Hanchett and Hanchett (Child support)

[2023] AATA 426

Hanchett and Hanchett (Child support) [2023] AATA 426 (14 February 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC024499

APPLICANT:  Ms Hanchett

OTHER PARTIES:  Child Support Registrar

Mr Hanchett

TRIBUNAL:Member D Tucker

DECISION DATE:  14 February 2023

DECISION:

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

·   from 6 January 2022 to 11 December 2022, Mr Hanchett’s ATI is varied to $85,900.

·   from 12 December 2022 to 31 October 2023, Mr Hanchett’s ATI is varied to $101,900

·   from 1 July 2022 to 31 October 2023, Ms Hanchett’s ATI is varied to $98,000.

Additionally, the father’s annual rate is increased to share the costs of child care as follows:

·   from 6 January 2022 to 31 December 2022, by $7,500 and;

·   from 1 January 2023 to 31 December 2023, by $2,496.

CATCHWORDS

CHILD SUPPORT – departure determination – high costs of child care – income, property and financial resources of the liable parent – a ground for departure established – decision 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 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 Hanchett (the mother) and Mr Hanchett (the father) are the separated parents of two children, [Child 1], born [in] September 2017, and [Child 2], born [in] January 2021 (the children).

2. The Child Support Agency (the CSA) began a child support assessment on 2 March 2021, which was registered for agency collection. At all relevant times the children were 100% in the mother’s care.

3. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also provides for a departure from the administrative assessment in special circumstances.

4. The father was assessed to pay the mother an annual rate of child support of $6,984, from 1 January 2022 to 30 June 2022. This rate considered the father’s 2020/2021 adjusted taxable income (ATI) of $57,779, and a 2021/2022 income estimate for the mother of $99,927.

6 January 2022 – The mother’s application for a departure

1. On 6 January 2022 the mother applied for a departure from the administrative assessment on the grounds that it did not adequately account for:

   ·   the significant cost of the children’s child care fees (Reason 6), and

   ·   the father’s income and unused earning capacity (Reason 8A and 8A).

24 March 2022 – the departure decision

Reason 6 – the costs of child care

1. The CSA decision-maker found that the mother’s out-of-pocket costs (after rebates and child care subsidies) were $92.78 per day ($24,122 per annum) for both children, from 1 February 2022;  and that as this exceeded 5% of the mother’s administratively assessed adjusted taxable income, Reason 6 was established.

Reason 8A & 8B – income, earning capacity, property or financial resources

1. The CSA also found that, due to a change in his employment, the father’s salary, after allowing for reasonable deductions, was $79,000 from 6 January 2022 and $83,000 from 1 May 2022.

2. Normally a child support assessment is calculated using the parents’ most recent taxable income. The CSA found that this was not appropriate in this instance as the father’s income had increased significantly and that Reason 8A was therefore established. In the absence of sufficient evidence, the CSA found that Reason 8B was not established.

3. The CSA noted that the assessment was based on the mother having an income of $99,927 per annum. She provided a payslip to show that her income had not significantly changed. Based on this, the CSA found that Reason 8A and Reason 8B were not established in relation to her.

4. On 24 March 2022 the CSA decided that a departure was warranted from the date of the mother’s application (6 January 2022), and decided that:

   ·   for the period 6 January 2022 to 31 January 2022, the annual rate of child support payable by the father would be increased by $4,771 (reflecting a fair share of child care costs).

   ·   For the period 1 February 2022 to 31 December 2022 the annual rate of child support payable by the father would be increased by $9,649 (to include a fair share of the mothers’ child care costs).

   ·   from 6 January 2022 to 30 April 2022, the father’s adjusted taxable income would be set at $79,000.

   ·   From 1 May 2022 (when the father’s income was due to increase again) to 31 October 2023, the father’s adjusted taxable income would be set at $83,000.

5. This outcome was designed to reflect the increases in the father’s salary and require him to contribute 40% of the costs of child care, in proportion to his percentage of the parents’ combined child-support income. The net effect was to render the father liable to pay child support of $21,195 per annum.

22 April 2022 – the father’s objection

1. On 22 April 2022, the father lodged a timely objection to the departure decision. He argued that he should not be obliged to pay an increase to cover the costs of child care, given that (i) he had no part in the decision to enrol the children in child care, and (ii) five days of child care per week was not necessary, as he could care for the children for two days per week while working from home.

2. The CSA’s objections officer conducted a merits review of the departure decision of 24 March 2022 and found that:

   ·   Reason 6 was established as the costs of the children’s child care exceeded 5% of the mother’s administratively assessed adjusted taxable income over the child support period. The objections officer also noted that the mother was not obliged to accept the father’s offer to care for the children at home for two days a week while he worked.

   ·   Reason 8A was established, because the income of both parents was not accurately reflected in the assessment:

   ·   The father’s income (less superannuation and reasonable deductions) was $79,000 from November 2021 and $82,000 from May 2022.

   ·   The mother’s income (less reasonable deductions) had increased to $98,000 from July 2022.

   ·   Reason 8B (unused earning capacity) was not established for either parent.

3. Based on these findings, on 3 August 2022, the objections officer partly allowed the father’s objection, deciding that:

   ·   from 6 January 2022 to 31 December 2022, the annual rate of child support payable by the father was increased by $7,500.

   ·   from 6 January 2022 to 31 October 2023, the father’s adjusted taxable income is set to $82,000.

   ·   from 1 July 2022 to 31 October 2023, the mother’s adjusted taxable income is set to $98,000.

4. The objections officer set the father’s contribution towards the costs of child care at $7,500 on the basis that this was 31% of the mother’s out-of-pocket child care expenses, matching the father’s 31% share of the combined child support income.

5. The objections officer made the departure period until 31 December 2022, on the basis that it was likely the mother’s child care costs would change in 2023 as the eldest child would be commencing primary school.

22 August 2022 – the mother’s application to the Administrative Appeals Tribunal (AAT)

1. On 22 August 2022 the mother applied to the Social Services and Child Support Division of the AAT (the tribunal) for further review.

2. On 3 November 2022 the mother and the father participated in a telephone directions hearing. Directions were issued requiring compliance by 24 November 2022.

3. On 16 December 2022 the mother and the father participated in a further hearing via telephone. The tribunal considered their written and oral submissions, including the response to the tribunal’s directions, and relevant documents provided by the CSA.

4. The grounds of the mother’s application were Reason 3 (the costs of educating the children in the manner both parents intended; Reason 6 (the high costs of child care) and Reason 8A (the other parent’s income).

LEGISLATION AND ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

   (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 …

2. Therefore, the issues which arise in this case are:

   ·   Does a ground exist for departure from the administrative assessment of child support, and if so, would it be just and equitable and otherwise proper to depart from the administrative assessment?

CONSIDERATION

Reason 6

23.Reason 6 will be met when the costs of maintaining a child are significantly affected by the high child care costs for the child (and the child is under 12 years of age). According to subsection 117(3B)of the Act, child care costs for a parent are high only if they total more than 5% of the parent’s adjusted taxable income for the care period.

1. According to topic 2.6.12 of the Child Support Guide (the Guide) there should be an element of necessity in incurring the child care costs, for example, work-related purposes. This extends to parents or non-parent carers attempting to join the workforce, including those who are undertaking study, training or education.

2. The father stated that because he works from home several days per week, he could care for the children on those days, thereby reducing the costs of child care. The mother has rejected this offer. The tribunal has no jurisdiction to direct where the children should live or be cared for on a day-to-day basis.

3. The tribunal carefully examined the documents from [Agency 1] reproduced within the CSA’s records and is satisfied that they verify that both children were in full-time child care from 1 February 2022, and the annual out-of-pocket cost of which totalled $24,122.

4. The tribunal finds that the mother was employed full time and therefore needed to have the children in full time child care.  To ascertain the 5% threshold, the law requires the tribunal to calculate the mother’s administratively assessed adjusted taxable income, being $86,665.20 for the relevant child support period 1 January 2022 to 31 March 2023. This equation produces an annualised figure and 5% of that annualised figure is used to determine the threshold. In this case, the 5% threshold equates to $4,333. The Tribunal therefore finds that the mother’s child care costs significantly impacts the cost of maintaining the children overall, and therefore Reason 6 is established as a ground for departing from the administrative assessment.

Just and equitable

1. Once a reason for departing from an administrative assessment has been established, the Registrar, or the tribunal, must consider the amount and duration of any proposed change and the factors listed in section 117(4) of the Act which are relevant to a particular case. These include:

   ·   the nature of the duty of a parent to maintain a child

   ·   the proper needs of the child

   ·   the income, earning capacity, property and financial resources of the child and of each parent

   ·   the commitments of each parent to support himself or herself, and any other child or person that they have a duty to maintain

   ·   the direct and indirect costs incurred by the carer entitled to child support in providing care for the child

   ·   any hardship that would be caused to the child, the parents or carers, or any other child or person that the liable parent has a duty to support, by the making of, or the refusal to make, a determination, and

   ·   any other relevant matters.

2. The tribunal accepts that the parents have a duty to maintain their children. There is no dispute that the children’s proper needs are being met. There is no evidence of any duty on the parents to maintain any other person or child outside the assessment. Nor is there any question that the children have any income, earnings, property or financial resources which would affect the child support assessment.

Parental income, property, or financial resources

1. At the tribunal’s hearing the father and the mother confirmed the findings made by the objections officer regarding their own incomes, as they were when the objection decision was made (3 August 2022).

2. The father also advised that since then, on 12 December 2022, he took up another job with a gross salary of $100,000 per annum, as he subsequently corroborated by a letter from his employer.

3. Both parties questioned whether the other had additional income apart from their declared earnings. The mother claimed that the father was working in his brother’s [business] on the weekend. She recalled that he did this work prior to their separation and was paid $200 per day. The father confirmed this was correct, but stated that after he and the mother separated, his brother had paid him only $150 per day, as this was all he could afford, as his business had declined due to the pandemic, and that since March 2022 he had only worked once per fortnight. Based on the father’s evidence, the tribunal finds it appropriate to add $3,900 to his annual salaried income ($150 x 26 fortnights p.a.).

4. The mother also claimed that the father’s spending patterns indicated a higher income than he had declared, giving as examples him having seven pets and a new car. The father denied this, stating that he had two pets, one of which was a stray. He also claimed that the ‘new’ car referred to by the mother belonged to his brother.

5. The mother also questioned whether the father’s mother and brother, who share his house, contribute to his finances by paying rent and sharing the cost of utilities. The father denied this in his statutory declaration and in his oral submissions. He told the tribunal that his family had lent him money to cover the legal costs proceedings in the Federal Court, but do not pay rent to live in his house or share household bills apart from buying groceries. The father explained that it would be against his family culture to accept rent from his mother and brother, especially when they had lent him significant sums of money.

6. The father pointed out that the mother was also living with her parents and therefore paid no rent. He took the tribunal to transfers into her bank account and questioned whether they represented earnings from private work in addition to her full-time job. He took the tribunal to page A37 of the hearing papers which showed a deposit of $1,000 into the mother’s bank account from a person identified as [Friend A]. The mother denied having any other paid work apart from her full-time employment and explained that [Friend A] was a friend who had lent her money. The father also pointed to inconsistencies between the mother’s Statement of Financial Circumstances (SoFC) and her bank accounts. However, the mother provided the tribunal with plausible explanations for these relatively small anomalies.

7. Each parent claimed that the other had not paid their fair share of the holding costs of their jointly owned investment properties. The mother also claimed that the father had sold motor vehicles which were jointly owned. The father responded that he had done so because the mother had questioned the ongoing costs of registering and insuring these vehicles.

8. While the tribunal accepts that the treatment of shared assets is a significant issue for both parties, it is not relevant to the tribunal’s review, which is concerned with how to fairly share the costs of providing for the children. The division of shared assets will presumably be addressed via a property settlement in due course. The tribunal notes that the child support legislation it must apply reflects the parliament’s intention that providing for children will be a higher priority for separated parents than maintaining assets.

9. After considering all the evidence, the tribunal is satisfied that the incomes and financial resources of both parents are not materially different from their declarations and the findings of the objections officer. It is not possible or necessary for the tribunal to forensically quantify the relatively small financial benefits each party may accrue by cohabitating with their families of origin.

10. Based on this the tribunal finds that the parent’s ATIs, allowing for reasonable work-related deductions, and including the father’s casual employment, are as follows:

    ·   The father’s ATI is:

    o$85,900 ($82,000 + $3,900) from 6 January 2022 to 11 December 2022, and

    o$101,900 ($98,000 + $3,900) from 12 December 2022.

    ·   The mother’s ATI is $98,000 from 1 July 2022.

11. Both parents are employed full time in their usual occupations and there is no evidence that they have any unused earning capacity. Therefore the tribunal finds that Reason 8B is not established

12. The tribunal has taken the Statement of Financial Circumstances of both parents into account when coming to this decision and has considered their actual expenses, and necessary commitments to support themselves or any other child or person as per paragraph 117(4)(e).

Direct and indirect costs of care

1. The mother raised the significant additional costs of schooling [Child 1] at an independent Catholic primary school, commencing from first term 2023. She was concerned that the departure period determined by the objections officer would end prior to these costs being incurred.

2. The mother claimed that the father had previously agreed to educate both children at a Catholic school but had since reneged. The father denies this and produced copies of correspondence from his solicitor, dated 9 March 2022 and 13 April 2022, that convey his disagreement with [Child 1’s] enrolment at a Catholic school. In another letter dated 4 May 2022, the father stated via his lawyer that he would enrol [Child 1] at [a named] Public School.

3. In an email dated 1 July 2022, the mother stated via her solicitor that she intended to sign an acceptance of an offer of enrolment at a Catholic school, on her own, so that the father would not be responsible for any school fees.

4. The mother told the tribunal that she had no further evidence to corroborate the father’s intention to educate [Child 1] at a Catholic school, such as his signature on an enrolment form. The tribunal is therefore not satisfied that [Child 1] is being educated in the manner intended by both parents and that it would not be just and equitable for the father to be required to contribute to the cost of her private schooling. 

5. In 2023 [Child 2] will be in child care five days per week. The mother provided the tribunal with a letter from [Agency 1] stating that after child care subsidies, the out-of-pocket costs for [Child 2’s] care in 2023 will be approximately $192 per fortnight ($4,992 per annum). It was also noted that this would increase to an unspecified amount when [Child 1] reached her sixth birthday ([in] September 2023) due to the workings of government subsidies.

6. The tribunal tested this evidence with the mother, as $192 per fortnight is lower than the rate than she paid for [Child 2’s] child care in the past. The mother was sure that this figure is correct and asked the tribunal to rely upon it.

7. The tribunal is also satisfied, based on the documents provided by [Agency 1], that the previous rate of child care paid by the mother was correctly considered by the CSA.

8. The annual out-of-pocket costs of [Child 2’s] childcare ($4,992) represents just over 5% of the mother’s administratively assessed adjusted taxable income It is therefore appropriate that the father contribute to meeting this additional cost, in proportion to his share of the combined childcare income.

1. From 12 December 2022 the father’s income matches the mother’s. It is therefore appropriate that he contribute 50% of this cost, initially at a rate of $2,496 per annum, with an increase in September 2023 as forecast by [Agency 1].

Hardship

1. Based on the information the father provided about his financial circumstances, the tribunal is satisfied that the additional costs set out above will not place him in financial hardship.

The tribunal’s findings and application of the law

1. To provide as much certainty to the parties as possible, and minimise the need for repeat proceedings, the tribunal will extend the departure period to 31 October 2023 at which point both parents’ 2022/23 taxable incomes can be available for consideration.

2. If there are significant changes to either parent’s income, financial resources or earning capacity in the future, they will be obliged to notify the CSA promptly to have this reflected in the assessment.

3. There is no evidence before the tribunal to indicate that either parent will suffer financial hardship due to the tribunal’s decision or that it prevents them from maintaining their own needs or those of the children.

4. After carefully considering all the relevant circumstances of the case, the tribunal is satisfied that this is a just and equitable sharing of the financial cost of meeting the children’s needs.

Is it otherwise proper to make a change to the administrative assessment?

1. 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 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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

3. The determination is otherwise proper.

DECISION

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

·   from 6 January 2022 to 11 December 2022, Mr Hanchett’s ATI is varied to $85,900.

·   from 12 December 2022 to 31 October 2023, Mr Hanchett’s ATI is varied to $101,900

·   from 1 July 2022 to 31 October 2023, Ms Hanchett’s ATI is varied to $98,000.

Additionally, the father’s annual rate is increased to share the costs of child care as follows:

·   from 6 January 2022 to 31 December 2022, by $7,500 and;

·   from 1 January 2023 to 31 December 2023, by $2,496.

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