Cortes and Dodman (Child support)

[2018] AATA 2408

Cortes and Dodman (Child support) [2018] AATA 2408 (13 June 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/PC012699

APPLICANT:  Mr Cortes

OTHER PARTIES:  Child Support Registrar

Ms Dodman

TRIBUNAL:Member S Hoffman

DECISION DATE:  13 June 2018

DECISION:

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

·         Mr Cortes’ adjusted taxable income is varied to $100,296 for the period 29 May 2017 to 31 December 2019;

·         The rate of child support payable by Mr Cortes is increased by $7,522 a year for the period 29 May 2017 to 31 December 2017;

·         The rate of child support payable by Mr Cortes is increased by $5,200 a year for the period 1 January 2018 to 31 December 2018.

·         The rate of child support payable by Mr Cortes is increased by $2,733 a year for the period 1 January 2019 to 31 December 2019.

CATCHWORDS
Child support - Departure determination - Income and financial resources of the parents - Proper needs of the children - Costs of private school fees - 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. This review is about the child support assessment in respect of [Child 1] and [Child 2], born February 2002 and May 2005 respectively.  The case started on 29 August 2014 with the Department of Human Services – Child Support (the Department) responsible for collecting child support from that date.  According to departmental records, the mother is providing 100% care of the children and the father is the parent liable to pay child support.  

2. On 27 March 2017 the mother lodged an application for a change of assessment with the Department.  The administrative assessment in place on that date was that the father’s annual child support liability was $414, based on his estimate of nil income and the mother’s 2015/16 taxable income of $71,404.  The father lodged a second income estimate on 12 April 2017, and from 26 April 2017 he was assessed to pay child support of $20,802 a year using this second income estimate of $111,924.

3. On 10 July 2017 a senior case officer from the Department decided to increase the annual rate of child support payable by the father in respect of school fees as follows:

   ·    From 29 May 2017 to 31 December 2017, by $3,761

   ·    From 1 January 2018 to 31 December 2018, by $5,388

   ·    From 1 January 2019 until a terminating event occurs for each child, the annual rate of child support payable by the father is to be increased by 50% of the school fees, as advised by the parents.

4. On 27 July 2017 the father lodged an objection to that decision.  On 25 September 2017 an objections officer decided the annual rate of child support was to be increased as follows:

   ·    From 29 May 2017 to 31 December 2017, by $7,522

   ·    From 1 January 2018 to 31 December 2018, by $5,200

   ·    From 1 January 2019 to 31 December 2019, by $5,466.

5. On 16 October 2017 the father lodged an application for review with the Administrative Appeals Tribunal (the tribunal).  The matter was heard on 13 June 2018.  The parents attended via conference telephone and gave sworn evidence.

6. The tribunal had before it documents provided by the Department (numbered 1 to 351); by the father (numbered A1 to A20); and by the mother (numbered B1 to B12).  Copies of these documents were sent to the parties before the hearing.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act).  The Act provides for an administrative assessment of child support to be paid.  Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:

1. A ground is established; and

2. It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and

3. It would be otherwise proper to make a particular determination.

1. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.

2. If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include variations to the annual rate of child support payable, or to the adjusted taxable incomes of the parents and/or carer, or to other components of the statutory formula used to calculate child support.

CONSIDERATION

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

1. Subparagraph 117(2)(b)(ii) of the Act provides that there is a ground for departure where, in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being educated in the manner that was expected by their parents.

2. In a written submission the father stated that before they separated, he and the mother had agreed both children would attend private schools.  At hearing he confirmed this was the case.  The mother had provided a statement from the school setting out the school fees.  There was no dispute around the amount of the fees as determined by the objection decision which were $15,045 for 2017, $10,411 for 2018 and $10,932 for 2019 for both children.[1]

   [1] The objections officer increased the 2018 fees by 5% to arrive at the 2019 figure.

3. Given the amount of school fees, the tribunal is satisfied that in the special circumstances of the case, the costs of maintaining the children are significantly affected because they are being educated in the manner that was expected by their parents.  The tribunal determines therefore that a ground for departure from the administrative assessment has been established, pursuant to subparagraph 117(2)(b)(ii) of the Act.

4. The tribunal will return to the father’s capacity to contribute to the cost of private education later in these Reasons for Decision.  

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

1. As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother 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 consider a variety of factors, as set out in subsection 117(4) of the Act.[2]

   [2] The tribunal is required to give ‘overt consideration’ to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares [2008] FMCAfam 886.

2. Section 3 of the Act makes it clear that 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 the support of another person the parent has a duty to maintain.  In this case the father and the mother have the primary duty to financially support the children. 

Income, property and financial resources – the father

1. The father works in the [specified] industry on a fly-in fly-out basis.  He was unemployed for a short time during March 2017.  He started a new job on 29 March 2017 which ended on 10 July 2017.  He started work with another employer on a permanent basis on 31 July 2017 as [an occupation].  He is still working for that employer.

2. Between 29 March 2017 and 10 July 2017 (104 days), based on information provided by his former employer, the father earned gross pay of $33,636.  If that amount is earned over 104 days, that equates to $118,049 a year.  If earned for the period 29 March 2017 to 30 July 2017 (the day before he started his current job), it equates to $99,009 a year.

3. Regarding the job he started on 31 July 2017, the father earns a base salary of $75,300 a year plus allowances.  According to his payslips, including allowances he earns $8,358 a calendar month which equates to $100,296 a year. 

4. Given the foregoing, the tribunal is satisfied that it is reasonable for it to use $100,296 as the father’s income for the purposes of this review.

5. The father lives with his partner who also works in the [same] industry and is paid an income similar to his.  They jointly own a property valued at $460,000 over which there is a mortgage of about $450,000.  There is $20,000 in their joint bank account.  The father said that was made up of his partner’s savings and what was left after the property settlement between him and the mother in this review was finalised.

6. In his Statement of Financial Circumstances (SFC) dated 8 November 2017, the father recorded owning a [Car 1] worth $4,000, which he said he is selling to his son for about $2,000 although he will continue to pay its running costs.  The father has purchased a [Car 2] for $11,000.  He paid for it by extending a personal loan.

7. In his SFC, the father wrote that he owed $15,000 on his credit card.  He said that debt was now down to $8,000 or $9,000, and that he owes $1,600 on a personal loan to purchase [an item].  He also recorded an $11,000 personal loan to [a bank] which he said was taken out by him and his partner to purchase their home.

8. The father’s gross weekly income is $1,928.  He listed weekly personal expenditure totalling $1,276 including tax paid on his wages, child support he pays and a minimum credit card payment of $190 a week.  He acknowledged the credit card payment was too high and was probably the monthly payment.  Adjusting for this means the personal expenditure figure should be reduced by about $145 a week to $1,131.

9. The household expenses listed by the father as being incurred on his behalf totalled $881 a week.  The expenses he incurred on behalf of the children totalled $142 a week.  This includes $70 a week in respect of the school fees.  However that is included as part of the child support he pays. To avoid double-counting, the amount of $142 should be reduced to $72 a week.

10. The total of the relevant figures – $1,131, $881 and $72 – is $2,084. This suggests a shortfall of about $156 a week ($1,928 - $2,084).  The mother pointed out that the father works away two weeks out of three and during those two weeks, all his food is provided by his employer yet he allowed $100 a week for himself for food.  She considered that to be overstated.  The father agreed his food costs were covered when he worked away.  His employment contract states that he is rostered on for seven days, then seven nights and then has ten or eleven days off.  This suggests that his expenditure on food will be less than $100 a week on average.

11. That tribunal notes that the father has included items considered to be discretionary spending, the most significant of which is $150 a week on cigarettes.  The father said he was trying to stop smoking.

12. As noted above, the duty to maintain their children 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.  The tribunal is satisfied that the father has the capacity to contribute 50% to school fees given what he spends on cigarettes and that his food costs are covered by his employer for more than 50% of the time.  It also notes that he has been able to reduce his credit card debt by about $6,500 between the date of his SFC (8 November 2017) and when the hearing was held, and has savings in a joint bank account.

13. The mother and father live in different states.  In a written submission, the father wrote about the children spending two weeks with him over the Christmas period and the cost of caring for them at this time, which included entertainment and the like.  He submitted that his partner contributes to the cost of the children as he cannot afford it all himself.  The parents attended court proceedings about a year ago at which time it was agreed that the mother contribute half the air fare for the children to travel interstate to see their father at Christmas.  The parents confirmed this contribution was made.

Income, property and financial resources – the mother

1. The mother works full time and earns $71,000 a year.  She salary-sacrifices such that her taxable income for 2016/17 was $46,831.  The child support system records her grossed up income.  For 2016/17 that was $82,631.  The mother said that she used to have a second part-time job from which she earned a few thousand dollars a year but she no longer does that.  Because she is recorded as providing 100% of the children’s care, small variations in the mother’s income has a negligible effect on the rate of child support.  Therefore the tribunal considers it unnecessary for it to vary the mother’s income in its determination.

2. The mother owns a property worth $310,000 over which there is a mortgage of about $291,000.  She said that she has about $130 in the bank.  She owns a [Car 3] and a caravan which she valued at $7,000.  According to her SFC dated 30 October 2017, her liabilities include an overdraft of $7,608, a credit card balance of $1,934 and a car loan of about $6,000.

3. The mother listed weekly household expenses of $1,744 in addition to her personal expenditure of $270.  These total $2,104 which is slightly more than her weekly income of $1,944, made up of her pay, family tax benefit and child support.  She said that it was a balancing act every single week to cover expenses.

Other issues pertaining to the parents’ incomes, property and financial resources

1. Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met.  These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.

2. During calendar year 2017, the father worked for three different employers within the [specified] sector, and for similar pay.  His taxable income for 2015/16 was $105,475 and for 2016/17 it was $113,256.  His current pay as recorded above has been calculated to be $100,296.

3. The mother has worked for her current employer for 15 years.  Her taxable income in 2015/16 was $71,404 and was $82,631 on 2016/17.  She estimated her current income to be $71,000 a year as she no longer has a second part time job.  Variations in her income have a negligible effect on the rate of child support.

4. The tribunal is satisfied that it is not open to it to make an earning capacity determination in respect of either parent and need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.

5. The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act).  The father had informed the Department that he was supporting his fiancé as she had lost her job on 14 June 2017.  He told them on 10 July 2017 that she had found a new job.  For that reason the tribunal concludes she has the capacity to support herself.  The tribunal is satisfied that neither parent had the duty to maintain another person for the period relevant to this review.  

Costs related to the children

1. 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 they may have (subsection 117(6) of the Act).

2. As set out under Issue 1, the school fees as determined by the objections officer were $15,045 for 2017, $10,411 for 2018 and $10,932 for 2019.  The father said that since he agreed to the children being privately educated, the parents’ circumstances have changed and he struggled to pay his share of the fees as required by the objection decision.  He also said that their son was not academically inclined and it made more sense for him to go to a public school.

3. The mother said that their daughter had changed schools at the start of 2018 which meant the school fees for her had reduced.  This explains the drop in school fees between 2017 and 2018.  The mother also said that their son did not want to change schools as he had been with his friends for years.  She said it suited him to have routine and remaining where he was gave him security.  She also said that the curriculum offered by the [private] school attended by both children was similar to that of local public schools.

4. As both parents expected their children to be educated privately and in the tribunal’s view have the capacity to pay for it (see paragraph 27 in relation to the father’s capacity to pay), the tribunal finds that the father is to contribute 50% of the school fees. 

5. The mother said that if their son gets an apprenticeship he will leave school at the end of this year.  Given that may well be the situation, and as discussed at hearing, the tribunal considers it appropriate that the child support assessment reflects that the father makes a contribution to the school fees for both children for calendar years 2017 and 2018, but only for the daughter for 2019.

6. If the son does remain at school during 2019, then it is open to the mother to lodge a further change of assessment at the appropriate time.  The tribunal’s determination is such that the rate of child support will be increased by $2,733 for the calendar year 2019 in respect of the daughter’s school fees.

Hardship

1. The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[3] in this respect:

   This requires the Court to balance the ‘hardship’ which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.

   [3] [1991] FamCA 93.

2. Both parents have expressed difficulty in managing their financial situations  The father’s position is that he cannot afford to pay towards school fees and manage other commitments, and that what he pays by way of child support, which is currently $26,860 a year, means that he struggles to afford to spend time with the children who live in a different state.  He said that the effect of the departmental decisions was to create arrears for him which he has struggled to pay, and he has relied on his partner to manage financially.  The tribunal has already set out its reasons why it considers the father has the capacity to contribute to the cost of school fees.

3. The mother said that it was a balancing act every single week to cover expenses; that is supported by the financial information she provided.

4. The tribunal considers that both parents struggle to meet their financial commitments which are increased because of the school fees.  Because the daughter turned 13 years old in May 2018, the child support liability increased at that time.  The tribunal notes that the daughter has changed schools to a less expensive one and the son may well leave school soon.

5. The administrative assessments of child support used different incomes for the father between 29 May 2017 and the current date.  His estimate of $111,924 applied from 29 May 2017 to 30 June 2017.  His 2015/16 taxable income of $105,475 applied from 1 July 2017 to 30 November 2017.  A provisional income of $107,268 applied from 1 December 2017.

6. The part of the tribunal’s decision which varies the father’s income to $100,296 will have the effect of reducing the child support assessment by about $2,500 a year compared to when the father was assessed on an income of $111,924; by about $1,100 a year compared to when he was assessed on $105,475; and by about $1,500 a year compared to when he was assessed on $107,268.[4]

   [4] Because of the complexity of calculations of the rate of child support, the tribunal’s figures are only estimates.

1. The tribunal estimates that its decision will have the effect of reducing the father’s arrears of child support by about $1,200.  It further notes that his child support liability could be significantly reduced within the next year if the son leaves school to take up an apprenticeship.

Any other relevant matters

1. The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).

2. There can be instances where it is appropriate to vary the rate of child support because of the income, earning capacity, property and financial resources of the child (subparagraph 117(2)(c)(i) of the Act).  The mother said that the son works part time at weekends [at a particular job] for which he earns $20 an hour.  She said that he works four or eight hours a week which suggests he earns between $4,160 and $8,320 a year.  The tribunal is satisfied that he does not earn enough to consider varying the rate of child support.

3. The mother lodged her change of assessment application on 27 March 2017.  However the father was not made aware that she was seeking to change the assessment until 29 May 2017.  It is for this reason that the departmental decisions both varied the administrative assessment from 29 May 2017 rather than an earlier date.  As this is a reasonable approach and neither party made submissions for different dates to be used, the tribunal is satisfied that departing from the administrative assessment from 29 May 2017, consistent with the departmental decisions, is appropriate in this case.

4. The tribunal’s determination ends on 31 December 2019 to give the parties some certainty into the future.

5. It is open to either parent to lodge a further change of assessment application if their circumstances change and this includes if the son does remain at school during 2019.

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

1. The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance.  Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.

2. The mother receives family tax benefit.  The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.

DECISION

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

·         The father’s adjusted taxable income is varied to $100,296 for the period 29 May 2017 to 31 December 2019;

·         The rate of child support payable by the father is increased by $7,522 a year for the period 29 May 2017 to 31 December 2017;

·         The rate of child support payable by the father is increased by $5,200 a year for the period 1 January 2018 to 31 December 2018.

·         The rate of child support payable by the father is increased by $2,733 a year for the period 1 January 2019 to 31 December 2019.