CHILD SUPPORT - departure determination - income, property and financial resources - benefits derived from business - adjusted taxable income - decision under review set aside and substituted

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

1. Mr Funn and Ms Holmes are the parents of [Child A] born in February 2008, [Child B] born in November 2009 and [Child C] born in May 2012. A child support case commenced on 30 March 2022.
2. Until 10 March 2024, the child support assessment reflected that Mr Funn had 38% care of all three children, and Ms Holmes had 62% care. From 11 March 2024, the child support assessment reflects that Mr Funn had 44% care of [Child A] and [Child B] and Ms Holmes had 56% care. In respect of [Child C], from 11 March 2024 to 5 February 2025, the child support assessment reflected that Mr Funn had 33% and Ms Holmes had 67% care, and from 6 February 2025 the child support assessment has reflected that Mr Funn has 38% care of [Child C] and Ms Holmes has 62% care.
3. On 27 June 2024, Mr Funn applied to Services Australia - Child Support (Child Support) for a departure from the administrative assessment of child support, on the basis of the income, property and financial resources of both parents. On 25 September 2024, a Child Support decision maker decided that there would be no departure from the existing administrative assessments as no ground for departure had been established.
4. Mr Funn objected to Child Support's decision on 17 October 2024. On 4 December 2024, a Child Support objections officer affirmed the decision made on 25 September 2024.
5. On 10 December 2024, Mr Funn applied to this Tribunal for an independent review of Child Support's decision. A hearing took place on 19 August 2025. Mr Funn and Ms Holmes attended the hearing by telephone and gave sworn evidence. The Tribunal had before it documents submitted by Child Support numbered 1 to 655 and C1 to C31, documents submitted by Mr Funn numbered A1 to A78 and documents submitted by Ms Holmes numbered B1 to B2.
6. Following the hearing the Tribunal issued further directions allowing the parties to file additional documentary evidence. Further documents were received from both parties and were numbered A79 to A82 (documents received from Mr Funn) and B3 to B29 (documents received from Ms Holmes). Copies of those documents were provided to the parties following the hearing. No further submissions were received from either party in response.

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988.
2. The Act provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents' adjusted taxable incomes and their percentages of care for the children. From 1 April 2024 to 30 June 2024, Mr Funn was assessed as being liable to pay child support to Ms Holmes at an annual rate of $34,040, based on an adjusted taxable income for Mr Funn of $1,039,718 and an adjusted taxable income for Ms Holmes of $54,060. From 1 July 2024, Mr Funn was assessed as being liable to pay child support to Ms Holmes at an annual rate of $7,712, based on Mr Funn's estimated income of $85,253.
3. The Act also provides for a departure from the administrative assessment in particular circumstances. Section 98B of the Act provides that, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Registrar in writing, requesting a determination to depart from the provisions of the Act in respect of the administrative assessment. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

(i) ... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

(ii) ... it would be:

(A) just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

to make a particular determination under this Part; ...

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8A, provides as a ground for departure:

that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

(ia) because of the income, property and financial resources of either parent; or

1. Relevantly, the child support assessments that are currently in place are as follows:
   • From 30 June 2023 to 5 March 2024, Ms Holmes is the parent assessed to pay child support. In that period Ms Holmes is assessed to pay an annual rate of $5,076 based on an income for Ms Holmes of $196,798 and an income for Mr Funn of $74,172.
   • From 6 March 2024 Mr Funn is the parent assessed to pay child support. From 6 March 2024 to 10 March 2024 Mr Funn is assessed to pay an annual rate of $6,882, based on incomes of $74,172 for Mr Funn and $54,975 for Ms Holmes.
   • From 11 March 2024 to 31 March 2024 Mr Funn is assessed to pay an annual rate of $5,661, based on the same incomes as in the previous period (the change in annual rate payable is due to a change in the care percentages for the children).
   • From 1 April 2024 to 30 June 2024 Mr Funn is assessed to pay an annual rate of $34,040, based on income of $1,039,718 for Mr Funn and $54,060 for Ms Holmes.
   • From 1 July 2024 to 25 September 2024 Mr Funn is assessed to pay an annual rate of child support of $7,712, based on an estimated income for Mr Funn of $85,253 and an income for Ms Holmes of $54,060.
   • From 26 September 2024 to 30 June 2025 Mr Funn is assessed to pay an annual rate of child support of between $10,133 and $10,999, based on Mr Funn's estimated income of $85,253 and Ms Holmes' estimated income of nil. The variations to the annual rate over that period were due to a change in the care percentages for [Child C], and also to [Child C] turning 13 during that period.
   • From 1 July 2025 the assessment would ordinarily use adjusted taxable incomes from 2024/25 for both parents. As neither parent has yet lodged a tax return for the 2024/25 financial year the assessment currently uses incomes determined by the Child Support Registrar of $318,534 for Mr Funn and $59,682 for Ms Holmes, resulting in Mr Funn being assessed to pay an annual rate of child support of $32,816.
2. Mr Funn told the Tribunal that he seeks a departure from the administrative assessment in respect of the child support assessment that was in place in the period from 1 April 2024 to 30 June 2024, particularly in relation to the adjusted taxable income used for him in that period, as well as the child support assessment that was in place from 26 September 2024 which utilises an estimated income for Ms Holmes of nil.
3. Mr Funn told the Tribunal that his taxable income in the 2022/23 financial year, used in the child support assessment in the child support period commencing 1 April 2024, included an amount of capital gains from the sale of a property at [Suburb 1], which was sold in approximately May 2023. Mr Funn said that following the sale of the property he was required to place the sale funds in a joint controlled account pending a property settlement between the parties. Further properties were sold during the 2023/24 financial year under the same terms. The proceeds of those sales formed part of the property pool that was distributed by a property settlement that was eventually finalised later in 2024.
4. Mr Funn said that although the proceeds from the property sales formed part of the property pool considered in the property settlement and ultimately distributed to him and Ms Holmes in accordance with the terms of the property settlement, for the purposes of capital gains tax the whole capital gain from the sale of the property at [Suburb 1] and also a property sold in the 2023/24 financial year were attributed to him and accounted for in his tax returns. Mr Funn's 2022/23 tax return shows that in that financial year Mr Funn had a taxable income of $907,002, made up mainly of salary and wages of $78,000 and a net capital gains amount of $963,715, and reduced by a net rental property loss of $132,716. The adjusted taxable income used in the child support assessment does not, pursuant to the provisions of the Act, allow a deduction for net rental property loss and so Mr Funn's adjusted taxable income in the 2022/23 financial year was $1,039,718.
5. Mr Funn's 2023/24 tax return shows that in that financial year Mr Funn had a taxable income of $198,646, made up mainly of salary and wages of $90,000 and a net capital gain of $211,947, and reduced by a net rental property loss of $102,711. Mr Funn's adjusted taxable income in the 2023/24 financial year was therefore $301,357.
6. Ms Holmes did not substantially dispute the evidence given by Mr Funn as to the capital gains amounts included in his taxable income. Ms Holmes pointed out that although the capital gains were attributed to Mr Funn for tax purposes, the actual tax payable on the capital gains was also paid out of the marital assets.
7. I am satisfied that the inclusion of the capital gains amounts that form part of Mr Funn's adjusted taxable income for the 2022/23 financial year results in an unjust and inequitable level of child support being payable by Mr Funn in the period from 1 April 2024 to 30 June 2024. It is not disputed that in reality those amounts have already been accounted for and distributed between the parents in the property settlement. To also include those amounts as part of Mr Funn's adjusted taxable income and require him to pay child support on the basis of that income effectively requires Mr Funn to account for those sums twice, once in the property settlement and then again in the child support assessment. It also ignores the fact that Ms Holmes also received benefit from those capital gains through her distribution from the property settlement.
8. The evidence before me is that in the period from 1 April 2024 to 30 June 2024, disregarding the capital gains amounts, Mr Funn's income comprised his income generated through his company, [Company 1] (the company). He also had rental income from a property that he retained as part of his distribution from the property settlement, but his costs associated with his rental properties were greater than the income generated.
9. In the 2023/24 financial year Mr Funn received salary and wage income from the company of $90,000. The company tax return for the 2023/24 financial year shows that in that year the company made a net profit of $13,418. In addition, the company contributed to expenses for which Mr Funn would be solely responsible if he were a typical pay-as-you-go employee. For example, in the 2023/24 financial year the company paid $20,149 for rent, which Mr Funn acknowledged was a contribution to the rent payable on the home in which he was living. He also received the benefit of the personal use of a motor vehicle, the value of which is accounted for in a $6,600 dividend to Mr Funn - Mr Funn said he did not actually receive that dividend in cash, it was an accounting mechanism to reflect the value of his personal use of the motor vehicle. The company also contributed to electricity costs for the home in which Mr Funn was living, but I accept that at least to some extent that reflected Mr Funn's increased actual costs of operating his business from home. Taking into account Mr Funn's salary, the personal benefits from rent and use of the motor vehicle, and the company profit which I find was a financial resource available to Mr Funn, I find that a fair income to be considered for Mr Funn in the period from 1 April 2024 to 30 June 2024 is approximately $130,000. This is significantly less than the income of $1,039,718 currently reflected in the child support assessment. Those circumstances constitute special circumstances that render the administrative assessment unjust and inequitable. Reason 8 is established.
10. The Tribunal has also considered Mr Funn's income and financial resources in the 2024/25 financial year. In that year Mr Funn received salary and wage income from the company of $86,634, slightly less than his salary in the 2023/24 financial year. A draft profit and loss statement provided by Mr Funn shows that in the 2024/25 financial year the company also had a lower net profit of $1,958, and that the company contributed $18,654 in rent. Assuming that the benefit of private use of a motor vehicle was approximately equivalent to what occurred in the 2023/24 financial year, I find that Mr Funn had income and financial resources in the 2024/25 financial year equivalent to an income of approximately $113,000.

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and the children. Regard must be had to the variety of factors set out in subsection 117(4) of the Act, which include factors such as the needs of the children, the parents' commitments and any hardship that would be caused by departing or not departing from the formula.
2. Mr Funn submitted to the Tribunal that Ms Holmes' estimated income used in the child support assessment in the period from 1 July 2024 to 30 June 2025 must be inaccurate, as he said Ms Holmes received a significant amount of money from the property settlement and so must have some income from investments at least. Ms Holmes provided the Tribunal with a copy of her 2024/25 income tax return which shows that in that financial year Ms Holmes had interest income of $64,053. She said it is her intention to buy a property when she is able to find something suitable, and when she does that the interest income will cease.
3. Apart from her income from interest, Ms Holmes told the Tribunal that she runs a small business. She initially was selling [Item 1], and then in November 2024 she opened a shop. According to Ms Holmes' 2024/25 tax return her business had income in that financial year of $137,986, and total expenses of $157,467, leaving a net loss of $19,481. There is no evidence that Ms Holmes' business has contributed to expenses for which she would ordinarily be responsible as a pay-as-you-go taxpayer. The business rents separate premises to Ms Holmes' home, and Ms Holmes said that while the business does own a vehicle it is a [type of] vehicle that she is not currently able to drive, and in any event is only permitted under the terms of its registration to travel a limited number of kilometres each year.
4. Ms Holmes told the Tribunal that she has a concern in particular about the administrative assessment that was in place in the period from 30 June 2023 to 5 March 2024, when she was assessed to be the paying parent on the basis of an income of $196,798. Ms Holmes said that she was not receiving that income in that period, and although she did not pay any child support to Mr Funn she also did not receive any child support from him in respect of that period. Ms Holmes said she has been told by Child Support that that assessment was an error, but there was nothing they could do about it.
5. It appears from a consideration of the information provided by Child Support that the income of $196,798 was an income determined by the Child Support Registrar because Ms Holmes' 2021/22 income tax return had not been lodged, and so her actual adjusted taxable income for that year was not available to Child Support, when that particular child support assessment was initially issued. Ms Holmes' actual 2021/22 adjusted taxable income of $54,975 appears to have become available to Child Support on 6 March 2024, and it was used in the child support assessment from that date. However, the usual provisions of the Act provide that where a person lodges their tax return late, the income used for them in a child support assessment will not be retrospectively reduced. Ms Holmes did not dispute that she was late in lodging her 2021/22 tax return, which she agreed was not lodged until March 2024.
6. It was open to Ms Holmes to lodge her 2021/22 income tax return earlier, or to provide Child Support with evidence of her actual 2021/22 income earlier, but it appears she did not do that. Nor did she seek a departure from the relevant child support assessment. I do not consider that it is now just and equitable to revisit the period from 30 June 2023 to 5 March 2024.
7. In respect of the needs of the children, it is not disputed that [Child A] and [Child B] attend a Catholic school, and the parents each contribute 50% of fees charged by the school. The parents also split some other costs including tutoring and some extra-curricular activities. [Child C] attends a government school. Ms Holmes said that [Child A] and [Child C] both have ADHD, but there are currently no additional costs currently associated with that. Ms Holmes said that she also maintains private health insurance for the children. As discussed with the parties in the hearing, generally costs such as private health insurance and other general costs incurred for children are taken to be already considered in the costs of children allowed for in the child support assessment, and do not constitute special circumstances.
8. On the basis of the evidence before me I am satisfied that it is appropriate to vary the adjusted taxable incomes for both parents as follows:
   • For the period from 1 April 2024 to 30 June 2024, Mr Funn's adjusted taxable income be varied to $130,000;
   • For the period 1 July 2024 to 30 June 2025, Mr Funn's adjusted taxable income be varied to $113,000;
   • For the period from 1 July 2024 to 30 June 2025, Ms Holmes' adjusted taxable income be varied to $64,053.
9. I do not consider that it is appropriate to make any further departure from 1 July 2025. The evidence is that both parents now derive income from small businesses, and there is insufficient evidence before the Tribunal to make any findings as to each parent's likely level of income going forward. It is open to either parent to make a further application for a departure from the child support assessment if they believe there are grounds to do so in respect of future child support assessments.
10. In total, the proposed departures will result in an overall reduction in Mr Funn's liability over the whole period from 1 April 2024 to 30 June 2025 in the region of $1,600 (although the exact amount will need to be calculated by Child Support). I am satisfied that this will not cause hardship to either parent or to the children.

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.
2. There is no evidence before me as to whether either parent receives family tax benefit for the children. To the extent that they do, I am satisfied that the terms of the departure result in an appropriate apportionment of financial responsibility between the parents and the community. The proposed decision is otherwise proper.

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

• For the period 1 April 2024 to 30 June 2024, Mr Funn's adjusted taxable income is varied to $130,000.
• For the period 1 July 2024 to 30 June 2025, Mr Funn's adjusted taxable income is varied to $113,000.
• For the period 1 July 2024 to 30 June 2025, Ms Holmes' adjusted taxable income is varied to $64,053