Gordiwalla and Jermone (Child support)

[2018] AATA 4471

Gordiwalla and Jermone (Child support) [2018] AATA 4471 (30 October 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/MC014172

APPLICANT:  Mr Gordiwalla

OTHER PARTIES:  Child Support Registrar

Ms Jermone

TRIBUNAL:Member R Anderson

DECISION DATE:  30 October 2018

DECISION:

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

·         The adjusted taxable income of Mr Gordiwalla in the period 1 July 2017 to 30 June 2018 is varied to $60,242 per annum;

·         The adjusted taxable income of Ms Jermone in the period 1 July 2017 to 30 June 2018 is varied to $59,482 per annum;

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 July 2017 to 31 July 2017 is to increase by $5,239 per annum;

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 August 2017 to 31 October 2018 is to increase by $3,898 per annum and

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 November 2018 to 31 December 2019 is to increase by $3,836 per annum.

CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of both parents – high costs of child care – just and equitable and otherwise proper to depart – 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

1. Mr Gordiwalla and Ms Jermone are the parents of [Child 1], who recently turned three years of age.  According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 6 December 2016.  The Department has been responsible for collection of child support from Mr Gordiwalla from the outset.

2. The child support liability was initially calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act).  The calculation was based on the income recorded by each parent in their most recently completed income tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department. Mr Gordiwalla has provided an estimate of his adjusted taxable income in respect of the period 8 December 2016 to 30 June 2017 and the 2017/2018 year.

3. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act, if they consider the administrative assessment results in an unfair amount of child support payable by one parent. Ms Jermone lodged such an application on 30 June 2017 on the basis that the administrative assessment produced an unfair outcome due to the high costs of child care significantly affecting the costs of maintaining [Child 1] (Reason 6).  Ms Jermone also raised what is commonly known as Reason 8, that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Gordiwalla.

4. Mr Gordiwalla cross-applied on the basis that the costs he incurred in having contact with [Child 1] (Reason 1), the monies he paid for the benefit of [Child 1] and/or Ms Jermone prior to sale of the marital home (Reason 5) and the income, property and financial resources available to Ms Jermone (Reason 8) resulted in an unfair amount of child support payable by him to Ms Jermone in respect of [Child 1].

5. On 22 August 2017, a delegate of the child support registrar found that a ground was established in relation to Reasons 6 and 8. Consequently, the annual child support liability of Mr Gordiwalla was to increase by $3,705.90 per annum in the period 30 June 2017 to 31 December 2018, reflecting a 50% contribution to the child care fees in respect of [Child 1] above the 5% threshold.

6. Mr Gordiwalla lodged an objection to the decision of 22 August 2017 out of time. On 8 March 2018, a differently constituted tribunal granted an extension of time request by Mr Gordiwalla to object to the decision of 22 August 2017. Subsequently, an objections officer decided to allow the objection on 16 May 2018, also finding a ground established in relation to Reasons 6 and 8.  As a result, the adjusted taxable income of Ms Jermone was varied to $53,412 in respect of the period 1 June 2017 to 31 July 2017 and the rate of child support payable by Mr Gordiwalla was to increase by $4,390 per annum in respect of the period 1 June 2017 to 31 December 2019.  The increase reflected a 50% contribution to the child care fees in respect of [Child 1] above the 5% threshold during the relevant period.

7. Mr Gordiwalla then lodged an application to this tribunal on 24 May 2018, requesting an independent review of the Department’s decision. The directions hearing was conducted by telephone with Mr Gordiwalla and Ms Jermone on 4 September 2018. Following this hearing, directions were made to both parties requiring them to provide further information and documents.

8. The hearing was held on 16 October 2018. Mr Gordiwalla and Ms Jermone both participated by conference telephone and gave oral evidence on affirmation.  The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 593, documents lodged by Mr Gordiwalla numbered A1 to A139, documents lodged by Ms Jermone numbered B1 to B94 and information from Centrelink numbered D1 to D4. All of the documents were provided to all parties prior to the hearing. While Mr Gordiwalla stated that he had not yet received D1 to D4, the content was discussed at hearing and copies sent to him following the hearing for his information. Mr Gordiwalla confirmed to the tribunal that he was no longer pursuing a ground in relation to Reason 1.

9. On 16 October 2018, the tribunal decided to defer making a decision in this matter to await further information from both parties in respect of the child care centre payment rules. The information was received on 18 October 2018, numbered A140 to A144 and B95 to B99.  It was subsequently sent to all parties for comment.  As no further comment was received, the tribunal then proceeded to make a decision.

ISSUES

1. When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

   ·         whether a ground exists to depart from the administrative assessment; and if so

   ·         whether any proposed departure is fair to Mr Gordiwalla, Ms Jermone and [Child 1]; and if so

   ·         whether any proposed departure is fair to the public.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

1. The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words ‘in the special circumstances of the case’. The meaning of this expression is not defined in the Act. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).

Reason 6 – High child care costs

1. Subparagraph 117(2)(b)(ib) of the Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because of high child care costs in relation to the child.  Subsection 117(3A) of the Act goes on to set out the conditions which must be satisfied before a ground under subparagraph 117(2)(b)(ib) can be established.  That is, the costs must be incurred by the payee and the children in care must be under 12 years of age at the start of the child support period.  It is not disputed that these two conditions are met.

2. The tribunal then turned its mind to whether the child care costs were “high”.  Subsection 117(3B) of the Act provides that child care costs are only “high” if, during a child support period, they total more than 5% of the amount worked out by dividing the payee’s adjusted taxable income for the period by 365 and multiplying the quotient by the number of days in the period. Further guidance is found at 2.6.12 of the Child Support Guide (the Guide).

3. The relevant child support periods in this case are 6 December 2016 to 31 July 2017 (238 days) and 1 August 2017 to 31 October 2018 (457 days).  According to departmental records, the adjusted taxable incomes (ATI) of Ms Jermone in the two child support periods were $17,136 and $53,412 respectively.  Applying the formula provided in subsection 117(3B) of the Act, the tribunal calculates the 5% threshold in the child support periods 6 December 2016 to 31 July 2017 and 1 August 2017 to 31 October 2018 to be $558 and $3,343 respectively.

Period	Relevant adjusted taxable income	(ATI/365 X number of days)	5% of applicable adjusted taxable income
6/12/16 TO 31/07/17	$17,136	$11,173	$558
01/08/17 TO 31/10/18	$53,412	$66,874	$3,343

1. The tribunal had before it statements from [Child care provider 1] for the period 22 May 2017 to 28 September 2018.  No statements were provided in respect of the period 6 December 2017 to 21 May 2017. Regardless, based on the statements provided the tribunal calculated the net costs of child care incurred by Ms Jermone after child care benefit and child care rebate in the period 22 May 2017 to 31 July 2017 to be $1,957.  It is abundantly clear that the costs of child care in the child support period 6 December 2016 to 31 July 2017 are high as required by the Act. 

2. In respect of the child support period 1 August 2017 to 31 October 2018, based on the statements provided and assuming a weekly net cost of $149.75 from 29 September 2018 to 31 October 2018, the tribunal calculated the net costs of child care incurred by Ms Jermone after child care benefit and child care rebate in the period 1 August 2017 to 31 October 2018 to be $11,659.  Clearly the costs of child care incurred by Ms Jermone in the child support period 1 August 2017 to 31 October 2018 are also high as required by the Act. 

3. Mr Gordiwalla did not dispute the tribunal’s finding that, in the special circumstances of the case, the costs of maintaining [Child 1] are significantly affected by the high child care costs.  The ground for departure in accordance with subparagraph 117(2)(b)(ib) of the Act has been established.

4. As the tribunal is satisfied that one of the grounds before it is established, it has not gone on to consider whether Reasons 5 or 8, relating to the additional monies paid by Mr Gordiwalla or the income, property and financial resources in relation to both parties is also established as a separate ground.  These issues will be dealt with in detail below under Issue 2, as will consideration as to an appropriate contribution to the child care costs by the parents, in accordance with their capacity.

Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Gordiwalla, Ms Jermone and [Child 1] to make a particular departure determination?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Gordiwalla and Ms Jermone have the primary duty to financially support [Child 1]. The tribunal is satisfied that neither party has a legal duty to support any other person.

2. In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). There was no dispute that [Child 1] was generally in good health. 

3. According to Departmental records, Mr Gordiwalla’s care of [Child 1] increased from 0% to 15% commencing 12 September 2018, in accordance with court orders.  Based on the orders, the gradual increase in care will not impact on the child support assessment until 2022, when the care percentage attributed to Mr Gordiwalla will then exceed 35%. According to his Statement of Financial Circumstances, after adjusting rental costs attributed to [Child 1] to equate to 15% care, Mr Gordiwalla estimates the average weekly costs of [Child 1] to be $189.50.  This amount is inclusive of discretionary costs for activities, entertainment, holidays, gifts, books and magazines of $40.  Mr Gordiwalla gave oral evidence that while [Child 1] is not yet old enough to attend formal language school, he is instructing him on the basis of a formal curriculum at home at a cost for materials of $10 per week. 

4. According to her Statement of Financial Circumstances, Ms Jermone estimates the average weekly costs of [Child 1] to be $659, including discretionary costs for entertainment, holidays and gifts of $84 and child care fees of $150. Therefore, the tribunal calculates the weekly “necessary” expenses of [Child 1], as estimated by the parents to be $564, or $29,328 per annum.

5. The administrative formula calculates the maximum cost of a child less than 13 years with combined child support income of the parents of $70,654 in the 2017/2018 year (based on combined adjusted taxable incomes in the vicinity of $120,000), to approximate $11,335 per annum.  This is significantly less than the “necessary” costs of [Child 1], as estimated by the parents.

The earning capacity, income, property and financial resources and commitments of each parent

1. In this case Mr Gordiwalla and Ms Jermone are both working full time and have not recently changed their occupations or work patterns.  Consequently, an earning capacity determination is not relevant to the circumstances of either party.

2. Mr Gordiwalla told the tribunal that he has worked as an [Occupation 1] for [Company 1] for five years. The tribunal examined his 2016/2017 and 2017/2018 income tax returns.  The tribunal accepts the letter dated 11 October 2017 from [Mr A], the chief financial officer of [Company 1].  The letter states that Mr Gordiwalla’s full-time annual salary at the time was $55,000 and confirms that one month’s salary, $4,583, relating to June 2016 was paid to Mr Gordiwalla in July 2017.  The deductible expenses were unremarkable, noting minimal discretionary donations.

3. It was also evident that Mr Gordiwalla operated a sole trader business [Occupation 2] and [Occupation 3] in both financial years.  Mr Gordiwalla gave oral evidence that this was necessary in order to assist him to meet his additional expenses following separation, discussed further below. 

4. The tribunal is satisfied that the tax returns as lodged by Mr Gordiwalla with the ATO, would generally provide an accurate reflection of his available financial resources, being $60,030 in the 2016/2017 year and $60,242 in the 2017/2018 year.  However, there was a timing issue in respect of his June 2016 payment and Mr Gordiwalla also chose to lodge an estimate with the Department in respect of the period 8 December 2016 to 30 June 2017 and the 2017/2018 year of $53,658 and $54,228 respectively. 

5. While a reconciliation occurs following lodgement of the respective income tax returns in accordance with the administrative formula, due to an error in the estimated year-to-date income provided by Mr Gordiwalla in December 2016, the tribunal is satisfied that the reconciliation process which has since taken place in respect of the 2016/2017 year does not result in a fair calculation of Mr Gordiwalla’s child support liability in respect of the initial child support period. This is also particularly so given the information from [Mr A], as discussed above.  As the 2017/2018 tax return of Mr Gordiwalla had not yet been recorded by the Department at hearing date, the reconciliation process was yet to take place in respect of the 2017/2018 year. Based on the 2017/2018 income tax return of Mr Gordiwalla before the tribunal, he has clearly under-estimated his available income.

6. Going forward, as property settlement occurred in late June 2018, Mr Gordiwalla told the tribunal that he now rarely earns an income from [Occupation 3].  In any event, he maintains that associated costs would eradicate the small amount he would receive for the odd occasion when he [worked in Occupation 3].  However, he continues in his regular [Occupation 2] job, earning approximately $200 gross per month.  Mr Gordiwalla gave oral evidence that he has recently received a pay increase to $65,000 per annum.  While he has not yet commenced receipt of the increased salary, he is hopeful it will be back-dated to 1 September 2018.  Mr Gordiwalla further stated that his employer often faces cash-flow issues resulting in his pay being late.  For example, he had not yet received his pay for September and as evidenced by the late payment he received in respect of the month of June 2016.  Regardless, the tribunal is satisfied that the income recorded on his 2018/2019 tax return will provide a reasonable indication of his available income from all sources, including his sole trader income.

7. Based on his Statement of Financial Circumstances, Mr Gordiwalla has a negative asset base.  His liabilities include car finance of $18,906 and credit cards totalling $15,530, due largely to legal fees and recent furniture purchases for re-establishment of $1,275.

8. The tribunal accepts the written evidence that Mr Gordiwalla currently holds $20,476 in his [superannuation] account. The tribunal is satisfied that Mr Gordiwalla has made no additional contributions during the relevant period.

9. The tribunal considered the evidence in relation to Mr Gordiwalla’s expenses, who currently shares his residence with [Child 1] for 15% of the time.   He told the tribunal that he is in good health.  After adjustment for rent, as discussed above, his estimated average weekly expenses and commitments are $740, including discretionary expenses in respect of entertainment, holidays, books and magazines of $50 per week.  In addition, Mr Gordiwalla stated that since separation he has been unable to afford to send money to his parents in [Country 1].  As discussed at hearing, such a moral obligation does not take priority over his child support obligations.  It is apparent that Mr Gordiwalla is able to meet the “necessary” and “discretionary expenses” of him and [Child 1].  It is also apparent that his weekly “necessary” costs far exceed the self-support amount allowed for in the administrative assessment in the 2017/2018 year of $24,535.

1. Mr Gordiwalla raised the issue in respect of the expenses he incurred for the benefit of [Child 1] and/or Ms Jermone in the period post-separation in December 2016 to property settlement in June 2018.  He submitted that the costs consisted of mortgage payments and interest on the home improvement loan and the [Bank 1] and [Bank 2] credit cards.  He further stated that the credit cards also consisted of child care fees prior to separation. Mr Gordiwalla submitted that the child support assessment was unfair as a result of the additional costs he incurred in relation to the marital home post separation, being in excess of $12,000.

2. The tribunal notes that at separation in December 2016, both parties moved out of the marital home.  Mr Gordiwalla told the tribunal that during this time he lived in shared accommodation in numerous locations.  He was adamant that the costs he incurred in the period to property settlement were not considered in the consent orders made in the Federal Circuit Court of Australia [in] June 2018. 

3. It was clear that both parties had legal representation at property settlement.  The tribunal examined the consent orders and the agreement letter from the respective lawyers to the Federal Circuit Court of Australia.  It was apparent that all outstanding liabilities, including the car loans and credit cards of both parties were reduced to nil from the proceeds of sale of the marital home.  It was also apparent that the agreement was for Ms Jermone to receive 63% of the net assets and superannuation. While Mr Gordiwalla asserted that there was no consideration in this agreement in respect of the costs he had incurred prior to the list of outstanding liabilities at 5 June 2018, there is nothing in the consent orders to say that they were not.  As discussed at hearing, the tribunal finds it difficult to accept that such costs would not have been considered in arriving at the consensus that 63% of the net assets should be attributed to Ms Jermone.  Particularly when Mr Gordiwalla was legally represented. Had they not been considered it is possible that the percentage attributed to Ms Jermone may have been greater, especially considering her greater level of care in respect of [Child 1].

4. The tribunal is also cognisant of the fact that of the debts referred to by Mr Gordiwalla, being the mortgage, home improvement loan, [Bank 2] and [Bank 1] credit cards, only the mortgage was in joint names.  Therefore, given that Ms Jermone and [Child 1] were not living in the marital home to receive any benefit, the only debt to which Ms Jermone had a legal liability was her 50% share of the mortgage.  Mr Gordiwalla submitted that these costs relating to the mortgage between December 2016 and settlement in March 2017 totalled $6,114. 

5. The tribunal considered the evidence of Ms Jermone regarding her income from all sources, her assets and liabilities. She told the tribunal that she works full time [for] [a company], where she has been employed for almost two years. It is evident from her 2016/2017 tax return that her sources of income consisted of gross wages and parenting payment (partnered).  The expenses were unremarkable, the net income recorded at $53,412.

6. In respect of the 2017/2018 year, it was evident that Ms Jermone commenced a sole trader business. She gave oral evidence that it involved [making products].  As it proved not to be sustainable or profitable, Ms Jermone cancelled her Australian business number in July 2018.  In any event, as it made a loss, there was no impact on the child support assessment.  Ms Jermone’s other income in 2017/2018 was confined to her gross wages.

7. In response to a question from the tribunal, Ms Jermone stated that she commenced studying to become [an Occupation 1] in the 2017/2018 year and expects to continue her studies following completion next year, hoping to be accepted into a Masters degree.  While Mr Gordiwalla was reluctant to accept that Ms Jermone no longer received an income from [making products], there was no supporting evidence before the tribunal to suggest that she continued to operate the business.  Ms Jermone explained that her income exceeded her annual base salary due to additional bonus payments and annual leave loading. The tribunal is satisfied that the income recorded on her 2017/2018 tax return of $59,482 is a reasonable indication of her available income from all sources.

8. Going forward, Ms Jermone’s recent payslips reflect a base salary of $56,135.  It was also evident that in the period to 18 September 2018 she has received a bonus payment and leave loading. The tribunal is satisfied that the income recorded on her 2018/2019 tax return will provide a reasonable indication of her available income from all sources.

9. The tribunal accepts the written evidence that at 30 June 2018 Ms Jermone held $23,650 in her Australian super account, noting that she will have since received $10,000 in accordance with the consent orders of [date] June 2018. The tribunal is satisfied that Ms Jermone has not made additional discretionary contributions during the relevant period.

10. It is evident from Centrelink records that Ms Jermone is in receipt of family tax benefit Part A and Part B at the fortnightly rate of $260.  For child support purposes, as family tax benefit is an income-tested benefit, it is not considered to be a part of her adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).  Furthermore, family tax benefit is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act).

11. The tribunal considered the assets and liabilities of Ms Jermone.  While she recently purchased a [motor] vehicle for $49,000, Ms Jermone gave oral evidence that her father sent her $20,000 to assist, leaving her to meet the gap with finance of $29,000.  As with Mr Gordiwalla, Ms Jermone also has credit card liabilities exceeding $10,000 as a result of re-establishment and everyday living expenses.  The tribunal calculates her net assets to be in the vicinity of $10,000.

12. The tribunal considered the evidence in relation to Ms Jermone’s expenses, who currently shares her residence with [Child 1] 85% of the time.  She told the tribunal that she is in good health.  Ms Jermone estimated her average weekly expenses to be $707, or almost $37,000 per annum.  Of this, $34 per week represented discretionary spending.  As with Mr Gordiwalla, her weekly “necessary” costs far exceed the self-support amount allowed for in the administrative assessment in the 2017/2018 year of $24,535. In response to a question from the tribunal, Ms Jermone stated that with the assistance of family tax benefit and child support payments she is able to meet the weekly “necessary” and “discretionary” costs of the household. Furthermore, if necessary she receives financial assistance from her father who resides in [Country 1]. In response to a question from the tribunal, Ms Jermone stated that she tries not to request assistance too often. It is noteworthy that there is no guarantee that the generosity of Ms Jermone’s father will continue and there is no obligation on him to do so. As such, the tribunal does not consider it appropriate to view his contributions to Ms Jermone as an income increasing her capacity to pay child support (Magee and Magee [2008] FMCAfam 896 and Wright and Wright & Anor [2009] FMCAfam 979).

Conclusion

1. After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Gordiwalla and Ms Jermone, and the needs of [Child 1], the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support.

2. The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). In this case, the tribunal is limited by the commencement of the child support assessment on 6 December 2016.  

3. Ms Jermone sought backdating of contributions by Mr Gordiwalla to child care costs prior to her application for a change of assessment on 30 June 2017, while Mr Gordiwalla sought consideration of additional costs incurred by him throughout the same period and extending to property settlement in June 2018.

4. As discussed above, the tribunal is not persuaded that the costs incurred by Mr Gordiwalla were definitively excluded from the property settlement process in June 2018.  If the additional costs were considered at property settlement, then the tribunal does not consider it appropriate to consider the additional costs incurred by Mr Gordiwalla between separation and property settlement, as this would ultimately result in “double-dipping”.  In the alternative, even if they were not, Ms Jermone has incurred the child care costs in respect of [Child 1] from separation to 30 June 2017 in the vicinity of $10,000 per annum.

5. The tribunal is cognisant that based on the administrative assessment, Ms Jermone’s adjusted taxable income has been significantly understated in the period 6 December 2016 to 31 July 2017.  In the case of Mr Gordiwalla, as noted above, the reconciliation of his 2016/2017 estimate has resulted in his adjusted taxable income in respect of the period 8 December 2016 to 30 June 2017 being significantly overstated.   It is noteworthy that due to Ms Jermone having 100% care of [Child 1] in the 2016/2017 year, her under-stated income of $17,136 rather than $53,412 does not have a significant impact on the child support liability. 

6. It is clear that the significant impact on the child support liability is essentially due to an error in the year-to-date income estimate provided by Mr Gordiwalla in respect of the period 1 July 2016 to 7 December 2016.  While ordinarily this would have been resolved through the objections process, the fact that the change of assessment process was already on foot, allows the error to be corrected within this decision, in addition to allowing for the payment error explained by [Mr A], if appropriate in the circumstances. The tribunal calculates the impact on the overall child support liability in the 205 day period from 8 December 2016 to 30 June 2017 to be in the vicinity of $1,800.  As noted above, in the same period, Ms Jermone met net child care costs in respect of [Child 1] of around $10,000 per annum. 

7. Overall, the tribunal does not find it appropriate to backdate a decision beyond 30 June 2017 and does not propose to make an adjustment in respect of the income of either party during the period 6 December 2016 to 30 June 2017. Nor is it appropriate to consider the child care costs incurred by Ms Jermone prior to 30 June 2017, or the additional costs incurred by Mr Gordiwalla prior to settlement.  It is reasonable for both parties to rely on the child support assessment as it was prior to 30 June 2017, when neither was in a position to expect any change.  Furthermore, the tribunal is not satisfied that it is appropriate to place the parties in a position of over-payment or arrears in respect of the period prior to the change of assessment application by Ms Jermone, in particular given that both parties have incurred additional costs during that period.

8. Based on the evidence before it, the tribunal calculates the net child care costs in respect of [Child 1] in the period 1 July 2017 to 31 July 2017 to be $890, annualising to $10,479. The tribunal found earlier in these reasons for decision that the costs relating to child care in respect of [Child 1] in the most recent 15-month child support period from 1 August 2017 to 31 October 2018 will be $11,659, annualising to $9,312.  Following commencement of Ms Jermone’s entitlement to the child support subsidy in July 2018, the weekly net cost of child care assuming 10 hours of care per day, five days per week is $149.75.

9. At 2.6.12 of the Guide, it states, “If the Registrar decides that the child support assessment should be changed because of high costs of child care, the costs of the child may be increased by the total net child care costs, for distribution between the parents according to their share of the combined income. The example makes it clear that the reference is to the combined child support income. 

10. The tribunal notes that the Department decisions have based the increased rate of child support payable by Mr Gordiwalla in respect of child care costs on the amount exceeding the 5% threshold. Mr Gordiwalla and Ms Jermone share equally in the combined child support income.  Although not strictly bound by the Policy (Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), given the similarity of income and assets, in this case the tribunal is satisfied that it is consistent with the objects of the legislation and therefore should be considered and applied accordingly.

11. Therefore, based on the actual net child care costs incurred by Ms Jermone, the tribunal proposes to increase the annual rate of child support payable by Mr Gordiwalla in the period 1 July 2017 to 31 July 2017 by $5,239 per annum, representing a 50% contribution.  In the period 1 August 2017 to 31 October 2018, the tribunal proposes to increase the annual rate of child support payable by Mr Gordiwalla by $4,656 per annum, representing a 50% contribution. 

12. At hearing there was disagreement in respect of the payment terms in regard to cancellations at [Child care provider 1].  It was clear from the submissions provided after the hearing that until 28 December 2018, with the provision of two weeks’ notice, Ms Jermone is eligible to receive a 50% discount on the fees charged for [Child 1] over the two days he is in the care of Mr Gordiwalla after Christmas.  As there is only one week during the Christmas school holiday period commencing 22 December 2018 before the expiration of the discounted offer on 28 December 2018, the additional two days where care is provided by Mr Gordiwalla will not be eligible for a discount. In response to a question from the tribunal, Ms Jermone stated that her mother will not be visiting throughout 2019.  In any event, the tribunal is satisfied that after 28 December 2018, there is no option for Ms Jermone other than to pay five days per week care for [Child 1], regardless of whether he is in attendance. Therefore, going forward, the tribunal calculates the net child care costs likely to be incurred by Ms Jermone in the period 1 November 2018 to 31 December 2019 to be $8,955 [(60 weeks x $149.75) – 50% of ($29.95 x 2 days)], which annualises to $7,672. A 50% contribution by Mr Gordiwalla equates to $3,836 per annum.

13. The tribunal is satisfied that the annual tax returns as lodged by the parties provide an accurate record of their available financial resources.  However, due to the inaccurate estimate of Mr Gordiwalla in respect of the 2017/2018 year in the amount of $54,228 and the increased income of Ms Jermone, the tribunal proposes to vary the adjusted taxable incomes of Mr Gordiwalla and Ms Jermone in respect of the 2017/2018 year to $60,242 and $59,487 respectively, thereby negating the need for any future reconciliation in respect of the 2017/2018 year.  Going forward, provided each parent lodges their future income tax returns in a timely manner, the administrative assessment will produce a fair outcome based on the income tax returns of each party. 

14. The tribunal calculates the proposed decision to result in arrears for Mr Gordiwalla of just under $950. Given the financial circumstances of both parties, the tribunal does not consider such a result to be just and equitable.  Therefore, the tribunal has decided to reduce the increased rate of child support in the period 1 August 2017 to 31 October 2018 to $3,898 per annum, in order to eradicate the arrears at 31 October 2018.

15. Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support. In this case, both parties have similar financial circumstances and commitments.  It appears that both parties are managing to meet their weekly household commitments, notwithstanding that it is not without difficulty.  The tribunal is satisfied that both parties have the ability to rearrange their finances to enable them to meet the necessary costs of their respective households and prioritise the necessary expenses of [Child 1].  

16. Based on the discretionary commitments incurred by Mr Gordiwalla in respect of himself and [Child 1] in the vicinity of $100 per week, the tribunal is satisfied that he has the capacity to maintain the current child support payments from 1 November 2018 of $133 per week.  As Mr Gordiwalla has managed to maintain payments more in the vicinity of $147 in recent times, the tribunal is satisfied that the proposed decision will not cause him hardship.  Given the significant child care costs incurred by Ms Jermone, the tribunal is satisfied that no departure from the administrative assessment would cause significant hardship to her and [Child 1].

Issue 3 – Is it otherwise proper to make a particular departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be ‘otherwise proper’ to make a departure determination.

2. According to Centrelink records, Ms Jermone is in receipt of family tax benefit Part A at between the base rate and maximum rate.  As a sole parent, she is also in receipt of family tax benefit Part B. Any change in the child support payable by Mr Gordiwalla will have no impact on her entitlement to family tax benefit Part B. In respect of family tax benefit Part A, as the income of Ms Jermone is above the maximum rate threshold and below the nil payment threshold, any increase in the child support payable by Mr Gordiwalla will likely result in a reduction in the rate of family tax benefit Part A payable to Ms Jermone, therefore decreasing any cost to the public.  Therefore, the tribunal considers that it is otherwise proper to make the particular proposed determination.

3. It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

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

·         The adjusted taxable income of Mr Gordiwalla in the period 1 July 2017 to 30 June 2018 is varied to $60,242 per annum;

·         The adjusted taxable income of Ms Jermone in the period 1 July 2017 to 30 June 2018 is varied to $59,482 per annum;

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 July 2017 to 31 July 2017 is to increase by $5,239 per annum;

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 August 2017 to 31 October 2018 is to increase by $3,898 per annum and

·         The rate of child support payable by Mr Gordiwalla in respect of the period 1 November 2018 to 31 December 2019 is to increase by $3,836 per annum.