Burch and Burch (Child support)

[2019] AATA 4863

Burch and Burch (Child support) [2019] AATA 4863 (30 August 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC015958

APPLICANT:  Mr Burch

OTHER PARTIES:  Child Support Registrar

Ms Burch

TRIBUNAL:Member R Anderson

DECISION DATE:  30 August 2019

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that:

·     In respect of the period 5 July 2018 to 30 November 2018, the annual rate of child support payable by Mr Burch is varied to $24,276;

·     in respect of the period 1 December 2018 to 30 June 2019, the annual rate of child support payable by Mr Burch is varied to $24,230;

·     in respect of the period 1 July 2019 to 15 November 2019, the annual rate of child support payable by Mr Burch is varied to $12,000;

·     in respect of the period 16 November 2019 to 31 December 2019, the annual rate of child support payable by Mr Burch is varied to $7,500; and

·     the child support liability payable by Mr Burch is to increase by $878, or $2,322 per annum in respect of the period 1 July 2019 to 15 November 2019.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – 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

1. Mr Burch and Ms Burch are the parents of [Child 1] and [Child 2].  According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 20 February 2012. The Department has been responsible for the collection of child support from Mr Burch since 5 October 2018.

2. The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act).  The calculation is based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act if they consider the administrative assessment results in an unfair amount of child support payable by one parent.

3. On 28 May 2018, the Department accepted an estimate lodged by Mr Burch in respect of his income from 1 July 2018 to 30 June 2019 of $5,000.  This resulted in his annual child support liability reducing from $24,276 to $2,780.  As a result, Ms Burch lodged a change of assessment application on 26 June 2018.  Her application was lodged on the basis that the administrative assessment produced an unfair outcome due to the private education costs of the children impacting significantly on their overall costs (Reason 3), due to the childcare costs in respect of [Child 2] impacting significantly on the overall costs of the children (Reason 6), due to her extraordinarily high costs of self-support impacting on her ability to provide financial support for the children (Reason 7) and due to the earning capacity, income, property and financial resources available to Mr Burch (Reason 8).

4. On 26 July 2018, a delegate of the child support registrar found that a ground was established in respect of Reason 8 and decided to vary the adjusted taxable income of Mr Burch to $120,771 in respect of the period 1 July 2018 to 30 June 2019. This resulted in the annual rate of child support payable by Mr Burch reverting back to $24,276.

5. In October 2018, Mr Burch lodged an extension of time request to the Department to lodge an objection to the decision of 26 July 2018.  The extension of time was subsequently granted and on 2 February 2019, the objections officer disallowed the objection.

6. On 18 February 2019, Mr Burch lodged an application to this tribunal for an independent review of the Department’s decision.  The directions hearing was conducted by telephone with both parties on 18 June 2019.  Following this hearing, directions were made to both parties requiring them to provide further information and documents. The hearing was held on 6 August 2019. Both parties participated by conference telephone and gave oral evidence to the tribunal on affirmation. 

7. The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 347, documents lodged by Mr Burch, numbered A1 to A79, documents lodged by Ms Burch numbered B1 to B84 and information from Centrelink numbered D1 to D6. All of these documents were sent to the parties prior to hearing.  On 6 August 2019, the tribunal decided to defer making a decision in this matter to enable additional time for Mr Burch to provide further information.  Documents numbered A80 to A108 were received from Mr Burch and exchanged with all parties, allowing time for comment.  As no further comment was received, the tribunal proceeded to make a decision on 30 August 2019.

ISSUES

1. When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

   ·         whether a ground exists to depart from the administrative assessment; and if so

   ·         whether any proposed departure is fair to Mr Burch, Ms Burch, [Child 1] and [Child 2] and

   ·         whether any proposed departure is fair to the public.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

1. The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are “out of the ordinary” and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433). At hearing, Ms Burch confirmed that she was no longer pursuing a ground under Reasons 6, 7 or 9.

Reason 3 – Costs related to the child’s care, training or education in the manner expected by the child’s parents

1. Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure exists 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. 

2. In this case there is no dispute that at separation [Child 1] was already in attendance at [School 1].  There is also no dispute that the mutual expectation of the parents was that [Child 2] would also receive a private education and attend [School 1]. 

3. Ms Burch gave oral evidence that [School 1] does not offer education beyond Grade 7.  The distance from their home to the closest [specified] secondary schools made it impossible for [Child 1] to continue a [specified] education. [Child 1] received a scholarship to attend [School 2] in [Suburb 1], which was within a reasonable distance from home.  While Mr Burch signed the scholarship acceptance for [Child 1], he did not sign the enrolment form.  Ms Burch also stated that with the benefit of a scholarship and bursary, the fees at [School 2] are less than those at the [specified] secondary schools.

4. In Mabry & Mabry (SSAT Appeal) [2010] FMCAfam 388, Reithmuller FM commented, “lack of agreement as to the specific school does not mean that the parents lack the expectation that the child will attend a private school of a particular category, for example a Catholic school.”  While the tribunal acknowledges that [Child 1] has moved from a [specified] private School to an [different type of] School, the reason is clearly due to the distance being prohibitive. In any event, in response to a question from the tribunal, Mr Burch stated that despite circumstances being beyond his control, in a bid to reduce stress and to provide a brighter future for the children through continued private education, he agrees with [Child 1] and [Child 2] receiving a private education.  The tribunal is satisfied that there was a mutual expectation of the parties at a point in time prior to the hearing that [Child 1] and [Child 2] would be educated in the private system (Mee v Ferguson [1986] FamCA 3) and finds accordingly.

5. The tribunal had before it invoices from [School 1] in respect of [Child 2]’s education and [School 2] in respect of [Child 1]’s education for the 2018 and 2019 years.  As discussed at hearing, the tribunal does not accept that costs such as books, stationery and computer levies are “out of the ordinary”, as children attending public schools are also required to meet such expenses.  It was evident that Ms Burch chose to make an upfront full year payment at [School 1] to receive the 10% discount and [Child 1]’s fees at [School 2] are reduced by a scholarship and bursary.  Therefore, the tribunal calculates the tuition fee costs for the children are as set out below.

2018 $	2019 $	TOTAL $
[School 1]	4,320	7,025	11,345
[School 2]	4,428	7,272	11,700

1. The education costs in respect of the children’s private schooling exceed $11,000 per annum.  Based on the costs of the children as estimated by Ms Burch, the tuition fees represent approximately 45% of the overall costs.  However, after adjustments for household costs the tuition fees represent approximately 30% of the overall costs.  Either way, there is no question that the education costs of the children significantly impact on the costs of maintaining them.  This conclusion was not disputed.   

2. Therefore, the tribunal finds that, in the special circumstances of the case, the ground for departure in subparagraph 117(2)(b)(ii) of the Act has been established in respect of [Child 1] and [Child 2]. Mr Burch provided oral and written evidence asserting that despite his agreement with the children attending a private school he is no longer in the financial position to contribute to such costs. Consideration as to an appropriate contribution to the education costs by the parents, in accordance with their capacity, will be discussed under the next heading regarding what is just and equitable.

3. As the tribunal is satisfied that one of the grounds before it is established, it has not gone on to consider whether Reason 8 is also established as a separate ground.  The relevant issues will also be dealt with in detail below under the next heading regarding what is just and equitable.

Issue 2 – Is it fair or “just and equitable” in relation to Mr Burch, Ms Burch, [Child 1] and [Child 2] to make a particular departure determination?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). Clearly Mr Burch and Ms Burch have the primary duty to financially support [Child 1] and [Child 2].

2. In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). Apart from [Child 2] struggling with [a certain issue], there was no dispute that the children are generally in good physical health with no significant costs.

3. The tribunal found earlier in these reasons for decision that the costs relating to [Child 1] and [Child 2] being educated in the manner that was expected by the parents was in the vicinity of $11,000 per annum. [Child 1] is currently in Year 12 and his final year of secondary school at [School 2] and [Child 2] is in Year 3 at [School 1].

4. Based on the estimates of Ms Burch and after apportioning the household costs to [Child 1] and [Child 2], the tribunal calculates their average weekly costs to approximate $733, or $38,116 per annum. This includes discretionary costs in respect of education, entertainment and gifts of approximately $274. Therefore, the tribunal calculates the weekly “necessary” costs of [Child 1] and [Child 2], as estimated by Ms Burch, to be $459 or $23,868 per annum.

5. It is noteworthy that the administrative formula calculates the maximum cost for one child over 13 years and one child under 13 years with the combined child support income of the parents as based on the income recorded on their 2016/2017 tax returns of $120,771 and $23,695 respectively to be $24,376.  This is closely aligned to the estimate of Ms Burch.

The earning capacity, income, property and financial resources and commitments of each parent

1. Mr Burch gave oral evidence that he is an [Occupation 1] by trade and specialises in [a certain area].  Having commenced employment with [Employer 1] in 2008, as a result of the global financial crisis, the department was shut down and transferred [overseas].  He then commenced a tertiary education course.   However, this was interrupted by an opportunity to take up an offer by the government to support [others in his occupation] and worked on [a specific project] in [City 1].  When the funding was no longer available he continued to study when it was once again interrupted by an offer from [Country 1].  Mr Burch spent three years on contract in [Country 1], returning to Australia in April 2015.  At that time his health had declined due to issues with [a certain part of his body].  As a result, he decided to retrain in [a different industry] as part of his future plan. 

2. As had happened previously, his education was interrupted by an offer for a limited contract with [Employer 2].  Mr Burch contracted using his own company, [Company 1].  When the contract ended, Mr Burch returned to study relying on savings and access to his share portfolio to meet his costs. On 28 May 2018, Mr Burch advised the Department as such and lodged an estimate of his adjusted taxable income in respect of the 18/19 year in the amount of $5,000. 

3. Mr Burch gave oral evidence that he had hoped to have already completed a graduate diploma of [subject 1], specialising in [a certain area].  However, given the Department’s departure decision, resulting in child support at the annual rate of $24,276, he instead he was forced to reduce from full-time to part-time studies.  This enabled him to seek employment as he was fast running out of money.

4. A parent’s earning capacity can only be taken into account in limited circumstances, as set out in subsection 117(7B) of the Act. This section requires the tribunal to consider three matters in determining that the parent’s earning capacity is greater than is reflected in his or her income used in the administrative assessment.  All three criteria must be met before a departure determination can be made to take into account whether the parties have a greater earning capacity. If the above criteria are satisfied then the tribunal must determine the actual earning capacity of the parent.

5. The first criterion requires Mr Burch to not work, despite ample opportunity to do so and/or reduce his weekly hours of work to below full-time work, and/or change his occupation, industry or working pattern. The tribunal is not satisfied that Mr Burch has reduced his working hours of his own making.  Rather, it has been a direct result of termination of various contracts and the reduction in available contracts within his industry in Australia.  This means the first criterion is not met.

6. In any event, based on the medical evidence provided, the tribunal accepts that Mr Burch’s capacity to work full-time was impacted by [mental health issues] as a result of childhood trauma and also by physical limitations following  [surgeries] in May and August of 2016.  As such the second criterion under subsection 117(7B) is not met.  As all three criteria cannot be satisfied it is not open to the tribunal to consider the earning capacity of Mr Burch.

7. The tribunal considered the financial circumstances of Mr Burch.  He is yet to lodge his tax returns for the 2017/2018 or 2018/2019 years.  While a draft of the 2017/2018 tax return was before the tribunal, Mr Burch stated that it has been prepared incorrectly in treating him as being in the business of share trading and consequently significantly overstates his tax payable.  Mr Burch maintains that his tax payable will still be significant, likely in the vicinity of $100,000, being in excess of his available funds at present. Returns from prior years may also need to be amended.

8. It is evident that Mr Burch received [allowances] from [Company 1] in the amount of $41,896 in the 2017/2018 year.  In addition, interest earned was $912.  At 30 June 2018 the value of Mr Burch’s share portfolio was $320,780. The tribunal is cognisant that of the funds received through the sale of shares, a portion was also reinvested into shares.  The financial documents in respect of [Company 1] are not before the tribunal. Regardless, based on the transaction statements provided after the hearing, in the tribunal’s view the income and financial resources available to Mr Burch in the 2017/2018 year are significantly higher than the adjusted taxable income used in the formula of $120,771 and finds accordingly.

9. Based on the transaction summary provided after the hearing, Mr Burch has had access to funds drawn throughout the 2018/2019 year in the vicinity of $67,000 and in the period 1 July 2019 to 2 August 2019 in the vicinity of $4,000. It is also noteworthy that just prior to 30 June 2018, Mr Burch transferred $70,000 to his savings account.  In February 2019 Mr Burch commenced part-time employment with [Employer 3], his gross wages to 30 June 2019 being $8,134.  Mr Burch gave oral evidence that the short-term period of employment will cease in July 2019.  He gave further oral evidence that he also set up [Company 2] in April 2019 to take on a short three-month support contract with [Employer 2].  He maintains that he did not receive any payments prior to 30 June 2019.  Having received approximately $11,000 since 1 July 2019, the final payment of $750 is imminent. Therefore, the tribunal finds that Mr Burch had access to income and financial resources in the 2018/2019 year in the vicinity of $150,000. Mr Burch gave oral evidence that due to the capital losses incurred in his share trading in the 2018/2019 year he will not incur an income tax debt in respect of his share trading.

1. It is noteworthy that the share price of [Employer 2] has declined significantly from over $6 in mid-2016 to around $3 in mid-2017, below $2 by October 2018 and is currently less than $1 per share.  In contrast [Company 3] shares are at a similar value to that in mid-2016, having risen to a high of $1.65 in November 2017 and steadily reducing since then.

2. Going forward, Mr Burch explained that there is no possibility of him finding employment in [his field] in Australia.  He is also pessimistic about finding a position in [subject  1] if and when he completes his graduate diploma.  He told the tribunal that he must find a job and is currently [overseas] seeking employment.  He is currently in the very early stages of possibilities in [other locations overseas].  The situation is further complicated by the medical condition of Mr Burch in respect of the working conditions he requires and the availability of medical treatment and/or the costs of medical treatment.

3. In response to a question from the tribunal, Mr Burch stated that while currently in [Country 2], he is unsure when he will return to Australia, planning to also stay with his fiancée in [Country 3].  He maintains that his fiancée has not contributed to his support in the past year.

4. While Ms Burch questioned the existence of overseas assets, Mr Burch told the tribunal that this is not the case.  In the absence of evidence to the contrary, the tribunal is satisfied that the assets of Mr Burch consist largely of his share portfolio. At 30 June 2019 the portfolio consisted of 25,000 [Employer 2] shares and 55,000 [Company 3] shares, having reduced from 140,000 and 72,000 respectively at 30 June 2018. At the date of hearing he estimated the value of his share portfolio to be $49,000, having been valued at $63,725 on 24 June 2019.  At 24 June 2019 Mr Burch’s total funds in the [bank] accounts totalled $8,685.  He told the tribunal that his available funds in the bank are now around $4,581 and household contents are valued at $500, having recently sold his motorbike and motor vehicle.  In addition to the [credit] card, which based on the statement before the tribunal he largely pays off each month, Mr Burch’s only other liability is the ATO debt.

5. As the ATO liability is not yet accurately quantified, the tribunal makes no finding in respect of Mr Burch’s net asset base. However, income tax is built into the child support formula and is an expense that all people incur.  The tribunal does not accept that Mr Burch’s only option is to pay his income tax debt in a single lump-sum.  Rather, it is open to him to negotiate a payment arrangement so as to enable him to also prioritise the needs of his children.

6. The tribunal accepts the written evidence of Mr Burch that at 11 July 2019, he held a balance in his [Super] account of $30,555. The tribunal is satisfied that no personal contributions have been made by Mr Burch in recent times. The tribunal accepts the oral evidence of Mr Burch that he contributed to superannuation in [Country 4] for an eight-year period and confirmed that he has no access until he reaches 67 years of age.

7. Mr Burch estimated his average weekly expenses after excluding motor vehicle costs as $1,237, or $64,324 per annum.  He further stated that he is trying to reduce his costs. He estimated his medical and dental costs at $200 per week, his weekly [practitioner] visits costing $130 out-of-pocket. Mr Burch requires no prescription medication, rather he uses over-the-counter medications to manage [an ailment]. In addition, Mr Burch told the tribunal that he receives treatment for [a medical condition] three times per year at a cost of $280 per session. It was evident from the information provided by Mr Burch that he has also sought various treatments overseas. The tribunal accepts that the medical costs incurred by Mr Burch to date are greater than the average person’s.

8. The tribunal considered the financial circumstances of Ms Burch, who gave oral evidence that she is currently studying and expects to graduate with a Bachelor of [Subject  2] at the end of 2020.  According to her 2017/2018 tax return, Ms Burch received newstart allowance in the amount of $19,604 and a pension education supplement of $208. In the meantime, Ms Burch has been self-employed through a sole trader business whereby she provides administrative services to the [School 1] and more recently also assists a [woman].  Ms Burch is required to provide regular financial information to Centrelink in order to continue receiving newstart allowance. 

9. Ms Burch is yet to complete her 2018/2019 tax return.  However, based on the financial information of her sole trader business and Centrelink information, the tribunal finds that her taxable income will remain below the self-support amount as it has consistently done since commencement of the child support assessment.  As there has been no change in the occupation or working hours of Ms Burch, it is not open to the tribunal to consider an earning capacity determination.

10. According to Centrelink information, Ms Burch is currently in receipt of newstart allowance at the fortnightly rate of $530 and pension education supplement at the rate of $62 per fortnight.   In addition, Ms Burch receives family tax benefit in the vicinity of $200 per fortnight.  Unlike newstart allowance and pension education supplement, as an income-tested benefit, family tax benefit is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act). Consequently, for child support purposes, it is not considered to be a part of Ms Burch’s adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).

11. While Ms Burch gave oral evidence that she does not envisage her circumstances will change until after she graduates, the tribunal notes that given the limitations on her working hours due to study and her caring responsibilities in respect of the children, in particular [Child 2], any increase in her income and financial resources beyond the self-support amount will have a negligible impact on the child support assessment.

12. There is no evidence before the tribunal to suggest that use of the most recently lodged income tax returns in respect of Ms Burch is not the most accurate way to assess her available income and financial resources prior to completion of her studies. The tribunal accepts the oral and written evidence of Ms Burch that she has no superannuation accounts in Australia.

13. The tribunal considered the assets and liabilities of Ms Burch. She shares her residence with [Child 1] and [Child 2] for 100% of the time.  According to her Statement of Financial Circumstances, completed on 26 February 2019, Ms Burch’s assets consist of a bank balance in the vicinity of $5,000, a [car], valued at $2,000 and household contents valued at $3,000.  Other than a loan from her parents of $3,800 which has no legally enforceable terms for repayment, Ms Burch has no other liabilities that are currently due and payable, noting that her HECS liability does not require any repayments going forward until the taxable income of Ms Burch exceeds $45,000. Therefore, the tribunal calculates the net asset position of Ms Burch to approximate $10,000 and finds accordingly.

14. In respect of expenses, Ms Burch estimated the current average weekly household expenses for her and the children to be $1,266.  This amount includes discretionary costs in respect of entertainment and gifts of $64 and private education costs of $225 ($11,700 per annum).  After allocating the “necessary” weekly expenses between Ms Burch and the children, the tribunal calculates the estimated “necessary” costs of Ms Burch to be $475, or $24,700 per annum, being closely aligned to the self-support amount used in the administrative formula in the 2019 year of $25,035.

Conclusion

1. After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Burch and Ms Burch and the needs of the children, the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support.

2. The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)).  In this case, as the Department has no authority to enforce collection of child support from Mr Burch prior to the arrears period commencing 5 July 2018, the tribunal considers that 5 July 2018 is an appropriate start date for a departure decision.

3. In this case, the administrative assessment at 5 July 2018 was based on an adjusted taxable income of $5,000, as estimated by Mr Burch and on the income recorded on the 2016/2017 tax return of Ms Burch of $23,695.  The resulting annual rate of child support was $2,780.  Based on the findings of the tribunal above in respect of the income and financial resources available to Mr Burch in the 2018/2019 year, the tribunal finds that the administrative assessment whereby Mr Burch is assessed at what is known as the fixed annual rate of $1,390 per child does not produce a fair outcome. 

4. Going forward, the tribunal is cognisant of the fact that Mr Burch may secure a contract overseas earning in excess of AUD100,000 in the near future. The tribunal also accepts that Mr Burch no longer has access to the financial resources he had previously as a resource to meet expenses in between employment contracts. 

5. Clearly, Mr Burch has managed to meet his expenses to date, including child support, without incurring additional liabilities. Mr Burch asserted that in the future there is no possibility of him securing employment in [his] sector in Australia.  He further stated that he was overly optimistic in his expectation that [subject 1] would provide him with an employment future, given the high degree of competition amongst [other professionals in the field]. It is for this reason that he is currently seeking employment overseas.

6. Mr Burch further stated that the Department have ignored his right to recover in respect of his health and his financial circumstances, ultimately impacting negatively upon his study. However, the children also have a right to a particular standard of living, which Mr Burch is obligated by law to provide for his children in accordance with his capacity.  While Mr Burch continues to sell shares to sustain his lifestyle, it is right that those funds are taken into account in determining his capacity to provide for the needs of his children.  This is irrespective of Mr Burch’s plan to derive a sustainable income in the future.  As in the case of Dwyer v McGuire (1993) FLC 92-420, Mr Burch’s priority must be the support of [Child 1] and [Child 2]’s present needs. Lindenmayer J stated as follows:

   child support is intended to assist the custodial parent to meet the recurring, day-to-day and often pressing expenses of maintaining the child, and it is little consolation, to either the mother or child, to say that they must live in penury today, because they have the prospect of living in relative luxury at some indeterminate future time. A hungry or otherwise needy child knows or cares nothing of prospects.

7. In response to a question from the tribunal as to how she manages to meet her expenses on a weekly basis, Ms Burch stated that she lives within her means and is very good at budgeting. The tribunal notes that Mr Burch has remained up to date with his child support payments based on the departure decision under review in the amount of $24,230 per annum, which has played a significant part in enabling Ms Burch to meet the household expenses, including the private education of [Child 1] and [Child 2].

8. Supporting documentation indicates that [Child 2]’s annual school fees were paid in full at the commencement of the 2019 school year. [Child 1]’s school fees are due in four quarterly payments, the most recent being paid in July 2019. Therefore, there is a single remaining payment in respect of [Child 1]’s private schooling in the amount of $1,756.  It is clear that the child support payable by Mr Burch at the rate of in excess of $24,000 per annum was also sufficient to meet the higher education costs of the children. However, a reduced child support liability from 1 July 2019 will create a different outcome. 

9. As already discussed, Mr Burch continues to have access to funds from his share portfolio, albeit significantly less than prior years.  In the tribunal’s view it is open to Mr Burch to prioritise the support of [Child 1] and [Child 2] and ongoing contributions towards his upcoming tax liability.  While prior to securing further employment Mr Burch will also incur interim costs of self-support, including medical costs, based on his oral evidence that he is currently staying with his fiancée, they will likely be significantly lower than the amount used in the administrative formula in the short-term. 

10. The tribunal is cognisant of the parties’ preference for some degree of certainty moving forward.  However, given the uncertainty surrounding the future financial position of Mr Burch, the tribunal proposes to end the departure decision on 31 December 2019, at which time the circumstances in respect of Mr Burch should be more certain. Furthermore, [Child 1] is no longer a child of the assessment from 16 November 2019.  The tribunal notes that the administrative assessment allows for Mr Burch to lodge an estimate in line with his actual circumstances if they differ from his most recently lodged tax return. It is also open to Ms Burch to lodge a change of assessment application if she considers it necessary in the circumstances.

11. The tribunal proposes to depart from the administrative assessment by varying the annual rate of child support payable by Mr Burch, based on his income and financial resources, noting that there is no expectation of a change in care in the proposed period that would impact on the assessment.

12. As found earlier in these reasons for decision, the income and financial resources available to Mr Burch in the 2018/2019 year are significantly higher than the estimated income used in the formula of $5,000.  They also exceed the amount of $120,771, as determined by the Department.  However, the tribunal does not consider that Mr Burch has the financial capacity currently to meet any additional arrears in respect of the 2018/2019 year. As such, the tribunal proposes to vary the annual rate of child support payable by Mr Burch in the 2018/2019 year to align with the respective child support payments he has made. The tribunal has taken into account the reduced financial resources of Mr Burch from 1 July 2019 and a 50% contribution by him to the final private school fees payment for [Child 1].  As such, the annual rate of child support payable by Mr Burch has significantly reduced from 1 July 2019 and again following [Child 1]’s completion of secondary school when he is no longer a child of the assessment.

13. According to departmental records, Mr Burch was up-to-date with his child support payments until the end of March 2019.  If Mr Burch has continued to make the assessed payments, the tribunal calculates that there will be an over-payment at 31 August 2019 of approximately $1,700.  If not, his arrears will reduce accordingly. Given that both parties were well aware of the possibility of a change to the child support, the tribunal considers this to be appropriate in the circumstances.

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

15. Ms Burch told the tribunal that if the assessment were to remain at the fixed annual rate, she and the children would most definitely experience hardship.  In her view, the assessment at $2,071 per month is appropriate for both parties.

16. Mr Burch stated that given his tax liability he will be forced to meet his expenses using his credit card and ultimately apply for bankruptcy if his child support remains at $2,071 per month.  He maintains that such a rate of child support has already negatively impacted his life, having led to him giving up his life in [City 1] due to the child support assessment forcing him to spend beyond his capacity. If such an assessment remains, he contends that it will certainly impact on his future capacity to pay child support.

17. Given that Mr Burch’s share portfolio is in the vicinity of $50,000 and that it is open to him to negotiate a payment arrangement with the ATO, the tribunal does not accept that bankruptcy is likely/ in the near future. The tribunal is satisfied that Mr Burch can meet the weekly child support going forward until 15 November 2019 of $275 and $144 until 31 December 2019.  In any event, there is also a real possibility that Mr Burch will secure a suitable employment contract in the near future. It is also open to Ms Burch to prioritise the “necessary” costs of the children in accordance with the financial resources available to her.

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

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination.

2. In this case Ms Burch is in receipt of family tax benefit Part A and Part B.  As a sole parent and based on her annual income, a change in the child support payable by Mr Burch will have no impact on her entitlement to family tax benefit Part B. In respect of family tax benefit Part A, it is evident that Ms Burch’s income is below the upper threshold at which her entitlement is at the maximum rate. As such, a decrease in the child support payable by Mr Burch will likely also have no impact on the rate of family tax benefit Part A payable to Ms Burch. In the circumstances, the tribunal considers that it is otherwise proper to make the particular proposed determination.

3. It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that:

·     In respect of the period 5 July 2018 to 30 November 2018, the annual rate of child support payable by Mr Burch is varied to $24,276;

·     in respect of the period 1 December 2018 to 30 June 2019, the annual rate of child support payable by Mr Burch is varied to $24,230;

·     in respect of the period 1 July 2019 to 15 November 2019, the annual rate of child support payable by Mr Burch is varied to $12,000;

·     in respect of the period 16 November 2019 to 31 December 2019, the annual rate of child support payable by Mr Burch is varied to $7,500 and

the child support liability payable by Mr Burch is to increase by $878, or $2,322 per annum in respect of the period 1 July 2019 to 15 November 2019.