Fontaine and Cuthbert (Child support)

[2017] AATA 2957

Fontaine and Cuthbert (Child support) [2017] AATA 2957 (31 December 2017)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/SC011420

APPLICANT:  Mr Fontaine

OTHER PARTIES:  Child Support Registrar

Ms Cuthbert

TRIBUNAL:Member K Timbs

DECISION DATE:  31 December 2017

DECISION:

The Tribunal sets aside the decision under review and substitutes the decision to make the following determinations to depart from the administrative assessment of child support:

• The annual rate of child support is to increase by $2,000 from 1 January 2017 to 31 December 2019.

• The adjusted taxable incomes of Mr Fontaine and Ms Cuthbert are increased to $68,000 from 1 November 2016 and to $75,000 from 1 July 2017 to 31 December 2019.

CATCHWORDS

Child support – Departure determination – Costs of education for the child – Manner expected by both parents – Income and financial resources of parents – Business income – 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 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

Child support assessments

1. Mr Fontaine and Ms Cuthbert are the parents of [Child 1] (born 2003). At relevant times, the Department of Human Services made child support assessments for her on behalf of the Child Support Registrar. Mr Fontaine is the parent liable to pay child support.

2. From 1 July 2016, the Department used adjusted taxable incomes of $46,954 for Mr Fontaine and $63,023 for Ms Cuthbert. The annual rate payable by Mr Fontaine was $2,805. Mr Fontaine’s adjusted taxable income was determined according to a decision made in 2014 to depart from the administrative assessment of child support (change of assessment) and Ms Cuthbert’s adjusted taxable income was equal to her 2015 taxable income.

3. From 18 July 2016, Mr Fontaine’s adjusted taxable income increased to $48,363 in accordance with the change of assessment decision and the annual rate increased to $2,969. It increased again to $4,104 on 27 July 2016 when [Child 1] turned 13.

4. From 1 August 2016, the Department used an adjusted taxable income of $57,380 for Ms Cuthbert, which was equal to her 2016 taxable income. Mr Fontaine’s adjusted taxable income did not change and the annual rate was $4,095.

5. From 1 August 2017, the Department has used an adjusted taxable income of $67,989 for Ms Cuthbert, which is equal to her 2017 taxable income. If not for the decisions discussed below, the annual rate would have been $4,009.

Change of assessment decision

1. On 26 October 2016, Ms Cuthbert applied for another change of assessment. On 19 December 2016, a delegate of the Registrar decided to increase the annual rate of child support by:

   ·      $2,495 for the 2017 calendar year;

   ·      $2,595 for 2018;

   ·      $2,699 for 2019; and

   ·      $2,807 for 2020.

2. On 14 March 2017, an Objections Officer of the Department disallowed Mr Fontaine’s objection to that decision.

Application for review

1. On 2 April 2017, Mr Fontaine applied for review of that decision. The Tribunal heard the application for review on 1 September 2017.

ISSUES

1. In the usual case, the Registrar makes child support assessments for child support periods using a formula in the Child Support (Assessment) Act 1989 (the Act).

2. Either parent may apply to change the formula assessment (section 98B) and the Registrar may do so if the case meets the following three criteria (section 98C):

   ·        There is a ground for changing the assessment. (Section 117(2) of the Act lists the 12 grounds).

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

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

3. To make a decision on Mr Fontaine’s application for review, the Tribunal considered whether the case meets those three criteria.

CONSIDERATION

Evidence considered

1. The Tribunal considered documents relevant to the decision under review provided by the Department, Mr Fontaine and Ms Cuthbert. Both parties gave evidence at hearing.

ISSUE 1 – Is there a ground to change the assessment?

1. The first step is to decide if there is a ground for changing the assessment. Ms Cuthbert applied for a change of assessment on the ground in section 117(2)(b)(ii) that:

   in the special circumstances of the case, the costs of maintaining the child are significantly affected…because the child is being…educated…in the manner that was expected by his or her parents.

2. [Child 1] and two of her siblings attend [School 1]. The discounted rate for three children was approximately $12,000 for both 2016 and 2017 and the cost of educating [Child 1] is therefore approximately $4,000 at relevant times. The Tribunal is satisfied that the private education takes the case out of the usual run of cases where children attend public schools and finds the expense significantly increases the cost of maintaining her. It follows that the ground applies if both parties expected [Child 1] to be educated in that manner.

3. Ms Cuthbert and Mr Fontaine did not live together at any time. She said that when [Child 1] was very young they discussed private education for her and that they agreed that this was important because they had both attended private schools. Mr Fontaine said that was not the case.

4. Ms Cuthbert said their relationship was very strained when [Child 1] went to primary school. She said the discussions were difficult and that Mr Fontaine did not agree with her choices of school. She said she enrolled [Child 1] in a private primary school without seeking a contribution towards the costs from Mr Fontaine. She said she revisited the issue when [Child 1] was to go to high school. She provided the Department with copies of email communication from February 2015 between her and Mr Fontaine about [Child 1]’s secondary education from 2016. In the email conversation, Ms Cuthbert suggested two private schools and advised [Child 1] would prefer to go to [School 1] “as all her friends are going there”. Mr Fontaine responded that:

   I am sure both school are find  so for it’s a no brainer (sic), the school she wants to go to, the school her friends go to, the school close to where she lives and the school with the least disruption to her current schooling life.

5. Mr Fontaine claimed that the email is not evidence that he expected [Child 1] to attend [School 1] or a similar school. He said his comments were limited to the schools suggested by Ms Cuthbert because her position was that public schooling was not an option. As evidence of that contention, he provided email communication between him and Ms Cuthbert in 2006 about the choice of primary school for [Child 1]. In that email conversation, Ms Cuthbert stated clearly that education at a public school was not an option and Mr Fontaine clearly explained why he believed public education would be preferable. Mr Fontaine told the Tribunal he did not restate his expectation that [Child 1] would attend a public school again in 2015 because he knew his opinion “virtually did not matter” and because he did not want to cause conflict with Ms Cuthbert because they were getting on well.

6. Mr Fontaine confirmed evidence from Ms Cuthbert that his three children with his current partner have attended private primary schools. He said they firstly attended a small Catholic school in their rural town because they wanted to support it so that it did not close down. He said, “The education wasn’t right for my middle child, in particular” who has Irlen dyslexia. He said the condition was diagnosed at a screening centre at a local Lutheran school. He said the three children moved to that school because it satisfies that child’s special needs and because he and his partner do not want the other children to go to different schools.

7. Mr Fontaine’s decision to send the children to the local Catholic school does not sit well with his defence of the public education system in the 2006 email conversation. In addition, at that time, he claimed that “that public primary schools are more than equipped to satisfy all learning aspects for [Child 1]’s Development (sic)” which, in the Tribunal’s view, is not consistent with his later decision to privately educate his younger children because one of them has a relatively common learning difficulty.

8. Mr Fontaine also said the school fees were “comparable to the public school system” and, when the Tribunal suggested that was unlikely, he said he did not pay the bills and could not give details. However, he said he was aware that it was cheaper to privately educate all three of his younger children than to pay for half of [Child 1]’s fees. However, he did not dispute information on the school’s website that the cost of educating his three youngest children would have been approximately $7,000 in 2017. That is less expensive for each child than the cost of educating [Child 1] but the total amount is significantly more than the amount determined by the delegate as his contribution to the cost of [Child 1]’s education.

9. In those circumstances, the Tribunal finds Mr Fontaine’s explanations for privately educating his three youngest children to be unconvincing. It does not accept he continued to hold the view that public education was preferable for any of his children when he and Ms Cuthbert corresponded about [Child 1]’s education in February 2015. Rather, his decision to privately educate his younger children demonstrates a preference for private education. The Tribunal accepts that Mr Fontaine did not expect to contribute to the cost of [Child 1]’s private education when he discussed high schools with Ms Cuthbert. However, the Tribunal takes account of the email correspondence and the private education of his younger children and is satisfied he expected she would be privately educated at [School 1] or at a similar school.

ISSUE 2 – Is it just and equitable to change the assessment?     

1. The next step is to consider whether it is just and equitable (fair) to make particular changes to the assessment. To do this, the Tribunal considered relevant matters listed under the headings below (as required by section 117(4)), which include the matters raised as grounds to change the assessment by the parties.

2. The Tribunal also had regard to the following objects of the Act in section 4:

   ·    The primary object of the Act is to ensure that children receive a proper level of support from their parents.

   ·    It is a particular object of the Act to ensure the level of financial support provided by parents is determined according to their capacity to provide that support and, in particular, that parents with a similar capacity to support their children provide similar levels of support.

Duty to support the children

1. Parents have a primary duty to support their children that has a higher priority than any other commitment except commitments they must meet to support themselves or other persons they have a legal duty to support (section 3 of the Act). Mr Fontaine and Ms Cuthbert each have three children younger than [Child 1] who live with them. Their duty of support for those children is equal to their duty of support for [Child 1]. The formula takes this into account by deducting relevant dependent child amounts from their adjusted taxable incomes.[1]

   [1] The parents may wish to confirm that the Department has correctly recorded all the children who they live with as relevant dependent children.

2. There are no other persons the parties are obliged to support.

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

Formula assessment

1. In the usual case, the adjusted taxable incomes used to calculate child support are equal to the taxable incomes and supplementary amounts for the parents for the financial year that ended before the start of a child support period. The first step in the formula assessment is to determine the costs of the children according to their ages and the combined income of the parents (less self-support amounts) using the Costs of the Children Table in Schedule 1 to the Act. (The Table recognises that parents spend more to support older children and that parents with higher income spend more to support them.)

2. The next step is to divide the cost of the children between the parents according to their share of the combined income after deductions for self-support and the support of other children. The annual rate of child support will be equal to the parent’s share of the costs of the children if, as in this case, the payer has a care percentage of less than 14%. (Otherwise, the annual rate reduces to take account of the costs the parent meets while the children are in their care.)

3. It follows that, if either parent’s adjusted taxable incomes is not commensurate with their income and/or capacity to provide support for a child, the annual rate will not result in a proper amount of support for the children that is similar to others in similar circumstances.

Ms Cuthbert

1. Ms Cuthbert owns a home with her ex-partner with equity of approximately $40,000. She has some savings, a car and some superannuation.

2. Ms Cuthbert works full-time as [an occupation] and the Tribunal is satisfied she is fully exercising her earning capacity. She has a permanent position [and] has irregular higher duties at [a higher] level. Her 2017 taxable income of approximately $68,000 is slightly lower than her ongoing income because she was working part-time for some of that year and because it does not take into account incremental increases, wage rises and salary increases from an enterprise agreement negotiated in the first half of the 2018 financial year. Taking those matters into account, the Tribunal infers that she will earn at least $75,000 in this financial year and into the future.

Mr Fontaine

1. Mr Fontaine discloses interests in motor vehicles, a small boat, household contents and some superannuation.

2. In the course of an earlier change of assessment proceeding in 2014, Mr Fontaine told the Department that he worked as an unpaid farm assistant on a property owned by his parents and that he ran a [specified] business. His 2014 taxable income was $11,000 from wages earned as [an Occupation 1].

3. Mr Fontaine’s Statement of Financial Circumstances listed his only income as $900 per week wages for work as [an Occupation 1]. He said he works for a company owned and controlled by his partner that operates a [service] business. After the hearing, he provided a 2017 group certificate showing it had paid him approximately $42,000. The Tribunal infers his 2017 taxable income of a similar amount was largely made up of those wages with no income declared from any other sources.

4. Mr Fontaine told the Tribunal the business operates from [premises] the company built for the [business] on the property owned by his parents. He and his partner live with their children in a home on the property and his parents live in a separate home on the same property.

5. Mr Fontaine told the Tribunal his work for the company includes [Occupation 1] work, “a bit of gardening” and tending to [livestock] owned by the company. The Tribunal suggested he did not have an arms-length employment relationship with the company and he responded that he “took care of the farming side of things” as well as [Occupation 1 work]. Based on that evidence, the Tribunal infers Mr Fontaine is fully exercising his earning capacity by working on the property and in the business. It finds he is not working only as [an Occupation 1] during [events].

6. Following the hearing, the Tribunal directed Mr Fontaine to provide financial statements for the company. He advised his partner refused to allow him access to those documents and the Tribunal then obtained the 2016 and 2017 company tax returns through the Registrar.

7. Mr Fontaine’s partner was unhappy about the exchange of that information and wrote to the Tribunal confirming the evidence that she is the sole director of the business. She also claimed that Mr Fontaine is “nothing more than an employee”, which the Tribunal finds is inconsistent with the evidence given by Mr Fontaine at hearing about his role in the “farming side of things”. It has not taken the information in the letter into account in its decision making for that reason.

8. Mr Fontaine’s partner might independently operate the [service] business and Mr Fontaine might not have a significant role in its management. However, the Tribunal finds, on his evidence, that he independently operates a farming business through the company. It infers his wages for [Occupation 1] work are unrelated to the income generated by the farming business for the company. The Tribunal further infers that, at least in part, he and his partner have arranged their businesses in this way to minimise their taxable income and his adjusted taxable income for child support and it is satisfied he has not fully and frankly disclosed his financial circumstances to the Tribunal.

9. The company’s tax returns do not show the income generated by the farming business or whether the company provides Mr Fontaine with financial resources other than wages. Without the more detailed financial statements, it is not possible to accurately determine the income to which he has access and the value of any financial resources. However, because he has not fully and frankly disclosed his financial circumstances, it would be fair to determine his adjusted taxable income to be similar to that of Ms Cuthbert so that he is allocated an equal share of the cost of meeting [Child 1]’s usual needs.

10. For those reasons, the Tribunal proposes to vary Mr Fontaine’s adjusted taxable income to $67,000 from 1 November 2016 and both parties’ adjusted taxable incomes to $75,000 from 1 July 2017 until December 2019.

[Child 1]

1. [Child 1] has no income, property, financial resources or earning capacity and she relies on the parties to meet her proper needs.

Proper needs

1. If the Tribunal made the proposed determinations of the parties’ adjusted taxable incomes, the costs of the child (under the Table) would be approximately $14,000 from 1 November 2016 and approximately $16,000 from 1 July 2017. The Tribunal is satisfied those costs reflect the cost of meeting [Child 1]’s usual needs.

2. The proper needs of the children include the cost of educating the children in the manner expected by the parents (section 117(6)). Those costs are not included in the costs in the Table. In that case, the Tribunal proposes to increase the annual rate by $2,000 from 1 January 2017 to 31 December 2019 to ensure Mr Fontaine meets half of the cost of [Child 1]’s education for that period.

3. Mr Fontaine said he had paid approximately $1,000 a year for four plane tickets for [Child 1] to visit him in 2017. However, he said she had not used the tickets two out of the last three times. He did not dispute Ms Cuthbert’s evidence that she had applied for the costs of the missed flights to be credited against his liability in the Child Support Register as a non-Agency payment. In that case, Ms Cuthbert bore that expense (as reduced child support) rather than Mr Fontaine. Because [Child 1] is not regularly visiting Mr Fontaine, the Tribunal does not find that he has any significant ongoing expense to have contact with her.

Necessary expenses/hardship

1. If the Tribunal made the proposed determinations, the annual rate of child support for [Child 1] would be approximately $9,000 from 1 November 2016 and $10,000 from 1 January 2017. The Tribunal considered the parties’ necessary expenses and whether making, or not making, those determinations would cause hardship to them or to any of their children.

2. Apart from education and childcare costs, Mr Fontaine and Ms Cuthbert listed relatively modest household expenses for themselves and the children living with them.

1. The Tribunal is not satisfied Mr Fontaine has fully disclosed his financial circumstances but he did not contend that it would cause him or his other children hardship to contribute to the cost of [Child 1]’s education. The Tribunal finds that would not be the case on the evidence he did provide. He would have net income of approximately $750 per week from declared taxable income of approximately $900 per week and he lists necessary expenses of approximately $625 per week for half of his household’s expenses and the education expenses for his three youngest children. This leaves him with a surplus of $125 per week and the Tribunal infers that, with some careful budgeting, he could meet a weekly child support liability of $170 to $200 per week without hardship to himself or the children living with him.

2. Ms Cuthbert pays high childcare costs and for the private education of three of the four children living with her. She could not meet all those expenses and the usual household expenses from her income. However, she told the Tribunal she had a private arrangement with her ex-partner to provide financial support for her three youngest children. She did not give details and the Tribunal is unable to make findings about her household income. Her ex-partner might meet expenses for her and all the children in the household that she cannot meet. In that case, the Tribunal is not satisfied that she or any of her children would suffer hardship if it did not make the proposed determinations. This does not weigh against making the proposed determinations because he does not have a duty of support for [Child 1].

Conclusion

1. In the Tribunal’s view, the proposed determinations ensure that both parents provide a proper amount of financial support for their children and that they contribute an appropriate amount to the cost of [Child 1]’s private education. It finds that making those determinations would further the relevant objects of the Act referred to above and are consistent with the parties’ duty of support for the children. It does not find that making them, or not making them, would cause hardship to the parties or to any of their children. On balance, it is satisfied that making the determinations is fair to the parties and to [Child 1].

ISSUE 3 – Is it otherwise proper to change the assessment?

1. The final step is to decide whether it is otherwise proper to depart from the administrative assessment. To do this the Tribunal must consider the effect the determination will have on the cost to the community of supporting children through payment of family tax benefit. It must decide whether this is a proper outcome given parents have the primary responsibility to support their children.

2. Ms Cuthbert receives family tax benefit and the rate would reduce if the Tribunal makes the proposed determination. The Tribunal is satisfied that reflects the primary nature of the parties’ obligations of support and that making the proposed determination would be otherwise proper in that case.

Conclusion

1. The Tribunal has found there is a ground for changing the assessment and that it is just, equitable and otherwise proper to make the proposed determination. For those reasons, it sets aside the decision under review and substitutes the decision to make the proposed determinations.

DECISION

The Tribunal sets aside the decision under review and substitutes the decision to make the following determinations to depart from the administrative assessment of child support:

• The annual rate of child support is to increase by $2,000 from 1 January 2017 to 31 December 2019;

• The adjusted taxable incomes of Mr Fontaine and Ms Cuthbert are increased to $68,000 from 1 November 2016 and to $75,000 from 1 July 2017 to 31 December 2019.