Hodder and Mayer (Child support)

[2019] AATA 1224

Hodder and Mayer (Child support) [2019] AATA 1224 (21 March 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC015021

APPLICANT:  Mr Hodder

OTHER PARTIES:  Child Support Registrar

Ms Mayer

TRIBUNAL:Member S Letch

DECISION DATE:  21 March 2019

DECISION:

The decision under review is varied so that Mr Hodder’s adjusted taxable income is varied to $133,314 from 21 November 2017 until the happening of a terminating event.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the 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 removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mr Hodder and Ms Mayer are the parents of [Child 1]], born September 2001. Mr Hodder has been assessed by the Department of Human Services (the Department) as liable to pay child support to Ms Mayer.

2. For the period 1 November 2017 to 20 November 2017, Mr Hodder is assessed to pay an annual rate of child support of $18,603. This assessment is based on Mr Hodder’s adjusted taxable income for 2016–17 of $133,314 and Ms Mayer’s 2016–17 adjusted taxable income of $53,911.

3. For the period 21 November 2017 to 30 June 2018, Mr Hodder is assessed to pay an annual rate of child support of $1,390 (the fixed annual rate). This assessment is based on Mr Hodder’s estimated income of $0 and Ms Mayer’s 2016–17 adjusted taxable income of $53,911.

4. On 20 February 2018, Ms Mayer applied for a change of assessment under what the Department refers to as Reason 8A on the basis that the assessment was not reflective of Mr Hodder’s financial capacity.

5. On 11 April 2018, the original decision-maker decided that, for the period 21 November 2017 until the happening of a terminating event, Mr Hodder’s adjusted taxable income should be varied to $127,659. Mr Hodder had received a redundancy payment of some $280,000 “in the hand” in November 2017.  

6. On 17 May 2018, Mr Hodder objected to the decision. On 12 June 2018, an objections officer disallowed Mr Hodder’s objection.

7. On 31 July 2018, Mr Hodder applied to the Tribunal for further review. Mr Hodder and Ms Mayer participated in the Tribunal’s hearing by conference telephone, and gave sworn evidence.

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?

12.Subparagraph 117(2)(c)(ia) of the Act, commonly referred to by the Department as Reason 8A, provides as ground for departure:

(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

…

(ia)      because of the income, property and financial resources of either parent; or

13.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.

14.Mr Hodder told the Tribunal that he lives from “month to month”. From 1 July 2018, he has been receiving a regular defined benefit pension of $3,316 per month – he said he had a “nil” income from November 2017 until 30 June 2018. He believes he should be assessed on a “nil” income until 30 June 2018, and then be assessed on his pension. Ms Mayer’s position is that upon receipt of the very substantial redundancy payment, Mr Hodder ought to have made provision for the just under two years of child support remaining for [Child 1]]. She said she feels like she has been left to “pick up the pieces”.  

15.Mr Hodder told the Tribunal he currently rents for $375 per week; he rents out his house for $475 per week. The mortgage is now around $460,000 – he estimated the house is worth between $800,000 and $850,000. He has around $17,000 left on re-draw; he originally put his redundancy money onto the mortgage, and has been redrawing since. Currently, there is a party interested in buying the house, subject to his employment arrangements – Mr Hodder said he would prefer to sell the house privately to avoid agent’s fees. The mortgage on the house is $2,300 per month. The current tenants moved in on 6 January 2019; the previous tenant was unreliable and left owing Mr Hodder around $8,000 which Mr Hodder said he regrets “letting him get away with”. 

16.In response to the Tribunal’s questioning, Mr Hodder said he did not think at the time he received the redundancy to set aside a sum to cover child support for [Child 1] until he turned 18. He said he “did not think he would get into trouble”; he made some poor business, investment and other decisions (including a failed investment in a café business, a failed oil investment, and losses from gambling), which have now put him in a difficult position, and on the cusp of the bank possessing the house. He said he has a poor credit history, and cannot refinance or get another loan.

17.Mr Hodder lives alone. He continues to pay for motor vehicle costs in respect of one of his daughters. He did not identify any particularly unusual expenses. He has some $50,000 in  [superannuation]; he commuted his defined benefit superannuation of some $400,000 to a 100% pension from July 2018 (to around $3,300 per month). He is paying a car loan; he had purchased the car for his previous failed business and continues to meet that expense through his current chemical-related business. He said his current business is not making a profit at this stage. He said the car loan was much more than the value of the car, so there was no point “making a loss”. He said it is hard to find work at his age; he is hopeful he will be able to run a successful business going forward.

18.Ms Mayer raised the issue of a boat she says is owned by Mr Hodder. Mr Hodder said the boat is not his; ownership of the boat is in his sister’s and brother-in-law’s names. The boat was only supposed to stay with him in Australia for a couple of years and be available for his use; however, because of some health issues, the owners have left it in Australia. Mr Hodder said it is for sale online, and is still available; Ms Mayer said she had seen from the online advertisement that the boat had recently sold; Mr Hodder indicated he wished that was the case, and said it was still listed for sale.

19.Ms Mayer said she understood that when Mr Hodder’s father passed away, in lieu of a settlement from the estate, it had been agreed the boat was to be Mr Hodder’s. Mr Hodder denied the boat is his. Following the hearing, Ms Mayer supplied a printout of the advertisement for the boat; she indicated it had been relisted in early February 2019.

20.Ms Mayer told the Tribunal she continues to work for the same employer and earns $1,040 per week before tax. Her household consists of herself, [Child 1], and now her second daughter. She did not identify any particularly unusual expenses for herself or her children.

21.Following the hearing, documents which had been exchanged between the parties were provided to both parties, with an invitation to provide additional materials and submissions. As discussed earlier in these reasons, Ms Mayer supplied a copy of an online advertisement for what she says is Mr Hodder’s boat.

1. The Tribunal is satisfied that the assessment based on Mr Hodder’s estimated income of $0 from November 2017 renders the assessment unfair and unjust in light of his substantial redundancy payment. There are special circumstances which render the formula assessment unfair; a ground to depart is established.

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

1. 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.

2. The child support scheme prioritises the needs of the child. In net terms, the redundancy payment was equivalent to almost two and half years at Mr Hodder’s usual level of income of some $130,000 per annum. There was less than two years until the likely end of the child support case when [Child 1] turned 18 years of age. Mr Hodder made no provision for [Child 1]’s support; instead, he promptly approached the Department to lodge a “nil” estimate.

3. Mr Hodder has, on his own admission, made some poor financial choices; however, ultimately, given the scheme directs that [Child 1]’s interests take priority, it would be just and equitable to assess Mr Hodder’s financial capacity at the same level as his 2016–17 income ($133,314) from 21 November 2017 when the “nil” estimate took effect, and until a terminating event.

4. There is nothing in Ms Mayer’s circumstances which would suggest her adjusted taxable income is not reflective of her financial capacity; there are no other grounds to make any further adjustments. There are no particularly unusual expenses associated with [Child 1]; similarly, Mr Hodder identified no particularly unusual or exceptional expenses.

27.The Tribunal makes no particular findings about the situation with the boat; even assuming Mr Hodder has no financial interest in the potential proceeds of sale, the Tribunal is satisfied that, with appropriate budgeting and, if necessary, re-arrangement of his financial resources, Mr Hodder, over time, can meet his child support liability – a liability which will stop accruing by no later than September of this year.         

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

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. Parents rather than the community have the primary duty to maintain a child.

2. 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.

3. As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be varied.

DECISION

The decision under review is varied so that Mr Hodder’s adjusted taxable income is varied to $133,314 from 21 November 2017 until the happening of a terminating event.