Conway and Vitali (Child support)

[2019] AATA 1732

Conway and Vitali (Child support) [2019] AATA 1732 (9 May 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/MC015791

APPLICANT:  Mr Conway

OTHER PARTIES:  Child Support Registrar

Miss Vitali

TRIBUNAL:Member A Schiwy

DECISION DATE:  9 May 2019

DECISION:

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

·       for the period 2 October 2018 until 31 January 2020 Mr Conway’s adjusted taxable income is varied to $173,935.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – capital gain in past year resulted in high assessed income - 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 Conway and Miss Vitali are the separated parents of three children.  This application is about the amount of child support payable by Mr Conway to Miss Vitali.

2. The child support case was registered in March 2017.  Child Support have determined that Mr Conway has 100% care of the oldest child, [Child 1]; and from 19 October 2018 he has had 29% care of the other two children (he had nil care for the two youngest children prior to 19 October 2018). 

3. The following administrative assessments were issued:

   ·       for the period 1 July 2018 to 18 October 2018 Mr Conway’s annual child support liability was assessed at $34,840, based on adjusted taxable incomes for 2016-17 of $299,429 for Mr Conway and $5,820 for Miss Vitali.

   ·       for the period 19 October 2018 to 1 January 2019 Mr Conway’s annual child support liability was assessed at $26,478, based on adjusted taxable incomes for 2016-17 of $299,429 for Mr Conway and $5,820 for Miss Vitali. (The decrease in liability was due to the change in care occurring from 19 October 2018).

   ·       for the period 2 January 2019 to 30 June 2019 Mr Conway’s annual child support liability was assessed at $21,678, based on Mr Conway’s estimated income for 2018-19 of $164,458 and adjusted taxable income for 2016-17 of $5,820 for Miss Vitali.   

4. On 2 July 2018 Child Support accepted Mr Conway’s estimate of income for 2018-19 of $122,535.  This decision was set aside by the Tribunal (differently constituted on 29 November 2018).  A new estimate was accepted on 2 January 2019 for $164,458.

5. On 2 October 2018 Mr Conway lodged a departure application with Child Support on the basis that the rate of child support payable under the administrative assessment was unfair because of the income and earning capacity of Mr Conway and Miss Vitali; and the high costs of education of the children.

6. On 15 November 2018 a Child Support case officer decided that Reason 3 had been established but it was not just and equitable to make a departure determination.  The officer found that Mr Conway’s taxable income for 2016-17 of $299, 429 was not representative of his ongoing income as it included a capital gain of $115,136 however the officer decided that a departure determination should not be made as the change in child support liability would not be material.

7. On 29 November 2018 Mr Conway objected to the decision.

8. On 16 January 2019 a Child Support objections officer decided to disallow the objection.

9. On 21 January 2019 Mr Conway lodged an application with this tribunal for an independent review of the objections officer’s decision.

10. A hearing was held on 9 May 2019.  Both Mr Conway and Miss Vitali attended the hearing via teleconference and gave evidence on affirmation to the tribunal.

11. In considering this matter the tribunal took into account the oral evidence of Mr Conway and Miss Vitali; and the relevant documentation provided by the Child Support Registrar (numbered 1 to 535) and supplementary papers (numbered (536 to 614); and Mr Conway (numbered A1 to A30). Copies of all of the numbered documents were provided to all parties.

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act) and in the Child Support (Registration and Collection) Act 1988.

2. The Assessment Act provides for an administrative assessment of the child support payable. It uses a formula that contains variables including the parents’ adjusted taxable incomes; their percentages of care for the children; and costs of the children. The Assessment Act also makes provision for a departure from the administrative assessment in certain circumstances.

3. The issues which arise in this case are:

   ·       does a ground for departure from the administrative assessment for child support exist? And if so,

   ·       is it just and equitable to make a particular determination? And

   ·       is it otherwise proper to make a particular determination?

CONSIDERATION

Issue 1 – Does a ground for departure from the administrative assessment for child support exist?

Mr Conway’s income

1. Mr Conway is an [Occupation 1] and is employed by [Company 1]. 

2. The following is not disputed:

   ·Mr Conway’s 2016-17 taxable income ($299,429) was unusually high as it included a capital gain.  His net income from salary and wages was $179,808. 

   ·His taxable income for 2017-18 was $163,490; (his tax return was not assessed until 23 January 2019).  

   ·His earnings, according to payslips, from 1 July 2018 to 21 April 2019 were $143,831.  This annualises to $173,935.

3. The tribunal found that Mr Conway’s income is as follows:

   ·2016-17               $179,808

   ·2017-18               $163,490

   ·2018-19               $173,935

4. From 1 July 2018 to 1 January 2019 Mr Conway’s child support liability was based on $299,429.  The difference in child support liability based on this income compared to an income of $173,935 is around $5,200 prior to the change in care, and $4,000 after the change in care.

5. The tribunal was therefore satisfied that there are special circumstances in this case and finds that the ground for departure in subparagraph 117(2)(c)(ia) of the Assessment Act does exist in relation to the income and financial resources of Mr Conway.

Issue 2 – Is it just and equitable to make a particular determination?

1. As the tribunal is satisfied that a ground to depart from the administrative assessment exists the tribunal must consider whether it is just and equitable as regards the children, the liable parent and the carer entitled to child support to make a particular determination (subparagraph 98C(1)(b)(ii) of the Assessment Act). Subsection 117(4) of the Assessment Act sets out a variety of factors that must be considered in deciding whether it would be “just and equitable” to make a particular determination. These factors include the proper needs and costs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Section 3 of the Assessment Act makes it clear that the parents have the primary duty to maintain their children and that this duty has priority over all commitments of the parents, other than commitments necessary for self-support or for the support of another person they have a duty to maintain. In this case Mr Conway and Miss Vitali have the primary duty to support their children.

Mr Conway

1. Mr Conway’s current income has been discussed and the tribunal has found that he currently earns $173,935 per annum.  After tax he clears around $122,000 (or $2,340 per week).

2. He owns his residence which he values at around $625,000.  He is currently undertaking extensive renovations at a cost of around $45,000 (he is doing most of the labour).  His mortgage is $489,017.

3. Mr Conway has around $190,000 in superannuation.

4. Mr Conway owes $54,568 to the tax office (due to the capital gain tax he was required to pay) and $12,700 for furniture.

5. Mr Conway lives with the children and he listed his household expenses for himself and the children at $1,630 per week (which includes his mortgage and also $226 for school fees - discussed below).  This amount includes discretionary spending for entertainment and other small items of $60 per week.  He pays health insurance of $70 per week.  Mr Conway is repaying his tax bill at the rate of $1,700 per month ($392 per week).  The weekly living expenses include $145 per week for repairs which is possibly related to the renovation work.  It also includes some high amounts for phone ($75 per week), medical of $96 per week and insurance of $86 per week.  After removing discretionary spending and house repairs, this leaves Mr Conway with around $453 per week.

6. Mr Conway said he has drawn down on his mortgage over the last 12 months to help make ends meet; he thought it may have been around $20,000 lower 12 months ago.  The tribunal noted that Mr Conway has significant equity in his home and the income to finance further draw downs if necessary.

7. The tribunal noted that Mr Conway has chosen to undertake renovations to his house costing $45,000 and these appear to be partly funded by drawing down on his mortgage.

8. Mr Conway is on a relatively high income however he also has significant liabilities.  The tribunal found that he has excess income (after payment of school fees) to fund a child support liability of at least $453 per week.  His liability on an income of $173,935 would be around $440 per week (based on current care percentages and income). 

Miss Vitali

1. Miss Vitali has not worked since 2002 and prior to this she worked in [Occupation 2].  She is on an income support payment and receives family tax benefit.

2. Mr Conway has submitted that Miss Vitali should be going back to work and taking on some financial responsibility for the children.  Miss Vitali stated that she has suffered from [Medical Condition 1] since separation and is receiving treatment for this.  She also has [Medical Condition 2] and this is exacerbated by stress.  She is currently applying for disability support pension.

3. Miss Vitali was directed to provide a Statement of Financial Circumstances but failed to do so.  She stated that she had been advised that as she was not working she did not need to complete the statement.  She stated that as part of the property settlement she received the house valued at $440,000 and superannuation of around $140,000.  She has no liabilities other than outstanding school fees.  At the moment she owes around $7,000 and is on a plan to pay this at the rate of $50 per month.

4. Miss Vitali has no debt against her residence but she currently does not have the capacity to borrow against her home.

5. Last year she applied for early release of superannuation under the hardship provisions.  She was allowed to withdraw $7,000 and she used this to pay outstanding bills.  She finds it very difficult to make ends meet and there is always something needed for the children.  Her mother recently gave her $1,500 to carry out some repairs on her car.

6. Miss Vitali is living with her partner who is on a low income of around $650 per week. 

7. The tribunal accepted that Miss Vitali is suffering significant financial hardship and relying on income support and child support from Mr Conway.  It is possible that she has capacity to earn further income through employment as she is being treated for her health conditions and these could improve.

The children

1. There is no evidence to suggest that the children have any other income or significant financial resources of their own.

2. The children all attend Catholic school and the parents agree that they both wish the children to be educated in this matter.  Miss Vitali and Mr Conway pay half the fees for the two younger children but Miss Vitali has refused to contribute to the eldest child’s fees; currently around $4,344 per annum.  The fees for the younger children are a little less as they are in high school and the fees go up in year 11. 

3. The tribunal was satisfied that both the parents should contribute to the school fees however Mr Conway is earning a significantly higher income.  Currently Mr Conway is effectively paying for just over two thirds of all the fees.  Given Miss Vitali relies on income support the tribunal was satisfied that she cannot afford to contribute to the fees without it causing her significant hardship.

4. Mr Conway provided evidence that [Child 1] requires [dental procedure] for medical reasons.  Miss Vitali does not dispute this.  Mr Conway provided evidence of the quoted cost which is $395 per month for 20 months ($7,900).  He is not eligible for any health insurance refunds.  The treatment has now commenced.

5. Apart from the school fees and dental fees, there was no evidence presented to the tribunal that the children have anything other than the usual expenses and needs for their age; expenses that are dealt with in the administrative assessment and addressed in the Costs of the Children Table.

Summary – just and equitable

1. Mr Conway is on significantly more income than Miss Vitali and will be for the foreseeable future.  He also has capacity to increase his mortgage if necessary.  After his current payments for school fees he still has sufficient net income to meet his child support liability.

2. The tribunal decided it would be just and equitable to assess Mr Conway on his income, as found by the tribunal, resulting in a decrease in his annual liability until 2 January 2019 and then a slight increase.  Given the disparity in their incomes, the tribunal decided that it would be just and equitable for Mr Conway to pay for all of [Child 1]’s school fees and half of the younger children’s fees (as is currently the case).  This still leaves Miss Vitali paying for half of the two younger children’s fees.  The tribunal decided that Miss Vitali would have no further capacity to contribute to [Child 1]’s [dental procedure].

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

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community.  It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits.  Parents, rather than the community have the primary duty to maintain their children.  Miss Vitali is in receipt of family tax benefit.  Any increase or decrease in child support payments from Mr Conway will have an impact on government payments.

Conclusion

1. It is open to the tribunal to vary the annual rate of child support payable, adjusted taxable income or the other variables such as costs of self-support used in the statutory administrative assessment formula. 

2. The tribunal has taken all of the factors set out above into account and proposes to make a departure determination that varies Mr Conway’s adjusted taxable income to $173,935.

3. The tribunal then considered what an appropriate start date for the departure determination would be, noting the maximum allowable is 18 months prior to the application being lodged.  Mr Conway applied for a departure determination on 2 October 2018 which was around three months after he commenced being assessed on his 2016-17 taxable income.  The tribunal decided it would not be equitable to backdate the departure determination; it was open to Mr Conway to apply earlier and it would be unfair to Miss Vitali to backdate.  The decrease in Mr Conway’s income will not result in a debt to Miss Vitali as Mr Conway owed over $18,000 in child support as at February 2019.

4. The tribunal then considered what an appropriate end date for the departure determination would be.  Mr Conway’s income is currently consistent and his 2018-19 tax return should fairly reflect his actual income.  He did not lodge his 2017-18 income tax return until January 2019 so the tribunal decided an appropriate end date would be 31 January 2020.

5. If the parents’ circumstances change significantly it is open to both of them to lodge a further departure determination application.

DECISION

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

·       for the period 2 October 2018 until 31 January 2020 Mr Conway’s adjusted taxable income is varied to $173,935.