Doran and Windle (Child support)

[2022] AATA 1166

Doran and Windle (Child support) [2022] AATA 1166 (10 March 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC021865

APPLICANT:  Mr Doran

OTHER PARTIES:  Child Support Registrar

Ms Windle

TRIBUNAL:Member S Letch

DECISION DATE:  10 March 2022

DECISION:

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

(a)For the period 5 March 2021 to 31 December 2023, Mr Doran’s adjusted taxable income is varied to $60,000;

(b)For the period 1 January 2021 to 31 January 2022, Mr Doran’s annual rate of child support liability is increased by $2,195 (child care costs);

(c)For the period 1 January 2021 to 31 December 2023, Mr Doran’s annual rate of child support liability is increased by $300 (medical costs);

(d)For the period 1 January 2021 to 31 December 2022, Mr Doran’s annual rate of child support liability is increased by $500 (to give effect to the $500 payment made by Ms Windle on Mr Doran’s behalf to meet arrears of child care fees referable to late 2020).

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent - benefits derived from business – cost of child care – medical costs – 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 Doran and Ms Windle are the parents of [Child 1], born 2016. Mr Doran has been assessed by the Child Support Agency (CSA) as liable to pay child support to Ms Windle. Mr Doran seeks a review of an objection decision by the CSA which allowed “in part” his objection to a “change of assessment” decision made on 15 April 2021. 

2. By way of background, it is convenient to set out some extracts from the objections officer’s decision dated 30 June 2021:

   For the period 1 October 2020 to 31 December 2021, Ms Windle is assessed to pay Mr Doran $837 per annum. This assessment is based on Mr Doran s 2019/2020 Adjusted Taxable Income (ATI) of $33,153 and Ms Windle s 2019/2020 ATI of$68,591.

   The case was registered on 1 Februa1y 2018.

   This is the first Change of Assessment determination.

   …

   DECISION UNDER REVIEW

   On 5 March 2021, Ms Windle applied for a change to the assessment on the basis of Reason 6 and Reason 8A in relation to Mr Doran`s income and financial resources.

   Ms Windle also applied under Reason 5, however when discussing her application with [Member], her claim was withdrawn.

   Included in Mr Doran`s response, was an unsigned application for special circumstances for Reasons 8A and 8B, whereby he sought a change from 23 August 2017. However, the application was not complete, [Member] consider his concerns under Just & Equitable.

   On 15 April 2021, [Member] found both Reasons established and made the following change:

   -For the period 5 March 2021 to 31 December 2022, Mr Doran`s adjusted taxable income is set at $56,000.

   -For the period 5 March 2021 to 31 January 2022, the annual rate payable by Mr Doran is increased by an amount of $2,542 for [Child 1]`s childcare.

   …

   Assuming [Child 1] continues to attend child care ten days per fortnight, I calculate Ms Windle`s costs will total $5,353 rounded ($205.90 / 2 x 52). Ms Windle`s costs exceed the threshold ($4,294). The second threshold is met.

   In relation to the third threshold, under the current child support formula, it calculates it costs $8,357 to raise [Child 1]. Ms Windle`s costs represent approximately 59% of the costs of children, therefore I am satisfied Ms Windle`s childcare costs significantly affect her ability to maintain [Child 1] overall.

   Based on the above information I am satisfied special circumstances exist. I find [Child 1] is younger than 12 years of age at the start of the child support period. I am also satisfied Ms Windle has reasonable and necessary child care costs that total more than 5% of her adjusted taxable income.

   Additionally I am satisfied these high childcare costs significantly affect the costs of maintaining [Child 1] when compared to the assessed costs under the child support assessment.

   Reason 6 is established.

   …

   Therefore, based on the above financials, I calculate a possible ATI (excluding personal benefits) for Mr Doran as follows:

   $42,474.00 Wages

   $26,932.50 Profit

   $69,406.50

   As the above calculations are based on projected figures, I have also reviewed Mr Doran's bank statements to make a comparison and note, for the period 1 March 2021 to 1 June 2021, Mr Doran received a total of $10,250 from his business. When annualised, the credits equate to $40,228.

   As the projections are vastly different when compared to the bank statements, I will base my calculations on the credits into Mr Doran's bank account, as I am satisfied this reflects what is actually occurring. To this figure, I will add an amount of $2,500 ($50 per week), which represents the personal benefit Mr Doran derives from his ability to claim his motor vehicle through the Trust.

   I will also add the increased rent expense of$5,l 75, as I believe the 33% increase is excessive, particularly when the landlord is Mr Doran's parents. I am also of the opinion that the funds would be available to Mr Doran as a distributions of profits, had the increase not have occurred. I do not intend to make any further additions for profit as the Trust's overall financial position is not known and it is possible that the increased wages may reduce the 2020/2021 Trust distribution.

   I therefore calculate an ATI as follows:

   $40,228 Credits into bank account

   $ 2,500 Motor Vehicle

   $ 5,175 Rent increase

   $47,903

   When an A TI of $47,903 is substih1ted in the assessment for Mr Doran, the roles reverse, with Mr Doran becoming the parent liable to pay an annual rate of child support of $969. I find the change significant and I am satisfied Mr Doran's additional financial resources render the assessment unfair.

   In relation to Ms Windle:

   Ms Windle's assessment is currently based on her 2019/2020 ATI of $68,591, which comprises of total income of$73,598 and deductions of $5,007. There is no info1mation before me to suggest her financial resources are higher or lower than this figure and as she is a PA YG employee, I am satisfied her future tax lodgements will reflect her income adequately. I therefore find Ms Windle fairly assessed on her A Tl.

   Reason 8A is established in relation to Mr Doran.

   …

   Ms Windle is assessed on an ATI of $68,591. Applying my findings under Reason 8A, Mr Doran is assessed on an ATI of at $47,903. This brings the parents combined income to $116,494. Mr

   Doran`s revised income represents approximately 41% of this figure, therefore I find it fair for Mr

   Doran to contribute a 41% share of [Child 1]`s childcare costs. This equates to $2,195 ($5,353 x 41%) per annum.

   Another factor that must be consider is whether hardship would be caused to a parent of child when considering making a change.

   In Mr Doran`s initial response, he declared annual expenses of $47,232, which included personal loans of $2,600 per annum, personal expenses of $2,600 and medical insurance/bills of $5,200 ($10,400). In his objection, Mr Doran`s annualised expenses were declared at $28,390.12.

   Utilising his revised figures, I find Mr Doran is left with $19,512.88.

   With regard to Mr Doran’s statement that his loans are increasing, I note the loans are to his parents and there is no evidence before me to support that regular payments are being made. I therefore do not find this decision will cause hardship to Mr Doran.

   In terms of a commencement date, Ms Windle`s application was received on 5 March 2021. As there have been no special circumstances presented to warrant backdating a decision, I will apply my findings from this date. I will continue my determination in relation to Reason 6, until the 31 January 2022, as [Child 1] will be of an age where he can commence primary school.

   With regarding to Reason 8A, I will continue my findings until 31 October 2022 as I am satisfied that future tax lodgements will not reflect all of the financial resources available to Mr Doran.

   I am satisfied it is fair to make the following changes:

   For the period 5 March 2021 to 31 January 2022, the annual rate payable by Mr Doran will be increased by $2,195 to reflect Mr Doran`s contribution to [Child 1]`s childcare.

   For the period 5 March 2020 to 31 October 2022, Mr Doran`s Adjusted Taxable Income will be set at $47,902 per annum.

   At this point, I am required to compare my decision against the decision made by [Member] on 15 April 2021. Although we have both found Reason 6 and Reason 8A established, our findings and determined effects on the assessment differ. As this is a full merit review, [Member]`s decision is set aside and replaced with the decision as noted above. …

   DECISION

   I have found special circumstances exist in this case and that it would be just and equitable and otherwise proper to make a change. The change to be made to the assessment is:

   For the period 5 March 2021 to 31 January 2022, the annual rate payable by Mr Doran will be increased by $2,195 to reflect Mr Doran's contribution to [Child 1]'s childcare.

   For the period 5 March 2020 to 31 October 2022, Mr Doran's Adjusted Taxable Income will be set at $47,903 per annum.

   The objection is part allowed.

3. The Tribunal observes that it appeared the objections officer incorrectly identified the date from which Mr Doran’s adjusted taxable income was to be varied as 5 March 2020; it is clear when regard is had to reasons given that the officer had determined the date to be 5 March 2021 (not 5 March 2020).

4. Mr Doran and Ms Windle participated in the Tribunal’s hearing by conference telephone. Both gave sworn evidence. In making its decision, the Tribunal took into account the CSA materials, and additional materials submitted by both parties.

CONSIDERATION

The legislative framework

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 Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·     a departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)). 

3. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to by the CSA as reasons 8A and 8B, provide as grounds for departure:

   (c)that, 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; or

   (ib)  because of the earning capacity of either parent

10.The matters which must be taken into account when assessing a person’s earning capacity are contained in subsection 117(7B) of the Act, which provides the following:

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.

11.The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

12.In short, Mr Doran raises no particular quarrel with making a contribution toward [Child 1]’s child care costs; rather, he says that his financial capacity is best reflected by his actual taxable income. He contends that assessing his income as some $47,000 is not reflective of his financial capacity, which he says is more in the order of the wage he is paid of around $37,000. He said his banking records confirm it is only his wage that he is drawing from the business, and that “legally” he does not see how the profit from the business can be attributed to him. He indicated the profit is “rolled into the business”. Mr Doran said that the motor vehicle [Vehicle 1]is mostly used for business; he occasionally uses it to go to the gym. He estimated he would use the motor vehicle about 10% of the time for personal reasons. Mr Doran did not know why the “subscriptions” expense in the 2020/21 profit and loss statement for the Doran Family Trust of some $14,000 had increased so significantly, and thought that might have related to a “MYOB” subscription, which he thought appeared very high. Mr Doran disputed the suggestion by the CSA that as he paid rent to his parents’ business, the rent amount was in some way illegitimate. Mr Doran said that his parents’ “superannuation” owns the building and that he is liable, and pays, rent for one office and access to a kitchen and toilet of $300 per week. He said no “rent money” is being returned to him.

13.Ms Windle told the Tribunal she has regularly seen Mr Doran driving around town (including transporting [Child 1]) in a brand new, [Vehicle 2]. Mr Doran confirmed that the vehicle claimed by the business is a [Vehicle 1]. Mr Doran initially suggested he could not drive a [Vehicle 1] and a [Vehicle 2] simultaneously; upon further questioning, Mr Doran did not deny that he was driving a [Vehicle 2] – however, he denied any ownership of the vehicle and said he “does not personally own a [Vehicle 2]”.

14.Ms Windle told the Tribunal she wants Mr Doran to make a further contribution to child care fees prior to March 2021. In addition to meeting all those costs from 1 January 2021, as Mr Doran stopped paying child care fees around late 2020, Ms Windle was forced to pay an additional sum of $500 to the child care operator to cover Mr Doran’s “shortfall”. Whilst Mr Doran conceded he had stopped paying child care fees as he was “struggling financially”, without further evidence, he indicated he did not accept Ms Windle’s claim at face value.

15.Since the beginning of 2021, Ms Windle identified several specialist appointments which she says leaves her “out of pocket” around $200 or more (on average) per consultation. Ms Windle said that NDIS “does not cover everything”. [Child 1] suffers [medical] issues. Mr Doran indicated he was willing to assist with medical costs; however, he said Ms Windle has not consulted with him. Ms Windle denied she had not consulted Mr Doran.

16.Ms Windle told the Tribunal she is doing the same work with a new contract earning around $73,000 per annum. She pays for after-school care for [Child 1] and is “out-of-pocket” around $40 to $50 per week. She is incurring legal costs for ongoing family law matters. She did not identify any other particularly unusual or uncommon expenses. Mr Doran did not identify any unusual expenses for himself or [Child 1].

17.At the time of Ms Windle’s application for a change of assessment, Mr Doran’s adjusted taxable income was assessed as $33,153 (his 2019/20 adjusted taxable income). The Tribunal considers that when proper regard is had to the profit of Mr Doran’s business in addition to his wage income and personal benefits obtained through the business structure such as motor vehicle use, his financial means are materially higher than the assessed sum. This renders the child support assessment unfair; in the special circumstances of the case, there is a ground to depart from the administrative formula. 

Issue 2 – Is it just and equitable to depart from the administrative assessment?

18.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

19.The Tribunal observes that section 2A of the Administrative Appeals Tribunal Act 1975 requires the Tribunal to be fair, just, economical, informal and quick. The Tribunal is not placed in a position in this application to undertake a forensic accounting exercise.

20.The Tribunal found Mr Doran’s evidence evasive at times; he was less than forthcoming when it came to his use of a [Vehicle 2] motor vehicle for which he denies any ownership interest. The Tribunal accepted Ms Windle’s evidence that she has routinely seen Mr Doran driving said vehicle.

21.In the Tribunal’s assessment, the best evidence of Mr Doran’s financial capacity is distilled from the 2020/21 financial statements of the Doran Family Trust. Mr Doran was paid a wage of $37,983.57. The profit for the 2020/21 financial year amounted to $18,275.17; the profit of the business controlled by Mr Doran should be assessed in the usual way and the profit should be regarded as a financial resource available to him for child support purposes.  Mr Doran was not able to explain the steep increase in “subscriptions” (from $3,258 to some $14,000 in 2020/21); on the evidence available to it, the Tribunal has no reason to doubt the validity of that expense as an “out-of-pocket” cost. Similarly, the Tribunal has no reason to doubt the legitimacy of the rental expense.  Accounting for likely personal benefits obtained by Mr Doran through the operation of the business, an overall assessment of Mr Doran’s adjusted taxable income at a figure of $60,000 would likely be a conservative and fair approach in determining Mr Doran’s financial capacity for child support purposes.  It would be just and equitable to apply that increase from 5 March 2021 when Ms Windle made her application for a change of assessment. In the interests of providing some certainty for the parents to make plans around, the Tribunal considers it appropriate for Mr Doran’s adjusted taxable income to be assessed at that sum until the end of 2023.

22.The Tribunal accepted Ms Windle’s evidence of $500 owing immediately prior to 1 January 2021. No particular issue was raised by the parties in the arithmetic applied by the CSA. The CSA increased Mr Doran’s annual rate from 5 March 2021; the Tribunal is satisfied that Ms Windle had incurred that expense from 1 January 2021, and that she had made a further contribution of $500 in respect of amounts unpaid by Mr Doran. In the circumstances, the Tribunal considers it just and equitable to require an additional contribution from Mr Doran from 1 January 2021, in addition to an extra contribution of $500 for the unpaid sum referable to a period in 2020 which was met by Ms Windle. The current costs being met by Ms Windle for [Child 1]’s after-school care of some $40 to $50 per week are less than the 5% threshold and do not warrant an adjustment being made.

23.The Tribunal finds Ms Windle is incurring “out of pocket” medical costs for [Child 1]. It is difficult to assess the quantum of such costs going forward as that will depend on [Child 1]’s needs. The evidence suggests Ms Windle has been “out of pocket” in the order of up to $600 a year (two to three specialist appointments per annum). It would be just and equitable to add an annual amount of $300 per annum to Mr Doran’s liability from 1 January 2021 (the same date from which the Tribunal has decided to increase Mr Doran’s liability in respect of child care costs) and until 31 December 2023; in the event those costs escalate, Ms Windle would be at liberty to approach the CSA for further consideration of necessary medical expenses.

24.The Tribunal considers no adjustment is required for Ms Windle’s income which has been adequately reflected under the child support formula arrangements. Neither party raised any particularly unusual expenses for themselves, or [Child 1] (aside from child care expenses and medical expenses) which would require any further adjustment to Mr Doran’s liability for the purposes of this review. The Tribunal is satisfied that, with careful budgeting, Mr Doran can meet his child support liability.

25.The Tribunal therefore considers it just and equitable to set aside the objection decision and substitute a decision in the terms set out above.

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

26.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.

27.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

28.As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be set aside.

DECISION

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

(a)For the period 5 March 2021 to 31 December 2023, Mr Doran’s adjusted taxable income is varied to $60,000;

(b)For the period 1 January 2021 to 31 January 2022, Mr Doran’s annual rate of child support liability is increased by $2,195 (child care costs);

(c)For the period 1 January 2021 to 31 December 2023, Mr Doran’s annual rate of child support liability is increased by $300 (medical costs);

(d)For the period 1 January 2021 to 31 December 2022, Mr Doran’s annual rate of child support liability is increased by $500 (to give effect to the $500 payment made by Ms Windle on Mr Doran’s behalf to meet arrears of child care fees referable to late 2020).