Faichney and Kelaghor (Child support)
[2024] AATA 2899
•19 June 2024
Faichney and Kelaghor (Child support) [2024] AATA 2899 (19 June 2024)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2023/BC027150
APPLICANT: Ms Faichney
OTHER PARTIES: Child Support Registrar
Mr Kelaghor
TRIBUNAL:Member I Sheck
DECISION DATE: 19 June 2024
DECISION:
The decision under review is varied so that:
For the period 1 June 2022 to 6 September 2023, the annual rate of child support payable by Mr Kelaghor is set at $2,954; and
For the period 7 September 2023 to 31 December 2026, the annual rate of child support payable by Mr Kelaghor is set at $10,000.
CATCHWORDS
CHILD SUPPORT – departure determination – costs of education – cost of maintaining the children – financial resources – special circumstances – 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
Ms Faichney and Mr Kelaghor are the separated parents of [Child 1] (born April 2010) and [Child 2] (born July 2011). The records of Services Australia – Child Support (Child Support) indicate that the child support assessment was first registered on 19 April 2010 and Child Support has been responsible for the collection of child support from Mr Kelaghor since 28 March 2012.
Ms Faichney first applied for a departure from the administrative assessment of child support on 22 March 2022. At that point the annual rate of child support payable by Mr Kelaghor was $2,040, or $170 per week. Ms Faichney sought an increase in the assessed rate to $10,000 per annum. The parties were notified by letters dated 28 April 2022 of Ms Faichney’s application for departure. On 23 May 2022 Mr Kelaghor provided estimates of his 2021–22 and 2022–23 years’ income. These estimates were accepted by Child Support and the rate of child support was consequently reduced to $446 per annum or $8.55 per week with effect from 23 May 2022. On 20 June 2022 a Child Support officer determined that grounds for departure were met and made a decision setting the annual rate of child support at $2,954 for the period 1 June 2022 to 3 December 2024.
On 14 June 2023, Ms Faichney objected to the decision. On 7 September 2023, she was granted an extension of time in which to object. An objections officer of Child Support reviewed the matter and on 13 November 2023 affirmed the decision to depart from the administrative assessment of child support and set the annual rate of child support at $2,954. The parties were notified of the objections officer’s decision by letters dated 13 November 2023.
On 4 December 2023, Ms Faichney lodged an application to the Tribunal for review of the objections officer’s decision. The Tribunal received documents 1 to 274 from Child Support in accordance with subsection 95(3) of the Child Support (Registration and Collection) Act 1988. Both parties confirmed receipt of these documents. A directions hearing was held on 4 April 2024 and the parties were directed to provide various documents. Documents A1 to A145 and B1 to B292 were submitted by Ms Faichney and Mr Kelaghor respectively pursuant to these directions and were provided to both parties. On 19 June 2024, the Tribunal conducted a hearing at which Ms Faichney and Mr Kelaghor gave evidence by MS Teams audio.
CONSIDERATION
The legislative framework and issues for the Tribunal to determine
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). This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar will utilise a parent’s adjusted taxable income as assessed by the Australian Taxation Office for the last relevant year of income.
The liable parent or a carer may apply for a determination departing from the administrative assessment under Part 6A of the Act. Section 98C establishes a three-step process to be satisfied prior to a departure determination being made: that there is a ground for a departure from the administrative assessment; that it is just and equitable to depart; and that it is otherwise proper to do so. Once satisfied as to these three issues, the Tribunal may make one of the determinations prescribed in section 98S of the Act.
Reason 8: A parent’s income, property, financial resources or earning capacity
A ground for departing from the administrative assessment of child support may exist if, in the special circumstances of the case, the administrative assessment of child support results in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of either parent’s income, property or financial resources, per subparagraph 117(2)(c)(ia) of the Act. This ground for departure is commonly referred to by Child Support as Reason 8 or Reason 8A. Mr Kelaghor’s application for departure was based on this ground and Ms Faichney contends that Mr Kelaghor’s available income and resources are greater than those used in the assessment.
The income, property and financial resources of Mr Kelaghor
Employment income
Mr Kelaghor gave the Tribunal some background details about his work and financial history. He said that he has mainly worked as a labourer; this includes [three areas of work]. He previously worked as [an occupation 1] and many years ago ran a [business 1] with Ms Faichney. He has worked a lot in [industry 1] in rural Queensland. He last worked [in this industry] about three years ago. The accommodation organised by the employer was sub-standard. Mr Kelaghor had recently received an inheritance from his late mother’s estate so he decided to quit the job due to the poor conditions and live off of his inheritance. Mr Kelaghor said that he had always battled with obtaining work, particularly since his release from prison in 2019. Since finishing his [industry 1] job in 2021 he has supplemented his income with casual work. He generally obtains work by word of mouth or through friends and associates. The Tribunal asked whether his income from casual work is declared as taxable income and Mr Kelaghor responded that “everyone wants to pay cash” but he preferred to be paid through his bank account and kept records of when he worked. He estimates that he will earn about $18,000 to $19,000 from employment in this tax year.
Considering first Mr Kelaghor’s available income from employment, he has provided his income tax returns for the 2020–21 to the 2022–23 years. He declared wages of $21,765 (gross) from [Employer 1] in the 2020–21 financial year and $13,137 in the 2021‑22 financial year. This would be consistent with the cessation of regular employment in [industry 1] around October 2021. Mr Kelaghor has declared no income at all from employment since that time. In making their decision of 13 November 2023 the objections officer noted that “Mr Kelaghor has now gained some new employment; however; it is unclear when this commenced precisely or if it is likely to continue long term. It is noted the income determined above [an estimate of $840 a week or $40,320 per annum] is based on Mr Kelaghor working a full year and I am not satisfied this has been or will be the case.” Mr Kelaghor has also provided his [Bank 1] bank statements for the period March 2022 to March 2024 for his account #7287. This is his only [Bank 1] account, as confirmed by the [Bank 1] on 3 May 2022.[1] In terms of deposits to the account, there is a regular payment of $50 a week from “[Niece A]”, ending in September 2023. Mr Kelaghor advised that this was repayment of a loan that he made to his niece and the Tribunal accepts that this is the case. There are deposits of $150 and $200 for [specified jobs] in October 2022[2] and further deposits from [Employer 2] of $1,212 and $900 in June and July 2023.[3] There was also what appears to be a deposit of $10,560 on 30 June 2023 which the Tribunal concludes is likely to be cash payment from employment. Further deposits of $650 on 17 August 2023 and $2,000 on 24 August 2023 appear to relate to work undertaken. The Tribunal notes that Mr Kelaghor gave evidence that he has had “good earnings” from September/October 2023; however; there are no further deposits relating to employment into his bank account from this point on.
[1] Hearing papers, page 100
[2] Hearing papers, pages B267 and B268
[3] Hearing papers, pages B277 and B278
The Tribunal concludes that Mr Kelaghor has been working on a casual basis from at least October 2022 and most of his earnings are cash in hand. This makes it extremely difficult to assess an accurate level of income. On the basis, however, of the bank deposits as discussed and Mr Kelaghor’s oral evidence the Tribunal finds that Mr Kelaghor had earnings of $12,122 in the period 1 October 2022 to 30 June 2023 (this would annualise to $16,207) and expects to earn some $18,000 to $19,000 in the period 1 July 2023 to 30 June 2024.
Rental income
In addition to his earnings from employment, Mr Kelaghor receives income from renting out his former residence. He lived at [Property 1]. It is a block of land with a “shed” on it. The shed does not have the relevant development approvals to allow a person to reside in it so late last year he had to move out or be fined by the council. He now lives “up the road” on [a nearby address]. He resides with an elderly man and helps him out around the house. He has rented out the [Property 1] block to 2 parties who pay $450 a fortnight each to park their caravans on the block and use the facilities in the shed. Examination of Mr Kelaghor’s bank statements shows that [Person A] has been paying rent to Mr Kelaghor since 1 September 2023 and [Person B] from 7 December 2023. Mr Kelaghor expects this arrangement to be ongoing.
Self-managed superannuation fund
Ms Faichney indicated in her departure application that Mr Kelaghor had bought and sold properties and earned income from share trading. Mr Kelaghor has also provided the income tax returns for his self-managed superannuation fund [Fund 1]. Mr Kelaghor told the Tribunal that he started the fund in 2000 as he wanted to make the decisions about how his retirement income would be invested. The financial statements show that as at 30 June 2018 the [Fund 1] held assets valued at $533,815. These assets comprised a property [next to] [Property 1], Australian shares and $75,435 in a [Bank 2] account. The [Fund 1] generated income of $23,430 in the 2017–18 year. Over the years there have been fluctuations in the value of the assets, notably a reduction following the stock market crash of February 2020. In addition to this the [Property 1] property was sold for $275,000 in 2021 and the proceeds invested in further shareholdings.
The most recent of the [Fund 1] financial statements that Mr Kelaghor has provided are those for the 2021–22 year. As at the end of that year the assets of the fund comprise shares valued at $678,240 and the [Bank 2] account has reduced to $26,890. In considering whether the assets held by the [Fund 1] should be considered to be a financial resource of Mr Kelaghor and available for him to support [Child 1] and [Child 2], this issue was considered in the Court decision Re Parrish & Torrey (SSAT Appeal) [2009] FMCAfam 274. This noted in part: “Superannuation is a financial resource. The question to be determined is whether it is a resource that should impact on the rate of child support, given the restrictions on accessing superannuation.” Mr Kelaghor was born after 30 June 1964, therefore his preservation age – that is, the point at which he can access his superannuation - is age 60. He is currently [age] years of age. The Tribunal is therefore not of the view that the assets or income of the [Fund 1] can yet be taken into account in assessing Mr Kelaghor’s income, property or financial resources.
Investment (shares) income
The last financial resource that has been available to Mr Kelaghor is his personal shareholding. Mr Kelaghor told the Tribunal that he bought shares with the inheritance he received. The net amount he received in the inheritance was around $150,000. Mr Kelaghor submitted that Child Support had told him that inheritances were not considered as income, so the deposits into his bank account from his [trading] account should not be taken into account in the assessment of the child support as they formed part of his inheritance. On this point, the Child Support Guide actually provides at section 2.6.14:
Windfall
Amounts received as a windfall (e.g. a distribution from a deceased estate or success in a lottery or other gambling venture) are not assessable as taxable income. They do not form part of the ATI and are not taken into account in a formula assessment.
There may be a reason to change an assessment if it is likely that a windfall will increase the parent's capacity to contribute to the financial support of the child.
The decision will depend on the circumstances of the case and any other reasons under consideration.
So while an inheritance does not of itself form part of a person’s income under the administrative assessment of child support, it may be appropriate to consider the effect of the lump sum when departing from the administrative assessment. In this case, Mr Kelaghor essentially chose to purchase investments with his inheritance some years ago and then drew down these investments more recently to supplement his income from casual work. He used those funds to support himself as well as treating [Child 2] and [Child 1] to luxury holidays and extravagant dining experiences. The point could be made that the funds available to Mr Kelaghor could also have been utilised as a contribution to the ongoing day-to-day needs of [Child 2] and [Child 1]. From the bank statements provided by Mr Kelaghor it can be seen that in the statement period 31 March to 30 September 2022 there were deposits totalling $51,470 from Mr Kelaghor’s [trading] account to his [Bank 1] account. In the following statement, from 1 October 2022 to 30 March 2023, there were further deposits totalling $57,912. The Tribunal concludes that these amounts do constitute a financial resource that was available to Mr Kelaghor. Mr Kelaghor submits that he does not have any shares left.
Are there grounds to depart from the administrative assessment of child support?
As noted above, under the administrative assessment of child support, Mr Kelaghor was assessed to pay an annual rate of $2,040, based on his provisional income in the 2020–21 financial year of $34,945. This reduced to an annual rate of $446 from 23 May 2022. Ms Faichney applied for a departure from the administrative assessment in March 2022. Over the period March 2022 to March 2023 Mr Kelaghor had financial resources available to him totalling $109,832. From October 2022 onwards Mr Kelaghor additionally had income from casual work and from September 2023 he has also been receiving rental income from his property at [Property 1]. The current rent (caravan site fees) received is $23,400 annual.
Given the resources available to Mr Kelaghor as discussed above, the Tribunal concluded that there are special circumstances in this case which mean the application of the administrative assessment of child support would result in an unjust and inequitable level of child support to be provided by Mr Kelaghor. The ground for departure in subparagraph 117(2)(c)(ia) exists in this case.
Is it fair or ‘just and equitable’ in relation to Ms Faichney, Mr Kelaghor and the children to make a particular departure determination?
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 fair as regards the parents and the child 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 have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the child, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The Tribunal does not propose to explore every matter in detail but will discuss those it regards as pertinent to this application (Gyselman).
The needs and costs of the children
Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Ms Faichney and Mr Kelaghor have the primary duty to financially support [Child 2] and [Child 1] and contributing to their costs should take priority over all other costs other than their “necessary” costs of self-support.
In determining the proper needs of the child, subsection 117(6) of the Act also requires the Tribunal to have regard to the manner in which the parents expected the child to be cared for, educated and trained as well as a consideration of any special needs of the child. Ms Faichney told the Tribunal that [Child 2] and [Child 1] are both in good health. They do, however, both suffer from an overbite and Ms Faichney received medical advice that this would need to be treated with braces. It was not a cosmetic decision. The orthodontic costs were $7,500 for each child. Ms Faichney has entered into a payment plan and is paying by instalments. In terms of their schooling, Ms Faichney said that the local State school [named] is frequently the scene of fights, with the Police in regular attendance. Further to this, she was concerned that [Child 2] and [Child 1] may be bullied due to her job as [an occupation 2]. For these reasons, Ms Faichney made the decision to send [Child 2] and [Child 1] to a private school. This decision was not made in consultation with Mr Kelaghor. The Tribunal put to Ms Faichney that she had listed the costs of the children’s education as $422 a week (which equates to some $22,000 annual). Ms Faichney confirmed that this was the case and noted that the fees go up each year.
The Tribunal further noted that Ms Faichney had listed children’s activities as $260 a week or $130 per week each. Ms Faichney responded that [Child 2] and [Child 1] were both involved in [sport 1] earlier in the year and currently play [other sports]. In addition to this, Ms Faichney is at work a lot of the time and does not spend as much time as she would like helping [Child 2] and [Child 1] with their school work. For this reason she has hired a tutor for them, so that they can maximise the opportunities that private school education can provide. The tutor costs $80 a fortnight.
Turning to [Child 1] and [Child 2’s] other costs, the Tribunal was satisfied that they would be equivalent to the costs of other children of their age (currently aged 14 and nearly 13). In her Statement of Financial Circumstances completed in December 2023,[4] Ms Faichney lists the estimated children’s costs as $831 a week ($43,212), which does not include any apportionment of housing costs, utilities and so on. Ms Faichney provided a further Statement of Financial Circumstances in April 2024[5] and in this document the costs of the children has increased to $1,094 a week ($56,888 per annum). As at the time of Ms Faichney’s application for departure, the costs of the children as calculated under the administrative assessment (which does not take into account additional costs such as private schooling or orthodontic expenses) was $9,279 per annum for each child, or a total of approximately $357 a week.
The earning capacity, income, property, financial resources and commitments of each parent
[4] Hearing papers, page A8
[5] Hearing papers, page A15
Ms Faichney
While the Tribunal has determined that the ground for departure is established, based on Mr Kelaghor’s financial resources and income, the Tribunal must still consider whether it is just and equitable, based on the parents’ assets, liabilities, income and commitments, to depart from the administrative assessment and make a particular departure determination. Both Mr Kelaghor and Ms Faichney provided Statements of Financial Circumstances to the Tribunal, to which the Tribunal has had regard. In terms of what would be an appropriate departure determination, the Tribunal has first considered the determination made by Child Support which sets the child support liability at the fixed annual rate of $246.17 a month at present. Mr Kelaghor has paid this regularly. In her application for departure, Ms Faichney sought an increase in the rate of child support to $10,000 per annum. This would be equivalent to around 53% of the costs of the children as determined under the administrative assessment. In terms of an income amount that would result in this rate of child support, with Ms Faichney’s adjusted taxable income of $78,967 (this was in place as at March 2022) Mr Kelaghor’s adjusted taxable income would have to be some $66,400. As noted above, Mr Kelaghor’s actual financial resources from his investments alone were $109,832 from March 2022 to March 2023 but are currently lower.
Turning to Ms Faichney’s income and commitments, she has been employed as [an occupation 2] for some 4 years. Ms Faichney had also stated that she was a self-employed [occupation 3] but told the Tribunal that this is more a hobby and she does not receive regular income from this venture. The Tribunal accepts that this is the case and concludes that Ms Faichney’s available income is accurately reflected in her assessed adjusted taxable income. Ms Faichney’s payslips indicate her gross salary is $3,724 a fortnight and her net pay is $2,681 a fortnight. In February 2024 Ms Faichney received an inheritance, following the passing of her father. This comprised a shareholding valued at $447,116 as well as a motor vehicle. The Tribunal asked Ms Faichney what she intended to do with her shareholding and she responded, “that’s my retirement.” The Tribunal notes that as the shares are in Ms Faichney’s name, they will be taken into account in her usual assessment of her taxable income. In addition to these assets, Ms Faichney owns her own home. She does not have any liabilities by way of mortgage, loans or credit cards.
The Tribunal asked Ms Faichney what the effect had been of the Child Support decision to set Mr Kelaghor’s child support liability at $2,954. Ms Faichney responded that to the best of her ability the children never go without, but she did have to limit non-essential expenditure; for instance she could only afford for them to take one sport a term. Also clothes are generally second-hand “from Vinnies” and she could not afford for the children to attend school camp. Taking a broad look at Ms Faichney’s overall financial situation, her household expenditure which is presently some $2,101 a week significantly exceeds her net salary of $2,681 a fortnight. Despite this, Ms Faichney appears to have managed her finances without accruing debt.
Mr Kelaghor
Mr Kelaghor’s income and financial resources are discussed in detail above. In his recent Statement of Financial Circumstances Mr Kelaghor lists his household expenses as $608 a week. Mr Kelaghor does not currently pay rent and owns his [Property 1] property (where the caravans are sited) outright. Of his expenditure, Mr Kelaghor includes $150 a week as “Holidays”. The Tribunal is of the view that this is discretionary spending that does not take priority over Mr Kelaghor’s obligation to contribute to the support of [Child 1] and [Child 2]. This means that Mr Kelaghor’s ongoing necessary expenses total $458 a week. Mr Kelaghor also has no mortgages, loans or credit cards but does owe an amount stated as $80,000 to [Agency 1], for which it appears he has entered into a payment plan. Mr Kelaghor has estimated that his overall income from casual work and rental income will be around $41,000 in the 2023-24 financial year ($788 a week). This leaves him with a surplus of some $300 a week before payment of child support (it is hard to calculate Mr Kelaghor’s tax liability as it is unclear whether employment income will be assessed in his taxable income).
What is the determination to be made?
The Tribunal has considered the evidence relating to [Child 1] and [Child 2’s] proper needs as well as the usual costs of the children that were assessed under the administrative assessment of child support. The income, resources, benefits and assets together with the commitments and liabilities of both parties were also studied to determine an appropriate departure determination. Subsection 117(4) of the Act requires the Tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the child, the carer, the liable parent or any other person the liable parent has a duty to support. Mr Kelaghor does not have a duty to support any other person. The Tribunal concludes that the departure determination as made by Child Support, which is to set the annual rate of child support at $2,954, results in an assessment of child support that does not take into account Mr Kelaghor’s financial resources and causes financial hardship to Ms Faichney and the children. The Tribunal concludes that it is not just and equitable to make such a determination.
Ms Faichney seeks a contribution of $10,000 per annum from Mr Kelaghor, which is close to half of the “usual” costs of the children but leaves her entirely responsible for the significant extra expenditure on private schooling, orthodontics and tutoring. Such a contribution (less than $200 a week) would not cause hardship to Mr Kelaghor and would to a certain degree alleviate Ms Faichney’s ongoing hardship. The Tribunal concludes that it is just and equitable to make such a determination.
Turning to the period for which such a determination should be in place, the Tribunal notes that the Child Support officer made the original decision on 20 June 2022 with effect from 1 June 2022 and the parties were notified of the decision when it was made. Ms Faichney did not object to that decision for another year. Although the Tribunal empathises with Ms Faichney’s situation at the time, the point must be made that Mr Kelaghor was entitled to rely on the decision that had been made as being indicative of his liability going forward. Mr Kelaghor was notified on 6 September 2023[6] that an objection had been lodged by Ms Faichney. At that time he had around $18,000 in his bank account. He was up to date with his child support payments and the Tribunal is unwilling to place him into a position of arrears when he had concluded that the matter was settled. The Tribunal therefore concludes that the decision made by Child Support should remain in place until Mr Kelaghor was notified of Ms Faichney’s objection and the annual rate of child support should increase to $10,000 from that point forward.
[6] Hearing papers, page 202
Turning to the end date of the determination, the decision made by Child Support was to end the departure determination on 31 December 2024, which is now only 6 months away. The Tribunal asked Ms Faichney what she thought an appropriate end date for a departure determination would be and she requested that a determination should be made until the children finish school. As [Child 2] turns 13 in a few weeks that would potentially give an end date more than four years away. Although this could obviate the need for further departure applications, the Tribunal notes that Mr Kelaghor will turn 60 [in] February 2027. At this point he may decide to retire from the workforce and access his superannuation, which would change his ongoing income and/or resources. Taking into account all of these factors, the Tribunal is of the view that a departure period ending on 31 December 2026 is appropriate. The Tribunal also considers such a timeframe allows some degree of certainty to both parties in relation to child support.
Is it otherwise proper to make a particular departure determination?
The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) of the Act sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. The relevant matters under this step relate to whether the child support payee receives family tax benefit from Centrelink. A decision to depart from the administrative assessment which results in an increase in the rate of child support will reduce the impact on the public purse as the amount of child support payable reduces the amount of family tax benefit received. In this case Ms Faichney does not receive family tax benefit so the decision to depart from the administrative assessment has no impact on the public purse. The Tribunal considers that it is in any event otherwise proper to make the particular determination.
DECISION
The decision under review is varied so that:
For the period 1 June 2022 to 6 September 2023, the annual rate of child support payable by Mr Kelaghor is set at $2,954; and
For the period 7 September 2023 to 31 December 2026, the annual rate of child support payable by Mr Kelaghor is set at $10,000.
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