Douglas and Heston (Child support) - [2022] AATA 4995

Douglas and Heston (Child support) [2022] AATA 4995 (24 November 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2022/SC024210
APPLICANT:  Mr Douglas
OTHER PARTIES:  Child Support Registrar
Ms Heston

REVIEW NUMBER:  2022/MC024277
APPLICANT:  Ms Heston
OTHER PARTIES:  Child Support Registrar
Mr Douglas

TRIBUNAL:Senior Member D Benk
DECISION DATE: 24 November 2022
DECISION:

The decision under review is affirmed. This means the application for review is unsuccessful.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision to depart - decision under review affirmed

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

Both parties ask the tribunal to independently review a decision made by the Child Support Agency (the Agency) dated 29 June 2022 which increased Mr Douglas’ child support liability from $446 per annum to $5,666 between 1 March 2022 to 28 February 2023.
The above change was triggered by a change of assessment application lodged by Ms Heston where she asked the Agency to reassess child support on the basis of Mr Douglas’ income, financial resources and earning capacity. In increasing the assessment, the Agency determined Mr Douglas’ inheritance (his partner’s death benefit) (and specifically the portion that he had access to for his own needs) is/was a financial resource and in the special circumstance of the case it is/was just equitable and otherwise proper to depart from the administrative assessment.
The child support assessment concerns one child, [Child 1], (14) who remains in the sole care of Ms Heston.
The matter was heard on 24 November 2022 when both parties participated via conference telephone. Prehearing directions were largely complied with and documents exchanged. In the course of the decision making, the tribunal had regard to the oral evidence, the documentary evidence and the law.

CONSIDERATION

Before making an order for departure from an administrative assessment under section 116 of the Child Support (Assessment Act) 1989 (the Act), subsection 117(1) requires the tribunal to be satisfied that a ground for departure exists under subsection 117(2); that it would be just and equitable as regards the child, the carer parent and the liable parent to make such an order; and that it would be otherwise proper to make the order.
Subsection 117(2) sets out the grounds upon which such an order might be made. Relevantly, paragraph (c) states as follows:
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:
(i)because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property or financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
When making the change of assessment application, Ms Heston asked the tribunal to consider subparagraphs 117(2)(c)(ia) and (ib). That is, to depart from the administrative assessment based on Mr Douglas’ income/financial resources and/or earning capacity as failure to do so would result in an unjust and inequitable determination of the level of financial support provided by Mr Douglas to [Child 1].
The tribunal will deal with the issue of Mr Douglas’ income, property, and financial resources first.
Mr Douglas’ position is simple. He claimed and received a death benefit from his late partner’s estate totalling $106,000. This represented accumulated superannuation and a death benefit paid under his late partner’s superannuation policy. He said that sum must be quarantined as it is for the benefit of those dependent upon the deceased person; that is, he and his son. He reinforced that his liability should return to the administrative assessment which applied an adjusted taxable income of $28,318 producing an annual liability of $446. He reinforced to increase his child support liability using entitlements he secured from his late partner produces the absurd result of his late partner subsidising [Child 1] which cannot possibly be the intent of the law. He maintains the decision to incorporate the death benefit as a financial resource is incorrect at law as it fails to appreciate that the payment is designed to assist grieving families with the loss of income of a family member. (This is not correct. The payment is a reflection of the accumulation of superannuation and any death benefit insurance policy.) It is not an income replacement policy.
Mr Douglas testified since the passing, his lifestyle has significantly been affected. His partner was working prior to her passing and the lump sum obtained is just a drop in the bucket compared to her potential future earnings. Mr Douglas also submitted that the buck stops with him. He has no one to claim child support from. He is alone and financially responsible for the care of his son which will continue indefinitely. He said the decision of the Agency has failed to take into account he is now a sole parent, who has had the rug pulled out from under him. He stated had the estate has been left with debts, Ms Heston would not be liable to contribute to them and yet, any income obtained from his late wife’s investments and sensible decision to secure a death benefit policy, have become a subject of interest by the Agency.
In relation to the use of death benefit funds, Mr Douglas discharged $36,000 in accumulated joint debts and the balance has been used to meet day-to-day needs for his son and himself. There is $6,300 remaining at the date of hearing. The money has not been wasted but rather has been spent wisely on the essentials. It was not, however, invested with the public trustee for his son or quarantined for his son’s future. Rather, it was used to make up the shortfall created by increased living expenses. Some was invested in cryptocurrency.
Mr Douglas might only have an adjusted taxable income of $28,318 per annum, but since receipt of the death benefit/superannuation payout, he has had access to funds of more than $100,000 which is properly assessed as a financial resource for the purposes of a departure application. As noted, $36,000 was applied to existing debt, thereby leaving $70,000 in the custody and control of Mr Douglas. Accepting the argument that both he and his son are beneficiaries, and given that the monies have not been quarantined or invested but rather used to satisfy daily expenses, the tribunal finds it appropriate to split the balance ($70,000) and assign $35,000 as a financial resource to Mr Douglas, which is consistent with his spending pattern in the bank statements before the tribunal. (The pattern of spending by Mr Douglas is much greater than this although the tribunal accepts that some of the spend has been for his sons benefit). Ms Heston maintains that the full sum of the inheritance should be applied; a position entirely understandable but which fails to take into account the discharge of accumulated debts and the requirement to adjust to reduced income following death.
Mr Douglas reinforced that the death benefit should be excluded from any calculation repeatedly stating he ‘does not know why he is here’. The argument is noted and indeed understood however, misunderstands the provisions of subparagraph 117(2)(c)(ia), which clearly states that the financial resources of a parent, as well as that parent’s income, are to be taken into account when assessing child support liability. Certainly, the monies received arose from superannuation/death benefit from his late partner, but on her passing ultimately became the property of Mr Douglas. At that point, the monies became his and were used by him for daily living expenses.
The tribunal finds that the sum utilised by Mr Douglas is a financial resource and constitutes a special circumstance for departure in this case as the addition of this financial resource results in an adjusted taxable income that is almost double that of the original income figure applied in the administrative assessment and has a significant impact on the overall assessment. The tribunal finds subparagraph 117(2)(c)(ia) is established. The tribunal also notes Judge Baker in Archer & Archer (SSAT Appeal) [2013] FCCA 226 upheld a decision of the then SSAT to consider an inheritance of $161,212 as creating a special circumstance. The tribunal appreciates Mr Douglas disputes these monies are an ‘inheritance’. However, they derive from the passing of his partner, and it matters little how they are labelled, as at the end of the day they fall within the category of funds available for his personal use and benefit and therefore are properly classified as a ‘financial resource’.
Ms Heston also asks the tribunal to assess whether Mr Douglas has an unused earning capacity. The tribunal will now determine whether the provisions of subparagraph 117(7B)(2)(c)(ib) are established.
However, in order to find the provisions of subparagraph 117(1)(c)(ib) have been satisfied, the tribunal would need find Mr Douglas is deliberately not exercising his earning capacity in order to reduce his child support liability.
Subsection 117(7B) of the Act states as follows:
(7B) 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 there being an 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 occupied or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or work 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 that 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.
Without doubt, Mr Douglas can work. He had in the past obtained work as a [Occupation 1] within school hours but lost that job on account of COVID-19. He continues to seek work within school hours as there is no child care or outside of school hours care in his regional location. There is no medical evidence certifying incapacity before the tribunal. At hearing, Mr Douglas said he does have medical conditions but declined to discuss them expressing concern Ms Heston may use any evidence against him in other proceedings. He has expressed a desire to work and remains in receipt of jobseeker which makes mandatory a commitment to job seeking. On the basis of the evidence before the tribunal, the tribunal finds Mr Douglas has not abandoned gainful employment for the major purpose of affecting his child support assessment, but rather because of the caring needs for his son given the passing of his partner. Therefore, the tribunal concludes Mr Douglas’ earning capacity does not satisfy the requirements of subparagraph 117(2)(c)(ib) as a ground for departing from the administrative assessment.
As the requirements of subparagraph 117(2)(c)(ia) have been satisfied, there are grounds to depart from administrative assessment. However, such departure is not automatic. The tribunal must now assess whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to depart from the administrative assessment.
When assessing whether it is just and equitable to depart from the administrative assessment, subsection 117(4) of the Act requires the consideration of the following;
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the party has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or any other person that the liable parent has a duty to support;
by the making of, or refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or refusal to make, the order;
Having considered all of those factors the tribunal finds on the basis of the evidence before it;
(a)Mr Douglas, being [Child 1]’s father, has a duty to maintain [Child 1].[1] That duty is not of lower priority than his need to maintain himself or any other child;
(b)[Child 1]’s proper needs, being accommodation, clothing, health, education and lifestyle are on par with the needs of other children in her age group (costs of children table), and require the support of both her parents;
(c)[Child 1], being only 14 years old, has no income, earning capacity, property or financial resources that would assist in making provision for her proper needs;
(d)The tribunal has already assessed Mr Douglas has financial resources that are higher than those applied in the administrative assessment of child support.   The tribunal is satisfied that Ms Heston has no additional income apart from that reflected in the administrative assessment. Both parties are in the rental market and have few assets.   Ms Heston does have some savings.
(da)The tribunal has already made an assessment of Mr Douglas’ earning capacity. The tribunal is satisfied that Ms Heston has exhausted her earning capacity.
(e)In addition to his obligation to maintain [Child 1], Mr Douglas has a duty to maintain himself, and his son currently aged 10.   Mr Douglas does have medical conditions which are subject to ongoing treatment and medical expenses are largely met by the public purse. His financial circumstances are such that those duties do not significantly affect his ability to pay child support for [Child 1] given the findings discussed above. Ms Heston suggested that Mr Douglas was partnered but he flatly said he was ‘single’ and is therefore responsible for the lion’s share of expenses. Ms Heston confirmed she is not required to support anyone else apart from herself and [Child 1]. She does have medical conditions but these are largely funded by the public purse.
(f)Ms Heston’s oral and documentary evidence confirmed she supports herself and [Child 1] who is in her sole care. She remains in receipt of Centrelink benefits and has some casual employment which is impeded by medical conditions. She has accumulated savings over 20 years which is her safety net. Mr Douglas does not incur any costs either direct/indirect for contact with [Child 1] as she remains in the sole care of Ms Heston.
(g)Mr Douglas stated that any change to the administrative assessment would cause hardship. The reassessed amount by the Agency taking into account his ‘financial resources’ equates to approximately 16 weeks in rent. He only has $6,300 left.   The tribunal acknowledges this but cannot ignore Mr Douglas was put on notice about the possibility of an increased child support liability over 8 months ago yet continued to engage in discretionary spending. Mr Douglas submitted that there would be no hardship to Ms Heston or [Child 1] as ‘you cant miss what you don’t have’, however the hardship exists by virtue that [Child 1] is not receiving the level of support that other children in similar circumstances would receive. It also sees [Child 1] treated differently to Mr Douglas’ son which is not the intention of the child support law as all children are given equal priority. The tribunal finds that Mr Douglas cannot demonstrate hardship in such circumstances.   There was no hardship demonstrated to the resident child of Mr Douglas who fortunately is in good health and has the safety net of welfare benefits.
[1] Section 3 of the Act refers
Global assessment of the above criteria results in the tribunal finding it would be just and equitable to depart from the administrative assessment. In departing the from the administrative formula, the Agency assessed an adjusted taxable income of $56,000. The tribunal’s calculation is slightly higher than this (when combining the base line adjusted taxable income and the portion of financial resources available and utilised by Mr Douglas), however the tribunal will not disturb the decision of the Agency, noting that it is not required to undertake a forensic analysis of the spending to Mr Douglas’ benefit or his son’s benefit. Applying an adjusted taxable income of $56,000 results in a rate of child support of $5,666 annually. It is noted this sum represents less than 5% of the overall inheritance or death benefit.
The last issue to be considered is whether it is otherwise proper to depart from the administrative assessment. When doing so, subsection 117(5) sets out what the tribunal must have regard to when deciding whether it would be otherwise proper to make a particular order. Subsection 117(5) states:
In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of the 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 any 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 eth child or the carer entitled to child support.
Again, both Mr Douglas and Ms Heston have the primary duty to support [Child 1]. This departure will now reflect that duty and reduce the impact on the public purse by way of any Centrelink entitlement. The tribunal therefore finds that it is ‘otherwise proper’ to depart from the administrative assessment.

Conclusion

Section 4 of the Act sets out the objectives of the Act. These objectives include:
·      Parents of a child have a primary duty to maintain that child;
·      That duty has a priority over all commitments of the parent other than commitments necessary for self-support;
·      The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and
·      The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.

The tribunal has found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper to make a departure determination.
The tribunal finds that the adjusted taxable income for Ms Heston is correctly assessed with reference to her taxation returns as there is no evidence of other income.
The tribunal has also found that Mr Douglas’ adjusted taxable income is appropriately set at $56,000 with effect from 1 March 2022 and ceasing one year beyond that date on 28 February 2023.
For the reasons above, the tribunal affirms the decision under review.

DECISION

The decision under review is affirmed. This means the application for review is unsuccessful.