Dungey and Charman (Child support)

[2021] AATA 4233

Dungey and Charman (Child support) [2021] AATA 4233 (7 September 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC021434

APPLICANT:  Mr Dungey

OTHER PARTIES:  Child Support Registrar

Ms Charman

TRIBUNAL:Member T Bubutievski

DECISION DATE:  07 September 2021

DECISION:

The Tribunal varies the decision under review, such that:

·   For the period 1 January 2020 to 30 June 2020 Ms Charman’s adjusted taxable income is increased by $3,500;

·   For the period 1 July 2020 to 31 December 2020 Ms Charman’s adjusted taxable income is set at $167,500;

·   For the period 1 January 2021 to 31 April 2021 Ms Charman’s adjusted taxable income is set at $170,500;

·   For the period 1 May 2021 to 31 December 2021 Ms Charman’s adjusted taxable income is set at $188,500; and

·   From 1 January 2022 until such time as a terminating event occurs, Ms Charman’s adjusted taxable income is increased by $6,500 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – ground for departure established – financial resources of the carer entitled to receive – just and equitable to depart – decision under review varied

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

1. Mr Dungey and Ms Charman are the parents of a daughter, aged 14. The case was registered with Services Australia (Child Support) (the Agency) for collection from 27 April 2012. Mr Dungey is the parent assessed to pay child support.

2. A previous decision of this Tribunal (differently constituted), made on 28 July 2016 set Mr Dungey’s adjusted taxable income for child support purposes at $200,000 from 1 October 2015 until the end of the case. There were no other changes made to the administrative assessment of child support. On 21 September 2020 Ms Charman made an application to change the child support assessment on the basis that the costs of educating their daughter in the manner expected by her parents significantly increase the costs of her maintenance (Reason 3). At that time the annual rate of child support payable by Mr Dungey was $7,795 based on his income as set by the Tribunal of $200,000 and Ms Charman’s 2019 adjusted taxable income of $158,427. This assessment also reflected that at that time the care of their daughter was shared between Mr Dungey and Ms Charman on the basis that Mr Dungey had 30% care and Ms Charman had 70% care.

3. On 18 November 2020 an Agency delegate of the Child Support Registrar found Reason 3 established in the application. The delegate noted that a mutual intention that the child be privately educated had been established, and there were current court orders to that effect.  The delegate decided to increase the annual rate of child support payable by Mr Dungey for an amount equivalent to half the out-of-pocket cost for their daughter’s tuition fees. The decision was that:

   ·     The annual rate of child support Mr Dungey is assessed to pay is increased by $4,976 per annum from 1 October 2020 to 31 December 2020.

   ·     The annual rate of child support Mr Dungey is assessed to pay is increased by $4,695 from 1 January 2021 to 31 December 2021.

   ·     The annual rate of child support Mr Dungey is assessed to pay is increased by $5,161 from 1 January 2022 to 31 December 2022.

   ·     The annual rate of child support Mr Dungey is assessed to pay is increased by $5,509 from 1 January 2023 to 31 December 2023.

   ·     The annual rate of child support Mr Dungey is assessed to pay is increased by $5,785 from 1 January 2024 to 31 December 2024.

4. Mr Dungey objected to this decision and on 16 April 2021 the decision was reconsidered by an Agency objections officer, who also found Reason 3 established. The objections officer also decided that Reason 8A was established in relation to Ms Charman’s income, on the basis that she had access to a company car for private use.  The objections officer did not change any of the decision as it related to the increases for school fees but did increase Ms Charman’s adjusted taxable income by $3,500 per annum from 1 January 2021 until the end of the case.

5. The Tribunal held a telephone directions hearing on 3 August 2021 and issued directions, with which the parties complied. The matter was heard by the Tribunal in Sydney on 7 September 2021. Mr Dungey and Ms Charman both attended the hearing by telephone and gave sworn evidence. The Child Support Registrar did not seek leave to appear. Both parties and the Tribunal had access to documents numbered 1 to 673 from the Agency, and after all submissions were received, documents A1 to A43 and B1 to B30 from the parties.

6. This case has a long history. Mr Dungey argued that the decision to set his income at $200,000 per annum was influenced by misleading information provided to the Agency and the Tribunal by Ms Charman. He has made a complaint to the Agency about the use of this information. At the directions hearing, the Tribunal explained to Mr Dungey that it does not have jurisdiction to review its own decisions. This means that it cannot review the decision to set his income at $200,000 per annum until the end of the case. He has previously agitated this issue before the Tribunal, with his application being dismissed on 4 July 2017. The Tribunal explained to Mr Dungey that he would need to seek to have the decision to set his income reviewed by a court with a family law jurisdiction, which Mr Dungey acknowledged that he already understood. At the substantive hearing Mr Dungey advised that he would be seeking an extension of time from the court to lodge an application for that issue to be reconsidered. 

ISSUES

1. The rate of child support payable by the 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, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. 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. In order to depart from the administrative assessment the Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

   (i) 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.

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 Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

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

Does a ground exist to depart from the administrative assessment under Reason 3?

1. Ms Charman sought a departure from the administrative assessment on the ground that the cost of maintaining their daughter is significantly affected by the cost of educating her in the manner that was expected by her and Mr Dungey. This is the ground reflected in subparagraph 117(2)(b)(ii) of the Assessment Act.

2. Their daughter attends [School 1], a private Catholic school. Mr Dungey acknowledged that he had signed the enrolment form for her to attend this school. This appears in the Agency’s documents and is dated 19 October 2015. Mr Dungey said that when he and Ms Charman were together they agreed that their daughter would attend [School 2], which he described as an “even more prestigious school” than [School 1]. He said that at that time they were both earning good money, but since then his financial and personal circumstances have changed. He said that private education is no longer affordable for him, and that he now has two other children who will not be afforded that opportunity.

3. Ms Charman advised that Mr Dungey agreed for their daughter to attend [School 1] during parenting negotiations in 2017. Subsequent court orders of 23 October 2019 provided to the Agency say that the child is to attend [School 1] unless alternative arrangements are agreed upon by the parents in writing. Ms Charman said that their daughter’s attendance at that school is court ordered.

4. Mr Dungey said that he did initially consent to their daughter attending [School 1], but that he withdrew that consent in 2018. Mr Dungey said that their daughter lived with him for a period of time in 2018 and at that time she was enrolled in [Town] primary school, a public school. Prior to moving to stay with him she had also been attending a public primary school. She returned to living with Ms Charman after this time and commenced attending [School 1] in 2019.

5. The Tribunal noted that a previous change of assessment decision of 29 October 2019 found that Reason 3 was not established. This was not because a mutual intention was not found, but because Mr Dungey was being billed for his half of the school fees. Mr Dungey said that he could not recall ever having paid half of the school fees.

6. Ms Charman said that Mr Dungey did not advise her that he had withdrawn consent for their daughter to attend [School 1]. She was notified of this by the school. She said that the school also informed her that it would attempt to recover unpaid school fees from Mr Dungey. Ms Charman said that in October 2020 she was advised that the school had been unable to do so and that she would be 100% responsible for the payment of the school fees.

7. Ms Charman provided the Tribunal with fee statements for 2020 and 2021, showing that in 2020 the fees were $2,163.75 per term ($8,655 per annum). For 2021 they are $2,585 per term ($10,340 per annum). The tuition component of these fees is $9,390.

8. For a reason to change the child support assessment to be established on the basis of private school fees it is first necessary to find that the children are being educated in the manner expected by the parents, and that there was a mutual intention by the parents that this education occur. A mutual intention is a positive choice and decision. It is more than simply not disagreeing or having a preference. In this case, there was clearly a mutual intention both while the parents were together and at the time that the enrolment forms were completed in October 2015 that their daughter be privately educated. Mr Dungey argues that by 2018 there was no longer a mutual intention due to his changed financial circumstances. While Mr Dungey may consider that he withdrew his consent in 2018, this was overtaken by the court order of 23 October 2019 which specifies that their daughter is to attend a particular private school. While the court does not specify how the costs of this education are to be shared between the parents, it is the usual case that the costs are shared equally between the parents when the court is silent on this issue. While Mr Dungey may be of the view that he cannot afford the expense of this education, the court order stands.

9. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 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. The Tribunal is satisfied that the expense of a private education is a special circumstance which renders the assessment unfair to Ms Charman and the child. The Tribunal finds this ground established.

10. As a ground is established, the Tribunal must also consider whether it is just and equitable, and otherwise proper, to change the assessment. This involves a consideration of all the circumstances of the parents and the children. This will cover the issues in relation to Ms Charman’s financial circumstances raised by Mr Dungey under Reason 8A.

Issue 2 – Would departure from the administrative assessment be just and equitable?

1. As the Tribunal is satisfied that a ground has been established 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. In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Assessment Act:

   (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)the 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 person 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 the refusal to make, the order; and

   (ii)to:

   (A)the liable parent; or

   (B)any other child or another person that the liable parent   has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The Tribunal only has to consider the factors set out in subsection 117(4) of the Assessment Act to the extent they are relevant in any particular case (see Gyselman).

3. Mr Dungey is in receipt of a number of pension payments. He provided copies of income summaries for the 2021 financial year showing three income amounts of $69,800.90; $11,649.20; and $20,808. Mr Dungey argues that he does not have the capacity to pay the child support as assessed. This argument brings forward the decision to set his income for child support purposes at $200,000 per annum until the end of the case, which is not reviewable here. That decision was made using the combination of a lump sum compensation payment received by Mr Dungey and his pension payments at that time of approximately $80,000 per annum. He was not, at the time the decision was made, earning $200,000 per annum and there is no dispute that he is unlikely to earn that much in the future. In considering Mr Dungey’s capacity to pay child support the Tribunal must accept that he has a capacity consistent with financial resources of $200,000 per annum.

4. Mr Dungey also argued that the binding financial agreement executed between himself and Ms Charman on 15 June 2012 finalised all the matters between them and she has no right to request additional child support. The Tribunal noted that that agreement finalised all matters between the parties in relation to their settlement of property and spousal maintenance, but that it does not affect the rights of either party or the child in relation to child support. Mr Dungey acknowledged that he had been given that legal advice previously. He thought that it still remained relevant that Ms Charman had allegedly claimed not to know that he was to receive compensation although the fact that he had a compensation claim on foot was referred to in that agreement. The Tribunal does not find this to be a relevant consideration in the current matter.

5. Mr Dungey has all the usual expenses to be expected in the support of himself and his family. His wife works. There was some dispute between the parties in relation to his wife’s income, but the Tribunal accepts that she does not have a capacity to make a large contribution to the household expenses. In addition to the mortgage on his home Mr Dungey has a mortgage on an investment property and said that he is finding it extremely difficult to meet all the repayments and pay child support. That is likely to be the case. Under the law, these sorts of financial conflicts must be resolved in favour of providing for the current needs of children in preference to securing other assets.

6. Ms Charman also has the usual expenses to be expected in the support of herself and the child. In addition, she is bearing the cost of private school fees. The Tribunal noted that the objections officer has calculated that Mr Dungey’s share of those fees for 2020 were $4,496 per annum, and this appears relatively accurate. The Tribunal could not see that this required any significant amendment. Only the tuition fees component of private school fees can be considered for child support purposes, even though the school may impose other fees. Their daughter is currently in Year 9. The [School 1] website shows that tuition fees for Year 9 in 2021 are $9,390. These fees have also been correctly reflected in the objection decision. There is an increase in fees between Year 9 and Year 10. Tuition fees for Year 10 for 2021 are $9,830. The objections officer applied an inflation factor of 5% in respect of the tuition fees to determine the likely expenses in future years. The Tribunal can find no fault with this reasoning and would have come to the same decision. The increase to the annual rate of child support payable by Mr Dungey made by the Agency does not require any amendment.

7. The Tribunal then turned to the issue of Ms Charman’s income and financial resources. Ms Charman’s 2020/2021 income statement shows gross payments of $169,194.33. Her current payslips show monthly gross income of $15,455.20 ($185,462.40 per annum). The Tribunal noted that Ms Charman’s payslips show a higher duties allowance of $1,405.02 per month. Ms Charman confirmed that she has been receiving this since May 2021. It is due to continue until December 2021 as she is filling a maternity leave position. Allowing for this, her normal rate of pay up until May 2021 would have been $166,384. If reasonable taxation deductions are considered, a rate of income of $164,000 could be maintained for Ms Charman for the period 1 July 2020 to 30 April 2021.

8. Ms Charman also confirmed that she has a company vehicle of which she has private use. She said that prior to January 2021 the vehicle policy of her employer (which has previously been provided to the Agency) allowed for reasonable personal use, but that since January 2021 she has had full personal use of the vehicle. She has had this vehicle for two years and does not need to maintain another vehicle.

9. Ms Charman also has a mobile phone provided by her employer, of which she has limited personal use. She also has her own private mobile phone. Ms Charman confirmed that she also has a corporate credit card, but this is strictly for business use. Mr Dungey disputed this, but the Tribunal was of the view that Ms Charman’s evidence is more consistent with normal business practice. Ms Charman is not self-employed. Mr Dungey has alleged that Ms Charman also receives bonuses in the course of her employment. He explained that when she represented her employer in court and saved them money on [claims] she was paid a percentage of the saving as a bonus. Ms Charman said that this was the situation for a previous position she held, but that she has not been in that position for at least three years and there are no bonuses payable to her in her current role. Mr Dungey said that Ms Charman may receive bonuses other than in cash. Ms Charman denied this was the case. She said that any bonuses would show up on her income summary, but that she was not entitled to any. She acknowledged that her income does increase from year to year, usually only in line with CPI.

1. Ms Charman’s 2019 adjusted taxable income was $158,427. For 2020 it was $159,951, a marginal increase only, which would be reflected in the ordinary course of the administrative assessment and for which no further allowance would be made in the assessment. For the 2021 financial year, however, there has been a larger increase. Her current rate of income is much higher again, until at least December 2021. The Tribunal calculated the annual rate of child support payable by Mr Dungey if these higher incomes were reflected in the assessment and was satisfied that they would reduce the annual rate of child support payable by him by several hundred dollars, and that it would be correct to reflect these incomes in the assessment for the relevant periods. The Tribunal was satisfied that Ms Charman’s income of $164,000 should be reflected in the assessment for the period 1 July 2020 to 30 April 2021. Again, allowing for reasonable taxation deductions, it would be appropriate for a taxable income of $182,000 to be reflected in the assessment for the period 1 May 2021 to 31 December 2021.

2. The Tribunal is satisfied that any personal use value Ms Charman receives from her work mobile phone is not sufficient to be relevant to the child support assessment. She does not have sufficient use of this so that she does not need a private telephone. This leaves the issue of the value of Ms Charman’s vehicle. Ms Charman’s evidence was that she has had this vehicle for two years. It is a [Year] model [Car make]. The Agency has valued the benefit of this to Ms Charman at $3,500 per annum from 1 January 2021 onwards. The Tribunal is satisfied that this is probably a reasonable estimate of the value of this benefit to Ms Charman during 2020, as she had reasonable personal use of the vehicle with no requirements to make any contribution. From 2021, however, she has full personal use of the vehicle. This means that she does not have the expense of registration, insurance, maintenance, fuel and any type of loan or lease in respect of her own car. This is a significant benefit, which is not accurately valued at $3,500 per annum. There is some difficulty in valuing this benefit, but the Australian Taxation Office’s statutory rate of valuing a car benefit provided by an employer is 20% of the purchase price of the vehicle. [Car maker] says that the base price for a [Car make] in 2019 was $31,986. 20% of this is $6,397.20 per annum. The Tribunal is satisfied that rounding this amount up to $6,500 fairly reflects the benefit to Ms Charman of the personal use of her work car and that this amount should be applied to the assessment from 1 January 2021 onwards.

3. Overall, the Tribunal decided that it would be just and equitable to vary Ms Charman’s adjusted taxable income in the assessment, taking account of the increase in her income and her vehicle benefit, as follows:

   ·   For the period 1 January 2020 to 30 June 2020 Ms Charman’s adjusted taxable income should be increased by $3,500 (in respect of the car benefit);

   ·   For the period 1 July 2020 to 31 December 2020 Ms Charman’s adjusted taxable income should be set at $167,500 (reflecting both her increased income and the car benefit);

   ·   For the period 1 January 2021 to 31 April 2021 Ms Charman’s adjusted taxable income should be set at $170,500 (reflecting both her increased income and the increased car benefit);

   ·   For the period 1 May 2021 to 31 December 2021 Ms Charman’s adjusted taxable income should be set at $188,500 (reflecting both her higher duties and the increased car benefit); and

   ·   From 1 January 2022 until such time as a terminating event occurs, Ms Charman’s adjusted taxable income should be increased by $6,500 per annum in reflection of her car benefit.

4. The Tribunal could see that Mr Dungey appeared to be up-to-date with his child support payments, but the information provided by the Agency only goes up to May 2021. Ms Charman said that Mr Dungey has not paid child support since 19 April 2021. This decision will create an overpayment for Ms Charman. The Tribunal is satisfied that the magnitude of that overpayment will be relatively small and that it will be able to be recovered from Ms Charman gradually, or by reducing Mr Dungey’s outstanding arrears of child support, without placing her or the child in undue financial hardship. She has sufficient financial resources to withstand this.

5. The Tribunal is satisfied that it would be just and equitable to make these changes to the assessment. It then considered whether or not it would be otherwise proper to do so.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal 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 nature of the duty of a parent to maintain a child, and the effect that any change to the assessment would have on the rate of any Centrelink benefits being received by the parties or the children.

2. The child support law recognises that each parent has a primary duty to maintain their children. In the case that they cannot, the government may assist in the form of family assistance payments. Ms Charman does not receive any family assistance payments, so this decision will not affect the amount of any family assistance payable to her. The Tribunal is satisfied that a departure from the assessment will better reflect the financial resources that have been available to both parents and ensure that the level of financial support provided by the parties for their daughter is determined according to their capacity to provide that support. The Tribunal finds that it is otherwise proper to depart from the administrative assessment in this matter. 

DECISION

The Tribunal varies the decision under review, such that:

·   For the period 1 January 2020 to 30 June 2020 Ms Charman’s adjusted taxable income is increased by $3,500;

·   For the period 1 July 2020 to 31 December 2020 Ms Charman’s adjusted taxable income is set at $167,500;

·   For the period 1 January 2021 to 31 April 2021 Ms Charman’s adjusted taxable income is set at $170,500;

·   For the period 1 May 2021 to 31 December 2021 Ms Charman’s adjusted taxable income is set at $188,500; and

·   From 1 January 2022 until such time as a terminating event occurs, Ms Charman’s adjusted taxable income is increased by $6,500 per annum.