Gagliardi and Gagliardi (Child support)

[2020] AATA 4391

Gagliardi and Gagliardi (Child support) [2020] AATA 4391 (6 October 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/MC018917

APPLICANT:  Mr Gagliardi

OTHER PARTIES:  Child Support Registrar

Mrs Gagliardi

TRIBUNAL:Member K Buxton

DECISION DATE:  6 October 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – ground for departure exists – financial resources of both parents – decision under review affirmed

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. Mrs Gagliardi and Mr Gagliardi are the parents of [Child 1], who turned 18 years of age in November 2019, and [Child 2], who is now 13 years of age. They have another adult daughter, [Child 3] The children live with Mrs Gagliardi and a child support has been registered with the Child Support Agency (CSA) for [Child 1] and [Child 2], who have been recorded as being in the 100% care of Mrs Gagliardi. The child support case ended for [Child 1] in November of 2019. Mr Gagliardi has sought review by this tribunal of a decision of the CSA about the amount of child support which had been assessed as payable by him to Mrs Gagliardi in respect of the children.

2. On 19 November 2019 Mrs Gagliardi applied for a departure from the administrative assessment, under Part 6A of the Child Support (Assessment) Act 1989 (the Act), on the basis of the high cost of privately educating [Child 2], and on the basis of [Child 1]’s special orthodontic needs.

3. The administrative assessment calculated child support payable by Mr Gagliardi to Mrs Gagliardi for the children for the period 1 October 2019 to 20 November 2019 at the annual rate of $9,484 for [Child 1] and [Child 2], based on 2018/19 adjusted taxable incomes of $57,916 for Mr Gagliardi and $36,564 for Mrs Gagliardi. From 20 November 2019 the child support assessment ceased to include [Child 1] and child support for [Child 2] was payable by Mr Gagliardi to Mrs Gagliardi at the annual rate of $7,511, calculated using the same 2018/19 adjusted taxable incomes of the parents.

4. On 22 January 2020 a decision maker at the CSA determined that a ground existed to depart from the administrative assessment but decided not the depart from the administrative assessment of child support.  Mrs Gagliardi objected to the decision and, on 24 April 2020, an objections officer allowed the objection and decided to increase the rate of child support payable by Mr Gagliardi on account of private school fees for [Child 2] as follows:

   a.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Gagliardi is increased by $6,295; and

   b.   For the period 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Gagliardi is increased by $6,295.

1. Mr Gagliardi applied to the tribunal for review of the objection decision. A directions hearing took place on 1 September 2020 in which Mr Gagliardi and Mrs Gagliardi participated and each gave their consent for the review application to proceed to a determination without a hearing. Subsequently, the Child Support Registrar also gave consent for the application to proceed on the papers. The parents were given the opportunity to provide any further documents relevant to the determination of the application. In reaching its decision, the tribunal has considered the subsection 37(1) of the Administrative Appeals Tribunal Act 1975 Statement and Documents and supplementary Statement and Documents prepared by the CSA (Exhibit 1) and documentation provided by Mr Gagliardi (Exhibit A) and Mrs Gagliardi (Exhibit B) (including some documents received later than the time provided for the in tribunal’s directions, but which have nonetheless been considered by the tribunal).

CONSIDERATION

The legislative framework

1. 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 which takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent. The legislative intent is that the tribunal will not interfere with the administrative formula result in the ordinary run of cases.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), a change of assessment can be made only if:

   a.a ground (or more than one ground) for departure exists; and

   b.departure from the administrative assessment would be:

   i.just and equitable as regards the children and each parent; and

   ii.otherwise proper.

3. Subsection 98C(2) of the Act provides that the grounds for departure are the same as those set out in subsection 117(2). 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 tribunal may make one of the range of determinations, prescribed in section 98S of the Act, which include varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Costs of educating the children

1. The Act provides as a ground for departure (subparagraph 117(2)(b)(ii)):

   (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 which is special or out of the ordinary. 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 private school fees give rise to special circumstances having regard to the manner of education expected by the parents.

3. At the time of separation [Child 2] was enrolled in [the School], a private catholic secondary school. His enrolment application, which was signed by both parents in June 2017, provided for him to commence his secondary schooling in Year 7 in 2019. [Child 2] commenced in Year 7 in 2019 and is now undertaking Year 8 at the college.

4. Mr Gagliardi submitted that he did not agree to contribute to the cost of [Child 2]’s education at that school as there were other schools providing similar education that were less expensive. He stated that it has been the choice of Mrs Gagliardi alone to send [Child 2] to that particular school, even though he had also signed the enrolment application. In order for Mrs Gagliardi’s application for a departure from the administrative assessment of child support to proceed, the threshold question for the tribunal is whether [Child 2] is being educated in the manner that was expected by the parents. The child support legislation does not expressly enquire into parents’ desire or preference, or even, expressly, intention. The relevant departure ground is established if, in the special circumstances of the case, the costs of maintaining the child or children are significantly affected because they are being educated in the manner that was expected by the parents: that is, what did the parents expect? The question whether, or to what extent, the parents may be able to contribute towards those costs is relevant to a consideration as to whether it is just and equitable to make a departure. This issue is discussed later in these Reasons.

5. [Child 2] was enrolled in [the School] prior to the parents’ separation in October of 2017. The tribunal notes that correspondence from Mr Gagliardi’s solicitors indicated that the parents had been separated under one roof for nine years prior to that time. It is not necessary to determine when the parents separated but, rather, whether they expected to be educated in the manner in which he is now being educated. [The School] is a catholic secondary school. Mr Gagliardi submitted that there were cheaper catholic secondary schools that he would not object to [Child 2] attending. Mrs Gagliardi noted, and Mr Gagliardi accepted, that their daughters were also educated at private, catholic secondary schools, although Mr Gagliardi submitted that the daughter’s school was cheaper. The tribunal finds that, by signing the enrolment form for [the School], the parents each expected that [Child 2] would be educated in a private, catholic secondary school. Mr Gagliardi submitted that he withdrew his support for [Child 2] to be educated at [the School] when he became aware that the parents were to separate. It would, he submitted, now be unaffordable for [Child 2] to be educated at that school. Having regard to the available evidence, the tribunal finds that, whilst Mr Gagliardi may be dissatisfied with the notion of ongoing contribution to [Child 2]’s school fees for his attendance at a private catholic secondary school, that is nonetheless the manner of education that each of the parents “expected” for [Child 2].

6. Mrs Gagliardi produced the CSA documents which established that the amount of the compulsory tuition fees and levies for [Child 2] at [the School] in 2019 and 2020 were about $12,000 per annum. The factual correctness of the calculation of the compulsory school fees and levies for [Child 2], as set out in the objection decision, was not disputed by either parent. The tribunal accepts that tuition fees of that magnitude would fall into the category of costs which parents would not have to expend in the education of a child in the public system.

7. The tribunal is satisfied that the costs of educating [Child 2] are of such a magnitude as to significantly affect the costs of maintaining him, and that special circumstances exist as those fees are not taken into account in the administrative assessment. The tribunal is therefore satisfied that the cost of [Child 2]’s education provides a ground to depart from the administrative assessment.

Just and equitable

1. As the tribunal is satisfied that the costs of privately educating the children provides a departure ground, the next relevant consideration for the tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the proper needs of the children of the assessment, the parents’ financial circumstances and commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Gagliardi submitted that the effect of the parents’ property settlement is that he had already made provision for [Child 2]’s education costs as Mrs Gagliardi received the majority of the joint assets. However, the evidence before the tribunal does not support the submission that the property settlement dealt expressly with child support issues. Correspondence from Mr Gagliardi’s lawyer, provided to the CSA, noted that the issue of private school fees was separate from the property settlement issues agreed upon by the parents. The tribunal therefore finds that Mr Gagliardi has not made financial provision for private school fees outside the child support assessment.

3. Mr Gagliardi works in the [Work 1] sector. His adjusted taxable income for 2018/19 was just under $58,000 and he provided evidence to establish that his 2019/20 adjusted taxable income is likely to be similar. The tribunal is satisfied that Mr Gagliardi has been generating income at about the same level for some years and that this income is reflected in the formula assessment. It is reasonable for the tribunal to consider both parents’ incomes in determining a just and equitable distribution of the school fees.

4. Mr Gagliardi frequently referred, in his written submissions made both to the CSA and to the tribunal, to the assets split in the property settlement with Mrs Gagliardi, the terms of which were agreed by both parents. This proceeding is not a de facto reconsideration of that settlement and any dissatisfaction Mr Gagliardi has with his current financial position as a result of that settlement is irrelevant to the review application before the tribunal. However, it is relevant to consider the parents’ capacity to contribute to the high costs of educating [Child 2] in determining whether it would be just and equitable to depart from the formula assessment.

5. Both parents provided to the tribunal completed Statements of their Financial Circumstances. Mr Gagliardi reported in his statement prepared and submitted to the tribunal on 9 May 2020 that he had net assets of about $506,000 in cash reserves, and that he intended to use most of the cash to purchase a home. Mr Gagliardi explained during the directions hearing that his circumstances has changed and he had purchased a home. Mr Gagliardi prepared and submitted to the tribunal an updated Statement of Financial Circumstance on 11 September 2020. In that statement he reported a home valued at $560,000, a home loan of $185,000 secured by a mortgage over that home, and cash reserves of about $6,000; therefore reporting net assets of about $380,000. Mr Gagliardi submitted that, now that he has used his cash reserves to purchase a property, he simply cannot contribute to [Child 2]’s school fees. He submitted that it was not possible to “get blood out of a stone”.

6. It was unclear from the material initially disclosed by Mr Gagliardi whether Mr Gagliardi’s loan facility had been fully drawn down as an up-to-date statement was not provided to the tribunal. It was unclear how the unaccounted for difference between his position in May 2020 and that reported in September 2020, of around $100,000, had been applied in that four-month period. In written submissions Mr Gagliardi stated that he had used some of the cash to “fund the shortfall in his income” but he did not provide detail as to the level of expenditure. The only conclusions reasonably open to the tribunal on the available evidence were that either Mr Gagliardi still had access to a significant portion of those funds (in his home loan account or otherwise) or he had used them to meet discretionary costs. The tribunal therefore directed that Mr Gagliardi produce further documents to the tribunal showing his current home loan balance. Mr Gagliardi did then produce further documents which show that Mr Gagliardi has not fully drawn-down the loan facility and that he has about $89,000 available within that facility, in addition to his more modest previously reported cash reserves of $6,000. Mr Gagliardi did not initially volunteer this information but, rather, was directed to produce it to the tribunal. It was a matter for Mr Gagliardi whether he chose to keep these funds in a bank account or in an offset or redraw facility. Either way he has retained access to those significant funds from which his own costs, and those of the children, could be met.

7. The proper costs of the child must be met by the parents in priority to all expenses other than their essential costs. The tribunal has determined that [Child 2] is being educated in the manner that was expected by the parents and the high costs of his education are therefore to be regarded in addition to [Child 2]’s other needs when assessing the proper costs of [Child 2].

8. In his earlier Statement of Financial Circumstances Mr Gagliardi stated that his annual rental expenses were about $22,000 per annum. More recently, he reported current home loan repayments of about $11,000 per annum. Mr Gagliardi also reported that he now incurs rates and levies of about $24 per week. Even when home ownership costs such as rates are considered, Mr Gagliardi has still reduced his annual accommodation expenses significantly. There is no basis to conclude that his other living expenses would have increased as a result of his home purchase as the papers show that he has purchased the property he was previously renting. Mr Gagliardi stated that he is also meeting debts arising from unpaid historical utility bills. It is unclear why he has chosen to pay these debts over time rather than from his cash reserves available to him prior to the purchase of his home or since, when he has stated that he was using those reserves to meet a shortfall in his income.

9. The tribunal concludes that, after the purchase of his property in July 2020, Mr Gagliardi still had access to around $89,000 in his redraw facility and has significantly reduced his accommodation expenses when compared to his previous situation when renting the home.

10. Mrs Gagliardi works in the [Work 2] industry. Her income from employment and interest has been consistent at around $36,000 for the last three financial years. The tribunal is satisfied that her income is reflected in the formula assessment. Mrs Gagliardi retains about $775,000 in funds following the property settlement which she has earmarked for the purchase of a home and notes that when she does so she will no longer earn interest income. Mrs Gagliardi’s somewhat superior liquid assets position, when compared with that of Mr Gagliardi, arises from the parents’ property settlement which is now long settled. The ongoing costs of the children are ordinarily met from the parents’ available income and financial resources. The parents may each be required to have to resort to funds other than their regular income in order to meet those costs and the evidence demonstrates that they each have the capacity to do so.

11. Mr Gagliardi submitted that Mrs Gagliardi could “afford” to meet [Child 2]’s school fees in their entirety and “didn’t need” any contribution from him through the child support assessment for school fees. When considering whether a departure is just and equitable the tribunal will consider that Mrs Gagliardi is meeting all of the school fees for [Child 2], in addition to meeting all of his direct costs as he is in her 100% care. Mr Gagliardi has been assessed to contribute about $7,500 in annual costs towards those general expenses for [Child 2], and the tribunal will consider Mr Gagliardi’s capacity to make a reasonable additional contribution to [Child 2]’s education costs. Mrs Gagliardi’s income is significantly lower than that of Mr Gagliardi, and the child support that Mr Gagliardi is assessed to pay to Mrs Gagliardi is not her “income” (as submitted by Mr Gagliardi) but, rather, a contribution towards the costs incurred in caring for [Child 2]. Mrs Gagliardi sought an equal contribution from Mr Gagliardi towards the school fees, notwithstanding that her income is lower than his, and the tribunal accepts that this is a reasonable distribution having regard to all of the circumstances.

12. There is no basis in the evidence otherwise to conclude that the amount allowed for self-support in the formula, of about $25,000 per annum, is not a reasonable measure of both parents’ essential needs. In terms of meeting ongoing costs for [Child 2], the most significant difference between the parents’ relevant financial circumstances lies in the disparity between their incomes and the direct expenditure met by Mrs Gagliardi for school fees for [Child 2].

13. The tribunal is satisfied that it is just and equitable to increase the amount of child support payable by Mr Gagliardi to Mrs Gagliardi on account of [Child 2]’s private school fees. Mrs Gagliardi meets those substantial costs directly to the school and the tribunal is satisfied that Mr Gagliardi has the capacity to assist with those costs. Having regard to the circumstances of the parents the tribunal will therefore conclude that it is proper to Mr Gagliardi to contribute 50% but no more, to [Child 2]’s school fees met by Mrs Gagliardi, for the 2020 and 2021 years, by way of a commensurate increase to the annual rate of child support payable by him. The tribunal therefore proposes a departure by way of an increase to the rate of child support payable by Mr Gagliardi on account of private school fees for the children as follows:

    a.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Gagliardi is increased by $6,295; and

    b.   For the period 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Gagliardi is increased by $6,295.

29.  Mrs Gagliardi sought a further departure on the basis that she had incurred significant orthodontic costs for [Child 1]. The tribunal notes that this departure was sought the day before the child support case ended for [Child 1]. The purpose of the child support assessment is to ensure the equitable contribution by each parent to the ongoing costs of caring for the children. However, the tribunal is not satisfied that it would be just and equitable to impose a retrospective change to the assessment of child support in respect of expenses incurred for a child in respect of whom the child support assessment has now ended. The tribunal does not propose to make a departure for the orthodontic treatment costs for [Child 1] that have been met by Mrs Gagliardi.

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, although neither parent receives such payments at present. In any event parents, rather than the community, have the primary duty to maintain their children. The rate of child support should reflect the obligation of both parents to take financial responsibility for the children. The tribunal is satisfied that the departure proposed is therefore proper.

CONCLUSION

31.  The administrative assessment did not include the cost of privately educating [Child 2]. The tribunal is satisfied that a departure ground exists in relation to school fees for [Child 2] and has found that it is just and equitable to depart from the assessment on account of those school fees. The tribunal has found that it is just and equitable, and otherwise proper, to increase the annual rate of child support payable by Mr Gagliardi to Mrs Gagliardi on account of private school fees for [Child 2] as follows:

a.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Gagliardi is increased by $6,295; and

b.   For the period 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Gagliardi is increased by $6,295.

1. As the tribunal has reached the same decision as that of the objections officer, that decision is affirmed.

DECISION

The decision under review is affirmed.