Florey and Varley (Child support)

[2021] AATA 4528

Florey and Varley (Child support) [2021] AATA 4528 (8 October 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC021265

APPLICANT:  Mr Florey

OTHER PARTIES:  Child Support Registrar

Ms Varley

TRIBUNAL:  Member P Jensen

DECISION DATE:  8 October 2021

DECISION:

The decision under review is set aside and, in substitution:

• Mr Florey’s rate of child support payable is increased by $5,840 per annum from 5 June 2020 to 31 December 2020;

• Mr Florey’s rate of child support payable is increased by $10,773 per annum from 1 January 2021 to 31 December 2021;

• Mr Florey’s rate of child support payable is increased by $11,376 per annum from 1 January 2022 to 31 December 2022; and

• Ms Varley’s adjusted taxable income is varied to $90,872 per annum from 1 September 2021 to 31 December 2022.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education significantly affect costs of child – special needs of the child do not significantly affect costs of child – ground established – 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

Introduction

1. Mr Florey and Ms Varley are the parents of [Child 1] who was born in 2007 and [Child 2] who was born in 2009. A child support case was registered in 2014 with what is commonly called the Child Support Agency or CSA. From November 2015, Mr Florey was recorded as providing 6% care and Ms Varley was recorded as providing 94% care for the children.

2. A change in care occurred on 18 December 2020. Ms Varley has been recorded as providing 80% care from that date. Mr Florey has been recorded as providing 20% care from 12 February 2021, which was when the CSA was belatedly advised of the change in care.

3. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 1 April 2020 the administrative assessment was based on Mr Florey’s 2018-19 adjusted taxable income of $98,189, Ms Varley’s 2018-19 provisional income of $88,371 and the parents’ recorded care for the children. Mr Florey was assessed to pay $16,970 per annum in child support.

4. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Varley lodged a departure application on 5 June 2020. The CSA granted her application and increased Mr Florey’s rate of child support payable from 5 June 2020 to 31 December 2021 by $5,200 per annum on account of [Child 1]’s private school fees. Mr Florey objected to that decision. An objections officer disallowed the objection. Mr Florey applied to the Tribunal for further review. I conducted a directions hearing on 9 July 2021 and a full hearing on 8 October 2021.

5. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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; …

A ground for departure

1. Subparagraph 117(2)(b)(ia) of the Act, commonly referred to as Reason 2, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ia)because of special needs of the child …

2. [Child 1] suffers from anaphylaxis. On 27 July 2020, Mr Florey stated in his response to Ms Varley’s departure application that he pays for “top private health insurance (BUPA $352 per fortnight) for myself and [Child 1] and [Child 2]”.[1] At the full hearing, Mr Florey confirmed that his wife is also covered by the insurance policy.

   [1]Page 86 of the hearing papers.

3. On 6 November 2020 the original decision-maker concluded that Reason 2 was not established, noting:[2]

   I do not have any evidence for consideration of ongoing necessary expenses that either parent is incurring for [Child 1]’s condition.

   [2]Page 205 of the hearing papers.

4. On 26 March 2021 the objections officer concluded that Reason 2 was not established, noting:[3]

   Whilst I do not question Mr Florey’s claim regarding [Child 1]’s health or wellbeing, there is no evidence to suggest an essential need for [private health insurance] to mitigate subsequent significant costs for [Child 1]’s medical treatment. Nor is there indication that such incurred, would be as significant as to be a financial detriment to Mr Florey’s ability to cater for his children’s financial needs.

   [3]Page 15 of the hearing papers.

5. To date, Mr Florey has not provided any further documentary evidence concerning the gross costs incurred in respect of [Child 1]’s anaphylaxis. At the full hearing he confirmed that he had not calculated those costs. He also agreed that he presumably would have to pay additional tax if he did not have private health insurance, but he had not calculated the quantum of that additional tax. He said that he had obtained the top tier of private health insurance prior to the children being born and they have always enjoyed that level of private health insurance. It follows that the decision to obtain that level of private health insurance was not in response to [Child 1] being diagnosed with anaphylaxis. Mr Florey stated that [Child 1] has been rushed to hospital multiple times due to her anaphylaxis. He confirmed that those emergency admissions had been via the public health system.

6. [Child 1] requires prescription glasses. Neither parent provided documentary evidence (such as receipts) to establish the cost of her glasses. Both parents acknowledged that the costs of [Child 1]’s prescription glasses did not warrant a variation to the rate of child support payable. In my opinion, those acknowledgements were properly made.

7. The evidence does not establish that the costs of maintaining the children are significantly affected by the costs associated with their special needs. Reason 2 is not established.

8. Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents …

9. [Child 1] attends [School], Brisbane. The parents separated in September 2013.[4] On 16 June 2017 they signed an “Agreement with the School” in which they asked [School] to accept [Child 1] as a student and they agreed to certain conditions including a condition that “I/We will pay all fees”.[5] At the hearing, Mr Florey acknowledged that when he signed that document he expected [Child 1] to be educated at [School].

   [4]Page 247 of the hearing papers.

   [5]Page 54 of the hearing papers.

10. [Child 1]’s fees in 2019 were $5,840 per term but she received a COVID-19 concession of $2,920 per term for Terms 2 to 4 of 2019.[6] Ms Varley lodged her departure application towards the end of Term 2, by which time [Child 1]’s net fees were $2,920 per quarter which equates to $11,680 per annum.

    [6]Pages 285 and 287 of the hearing papers.

11. [Child 1] has not received a COVID-19 concession in 2021. She is currently in Year 9. Fees for Years 7 to 11 are $23,940.[7] Ms Varley said she applied for, and was granted, a 10% discount. The discounted fees are $21,546.

    [7]Page B13 of the hearing papers.

12. There was a 5.6% increase in the school’s fees from 2020 to 2021 (before any concession) and I consider that evidence to be the best evidence of the likely increase in fees for 2022. Ms Varley said she is likely to receive a 10% discount in 2022. [Child 1]’s fees for 2022 are likely to be $23,940 x 1.056 x 0.9 = $22,752.

13. Ms Varley is the only parent who makes payments directly to the school. Usually, the fact that both parents expected their child to be educated at a particular school but only one parent is paying the significant school fees would constitute special circumstances. Mr Florey effectively submitted that there were two reasons why the circumstances of the current case did not constitute special circumstances.

14. First, Mr Florey submitted that the parents’ property settlement had been adjusted in Ms Varley’s favour on the basis that she would meet the children’s out-of-the-ordinary costs and Mr Florey’s contribution to their costs would be confined to his administratively assessed rate of child support payable. Mr Florey provided a copy of the parents’ agreement concerning their property settlement.[8] There is no dispute that the Family Court subsequently made consent orders that reflected the terms of that agreement. There is also no dispute that the orders do not refer to any variation in Ms Varley’s favour for the reasons stated by Mr Florey. I referred Mr Florey to section 66R of the Family Law Act 1975. The effect of that section is that if an order does not refer to such a variation, the order “is taken not to make provision for the maintenance of the child.” I am required by law to proceed on that basis. It was therefore not necessary to hear from Ms Varley on that issue.

    [8]Page 266 of the hearing papers.

15. Second, Mr Florey said that when Ms Varley presented the “Agreement with the School” to him, she said that she would pay all the school fees. Ms Varley said that did not occur. The condition of the “Agreement with the School” referred to above, in the context of both parents signing the document, relevantly states: “We will pay all fees”. In the absence of any further evidence on point, I am not persuaded that Ms Varley undertook to pay all the school fees. 

16. [Child 1] is being educated in the manner that was expected by the parents and the associated fees significantly affect the costs of maintaining her. The circumstances as a whole constitute special circumstances. Reason 3 is established in relation to [Child 1]’s [School] fees.

17. During the full hearing I asked Ms Varley about [Child 2]’s schooling. She said he is currently attending a public school but he is enrolled to commence Year 7 at a private school in 2022. It appears that Mr Florey has not signed the enrolment form for that school. If [Child 2] attends that school, it appears that there will be a dispute as to whether he is being educated in the manner that was expected by the parents. Ms Varley did not raise the issue of [Child 2]’s secondary school education with the CSA. Neither parent has provided any documentary evidence on the issue. After some discussion, both parents were agreeable to me proceedings on the basis that Reason 3 is not established in respect of [Child 2]’s education to date and it would be premature to make findings of fact in respect of the education that he might receive in 2022. The matter was left on the basis that if [Child 2] attends a private school in 2022, Ms Varley can lodge another departure application in respect of that change in circumstances.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Varley is [an Occupation 1]. She has been employed by [Employer] for over four years. She salary-packages a portion of her income. Her 2019-20 taxable income was $71,202. Her 2019-20 adjusted taxable income, which included the value of her salary packaging, was $90,872.

3. According to documentation provided by Mr Florey, Ms Varley’s 2020-21 adjusted taxable income was $61,157 and the administrative assessment has been based on that income since 1 September 2021.[9] At the full hearing, Ms Varley said her income had not changed since 2019-20. She said she had started using a different accountant. It appears that her accountant might have made a mistake when preparing her 2020-21 tax return. Both parents were agreeable to Ms Varley’s adjusted taxable income being varied to $90,872 per annum from 1 September 2021.

   [9]Pages A11 and A12 of the hearing papers. The CSA was required to provide that information but did not do so: section 38AA of the Administrative Appeals Tribunal Act 1975.

4. Ms Varley completed a Statement of Financial Circumstances on 6 May 2021. She stated that she owns her home which she valued at $1.4m and she has an associated home loan with an effective balance of $0.3m. Her household consists of herself and the two children. Apart from [Child 1]’s school fees, Ms Varley’s household expenses are unremarkable.

5. Mr Florey disputed some of the financial information that Ms Varley provided. For example, he disputed the declared net balance of her superannuation. Ms Varley confirmed the balance that she had declared. Mr Florey was unable to take the matter further. If I had considered it likely that further investigations into that matter or the other matters that Mr Florey had raised would affect the appropriate rate of child support payable I would have directed Ms Varley to provide documentation in respect of those matters. On an assessment of the evidence as a whole, I did not consider that necessary.

6. Mr Florey is [an Occupation 2]. There is no dispute that his income is fairly reflected in his adjusted taxable incomes as assessed by the Australian Taxation Office from time to time. His adjusted taxable incomes for 2018-19 and 2019-20 were $96,189 and $99,291 respectively.

7. Mr Florey’s household consists of himself, his wife, his two stepchildren and [Child 1] and [Child 2]. Mr Florey’s wife is [an Occupation 3] and she earns approximately $73,000 per annum. He said she owns their home and she is liable for the associated home loan. He said they recently purchased a negatively geared investment property but she has a 99% interest in the property and the associated loan and he has a 1% interest. His only other debt is a credit card debt which, as at 29 August 2021, had a balance of $6,600.[10] His average household expenditure is unremarkable.[11] Ms Varley disputed some of the financial information that Mr Florey had provided. On a consideration of the evidence as a whole, I did not consider it necessary to investigate those matters further.

   [10]Page A6 of the hearing papers.

   [11]Page A8 of the hearing papers.

8. The parents have similar incomes. Ordinarily it would be appropriate to require them to make equal contributions towards [Child 1]’s [School] fees. The original decision-maker limited Mr Florey’s contribution to $5,200 per annum. The original decision‑maker noted (with underlining added):[12]

Mr Florey advised he is leasing a vehicle through a salary sacrifice package. His payslips show fortnightly deduction amounts for [Financial institution] totalling $862 per fortnight, which is the same amount he listed on his change of assessment application for car payments.

…

Mr Florey’s personal expenses declared in his application include his fortnightly payments of $862 for his novated lease arrangement. I should point out that the purchase of an asset does not take priority over child support.

However, after taking into account the tax payable on his taxable income and his reasonable personal expenses, he has limited capacity to contribute towards the school fees at this point.

[12]Pages 207 and 208 of the hearing papers.

1. The objections officer reached a similar conclusion.[13] At the full hearing I questioned Mr Florey about his payslip for the fortnight ending 7 May 2021.[14] He agreed that his employer contributed $651.19 towards his superannuation and he made a voluntary contribution of $255.05 (which equates to voluntary contributions of approximately $6,650 per annum). He was making similar voluntary contributions in July 2020.[15] He no longer has a novated lease and he is no longer making novated lease payments.[16] His election to make voluntary superannuation payments of approximately $6,650 per annum suggests that his capacity to contribute to [Child 1]’s [School] fees is greater than he has previously indicated.

   [13]Page 18 of the hearing papers.

   [14]Page A9 of the hearing papers.

   [15]Page 107 of the hearing papers.

   [16]The payslip for the fortnight ending 17 July 2020 on page 112 of the hearing papers shows the regular payments via REMSERV.

2. In order to properly investigate whether Mr Florey lacked the capacity to effectively pay half of [Child 1]’s [School] fees, I directed him on 9 July 2021, and again on 31 August 2021, to provide his bank account statements for the period from 1 July 2020 to 30 June 2021. He failed to comply with those directions. That failure can be viewed within a broader context.

3. On 19 April 2021 the Tribunal Registry sent a letter to Mr Florey which included the following:

   You must complete the enclosed Statement of Financial Circumstances and return it to the [Tribunal] within 14 days.

4. On 4 May 2021 the Registry sent another letter to Mr Florey. It noted his failure to return the Statement of Financial Circumstances and it gave him a further 7 days to do so.

5. The matter was listed for a directions hearing on 9 July 2021. I issued a written direction on 5 July 2021 which was emailed to Mr Florey. I noted his ongoing failure to complete and return a Statement of Financial Circumstances and I directed him to provide that document by midday on 8 July 2021. I informed him that if he failed to comply with the direction, his application for review might be dismissed.

6. Approximately one hour before the directions hearing, Mr Florey sent an email to the Registry stating that he was sick and unable to attend. He did not provide any supporting documentation such as a medical certificate. He did not withdraw his application for review. The directions hearing proceeded in his absence. Ms Varley indicated that she would prefer the matter to proceed to a full hearing rather than have it dismissed on the basis of Mr Florey’s non-compliance with my direction. On 9 July 2021, I listed the matter for a full hearing on 13 August 2021 and I issued directions to both parents which included a direction to Mr Florey to provide “account statements of all financial accounts (including savings accounts, cheque accounts, business accounts, credit card accounts and loan accounts) to which he was a signatory (either solely or jointly) from 1 July 2020 to 30 June 2021” by 30 July 2021. Three days before the scheduled full hearing, Mr Florey withdrew his application for review. Ms Varley subsequently applied to have it reinstated. On 30 August 2021, I granted her reinstatement application. On 31 August 2021, I issued further directions which effectively restated the directions dated 9 July 2021 to the extent that the parents had not complied with those earlier directions. Importantly, Mr Florey was once again directed to provide his bank account statements from 1 July 2020 to 30 June 2021. On 20 September 2021 the Registry sent a letter to Mr Florey concerning his non‑compliance with the directions.

7. At the full hearing I asked Mr Florey why he had not provided his bank account statements for the period from 1 July 2020 to 30 June 2021. He said he thought he had provided them. It became apparent that he was referring to documentation that he provided to the CSA on 27 July 2020: some bank account balances; the first page of a five-page statement for one of his savings accounts which covered the period from 31 March 2020 to 30 April 2020; three credit card summaries; and one credit card statement for the period from 10 to 29 June 2020.[17] I do not accept that Mr Florey mistakenly believed that his provision of that documentation to the CSA constituted compliance with the relevant direction. In response to further questions, Mr Florey referred to the withdrawal of his application for review and its subsequent reinstatement, and he stated: “[T]hat’s why I hadn’t bothered. I didn’t give it another thought after that.” He said he was willing to provide his bank account statements for the period from 1 July 2020 to 30 June 2021. However, he had already been directed to provide those statements and he had failed to do so. The directions included the following information: “The [Tribunal] may draw adverse inferences against a party if that party fails to comply with a direction to give information or evidence to the [Tribunal].” I did not consider it appropriate to delay the resolution of the matter by adjourning the proceedings to give Mr Florey a further opportunity to comply with the directions dated 9 July 2021 and 31 August 2021, considering his additional evidence, and then reconvening for a second day of hearing. Having considered the circumstances surrounding Mr Florey’s ongoing failure to comply with his legal obligation to provide his bank account statements, I find that he intentionally did not provide those statements because he knew that they did not support his assertion that he lacked the capacity to effectively pay half of [Child 1]’s [School] fees. I find that he had, and still has, that capacity. I also find that it is appropriate to require him to make that contribution.

   [17]Page 106 to 111 of the hearing papers.

1. Ms Varley lodged her departure application on 5 June 2020 and I consider it appropriate to make a departure decision with effect from that date. [Child 1] will complete Year 10 in 2022 and I consider it appropriate to make a departure decision with effect until 31 December 2022.  Mr Florey’s rate of child support payable will be increased by $11,680 / 2 = $5,840 per annum from 5 June 2020 to 31 December 2020, $21,546 / 2 = $10,773 per annum from 1 January 2021 to 31 December 2021 and $22,752 / 2 = 11,376 per annum from 1 January 2022 to 31 December 2022.

2. Ms Varley’s adjusted taxable income will be varied to $90,872 per annum from 1 September 2021 to 31 December 2022.

3. The proposed decision will increase Mr Florey’s child support arrears by approximately $4,500 and it will require him to pay a current rate of child support of approximately $28,300 per annum. For the reasons stated above, I find that he has been under-assessed to date and he has the capacity to pay those arrears and that rate of child support payable, and it is appropriate that he do so. The proposed decision will be just and equitable.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

2. Ms Varley stated that she receives “government benefits” but she did not know their name.[18] She probably receives family tax benefit. Increasing Mr Florey’s rate of support payable will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result will be otherwise proper.

   [18]Page B3 of the hearing papers.

DECISION

The decision under review is set aside and, in substitution:

• Mr Florey’s rate of child support payable is increased by $5,840 per annum from 5 June 2020 to 31 December 2020;

• Mr Florey’s rate of child support payable is increased by $10,773 per annum from 1 January 2021 to 31 December 2021;

• Mr Florey’s rate of child support payable is increased by $11,376 per annum from 1 January 2022 to 31 December 2022; and

• Ms Varley’s adjusted taxable income is varied to $90,872 per annum from 1 September 2021 to 31 December 2022.