Bubb and Bubb (Child support)

Bubb and Bubb (Child support) [2019] AATA 2526 (19 June 2019)

DIVISION:Social Services & Child Support Division
REVIEW NUMBERS: 2019/MC015711
2019/BC016482

APPLICANTS: Mr Bubb
Ms Bubb

OTHER PARTIES: Child Support Registrar
Ms Bubb
Mr Bubb

TRIBUNAL:Member P Noonan
DECISION DATE: 19 June 2019
DECISION:

The tribunal sets aside the decision under review and, in substitution, decides to vary (increase) the annual rate of child support payable by Mr Bubb by $400 for the period 1 July 2018 to 30 June 2019.

CATCHWORDS

CHILD SUPPORT – departure determination – necessary commitments for self-support for the liable parent - costs of medical treatment for the child – financial resources of both parents - 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

Mr Bubb and Ms Bubb are the parents of two children.
The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of the child support payable. It uses a formula, which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in certain circumstances.
A child support case was first registered with the Department of Human Services (the Department) on 16 May 2018 and child support has been registered for collection by the Department from that date. Care of the children is registered as being 68% to Ms Bubb and 32% to Mr Bubb.
On 5 June 2018 Mr Bubb applied for a departure from the administrative assessment of child support payable. He applied on the basis that in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of their commitments which are necessary to enable them to support themselves (sub-subparagraph117(2)(a)(iii)(A)). Ms Bubb cross applied on the basis that the costs of maintaining the children are significantly affected by their special needs.
At the time of Mr Bubb’s application for departure the administrative assessment of child support payable was that:
·For the period 16 May 2018 until 31 July 2018; an annual rate of child support payable of $9,992 based on Mr Bubb’s 2016-17 adjusted taxable income of $76,954 and Ms Bubb’s 2016-17 adjusted taxable income of $31,166.
On 17 September 2018, a Department decision maker decided that Ms Bubb’s cited reason for departure had been established and Mr Bubb’s cited reason for departure had not been established. The officer decided that a departure determination was appropriate in the following terms:
·For the period 1 July 2018 until 31 December 2019; the rate of child support payable by Mr Bubb is increased by $600 per annum. This is in recognition of his contribution to the children`s special needs costs.
·From 1 January 2020; the normal administrative provisions of the Child Support (Assessment) Act 1989 will apply.
Mr Bubb lodged an objection and on 11 December 2018 an objections officer decided to part allow the objections. The officer decided as follows:
·The application is refused under Section 98F of the Child Support (Assessment) Act 1989, because it would not be just and equitable to change the assessment.
Both Mr Bubb and Ms Bubb subsequently appealed to this tribunal for an independent review. The tribunal conducted a directions hearing and issued directions to both parties for production of documents and information in preparation for the hearing.
A hearing for the matter was held by the tribunal on 19 June 2019. Both Mr Bubb and Ms Bubb attended the hearing by conference telephone and gave evidence on affirmation. The Child Support Registrar did not attend the hearing.
In reaching its decision the tribunal considered the evidence of Mr Bubb and Ms Bubb at the hearing as well as the documentation provided by the Department and each party.
Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following requirements are met:
(i)that one, or more than one, of the grounds for departure referred to in subsection 117(2) 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 this Part …

CONSIDERATION

A ground for departure – special needs costs

The legislative grounds applicable to this ground are set out in subsection 117(2) of the Assessment Act. The legislative test is detailed in subparagraph 117(2)(b)(ia). The test is whether:
… in the special circumstances of the case, the costs of maintaining the child are significantly affected because of special needs of the child;
It was not contested by either parent that the children received [medical] care during 2018–19. Ms Bubb submitted receipts showing out of pocket costs totalling $800. She submitted [medical] care has now ceased and the last submitted receipt indicated this cost ceased to be incurred in May 2019.
The tribunal accepted that the [medical] care was necessary and that it involved significant out-of-pocket expenses. In Lightfoot and Hampson (1996) FLC 92-663 (“Lightfoot”) at [82], the Full Court stated that the phrase “special needs of the child”:
encompasses a wide range of needs of a child which are seen as special in the sense of necessary or at least desirable for that child’s welfare but outside the “normal” needs of a child which could be catered within the formula. This would include such things as unusual medical expenditure, facilities for a handicapped child etc.
The tribunal was satisfied that the [medical] care is a “special need” in that it was medically necessary for the children’s health and wellbeing. The case of Lightfoot established the principle that if these costs are necessary or desirable for the child’s welfare, and they impact significantly on the cost of raising the child, a change to the child support assessment may be required.
In this case Ms Bubb’s 2016–17 adjusted taxable income was $31,166 and child support payable to her was $9,992 per annum. The tribunal was satisfied that the out-of-pocket expense of $800 incurred by Ms Bubb constituted an out-of-pocket expense that significantly affected the cost of maintaining the children, within the context of the amount of child support payable. Further, that this cost was additional to the usual everyday medical needs of a child. The tribunal considered it reasonable that Mr Bubb pay half of this cost.
The tribunal therefore found that there are special circumstances relating to the children’s need for medical treatment and that Reason 2 has been established.
The approach of the Federal Circuit Court in these cases has been to limit the analysis about particular grounds once it was evident that one had been established, and to thereafter focus on the “just and equitable” considerations. The tribunal adopts that approach in its reasoning in this matter.

Would departure from the administrative assessment be just and equitable?

The requirement to consider whether a departure would be just and equitable 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, their income, earning capacity and financial resources and any hardship that would be caused by departing or not departing from the formula.

Mr Bubb

Mr Bubb is [employed] on a full time basis and this has been the case for some time. His 2017–18 adjusted taxable income was $75,760. Mr Bubb contended that he and Ms Bubb own an investment property located at [Address 1] that is subject to property settlement proceedings. He contended that the sale of this property has been delayed due to insurance proceedings being pursued in respect to damage to the property. He contended that the property has not been rented out due to this damage and he is solely incurring costs in respect to the property. Further that these costs are unavoidable and result in his necessary costs for self-support rising to a level that makes the normal application of the child support formula unjust and inequitable. In addition Mr Bubb contended that it is inappropriate for his taxable income not to be utilised in the child support assessment, rather than his adjusted taxable income, which incorporates an add back for claimed net rental property losses, as the asset is currently unrealisable.
Ms Bubb contended that Mr Bubb has chosen to pursue the insurance claim when an offer was made by the insurer and which he rejected. She had always been in favour of a quick sale of the property. This has not been possible because of the actions of Mr Bubb. She submitted an interim property order from the Federal Circuit Court dated 22 March 2019 that orders at Point 7 that:
That the parties do all such acts and things and sign all documents as may be required to immediately place the property situate at and known as [Address 1] more particularly described in Certificate of Title Volume [number] Folio 009 ("[Address description]") upon the market for sale ("the sale").
Further the tribunal noted that Point 12 of the interim property orders state:
That pending the sale or the completion of the sale:
a. the father pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings as and when they fall due;
The tribunal considered the investment property in question, and its associated costs, is currently subject to interim court property orders that order its sale. As such the costs associated with the investment property are part of the property settlement proceedings between the parties. The tribunal noted that such a situation has been considered at point 2.6.13 of the Child Support Guide (the Guide).[1] The tribunal may have regard to the Guide where it considers it is in accordance with the law and the object of the Act. The Guide states as follows:
[1] effect of a property settlement or agreement
An order or agreement relating to a property settlement which requires one parent to assume liability for a debt is unlikely to amount to a special circumstance. However, the responsibility of one parent for debts pending property settlement may amount to a special circumstance.
Where property settlement has not been made, the Registrar will consider:
·who exercises control of the relevant assets, e.g. it is less likely to be fair to change the assessment where the parent retains control of the asset.
·whether a property settlement is likely to occur within a short period. If so, it may be appropriate to change the rate of child support for a short time pending property settlement and/or disposal of the asset.
1. The tribunal considered the Guide to be in accordance with the objects of the Act in this instance. The tribunal accepted that Mr Bubb is liable for debts, pending property settlement, in respect to the investment property. However, the tribunal noted Ms Bubb’s evidence that she had sought sale of the property, as reflected by her legal correspondence dated 27 April 2018, and her engagement with a [person] in May 2018. She contended that she has long sought sale of the property, however, Mr Bubb has pursued an insurance claim in preference to pursuing a sale and continues to do so despite a settlement offer being made by the insurer, which she had been in favour of accepting. The tribunal accepted Mr Bubb’s contention that he seeks to pursue the insurance claim to maximise the final return on the property. The tribunal acknowledged the evidence that Ms Bubb has lately become a joint party to the insurance action, however, accepted her contention that she has only agreed to this on the basis that the sale process as ordered by the Court is not delayed.
2. On balance the tribunal considered, and so found, that Mr Bubb’s actions in respect to the investment property reflect that he has exercised control over the property such that a sale of the property has not yet occurred. In so finding the tribunal notes that it is not concerned as to the various arguments in respect to the potential financial outcome from such a sale, as this is necessarily a consideration of the property settlement process and does not concern the assessment of child support payable. Likewise, the tribunal notes that expenditure in respect to the investment property will eventually be considered as a component of the final property settlement orders.
3. The tribunal noted that Mr Bubb disclosed in his Statement of Financial Circumstances that he has 50% ownership of the former family home which he estimated as being worth $320,000 (his share) with a total mortgage of $131,134. He also disclosed 50% ownership of the investment property which he estimated as being worth $160,000 (his share) with a total mortgage of $248,907. He disclosed funds in the bank of $4,457 but noted this has now dropped to around $600. He disclosed minimal other assets except for superannuation worth around $310,000. He disclosed weekly personal expenditure of $548 which consisted of $361 in tax, $173 in child support and $13.21 in credit card payments. His weekly household expenditure was disclosed as $1,148. He noted that he is no longer paying $16 a week in education costs. The tribunal accepted the disclosed expenditure as reasonable.
4. After considering his assets, liabilities and claimed expenditure the tribunal considered that there was no indication that Mr Bubb has access to financial resources such that his income from employment would not be an appropriate basis upon which to consider his child support payable.
Ms Bubb
1. Ms Bubb is employed on a permanent part time basis [in an occupation]. Her 2017–18 taxable income was $41,658. The tribunal noted that Ms Bubb disclosed in her Statement of Financial Circumstances that she has 50% ownership of the former family home which she estimated as being worth $320,000 with a mortgage of $65,567 (her share). She also disclosed 50% ownership of the investment property which she estimated as being worth $160,000 with a mortgage of $124,453 (her share). Her claimed deductions were unremarkable and the tribunal noted she received a regular amount of newstart allowance as a component of her income. Her disclosed weekly personal expenditure of $100 consisted of $100 in tax. Her weekly household expenditure was disclosed as $1,755. After subtracting costs incurred by her sister, her expenditure reduces to $1,230 per week. The tribunal accepted the disclosed expenditure as reasonable.
2. After considering her assets, liabilities and claimed expenditure the tribunal considered that there was no indication that Ms Bubb has access to financial resources such that her income from employment would not be an appropriate basis upon which to consider her child support payable. She gave evidence that she struggles to meet her necessary costs for self-support and occasionally relies on charity and her parents for financial assistance. Her sister also resides with her and assists with the rent. Clearly any child support payable to her would assist her in supporting the children.
The children
1. In determining the proper needs of the children it is necessary to have regard to the manner in which the children are being, and in which the parents expected the children to be, cared for, educated or trained, and any special needs of the children (subsection 117(6) of the Act). In Eades & Cadell (SSAT appeal) [2009] FMCAfam 275 at [22], Slack FM stated as follows:
  In considering the proper needs of the child [s 117(4)(b)], the SSAT:
  a.    would ordinarily consider the evidence of the parties about the needs of the children to assess the reasonableness and quantum of those needs;
  b.    may have regard to publish guidelines as to the needs of the children (see Hallinan & Witynski at 94.323).
  c.    may also have regard to the costs of children used in the assessment of child support under the existing formula arrangements (although it is not sufficient or appropriate to rely upon the formula to perform that task, Lindenmayer J in Dwyer & McGuire (1993) FLC92-420 (and see also Gyselman (supra) at 79.078).
2. The tribunal has already considered the special needs raised by Ms Bubb earlier in these reasons. There were no other special needs of the children mentioned that significantly affect the costs of the children. Overall the tribunal considered each parent should meet the costs of raising the children according to their respective financial capacity as determined by the tribunal. The tribunal considered this an appropriate case to largely distribute the costs of raising the children using the relevant child support formula, which is based on social science research giving the average costs of children in various family income brackets.
Otherwise proper
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. Ms Bubb receives family tax benefit in respect of the children. Accordingly an increase in child support may reduce the cost to the community. As such the tribunal was satisfied that changing the amount of child support payable would not have any adverse effect upon the community. Such a result would be otherwise proper.
Conclusion
1. It is open to the tribunal to vary the rate of child support payable or vary some of the variables that are used in the administrative assessment formula. The tribunal considered Mr Bubb has access to financial resources and a demonstrated earning capacity such that it is reasonable to expect him to provide some child support.
2. The tribunal recognises that the principal object of the Act is to ensure that children receive a proper level of financial support from their parents. Further the tribunal notes the statements contained in sections 3 and 4 of the Act to the following effect:
  ·     Parents of a child have a primary duty to maintain the child;
  ·     The duty has a priority over all other 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;
  ·     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.
3. Mr Bubb submitted that if he was required to pay child support at the level set by the objections officer or higher he would be in danger of defaulting on his mortgages. He considered Ms Bubb would not be placed in undue hardship by a reduction in child support payable to her as she shares her accommodation with her sister and has some cash.
4. Ms Bubb submitted that if there was a reduction in child support payable to her she would struggle to pay the rent. She submitted Mr Bubb can afford the level of child support payable as assessed, as he earns more than her, and has chosen to direct his financial resources towards pursuing an insurance dispute, rather than accepting an offered insurance settlement and selling the investment property. Those financial resources would otherwise have been afforded her for the support of the children.

In considering the evidence before it, and the question of a just and equitable outcome, the tribunal noted the disparity between the two parties’ incomes. Mr Bubb’s 2017–18 investment property losses were $20,027.55. His taxable income was $55,733. Ms Bubb’s 2017–18 taxable income was $41,658. Should Mr Bubb be required to pay child support based upon his 2017–18 adjusted taxable income of $75,760 and Ms Bubb’s 2017–18 taxable income of $41,658 he would be required to pay child support of $9,068 per annum. Accordingly he is still left with a higher income than Ms Bubb even after subtracting this proposed child support liability from his taxable income. The tribunal considered in such circumstances, where the tribunal has found Mr Bubb has exercised effective control over the investment property, it is appropriate that he be required to make such a contribution towards the support of the children. Further that he also make a further contribution of $400 per annum for the period 1 July 2018 to 30 June 2019 in respect to the special needs costs of the children. No departure dates in respect to his adjusted taxable income are necessary as the amount payable closely reflects that payable under the administrative assessment of child support payable.
Under the departure determination Mr Bubb will be required to pay child support of $10,392 per annum or $199 per week for the period 1 July 2018 to 30 June 2019. Overall the tribunal considered it just and equitable that Mr Bubb be required to make such a payment of child support that is reasonably reflective of both parents’ current overall access to financial resources and the costs of caring for the children. The tribunal did not consider Mr Bubb will be placed in undue financial hardship by this decision. He has demonstrated considerable discretionary financial capacity by his decision to pursue the insurance claim in respect to the investment property and he retains a reliable and reasonable income. Further his overall situation will be further relieved in the pending property settlement which incorporates the now ordered sale of the investment property. The tribunal also considered that Ms Bubb will have a reasonable level of ongoing child support paid to her for the benefit of the children.
Overall the tribunal considered both parents will be provided with certainty in planning their respective finances to adequately support the children by the implementation of this departure determination, and that it is a just and equitable outcome in regard to the respective situations of each parent.

DECISION

Key Legal Topics

Areas of Law

Family Law
Administrative Law

Legal Concepts

Judicial Review
Remedies
Statutory Construction
Costs

[2019] AATA 2526

19 June 2019

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Judicial Review

Remedies

Statutory Construction

Costs