Annese and Watchorn (Child support)

Annese and Watchorn (Child support) [2022] AATA 3048 (24 May 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/MC023336
APPLICANT:  Miss Annese
OTHER PARTIES:  Child Support Registrar
Mr Watchorn

TRIBUNAL:Member H Moreland
DECISION DATE: 24 May 2022
DECISION:

The Tribunal sets aside the decision under review and substitutes a new decision that an amount of $16,409 is to be excluded from Mr Watchorn’s 2020/21 adjusted taxable income for the period from 1 November 2021 to 25 July 2022.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether post separation costs should be excluded from the adjusted taxable income for the last relevant year – cashing out leave not in the ordinary course after separation – an amount should be excluded – 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.

REASONS FOR DECISION

BACKGROUND

This is an application from Miss Annese for a review of a decision by Child Support regarding Mr Watchorn’s post separation income. Miss Annese and Mr Watchorn are the parents of [Child 1] and [Child 2].
On 22 October 2021, Mr Watchorn made a post separation income application.[1] On 29 October 2021, the Child Support Registrar decided to accept Mr Watchorn’s application.[2] On 4 November 2021, Miss Annese lodged her objection to this decision. On 30 January 2022, an objections officer decided to allow Miss Annese’s objection in part.[3]
[1] Child Support papers, p 50.
[2] Child Support papers, pp 59-60.
[3] Child Support papers, p 188.
On 21 February 2022, Miss Annese applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for an independent review of the decision.
The application was heard on 5 May 2022. Miss Annese and Mr Watchorn participated in the hearing by videoconference. The Tribunal had before it documents provided to it by Child Support. Miss Annese and Mr Watchorn both provided documentary evidence to the Tribunal. Relevant aspects of the evidence and material before the Tribunal will be referred to in the Tribunal’s consideration of the issues to be decided.

CONSIDERATION

The statutory provisions relevant to this application for review are contained in the Child Support (Assessment) Act 1989 (the Act). The Act provides that an administrative assessment of the child support payable by one parent to the other can be made. Such an assessment is based on a statutory formula based on factors such as the parents’ adjusted taxable incomes, number of children in each assessment, as well as the percentages of care for each child.
The Tribunal also referred to the Department of Social Services (DSS) Child Support Guide (the Guide) in making this decision. The Guide sets out the approach taken by Child Support to its consideration of child support matters. It expresses policy and the Tribunal is not bound by such policy, however, in Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60, the Full Court of the Federal Court held that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the relevant legislation. The Tribunal adopts this approach in the present matter.
The Tribunal notes the following objects of the Act:
·      Subsection 4(1): “The principal object of this Act is to ensure that children receive a proper level of financial support from their parents”.
·      Paragraph 4(2)(a): “That the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support.”
·      Paragraph (4)(2)(d): “That children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them.”
Under section 44 of the Act, a parent can apply to the Registrar for the administrative assessment of their child support to be exclude certain income, up to a maximum 30% of the person’s adjusted taxable income for a period of up to three years after the date of separation, if the following criteria is met:
·      the applicant and the other parent lived together on a genuine domestic basis for at least six months;
·      the separation of the applicant and the other person occurred within the last three years and before either parent applied for a child support assessment;
·      at the time of the application, the parents remain separated; and
·      that in the last relevant year of income, or in the application period for an income election, the applicant parent earned, derived or received income:
The Tribunal notes that section 44 of the Act provides a discretion for the decision-maker, rather than an automatic entitlement should an applicant meet certain criteria. The Tribunal concurs with the view expressed by Senior Member Ellis in another decision of the Tribunal, that to use its discretion to apply section 44, the Tribunal must, while considering the objects of the Act, be satisfied that a parent has taken steps to change their income after separation primarily in order to re-establish themselves; and the discretion is not to be applied simply because the parent’s income has changed.
The Tribunal notes that the last relevant year of income means the income for the most recent financial year that ended before a child support period commenced, which in this case is the 2020/21 financial year.
The Guide, at 2.5.2 Additional income earned post separation, includes the following:
Additional income
Parents may earn additional income from a variety of sources, including from overtime, a second job, a career change to a higher paying job, or from investment income. For a self-employed person, additional income may be earned, derived or received through extending the opening hours of their business, increasing production or developing new markets or new products (to a greater extent than before separation). The parent must be able to show that the change that resulted in the additional income being earned happened after separation (section 44(1)(d)(i)).
[Emphasis added]
The ordinary course of events
Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent’s adjusted taxable income. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events (section 44(1)(d)(ii)).
Income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their adjusted taxable income. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income.
However, income that parents earn outside the ordinary course of events is able to be excluded from their adjusted taxable income. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job. However, moving from an unemployment benefit to employment is considered to be within the ordinary course of events. Any income to be excluded must have been earned, derived or received in a pattern established after separation.[4]
[Emphasis added]
[4] >
The term “ordinary course of events” is not defined in the Act. However, the Explanatory Memorandum (the EM) to the Bill for the amending Act (Child Support Legislation Amendment (Reform of the Child Support Scheme—New Formula and Other Measures) Act 2006 (the Amending Act)) provides a brief explanation of the intent of the legislation:
Income that would have been earned in the normal course of events, such as an annual pay rise, is not additional income for the purposes of paragraph 44(1)(c). An application for the lower level of income may not be necessary if, for example, the income pattern has reverted to what it was before the parents separated.
The EM also gives the following example which is useful to convey the concept:
Ted has an income of $30,000 at the date of separation from his wife. After separation, his income increases to $60,000 as he takes on a second job. His child support liability is assessed on $60,000, as that was his income for last relevant year of income. Ted can apply to have his income set at $30,000 rather than $60,000, the extra $30,000 being additional income earned for re-establishment costs. However, even if his application is successful, his current income used in the assessment, that is, $60,000, can only be reduced by a maximum of 30%. Therefore, his income would be set at $42,000. Ted has $18,000 quarantined from his income before the self-support component is deducted and his children receive child support based on an income for him of $42,000.[5]
[5] >
Miss Annese and Mr Watchorn were married on [date] November 2015. There is some conflict in the Child Support papers about the date of separation but Mr Watchorn told the Tribunal that he was satisfied that whichever date Miss Annese said was the correct date, was the correct date. Miss Annese said the correct date was 27 July 2019.[6]
[6] Child Support papers, p 79.
Accordingly, the Tribunal is satisfied that Miss Annese and Mr Watchorn lived together on a genuine domestic basis for more than six months and that, with regard to the time limit set out in section 44 of the Act, Mr Watchorn can apply to have post separation income excluded from his child support assessment for the period until 26 July 2022.
Having established the above, the Tribunal considered the three remaining considerations as required under section 44 of the Act:
·      Whether the parent earned the additional income after separation in the ordinary course of events.
·      The amount by which the parent’s adjusted taxable income should be reduced.
·      The date from which the reduction should be made.

Did Mr Watchorn earn additional income after separation in the ordinary course of events?

According to Mr Watchorn’s application for post separation income to be excluded from his annual adjusted taxable income, Mr Watchorn asked for $49,395.59 to be excluded. This, he said, comprised the following:
Change in Income from multiple Sources:
Promotion to New job (18/2/20) carried with it a $25,944 pay rise.
Leave was cashed out (due to workcover injury Sustained April 2020) increase by $16,409.
Workcover (due to injury Sustained April 2020) Make up pay: $3564
Promotion to new Position had an inbuilt increase in overtime component (weekly hours increasing from 40 per week to 42 per week. - $3478.59).[7]
[7] Child Support papers, p 57.
Child Support approved Mr Watchorn’s claim and subsequently, Miss Annese lodged an objection.
The Tribunal also notes the following from the Child Support papers:
Mr Watchorn applied for post separation income to be excluded from his 2020-21 financial year income which is for the period 1 July 2020 to 30 June 2021.
Mr Watchorn is applying for income earned after he was promoted to be excluded as post separation income. Prior to and after separation Mr Watchorn was working in the role of an [Occupation 1]. Mr Watchorn was promoted to a Senior [Occupation 1] effective from 10 February 2020 as per the letter he received dated 16 January 2020. As a result of Mr Watchorn`s promotion his annual salary has increased.
As established above the parents separated on 26 July 2019 and Mr Watchorn`s promotion was confirmed in the letter dated 16 January 2020 which was almost six months after they separated.
As such, we are satisfied the income was earned in accordance with a pattern of earnings established after separation.[8]
[8] Child Support papers, p 15.
…
In her objection Miss Annese has made reference to Mr Watchorn`s rental income and losses in relation to his post separation income. When considering additional income in relation to post separation income we would only need to take into account whether there was a net rental amount, not a rental loss as rental losses are added back on to the income. Miss Annese has confirmed Mr Watchorn had an increase in his losses therefore when considering Mr Watchorn`s claim we will be considering changes in relation to his employment only to determine if post separation income should be excluded.
When Mr Watchorn made this application or post separation income to be excluded he noted he had additional income from the following sources:
Promotion to a new job (18 February 2020) carried with it a pay rise of $25,944.
Promotion to new position had an inbuilt overtime component (weekly hours increased from 40 hours per week to 42 hours per week): $3,478.59
Annual leave cashed out (due to Workcover injury sustained April 2020) $16,409.
Workcover make up pay (due to injury sustained April 2020) $3,564
In this case Mr Watchorn’s income has increased because he was promoted to a Senior [Occupation 1] effective from 10 February 2020 as per the letter her received 16 January 2020. As a result of Mr Watchorn’s promotion his annual salary has increased.
The information shows that in any of the roles Mr Watchorn undertakes there is overtime and allowances associated with that role and as such we don’t consider any overtime or allowance components to be outside of the ordinary course of events’.
Mr Watchorn’s payslips show his annual income at the time he separated was $99,535.84 and after his promotion his income increased to $119,875.05. The pay difference is $20,339.21 ($119,875.05 - $99,535.84) and we consider this income to be outside of the ‘ordinary course of events’ as Mr Watchorn accepted a promotion and as a result earned higher income in the 2020-21 financial year.
However the incremental increase to Mr Watchorn’s income from 1 January 2021 is an increase that occurs each year, and would be considered to be income earned within the ordinary course of events.
Mr Watchorn has also cashed out his annual leave which totalled $16,409 and we consider this income to be outside of the ordinary course of events.
Mr Watchorn received a makeup payment of $3,564 from Workcover as a result of an injury. We don’t consider that this payment was extra income earned in addition to his normal income nor do we consider this income to be income earned outside of what we consider to be the ordinary course of events.
We are satisfied Mr Watchorn’s additional income amount of $36,748.21 ($20,339.21 + $16,409) was earned outside of the ordinary course of events, and started to be earned within three years of the parents separating.
The post separation additional income amount we are excluding must not be more than 30% of a parent’s adjusted taxable income. 30% of Mr Watchorn’s 2020-21 adjusted taxable income is $47,560.20 [$158,534 X 30 / 100].
The additional income amount of 36,748 (rounded) is not more than $47,560 (rounded). We calculate the post separation amount as follows:
$158,534 - $36,748 = $121,786.[9]
[9] Child Support papers, pp 15-16.
In order to determine whether there had been a change in Mr Watchorn’s pattern of earnings; and whether any increase was, or was not, received in the ordinary course of events, the Tribunal first considered, based on the evidence before it, what Mr Watchorn’s pattern of earnings was, prior to his separation from Miss Annese.
In an affidavit prepared for Family Court proceedings dated 15 July 2021, Mr Watchorn said that he had been employed with [Employer 1] prior to him and Miss Annese living together and since the children were born; it was the only type of work he had done since they were married and had children and he was always required to work pursuant to a roster.[10]
[10] Child Support papers, pp 118-119 (at paragraph 18).
In an affidavit by Miss Annese in relation to the same Family Court proceedings (dated 6 July 2021), Miss Annese said that Mr Watchorn, towards the end of their relationship, worked a lot of overtime.[11] Mr Watchorn did not dispute this in his affidavit in response.[12]
[11] Child Support papers, p 84 (at paragraph 20).
[12] Child Support papers, p 116 (a paragraph 8).
The Tribunal concludes that prior to his separation from Miss Annese, Mr Watchorn was a [Occupation 1] employed by [Employer 1] who derived his income through a combination of his base salary and overtime.
The Tribunal then considered what Mr Watchorn’s pattern of earnings was after his separation from Miss Annese.
Mr Watchorn told Child Support that he has a “new position” as a “Senior [Occupation 1]”.[13] He said it differs from his previous role because it requires him to work at different [branches], depending on organisational needs.[14] He also said that his new role required him to work 42 hours per week, rather than 40 hours per week, resulting in a change in his overtime.
[13] Child Support papers, p 149.
[14] Child Support papers, p 149.
In the aforementioned affidavit, Mr Watchorn disputed that he had changed his working arrangements to voluntarily take up extra work shifts since the separation.[15] He also said that he was in the process of seeking a transfer to a different branch where there was a more supportive environment with regard to flexible working arrangements but it was likely that this “would affect [his] employment including [his] ability to maintain [his] current [position]” and disqualify him from other “qualifications”.[16]
[15] Child Support papers, p 118 (at paragraph 16).
[16] Child Support papers, p 118 (at paragraph 18).
In the aforementioned affidavit by Miss Annese, she said that Mr Watchorn, shortly after separation, signed a “reserve” contract, which gave him a benefit of $15,000 plus shift penalties.[17]
[17] Child Support papers, p 97 (at paragraph 111).
In disputing Miss Annese’s assertion that Mr Watchorn chose the dates he was to care for the children based on his work schedule or lifestyle, Mr Watchorn, as noted above, said that he had been employed with [Employer 1] prior to them living together and since the children were born and it was the only type of work he had done since they were married and had children and he was always required to work pursuant to a roster.[18]
[18] Child Support papers, pp 118-119 (at paragraph 18).
Mr Watchorn told the Tribunal that he had applied for the secondment in December 2019, after the separation. He said that it commenced in February 2020 and was based on a separate contract. Mr Watchorn said that he had not previously undertaken a secondment and this role was different to previous roles because it involved filling short term vacancies within [Employer 1].
The Tribunal asked Mr Watchorn to provide it with a contract to demonstrate that this position was a separate position but Mr Watchorn referred the Tribunal to the heavily-redacted document in the Child Support papers which he said is referred to at [Employer 1] as the “[contract]”,[19] despite it appearing to be a letter of offer.
[19] Second party papers, B10.
Miss Annese told the Tribunal that she objects to the characterisation of the change in Mr Watchorn’s role at [Employer 1] as being a “promotion”, she told the Tribunal that, in her view, it was a “secondment”, rather than a promotion.

Miss Annese made a number of submissions on the importance of the distinction. The Tribunal finds there are two key distinctions between whether Mr Watchorn was on secondment or promoted. The first is that the Tribunal concludes that as Mr Watchorn was on a secondment, he had a right of return to his previous role. The second is that the Tribunal concludes that a secondment is more akin to being higher duties than a new role as a result of a career change.
The Tribunal also notes that, while the terms are used interchangeably, the document that Mr Watchorn refers to as being a contract refers to the Senior [Occupation 1] role being a “secondment”.[20]
[20] Child Support papers, p 150.
The Tribunal acknowledges that Mr Watchorn was an “[Occupation 1]”, who expressed interest in a secondment to a role as an “[senior] [Occupation 1]”, and was appointed to that position from 10 February 2020. The Tribunal, however, is not satisfied that this was akin to a “career change to a higher paying job”. Mr Watchorn was carrying out similar work, in the same organisation, with a right of return to his [Occupation 1] position.
Further, the Tribunal notes that [Employer 1] characterised the change as resulting in “variations” to his employment conditions. The letter of offer was heavily redacted, so the Tribunal is unable to ascertain whether the variations might be more akin to changed employment conditions. But based on the evidence before it, the Tribunal is not satisfied that there was such a substantial change to Mr Watchorn’s role that the income was a changed “pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate”; and “that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events”.
Mr Watchorn provided evidence to Child Support that he did have relocation and establishment costs as a result of his separation; and he disputed an assertion by Miss Annese that he had moved in with his new partner immediately after the separation. The Tribunal accepts that Mr Watchorn has had post separation expenses and there is no doubt that Mr Watchorn has taken on a form of duties that provides a higher income but the Tribunal find it is reasonable to expect that this income would have been earned in the ordinary course of events. This is because the Tribunal not satisfied that if Mr Watchorn had not separated from Ms Annese, he would not have taken the opportunity offered by the secondment.
The Tribunal finds that Mr Watchorn’s increased base salary is not to be excluded from his adjusted taxable income for the purpose of calculating his child support liability.
With regard to the inbuilt overtime of $3,478.59, the objections officer decided not to exclude it on the basis that Mr Watchorn’s income typically includes overtime and allowances. The Tribunal acknowledges that the Guide refers to overtime being the type of income that can be excluded from adjusted taxable income but finds that in the case of Mr Watchorn and his work history, also finds that overtime is an ordinary part of his income. The Tribunal finds, for this reason, that the $3,478.59 in inbuilt overtime is not to be excluded from Mr Watchorn’s adjusted taxable income for the purpose of assessing the child support payable to Miss Annese.
The objections officer also decided that Mr Watchorn’s makeup payment of $3,564 from WorkCover was not extra income earned in addition to his income, nor income earned outside of what they considered to be outside the normal course of events.[21] The Tribunal concurs with this view.
[21] Child Support papers, p 194.

Annual leave

The objections officer also decided that cashing out the $16,409 in leave was outside the ordinary course of events. The Tribunal also concurs with this view, particularly as the Guide specifically states that cashing out leave entitlements is the type of income that can be excluded from adjusted taxable income.
This means that the Tribunal finds that $16,409 can be excluded from Mr Watchorn’s adjusted taxable income for the purpose of assessing his child support liability.

Other matters

Miss Annese raised a number of issues during the hearing and in her written submissions, in particular, Miss Annese said she had evidence that Mr Watchorn was receiving rental income that he had not declared to relevant authorities.
The Tribunal acknowledges Miss Annese’s submissions but for the purpose of this review, the Tribunal has jurisdiction to determine whether section 44 can apply or not. There may be other avenues, or types of application for review that are more appropriate to address Miss Annese’s concerns.

DECISION

[2022] AATA 3048

24 May 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Statutory Construction

Judicial Review

Remedies

Jurisdiction