Godfrey and Sherman (Child support)

[2018] AATA 4652

Godfrey and Sherman (Child support) [2018] AATA 4652 (30 October 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBERS:  2018/SC014038

2018/SC014092

APPLICANTS:  Ms Godfrey

Mr Sherman

OTHER PARTIES:  Child Support Registrar

Mr Sherman

Ms Godfrey

TRIBUNAL:Member W Kennedy

DECISION DATE:  30 October 2018

DECISION:

The decision under review is affirmed.

CATCHWORDS
CHILD SUPPORT – departure determination - income, property and financial resources of parents – high costs of child care - ground for departure established – decision under review affirmed

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

REASONS FOR DECISION

BACKGROUND

1. This decision concerns an application for a departure from the formula assessment of child support.  Mr Sherman and Ms Godfrey are the parents of [Child 1] who was born in 2016.  There has been a child support assessment in place for [Child 1] made by the Child Support Agency of the Department of Human Services (the Department) since 23 October 2017.  The assessment is based on Ms Godfrey having a care percentage of 100%.

2. The annual rate of child support payable by Mr Sherman at the time of Ms Godfrey’s application to the Department was $1,430.00.  This was based on Mr Godfrey’s adjusted taxable income (ATI) of $32,565.00 and Ms Godfrey’s ATI of $50,750.00.

3. On 28 November 2017 Ms Godfrey applied to the Department for a departure from the assessment based on reason 3 (the cost of educating and training [Child 1] in the manner expected by the parents), reason 6 (the high cost of child care), reason 8A (the income, property and financial resources of one or both of the parents) and reason 8B (the earning capacity of one or both of the parents).  On 2 January 2018 Mr Sherman cross applied on the basis of reason 8A.

4. On 6 February 2018 a delegate of the Child Support Registrar considered the departure application and decided that reason 6 had been established but that it would not be just and equitable to depart from the formula assessment.  As a result the formula assessment of child support continued.

5. On 23 February 2018 Ms Godfrey lodged an objection to that decision, stating that relevant evidence had not been fully considered.  On 30 April 2018 a Department objections officer considered Ms Godfrey’s objection, finding that reason 6 and reason 8A in respect of both parents had been established.  The objections officer decided to set, for the period from 23 October 2017 to 1 December 2019, the following:

   ·     Mr Sherman’s ATI at $57,000.00

   ·     Ms Godfrey’s ATI at $77,000.00

   ·     Ms Godfrey’s self-support amount at $29,292.00

6. On 10 May 2018 Ms Godfrey lodged an application for a review of the decision with this Tribunal.  Ms Godfrey’s application has been assigned the reference SC014038.  On 16 May 2018 Mr Sherman lodged an application for a review of the decision with this Tribunal.  Mr Sherman’s application has been assigned the reference SC014092.  The Tribunal had access to the statement and documents provided by the Department.  The documents are at folios 1 to 331 of the hearing papers and were provided to the parties in advance of the hearing. 

7. Before the hearing Mr Sherman provided the documents at folios B1 to B9 of the hearing papers while Ms Godfrey provided the documents at folios A1 to A45 of the hearing papers.  At the hearing the parents acknowledged that they had received copies of the additional documents.  The matter was heard and determined in Sydney on 30 October 2018.  Mr Sherman and Ms Godfrey both attended the hearing by telephone and gave their oral evidence under affirmations.  The Child Support Registrar was not represented at the hearing.

CONSIDERATION

The legislative framework and issues for the Tribunal to determine

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act).  This requires the application of a statutory formula which takes into account factors such as the number and ages of the children, the level of care provided and the income of each parent.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act.  Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process for considering applications to do so.  The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

   ·     that one, or more than one, of the grounds for departure referred to in subsection 117(2) of the Act exists; and

   ·     that it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   ·     that it would be otherwise proper to make a particular determination.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act.  Each of the grounds, which for administrative purposes are referred to as reasons, require that special circumstances be established.  The term “special circumstances” is not defined in the Act.  In Gyselman and Gyselman (1992) FamCA 93 the Full Court of the Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

4. 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 must make one of the determinations prescribed in section 98S of the Act.  These include varying the annual rate of child support payable or a parent’s adjusted taxable income or varying the self-support amount.

Issue one – Does a ground exist to depart from the administrative assessment?

1. The Tribunal’s first task is to determine whether a ground for departure from the administrative assessment can be established.  In her application to the Department Ms Godfrey asserted that there are four grounds (or reasons) for a departure from the administrative assessment.  In his cross-application Mr Sherman also asserted that there was a ground to depart from the administrative assessment.  The Tribunal considered each of these in turn.

Does a ground exist to depart from the administrative assessment under reason 3?

1. Ms Godfrey has sought a departure from the administrative assessment on the ground that there are extra costs involved in educating and training [Child 1] in the manner expected by the parents.  This ground for departure, known as reason 3 for administrative purposes, is set out in subparagraph 117(2)(b)(ii) of the Act:

   (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. Ms Godfrey said at the hearing that she wishes [Child 1] to learn to swim and to have exercise classes and that these have an impact on the cost of caring for her.  Mr Sherman said that he is happy to take [Child 1] to swim and that he agrees that she should have the benefit of classes.  The Tribunal finds that the costs nominated by the parents are part of the normal costs of raising children and that they are taken into account in the child support formula assessment.

3. The Tribunal finds that there is no evidence of special circumstances that would allow a departure from the formula assessment of child support under subparagraph 117(2)(b)(ii) of the Act.

Does a ground exist to depart from the administrative assessment under reason 6?

1. Ms Godfrey sought a departure from the administrative assessment on the ground that the cost of maintaining [Child 1] was significantly affected by high child care costs.  This ground for departure, known as reason 6 for administrative purposes, is set out a paragraph 117(2)(b)(ib) of the Act:

   (b)      that, in the special circumstances of the case, the costs of maintaining the child   are significantly affected:
     …
     (ib)      because of high child care costs in relation to the child; …

2. Subsection 117(3A) of the Act stipulates that the child care costs must be incurred with respect to a child younger than 12 at the start of the child support period and that the costs are incurred by a parent or non-parent carer.  Further, subsection 117(3B) of the Act requires, in effect, that for child care costs to be high, the child care costs that have been incurred must be higher than 5% of the adjusted taxable income of the parent who incurred the costs.

3. [Child 1] was born in 2016 and is thus younger than 12.  The Tribunal has before it documentation showing that [Child 1] attends daycare for two days each week and that the net cost to Ms Godfrey is $102.76 per week (folios 114 to 117).  Ms Godfrey’s payslip (folio 118) shows that her weekly pay is $1,547.08.  Thus Ms Godfrey’s child care costs exceed 5% of her income and the Tribunal finds that there is a special circumstance that would allow a departure from the formula assessment of child support under subparagraph 117(2)(b)(ib) of the Act.

Does a ground exist to depart from the administrative assessment under reason 8A?

1. Ms Godfrey sought a departure from the administrative assessment on the grounds that Mr Sherman’s income, property and financial resources are greater than is reflected in the ATI used for him in the child support assessment in effect at the time of her application.  This ground for departure, which is known as reason 8A for administrative purposes, is set out at subparagraph 117(2)(c)(ia) of the Act:

   (c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   (ia)   because of the income, property and financial resources of either parent; …

2. Mr Sherman has provided a Statement of Financial Circumstances (SOFC) (folios B1 to B9).  Mr Sherman states that his income amounts to $720.00 per week and that his expenses amount to $686.00 per week.  It appears to the Tribunal that Mr Sherman has underestimated his expenses, claiming that he has either no or very little expenditure for many normal items.  Mr Sherman states that he has assets of some $51,887.00 and no liabilities (other than a modest credit card balance). 

3. As Mr Sherman is self-employed there are no payslips in evidence, however the income figure provided in his SOFC is consistent with his personal income tax return for 2016/17 (folios 70 to 76).  The profit and loss statement provided by Mr Sherman for the period from 1 July 2017 to 31 December 2017 shows a profit of $17,359.00, which equates to $667.65 per week.  However the statement also shows expenses of $1,164.00 for “[items]” and $11,818.00 for “Pay In”.  At the hearing Mr Sherman explained that the [items] are the [items] used in his [business] and the pay in is the cost of hiring the [vehicle]. 

4. The Tribunal has before it the following documentation relating to Mr Sherman’s personal finances:

   ·[Bank 1] Bank account …[number] for the period from [date] September 2017 to [date] December 2017 (folios 128 to 129)

   ·[Bank 1] Bank account …[number] for the period from [date] September  2017 to [date] December 2017 (folios 130 to 134)

   ·[Bank1] Bank account …[number] for the period from [date] September 2017 to [date] December 2017 (folio 135)

   ·[Bank 1] credit card account …[number]  for the period from [date] September 2017 to [date] November 2017 (folios 136 to 145).

5. Mr Sherman’s account …[number] receives payments for his [business].   During the three month period covered by the statements it received $11,992.62.  The account pays some business related expenses such as for insurance and to the Australian Taxation Office.  Funds are also transferred from this account to Mr Sherman’s account …[number] or to repay Mr Sherman’s credit card.

6. Mr Sherman’s account …[number] receives mainly small amounts from various sources, including [business] and [business].  During the three month period covered by the statements it received $6,798.56.  Mr Sherman pays his rent from this account and meets other, mostly small expenses, from this account.  Mr Sherman’s account …[number] is a largely inactive savings account.

7. Most of Mr Sherman’s expenses are met through the use of his credit card …[number].  The expenditure on this card totals:

   ·$5,504.29 in September 2017 (folio 136)

   ·$3,085.91 in October 2017 (folio 138)

   ·$3,266.53 in November 2017 (folio 142)

8. During the period covered by the credit card statements repayments were:

   ·$4,100.00 [in] October 2017 (folio 140)

   ·$1,500.00 [in] October 2017 (folio 140)

   ·$2,000.00 [in] November 2017 (folio 144)

9. The payment of $1,500.00 made [in] October 2017 was from Mr Sherman’s account …[number] (folio 128).  The other payments were not sourced from any of the accounts before the Tribunal.  At the hearing Mr Sherman said that those payments were made in cash.  He said that he sometimes receives payments in cash and when he does he either puts it into his bank account or his credit card account.

10. As Mr Sherman receives some of his income in cash an examination of his bank account statements does not necessarily establish his income.  The Tribunal has decided to establish an estimate of Mr Sherman’s income through an examination of his expenditure.  Mr Sherman’s credit card accounts show an average expenditure of $3,952.24 per month.  To establish Mr Sherman’s actual expenditure the Tribunal adds $240.00 per week rent and other minor expenses averaging some $110.00 per week, those expenses being met directly from Mr Sherman’s account …[number].  The documentation shows that Mr Sherman’s weekly expenditure is some $1,260.00 which equals some $65,500.00 per annum.  Some of Mr Sherman’s expenses are legitimate business expenses that deliver no personal benefit to him.  Mr Sherman has provided an analysis of his credit card expenditure which concludes that 42.5% of his credit card expenditure is business related.  If the Tribunal were to accept this figure it would mean that Mr Sherman’s personal expenditure on his credit cards together with other expenditure made directly from his bank account would amount to $45,470.00 per annum.  However the Tribunal believes that Mr Sherman derives some benefit from some of the expenditure that is classified as business-related.  The Tribunal concludes that Mr Sherman’s personal expenditure is at least $48,000.00 per annum.  Grossing this figure up for income tax produces a taxable income figure of $60,320.00.

11. The actual ATI used in the assessment at the time that Ms Godfrey applied for the departure from the assessment was $32,565.00.  As this is significantly lower than the figure established by the Tribunal, the Tribunal finds that there is a special circumstance that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ia) of the Act.

12. Mr Sherman cross-applied under reason 8A on the ground that Ms Godfrey’s income, property and financial resources are greater than is reflected in that ATI.  Ms Godfrey has provided a SOFC which states that her weekly income is $1,868.00 and that her weekly expenses are $1,846.00.  In response to the directions of the Tribunal Ms Godfrey has provided the following documentation:

    ·[Bank 2] account …[number] for the period from 1 July 2017 to 31 December 2017 (folios A18 to A19)

    ·[Bank 2] account …[number] for the period from 3 August 2017 to 2 February 2018 (folios A20 to A26)

    ·[Bank 2] Mortgage account …[number] (folios A27 to A33)

    ·[Bank 2] Mastercard …[number] for the period from 9 September 2017 to 9 January 2018 (folios A34 to A45).

13. Ms Godfrey’s account …[number] is an offset account in which she holds savings.  The account receives deposits from Ms Godfrey’s account …[number] and pays the mortgage on her investment property.  Ms Godfrey’s account …[number] is a day to day account.  It receives her salary, rent from her investment property and her family tax benefit (FTB).  She pays her rent from this account and some other payments (for instance the strata fees on her investment property).  Most of Ms Godfrey’s day to day expenses are met using her credit card …[number].  The repayments on the credit card are sourced from her account …[number].

14. The Tribunal finds that the documentation and oral evidence provided by Ms Godfrey presents an accurate picture of her financial circumstances.  The Tribunal finds no evidence of undisclosed income or of unexplained expenditure.  In her tax return Ms Godfrey declares rental losses which reduces her taxable income.  While this is consistent with the law relating to income taxation it is not appropriate when establishing a person’s ATI for child support purposes.  Ms Godfrey’s actual income is $80,448.00, as established by her payslip (folio 118).  As this is considerably higher than the $50,750.00 used in the assessment when Ms Godfrey applied to the Department the Tribunal finds that there is a special circumstance that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ia) of the Act.

Does a ground exist to depart from the administrative assessment under reason 8B?

1. Ms Godfrey sought a departure from the administrative assessment on the ground that Mr Sherman’s earning capacity is not reflected in the formula assessment.  This ground, known as reason 8B for administrative purposes, is set out in subparagraph 117(2)(c)(ib) of the Act:

   (c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   …

   (ib)   because of the earning capacity of either parent; …

1. Subsection 117(7B) of the Act provides:

   (7B)In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a)    one or more of the following applies:

   (i)the parent does not work despite ample opportunity to do so;

   (ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii)the parent has changed his or her occupation, industry or working pattern; and

   (b)    the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i)the parent's caring responsibilities; or

   (ii)the parent's state of health; and

   (c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

2. At the hearing Ms Godfrey said that she is not suggesting that Mr Sherman is not working full-time.  She said that she misunderstood the nature of reason 8B.  Mr Sherman’s evidence is that he continues to work full-time.  The Tribunal finds that paragraph 117(7B)(a) of the Act is not satisfied and it is not open to the Tribunal to make a finding as to Mr Sherman’s earning capacity.  The Tribunal finds that there are no special circumstances that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ib) of the Act.

Issue two – Would departure from the administrative assessment be just and equitable?

Relevant law and evidence

1. As the Tribunal is satisfied that there is a ground to depart from the administrative assessment of child support under reason 6 and also under reason 8A, the next step is to consider whether it is just and equitable to depart from the assessment.  In deciding whether it is just and equitable the Tribunal had regard to the following matters set out in subsection 117(4) of the Act:

   (4)  In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (a)    the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b)    the proper needs of the child; and

   (c)    the income, earning capacity, property and financial resources of the child; and

   (d)    the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)  the earning capacity of each parent who is a party to the proceeding; and

   (e)    the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)himself or herself; or

   (ii)  any other child or another person that the person has a duty to maintain; and

   (f)     the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)    any hardship that would be caused:

   (i)      to:

   (A)  the child; or

   (B)  the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)       to:

   (A)  the liable parent; or

   (B)  any other child or another person that the liable parent has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10) by the making of, or the refusal to make, the order.

2. The Tribunal considered the evidence provided by both parents, including the documents and SOFC form that each party provided to the Tribunal, as well as the documents provided by the Department.

Assessment of evidence, findings of fact and application of the law

1. Section 3 of the Act states that it is the duty of both parents to financially support their children.  [Child 1] should receive a proper amount of financial support from her parents in accordance with their capacity to contribute.

The child’s needs

1. Paragraph 117(4)(b) of the Act requires the Tribunal to consider the proper needs of the children.  At the hearing the parties agreed that [Child 1] is healthy and has no special needs or extraordinary costs that need to be taken into account by the Tribunal.

The child’s incomes and earning capacities

1. [Child 1] is two years old and has no independent income or earning capacity.

The income, property and financial resources and earning capacity of Mr Sherman and his necessary commitments

1. Mr Sherman’s financial circumstances were closely examined by the Tribunal.  At the hearing Mr Sherman said that he is very frugal because he cannot afford to live any other way.  The Tribunal examined the SOFC (folios B1 to B9), which shows that his household income is slightly lower than his household expenditure.  Mr Sherman’s effective income, including the benefits he derives from being self-employed has been considered above.  The Tribunal is satisfied that Mr Sherman has sufficient financial resources to meet his necessary commitments.

The income, property and financial resources and earning capacity of Ms Godfrey and her necessary commitments

1. Ms Godfrey’s financial circumstances were closely examined by the Tribunal.  The Tribunal examined the SOFC (folios A4 to A15) and the other documentation provided by Ms Godfrey. 

2. The Tribunal concludes that the documents provided to the Tribunal by Ms Godfrey together with her oral evidence presents an accurate picture of the financial resources available to her.  The Tribunal is satisfied that Ms Godfrey has sufficient financial resources to meet her necessary commitments.

The parents’ duty to support others

1. At the hearing Ms Godfrey said that she does not have the legal duty to support any person other than [Child 1].

2. At the hearing Mr Sherman said that he does not have the legal duty to support any person other than [Child 1].

Hardship

1. The Tribunal has found that both parents have incomes that are sufficient to meet their necessary commitments.

2. The departure from the formula assessment contemplated by the Tribunal will result in Mr Sherman’s child support liability increasing from the assessment that was in place when Ms Godfrey applied for the departure from the assessment.  At the time that Ms Godfrey applied for the departure Mr Sherman was assessed to pay Ms Godfrey $1,430.00 per annum.  As a result of the decision of the objections officer Mr Sherman was assessed to pay Ms Godfrey $5,124.00 per annum.  This resulted in arrears of $1,938.00 for Mr Sherman.  The decision contemplated by the Tribunal will not change this outcome.

3. The Tribunal is satisfied that Mr Sherman has access to sufficient financial resources to meet the child support liability contemplated by the Tribunal.  Taking into account Mr Sherman’s primary obligation to support [Child 1] the Tribunal finds that the decision contemplated by it will not cause hardship to Mr Sherman.   

Terms and period of departure

1. The Tribunal has found that based on an examination of Mr Sherman’s expenditure his gross income is some $60,320.00.  Allowing for a reasonable level of deductions this produces an effective taxable income of some $57,000.00.  The Tribunal has decided to depart from the formula assessment by increasing Mr Sherman’s ATI to $57,000.00.  The Tribunal has found that Ms Godfrey’s gross income is some $80,448.00.  Allowing for a reasonable level of deductions this produces a taxable income of some $77,000.00.  The Tribunal has decided to depart from the formula assessment by increasing Ms Godfrey’s ATI to $77,000.00.  The Tribunal will also increase Ms Godfrey’s self-support amount by $5,138.00 (being her weekly childcare cost multiplied by 50 weeks) to $29,292.00 to take into account the high level of child care costs.

2. At the hearing Ms Godfrey said that she would like any departure from the formula assessment to commence on 23 October 2017, the day on which the assessment was first registered.  Ms Godfrey was advised that her application for a child support assessment had been accepted and was advised of the details of the formula assessment by letter dated 6 November 2017.  She contacted the Department on 17 November 2017 and formally applied for the departure on 28 November 2017.  The Tribunal considers that Ms Godfrey acted promptly and that it would be appropriate to date the departure from the commencement of the assessment, that being 23 October 2017.  While this results in arrears for Mr Sherman the Tribunal finds that such an outcome is not unreasonable, given that he has had the benefit of the income for the period and the quantum does not represent a particularly significant financial burden.  Having regard to the matters in subsection 117(4) of the Act, the Tribunal finds that it would be just and equitable for the departure to commence from the start of the assessment.

3. At the hearing both Mr Sherman and Ms Godfrey said that they would like the Tribunal’s determination to be of reasonable length so that they do not need to go through the change of assessment process in the immediate future.  The Tribunal has decided that the period of departure from the formula assessment will be from 23 October 2017 to 1 December 2019.

Issue three – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal to undertake is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment. Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:

   (a)      the nature of the duty of a parent to maintain a child (as stated in section 3) and,   in particular, the fact that it is the parents of a child themselves who have the   primary duty to maintain the child; and

   (b)      the effect that the making of the order would have on:

   (i)       any entitlement of the child, or the carer entitled to child support, to an                    income tested pension, allowance or benefit; or

   (ii)       the rate of any income tested pension, allowance or benefit payable to   the child or the carer entitled to child support.

2. The child support law recognises that each parent has a primary duty to maintain their children.  In this case Ms Godfrey receives FTB but no other benefits.  As a result of the Tribunal’s decision Ms Godfrey’s FTB may change marginally.  The Tribunal finds that this is appropriate and is satisfied that it is otherwise proper to depart from the administrative assessment in this matter.

3. The decision of the Tribunal is the same as the decision of the objections officer and as a result that decision is affirmed.

DECISION

The decision under review is affirmed.