Baird and Ellis (Child support)

[2018] AATA 3992

Baird and Ellis (Child support) [2018] AATA 3992 (31 August 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC013654

APPLICANT:  Mr Baird

OTHER PARTIES:  Child Support Registrar

Ms Ellis

TRIBUNAL:Member J Longo

DECISION DATE:  31 August 2018

DECISION:

The decision under review is set aside and, in substitution, the tribunal decides as follows:

• From 18 November 2016 to 8 October 2017 Mr Baird’s adjusted taxable income is varied to $39,800 per annum;

• From 9 October 2017 to 17 April 2018 Mr Baird’s adjusted taxable income is varied to $180,000 per annum;

• From 18 April 2018 to 31 December 2019 Mr Baird’s adjusted taxable income is varied to $86,760 per annum;

• From 1 July 2017 to 31 December 2019 Ms Ellis’ adjusted taxable income is varied to $46,060 per annum.

CATCHWORDS

Child support - Departure determination - earning capacity not established for liable parent - Income, property and financial resources of both parent - Proper needs of the children - 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. The issue to be determined in this application is whether there is a reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.

2. Mr Baird and Ms Ellis are the parents of [Child 1], [Child 2] and [Child 3]. Mr Baird is the parent liable to pay child support. The application for child support was registered with the Department of Human Services – Child Support (the Department) from 18 November 2016 and is currently subject to Departmental collection of child support. The children are in the primary care of Ms Ellis (86%) and regular care of Mr Baird (14%).

3. Prior to the departure application, Mr Baird was assessed to pay child support of $4,119 per annum for the period 2 June 2017 to 30 June 2017. This assessment was based on Mr Baird’s 2016/2017 estimate of $15,642 together with Ms Ellis’ 2015/2016 adjusted taxable income of $2,449. For the period 1 July 2017 to 31 October 2017, Mr Baird was assessed to pay child support of $nil based on his 2017/2018 estimate of $20,075 together with Ms Ellis’ 2015/2016 adjusted taxable income of $2,449.

4. Ms Ellis applied to the Department for a departure determination on 1 June 2017 on the basis that, in the special circumstances of the case, because the children are being cared for, educated or trained in the manner expected by the parents, the cost of maintaining the children is significantly affected (Reason 3) and the administrative assessment of child support was not reflective of Mr Baird’s income, property, financial resources and earning capacity (Reason 8A and 8B).

5. Mr Baird disagreed with the departure determination and cross-applied on the basis that he had paid money to a third party for the benefit of the child (Reason 5) and the administrative assessment of child support was not reflective of Ms Ellis’ income, property and financial resources (Reason 8A).

6. On 1 November 2017 the Department determined to change the administrative assessment as follows:

   ·       From 18 November 2016 to 31 December 2016 Mr Baird’s adjusted taxable income is set to $23,752 (the self-support amount);

   ·       From 1 January 2017 to 31 January 2019 Mr Baird’s adjusted taxable income is set to $83,314 per year;

   ·       From 18 November 2016 to 30 June 2017 Ms Ellis’ adjusted taxable income is set to $25,833 per year;

   ·       From 1 July 2017 to 31 July 2017 Ms Ellis’ adjusted taxable income is set to $38,857 per year;

   ·       From 1 August 2017 to 31 January 2019 Ms Ellis’ adjusted taxable income is set to $56,017 per year;

   ·       From 15 February 2017 to 31 October 2017 Ms Ellis’ self-support amount is increased by $3,627 per year;

   ·       From 1 November 2017 to 31 January 2019 Ms Ellis’ self-support amount is increased by $7,735 per year.

7. Mr Baird objected to the decision on 28 November 2017. An objections officer of the Department allowed the objection on 13 February 2018 and made a change to the administrative assessment as follows:

   ·      From 18 November 2016 until 8 October 2017 the adjusted taxable income of Mr Baird is set at $83,314 per annum;

   ·      From 9 October 2017 until 31 October 2020 the adjusted taxable income of Mr Baird is set at $180,000 per annum;

   ·      From 18 November 2016 until 30 June 2017 the adjusted taxable income of Ms Ellis is set at $25,924 per annum;

   ·      From 1 July 2017 until 31 July 2017 the adjusted taxable income of Ms Ellis is set at $38,924 per annum;

   ·      From 1 August 2017 until 31 October 2020 the adjusted taxable income of Ms Ellis is set at $56,084 per annum;

   ·      From 1 February 2017 until 31 January 2019 the annual rate otherwise payable by Mr Baird is increased by $1,500.

8. On 6 March 2018 Mr Baird lodged an application with the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision. Directions for this matter were made on 3 May 2018 for the parties to provide additional information. The application was heard on 10 May 2018. The tribunal considered the documents and information which were provided to the parties prior to the hearing,[1] as well as the oral evidence of Mr Baird and Ms Ellis.

CONSIDERATION

[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Department numbered 1 to 1485; Mr Baird’s documents numbered A1 to A129; and Ms Ellis’ documents numbered B1 to B167.

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) Act1989 (the Assessment Act). The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Assessment Act. Section 98C establishes a three-step process to be satisfied: that there is a ground for a departure; that it is just and equitable to depart; and that it is otherwise proper. Once satisfied, the tribunal may make one of the determinations prescribed in section 98S of the Assessment Act.

Reason 8 – Income, property and financial resources of Mr Baird and Ms Ellis

1. The tribunal notes that Ms Ellis sought a departure from the administrative assessment in the special circumstances of the case, as the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by Mr Baird for the child because of his income, property, financial resources and earning capacity (subparagraphs 117(2)(c)(ia) and (ib) of the Assessment Act).

2. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 the Full Court of the Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. Likewise, in Philippe and Philippe (1978) FLC 90-433 the Court held that ‘special circumstances’ are ‘facts peculiar to the particular case which set it apart from other cases’. The tribunal was guided by these cases in the consideration of this application.

3. Mr Baird’s submission to the tribunal was that the income being used by the Department is not reflective of his circumstances. He stated that he quit his job on 24 October 2016, as [an occupation 1] for [Business 1] at a [work site] in [state], due to family reasons. Mr Baird stated that he was required to look after the children because Ms Ellis disappeared from 19 October 2016 until 31 October 2016. He was unable to continue in his employment as he was not sure whether Ms Ellis would return and he needed to care for the children. This was a very emotional period due to his care of the children and the circumstances regarding Ms Ellis leaving. He was seeing a counsellor during this time, a family friend [named].

4. On 9 January 2017 he commenced working on a casual basis for his [relative] in the [occupation 1] field. He was working two to three days per week as he had the care of the children during the week and weekends. He was staying at his cousin’s house at the time which made it difficult. Mr Baird stated that he was working 15 hours per week for his [relative] and his annual salary was $41,000 (pro-rata).

5. Mr Baird stated that he then commenced employment with [Business 2] in the [specified] Office on 9 October 2017. Initially, his salary was $100,000 per annum but when he moved to work onsite at a [location] his salary increased to $180,000 per annum. Mr Baird stated that he moved to the [location] site after four weeks in the [specified] office. His contract ended on 17 April 2018.

6. Mr Baird stated that he has since started another contract with [Business 2] as [an occupation 2] in [another city] on a full-time basis. The contract was supposed to commence on 1 May 2018 but instead commenced on 16 May 2018. The work is mainly [specified] work. He thinks the contract is open ended but cannot recall. Mr Baird stated that his income is $86,700 per annum. He is able to do overtime when available but due to his care commitments he is not able to do this often.

7. The tribunal notes that Mr Baird’s income tax return for 2016/2017 shows taxable income of $102,937 for this period. His income according to the payslips provided, towards the end of his contract with [Business 2] shows a fortnightly gross payment of $7,115.38 (approximately $180,000 per annum).

8. Ms Ellis stated that Mr Baird stopped work to avoid paying child support and not because he was caring for the children. She stated that she had difficulty accepting Mr Baird’s income when he was working for his [relative] as it was considerably lower than his income before he reigned. She believes that he was working for cash during this period.

9. Ms Ellis stated that in relation to her own circumstances, she is now working two days per week for [Business 3] in [occupation 3]. She averages between four and eight hours per day. She also undertakes [occupation 3] through her business name, [Business 4], but is able to do this remotely from home. Another client, whose business is in transportation, provides sporadic work for her. The tribunal notes that Ms Ellis has provided payslips from [Business 3] which show her weekly hours between 4 ½ to 10 hours per week. Ms Ellis also provided invoices from [Business 4] which showed her hourly rate of $45 per hour and that she worked between eight hours and 10 hours. It is unclear, however, for what period the invoices relate, whether weekly, fortnightly or monthly.

10. Subsection 117(7B) of the Assessment Act was introduced into the legislation from 1 July 2006 for the purpose of limiting the circumstances under which a parent can be found to have a higher capacity to earn an income for child support purposes. It requires the consideration of three criteria to establish a parent has a higher earning capacity than reflected in the administrative assessment of child support as follows:

• that the parent has changed their work patterns or industry; or that the parent has reduced their hours of employment; or is not working despite ample opportunity to do so;

• that the change is not due to the parent’s caring responsibilities or state of health; and

• the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support

1. Ms Ellis has stated that Mr Baird had no need to leave his employment due to his caring responsibilities. Mr Baird’s evidence was that he was required to care for the children and consequently was unable to continue in his employment. The tribunal has determined that a ground based on Mr Baird’s earning capacity is not established in considering whether to depart from the administrative assessment. The reason this ground has not been established relies on both the events relating to Mr Baird’s reasons for resigning from his employment and the timing of his resignation. At the time Mr Baird resigned, there was no enforceable maintenance liability. The case was registered with the Department on 18 November 2016 which was after Mr Baird resigned from his employment in October 2016. Notwithstanding the date in the change to Mr Baird’s employment, the tribunal also accepts that Mr Baird’s reason for resigning from employment were due to caring responsibilities at the time. On this basis, the tribunal has decided that a ground for departure based on Mr Baird’s earning capacity is not established.

2. It is clear, however, from the information provided that Mr Baird’s income during the period from 18 November 2016 was different from the income used in the administrative assessment. Mr Baird’s income during the period from 18 November 2016 was based on his 2015/2016 adjusted taxable income of $240,324; from 12 January 2017 was based on estimates of income for 2016/2017 of $15,642 and from 1 July 2017 on an estimate of income for 2017/2018 of $20,075. These income amounts differ considerably from Mr Baird’s income during the period. Mr Baird’s income tax return for 2016/2017 was $102,937; however, he resigned from his employment in October 2016. He worked casually from January 2017 with his [relative], earning approximately $300 per week and returned to contract work in [state] in October 2017, earning between $100,000 and $180,000 per annum until April 2018. These amounts differ considerably from the administrative assessment as determined.

3. The tribunal has determined that there are special circumstances in this application which establish a ground for departure under subparagraph 117(2)(c)(ia) of the Assessment Act in relation to Mr Baird’s income. It is clear from both the oral and written evidence before the tribunal that Mr Baird’s income from employment for 2016/2017 and 2017/2018 was higher than as assessed in the administrative assessment. The tribunal has found the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided to [Child 1], [Child 2] and [Child 3]. Consequently, the tribunal concludes that there is a ground established for departure.

Other grounds

1. The tribunal also notes that Ms Ellis sought a departure from the administrative assessment in the special circumstances of the case, the costs of maintaining the child are significantly affected because of the high child care costs in relation to the children (subparagraph 117(2)(b)(ib) of the Assessment Act). Mr Baird also sought a departure from the administrative assessment in the special circumstances of the case on the basis of payments made for the benefit of the children (subparagraph 117(2)(c)(ii) of the Assessment Act). However, the tribunal has already determined that there are grounds to depart from the administrative assessment based on the considerations above. The tribunal will therefore consider the submissions on this issue in the context of whether it is just and equitable and otherwise proper to depart from the administrative assessment.

Would departure from the administrative assessment be just and equitable?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment, the next step is to consider whether it is just and equitable to depart from the administrative assessment. In deciding whether it is just and equitable, the tribunal had regard to the matters set out in subsection 117(4) of the Assessment Act. Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child over all commitments of the parents other than commitments necessary for self-support or the support of another person to whom they have a duty.

2. The tribunal notes that considerable information has been provided by the parties regarding matters not relevant to these proceedings. This information relates to such issues as the property settlement and care arrangements, including the withholding of care, during the period. The tribunal notes that these matters, while important, have not been considered in the context of this application as they do not relate to the determination to be made. The tribunal has instead had regard to the matters set out in subsection117(4) of the Assessment Act in determining whether it is just and equitable to depart from the administrative assessment.

3. In relation to Mr Baird’s financial circumstances, he stated that his income from employment from January 2017 was from employment with his [relative]. This income is provided in payslips provided to the tribunal.[2] Mr Baird’s year to date earnings from [Business 1] until 27 October 2016 show gross income of $78,158.82. His 2016/2017 income tax return shows gross income of $108,097. This would indicate income of approximately $29,900 for the period from November 2016 until 30 June 2017. Mr Baird did not state whether he remained employed with his [relative] until commencing his contract with [Business 2] in October 2017. If Mr Baird’s income for the period November 2016 to June 2017 were annualised, his income would equate to approximately $39,800 per annum. This is almost equivalent to his annual salary as indicated on his payslips from his employment with his [relative] ($41,000). From October 2017 until April 2018, Mr Baird’s income increased. He stated that he started on $100,000 per annum but within four weeks this increased to $180,000 per annum. The payslips provided from [Business 2] confirm the latter income. Mr Baird stated that his contract ended and he commence another contract in May 2018. He is still employed in this position. His contract of employment indicates he is employed as [a different occupation] with annual income of $86,760.

   [2] Page 342 to 346 of the subsection 37(1) Statement and Documents provided by the Department.

4. In addition, Mr Baird has provided information regarding his assets and liabilities. Mr Baird’s Statement of Financial Circumstances shows that he owns a motor vehicle ($18,000) and household contents ($5,000) and funds in bank ($1,476). Mr Baird’s liabilities consist of car loan ($20,000), credit card debt ($8,000) and outstanding legal fees ($5,846). He has superannuation totalling $72,500. Mr Baird’s personal expenses are $1,564 per week (child support and income tax and private health insurance). In regard to his household expenses, Mr Baird has indicated that these are around $1,610 per week, which includes expenses for the children.

5. There is also no dispute in regard to Ms Ellis’ income from [occupation 3 work]. The tribunal finds that she is employed part-time. Ms Ellis stated in her statement of financial circumstances that her income from [occupation 3] was $520 per week. Ms Ellis also receives parenting payment of $385 per week according to her statement of financial circumstances.

6. In regard to her assets, she owns a motor vehicle ($12,500) and household contents ($57,250) and funds from the sale of the marital home held on trust ($94,000). Ms Ellis’ statement of financial circumstances states her liabilities as a loan from her parents ($15,000), student loans ($12,000). While Ms Ellis’ personal expenses are approximately $20 per week and her household expenses are around $1,380 per week. The tribunal notes that Ms Ellis’ income is less than her expenditure, however there is no indication that she is incurring significant debt to meet these costs. Ms Ellis has stated that she has borrowed funds from her parents and family to pay her expenses. While some evidence of these transfers has been provided, there is no evidence of repayment of these funds. The tribunal notes that Ms Ellis receives family tax benefit, which is excluded as income for the purpose of child support and has factored into her income the child support as assessed. However, even if these amounts were included, her income is less than her expenses.

1. In determining the proper needs of a child, it is necessary to have regard to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Assessment Act). The tribunal has considered the evidence of the parties relating to the needs of the child. Ms Ellis referred to medical issues of the children in further submissions. It is unclear when these conditions arose. No medical evidence or information relating to the costs associated with treatment were provided. Ms Ellis states that these conditions have now abated. On this basis, the tribunal has not considered these costs in its determination of the level of child support payable.

2. The tribunal also considered Ms Ellis’ out of pocket expenses relating to child care for the children. It is clear from the information provided that Ms Ellis’ child care costs are considerably more than 5% of her adjusted taxable income. However, the tribunal has also considered whether these costs are necessary expenses. The child care received by Ms Ellis is not due to her work commitments, which Ms Ellis indicated was around 12 hours per week. Ms Ellis undertakes much of this work at home. It is difficult to accept that these expenses are necessary costs for self-support for Ms Ellis or the children in the circumstances. Accordingly, the tribunal has not determined these costs as part of the child support payable. In relation to Mr Baird’s submission regarding the purchase of a motor vehicle for the benefit of the children, the tribunal has considered that this matter was more appropriately dealt with in the division of the marital pool of assets rather than in the context of the child support payable and has not considered this as a part of the departure determination.

3. Subsection 117(4) of the Assessment Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support.

4. The tribunal is satisfied that it is just and equitable to make a departure determination and varies the child support payable by Mr Baird from 18 November 2016 as follows:

• From 18 November 2016 to 8 October 2017 Mr Baird’s adjusted taxable income is varied to $39,800 per annum;

• From 9 October 2017 to 17 April 2018 Mr Baird’s adjusted taxable income is varied to $180,000 per annum;

• From 18 April 2018 to 31 December 2019 Mr Baird’s adjusted taxable income is varied to $86,760 per annum;

• From 1 July 2017 to 31 December 2019 Ms Ellis’ adjusted taxable income is varied to $46,060 per annum.

1. In relation to both Mr Baird and Ms Ellis, the tribunal does not believe either party would experience hardship if a departure determination were to be made in the manner determined in paragraph 33 above. Ms Ellis is able to afford the costs of the children based on the information provided to the tribunal and consequently the tribunal is satisfied that there would be no hardship to her. A reduction to Mr Baird’s liability will also not cause hardship to him.

2. The above determination is a decrease in child support payable by Mr Baird from November 2016 based on the administrative assessment which was in place prior to the application. In making this decision the tribunal has carefully considered all of the written and oral evidence and costs regarding the child’s proper needs. The income, resources, benefits and assets, together with the commitments and liabilities of both parties, were also considered to determine the above departure determination, as were the previous determinations of Mr Baird’s child support liability. In considering all of the factors in subsection 117(4) of the Assessment Act, the tribunal has taken the view that neither party will experience hardship as a consequence of this departure determination, based on the above considerations.

Is it otherwise proper to make a particular 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 their child.

2. Ms Ellis is receiving family tax benefit in respect of the children. The proposed departure determination should reduce the amount of family tax benefit payable, compared to the administrative assessment of child support, and will, therefore, result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result is otherwise proper.

DECISION

The decision under review is set aside and, in substitution, the tribunal decides as follows:

• From 18 November 2016 to 8 October 2017 Mr Baird’s adjusted taxable income is varied to $39,800 per annum;

• From 9 October 2017 to 17 April 2018 Mr Baird’s adjusted taxable income is varied to $180,000 per annum;

• From 18 April 2018 to 31 December 2019 Mr Baird’s adjusted taxable income is varied to $86,760 per annum;

• From 1 July 2017 to 31 December 2019 Ms Ellis’ adjusted taxable income is varied to $46,060 per annum.