Hamshaw and Iddings (Child support)

[2021] AATA 5033

Hamshaw and Iddings (Child support) [2021] AATA 5033 (24 November 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC021638

APPLICANT:  Ms Hamshaw

OTHER PARTIES:  Child Support Registrar

Mr Iddings

TRIBUNAL:Member S Letch

DECISION DATE:  24 November 2021

DECISION:

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

(a)for the period 1 March 2020 to 28 February 2021, Mr Iddings’ annual child support liability is increased by $1,688 (in respect of child care costs);

(b)for the period 1 July 2020 to 31 December 2020, Mr Iddings’ adjusted taxable income is varied to $120,000.

To avoid any doubt, this decision has no effect on the departure decision made by the Child Support Agency on 21 May 2021 which, amongst other things, varied Mr Iddings’ adjusted taxable income to $200,000 for the period 1 January 2021 to 28 February 2023.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of child care – cost of maintaining child are significantly affected – financial resources of liable parent – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

1. Ms Hamshaw and Mr Iddings are the parents of [Child 1], born 2012, and [Child 2], born 2014. Mr Iddings has been assessed by the Child Support Agency (CSA) as liable to pay child support to Ms Hamshaw. Ms Hamshaw seeks a review of an objection decision by the CSA which allowed “in part” her objection to a “change of assessment” decision of 12 March 2020.  

2. It is convenient to set out some extracts from the objections officer decision dated 31 July 2020 by way of background:

   DECISION UNDER REVIEW

   On 11 November 2019, Ms Hamshaw applied for a change to the assessment on the basis of Reasons 6, 8A and 8B.

   On 12 March 2020, DM [Mr A] found Reason 6 established and made the following decision:

   - That for the period 1 March 2020 to 28 February 2021, the rate of child support payable by Mr Iddings is increased by $2,364 per annum.

   GROUNDS FOR REVIEW:

   Ms Hamshaw has written to object to this decision on the grounds:

   - The DM used incorrect information and did not consider all the facts and information relevant.

   Mr Iddings disagrees with Ms Hamshaw`s objection.

   …

   The assessment for the period 1 January 2020 to 21 April 2020 was based on Mr Iddings’ 2018/19 adjusted taxable income of $97,171. On 22 April 2020, Mr Iddings lodged his 2019/20 estimate income of $44,191, which was applied to 31 July 2020.

   Based on the response from Mr Iddings employer and his payslips, I am satisfied that he is employed on a full time basis since 3 June 2019 and in receipt of a gross annual income of approximately $82,513.71 (YTD to 22 June 2020). As this income is below Mr Iddings’ 2018/19 adjusted taxable income of $97,171, I cannot be satisfied that his income is higher.

   However, Ms Hamshaw asserts that Mr Iddings’ payments are shared with his wife to reduce his income. A perusal of a letter from Mr Iddings’ employer confirms that any commissions paid to Mr Iddings and [Ms B] are commensurate with their efforts on the individual [job projects]. On such basis, I accept that Mr Iddings is not alienating his income to his current partner.

   In regards to Mr Iddings’ estimate income of $44,191, when a parent elects to have their child support based on an estimate of their income, the agency will compare their estimate with their actual income for the estimate period. If the parent`s adjusted taxable income earned over the estimate period is more than their estimate, the department must amend the assessment to reflect the actual income earned.

   I am satisfied the agency`s automatic estimate reconciliation process will identify any discrepancies between Mr Iddings’ estimate of income and the actual income he receives during the estimate period. As such, I propose to rely on the agency`s reconciliation process to examine their estimate of income at a future date.

   Based on the above information I am not satisfied special circumstances exist. I do not find Mr Iddings’ current financial resources and income is significantly higher and I am not satisfied the child support assessment is unfair because he has a greater capacity than the child support assessment currently indicates.

   Reason 8A is not established.

   …

   Reason 8B is not established.

   …

   I have made the decision to set aside the determination made by DM [Mr A] on 12 March 2020 and replace it with the following:

   - For the period 1 March 2020 to 28 February 2021, the rate of child support payable by Mr Iddings is increased by $1,688 per annum.

   I have evaluated Mr Iddings’ capacity to meet the new child support he will pay. Mr Iddings’ income of $63,145 is significantly is higher than the sum of the self-support amount of $25,038 and new child support rate he is assessed to pay. Subsequently, I am satisfied Mr Iddings has the financial capacity to pay his increased child support obligation.

   …

   DECISION

   I have found special circumstances exist in this case and that it would be just and equitable and otherwise proper to make a change. The change to be made to the assessment is:

   - For the period 1 March 2020 to 28 February 2021, the rate of child support payable by Mr Iddings is increased by $1,688 per annum.

3. On 1 January 2021, Ms Hamshaw made another application for a change of assessment. On 4 March 2021, she applied for review of the CSA objection decision dated 31 July 2020. On 1 June 2021, her application for an extension of time was granted by the Tribunal.

4. Prior to Ms Hamshaw’s extension request being granted, on 10 May 2021, the CSA made a fresh departure decision. It is convenient to set out some extracts from the decision letter:

   …

   I have however taken a more holistic approach in terms of addressing these claims and Mr Iddings’ reduced income circumstances, as I do not consider the letter from [Employer] to be absolutely final in considering whether Ms Hamshaw`s claims are valid. This process is not one of being proven beyond all reasonable doubt, such as in a criminal case, this process considers the balance of probability and decisions should be made in that manner.

   In considering Ms Hamshaw`s claims I have reviewed Mr Iddings’ income since his current spouse was reported in the tax returns and this was first reported in the 2017-18 financial year. In that year Mr Iddings’ ATI was $193,638 and in the three years leading up to then his incomes were $172,196, $209,518, and $229,885. In 2018-19 Mr Iddings’ income reduced to $97,171 and his 2019-20 ATI is $65,599. I have reviewed Mr Iddings’ wife`s incomes over the same period and prior to 2017-18 they did not exceed Mr Iddings’ 2019-20 ATI. However, since 2017-18 her income has increased substantially, effectively swapping with Mr Iddings’ previous incomes.

   At this point it is relevant to state that the evidence from Mr Iddings’ employer is that he and his spouse are paid separately for their individual work. In terms of the issue of income splitting, I do not have direct evidence outside of the physical change in income that has occurred, and Reason 8A considers what is actually being received. To find Mr Iddings is income splitting I must find there to be more weight in Ms Hamshaw`s claims that Mr Iddings has an arrangement in place that provides his spouse with part of his income, over what has been stated by the employer.

   As this point I will not find Reason 8A established purely on the basis that I do not have conclusive evidence that income that would be directly payable to Mr Iddings is being paid to his wife, and I will not override the evidence provided by Mr Iddings’ employer on face value` assumption that this is occurring. This does however give way to the consideration of Mr Iddings’ capacity to earn which is considered below.

   Reason 8A is not established.

   …

   Having established Reason 6 in the application I propose to split the out of pocket child care costs between the parents. Both benefit from the child care arrangements enabling them to work, and therefore given the costs are high, both should make a contribution. The total amount determined under Reason 6 above were $3,880 therefore Mr Iddings’ contribution to this cost is $1,940. As the previous COA determination ended on 28 February 2021 and Ms Hamshaw`s application was received in January, it is fair that the increased rate be applied from 1 March 2021. I will apply this change until 28 February 2023 to ensure these costs are adequately covered and eliminate the need for a subsequent COA application under the same matter.

   With regards to Mr Iddings’ income, I have established Reason 8B above therefore I am not satisfied Mr Iddings is exercising his earning capacity with regards to the ongoing child support assessment. Ms Hamshaw has previously applied under Reason 8B and no change was made, and she has not sought further appeal of the objection decision. While this precludes me from considering prior assessment periods, I am not satisfied Mr Iddings’ capacity has been adequately reflected in the assessment from at least the date of Ms Hamshaw`s COA application, being 1 January 2021.

   Given Mr Iddings’ historical capacity to earn a significantly greater amount, and that this was over $200,000 per annum prior to his changed circumstances, I am satisfied this is an appropriate reflection of his current capacity. I will therefore set Mr Iddings’ income at $200,000 from 1 January 2021. To ensure his capacity is adequately reflected in the assessment I will set this in place until 28 February 2023 to align with the cessation of the change regarding child care costs. I acknowledge this will create arrears payable for Mr Iddings however I cannot find this to be an unfair result given Reason 8B requires me to come to the conclusion that Mr Iddings’ current circumstances are motivated by the effect on child support, and this must be rectified in the assessment.

   With regards to Ms Hamshaw`s circumstances, she has had a change of employer on 14 December 2020 and this has resulted in higher earnings. As of pay period ending 2 April 2021, Ms Hamshaw had year to date earnings of $18,415. This annualises to $61,104 having been earned over a period of 110 days. Taking into account allowable tax deductions, Ms Hamshaw`s current income is considered to be $60,500 per annum. Ms Hamshaw`s current income in the assessment is $50,869 and were this to be replaced with $60,500 there would be approximately a $1,000 decrease to Mr Iddings’ annual liability, under the above increase to his earnings. I consider this significant enough to render the assessment unfair and will therefore amend Ms Hamshaw`s income from 1 January 2021 to align with the changes to Mr Iddings’ income.

   …

   - For the period 1 March 2021 to 28 February 2023 the annual rate of child support payable by Mr Iddings is increased by $1,940 to reflect his share of the children`s high child care costs.

   - For the period 1 January 2021 to 28 February 2023 Mr Iddings’ Adjusted Taxable Income is set at $200,000.

   - For the period 1 January 2021 to 30 November 2022 Ms Hamshaw`s Adjusted Taxable Income is set at $60,500.

5. Ms Hamshaw and Mr Iddings participated in the Tribunal’s hearing by conference telephone. Both gave sworn evidence. In making its decision, the Tribunal took into account the CSA materials, and additional materials submitted by both parties.

CONSIDERATION

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

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

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

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

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

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 may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

10.Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to by the CSA as reasons 8A and 8B, provide as grounds 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

(ib)       because of the earning capacity of either parent

11.The matters which must be taken into account when assessing a person’s earning capacity are contained in subsection 117(7B) of the Act, which provides the following:

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.

12.The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

13.In short, Ms Hamshaw told the Tribunal that the decision by the CSA in May 2021 represented the outcome she was seeking. However, Mr Iddings’ income has been increased to $200,000 per annum from 1 January 2021 (the date of her application for a departure) and not from 1 July 2020. In this application, she seeks Mr Iddings’ adjusted taxable income to be increased to $200,000 for the period 1 July 2020 to 31 December 2020.

14.Mr Iddings suggests his income is not that high; however, he says he is prepared to “work towards” that level of income. He conceded that his financial prospects are improving. He would not agree to his income being set at the level of $200,000 for the six-month period in dispute. He maintains his actual income at that time was something in the vicinity of $120,000, and that the income derived by his wife of some $227,000 for the 2020/21 financial year is legitimately income derived by her – she is not a “debit-credit” agent like Mr Iddings, and in addition to deriving commissions, derives other income from other endeavours including [job task]. Mr Iddings said his wife’s remuneration is commensurate with her efforts, and denies any manipulation for the purposes of minimising his income.

15.There was no dispute by either party in this application about the assessment of Ms Hamshaw’s income, and the contribution that the CSA has assessed Mr Iddings should make towards Ms Hamshaw’s high child care costs.

16.Putting aside the issue of Mr Iddings’ income, the costs of child care are substantial, and in the special circumstances of the case, there is a ground to depart from the administrative formula. 

Issue 2 – Is it just and equitable to depart from the administrative assessment?

17.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

18.The Tribunal regards the departure decision of 10 May 2021 to be a fair reflection of Mr Iddings’ financial capacity, effective in the assessment from 1 January 2021 (the date of Ms Hamshaw’s fresh change of assessment application). The assessment adequately provides for a contribution from Mr Hamshaw towards child care costs, and seems to the Tribunal to adequately reflect Ms Hamshaw’s financial capacity. Certainty is provided to the parties by the assessment being given effect until late 2022/early 2023. The Tribunal considers the better approach is to leave that decision to stand; accordingly, for this application, the Tribunal will consider in particular the assessment of Mr Iddings’ income prior to 1 January 2021.

19.Mr Iddings’ income in the assessment from July 2020 was represented by his 2018/19 adjusted taxable income of $97,171. His 2020/21 adjusted taxable income amounted to just under $120,000. Mr Iddings argues the sum of around $120,000 is more reflective of his financial capacity.

20.In the Tribunal’s assessment, Mr Iddings’ prospects have likely been steadily improving in line with the length of tenure with his current agency, and the improving [market]. Assessing Mr Iddings at $120,000 for the first six months of the 2020/21 financial year, and then $200,000 from 1 January 2021 (in accordance with the current departure decisions) would appear to the Tribunal a fair reflection of Mr Iddings’ increasing financial capacity.

21.The Tribunal considers it just and equitable to vary Mr Iddings’ income to $120,000 for the period 1 July 2020 to 31 December 2020. The Tribunal is satisfied that Mr Iddings has the financial capacity to meet the additional liability created for this period. Ms Hamshaw’s adjusted taxable income of some $49,000 for the latter half of 2020 was reflective of her financial capacity, and no adjustment to the formula assessment is required. There was no dispute by either party concerning child care costs; the Tribunal finds it just and equitable that Mr Iddings’ liability be increased by $1,688 per annum from 1 March 2020 to 28 February 2021 in accordance with the objection decision of 31 July 2020 (the departure decision of 10 May 2021, which will continue to have operative effect, increased Mr Iddings’ liability from 1 March 2021 to 28 February 2023 to reflect his requirement to make an ongoing contribution towards child care expenses).

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

22.The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

23.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

24.As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be set aside.

DECISION

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

(a)for the period 1 March 2020 to 28 February 2021, Mr Iddings’ annual child support liability is increased by $1,688 (in respect of child care costs);

(b)for the period 1 July 2020 to 31 December 2020, Mr Iddings’ adjusted taxable income is varied to $120,000.

To avoid any doubt, this decision has no effect on the departure decision made by the Child Support Agency on 21 May 2021 which, amongst other things, varied Mr Iddings’ adjusted taxable income to $200,000 for the period 1 January 2021 to 28 February 2023.