Alford and Alford (Child support)

[2018] AATA 4155

Alford and Alford (Child support) [2018] AATA 4155 (24 September 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/BC014164

APPLICANT:  Ms Alford

OTHER PARTIES:  Child Support Registrar

Mr Alford

TRIBUNAL:Member S Letch

DECISION DATE:  24 September 2018

DECISION:

The Tribunal varies the decision under review and decides that:

(a)    a sum of $5,395 be added to Mr Alford’s child support liability for the period 4 September 2017 to 31 December 2017;

(b)    for the period 1 January 2018 to 31 December 2018, Mr Alford’s annual child support liability is increased by $23,405;

(c)    for the period 1 January 2019 to 31 December 2019, Mr Alford’s annual child support liability is increased by $18,643.

CATCHWORDS
CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – ground for departure exists – decision 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. Ms Alford and Mr Alford are the parents of [Child 1] (who turned 18 years of age on 1 November 2017), [and other named children].  Ms Alford is recorded by the Department of Human Services (the Department) as having 100% care of the children. Ms Alford has sought review by this Tribunal of a decision of the Department on her objection to increase Mr Alford’s child support liability by requiring he contribute 25% (and not 50% or more as urged by Ms Alford) of the total private school fees.

2. For the period 1 November 2017 to 30 November 2018, Mr Alford is assessed to pay an annual rate of child support of $38,876. This assessment is based on a 2016/17 adjusted taxable income of $202,226 for Mr Alford and a 2016/17 adjusted taxable income of $63,476 for Ms Alford.

3. On 4 September 2017, Ms Alford applied for a change of assessment under what the Department refers to as reason 3. On 17 January 2018, the Department made a decision to increase Mr Alford’s annual child support liability by $10,950 for the period 1 January 2018 to 31 December 2018 on the basis of the cost of private school fees. 

4. On 15 February 2018, Ms Alford objected to the decision. On 26 April 2018, an objections officer decided to disallow Ms Alford’s objection.

5. On 24 May 2018, Mr Alford sought further review by the Tribunal. The Tribunal’s hearing took place on 19 September 2018. Ms Alford attended the hearing in person, accompanied by her legal representative, [Ms A]. Mr Alford participated by conference telephone, accompanied by [Mr A]. 

6. In reaching its decision, the Tribunal has considered the sworn evidence given by both parties; the documentation provided by the Department (Exhibit 1), and materials from Ms Alford (Exhibit A) and Mr Alford (Exhibit B).  

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. Commonly referred to as Reason 3, the Act provides as a ground for departure (subparagraph 117(2)(b)(ii)):

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

   (ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;…

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 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”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

3. Mr Alford accepts it was expected the children would be educated privately; however, he contends the arrangement to educate the children in that manner was qualified by substantial ongoing financial assistance from Ms Alford’s mother. It is trite, but any arrangement into the future for private education will be subject to the capacity to meet tuition fees. It is common for separated parties, following a change in financial circumstances, to claim an arrangement is no longer affordable.

4. However, what is important in establishing whether there is a ground to depart is whether it was expected by the parents the children would be educated privately. The evidence reveals the children were enrolled from birth; in the Tribunal’s assessment, there can be no serious dispute such expectation existed.[1] 

   [1] The Tribunal was referred by [Ms A] to Malcher & Malcher [2016] FamCA 1063 which the Tribunal accepts accurately reflects the law in this area.

5. The Tribunal is satisfied that the costs of educating the children are in the magnitude of $40,000 or more per annum. Those costs significantly affect the costs of raising the children. The Tribunal is therefore satisfied in the special circumstances of the case that those costs provide a ground to depart from the administrative assessment.

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

1. 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.

2. The nub of the dispute rests with the level of contribution which Mr Alford should make to the tuition fees. The Department determined that, as a result of historical contributions from Ms Alford’s mother ([Ms B]) in the range of half the total school fees, the “out of pocket” balance of some $20,000 per annum should be shared equally between Ms Alford and Mr Alford.

3. Ms Alford objected to that decision. She submitted to the Department that no such gratuitous contributions had been made by [Ms B] to Ms Alford after Ms Alford and Mr Alford separated on 13 March 2017. [Ms B] is not liable for the fees, and under no obligation to make any such contribution. Ms Alford objected to the approach of the Department to treat any transfer of funds from [Ms B] to Ms Alford as effectively being for the benefit of both Ms Alford and Mr Alford.

4. During the hearing, Ms [Ms A] contended there should be an additional contribution from Mr Alford for fees from 4 May 2017 (prior to the change of assessment application made by Ms Alford in September 2017, and prior to the Department adding the fees to Mr Alford’s liability from 1 January 2018). She observed Ms Alford, during 2017, had taken from an advance of the property settlement a sum of around $9,500 to pay outstanding school fees. She referred to the matter of Danson v Danson [2015] FamCA 1167 which held that it would not be just and equitable for school fees to be met from the parties’ capital prior to property-related orders where such expenses could ordinarily be met from the ongoing income of the parties. Ms [Ms A] submitted the additional contribution should be extended to the assessment until 4 January 2020 in the interests of giving the parties some certainty in terms of financial planning. Ms [Ms A] contended Mr Alford was “put on notice” that the school fees were a live issue from April 2017 during negotiations about child support; accordingly, there would be no prejudice to him if the effect of the departure was to be made retrospective. Ms [Ms A] put the alternative submission that, at the very least, Mr Alford should be held liable for a contribution of half the total fees for term four of 2017 (calculated to be $5,395).

5. Mr Alford told the Tribunal he considers the 2017 position “should hold” and he should not be liable for any fees in 2017. He agrees with the Department’s decision to add fees of 25% of the total for 2018, and to apply that principle (a 25% contribution) in future years, including throughout 2019.

6. Ms [Ms A] submitted that the objects of the Act favour support of the child where parents have financial capacity to do so. She pointed to the terms subsection 117(7) of the Act, and  the requirement, in having regard to the income, earning capacity, property and financial resources of the child, to disregard the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the Tribunal considers that it is appropriate to have regard to. 

7. Mr Alford pointed the Tribunal to materials associated with family law proceedings revealing contributions by [Ms B] totalling $637,000 over the course of the marriage; on average, almost $50,000 per year.  He told the Tribunal [Ms B] – a highly respected [occupation specified] – values education very highly; whilst conceding there is no evidence [Ms B] had made any contributions since those made in early 2017, he said the long pattern of contributions evidences her intent to provide continued support for educating the children. [Mr A] submitted that the children started to attend private school as a consequence of [Ms B] undertaking to contribute to the fees; without her contribution, a private education would not have been financially viable without the parents “dipping into capital”. Mr Alford pointed the Tribunal to an email from [Ms B] dated 9 October 2012 in which [she] had stated her contribution for the education of her grandchildren was something she was committed to.

8. Mr Alford referred the Tribunal to text messages with Ms Alford. He said that [Ms B] had told him she had already paid the school fees for 2017. Mr Alford said that if he was also making a contribution to the fees, Ms Alford would have been assisted in “moving out” (of the family home). He said [Ms B] had indicated to him she had not wanted that outcome.

9. Ms [Ms A] referred the Tribunal to Ms Alford’s [named bank] records revealing two payments of $10,000 (totalling $20,000) made by [Ms B] into Ms Alford’s account in January 2017. Ms [Ms A] said there were two more instalments in another “tranche” of payments. Ms [Ms A] said there was no dispute instalments had been paid; however, the question was how those instalments were to be treated.

10. Ms [Ms A] submitted this was not a case of “income splitting” where it would be appropriate to take account of the income of another person; the contributions by [Ms B] have always been gratuitous and benevolent in nature, and have not continued since separation. Ms [Ms A] referred to the case of Jacks & Parker [2011] FamCAFC 34 in which it was determined there was no proper basis to treat support from the wife’s parents as a relevant resource for the wife to draw upon; the wife’s parents were under no obligation to make financial contributions. Ms [Ms A] submitted that despite Mr Alford’s higher income, and Ms Alford initially seeking Mr Alford pay 65% of the private school fees, Ms Alford seeks a 50% contribution from him. She submitted that it was appropriate for an exploration of financial capacity rather than taking into account historical assistance provided by [Ms B] given it is the parents who have the primary duty to maintain the children.

11. Ms [Ms A] pointed to Mr Alford’s historically high income (consistently in the order of $200,000 per annum); with appropriate budgeting, Mr Alford, in addition to his ongoing child support obligation, ought to be able to contribute half of the fees, and meet any child support arrears. She speculated that if [Ms B] had not made any contributions, it is entirely possible the parties may have structured their affairs differently (for example, not purchased an investment property); however, what is important is Mr Alford’s current financial capacity.

12. In relation to Ms Alford’s household, she has the care of the four children who remain at home. Mr Alford has no overnight care of any of the children at this stage. Ms Alford recently increased her hours at work; her weekly wage has increased to $2,019 per week, with a corresponding increase in her tax liability. She told the Tribunal her financial position is “getting better”. She said she, and the children, do not live extravagantly; she did not identify any unusual expenses for herself, or the children (leaving aside the school fees).

13. Mr Alford is currently renting and lives by himself. He said 2017 had been “very tough” as a result of the marriage breakdown. He said the situation this year had improved. He told the Tribunal he has been paying $150 per week towards [Child 1’s] lodgings at university (half his weekly fee of $300). He has a novated lease which costs him approximately $150 per week, which he is committed to until the end of 2019. Mr Alford appeared not to be aware that [Child 1] is also receiving youth allowance from Centrelink; Ms Alford told the Tribunal she has been helping [Child 1] with some of his costs, including medical expenses. Mr Alford said he is about to finish a course for which he has been accumulating HECS-HELP, which he is currently repaying. Mr Alford told the Tribunal he considers he will be a “long-term renter” – he said he wants to be able to continue to be able to contribute to [Child 1’s] costs, and would like to be able to make contributions for motor vehicles for the children. Mr Alford estimated he would spend around $70 per week on entertainment expenses (primarily food) when he sees the children. He told the Tribunal that if he was put in a position where a decision created arrears of his child support liability, he would find that “very difficult”.

14. Ms [Ms A] submitted that the priority is support for education of the children who are still under 18 years of age. Ms [Ms A] referred to the matter of Bowditch v NSW Trustee and Guardian [2012] NSWSC 275 as authority for the proposition that younger children should be given priority over tertiary education for older children.

15. The Tribunal has carefully considered the financial position of both parties, and the needs of the children. Neither party has any particularly unusual costs associated with their own self-support; putting aside the school fees, there appear no particularly unusual expenses associated with the children.  

16. The Tribunal is satisfied that the usual formula arrangements should continue to apply in the ordinary course in respect of Mr Alford’s and Ms Alford’s respective adjusted taxable incomes. The application of the formula reflects their financial capacity.  Any increases or decreases in the wage or salary income of either party will be reflected in the assessment in child support periods that begin in the ordinary course after the end of each financial year.

17. The issue for the Tribunal to determine is what is just and equitable in terms of Mr Alford’s contribution to school fees. The Tribunal is mindful Mr Alford’s current annual child support liability is in the order of around $50,000 per annum; increasing his liability to half, and not one quarter, of the total fees will increase his total annual child support liability to around $60,000 per annum.

18. The starting position in these sorts of cases is that private school costs should be shared by the parents. It is generally not the case that payments from non-liable third parties (such as parents) will disturb that position given the primary duty is always with the parents. This is consistent with the case law in this area. More likely would be a suggestion that the parent with higher income (here, Mr Alford, by some magnitude) would be asked to contribute more than 50%. The Tribunal observes Ms Alford is not seeking a contribution of higher than 50% of the total fees from Mr Alford.

19. In respect of Mr Alford’s financial capacity, Ms [Ms A] correctly contended that it is the children of the child support case which would be regarded as having priority over contributions to [Child 1’s] support at university. In accepting that submission, the Tribunal is in no way being critical of Mr Alford’s willingness and genuine commitment to provide support to [Child 1] and ultimately his older children; however, the priority of his younger children is a relevant factor in weighing his financial capacity.

20. The Tribunal finds no contributions have been received by Ms Alford from her mother since the parties separated in March 2017. Significant contributions were made in early 2017 which appear to have accounted, at least indirectly, for a significant proportion of the tuition fees in 2017. However, Ms Alford paid a further $9,500 in 2017 to meet outstanding fees. The Tribunal accepted the proposition that the instalments paid by [Ms B], however characterised, should not displace Mr Alford’s primary duty to meet the costs of educating his children.

21. The position of the fees from January 2018 is not in any way clouded by contributions from [Ms B] given no such contributions have been received. The Tribunal is comfortably satisfied that Mr Alford should, at the very least, be held liable to meet half those fees from 1 January 2018, consistent with the assessment of the Department. The effect of the decision to increase Mr Alford’s liability to half the fees will be to add approximately $10,000 to Mr Alford’s liability for 2018; as we are now just over three-quarters through 2018, a sum of approximately $7,500 will accrue as outstanding.

22. With careful budgeting, the Tribunal considers Mr Alford should be able to meet half the cost of fees on an ongoing basis. Similarly, he should be able to make arrangements to cover the arrears over time which will accrue from January 2018. However, the Tribunal recognises the further burden on Mr Alford were it to expect a contribution from him for a period prior to 1 January 2018. Whilst the Tribunal understood Mr Alford more recently received a reasonably substantial sum of money (approximately $190,000, less his legal fees) by way of the property settlement, it should not be assumed it would be just and equitable that what is effectively a distribution of capital should be applied to meeting child support arrears related to school fees.

1. The Tribunal, with greater satisfaction, notwithstanding that it accepts Mr Alford had been earlier “put on notice” about the controversy over school fees,  does not consider it just and equitable to entertain giving effect to a departure prior to Ms Alford’s application with the Department on 4 September 2017. The alternative submission by Ms [Ms A] is to render Mr Alford liable for 50% of the fees for term four of 2017 (which will have commenced shortly after Ms Alford’s application).

2. Ultimately, given the Tribunal’s satisfaction that [Ms B’s] contributions, however characterised, do not diminish Mr Alford’s primary obligation to the children, the Tribunal is satisfied it would be just and equitable to add to Mr Alford’s child support liability a sum of $5,395 for the period 4 September 2017 to 31 December 2017 to reflect his contribution of one half of the fees for term four of 2017. In so doing, the Tribunal observes that the Tribunal has determined it just and equitable for Mr Alford to meet 50% of the fees, notwithstanding his proportionately (significantly) higher income. This will increase the sum of arrears he will owe; however, the Tribunal considers Mr Alford, who receives a good income, should be able to meet that liability over time without causing excessive hardship.

3. Going forward, the figures for school fees put forward by Ms Alford were not disputed by Mr Alford; the Tribunal finds that total fees for 2018 are $46,810, and $37,287 for 2019. The Tribunal considers it appropriate in the circumstances to increase Mr Alford’s annual liability from 1 January 2018 to 31 December 2019; at such time, Ms Alford may make an application with the Department for a change of assessment on the basis of the anticipated school fees for 2020 and beyond. 

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

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. 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.

3. As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be varied.

DECISION

The Tribunal varies the decision under review and decides that:

(d)    a sum of $5,395 be added to Mr Alford’s child support liability for the period 4 September 2017 to 31 December 2017;

(e)    for the period 1 January 2018 to 31 December 2018, Mr Alford’s annual child support liability is increased by $23,405;

(f)     for the period 1 January 2019 to 31 December 2019, Mr Alford’s annual child support liability is increased by $18,643.