Cramton and Murphy (Child support)

Cramton and Murphy (Child support) [2022] AATA 4987 (7 December 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/AC024060
APPLICANTS:  Mr Cramton
OTHER PARTIES:  Ms Murphy
Child Support Registrar

TRIBUNAL: Member S Cullimore

DECISION DATE: 7 December 2022

DECISION:

The decision under review is set aside and the Tribunal substitutes a new decision that the application lodged by Mr Cramton on 21 August 2021 is now refused.

This means that:

· the previous change of assessment decision made on 13 May 2021 should now be applied for the period 11 December 2020 to 31 December 2021; and
· the matter reverts to the normal administrative assessments from 1 January 2022 onwards.

CATCHWORDS

CHILD SUPPORT – departure determination – no 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

The following background matters are drawn from the files of the Child Support Agency (“the CSA”) and are not in dispute. The Tribunal finds each matter as a fact.
The child support case commenced 4 February 2020 and was Registrar collect from 8 January 2021 to 31 October 2021. Since 1 November 2022, it has reverted to private collect.[1]
[1] See C716
The parents have three children now aged 8, 7 and 3.
There have been multiple care changes. Since 4 February 2020, the care percentage of Mr Cramton has varied from 0% to 42%. Since 14 April 2022 care has been 59% to Ms Murphy and 41% to Mr Cramton.[2]
[2] See delegate decision at C621. This decision is also now under objection.
A previous change of assessment decision was in place from 11 December 2020. This fixed the adjusted taxable income (“ATI”) of Mr Cramton at $90,377 until 31 December 2021.[3]
[3] This was the objection decision dated 13 May 2021: see at C133, and see below.
This decision resulted in Mr Cramton paying different rates of between about $10,500pa to about $17,000pa in child support.[4]
[4] See C145 onwards and see below.
On 21 August 2021 Mr Cramton lodged an application for a “further change of assessment” based on Reasons 7, 8A and 8B.[5]
[5] C251
By a decision dated 24 September 2021 a delegate of the CSA found Reason 8A established and made a further departure determination fixing the ATI of Mr Cramton at $88,000 for the period from 1 January 2022 to 31 January 2022 (i.e. for just one month) and the ATI of Ms Murphy at $69,343 for the period from 1 February 2021 to 12 December 2021 and then $52,007 for the period 13 December 2021 to 31 January 2022.[6]
[6] C343
On 7 December 2021 Mr Cramton objected to the delegate decision.[7]
[7] C387. He was granted an extension of time to do so.
On 21 February 2022 an objections officer “part allowed” his objection and made a different, further departure determination: (1) fixing the ATI of Mr Cramton at $145,668pa for the period from 1 July 2021 to 31 October 2022, and (2) fixing the ATI of Ms Murphy at $71,545 for the period from 1 February 2021 to 12 December 2021, and then at $153,659 for the period 13 December 2021 to 12 December 2022.
Under that decision, the annual rates of child support since 1 February 2021 have varied considerably from about $5,000pa to as much as $30,000pa.
On 14 April 2022 Mr Cramton applied for further review by this Tribunal of the objection decision.[8]
[8] He was granted an extension of time to do this as well.

DOCUMENTARY EVIDENCE AND HEARING

The Tribunal had before it the original bundle of documents provided by the CSA. These documents are referred to as C1 to C567.
Supplementary documents received from the CSA were C568 onwards.
Directions were made by the Tribunal for production of further documents by the parents.
Documents received from Mr Cramton were marked A1 to A9 and documents received from Ms Murphy were marked B1 to B23.
Two telephone directions hearings were held and the hearing itself was held on 7 December 2022.
Both parents attended these hearings via teleconference.

CONSIDERATION

The relevant law

Child support is usually based upon “administrative assessments”. These normally use the ATIs of the parents for the financial year ending before the start of the relevant child support period.
In some circumstances the CSA will use an estimate of a parent’s current income. An estimate must be lower than the ATI used in the administrative assessment. It cannot be higher.
Part 6A of the Child Support (Assessment) Act 1989 (“the Act”) sets out certain circumstances in which the Registrar, on application by a parent, may depart from or “change” the administrative assessment, or in other words, change in some way the manner of working out the child support liability of the payer.
The central issues for a decision maker to determine in any COA matter mirror the three steps in the process which are set out in section 98B of the Act.
They are:
(i) whether one, or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exists; and if so
(ii) whether it would be:
(A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B)otherwise proper;
to make a particular determination to depart from the administrative assessment of child support.
A “further change” to the assessment can be made to an assessment which has already been changed.
An application for a change or further change to the assessment can also be refused.
Under subsection 117(2) of the Act, a decision maker is required to consider whether, “in the special circumstances of the case”, the administrative assessment of child support is unjust or inequitable because of various factual scenarios (the so called “grounds for departure”).
These factual matters (grounds) cover such matters as “the income property and financial resources of either parent”: this is called “Reason 8A”.
The “special circumstances” which must be present must tend to justify or support a departure determination being made.
Those circumstances must also be separate and discrete matters from the matters which make up the “grounds” for departure. Decision makers often confuse this issue by stating that the grounds themselves (for example, the costs of private education, which is Reason 3) constitute the special circumstances. The Tribunal considers that that approach does not reflect the law, as set out in the Act, or pronouncements by courts having supervisory jurisdiction in this area.
For the second step, subsections 117(4) to (9) (inclusive) of the Act then require the decision maker to consider the “just and equitable factors” before making a particular departure determination.
These factors include the “income, property and financial resources of each parent”; the earning capacity of the parents; the costs of providing care to the child; the necessary living expenses of the parents; and any hardship that would be caused to either parent or the child by the making of any particular change of assessment decision.
If satisfied that it is appropriate to do so, the Registrar may then make any of the forms of “departure determination” allowed by section 98S of the Act.
These include but are not limited to fixing a parent’s ATI at a figure in excess of (or sometimes below) that used in an administrative assessment, fixing an annual rate of child support, or increasing a parent’s “self-support amount”.
Only one Reason needs to be established in these matters. If one Reason is established, matters relevant to other Reasons may be considered under the “just and equitable” factors.

The relevant “administrative assessments” in this case

The rates of child support payable under the previous change of assessment decision of 13 May 2021 become the “administrative assessment” for some purposes in this matter.
That decision applied for the period from 11 December 2020 to 31 December 2021. It changed the ATI of Mr Cramton to $90,377. Ms Murphy’s ATIs to be used in the calculation of child support were those used as per the “normal” formula assessments.
The rates of child support payable by Mr Cramton were:
·     From 11 December 2020 - $13,095pa;[9]
·     From 6 January 2021 - $10,512pa;[10]
·     From 11 January 2021 - $13,095pa;[11]
·     From 27 January 2021 - $11,373pa;[12]
·     From 1 April 2021 - $10,512;[13]
·     From 29 May 2021 - $17,232pa;[14]
·     From 1 August 2021 to 31 December 2021 - $16,923pa.[15]
[9] C147
[10] C150
[11] C156
[12] C159
[13] C165
[14] C175
[15] C188
Then, from 1 January 2022 onwards, the “normal” formula assessments are the administrative assessments.
Based on the parents’ 2020/21 ATIs of $80,034 for Mr Cramton and $44,969 for Ms Murphy, the annual rate from 1 January 2022 would be $14,259.[16]
[16] C237
Based on the parents’ 2021/22 ATIs of $129,979 for Mr Cramton and $71,644 for Ms Murphy, the annual rate would have been $12,399 from 1 December 2022.[17] However, the CSA accepted an income estimate for Mr Cramton of $36,500 for the period 1 November 2022 to 30 June 2023.[18]
[17] C640
[18] C658 onwards
Given care is now 59%/41%, the effect of accepting that estimate was to “reverse the case”, so that Ms Murphy became the payer of child support.
The initial rate from 1 November 2022 was $2,823pa.[19]
[19] C695
The Tribunal must consider whether there should be any change or further change of assessment in this matter from the above “administrative assessments”.

Is there a ground for a further departure or new departure?

The Tribunal has concluded that the evidence and the submissions of the parents raise only one possible Reason, Reason 8A, the income property and financial resources of either parent.
Reason 8A is contained in subparagraph 117(2)(c)(ia) of the Act as follows:
in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child……
…
(ia) because of the income, property and financial resources of either parent… [Tribunal’s emphasis]
The test requires the Tribunal to consider the level of child support as determined by the administrative assessments, set out above, on the one hand, and the “income, property and financial resources of either parent” on the other hand, and decide whether the result is in common parlance “unfair” (strictly, “unjust and inequitable”).
The level of child support can be “unfairly” low or “unfairly” high, in a particular case.
Neither parent owns any real estate property, or has any signifcant savings, or has any other assets of significance.
From all of the evidence before it, the Tribunal finds the following material facts concerning the income and financial resources of Mr Cramton:
·     He previously worked for [Employer 1];
·     In about January 2022 he was paid a taxable “retention amount” of $50,000 gross;[20]
·     He left [Employer 1] in about September 2022 and is now obliged to repay the retention amount over two years;
·     He now works as a casual [Occupation];
·     As at 20 November 2022 he had only earned about $2,500 gross from that work for 2022/23 YTD;[21]
·     His 2020/21 ATI was $80,034;[22]
·     His 2021/22 ATI was $129,979, which included the retention amount.[23]
[20] C428
[21] A7
[22] C336
[23] A1
From the evidence before it, the Tribunal finds the following material facts concerning the income, property and financial resources of Ms Murphy:
·     She formerly worked for [Employer 2];
·     She suffered personal injuries while in that employment;
·     She suffered left de Quervain’s tendinopathy;[24]
[24] B5
·     Before February 2021 she was dependent upon income support payments;
·     From February 2021 she was granted a [Government department] “incapacity payment”;
·     The annual rate was initially $71,545;
·     After 28 April 2022 the new rate was $1,253.48 per week, or $65,180.96pa;[25]
·     These amounts appeared in her 2020/21 and 2021/22 tax returns and formed part of her ATI;
·     In about September 2021 she received a “permanent impairment” amount (lump sum compensation) of $100,000;
·     This was for non-economic loss;[26]
·     In 2019/20 her ATI was only her taxable income support payments of $18,234;
·     In 2020/21 her ATI was $44,969;
·     In 2021/22 her ATI was $71,644;
·     She receives carer allowance for the care of one of the children (this is about $136.00 per fortnight).
[25] B5
[26] B10
The Tribunal needs then to consider the amount of the child support liability of Mr Cramton under the “administrative assessments” as set out above as against the “income property and financial resources of either parent”, as set out above.
To give background to the consideration this matter, Reason 8A is the Reason most commonly relied upon in CSA matters, however the scope and meaning of this provision remain very problematic. In many cases, CSA decision makers (and indeed AAT Tribunal Members) differ widely on the meaning and application of this Reason to any particular set of facts.
Two preliminary observations on this provision must be made:
· That it appears to require an analysis of “income property and financial resources”, as a whole, collectively, and not income or property or financial resources;
· That it is the income property and financial resources of either parent (i.e. of one parent) which needs to make the previous CSA decision “unfair”.
One view of Reason 8A is that the decision maker needs to look at the complete picture of each parent’s income property and financial resources.
The alternative and much commoner approach is in effect to “deconstruct” the phrase into its three separate elements, and try to identify something in (usually) the income or the financial resources of one parent which, by itself, makes the administrative assessment unfair.
However, that approach involves reading the word “and” in the law as in fact meaning “or”.
Then, the legislation gives no clue as to what degree of difference or disparity between the parents’ overall financial positions there must be, except of course that this difference or disparity must be such as to now render the previous CSA decision “unfair”.
These are serious defects in the law itself.
As to the meaning of the terms themselves, the Tribunal’s view is that the term “income” requires the identification of a specific income or income-like amount. This amount, however, must be an amount which will not appear in the parents’ ATIs, as set out in section 43 of the Act. It is important to bear in mind that such items as “tax-free pensions” are included in a person’s ATI, and therefore are reflected in the formula amount of child support.
The term “financial resources” in this context means a specific sum of money or benefit available to the parent, or a source of potential income, or benefit, if the parent elects or chooses to convert this resource to cash. Benefits from the running of a small business or trust, such as personal expenses of the parent paid for by another entity, are good examples. A tax-free redundancy payment, a trust fund set up for the benefit of the parent, or some forms of compensation, which are not taxable, are examples.
The Tribunal noted that the basis of these change of assessment proceedings, at least until 31 October 2022, has been: (1) Ms Murphy’s receipt since February 2021 of an incapacity payment; (2) her receipt in about September 2021 of a compensation lump sum of $100,000; and (3) the receipt by Mr Cramton in about January 2022 of a lump sum of $50,000 in retention moneys.
The Tribunal notes that, once their relevant tax returns for 2020/21 and 2021/22 were lodged, the “normal” ATIs of the parents, as used in the formula, have included the incapacity payment paid to Ms Murphy and the retention money paid to Mr Cramton. In this regard, applying to further change the assessment to reflect a parent’s increase in income which will form part of their ATI is, in a sense, a premature step. The formula has to be allowed to do its work.
It is only the lump sum of compensation for non-economic loss (pain and suffering) which would not, and would never have been, added to Ms Murphy’s ATI.
The lump sum is not “income” or income-like, however, the Tribunal finds that it is a “financial resource” in the sense that it is moneys available to Ms Murphy.
As stated above, the rates of child support payable by Mr Cramton under the 13 May 2021 decision were between $10,500pa and $17,000pa. From 1 January 2022 to 31 October 2022 the rate, as per the normal formula, would have been $14,259pa. (From 1 November 2022 the case has reversed.)
The Tribunal has assessed all of the evidence and the submissions of the parents. It is not convinced that the administrative assessments, up to 31 October 2022, were “unfairly high” in relation to Mr Cramton or that they were “unfairly low” in relation to Ms Murphy, because of the receipt by each of them of these various “additional” amounts. It is not the actual total of their income and financial resources which is the key issue: it is whether the rates of child support fixed by the administrative assessments are themselves intrinsically “unfairly low or high” because of these “extra” income amounts or “extra” financial resources.
Put another way, the Tribunal is not convinced that Mr Cramton’s access to the $50,000 retention moneys, which in any event he is now repaying, should create for him any higher child support liability, or that Ms Murphy’s receipt of the incapacity payment or the lump sum, should reduce her child support entitlements, when compared to the rates of child support flowing from the “administrative assessments”.
As to the $100,000 lump sum compensation, the Tribunal disagrees with the objection decision that it should be treated as an income-like amount available to Ms Murphy for 12 months, over two financial years.
The Tribunal would deal with this lump sum by adding any “deemed” interest on this lump sum to the other income for Ms Murphy, e.g. by adding nominal interest of say $4,000pa. The lump sum should be treated as “savings”, or capital, not income. This modest amount of deemed interest would not materially affect the assessment of child support.
The Tribunal notes that the parents’ circumstances have again changed materially since September/October this year. Mr Cramton has left [Employer 1], his income has dropped significantly, and he must repay the retention moneys. He is now working on a casual basis and is being assessed based upon an income estimate of $36,500.
This has had the effect that since 1 November 2022 Ms Murphy is the payer of child support.
Care has also changed, and the case has become private collect.
There is also a new change of assessment application, lodged by Mr Cramton on 10 October 2022.
These are all new matters, and the parents were agreed that the Tribunal in this matter should only address in its decision the circumstances which applied before 31 October 2022.
The Tribunal has decided that, looking at the whole of the circumstances which applied from 8 January 2021, when the case became Registrar collect, to 31 October 2022, when the case reversed, none of the “Reasons” to further change the assessment (or since 1 January 2022, change the assessment) have been made out.
Therefore, the correct and preferable outcome is that the application lodged by Mr Cramton on 21 August 2021 for a further change to the assessment (or since 1 January 2022, change the assessment) be refused.

DECISION

The decision under review is set aside and the Tribunal substitutes a new decision that the application lodged by Mr Cramton on 21 August 2021 is now refused.

This means that:

the previous change of assessment decision made on 13 May 2021 should be applied for the period 11 December 2020 to 31 December 2021; and
the matter reverts to the normal administrative assessments from 1 January 2022 onwards.

[2022] AATA 4987

7 December 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Appeal

Judicial Review

Statutory Construction

Remedies