Walden and Masland (Child support) - [2022] AATA 2095

Walden and Masland (Child support) [2022] AATA 2095 (21 April 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2021/MC022426
APPLICANT:  Mr Walden
OTHER PARTIES:  Child Support Registrar
Ms Masland

TRIBUNAL:Member Y Webb
DECISION DATE: 21 April 2022
DECISION:

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

the previous departure determination made by the AAT of 30 January 2019 is ended on 11 March 2021; and
for the period 12 March 2021 to 31 October 2023 Mr Walden’s adjusted taxable income is varied to $80,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – 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 relates to the issue of child support regarding the children of Mr Walden and Ms Masland (“the children”). The children are aged 16 and 13. Services Australia (“Child Support Agency”) records that currently the eldest child is in the 86% care of Ms Masland and 14% care of Mr Walden and the younger child is in the 67% care of Ms Masland and 33% care of Mr Walden.
The child support case was first registered by the Child Support Agency on 28 February 2013 and has been collectable by the Child Support Agency since that date.
On 12 March 2021 Mr Walden applied to the Child Support Agency for a change to the administrative assessment on the basis of Reason 8A. Mr Walden stated that he was seeking a decrease in his annual rate of child support payable because COVID-19 had had a major impact on his income. (Mr Walden initially also raised Reason 1 but he subsequently withdrew that ground early in the process.)
At the time of Mr Walden’s application for a change to the assessment, a previous change of assessment decision was still in place; that was a decision of the Administrative Appeals Tribunal (“AAT decision”) made on 30 January 2019. That decision was as follows:
·For the period 1 March 2018 until (the eldest child) ceases being eligible for child support assessment purposes, Mr Walden’s adjusted taxable income is varied to $140,000.
·From 1 July 2019 and from each 1 July thereafter for the duration of this decision, Mr Walden’s adjusted taxable income increases by the Child Support Inflation Factor.
On 12 March 2021 when Mr Walden lodged his application for a change to the assessment, and for the period 1 January 2021 to 30 June 2021 his rate of child support payable was approximately $29,800 per annum. This was based on an indexed income for Mr Walden of $146,944 and Ms Masland’s 2019/2020 adjusted taxable income of $26,843,
Currently for the period 10 January 2022 to 17 July 2022 Mr Walden is assessed to pay an annual rate of child support of approximately $25,518 based on an indexed income for Mr Walden of $150,765 and a 2020/2021 adjusted taxable income of $23,949 for Ms Masland.
On 22 June 2021 a delegate of the Registrar, [named] decided that Reason 8A had been established. However, the delegate decided that it would not be just and equitable to change the assessment and Mr Walden’s change of assessment application was refused pursuant to section 98F of the Child Support (Assessment) Act 1989 (the “Assessment Act”).
On 1 July 2021 Mr Walden objected to that decision.
On 15 September 2021 his objection was disallowed. The objections officer determined that no Reason had been established. The objections officer affirmed the original decision deciding that the change of assessment application should be refused in accordance with section 98F of the Assessment Act. This meant that the AAT decision of 30 January 2019 remained in place.
On 29 September 2021 Mr Walden requested review by the Administrative Appeals Tribunal (“the Tribunal”).
A telephone directions hearing was held on 1 March 2022 with both parents.
The hearing took place on 21 April 2022 and both parents gave evidence on affirmation.

ISSUES

The central issues for the Tribunal to determine in this case are:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exist; and if so,
·      Whether it would be:
(a)   just and equitable as regards the children, the liable parent, and the carer entitled to child support; and
(b)   otherwise proper
to make a particular determination to depart from the administrative assessment of child support.

DOCUMENTARY EVIDENCE

The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule. The Tribunal had regard to all of this evidence, and refers specifically to particular items in this Statement of Reasons.

CONSIDERATION

The child support law

The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment 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.
A parent may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment 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 as described in paragraph 13 above.
Section 98J of the Assessment Act is applicable in this case. This provides that a person who has made an application for a change of assessment is not precluded from making a subsequent application for a change of assessment if, because of circumstances existing at the time of the subsequent application, there are grounds from departing from the administrative assessment.
As observed by the Family Court in Ignacio v Ignacio [2016] FamCA 50 at [106]:
The Assessment Act (s 98J) is not so broad as to enable parties to engage in child support assessment departure disputes whenever they feel inclined, irrespective of surrounding circumstances. Multiple departure applications are possible, but subsequent departure applications are only permitted when the circumstances at the time the subsequent application is made warrant it.
The question for the Tribunal, therefore, is whether the application is grounded by circumstances existing at the time the (subsequent) application was made. That point in time was 12 March 2021 when Mr Walden applied for a change to the assessment. If the ground is established by reference to the time the subsequent application was made, the Tribunal will then have the usual discretion to take into account all the matters provided for in subsection 117(2) of the Assessment Act, including the discretion to apply any new determinations retrospectively up to 18 months prior to the date of the subsequent application and indefinitely into the future. Before the Tribunal can consider this, however, it must first be satisfied that a ground is established.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and 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 Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.
The phrase “special circumstances of the case” is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.
Whilst it is not possible to define with precision the meaning of that term, 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.
[1] (1992) FLC 92-279
Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.

Does a ground or grounds exist to depart from the administrative formula assessment?

In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by Mr Walden and Ms Masland at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by both parents prior to the hearing.

Reason 8A

The legislative grounds corresponding to Mr Walden’s application in relation to Reason 8A are set out in subparagraph 117(2)(c)(ia) of the Assessment Act. The test is whether:
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: [paragraph 117(2)(c)]
(ia) because of the income, property and financial resources of either parent; …
To establish this ground it is necessary to show that either Mr Walden’s or Ms Masland’s income, property or financial resources used in the assessment make the child support assessment unfair.

Mr Walden’s income, property and financial resources

Mr Walden is associated with a number of trusts and companies. It is not in dispute that he derives income from two of these companies: [Company 1] and [Company 2]. He is the sole director and sole shareholder of [Company 1]. It appears from the financial information provided that [Company 1] is the company trustee of the [Trust 1]. “[Company 1]” is a farming business. Mr Walden explained, and the Tribunal accepts, that the farm grows [product] on a contract basis. Mr Walden is an employee of [Company 1] and currently receives a monthly salary of $5,689.60 according to his most recent payslip for the month of March 2022[2]. Mr Walden stated that the farm has been detrimentally affected by COVID-19. It has been almost impossible to find workers to work on the farm. In addition, the farm has not been profitable for the last two years due to severe floods in northern New South Wales where the farm is located. Mr Walden stated that due to the floods he is expecting that [Company 1] will again operate at a loss for the 2021/2022 financial year. It also operated at a loss in the 2020/2021 year with the [Trust 1]’s tax return showing a loss of -$1332[3] and an even greater loss in the 2019/2020 year with the Trust tax return showing a loss of -$46,881[4]. These figures stand in contrast to the figures in the 2018/2019 [Trust 1] tax return which showed a total net income (before losses carried forward were deducted) of $123,581 and a profit of $48,534 with tax losses deducted[5].
[2] A80
[3] A33-A43
[4] C1-pages 164-166
[5] C1 pages 160-162
Mr Walden told the Tribunal that so badly was the [Company 1] business going that he deposited $78,500 into the business (as a loan) on 3 December 2020, describing this amount as “the last of my savings”. He stated that had he not done so the [Company 1] business would have had to be declared bankrupt. Apart from the bank transaction from Mr Walden’s personal [Bank 1] account ending in 3843 showing an amount of $78,000 withdrawn and then deposited into Mr Walden’s personal [transaction] account ending in 1236 and then transferred to “other bank [Bank 1] loan” all on the same day (3 December 2020) there is no other specific evidence provided regarding the exact whereabouts of those funds.
Mr Walden is also one of the directors and a minority shareholder of [Company 2]. This company installs [products] and provides [specified] services, including importing [goods] from overseas. It consults and provides services to the commercial market. Mr Walden advised that his title is [specified]. Mr Walden explained that the [specified] services he provides through [Company 2] are paid through the [Company 1] payroll. Therefore, the income he receives through the [Company 1] payroll comprises salary, [specified] fees and directors’ fees associated with his work for both [Company 1] and [Company 2]. Mr Walden told the Tribunal that the [Company 2] business has also been severely affected by COVID-19 predominantly because commercial organisations were not seeking those services during repeated lockdowns and secondly because the business heavily relies on sourcing [goods] from overseas and with the international travel restrictions he has not been able to attend trade fairs or make international business connections. Mr Walden was adamant that the only income he has received in the last financial year was as disclosed in his personal 2020/2021 income tax return.
Mr Walden was directed to provide the financial statements and tax returns for all of the companies with which he is associated. However, he did not provide all of the requested documents. He provided his personal income tax return for the 2020/2021 financial year which showed a taxable income of $56,295 (after deductions), a net property loss of $7,860 and reportable employer superannuation contributions of $214 both of which for child support purposes are added back to his income. Hence, for child support purposes his income tax return showed that his 2020/2021 income was $64,369 and the Tribunal so finds.
This was considerably lower than his income in the 2019/2020 financial year. Mr Walden’s personal income tax return for the 2019/2020 year was included in the C1 papers[6] and the Tribunal is satisfied that Mr Walden’s taxable income in the 2019/2020 financial year for child support purposes was $116,893 as calculated by the Child Support Agency based on his income as assessed by the Australian Taxation Office. However, as Mr Walden’s income was set by the AAT decision of 30 January 2019 this amount of $116,893 was not used in the assessment.
[6] C1 – pages 150-153
Mr Walden provided a letter from his accountant, [Mr A], dated 22 November 2021 which confirmed that Mr Walden is a director and shareholder of a number of companies: [Company 1], [Company 3] (with others), [Company 4], [Company 5], [Company 6] and [Company 2] (with others). [Mr A] advised that all of the companies with which Mr Walden is associated made a loss in the 2020/2021 financial year[7]. The Tribunal accepts [Mr A] is a professional, qualified accountant and that his letter is accurate. The Tribunal does not know the full details of the financial circumstances of those companies whose financial statements or tax returns were not provided. However, the Tribunal accepts that for those companies where Mr Walden is only one of several directors and only a minor shareholder that there are privacy issues which affect his ability to provide more detailed financial information.
[7] A60
Mr Walden did provide the Financial Statements for the Walden Family Discretionary Trust including the Trust tax return for the year ended 30 June 2021. The balance sheet showed that the assets of the Trust were $1,046,166 in 2021 and the liabilities were $1,046,432 with total trust equity at -$266 thus confirming that the Trust made no profit or distributions in the 2020/2021 financial year[8]. This was reflected in the Walden Family Discretionary Trust tax return[9] (the company trustee for which is [Company 6]).
[8] A46-A48
[9] A55-A59
He also provided the 2020/2021 tax return for [Company 5][10]. This showed virtually no business activity in the financial year with total assets of $20 and total liabilities of $3,105.
[10] A61-A75
Mr Walden also is the sole trustee and sole beneficiary of a self managed superannuation fund: the Walden Family Superannuation Fund. In the 2019/2020 financial year the Trustee for Walden Family Superannuation Fund’s tax return showed that the company trustee for the Fund was [Company 6] (a company of which Mr Walden is the sole director and sole shareholder). It also showed that Mr Walden’s closing account balance as at 30 June 2020 was $361,400.17[11].
[11] C1-page 186
In his Statement of Financial Circumstances signed on 3 September 2021 Mr Walden stated that the value of his superannuation was $700,000. In relation to the much higher value in 2021 than was the case in 2020 Mr Walden stated that this was predominantly due to the transfer of $320,000 from [Superannuation Fund 1] into his self-managed superannuation fund. The Child Support Agency provided bank statements pertaining to Mr Walden from [Bank 1][12]. Mr Walden explained that for superannuation two accounts are relevantly linked: account ending in 3057; a business transaction account named as [Company 6] as Trustee for the Walden Family Discretionary Trust (“the Walden Family Discretionary Trust”) and the account ending in 2951; a [Bank 1] Investment Account named [Company 6] as Trustee for the Walden Family Superannuation Fund (“the SMSF”). Bank statements for both of these accounts were obtained by the Child Support Agency for the period November 2020 to November 2021.
[12] C2-pages 496-508
It is evident that on 10 November 2020 an amount of $322,816.72 was transferred from [Superannuation Fund 1] into account 2951 and that this significantly increased the value of his superannuation. The Tribunal also accepts that in December 2020 Mr Walden’s superannuation fund purchased a property in New South Wales and that the transaction withdrawing $472,002 on 14 December 2020 relates to that purchase. Mr Walden stated that the transactions showing deposits into the Walden Family Discretionary Trust from [a real estate agent] relate to rent received from the investment property in New South Wales which was bought by the SMSF. He also advised that the SMSF receives quarterly returns on its investment with [Trust 2]. Mr Walden clarified that the $700,000 approximate value of his superannuation comprised several components: the value of the investment property in New South Wales, the rent from that property; the quarterly returns on the [Trust 2] investment; employer contributions relating to his salary/director’s fees and interest. The Tribunal accepts that the bank statements ending in 3057 and 2951 reflect these various transactions and investments relating to Mr Walden’s superannuation.
The Tribunal also accepts that investments and returns on investments made by the SMSF are preserved and cannot be accessed until Mr Walden reaches his preservation age.
In relation to property, Mr Walden lives part time in a residence on the farming property in northern New South Wales. He explained that the farm is owned by [Company 1]. He is the sole director and sole shareholder of that company. Mr Walden stated that there is a loan against the farm loaned by the Walden Family Discretionary Trust for approximately $900,000. In his Statement of Financial Circumstances Mr Walden advised that the farm is worth approximately $1-$1.5 million. Mr Walden stated that he lives part-time at the farm but otherwise he resides in a rental property in [Suburb 1], [City 1]. In his Statement of Financial Circumstances Mr Walden advised that he pays rent of $550 per week for the [Suburb 1] property[13]. He agreed that the rent was more than $550 per week but he advised that he shares the accommodation with his partner. He indicated that the deposits in the bank statement ending in 1236 and described as “transfer from [Ms B]” for “rent” were his partner’s contributions to the rent for the [City 1] rental property. Mr Walden also explained that the transactions in the bank statement ending in 1236 described as payments to “[name] and [name]” refer to the rent paid to the agent for the [City 1] property which is a monthly amount of $5,214. The Tribunal accepts this evidence as accurate based on the bank statements.
[13] A10

In addition Mr Walden advised that he owns an investment property in Western Australia which is negatively geared for tax purposes. There is a mortgage over this property of approximately $270,000. Mr Walden advised that the property is valued at approximately $280,000 and therefore that he holds very little equity in the property. He agreed with Ms Masland that he has owned this property since prior to separation but he stated that it was over-priced when it was purchased for $300,000 in 2005. Mr Walden’s personal income tax return for the 2020/2021 year shows gross rental income of $13,003 and a net rental property loss of $7,860[14] in relation to this property.
[14] A24
In total therefore the Tribunal finds that Mr Walden directly or indirectly owns three properties: the farm in northern New South Wales which is owned by [Company 1] (the company for which Mr Walden is the sole director and sole shareholder); the investment property in Western Australia which is wholly owned by Mr Walden (subject to a mortgage) and which is rented out returning a net rental property loss; and the investment property in New South Wales owned by Mr Walden’s self-managed superannuation fund (for which he is the sole trustee and sole beneficiary).
In relation to other financial resources Mr Walden declared savings of approximately $3,000; a [specified] motorbike which he valued at approximately $12,000 and household contents of approximately $20,000 in addition to his superannuation which he valued at $700,000[15].
[15] A6-A7
Considering all of the information in relation to Mr Walden’s income the Tribunal is satisfied that his income has been significantly affected by COVID-19 and the severe floods in northern New South Wales both recently in 2022 and also in 2021. The Tribunal has found that Mr Walden’s income is at least $64,369 based on the information in his 2020/2021 personal income tax return. The Tribunal is not persuaded that this represents the totality of his income. Mr Walden’s finances are part of a very convoluted and complex web of trusts and companies such that it is difficult to ascertain the true state of his finances. There are deposits into his bank account ending in 1236 which are not fully explained. Mr Walden described the transactions on 3 December 2020 whereby he withdrew $78,500 from his bank account ending in 3843 and deposited $78,000 in his bank account ending in 1236 and then withdrew $78,500 from his 1236 account with a transaction described as “transfer to other net bank loan” transferring the amount of $78,500. Mr Walden described these funds as the “last of my savings” although he also described, in his discussions with the Child Support Agency on 6 April 2021 that he had “used up all his savings” on $20,000 worth of legal fees relating to the care of the children[16]. These amounts tend to suggest that Mr Walden had income or other financial resources on which he has drawn. In his Statement of Financial Circumstances Mr Walden declared that his income comprised $1,150 per week in salary/wages and $240 per week rental income. This converts to an annual income of approximately $72,280. The Tribunal does not have access to the financial details of companies in which Mr Walden is one of a number of directors and shareholders. His lifestyle of residing in a luxury home in [City 1] and his desire to take the children on a European holiday this year as well as his renovations to the farm residence tends to suggest that he has financial resources which have not been fully disclosed to the Tribunal. Determining a precise income for Mr Walden is difficult. The Tribunal considers that an income of $80,000 per annum is probably realistic for Mr Walden taking into account the gaps in evidence.
[16] C1-page 210
The Tribunal is satisfied that Mr Walden’s financial circumstances have significantly declined since 2019 when the AAT made its decision. At the time when Mr Walden made his application for a change to the assessment (on 12 March 2021) the indexed income used in the assessment for Mr Walden was $146,944 and the amount of child support payable was $29,800 per annum. The Tribunal has found that Mr Walden’s available income is $80,000 per annum. If this amount was substituted for $146,944 in the child support formula (and on the basis of the care of the eldest child being 25% to Mr Walden and 75% to Ms Masland and the care of the youngest child being 33% to Mr Walden and 67% to Ms Masland – these percentages appear to be currently in dispute – the annual amount of child support payable would be approximately $11,700. There is therefore a significant disparity – in terms of child support payable - between an income of $146,944 and $80,000 as determined by the Tribunal. The Tribunal is satisfied that this creates a special circumstance and that Reason 8A has been established in relation to Mr Walden’s income.

Would it be just and equitable to depart from the administrative assessment?

Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain. The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.
Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of the duty of the parents towards their children; the needs of the children; any income, earning capacity and financial resources of the children; the income, earning capacity and financial resources of the parents; self-support commitments; and an evaluation of hardship on the parties (and/or the children) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues, the Full Family Court, in the case of Gyselman, stated that:
However, some of the matters listed in sub-section [117](4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).
Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act.

The proper needs of the children

In determining the proper needs of the children, subsection 117(6) of the Assessment Act requires the Tribunal to have regard to the manner in which the parents expected the children to be cared for, educated and trained as well as a consideration of any special needs of the children.
Both parents agreed and it is not in dispute that they are sharing the costs of orthodontic treatment for the younger child and the school fees for the eldest child.
The parents did not raise any other issues regarding the proper needs of the children.

The income, earning capacity, property and financial resources of the children

Both Mr Walden and Ms Masland advised that the children have no income, property or significant financial resources of their own and the Tribunal finds that the children are wholly dependent on their parents for financial support.

Mr Walden’s income, property, financial resources, expenses and earning capacity

Mr Walden’s income, property and financial resources have been extensively covered above. In relation to expenses he declared that his household expenses total $1,055 per week which annualises to approximately $54,860 per annum. In addition he has income tax expenses which he stated in his Statement of Financial Circumstances were approximately $168 per week ($8,736 per annum) but which in more recent times – according to his payslips – is approximately $290 per week[17] ($15,093 per annum). These expenses total approximately $70,000 not including child support. The Tribunal is satisfied that Mr Walden has the capacity to pay child support commensurate with an income of $80,000 per annum.
[17] A80
In relation to earning capacity the Tribunal accepts that Mr Walden has been involved in his business activities for many years and although the businesses have not been performing very profitably in recent times the Tribunal has accepted that this was due to events – the pandemic and the severe flooding in northern New South Wales in 2021 and 2022 – which were beyond Mr Walden’s control. The Tribunal finds that Mr Walden’s earning capacity is not an issue in this matter.

Ms Masland’s income, property, financial resources, expenses and earning capacity

As at 12 March 2021 Ms Masland was being assessed on her adjusted taxable income of $26,843 derived from employment income and Centrelink payments of $16,769. Ms Masland explained that she had been working but that she injured her back and had to leave her employment as a [Occupation 1]. Ms Masland stated that she is currently studying and is hoping to start a new business in the new financial year. Until then she is receiving Centrelink benefits. She is also receiving some family tax benefit to assist with the costs of the children. The Tribunal accepts Ms Masland’s statements regarding her income.
Ms Masland advised that because she was in financial hardship, she had to withdraw funds from her superannuation. During 2020 and 2021 she withdrew a total of $20,000 under the COVID-19 early release of superannuation scheme. Ms Masland stated that she applied these funds to her mortgage which she was really struggling to pay. In addition she withdrew a further $10,000 in September 2021 on financial hardship grounds. This was taxed and she received approximately $7,000 net after tax.
Ms Masland also informed the Tribunal that she had recently sold her house (in October 2021) which was subject to a mortgage of approximately $505,000 and with the proceeds she had bought a townhouse outright. She advised that this has greatly assisted her financial circumstances because while she still has little in the way of savings, she no longer has the stress and expense of a mortgage. The Tribunal accepts Ms Masland’s statements regarding the sale of her house and the purchase of a town house. It also accepts that this has had a positive impact on Ms Masland’s household expenses. Subtracting the mortgage costs from the declared household expenses results in household expenses for Ms Masland of approximately $3,470 per month or $41,640 per year. In relation to financial resources Ms Masland declared that she owns a [vehicle of specified year, make and model], has modest savings and household contents which she valued at approximately $3,000. She advised that she has superannuation to the value of $42,000.
The earning capacity provisions are difficult to satisfy. There are three criteria, all of which must be satisfied. Subsection 117(7B) of the Assessment Act states:
(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a)one or more of the following applies:
(i)the parent does not work despite ample opportunity to do so;
(ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii)the parent has changed his or her occupation, industry or working pattern; and
(b)the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i)the parent’s caring responsibilities; or
(ii)the parent’s state of health; 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.
Ms Masland advised that she had never worked full-time for at least the last 10 years because she was focussed on caring for the children. She stated that she has worked on a part-time basis and had only been working in the [Occupation 1] position for three months in 2020 when she suffered the back injury and had to cease work.
The Tribunal accepts Ms Masland’s statements that she suffered a back injury and that this led to her ceasing her employment. It accepts that she is studying and retraining and that she anticipates returning to part-time work within the next few months. The Tribunal finds that Ms Masland is genuine in relation to her plans to return to work part-time. It is satisfied that a major purpose of her current situation is not to deliberately affect the amount of child support payable. Hence the earning capacity provisions are not applicable in Ms Masland’s case.

Necessary commitments to support themselves

The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson[18] the Full Court of the Family Court stated at paragraph 128:
Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.
[18] (1986) FLC 91-716; [1986] FamCA 3
Neither parent claimed to have any out of the ordinary self-support expenses and the Tribunal finds accordingly.

Any hardship to either parent or the children by the making of, or refusal to make, an order

Mr Walden stated that if he was a company, he would be trading insolvent. He stated that his income is per his tax return. He could accept a 10 or even 20 per cent increase on that amount but not attributing an income to him of more than double or triple what it actually is. Mr Walden stated that currently he can’t leave the country due to his $32,000 child support debt and that is unfair as well as inhibiting him from earning his income.
Ms Masland stated that she has been under severe financial stress in recent years and this has led to her selling the family home. She did this to ensure that the children were well supported.

Proposed determination

The Tribunal has carefully considered the available evidence and the statements and contentions of both parents.
The Tribunal is satisfied that the AAT decision of 30 January 2019 which varied Mr Walden’s adjusted taxable income to $140,000 per annum (and indexed annually) is no longer reflective of his actual income.
Therefore, for the reasons detailed above, the Tribunal proposes to end the AAT decision of 30 January 2019 and to vary Mr Walden’s adjusted taxable income to $80,000 per annum.
The Tribunal proposes that Ms Masland’ adjusted taxable income continue to be calculated according to her income as assessed by the Australian Taxation Office.
In relation to the start date of the change to the assessment the Tribunal proposes that this commence from 12 March 2021 being the date when Mr Walden lodged his application for a change to the assessment.
Mr Walden urged the Tribunal to consider his income over the last two years. The Tribunal is unable to make a change to the assessment more than 18 months prior to his application and the Tribunal does not consider that changing the assessment prior to his application on 12 March 2021 would be appropriate. Mr Walden could have made his application earlier if he was concerned about the income which was to be used in the assessment but he did not do so until 12 March 2021. The Tribunal therefore proposes that the change to the assessment commence from 12 March 2021. This would also mean that the previous AAT decision of 30 January 2019 is ended on 11 March 2021.
In relation to duration the Tribunal is mindful that Mr Walden’s income is currently much lower than it was in the past and hopefully than it will be in the future. The Tribunal does not wish to lock in an income too far into the future as that would not be just and equitable to both parties and the children. With an expectation that Mr Walden’s financial circumstances will improve into the future the Tribunal proposes to put its decision in place until 31 October 2023. This will give Mr Walden time to lodge his income tax return for the 2022/2023 financial year.
The Tribunal does not propose to extend the change to the assessment for a longer period because it is mindful that any improvements in Mr Walden’s financial position should be reflected in the child support assessment as soon as possible.
The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents.

Is it otherwise proper to depart from the administrative assessment?

The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). 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 left to the public welfare system when the parents themselves have the capacity to maintain their children.
The Tribunal is satisfied that Ms Masland needs financial assistance to support the children and that Mr Walden has the capacity to contribute to those costs.
Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income-tested pension, allowance or benefit.

Ms Masland is receiving family tax benefit and she confirmed that she is aware of the impact of child support payments on that benefit.
The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.

DECISION

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

the previous departure determination made by the AAT of 30 January 2019 is ended on 11 March 2021; and
for the period 12 March 2021 to 31 October 2023 Mr Walden’s adjusted taxable income is varied to $80,000 per annum.

SCHEDULE – List of Exhibits

Services Australia – Child Support Agency marked as C exhibits:
· CSA’s large bundle of 485 pages marked as exhibit – C1
· CSA’s smaller bundle pages 486 to 517 – marked as exhibit C2
Mr Walden has provided the following documents marked as A exhibits:
·     A1-A12                Statement of Financial Circumstances
·     A13-A14               Cover email
·     A15 -A32              Mr Walden’s income tax return 2020/2021
·     A33-A43               [Trust 1] Tax Return 2020/2021
·     A44-A54               Walden Family Discretionary Trust Financial Reports 2021
·     A55-A59    `         Walden Family Discretionary Trust Tax Return 2020/2021
·     A60   Accountant’s letter 22 November 2021
·     A61-A75               [Company 5] company tax return 2020/2021
·     A76-A80               Payslips – Mr Walden
·     A81-A83               Accountant’s letter 22 November 2021 (duplicate)
Ms Masland has provided the following documents marked as B exhibits:
·     B1–B10                Statement of Financial Circumstances
·     B11-B13               Centrelink statement of payments
·     B14-B15               Written submission