Hadaway and Hadaway (Child support)

[2018] AATA 1709

Hadaway and Hadaway (Child support) [2018] AATA 1709 (18 April 2018)

DIVISION:       Social Services & Child Support Division

REVIEW NUMBER:  2017/SC013173

APPLICANT:  Mr Hadaway

OTHER PARTIES:    Child Support Registrar

Ms Hadaway

TRIBUNAL:    Member J Cuthbert

DECISION DATE:     18 April 2018

DECISION:

The tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying Mr Hadaway’s adjusted taxable income to $59,000 from 4 August 2017 to 31 December 2019;

• increasing the annual rate of child support payable by Mr Hadaway by $343 from 1 January 2017 to 31 December 2017 and by $500 from 1 January 2018 to 31 December 2019; and

• increasing the annual rate of child support payable by Mr Hadaway by $1,600 from 1 May 2018 to 31 December 2019 in relation to [Child 1]’s special needs.

CATCHWORDS
Child Support – Departure determination – Income and financial resources of parents – Business income – Costs of education of children – Special needs of the children - 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

HISTORY

1. This review concerns an application for a change to a child support assessment made by Ms Hadaway on 4 August 2017.

2. Ms Hadaway and Mr Hadaway are the parents of [Child 2] (born 2000), [Child 3] (born 2001), [Child 4] (born 2008) and [Child 1] (born 2015). There has been a child support assessment in place, made by the Department of Human Services – Child Support (the Department), since 11 September 2015. The child support assessment is currently based on Ms Hadaway having care percentages of 100%. The assessment for [Child 2] ended on 15 February 2018.

3. From 1 September 2016 to 31 August 2017 Mr Hadaway was assessed to pay child support of $6,184 a year based on his 2015/16 adjusted taxable income of $44,715 and a provisional income of $19,927 for Ms Hadaway.

4. For the child support period which started on 1 September 2017 Mr Hadaway was assessed to pay child support of $6,314 a year based on his 2016/17 adjusted taxable income of $45,555 and a provisional income of $19,927 for Ms Hadaway.

5. On 4 August 2017 Ms Hadaway applied to the Department for a departure from the assessment on the grounds that Mr Hadaway’s income, property and financial resources were not properly reflected in the assessment and also because of costs concerning the children’s special needs and [Child 1]’s attendance at child care.

6. On 26 October 2017 a decision was made to depart from the child support assessment by varying Mr Hadaway’s adjusted taxable income to $82,000 from 1 September 2017 to 31 December 2019 and increasing the annual rate of child support payable by Mr Hadaway by $1,124 from 1 August to 31 December 2017, $1,148 from 1 January to 30 June 2018 and $990 from 1 July to 31 December 2018.

7. Mr Hadaway lodged an objection to that decision. On 13 December 2017 his objection was partly allowed. The objections officer set aside the earlier decision and decided to depart from the child support assessment by varying Mr Hadaway’s adjusted taxable income to $59,803 from 4 August 2017 to 31 October 2019.

8. On 21 December 2017 Mr Hadaway lodged an application for a review of the objection decision with the tribunal.

9. The matter was heard on 18 April 2018. Mr Hadaway attended the hearing in person. Ms Hadaway attended the hearing by telephone. The Child Support Registrar was not represented at the hearing. The tribunal had access to the statement and documents provided by the Department (folios 1 to 556), documents provided by Mr Hadaway (folios A1 to A82) and documents provided by Ms Hadaway (B1 to B35).

CONSIDERATION

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 Assessment Act). This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.

2. A liable parent or a carer may apply to the Child Support Registrar (the Registrar) for a determination to depart from the child support assessment under Part 6A of the Assessment Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the tribunal standing in place of the Registrar, must be satisfied:

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

   (ii)    that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part;

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act. If satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations in section 98S of the Assessment Act. That section permits a range of determinations, including varying the annual rate of child support payable or a parent’s adjusted taxable income.

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

1. Ms Hadaway sought a departure from the administrative assessment on the ground that Mr Hadaway’s income, financial resources and property were greater than reflected in his adjusted taxable incomes.

2. The grounds for departure are set out in subsection 117(2) of the Assessment Act. Subparagraph 117(2)(c)(ia) provides as a ground for departure:

   (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; or

3. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279, the Full 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.

Mr Hadaway’s income, property and financial resources

1. Mr Hadaway is an [Occupation 1]. Since 2013 he has worked for [Company 1]via his company [COMPANY 2]. [COMPANY 2] also receives income from Mr Hadaway’s work as a [Occupation 2].

2. Mr Hadaway’s 2016/17 adjusted taxable income of $45,555 is made up of salary and dividends of $42,380 from [COMPANY 2], net rent of $2,765 and net income of $1,170 from the hire of his motor vehicle. The rent received comes from a house at [Town 1] in which Mr Hadaway has a 50% share. Mr Hadaway claimed expenses of $150 for washing his car, $150 for laundry and $460 for donations.

3. In 2016/17 [COMPANY 2] recorded income of $74,661 including $1,346 in sales, $19,500 from [another source] and $53,115 in professional fees as well as a fringe benefits tax contribution of $700. [COMPANY 2] claimed expenses totalling $74,253 including the salary paid to Mr Hadaway, leaving a profit of $408.

4. [COMPANY 2] claims expenses related to a motor vehicle owned by Mr Hadaway which he rents to [COMPANY 2]. Expenses of $10,444 were claimed by [COMPANY 2] in 2016/17. On 8 June 2017 Mr Hadaway obtained finance for the purchase of another vehicle costing $31,803. The finance payments are $235.31 a fortnight. He told the tribunal that the vehicle is subject to a similar arrangement. The tribunal notes that the motor vehicle expenses for 2017/18 are likely to be significantly greater than the expenses in 2016/17.

5. Mr Hadaway told the tribunal that he pays a contribution to [COMPANY 2] based on 20% private use in accordance with the statutory formula method for fringe benefits tax, after a deduction for depreciation claimed in his personal tax return ($990 in 2017). He said that he walks to work and the shops and estimated that his private usage of the vehicle would be closer to 7.5%. However, Mr Hadaway did not keep any record of business or private mileage. He said that the vehicle is mainly used for his work as a [Occupation 2]. The tribunal considers that the arrangement Mr Hadaway has made whereby he rents his vehicle to [COMPANY 2] and pays a fringe benefits tax contribution does not properly reflect the significant financial resource available to him.

6. The tribunal notes that [COMPANY 2] purchased a laptop and [a certain] equipment (with a total value of $4,386) in the 2016/17 financial year, more than the depreciation of $939 claimed. However, Mr Hadaway claimed $990 for depreciation for his vehicles and $191 in relation to the rental property.

7. [COMPANY 2] claimed an expense for overtime meal allowance of $5,644 in 2016/17. Mr Hadaway said that it related to him staying late at work and his work as a [Occupation 2]. The tribunal finds that the expense reflects a financial resource available to Mr Hadaway.

8. [COMPANY 2] also claimed expenses of $2,808 for rent and $131 for electricity. Mr Hadaway said that he claims 15% of his costs based on the use of the smaller bedroom in a two-bedroom unit. He said that he has a computer, desk and [certain] equipment in the room. The tribunal finds that the ability to claim the expenses for rent and electricity provide Mr Hadaway with a financial benefit. [COMPANY 2] pays for Mr Hadaway’s mobile telephone and internet connection (an expense of $1,185 claimed in 2016/17). The tribunal finds that a portion of the telephone and internet bills are also a financial resource.

9. Mr Hadaway acknowledged that the amount of $837 claimed by [COMPANY 2] for costumes and clothing related to regular payments to his account with Lowes. He acknowledged that apart from one jacket which was made with different coloured lapels to match those of the band members and cost a few hundred dollars, the expense relates to the purchase of clothing such as black pants and shirts which can be worn more generally. The tribunal finds that the ability of [COMPANY 2] and Mr Hadaway to claim expenses for clothing and laundry provides him with a financial resource.

10. Mr Hadaway told the tribunal that cash withdrawals made from [COMPANY 2]’s bank account are debited to his loan account. He acknowledged that he had repaid $3,513 to [COMPANY 2] in 2016/17 and said that [COMPANY 2] now owes him about $1,000.

11. In 2016/17 [COMPANY 2] claimed expenses of $4,195 for monies paid to other [Occupation 2] and $3,364 for superannuation.

12. The tribunal notes that in the period 1 July 2017 to 14 March 2018 [Company 1] paid [COMPANY 2] $39,961. Allowing for a one-week holiday Mr Hadaway said that he had planned in June 2018 the tribunal finds that [COMPANY 2] is likely to be paid about $55,000 by [Company 1]in the current financial year, slightly more than in the previous year.

13. Mr Hadaway did not provide the tribunal with bank statements for all accounts held by him for the period 1 December 2017 to 28 February 2018 as directed. He acknowledged that he had failed to provide statements for three accounts in his name and a joint account held with his mother. He said that he had determined that they were not relevant as there were negligible transactions. However, the bank statements Mr Hadaway did provide show credits and debits to the other accounts he holds. The joint account is used for rental income and expenses. Mr Hadaway told the tribunal that he only receives the net rent from his mother after the end of each financial year. Without copies of the bank statements Mr Hadaway was directed to provide, the tribunal is unable to conclude that his finances are as limited as he states or that he does not receive cash income from his work as a [Occupation 2] as suggested by Ms Hadaway.

14. As well as his interest in the property at Cowra, Mr Hadaway owns a motor vehicle, [certain] equipment, household contents and personal effects. There is no evidence that he has any other property which has a potential to provide him with income. 

15. It is not possible to make a precise calculation of Mr Hadaway’s income and financial resources due to the intermingling of expenses between him and [COMPANY 2]. The tribunal finds that Mr Hadaway has income and financial resources available to him from the operation of [COMPANY 2] far greater than suggested by his adjusted taxable incomes. After consideration of the income and expenses of [COMPANY 2] and Mr Hadaway the tribunal considers that he has income and financial resources similar to a person with an adjusted taxable income of between $58,000 and $60,000 a year (income of about $75,000 less related expenses of between $15,000 and $17,000). The tribunal does not accept Mr Hadaway’s suggestion that his total income and financial resources are $53,573.

Mr Hadaway’s earning capacity

1. The tribunal also considered Mr Hadaway’s earning capacity and the three criteria in subsection 117(7B) of the Assessment Act. He told the tribunal that while he is working full-time hours for [Company 1], his productivity (and therefore his income) is low due to his depression. The tribunal accepts that, in addition to his work for[Company 1], Mr Hadaway also spends one to three nights a week working as a [Occupation 2].

2. The tribunal finds that Mr Hadaway has not altered his work pattern or industry since separation and that he is not working less than full-time hours. For those reasons the first criterion of subsection 117(7B) of the Assessment Act is not satisfied. As a consequence the tribunal is unable to determine whether Mr Hadaway has any unused earning capacity.

Do the existing assessments provide a result which is unjust and inequitable?

Ms Hadaway’s income, property, financial resources and earning capacity

1. In order to determine whether Mr Hadaway’s income and financial resources result in child support assessments which are an unjust and inequitable determination of the financial support he should provide for the children, the tribunal considered whether Ms Hadaway’s adjusted taxable income is indicative of her income, property, financial resources and earning capacity.

2. Ms Hadaway is in receipt of carer payment and carer allowance as well as family tax benefit (which is not taken into account in the calculation of child support). She has some savings, a car and household contents. There is no evidence that Ms Hadaway has any other financial resources or property of significant value which is capable of providing her with any significant income.

3. Mr Hadaway did not suggest that Ms Hadaway has potential to earn more income. The tribunal accepts that she has not been in paid work since prior to [Child 4]’s birth and that she and Mr Hadaway separated when [Child 1] was a baby. Ms Hadaway also gave birth to her youngest child in 2017. While Ms Hadaway completed a Certificate III in Community Services in 2013 she told the tribunal that she had not looked for work. The tribunal also accepts her evidence that [Child 4] and [Child 3] have medical conditions which affect her ability to work or study.

4. The tribunal finds that the three criteria in subsection 117(7B) of the Assessment Act are not satisfied in Ms Hadaway’s case as the tribunal accepts that the decision she has made not to seek employment is not motivated by a desire to affect the child support assessment but is due to her caring responsibilities. As a consequence the tribunal is unable to determine that Ms Hadaway has any unused earning capacity.

Are there special circumstances for which to depart from the assessment?

1. Taking into account the objects of the Assessment Act (section 4), including that children should share in the standard of living of both their parents, the tribunal finds that the income and financial resources of Mr Hadaway provide special circumstances for which to depart from the assessment. Mr Hadaway would be liable to pay far more child support if the assessment was based on his income and financial resources rather than his adjusted taxable income. The tribunal finds that the assessment is unfair to Ms Hadaway and to the children for that reason, and that a ground is established to depart from the assessment under subparagraph 117(2)(c)(ia) of the Assessment Act.

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

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 just and equitable to depart from the assessment having regard to the matters set out in subsection 117(4) of the Assessment Act.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. In accordance with the objects set out in section 4 of the Assessment Act, the children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute.

The children’s needs

1. [Child 2] is now 18 years old and has left school. [Child 3] is 16 years old, [Child 4] is nine and [Child 1] is three. In 2017 [Child 2] and [Child 3] attended [School 1] and [Child 4] attended [School 2] [Child 3] is in Year 11 in 2018 and [Child 4] is in Year 4. There is no dispute that both parents signed enrolment forms for the children to attend those schools and that they were attending school when their parents separated.

2. After fee relief was granted in 2017 the total owed for school fees was $686. Ms Hadaway paid half of that amount. However Mr Hadaway did not make a contribution and amounts of $160 and $183 remain outstanding.

3. The fees for 2018 are $1,482 for [School 2] and $4,806 for[School 1]. Ms Hadaway told the tribunal that they have not yet applied for fee relief and that she is unsure whether any relief will be granted. Even if some fee relief is granted as it was in 2017, the tribunal finds that the cost of the children’s school fees significantly affects the overall cost of their support as Ms Hadaway has very limited means and is already meeting various other costs associated with [Child 3] and [Child 4]’s education.

4. [Child 3] and [Child 4] have both been diagnosed with autism and [Child 3] also has [ a behaviour disorder] and an intellectual delay. Ms Hadaway told the tribunal that the costs of treatment are generally met using a health care card or by the National Disability Insurance Scheme. However, she said that she does have some expenses relating to travel to appointments and her time. The tribunal notes that Ms Hadaway receives carer payment from Centrelink but also carer allowance for [Child 3] and [Child 4] to assist with additional expenses in relation to their care.

5. [Child 1] attends child care. The tribunal accepts that he was enrolled for one day a week from February 2017 and that he started attending for two days a week in April 2017. Until 1 August 2017 Mr Hadaway and Ms Hadaway were meeting those costs from deposits that they were both making to a joint bank account. They were in credit with the child care provider when Mr Hadaway made a payment of $1,000 directly to the provider on 1 August 2017. Mr Hadaway’s claim to have the payment credited against his child support liability was ultimately refused.

6. Since 10 October 2017 [Child 1] has been attending child care for three days a week. Ms Hadaway said that she increased the days because a day became available when there was a special needs teacher in the class. She provided the tribunal with a report from an early childhood intervention service from December 2017, a medical assessment from March 2018 and a letter from a general practitioner which indicate that [Child 1] has borderline mild developmental delay. He is to be reviewed by a paediatrician in July 2018. A letter from the child care provider dated 5 December 2017 indicates that [Child 1] has benefitted from attending the centre for three days a week. Mr Hadaway said that he had no comment as to whether, or not, [Child 1] has special needs.

1. Mr Hadaway had agreed that [Child 1] should attend child care for two days a week. The tribunal accepts that [Child 1]’s attendance at child care for three days a week relates to issues concerning his development. The tribunal finds that [Child 1]’s attendance for a third day each week relates to a special need.

2. The credit on the child care account has mostly been absorbed by subsequent fees. However, the tribunal accepts Ms Hadaway’s evidence that she has paid $563.06 to the provider since that time. The tribunal notes that at 6 April 2017 the account was still in credit. The current cost of child care, after rebate and benefits, is $20.68 a day or about $3,200 a year. The tribunal notes that in October 2017 the cost was $18.38 a day, about $1,900 a year, when [Child 1] was attending for two days a week. The tribunal finds that those costs significantly affect the overall cost of [Child 1]’s support.

3. Apart from the costs mentioned above, the tribunal is satisfied that the costs related to the care of the children are not out of the ordinary range of expenses for children of their ages.

The children’s income, property, financial resources and earning capacity

1. The tribunal has no evidence that any of the children have any income, property or financial resources or any unused earning capacity that needs to be taken into account in the child support assessment.

The parents’ duty to support others

1. The tribunal finds that Mr Hadaway does not have a duty to support any other person apart from [Child 3], [Child 4] and [Child 1] (and previously [Child 2]). Ms Hadaway has a duty to support her younger daughter who is taken into account as a relevant dependant by the Department.

The income, property, financial resources and earning capacity of Ms Hadaway

1. The income, property, financial resources and earning capacity of Ms Hadaway have been discussed above.

Ms Hadaway’s necessary commitments

1. Ms Hadaway lives with [Child 2], [Child 3], [Child 4] and [Child 1] and her youngest child in a house she rents for $475 a week. In addition to Centrelink payments and child support from Mr Hadaway, she receives child support for her youngest child. The tribunal is satisfied that Ms Hadaway struggles to meet the reasonable and necessary expenses that she has for herself and the children.

The income, property, financial resources and earning capacity of Mr Hadaway

1. The income, property, financial resources and earning capacity of Mr Hadaway have been discussed above.

Mr Hadaway’s necessary commitments

1. Mr Hadaway pays rent of $360 a week. His bank statements and other evidence he provided do not indicate that he is unable to meet his reasonable and necessary costs as well as some discretionary expenses. He told the tribunal that he is saving to go on a cruise in 2019 and that he purchased a gift for his mother costing about $800.

Terms and period of departure

1. Ms Hadaway made her departure application on 4 August 2017. She seeks a departure from the assessment for the maximum period of 18 months. She told the tribunal that she did not have any evidence that Mr Hadaway’s income was not properly reflected in the assessment until he completed fee relief forms for the children’s schools in 2017. However, the tribunal notes that Mr Hadaway was employed on a contract basis for [Company 1] via [COMPANY 2] for some years prior to the separation in 2015 and had a history of fairly low taxable incomes. For that reason the tribunal finds that it would be just and equitable to depart from the assessment by varying Mr Hadaway’s adjusted taxable income from 4 August 2017 and not from an earlier date.

2. The tribunal finds that it would be just and equitable to depart from the assessment by varying Mr Hadaway’s adjusted taxable income to $59,000. To provide some certainty to the parties, the tribunal proposes that the variation should continue until 31 December 2019.

3. The tribunal considers it just and equitable that Mr Hadaway should continue to meet 50% of the costs of child care for [Child 1] from the time the $1,000 payment he made should have been exhausted. The tribunal finds that it would be just and equitable to increase Mr Hadaway’s child support liability by $1,600 from 1 May 2018 to 31 December 2019 to take into account his contribution to [Child 1]’s child care costs

4. The tribunal also finds that Mr Hadaway’s child support liability should also be increased to take into account his contribution to the children’s school fees. The tribunal proposes to increase his liability by $343 (50% of the amount payable for 2017 and which is still outstanding) and by $500 for 2018. The proposed decision is made on the basis that it is likely that fee relief will be granted and that total fees of less than $1,000 will be payable; if that turns out not to be the case, either parent can apply for a further departure from the assessment.

5. The tribunal finds that the proposed variations result in a child support liability (about $245 a week from 1 May 2018) which reflects a reasonable level of support for the children given the differences between their parents’ incomes, property and financial resources, the school fees likely to be payable and [Child 1]’s special needs.

Hardship

1. The child support payable on the basis of the decision proposed should assist Ms Hadaway to meet the children’s proper needs.

2. In January 2018 Mr Hadaway owed child support arrears of just over $1,000. The proposed decision will result in a slight change to the arrears. In light of the findings made about his income and financial resources, the tribunal finds that the proposed decision will not result in hardship to Mr Hadaway.

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 Assessment 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. Ms Hadaway receives family tax benefit. The tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter and to properly reflect Mr Hadaway’s income and financial resources as well as the costs related to the children’s school fees and [Child 1]’s special needs.

DECISION

The tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• varying Mr Hadaway’s adjusted taxable income to $59,000 from 4 August 2017 to 31 December 2019;

• increasing the annual rate of child support payable by Mr Hadaway by $343 from 1 January 2017 to 31 December 2017 and by $500 from 1 January 2018 to 31 December 2019; and

• increasing the annual rate of child support payable by Mr Hadaway by $1,600 from 1 May 2018 to 31 December 2019 in relation to [Child 1]’s special needs.