Bannon and Applegate (Child support)
[2018] AATA 3286
•4 June 2018
Bannon and Applegate (Child support) [2018] AATA 3286 (4 June 2018)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2018/BC013468
APPLICANT: Ms Bannon
OTHER PARTIES: Child Support Registrar
Mr Applegate
TRIBUNAL:Member M Baulch
DECISION DATE: 4 June 2018
DECISION:
The tribunal set aside the decision under review and, in substitution, decided that there are to be departure determinations, pursuant to paragraph 98S(1)(a) of the Child Support (Assessment) Act 1989, such that:
From 25 October 2017 until 31 December 2017 the annual rate of child support payable by Mr Applegate is varied to $11,568;
From 1 January 2018 until 31 December 2018 the annual rate of child support payable by Mr Applegate is varied to $13,512;
From 1 January 2019 until 30 January 2019 the annual rate of child support payable by Mr Applegate is varied to $13,917;
From 31 January 2019 until 26 March 2019 the annual rate of child support payable by Mr Applegate is varied to $16,053;
From 27 March 2019 until 31 December 2019 the annual rate of child support payable by Mr Applegate is varied to $17,155;
From 1 January 2020 until 31 December 2020 the annual rate of child support payable by Mr Applegate is varied to $17,670.
CATCHWORDS
Child support - Departure determination - Income, property and financial resources of liable parent - Non-compliance with directions - Costs of special needs not significant - Costs of education of children - A ground for departure established - Annual rate payable varied - 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
This application for review concerns the amount of child support paid by Mr Applegate to Ms Bannon in respect of their children, [Child 1], who was born in 2006, and [Child 2], who was born in 2009.
The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one separated parent to the other. It uses a statutory formula which contains variables such as the parents’ incomes, the number of children, their ages and the percentages of care.
A parent can make an application to the Department of Human Services – Child Support (the Department) for a change to the administrative assessment based on the statutory formula in the special circumstances of their case – referred to in the Act as a departure determination. Ms Bannon made such an application on 25 October 2017.
On 7 December 2017, a departmental decision-maker considered the application and decided that there should be a change to the child support assessment such that Mr Applegate’ adjusted taxable income was set at $95,000 per annum for the period 25 October 2017 to 31 December 2020.
Mr Applegate lodged an objection to that decision and, on 27 February 2018, that objection was partly allowed. The objections officer decided that there should be a departure determination such that Mr Applegate’s adjusted taxable income was set at $68,500 per annum for the period 1 January 2018 to 31 December 2018 (the decision under review). Ms Bannon has now applied to the Administrative Appeals Tribunal (the tribunal) for an independent review of the Department’s decision.
A hearing into the application for review was held by the tribunal on 4 June 2018. Ms Bannon discussed the application for review with the tribunal by telephone and gave sworn evidence during the hearing. Neither Mr Applegate nor a representative of the Child Support Registrar participated in the hearing.
The tribunal had before it relevant documents provided to it by the Department pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, which were labelled folios 1 to 701. The tribunal also had regard to additional documents provided by Ms Bannon (labelled folios B1 to B105).
PRELIMINARY MATTER
On 9 April 2018 a telephone directions hearing was convened in which Ms Bannon and Mr Applegate participated by conference telephone and I made directions in relation to Ms Bannon’s application for review. Those directions included that:
· The matter would be heard on 4 June 2018 with both parties participating by telephone; and
· Mr Applegate was to provide a number of documents and information in relation to the application for review by 27 April 2018. This timeline was later extended in consultation with the Registry to assist Mr Applegate’ compliance with my directions.
Hearing on 4 June 2018
Mr Applegate advised me at the directions hearing that he would be overseas on 4 June 2018 and unable to participate in a hearing on that date. In my directions, Mr Applegate was directed to provide evidence in support of this assertion by close of business 18 April 2018 before an alternate hearing date would be contemplated. No such evidence has been received.
When the Registry contacted Mr Applegate on his mobile telephone on 4 June 2018 to set up the telephone conference for the hearing he answered the Registry’s telephone call and I was satisfied that Mr Applegate was not overseas. Mr Applegate advised the Registry officer that he was unable to participate in the hearing.
I was satisfied that Mr Applegate had reasonable notice of the hearing to occur on 4 June 2018 and, pursuant to paragraph 40(1)(b) of the Administrative Appeals Tribunal Act 1975, I decided to proceed with the hearing in his absence.
Compliance with directions to supply documents and information
During the directions hearing on 9 April 2018, Mr Applegate indicated that he would be able to provide the documents or information I was requesting he provide. During that directions hearing, I also warned both parties of the potential consequences if they did not comply with my directions, including that I may draw adverse inference from their failure to comply.
Mr Applegate has provided no documents or information in response to the directions I made. I note that the Registry file indicates that a Registry staff member was in contact with Mr Applegate about his compliance with those directions on 17 May 2018. I am satisfied that Mr Applegate is aware of my directions and had indicated a capacity to comply with them during the directions hearing.
Mr Applegate has provided no explanation for his failure to provide the documents or information requested and I was satisfied that he has deliberately not complied with my directions of 9 April 2018.
As noted by Judge Baker in Archer & Archer & Anor (SSAT Appeal) [2013] FCCA 226 at [67] to [70], when faced with a failure of a party in a child support matter to comply with directions to provide information relevant to an application for review of an objections officer’s decision:
67.The appellant has a duty to make full and frank disclosure before the Tribunal. In Gilmour and Gilmour [24] the Full Court of the Family Court made it clear that there is a duty to make full disclosure under child support legislation in the same way as such a duty applies in financial proceedings under the Family Law Act1975.
68.In respect of the duty of disclosure, the Full Court of the Family Court in Weir & Weir [25] said:
· It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour’s findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.[26]
69.In Chang v Su [27], the Full Court of the Family Court summarised the law to be applied and the approach to be adopted in cases, where through a lack of full and frank disclosure, the Court is unable to fully ascertain the extent of a party’s wealth. The Full Court referred to Black & Kellner [28] and referred to what Chief Justice Nicholson said in dismissing the appeal:
· As Senior Counsel for the wife pointed out, the first step in proceedings for a property settlement is for the court to ascertain the wealth of the parties and in this regard it is of interest to note the remarks of the Full Court in the case of Giunti and Giunti [1986] FamCA 15; (1986) FLC 91-759, particularly at 75,555 where the court commented:
· It is obviously desirable as a general principle that the court should first of all identify the pool of assets available and evaluate it. If each party complies with his or her obligation to make a full and substantive disclosure of their financial affairs – see Briese and Briese (1986) FLC 91-713, affirmed by the Full Court in Oriolo and Oriolo (1985) FLC 91-653, there is no problem, although there may be disputes as to valuation.
· However if, as here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require? It would be simple, if that were the case, to evade the jurisdiction of this court, not by outright refusal which would attract sanctions but by obfuscation and evasion.[29]
70.Halligan FM, as he then was, pointed out in Agrippa & Horton (SSAT Appeal) [30] that if the Tribunal is satisfied that a party has made a deliberate non-disclosure of his or her financial circumstances, it should be reasonably robust in assessing the non-disclosing parent’s financial circumstances adversely to that parent and in favour of the other parent. This was the position held by the Full Court of the Family Court in Chang v Su.[31]
These principles will guide my consideration of Ms Bannon’s application for review.
ISSUES
Pursuant to section 98C of the Act, a determination to depart from the administrative assessment of child support determined in accordance with the statutory formula may be made if the following three requirements are met:
(i)that one, or more than one, of the grounds for departure referred to in [subsection 117(2) of the Act] exists; and
(ii)that 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 under [Part 6A of the Act]; …
CONSIDERATION
When Ms Bannon made her application for a departure determination on 25 October 2017, the assessment of child support required Mr Applegate to pay an annual rate of $3,830 based upon both parents’ 2016–17 taxable incomes: for Ms Bannon that was $46,315 and for Mr Applegate it was $45,427. This assessment was based upon care determinations which recorded Ms Bannon as having 100% care of [Child 1] and [Child 2]. The assessment also had regard to Mr Applegate’ liability to pay child support under another assessment for another child, who was born in 2001.
Since then, the bundle of documents shows that the Australian Taxation Office (ATO) has amended the taxable incomes of both parents. For Ms Bannon, her 2016–17 taxable income is now assessed as $73,280 and for Mr Applegate, his 2016–17 taxable income is assessed as $68,240. Had the Department not made a departure determination, and if the administrative assessment was to be based on Mr Applegate’ and Ms Bannon’s amended taxable incomes, I estimated that Mr Applegate would have been required to pay child support for [Child 1] and [Child 2] of approximately $7,882 per annum.
This, therefore, is the administrative assessment of child support from which I am considering departing.
Is there a ground, or grounds, for departure?
All the grounds for departing from the administrative assessment of child support are prefaced by the term ‘in the special circumstances of the case’. As noted by the Full Court of the Family Court:[1]
Whilst it is not possible to define with precision the meaning of that term, as a generality 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 court will not interfere with the administrative formula result in the ordinary run of cases. In Savery's case (at Fam LR 815 FLC 77,897), Kay J, adopting the view in In the Marriage of Philippe (1977) 4 Fam LR 153; [1978] FLC 90-433 at Fam LR 155 FLC 77,202 in a different context, said that ‘special circumstances’ were ‘facts peculiar to the particular case which set it apart from other cases’. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
[1] See Gyselman and Gyselman [1991] FamCA 93.
Educating the children in the manner expected by the parents
Subparagraph 117(2)(b)(ii) of the Act (commonly referred to as ‘Reason 3’ by the Department) provides as a ground for departure where:
…in the special circumstances of the case, the costs of maintaining the child are significantly affected…because the child is being cared for, educated or trained in the manner that was expected by his or her parents.
[Child 1] and [Child 2] attend a private school, [School 1], and Ms Bannon’s application for a departure determination seeks a change to the child support assessment under this ground.
Within the documents before me are applications for enrolment for each of [Child 1] and [Child 2], signed by the parents on 13 September 2011, to attend [School 1]. There are also enrolment contracts with [School 1], also signed by both parents, dated 22 December 2011 for [Child 1] and 24 February 2014 for [Child 2].
Mr Applegate is recorded in the Department’s file notes as stating his signature on these forms was forged and that he did not have an expectation that [Child 1] and [Child 2] should attend [School 1]. The allegation that Mr Applegate’ signature was forged was denied by Ms Bannon at hearing. Her evidence was that both she and Mr Applegate signed the forms, both parents attended the enrolment interview, and both parents expected [Child 1] and [Child 2] to attend [School 1].
Having considered the matter, I was satisfied that the weight of evidence suggests that, historically, both Ms Bannon and Mr Applegate expected [Child 1] and [Child 2] to be educated at [School 1].
In 2017 [Child 1] was in Grade 6 and [Child 2] was in Grade 2. An annual fee schedule for [School 1] for 2017 shows that the annual fees for the first child at Junior School (Prep to Grade 6) was $5,700 and, after discount, the fees for a second child was $4,626. I therefore found that the gross fees for [Child 1] and [Child 2] to attend [School 1] in 2017 were $10,326. The evidence shows that Ms Bannon had the benefit of a bursary for both children, which reduced the fees by $2,955 to $7,371.
The evidence was Ms Bannon met the costs for 2017, with the assistance of her parents, and some of the fees were paid by Mr Applegate directly to the school. I note that Mr Applegate has claimed credit for these amounts as non-Agency payments (pursuant to section 71C of the Child Support (Registration and Collection) Act 1988) and the Department has decided to credit $1,120 against his child support liability.
A statement of account from [School 1] dated 9 February 2018 shows that Ms Bannon has been invoiced fees for [Child 1], in Grade 7, and [Child 2], in Grade 3, of $2,815 for the first term after the sibling discount – equivalent to $11,260 for the full year. Ms Bannon advised me that she has not applied for bursaries this year and, if she did, there is no guarantee that her application would be successful.
Were the administrative assessment of child support based upon the parents’ taxable income, as amended by the ATO, the costs of the children for the current child support period would be approximately $20,244 per annum. I was satisfied that private school fees of $7,371 in 2017 and $11,260 in 2018 would significantly affect the costs of maintaining [Child 1] and [Child 2].
I was also satisfied that the costs of [Child 1] and [Child 2] attending [School 1] are greater than the costs of them attending a government school and the expenses incurred are out of the ordinary and therefore constitute special circumstances.
I therefore found that the ground for departure set out in subparagraph 117(2)(b)(ii) of the Act has been established in this case.
Just and equitable
The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. Regard must be had to a variety of factors, set out in subsection 117(4) of the Act, such as the needs of the children, the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.
[Child 1] and [Child 2]
At all relevant times the Department has recorded [Child 1] and [Child 2] as being in Ms Bannon’s care 100% of the time. There is no evidence that [Child 1] and [Child 2] themselves have any income, property, earning capacity or financial resources relevant to my consideration.
As noted above, the costs of the children used in the statutory formula is approximately $20,244 per annum. I have found that the parents expected [Child 1] and [Child 2] to be educated at [School 1] and this cost $7,371 in 2017 and $11,260 in 2018.
Ms Bannon also asserted that the costs for [Child 1] to travel to Canberra for an excursion ($1,713) and the costs she incurred acquiring [Child 1] a laptop for use at school ($2,149.77) are also relevant to my consideration of her application for a departure determination. It was my view that excursions and BYO device policies are not unique to the private school sector and frequently apply to children attending public school. I did not consider these expenses to be out of the ordinary and declined to have regard to them when considering a departure determination.
Ms Bannon’s evidence was that [Child 1] has [certain medical conditions]. He takes medication, sees a psychologist fortnightly and a paediatrician every six months. Ms Bannon stated that [Child 2] [also has medical conditions]. Ms Bannon told me that [Child 2] takes medication and sees a psychologist each fortnight, a psychiatrist each month and also consults a paediatrician. Ms Bannon receives carer allowance for both children, but has out-of-pocket expenses above the amount of the allowance she receives, which she stated were $20 to $30 each month ($240 to $360 per annum). I did not see these costs, when compared to the costs of the children used in the statutory formula ($20,244 per annum), to be a significant or relevant consideration when contemplating a departure determination.
Ms Bannon
When she made her application for a departure determination, the administrative assessment of child support was based upon Ms Bannon’s adjusted taxable income of $46,315 – determined by reference to her 2016-17 taxable income. Since the decision under review as made, the ATO has made an amendment to the assessment of Ms Bannon’s 2016-17 taxable income, such that it is now $73,280.
Ms Bannon works full-time. Her payslips disclose a current gross income before deductions of approximately $2,473.14 per fortnight, or about $64,301 per annum. Ms Bannon lists no assets of any significance and is subject to a debt agreement in relation to liabilities of $145,867. Her evidence was that she is paying $300 per fortnight ($7,800 per annum) in relation to the debt, with payments to be made until 2022.
I was satisfied that Ms Bannon’s income, property and financial resources are adequately represented by her taxable income, as amended by the ATO, that would have been used in the administrative assessment of child support had the Department not made a departure determination.
I received no submissions, nor identified any evidence, that Ms Bannon has any unutilised earning capacity that is relevant to my consideration.
Ms Bannon’s Statement of Financial Circumstances form completed on 7 March 2017 shows total fortnightly expenditure as follows:[2]
[2] Ms Bannon’s evidence was the amounts disclosed on the form were fortnightly, and not weekly, amounts.
Income tax: | $261.00 | Credit card payments: | $20.00 |
Health insurance: | $98.00 | Household expenses: | $1,907.00 |
I calculated that Ms Bannon’s living expenses are currently $2,286.00 per fortnight, or $59,436 per annum for herself, [Child 1] and [Child 2]. Ms Bannon attributes $807 per fortnight ($20,982 per annum) of this expenditure to [Child 1] and [Child 2], leaving $1,100 per fortnight ($28,600 per annum) as her expenditure on her own support.
Under the administrative assessment of child support, Ms Bannon has the benefit of a self-support amount of $24,154 per annum. I identified no evidence to persuade me that Ms Bannon’s commitments to support herself are not adequately represented by $24,154 per annum.
Ms Bannon submitted that if I were not to make a departure determination she, [Child 1] and [Child 2] would suffer hardship and I accepted that not making a departure determination would potentially result in hardship for Ms Bannon and the children.
Mr Applegate
When Ms Bannon made her application for a departure determination, the administrative assessment of child support was based upon Mr Applegate’ adjusted taxable income of $45,427 — determined by reference to his 2016–17 taxable income. Since the decision under review as made, the ATO has made an amendment to the assessment of Mr Applegate’ 2016–17 taxable income, such that it is now $68,240.
The documents indicate that Mr Applegate has asserted on a number of occasions that he is no longer working, The bundle of documents prepared by the Department indicate that Mr Applegate has, on at least two occasions, made estimates of his income which were ultimately not accepted by the Department to be accurate. There is no independent corroborative evidence that Mr Applegate has ceased employment.
As Mr Applegate has failed to comply with my directions to provide information about his financial circumstances, I will infer that he continues in employment and continues to earn an income commensurate with his taxable income in the 2016–17 financial year.
I was satisfied that Mr Applegate’ income, property and financial resources are adequately represented by his taxable income, as amended by the ATO, that would have been used in the administrative assessment of child support had the Department not made a departure determination.
Having concluded that Mr Applegate continues to be employed, I was satisfied that he has no unutilised earning capacity that is relevant to my consideration.
Under the administrative assessment of child support, Mr Applegate has the benefit of a self-support amount of $24,154 per annum. Mr Applegate has not put forward any evidence to suggest that his commitments to support himself should not be measured by $24,154 per annum.
Mr Applegate has a liability to pay child support in another case for a child born in 2001. The statutory formula recognises this by allowing him a multi-case allowance of $4,676 per annum (section 47 of the Act) in addition to the self-support amount. Mr Applegate’ liability is also subject to the multi-case cap (section 55HA of the Act). This provides that he does not pay more in child support for three children living in two households than he would pay if all three children lived together in one household. I was satisfied that the multi-case allowance and multi-case cap adequately reflect Mr Applegate’ duty to support his other child.
Mr Applegate has failed to comply with my directions to provide information about his financial circumstances and, as a consequence, I will infer that my making a departure determination that increases his liability to pay child support would not cause Mr Applegate any hardship.
Having considered those matters set out in subsection 117(4) of the Act, I was satisfied that it would be just and equitable to make a departure determination that increases Mr Applegate’ liability to pay child support.
Otherwise proper
The requirement to consider whether a departure would be otherwise proper, is set out in subsection 117(5) of the Act, which directs my attention to what is fair to the community. It is necessary to consider the effect, if any, that a departure from the administrative assessment would have on entitlements to income tested pension, allowance or benefit. Parents, rather than the community, have the primary duty to maintain their children.
The evidence shows that Ms Bannon receives family tax benefit at more than the minimum rate. I concluded that a departure determination which would increase the child support liability would potentially result in a reduction in the amount of family tax benefit payable to Ms Bannon. Therefore, I was satisfied that a determination that increases the amount of child support payable by Mr Applegate would be otherwise proper.
Conclusion
Section 4 of the Act sets out the objectives of the Act, these objectives include:
· Parents of a child have a primary duty to maintain that child;
· That duty has a priority over all commitments of the parent other than commitments necessary for self-support;
· The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and
· The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.
I have found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper for me to make a departure determination. Section 98S of the Act describes the determinations that I may make if a decision is made to depart from the administrative assessment of child support.
I have found that a ground for departure exists on the basis of school fees incurred by Ms Bannon for [Child 1]’s and [Child 2]’s attendance at [School 1]. I decided that a departure determination that increases Mr Applegate’ liability to pay child support by an amount equivalent to half the costs of the school fees would be appropriate. Given the duty to maintain the children should be borne by the parents, I considered that a departure determination is more appropriate than the objections officer’s suggestion that Ms Bannon seek another bursary for the school fees.
This would make Mr Applegate’ liability $11,568 for the 2017 school year (equivalent to $7,882 plus half of $7,371) and $13,512 for the 2018 school year (equivalent to $7,882 plus half of $11,260).
I also considered the liability should also be increased by 3% each year from 2019 to reflect the likely increase in the school fees and the likely increased costs of caring for two children of [Child 1]’s and [Child 2]’s ages more generally.
I considered that the date Ms Bannon made her application for a departure determination, 25 October 2017, to be the appropriate date from which my departure determinations should commence.
Ms Bannon submitted that a departure determination that applied to December 2020 was fair. Mr Applegate did not avail himself of the opportunity provided by a hearing to tell me his views about a potential departure determination.
I noted that between now and December 2020 there would be a number of occurrences which would impact on Mr Applegate’ liability to pay child support under the statutory formula:
· On 31 January 2019, the child in respect of whom Mr Applegate is also liable to pay child support will turn 18 years of age. In the normal course of events Mr Applegate’ liability to pay child support for this child would end, and he would cease to benefit from the multi-case allowance and multi-case cap; and
· On 27 March 2019, [Child 1] will turn 13 years of age which results in an increase in the costs of the children used in the statutory formula.
I considered my departure determinations should reflect these changes.
The only uncertainty is the possibility that Mr Applegate’s liability to pay child support under the other case might extend beyond that child’s 18th birthday (see section 151B and 151C of the Act). However, I was of the view that, if the Department decided that Mr Applegate’ child support liability for this child was to extend beyond 31 January 2019, it would be open to Mr Applegate to make his own application for a departure determination on that basis.
Accordingly, I concluded that the appropriate departure determinations to apply in this case are, pursuant to paragraph 98S(1)(a) of the Act:
· From 25 October 2017 until 31 December 2017 the annual rate of child support payable by Mr Applegate is varied to $11,568;
· From 1 January 2018 until 31 December 2018 the annual rate of child support payable by Mr Applegate is varied to $13,512;
· From 1 January 2019 until 30 January 2019 the annual rate of child support payable by Mr Applegate is varied to $13,917;
· From 31 January 2019 until 26 March 2019 the annual rate of child support payable by Mr Applegate is varied to $16,053;
· From 27 March 2019 until 31 December 2019 the annual rate of child support payable by Mr Applegate is varied to $17,155;
· From 1 January 2020 until 31 December 2020 the annual rate of child support payable by Mr Applegate is varied to $17,670.
For these reasons, I therefore decided to set aside the decision under review and substitute my own decision as set out below.
DECISION
The tribunal set aside the decision under review and, in substitution, decided that there are to be departure determinations, pursuant to paragraph 98S(1)(a) of the Child Support (Assessment) Act 1989, such that:
From 25 October 2017 until 31 December 2017 the annual rate of child support payable by Mr Applegate is varied to $11,568;
From 1 January 2018 until 31 December 2018 the annual rate of child support payable by Mr Applegate is varied to $13,512;
From 1 January 2019 until 30 January 2019 the annual rate of child support payable by Mr Applegate is varied to $13,917;
From 31 January 2019 until 26 March 2019 the annual rate of child support payable by Mr Applegate is varied to $16,053;
From 27 March 2019 until 31 December 2019 the annual rate of child support payable by Mr Applegate is varied to $17,155;
From 1 January 2020 until 31 December 2020 the annual rate of child support payable by Mr Applegate is varied to $17,670.
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