Aguilar and Aguilar (Child support)

[2020] AATA 5829

Aguilar and Aguilar (Child support) [2020] AATA 5829 (7 December 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC019430; 2020/BC019492

APPLICANT:  Mr Aguilar

OTHER PARTIES:  Child Support Registrar

Ms Aguilar

TRIBUNAL:Member S Letch

DECISION DATE:  7 December 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – redundancy payment – decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information 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. Mr Aguilar and Ms Aguilar are the parents of [Child 1], born June 2003. Both Mr Aguilar and Ms Aguilar seek a review of a decision by the Child Support Agency (CSA) to disallow Mr Aguilar’s objection to a “change of assessment” decision on 20 March 2020 which varied Mr Aguilar’s adjusted taxable income to $70,000 for the period 1 November 2019 to 31 October 2020.  

2. It is convenient to set out some extracts from the objections officer decision dated 26 June 2020 by way of background:

   …

   Mr Aguilar is the parent liable to pay child support to Ms Aguilar. The case was registered on 28 July 2017 and is collectable by Services Australia Child Support (the agency).

   For the period 1 November 2019 to 30 June 2020, Mr Aguilar is assessed to pay an annual rate of child support of $435 (Minimum Annual Rate). This assessment is based on Mr Aguilar`s 2019/20 income estimate of $0 and Ms Aguilar`s derived income of $22,313.

   For the period 1 July 2020 to 31 October 2020, Mr Aguilar is assessed to pay an annual rate of child support of $10,267. This assessment is based on Mr Aguilar`s 2018/19 adjusted taxable income of $129,292 and Ms Aguilar`s derived income of $22,313.

   As at the date of writing this decision, Mr Aguilar has outstanding arrears of $5,670.83 owing to Ms Aguilar.

   …

   Based on the above information I am satisfied [Child 1] has special needs, although I am not satisfied these special needs significantly affect the costs of maintaining [Child 1] when compared to the assessed costs in the current child support assessment.

   Reason 2 is not established.

   Reason 8A: To establish this Reason, Ms Aguilar must show that either her or Mr Aguilar’s income, property and financial resources make the child support assessment unfair.

   The evidence of each parent and other evidence available:

   In her application under this Reason, Ms Aguilar advises Mr Aguilar has resigned from his employment and that he received a lump sum payment.

   In his response, Mr Aguilar provides a copy of an affidavit (dated 9 December 2019) in which Mr Aguilar states he contracted a virus in November 2019 and was admitted to hospital on or around 11 November where he remained for a period of more than two weeks.

   Mr Aguilar advises he has not worked since this date and his claim for a Disability Support Pension was rejected.

   In his objection, Mr Aguilar advises he disagrees with the CoA decision to consider his redundancy payment as part of his financial resources for child support purposes.

   When discussing the objection, Mr Aguilar advises:

   - He did receive a payout of $53,000 from his employment and advises he has received no income since this time.

   - He is not eligible to receive Centrelink benefits until September 2020 as the payout received prevents him from being eligible.

   - He has paid off loans and solicitors fees with the lump sum received.

   - The parents property settlement has considered child support matters.

   Mr Aguilar claims he has no money remaining and no source of income. When asked how he is meeting his daily expenses, Mr Aguilar advises he does not have many expenses as he has prepaid his bills, he claims to borrow money from other people and is financially supported by his wife who is in receipt of a carer`s pension.

   Mr Aguilar provides various documents in support of his objection including but not limited to copies of medical certificates, documents relating to the parents property settlement negotiations along with a copy of the parent`s final orders for property settlement (dated 11 February 2020).

   Mr Aguilar subsequently provided a copy of a letter from Centrelink (dated 16 April 2020) which advises that an income maintenance period has been applied because of money Mr Aguilar received for redundancy payments and/or leave entitlements such as annual leave, sick leave or long service leave. The letter states that the income maintenance period will start from 28 October 2019 and will end on 29 November 2020.

   When discussing the objection, Ms Aguilar advises she does not agree with the claims made by Mr Aguilar. Ms Aguilar advises there was a proposal for a lump sum payment for Child Support through their property settlement negotiations, however this was declined.

   Ms Aguilar advises she is aware Mr Aguilar has prepaid his bills with the lump sum he received as this was noted in property settlement.

   …

   The income currently used in the assessment is $0. Based on the above information I am satisfied special circumstances exist. I also find Mr Aguilar's current financial resources and income is significantly higher and I am satisfied the child support assessment is unfair because he has a greater capacity than the child support assessment currently indicates.

   Reason 8A is established.

   …

   The most recent information available from Mr Aguilar`s doctor (letter dated 4 February 2020) refers to Mr Aguilar being extremely incapacitated` and that his vocational possibilities looking forward are severely limited, if not negligible.`

   Based on the information before me, I do not find Mr Aguilar has an unexercised earning capacity and I am not satisfied the child support assessment is unfair.

   Reason 8B is not established.

   …

   Ms Aguilar is currently assessed on her a 2018/19 deemed income of $22,313. There is no information before me to indicate Ms Aguilar is in receipt of an income significantly different to this.

   Under Reason 8A, I have established that Mr Aguilar`s income and financial resources are not accurately reflected in the child support assessment.

   Mr Aguilar is currently assessed on his 2019/20 income estimate of $0. Mr Aguilar received a payment of around $85,722 upon his resignation from employment.

   Mr Aguilar advises he has no money remaining as he has used the funds to pre-pay his bills and submits he borrows money from others in order to meet his daily expenses. Mr Aguilar claims he has incurred some expenses as a result of his medical condition which has required him to purchase things such as a new bed, bedding, disability aids and medication.

   It is unclear what consideration Mr Aguilar gave to the financial support of [Child 1] when determining how to disperse of the funds received from his employer. I accept that Mr Aguilar would have incurred some costs in relation to his medical condition. Given the information before me, I am satisfied that Mr Aguilar has access to income and financial resources of around $70,000.

   Other than those referenced earlier in this decision, neither parent has provided any evidence of any other special` expenses they meet for themselves or the child that I must consider in this decision.

   Neither parent has provided any evidence or information to suggest that [Child 1] is in receipt of an income or financial resources that would render the child support assessment unfair.

   CoA DM [Mr A] found Reason 8A established and found it fair to make the following change:

   - For the period 1 November 2019 to 31 October 2020 Mr Aguilar`s adjusted taxable income be increased to $70,000.

   I have reviewed all of the information available to me and this has resulted in an outcome identical to the findings of CoA DM [Mr A]. Therefore, the objection is disallowed.

   This means the decision of CoA DM [Mr A] remains unchanged.

   …

3. Mr Aguilar and Ms Aguilar participated in the Tribunal’s hearing by conference telephone. In making its decision, the Tribunal took into account the CSA materials, additional materials submitted by both parties, and the sworn evidence of both parties during the hearing.

CONSIDERATION

The legislative framework

1. 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. It 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.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·     a departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)). 

3. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

4. 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 Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

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

   (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; or

2. The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. 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. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v 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”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

10.Mr Aguilar essentially submits the child support assessment should be based on his estimated “nil” income from when he stopped work; he has subsequently started to receive a disability support pension from Centrelink, having served an income maintenance period as a result of his termination payments. He has advised the CSA of his disability support pension; he advised that he has now been assessed to pay the minimum annual rate of child support from November 2020. He does not consider his termination payments – which he says he spent on necessary expenses, including “prepaying” some expenses ­– should be assessed as income for any period after he stopped working. He says the CSA had given him the impression when he supplied his “nil” estimate that he would not be required to set aside any monies for child support and that he could spend the lump sum in any way he chose to.

11.Ms Aguilar’s position is that Mr Aguilar’s child support liability for the 2019/20 financial year should be assessed on his actual taxable income of some $305,000, less an adjustment of $150,000 representing a superannuation withdrawal he was required to make for a property settlement. She concedes that from 1 July 2020, Mr Aguilar’s only source of income is his disability support pension – the result being that his entitlement would  properly be based on that fact (as per the current “minimum annual rate” assessment).

12.The Tribunal observes the situation in this case is one which arises quite commonly. The usual position is that for a period of time after a redundancy payment – often around 12 months if that sum roughly equates to the person’s usual wage or salary – adjusted taxable income at a roughly comparable level of income continues to be applied to the assessment for a reasonable period of time. Ultimately, these assessments prioritise the needs of the child – there is a reasonable expectation that the child should share in the financial resources available to the parent following receipt of an employment-related lump sum.

13.The assessment at the time of Ms Aguilar’s application for a change of assessment was based on a “nil” income for Mr Aguilar. In the special circumstances of the case, the child support assessment was rendered unfair by failing to account for Mr Aguilar’s lump sum payment as an available financial resource. There is a ground to depart from the formula.  

Issue 2 – Is it just and equitable to depart from the administrative assessment?

14.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of 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.

1. Mr Aguilar’s gross lump sum payment was some $85,000; the net amount he received was some $53,000: folio A52. It is the gross sum (before tax) which is applied in the ordinary formula arrangements.[1] The CSA approach was to allow a reduction in the amount to be assessed on the basis of Mr Aguilar’s medical costs. The Tribunal understood Mr Aguilar’s argument around what he says the CSA led him to believe (ultimately resulting in him forming the view he would not need to set aside any of the lump sum); however, the Tribunal observes that it is ultimately the interests of the child which prevail. It is also noteworthy that shortly after Mr Aguilar’s estimate was accepted, Ms Aguilar made a change of assessment application, effectively putting Mr Aguilar on notice that the child support assessment was being contested and that there was the possibility a change could be made to his liability.

   [1] The Tribunal observes that in broad terms, a taxpayer would pay around $20,000 tax on an income of $85,000. In broad terms, Mr Aguilar received $53,000, or a difference of $32,000.

2. The Tribunal understood Ms Aguilar’s submission; however, it would not be fair to assess Mr Aguilar on an income of approaching $150,000 over the entire tax year as this would not be reflective of his financial capacity at different stages of the financial year. However, on the other hand, the Tribunal considers it would be fair to assess Mr Aguilar on a higher level of income (and not the minimum annual rate contended by Ms Aguilar on the basis of Mr Aguilar’s significantly reduced 2020/21 income) after 30 June 2020.

3. Neither party raised any particularly exceptional expenses. The formula assessment for Ms Aguilar’s income appears reflective of her financial capacity and there is no basis to make any adjustments to the rolling child support formula assessments of her income.

4. Ultimately, the Tribunal accepts that Mr Aguilar has incurred some additional medical expenses, and observes that the level of tax extracted from his lump sum appears to exceed the “ordinary” level of tax on a gross amount of $85,000. It would not be fair to apply that sum; having considered all the circumstances, the Tribunal considers a fair assessment to be to reflect Mr Aguilar’s adjusted taxable income as $70,000 for the period 1 November 2019 to 31 October 2020 (or a period of 12 months). In the interests of the child, it would be just and equitable to do so.

5. As the assessment has reverted to the minimum annual rate under the formula arrangements from the beginning of November 2020, there is no requirement for the Tribunal to extend an assessment beyond 30 October 2020 given the assessment now reflects Mr Aguilar’s status as a disability support pensioner. The Tribunal considers that, with careful budgeting, Mr Aguilar can reduce the arrears of child support he owes over time.

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

20.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.

21.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

22.As the Tribunal has reached the same conclusion as the objections officer, the decision under review will be affirmed.

DECISION

The decision under review is affirmed.