Watcham and O’Hanlon (Child support)

[2025] ARTA 622

Watcham and O’Hanlon (Child support) [2025] ARTA 622 (11 March 2025)

Applicant:  Mr Watcham

Respondent:  Child Support Registrar    

Other Parties:       Ms O’Hanlon

Tribunal Number:   2024/SC028260 

Tribunal:  General Member R Prasad

Place:Sydney

Date:11 March 2025

Decision:             The Tribunal affirms the decision under review.

Statement made on 11 March 2025 at 2:43pm

CATCHWORDS 

CHILD SUPPORT – change of assessment – significant tax debt – father receives a higher income and/or has other property and financial resources available to him – income, property and financial resources – no grounds for departure established – decision under review affirmed 

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

BACKGROUND

1.Mr Watcham (the father) and Ms O’Hanlon (the mother) are the parents of three children, twins born [date] February 2008 and a younger child born [date] November 2009, who are subject to an administrative assessment. Since 11 January 2011, this case was registered with Services Australia – Child Support (Child Support), with collection from 22 February 2022. The existing percentages of care are that the mother has 100% care of the children from 1 August 2023.

2.The father lodged an application to change the child support assessment (the departure application) on 5 January 2024. On 10 May 2024, Child Support refused his application as no reason had been established to change the assessment.

3.On 18 May 2024, the father lodged an objection. An objections officer, on 12 July 2024, disallowed the objection (the objection decision).

4.On 15 July 2024, the father sought review of the objection decision by the Administrative Appeals Tribunal (the AAT).

5.From 14 October 2024, the 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.

6.A directions hearing was held on 16 December 2024. Directions were issued on 17 December 2024 requiring compliance by 10 January 2025.

7.The hearing took place on 10 February 2025. The father attended the hearing by MS Teams audio and provided documentation,[1] as did the mother.[2] The Child Support Registrar elected not to be represented at the hearing, but provided documentation.[3]

[1] A1 to A171.

[2] B1 to B7.

[3] T1 to T231.

ISSUES

8.The issues before me are:

a.    does a ground exist for departure from the administrative assessment of child support; and if so,

b.    would it be just and equitable and otherwise proper to make a particular determination.

CONSIDERATION

What does the law say in relation to departure of administrative assessments?

9.Section 98C of the Child Support (Assessment) Act 1989 (the Act) provides that a decision to depart from an administrative assessment may be made if each of the following requirements are met:

a.    at least one ground for departure referred in subsection 117(2) of the Act exists;

b.    it would be just and equitable as regards to the child and the parents to the assessment; and

c.     it would otherwise be proper.

10.Section 117 of the Act provides the matters that must be considered before being satisfied in making an order in relation to a child in the special circumstances of the case. The phrase ‘special circumstances of the case’ is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary.[4]

[4] Gyselman and Gyselman [1991] FamCA 93 (Gyselman) at [39].

11.The ground for departure that I have been asked to consider is set out in subparagraph 117(2)(a)(iii)(A) which provides that, in the special circumstances of the case, the capacity of a parent to provide financial support for the child is significantly reduced because of their commitments which are necessary to enable them to support themselves. The term ‘necessary’ is used in contradistinction to ‘unnecessary’ and  should not be given a more stringent meaning.[5] Further, this ground will require assessment of the unavoidable or compulsory expenses together with the necessary living expenses.[6]

[5] Gyselman at [95].

[6] Mee and Ferguson [1986] FamCA 3 at [58].

12.In deciding whether a decision is fair, consideration is given to the amount and duration of any proposed change and the factors listed in subsection 117(4) of the Act which are relevant to a particular case. Particular factors may be given more weight depending on the circumstances of the case.

13.Subsection 117(5) of the Act provides that in determining whether it would be ‘otherwise proper’ to change the assessment, consideration must be given to:

a.the nature of the duty of a parent to maintain a child and, in particular, the fact that it is the parents of a child who have the primary duty to maintain the child; and

b.the effect that any proposed change would have on the child or the receiving parent's entitlement to, or the rate of, an income tested pension, allowance or benefit.

What information has been provided?

14.In the departure application, the father stated that his current financial commitments significantly exceed his ability to meet his child support liability. He mentioned that he had a tax debt which was a legal obligation he could not avoid or defer. He noted that each month, his tax repayments were $3,385, his share of rent was $2,708 and child support payments of $4,646, which were in combination more than his income of $9,052, even before accounting for his other living expenses and liabilities. He also noted that he had additional costs while the children were spending time with him. The father stated that his employer pays private health insurance for the entire family at $412 gross per month, which is used to calculate his adjusted taxable income. He has $0 in trust distributions. He also noted that he has a child support debt with an arrears payment plan of $200 per month, and a HECS-HELP debt which he had recently paid off but has enrolled into a [course]. He noted that he has sold all his shares, which has resulted in the significant amount of tax owing, to maintain his child support liability. In the application for review to the Tribunal, the father stated that he had an extraordinary tax debt which is highly unusual and not a common financial burden. If he failed to comply with the Australian Taxation Office (ATO) mandated minimum monthly repayments, the ATO would initiate bankruptcy proceedings which would severely impact his ability to support himself and his family. He stated that these circumstances are special and out of the ordinary and departure from the administrative assessment is necessary for a just and equitable outcome.

15.The father provided a HELP statement which showed that he had $14,958 owing at 1 January 2025. He also provided an income tax statement showing that $125,323 was owing at 1 January 2025. At the hearing, he advised that the current balance of his tax debt was $127,809. He said that he had to cancel the repayment arrangements because Child Support were garnishing his wages. He advised that this debt may have arisen from the 2021 financial year, but he had lodged his tax return late which is why the income tax statement shows an increased amount at 21 November 2022, however this appears to be increased tax for the 2022 financial year. He noted that when he lodges his tax return, there is a new payment arrangement.

16.In his statement of financial circumstances (the father’s statement), the father indicates he works as an [occupation] for a [company] on a full time basis earning an average gross weekly wage of $3,102 and receives family health insurance of $188 weekly. He referred to the [Family] Trust (the trust) and [a] Pty Ltd (the trustee), which he is a director of both and earns $0 from each. Other income earners in the home include his wife and daughter. He pays income tax of $1,537 and $1,079 in child support weekly. The total value of his property, comprising funds in financial institutions, investments, three cars, 14% interest in the trust valued at $85,000, and household contents, is $1,118,712. He has $238,550 in superannuation, unpaid income tax of $120,218, a car loan of $34,700 and owes $3,500 on his credit card. He also has personal child support liabilities and owes child support penalties of $32,502.  He estimates total household expenditure to be $4,515 each week for himself, his wife and the children. The father confirmed that these household expenses, being $234,780 per annum, looked correct, and that his share was $2,138 per week. The father advised that the trust was established in 2011 and that there had been no income or dividends given to any beneficiary. The father also advised that he was a director of a not-for-profit organisation, [name deleted], until July 2024 but received no income.

17.The Child Support records indicate that the father had a taxable income of $256,971 for the 2023 financial year and deemed income of $267,250 for the 2024 financial year. His payslip for October 2024 shows gross pay of $13,491 and net pay of $233 (deductions included income tax of $6,745, child support of $6,379 and employee stock purchase of $135). His November 2024 payslip shows a gross pay of $13,613 and net pay of $1,835 (income tax of $6,806, child support of $4,836 and employee stock purchase of $136). His December 2024 payslip shows gross pay of $13,613 and net pay of $854 (deductions included income tax of $6,806, personal deduction of $74, child support of $5,742 and employee stock purchase of $136). The father asserted that after the child support amounts are being garnished from his wage, he was getting less than his protected earnings. He has requested further information about the garnishee order from Child Support but this has not been provided. He said he could not meet his child support liability because of his significant tax debt and has become reliant on his wife’s income. His [account] shows his transactions in 2024, which included 14 stock sales and 12 transactions for dividend income, with the total amount being USD539. He advised that this was a six monthly scheme where employees can elect an amount between 1% to 15%, but he cannot afford more than 1%. The equity incentive plan from his employer, granted on 18 February 2020, indicates that he will vest 108 shares over a four year period on a quarterly basis. He noted that there is no promise that he will get these shares. Once his shares vest each quarter, he immediately sells them and his employer shares this information with the ATO and is included as part of his taxable income.

18.The father provided a summary of his bank accounts and states that while he is a signatory to his wife’s and children’s accounts, he needed their permission and also provided a statement from his wife raising privacy concerns with sharing her information with the mother and accordingly those bank statements have not been provided. I reminded the father that failure to comply with the directions and make a full and frank disclosure of his financial circumstances means that I am able to draw adverse inferences.[7] He did provide his own bank accounts and noted his [accounts] were a multicurrency accounts that his wife uses and include his shares from his employment coming in and out in US currency. A [bank] portfolio statement for the 2024 financial year shows that he and his wife also own around 3,000 units of shares which are valued at $285. He provided a [Finance] statement dated 1 January 2025 showing the amount financed was $42,786, monthly repayments are $735, the last repayment was made on 13 December 2024, and the outstanding balance was $33,159.

[7] Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409 at [24], [25] and [34].

19.The objection decision noted a lottery winning and the father advised that his family, which included his brother who is overseas and his parents, entered into a lottery in 2021 and they won part of the lottery. Their share was transferred to them and his share was $400,000 and he used the majority to establish the trust. He also bought the children gifts and went on nice dinners, and cleared debts.

20.The mother advised that the child support payments go towards the children’s education and medical bills. The children see different specialists and she does not have private health insurance to cover these, and are therefore all out of pocket expenses with a small rebate. One of the children goes to TAFE and she pays for their books and stationery, another child is studying for their HSC and has costs for preparation and uniforms, and the third child is being homeschooled as he has autism and is subject to a lot of bullying. She has not investigated whether she can receive NDIS support and noted that because of her mental health, she will need support and guidance to do this. She noted that the father has an investment property and also has an Airbnb.

21.In her statement of financial circumstances (the mother’s statement), the mother notes she is receiving the disability support pension of $750 weekly, and child support of $1,533, and one of the children was another income earner in her home. She had no superannuation and no liabilities, but noted she had household contents and other personal property of $2,000. The father noted that her statement was incomplete and did not include her partner’s details or the medical expenses she mentioned. The mother asserted that she has a carer and not a partner, which she has not had for many years.

22.The father advised that the trustee balance sheet for the 2024 financial year refers to real property valued at $1,291,000 which includes vacant land that has been on the market for the last six months and recently withdrawn, and also another property which is leased out. He stated that he and his wife had a residential lease of $1,400 a week, and they rent out the attached private room which has a private entrance. The trustee profit and loss statement for the 2024 financial year notes that the gross profit after cost of sales which was subtracted from trading income, was $42,883 with long term rental income of $31,437 and short term rental income of $2,817. There was also an amount of $3,554 for wages. There was an overall loss of $41,711, with total operating expenses of $84,594, although some of these expenses did not appear to be related to the company or were unclear, such as event costs, national travel, rent, training and development and sponsorship, with these expenses totalling $44,886. Wages and salaries of $3,920 and superannuation of $431 were also included as an expense.

Should the administrative assessment be changed in the special circumstances of the case?

23.The father has sought review of the objection decision as he considers his income tax debt to be extraordinary and highly unusual, which make his circumstances special and out of the ordinary. His tax debt as at 1 January 2025 was $125,323 and had increased to $127,809 at the time of the hearing. He says he is required to repay $3,385 each month. I consider that his tax debt is a necessary and compulsory expense. The father also referred to a HELP debt of $14,958 he owes as a result of his recent university studies. While he is trying to upskill, this is not a necessary or unavoidable expense. I must now assess whether he has other necessary commitments as well as his living expenses.

24.The father’s taxable income for the 2023 financial year was $256,971 and for the 2024 financial year, he has a deemed income of $267,250. His recent payslips indicate he receives a gross monthly salary of $13,613 and net pay ranging between $233 to $1,835, after income tax, child support and employee stock purchase has been deducted. He advised that his annual household expenses were $234,780, however his share was $111,176. The father has also raised concern about Child Support garnishing child support payments through his pay. I note that collection of a child support liability is beyond the scope of this review, and so I will make no further comment.

25.The information before me indicates that the father’s share of a lottery winning in 2021 was $400,000, a majority of which was used to establish the trust and the remainder used on gifts, dinners and debts. The father’s share of the trust is also 14% or valued at about $85,000. His is a director of the trust and trustee, which is the trading company. He says that no income or dividends is given out to any beneficiary. The trustee financial documents indicate that real property valued at $1,291,000 is being held. The real property comprises of vacant land which was placed on the market for six months and was recently removed, and another property which is being leased out with long term and short term rental income totalling $34,254. While there was a net loss of $41,711, there were also expenses that did not appear to be related to the business or were unclear, such as event costs, national travel, rent, training and development and sponsorship. These expenses total $44,886. Wages was included as both as trading income and expenses, and superannuation was also paid out. There is considerable inconsistency in the evidence before me where the father states that no income was received while he was a director, but there were clearly amounts paid and/or received as wages and superannuation, as well as training and development. The financial reports that were provided, comprising of a balance sheet and profit and loss statements were only one page each, without any details explaining these categories. I note the father also sub-leased the property he was renting, and there is no information about that source of income and is not noted in the father’s statement. Where there are family businesses or if someone is self-employed, there will be legal structures and arrangements that would mean the taxable income does not properly reflect the realistic capacity of the person to provide financial support for their children.[8]

[8] Voss & Child Support Registrar & Anor [2009] FMCAfam 1296.

26.The father also has an outstanding balance of $33,159 for his car, but he has been able to consistently make monthly repayments of $735. I do not consider these repayments to be a necessary expense and are available for the father to meet his own living expenses. Further, it is not clear how the father is able to meet these expenses if he is claiming he is unable to meet his usual living expenses which indicates he has access to financial resources which have not been declared. In this regard, the father only provided a summary of the accounts he is signatory to and not all of the bank statements as directed, asserting privacy concerns for third parties. As I advised at the directions hearing and at the hearing, the directions specifically noted that both parents were required to comply with their obligations to make full and frank disclosure of their financial circumstances for the purposes of this review. I note that the father has indicated that he has been relying on his wife, and his summary indicates they have joint accounts.

27.In the absence of a full and frank disclosure of his income, property and financial resources, it appears to me that the father receives a higher income and/or has other property and financial resources available to him. Without any cogent evidence to the contrary, I am not satisfied that his expenses significantly reduce his capacity to financially support the children.

28.Overall, I am unable to be satisfied that the ground for departure provided for in subparagraph 117(2)(a)(iii)(A) has been established. As no reason has been established, I do not have to proceed to consider the just and equitable or otherwise proper considerations.

DECISION

The Tribunal affirms the decision under review.

Date of hearing:	Monday, 10 February 2025
Representative for the Applicant:	Self represented
Representative for the Other party:	Self represented