Holder and Horvath (Child support)
[2020] AATA 4775
•30 September 2020
Holder and Horvath (Child support) [2020] AATA 4775 (30 September 2020)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2019/PC017339
APPLICANT: Ms Holder
OTHER PARTIES: Child Support Registrar
Mr Horvath
TRIBUNAL:Senior Member R Ellis
DECISION DATE: 30 September 2020
DECISION:
The Tribunal sets aside the decision under review and, in substitution, decides that:
for the period from 1 July 2019 to 30 June 2020 the adjusted taxable income of Mr Horvath is varied to $38,551;
for the period from 1 July 2020 to 31 October 2020 the adjusted taxable income of Mr Horvath is varied to $18,290; and
for the period from 1 July 2019 to 30 June 2020 the annual rate payable by Mr Horvath is increased by $697 being his half contribution towards the costs of orthodontics for [Child 1].
CATCHWORDS
CHILD SUPPORT – departure determination – whether there was a ground for departure – costs of special needs significantly affect the cost of maintaining the child – financial resources of both parents – 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.
Ms Holder and Mr Horvath are the parents of [Child 1] (born December 2010). There has been a child support assessment in place since 18 April 2012 and Mr Horvath is the parent liable to pay child support under the assessment.
The following administrative assessments of child support are under consideration:
· for the period from 15 January 2019 to 30 June 2019 Mr Horvath was assessed to pay an annual rate of $9,144 based on a 2018-19 estimated adjusted taxable income of $128,062 for Mr Horvath and a 2017-18 adjusted taxable income of $44,799 for Ms Holder; and
· for the period from 1 July 2019 to 31 October 2019 Mr Horvath was assessed to pay an annual rate of $8,466 based on a 2017-18 adjusted taxable income of $120,077 for Mr Horvath and a 2017-18 adjusted taxable income of $44,799 for Ms Holder.
On 22 January 2019 Ms Holder applied to the Child Support Agency for a departure from the administrative assessment on the basis of the special needs of the child (the ground commonly referred to as Reason 2) and a parent’s income, property, financial resources and earning capacity (Reasons 8A and 8B).
On 17 April 2019 the Child Support Agency made the decision to change the assessment (the original decision) so that:
· for the period from 1 May 2019 to 30 April 2020 the adjusted taxable income for Mr Horvath will be set at $128,000; and
· for the period from 1 May 2019 to 30 April 2020 the annual rate amount will increase by $1,645 in recognition of Mr Horvath’ share of orthodontic and psychology costs.
On 27 May 2019 Mr Horvath objected to this decision and on 7 August 2019 the Child Support Agency allowed the objection in part and made the decision (the objection decision) that:
· for the period from 1 July 2019 to 31 October 2020 the adjusted taxable income for Mr Horvath is set at $128,062; and
· for the period from 1 July 2019 to 30 June 2020 the annual rate of child support payable by Mr Horvath is increased by $1,183.
On 5 September 2019 Ms Holder applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal). On 23 December 2019 Ms Holder withdrew her application and the application for review was dismissed pursuant to subsection 42A(1B) of the Administrative Appeals Tribunal Act 1975.
On 7 January 2020 Mr Horvath applied for reinstatement of the application for review and on 30 January 2020 the Tribunal granted his application.
A directions hearing was held on 7 May 2020. Both Ms Holder and Mr Horvath 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 (370 pages).
Ms Holder and Mr Horvath were directed to provide further information to the Tribunal. Both parents complied.
A hearing was held on 8 September 2020. Ms Holder and Mr Horvath gave evidence on affirmation by conference telephone. The Tribunal received documents folioed A1 to A333 from Ms Holder and B1 to B82 from Mr Horvath. Additional documents were also received from the Child Support Agency (pages 371–380).
At the directions hearing and at the commencement of the hearing the Tribunal clarified with Ms Holder and Mr Horvath the reasons for their concerns. Ms Holder confirmed she wanted the Tribunal to review the income, property, financial resources and earning capacity of Mr Horvath. Ms Holder said she would also like the Tribunal to review the costs associated with [Child 1]’s special needs as the objection decision had not considered the costs of her therapy. Mr Horvath said his primary concern was the way in which the Child Support Agency had assessed his income but he also wanted the Tribunal to review the costs associated with [Child 1]’s special needs.
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 of the Act provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three-step process such that the issues for determination by this Tribunal are:
· whether or not a ground is established to depart from the administrative assessment of child support; and if so
· whether or not it is just and equitable to make a particular departure determination; and if so,
· whether or not 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
Issue 1 – Is there a ground for departure?
In circumstances where multiple grounds for departure are put forward, the Tribunal need 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.
There may be a reason for changing an assessment if, in the special circumstances of the case, the costs of maintaining the child are significantly affected because of the special needs of the child (subparagraph 117(2)(b)(ia) of the Act).
The term “special needs” is not defined in the legislation and the Tribunal requires some evidence that the needs of the child relate to a condition or disability that is out of the ordinary. The special needs must involve a cost that is additional to the normal needs of a child that are expected to be met from the child support assessment. These costs must also significantly impact the costs of maintaining the child overall.
Ms Holder told the Tribunal [Child 1] had special needs for which she was incurring significant additional costs. She said [Child 1] had required orthodontic treatment, was seeing a therapist and had also attended an education centre for additional tuition due to learning difficulties.
The Tribunal notes in evidence from the Child Support Agency a letter from specialist orthodontist Dr [A] dated 26 November 2018. The letter, addressed to the referring dentist, outlines a treatment plan for [Child 1] following a clinical and radiographic examination. Dr [A] recommends commencement at this stage of [treatment]. Dr [A] states this may be followed by further treatment with the need for monitoring on a regular basis to assess the need for [further treatment].
Ms Holder said [Child 1] had completed the first stage of treatment with part of the cost met by private health insurance. She said [Child 1] now required braces and this was the subject of a separate change of assessment application for consideration by the Child Support Agency.
Mr Horvath told the Tribunal he agreed [Child 1] required orthodontic treatment but believed the work could have been performed at a much lower cost. Mr Horvath said he had suggested to Ms Holder that [Child 1] be treated at an oral health centre but she had ignored him.
In response to directions Ms Holder provided the Tribunal with a statement from her private health insurer for the period from 11 May 2018 to 11 May 2020. The statement shows the following fees and rebates for orthodontic treatment undertaken by Dr [A]:
Date of service
Fee ($)
Fund benefit ($)
Net cost ($)
26/11/2018
96.00
61.60
34.40
26/11/2018
28.00
17.60
10.40
26/11/2018
28.00
17.60
10.40
26/11/2018
78.00
63.60
14.40
15/1/2019
49.00
-
49.00
15/1/2019
49.00
-
49.00
15/1/2019
98.00
63.20
34.80
6/2/2019
1,280.00
252.20
1,027.80
21/11/2019
330.00
165.60
164.40
The Tribunal is satisfied, based on the evidence provided, that [Child 1] has special needs in relation to her orthodontic treatment and finds the total out-of-pocket cost to Ms Holder after private health rebates to be $1,394.60. While Mr Horvath believes the cost of the treatment could have been less the Tribunal will rely on the actual costs as incurred by Ms Holder.
Ms Holder told the Tribunal that [Child 1] was also seeing a psychologist for therapy primarily associated with the separation of the parents and the associated impact on family dynamics. Ms Holder said that at the time of the hearing [Child 1] had been to 36 sessions and was attending regularly on a fortnightly basis. She said there were occasions when [Child 1] might miss a session and this was usually because Mr Horvath refused to take her when she was in his care. Ms Holder said it was her view [Child 1] would continue having therapy while it was needed with this decision to be made by her GP in consultation with the psychologist.
Ms Holder said the cost of [Child 1]’s therapy had changed over time but was initially $140 per session when [Child 1] commenced in December 2018 and then reduced to $120 per session. Ms Holder said under a mental health plan the cost was subsidised for 10 sessions and after that she was able to claim a private health rebate for additional sessions. She said the private health rebate was $70 for each $120 session but was capped at $400 each year.
Mr Horvath told the Tribunal he disagreed that [Child 1] required therapy. He said Ms Holder was simply using therapy to alienate [Child 1] against him. Mr Horvath added that the psychologist treating [Child 1] had not provided a full report regarding the ongoing need for therapy and therapy had not been recommended by the school [Child 1] was attending. Mr Horvath said he was also able to claim the costs of therapy through his private health insurance, however, he had been unable to do so as Ms Holder had never sent him an invoice.
The Tribunal notes in evidence from the Child Support Agency a letter dated 8 December 2018 from Dr [B] at [a clinic] referring [Child 1] to registered psychologist [Ms C] for opinion and management of anxiety. The Tribunal notes a further letter from Dr [B] dated 14 March 2019 stating that [Child 1] continues to see Ms [C] for psychology sessions. Dr [B] states it is “unclear” how long the sessions will be required, however, she is of the opinion [Child 1] will need the sessions for “at the least the next 6 months”.
In a submission received by the Tribunal on 1 June 2020 Mr Horvath refers to a single expert witness, Dr [D], appointed by the court to assess [Child 1]. In this submission Mr Horvath states the report prepared by Dr [D] is not available due to confidentiality constraints imposed by the court, however, an independent children’s lawyer had assessed the report and recommended both parents attend family therapy. Mr Horvath states [Child 1] may, at the discretion of the therapist, attend these therapy sessions.
Ms Holder said in her view [Child 1] would continue with therapy for as long as she needed it. Ms Holder told the Tribunal that a forthcoming court hearing would address a range of matters in relation to [Child 1] including her need for therapy. Ms Holder added that, in response to directions from the Tribunal, she had provided an update from the psychologist relating to [Child 1]’s prognosis and ongoing need for treatment.
The Tribunal notes in evidence a three-paragraph report dated 18 May 2020 from Ms [C]. In this report Ms [C] confirms [Child 1] has been attending since December 2018 for anxiety relating to ongoing issues in the Family Court, conflict between the parents, her involvement in that conflict and different parenting approaches. Ms [C] states [Child 1] has attended 28 sessions “on a fortnightly basis” and “will reportedly continue to do so for the foreseeable future”. Ms [C] concludes it is in [Child 1]’s best interest to continue counselling “in order to maximise the quality of her mental health and wellbeing” with attendance monitored and sessions “adjusted according to her needs”.
In response to directions Ms Holder provided the Tribunal with a Medicare claims history for [Child 1] for the period from 15 March 2017 to 15 March 2020. Following the hearing Ms Holder provided a further Medicare claims history for [Child 1] for the period up to 9 September 2020 which the Tribunal accepted as relevant evidence (A334–A338). These claims histories show the following in relation to therapy costs for [Child 1]:
Date of service
Total cost ($)
Benefit paid ($)
Cost to claimant ($)
17/12/2018
140.00
84.80
55.20
24/1/2019
140.00
84.80
55.20
22/2/2019
140.00
84.80
55.20
8/3/2019
120.00
84.80
35.20
14/3/2019
120.00
84.80
35.20
22/3/2019
120.00
84.80
35.20
5/4/2019
140.00
84.80
55.20
29/4/2019
120.00
84.80
35.20
17/5/2019
120.00
84.80
35.20
31/5/2019
120.00
84.80
35.20
29/11/2019
120.00
53.80
66.20
29/1/2020
120.00
53.80
66.20
21/2/2020
120.00
53.80
66.20
6/3/2020
120.00
53.80
66.20
3/4/2020
120.00
86.15
33.85
24/4/2020
120.00
86.15
33.85
15/5/2020
120.00
86.15
33.85
29/5/2020
120.00
86.15
33.85
26/6/2020
120.00
86.15
33.85
13/7/2020
120.00
87.45
32.55
24/7/2020
120.00
87.45
32.55
30/7/2020
120.00
87.45
32.55
7/8/2020
120.00
87.45
32.55
The private health insurance statement provided by Ms Holder shows [Child 1] also saw Ms [C] on 14 June 2019, 28 June 2019, 26 July 2019, 9 August 2019, 23 August 2019, 6 September 2019 and 2 October 2019. Each of these seven sessions cost $120 with a net cost to Ms Holder of $50 per session after accounting for the private health rebate.
The Tribunal is satisfied, based on the evidence provided, that [Child 1] has special needs in relation to her therapy. [Child 1] started therapy on 17 December 2018 and the evidence confirms she attended one session with Ms [C] in 2018 and 17 sessions in 2019. The Tribunal finds the total out-of-pocket cost to Ms Holder for these sessions was $848.20.
From 1 January 2020 up to 9 September 2020, according to her Medicare claims history, [Child 1] saw Ms [C] on 12 occasions. The Tribunal finds the total out-of-pocket cost to Ms Holder for these sessions was $498.05.
In her post-hearing submission Ms Holder stated that [Child 1] also attended on 21 August 2020 and 4 September 2020 but these visits were not on the Medicare statement. Based on [Child 1]’s current pattern of attendance and her attendance in late 2019 the Tribunal can reasonably conclude that, in addition to these two sessions, [Child 1] will attend a further five sessions in 2020. One of these sessions should include the full Medicare subsidy under the mental health plan as nine have already been claimed to date (cost of this one session to Ms Holder of $32.55). Ms Holder is able to claim the remaining six sessions through her private health fund (cost to Ms Holder of $300 based on the private health rebate in 2019).
The Tribunal finds the total out-of-pocket costs to Ms Holder for [Child 1]’s therapy in 2020 will be approximately $830.60 ($498.05 plus $32.55 plus $300).
It is uncertain how long [Child 1] will be required to continue seeing a psychologist. Ms Holder is of the view it will be for as long as needed. In March 2019 Dr [B], the referring GP, considered it would be at least a further six months. The treating psychologist, Ms [Ms C], has stated that “reportedly” it will continue for the “foreseeable future”. Mr Horvath does not believe therapy is needed and has referred to a report from a single expert witness, however, this is not available to the Tribunal for review. Given the limited recent evidence in relation to [Child 1]’s prognosis and her ongoing need for therapy the Tribunal will not consider costs beyond 2020. The Tribunal is also conscious Ms Holder has advised the court will also address [Child 1]’s need for therapy in a forthcoming hearing.
Ms Holder also raised the matter of tuition costs for [Child 1] at [tutoring centre]. She confirmed [Child 1] started at [tutoring centre] on 5 February 2019 and went on 12 occasions. The cost of each session was $62. She said [Child 1] was not attending [tutoring centre] in 2020 because she could not afford it. Ms Holder added that [Child 1] was now receiving extra help through a school-based program. Mr Horvath told the Tribunal he did not believe [Child 1] required additional tuition and her school report showed she was performing reasonably well.
The Tribunal notes in evidence from the Child Support Agency a report from [tutoring centre] which states that [Child 1] is underachieving in comprehension, spelling and writing skills. It also states [Child 1] has processing skills below what they should be for her age and concludes that she needs a minimum of 12 months intervention.
In his submission to the Tribunal Mr Horvath included a copy of the 2019 Year 3 NAPLAN results for [Child 1]. The Tribunal notes that [Child 1] achieved levels within the range of achievement for the middle 60 per cent of Year 3 students in Australia in four of the five assessment areas. She was below this level of achievement in spelling only.
Apart from the report provided by the tuition provider, [tutoring centre], there is no evidence before the Tribunal to indicate additional tuition is essential for [Child 1]. Her NAPLAN results for 2019 suggest she is performing at an expected standard and there is nothing specific from her school which confirms [Child 1] has a learning difficulty which would be considered special or out of the ordinary. Ms Holder has advised that [Child 1] is now attending a program through her school which would suggest that external tuition might be desirable for [Child 1] rather than necessary. As such the Tribunal will not consider the tutoring costs further.
The Tribunal has found that [Child 1] has special needs in relation to her orthodontic treatment and her therapy. The out-of-pocket cost to Ms Holder of orthodontics was $1,394.60 and between 2018 and 2020 the total out-of-pocket cost of therapy was $1,678.80. The assessed costs for [Child 1] in the child support assessment at the time Ms Holder made her change of assessment application were $15,955.
The Tribunal finds, in the special circumstances of the case, the costs of maintaining [Child 1] are significantly affected by her special needs and a ground for departure therefore exists. The Tribunal will consider the cost of meeting these special needs when determining a just and equitable outcome.
Issue 2 – Is it just and 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,[1] which are as set out in subsection 117(4) of the Act:
[1] 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 duty has priority over nearly all other commitments.
In this case the parents have the primary duty to financially support [Child 1]. Mr Horvath also has a relevant dependent child and the Tribunal has taken this into account under subparagraph 117(4)(e)(ii) of the Act when making its assessment.
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).
The Tribunal has found there are extra costs to be taken into account in relation to the special needs of [Child 1]. The Tribunal was made aware that [Child 1] is also attending a private [school], however, the costs are currently being met by Ms Holder.
The income, earning capacity, property and financial resources of the child
The Tribunal is satisfied that [Child 1] has no income, earning capacity, property and financial resources which should be taken into account for the purposes of child support.
The income, property, financial resources and earning capacity of each parent
Ms Holder told the Tribunal she worked part-time as an office [occupation] and had always worked part-time. Ms Holder said up until the impact of the coronavirus pandemic she had been working approximately 27 hours per week. Ms Holder said her income had fallen slightly in 2019-20 as a result of the pandemic.
The Tribunal notes in records provided by the Child Support Agency that Ms Holder had an adjusted taxable income in 2019-20 of $44,817. Ms Holder told the Tribunal this included her income from employment and rental income from an additional small home on [her] property. Ms Holder said she was also now receiving jobkeeper payment but her current income remained around the same.
In response to directions Ms Holder provided the Tribunal with a copy of her 2018-19 income tax return. The Tribunal notes that in 2018-19 Ms Holder had an adjusted taxable income of $47,014 which includes a net rental property loss of $4,643.
Ms Holder also provided the Tribunal with a Statement of Financial Circumstances received on 1 October 2019. It shows total average weekly income of approximately $1,032 including $880 from employment, $50 from board, $25 in child support and the remainder in family tax benefit. Total weekly household expenditure is approximately $1,183 including $476 for her mortgage payments, $120 for food, $120 for other necessary commitments and $50 for medical costs. Ms Holder told the Tribunal her other necessary commitments included such things as the costs of attending Relationships Australia, camper trailer registration, gym membership and day care if needed. Her weekly personal expenditure is approximately $516 including $151 in income tax, $83 in superannuation, $202 in minimum credit card payments across three credit cards and $80 in private health insurance. Ms Holder lists the total value of her assets at approximately $557,790 which includes her home valued at $500,000, household contents of $39,929, [a] motor vehicle valued at $15,000, a caravan valued at $2,500 and a small amount of cash at bank. Her total liabilities are approximately $298,695 of which $251,518 is her mortgage and $39,176 in credit card debt. Ms Holder has total superannuation of approximately $8,132.
Mr Horvath told the Tribunal he believed Ms Holder was receiving cash rental income for the additional home on her property and may also have a second investment property. Ms Holder responded by saying that she declared all income received from the smaller home on her property and did not have a second investment property.
The Tribunal finds that in 2018-19 Ms Holder had an adjusted taxable income of $47,014. The Tribunal also finds that in 2019-20 Ms Holder had an adjusted taxable income of $44,817. There is no evidence before the Tribunal to substantiate the claim made by Mr Horvath that Ms Holder is earning cash income. The Tribunal is satisfied the latter amount represents her current income, property and financial resources for the purposes of child support.
At the time Ms Holder made her application for a departure from the administrative assessment on 22 January 2019 she was being assessed on her 2017-18 adjusted taxable income of $44,799. The Tribunal has found that Ms Holder had an income in 2018-19 of $47,014. While Ms Holder has been slightly under-assessed in 2018-19 this makes very little difference to the amount of child support payable by Mr Horvath.
The Tribunal is satisfied that for the purposes of child support Ms Holder’s income, property and financial resources are fairly assessed under the administrative assessment.
Mr Horvath told the Tribunal he was not currently working and was in receipt of a carer payment. Mr Horvath said he had previously been employed on a seasonal basis as [an occupation] but his last contract had ended in December 2019 and he had not worked since. Mr Horvath explained this was largely due to his responsibilities as a carer for his stepdaughter, [Child 2], which had become more onerous as she became older.
Mr Horvath said he had been working for a labour hire company on a contract up until 5 May 2019. He said the work was only [seasonal]. Mr Horvath said he picked up another contract with [Company 1] in September 2019 for a short period and then completed this work in December 2019. He said the income from his work with [Company 1] was reflected in his 2019-20 tax return.
In his submission to the Tribunal Mr Horvath states that he was reassessed by Centrelink for a carer payment – adult and this was approved on 23 January 2020. Mr Horvath said this allowed him to be absent from his caring responsibilities for 63 days per year and so he could pick up more seasonal work to supplement his income. Mr Horvath told the Tribunal that he was able to work more when [Child 2] was younger but her condition meant she was becoming increasingly reliant on him and her mother has full-time carers. He said this restricted his work options.
In response to directions Mr Horvath provided the Tribunal with a copy of his 2018-19 and 2019-20 tax returns. His 2018-19 tax return shows a taxable income of $93,416 which includes income from salaried employment as well as income from personal services less work-related and other deductions. Mr Horvath also received a tax-free benefit in 2018-19 of $11,713 which, when added to his taxable income, results in an adjusted taxable income for child support purposes of $105,129. His 2019-20 tax return shows a taxable income of $21,359 which includes income from salaried employment less work-related and other deductions. Mr Horvath also received a tax-free benefit in 2019-20 of $17,192 which, when added to his taxable income, results in an adjusted taxable income for child support purposes of $38,551.
The Statement of Financial Circumstances provided to the Tribunal by Mr Horvath on 24 September 2019 shows total average weekly income of approximately $324 which is his carer payment. Total weekly household expenditure is $1,201 including $350 in food, $250 in mortgage payments and $135 in insurance. Mr Horvath told the Tribunal that his weekly household expenditure was for the total household as they had joint expenses. Mr Horvath states his total personal expenditure is approximately $306 per week including approximately $196 in child support, $100 in health insurance premiums and minimum credit card payments of $10. Mr Horvath lists the total value of his assets as $246,941 including a 15 per cent share in the family home valued at $67,500, a 33 per cent share in a family farm in [State 1] valued at $100,000, two motor vehicles with a total value of $8,000, household contents of $2,000, a camper trailer valued at $1,250 and a small amount of cash at bank. His total liabilities are approximately $200,615 including a 50 per cent share of the mortgage on the family home of $200,000 and a small credit card debt. Mr Horvath has superannuation in three funds with a total value of approximately $65,331.
Ms Holder told the Tribunal it was likely Mr Horvath was earning cash income from the farm in [State 1] and was not declaring it so he could continue receiving the carer pension. She also pointed out that Mr Horvath was only declaring a 15 per cent share in the family home but was responsible for half the mortgage. She said this did not make sense. Mr Horvath responded by saying that his brother lived on the farm in [State 1] and worked on the mines. He said it was 800 acres but was not a working farm and he received no income for his share. He said he covered half the mortgage on the family home as he had joint finances with his partner but reiterated his share was only 15 per cent.
The Tribunal accepts the point made by Ms Holder that it is probable Mr Horvath has a stronger asset position than he declares. In particular, his one third share of an 800-acre farm in [State 1] is likely to be worth more than $100,000. The Tribunal will take this into account when making a just and equitable determination.
The Tribunal finds that in 2018-19 Mr Horvath had an adjusted taxable income of $105,129. The Tribunal also finds that in 2019-20 Mr Horvath had an adjusted taxable income of $38,551.
As Mr Horvath is not currently working and is only in receipt of a carer payment the Tribunal accepts that his income from 1 July 2020 will be lower than his 2019-20 income.
The Tribunal notes in evidence from Mr Horvath a Centrelink notice dated 28 January 2020 which states his regular carer payment from 12 February 2020 is $703.50. As this is a fortnightly payment the Tribunal is satisfied that Mr Horvath had an income from 1 July 2020 of approximately $18,290 and this remains his current income for child support purposes.
The Tribunal also considered the earning capacity of both parents. In order to establish that either Ms Holder or Mr Horvath have an earning capacity greater than that reflected in the child support assessment which would therefore render the assessment unfair, all three compulsory criteria set out in subsection 117(7B) of the Act must be satisfied. Those three criteria are:
(a)one or more of the following applies:
· the parent does not work despite ample opportunity to do so (subparagraph 117(7B)(a)(i));
· the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged (subparagraph 117(7B)(a)(ii));
· the parent has changed his or her occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
(b)the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern is not justified on the basis of:
· the parent’s caring responsibilities (subparagraph 117(7B)(b)(i)); or
· the parent’s state of health (subparagraph 117(7B)(b)(ii)); and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child (paragraph 117(7B)(c)).
Ms Holder is working part-time and told the Tribunal she had always done so. Mr Horvath told the Tribunal he believed Ms Holder had reduced her working hours and had additional earning capacity. The Tribunal notes in evidence from the Child Support Agency that Ms Holder’s income has not varied significantly in the past four financial years. The Tribunal is satisfied, based on the evidence provided, that the earning capacity criteria set out in subsection 117(7B) of the Act are not met for Ms Holder.
Ms Holder told the Tribunal she believed Mr Horvath had given up his well-paid job to avoid paying child support. Mr Horvath responded by saying he was not choosing to place himself in financial difficulty and his caring responsibilities restricted his ability to work.
Mr Horvath is not currently working but he has been assessed as eligible to receive a carer payment in keeping with his caring responsibilities. This means even though the first criterion is satisfied the second criterion is not as his decision not to work can be justified on the basis of his caring responsibilities. Although Mr Horvath has previously worked longer hours while in receipt of his carer payment the Tribunal accepts his explanation that his caring responsibilities for [Child 2] have become more demanding over time.
The Tribunal is satisfied, based on the evidence provided, that the earning capacity criteria set out in subsection 117(7B) of the Act are not met for Mr Horvath.
Any hardship that would be caused
The Tribunal has found that at the time Ms Holder made her application for a departure she was slightly under-assessed but that her income was nonetheless fairly represented in the administrative assessment. This remains the case. Ms Holder has a current income for the purposes of child support of approximately $44,817.
Ms Holder is in receipt of family tax benefit which, when added to her other income, gives her access to total income of approximately $48,832. She has estimated her household expenditure at $61,542 although the Tribunal notes this includes mortgage repayments on her home which appear high for the amount of the loan as well as other necessary commitments which include discretionary expenditure such as gym membership. Ms Holder estimates her total personal expenditure at approximately $26,832 per annum.
Ms Holder told the Tribunal she was living well beyond her means as evidenced by her increasing credit card debt. She said she found it tough to survive as a single parent and support a child with special needs without child support from Mr Horvath.
Mr Horvath currently has access to income of approximately $18,290 and the Tribunal has found that his income in 2019-20 for child support purposes was approximately $38,551. His adjusted taxable income when Ms Holder made her application for a departure was approximately $105,129. At that time Mr Horvath was being assessed on an estimated adjusted taxable income of $128,062. This means he was being significantly over-assessed, however, as his income was based on an estimate in place from 15 January 2019 Mr Horvath always had the option of updating this estimate. It was incumbent on Mr Horvath to ensure his estimated income was as accurate as possible and so the Tribunal does not consider the assessment of his income to be unfair up to 30 June 2019. The Tribunal is also conscious, as mentioned earlier, that Mr Horvath may well have a stronger asset position than indicated which, in some ways, balances out this over-assessment.
Mr Horvath has estimated his total household expenditure at approximately $62,452 per annum and his total personal expenditure is $15,392 per annum. This includes child support of approximately $10,192 per annum. The Tribunal notes that Mr Horvath has included costs for the entire family in his total household expenditure.
Mr Horvath told the Tribunal he had no lifestyle and could not afford to go out. He added that he and his partner tried to live within their means.
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). The earliest date open to the Tribunal from which to make a determination would be 22 July 2017. The Tribunal must decide whether or not it is just and equitable to backdate the determination (prior to the change of assessment application date).
The Tribunal is of the broad view that retrospectively changing entitlements should be avoided without compelling reasons. Backdating the assessment will create a significant overpayment which will cause some hardship to Ms Holder. This is to be avoided particularly as Mr Horvath was able to update his estimated income at any time. The Tribunal has considered the income of Mr Horvath and determined the assessment was not unfair on this basis up until 30 June 2019.
The Tribunal has established, however, that [Child 1] has special needs in relation to her orthodontics and therapy. The out-of-pocket cost to Ms Holder of orthodontics was $1,394.60 and between 2018 and 2020 the total out-of-pocket cost of therapy was $1,678.80.
Having considered the interests of both parents the Tribunal proposes to make the following determination:
· for the period from 1 July 2019 to 30 June 2020 the adjusted taxable income of Mr Horvath is varied to $38,551;
· for the period from 1 July 2020 to 31 October 2020 the adjusted taxable income of Mr Horvath is varied to $18,290; and
· for the period from 1 July 2019 to 30 June 2020 the annual rate payable by Mr Horvath is increased by $697 being his half contribution towards the costs of orthodontics for [Child 1].
A significant majority of the orthodontic cost for [Child 1] was met by Ms Holder in early 2019 when Mr Horvath had an adjusted taxable income of $105,129. Although his adjusted taxable income in 2019-20 fell to $38,551 the Tribunal is satisfied it is just and equitable for Mr Horvath to meet an equal share of these costs. To give effect to this outcome the Tribunal has increased the annual rate payable by Mr Horvath by $697 from 1 July 2019 and distributed his contribution across a 12-month period to assist him in meeting this amount.
While the Tribunal also found a ground for departure in relation to the cost of therapy for [Child 1], approximately $1,146 of the total cost of $1,678.80 was either met or will be met by Ms Holder between 1 July 2019 and 31 December 2020. During this period Mr Horvath had an adjusted taxable income of $38,551 which then fell to $18,290 from 1 July 2020. Both parents have expenses which outweigh their income by a considerable amount. Neither parent adequately explained to the Tribunal how they planned to meet the difference between their stated expenses and their current incomes. Mr Horvath has a current income which is below the self-support amount. It is for these reasons the Tribunal does not find it just and equitable to make a change to the assessment on the basis of the costs associated with [Child 1]’s therapy. This will mean Ms Holder will be required to meet the total cost of therapy herself or find alternate means of addressing [Child 1]’s needs into the future. As Mr Horvath has a low income this severely limits his capacity to contribute to the costs of therapy. The Tribunal is also mindful, as previously mentioned, that these costs will likely be addressed by the courts.
The Tribunal applied the newly calculated income for Mr Horvath in the child support formula and found the level of child support alone payable by Mr Horvath would be approximately $676 from 1 July 2019 to 30 June 2020. The combined annual amount of child support and the cost of orthodontics for [Child 1] payable by Mr Horvath would be approximately $1,373 during this period. From 1 July 2020 no child support will be payable by Mr Horvath.
In making this decision the Tribunal has only varied the income of Mr Horvath until 31 October 2020. The Tribunal is reticent to vary his income beyond this date as Mr Horvath may gain further seasonal work which, as he has pointed out, is more likely during the summer months. Mr Horvath may wish to consider submitting an estimate of income after 31 October 2020. Either parent is also able to make a further application for a change of assessment at any time should they believe their circumstances warrant doing so.
The Tribunal acknowledges the proposed determination may cause hardship to Ms Holder and [Child 1] from 1 July 2019 in light of the expenses she has incurred and may continue to incur, however, this is considered unavoidable given Mr Horvath had a significantly reduced capacity to support [Child 1] from this date. The Tribunal is satisfied the proposed determination will not cause hardship to Mr Horvath.
Issue 3 – Is it otherwise proper to make a particular departure determination?
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.
The Tribunal finds that Ms Holder receives family assistance in respect of [Child 1]. The proposed determination will likely mean an increase in the level of community support for [Child 1], however, the Tribunal is satisfied this is appropriate in the circumstances of this case and would be otherwise proper.
DECISION
The Tribunal sets aside the decision under review and, in substitution, decides that:
for the period from 1 July 2019 to 30 June 2020 the adjusted taxable income of Mr Horvath is varied to $38,551;
for the period from 1 July 2020 to 31 October 2020 the adjusted taxable income of Mr Horvath is varied to $18,290; and
for the period from 1 July 2019 to 30 June 2020 the annual rate payable by Mr Horvath is increased by $697 being his half contribution towards the costs of orthodontics for [Child 1].
Key Legal Topics
Areas of Law
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Family Law
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Administrative Law
Legal Concepts
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Jurisdiction
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Remedies
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Judicial Review
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Costs
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