not reflected in his taxable income of $137,886 for that financial year. Adding his non-taxable DVA Pension of $34,000 to his taxable income for the 2019/20 financial year of $137,886 results in a combined taxable income and financial resources amount of $171,886.
His SOFC also reports his total gross weekly income as at 17 December 2020 at $3,341.21 annualised to $173,742.40 (rounded down to $173,742) comprising his weekly income of $2,667 (annualised to $138,684), plus his tax exempt weekly DVA Pension of $673.51, annualised to $35,022.52 (rounded up to $35,023). The Tribunal considers it reasonable to assess Mr Sitwell’s income and financial resources available to him for child support purposes for the 2020/21 financial year as equating to an annual income of $173,707 ($138,684 + $35,023 = $173,707).
The administrative assessment as at the date of Mr Sitwell’s change of assessment application on 20 December 2019 required him to pay Dr Sitwell child support for the period 21 November 2019 until 20 February 2021 at the annual rate of $31,071, based on his 2018/19 taxable income assessment of $135,855 and Dr Sitwell’s 2018/19 taxable income of $60,812.
The Tribunal has found that Mr Sitwell’s income and financial resources available to him for child support purposes for the 2019/20 financial year equated to an income of approximately $171,886, and for the 2020/21 financial year, his taxable income and financial resources available to him for child support purposes equated to an income of approximately $173,707.
The Tribunal has also found that Dr Sitwell’s taxable income and financial resources for the 2019/20 financial year equated to an income of $71,961, and her taxable income for the 2020/21 financial year, based on her payslips for the financial year to 1 March 2021 will be approximately $71,653 (annualised).
As neither of the parent’s incomes for the 2019/20 and 2020/21 financial years is reflected in the assessment, the Tribunal finds that the assessment is unfair, unjust and inequitable, and a ground for departure established.
Mr Sitwell’s evidence regarding Dr Sitwell’s capacity to earn income was limited to his assertion that, although she gave evidence that she had reduced her working hours for the reasons which appear below, this was not reflected in the current payslips she provided for the period 9 February 2021 to 1 March 2021, reflecting a year-to-date (1 July 2020 to 1 March 2021 – 244 days) gross income of $47,900.00, annualised to $71,654.00 ($47,900.00 / 244 x 365 = $71,653.68 – rounded up to $71,654.00).
Dr Sitwell’s evidence on this issue was that she had reduced her [practice] hours, because of the decline in her patients following the onset of the COVID 19 pandemic in March 2020, to care for the children who were in her 100% care until a care change occurred on 4 December 2020. However, she said she was able to devote more of her time to assisting with the business administration of [Business 1] while working from home. She said her overall work hours remained the same and there was no significant decrease in her income.
The income analysis referred to above suggests her income for the 2020/21 financial year will be approximately the same as her 2019/20 income and financial resources, determined by the Tribunal at $71,961.
The Tribunal therefore finds that there has been no diminution in Dr Sitwell’s income in consequence of her changed work pattern, and even if there was, she was justified in reducing her working hours in order to care for the children. The Tribunal finds no ground for departure established.

School fees and charges

Both parents acknowledged at the hearing that there was no dispute regarding their mutual intention that the children receive a private education and Mr Sitwell acknowledged in evidence that he accepted responsibility for meeting half of the children’s education costs.
The issue raised by Dr Sitwell was with respect to the apportionment of the liability for the children’s school fees and charges relative to the incomes and financial resources of the parents.
Mr Sitwell’s issue was whether the DVA education allowances reflected in Dr Sitwell’s SOFC referred to below, and a COVID 19 bursary subsidy granted by the children’s school, ([the] School) for the second semester in 2020 and the first semester in 2021, reflected in the School’s letter of 27 August 2020 to Dr Sitwell (see Exhibit A page A149) had been taken into account in the objection decision’s determination of his contribution to the children’s school fees and charges.
He also acknowledged in his evidence at the hearing that he has not contributed to the children’s school fees since October 2019.
Dr Sitwell gave evidence that the DVA education allowances listed in her SOFC are paid to her bank account and applied for the benefit of the children’s education expenses. The allowances are as follows:
·[Child 1] – $57.20 per fortnight, annualised to $1,487 ($457.20 x 26 = $1,487.33);
·[Child 2] – $280 per annum; and
·[Child 3] – $280 per annum.
[Child 1]’s DVA education allowance continues to the end of her grade 12 secondary education in 2024. [Child 2]’s allowance of $280 per annum continues until he completes grade 6 and transitions to secondary school in January 2022, when he will be eligible for the fortnightly DVA subsidy of $57.20; [Child 3]’s allowance of $280 per annum continues until she transitions to secondary school in grade 7 in January 2027.
[The] School bursary provides for a 50% reduction in the balance of the school fees for semesters 2 in the 2020 school year and 1 in the 2021 school year, after deducting the school’s family maximum discount of $421.25 per term, and the sibling discounts for [Child 2] and [Child 3] of $475 and $536.25 per term, calculated at $2,998.75 in [the] School’s fee statement at page A153 of Exhibit A.
An analysis of the relevant components of the children’s school fees and charges is set out below:
[Child 1]: year 8, 2020.
Tuition fees: $11,640 ($2,910 per term x 4 = $11,640)
Less DVA allowance: $1,487
Subtotal: $10,153
[Child 2]: year 5, 2020
Tuition fees: $9,500 ($2,375 per term x 4 = $9,500)
Less sibling discount: $1,900 ($475 per term x 4 = $1,900)
Less DVA allowance: $280
Subtotal: $7,320
[Child 3]: year 1, 2020.
Tuition fees: $8,580 ($2,145 per term x 4 = $8,580)
Less sibling discount: $2,145 ($536.25 x 4 = $2,145)
Less DVA allowance: $280
Subtotal: $6,155
Total net school fees: $23,628
Less family maximum discount: $1,685 ($421.25 per term x 4 = $1,685)
Less COVID 19 bursary: $2,999.75
Total adjusted school fees for 2020: $18,943.25 (rounded down to $18,943)
According to the [School]’s statement of fees provided by Dr Sitwell reflected at page A153 of Exhibit A, the fees for each of the children for the 2021 school year are the same as the previous 2020 year’s fees. On that basis, the Tribunal finds the total amount of the adjusted school fees for the 2021 school year would be $18,943.

Just and equitable

The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.
Both parents provided SOFCs, the contents of which were largely unremarkable.
Dr Sitwell’s SOFC dated 21 December 2020 listed her gross average weekly income at $1,330, annualised to $69,160, which is not dissimilar to the Tribunal’s finding as to her income for the 2019/20 financial year. In addition, she reported receipt of government benefits comprising a DVA education allowance for the child [Child 1] $29 per week and a DVA (one-off) education allowance $280 for each of the children, [Child 2] and [Child 3], reflected as a weekly payment of $11.
She listed assets totalling $141,692, comprising negligible bank savings of $875, a [vehicle] at an estimated value of $30,000, her one third interest in [Business 1] at an estimated value of $146,125, household contents at an estimated value of $10,000, and other personal property including jewellery at an estimated value of $6,452. She amended the estimates of her bank account balances to reflect their current status, increasing her NAB Visa account balance to $5,021, and her Bank of Melbourne account balance to $6,707.
Her superannuation was listed at $86,436.
She listed liabilities totalling $392,299 comprising a finance company debt of $34,014 for the purchase of her motor vehicle, credit card debt of approximately $5,600 which she said, in evidence at the hearing, has increased to approximately $11,700, a HECS debt for her chiropractic course of $44,662, and her $115,000 one third share of her liability as guarantor for a National Bank business loan to [Business 1]. Her weekly personal expenditure comprising tax liability, credit card and health insurance premiums totalled $610, and her average weekly expenses totalling $1,759, including rent of $450 per week and education expenses of $418, were unremarkable.
Save the amendments referred to above, Dr Sitwell affirmed the contents of her amended SOFC.
Mr Sitwell did not challenge Dr Sitwell’s evidence regarding her SOFC.
Mr Sitwell affirmed the contents of his SOFC dated 17 December 2020 at Exhibit B, pages B1 to B9, subject to the minor amendments set out below.
He reported his average gross weekly income as $3,341.21, annualised to $173,742.92, rounded up to $173,943, which is the income the Tribunal has found was his income for the 2020/21 financial year. He also disclosed the gross weekly component of his DVA special rate untaxed pension income of $675.51, annualised to $35,022, which the Tribunal has found to be a financial resource available to him for child support purposes.
He gave evidence that his current partner has only recently commenced employment, having been made redundant since June 2020, and precise details of her income were not available at the time of hearing.
His listed assets were confined to a motor vehicle valued at $38,000. In the explanatory commentary attached to his SOFC, he said his savings have been exhausted repaying debt on the former family home and meeting legal fees arising from the parents’ Family Court property settlement proceedings which were still on foot at the time of completion of his SOFC in December 2020.
He listed liabilities totalling $96,857, comprising a loan of $44,218 on his motor vehicle, credit card debt of $9,638 which he amended to $15,000 at hearing, and outstanding Family Court legal fees of $43,000.
His personal expenditure items totalling $1,171, comprising income tax instalments and child support, were unremarkable as were his listed average household expenses totalling $787. Dr Sitwell challenged his weekly rental expenditure item of $250, asserting he had recorded it at $150 in his Family Court affidavit material. Mr Sitwell gave evidence that at the time he swore his Family Court affidavit, he had a partner sharing the rental costs who moved out in mid-2020, and the room occupied by that person is now available for the children, pursuant to the change in care arrangements on 4 December 2020. The Tribunal accepts his evidence in regard to this issue.
Although reference was made in the decision under review to [Child 1] having [specified medical conditions] , and both [Child 1] and [Child 3] having orthodontic conditions, there was no challenge at the hearing to the objections officer’s finding that none of these conditions were established as special needs, for which the related treatment costs were significantly sufficient to justify a departure from the administrative assessment of child support.
The Tribunal is therefore satisfied that none of the children or the parents has special needs, nor do the children have independent sources of income or other financial support other than as reflected in the Reasons set out above.

Conclusion

The Tribunal has found Mr Sitwell’s taxable income and financial resources available to him for child support purposes for the 2019/20 financial year equate to an income of approximately $171,886, and an income of approximately $173,707 for the 2020/21 financial year. The Tribunal has also found Dr Sitwell’s taxable income and financial resources available to her for the 2019/20 financial year equate to an income of $71,961, and her taxable income for the 2020/21 financial year will be approximately $71,653.
The Tribunal will therefore vary Dr Sitwell’s ATI for the period 1 January 2020 to 31 December 2021 to $71,807, the average of her incomes and financial resources for the 2019/20 and 2020/21 financial years reflected above. The Tribunal will also vary Mr Sitwell’s ATI for the period 1 January 2020 to 31 December 2021 to $172,796, the average of his incomes and financial resources for the 2019/20 and 2020/21 financial years reflected in the Reasons above.
Regarding the apportionment of the respective parents’ liability for the children’s school fees referred to above for the 2020 and 2021 school years, the Tribunal will apply the apportionment in accordance with the percentage relationship each parent’s income and financial resources bears to the other.
Averaging Mr Sitwell’s incomes and financial resources for the 2019/20 and 2020/21 financial years of $171,886 and $173,707 results in an average income amount of $172,796.50 (rounded up to $172,797). Averaging Dr Sitwell’s incomes and financial resources for the same years of $71,961 and $71,653 results in an average income amount of $71,807. The percentage apportionment between the parents’ respective averaged incomes reflects percentages of 70% for Mr Sitwell and 30% for Dr Sitwell.
Mr Sitwell’s share of the children’s total adjusted school fees as set out above in the amount of $18,943 for each of the 2020 and 2021 school years will therefore be $13,260 ($18,943 x 70 / 100 = $13,260).
The Tribunal will therefore increase Mr Sitwell’s annual rate of child support for each of the periods 31 January 2020 to 1 December 2020, and 31 January 2021 to 1 December 2021 by $13,260 in recognition of his contribution to the children’s school fees.

Otherwise proper

The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. Varying Dr Sitwell’s and Mr Sitwell’s respective incomes on which child support is calculated from that used in the administrative assessment, based on their incomes and financial resources which are not reflected in the administrative assessment will result in an appropriate apportionment of financial responsibility between the parents and the community.
The Tribunal is satisfied that, having regard to the facts and circumstances of this case, as set out above, varying the incomes of the respective parents as set out above, and increasing Mr Sitwell’s annual rate of child support to reflect his contribution to the children’s school fees, relative to his level of income and financial resources, and his circumstances generally, will not result in undue hardship to him, Dr Sitwell, or the children. Such a result would be otherwise proper.

DECISION

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

For the period 1 January 2020 to 31 December 2021, Mr Sitwell’s adjusted taxable income is varied to $172,797;
For the period 1 January 2020 to 31 December 2021, Dr Sitwell’s adjusted taxable income is varied to $71,807;
For the period 31 January 2020 to 1 December 2020, Mr Sitwell’s annual rate of child support is increased by $13,260 in recognition of his contribution to the children’s school fees; and
For the period 31 January 2021 to 1 December 2021, Mr Sitwell’s annual rate of child support is increased by $13,260 in recognition of his contribution to the children’s school fees.

[2021] AATA 2724

9 June 2021

Key Legal Topics

Areas of Law

Family Law

Legal Concepts

Jurisdiction

Remedies

Statutory Construction