Watsons and Luntley (Child support)

Watsons and Luntley (Child support) [2023] AATA 4663 (7 December 2023)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/MC026109
APPLICANT:  Ms Watsons
OTHER PARTIES:  Child Support Registrar
Mr Luntley

TRIBUNAL:Member T Hamilton-Noy
DECISION DATE: 7 December 2023
DECISION:

The Tribunal sets aside the decision under review and substitutes its decision that:

For the period 30 August 2022 to 31 December 2024, Ms Watsons’ adjusted taxable income is varied to $258,543 and Mr Luntley’s adjusted taxable income is varied to $144,796.
For the period 30 August 2022 to 31 December 2022, child support payable by Mr Luntley is increased by $14,997 to reflect the schooling costs of the children.
For the period 1 January 2023 to 31 December 2023, child support payable by Mr Luntley is increased by $33,668 to reflect the schooling costs of the children.
For the period 1 January 2024 to 31 December 2024, child support payable by Mr Luntley is increased by $37,494 to reflect the schooling costs of the children.
For the period 1 January 2023 to 31 December 2024, child support payable by Mr Luntley is increased by $3,237 per annum to reflect [Child 2]’s special needs.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – costs of special needs of the child – financial resources and earning capacity of the parents – whether just and equitable 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

Ms Watsons and Mr Luntley are the separated parents of [Child 1] and [Child 2]. A case has been registered with Services Australia – Child Support (Child Support) since 3 June 2022 and payments are currently collectable by Child Support. Mr Luntley is the payer of child support in this matter and Ms Watsons the payee.
On 29 July 2022, Child Support issued administrative assessments of child support to the parties for the following periods:
· For the period 3 June 2022 to 21 March 2023, Mr Luntley was to pay $3,802 per annum, based on his 2020/2021 adjusted taxable income of $52,376 and Ms Watsons’ 2020/2021 adjusted taxable income of $258,543.
· For the period 22 March 2023 to 2 September 2023, Mr Luntley was to pay $4,202 per annum, based on his 2020/2021 adjusted taxable income of $52,376 and Ms Watsons’ 2020/2021 adjusted taxable income of $258,543 (the change was due to [Child 1] turning 13 years of age).
On 18 August 2022, Child Support accepted an income estimate provided by Mr Luntley and issued further assessments to the parties, including for the following periods:
·      For the period 18 August 2022 to 21 March 2023, Mr Luntley was to pay $3,042 per annum, based on his estimate of $0 and Ms Watsons’ 2020/2021 adjusted taxable income of $258,543;
·      For the period 22 March 2023 to 30 June 2023, Mr Luntley was to pay $3,042 per annum, based on his estimate of $0 and Ms Watsons’ 2020/2021 adjusted taxable income of $258,543.
·      For the period 1 July 2023 to 2 September 2023, Mr Luntley was to pay $4,202 per annum, based on his 2020/2021 adjusted taxable income of $52,376 and Ms Watsons’ 2020/2021 adjusted taxable income of $258,543.
On 30 August 2022, Ms Watsons made a departure application on the basis of the special needs of the children (called “Reason 2” by Child Support); the manner in which the children were being educated (called “Reason 3” by Child Support); and the income, property and financial resources of the parents (called “Reason 8A” by Child Support).
On 6 January 2023, an employee of Child Support found that grounds were established to depart from the administrative assessment of child support and made a departure determination that:
·      For the period 30 August 2022 to 31 December 2023, Mr Luntley’s adjusted taxable income is varied to $90,000;
·      For the period 30 August 2022 to 31 December 2023, Ms Watsons’ adjusted taxable income is varied to $558,543;
·      For the period 30 August 2022 to 31 December 2022, child support is increased by $27,932;
·      For the period 1 January 2023 to 31 December 2023, child support is increased by $31,576.
On 20 January 2023, Mr Luntley objected to this decision.
On 21 April 2023, an objections officer of Child Support allowed the objection and made departure determinations that:
·      For the period 22 September 2022 to 30 November 2024, Mr Luntley’s adjusted taxable income is varied to $144,796;
·      For the period 22 September 2022 to 31 December 2025, Ms Watsons’ adjusted taxable income is varied to $558,543;
·      For the period 22 September 2022 to 31 December 2023, child support is increased by $10,960;
·      For the period 1 January 2024 to 31 December 2024, child support is increased by $11,666;
·      For the period 22 September 2025 to 31 December 2025, child support is increased by $12,390.
On 16 May 2023, Ms Watsons made an application to the Administrative Appeals Tribunal for an independent review of Child Support’s decision.
A directions hearing was conducted with the parties on 17 August 2023, in which both parties participated by MS Teams audio. Following the directions hearing the Tribunal issued directions to the parties for the provision of further documents.
The hearing was held on 5 October 2023, on which date both parties participated by MS Teams video and gave evidence on affirmation. At the hearing, the Tribunal had before it documents provided by Child Support (1 to 548), documents provided by Ms Watsons (A1 to 174) and documents provided by Mr Luntley (B1 to B54). Copies of all documents were provided to the parties prior to the hearing and both parties confirmed receipt of all documents.
On 4 October 2023 Ms Watsons’ representative provided written submissions to the Tribunal (A175 to A188) and on the morning of 5 October 2023 Mr Luntley provided further information to the Tribunal (B55 to B61). The additional documents were sent to the parties with time for comment after the hearing. In response, Mr Luntley provided submissions (B62 to B67) which were sent to Ms Watsons for comment. Ms Watsons’ response (A189 to A193) did not raise new matters and was sent to Mr Luntley for his information only.
On 15 November 2023, during the period in which the Tribunal had deferred the matter to consider the evidence before it, Mr Luntley sent in further information about his employment arrangements. In response to these documents, the Tribunal issued further Directions to Mr Luntley for the provision of additional information. Upon receipt of this, the documents including the Directions (B68 to B73) were sent to Ms Watsons for comment. Ms Watsons’ response (A194 to A198) were sent to Mr Luntley for his information only, as the response did not provide new information to the Tribunal. The Tribunal then proceeded to make a decision on all of the information before it on 7 December 2023.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Assessment 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 Assessment Act. The liable parent or carer 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 98C of the Assessment Act 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 the place of the Registrar, must be satisfied that:
(i)there is a ground to depart from the administrative assessment of child support;
(ii)it is just and equitable to depart; and
(iii)it is otherwise proper to depart.
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 is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the legislation. In Gyselman and Gyselman (1992) FLC 92-279, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.
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 Assessment Act.

CONSIDERATION

Issue 1 – Is there a ground established to depart from the administrative assessment of child support?

While a number of grounds were raised by Ms Watsons in her departure application to Child Support, one of the primary contentions between the parties in this matter is whether there was an agreement for the children to attend their current school and what proportion of the schooling costs should be borne by each party. Given this, the Tribunal first considered this ground for departure.
Subparagraph 117(2)(b)(ii) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by their parents.
The term “manner expected” is not defined in the Assessment Act. In Mee and Ferguson [1986] FamCA 3, the Full Court of the Family Court held (in relation to a similar provision in the Family Law Act 1975) that it refers to the manner:
in which the child "is being", and which the parties to the marriage "expected" the child to be educated. That provision appears to have direct relevance to the issue of private school education, particularly its reference to the manner in which the parties "expected" the child to be educated. The word "expected" in the past tense presumably relates to some expectation of the parties at a point in time earlier than the hearing.
The Tribunal accepted from the consistent evidence of both parties that the two children had been put on a waiting list for the [Suburb 1] campus of [College 1] when they were infants, with the intention that each child would commence at the school in Year 7. The Tribunal accepted that both children had commenced attending [Suburb 1] Primary School for Prep. The Tribunal accepted that, within the context of the COVID-19 pandemic and Ms Watsons’ concern about the children’s schooling, Ms Watsons and Mr Luntley participated in mediation during 2021 and, as a result of the mediation session, the children were both moved to [College 1] at the beginning of the 2022 school year. The parties signed a Parenting Plan on 1 March 2021 and the Tribunal had particular regard to Clause 7.7 which states that:
Unless otherwise agreed by the parents in writing, the children will commence schooling at [College 1] in [Suburb 2] in 2022 with the costs to be shared equally between the parents.
Clause 9 of the Parenting Plan provided for the following arrangements for the schooling and other additional costs for the children:
The parents will split the following expenses equally for the benefit of the children:
All school tuition fees for each of the children;
All school uniform expenses;
All mandatory fees, levies, excursion expenses, prescribed computer costs and program expenses levied by the school;
All private health insurance premiums for the children;
All agreed extra curricular activities for the children including registration and uniforms; and
The gap on all hospital, medical and dental costs relating to the children.
The Tribunal accepted that, following the signing of the Parenting Plan, Ms Watsons emailed Mr Luntley on 22 March 2021 stating that: “You’ll still need to sign that paper. Please do so or she will loose [sic] her place. We can sort the rest out afterwards.”
Mr Luntley responded to the email on 23 March 2021, stating that:
I have considered your proposal for kids to get enrolled in [College 1] at [Suburb 2] campus.
Given that fact where we now live and how many wonderful public schools there are, also taking in account high fees at [College 1] (see attached document) and the distance – I am not in position to sign the enrolment letter you sent through.
If you still insist that they should attend this particular school I have no objections but it will need to be at your expense as well as driving to and from school.
I am still happy to contribute for all items outlined in the current parent plan as well as to provide for them while in my care.
The Tribunal finds on the evidence before it that [Child 1] was offered a place at [College 1] for Year 6 in 2022 by letter dated 18 March 2021. An acceptance of this offer was signed electronically by Mr Luntley on 23 March 2021. [Child 2] was offered a place at [College 1] for Year 4 in 2022 by letter dated 1 April 2021. An acceptance of this offer was signed electronically by Mr Luntley on 1 April 2021.
Ms Watsons’ evidence to the Tribunal at the hearing was that the parties had, prior to separation in 2017, only ever discussed the children attending [College 1] [Suburb 2]. They had intended that [Child 1] commence there in Year 7 and [Child 2] in Year 5 in 2023. This was on the basis that Ms Watsons’ cousins had attended the school and they were living in [Suburb 1] at the time. They did not have any discussion about other schools. There would have been an initial form signed by the parties to put the children on a waiting list for the school and this was done when they were infants.
Ms Watsons told the Tribunal that as of 2021 the children were already on a waiting list for the school. The children found the COVID-19 pandemic particularly hard and their school at the time wasn’t meeting their needs. The parties attended mediation in relation to the children’s schooling, during which neither party was legally represented. The enrolment forms for the children to attend [College 1] were signed as a result of the outcome of mediation. The discussion at mediation had been around [Child 1] needing to be moved and Mr Luntley indicating that he could not handle the children at two different schools, so an agreement had been reached that they would send both children to [College 1] at the same time, to commence in 2022. Ms Watsons stated that the intention between the parties had always been a 50% contribution by each parent, but Mr Luntley had then decided he didn’t want to contribute any more. Ms Watsons stated that Mr Luntley had not proposed the children attend a different school, but he had indicated the costs would all be “on her”. Ms Watsons submitted it was appropriate for each parent to contribute equally to the school costs for the children. As to Mr Luntley’s past contributions to the school fees, when asked whether Mr Luntley had contributed up until June 2022, Ms Watsons stated that Mr Luntley had paid “at some points” and then stopped.
Mr Luntley told the Tribunal that he had been paying amounts to Ms Watsons up until school started but things had come to a head after a disagreement over the private school fees. For the past 18 months he has been paying child support. Mr Luntley agreed with Ms Watsons that the parties had agreed when they were married that the children would attend [College 1] for their secondary schooling. He agreed the children’s names had been added to a waiting list when they were infants and agreed that during mediation in 2021, he had consented to pay half of the school fees for the children. The Tribunal asked whether Mr Luntley had signed the enrolment and acceptance forms, to which he stated this was a “tricky one” and that he didn’t want to sign the forms but there was a lot of pressure on the children and he “crumbled under stress”. The Tribunal observed that the case law suggested the Tribunal was to consider the past intention of the parents, and asked how, given the forms signed by both parties, mutual intention was not established. Mr Luntley stated in response that the children were at [Suburb 1] Primary School and he didn’t want to object given Ms Watsons covered the costs.
As to the costs of the children’s schooling, the Tribunal finds from invoices provided by Ms Watsons to Child Support and to the Tribunal that [Child 1]’s schooling costs for Semester 1 of 2022 totalled $14,740 and [Child 2]’s totalled $12,725. [Child 1]’s schooling costs for Semester 2 of 2022 were $16,203 and [Child 2]’s were $13,792.
Ms Watsons provided school information about fees and expenses for 2023 and the Tribunal finds that costs for [Child 1] total $35,372 and for [Child 2] total $31,964, for fees and compulsory additional costs. Ms Watsons gave evidence to the Tribunal at the hearing that she has just received an invoice for Semester 1 for 2024 and fees total $37,494. Mr Luntley did not dispute this aspect of Ms Watsons’ evidence and the Tribunal accepted this evidence as correct.
The Tribunal finds from the evidence before it that, prior to separation, the parties had a mutual intention that the children would attend [College 1] for their secondary school education. The Tribunal finds that the commencement of both children’s schooling was moved forward due to the pandemic and that, following mediation, the parties agreed for the children to commence at [College 1] in 2022. The Tribunal finds that the negotiations of the parties at mediation followed by the signing of a Parenting Plan in March 2021 establishes mutual intention in this matter. The Tribunal did not consider that Mr Luntley’s subsequent email to Ms Watsons about the payment of fees negates that mutual intention has been established for the children to commence at [College 1] in 2022, when the historical and clear intention of both parties is considered.
The costs for each child to attend [College 1] are significant and, given these costs are significantly in excess of those for attendance at a government secondary school, special circumstances are established in this case. The Tribunal therefore finds that, in the special circumstances of this case, the costs of maintaining [Child 1] and [Child 2] are significantly affected because both children are being educated in a manner expected by their parents. This ground for departure is established.

Issue 2 – Is it just and equitable to make a departure determination?

As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Assessment Act. This in turn requires the Tribunal to consider a range of factors, set out in subsection 117(4) of the Assessment Act. In addition to the schooling costs of the children, already considered in some detail above, the Tribunal also took the following matters into consideration.

The nature of the duty of a parent to maintain a child and the income, earning capacity, property and financial resources of the child

There was no evidence before the Tribunal that either child has access to any other income, property or financial resources from which to support themself and the Tribunal finds accordingly. The Tribunal finds that [Child 1] and [Child 2] are entirely reliant on their parents to meet all of their needs.

The proper needs of [Child 1]

Subsection 117(6) of the Assessment Act states that in having regard to the proper needs of the child, the court must have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and any special needs of the child.

The Tribunal accepted from the evidence given by Ms Watsons at the hearing that [Child 1] does not have any proper needs outside of the schooling costs, discussed in some detail above. The Tribunal accepted Ms Watsons’ evidence that [Child 1] is attending a school counsellor; however, finds that there are no out of pocket costs for this.
Ms Watsons provided invoices for sports activities and dental costs for [Child 1]. The Tribunal considered that these were within the range of usual costs incurred for a child and did not consider these established that [Child 1]’s proper needs are outside the ordinary for a child of her age.

The proper needs of [Child 2]

The Tribunal accepted from the Child Support documents that [Child 2] attended [a named] Clinic in September 2021 for assessment by a psychologist, due to concerns about learning difficulties. At the time of the assessment there was an Individual Learning Plan in place and [Child 2] was receiving additional remedial support with learning at his primary school and was receiving reading tutoring outside of school. The report prepared by [the] Clinic noted that [Child 2] had worked with a speech pathologist between four and six years of age and that his reading capacity sat some two years below his school peers.
Following testing, the psychologist in question found that [Child 2]’s full-scale IQ and overall intellectual ability was in the “low average” range, and that he had a weakness in verbal comprehension and processing speed. The testing results further indicated that [Child 2] presented with ADHD inattention type. Recommendations were made for a range of within-school modifications and interventions, and in addition it was noted that [Child 2] may require review by a paediatrician and counselling support with a psychologist.
The Tribunal accepted that further assessment was undertaken by a paediatric psychologist with the [named] Clinic in May 2022, in which [Child 2] was found to be performing significantly below age expectations across reading, written expression and maths domains. [Child 2] was found to meet the criteria for a specific learning disorder with moderate impairment in reading and moderate impairment in written expression.
The Tribunal accepted from the above reports that [Child 2] has been diagnosed with ADHD and a learning disorder. Ms Watsons told the Tribunal that [Child 2] is attending a tutor, [Ms A], and that it was suggested in one of the reports that [Child 2] have additional help and that his most recent NAPLAN results also suggested extra support given he was in the bottom scale of testing. She accessed [Ms A] through recommendations from other parents. Ms Watsons stated that [Child 2] has not been assessed for NDIS as she was told by his paediatrician that he is not eligible.
Ms Watsons gave evidence to the Tribunal at hearing that [Child 2] has also suffered from anxiety for which he has been referred to a psychologist through his GP. Ms Watsons gave evidence that [Child 2] has had two Mental Health Care plans prepared and has attended all eight sessions provided under his current plan during 2023 and is attending monthly to six-weekly sessions at present.
Mr Luntley did not dispute [Child 2]’s diagnosis or seek to make comment to the Tribunal about the range of costs Ms Watsons is incurring for [Child 2’s] various interventions. Mr Luntley told the Tribunal that he was paying part of [Child 2]’s costs, including psychology bills, up until school started when there was a disagreement about the school fees.
Ms Watsons provided invoices for [Ms A] to Child Support and to the Tribunal, and a table of estimated costs, in which she stated costs for [Ms A] had totalled $4,390 between 21 August 2022 and 21 August 2023. The Tribunal accepted this as an accurate reflection of out-of-pocket costs for [Child 2]’s tutoring over a 12-month period. Ms Watsons also stated in this document that [Child 2]’s costs for attendance at a psychologist had been $1,865 over the same period. The Tribunal accepted from an invoice prepared by consultant paediatrician [Dr B] dated 29 March 2023 that an additional cost of $220 was incurred by Ms Watsons for attendance at the paediatrician.
Taking into account the above, the Tribunal finds that [Child 2]’s out-of-pocket costs over a 12-month period that relate to his special needs amount to $6,475. The Tribunal finds that this amount well exceeds the usual costs of a child of [Child 2]’s age. The Tribunal is prepared to accept that these amounts are likely to represent ongoing additional costs for [Child 2], given the nature of his diagnosis.

The income, property and financial resources of Ms Watsons

The Tribunal accepts that Ms Watsons is employed in a family business, undertaking administration and finance work for [Company 1]. Ms Watsons described to the Tribunal that her father runs the business and has shareholdings in a number of other businesses which she does not work for.
Ms Watsons described her role as being a work-from-home arrangement, a few hours per day depending on what is required, and as involving administration for her father’s company, which includes payments, paying bills and being “light on” so that she can manage the children’s needs. She described previously working under a different company structure and in an office, but that since she had had the two children, having worked from home on limited hours. She described that her hours per week are variable, sometimes five hours per week, sometimes 20, and that she has not worked on a full-time basis at all since having the children. When negotiating the role with her father, she discussed an amount that would be enough to support herself on and that was considered fair and reasonable for her role. Ms Watsons estimated her income in her Statement of Financial Circumstances as $100 per week from employment and $2,019 from [Family Trust 1] and [Family Trust 2], a discretionary trust.
Ms Watsons gave evidence that her father is the Managing Director of the company and that her role is limited to undertaking financial work for the parent company. She was appointed as a director “a long time ago” and removed herself three months earlier as a director, after Child Support made its decision. Ms Watsons stated that she disagreed with being attributed with a percentage of the profits of the company; she has never had any power to give herself any distribution from the company and her father has controlling power of the relevant trusts.
Ms Watsons provided the Tribunal her 2021/2022 income tax return, in which $5,000 income was declared from her position as a “director – executive”, $34 in gross interest and $150,392 in franked distributions from trusts. Following minor deductions, Ms Watsons’ taxable income for 2021/2022 was $153,706. The income tax return for the [Family Trust 2] for 2021/2022 states that franked distributions of $114,285 were made to Ms Watsons and that larger amounts were distributed to her other family members. The income tax return for the [Family Trust 1] for 2021/2022 states that $35,713 was distributed to Ms Watsons. The financial statements for [Family Trust 1] for 2021/2022 declared total income of $108,000 from dividends received. There was no loan to Ms Watsons or any other information in the financial statements that would suggest Ms Watsons is receiving any other benefit from the trust structure.
The Tribunal was also provided an income tax return for [Company 1] in the same financial year, 2021/2022, which declared total income for the company of $643,637. Following expenses and tax losses carried forward from previous years, the taxable income for the company in 2021/2022 was $0. Dividends were paid to [Family Trust 1] and [Family Trust 2]. Dividends were also paid to two other companies and the Tribunal accepted on the evidence before it that Ms Watsons not associated with either of these two companies. The Tribunal could not identify any deductions claimed by the company that were clearly associated with any payments or financial benefit being made to Ms Watsons.
For the following financial year, the 2022/2023 financial year, the Tribunal was provided financial statements for the [Family Trust 2]. Total income of $400,000 was declared from dividends received, of which $80,000 was distributed to Ms Watsons. The 2022/2023 financial statements for the [Family Trust 1] state that the trust received total income of $100,000 from dividends, of which $20,000 was distributed to Ms Watsons. Both sets of financial statements noted significant movement in beneficiaries’ accounts, but the Tribunal was unable to ascertain from the information provided what benefit, if any, was flowing to Ms Watsons from this account.
As to any other income, property or financial resources, Ms Watsons’ Statement of Financial Circumstances states that her home has an estimated value of $3.5 million (with a mortgage of $312,459 plus a loan from [Family Trust 1] of $400,000 used to pay down the mortgage), she has an amount of $10,000 in bank accounts, $40,000 in investments and a motor vehicle with an estimated value of $70,000. While these assets are significant, the Tribunal did not consider that they provide notable financial resources over and above Ms Watsons’ level of income that should be reflected for child support purposes.
The Tribunal finds that Ms Watsons’ stated household expenses of $2,954 per week are in excess of her claimed net income from employment. The bank statements she provided to the Tribunal list a large amount of discretionary expenses over and above the household expenses she claims. One possible explanation for this is that additional financial resources are flowing to Ms Watsons from the company structures owned and run by her father that are not clearly identifiable from the documents Ms Watsons has provided to the Tribunal. Another possible explanation is that Ms Watsons’ parents are assisting her to meet a proportion of her household costs, for example, by payments towards the large amount of school fees Ms Watsons is meeting on her own since Mr Luntley ceased contributing to these during 2022.
The information before the Tribunal indicates that, in the 2022/2023 financial year, Ms Watsons’ level of income has been $100,000 from distributions from the company and trust structure. The Tribunal finds that this level of income is inconsistent with Ms Watsons’ ability to meet her claimed household expenses and inconsistent with the level of assets she is able to hold. However, the Tribunal was not persuaded, after considering all of the evidence before it, that Ms Watsons’ level of income is within the range of $558,543, being the income level found by Child Support, or that Ms Watsons should be attributed with a proportion of the profits from the company, for two reasons.
Firstly, the Tribunal accepts Ms Watsons’ description of the arrangements around her father’s company, her role within the company and her lack of ability to influence any distribution amounts made to her. While Ms Watsons has removed herself as a director from the company structure, the Tribunal did not perceive that this altered any practical arrangements within the company or Ms Watsons’ access to any financial resources of the company. The Tribunal found the evidence given by Ms Watsons about her role within the company to be clear and credible and, on balance, accepted the description given by Ms Watsons about her role within the company. The Tribunal, for this reason, does not find that Ms Watsons should be attributed with any profit, other financial benefits or distributions from the company or trust structures.
Secondly, the Tribunal does not find that any contributions made to Ms Watsons’ living costs from third parties (such as her parents) are clear enough to be attributed to her as regular income for child support purposes. Nor would any such payments replace the obligation on both parents to be the primary contributors to the needs of the children.
Having weighed up all of the information before it, the Tribunal finds that the use of Ms Watsons’ 2020/2021 adjusted taxable income of $258,543 is appropriate and is reflective of the level of income that would be required to maintain her regular household expenses in addition to the discretionary expenditure indicated in the bank statements provided to the Tribunal. The Tribunal finds that the continued use of Ms Watsons’ 2020/2021 adjusted taxable income, past the end of the 2020/2021 financial year, provides a fair and reasonable reflection of her ongoing capacity to contribute to the needs of the children of the assessment.

The income, property and financial resources of Mr Luntley

Information contained in the Child Support documents indicates that Mr Luntley is associated with three company structures: [Company 2], [Company 3] and [Company 4]. Mr Luntley gave evidence to the Tribunal at the hearing that he doesn’t remember when [Company 3] was set up, but it was over 10 years ago. He stated that he normally works as an [Occupation 1] and last worked for that company in 2021 and there had been no payments to the company since that time.
Mr Luntley stated that the second company, [Company 2], is a start-up company setting up a mobile app, “[App 1]”. He invested $50,000 into the company in the past two years and the app is active but not working as yet.
Mr Luntley stated that the third company, [Company 4], was set up some six to seven years ago and is another start-up that never took off. Mr Luntley stated he had invested $100,000 into the company between 2015 and 2021.
The Tribunal asked Mr Luntley about accounts for the three businesses and he stated that the last two companies have one business account with [Bank 1] which has “nothing, $50” in it. Mr Luntley stated that [Company 3] has its own [Bank 1] business bank account which last received income from his employment contract in August 2021. The Tribunal took Mr Luntley to an account statement for this account and noted that Mr Luntley’s evidence did not appear to be correct. The Tribunal noted, for example, transactions into the account on 29 July 2022 in the amounts of $10,175, $12,650, $13,970 and $14,685. Mr Luntley stated in response he does not know what these relate to.

The Tribunal asked Mr Luntley about his work history and he told the Tribunal that he had stopped working in September 2021 and had lived off savings for 12 months. He travelled overseas for six weeks (plus two in quarantine) in 2022 which he funded himself. He commenced a new position in [Industry 1] with [Employer 1] on 26 September 2022 and this position is full-time ongoing. The Tribunal observed that Mr Luntley had had expenditure of $300,000 over a 12-month period according to his bank statements and queried whether he should be set on this level of income, to which Mr Luntley answered, “Why wouldn’t you?”.
The Tribunal asked Mr Luntley about the $0 estimate of income he had provided to Child Support in or around August 2022 (Child Support had used the estimate for a child support period commencing on 18 August 2022) and Mr Luntley stated that he thinks he was in Europe when Child Support called him. He did not otherwise comment on the appropriateness of this estimate given his overall financial circumstances at the time.
The Tribunal also asked Mr Luntley about his personal bank accounts and he stated he has three: one is an interest account, one a trading account and one a savings account. When asked about his share-trading activities, Mr Luntley stated he had done this during the COVID-19 pandemic and is no longer share trading. The Tribunal asked about transactions in the share-trading account from March 2023 (amounts of $260,637.05, $102,503.71, $90,359.62 and $12,144.09, each described as “Direct Debit [number] commsec securiti commsec”) and asked where this money was going to, to which Mr Luntley stated he doesn’t know, probably to one of his CommSec accounts. He then stated again that he has three accounts and then stated that he transfers from one non-trading CommSec account to a trading account. When asked which account would show the records of the transactions undertaken, Mr Luntley stated that he has a history of shares he buys and sells and “can do the same thing in Excel”. The Tribunal observed that, as part of its directions, it had required Mr Luntley to provide his share-trading account from 1 July 2022 to the present. Mr Luntley stated in response that he doesn’t think he has provided these. When asked why he hadn’t Mr Luntley stated there was “no particular reason” and he “didn’t provide” them.
The Tribunal asked Mr Luntley whether he had bought and sold property and he stated that he last sold property in April or May 2023 and thinks he put the proceeds into his access account. When asked what amount he had made from the sale, he stated he “doesn’t remember the exact amounts”.
The Tribunal observed it had also required, as part of its directions, Mr Luntley to provide his 2021/22 income tax return and he stated he wasn’t sure why he hadn’t provided this. The Tribunal observed that Mr Luntley’s 2022/2023 PAYG summary had also not been provided in response to the Tribunal’s directions and Mr Luntley stated there was “no reason” that he had not provided this. The Tribunal noted at the hearing that it may draw adverse inferences from Mr Luntley’s failure to comply with the directions issued by the Tribunal and may proceed to assess Mr Luntley at the capped amount of child support in addition to requiring him to pay part of the school fees and [Child 2]’s special needs. Mr Luntley stated in response that he cannot afford this.
Following the hearing, while the Tribunal had deferred to consider the matter, Mr Luntley wrote to the Tribunal stating as follows:
I am the respondent in the above case and wish to inform you that my employment with [Employer 1] [sic] ceased on November 3, 2023.
Given this information, the Tribunal issued further directions to Mr Luntley to provide his employer separation certificate or, in the absence of an employer separation certificate having been provided, information about the reasons of cessation of employment on 3 November 2023. In response to the Tribunal’s directions, Mr Luntley provided an Employer Separation Certificate dated 21 November 2023 which states that Mr Luntley’s employment started on 26 September 2022 and ceased on 3 November 2023. The stated reason for the separation was “employee ceasing work voluntarily” and further details provided were that “employee resigned effective 3 Nov 2023”. No claim had been made for workers’ compensation and the final payment was $6,939 plus annual leave of $9,335.
The Tribunal found Mr Luntley to give his evidence at the hearing in an evasive and unclear manner. He presented as reluctant to provide the Tribunal with any meaningful details about his financial arrangements, for example, around the sale of a property in mid-2023 and any financial benefit he received from this. As a result of the manner in which Mr Luntley gave his oral evidence to the Tribunal at the hearing, the Tribunal had difficulty gaining a full understanding of Mr Luntley’s financial arrangements or the level of income and financial resources available to him.
Further, there was significant non-compliance with the directions issued by the Tribunal prior to the hearing and Mr Luntley did not give the Tribunal clear or compelling reasons for this. The courts have held that, in such circumstances, the Tribunal is able to proceed to draw adverse inferences about a parent’s financial position. For example, in Agrippa and Horton (SSAT Appeal) [2010] FMCAfam 1144 (at [24] – [25]) the Federal Magistrates’ Court noted that:
There is further significance in the inconsistency between the father’s evidence to the Tribunal and the financial records. In financial proceedings under the Family Law Act 1975 a party has a duty of full and frank disclosure of all of his or her financial circumstances (Black & Kellner, (1992) 15 Fam LR 343, (1992) FLC 92-287, Weir & Weir, (1992) 16 Fam LR 154, (1993) FLC 92-338). If it is established to the Court’s satisfaction that there has been deliberate non-disclosure, “then the court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud” (Weir, above, FamLR at 158, FLC at 79,593).
In my view the same principle must apply in the assessment of child support for the same reason. If the SSAT is satisfied that a parent has made a deliberate non-disclosure of his or her financial circumstances, it should be reasonably robust in assessing the non-disclosing parent’s financial circumstances adversely to that parent and in favour of the other parent. That is not to say that it may arrive at an entirely arbitrary result, but rather that it may draw generous inferences adverse to the non-disclosing party about that party’s financial circumstances.

In the current case, both the non-compliance with directions and the manner in which Mr Luntley gave his evidence at the hearing lead the Tribunal to find that there has been deliberate non-disclosure of Mr Luntley’s financial circumstances. The Tribunal finds that, in addition to Mr Luntley’s income from employment, he has had access to significant savings to use as living expenses, income from the sale of a property and income from share-trading. The Tribunal considers that, given this access to this range of additional financial resources, the use of Mr Luntley’s adjusted taxable income significantly understates his financial position.

The earning capacity of Ms Watsons

Subsection 117(7B) of the Assessment Act requires the Tribunal to consider the following matters in determining whether a parent’s earning capacity is greater than is reflected in their income used in the administrative assessment:
·   Whether the parent:
oIs not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i)); and/or
ohas reduced their weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii)); and/or
ohas changed their occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
·   If the parent’s decision about their work arrangements is not justified by either their caring responsibilities (subparagraph 117(7B)(b)(i)) or their state of health (subparagraph 117(7B)(b)(ii)); and
·   If the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).
The Tribunal finds that Ms Watsons is working, has not reduced her weekly hours of work in the relevant period and has not changed her occupation, industry or working pattern. The Tribunal finds that it is not open to make an earning capacity determination in respect of Ms Watsons’ circumstances.

The earning capacity of Mr Luntley

The Tribunal has noted, above, that Mr Luntley’s most recent employment commenced in September 2022 and ceased on 3 November 2023. In the directions issued to Mr Luntley after he notified the Tribunal that his employment had ceased, the Tribunal sought written submissions from Mr Luntley in response to the following information:
The Tribunal notes that it may need to consider the issue of earning capacity within the context of whether it is just and equitable to depart from the administrative assessments of child support. The earning capacity criteria are set out at subsection 117(7B) of the Child Support (Assessment) Act 1989 as follows:
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.
Mr Luntley is invited to comment on the above legislative criteria and whether these apply to his circumstances, given his recent cessation of employment.

No response was received from Mr Luntley to this request for submissions.
As to the earning capacity criteria, the Employment Separation Certificate provided to the Tribunal states that Mr Luntley voluntarily ceased his employment. The Tribunal finds from this information that as of 4 November 2023 Mr Luntley was not working despite ample opportunity to do so. The first criteria is met.
There is no evidence before the Tribunal that Mr Luntley’s decision to cease employment was due to caring responsibilities or health concerns. The second criteria is met.
In terms of the third criteria, the Tribunal has had regard to the manner in which Mr Luntley gave his evidence at hearing about his financial arrangements, to the timing of his decision to cease his employment and to his lack of response to the directions issued by the Tribunal inviting him to comment on the relevant earning capacity criteria. The Tribunal finds that Mr Luntley has not demonstrated that it was not a major purpose of his decision to cease work to affect the administrative assessment of child support. The third criteria is also met.
The Tribunal therefore finds that, as of 4 November 2023, Mr Luntley has had an unexercised earning capacity of $144,796 per annum from employment.

The necessary commitments of Ms Watsons

Ms Watsons provided a Statement of Financial Circumstances to the Tribunal in which she estimates household expenditure for herself and the two children of $2,954 per week. A significant proportion of this amount ($1,325 per week) relates to the schooling costs of the children.
As noted above, the Tribunal is of the view that Ms Watsons has a high level of discretionary expenditure on top of her stated household expenses but is unsure of how these additional costs are being funded. What the Tribunal does observe, however, is that Ms Watsons’ level of taxable income from employment is insufficient to meet her regular household expenses.

The necessary commitments of Mr Luntley

Mr Luntley also provided a Statement of Financial Circumstances to the Tribunal in which he states his household expenses amount to $1,235 per week. Of this amount, $711 is for “rent/mortgage”. At the time of completing the Statement of Financial Circumstances, Mr Luntley was receiving gross income of $2,788 per week, which the Tribunal noted was in excess of his stated weekly household expenses.

The direct and indirect costs incurred by Ms Watsons in providing care for the two children

The legislation requires the Tribunal to consider any direct and indirect costs incurred by the carer entitled to child support in providing care for the child. The circumstances of this case are somewhat unusual in that Ms Watsons is on a reasonable salary given the low amount of hours she works each week, which she appeared to acknowledge in her evidence to the Tribunal at the hearing. Given this, and while Ms Watsons has full-time care of the children and is working hours around their needs, the Tribunal cannot be satisfied that there is any level of income being foregone by Ms Watsons at present.

Hardship

Paragraph 117(4)(g) of the Assessment Act requires the Tribunal to consider any hardship that would be caused to Ms Watsons or Mr Luntley, or to [Child 1] or [Child 2], or to any child or other person that the parties have a duty to support, by the making of, or the refusal to make, a departure determination.
The Tribunal accepts that Ms Watsons has a significant level of expenses for the children relating to their schooling costs and [Child 2]’s special needs and that she is currently meeting the entirety of these costs. The Tribunal finds that Ms Watsons, [Child 1] and [Child 2] would experience a level of hardship if the Tribunal were to refuse to make a departure determination.
Given Mr Luntley’s recent income had been sufficient to meet his household costs, and given the Tribunal has found Mr Luntley has also had access to other savings, funds from the sale of a property and share-trading activity, the Tribunal finds that Mr Luntley would not face hardship if the Tribunal were to make a departure determination in this matter to reflect a more equitable distribution of costs borne for the two children of the assessment.

What is the proposed departure determination in this case?

The Tribunal considers that any departure determination made by the Tribunal should reflect the intention of the parties that the children are to be educated at [College 1] from 2022 onwards. The express intention of the parties arising from the mediation session they attended was that they should share these costs equally. The evidence before the Tribunal is that, from sometime around mid-2022, Mr Luntley ceased contributing to the schooling costs of the children. The Tribunal intends to increase child support payable by Mr Luntley from 30 August 2022 to reflect his half contribution to the children’s schooling. The semester 2 costs for [Child 1] and [Child 2] in 2022 totalled $29,995 and the Tribunal finds that Mr Luntley should contribute to half of these costs during 2022, of $14,997, between 20 August 2022 and 31 December 2022.
The schooling costs for the children for 2023 total $67,336 and the Tribunal considers that Mr Luntley should contribute to half of these costs, or $33,668. The best evidence before the Tribunal is that the 2024 costs, recently advised to Ms Watsons, total $37,494 for each child and the Tribunal finds that Mr Luntley should again contribute to half of the schooling costs during 2024.
As to the parties’ incomes, the Tribunal considers it appropriate to maintain Ms Watsons at her 2020/2021 adjusted taxable income during 2023 and 2024, to reflect her ability to meet a higher level of household expenses than her taxable income would suggest, in addition to the discretionary expenditure indicated in her bank statements. The Tribunal finds that Mr Luntley has an unexercised earning capacity of $144,796 from ceasing his employment voluntarily in November 2023.
If the Tribunal varies Ms Watsons’ adjusted taxable income to $258,543 and Mr Luntley’s to $144,796, Mr Luntley is required to pay child support in the range of $13,000 per annum from August 2022 and in the range of $14,588 per annum from March 2023 when [Child 1] turned 13 years of age. Increasing Mr Luntley’s adjusted taxable income by, for example, a notional $50,000 per annum to reflect the other financial benefits he appears to have access to, has a relatively limited impact on the amount of child support payable. Given this, the Tribunal intends to vary each parent’s adjusted taxable income to the above amounts to reflect their recent circumstances and to reflect Mr Luntley’s ongoing unexercised earning capacity.
The Tribunal considers it appropriate to increase child support payable to reflect the costs being incurred by Ms Watsons for [Child 2]’s special needs. The Tribunal finds that increasing child support by $3,237 per annum for the 2023 and 2024 calendar years ensures that Mr Luntley is contributing to [Child 2]’s ongoing additional costs. Given the conclusions drawn by the Tribunal about Mr Luntley’s circumstances, the Tribunal was not persuaded that by taking this approach Mr Luntley would be placed into financial hardship.
The Tribunal considers it appropriate to commence a departure determination from 30 August 2022, being the date on which Ms Watsons made a departure application to Child Support. The Tribunal considers that a departure determination should be extended out to the end of the 2024 calendar year. This provides the parties a level of certainty going forward but also allows reconsideration at that point, if appropriate to do so, of a range of matters that the Tribunal has been unable to determine with any level of certainty. These include both parents’ actual levels of income and access to financial resources that make them each able to maintain a high level of assets with significant discretionary expenditure, the ongoing costs of [Child 2]’s special needs as he moves into secondary schooling and any further employment arrangements commenced by Mr Luntley.
For the above reasons, the Tribunal intends to make a departure determination on the following terms:
·For the period 30 August 2022 to 31 December 2024, Ms Watsons’ adjusted taxable income is varied to $258,543 and Mr Luntley’s adjusted taxable income is varied to $144,796.
·For the period 30 August 2022 to 31 December 2022, child support payable by Mr Luntley is increased by $14,997 to reflect the schooling costs of the children.
·For the period 1 January 2023 to 31 December 2023, child support payable by Mr Luntley is increased by $33,668 to reflect the schooling costs of the children.
·For the period 1 January 2024 to 31 December 2024, child support payable by Mr Luntley is increased by $37,494 to reflect the schooling costs of the children.
·For the period 1 January 2023 to 31 December 2024, child support payable by Mr Luntley is increased by $3,237 per annum to reflect [Child 2]’s special needs.

Issue 3 – Is it otherwise proper to make a departure determination?

The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Assessment Act. Ms Watsons stated in her Statement of Financial Circumstances that she is not currently receiving family tax benefit and the Tribunal decided that any departure determination made by the Tribunal is unlikely to have any impact on the public purse. The Tribunal therefore concluded that it is also otherwise proper to make the proposed departure determination and has affirmed the decision under review.

DECISION

The Tribunal sets aside the decision under review and substitutes its decision that:

For the period 30 August 2022 to 31 December 2024, Ms Watsons’ adjusted taxable income is varied to $258,543 and Mr Luntley’s adjusted taxable income is varied to $144,796.
For the period 30 August 2022 to 31 December 2022, child support payable by Mr Luntley is increased by $14,997 to reflect the schooling costs of the children.
For the period 1 January 2023 to 31 December 2023, child support payable by Mr Luntley is increased by $33,668 to reflect the schooling costs of the children.
For the period 1 January 2024 to 31 December 2024, child support payable by Mr Luntley is increased by $37,494 to reflect the schooling costs of the children.
For the period 1 January 2023 to 31 December 2024, child support payable by Mr Luntley is increased by $3,237 per annum to reflect [Child 2]’s special needs.

[2023] AATA 4663

7 December 2023

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Family Law

Administrative Law

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