Cauley and Lovell (Child support)

[2023] AATA 4700

Cauley and Lovell (Child support) [2023] AATA 4700 (21 November 2023)

DECISION AND REASONS FOR DECISION

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2023/SC026256

APPLICANT:  Ms Cauley

OTHER PARTIES:  Child Support Registrar Mr Lovell

TRIBUNAL:  Senior Member K Dordevic

DECISION DATE:  21 November 2023

DECISION:

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

·     for the period 12 April 2022 to 30 September 2022 Mr Lovell’s adjusted taxable income is varied to $326,402 and Ms Cauley’s adjusted taxable income is varied to $52,421; and

·     for the period 1 July 2023 to 12 March 2024 Mr Lovell’s adjusted taxable income is varied to $278,300.

CATCHWORDS

CHILD SUPPORT – departure determination – income and financial resources of the liable parent – a ground for departure established – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION BACKGROUND

1.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.

2.This case was registered with Services Australia – Child Support (Child Support) on 12 April 2022 and has been collectable since that date. The parents, Ms Cauley (the mother) and Mr Lovell (the father), have two children [Child 1] (born [May] 2008) and [Child 2] (born [January] 2011), who are recorded as being in the mother’s sole care.

3.On 30 March 2023, following a change of assessment application lodged by the mother on 30 October 2022, a senior case officer amended the administrative assessment by varying the parents’ adjusted taxable incomes to $230,000 (the father) and $52,421 (the mother) during the period 12 April 2022 to 30 September 2022.

4.The father sought a timely review of that decision and on 25 May 2023 an objections officer allowed the objection, determining that it would not be just or equitable to amend the administrative assessment.

5.On 15 June 2023 the mother sought further review by application to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal). Directions were issued on 24 August 2023, requiring compliance by 20 September 2023.

6.On 28 September 2023 the mother sought permission to give her evidence without the father being present and to have his oral testimony relayed to her. She submitted that to participate in the hearing whilst the father was present would place her health and wellbeing at risk. On 3 October 2023 she provided supporting evidence from [a named] Domestic and Family Violence Clinician, [from Agency 1]. On 4 October 2023 the father objected to this mode of hearing, stating that he has endured unfounded allegations for over 12 months. The Tribunal granted the mother’s request.

7.The Tribunal heard the matter on 11 October 2023. Both parties appeared separately. The father appeared in person and the mother by MS Teams audio. The relevant oral testimony provided by each party was conveyed to the other at the commencement of each separate hearing. The Child Support Registrar was not represented at the hearing. The Tribunal also considered the documentation provided by the Child Support (folios 1 to 374), the mother (folios A1 to A25) and the father (folios B1 to B62). The Tribunal notes that the mother requested that the documentation provided by the father not be exchanged with her and therefore she did not have the benefit of this evidence.

8.Following the hearing, the Tribunal issued directions to [Employer 1], the father’s employer, pursuant to subsection 95H(1) of the Child Support (Registration and Collection) Act 1988, requiring provision by close of business on 19 October 2023, for the following:

·The reason/s why [the father]’s employment with [Employer 1] ceased on 13 October 2023 (i.e. termination, voluntary redundancy, resignation);

·[The father]’s entitlements upon ceasing to work at [Employer 1] (including details of any annual leave, severance or redundancy payments he is entitled to or has been paid); and

·A copy of [the father]’s final payslip.

9.On 20 October 2023 [Employer 1] advised that the request would be forwarded to in- house counsel, [Lawyer A]. On the same day the Tribunal issued another section 95H notice to [Lawyer A] in the same terms as the notice above, requiring compliance by 3 November 2023.

10.A partial response was received from [Employer 1] on 20 November 2023 (marked folios D1 to D4).

11.The Tribunal reached its decision on 21 November 2023.

ISSUES

A ground for departure

12.Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure if the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either party’s income, property or financial resources. The central issue in this matter is whether the administrative assessment accurately reflected the father’s income and financial resources from the date the child support case was registered.

13.The administrative assessment dictated that the father was liable to contribute $7,408 towards the children’s costs from 12 April 2022 to 30 September 2022, based on the parents’ 2021 adjusted taxable income of $55,015 (the father) and $13,475 (the mother). From 1 October 2022 the father was liable to contribute $14,406 in child support per annum on the basis of his 2022 provisional income of $56,610. The assessment was amended on 20 December 2022 following the father’s lodgement of his 2022 income tax declaration of

$230,000, increasing his annual rate to $37,888 per annum. On 2 May 2023 the administrative assessment was amended again from 1 October 2022 based on the parents’ actual 2022 adjusted taxable incomes of $326,402 (the father) and $52,421 (the mother), resulting in the father’s liability increasing to $39,296 per annum.

14.In her application for a departure determination the mother advised that the father’s income was “higher” than that reported in the 2022 financial year.[1] She went on to state that she wanted the father’s income reviewed from 30 June 2021, stating that the father secured new income from 12 March 2021. At hearing the mother clarified that she sought to have the father’s 2022 adjusted taxable income reflected in the administrative assessment from the date of registration of the child support case, being 12 April 2022.

[1] At folio 48

15.The Tribunal finds, on the basis of the father’s declaration dated 19 September 2023, that he has been employed on a full-time basis with [Employer 1] for 2.5 years[2] and his 2022 adjusted taxable income accurately reflects the income and financial resources available to him during that financial year. When asked to account for why his 2022 income tax declaration lodged on 20 December 2022 was some $96,000 less that his actual income the father stated that he was told that he would be unable to recover any overpayment. It was on this basis that he declared his base salary and did not include his bonus.

[2] At folio B2

16.It is evident that the father’s actual income was not accurately reflected in the administrative assessment from the date of registration of the child support case. Instead, it was based on a financial year where he was only employed for about three months. Application of his actual income to the administrative assessment would increase the father’s annual rate from $7,408 to around $39,346 during the period 12 April 2022 to 30 September 2022.

17.As the father’s income is not properly reflected in the child support assessment, there are special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. The Tribunal concludes that the ground provided for in subparagraph 117(2)(c)(ia) of the Act is established.

Just and equitable

18.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 parties’ respective earning capacities, the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula assessment. The Tribunal has considered all the factors outlined in subsection 117(4) of the Act but will only refer to those considerations pertinent to the application.

19.The mother’s 2021 and 2022 adjusted taxable incomes were $13,475 and $52,421 respectively. The mother provided a Statement of Financial Circumstances dated 23 September 2023.[3] She declares receipt of weekly income of $1,590 made up of

employment income of $715, child support payments of $753.11 and family tax benefit of

$121.60. She reports that the family home is valued at $2,850,000, she has savings of

$15,559, household contents valued at $10,000 and superannuation of about $10,430. Her liabilities include unpaid capital gains tax of $30,000 and outstanding school fees for the 2023 year of $18,909. Her weekly personal expenditure is $231.86, made up of $82.34 in income tax, $25 in superannuation, $38.52 for private health insurance and $86 for life insurance. Her weekly household expenses are $3,019, of which about $1,738 relate to her care of the children, including $400 for child-minding provided by a nanny. At hearing the mother confirmed that she does not seek a contribution from the father in respect of the child-minding costs, explaining that she understands that this was addressed in the parents’ property settlement. The mother explained that she meets the shortfall between her income and expenses from borrowings from her parents. This will need to be paid back to her parents upon the sale of the former marital home.

[3] At folios A1 to A10

20.The father contends that the mother has an unused earning capacity; he asserts that her earning capacity is in the vicinity of $150,000 per annum. Subsection 117(7B) provides that when considering the earning capacity of a parent a decision maker is required to consider three tests:

(7B)In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

(a)one or more of the following applies:

(i)the parent does not work despite ample opportunity to do so;

(ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

(iii)the parent has changed his or her occupation, industry or working pattern; and

(b)the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

(i)the parent's caring responsibilities; or

(ii)the parent's state of health; and

(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

21.It is not in dispute that prior to the parents’ separation the mother had not engaged in paid work for about 14 years. At hearing the mother testified that she secured part-time employment in 2022. The Tribunal is satisfied that the mother has changed her working pattern, from moving from unemployment to part-time employment. The Tribunal finds that the decision to change her working pattern was not justified on the basis of her caring responsibilities or state of health. In order for the Tribunal to be satisfied that the third criterion of subsection 117(7B) of the Act it must be persuaded that a substantial motivation in the change in the mother’s working pattern was to affect the administrative assessment. As a matter of fact, the mother’s adjusted taxable income has increased since the parents’ separation, an action which has resulted in the father’s administratively assessed child support liability decreasing. The Tribunal finds that the third criterion in subsection 117(7B) of the Act is not met and that the mother should be assessed in accordance with her adjusted taxable income.

22.The Tribunal finds that the younger child is currently under investigation for a neurodevelopmental condition. The mother advised that she has a health care card and the neurological assessment is being undertaken in the public health system. Therefore, she has no out of pocket costs relating to the assessment. The mother states that the older child has a mental health diagnosis and attends a psychologist and allied health professionals. She estimates that her out of pocket expenses relating to the older child’s health is about $1,500 per annum. The mother has declared significant costs associated with child minding for the children. The father disputes both the necessity and existence of this cost given the children’s ages and the extended family support available to the mother. He advised that the child has disclosed to him that she is left home alone and cared for by her maternal aunt and grandmother. The father states that the children did have their own bank accounts with balances of about $5,500 which, as part of the property settlement, was divided equally between the parents. He understands that the children may have some modest income from babysitting but could not comment further. He understands that the older child is in good health. The Tribunal concludes that the mother incurs costs associated with the children’s health in the vicinity of $1,500 per annum and that neither child has income or financial resources that would render the administrative unjust or unfair.

23.Both children are enrolled in [School 1] (the school). The Tribunal finds that the older child was enrolled in and attended the school from Year 5, 2019, prior to the parents’ separation. The younger child’s enrolment occurred after the parents’ separation in 2023. The older child is currently in Year 9 and the younger child in Year 7. The father testified that both he and the mother “verbally agreed” that the younger child would attend the school. Having taken into account the documentary evidence, the parents’ submissions and their oral testimony, and after careful consideration of the legal authorities, the Tribunal is satisfied that both children are being educated in the manner expected by their parents.

24.The 2022[4] and 2023[5] annual fee statements in evidence indicate that the costs associated with the children attending the school were $12,288 and $23,811 respectively, including all compulsory costs but excluding uniform and voluntary building fund contributions. On

22 February 2023 the parents entered into a Binding Child Support Agreement (BCSA),[6] pursuant to section 80C of the Act, which provides that the father pay periodic child support in addition to 50% of the children’s school fees and associated costs from 1 March 2024. These contributions are not to be credited against the annual rate of child support payable by the father under the administrative assessment.[7]

[4] At folio 177

[5] At folio 111

[6] At folios 230 to 240

[7] At folio 237

25.After sporadic attendance by the younger child at the school in early 2023 the mother advised that she withdrew the younger child from the school in Term 3, 2023 and so is not liable to meet her private education costs from that time. The child has been notionally enrolled at a local high school which was necessary to enable the mother to transfer the younger child to an alternative school where she will get the specialist attention she requires. The older child continues to attend the school.

26.It is not in dispute that the 2022 costs associated with their children attending private school were paid in full, prior to the child support case commencing. Apparently, the mother met this cost from what the father refers to as the marital asset pool and the mother refers to as a gift of $400,000 made by the maternal grandparents to meet the children's private education costs. In any event, the father asserts that as the BCSA dictates that he is liable to contribute to the children’s school costs from 1 March 2024 and not before. Further, his view is that as the mother met the costs of the 2022 tuition from the marital assets, he in effect made a 50% contribution towards the 2022 private school fees and that as the BCSA is silent as to who is to meet the costs of the children’s 2023 education costs, by deduction the mother is solely liable for this cost.

27.In response, the mother stated even though the orders are silent as to the father’s contribution in the 2022 and 2023 calendar years she does not want to pursue a contribution from him as it would “cause problems” and she is concerned that the father, in disclosing that his employment was terminated, will become “really angry” and she is “too scared, to be honest”. Instead, she would prefer to negotiate with the school and enter into a payment plan. She also intends to get a weekend job to meet this cost, so that the older child is available to supervise the younger child. She is also of the view that with a contribution towards the children’s costs commensurate with the father’s actual income from 12 April 2022 to 30 September 2022, she will be able to manage.

28.The father’s 2021 to 2023 adjusted taxable incomes are $55,015, $326,402 and $344,055 respectively. The father provided a Statement of Financial Circumstances dated 19 September 2023,[8] declaring full-time employment with [Employer 1] for over 2.5 years with weekly employment income of $4,422 and net rental income of $287. He reports that his home is valued at $920,000, and that he also holds a property in [Country 1] valued at $297,501, has savings of $111,543, a motor vehicle valued at $52,900, shares valued at $26,690, household contents valued at $14,000, a watch, mountain bike and sports gear valued at $8,000 and superannuation of $681,623. His liabilities include mortgages totalling $201,629, motor vehicle finance of $34,736 and a credit card liability of $2,250. His weekly personal expenditure is $3,246, made up of $1,516 in income tax, $353 in superannuation, $756 in child support, $562 in minimum credit card repayments and $59 for private health insurance. His weekly household expenses are $2,534, of which about $67 relates to his care of the children. At hearing the father explained that this cost is associated with providing food to the younger daughter when he spends time with her. He declared medical expenses of about $50 per month. He has a history of asthma, requires a knee replacement and requires biannual psychiatric review.

[8] At folios A1 to A10

29.The father advised that his role of [position 1] at [Employer 1] has been terminated. His last day will be 13 October 2023. He explained that when publicly listed the share price plummeted, and he was given options on share reserve stock units. On the day that the shares vested he discovered that he has a $27,000 tax liability. Though his 2023 income tax return may suggest that he made again a capital gain of between $50,000 and $60,000, this is simply not the case. Creditors have been appointed to the board and there have been extensive cuts. He understands that there are pending fraud investigations. He has negotiated about 14 weeks of pay and is also seeking that the company meet his $27,000 tax liability.

30.The father requested that the Tribunal not exercise its powers to seek confirmation from his employer regarding his termination, the reasons for the termination of his employment or the quantum of any payout he would receive. He wants his private life to remain separate from his employment, and that he instead would “swear on my life” that he would provide all necessary documentation. The Tribunal preferred to seek independent evidence from [Employer 1]. In partial compliance with the Tribunal’s order, [Employer 1] provided a copy of the father’s final payslip. It indicates that his base salary was $230,000 and that his final day of employment was 13 October 2023. Bonus paid up until the date of termination was $48,300 and his ordinary hours were $66,346.17. This suggests that his gross income is the vicinity of $398,500 per annum. In addition, the father received termination payments totalling $95,096.15, suggesting that he received about 21.5 weeks of salary or 150 days at his base rate. The Tribunal is satisfied that it is appropriate to vary the father’s adjusted taxable income to $278,300 ($230,000 + $48,300) for the period 1 July 2023 to 12 March 2024 (14 October 2023 + 150 days). This will provide certainty to both parents and avoid the need for further proceedings, which are understandably draining for both parents.

31.The Tribunal questioned the father as to his earning capacity. He stated that he is the survivor of 14 years of domestic violence and abuse; he then clarified, explaining that by not financially contributing to the household in 14 years the mother perpetrated financial abuse. He submits that his earning capacity is significantly impaired, primarily because he has been diagnosed with clinical depression. He thinks it unlikely that he will secure alternate employment until at least February 2024. He also spoke at length of the bias inherent in the property settlement and pointed out that the BCSA termination clauses include loss of employment for a continuous period of six months. The Tribunal notes that despite being ordered to provide the reasons for termination, [Employer 1] did not do so. The reasons for termination of the father’s employment is a relevant consideration when determining the father’s earning capacity. However, as the father submits that he is unlikely to secure employment until at least February 2024 and that the Tribunal has already determined that it is appropriate to vary his adjusted taxable income until 12 March 2024, the Tribunal is not persuaded that it is appropriate to amend the assessment on the basis of his earning capacity at this time.

32.The Tribunal has carefully considered the mother’s submissions regarding a contribution from the father in respect of the children’s 2023 private education costs. In similar fact scenarios, the Tribunal may be minded to determine that the father contribute to these costs commensurate with the parents’ respective income percentages. However, after placing significant weight on the mother’s submissions, the Tribunal is not persuaded that it would be appropriate to depart from the administrative assessment on this basis.

33.The father’s position is that it is neither just nor equitable to amend the administrative assessment on the basis of his actual income during the period 12 April 2022 to

30 September 2022; in fact, he states that this would in effect be double dipping as that during that same the mother had access to $600,000 in liquid assets from the marital pool. The mother contends that there would be certain hardship to her, and the children, should the father not contribute to the children’s costs commensurate with his income from the date the case was registered. She does not dispute that from the date of registration until lodging her departure application she had access to funds from the marital asset pool.

However, she submits that from at least October 2021 she had no access to the father’s income and it was around this time that he withdrew $400,000 from joint accounts to purchase a property for himself. In any event, she stressed that this was taken into account in the property settlement.

34.Review of the documents provided by Child Support demonstrate that on 4 May 2022 the mother contacted Child Support and advised that she wanted to lodge a departure application as the father’s income for the purposes of the administrative assessment was based on his 2021 adjusted taxable income of $55,000. The mother stated that the father had secured employment with an income of $240,000 per annum. The case officer advised her, amongst other things, that “increases in income always get backdated for both parents”.[9] The mother contacted Child Support again on 11 May 2022[10] when she was again advised of the departure process. She contacted a third time on 21 July 2022 when she was advised that any departure application “may not be accepted as the tax lodgement time frame is still open”.[11] She lodged the departure application some three months later. Taking into account her contacts with Child Support, the Tribunal is not persuaded that she rested on her rights.

[9] At folio 31

[10] At folios 32 to 33

[11] At folio 34

35.Section 3 of the Act stipulates that a parent’s duty to maintain their children has priority over all other commitments, other than their necessary commitments to support themselves. During the period 12 April 2022 to 30 October 2022 the father had the benefit of income that was not reflected in the administrative assessment. The Tribunal determines that it is just and equitable that the father’s actual income is reflected in the administrative assessment from 12 April 2022 to 30 October 2022. It is for the same reasons the Tribunal is satisfied that it is only fair that the mother’s 2022 adjusted taxable income is also reflected in the administrative assessment during this same period.

36.This aspect of the decision will create arrears of about $14,950. After examination of the father’s Statement of Financial Circumstances and his termination payment, the Tribunal concludes that the father will not suffer undue hardship in meeting these arrears over time. Certain hardship would be caused to the mother and children were the father not to contribute to the extent that his income allowed.

37.The Tribunal is satisfied that the administrative assessment is unfair given the father’s income and financial resources. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it is just and equitable to depart from the administrative assessment.

Otherwise proper

38.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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

39.The determination is otherwise proper.

DECISION

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

·     for the period 12 April 2022 to 30 September 2022 Mr Lovell’s adjusted taxable income is varied to $326,402 and Ms Cauley’s adjusted taxable income is varied to $52,421; and

·     for the period 1 July 2023 to 12 March 2024 Mr Lovell’s adjusted taxable income is varied to $278,300.