DIVISION: Social Services & Child Support Division

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

• For the period from 24 January 2019 to 30 June 2019, Mr Georgiev's adjusted taxable income is varied to $110,000;
• For the period from 1 July 2019 to 31 December 2020, Mr Georgiev's adjusted taxable income is varied to $84,984; and
• For the period from 1 July 2019 to 31 December 2020, Ms Georgiev's adjusted taxable income is varied to $44,228.

CHILD SUPPORT - departure determination - income, property and financial resources of both parents - benefits derived from business - 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 so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

1. Mr and Ms Georgiev are the parents of one child. Ms Georgiev's care percentage for the purposes of assessing child support at the time of the objection decision was recorded as 100%.
2. Ms Georgiev lodged an application with the Department of Human Services (now Services Australia) (the Department) on 18 June 2019 seeking a departure from the administrative assessment of child support. At the time of the application, Mr Georgiev was liable to pay an annual rate of child support of about $10,855. This was calculated using an adjusted taxable income (ATI) of $75,900 for Mr Georgiev and an ATI of $58,609 for Ms Georgiev. From 1 July 2019, Mr Georgiev's ATI changed to $40,078.
3. On 2 October 2019, the Department found that grounds to depart existed and varied the assessment by setting an annual rate payable by Mr Georgiev to Ms Georgiev as follows:
   • $17,462 for 2019;
   • $17,986 for 2020;
   • $18,526 for 2021;
   • $19,082 for 2022.
4. Mr Georgiev objected to this decision and on 7 January 2020 an objections officer allowed the objection and set aside the earlier decision and instead decided as follows:
   • For the period from 24 January 2019 until there is a terminating event which ends the case, Mr Georgiev's ATI is set at $115,000 to be increased by the Child Support Inflation Factor on 30 June 2020 and on 30 June each year thereafter.
5. Mr Georgiev has sought a further review of this decision.
6. Mr Georgiev submits that his ATI does not reflect his true income and financial resources and should be lower such that the assessment of child support is unfair.
7. The Tribunal hearing was conducted on 3 June 2020. The parties appeared by conference telephone. In reaching its decision, the Tribunal has considered the sworn evidence given by both parties at the hearing, together with the documentation provided by the Department (exhibit 1), the documentation provided by Mr Georgiev (exhibit 2) and the documentation provided by Ms Georgiev (exhibit 3).

1. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable by the liable parent. The Act also provides for a departure from the administrative assessment in certain circumstances.
2. A departure from an administrative assessment may be made pursuant to section 98C of the Act if the following matters are established:
   • One or more than one of the grounds for departure referred to in subsection 98C(2) exists;[1]
   • A departure is just and equitable as regards the children and each parent;[2] and
   • It is otherwise proper to make a departure decision.[3]

Is the assessment unfair because of the income, property, or financial resources of either parent?

1. Ms Georgiev's initial change of assessment application sought a departure from the assessment in place at the time on the ground that, in the special circumstances of the case, Mr Georgiev's income made the assessment of child support unfair because it was not reflective of his true financial position.
2. A ground to depart from the administrative assessment of child support may exist if, in the special circumstances of the case, the application of the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either parent's income, property and financial resources.[4]
3. The term "special circumstances" is not defined in the Act. In Gyselman v Gyselman [1991] FamCA 93; [1992] FLC 92-279, the Full Court of the Family Court determined that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.
4. There are a range of circumstances that may support the finding that the administrative assessment would result in an unjust or inequitable determination of the level of child support. The calculation of income and financial resources for the purposes of taxation law does not limit the Tribunal's consideration of the true resources available to a party to child support proceedings and is but one factor to be taken into account in the particular circumstances of the case.
5. In Ashcroft & Ashcroft (SSAT Appeal) [2008] FMCAfam 1250, the Federal Magistrates Court stated:

Whilst it may be legitimate for citizens to organise their financial affairs to minimise the taxation liability, it has long been recognised that the obligation to provide proper financial support for children is both a moral and legal obligation that all parents must bear to the best of their ability. It is appropriate to examine the financial affairs of parents to ensure their obligation to pay child support is not accorded less priority than obligations other than those reasonably necessary to support the payer.

1. For the purposes of the Act, a financial resource is something which is not property but from which a financial benefit can be gained.[5]
2. Mr Georgiev owns two commercial properties from which he earns rental income. He has also been in receipt of workers' compensation payments since about June 2019 due to some physical and mental health issues which have prevented him from working from at least April 2019.
3. Mr Georgiev also receives a share in the income from a taxi plate that is owned by other members of his family.
4. In the 2018/2019 financial year, Mr Georgiev's tax return indicates that he earned the following income:
   • $195,642 gross in rental income;
   • $4,750 in workers' compensation payments;
   • $26,250 in wages from the [Business 1]; and
   • $3,220 gross in taxi plate income.
5. This amounted to a total of $229,862. From this $116,642 in expenses associated with the rental properties was deducted as well as $43,692 which represented 50% of losses associated with a partnership with Ms Georgiev. This related to the losses sustained as a result of the parties operating a [Business 1] in that financial year.
6. The total taxable income declared by Mr Georgiev for the 2018/2019 year was $66,091.
7. Mr Georgiev told the Tribunal that he and Ms Georgiev operated a [Business 1] via a partnership from about May 2018 until early 2019. In November 2018 the parties separated.
8. Mr Georgiev said that the [Business 1] ended up being repossessed and ultimately was taken over by his son.
9. Mr Georgiev has provided evidence of his payment of expenses that appear to relate to the [Business 1] in the 2018/2019 year which amount to up to $40,000 including workers' compensation premiums, wages, paying for utilities and supplies and GST liabilities. The Tribunal is therefore prepared to accept that the $43,692 loss recorded on his tax return for the 2018/2019 year was an actual loss which ought to be taken into account in relation to Mr Georgiev's income for that period. The Tribunal notes that a similar loss has been taken into account in relation to Ms Georgiev's income for the same period for the purposes of assessing child support.
10. Ms Georgiev raised an issue regarding the expenses claimed in relation to the rental income earnt by Mr Georgiev. She submitted that the $70,000 deduction in relation to interest paid on a mortgage held by both parties was not a business expense because it related to the mortgage held over the matrimonial home and not the commercial properties. Ms Georgiev contended that the commercial properties were unencumbered.
11. Mr Georgiev told the Tribunal that in 2017, the parties restructured a series of loans that were held over four properties, being the two commercial properties mentioned above, the matrimonial home and an investment property in [Suburb 1]. The restructure of these loans resulted in all of them being secured against the matrimonial home, rather than all four properties which resulted in the parties securing a better interest rate. However, the repayments of this interest only loan were continued to be met by the income received from the rent of the commercial properties at least up until August 2019 when Mr Georgiev stopped paying the rent into the parties' joint account and had it paid into a personal account he set up following separation.
12. So while it would seem that from 2017 the loan was only secured by the matrimonial home, the income from the commercial properties was still used to meet these repayments such that the Tribunal finds that these interest payments were amounts that Mr Georgiev did not have access to during the 2018/2019 year. Therefore, the Tribunal does not consider these payments should be added back to his income for that period.
13. The Tribunal also has before it copies of Mr Georgiev's bank account and credit card statements. A review of these reveal that during the period from December 2018 to June 2019, Mr Georgiev paid about $51,533 towards his [credit] card. Taking into account that some of this spending was related to expenses associated with the [Business 1] during that period (about $14,755 according to Mr Georgiev's calculations/notations on the statements), this amounts to about $36,000 in discretionary spending over a seven month period.
14. During this time Mr Georgiev also was paying $700 rent per week. This amounts to about $19,600 for that same period.
15. The discretionary spending on the credit card, if annualised, amounts to about $61,000 per annum net available to Mr Georgiev in the 2018/2019 year. Adding to this the rent paid between December 2018 and June 2019, an amount of $80,600 results. The Tribunal therefore is satisfied that Mr Georgiev had available to him during the 2018/2019 year about $80,600 net in income and financial resources. Child support is assessed on gross income and thus, this figure ought to be grossed up. This amounts to about $110,000 gross per annum.
16. The Tribunal therefore finds that despite Mr Georgiev's taxable income being reported as $66,019 for the 2018/2019 year, he in fact had access to at least about $110,000 gross in income and financial resources.
17. At the time of the change of assessment application, the ATI applied to the assessment of child support for Mr Georgiev was $75,900. Given the significant difference between this figure and the figure arrived at above by the Tribunal, in the special circumstances of the case, the Tribunal finds that Mr Georgiev's income makes the assessment of child support unfair such that a ground to depart has been established.

Issue 2 - Would departure from the formula assessment be just and equitable?

1. Subsection 117(4) of the Act sets out the criteria that must be considered in determining whether it would be just and equitable as regards the children and the parents to make a departure order. This involves a consideration of the following:

(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and

(c) the income, earning capacity, property and financial resources of the child; and

(d) the income, property and financial resources of each parent who is a party to the proceeding; and

(da) the earning capacity of each parent who is a party to the proceeding; and

(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support;

(ii) any other child or another person that the person has a duty to maintain; and

(f) the direct and indirect costs incurrent by the carer entitled to child support in providing care for the child; and

• (A) the child; or
• (B) the carer entitled to child support;

by the making of, or the refusal to make, the order; and

• (A) the liable parent; or
• (B) any other child or another person that the liable parent has a duty to support;

by the making of, or the refusal to make, the order; and

(iii) to any resident child of the parent by the making of, or the refusal to make, the order.

1. Mr Georgiev's financial circumstances have been considered in some detail above.
2. Mr Georgiev lives in a rental property that his son owns and pays about $700 in rent per week. Mr Georgiev told the Tribunal that currently he is not making these payments because his financial circumstances have changed dramatically in the last couple of months as a result of the COVID-19 pandemic.
3. He estimates his average weekly household expenses to be about $1,271 but this includes the $700 rent expense that he is not currently paying. This also includes about a $150 per week contribution to the child's private school fees which the parties share the payments of under a binding child support agreement entered into by the parties in March 2020.
4. Mr Georgiev owes about $250,000 in personal loans he borrowed from family and friends in order to pay for legal fees arising from the Family Court proceedings the parties have been involved in since separation. Mr Georgiev told the Tribunal that no interest is being charged on these loans and he is to simply repay the money when he can.
5. Mr Georgiev told the Tribunal that since April 2020, he has not received any rental income from his commercial properties as the tenants, who operate cafes, have not been able to operate due to restrictions as a result of the COVID-19 pandemic. He is unsure when they will be in a position to start making rental payments again. He is still in receipt of workers' compensation payments.
6. Mr Georgiev provided to the Tribunal an estimation of his expected income and expenses for the current financial year. He estimates that his total income is likely to be about $164,445 (made up of rental income, taxi plate income and about $62,500 in workers' compensation payments) and the relevant expenses will be about $81,461, making the net amount $82,984 gross. The Tribunal accepts this evidence and considers that for the current financial year, this is an appropriate reflection of Mr Georgiev's income and financial resources.

1. Ms Georgiev is employed on a casual basis as [an Occupation 1]. In the 2018/2019 financial year, Ms Georgiev reported on her personal income tax return, a taxable income of $9,035. During that year, Ms Georgiev received about $28,446 in income from her casual work and $24,280 in net rental income but because of the application of the loss of $43,691 from the partnership, this was reduced to $9,035.
2. Ms Georgiev told the Tribunal that her income has reduced recently as a consequence of the COVID-19 pandemic restrictions which have resulted in her only receiving about five hours of work a week. She stated that she was unlikely to have any work available at the [workplace] for the rest of the year.
3. Ms Georgiev is still receiving rental income from the [Suburb 1] property and she stated that this has not changed. Ms Georgiev estimates that she receives about $543 net per week in rental income which amounts to about $28,236 per annum.
4. Ms Georgiev said that the work she is receiving pays about $47 per hour which, at five hours per week, is about $235 per week. A review of Ms Georgiev's bank account statements shows that Ms Georgiev was, prior to the pandemic, receiving about $1,411 per month from her casual employment or $14,112 in total over the period from July 2019 to April 2020. Adding $235 per week for the months of May and June, a total of about $15,992 results. Adding this to the rental income, a figure of $44,228 is arrived at.
5. Ms Georgiev lives with the child, the subject of the assessment and her adult daughter in the matrimonial home that she received as part of the property settlement arrived at between the parties. Ms Georgiev told the Tribunal that she had to borrow about $550,000 in order to take over the matrimonial home and her repayments will be about $2,300 per month.
6. Ms Georgiev also borrowed a total of $1.18 million from her father in order to buy out her share of the property and pay for her legal fees. Ms Georgiev told the Tribunal that she has a loan agreement with her father where she will be repaying him interest only repayments (being charged about 3.25% on the principle) starting from next month.
7. Ms Georgiev estimates her average weekly expenses amount to about $1,773, taking into account that Mr Georgiev now pays half of the education expenses. Her adult daughter contributes to some of the household expenses and her mortgage repayments are now $575 per week instead of $1,185 per week.

Consideration of whether a departure is just and equitable

1. As outlined above, the Tribunal finds that Mr Georgiev's income and financial resources are best reflected by a figure of $110,000 per annum for the 2018/2019 year and $84,984 for the 2019/2020 year.
2. Both parties have in the last year, borrowed significant funds to pay for their legal fees associated with Family Court proceedings. Given the quantum of those fees are similar and both parties are required to repay these funds at some stage, the Tribunal does not intend to take these funds into account in relation to either party's financial resources.
3. Ms Georgiev told the Tribunal that she suspected that Mr Georgiev was still working in the [Business 1] now owned by his son and he was likely receiving cash for this work. She stated that she had "professional evidence" of this but this evidence was not submitted to the Tribunal and therefore it cannot be taken into account.
4. Mr Georgiev denied still working in the [Business 1] and stated that he has suffered from a number of medical issues since mid-2019 which have prevented him from working.
5. The Tribunal has before it a letter from Mr Georgiev's doctor which indicates that at least from April 2019, Mr Georgiev has been unable to work due to a number of medical issues and the Tribunal also has before it evidence of Mr Georgiev receiving workers' compensation payments since June 2019 to date. Based on this evidence and the fact that there is no evidence of Mr Georgiev working currently or receiving any other income apart from that already identified, the Tribunal finds that there is no basis to conclude that Mr Georgiev is still working in the [Business 1].
6. If an ATI of $110,000 was applied to the assessment of child support, an annual rate of about $16,016 results or $308 per week.
7. In 2018/2019, Mr Georgiev was able to spend at least $36,000 on discretionary expenses over a period of about seven months which amounts to about $1,285 per week. On this basis the Tribunal concludes that Mr Georgiev has the capacity to pay the rate produced by an ATI of $110,000.
8. In the current financial year, the Tribunal finds that a figure of $84,984 appropriately represents Mr Georgiev's income for that period. If this is applied to the assessment of child support, an annual rate of about $13,915 results or $267 per week. Again, the Tribunal concludes, based on Mr Georgiev's average weekly expenses and discretionary spending that he has the capacity to pay this amount of child support.
9. The Tribunal therefore considers that it is just and equitable to vary Mr Georgiev's ATI to $110,000 for the period from 24 January 2019 when the child support case commenced until 30 June 2019. From 1 July 2019, the Tribunal considers it appropriate to vary Mr Georgiev's ATI to $84,984.

1. Ms Georgiev's income for the 2018/2019 year is appropriately reflected in her personal income tax return for that year.
2. However, from 1 July 2019, the Tribunal has found that Ms Georgiev's income and financial resources are best reflected by a figure of $44,228, particularly given there will be no partnership losses to be accounted for in this financial year.
3. Given that the current ATI for Ms Georgiev as applied to the assessment of child support is $9,035, the Tribunal considers it appropriate to vary Ms Georgiev's ATI to $44,228 from 1 July 2019 so that her ATI appropriately reflects her income in the assessment.

1. Ms Georgiev made her change of assessment application on 18 June 2019, but the child support case commenced on 24 January 2019. Given the Tribunal has made findings regarding Mr Georgiev's income for the 2018/2019 year, the Tribunal considers it appropriate that the decision to vary his ATI should commence from 24 January 2019. The decision to vary Ms Georgiev's ATI will commence from 1 July 2019.
2. The Tribunal considers in circumstances where both parties' financial circumstances are uncertain at this time, that the decision to vary both parties' ATIs should end on 31 December 2020 so that their circumstances can be further reviewed after that.

Issue 3 - Is a change of assessment otherwise proper?

1. In considering whether a departure is otherwise proper, the Tribunal must take into account subsection 117(5) of the Act which requires the Tribunal to have regard to the nature and duty of a parent to maintain a child and the effect that the making of the order would have on any entitlement of the child or carer entitled to child support to an income tested pension, allowance or benefit or the rate of any income tested pension, allowance or benefit payable to the child or the carer.
2. Ms Georgiev is not in receipt of family tax benefit in respect of the child. The decision of the Tribunal therefore will have no impact upon the cost to the community. The Tribunal thus considers the departure decision is otherwise proper in the circumstances of this case.

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

• For the period from 24 January 2019 to 30 June 2019, Mr Georgiev's adjusted taxable income is varied to $110,000;
• For the period from 1 July 2019 to 31 December 2020, Mr Georgiev's adjusted taxable income is varied to $84,984; and
• For the period from 1 July 2019 to 31 December 2020, Ms Georgiev's adjusted taxable income is varied to $44,228.

[2] See sub-subparagraph 98C(1)(b)(ii)(A).

[3] See sub-subparagraph 98C(1)(b)(ii)(B).

[5] See Costa & Fairbank [2010] FMCAfam 39 and Walker & Fielding [2010] FMCAfam 32.