Dipper and Wane (Child support)

[2018] AATA 3494

Dipper and Wane (Child support) [2018] AATA 3494 (8 June 2018)

DIVISION: Social Services & Child Support Division

REVIEW NUMBER: 2017/SC013152

APPLICANT: Mr Dipper

OTHER PARTIES: Child Support Registrar

Ms Wane

TRIBUNAL: Member J Leonard

DECISION DATE: 8 June 2018

DIRECTION TO ALTER DECISION OR REASONS FOR DECISION:

Pursuant to section 43AA of the Administrative Appeals Tribunal Act 1975, the following alterations are made to the written statement of reasons for the decision:

The second sentence in paragraph 42 of the written statement of reasons for the decision is altered to read: The Tribunal notes also the disparity in adjusted taxable income between Mr Dipper and Ms Wane with their respective income percentages of 59% and 41% based on their 2016/17 adjusted taxable income.

AND

The second sentence in paragraph 44 of the written statement of reasons for the decision is altered to read: Based on her income relative to Mr Dipper’s, the Tribunal finds that Ms Wane should be responsible for 41% of the cost and Mr Dipper responsible for 59% of the cost over this five-month period and proposes to vary the annual rate of child support payable by Mr Dipper to $5,577 for this period.

AND

The amount in the decision on the front and last page is altered to read $5,577.

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/SC013152

APPLICANT:  Mr Dipper

OTHER PARTIES:  Child Support Registrar

Ms Wane

TRIBUNAL:Member J Leonard

DECISION DATE:  8 June 2018

DECISION:

The Tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying the annual rate of child support payable by Mr Dipper to $5,757 for the period 1 August 2017 to 31 December 2017.

CATCHWORDS
Child support - Departure determination - Costs of education - Income, property and financial resources of parents - Decision to depart - 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 Dipper and Ms Wane are the parents of [Child 1] and [Child 2] (born 2001), [Child 3] (born 2003) and [Child 4] (born 2007).  There has been a child support assessment in place for the children, made by the Department of Human Services – Child Support (the Department) since 2011.  The assessment is currently based on Ms Wane having a care percentage of 56% for the children and Mr Dipper having a care percentage of 44%.

2. For the period 1 August 2017 to 7 January 2018, Mr Dipper was assessed to pay child support of $9,256 a year.  That assessment was based on Ms Wane’s 2016/17 adjusted taxable income of $140,605 and Mr Dipper’s 2016/17 adjusted taxable income of $206,248.

3. On 1 August 2017, Mr Dipper applied for a departure from the assessment on the grounds that the costs of maintaining the children are significantly affected because of the costs of educating [Child 1] and [Child 3] in the manner both parents intended.

4. On 21 September 2017, a decision was made not to depart from the child support assessment.  Mr Dipper lodged an objection to that decision which was disallowed on 15 November 2017.

5. On 19 December 2017, Mr Dipper lodged an application for a review of the objection decision with the Administrative Appeals Tribunal (the Tribunal).

6. The matter was heard on 24 April 2018.  The Tribunal spoke to Ms Wane and Mr Dipper by conference telephone.  The Tribunal had access to the statement and documents provided by the Department (folios 1 to 297), as well as documents provided by Mr Dipper and Ms Wane.  The Tribunal adjourned and directed Mr Dipper and Ms Wane to provide further documents.  These were received and Mr Dipper provided comment.  The additional material provided by Mr Dipper was numbered A1 to A72 and the additional material provided by Ms Wane was numbered B1 to B81.  The Tribunal made its decision on 8 June 2018.

CONSIDERATION

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.

2. A liable parent or a carer may apply to the Department for a determination to depart from the child support assessment under Part 6A of the Assessment Act (section 98B). Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

   that one, or more than one, of the grounds for departure referred to in subsection 117(2) exists; and

   (ii)       that 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 under this Part; …

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act. If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations in section 98S of the Assessment Act. That section permits a range of determinations, including varying the annual rate of child support payable or a parent’s adjusted taxable income.

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

1. Mr Dipper sought a departure from the administrative assessment on the ground that the cost of educating [Child 1] and [Child 3] in the manner he and Ms Wane expected significantly affects the cost of the support of the children. Subparagraph 117(2)(b)(ii) of the Assessment Act provides as a ground for departure:

   (b)that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …

   (ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents;

   …       

2. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman v Gyselman [1992] FLC 92-279 the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

3. Mr Dipper submitted that in 2012 Ms Wane signed the enrolment form for [Child 1] to attend [College 1]. Although she stated at that time that she was unable to contribute to the fees, her financial situation has improved and he no longer has savings to draw upon to pay for the entire school fees, which increased when [Child 3] commenced at the school in 2016.

4. The Tribunal is satisfied that both Mr Dipper and Ms Wane expected that [Child 1] and [Child 3] would be educated at [College 1].

5. The Tribunal finds that the school fees, and compulsory resource and service fees for the boys’ attendance at [College 1] were $9,476.60 for [Child 1] and [Child 3] in 2016 and $9,971.70 in 2017.  Included in this amount were fees for excursion levy and laptop expenses totalling $998 in 2017.  The Tribunal is of the view that these expenses should be disregarded as they are met by all parents with school aged children.  The Tribunal calculates that the compulsory fees amount to $8,973.70 in 2017. 

6. The costs of the children used in the statutory formula are determined under the Costs of the Children Table in Schedule 1 to the Assessment Act (the Table). The costs include the usual costs that parents must meet to support their children but do not include the costs of tuition at a private school. The Tribunal is satisfied that [Child 1] and [Child 3] have at least the usual needs of children their age and in addition have costs related to their education at a [private] college, which is being met by Mr Dipper. The Tribunal finds that those costs significantly affect the overall cost of their support and provide special circumstances to depart from the child support assessment. The Tribunal finds that a ground is established to depart from the assessment under subparagraph 117(2)(b)(ii) of the Assessment Act.

Issue two – Would a departure from the administrative assessment be just and equitable?

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 just and equitable to depart from the assessment having regard to the matters set out in subsection 117(4) of the Assessment Act.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. In accordance with the objects set out in section 4 of the Assessment Act, the children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute.

The children’s needs

1. [Child 1] is 16 years old and [Child 3] is 14 years old. Their attendance at [College 1] has been discussed above.

2. [Child 4] attended [a named public] School until 2018 when she commenced at [Private school 1] in Year 5.  Mr Dipper was contributing to the cost of [Child 4’s] education in 2017. School fees, and compulsory resource and service fees for [Child 4] amount to $4,322.40 in 2018.  Mr Dipper stated he believed he signed the paperwork for [Child 4] to attend [Private school 1] but did not realise it was a fee paying school. Ms Wane paid the fees for term one on 31 January 2018 and intends to continue paying the school fees for [Child 4].  The Tribunal is satisfied that [Child 4] has at least the usual needs of a child her age and in addition has costs related to her education at a [private] primary school which is being met by Ms Wane.

3. [Child 2] attends a selective public high school. The cost of [Child 2’s] education is being met by both parents.

4. [Child 3] and [Child 2] are having orthodontic treatment. Ms Wane was contributing to the out-of-pocket expense.  The Tribunal notes Ms Wane included her share of the orthodontic expenses on her Statement of Financial Circumstances form but even so considers she overstated the total cost of out-of-pocket medical expenses for the children.

5. The Tribunal finds that the parents have the usual necessary direct costs as others in their financial circumstances would have for children their age.

The children’s income, property, financial resources and earning capacity

1. The Tribunal has no evidence that the children have any income, property or financial resources or any unused earning capacity of any significance that needs to be taken into account in the child support assessment.

The parents’ duty to support others

1. There is no evidence that Mr Dipper or Ms Wane have a legal duty to support any other person apart from [Child 5].

The income, property, financial resources and earning capacity of Ms Wane

1. Mr Dipper expressed concern that the assessment of child support had been based on Ms Wane’s income of $57,200 in 2012 and that her income has increased in subsequent years. As noted above, at the time Mr Dipper lodged his departure application the administrative assessment of child support was based on Ms Wane’s 2016/17 adjusted taxable income of $140,605. The assessment immediately prior, from 1 March 2017 to 31 July 2017, was based on Ms Wane’s 2015/16 adjusted taxable income of $116,826. The Tribunal considers Ms Wane’s income was properly reflected in the administrative assessment.

2. Ms Wane’s contract of employment was terminated on 5 December 2017 and she was paid one month’s salary in lieu of serving her notice period.  Her notice of termination cites a downturn in revenue as the reason for her termination. Ms Wane provided evidence of her job seeking efforts and she gained employment effective from 9 April 2018 on a salary of $100,000. Ms Wane explained she is employed four days per week as her employer did not have the budget to pay her for five days work per week.

3. The Tribunal considered Ms Wane’s earning capacity having regard to subsection 117(7B) of the Assessment Act. The Tribunal finds that Ms Wane changed her work pattern in December 2017 when her employment was terminated and her subsequent employment is less than full-time. The Tribunal is satisfied that the first criterion of subsection 117(7B) of the Assessment Act is met. As the change to her work pattern was not due to ill health or her caring responsibilities the Tribunal finds that the second criterion of subsection 117(7B) is met. The Tribunal must therefore consider whether the following criterion in paragraph 117(7B)(c) of the Assessment Act is met:

   (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.

4. Ms Wane’s employment was terminated by her employer and the Tribunal is satisfied that this is not a case in which Ms Wane ceased work voluntarily or changed her work pattern to four days per week in order to affect her entitlement to child support. The Tribunal finds that the third criterion of subsection 117(7B) of the Assessment Act is not satisfied. As a consequence the Tribunal is unable to determine that Ms Wane has any unused earning capacity.

5. The Tribunal notes Ms Wane provided an estimate of income of $0 from 8 January 2018. She advised the Tribunal she has updated her estimate when she commenced employment in April 2018.  After the end of the year of income the Department will compare Ms Wane’s estimated income with her actual income for the year.  If her actual income is more that her estimated income, the assessment will be amended using her actual income.

6. In considering whether it is just and equitable to depart from the administrative assessment on the basis that Mr Dipper considers that Ms Wane can now afford to contribute to the boys’ school fees, the Tribunal considers it necessary to consider the parents’ income and financial resources relative to each other.

Ms Wane’s necessary commitments

1. Ms Wane lives in a property and pays $1,068 per fortnight on her mortgage. The balance is approximately $384,000 and the home is valued at approximately $2,300,000.

2. Ms Wane told the Tribunal that she borrowed $40,000 from her parents approximately eight years ago to purchase her home for $1,000,000 however there is no loan agreement and she is not making repayments.  She is utilising the redraw facility on her home loan to assist with her living expenses. 

3. In considering the claimed $3,428 per week household expenses, the Tribunal finds that Ms Wane has overstated some of her expenses on her Statement of Financial Circumstances, including costs such as medical expenses and mortgage repayments.  Her bank statements show a level of discretionary spending on items such as nails and donations.  She received deposits totalling $450 from her mother.

4. The Tribunal is satisfied however that Ms Wane does not have income from any source not already stated.

5. The Tribunal accepts Ms Wane’s evidence that she has drawn on the equity in her house in order to assist with the expenses she has for herself and the children, but does not consider that in this case her family home should be regarded as a financial resource to be borrowed against to meet her child support obligations.  

The income, property, financial resources and earning capacity of Mr Dipper

1. Mr Dipper is employed full time and he advised on his Statement of Financial Circumstances form that his yearly income before tax is $200,000.  On his breakdown of monthly expenses he listed after tax salary of $10,000 per month net of novated lease on his vehicle.

2. It is unclear to the Tribunal why Mr Dipper claims to have only 30% equity in the jointly owned marital home and whether his mortgage repayments represent 30% or 50% of the mortgage, however the Tribunal does not consider that in this case it should be expected that Mr Dipper should borrow against the asset to meet his obligation to provide for the support of the children.

3. There is no evidence Mr Dipper has undisclosed income, property or financial resources.

Mr Dipper’s necessary commitments

1. In response to directions issued after the hearing, Mr Dipper provided a Statement of Financial Circumstances in which he stated he owns a home jointly with his wife.  He stated his 30% share of the property is valued at $720,000 and his share of the mortgage is $700,000. Bank statements show mortgage repayments of $2,000 per fortnight.  Mr Dipper provided copies of bank statements and credit card statements, which show that his savings are consistently less than $5,000.  He stated he pays the boys’ school fees on his credit card which he pays off in full every month.

2. Mr Dipper stated that his savings have dwindled over time, which prompted him to seek a reduction of his child support liability to reflect the payment of the boy’s school fees.  Based on his oral and documentary evidence the Tribunal is satisfied that Mr Dipper is able to meet his reasonable and necessary expenses and pay child support for the children.

Terms and period of departure

1. Mr Dipper asked the Tribunal to decrease the assessed amount of his child support liability to take into account his liability for [Child 1] and [Child 3’s] school fees from 2016 noting that he had been responsible for [Child 1’s] fees since 2014.

2. The Tribunal finds that it would not be just and equitable to make any departure from the assessment prior to 1 August 2017 as Mr Dipper did not object to earlier decisions made by the Department relating to applications to decrease his child support liability on the basis of the costs of the boys’ education.  The Tribunal notes also the disparity in adjusted taxable income between Mr Dipper and Ms Wane with their respective income percentages of 61% and 39% based on their 2016/17 adjusted taxable income.  Further, the Tribunal notes that from 2018 Ms Wane has been responsible for the cost of [Child 4’s] [private] school education. The Tribunal finds that it would not be just and equitable to reduce Mr Dipper’s annual rate of child support from 1 January 2018 given Ms Wane’s commitment to paying for [Child 4’s] school fees.

3. The Tribunal considers that it is just and equitable to depart from the assessment for the period 1 August 2017 to 31 December 2017 and proposes to decrease the annual rate of child support payable by Mr Dipper for this period.

4. The annual cost of [Child 1] and [Child 3’s] compulsory tuition fees at [College 1] is $8,973.70 in 2017.  Based on her income relative to Mr Dipper’s, the Tribunal finds that Ms Wane should be responsible for 39% of the cost and Mr Dipper responsible for 61% of the cost over this five-month period and proposes to vary the annual rate of child support payable by Mr Dipper to $5,757 for this period.

5. The Tribunal is satisfied that this reflects a reasonable level of support for the children in light of their parents’ circumstances.

Hardship

1. Mr Dipper’s arrears of child support ($1,380 in January 2018) will decrease as a result of the proposed decision and Ms Wane may have a small overpayment  depending upon whether Mr Dipper has paid his child support liability in full since February 2018.  However, in light of the findings made about Ms Wane’s income, financial resources and earning capacity the Tribunal considers that the proposed decision will not result in hardship to her or the children.

Issue three – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal to undertake is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:

   (a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b)      the effect that the making of the order would have on:

   (i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

1. The child support law recognises that each parent has a primary duty to maintain their children.  Ms Wane receives family tax benefit and the proposed decision may result in an increase to her entitlement to family tax benefit for a short period.  The Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter and to properly reflect the additional cost of [Child 1] and [Child 3’s] tuition at a [private] college.

DECISION

The Tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying the annual rate of child support payable by Mr Dipper to $5,757 for the period 1 August 2017 to 31 December 2017.