Ahmad and Chalmers (Child support)

[2020] AATA 5101

Ahmad and Chalmers (Child support) [2020] AATA 5101 (28 October 2020)

DIVISION:     Social Services & Child Support Division

REVIEW NUMBER:  2020/AC019382

APPLICANT:  Ms Ahmad

OTHER PARTIES:  Mr Chalmers

Child Support Registrar

TRIBUNAL:  Member S Cullimore

DECISION DATE:  28 October 2020

DECISION:

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• The annual rate of child support payable by Mr Chalmers is fixed at $7,250 for the period from 1 January 2020 to 31 December 2022.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the child are significantly affected – a ground for departure established – financial resources of both parents – 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

1. The following background matters are drawn from the files of the Child Support Agency (“the CSA”) and are not in dispute.

2. The child support case between the parents is for one child, now aged 11.

3. The case was registered on 3 June 2009 and has been Registrar Collect since 6 March 2017.

4. Ms Ahmad has had sole care of the child since 10 January 2019.[1]

   [1] C224

5. On 31 December 2019 Ms Ahmad lodged a change of assessment (“COA”) application.

6. On 13 March 2020 a delegate made a departure determination adding various amounts under Reason 3 (school fees) to the administrative assessments of child support for the period from 1 July 2018 to the end of the case (7 May 2027).

7. On 18 April 2020 Mr Chalmers lodged an objection.

8. On 30 June 2020 an objections officer “part allowed” the objection of Mr Chalmers and added similar amounts to the administrative assessment of child support, but for the more limited period from 1 January 2019 to 31 December 2021.

9. The resulting annual rate of child support is now $7,201 pa.[2]

   [2] C260

10. On 3 July 2020 Ms Ahmad applied for further review by this Tribunal of the objection decision. 

DOCUMENTARY EVIDENCE AND HEARING

1. The Tribunal had before it the original bundle of documents provided by the CSA. These documents are referred to as C1 to C251.

2. Supplementary documents from the CSA were marked C252 onwards.

3. Directions were made by the Tribunal concerning the production of further documents by the parents.

4. Documents received from Ms Ahmad were marked A1 to A12 and documents received from Mr Chalmers were marked B1 to B48.

5. Mr Chalmers and Ms Ahmad both attended the hearing via teleconference.

CONSIDERATION

The relevant law

16.Section 3 of the Child Support (Assessment) Act1989 (“the Act”) sets out the legal duty of parents to maintain children, as follows:

Duty of parents to maintain their children

(1)The parents of a child have the primary duty to maintain the child.

(2)Without limiting subsection (1), the duty of a parent to maintain a child:

(a)is not of lower priority than the duty of the parent to maintain any other child or another person; and

(b)has priority over all commitments of the parent other than commitments necessary to enable the parent to support:

(i)himself or herself; and

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

(c)is not affected by:

(i)the duty of any other person to maintain the child; or

(ii)any entitlement of the child or another person to an income tested pension, allowance or benefit.

17.Section 4 sets out the objects of the Act. Subsection 4(1) sets out the principal purpose to be: “to ensure that children receive a proper level of financial support from their parents”.

18.Ordinarily, child support is worked out under a “formula” set out in Part 5 of the Act.

19.The formula has regard to the adjusted taxable income (ATI) of each parent, to the number of children, and to the ages and respective care percentages of the parents for each child.

20.An ATI consists of the person’s taxable income (as assessed by the ATO) with various sums “added back”, if they are applicable. One example is investment or rental losses.

21.Part 6A of the Act sets out certain circumstances in which the Registrar, on application by a parent, may depart from the administrative assessment, or in other words, change in some way the manner of working out the child support liability of the payer.

22.The central issues for a decision maker to determine in any COA matter mirror the three steps in the process which are set out in section 98B of the Act.

23.They are:

(i) whether one, or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exists; and if so

(ii)   whether it would be:

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

(B)otherwise proper;

to make a particular determination to depart from the administrative assessment of child support.

1. Under subsection 117(2) of the Act, a decision maker is required to consider whether, “in the special circumstances of the case”, the normal administrative assessment of child support is unjust or inequitable because of various factual scenarios (the so-called “grounds for departure”).

2. These factual matters (grounds) cover such matters as out of the ordinary expenses incurred by a parent in meeting the private school fees for a child, where there was a “mutual expectation” of private schooling (Reason 3).

3. The “special circumstances” which must be present in the case of each Reason must tend to justify or support a departure determination being made. Those circumstances must also be separate and discrete matters from the factual matters which make up the “grounds” for departure. Decision makers often confuse this issue by stating that the grounds themselves constitute the special circumstances.

4. For the second step, subsections 117(4) to (9) (inclusive) of the Act then require the decision maker to consider the “just and equitable factors” before making a particular departure determination.

5. These factors include the income, property and financial resources of each parent; the earning capacity of the parents; the costs of providing care to the child; the necessary living expenses of the parents; and any hardship that would be caused to either parent or the children by the making of (or refusal to make) any particular change of assessment decision.

6. If satisfied that it is appropriate to do so, the Registrar may then make any of the forms of departure determination allowed by section 98S of the Act.

7. These include but are not limited to adding an amount to the normal administrative assessment or fixing an annual rate of child support.

8. The Tribunal is empowered to make a departure determination in this matter with effect from 30 June 2018, i.e. 18 months before the COA application was lodged: subsection 98S(3B) of the Act.

9. Subparagraph 117(7A)(b)(i) of the Act also has some relevance to this matter (see below) and relevantly states:

   (7A)In having regard to the income, property and financial resources of a parent of the child, the [Tribunal] must:

   (a)…

   (b)disregard:

   (i)the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, … unless, in the special circumstances of the case, the [Tribunal] considers that it is appropriate to have regard to them; and

   (ii)any entitlement of the …. carer entitled to child support to an income tested pension, allowance or benefit.

10. Courts exercising a supervisory role over this Tribunal in change of assessment matters have laid down some general principles of relevance to this matter.

11. In various cases the Federal Circuit Court has said that the rationale of a departure determination is that it should reflect as far as possible the actual financial circumstances of the parents: it is a “bespoke” or “tailored” approach to the fixing of child support, rather than the general “one size fits all” application of the normal formula.

The relevant “administrative assessments” in this case

1. The “administrative assessments” are the rates which would have been produced by the “normal” administrative assessments, i.e. based upon the parents’ recent ATIs.

2. The annual rate of child support payable by Mr Chalmers as at 1 September 2019 was $6,167. This was based upon his 2018/19 ATI of $61,313.

3. After the lodgement of his 2019/20 tax return, which showed an ATI of $61,410, from 1 October 2020, his child support rate became $6,092 pa.

4. The recent ATIs of Ms Ahmad have been either slightly above or under her self-support amount (and therefore do not affect or have very minor affect on the formula calculation).

5. The Tribunal must consider whether there should be any change in this matter from the above assessments.

IS THERE A GROUND FOR DEPARTURE?

1. Reason 3 is contained in subparagraph 117(2)(b)(ii) of the Act as follows:

   (b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   ….

   (ii) because the child is being .. educated or trained in the manner that was expected by his or her parents: …

2. The Tribunal noted that the parents separated before or shortly after the birth of the child. The case started when she (the child) was 4 weeks old.

3. It was not disputed that on 29 June 2012 both parents signed the school enrolment form, which in fact covered enrolment in Reception through to Year 12.

4. Further, they equally shared the cost of private schooling for the child in the first half year of Reception, in 2014.  

5. The school covers Reception to Year 12, without a change of geographic location.

6. The child is now in Year 5 and will finish Year 12 at the end of 2027.

7. The Tribunal is satisfied that the fees, before a school card discount, are now about $1,800 pa, and that these costs would “significantly affect the costs of maintaining” the child. They add some 20% to the costs of care.

8. The question of what amounts to a “mutual expectation” of a private education is a contentious issue.

9. The legislation is worded in such a way (“the child is being ... educated ... in the manner that was expected by his or her parents”) so as to support the interpretation that, once a mutual expectation is formed, at some point in time, which could well be before separation, that is a sufficient basis for the payer to remain potentially liable indefinitely after separation for some or all private school fees.

10. In this case Mr Chalmers submitted that any “mutual expectation” which had existed before separation (i.e. in about May 2009) was restricted to the child’s primary schooling, and did not extend to the child’s secondary schooling (which starts at the beginning of Year 7).

11. The law on the topics of (1) when the “mutual expectation” must exist (i.e. before or after separation), (2) whether any subsequent change in that expectation must itself be mutual, and (3) whether “mutual expectation” can ever be broken by subsequent events and changes in the parties’ circumstances, is regrettably still very unclear.[3]

    [3] See for example the discussion in the “Standing Committee Report on the CSP – June 2015”, at 3.131.

12. In the case known as Dobbins & Devlin [2014] FCCA 1274, Judge Riethmuller stated at paragraph 43 that a parent could “change their expectations with respect to their child’s education simply due to financial reasons”.

13. In that case however both parents had enrolled the child concerned into a government school for financial reasons. In this matter the child was enrolled straight into a private school.

14. Given the relevant facts, as found above, and the continuing uncertainty in the law in this area, the Tribunal finds that there was the relevant “mutual expectation” of private schooling for the child, and the Tribunal is not prepared to find that the relevant mutual expectation will be “broken” (or as a matter of law, can be broken) by the child reaching a particular stage in her private education.

15. The Tribunal is satisfied therefore that the ground for Reason 3 is made out.

16. The issue then is whether there are special circumstances relating to the children’s education and the payment of the school fees which would tend to persuade the Tribunal to now make a departure determination under Reason 3.

17. In this regard the Tribunal notes that the child does suffer from autism and ADHD and that generally a private school is better equipped to provide one on one tuition to children with these kinds of problems.

57.Reason 3 is established.

Does any other Reason need to be established?

1. As to the need for detailed consideration of any other Reason, in Marsh & Eccles [2008] FMCAfam 1417, Riethmuller FM stated as follows:

   Once a ‘special circumstance’ is established, it is then necessary to determine what would be a just and equitable and otherwise proper child support assessment….only one special circumstance in the period is sufficient to satisfy the first step of the departure process

2. The Tribunal therefore need not consider whether any other Reason is in fact made out on the evidence.

The just and equitable factors

1. The Tribunal then considered what particular departure determination it should make in this case.

2. The Tribunal must consider whether it is “just and equitable” to both parents and the children to depart from the administrative assessment in any particular way.

3. The factors to be taken into account are set out in subsection 117(4) of the Act, as follows:

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

   (b)      the proper needs of the child; 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:

   (i)       himself or herself; or

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

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

   (g)      any hardship that would be caused:

   (i)       to:

   (A)       the child; or

   (B)      the carer entitled to child support;

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

   (ii)      to:

   (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.

4. Subsection 117(9) of the Act states that the subsection 117(4) factors “do not limit other matters to which the [Tribunal] may have regard”.

5. In determining whether it would be just and equitable to make a departure determination, the Tribunal “must have regard to” the factors specified in subsection 117(4). Whilst the section need not be slavishly followed, each of the factors listed in subsection 117(4) relevant to this matter should be considered.

6. These relevant factors are considered below.

Income and expenses of Ms Ahmad

·      Ms Ahmad is the full-time carer of her father and receives carer payment (a pension) and carer allowance;

·      These come to about $1,075.00 pf;

·      She also receives family tax benefit (FTB) of $278.88 pf;

·      The Tribunal must and does disregard the payments of the carer payment and the FTB as they are income tested pensions or benefits (see above);

·      She is single and has no other dependants;

·      Her total declared household expenses come to $845.50 pw, about $44,000 pa (A8). Those expenses are reasonable in the circumstances.

Costs of providing care

1. The reasonable costs of providing care to the child, per week, as far as the Tribunal can determine, are in the region of $177, made up as follows:

   ·      Food = $85;

   ·      Medication = $10;

   ·      Children’s activities = $10;

   ·      Petrol = $25;

   ·      Clothing = $10;

   ·      Share of utilities = $27;

   ·      Miscellaneous = $10.

2. This comes to $9,204 pa.

3. The Tribunal noted that these costs are reasonable in the circumstances.

Mr Chalmers’s income, expenses and capacity to pay

1. The Tribunal notes that Mr Chalmers is no longer receiving rent but has moved with his partner into the home which he owns.

2. His partner’s income is to be disregarded (see above).

3. His ATI is now likely to drop from 1 July 2020 (because the net rental losses will not be added back) and will likely be in the region of $60,000 pa this year and going into the near future.

4. As to his own personal household and living expenses, he puts these at in total $1,030 pw ($53,560 pa) (see A9).

5. He pays very substantial mortgage repayments of $321 pw, almost one third of his total expenses, and his other household expenses seem relatively modest.

6. The Tribunal is satisfied that he has the capacity to pay ongoing child support of something slightly over what the “normal” formula would produce.

Hardship

1. With regard to hardship (paragraph 117(4)(g)) the Tribunal must consider this factor with reference to both of the parents and the children. 

2. The requirement is to “weigh or balance the hardship” that the making of, or refusal to make, a departure determination would cause to the carer entitled to child support, and to the payer, and to the children.

3. Mr Chalmers has broadly kept up to date with his child support payments. This decision, which is nominally backdated to 1 January 2020, is very close to the objection decision, and will not cause him any net debt.

4. Ms Ahmad is facing substantial and rising costs relating to the child and needs as much financial support from him as he can reasonably give.

5. On balancing the hardship, the Tribunal finds that the hardship to Ms Ahmad and the child of not making this decision outweighs the hardship to Mr Chalmers of a very modest increase over his current child support liability, which is $7,201 pa.

Proposed departure determination

1. The Tribunal considered that any departure determination should take specific account of various matters, set out below.

2. The Tribunal noted that the child is 11 and that she will be 13 on 7 May 2022.

3. Ms Ahmad has sole care.

4. Mr Chalmers has reasonably secure employment, and so this is a suitable matter for a departure decision of some duration.

5. The Tribunal proposes to make a new departure determination, for certainty, from 1 January 2020, which is based upon the income which the Tribunal has found is available for Mr Chalmers to draw upon, and the limited financial circumstances of Ms Ahmad, as set out above.

6. The annual rate of child support fixed by the formula, as a guide, for a payer with an ATI of $60,000, and a payee with an ATI of under the self-support amount, with one child under 13, is $5,852 pa.

7. Mr Chalmers can afford to pay, and in the view of the Tribunal, should contribute, the bulk of the school fees on top of the normal formula amount.

8. In all the circumstances the Tribunal considers the annual amount of $7,250 to be fair to both parents and to the child.

9. The Tribunal will not backdate this decision to any date before 1 January 2020 as it does not believe that it is fair to create a debt for Mr Chalmers.

10. The Tribunal will extend this decision to 31 December 2022, the end of Year 7 for the child. This will give the parents some certainty and allow them both to budget.

Is it otherwise proper to further depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. 

1. Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:

   (a) ….

   (b)      the effect that the making of the order would have on:

   (i)       any entitlement of …. the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii)      the rate of any income tested pension, allowance or benefit payable to… the carer entitled to child support.

2. The Tribunal notes that Ms Ahmad receives ongoing FTB.

3. She needs to advise Centrelink of this new decision, which will lead to a decrease in her FTB entitlements.

4. In any event, the Tribunal believes that it is otherwise proper to depart from the administrative assessment in the way set out in this decision.

DECISION

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• The annual rate of child support payable by Mr Chalmers is fixed at $7,250 for the period from 1 January 2020 to 31 December 2022.