Faithfull and Welliver (Child support)

[2023] AATA 3740

Faithfull and Welliver (Child support) [2023] AATA 3740 (21 September 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/MC024879

APPLICANT:  Ms Faithfull

OTHER PARTIES:  Child Support Registrar

Mr Welliver

TRIBUNAL:Member M Martellotta

DECISION DATE:  21 September 2023

DECISION:

The Tribunal sets aside the decision under review and, in substitution to depart from the administrative assessment so that for the periods:

• 13 May 2022 to 31 July 2022, the second party’s adjusted taxable income is varied to $83,678.

• 1 August 2022 to 4 May 2023 the second party’s adjusted taxable income is varied to $69,000.

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 set aside and substituted

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. This review concerns a decision made by Services Australia – Child Support (Child Support) to depart from an administrative assessment of child support.

2. The applicant and second party are the parents of one child.[1]  The child resides with the applicant in [Country 1]. The current case commenced on 28 April 2022.

   [1] Born 13/12/2018.

3. On 13 May 2022 the applicant lodged a change of assessment application on the ground of Reasons 8A (income, property, financial resources of the second party).  At the time of her application, according to Child Support records, the following relevant administrative assessment was in place:

   ·From 1 September 2021 to 30 November 2022 the second party was assessed to pay child support at an annual rate of $906 based on his 2020/21 adjusted taxable income of $36,388 and the applicant’s 2020/21 adjusted taxable income (ATI) of $21,708.

4. On 3 August 2022 a Child Support senior decision maker decided that grounds to depart from the administrative assessment had been established. They varied the administrative assessment in the following terms:

   ·For the period 13 May 2022 to 31 December 2023 the second party’s ATI is varied to $84,000.

5. The second party objected to the decision. His objection was partly allowed and a new decision was made in the following terms:

   For the periods:

   ·13 May 2022 to 3 July 2022, the second party’s ATI is varied to $84,000.

   ·4 July 2022 to 5 August 2022 the second party’s ATI is varied to $70,000.

   ·6 August 2022 to 30 November 2022 the second party’s ATI is varied to $22,750.

6. The Tribunal convened two direction hearings prior to the hearing.  These dealt with procedural matters. The hearing was held on 13 July 2023. Both parties participated at the hearing by telephone, and each provided submission and evidence. The Tribunal decided to reconvene the hearing on 21 September 2023 to take further evidence to clarify information provided by the parties in post-hearing submissions. The applicant and second party both attended by telephone. Other evidence before the Tribunal included documents provided by Child Support, and documents provided by each party in response to the Tribunal directions.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act). Section 98C of the Act, states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (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 …

2. 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 child, 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 OF LEGISLATION SUBMISSIONS AND EVIDENCE

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 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 (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 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.[2] In this matter the only ground contested at hearing was whether a ground for departure is established pursuant to Reason 8A.

   [2] 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) FLC 92-279). Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

Reason 8A – income, property and financial resources of the parties

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Act relating to 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 income, property and financial resources of either parent.

The applicant

1. The applicant disagrees with the objection decision. She says that the second party conducts his financial affairs in such a way to avoid paying a proper amount of child support. She says that shortly after making her application for change of assessment the second party changed his employment and, in her view, he did this to impact the assessment. The applicant submits that the second party’s lifestyle and discretionary spending demonstrates he has capacity greater than what is reflected in the assessment.

2. She feels that an acceptable level of child support payable by the second party is about $500 per month ($6,000 per annum) and any variation should at a minimum reflect this. She submits that any variation in those terms should be backdated to 18 months prior to her change of assessment application and it should continue for as long as possible.  She did not make her application before 13 May 2022 due to personal and work circumstances.

3. The applicant gave evidence that she and the child returned to [Country 1] in 2020. After a period of unemployment she was able to resume full-time employment in late 2021. She recently commenced employment with a new company.

4. Her evidence was that apart from receiving some government child allowance her employment income is her only source of income and she otherwise does not have any financial resources at her disposal. She receives a fixed amount each month. However as of mid-September 2023 her employment has ceased and she is now looking for employment.  She expects to receive two months of employment income and from October 2023 if she has not secured employment will be in receipt of income support payments. She will be lodging an estimate of income with Child Support to update them of her new financial circumstances.

5. She previously owned a property (an apartment in [Country 1]) which she sold in 2022. Once she paid out all the expenses, she was left with about 8,000 euro.  All of these transactions were disclosed in her income tax returns.  She is now renting. She recently bought herself a car (50,000 euro) which is under finance through her employment. She otherwise does not own any significant assets.  She has no superannuation.

6. The applicant provided the Tribunal with a Statement of Financial Circumstances,[3] copies of her most recent income tax returns, recent payslips, and copies of her bank accounts.  The Tribunal reviewed those documents and is satisfied that the documents are consistent with her evidence. A tax return for the 2022 tax year (calendar) shows a taxable income of 52,446 euro (about $80,000).

   The second party

   [3] She provided amounts in Australian dollars.

7. Does not agree with a departure that would result in an assessment of about $500 per month as suggested by the applicant.  He said that in his current financial situation that would be unachievable or difficult to manage. He believes that the assessment should be based upon estimates that he has since lodged with Child Support. He has engaged a third party for 12 months to assist him with his dealings with Child Support as he has multi-case assessment. His hours of employment have been affected by care needs of two other dependent children (for whom he has shared care) and taking care of his elderly parents, one of whom is in respite.

8. He generally works in the [occupation 1] industry and has worked in that sector since about 2012. The last continuous period of employment he had was in 2019. From 2019 the regularity of his work changed due to personal issues and then COVID-19 also had an impact on his employment.

9. In about August 2021 he re-entered full-time employment in a customer service role before moving to a full-time [occupation 1] role in November 2021. He remained in that full-time role until about June 2022. He resigned from that role to take up a new employment offer.

10. On 4 July 2022 he commenced a new role undertaking sales for [a business 1]. He said that that role provided him more regular work hours and weekends off, however, that role did not endure, and he ceased employment on 5 August 2022.  The second party said that the role was not a good fit and his employer decided to dismiss him ‘on the spot’ during the probation period. The Tribunal notes that this evidence is consistent with the employment separation certificate included in the documents.

11. From August 2022 he was unemployed, and he was looking for employment that would allow him to work weekdays and have the weekends available for his children. He applied and was granted jobseeker payment from about September 2022.  

12. His parents provide him with financial support in periods when he was not working. This would not be regular amounts but just as and when it was required. These are reflected in his personal bank accounts which for that period show some ‘fast transfers’ of various amounts.

13. On 19 December 2022 he started full-time employment in [occupation 1] where he remained until about 10 April 2023. This employment was terminated because he was unable to come to an arrangement with his employer which allowed him time off work on weekends which interfered with his care of his children on weekends. His parents who are elderly could only provide limited assistance due to their health and as their health and capacity deteriorated, he was left with trying to negotiate hours with his employer which was not successful.  This evidence is supported by a letter provided by the second party’s employer.

14. He was also increasingly having to provide support to his parents who needed help with day-to-day activities such as transportation to and from appointments.  His elder sibling does not provide any assistance.  His parents are self-funded retirees and do not receive any subsidised home care.  

15. He has not been employed since April 2023, his main source of income since then was initially jobseeker and more recently he is now in receipt of carer payment. He confirmed in response to questions asked by the Tribunal that in addition to his parents his current partner and a friend also provide him with some financial support from time to time as demonstrated by his personal bank statements. He said that as and when he requires assistance, he would ask his parents and they would probably assist him. He said that those cash deposits should not be treated as a financial resource as they are irregular. The shortfall between his current income and his weekly expenses is probably being met by his parents.

16. The second party provided a Statement of Financial Circumstances which he stated is reflective of his current circumstances given he is again unemployed. This discloses his income is derived of social security payments. He does not own any real estate and holds superannuation of about $60,000.

17. A notice of the second party’s assessment for the 2021/22 financial year disclosed a taxable income of $83,678.

18. Based on his income statements he expects to have a 2022/23  taxable income in the vicinity of $69,000. [4]

    [4] This is consistent with information provided to the Agency by the second party.

19. According to the second party’s estimate of income recently lodged with Child Support his income is now derived from receipt of carer payment for his parents of $911 per fortnight (dated May 2023) and this forms the basis of his current estimate of $23,709. At hearing Mr Second party stated his fortnightly carer payments are about $1000 per fortnight.

Conclusions

1. In this case, the Tribunal is satisfied and finds that in terms of the applicant:

   a)     Since late 2021 she earns her income from full-time employment. In April 2023 she commenced new employment. As of September 2023, she is no longer employed and is seeking employment. She may possibly be in receipt of income support payments from October 2023.

   b)     She does not have access to any financial resources in addition to her employment income.

   c)   She does not own any significant assets apart from a motor car.

   d)     She does not hold any superannuation.

2. In this case the Tribunal is satisfied and finds with respect to the second party:

   a)     He recommenced full-time employment in August 2021.

   b)     He remained in full-time employment (across different employers) until August 2022.

   c)   He was unemployed between August 2022 and December 2022.

   d)     He returned to full-time employment in December 2022, he ceased that employment in April 2023.

   e)     His taxable income for the 2021/22 financial year was $83,678.

   f)    His 2022/23 taxable income will be about $69,000.

   g)     When unemployed he receives financial assistance from his parents and occasionally from his girlfriend.

   h)     In May 2023 he has lodged an estimate of income based upon receipt of carer payment.

   i)    He does not own any significant assets.

   j)    He holds superannuation of about $60,000.

Is a ground to depart established?

1. In this matter at the time of the change of assessment application, the administrative assessment in place utilised the respective 2020/21 ATIs of each parent. As noted  pursuant to that statutory formula, the general approach is that the Registrar will utilise a parent’s ATI as assessed by the Australian Taxation Office for the last relevant year of income. A review of the child support documents demonstrate that this is what was occurring in this case.

2. In this matter the Tribunal is satisfied that in reviewing the child support assessment in place at the time of the change of assessment application, the ground to depart on the basis of the second party’s income is established. This is because the second party was in full-time employment and his actual ATI relevant to the assessment of $83,678 was greater than the amount of $36,388 as utilised. If that amount was utilised, this would result in the second party’s annual liability increasing from $900 to about $5,000 per annum.

3. For this reason, the Tribunal concludes that a ground for departure exists because in the special circumstances of the case, application of the provisions of the Act relating to 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 children because of the income, property and financial resources of the second party.

Issue 2 – Is it just and equitable to make a particular departure determination?

1. As the Tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the Tribunal is to consider whether it is just and equitable as regards the children and the parental parties 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 set out in subsection 117(4) of the Act: which is discussed in the following paragraphs.[5]

Proper needs of the children

[5] The Tribunal notes the Federal Magistrates Court case of Tyagi & Meares [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4) the section need not be ‘slavishly followed, each of the relevant factors listed … should be considered’.

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 other needs of the child.

2. At hearing the applicant gave evidence about the child care costs for the child.  The Tribunal considers this aspect in relation to the direct and indirect costs incurred by a carer in providing care for the child.

The direct and indirect costs incurred by a carer in providing care for the child

1. The applicant stated that the child is four-and-a-half years of age.  He attends an early childhood education creche and also child care so she can work full time. Her costs for the child care are all out of pocket and she does not receive any subsidy. 

2. Once her son starts school (September 2023) then some of her child care costs will reduce to after school hours and this would be ongoing and those costs would probably slightly reduce. The applicant provided evidence of the costs of child care post hearing which showed billing for the period of May 2023 of about 450 euro (about $760 AUD).

3. The applicant submitted that she was not specifically seeking any additional contribution by the second party to those costs provided that the assessment was varied to require the second party pay about $500 per month.

4. The Tribunal finds that the applicant incurs out-of-pocket expenses related to child care costs which represents approximately just over 10% of her current income (of about $80,000 AUD). The Tribunal concludes that this a relevant consideration in determining whether a particular departure is 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).

1. There was no evidence presented to the Tribunal that the child has any income or unused earning capacity that needs to be taken into account in the child support assessment and as such 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. Neither party made submissions in this regard and the Tribunal concludes 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. In this matter the Tribunal has concluded that the applicant usually derives her income from her employment and otherwise does not own any significant assets or property or have access to any other financial resources.

2. The child support documents show that in 2020/21 her taxable income was $21,338 and that currently the assessment is utilising her overseas income of $82,582.  As noted the applicant’s employment has now ceased and she may possibly be in receipt of social security payments, she intends to lodge an estimate of income.  The Tribunal is satisfied that the applicant’s income, property and financial resources relevant to the assessment are reflected in her ATI as reflected in her assessed income tax returns.

3. With regard to the second party, the Tribunal concludes that he derives his income from employment and currently from social security payments. As noted, the second party has recently lodged an estimate of income which declares an income estimate of $23,709 derived from carer payment. In this case the Tribunal also notes there is evidence that he receives a level financial support from family members.

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. To succeed on this basis the Tribunal must be satisfied that all three compulsory criteria in subsection 117(7B) are satisfied before it determines that a parent’s earning capacity is greater than is reflected in his or her income for the purposes of the Act. Those criteria are:

   a)   a change in a pattern of work demonstrated by:

   ·the parent not working despite ample opportunity to do so

   ·the parent reducing the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged

   ·the parent changing his or her occupation, industry or working pattern

   b)   the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern is not justified on the basis of:

   ·the parent’s caring responsibilities

   ·the parent’s state of health

   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.

2. In this case there is evidence of a change in the second party’s pattern of work. The most recent being the applicant ceasing full-time employment as of April 2023 which he states is predominately due to not being able to negotiate time off on the weekends to care for two other dependent children and also to provide increased care to his parents

3. The applicant submitted that the second party has deliberately changed his pattern of work to minimise his child support liability. She says that she also has caring responsibilities but this does not prevent her from full time employment.

4. The second party provided evidence pertaining to his caring responsibilities. On balance, the Tribunal accepts that evidence and concludes that the second party’s earning capacity is not a consideration in any departure determination.

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

1. Each party provided a Statement of Financial Circumstances which identified their respective costs of self-support. The applicant states these to be in the vicinity of $1400 per week, the second party discloses costs of about $900 per week.

Any hardship that would be caused

1. The applicant states that she is struggling to meet her son’s costs of care.  As noted, she incurs significant child care costs which amount to over 10% of her income. The second party states that he has two other dependent children (who are already accounted for in the assessment) and has reduced income for part of the child support periods under review.

2. Allowing the formula to operate results in the second party’s ATI as assessed by the ATO for the 2021/22 year ($83,678) being applied to the assessment with effect from 25 November 2022. From 5 May 2023 the assessment has utilised the second party’s estimate of $23,816. This would mean that the second party’s ATI for the 2021/22 financial year only will apply to the assessment for a period of about six months.[6]

   [6] The Tribunal also notes that any estimate lodged in the same financial year as a departure based on income, cannot be reconciled s64(5) of the Act.

3. In considering what is just and equitable the Tribunal accepts that the applicant has incurred significant costs of childcare and in the Tribunal’s assessment, this is a relevant consideration. If the Tribunal reverted to the administrative assessment, it would also result in potential arrears being owed by the applicant arising from reversal of the implementation of the original and objection decisions[7].  This would occur at a time when the applicant is facing uncertainty in her future employment. On the other hand, the Tribunal accepts that since April 2023 the second party’s pattern of work has changed due to his caring responsibilities, he has however had periods of fulltime employment, in the Tribunal’s view his income for those periods ought to be fairly and equitably reflected in the assessment. Reverting to the administrative assessment, would not in the Tribunal’s assessment achieve such an outcome.

   [7] From what the Tribunal can ascertain the second party is not in arrears

4. For these reasons the Tribunal is proposing a departure so that for the periods

• 13 May 2022 to 31 July 2022, the second party’s ATI is varied to $83,678

• 1 August 2022 to 4 May 2023 the second party’s ATI is varied to $69,000

1. In the Tribunals assessment a departure in these terms strikes a balance which is both just and equitable which takes into account the respective circumstances of the parties. The Tribunal notes that it differs from the most recent objection decision by extending the application of a varied ATI until 4 May 2023. This is a date shortly after the second party ceased his full time employment (in April 2023) and is just before the estimate takes effect. On this basis the second party will incur a weekly child support liability of about $90 for a  further period of about six months before the administrative assessment which utilises his estimate resulting in a weekly liability of about $8 per week takes effect.

2. Although the second party is currently in receipt of carer payment, the Tribunal notes evidence that he also receives a level of financial assistance from his parents. The Tribunal is satisfied that any arrears generated by implementation of the proposed departure will not cause hardship for the second party.

3. For these reasons the Tribunal is satisfied that a departure in the proposed terms is just and equitable.

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

1. The final step is for the Tribunal to determine 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 left to the public welfare system.

2. At hearing, the second party stated that he received FTB as the departure may impact the impost on the public purse, the Tribunal is satisfied that it would be otherwise proper to make a departure in the proposed terms.

DECISION

The Tribunal sets aside the decision under review and, in substitution to depart from the administrative assessment so that for the periods:

• 13 May 2022 to 31 July 2022, the second party’s adjusted taxable income is varied to $83,678.

• 1 August 2022 to 4 May 2023 the second party’s adjusted taxable income is varied to $69,000.