Earnshaw and Thornhill (Child support)

[2022] AATA 1174

Earnshaw and Thornhill (Child support) [2022] AATA 1174 (17 March 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/PC022502

APPLICANT:  Ms Earnshaw

OTHER PARTIES:  Child Support Registrar

Mr Thornhill

TRIBUNAL:Member M Martellotta

DECISION DATE:  17 March 2022

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the children are significantly affected – 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 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. Ms Earnshaw and Mr Thornhill are the parents of two children.[1] The parents each have care of the eldest child and the applicant has above primary care of the youngest. Mr Thornhill is the parent liable to pay child support.

   [1] Born [in] October 2007 and [July] 2005

2. On 26 May 2021 Ms Earnshaw lodged a change of assessment application with the Department of Human Services – Child Support (the Agency). Her grounds included:

   ·Reason 2 – the children have special needs.

   ·Reason 3 – costs of caring for, educating or training the children in a manner intended by the parents.

   ·Reason 5 – Ms Earnshaw has provided money, goods or property for the children’s benefit.

   ·Reason 8A – that the assessment does not reflect Mr Thornhill’s income, property and financial resources.

3. At the time of the application the administrative assessment in place was as follows:

   ·For the period 7 May 2021 to 6 August 2022 the annual rate of child support was $4,617 based on Mr Thornhill’s 2019/20 adjusted taxable income (ATI) of $107,380 and Ms Earnshaw’s 2019/20 ATI of $238,168

4. An Agency decision maker decided that only reason 3 was established and made a departure determination so that for the period 7 May 2021 to 31 December 2021 the annual rate of child support payable by Mr Thornhill is increased by $2,413 per annum. Ms Earnshaw objected to that decision. An Agency objections officer affirmed the original decision on 29 September 2021.

5. Ms Earnshaw applied for review of the decision by the tribunal. The tribunal convened a telephone direction hearing and issued directions. Ms Earnshaw and Mr Thornhill attended a hearing on 17 March 2022. They provided evidence on affirmation. The Agency provided 377 pages of documents. Ms Earnshaw provided documents A1–A30. Mr Thornhill provided documents B1–B47.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. Child support legislation is interpreted by the Agency with the aid of the Child Support Guide (the Guide). The tribunal is not bound by law to apply the policy as set out in the Guide but provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it.[2]

   [2] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

3. The issues for the tribunal to determine in this case are:

   ·     Does a ground for departure exist? if so,

   ·     Would it be just and equitable as regards the children, the liable parent, and the carer entitled to child support to depart from the administrative assessment of child support?

   ·     Is it otherwise proper to make a particular departure determination?

CONSIDERATION

Issue 1 – Is there a ground to depart from the administrative assessment?

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which considers factors such as the number of children, the age of each child, the level of care provided and the income of each parent. Income used in the calculation has a number of components to arrive at the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (the Registrar) will utilise a parent’s ATI as assessed by the Australian Taxation Office for the last relevant year of income.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and as noted, establishes a three-step process.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[3] In this matter Ms Earnshaw confirmed that she was pursuing the ground raised by reasons 2, 3 and 8A.

   [3] The phrase “special circumstances of the case” is not defined in the Act. However the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC92–279). Likewise, in Philippe and Philippe (1978) FLC 90–433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”

4. The tribunal first considered if a ground is established pursuant to reason 3.

Reason 3 – Costs of education

1. A ground for departure exists if, in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being cared for, educated or trained in the manner that was expected by their parents (subparagraph 117(2)(b)(ii)).

2. Ms Earnshaw’s original submission as part of the application for the change of assessment was that the parents should contribute to the private school fees for the children’s attendance at [College 1] on a pro-rata basis which reflected the parties’ respective incomes. Her application also sought a departure which would require Mr Thornhill to contribute to extracurricular costs of their daughter.

3. It is not in contention and the tribunal is satisfied and finds that both parents signed the enrolment forms for both children to attend the college and that Mr Thornhill was agreeable to a pro-rata split of the school fees as documented in an agreement with the school for the 2020 academic year. He ceased making  contributions after Ms Earnshaw had a child support assessment application accepted in May 2021.

4. It was not contested that in 2021 the relevant education costs for compulsory fees and levies for both children was $13,973 and further that Mr Thornhill was amenable to a departure which provided for a pro-rata contribution on his part for the 2021 year and further he would enter into a re-negotiation of a pro-rata payment of the school fees going forward.

5. It was on this basis that the departure put in place by the Agency provides that Mr Thornhill’s liability for the period 7 May 2021 to 31 December 2021 is increased by $2,413.

6. At hearing the parties confirmed that a new payment arrangement is now in place and Mr Thornhill is contributing to the school fees on an agreed pro-rata basis. That arrangement has taken effect as of the new academic year of 2022. Mr Thornhill provided documents to the tribunal consistent with his evidence. The tribunal finds that Mr Thornhill is making a pro-rata contribution to the children’s costs of education.

7. At hearing Mr Thornhill confirmed that he was satisfied with the outcome of the Agency departure decision so far as it pertained to his contribution to the school fees until 31 December 2021. Neither party sought a departure so far as it pertained to school fees beyond that date given the agreement that is now in place.

8. Ms Earnshaw’s submission however was that the Agency’s refusal to include a contribution to their daughter’s extra-curricular costs is not correct. She says that the costs she incurs  for this activity establishes itself as a special circumstance. Her evidence and submissions are as follows:

   ·Their daughter has been taking [activity 1] classes from a very young age and this was an expense met by both parents prior to separation. Mr Thornhill contributed to these costs until May 2021 but ceased when the child support assessment issued.

   ·This is an activity their daughter enjoys doing and whilst she does would not say that she has a particular gift or that she is intending to pursue [activity 1] as a career their daughter performs very well in her exams.

   ·This extra-curricular activity involves costs that are above average compared to normal extra-curricular activities as it includes uniforms, costumes, shoes and exam fees. Ms Earnshaw’s evidence is that she has paid costs of $1,707 in the six-month period July to December 2021.  

   ·The annual cost of the activity would be about $3,414 which amounts to 15% of the costs of the child ($22,701) and this establishes it as a special circumstance to which Mr Thornhill should make a pro rata contribution until the end of 2023.

9. Mr Thornhill told the tribunal he did not agree with a departure which also included the extra-curricular costs. He said that whilst he agrees the [activity 1] lessons have been a long- standing activity pre-dating separation, he also makes contributions to the children’s extra-curricular costs. For example, he covers the costs of their son’s sporting activities to an amount of about $4,000 per annum. Ms Earnshaw disagreed and said that she makes other contributions over and above what Mr Thornhill does.

10. In terms of [activity 1] the tribunal is satisfied that this is an activity which both parents had agreed and supported prior to separation. The tribunal is also satisfied that in terms of establishing a ground for departure if the costs of this extracurricular activity in combination with the children’s education costs were combined (annual cost being about $17,387) then this satisfies the threshold question – namely a ground to depart is established because in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being cared for, educated or trained in the manner that was expected by their parents.

11. The question as to whether Mr Thornhill is to contribute towards all or any of those costs will be considered by the tribunal when determining what would be a just and equitable determination.

Issue 2 – What is a just and equitable determination?

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 as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below,[4] which are as set out in subsection 117(4) of the Act.

Duty to maintain the children

[4] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act; Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886

1. Both parents have a duty to maintain the child and in this regard the tribunal notes the following relevant provisions of the Act:

   …that parents of a child have a primary duty to maintain the child. The duty has a priority over all commitments of the parent other than commitments necessary for self-support.[5]

Proper needs of the children

[5] Section 3 of the Act

1. In determining the proper needs of the child it is necessary to have regard at a broad level to the manner in which the child is being, and in which the parents expect the child to be, cared for, educated or trained, and also any special needs of the children. It is apparent from authorities that the scope of matters to be taken into consideration are broader than the costs of education or their health.

2. The tribunal has already considered matters raised with respect to the children’s education and extra-curricular activities.  In terms of the education costs the tribunal is satisfied that a departure to reflect those costs is warranted to the end of 2021.  The tribunal however is not satisfied that a departure to also accommodate the daughter’s [activity 1] classes is appropriate. The tribunal accepts Mr Thornhill’s evidence that he also makes contributions towards their son’s extra-curricular activities which on an annual basis is equivalent to what Ms Earnshaw is meeting with respect to the [activity 1] classes.

3. Ms Earnshaw also makes the following submissions in terms of their daughter’s heath and associated costs which she says total $8,050 per annum:

   a)Their daughter attends regular psychology appointments which incur an annual out of pocket cost of $1,440.

   b)Their daughter has been given a [medical condition 1] diagnosis and this incurs medical out of pocket costs of $694 per annum.

   c)Due to this diagnosis their daughter is unable to eat [specified products]. The cost of [her required] products has increased her annual grocery costs by $5,915 and Mr Thornhill should contribute to this cost. She has based this upon an analysis of grocery expenditure pre and post the diagnosis.

4. Mr Thornhill told the tribunal that he has no objection to meeting the costs of their daughter’s psychology appointments and he has already taken responsibility for meeting these costs in 2022.  Whilst Ms Earnshaw disagreed with the circumstances of this arrangement, she did agree that Mr Thornhill has paid for the  consultations undertaken so far in this year. Mr Thornhill provided documents to the tribunal which confirmed his evidence that he is meeting these costs. There was no cogent evidence that demonstrated that Mr Thornhill would not be continuing to meet those costs in 2022 and the tribunal so finds. Given this the tribunal concluded that a departure from the administrative assessment in relation to the psychology appointments is not warranted.

5. In terms of the cost of treating and accommodating the [medical condition 1] diagnosis, Mr Thornhill submitted that he also [has this medical condition] and has not incurred any additional costs of the amounts as submitted by Ms Earnshaw. He further states that he also meets other costs for the children for example he deposits a regular amount into their accounts by way of an allowance and meets other costs outside of the assessment. In this matter the tribunal is not satisfied that a departure to accommodate the dietary and related costs of the child’s [medical condition 1] diagnosis is something that is warranted outside of the administrative formula. This aspect is further expanded in the tribunal’s conclusions on whether a departure would be just and equitable.

Income, earning capacity, property and financial resources of the children

1. In having regard to the income, earning capacity, property and financial resources of the children, the tribunal must disregard any entitlement of the children or the carer entitled to child support to an income-tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act).

2. Ms Earnshaw told the tribunal that the children have had some part-time work however due to COVID-19 restrictions their hours are variable and the amount they receive is not significant. Mr Thornhill did not disagree with those submissions.

3. The tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

Other party receiving money, goods and property for the benefit of the children

1. As noted, Ms Earnshaw did not pursue this ground. The tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

The income, property and financial resources of each parent who is a party to the proceeding

1. Both parties derived their income as employees.  The administrative assessment has utilised their last relevant incomes for Mr Thornhill in 2019/20 ATI of $107,380 and Ms Earnshaw’s 2019/20 ATI of $238,168.

2. Income tax returns for the 2020/21 confirm that the parents continue to derive their income as PAYE with equivalent ATI – Mr Thornhill ($108,738) and Ms Earnshaw ($239,202).

3. Ms Earnshaw submits however that Mr Thornhill has the benefit of a financial resource arising from a loan arrangement entered into with his sister and brother-in-law. She submits that Mr Thornhill is not paying interest and so has access to a financial resource of about $15,000 which should be factored in.

4. Mr Thornhill told the tribunal that the loan arrangement is legitimate. He has entered into an agreement with his sister’s and her husband’s company ([Business 1]) who have lent him $327,000 toward the purchase of a home (this loan is in addition to two home loans he has secured). A loan agreement was provided to the Agency and was included in the documents. The loan provides that Mr Thornhill can elect to make repayments which includes interest on the principal or alternatively the property is to be sold at the conclusion of the 9-year term of the loan and the lender will recoup their investment by a return of 25% of the sale price.

5. Mr Thornhill told the tribunal that the loan arrangement has allowed him to purchase a property that is close to the children’s school and the intention is once the children complete high school he will sell the property.

6. Apart from this issue, no other submissions were raised.  Documents were provided by the parties to the tribunal setting out their respective financial circumstances. In relation to Ms Earnshaw the tribunal finds that:

   a)She has a total average weekly income of $4,601

   b)Total value of property owned is $621,405

   c)The gross value of superannuation is $526,183

   d)Her total liabilities total $513,682

   e)Her total household expenditure is $2,650

7. In terms of Mr Thornhill the tribunal finds that:

   a)His total average weekly income is $2,216

   b)Total value of property owned is $1,034,908

   c)Total gross value of superannuation is $579,656

   d)Total liabilities is $1,007,831

   e)Total household expenditure is $1,430

8. The tribunal is satisfied that the loan arrangement is a legitimate financial arrangement pursuant to which Mr Thornhill is required to make repayments or  provide a return on the investment made by [Business 1]. For this reason the tribunal is satisfied that a departure from the administrative assessment in relation on the basis of Mr Thornhill’s income, property or financial resources is not warranted.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the 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 because of the earning capacity of either parent (subparagraph 117(2)(c)(ib)). No submission or evidence was presented which would warrant any departure on this basis.

   The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support themself, or any other child or another person that the person has a duty to maintain

2. The tribunal is satisfied, taking into account the relevant costs of self-support utilised in the assessments and based upon evidence provided at hearing, that neither party has extraordinary costs of self-support that are relevant to the assessment.

Any hardship that would be caused

1. Ms Earnshaw stated that whilst she does have a greater level of income, it is only fair that Mr Thornhill make additional contributions in the terms that she has submitted. She said ultimately, she has the greater care of the children and carries the greater burden of their costs.

2. Mr Thornhill says that he is already making financial contributions in additional to the assessed amount of child support. He is financially stretched meeting his mortgage repayments.

Conclusions as to a particular departure determination

1. In this matter at the time of Ms Earnshaw’s change of assessment application the administrative assessment provided that:

   For the period 7 May 2021 to 6 August 2022 the annual rate of child support was $4,617 based on Mr Thornhill’s 2019/20 adjusted taxable income (ATI) of $107,380 and Ms Earnshaw’s 2019/20 ATI of $238,168

2. As noted, Mr Thornhill was amenable to a departure which required him to pay an additional amount of child support pertaining to the children’s cost of education. He met that liability and has since then undertaken a pro rata payment arrangement with the school.  Mr Thornhill is also meeting the costs of their daughter’s psychological counselling. These are amounts being met in addition to the amount of child support assessed under the formula.

3. The tribunal has concluded that the particular departure determination appropriate in this matter is that for the period May to December 2021 Mr Thornhill pay an additional amount in relation to the children’s school fees namely that the amount worked out on a pro-rata basis relative to income being for the period 7 May 2021 to 31 December 2021 the annual rate of child support payable by Mr Thornhill is increased by $2,413 per annum.

4. The tribunal notes that both parties are paying mortgages which are relative to the purchase price of their primary places of residence, they each hold similar levels of superannuation. The main difference is the significant difference in their respective incomes.

5. The tribunal considers that taking into account the relative financial positions of the parties, and also taking into account that Mr Thornhill is meeting extra-curricular costs for their son, is meeting the out-of-pocket costs of their daughter’s counselling and is also making a pro- rata contribution to the children’s education costs that this is a just and equitable departure determination.

Issue 3 – Would it otherwise be proper to make a particular departure determination?

1. The final step for the tribunal to determine is whether it is “otherwise proper” to make a particular departure determination.  Subsection 117(5) requires the tribunal to take into account whether the proposed departure is proper in the context of public interest and welfare expenditure of the community.  A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should not be unnecessarily abrogated to the public welfare system.

2. According to the Statement of Financial Circumstances neither party is in receipt of family tax benefit and the proposed departure from the administrative assessment has no impact on the public purse. In this case the tribunal finds that the requirements under paragraph 117(5)(a) of the Act are met.  The tribunal concludes that it is otherwise proper to depart from the administrative assessment.

DECISION

The decision under review is affirmed.