Flatley and Flatley (Child support)

[2022] AATA 2099

Flatley and Flatley (Child support) [2022] AATA 2099 (5 May 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC022851

APPLICANT:  Mr Flatley

OTHER PARTIES:  Child Support Registrar

Mrs Flatley

TRIBUNAL:Member F Staden

DECISION DATE:  5 May 2022

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – money, goods or property provided for the benefit of the child – decision to depart –  decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mr Flatley and Ms Flatley are the separated parents of [Child 1], born 2006. There has been a child support assessment for this case from 8 January 2021. [Child 1] is in the greater than primary care (100%) of Ms Flatley. Mr Flatley is the parent liable to pay child support. Ms Flatley opted for collection of child support by Services Australia – Child Support (Child Support) from 8 January 2021.

2. At around the time of Mr Flatley’s change of assessment application, the following assessments were in place:

   ·     For the period 8 January 2021 to 18 February 2021, Mr Flatley’s annual child support liability was $17,856 based on Mr Flatley’s 2019/20 derived adjusted taxable income of $126,539 and Ms Flatley’s 2019/20 derived adjusted taxable income of $62,459;

   ·     For the period 19 February 2021 to 30 June 2021, Mr Flatley’s annual child support liability was $18,936 based on Mr Flatley’s 2019/20 derived adjusted taxable income of $126,539 and Ms Flatley’s 2020/21 estimated income of $45,940;

   ·     For the period 1 July 2021 to 8 July 2021, Mr Flatley’s annual child support liability was $17,856 based on Mr Flatley’s 2019/20 derived adjusted taxable income of $126,539 and Ms Flatley’s 2019/20 derived adjusted taxable income of $62,459; and

   ·     For the period 9 July 2021 to 7 April 2022, Mr Flatley’s annual child support liability was $18,936 based on Mr Flatley’s 2019/20 derived adjusted taxable income of $126,539 and Ms Flatley’s 2020/21 estimated income of $45,940.

3. On 1 June 2021, Mr Flatley applied for a change of assessment on the basis of money, goods or property provided for the benefit of the child or children (Reason 5).

4. On 26 July 2021, Ms Flatley lodged a written response to Mr Flatley’s application.

5. On 2 August 2021, a Child Support primary decision maker found Reason 5 established and made the following decision:

   ·     For the period 8 January 2021 to 8 July 2021, the annual rate otherwise payable by Mr Flatley shall be reduced by $6,280.

6. Ms Flatley lodged an objection to the 2 August 2021 decision on 17 September 2021.

7. On 12 November 2021, an objections officer allowed Ms Flatley’s objection and made the following decision:

   ·     For the period 8 January 2021 until a terminating event for [Child 1], the annual rate payable by Mr Flatley shall be set to $18,936.

8. On 1 December 2021, Mr Flatley applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision.

9. On 9 March 2022, a telephone directions hearing was conducted with Mr Flatley and Ms Flatley. Directions were issued on 10 March 2022 and 11 April 2022.

10. A hearing was held on 5 May 2022 in Canberra. Mr Flatley and Ms Flatley gave sworn evidence by telephone. Ms Flatley was represented by [Ms A] of [Law Firm 1]. The tribunal had before it papers from Child Support (326 pages), Mr Flatley (pages A1 to A107) and Ms Flatley (pages B1 to B183). Copies of these documents were provided to all parties.

11. Relevant aspects of the evidence are referred to in the consideration below.

ISSUES

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under the Child Support (Assessment) Act 1989 (the Assessment Act). The formula used to calculate the rate takes into account factors such as the number of children, the levels of care provided and the income of each parent.

2. Under section 98B of the Assessment Act, a liable parent or carer receiving child support can apply to the Child Support Registrar for a determination to depart from the administrative assessment. This is known as a change of assessment.

3. Under section 98C of the Assessment Act, the Child Support Registrar, here the tribunal, may change the assessment if the case meets the following three criteria:

   · There is a ground to depart from the assessment (subsection 117(2) of the Assessment Act lists those grounds). Only one ground has to be established for the tribunal to proceed to consider the next criterion (Marsh & Eccles [2008] FMCAfam 1417);

   ·     It is “just and equitable” to make particular changes to the assessment; and

   ·     It is “otherwise proper” to make those changes to the assessment.

CONSIDERATION

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

1. Subparagraph 117(2)(c)(ii) of the Assessment Act provides a ground for departure exists where, in the special circumstances of the case, the use of the administrative assessment would result in an unjust and inequitable determination of a parent’s child support liability because of the provision of money, goods or property for the benefit of the child or children.

2. 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.

3. Ms Flatley, [Child 1] and the older child of Ms Flatley and Mr Flatley live in a dwelling on a rural property (the farm) in the name of Mr Flatley. He bought the [size] farm in 2012 for $530,000 and currently values it at $700,000. There are [number] sheep on the farm. Mr Flatley lived on the property until he and Ms Flatley separated in August 2020.

4. The [Bank 1] home loan in relation to the farm (the home loan) is in Mr Flatley’s name alone. Other than one repayment by Ms Flatley in June 2021, Mr Flatley has made all home loan repayments since the August 2020 separation. Mr Flatley argued that his home loan repayments should be treated as a payment for the benefit of [Child 1] as he is providing a home for him.

5. Ms Flatley argues that the farm dwelling is in very poor condition and is not adequate accommodation for [Child 1]. She provided an assessment by [Ms B], Senior NSW Property Manager, [Estate Agent 1] which stated: “We believe in the current rental market a weekly amount of $255 to $275 could be achieved … The property needs considerable repairs to be deemed habitable for rental purposes. …” Attached to the valuation was a lengthy list of repairs necessary before a tenancy could be undertaken.

6. The tribunal confined its attention to home loan repayments made by Mr Flatley from January 2021, the start of the child support assessment in this case. Although Mr Flatley did not make a change of assessment application on the basis of his home loan repayments until June 2021, he had agitated the issue of his home loan repayments with Child Support since at least March 2021 under non-agency payment provisions.

7. At the beginning of January 2021, the balance owing on the home loan was $308,097 and the interest rate was 4.52%. According to the [Bank 1] Home Loan Repayment Calculator (the Calculator), the associated required minimum fortnightly repayment was $722. From 3 September 2021, the interest rate fell to 2.19% and, again according to the Calculator, the associated required minimum fortnightly repayment was $523. Mr Flatley said that the interest rate fall was because he renegotiated the loan after the bank failed to apply a Covid-related pause to the home loan repayments.

8. Bank statements provided by Mr Flatley show that from 1 January 2021 to 31 January 2022, he made 28 fortnightly home loan repayments of $1,000, totalling $28,000. Additional repayments made over that period were: 27 April 2021 – $500 from Mr Flatley and 30 June 2021 – $1,000 from Ms Flatley. Thus, a total of $29,500 was paid into the home loan account between 1 January 2021 and 31 January 2022. On 28 May 2021, $1,000 was transferred out of the home loan account into an account in Mr Flatley’s name, reducing the repayments to $28,500. Of these repayments, $18,226 can be taken to be minimum required fortnightly repayments (($722*18) + ($523*10)) for the period 1 January 2021 to 31 January 2022, with the remaining $11,274 reducing the outstanding home loan amount.

9. The tribunal therefore found that the necessary expenditure on the home loan during the period 1 January 2021 to 31 January 2022 was the required minimum repayments of $18,226 of which Ms Flatley paid $1,000 and Mr Flatley $17,226. While it was open to Mr Flatley to make home loan repayments above the required minimum during this time, the tribunal found that it was not a necessary expense and so should not be taken into account in the cost of providing accommodation for [Child 1].

10. The tribunal also identified five payments of $500, a total of $2,500, to the [council] in Mr Flatley’s bank statements for the period 1 January 2021 to 31 January 2022. The tribunal accepted that these were payments towards the council rates for the farm and should be considered along with Mr Flatley’s necessary home loan repayments. There was no other evidence about the rates for the farm.

11. The tribunal therefore concluded that Mr Flatley paid $19,726 ($17,226 + $2,500) over the period 1 January 2021 to 31 January 2022 in necessary home loan repayments and rates for the farm, an average of about $700 a fortnight.

12. The tribunal found that Mr Flatley’s payments to [Bank 1] and [the council] in relation to the property in which [Child 1] lives constitute a special circumstance in this case and that, given that special circumstance, the use of the administrative assessment in this case would result in an unjust and inequitable determination of Mr Flatley’s child support liability. The tribunal therefore found that Reason 5 is established. The question of whether it would be just and equitable to change the child support assessment on the basis of Reason 5 is considered below.

Issue 2: Is it just and equitable to depart from the administrative assessment?

1. To decide whether it is just and equitable to depart from the administrative assessment, the tribunal must consider the matters required by subsection 117(4) of the Assessment Act, plus any other matters raised in the change of assessment application.

Duty of a parent to maintain a child/commitments necessary for self-support or the support of anyone else the parent has a duty to maintain

1. Section 3 of the Assessment 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.

2. Mr Flatley and Ms Flatley each have the primary duty to financially support [Child 1]. Neither identified anyone whom they have a legal duty to maintain.

3. Mr Flatley did not identify any personal health-related costs or any other unusual self-support expenses he wished the tribunal to consider. Ms Flatley noted that she was in a major car accident in 2008 in which she suffered significant injuries leading to an ongoing need for rehabilitation. She is also seeing a psychologist and has a sleep condition. Ms Flatley did not provide evidence in relation to her health expenses in 2021/22, noting at the telephone directions hearing that she has only recently begun addressing her health needs after a period of not doing so.

The proper needs of the child

1. In determining the proper needs of a child, it is necessary to consider the manner in which the parents expected the child to be cared for, educated or trained, and any special needs of the child.

2. [Child 1] attends a Catholic school and the parents equally share the school fees.

3. [Child 1] has several health conditions which have associated costs. He has a diagnosed auditory processing issue, with connected learning difficulties and requires one and sometimes two tuition sessions a week at a cost of $55 a session. He has a sleep disorder for which he sees [Dr C] of [a named] Sleep Disorders Clinic every three months and takes specialist prescribed medication. It costs Ms Flatley $170 a visit to [Dr C] plus the fuel and accommodation costs associated with a trip to Sydney. [Child 1] continues to see a specialist paediatric dentist in Sydney every six months, again with related travel costs plus a cost per visit which varies from around $200 to more than $400 depending on treatment received. [Child 1] also has low muscle tone for which he needs regular physiotherapy at a cost of around $40 a session in addition to using the school gym. Finally, [Child 1] has been seeing a clinical psychologist, [Ms D], under a GP mental health plan, with an out-of-pocket cost of just over $100 a visit. He should go once a month but is only going every three months.

4. Mr Flatley said that he was not aware of all of [Child 1]’s health-related needs and treatments. He submitted that Ms Flatley had embellished [Child 1]’s requirements to an extent and wanted to see more detailed evidence of the outgoings. His view was that many of these issues had been dealt with when [Child 1] was in primary school, although he agreed with the provision of tutoring for [Child 1]. Ms Flatley responded that [Child 1]’s auditory processing issue and low muscle tone will be lifelong issues. Mr Flatley noted that he has now taken out health insurance which will cover [Child 1] and assist with some of his costs.

5. The tribunal observed that there was evidence in Ms Flatley’s bank statements and other material of her outgoings in relation to the costs of meeting [Child 1]’s health needs and was satisfied that these costs were significantly higher than might be expected, at least an average of $150 a week, or $300 a fortnight, including tuition. This may reduce once [Child 1] has access to Mr Flatley’s health insurance.

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

1. There is no evidence that [Child 1] has access to income, property or financial resources which could be used for his self-support.

Income, property and financial resources and earning capacity of Mr Flatley

1. Since July 2019, Mr Flatley has been suspended on full pay, about $120,000 a year, from his job as an [Occupation 1]. The reason for his suspension and the related proceedings are not relevant here. However, Mr Flatley is concerned that when those proceedings are finalised he will no longer be employed.

2. In his 17 December 2021 Statement of Financial Circumstances (SoFC), Mr Flatley noted that he also worked as a [Occupation 2] in the period January 2020 to May 2021, earning around $600 a week. This equates to around $26,000 in 2020/21. At hearing, Mr Flatley explained that he had to cease this employment because his doctor stated that he was unable to sign Mr Flatley off as unable to do one job and yet as able to do another.

3. Finally, Mr Flatley has an ABN and runs the farm as a sole trader/contractor. As he no longer lives at the farm, his involvement in the enterprise has effectively been put on hold. The tribunal observed that, as the farm is in his name, Mr Flatley could reduce his taxable income by claiming farm-related expenses, including interest on the home loan, as allowable business deductions. There would be no principal place of residence issues in relation to the period from January 2021 on as Mr Flatley has not lived at the farm since August 2020. Mr Flatley stated that one reason why he could not lodge an income tax return is that he does not have access to documents which are at the farm. The tribunal observed that Mr Flatley last lodged an income tax return in 2004 and so his separation from Ms Flatley was not the primary reason for his non-lodgement.

4. In terms of assets other than the farm, Mr Flatley is one of ten members of a car club who own a property valued at around $100,000 and he and Ms Flatley jointly own a property neighbouring the farm through their self-managed superannuation fund. The parties dispute the current financial status and value of this superannuation asset. Mr Flatley lists a contribution of $230 a week to it which is shown on his pay slips, Ms Flatley does not. Ms Flatley argued that the fund was in arrears. Mr Flatley stated that he had no knowledge of this.

5. Mr Flatley told the tribunal that he has paid off various credit card debts and his car loan by selling the car that was subject to the loan to his current partner. Thus, his only liability of significance is the home loan. Mr Flatley explained that the $500 a week in rent/mortgage in the average weekly expenses listed on his SoFC is his repayment of the home loan. Whether he is staying with his parents, as stated on his SoFC, or his current partner, Mr Flatley pays no rent. He lists little else as outgoings for himself or [Child 1], mainly food ($200 a week for Mr Flatley and a $200 contribution to household costs), [Child 1]’s school fees ($92 a week), telephone ($40 a week) and gifts, hairdressing and toiletries ($40 a week). He does not have vehicle-related expenses because he no longer owns a car and borrows one from his parents or partner when needed. His only other listed outgoings are income tax and child support but the tribunal notes Mr Flatley’s evidence that he will now have the additional expense of health insurance.

Income, property and financial resources and earning capacity of Ms Flatley

1. Ms Flatley works full-time as a [Occupation 3]. Her usual earnings are around $50,000 a year but in December 2021 she received a $7,000 bonus. On 9 March 2022, Ms Flatley lodged an income tax declaration of $59,000 for 2020/21. Her last lodged income tax return was for 2003/04 as was the case for Mr Flatley. Ms Flatley has no other sources of income apart from the family tax benefit and child support she receives for [Child 1].

2. Ms Flatley has little in the way of assets, other than the joint superannuation fund mentioned above, although this is likely to change once the parties complete a property settlement. Her liabilities as listed on her 12 December 2021 SoFC consist of about $2,000 in combined debts owed to her credit card provider, a vet and Revenue NSW. She also has a loan from her older son of $31,000. Evidence in Ms Flatley’s bank statements shows that she often borrows money for particular purposes from her mother and then repays it when she is able. Ms Flatley confirmed that this is the case.

3. Ms Flatley’s SoFC indicates that she has health insurance but this is no longer the case as she was unable to afford it. Medical/chemist/pharmaceutical expenses are high, around $250 a week with about $90 of this being for [Child 1]. This approximately accords with the tribunal’s finding above that the cost of meeting [Child 1]’s health-related needs once tuition costs are taken into account is around $150 a week or $300 a fortnight.

4. The other notable outgoing in Ms Flatley’s SoFC is farm expenses, including the unpaid work of Ms Flatley and her sons, which Ms Flatley estimated to total over $1,000 a week. Ms Flatley acknowledged that she had additionally briefly agreed to contribute to the cost of the home loan but said she ceased on legal advice. Mr Flatley disputes Ms Flatley’s assessed values of farm expenses and unpaid work, although he does concede that there are such expenses and that unpaid work is done. Even allowing for Mr Flatley’s concerns, the tribunal found it not unreasonable to attribute a value of at least $500 a fortnight to the farm expenses met and the unpaid work done by Ms Flatley, [Child 1] and his brother.

Direct and indirect costs of providing care for the child incurred by the parent entitled to child support

1. Ms Flatley did not identify any particular costs associated with caring for [Child 1] other than those mentioned above.

What determination should be made taking into account the above factors?

1. The proposed departure determination is that:

   ·     For the period 8 January 2021 to 31 May 2023, until a terminating event for [Child 1], the annual rate of child support payable by Mr Flatley is set at $18,936.

2. The start date of 8 January 2021 is the date from which this case was registered for a child support assessment and it was only after this that Mr Flatley first agitated the issue of his home loan repayments being taken into account by that assessment. The start date is also consistent with the start date used in the original decision and objections officer’s decision in this matter.

3. The end date of a terminating event for [Child 1] will give the parties certainty going forward.

4. The amount of the child support liability has not been adjusted on the basis of Mr Flatley’s necessary minimum home loan and rate payments of around $700 a fortnight. The tribunal found that these payments are more than balanced out by the fortnightly costs to Ms Flatley of meeting [Child 1]’s special needs, about $300 a fortnight, and of maintaining the farm, minimally $500 a fortnight. It would, therefore not be just and equitable to change the assessment on the basis of Mr Flatley’s home loan and rate payments.

5. The $18,936 in child support liability is that associated with Mr Flatley’s 2019/20 derived adjusted taxable income of $126,539 and Ms Flatley’s 2020/21 estimated income of $45,940 and was the amount determined by the objections officer in this matter. Ms Flatley has since declared her 2020/21 taxable income to be $59,000. Mr Flatley’s identified taxable income for 2020/21 is around $146,000, $120,000 from his suspended employment and $26,000 from his work as a [Occupation 2]. Allowing for allowable deductions should either party lodge an income tax return, the resulting annual child support liability would be above $18,936 but not significantly so. The tribunal noted the evidence in Ms [A’s] submission that Ms Flatley accepted the level of child support determined by the objections officer and the tribunal therefore found no reason to disturb the objections officer’s decision in this regard.

Any hardship resulting from the departure determination

1. Mr Flatley continues to be suspended on full pay and the tribunal was not persuaded that Mr Flatley was likely to experience hardship because of this decision. Mr Flatley believes he may lose his job soon but that has yet to occur. If it does happen, there will likely be other employment opportunities for someone with Mr Flatley’s skills and his asset situation may be clearer if a property settlement is completed with Ms Flatley. Additionally, Mr Flatley would have the option of making another change of assessment application based on a significant change in circumstances as would Ms Flatley.

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

1. The tribunal considered the impact of its proposed determination on the balance of support provided by the parents on one hand and the taxpayer on the other. It is necessary to decide whether this is a proper outcome given that parents have the primary responsibility to support their children.

2. Ms Flatley receives family tax benefit for [Child 1]. The proposed determination will not significantly impact the amount Ms Flatley receives. The tribunal was therefore satisfied that this decision is otherwise proper in the circumstances of the case.

DECISION

The decision under review is affirmed.