Adshead and Adshead (Child support)

[2022] AATA 3372

Adshead and Adshead (Child support) [2022] AATA 3372 (23 June 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC022785

APPLICANT:  Mr Adshead

OTHER PARTIES:  Child Support Registrar

Ms Adshead

TRIBUNAL:Member J Leonard

DECISION DATE:  23 June 2022

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – cost of maintaining the children are significantly affected – income, property and financial resources of the parents – special needs of children – no ground for departure established – decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been 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

1. Ms Adshead and Mr Adshead are the parents of three children. Mr Adshead has sought review of a decision of Services Australia (Child Support) about the amount of child support payable in respect of the youngest two children [Child 1] (born 2002) and [Child 2] (born 2005). The child support assessment in respect of [Child 1] ended on 31 July 2020 when she turned 18.

2. Immediately prior to 16 January 2020 [Child 1] and [Child 2] were recorded as being in the full-time care of Mr Adshead. Ms Adshead was liable to pay child support to Mr Adshead.

3. From 16 January 2020 the administrative assessment of child support required Mr Adshead to pay Ms Adshead the annual rate of child support of $15,385 which was based on his 2018–19 adjusted taxable income of $154,756 and Ms Adshead’s 2018–19 adjusted taxable income of $35,852. Mr Adshead was recorded as having a care percentage of 100% in respect of [Child 2] and 0% in respect of [Child 1]. Ms Adshead was recorded as having a care percentage of 0% in respect of [Child 2] and 100% in respect of [Child 1].

4. On 21 February 2020 Child Support accepted Ms Adshead’s application to collect ongoing child support payments.

5. On 26 February 2020 Mr Adshead applied for a departure from the administrative assessment from 16 January 2020 on the grounds that in the special circumstances of the case:

   ·     the assessment did not correctly reflect Ms Adshead’s income, property or financial resources,

   ·     the costs of maintaining [Child 1] and [Child 2] are significantly affected by the costs of educating them in the way both parents intended, and

   ·     the child support assessment is unfair because Mr Adshead has given money, goods or property to the children.

6. From 19 June 2020 [Child 2] was recorded as being in the full-time care of Ms Adshead. Mr Adshead lodged an estimate of income on 23 June 2020 of $39,107. This estimate of income was subsequently reconciled following lodgement of his 2019–20 income tax return. Mr Adshead’s 2019–20 adjusted taxable income was $115,159.

7. The administrative assessment of child support for the period 1 July 2020 to 30 July 2020 required Mr Adshead to pay to Ms Adshead the annual rate of child support of $27,830 based on his 2020–21 reconciled estimate of $126,500 and Ms Adshead’s 2018–19 adjusted taxable income of $35,852.

8. The administrative assessment of child support from 31 July 2020 reduced to $19,347 per annum when [Child 1] ceased to be a child of the assessment.

9. From 3 October 2021 Ms Adshead is recorded as having a care percentage of 0% in respect of [Child 2] and Mr Adshead is recorded as having a care percentage of 100%. The administrative assessment of child support requires Ms Adshead to pay an annual rate of child support of $4,745 which is based on her 2020–21 adjusted taxable income of $52,055 and Mr Adshead’s 2020–21 adjusted taxable income of $126,850.

10.  On 1 July 2020 a delegate of Child Support determined that a ground to depart from the administrative assessment existed due to the cost of educating [Child 1] and [Child 2] in the manner both parents intended and decided:

·    for the period 16 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Adshead is decreased by $4,891, and

·    for the period 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Adshead is decreased by $2,841.

11.  Ms Adshead applied for an extension of time to object to that decision on 14 July 2021 on the basis that Mr Adshead was not paying the school fees. At the time the objection was lodged, the assessment was based on Mr Adshead’s 2021–22 estimate of $26,071 and Ms Adshead cross-applied for a departure on the basis that the assessment did not correctly reflect Mr Adshead’s income, property or financial resources.

12.  The extension of time was granted. On 27 October 2021, an objections officer allowed the objection and decided that from 16 January 2020 the child support assessment will be based on the administrative assessment as none of the grounds for departure were established.

13.  Mr Adshead applied to the Tribunal to have the objections officer’s decision reviewed. The Tribunal hearing took place on 23 June 2022. Mr Adshead and Ms Adshead appeared by conference telephone and gave evidence under affirmation. In reaching its decision, the Tribunal has considered the oral evidence given during the hearing together with the documentation provided by Child Support (545 pages), Mr Adshead (A1 to A238) and Ms Adshead (B1 to B12).

CONSIDERATION

The legislative framework

14. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used which takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent. A parent may apply for a departure from the assessment, under Part 6A of the Act, in certain circumstances. However, the legislative intent is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. Under subsection 98C(1) of the Act, a change of assessment can be made only if:

a.    a ground (or more than one ground) for departure exists; and

b.    departure from the administrative assessment would be:

i.just and equitable as regards [Child 1] and [Child 2] and each parent; and

ii.otherwise proper.

15.  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 range of determinations, prescribed in section 98S of the Act, which include varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Ground for departure

16.  Mr Adshead clarified at the hearing that he did not intend to seek a departure from the administrative assessment on the basis that the child support assessment is unfair because he has given money, goods or property to the children.

Are the costs of maintaining [Child 1] and [Child 2] significantly affected because they are being educated in the manner expected by their parents?

17.  Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure in the special circumstances of the case where the cost of maintaining the child is significantly affected because he or she is being educated in the manner that was expected by the parents.

18.  The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.

19.  The children had attended a Catholic primary school and Mr Adshead stated it was intended that they be educated in a Catholic secondary school. Ms Adshead was living in the United Kingdom when the children were enrolled in [College 1] by Mr Adshead. He enrolled the children and took on responsibility for their school fees. In 2020 [Child 1] was in Year 12 and [Child 2] was in Year 9. The fees were $6,105 and $3,768 per annum respectively.

20.  Ms Adshead stated the children were enrolled at [College 1] without her knowledge. Mr Adshead could have contacted her in the United Kingdom if he chose to. When [Child 1] came to live with her in January 2020 she wanted to continue her education at [College 1] and Ms Adshead did not explore other possibilities. Similarly, when [Child 2] came to live with her in September 2021 she wanted to continue attending [College 1] and Ms Adshead supported that decision. Ms Adshead had to re-enrol [Child 2] at [College 1] once she came to live with her as Mr Adshead had un-enrolled her. Ms Adshead provided bank transactions which showed that in the period 14 May 2021 to 9 September 2021 she transferred amounts totalling $544 to [College 1] in respect of [Child 2].

21.  Mr Adshead stated the school fees are in arrears and he has entered into a payment arrangement of $250 per week with [College 1] and intends to pay the outstanding fees in respect of [Child 2] and [Child 1]. This evidence was not disputed by Ms Adshead.

22.  Although Ms Adshead did not sign the enrolment form for [Child 1] and [Child 2] when they commenced at [College 1], she did not propose alternative schools when the children came into her care and she supported their decision to remain at [College 1]. The Tribunal finds that [Child 1] and [Child 2] were being educated in the manner expected by the parents.

23.  When the original decision maker decided to reduce the annual rate of child support payable by Mr Adshead from 16 January 2020, the assessment at that time was based in part on Mr Adshead’s income estimate of $39,107. Child Support found that the cost of educating the children was significant compared to the total cost of the children under the administrative formula. As later determined, Mr Adshead’s actual 2019–20 adjusted taxable income was $115,159 and his 2020–21 adjusted taxable income was $126,850.

24.  Mr Adshead was admitted to practise [discipline] in 2014. Initially, he was operating as a sole trader and in approximately October 2019 he established a company. He stated that his capacity to support the children is significant. He draws a wage, has a shareholder loan, and the company meets the costs of a vehicle. Mr Adshead raised concerns with the unfairness of the situation and stressed that for a number of years he struggled and he received no child support from Ms Adshead. He believes she had access to significant financial resources through her husband’s business and that she was receiving income from the business in 2019. He considers that it is unfair that he was liable for child support for [Child 1] from 16 January 2020 while he was also paying her school fees and he had not received child support from Ms Adshead when he had 100% care of the children. The Tribunal notes that in February 2016 Child Support refused to make a change to the child support administrative assessment.

25.  In relation to Mr Adshead’s application, the issue the Tribunal must consider is whether the cost of educating [Child 1] and [Child 2] in the manner both parents expected significantly affects the cost of maintaining them.

26.  The cost of the children allowed for in the assessment from 1 July 2020 is $15,393 for each child, however because the assessment did not continue for [Child 1] beyond her eighteenth birthday, Mr Adshead was not liable to pay child support in respect of her from 30 July 2020. Mr Adshead met the cost of [Child 1]’s education, but this did not significantly affect the cost of maintaining her.

27.  The cost of educating [Child 2] was $3,768 in 2020 and approximately $5,500 in 2021. [Child 2] returned to live full-time with Mr Adshead in October 2021. Mr Adshead’s adjusted taxable income in 2020–21 was $126,850 and he has financial resources available to him through operating through a company structure. The cost of maintaining [Child 2] under the formula was $23,285. Mr Adshead stated his capacity to support the children is significant. The Tribunal finds that the cost of maintaining [Child 2] was not significantly affected because of the costs of educating her in the manner expected by the parents. The Tribunal finds that the provisions of subparagraph 117(2)(b)(ii) of the Act are not established and there is no ground to depart from the administrative assessment on this basis.

The income, property and financial resources of the parents

28.  The Act provides, as grounds for departure from the administrative assessment of child support (in subparagraph 117(2)(c)(ia)):

(c) 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.

29.  The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

30.  Ms Adshead is employed full-time and earns $52,598 per annum. She is partnered, and stated she is a ‘silent director’ of her husband’s business. She denied receiving income from her husband’s business in 2020 or 2021. She stated she believes her husband earns more than she does but she has not discussed his income with him and does not know what he earns.

31.  Ms Adshead did not comply with the Tribunal’s directions to provide a Statement of Financial Circumstances, bank statements or personal income tax returns for the 2019–20 and 2020–21 financial years.

32.  The Tribunal may draw adverse inferences against a party where that party fails to comply with a direction to give information or evidence to the Tribunal. The Tribunal was hampered by Ms Adshead’s failure to provide documents that would assist to determine her financial circumstances. The Tribunal infers that Ms Adshead has access to financial resources or income in addition to her adjusted taxable income as determined by the Australian Taxation Office.

33.  Ms Adshead raised concerns with the administrative assessments that were based on estimates of income provided by Mr Adshead in 2020 and 2021. She stated she had not realised that those estimates had been reconciled with Mr Adshead’s adjusted taxable income as notified by the Australian Taxation Office and stated she was unaware that Mr Adshead owed arrears of child support as a consequence. She did not submit that the use of his adjusted taxable income resulted in an unjust or inequitable determination of the financial support payable by him in respect of [Child 1] and [Child 2].

34.  In 2019 Mr Adshead established a company from which he draws a salary. The company operated at a loss in 2019–20 and returned a profit of $72,749 in 2020–21. A business may be able to deduct certain expenses from income for tax purposes and as a result legitimately may have a reduced income or may even run at a loss. These deductible expenses can result in a child support assessment that does not take into account the full financial resources available to the parent. In these cases, assessing child support on the basis of taxable income can result in an unjust and inequitable level of child support.

35.  However, because the income, property and financial resources of Ms Adshead are unknown, the Tribunal could not be satisfied that the application of the administrative assessment of child support results in an unjust or inequitable determination of the level of child support payable under the administrative assessment.

The special needs of the children

36.  Subparagraph 117(2)(b)(ia) of the Act provides a ground for departure in the special circumstances of the case where the cost of maintaining the child is significantly affected because of the special needs of the child.

37.  Ms Adshead stated she incurred expenses of $6,325 and $6,500 for [Child 2]’s and [Child 1]’s orthodontic treatment in 2021 and her husband assisted with the costs. She stated she is paying him back.

38.  There is no documentary evidence to support Ms Adshead’s claims that the cost of the children’s orthodontic treatment significantly affected her capacity to support [Child 1] and [Child 2] and the Tribunal did not accept her oral evidence on this point. The Tribunal finds no reason to depart from the administrative assessment on the basis of the costs of orthodontic treatment.

Conclusion

39.  Taking into consideration all of the factors present in this case, the Tribunal determines that a ground for departure has not been established.

DECISION

The decision under review is affirmed.