Hashemi and Hashemi (Child support)

[2020] AATA 4392

Hashemi and Hashemi (Child support) [2020] AATA 4392 (21 September 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC018877

APPLICANT:  Mr Hashemi

OTHER PARTIES:  Mrs Hashemi

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  21 September 2020

DECISION:

The decision under review is set aside and, in substitution:

• from 1 January 2020 to 31 March 2020, Mr Hashemi’s rate of child support payable is increased by $19,368 per annum;

• from 1 April 2020 to 19 July 2020, Mr Hashemi’s rate of child support payable is varied to $10,760 per annum; and

• from 20 July 2020 until the occurrence of a child support terminating event, Mrs Hashemi’s rate of child support payable is varied to the minimum annual rate of child support payable.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – a ground for departure established – financial resources of the parents – whether a departure determination may be made for a parent who has more than 65% care of the child – just and equitable 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

Introduction

1. Mr Hashemi and Mrs Hashemi are the parents of [the child] who was born in 2006. A child support case was registered in October 2017 with what is commonly called the Child Support Agency, or CSA. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the child. From 1 September 2019 the assessment was based on Mr Hashemi’s deemed 2018-19 adjusted taxable income of $711,538, Mrs Hashemi’s 2018-19 adjusted taxable income of $129,391, and Mr Hashemi’s 35% care and Mrs Hashemi’s 65% care of [the child]. Mr Hashemi was required to pay $17,643 per annum in child support.

2. The Act also provides for a departure from the administrative assessment in certain circumstances. Mrs Hashemi lodged a departure application on 8 October 2019. The CSA granted her application and made a departure decision. Mr Hashemi objected to that decision. An objections officer varied the decision so that:

   ·    from 1 January 2020 to 31 December 2020, Mr Hashemi’s rate of child support payable is increased by $17,645 per annum;

   ·    from 1 January 2021 to 31 December 2021, Mr Hashemi’s rate of child support payable is increased by $18,174 per annum; and

   ·    from 1 January 2022 to 31 December 2022, Mr Hashemi’s rate of child support payable is increased by $18,719 per annum.

3. Mr Hashemi applied to the Tribunal for further review. I conducted a directions hearing on 7 July 2020 and a full hearing on 25 August 2020. Mr Hashemi and Mrs Hashemi gave sworn evidence by conference phone. After the hearing I ordered the Registrar to provide written submissions on a legal issue, and those submissions were provided on 17 September 2020.

4. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

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

   (ii)... 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; …

A ground for departure

1. Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents …

2. [The child] is currently in Year 9 at [a] School. It is the only school she has ever attended. Mr Hashemi submitted that [the child] is not being educated in the manner that was expected by him. There is no dispute that she is being educated in the manner that was expected by Mrs Hashemi.

3. On 16 May 2017, [the School] sent an email to the parents asking them “to confirm [the child]’s enrolment for Year 7 [in] 2018.” Mr Hashemi replied, with underlining in the original: “I wish to confirm that [the child] will be commencing Year 7 at [the School] in 2018.” That evidence suggests that if [the child] were to receive her secondary school education at [the School], she would be educated in the manner expected by Mr Hashemi.

4. In January 2018 the parents entered into a written agreement which included the following:

   [Mr Hashemi] will pay 90% of the following costs and expenses for [the child]:

   (i)tuition fees and compulsory levies charged by [the School], or such other school as may be agreed between the parties which provides a similar standard of education; …

5. Mr Hashemi submitted that it is clear from that agreement that his expectations concerning [the child]’s secondary schooling were not confined to her attending at [the School]; he said he expected her to receive “a good education” and there were a number of schools that could provide such an education. In my opinion, it follows that if [the child] were to attend any of those schools she would be educated in the manner that Mr Hashemi expected. [The child] is attending one of those schools, namely [the School], and she is consequently being educated in the manner that was expected by Mr Hashemi.

6. Mr Hashemi said he paid [the School]’s 2018 fees and at least most of [the School]’s 2019 fees. He was not sure if he continued paying those fees until the end of 2019. Mrs Hashemi said he did pay all of [the School]’s 2018 and 2019 fees, and she reimbursed him for 10% of those fees. Mr Hashemi did not dispute that evidence and I accept it as correct. The fact that Mr Hashemi paid those fees is further evidence that he expected [the child] to be educated at [the School], and she is being educated in the manner that he expected.

7. More recently, Mr Hashemi stated that “it is not my current expectation that [the child] should continue to attend [the School] and nor has it been since I raised this matter with [Mrs Hashemi] in mid 2019.” However, the issue is not whether [the child] is being educated in the manner that is expected by Mr Hashemi. The issue is whether she is being educated in the manner that was expected by Mr Hashemi. His statement is an implicit acknowledgement that he previously held the relevant expectation.

8. In summary, [the child] is being educated in the manner that was expected by the parents. [The School]’s tuition fees for 2020 are $21,520, and those costs significantly affect the costs of maintaining [the child]. Prior to 2020, Mr Hashemi paid the tuition fees and Mrs Hashemi reimbursed him for 10% of those fees. That arrangement was unremarkable given the parents’ previous expectations concerning [the child]’s education, the parents’ respective incomes and the agreement they reached concerning the payment of those fees. However, in 2020, Mr Hashemi ceasing paying, or making a direct contribution towards, those fees. Mrs Hashemi has been paying those fees. Those circumstances as a whole constitute special circumstances. Reason 3 is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable 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 child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Hashemi is an [Occupation 1]. His three most recent adjusted taxable incomes to 2018‑19 were $670,109, $692,158 and $631,069. He has not lodged his 2019-20 tax return. He provided evidence that his revenue decreased from April 2020 due to COVID-19. His April 2019 revenue was $66,495 and his April 2020 revenue was $8,886. His May 2019 revenue was $75,916 and his May 2020 revenue was $49,053. His June 2019 revenue was $67,193 and his June 2020 revenue was $67,366. His July 2019 revenue was $47,919 and his July 2020 revenue was $43,502. While that raw data suggests that his revenue quickly returned to pre-COVID-19 levels, Mr Hashemi explained that he took three weeks’ leave in June - July 2019 but he did not take leave in June - July 2020. Nevertheless, the evidence suggests that he has quickly returned to earning a high income, albeit perhaps not as high as his previous years’ incomes. He has also been receiving $3,000 per month in JobKeeper payments since the start of May 2020.

3. Mr Hashemi’s household consists of himself and [the child]. He owns his home which he valued at $1,450,000. He has an associated home loan with a balance of $1,113,000. In May 2020 he had an offset account with a balance of $430,000.

4. Mrs Hashemi is [an Occupation 2]. She is employed by [Employer]. Her 2019-20 adjusted taxable income was $140,698. Currently, her household consists of herself. She owns her home which she valued at $1,200,000. She has an associated home loan with a balance of $300,000. Mr Hashemi disputed Mrs Hashemi’s valuation of her home but he did not propose a different valuation and he did not provide any documentary evidence concerning its value.

5. Mrs Hashemi received an investment property as part of the parents’ property settlement. She valued it at $920,000. It has an associated loan with a balance of $600,000. Again, Mr Hashemi disputed Mrs Hashemi’s valuation of the investment property but he did not propose a different valuation and he did not provide any documentary evidence concerning its value.

6. Mrs Hashemi’s investment property is negatively geared. The loss is automatically added back to Mrs Hashemi’s taxable income when calculating her adjusted taxable income. Mr Hashemi noted that Mrs Hashemi’s investment property expenses include depreciation, but depreciation is not a cash expense, and so from a cash perspective her adjusted taxable income understates her available income. In 2019-20 the investment property made a loss of $1,476. The depreciation expenses were $1,945. Adding back the depreciation would result in a very modest profit of $469. The parents’ combined income is hundreds of thousands of dollars. Nothing turns on the potential profit of a few hundred dollars, particularly given that Mr Hashemi’s 2019-20 adjusted taxable income remains unknown.

7. Mr Hashemi submitted, in effect, that even if Reason 3 is established, he should not be required to contribute to [the School]’s fees. He referred me to part of a sentence in In the marriage of Paradine and Paradine [1981] FamCA 51. The Full Court of the Family Court considered the application of paragraph 76(1)(3) of the Family Law Act 1975, as it then was. The Reasons for Judgment do not reproduce that provision and Mr Hashemi has not provided a copy of that provision. The earliest version of that Act on legislation.gov.au is for 31 May 1992, by which time section 76 had been repealed. The Court was constituted by Simpson SJ, Gun and Yuill JJ. Simpson SJ stated:

   In my view, there is no general rule that a parent should not be obliged to contribute to the fees of a private school because he has not consented to the child attending that school.

8. Gun J stated:

   In my opinion, the question of whether or not a party should be compelled to contribute towards the payment of private school fees is one which should be dealt with having regard to all the circumstances in each particular case. I do not disagree with the proposition that, speaking generally, a party should not be obliged to contribute towards private school fees unless he has consented to do so, or unless he has consented to the children attending that school.

9. Yuill J did not express a view on the issue.

10. In the marriage of Paradine and Paradine does not support Mr Hashemi’s submission. [The child] is being educated in the manner that he expected and he should contribute to the associated costs.

11. The evidence suggests that Mr Hashemi continued to earn his usual high income until the end of March 2020. I consider the administrative assessment to be a fair calculation of the appropriate base rate of child support payable up until the end of March 2020. It is appropriate to increase Mr Hashemi’s rate of child support payable from 1 January 2020 to 31 March 2020 on account of [the School]’s tuition fees. In 2018 the parents agreed that he would pay 90% of the fees, and while the parents’ views do not determine the matter, I consider their agreement to be a fair apportionment of those fees. Mr Hashemi’s rate of child support payable will be increased by $21,520 per annum x 0.9 = $19,368 per annum during that period

12. From 1 March 2020, each parent was recorded as providing 50% care to [the child]. Mr Hashemi’s revenue decreased dramatically in April 2020. It increased in May 2020. His revenue in June and July 2020 was similar to his revenue in June and July 2019. On 11 May 2020 his care of [the child] increased from 50% to 86%. On 20 July 2020 his care increased to 100%. The changes in circumstances during the period from 1 March 2020 to 19 July 2020 need to be viewed in the broader context of the parents’ past incomes and their likely future incomes. Further, Mr Hashemi had $430,000 in an offset account; there can be no suggestion that he required financial support from Mrs Hashemi to meet [the child]’s day-to-day costs while she was in his care, although, of course, both parents should contribute to their child’s costs. Mrs Hashemi was paying [the School]’s fees. Once a ground for departure has been established, the decision-maker has a broad but not unfettered discretion concerning the making of a departure decision: section 98S of the Act. Broadly speaking, it would be appropriate to vary Mr Hashemi’s rate of child support payable during the period from 1 April 2020 to 19 July 2020 so that he paid half of [the School]’s fees, i.e. $10,760 per annum. That observation is subject to potential qualifications that may arise pursuant to sections 40C and 98S of the Act.

13. Part 5 of the Act provides for the administrative assessment of child support payable. Division 2 of Part 5 is entitled “The formulas”, and as the title suggests, it contains a number of formulas for calculating the administrative assessment of child support payable in different scenarios. Section 40C is contained in Division 2 of Part 5. It states:

    Parents with more than 65% care

    The annual rate of child supportpayable by a parent for a child for a day in a child support period is nil if: 

    (a)the parent's annual rate of child support for the child is worked out under section 35 or 37 (income of both parents, no non-parent carer); and 

(b)the parent's percentage of care determined for the purposes of the administrative assessment of child support for the child is more than 65%.

1. Section 35 is applicable in this case. It states:

   This is how to work out the annual rate of child support payable for a child for a day in a child support period if no non-parent carer has a percentage of care for the child for the day.

   Method statement 

   Step 1.   Work out each parent's child support income for the child for the day (see section 41).

   Step 2.   Work out the parents' combined child support income for the child for the day (see section 42).

   Step 3.   Work out each parent's income percentage for the child for the day (see section 55B).

   Step 4.   Work out each parent's percentage of care for the child for the day (see Subdivision B of Division 4 of Part 5).

   Step 5.   Work out each parent's cost percentage for the child for the day (see section 55C).

   Step 6.   Work out each parent's child support percentage for the child for the day (see section 55D).[1]

   Step 7.   Work out the costs of the child for the day under sections 55G and 55H. 

Step 8.   If aparent has a positive child support percentage under step 6, the annual rate of child support [2] payable by the parent for the child for the day is worked out using the formula:

Parent’s  Costs of the child
  child support percentage        x            for the day

for the child for the day

Note: If a parent’s percentage of care for a child is more than 65%, the parent’s annual rate of child support for the child is nil (see section 40C).

[2]The bold italics is in the legislation.

1. Applying the method statement to his case, and using 11 May 2020 as an example:

   Step 1:Mr Hashemi’s child support income was $417,142 - $25,575 = $391,567.

   Mrs Hashemi’s child support income was $129,391 - $25,575 = $103,816.

   Step 2:The parents’ combined child support income was $391,567 + $103,816 = $495,383.

   Step 3:Mr Hashemi’s income percentage was $391,567 / $495,383 = 79.04%.

   Mrs Hashemi’s income percentage was $103,816 / $495,383 = 20.96%.

   Step 4:Mr Hashemi’s percentage of care was 86%.

   Mrs Hashemi’s percentage of care was 14%.

   Step 5:Mr Hashemi’s cost percentage was 76%.

   Mrs Hashemi’s cost percentage was 24%.

   Step 6:Mr Hashemi’s child support percentage was 79.04% - 76% = 3.04%.

   Mrs Hashemi’s child support percentage was $20.96% - 24% = -3.04%, and was therefore 0%.

   Step 7:[The child]’s costs was $29,156.

   Step 8:Mr Hashemi’s child support payable was 3.04% x $29,156 = $886 per annum.

2. The note at the bottom of section 35 reminds the reader of section 40C, and pursuant to that section, if a parent would otherwise have a positive annual rate of child support payable but they have more than 65% care, their administratively assessed rate of child support payable pursuant to the formula provisions contained in Part 5 of the Act is nil. A rate of nil is still a rate, but if that was in doubt, section 5 of the Act removes that doubt; it states that the term “annual rate” includes an annual rate of nil.

3. Step 8 creates the annual rate of child support payable, and it only creates an annual rate of child support payable for a parent who has a positive child support percentage. A parent whose child support percentage is nil does not have an annual rate of child support payable. The view that only one parent has an annual rate of child support payable is supported by the opening words of section 35 of the Act which refer to “the” annual rate of child support payable.

4. The Act therefore draws a distinction between a parent having a nil rate of child support payable and a parent not having an annual rate of child support payable.

5. Part 6A of the Act is entitled “Departure from administrative assessment of child support (departure determinations)”. The term “administrative assessment” is relevantly defined as an assessment under Part 5 of the Act: section 5 of the Act. Section 98S of the Act lists the departure determinations that can be made under Part 6A. They are all confined to “varying” some aspect of the administrative assessment formula. They include “a determination varying the annual rate of child support payable by a parent”: paragraph 98S(1)(a) of the Act. On a plain reading of that provision, it allows for a determination varying a parent’s annual rate of child support payable from nil to a positive rate.

6. The Registrar submitted:

   21. The general policy intent reflected throughout [the Act] is that a parent should not be entitled to be paid child support where they are not an ‘eligible carer’ (i.e. where they have less than 35% care of the child).

7. The Registrar referred to sections in the Act in support of that submission. However, none of those sections fall within Part 6A of the Act. In the ordinary course, a parent who provides more than 65% care will not be required to pay child support. However, Part 6A recognises that the administrative assessment formula does not always produce a fair result, hence the discretion to vary the result. If the Legislature had intended that a parent who provides more than 65% care should never be required to pay child support, it could have easily inserted a provision in Part 6A in similar terms to section 40C in Part 5.

1. The Registrar also submitted (with minor stylistic changes added):

   23. As mentioned above, where a departure determination is made which imposes a “positive annual rate” on a parent in circumstances were that parent would have a nil annual rate under the formula assessment because the parent’s care is above 65% (see section 40C of the Act), then the Registrar may consider it appropriate to amend the administrative assessment (as amended by the departure determination) on the basis that the determination would not be consistent with the policy intention and objects of the Child Support Legislation (see section 75 of the Act).

2. Subsection 75(1) states that “[t]he Registrar may, at any time, amend any administrative assessment by making such alterations and additions as the Registrar considers necessary to give effect to [the child support legislation].” For example, the Registrar may amend the administrative assessment for the purpose of “giving effect to a decision or order of the [Tribunal] or of a court having jurisdiction under [the relevant legislation]”: paragraph 75(4)(e) of the Act. The Registrar is required to implement departure decisions that are made by the Tribunal or a court having jurisdiction under the relevant legislation, and subsection 75(4)(e) facilitates compliance with that legal obligation. If a parent is administratively assessed to pay a nil rate of child support payable, and a departure decision varies that parent’s rate of child support payable to a positive rate, there is no discretion to not implement the departure decision.

3. However, if a parent does not have an annual rate of child support payable, then there is no annual rate to vary. As the Registrar put it, the departure decision has no work to do. The correct implementation of the departure decision in such circumstances would result in no amendment to the administrative assessment. If those circumstances changed, and the parent acquired an annual rate of child support payable, then the departure decision would have work to do, and the administrative assessment would have to be amended accordingly. It is worth noting that departure decisions almost always have a prospective element. There is nothing inappropriate about making a departure decision that varies a parent’s annual rate of child support payable even though there may be periods when the departure decision has no work to do. A purist might draft the departure decision as follows: “During periods when the parent has an administratively assessed annual rate of child support payable, the parent’s annual rate of child support payable is varied to …” However, given the constraints contained in section 98S of the Act, such introductory words can always be inferred.

4. On 14 April 2020, Mr Hashemi lodged an estimate of income of $0. The CSA accepted that estimate of income. The Registrar has acknowledged that Mrs Hashemi should have been administratively assessed to pay child support to Mr Hashemi. However, the CSA decided to offset her administratively assessed rate of child support payable against the variation to Mr Hashemi’s rate of child support payable pursuant to the departure decision, which resulted in Mr Hashemi continuing to be required to pay child support. It appears that the parents were not notified of that decision, which may complicate matters further.

5. CSA file notes suggest that Mr Hashemi amended his estimate of income in late May 2020: pages 544 to 553 of the hearing papers. The CSA decided to amend his estimate with effect from 11 May 2020. The Registrar has submitted that the decision was made in error, and the estimate should have been amended with effect from 24 April 2020. Once again, it appears that the parents were not notified of the decision that was made.

6. Further complications may arise when the administrative assessments that have been based on Mr Hashemi’s estimates of income are reassessed on the basis of his actual 2019-20 adjusted taxable income.

7. Returning to the decision under review, I consider it appropriate to vary Mr Hashemi rate of child support payable during the period from 1 April 2020 to 19 July 2020 to $10,760 per annum: see paragraph 24 above. In reaching that conclusion I am mindful that if at any time during that period Mr Hashemi does not have an annual rate of child support payable, then there will be no work for the departure decision to do. That is a result of the constraints on the discretion contained in section 98S of the Act.

8. Since 20 July 2020, Mr Hashemi has been recorded as providing 100% care and Mrs Hashemi has been administratively assessed to pay child support to Mr Hashemi pursuant to section 35 of the Act. Ms Hashemi has been the “liable parent”: section 5 of the Act. Section 98SA states:

   Variation not to be below minimum annual rate of child support

   The Registrar must not make a determination under this Part that varies, or that has the effect of varying, the annual rate of child support payable, for a day in a child support period, by a liable parent for all of the children in the child support case that relates to the child in respect of whom the determination is made to a rate below the minimum annual rate of child support for the child support period, unless the liable parent has at least regular care of at least one of the children in that child support case.

9. The minimum annual rate of child support is defined in section 66 of the Act. Further information can be found at 2.5.4 of the Child Support Guide. A person has less than regular care if they have less than 14% care: section 5 of the Act. As matters currently stand, I consider it appropriate to vary Mrs Hashemi’s rate of child support payable from 20 July 2020 to the minimum annual rate of child support payable.

10. In my opinion, the proposed decision will remain just and equitable while Mrs Hashemi continues to provide less than 14% care and she continues to pay [the School]’s school fees. It is not clear for how long that status quo will be maintained. If there is a significant change in circumstances, either parent can lodge another departure application. In the meantime, the departure decision will have effect until the occurrence of a child support terminating event.

Otherwise proper

1. 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. In this case, neither parent has received allowances or the like in respect of their care of [the child]. The proposed decision will be otherwise proper.  

DECISION

The decision under review is set aside and, in substitution:

• from 1 January 2020 to 31 March 2020, Mr Hashemi’s rate of child support payable is increased by $19,368 per annum;

• from 1 April 2020 to 19 July 2020, Mr Hashemi’s rate of child support payable is varied to $10,760 per annum; and

• from 20 July 2020 until the occurrence of a child support terminating event, Mrs Hashemi’s rate of child support payable is varied to the minimum annual rate of child support payable.

[1]Subsection 55D(1) sets out a formula for calculating a parent’s child support percentage. Subsection 55D(2) states that a parent’s child support percentage for a day in a child support period is taken to be nil if the amount worked out using the formula is negative.