Foxcraft and Foxcraft (Child support)

[2022] AATA 1708

Foxcraft and Foxcraft (Child support) [2022] AATA 1708 (19 April 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2021/BC021976 & 2021/BC021966

APPLICANT:  Ms Foxcraft

OTHER PARTIES:  Child Support Registrar

Mr Foxcraft

TRIBUNAL:Member J Thomson

DECISION DATE:  19 April 2022

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that:

• Mr Foxcraft’s adjusted taxable income is varied to $284,398 from 5 November 2020 to 31 August 2021;

• Mr Foxcraft’s annual liability is increased by:

  o$7,480 from 1 January to 31 December 2021;

  o$7,769 from 1 January to 31 December 2022; and

  o85% of [Child 1’s] tuition and other compulsory school fees in each of the 2023 to 2025 calendar years (inclusive). The annual rate is to be increased from 1 January to 31 December in each year. Ms Foxcraft is to provide to the Agency a copy of the fee schedule or statement of fees by 28 February of each relevant year. If Ms Foxcraft provides this evidence after 28 February in the relevant year, the annual increase will apply from the date of receipt by the Agency.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – a ground for departure 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

BACKGROUND

1. Mr Foxcraft and Ms Foxcraft are the parents of [Child 1], born [in] December 2015, and recorded as being in the 65% care of Ms Foxcraft and the 35% care of Mr Foxcraft.

2. On 9 December 2020, Ms Foxcraft applied to Services Australia – Child Support Agency (the Agency) for a change of assessment of child support payable to her by Mr Foxcraft for the child [Child 1] on the grounds that the costs of maintaining [Child 1] are significantly affected by the costs of caring for, educating or training [Child 1], in the manner expected by the parents (the ground commonly referred to as Reason 3).

3. The administrative assessment in place at the time of Ms Foxcraft’s application required Mr Foxcraft to pay child support to Ms Foxcraft as follows:

   ·for the period 1 November 2020 to 4 November 2020 at the annual rate of $16,208 based on his 2020 adjusted taxable income (ATI) of $298,839 and Ms Foxcraft’s 2020 ATI of $42,213; and

   ·for the period 5 November 2020 to 30 June 2021 at the annual rate of $15,662, based on an estimated 2020/21 ATI of $215,193 for Mr Foxcraft and Ms Foxcraft’s 2020 ATI of $42,213.

4. On 29 March 2021, an Agency decision maker [found] Reason 3 established and changed the assessment as follows:

   ·     for the period 5 November 2020 to 30 November 2021, Ms Foxcraft’s ATI is set at $70,000;

   ·     for the period 5 November 2020 to 30 November 2021, Mr Foxcraft’s ATI is set at $305,400;

   ·     for the period 1 January 2021 to 31 December 2021, the annual rate of child support payable by Mr Foxcraft is increased by $7,040 to reflect his share of [Child 1’s] school fees; and

   ·     from 2022 to 2025 the annual rate of child support payable by Mr Foxcraft is increased by 80% of [Child 1’s] school fees in each applicable year. The annual rate is to be increased from 1 January to 31 December in each year to reflect Mr Foxcraft’s share of [Child 1’s] school fees. Ms Foxcraft is to provide a copy of the school fees schedule and statement of fees for each year by 28 February. Should this be provided later than 28 February in the relevant year, the annual increase will only be applied from the date the fees schedule or statement of fees is received by the Agency.

5. On 20 April 2021, Mr Foxcraft objected to [the] decision, and on 1 July 2021, an objections officer set aside [the] decision, deciding, in substitution, that Ms Foxcraft’s ATI for the period 5 November 2020 until 31 August 2021 should be set at $72,896, and Mr Foxcraft’s ATI for the same period should be set at $265,968. In a later amended decision dated 7 July 2021, the objections officer corrected the ATI for Ms Foxcraft for the period 5 November 2020 to 31 August 2021 to $72,836, but otherwise made no further change to the earlier decision of 1 July 2021.

6. On 20 July 2021, Ms Foxcraft sought review of the objections officer’s decision. On 23 July 2021 Mr Foxcraft also sought review of the objections officer’s decision.

7. The Tribunal heard both applications on 15 February 2022. Both parents attended the hearing via conference telephone and gave affirmed evidence. The Tribunal had before it copies of documentation provided by the Agency (admitted into evidence and marked Exhibit 1). Both parents provided documentation: Ms Foxcraft’s documents were admitted into evidence and marked Exhibit A and Mr Foxcraft’s documents were admitted into evidence and marked Exhibit B. Both parents had copies of these papers with them at the hearing. In reaching its decision, the Tribunal has considered the affirmed evidence given by the parents at the hearing and the documentation contained in Exhibits 1, A and B.

8. The matter was deferred to 18 April 2022 and the decision was made on 19 April 2022.

ISSUES

1. The issues which arise in this case are:

   ·      Mr Foxcraft’s liability to contribute to the kindergarten and private school education costs for the child [Child 1];

   ·      Mr Foxcraft’s level of contribution to those kindergarten and private school education costs, relative to the parents’ respective incomes;

   ·      The income available to Mr Foxcraft for child support purposes for the 2020/21 financial year; and

   ·      Ms Foxcraft’s income earning capacity.

CONSIDERATION

1. The statutory provisions relevant to this matter are contained in the Child Support (Assessment) Act 1989 (the Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. A formula is used. It takes into account variables including each parent’s ATI for the last relevant year of income, the number of children and the level of care provided by each parent. Part 6A of the Act allows for a departure from the administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make a departure determination if three matters are established:

   ·One, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(ii));

   ·A departure is just and equitable as regards the children and each parent (sub- subparagraph 98C(1)(b)(ii)(A)); and

   ·It is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)).

2. Subsection 98(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2) of the Act.

3. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Registrar may make it one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the ATI or the cost percentage of the child.

Grounds for departure

1. Subparagraph 117(2)(b)(ii) provides as a ground for departure:

   (b)  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;

2. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislation in subsection 117(2) must be guided by the qualification that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

Ms Foxcraft’s evidence at hearing

1. Ms Foxcraft’s evidence at the hearing focused on the following issues:

   ·Mr Foxcraft’s taxable income available to him for child support purposes;

   ·Mr Foxcraft’s liability to contribute to the private education costs for the child, [Child 1]; and

   ·The level of his contribution to those costs commensurate with the parents’ respective taxable incomes available to them for child support purposes.

2. The issue of Mr Foxcraft’s liability to contribute to the education costs for [Child 1] was considered in detail by both the initial decision [maker], the objections officer in the decision under review and [Judge A] of the Federal Circuit Court as articulated in their respective decisions.

3. The evidence regarding Mr Foxcraft’s initial agreement to [Child 1] being privately educated at primary and secondary levels at either  [College 1] or [College 2] and his having signed an enrolment application form and the child’s actual attendance at [College 1] for his kindergarten and primary education prior to and since the parents’ separation summarised in detail in [Judge A’s] Reasons for Judgment dated [in] August 2019 before the Tribunal at pages 254 to 277 of Exhibit 1 establishes to the Tribunal’s satisfaction [Child 1], in attending [College 1], is being educated in the manner that was expected by his parents.

4. In response to the orders sought by the parents in the Federal Circuit Court proceedings, at page 267 of her Reasons for Judgment, [Judge A] determined at paragraph 116 that:

   the best interests decision for schooling is to allow the child to go to [College 1], no matter what the living arrangements are, as when with the mother, he is closer to that school, which will lessen travel when with the mother, and it is a school the child knows within his limited range of comprehension.

5. [Child 1] attended [College 1’s] kindergarten and Year 1 throughout the 2020 and 2021 academic years, and is currently enrolled and attending that school as a Grade 1 student. Although there was no direct evidence before the Tribunal of [Child 1’s] current school fees for the 2021 academic year in the form of term fee statements or invoices, the evidence before the objections officer was that the annual tuition fees for the 2021 academic year are approximately $8,800, and neither parent challenged this amount at the hearing.

6. Ms Foxcraft’s Statement of Financial Circumstances (SOFC) dated 1 August 2021 (see Exhibit A pages A1 to A11) records her current occupation as [an occupation 1] with [Employer 1]. She also provided a copy of a letter from [the specific site] where she works confirming she has been employed there since 18 November 2019, and her commencement as a full-time employee from 1 March 2021 (see Exbibit 1, page 252).

7. Ms Foxcraft provided a copy of her 2020/21 income tax return (see Exhibit 1, pages 30 to 41) reflecting her total income of $74,402 from her [Employer 1] employment of $74,166, and interest and share portfolio dividend income of $236, against which she claimed allowable deductions, including related self-education expenses of $4,937 (about which the Tribunal will comment later in these Reasons), resulting in a taxable income, net of deductions, of $68,030.

8. Although Mr Foxcraft asserted Ms Foxcraft derived income from a family trust administered by her mother, Ms Foxcraft denied she received any income from this source and although there was some discussion in the objection decision regarding a family trust which appears to have been in operation some years ago and has not filed a tax return since 2017 (reflecting nil income) there was no evidence before the Tribunal to suggest that Ms Foxcraft receives any additional income other than as disclosed in her 2020/21 income tax return referred to above.

9. The Tribunal therefore finds Ms Foxcraft’s taxable income for the 2020/21 financial year was approximately $68,030.

10. Mr Foxcraft also asserted at the hearing that Ms Foxcraft had a capacity to generate income to a level of $120,000 per annum, His evidence in this regard was based on her income prior to the parents’ divorce. He asserted she had changed her job after [Child 1] was born in December 2015, at a time when she was on maternity leave, and has chosen to return to the workforce at a significantly lower income.

11. Ms Foxcraft’s earlier employment history is summarised in the objections officer’s decision at page 75 of the Agency’s paper, Exhibit 1, and was not seriously challenged at the Tribunal hearing.

12. At the hearing, Ms Foxcraft gave evidence that prior to [Child 1’s] birth in December 2015, she was earning an income of approximately $120,000. Upon returning to the workforce in January 2017, she was only able to find part-time employment. She said she was made redundant in December 2018. She then undertook a course of further study in [occupation 1] following which she was successful in obtaining employment with her current employer, [Employer 1] on a part-time basis, and since November 2021, is employed on a full-time permanent basis on the salary referred to above.

13. Ms Foxcraft gave evidence that she is currently funding her [studies], the cost of which she claims against her income, as noted above.

14. The Tribunal is satisfied Ms Foxcraft does not have an unexercised capacity to earn more than she is currently receiving from her employment as [an occupation 1] with [Employer 1], as reflected in her SOFC referred to earlier in these Reasons.

Mr Foxcraft’s evidence at hearing

1. The Tribunal has delt with Mr Foxcraft’s evidence regarding the issue of the parents’ mutual intention regarding the private education expectations for the child, [Child 1], and Mr Foxcraft’s assertions regarding Ms Foxcraft’s income sources and her earning capacity earlier in these Reasons.

2. The objections officer did not have Mr Foxcraft’s 2020/21 income tax return available to her as part of the objection process; subsequently it was provided to the Tribunal in response to its directions prior to hearing.  Mr Foxcraft has also provided his SOFC dated 19 October 2021 (see Exhibit B, pages B1 to B11). Both documents reflect his current employment as the [occupation 2] for [Employer 2] on an annual salary plus bonuses of approximately $297,218, against which he claims allowable deductions of $10,075 work-related motor vehicle expenses, resulting in a net taxable income of $284,398 for the 2020/21 financial year.

3. The Tribunal therefore finds he has a taxable income of $284,398 for the 2020/21 financial year.

4. Mr Foxcraft asserted that Ms Foxcraft’s parents contributed to the child, [Child 1’s] kindergarten fees at [College 1] as well as Ms Foxcraft’s day-to-day living expenses. He also asserted he had incurred substantial legal expenses as a consequence of the parents’ lengthy Federal Circuit Court proceedings regarding issues relating to the child [Child 1’s] care and contact, education issues, and property settlement for which he had borrowed funds from his father to defray. He acknowledged that Ms Foxcraft had also incurred similar legal costs, but asserted her parents had contributed or otherwise assisted her in meeting those costs.

5. Ms Foxcraft denied receiving any assistance from her parents with respect to [Child 1’s] kindergarten fees at [College 1], her day-to-day living expenses or her legal costs, and there was no evidence before the Tribunal to support Mr Foxcraft’s assertions regarding those issues.

6. The Tribunal is satisfied the [College 1] school fees were $8,800 for the 2021 academic year. This cost is greater than attending a government school and so is an expense that is out of the ordinary. This represents 13% of Ms Foxcraft’s taxable income. The Tribunal is satisfied that this is a significant cost affecting the cost of caring for [Child 1].

7. The Tribunal concludes that, in the special circumstances of the case, Ms Foxcraft’s costs in maintaining the child is significantly affected because the child is being educated in the manner expected by his parents. Therefore, the ground provided for in subparagraph 117(2)(b)(ii) of the Act is established.

Just and equitable considerations

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. Both parents affirmed the SOFCs they provided at the hearing, subject to the changes noted below.

3. In addition to the income she derives from her occupation as [an occupation 1], share portfolio and bank interest, Ms Foxcraft reports receipt of family tax benefit of $61 per week, annualised to $3,172. She amended her bank account balance to the reduced amount of approximately $8,000 to reflect the increase in her share portfolio value from $1,840 to $35,000 as a consequence of the purchase of additional shares from her bank savings.

4. Ms Foxcraft also amended her asset summary to reflect her interest in an additional [Brand 1] motor vehicle she shares with her mother. She gave evidence that she contributed $50,000 from her bank savings and part of her $90,000 property settlement from Mr Foxcraft to the purchase of this vehicle; the balance of the purchase price for the vehicle was provided by her mother. She said she intends selling the [Brand 2] vehicle reflected in her asset summary and has applied the balance of her property settlement funds to meet outstanding legal fees.

5. Ms Foxcraft gave evidence that the house she and [Child 1] occupy is one of the two residences constructed on the property owned by her parents, [named]. She gave evidence that she pays $450 per week rental to her parents as evidenced in the bank statements she provided to the Tribunal at pages A62 to A71 of Exhibit A, and also contributes $20 per week to the cost of the electricity service to her house.

6. Otherwise, her SOFC was unremarkable. Mr Foxcraft did not challenge Ms Foxcraft’s evidence regarding her SOFC.

7. Turning to Mr Foxcraft’s SOFC, he amended his asset summary to reflect the disposal of his [Brand 3] vehicle valued at approximately $100,000 in November/ December 2021, and the debt on that vehicle reflected in his liabilities summary. He said he has replaced the [Brand 3] with a less expensive [Brand 4], valued at approximately $59,000 to $60,000.

8. Mr Foxcraft lists a loan from his parents for which he provided a copy of the loan agreement at pages 316 to 320 of Exhibit 1 reflecting a loan of $100,000, the purpose for which is recorded as for the purchase of a property.

9. Mr Foxcraft declined to provide details of his current partner’s income but did reveal that his partner is employed and in receipt of income.

10. Mr Foxcraft complained throughout the hearing of financial hardship consequent upon the legal expenses he has incurred in the family law proceedings in which he and Ms Foxcraft are involved, expenses relating to renovations he is making to his home he shares with his current partner, [named], and the credit card debt incurred to fund his property settlement with Ms Foxcraft. He lists his residence in his SOFC reflecting the value of his 50% share at $450,000 against his share of the mortgage debt on the property of $363,645.

1. While the Tribunal accepts his evidence regarding these debts, they are essentially debts related to his family law dispute with Ms Foxcraft and otherwise discretionary in nature, and have no relevance when considering his income, property and financial resources for the purpose of meeting his obligation to contribute to the support of his child, [Child 1]. It should also be borne in mind that Ms Foxcraft is faced with legal costs arising from the family law proceedings as well as the day-to-day costs of providing accommodation, transport and otherwise for herself and [Child 1].

2. The administrative assessment in place at the time of Ms Foxcraft’s change of assessment application required Mr Foxcraft, as the parent liable to pay child support, to pay an annual rate of child support of $16,208 during the assessment period 1 November 2020 to 4 November 2020, based on his 2020 ATI of $289,839 and Ms Foxcraft’s 2020 ATI of $42,213. For the period 5 November 2020 to 30 June 2021, Mr Foxcraft was assessed to pay child support at the annual rate of $15,662, based on his 2020/21 estimated ATI of $215,139, and Ms Foxcraft’s 2020 ATI of $42,213.

3. The Tribunal has found that Mr Foxcraft’s taxable income for the 2020/21 financial year of $284,398, and Ms Foxcraft’s taxable income for the 2020/21 financial year was $68,030. Applying this to the administrative assessment would result in an annual rate payable by Mr Foxcraft of $14,254. If the administrative assessment is left to operate as designed Ms Foxcraft’s 2021 taxable income will be reflected in the administrative assessment from 14 July 2021.  The Tribunal does not consider it fair and reasonable to make a change to Ms Foxcraft’s income in the assessment. She promptly lodged her 2020/21 income tax return on 8 July 2021, which was notified to the Agency on 14 July 2021 and her income of $68,030 was reflected in the administrative assessment in the normal course of events.

4. However, the Tribunal is satisfied that it is appropriate to amend the administrative assessment to reflect Mr Foxcraft’s 2021 ATI of $289,839 from 5 November 2020, the date that he lodged his income estimate of $215,193, an estimate significantly less than his actual income for the 2020/21 financial year. The tribunal has determined that it is appropriate that this remain in place until 31 August 2021, as this income is reflected in the administrative assessment from 1 September 2021.

5. The question of private schooling has been considered by the Full Court of the Family Court in Mee and Ferguson (1986) FLC 91-716. The principle that emerged is that where a parent has agreed to a child attending private school, that parent is liable to contribute to the fees so long and to the extent that they have a reasonable financial capacity to do so.

6. The Tribunal has already determined that the father’s income and financial resources in the 2021 financial year were $284,398 and the mother’s were $68,030. Allowing for the self-support amount ($26,319) the mother’s income, expressed as a percentage, makes up only approximately 14% of the parents’ combined income and financial resources ($299,790). The Tribunal is satisfied that it is appropriate that the father contribute 85% of the child’s costs. In the Tribunal’s view, given his income and financial resources, this will not cause him undue hardship.

7. Ms Foxcraft has provided a schedule of the annual tuition fees for [College 1] for the 2022 school year for [Child 1’s] grade I year (see page A27 of Exhibit A). The schedule reflects [Child 1’s] tuition fees for 2022 will be $2,285 per term, annualised to $9,140.

8. Therefore, it is appropriate to depart from the administrative assessment and so increase the father’s annual rate by $7,480 in the 2021 calendar year and by $7,769 in the 2022 calendar year.

9. For the 2023 to 2025 calendar years (inclusive) the Tribunal determines that it is appropriate that Mr Foxcraft’s annual rate is increased by 85% of [Child 1’s] tuition and compulsory school fees in each applicable year. The annual rate is to be increased from 1 January to 31 December in each year to reflect Mr Foxcraft’s share of [Child 1’s] tuition and other school fees. It is Ms Foxcraft’s responsibility to provide the Agency with evidence of these costs by 28 February in each relevant year. If she does so in a timely manner, it will increase the father’s annual rate from 1 January. It is appropriate that should she provide this from 1 March onwards, the father’s annual rate will only increase from the date of lodgement of the relevant education costs with the Agency. This aspect of the decision will provide certainty to the parties and minimise the need for further proceedings.

10. There was no evidence before the Tribunal to suggest that either parent or the child [Child 1] suffers from any serious medical impairment or has other special needs. The Tribunal is therefore satisfied that making a change to the assessment to better reflect the incomes, property and financial resources available to the parents for child support purposes, including contributions to school fees, will not cause undue hardship to either parent of the child, [Child 1].

CONCLUSION

1. Consistent with its findings regarding the parents’ incomes for the 2020/21 financial year as set out above, the mutual intentions of the parents to have [Child 1] privately educated, and the significant cost associated with that private education, the Tribunal considers it appropriate to determine a contribution of 85% by Mr Foxcraft to [Child 1’s] annual school fees commencing from 1 January 2021 through to the end of the 2025 school year.

2. The Tribunal is satisfied that the administrative assessment is unfair given the cost of educating the child in the manner expected by his parents and because of Mr Foxcraft’s ATI. After due consideration of all the factors outlined in subsection 117(4) of the Act, the Tribunal is satisfied that it is just and equitable to depart from the administrative assessment of child support.

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. Ms Foxcraft is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that:

• Mr Foxcraft’s adjusted taxable income is varied to $284,398 from 5 November 2020 to 31 August 2021;

• Mr Foxcraft’s annual liability is increased by:

  o$7,480 from 1 January to 31 December 2021;

  o$7,769 from 1 January to 31 December 2022; and

  o85% of [Child 1’s] tuition and other compulsory school fees in each of the 2023 to 2025 calendar years (inclusive). The annual rate is to be increased from 1 January to 31 December in each year. Ms Foxcraft is to provide to the Agency a copy of the fee schedule or statement of fees by 28 February of each relevant year. If Ms Foxcraft provides this evidence after 28 February in the relevant year, the annual increase will apply from the date of receipt by the Agency.