Hollyer and Johnstone (Child support)

[2023] AATA 196

Hollyer and Johnstone (Child support) [2023] AATA 196 (12 January 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/MC024286

APPLICANT:  Mr Hollyer

OTHER PARTIES:  Child Support Registrar

Ms Johnstone

TRIBUNAL:Senior Member S De Bono

DECISION DATE:  12 January 2023

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that from 1 November 2021:

• Ms Johnstone’s annual ATI is increased by $30,539 and her self-support amount is decreased by 50%.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the carer entitled to receive – a ground for departure established – decision to depart - decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. The issue to be determined in this application is whether there is reason to change the administrative assessment of child support and whether it is just and equitable and otherwise proper to do so.

2. Mr Hollyer and Ms Johnstone are the separated parents of twins [Child 1] and [Child 2] who are currently in the primary care of Ms Johnstoneand the regular care of Mr Hollyer. There has been a registered child support case in place with Child Support (the Agency) since 20 May 2009. Mr Hollyer is currently the parent liable to pay child support.

3. Prior to the application for a departure determination made by Mr Hollyer, the Agency had determined the administrative assessment of child support as follows:

   ·From the period 1 May 2020 until there is a terminating event Mr Hollyer’s income is set at $78,800 annually. This decision was made by the AAT on 20 October 2020 and is not subject to change.

   ·For the period 1 November 2021 to 31 January 2023 Mr Hollyer is assessed to pay an annual rate of child support of $11,468 per annum based on his set adjusted taxable income (ATI) of $78,800 and Ms Johnstone’s provisional income of $23,058.

4. On 14 January 2022 Mr Hollyer applied for a departure from the administrative assessment of child support (referred to as a change of assessment) on the basis of Reasons 4, 8A and 8B. Mr Hollyer’s submission was that the child support assessment was unfair because Ms Johnstone’s income, property and financial resources were not reflected in the administrative assessment of child support; and that Ms Johnstone had access to financial resources in particular, which were not reflected in the administrative assessment. Mr Hollyer also applied on the basis of Reason 4 as he thought one of his daughters was working and her income was not taken into account in the administrative assessment.

5. On 17 February 2022 the Agency determined that Reason 8A was established but Reasons 4 and 8B were not. A departure determination was made to depart from the administrative assessment as follows:

   ·For the period 1 November 2021 until [Child 1] and [Child 2] are no longer children of the assessment, Ms Johnstone’s ATI is increased by $30,000.

6. On 21 March 2022 Mr Hollyer objected to this decision and on 1 July 2022 the objections officer partially allowed Mr Hollyer’s objection. The objections officer set aside the original decision and substituted a new decision as follows on the basis that Reason 8A is established but Reason 4 and Reason 8B were not established:

   ·For the period 1 November 2021 to a terminating event, the ATI for Ms Johnstone is increased by $30,000 per annum.

   ·For the period 1 November 2021 until a terminating event, the self-support amount for Ms Johnstone in the formula assessment is decreased by 30%.

7. On 19 July 2022 Mr Hollyer applied to the Administrative Appeals Tribunal (the tribunal) for an independent review of this decision. Directions for this matter were made on 18 October 2022. A telephone hearing was held on 22 November 2022 where Mr Hollyer and Ms Johnstone gave evidence under affirmation.

8. The tribunal considered the documents and information, which were provided by the parties prior to the hearing and after the hearing, as well as the evidence provided by Mr Hollyer and Ms Johnstone.[1] Mr Hollyer provided additional information after the hearing which was exchanged for information purposes only. The tribunal deferred its decision and reconvened and made its decision on 12 January 2023. Relevant aspects of the material and evidence will be referred to in the tribunal’s decision.

ISSUES

[1] Administrative Appeals Tribunal Act 1975 subsection 37(1) and section 38AA Statement and Documents provided by the Department Agency numbered 1–360; Mr Hollyer’s documents numbered A1–A10; and Ms Johnstone’s documents numbered B1–B86. Other documents were received by the tribunal after the hearing and the tribunal made the decision not to exchange these documents as oral submissions were made during the hearing in relation to these submissions.

1. The issues which arise in this case are:

   ·     Where an application is made in relation to a child in the special circumstances of the case; whether there exists a ground to depart from the administrative assessment of child support; and

   ·     whether it would be just and equitable and otherwise proper as regards the child, the parent entitled to child support and the parent liable to pay child support to depart from the existing administrative assessment of child support.

LAW AND CONSIDERATION

1. The law relevant to this review is found in the Child Support (Assessment) Act 1989 (the Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. The liable parent or carer may apply for a determination departing from the administrative assessment under Part 6A of the Act. Section 98C establishes a three-step process to be satisfied prior to the departure determination being made: that there is a ground for a departure from the administrative assessment; that it is just and equitable to depart; and that it is otherwise proper. Once satisfied, the tribunal may make one of the determinations prescribed in section 98S of the Act which can include relevantly; determining the annual rate of child support payable; varying the parent or non-parent carer’s cost percentage for the child; varying the parent’s child support income; varying the parent’s combined child support income; varying the parent’s ATI, self-support amount or the costs of the children.

Issue 1 – Is there a ground to depart from the current administrative assessment of child support?

1. Mr Hollyer submitted at the hearing that he did not want consideration for a departure determination on the basis of Reason 4. Ms Johnstone submitted that [Child 1] was working but it was a casual job and she did not earn enough to support herself.

2. The tribunal proceeded on the basis of the consideration of Reasons 8A and 8B. Reasons 8A and 8B concern the income, property and financial resources and earning capacity of each parent.

3. Subparagraphs 117(2)(c)(ia) and (ib) of the Act provide that a ground for departure from an administrative assessment exists if:

   (c) …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.

   (ib) because of the earning capacity of either parent.

4. The term “special circumstances” is not defined in the Act. In Gyselman v Gyselman [1992][2] the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

   [2] FLC 92-279.

5. In considering the above, the tribunal is mindful of the requirement of satisfying subsection 117(7A) of the Act having regard to the capacity of the parent to derive an income but disregarding the capacity of anyone who does not have a legal duty to maintain the child. To this end, the tribunal has considered Mr Hollyer’s and Ms Johnstone’s circumstances as parents of [Child 1] and [Child 2].

6. A parent’s earning capacity can only be taken into account in limited circumstances, as set out in subsection 117(7B) of the Act. According to the provisions, the tribunal must be satisfied that either the parent does not work despite ample opportunity to work; or the parent has reduced their hours per week below full-time work; or has changed occupation. In addition, the provisions require that the change is not justified on the basis of caring responsibilities or health and that the major purpose of the change was not to affect the administrative assessment of child support.

7. It was evident to the tribunal that neither Mr Hollyer nor Ms Johnstone’s earning capacity had changed. Mr Hollyer continues to be self-employed and working on a full-time basis; and Ms Johnstone continues to be in receipt of disability support pension. Neither Mr Hollyer nor Ms Johnstone have changed their circumstances in order to affect the administrative assessment of child support. The tribunal is satisfied that Reason 8B is not established.

8. The period under consideration in this current application for review is from 1 November 2021 until a terminating event occurs in respect of [Child 1] and [Child 2]. Mr Hollyer agreed that a change of assessment should occur, but he disagreed with the particulars of the change of assessment. It was Mr Hollyer’s view that the administrative assessment of child support should be based on him having no liability to pay child support for [Child 1] and [Child 2] due to the increased financial resources that had become available to Ms Johnstone.

9. The tribunal considered whether the administrative assessment accurately takes into account Ms Johnstone’s financial resources.

10. Mr Hollyer told the tribunal that Ms Johnstone had inherited a sum of money from a deceased aunt. He also said she had inherited a car which she had sold and had retained the profits of the sale. With the proceeds of the deceased estate Ms Johnstone has purchased a house, she had no liability for rental or home loan repayments. Mr Hollyer said he still has a home loan and does not have the savings Ms Johnstone currently has available to her, this in his view makes the assessment unjust and inequitable.

11. The tribunal notes the following from the evidence and material before it. Ms Johnstone has three [Bank] accounts:

    ·[Account 1[ending in account number 6073;

    ·[Account 2] basic ending in account number 3530; and

    ·[Account 3] ending in account number 0471.

12. The Administration Statement in relation to the distribution from Ms Johnstone’s aunt’s estate show the following distributions made to her:

    ·On 26 November 2021: $584,146.04[3]

    ·On 2 December 2021: $105,104.04[4]

    ·On 3 December 2021: $50,339.57[5] deposited on 3 December 2021.[6]

    [3] Page 163 of the hearing papers.

    [4] Page 165 of the hearing papers.

    [5] Page 164 of the hearing papers.

    [6] Page 212 of the hearing papers into Westpac bank account ending in account number 3530.

13. On 2 December 2021 there is a deposit of $704,881.78 into the [Account 2] account ending in account number 3530.[7]

    [7] Page 212 of the hearing papers.

14. The tribunal is satisfied that Ms Johnstone received a total of $739,589.65 in disbursements from her aunt’s estate.[8]  There was no evidence before the tribunal that Ms Johnstone had received more than this amount.

    [8] This amount is derived by adding together the amounts in paragraph 22 of these Reasons. The deposit of $704,881.78 is not additional funds.

15. Based on the oral and material evidence before it the tribunal is satisfied that Ms Johnstone has access to financial resources which are not reflected in the administrative assessment of child support from 1 November 2021. The tribunal finds that special circumstances exist which make the determination of financial support to be provided by Mr Hollyer on the basis of Ms Johnstone’s provisional income of $23,058 to be unjust and inequitable. Accordingly, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it ‘just and equitable’ to depart from the administrative assessment of child support?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is fair as regards the parents and the children to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act.

2. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsection 117(4) of the Act, such as the duty of a parent to maintain a child, the proper needs of the child, the income, property and financial resources of the child and each parent, the commitment of each parent to support him or herself, the direct and indirect costs incurred by the carer in providing care for the child, any hardship that would be caused to the child or the parents by the making of, or the refusal to make a determination.  The tribunal does not propose to explore every matter in detail but will discuss those it regards as pertinent to this application (Gyselman).

The proper needs of the children

1. Section 3 of the Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support, or the support of another person the parent has a duty to maintain (Ashcroft and Ashcroft (SSAT Appeal) [2008]).[9] In this case Mr Hollyer and Ms Johnstone have the primary duty to financially support [Child 2] and [Child 1], and contributing to their costs should take priority over all other costs other than their “necessary” costs of self-support.

   [9] FMCAfam 1250.

2. In determining the proper needs of the child, subsection 117(6) of the Act also requires the tribunal to have regard to the manner in which the parents expect the child to be cared for, educated and trained as well as a consideration of any special needs of the child.

3. Ms Johnstone told the tribunal that [Child 2] has a [device] which was inserted at [Hospital] on 26 October 2022, there was no cost associated with this. Both girls also require wisdom teeth removal, which Ms Johnstone says is medically necessary and estimates the cost to be about $8,000.[10] Ms Johnstone provided further information after the hearing which included a summary of costs as well as a support letter from [Dr A], specialist orthodontist. outlining the necessity for this[11]. [Child 2] underwent surgical wisdom teeth extraction on 12 December 2022.[12] Ms Johnstone has paid a total of $5,300 on 21 November 2022.[13]

   [10] B25.

   [11] B25.

   [12] B21.

   [13] B22–B24.

4. Both girls attend [School] which is an independent school which has a ‘needs based funding approach’ which passes on the Australian Government based funding directly to the school. Ms Johnstone said that this means the costs for schooling are lower than at most government secondary schools and, the out-of-pocket costs for the girls’ schooling is lower when compared with the costs for a government school.

5. Mr Hollyer said he did not receive adequate information about the need for orthodontic treatment for [Child 2] from Ms Johnstone and that Ms Johnstone had refused to give him the contact details for the dentist or the facial maxilla surgeon. It is for these reasons that he has not contributed to the cost of the procedure for [Child 2] as it is his view that it has been Ms Johnstone’s decision to proceed with this treatment without his consent. Mr Hollyer did not disagree that the need for orthodontic treatment was medically necessary, only that he was of the view that he was not consulted adequately by Ms Johnstone in relation to the costs of the procedure nor was he able to have a conversation with the treating practitioner about the specifics of the procedure.

6. Based on the oral and material evidence before the tribunal it seems Ms Johnstone is meeting most of the costs for the children.

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

1. While the tribunal has found that a ground for departure is established, based on Ms Johnstone’s financial resources, the tribunal must still consider whether it is just and equitable, based on the parents’ assets, liabilities, income and commitments, to depart from the administrative assessment.

2. Mr Hollyer’s administrative assessment of child support is based on his ATI being assessed at a fixed rate of $78,800 which was set by the tribunal (in another departure determination made on 20 October 2021), the tribunal calculates this to be a weekly gross income of $1,515. Mr Hollyer provided a Statement of Financial Circumstances (SOFC) which shows he pays home loan repayments of $300 weekly or $15,600 annually. His total household expenditure is $465 weekly, there were no costs which were out of the ordinary. Mr Hollyer has limited savings of about $1,100 and he has an outstanding balance of $212,685 on his home loan, he values his home at $583,000. Mr Hollyer records his weekly income as being $850, however, the tribunal has set his income at $1,515 weekly. Based on Mr Hollyer’s set ATI and expenses he has discretionary funds of approximately $750 weekly.

3. Ms Johnstone has been in receipt of a disability support pension since 2009. Ms Johnstone purchased a home with most of the proceeds from the sale of her aunt’s estate for $640,000.[14] A further $33,210.02 was paid in stamp duty, transfer and settlement fees, and conveyancing fees. Ms Johnstone had remaining funds from the distributions of her aunt’s estate after the purchase of the house as follows:

   Estate distributions totalling:      $739,589.65 -
                 Home purchase:                    $640,000.00 -
                 Costs:   $33,210.02

   Remaining distribution            $66,379.63.

   [14] Page 154 of the hearing papers.

4. Ms Johnstone said she had to make some minor renovations to the house she purchased, she needed to install a ramp for her wheelchair as she requires a wheelchair, and she had to make modifications to the bathroom to ensure it was wheelchair accessible. She currently has about $30,000 remaining, she said this has to last her the rest of her life.

5. Mr Hollyer also submitted that Ms Johnstone had sold a car belonging to her aunt. Ms Johnstone said this was not part of the estate left to her and she sold the car. She received $12,000 for the car.[15] Ms Johnstone said the proceeds from the sale of the car went on repairs and staging for the sale of her aunt’s house. Ms Johnstone provided copies of receipts which she said were for these purposes. There were also withdrawals shown on the [Account 2] bank account which shows a withdrawal of $15,000 for repairs to decking, a pergola and tree removal which Ms Johnstone said was for her aunt’s property.[16] On balance the tribunal accepted Ms Johnstone’s evidence that the proceeds from the sale of the car went to ready her aunt’s house for sale and, as such this was not a financial resource available to Ms Johnstone.

   [15] B82.

   [16] Page 200 of the hearing papers.

6. Ms Johnstone said prior to her inheritance she and the girls lived with her parents, she incurred some costs but said those costs were below what she would expect to pay if she had to rent privately.

7. Mr Hollyer was also of the view that their eldest daughter [Ms B], who is no longer a child of the assessment was paying board to Ms Johnstone and pointed to a number of transactions shown in Ms Johnstone’s account that [Ms B] had made. Ms Johnstone said [Ms B] would pay her for things like shampoo as she liked a particular brand of shampoo, or she would pay Ms Johnstone for her phone. Ms Johnstone did not agree that [Ms B] paid a regular amount for board and lodging. The tribunal notes that deposits made by [Ms B] to Ms Johnstone’s bank account are not regular payments of consistent amounts. The tribunal is satisfied on balance that [Ms B] does not pay board to Ms Johnstone, but rather reimburses Ms Johnstone for the costs of items Ms Johnstone purchases for her and the cost of her phone that she reimburses to Ms Johnstone on an ad hoc basis.

1. The tribunal notes that Ms Johnstone’s SOFC shows she has income from disability support pension of $493.80 weekly, family tax benefit (FTB) is excluded from the calculation of income. Based on Ms Johnstone’s SOFC she receives disability support pension of $25,677 annually. Ms Johnstone owns her home. She has savings of about $30,000 which is the residual of the funds from her aunt’s estate. Her weekly expenses are $1,077.00. Ms Johnstone’s weekly expenses are more than her weekly incoming funds. Ms Johnstone said her expenses currently are greater than the money she receives from Centrelink and this is why her savings have reduced as well as money she has spent on her home and the cost of wisdom teeth removal for [Child 2].

2. Considering the other factors outlined in subsection 117(4) the tribunal notes that neither Mr Hollyer nor Ms Johnstone has a duty to maintain anyone else.

3. The tribunal is satisfied that Ms Johnstone has financial resources which are not reflected in the administrative assessment of child support when taking into account her financial circumstances and Mr Hollyer’s financial circumstances.

4. The tribunal is satisfied when consideration is given to Mr Hollyer’s and Ms Johnstone’s circumstances, the proper needs of the children, the income property and resources of each parent to support themselves, the direct and indirect cost incurred by the carer in providing care for the children and any hardship that would be caused to the children or the parents by the making of, or the refusal to make a departure determination; that it is just and equitable to depart from the administrative assessment of child support.

5. Mr Hollyer submitted that in his view Ms Johnstone’s income from 1 November 2021 until a terminating event in respect of the girls should be set at $110,000. Mr Hollyer came to this conclusion because it is his view that Ms Johnstone had a positive cash advantage of $80,500. This being the residual amount of the disbursements from her aunt’s estate after she purchased a home and her disability support pension of approximately $23,000 annually and an extra $50,000 that was yet to be paid to her from her aunt’s estate. This amount calculated over the remaining child support period according to Mr Hollyer was 1.5 years. Mr Hollyer was also agreeable to the 30% increase in Ms Johnstone’s self-support amount.

6. The tribunal is satisfied that Ms Johnstone has received all the disbursements from her aunt’s estate and there are no further disbursements to be made (see paragraph 36). Even if the tribunal were to accept Mr Hollyer’s submission of an income of $110,000 for Ms Johnstone this would not result in the outcome Mr Hollyer wants, which is to pay no child support for [Child 2] and [Child 1] until a terminating event occurs.  

7. The tribunal is of the view that the assessment Mr Hollyer wants to implement would be unjust and inequitable given that Ms Johnstone has the primary care of the girls and she has also paid for the costs of surgery for [Child 2]. More importantly it is the tribunal’s view that $110,000 is not an accurate calculation of Ms Johnstone’s ATI which Mr Hollyer has calculated on the basis of the financial resources he understands were available to Ms Johnstone from her aunt’s estate.

8. The residual of the disbursements from Ms Johnstone’s aunt’s estate after the purchase of her home was $66,379.63. Ms Johnstone said she has $30,000 remaining. Ms Johnstone has had the benefit of residual proceeds of her aunt’s estate but a portion of this money has gone towards the cost of wisdom teeth removal for [Child 2]. Ms Johnstone provided evidence that the costs for this totalled $5,300. The tribunal is satisfied that the residual amount from Ms Johnstone’s aunt’s estate should be reduced by $5,300 as Mr Hollyer has not contributed to the cost of this procedure.

9. The tribunal is satisfied that Ms Johnstone received a residual after the purchase of her home and the deduction in the costs of oral surgery for [Child 2] of $61,079.63. The tribunal is satisfied that the amount of $30,539 per annum should be added to Ms Johnstone’s ATI from 1 November 2021 until a terminating event occurs. This represents half of the residual amount calculated over the remaining likely assessment period.

10. The tribunal considered whether Ms Johnstone’s self-support amount should be decreased because she is living rent and mortgage free. The self-support amount is set by law at one third of the annualised Male Total Average Weekly Earnings (MTAWE). In 2021 this figure is set at $26,319 and in 2022 this figure is set at $27,508 and represents the costs of the necessary commitments for self-support.

11. Necessary commitments for self-support include the reasonable cost of food, accommodation, household essentials, clothing, necessary transport and necessary health costs (2.6.13 of the Child Support Guide).  The tribunal notes the significant benefit Ms Johnstone has in not having to pay rent or a mortgage and finds this represents a significant reduction in her cost of self-support. The tribunal is also mindful that Ms Johnstone did not have to pay rent while she was living with her parents and so her self-support costs in relation to accommodation are lower than Mr Hollyer in light of this. It is for these reasons the tribunal finds that Ms Johnstone’s self-support amount should be reduced by 50%.  

12. The tribunal determines that from 1 November 2021 until a terminating event occurs in respect of the children that Ms Johnstone is to be assessed in the following way:

    ·Ms Johnstone’s ATI is increased by $30,539 per annum and her self-support amount is reduced by 50%.

13. This will mean that Mr Hollyer has a reduction in his child support liability, and it is the tribunal’s view that neither Mr Hollyer nor Ms Johnstone will experience financial hardship as a result of this decision. It also recognises that Ms Johnstone’s expenses are higher than Mr Hollyer’s expenses because she has the primary care of [Child 1] and [Child 2] and her income is a fixed amount on an ongoing basis, while Mr Hollyer may have the opportunity to increase his income because he is self-employed. This decision also recognises that Mr Hollyer has higher residual funds available to him on a weekly basis as indicated by his SOFC.

14. This decision will reduce Mr Hollyer’s child support liability by about $2,900 annually which is a reduction of about $57 a week. Given Ms Johnstone does not have to pay a mortgage or rent the tribunal is satisfied that this decision will not create hardship for Ms Johnstone, [Child 2] or [Child 1]. It is on this basis that the tribunal is satisfied that it is just and equitable to depart from the administrative assessment of child support.

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

1. The final step to consider is whether a departure would be otherwise proper and 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 their children. Ms Johnstone was receiving FTB in respect of her children in 2021. The proposed departure determination will therefore result in a more appropriate apportionment of financial responsibility between the parents. Such a result is otherwise proper.

DECISION

The tribunal varies the decision under review and, in substitution, decides that from 1 November 2021:

·Ms Johnstone’s annual ATI is increased by $30,539 and her self-support amount is decreased by 50%.