Turakhia and Turakhia (Child support) - [2024] ARTA 546

Turakhia and Turakhia (Child support) [2024] ARTA 546 (22 October 2024)

Applicant/s: Ms Turakhia

Respondent: Child Support Registrar

Other Parties: Mr Turakhia

Tribunal Number:   2024/AC028039
Tribunal: Member C Breheny
Place:Hobart
Date:22 October 2024
Decision:
The decision under review is set aside and a decision substituted that
·     for the period 3 August 2023 to 30 June 2024 Mr Turakhia’s adjusted taxable income is set at $60,513 per annum and
·     for the period 1 July 2024 to 30 June 2026 Mr Turakhia’s adjusted taxable income is set at $120,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources – benefits derived from business – special circumstances – ground for departure – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 16(2AB) of the Child Support (Registration and Collection) Act 1988.

Statement of Reasons

From 14 October 2024, the Administrative Appeals Tribunal (AAT) became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.

BACKGROUND

Ms Turakhia and Mr Turakhia are the separated parents of [Child 1], born March 2010 and [Child 2], born August 2014. A child support case had been initially registered with Services Australia – Child Support (Child Support) since January 2011 and most recently registered for collection from 30 November 2020. Child support is payable on the basis that Ms Turakhia has 100% care of the children and Mr Turakhia was at all relevant times liable to pay child support to Ms Turakhia.
There have been four previous departure determinations in this case; the most recent one was lodged by Ms Turakhia on 20 August 2019 on the basis that Mr Turakhia’s income, financial resources and earning capacity were not adequately reflected in the administrative assessment. In a decision of 17 March 2020, a Child Support objections officer decided to set Mr Turakhia’s adjusted taxable income at $150,000 for the period 1 August 2019 to 7 January 2022. The child support case ended in early 2020, as Mr Turakhia was no longer a resident of Australia and was not residing in a reciprocating jurisdiction. The child support case recommenced on 15 September 2020, after Mr Turakhia’s return to Australia.
From 1 October 2021 to 31 October 2021 Mr Turakhia’s child support liability was assessed as being the minimum annual rate ($446) based on his 2020/21 adjusted taxable income of $17,973. For the period 1 November 2021 to 31 January 2024 child support liability was calculated on a provisional income of $18,494 for Mr Turakhia resulting in child support payments at the minimum annual rate of $459.
On 3 August 2023, Ms Turakhia lodged another change of assessment application, indicating that the administrative assessment did not accurately reflect Mr Turakhia’s income, financial resources and earning capacity and that she incurred significant additional costs due to the children’s private school fees and [Child 1’s] special needs. Ms Turakhia later withdrew her application in relation to the private school fees and special needs for [Child 1], but she contended that Mr Turakhia was working and had access to a higher income.
Mr Turakhia told Child Support on 26 October 2023 that he stopped receiving payments from Centrelink and had been self-employed from September 2023. He was not yet earning any money, but his partner was financially supporting him.
On 17 November 2023, a Child Support decision-maker determined that no ground to depart from the administrative assessment had been made out and refused Ms Turakhia’s application.
On 18 December 2023, Ms Turakhia objected to the decision, indicating that Mr Turakhia was working but not declaring his income. On 29 January 2024 Mr Turakhia declared a provisional 2022/23 taxable income of $56,500 to Child Support.
On 15 February 2024, a Child Support objections officer decided to disallow the objection and refused to change the administrative assessment. The objections officer found that Mr Turakhia declared a taxable income of $56,500 which was applied to the administrative assessment from 1 February 2024 and noted that there was no evidence verifying that Mr Turakhia had any income prior to that date or that his current income was higher.
On 4 April 2024, Ms Turakhia applied to the (then) Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for an independent review of Child Support’s decision. She was granted an extension of time to lodge her application on 3 June 2024.
A hearing into the application for review was held on 22 October 2024. Both Mr Turakhia and Ms Turakhia attended the hearing by telephone and gave evidence on affirmation. I had before me the statement and documents provided by Child Support pursuant to subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975, received on 20 June 2024 and 3 October 2024 respectively and numbered 1–222. I also considered additional documents provided by Ms Turakhia (marked A1–A18) and Mr Turakhia (marked B1–B29) as a result of written directions issued on 17 September 2024.

LEGISLATIVE FRAMEWORK AND ISSUES

The legislation relevant to this review is contained in the child support law, in particular the Child Support (Assessment) Act 1989 (the Act) and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula, which takes into account factors such as the number of children, the level of care provided and the income of each parent. Either the liable parent or the carer entitled to child support may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied that a ground for departure exists and that it is just and equitable and otherwise proper to make a departure determination.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Act. If satisfied that a ground or grounds exist, and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act.
In the legislation, each ground for departure is prefaced by the words, “in the special circumstances of the case”. Therefore, when considering whether one (or more) ground exists, the Tribunal must be satisfied that there are “special circumstances” in the case. The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman (1992) FLC 92–279 stated that:
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.
Subsection 98C(3) of the Act provides that subsections 117(4) to (9) of the Act apply and the Tribunal must consider these when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

CONSIDERATION

A ground for departure

Ms Turakhia asked for a change to the administrative assessment on the basis that it does not correctly reflect the parties’ respective income, property, and financial resources (also known as “Reason 8A”). In the hearing Ms Turakhia further submitted that the children are attending a private school and Mr Turakhia ought to be contributing to the school fees.
Mr Turakhia said that he was willing to contribute to the children’s school fees, but he could not afford to pay child support as well as additional expenses, such as school fees for the children.
Neither party submitted that the other had greater earning capacity for the purposes of this review (both work full-time) and I have thus not considered this issue further.

Income, property, financial resources and earning capacity of both parties

Subparagraph 117(2)(c)(ia) of the Act provides that, in the special circumstances of the case, a ground for departure may be established if the application of the legislative provisions relating to an administrative assessment results in an “unjust and inequitable determination of the level of financial support to be provided by the liable parent” due to the income, property and financial resources of either parent.

Mr Turakhia – income, property and financial resources

Ms Turakhia submitted that Mr Turakhia is [an occupation 1] and has capacity to earn a high income. He was now probably involved in a business and had access to greater financial resources. His lifestyle (frequent holidays and a new car) did not match the low provisional income amount of $18,494.
Mr Turakhia did not dispute that he was involved in a business and said that his wage from the business was about $1,178 gross per week (about $61,256 per annum). He said that at most he could earn a wage of about $65,000 from the business and agreed that child support liability could be assessed on this basis.
Mr Turakhia’s company
Mr Turakhia stated that he is the sole director of a company called ([Business 1] which started in about mid-2023. The company is involved in [industry 1]. He noted that the company’s principal contract is with [Business 2][1] (which specialises in the [type of operations]). Mr Turakhia said that 80–90% of his company’s business income is derived from [Business 2]. [Business 1] has a fixed term contract arrangement with [Business 2] until the end of June 2026. Mr Turakhia is not certain what the future of the company will be after that date.
[1] I note the [Business 2] website indicates that it is part of the “[Business 3]” group of companies.
Mr Turakhia said that [Business 1] currently has about ten employees, seven are full-time and three are casual positions. The number of employees varies however, for example a few months ago there were only six employees. They are various tradespersons involved in [their work] and Mr Turakhia’s role is to coordinate their attendance at the job sites. Employees’ wages range from $29.95 per hour for an apprentice to $60 per hour for qualified tradespersons. He agreed that some of his employees earned more than he does but stated that his company needed highly qualified workers to fulfill its contract obligations.
Mr Turakhia said that [Business 1] has not yet lodged a tax return and he does not (as yet) employ an accountant but does his own accounting using QuickBooks accounting software.
Mr Turakhia provided a profit/loss statement for the company for the period 1 September 2023 to 27 September 2024 (folio B19). In that 13-month period the company’s business income was $507,035.39. Mr Turakhia listed business expenses of $447,494.45 and net company earnings of $65,556.04.
In discussing the information that he had provided, Mr Turakhia noted that “Office expenses” of $33,156.07 were not actually office expenses but included the cost of materials that needed to be purchased to complete the various jobs. He listed wages expenses of $129,352.19 and superannuation expenses of $13,794.55, and I note that this appears to be rather low, particularly since a skilled tradesperson earning $60 per hour would have a wage of about $118,560 per year[2] and Mr Turakhia’s own wage of about $61,000 is also included in that amount.
[2] $60 x 38 = $2,280 per week x 52 = $118,560 per year
Mr Turakhia listed another amount of $164,531.76 for “Wages Expense” but noted that this amount related to wages “on-costs” such as leave entitlements, holiday loading, payroll tax and so on. I appreciate that there are additional costs that must be met by the employer but an amount of about 127% of the total wages cost appears to be excessive, particularly as superannuation expenses are already separately accounted for.
Despite these anomalies it appears that Mr Turakhia’s business was able to make a profit of $65,556 in the first 13 months of operation, which equates to about $60,513 per year. Mr Turakhia agreed that the business was making a profit but stated that currently expenses exceed company income and there would be no business income generated over the Christmas/New Year period due to industry shutdowns over the holidays.
I appreciate Mr Turakhia’s concerns, but I note that these issues would also have arisen during the holiday period in 2023/24. I further note that 80–90% of the company’s business (and therefore income) is derived from its arrangement with [Business 2] and there appears to be no reason why income for the current (i.e. 2024/25) and the next financial year (i.e. 2025/26) should not generate similar business income.
Personal income
It appears that Mr Turakhia has not lodged a personal income tax return since 2020/21. At that time his taxable income was $17,973 (folio 190). On 29 January 2024 Mr Turakhia contacted Child Support and declared his 2022/23 taxable income to be $56,500. There is no evidence before me to indicate how Mr Turakhia arrived at this figure.
Bank statements for Mr Turakhia’s personal bank account (xxxx4257) for the period 24 December 2023 to 10 November 2023 (folios 121-125) show no salary/wage deposits but a few transfers from his partner.
Bank statements for the period 9 November 2023 to 3 October 2024 (folios B1–B18) indicate transfers from [Business 1] commencing from 27 November 2023, with regular weekly wages from 29 January 2024 (folio B2). Net deposits until 30 June 2024 amounted to $23,900.
Weekly wages from 29 January 2024 onward appear to be $750.38 net per week and I have estimated that his would amount to gross wages of $865 per week or $44,980 per year. As noted above, Mr Turakhia declared a higher personal taxable income for the previous financial year ($56,500 for 2022/23) to Child Support at about the same time.
From 1 July 2024 the bank account statements show weekly wages of $978 net. This amounts to a gross income of about $1,178 per week, which is Mr Turakhia’s current stated income of $61,256 per annum.
Conclusion
I have examined the available evidence before me and I am not certain that I have a thorough understanding of Mr Turakhia’s financial circumstances, particularly as they pertain to the 2023 calendar year. He appears to have had some income, given his income declaration to Child Support and his business commenced in the latter half of 2023 (i.e. the beginning of the 2023/24 financial year). His bank account statements however do not provide sufficient information in this regard and it is possible that Mr Turakhia has other, undisclosed bank accounts.
Based on the available evidence I am satisfied and find that business profit amounts to $60,513 from 1 September 2023 onwards and I am also satisfied that Mr Turakhia’s personal income was about $44,980 per annum from 1 February 2024 and $61,256 per annum from 1 July 2024.

Ms Turakhia – income, property and financial resources

Ms Turakhia is employed on a full-time basis as [an occupation 2]. She has been with her current employer for about a year. Ms Turakhia noted that she is entitled to receive a base salary, plus commission. Her 2022/23 adjusted taxable income was $55,827 (folio 187). It appears however that Ms Turakhia was also in receipt of reportable fringe benefits of about $5,167 in that year, as Child Support assessed her 2022/23 adjusted taxable income as being $60,994 (folio 171).
Ms Turakhia provided an Income Statement for the 2023/24 financial year indicating a gross annual salary of $56,500 plus $6,063.82 reportable fringe benefits, which would result in an adjusted taxable income for Child Support purposes of about $62,564 per annum.
Ms Turakhia said that she is currently negotiating a salary increase with her employer. She is hoping for an increase to about $70,000 in her base salary. She may also be eligible for commission of up to $15,000 per annum now that she has been with her employer for 12 months.
Based on the Income Statement provided by Ms Turakhia I have estimated that her gross salary would have been about $1,086.50 per week =, resulting in net payments of about $871 per week in the last financial year. Net payments would have increased to about $915 per week (on the same salary), given the new tax rates applicable from 1 July 2024.
I have no evidence that Ms Turakhia has any other source of income, and I am therefore satisfied that Ms Turakhia’s income, property and financial resources are adequately represented by her annual income tax returns.

Conclusion – income, property and financial resources of both parties

When Ms Turakhia lodged her departure application on 3 August 2023 (the 2023/24 financial year), the rate of child support was $459 per annum based on Mr Turakhia’s provisional income of $18,494 and Ms Turakhia’s 2021/22 adjusted taxable income of $56,887.
I have found that Mr Turakhia’s actual income and financial resources from (at least) 1 September 2023 onwards amounted to (at least) $60,513 per annum based on the profits from his business alone and I have estimated that Mr Turakhia’s child support liability for the children, if calculated on this basis would be $8,636 per year from 1 September 2023. This amount reduces by about $20 per year if Ms Turakhia’s 2023/24 taxable income of about $62,564 is used in the assessment, which I do not consider significant.
I find that the difference between an annual child support liability of $8,636 and the annual rate of child support ($459) based on Mr Turakhia’s provisional income is so great that it gives rise to special circumstances in this particular case.
I am therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Turakhia’s income, property and financial resources only.
Subparagraph 98C(1)(b)(i) of the Act is satisfied if “one, or more than one” of the grounds for departure is established. Having found one ground for departure established, I will now consider whether it is just and equitable to make a departure determination.

Just and equitable

The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. To do so I must have regard to a number of factors set out in subsection 117(4) of the Act, such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing, or not departing, from the statutory formula.

Ms Turakhia

Ms Turakhia’s income from employment has been discussed above. Her 2023/24 adjusted taxable income is about $62,564 and she noted that she is currently negotiating a salary increase with her employer.
Ms Turakhia’s Statement of Financial Circumstances (folios A1–A9) indicates current gross weekly income of $1,000 and Centrelink payments of about $344 per week. I have estimated that Ms Turakhia’s current net income from employment is about $915 per week and together with her Centrelink payments this would amount to net weekly earnings of $1,259.

In the hearing Ms Turakhia confirmed total household expenses for herself and the two children of $1,498 per week from which I have deducted an amount of $80 per week for entertainment, holidays, gifts which are considered non-essential expenses.[3] Thus, expenses amount to $1,335 per week.
[3] The Family Court (in Mee and Ferguson (1986) FLC 91-716) has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses which can be considered to take priority over the parents’ primary duty to support their children. This includes expenses such as a reasonable amount for rent or mortgage payments, food, utilities, and some loans.
Ms Turakhia’s current expenses exceed her income by about $76 per week and she noted that she relies on child support payments and assistance from her parents to meet her financial obligations.
Ms Turakhia’s expenses include private school fees for the children of about $3,506 per year or about $67 per week. Ms Turakhia provided evidence that the school fees in 2025 will increase to about $7,300 (folio A15). [Child 1] will be in Year 10 and [Child 2] in Year 5. Ms Turakhia noted that she will no longer be eligible for the “School card” concession in 2025. In addition, she will need to pay an annual school levy of $950 and an annual bus levy of $1,380 next year. Total schooling costs for [Child 1] and [Child 2] thus amount to $9,710 (or about $187 per week) in the 2025 school year. This means that Ms Turakhia’s expenses and budget shortfall would increase by about $120 per week.
Ms Turakhia noted that Mr Turakhia ought to contribute to the school fees for the children. Mr Turakhia stated that he would be willing to contribute to school fees but he could not afford to pay both his child support liability and the school fees.

Mr Turakhia

Mr Turakhia provided a Statement of Financial Circumstances (folios B20–B28) in which he indicated a current income from his business of $1,178 gross per week (about $61,256 per year). He listed expenses (including taxation and minimal household expenses) of $1,040 per week. His biggest expense is rent of $600 per week, which he says he pays to a “friend”.
Mr Turakhia had previously stated that his partner was supporting him financially and Ms Turakhia noted that she saw Mr Turakhia’s partner at his home in early September 2024 (on Father’s Day). Mr Turakhia said that he and his partner have now separated. She has returned to Sydney, and he lives alone.
I note Mr Turakhia indicated only minimal expenses for a motor vehicle, electricity, and telephone. He stated that the majority of motor vehicle costs (registration, petrol , maintenance) were paid for by his business.
At present Mr Turakhia’s wages from his business exceed his stated expenses by about $138 per week from which he appears to meet his current child support liability of about $141 per week.

The children

Ms Turakhia indicated that her weekly expenses for the children include private school fees, which are currently about $3,506 per year but will increase to $7,300 in 2025. She also listed children’s activities of $80 per week and $20 per week for [Child 1’s] tutoring.
The children are now 10 and 14 years old and otherwise have no income, property or financial resources relevant to my determination.

Otherwise proper

The requirement to consider whether it is “otherwise proper” to depart from the administrative assessment 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 or benefits (subsection 117(5) of the Act).
It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children.
Ms Turakhia is in receipt of payments from Centrelink, which are affected by maintenance payments such as child support. Any increase or decrease to child support payable would result in an appropriate increase or decrease in these payments. Such a result would be otherwise proper.

Conclusion

Section 98S of the Act describes the determinations that the Registrar, and the Tribunal standing in the shoes of the Registrar, may make if it decides to depart from the administrative assessment. It is open to the Tribunal to set a rate of child support payable or set some of the variables used in the administrative assessment formula (for example, vary one or both parents’ adjusted taxable income).
When Ms Turakhia lodged her departure application on 3 August 2023, the rate of child support was based on a provisional income of $18,494 for Mr Turakhia and Ms Turakhia’s 2021/22 adjusted taxable income at $56,887, resulting in a child support liability of $459 per annum payable by Mr Turakhia to Ms Turakhia.
Ms Turakhia submitted that Mr Turakhia was working and had additional financial resources which ought to be taken into account. I note Ms Turakhia told Child Support on 27 September 2023 that Mr Turakhia may be “working for [Business 3]” (folio 95) and may also be self-employed.
Mr Turakhia told Child Support on 26 October 2023 (folio 102) that he has “not worked for [Business 3]”, that he commenced working for himself around September 2023 “doing labour jobs” and that he has not received any income from self-employment. Evidence before me indicates however that at that time Mr Turakhia had already set up his own [industry 1] company ([Business 1]), which apparently had entered into a three-year commercial arrangement (to end June 2026) with [Business 2] which is a [Business 3] company. Mr Turakhia’s company was making a business profit within its first 12 months of operation. It therefore appears that Mr Turakhia was not entirely open about his business and financial circumstances in his discussions with Child Support in October 2023.
I am also not entirely clear on how Mr Turakhia could make an income declaration of $56,500 for the 2022/23 financial year to Child Support in early 2024 but provide bank statements for the period 24 December 2022 to 10 November 2023 (folios 121–125) indicating no income from employment at all.
I note Mr Turakhia has an obligation to make full and frank disclosure of his financial affairs to assist me to come to the correct or preferable decision.[4] I am not satisfied that he adequately met this obligation.
[4] Humphries and Berry [2008] FMCAfam 409
I have no evidence of Mr Turakhia’s income from his company for the period 3 August 2023 (when Ms Turakhia lodged her application) to the end of January 2024, when weekly wages from [Business 1] first appear in his personal bank account. I am also concerned that Mr Turakhia has apparently not yet engaged a professional to properly account for the company’s finances and I have noted some of the inconsistencies in the profit/loss statement Mr Turakhia provided. Nevertheless, I am satisfied that his company made a business profit of about $60,513 per annum and I am persuaded that he would have had access to these financial resources from (at least) 3 August 2023 onwards.
From 1 July 2024 Mr Turakhia’s bank statements show regular weekly deposits, being his wages from [Business 1] of $61,256 per annum. The company continues its arrangement with [Business 2] and I see no reason why it should not continue to make an annual profit of (at least) $60,513 and provide Mr Turakhia’s wages of about $61,256 per annum.
Based on these deliberations I have therefore set aside the decision under review and determine an income amount for Mr Turakhia. For the period 3 August 2023 to 30 June 2024 Mr Turakhia’s adjusted taxable income is set at $60,513 per annum (based on company profit). I have set this income amount given the very limited evidence about Mr Turakhia’s wages at that time.
For the period 1 July 2024 to 30 June 2026 (when the arrangement with [Business 2] ends) I have decided to set Mr Turakhia’s adjusted taxable income at $120,000 per annum, based on company profit and his regular weekly wages.
I have estimated that this will create substantial arrears of about $9,200 for Mr Turakhia and an ongoing child support liability of about $1,900 per month. I am persuaded that Mr Turakhia has capacity to meet these amounts.
I will not set an income amount for Ms Turakhia, thus any increase in her salary will ultimately affect the assessment and I will not add an additional amount for school fees, as I am of the view that Ms Turakhia will be able to meet all of her financial commitments with the assistance of the increased child support payments from Mr Turakhia.

DECISION

The decision under review is set aside and a decision substituted that

· for the period 3 August 2023 to 30 June 2024 Mr Turakhia’s adjusted taxable income is set at $60,513 per annum and
· for the period 1 July 2024 to 30 June 2026 Mr Turakhia’s adjusted taxable income is set at $120,000 per annum.

Date(s) of hearing:	Tuesday, 22 October 2024
Representative for the Applicant:	Self
Representative for the Other party:	Self