Hanchett and Hanchett (Child support)

Hanchett and Hanchett (Child support) [2022] AATA 3058 (24 May 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2021/HC022653
APPLICANT:  Mr Hanchett
OTHER PARTIES:  Child Support Registrar
Ms Hanchett

TRIBUNAL:Senior Member R Ellis (Presiding), Senior Member M Kennedy

DECISION DATE: 24 May 2022
DECISION:

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

for the period from 1 September 2020 to 31 December 2020 the adjusted taxable income of Mr Hanchett is varied to A$127,889;
for the period from 1 January 2021 to 30 April 2024 the adjusted taxable income of Mr Hanchett is varied to A$96,407;
for the period from 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Hanchett is increased by A$5,944; and

for the period from 1 January 2022 to 30 June 2022 the annual rate of child support payable by Mr Hanchett is increased by A$10,002.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – costs of education – manner expected by both parents – 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

This review is about whether or not there should be a departure from the administrative assessment of child support.
Mr Hanchett and Ms Hanchett are the parents of [Child 1] (born May 2003), [Child 2] (born April 2005) and [Child 3] (born May 2007). There has been a child support assessment in place since 28 October 2018 and Mr Hanchett is currently the liable parent.
The following administrative assessments of child support are under consideration:
·     for the period from 23 September 2020 to 7 May 2021 Mr Hanchett was assessed to pay an annual rate of A$3,942 based on a 2019-20 adjusted taxable income of A$38,169 for Mr Hanchett and a 2020-21 estimated income of A$102,773 for Ms Hanchett;
·     for the period from 8 May 2021 to 30 June 2021 Mr Hanchett was assessed to pay an annual rate of A$3,378 based on a 2019-20 adjusted taxable income of A$38,169 for Mr Hanchett and a 2019-20 adjusted taxable income of A$135,591 for Ms Hanchett; and
·     for the period from 1 July 2021 to 30 November 2021 Mr Hanchett was assessed to pay an annual rate of A$3,386 based on a 2019-20 adjusted taxable income of A$38,169 for Mr Hanchett and a 2019-20 adjusted taxable income of A$135,591 for Ms Hanchett.
On 19 December 2020 Ms Hanchett applied to the Child Support Agency for a change to the assessment on the basis of the high costs of caring for, educating or training the children (Reason 3) and a parent’s income, property and financial resources (Reason 8A).
On 1 March 2021 the Child Support Agency made the decision to change the assessment so that for the period from 1 September 2020 to 30 November 2021 the adjusted taxable income of Mr Hanchett is set at A$129,753 (the original decision).
On 28 May 2021 Mr Hanchett objected to this decision and on 4 August 2021 the Child Support Agency allowed the objection and made the decision to change the assessment (the objection decision) so that:
·     for the period from 1 September 2020 to 31 July 2021 the adjusted taxable income of Mr Hanchett is set at A$127,394;
·     for the period from 1 August 2021 to 30 November 2021 the adjusted taxable income of Mr Hanchett is set at A$115,840;
·     for the period from 19 December 2020 to 31 December 2020 the annual rate otherwise payable by Mr Hanchett is increased by the sum of A$7,956 and
·     for the period from 1 January 2021 to 31 December 2021 the annual rate otherwise payable by Mr Hanchett is increased by the sum of A$5,944.
On 3 November 2021 Mr Hanchett applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).
A directions hearing was held on 22 February 2022. Mr Hanchett and Ms Hanchett attended by conference telephone. Prior to the directions hearing the Child Support Agency provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (580 pages).
Mr Hanchett and Ms Hanchett were directed to provide further information and both complied to the satisfaction of the Tribunal.
A hearing was held on 24 May 2022. Mr Hanchett and Ms Hanchett gave evidence on affirmation by conference telephone. Prior to the hearing the Tribunal received documents folioed A1 to A12 from Mr Hanchett and B1 to B32 from Ms Hanchett and these were distributed to the parties. Additional documents were also received from the Child Support Agency (pages 581–599).
At the directions hearing and at the commencement of the hearing the Tribunal sought clarification from Mr Hanchett and Ms Hanchett as to the reasons for their concerns. Mr Hanchett told the Tribunal the Child Support Agency had used incorrect income figures from his United States (US) tax return in the assessment. Mr Hanchett also questioned the manner in which the Child Support Agency had treated a sign-on bonus received when he commenced his employment in the US as well as the exchange rate used to convert his US income to Australian dollars. Mr Hanchett said he was not in a financial position to contribute to private school fees for the children. Ms Hanchett said she was comfortable with the objection decision made by the Child Support Agency in relation to the income used in the assessment for Mr Hanchett. Ms Hanchett said she also wanted the Tribunal to resolve the issue of private school fees for the children as she was currently meeting this cost herself.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.
Under Part 6A of the Act, the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and establishes a three-step process such that the issues for determination by this Tribunal are:
·     whether a ground is established to depart from the administrative assessment of child support; and if so,
·     whether it is just and equitable to make a particular departure determination; and if so,
·     whether it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support 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, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held that:
as a generality 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 court will not interfere with the formula in the ordinary run of cases.
In Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If the Tribunal is 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 prescribed in section 98S of the Act.
The range of determinations which can be made includes variations to the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

In circumstances where multiple grounds for departure are put forward, the Tribunal needs only be satisfied that one ground is established before going on to determine whether or not a particular determination is just and equitable and otherwise proper.

Issue 1 – Is there a ground for departure?

A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).
Mr Hanchett told the Tribunal he was employed as a design engineer and commenced in the role on 15 January 2020 after moving to the US. Mr Hanchett said his salary was approximately US$80,000 and he received a sign-on bonus of US$10,000. Mr Hanchett pointed out the bonus was a one-off as indicated in his letter of appointment.
The Tribunal notes in evidence from the Child Support Agency an extract from a letter addressed to Mr Hanchett relating to his offer of employment. The letter, dated 22 November 2019, states Mr Hanchett will receive an annual salary of US$80,000 paid on a monthly basis and a “one-time cash payment of US$10,000”.
Mr Hanchett told the Tribunal his income had not changed since he commenced employment in the US. He added that he was earning no other income in the US or Australia.
In response to directions Mr Hanchett provided the Tribunal with a copy of his 2021 US individual income tax return.[1] It shows a gross income of US$76,276 and standard deductions of US$18,800 leaving a taxable income of US$57,476. Mr Hanchett said he was not an accountant and unfamiliar with the detail of his deductions, however, the standard deductions were for a head of household as permitted by the US Internal Revenue Service.
[1] The US tax year for individuals runs from 1 January to 31 December
According to the website Investopedia[2] the head of household tax designation in the US allows an individual to receive higher deductions if they meet certain eligibility criteria. The Tribunal does not dispute that Mr Hanchett is entitled to receive such significant deductions in accordance with US tax law. There are very different rules and practices, however, around standard deductions for a head of household in the US and work-related deductions in Australia. This, along with the different approaches to recognising the obligations of parents to support children through the taxation systems between the two countries, means that a taxable income in the US may not correlate fairly to the notion of an adjusted taxable income for child support purposes in Australia.
[2] >
It is the view of the Tribunal, in considering the notion of ‘income’ for the purpose of this ground, it is necessary to make a reasonable adjustment from the US taxable income figure. In the absence of any more detailed information about what Mr Hanchett’s work-related expenses might be (as if they were to be deducted from Australian employment income) the Tribunal considers it fair to assume a reasonable amount for deductions, being US$4,000, which would be similar to the usual deductions an individual taxpayer in Australia might receive as an ordinary salary and wage earner. The Tribunal is satisfied that a better quantification of income for the purposes of this ground would be, taking into account these differences, in the order of US$72,276 in 2021.
The Tribunal notes in evidence from the Child Support Agency a copy of Mr Hanchett’s 2020 US individual income tax return. It shows a gross income of US$92,806 and standard deductions of US$18,650 leaving a taxable income of US$74,156. Using the same approach discussed above, the Tribunal is satisfied that a better quantification of income for Mr Hanchett for Australian child support purposes would be in the order of US$88,806 in 2020.
Ms Hanchett told the Tribunal she agreed the US$10,000 was a one-off bonus. Ms Hanchett said, in her view, it was reasonable for the income Mr Hanchett was earning in the US in 2020 to be used in the assessment rather than his 2019-20 Australian adjusted taxable income of A$38,169. Ms Hanchett pointed out that Mr Hanchett had only worked in Australia for part of the 2019-20 financial year before moving to the US.
The Tribunal accepts the US$10,000 Mr Hanchett received when he commenced employment in the US at the start of 2020 was a one-off bonus. In a written submission to Tribunal received with his application on 3 November 2021 Mr Hanchett argues the bonus should not be accounted for after July 2020. Mr Hanchett states the correct accounting would be to divide his US income by half and add this amount and the bonus to his 2019-20 income in Australia. The Tribunal does not accept this argument. Mr Hanchett received the benefit of this bonus throughout the US 2020 tax year. In fact, were the Tribunal to follow the argument put by Mr Hanchett, taking half his US income from 2020 and adding it to half his US income in 2021 would be to his disadvantage. This would mean assessing Mr Hanchett on a higher amount for the 2020-21 Australian tax year than if he were simply assessed on his US 2020 income until the end of 2020 and then his US 2021 income.
Mr Hanchett also provided the Tribunal with a Statement of Financial Circumstances received on 8 December 2021. In this document Mr Hanchett states he has a gross income of US$1,576 per week. His total average weekly expenditure is US$665 which includes US$162 in rent, US$100 in entertainment and US$100 in dorm fees for [Child 1]. His total personal expenditure is US$848 per week including US$294 in income tax, US$180 in minimum credit card payments and child support of US$225. Mr Hanchett lists assets totalling US$6,000 including a [vehicle]. Mr Hanchett has liabilities of US$206,951 including a vehicle loan of US$23,894, a student loan of US$179,437 and combined credit card debts of US$3,622. Mr Hanchett has superannuation in an Australian fund of A$101,658.
Mr Hanchett explained that he had drawn on his student loan some time ago to pay legal fees relating to an immigration matter. Mr Hanchett said he was not currently required to make repayments on the loan as a result of a US government decision arising from the COVID-19 pandemic but he expected this to change in around November 2022. Mr Hanchett said, ultimately, he thought the loan would be repaid from his US pension once he retired. Mr Hanchett added that he also had credit card debts in Australia which he neglected to include in his Statement of Financial Circumstances but these were unlikely to be repaid.
The Tribunal notes the child support listed in his Statement of Financial Circumstances totals US$11,700 and is for [Child 4]. In his written submission Mr Hanchett states this is an outstanding child support debt he is paying in the US which has arisen from an error by the Child Support Agency. Mr Hanchett states the debt arose due to under collection by the Child Support Agency which he discovered upon returning to the US. The Tribunal further notes in evidence a statement from [a] County Child Support dated 5 January 2021 which shows the total amount due of US$9,467.83. [Child 4] is no longer reflected within the child support assessment as he is more than 18 years of age.
During the course of the hearing Mr Hanchett also referred to attempts by the parents to come to a private agreement in relation to child support matters. Mr Hanchett said the courts would not make orders in relation to their agreement which he believed contravened Part 1, Section 4 of the Act which expressly permitted such private arrangements. Mr Hanchett also raised issues relating to the legality of the Australian child support system and his right to raise his children as he sees fit. These are matters the Tribunal is unable to address through this process.
The Tribunal has found that Mr Hanchett’s income may reasonably be quantified as US$88,806 in 2020 and US$72,276 in 2021. For the purpose of determining, under subdivision BA of Division 7 of Part 5 of the Act, an amount of income expressed in foreign currency to be a parent’s overseas income, the Tribunal is required to convert this amount into an equivalent amount in Australian currency. To do so, the Tribunal considered Regulation 12 of the Child Support (Assessment) Regulations 2018, which states at 12(2):
The equivalent amount in Australian currency must be worked out using:
(a) the average exchange rate for the foreign currency for the financial year which the income was derived, being the average of the international money transfer buying rates published by the Commonwealth Bank of Australia for that currency for that financial year; or
(b) if no such rate is available for the foreign currency for that financial year – an exchange rate for the foreign currency that the Registrar considers appropriate.
The Tribunal calculated an Australian dollar value for Mr Hanchett’s US dollar income using an exchange rate based on historical data published by the Reserve Bank of Australia.[3] The average monthly exchange rate for 2020 was 0.6944 US dollars to 1 Australian dollar. Based on this exchange rate, which the Tribunal considers appropriate, the Tribunal is satisfied Mr Hanchett’s income in 2020 for the purposes of child support was approximately A$127,889. The average monthly exchange rate for 2021 was 0.7497 US dollars to 1 Australian dollar. Based on this exchange rate, which the Tribunal considers appropriate, the Tribunal is satisfied Mr Hanchett’s income in 2021 for the purposes of child support was approximately A$96,407.
[3] >
The Tribunal also considered the income, property and financial resources of Ms Hanchett.
Ms Hanchett told the Tribunal she was employed on a permanent part-time [basis]. Ms Hanchett said at one point she was also undertaking extra hours at [Workplace 1], however, that ceased due to the COVID-19 pandemic as [the] management did not want staff working across sites.
The Tribunal notes in evidence from the Child Support Agency that Ms Hanchett had an adjusted taxable income of A$135,591 in 2019-20 and an adjusted taxable income of A$123,405 in 2020-21. Ms Hanchett explained the fall in her income was because she was no longer working extra hours at [Workplace 1]. Ms Hanchett added that her salary had not changed significantly in 2021-22 and she expected it would be similar to her salary in 2020-21.
Ms Hanchett also provided the Tribunal with a Statement of Financial Circumstances received on 5 November 2021. Ms Hanchett lists total weekly household expenditure of approximately A$1,440 including rent of A$240 and education expenses of A$580. Ms Hanchett said Mr Hanchett had not paid child support for more than a year and the school fees were currently in arrears as a result. Ms Hanchett has total weekly personal expenditure of A$912 with A$610 of this being income tax and A$200 being minimum credit card repayments. Ms Hanchett has total assets of approximately A$14,196 including a [vehicle] valued at A$4,000. Her liabilities total A$90,000 including credit card debts totalling approximately A$50,000, a personal loan of A$18,000 and outstanding school fees of A$20,000. Ms Hanchett declares superannuation of approximately A$90,333.
At the time Ms Hanchett made her application for a change of assessment on 19 December 2020 she was being assessed on a 2020-21 estimated income amount of A$102,773. The Tribunal notes that subsequently, for the period from 23 September 2020 until 30 June 2021, Ms Hanchett was assessed on a reconciled estimate using her actual adjusted taxable income for 2020-21. The Tribunal also notes that Ms Hanchett is currently assessed on her 2020-21 adjusted taxable income of A$123,405 and is satisfied this is an accurate reflection of her financial circumstances.

The Tribunal finds that for the purposes of child support Ms Hanchett is fairly assessed on her adjusted taxable income under the administrative assessment.
The administrative assessment in place at the time Ms Hanchett made her application for a change of assessment was based on a 2019-20 adjusted taxable income amount of A$38,169 for Mr Hanchett. The Tribunal has found, however, that Mr Hanchett had access to income, property and financial resources equivalent to a person with an adjusted taxable income of approximately A$127,889. When this amount is applied in the child support formula, the annual rate of child support payable by Mr Hanchett would be approximately A$7,989.
The Tribunal finds this to be significantly more than his liability under the administrative assessment. The Tribunal is satisfied that special circumstances exist and the application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by Mr Hanchett in respect of the children.
On this basis the Tribunal finds there is a ground for departure from the administrative assessment.

Issue 2 – Is it just or equitable to make a particular determination?

As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether or not it is just and equitable as regards the children, the liable parent, and the carer entitled to child support 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 consider the matters discussed below,[4] which are as set out in subsection 117(4) of the Act:
[4] The Tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886.
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)himself or herself; or
(ii)any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)any hardship that would be caused:
(i)to:
(A)the child; or
(B)the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)to:
(A)the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

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

Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments. In this case the parents have a duty to support [Child 1], [Child 2] and [Child 3].
The Tribunal was not made aware that either parent has a legal responsibility to any other child or person.

The proper needs of the child

In relation to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).
Ms Hanchett told the Tribunal that in 2020 [Child 1] was in Year 12, [Child 2] in Year 10 and [Child 3] in Year 8 at [College 1]. Ms Hanchett said despite both parents signing the enrolment forms for the children to attend the college Mr Hanchett was refusing to contribute to the cost of their education. She said [Child 2] was currently in Year 12 and [Child 3] in Year 10. Ms Hanchett said she was struggling to pay the fees herself and it was her view both parents should contribute equally towards the costs of educating the children.
The Tribunal notes in evidence from the Child Support Agency a statement from [College 1] showing tuition fees for the three children, after allowing for sibling discounts, totalled A$15,213 in 2020. With the inclusion of exceptional costs including a compulsory building levy and [a] levy the total cost in 2020 was A$15,918. The Tribunal further notes in evidence from the Child Support Agency a statement from [College 1] showing tuition fees for [Child 2] of A$6,500 and for [Child 3] of A$5,855 in 2021. After allowing for a sibling discount for [Child 3] her fees were reduced to A$4,684. With the inclusion of exceptional costs including a compulsory building levy and [a] levy the total cost in 2021 was A$11,889.

Mr Hanchett told the Tribunal he did not dispute that prior to separation both parents had wanted [Child 1], [Child 2] and [Child 3] to be educated at [College 1] and both parents had signed the necessary enrolment forms. Mr Hanchett said he also agreed with the amount of costs calculated for the children to attend the college in 2020 and 2021. Mr Hanchett said, put simply, he could no longer afford the costs of private school fees and should not be forced into greater debt to meet those fees.
Mr Hanchett pointed out that in a previous decision of the Child Support Agency he had argued that he should not be required to pay school fees for the children when his financial position did not allow him to take on further debt. Mr Hanchett said his argument had been accepted at that time and his financial position remained unchanged.
The Tribunal notes in evidence that on 8 September 2019 Ms Hanchett applied for a change of assessment on the basis of Reason 3 and Reason 8A. On 3 February 2020 the Child Support Agency made the decision that for the period from 15 April 2019 to 14 January 2020 the adjusted taxable income of Mr Hanchett was set at A$72,000 per annum. Despite also finding that the children were being educated in a way both parents intended and the associated costs significantly affected the costs of maintaining [Child 1], [Child 2] and [Child 3], the decision maker concluded Mr Hanchett had limited capacity to contribute.
Mr Hanchett told the Tribunal he expected [Child 2] would complete his secondary education at [College 1] in 2022, however, [Child 3] had indicated to him she wanted to move to the US this year. Mr Hanchett said he had subsequently advised the college that [Child 3] would no longer be attending from 1 July 2022.
Ms Hanchett said she agreed both parents were in debt, however, she was behind in the school fees because Mr Hanchett was refusing to pay child support. Ms Hanchett added that she intended to address her debts, including any outstanding school fees, once property settlement had been finalised between the parents. Ms Hanchett said she would be talking to [Child 3] about moving to the US but if that was her wish she would not prevent her from going.
The term “manner expected” in relation to the education of a child is not defined in the legislation. In Mee and Ferguson [1986] FamCA 3, the Full Court of the Family Court considering a similar provision in the Family Law Act 1975 said:
It refers to the manner in which the child ‘is being’, and which the parties to the marriage ‘expected’ the child to be educated. That provision appears to have direct relevance to the issue of private school education, particularly its reference to the manner in which the parties ‘expected’ the child to be educated. The word ‘expected’ in the past tense presumably relates to some expectation of the parties at a point in time earlier than the hearing. (at [37])
The Tribunal finds there was a mutual expectation before Mr Hanchett and Ms Hanchett separated that [Child 1], [Child 2] and [Child 3] were to receive a private education at [College 1]. While Mr Hanchett argues he can no longer afford private school fees the Tribunal is nonetheless satisfied the underlying mutual expectation that the children receive a private school education is not diminished in this case.
The Tribunal acknowledges Mr Hanchett believes he cannot afford to contribute to these education costs and will take this into account when making a just and equitable determination.
The Tribunal was not made aware that the parents expected [Child 1], [Child 2] or [Child 3] to be cared for in a particular way or that the children had any special needs.
The Tribunal finds it reasonable to calculate the costs of their needs, other than the education costs, by reference to the Costs of the Children Table (provided for in section 155 of the Act) in the circumstances of this case.

The income, earning capacity, property and financial resources of the child

The Tribunal finds the children have no income, earning capacity, property and financial resources which are to be taken into account for the purposes of child support.

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

The Tribunal has already considered in detail the income, property and financial resources of both parents.
The Tribunal is satisfied that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met in relation to Mr Hanchett or Ms Hanchett.

Any hardship that would be caused

The Tribunal has found that Mr Hanchett had access to income, property and financial resources in the US equivalent to a person with an adjusted taxable income of approximately A$127,889 in 2020 and approximately A$96,407 in 2021.
Mr Hanchett has told the Tribunal his current income remains around the same. He has total household expenditure of approximately A$46,125 per annum which includes some discretionary expenditure. Mr Hanchett has total personal expenditure of approximately A$58,818 per annum which includes an outstanding amount of child support for [Child 4] Hanchett of approximately A$15,606. It is unlikely Mr Hanchett is required to meet the full amount in one year, in other words, the A$15,606 would be paid back over several years. Mr Hanchett also has other outstanding debts in the form of a US student loan and credit card debts in Australia, however, he has pointed out that neither are currently being repaid.
Ms Hanchett is currently assessed on her 2020-21 adjusted taxable income of A$123,405 and the Tribunal has found this to be an accurate reflection of her financial circumstances.
Ms Hanchett has total average household expenses of approximately A$74,880 per annum and this includes an amount for school fees of A$30,160. The Tribunal has found the total cost of fees for [Child 2] and [Child 3] in 2021 was A$11,889 and the difference is the unpaid fees. Ms Hanchett has total personal expenditure of approximately A$47,424 per annum.
Having considered the interests of both parents the Tribunal proposes to make the following determination:
·         for the period from 1 September 2020 to 31 December 2020 the adjusted taxable income of Mr Hanchett is varied to A$127,889 per annum;
·         for the period from 1 January 2021 to 30 April 2024 the adjusted taxable income of Mr Hanchett is varied to A$96,407 per annum;
·         for the period from 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Hanchett is increased by A$5,944; and
·         for the period from 1 January 2022 to 30 June 2022 the annual rate of child support payable by Mr Hanchett is increased by A$10,002.

The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act). Ms Hanchett made her application for a departure on 19 December 2020. The Tribunal must decide whether it is just and equitable to backdate the determination prior to this date.
The Tribunal notes the 2019-20 adjusted taxable income for Mr Hanchett of A$38,169 was first applied to the child support assessment from 1 September 2020, however, Ms Hanchett only became aware of this when she received correspondence from the Child Support Agency dated 14 December 2020. In her application for a departure Ms Hanchett points out it was this correspondence which prompted her to act. The Tribunal is satisfied it is fair to commence its determination from 1 September 2020 when the adjusted taxable income of A$38,169 was used in the assessment. The Tribunal has varied the income of Mr Hanchett up until 30 April 2024. This should provide the parents with some certainty in relation to their child support payments while also allowing Mr Hanchett time to submit his tax return for the 2023 US financial year.
Ms Hanchett is currently attempting to meet the costs of educating [Child 2] and [Child 3] alone. Ms Hanchett has told the Tribunal the school fees were in arrears by approximately A$20,000 at the end of 2021 but she intends to meet her share through the child support she should be receiving as well as property settlement. Mr Hanchett has told the Tribunal he can no longer afford private school fees and should not be forced into further debt.
The Tribunal acknowledges that Mr Hanchett and Ms Hanchett parents have significant debts. Unless they come to an agreement in relation to the schooling for [Child 2] and [Child 3] both parents remain legally responsible, however, for the fees at [College 1].
In keeping with the outcome of the change of assessment decision made by the Child Support Agency on 3 February 2020, when Mr Hanchett was found to have an income of A$72,000 per annum, the Tribunal considers it unreasonable for him to meet a portion of the school fees for 2020. It is noted that Ms Hanchett did not object to this decision.
The Tribunal has found the overall cost for [Child 2] and [Child 3] to attend [College 1] was A$11,889 in 2021. Mr Hanchett’s equal share is A$5,944.
According to the college website the tuition fees for students in Years 10 to 12 are A$6,630 in 2022.[5] Including exceptional costs for a compulsory building levy per family of A$670 and [a] Levy of A$50 the Tribunal calculates the total cost for [Child 2] to be A$7,350 (A$3,675 for Mr Hanchett). With a second child discount the tuition fees for [Child 3] is A$5,304. As the parents agree [Child 3] is likely to leave the college from 1 July 2022 the Tribunal has halved her fees and determines the total costs for [Child 3] to be A$2,652 in 2022 (A$1,326 for Mr Hanchett).
[5] [Source deleted]
The Tribunal notes that if, as expected, [Child 3] moves to the US in mid-2022 then Ms Hanchett will become the paying parent. To ensure Mr Hanchett meets his share of the school costs for [Child 2] and [Child 3] in 2022 the annual amount for each child must be doubled and then applied across the six months between 1 January 2022 and 30 June 2022.
In accordance with the determination of the Tribunal the annual rate of child support alone payable by Mr Hanchett from 1 September 2020 will be approximately A$7,989. This will fall to approximately A$2,967 from 1 January 2021 when his lower adjusted taxable income is used in the assessment but rise to approximately A$16,686 when [Child 1] is no longer a child of the assessment from 8 May 2021. It will rise again to approximately A$17,266 when Ms Hanchett’s 2020-21 adjusted taxable income is applied from 1 August 2021. The annual rate of child support, including school costs, payable by Mr Hanchett will be approximately A$8,911 from 1 January 2021 increasing to approximately A$22,630 from 8 May 2021 and then to approximately A$23,210 from 1 August 2021.
Mr Hanchett will have met his share of the school costs for [Child 2] and [Child 3] in the current year by 30 June 2022. As previously noted, should [Child 3] move to the US in mid-2022 Ms Hanchett will become the paying parent.
Mr Hanchett’s financial circumstances changed when he commenced employment in the US on 15 January 2020. It is the primary duty of parents to maintain their children to the extent of their capacity to do so and that duty takes priority over all commitments of the parents other than their necessary commitments of self-support. The Tribunal considers it is fair for the parents to share the private education costs for [Child 2] and [Child 3] equally in 2021 and 2022. The Tribunal acknowledges its determination may cause some hardship to Mr Hanchett, particularly from the time [Child 1] is no longer a child of the assessment. Given the commitment made by both parents in relation to educating the children, however, the Tribunal considers it just and equitable to balance the hardship between Mr Hanchett and Ms Hanchett. In doing so the Tribunal has taken account of the higher adjusted taxable income available to Mr Hanchett in the US and his ongoing discretionary expenditure.
The Tribunal is also satisfied, taking into account all her circumstances, the proposed determination will not cause hardship to Ms Hanchett or the children.

Issue 3

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. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.
Ms Hanchett is not in receipt of family tax benefit. The Tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community and would be otherwise proper.

DECISION

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

for the period from 1 September 2020 to 31 December 2020 the adjusted taxable income of Mr Hanchett is varied to A$127,889;
for the period from 1 January 2021 to 30 April 2024 the adjusted taxable income of Mr Hanchett is varied to A$96,407;
for the period from 1 January 2021 to 31 December 2021 the annual rate of child support payable by Mr Hanchett is increased by A$5,944; and
for the period from 1 January 2022 to 30 June 2022 the annual rate of child support payable by Mr Hanchett is increased by A$10,002.

[2022] AATA 3058

24 May 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Statutory Construction

Remedies

Judicial Review