Isaac and Isaac (Child support) - [2020] AATA 582

Isaac and Isaac (Child support) [2020] AATA 582 (24 January 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/MC016653
APPLICANT:  Mrs Isaac
OTHER PARTIES:  Child Support Registrar
Mr Isaac

TRIBUNAL:Member R Anderson
DECISION DATE: 24 January 2020
DECISION:

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

·     In respect of the period 1 January 2019 to 30 June 2019, the adjusted taxable income of Mr Isaac is varied to $78,053 per annum;
·     In respect of the period 1 January 2019 to 31 December 2020, the annual rate of child support payable by Mr Isaac is increased by $2,270 per annum;
·     In respect of the period 1 July 2019 to 30 June 2020, the adjusted taxable income of Mr Isaac is varied to $79,257 per annum;
·     In respect of the period commencing 1 July 2020 to 30 June 2021, the adjusted taxable income of Mr Isaac is varied to $80,445 per annum,
·     In respect of the period commencing 1 July 2021 until a terminating event occurs in respect of the child support assessment of [Child 3], the adjusted taxable income of Mr Isaac is varied to $81,652 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the child is significantly affected – financial resources of both parents - 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

Mr Isaac and Mrs Isaac are the parents of [Child 1], [Child 2] and [Child 3]. According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered [in] September 2014. The Department has been responsible for the collection of child support from Mr Isaac from the outset.
For the purposes of this review, [Child 1] is no longer a child of the assessment, while [Child 2] ceased to be a child of the assessment on 14 November 2018, following completion of her secondary school studies.
The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act). The calculation is based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office (ATO), or the most recent estimate accepted by the Department. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act if they consider the administrative assessment results in an unfair amount of child support payable by one parent.
Following an extended period of sick leave, Mr Isaac was dismissed from [Employer 1] in February 2017 and commenced a disability pension through his defined benefit [Superannuation fund 1]. On objection, a previous departure decision varied the adjusted taxable income of Mr Isaac to $87,105 in respect of the period 1 July 2016 to 30 June 2017. The decision also increased his annual child support liability by $4,448 in respect of the period 1 January 2018 to 31 December 2018 to reflect a 50% contribution to the out-of-pocket private education fees of [Child 2] and [Child 3].
[In] November 2018, Mrs Isaac lodged a change of assessment application. As [Child 2] was no longer a child of the assessment, the application was lodged on the basis that the administrative assessment produced an unfair outcome due to the upcoming private education costs of [Child 3] in 2019 impacting significantly on her overall costs (Reason 3) and due to the earning capacity, income, property and financial resources available to Mr Isaac (Reason 8). Mrs Isaac also submitted that her capacity to provide for [Child 3] was reduced due to her duty to maintain [Child 1] and [Child 2] (Reason 9).
At that time, the income of Mr Isaac was based on an estimate accepted by the Department in the amount of $68,255 per annum. In January 2019, Mr Isaac updated his estimated income to $68,828 per annum, as a result of the CPI indexation of his [Superannuation fund 1] pension. The annual rate of child support payable by Mr Isaac was just under $9,500.
[In] March 2019, a delegate of the child support registrar found that a ground was established in respect of Reason 3 and decided to increase the annual rate of child support payable by Mr Isaac to account for a 50% contribution to [Child 3]’s private school fees as follows:

Period	Increase in annual child support payable by Mr Isaac
01/01/19 to 31/12/19	$4,540
01/01/20 to 31/12/20	$4,940
01/01/21 to 31/12/21	$4,767
01/01/2022 until a terminating event occurs in respect of the child support assessment of [Child 3]	$5,005

[Later in] March 2019, Mr Isaac lodged an objection to the decision of [March] 2019. [In] May 2019, an objections officer decided to allow the objection and decided that there was no ground established to warrant a departure from the administrative assessment.
On 3 June 2019, Mrs Isaac lodged an application to this tribunal for an independent review of the Department’s decision. The directions hearing was conducted by telephone with both parties on 12 November 2019. Following this hearing, directions were made to both parties requiring them to provide further information and documents. The hearing was held on 9 January 2020. While Mrs Isaac participated by conference telephone and gave oral evidence to the tribunal on affirmation, Mr Isaac participated in person and gave sworn oral evidence.
The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 312, documents lodged by Mr Isaac, numbered A1 to A86, documents lodged by Mrs Isaac numbered B1 to B98 and information from Centrelink numbered C1 to C5. All of these documents were sent to the parties prior to hearing.
On 9 January 2020, the tribunal decided to defer making a decision in this matter to enable further submissions from the parties in relation to the [Education investment] funds of the children and the application of funds received in respect of [Child 2] in the previous departure decision. Further information was received from Mrs Isaac on 10 January 2020, numbered A87 to A92 and was provided to Mr Isaac for comment. He responded with documents numbered B99 to B116, which were exchanged with the parties for their information. The tribunal then proceeded to make a decision.

ISSUES

When calculation of the rate of child support is based on the usual administrative formula as discussed above, it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income of each parent. Section 98C of the Act allows for a decision maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:
·         whether a ground exists to depart from the administrative assessment; and if so
·         whether any proposed departure is fair to Mr Isaac, Mrs Isaac and the children; and
·         whether any proposed departure is fair to the public.

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

The grounds for departure 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. However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).
At hearing, Mr Isaac raised the issue of Reason 5. That is, that the administrative assessment is unfair because of money, goods and/or property that he has provided for the children. Mr Isaac gave oral evidence that he has gifted the children significant sums of money since separation to assist them financially. He confirmed to the tribunal that the payments were “gifts”. An uninvited, voluntary or excessive payment for the benefit of the child by a parent, outside the child support assessment, should not affect the payee's entitlement to receive child support to meet the day-to-day needs of the child (Strauss and Strauss [1998] FamCA 2).
The tribunal discussed “necessary” versus “discretionary” costs and the intention of the legislation to consider contributions to the “necessary” and day-to-day needs of the children. As the gifts were for the children to use as they wished, the payments clearly did not fall under the intention of subparagraph 117(2)(c)(ii) of the Act. As such, the tribunal did not proceed to consider the ground any further.

Reason 3 - Costs related to the child’s care, training or education in the manner expected by the child’s parents

Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents.
Mrs Isaac gave oral evidence that [Child 3] has been enrolled to commence Year 10 at [Secondary College] in 2020. Consequently, she is only seeking a contribution from Mr Isaac in respect of the school fees she has already paid for [Child 3] at [School] during the 2019 school year.
The statement from [School] recorded payments received from Mrs Isaac for [Child 3] in the 2019 year of $9,080, being for tuition fees and the compulsory capital levy. This was undisputed. Based on the incomes used in the administrative assessment throughout most of 2019, the average costs of a child of more than 13 years whereby the parents’ combined child support income (after allowance for costs of self-support) is in the vicinity of $83,000 is estimated in the Costs of Children Table at $17,749. The school fees for [Child 3] in the 2019 year represent over 50% of the average cost. Furthermore, they represent approximately 16% of Mrs Isaac’s taxable income. All parties agreed that the costs significantly affect the cost of maintaining [Child 3] and the tribunal finds accordingly.
While the term, “manner that was expected” is not defined in the legislation, in Mee v Ferguson [1986] FamCA 3, it was noted that, “The word "expected" in the past tense presumably relates to some expectation of the parties at a point in time earlier than the hearing”.
It is undisputed that [Child 1], [Child 2] and [Child 3] all attended a Catholic primary school, [Name], which was a feeder school to [School]. It was also undisputed that [Child 1] and [Child 2] completed their secondary studies at [School] in 2016 and 2018 respectively. [Child 3] commenced Year 7 at [School] in 2017.
Mr Isaac submitted that he has never been included in decisions regarding the secondary schooling of [Child 3]. He did not sign an enrolment form and until receipt of information through the AAT process, had no information as to what, if any, assistance [Child 3] was receiving at [School] or her general progress. Mr Isaac stated that he fails to see how there can be a mutual expectation when there was no discussion.
In response, Mrs Isaac stated that in her view the intention of both parents was for [Child 3] to be educated at the same school as her sisters, that is, [School]. She further stated that [Education investment] funds were initially set up for each of the children. While [Child 1] and [Child 2]’s continued and provided a regular contribution to their private secondary school fees until completion of their studies, prior to separation, a decision was made to close [Child 3]’s [Education investment] fund. Mrs Isaac gave oral evidence that the withdrawal amount at the time was around $10,000 and that this amount was deposited into the offset account and earmarked for [Child 3]’s future education. Court orders from property settlement referred to the $10,000 where it was agreed that it would be put towards the education and related expenses of the children.
Mr Isaac did not dispute that the $10,000 was earmarked for education purposes. However, he disputes that an [Education investment] fund was ever set up for [Child 3]. He told the tribunal that due to [Child 3]’s learning disability ([specified]), it was decided that a decision in regard to her secondary schooling would be made based on advice from “experts” at the time. He maintains that such discussions did not take place and pointed out that he has seen no evidence in regard to Mrs Isaac researching the most appropriate school for [Child 3]. He reiterated that the decision should have been made jointly and based on the best support available for [Child 3].
In response to a question from the tribunal, Mr Isaac stated that he would have been in favour of whatever school was recommended to satisfy the needs of [Child 3], whether that be a public school, a Catholic school or a Grammar school. In Mabry & Mabry & Anor (SSAT Appeal) [2010] FMCAfam 388, Riethmuller J commented, "…lack of agreement as to the specific school does not mean that the parents lack the expectation that the child will attend a private school of a particular category, for example a Catholic school." In this case it appears that Mr Isaac was willing to accept whatever school met the needs of [Child 3] and was clearly open to that being a private school.
Following the hearing, Mrs Isaac provided evidence in respect of the [Education investment] fund originally opened for [Child 3] in 2004. Regardless, funds in the amount of around $10,000 were clearly set aside by the parents prior to separation for her education. As discussed at hearing, it is unusual for parents to set aside a lump sum to meet the educational costs of a public school.
Mrs Isaac drew the tribunal’s attention to details of a letter sent to her legal representative from Mr Isaac, undertaking to commit to paying half of [Child 2] and [Child 3]’s expenses, giving examples of [sport] and school fees, on the condition that Mrs Isaac encourage contact between the children and their father and paternal grandparents. Mr Isaac asserted that this was out of context as it was part of a “peace offering” that was ultimately not accepted. However, it does indicate that Mr Isaac was open to the children attending a private school.
In the case of Reiner & Reiner & Anor (SSAT Appeal) [2013] FCCA 189 (Reiner), Riethmuller J acknowledged that it was reasonable to draw a conclusion that there was a mutual expectation by the parents that a child be educated in a manner similar to the siblings and with a similar ethos when two older sons had attended a particular private school and a third continued to attend when the fourth child commenced.
The tribunal considered the evidence of the parties. The tribunal acknowledges the frustration of Mr Isaac in being excluded from the decision-making process in respect of [Child 3]’s education and it seems much of the children’s lives. He is understandably distressed by the lack of contact he has had with all of his children since separation. However, this review is not about such issues.
Based on the discussions above, the tribunal is not persuaded that there was no mutual expectation that [Child 3] would attend a private school. As it happens, [School] provided support to [Child 3] in respect of her learning disabilities. It could just have easily been a different private school. Such support will not be available to her at [Secondary College].
The court has acknowledged that it is possible for the expectation of a parent in respect of a child’s education to change over time due to financial reasons (Dobbins & Devlin (SSAT Appeal) [2014] FCCA 1274). The tribunal does not accept that the financial circumstances of Mr Isaac are such that this is the case here.
On balance, the tribunal finds that, in the special circumstances of the case, the ground for departure in subparagraph 117(2)(b)(ii) of the Act has been established in respect of [Child 3].
The extent to which a parent continues to have the capacity to contribute to private school fees was discussed in Mabry & Mabry & Anor (SSAT Appeal) [2010] FMCAfam 388. As discussed at hearing, consideration as to an appropriate contribution to the education costs by the parents, in accordance with their capacity, will be discussed under the next heading regarding what is just and equitable.
As the tribunal is satisfied that one of the grounds before it is established, it has not gone on to consider whether any other grounds are established. The relevant issues will be dealt with in detail below under the next heading regarding what is just and equitable.

Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Isaac, Mrs Isaac and the children to make a particular departure determination?

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. This in turn requires the tribunal to have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

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] FMCAfam 1250). Clearly Mr Isaac and Mrs Isaac have the primary duty to financially support [Child 3].
According to Departmental records, [Child 2] ceased to be a child of the assessment pursuant to section 151D of the Act on 12 December 2018, after which both parents’ liability towards her under the Act ceased. [Child 1] ceased to be a child of the assessment some two years prior. However, in the case of Carlson & Acuff (SSAT Appeal) [2010] FMCAfam677, Riethmuller J notes that section 66L of the Family Law Act 1975 regulates the circumstances when a parent’s duty to maintain a child over 18 years of age would be enforced, and opined that where a child is in full time education they would fall squarely within paragraph 66L(1)(a) of the Family Law Act 1975. Riethmuller J further noted the real question became the amount of the obligation, in light of the parents’ expectations about whether the child should contribute to the household expenses.
Mrs Isaac gave oral evidence that [Child 1] completed her tertiary studies in [Subject 1] in 2019 and is currently seeking employment in the field. In the meantime she has three casual, part-time positions. [Child 2] is about to commence her second year of full-time study in [Subject 2]. She is also employed on a casual, part-time basis. Mrs Isaac estimated their earnings to be $400 per week and estimated their weekly costs met by her, excluding a portion of the mortgage, to be $140. In response to a question from the tribunal Mrs Isaac stated that there is no expectation that [Child 1] or [Child 2] contribute to household expenses. The tribunal notes that Mrs Isaac manages to meet the weekly expenses of the household without incurring any debt and while paying an additional $404 per fortnight into her mortgage. It is open to Mrs Isaac to request a contribution from [Child 1] and [Child 2], which would result in her required contribution to their costs being significantly less.

In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act). There was no dispute that the children are all generally in good physical health.
The tribunal found earlier in these Reasons for Decision that the costs relating to [Child 3] being educated in the manner that was expected by the parents was $9,080 in the 2019 year. Upon further examination of the previous departure decision of 19 March 2018, it was apparent that while the $10,000 earmarked for education had been offset against the 2017 and 2018 school fees of [Child 2] and [Child 3], as agreed through property settlement, the [Education investment] contributions of approximately $5,000 per annum in respect of [Child 2] appeared not to have been taken into account.
Following the hearing, Mrs Isaac provided evidence of the [Education investment] benefits received in respect of [Child 2] in the 2017 and 2018 years of $5,554.66 and $5,055.37 respectively. She also provided details of the 2016 and 2018 school fees schedules. The 2017 fee schedule was not available. It is noteworthy that the composite fees appear not to have been separated in 2018. Rather they are absorbed into the tuition fees. In the absence of the fee schedule for 2017, based on the 2017 fee information provided to the decision-maker in March 2018 by Mrs Isaac, it appears that the tuition fees and composite fees were also separated in 2017. As such, an increase in tuition fees from 2016 to 2017 for years 7 and 11 from $4,950 and $5,434 to $5,247 and $5,760 seems reasonable. The tribunal does not consider it appropriate to average the fees between 2016 and 2018 as Mrs Isaac has done. In addition, there was a capital levy of $1,353 per family and a 4% sibling discount for [Child 3] of $210 (4% of $5,247). Accordingly, the tribunal is satisfied that the tuition fees and capital levy for [Child 2] and [Child 3] in 2017 totalled $12,150. After allowing for [Education investment] benefits of $5,554.66 and apportionment of the $10,000 earmarked for education at $6,667, the tribunal calculates the outstanding school fees for 2017 in respect of [Child 2] and [Child 3] to be around $397.66.
It is clear that the actual 2018 fees were not updated when the departure decision of March 2018 was made. Instead, the estimated fees were used in the calculations. .According to the 2018 schedule of fees, the tuition fees for years 8 and 12 in respect of [Child 3] and [Child 2] are $7,200 and $7,500 respectively. In addition, there was a capital levy of $1,450 per family and a 4% sibling discount for [Child 3] of $288 (4% of $7,200). Accordingly, the tribunal is satisfied that the tuition fees and capital levy for [Child 2] and [Child 3] in 2018 totalled $15,862.
After allocating the [Education investment] benefits and the remaining $3,333 of the $10,000 earmarked for education, the tribunal calculates the outstanding school fees for 2018 in respect of [Child 2] and [Child 3] to be around $7,474. A 50% contribution by Mr Isaac would amount to $3,737. Instead he was assessed to contribute $4,448 per annum. It is noteworthy that regardless of how Mrs Isaac spent the $10,000, there is no question that it has been offset against the school fees in the departure decision of 19 March 2018.
Mrs Isaac is registered with the Department as having sole care of [Child 3]. She estimated her costs after excluding school fees and including her portion of the mortgage, to approximate $283. This included discretionary costs of $27 per week in respect of entertainment and gifts. [Child 3] is no longer involved in [sport]. Mr Isaac told the tribunal that he sees the children intermittently and estimated his annual costs to be around $2,000 to $3,000. Therefore, the tribunal calculates the average weekly “necessary” costs of [Child 3], as estimated by the parents to be around $290 or $15,000 per annum. It is noteworthy that the combined costs are less than the costs of children cap referred to in paragraph 18 above, of $17,749.

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

Mrs Isaac gave oral evidence that she has been employed by [Employer 2] in an administrative role for more than 10 years. In early 2017 she commenced full-time employment in the role of office manager. The tribunal examined her 2017/2018 and 2018/2019 tax returns, both reflecting her sources of income from gross wages, bank interest and dividends from [Company 1] and [Company 2] shareholdings. The deductible expenses are unremarkable. Mrs Isaac explained that the interest received in the 2017/2018 year of $8,274 was due to the deposit of funds received after property settlement prior to the purchase of her current residence. Accordingly, the income used in the administrative assessment, as recorded in the 2017/2018 and 2018/2019 tax returns was $63,743 and $56,175 respectively. The tribunal is satisfied that this is an accurate reflection of Mrs Isaac’s income and financial resources and finds accordingly.
According to the recent payslips before the tribunal, it is evident that the gross wages of Mrs Isaac in the 2019/2020 year will approximate $60,000. Mrs Isaac agreed and stated that she received a pay rise in the latter half of 2019. She further stated that going forward, she foresees no significant change in her financial circumstances. Allowing for similar deductions and interest as in the 2018/2019 year, the tribunal estimates the income of Mrs Isaac in 2019/2020 will approximate $59,500 and finds accordingly.
According to Centrelink information, Mrs Isaac is in receipt of family tax benefit (FTB) payments Part A and Part B in the amount of $174 per fortnight. As an income-tested benefit, FTB is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act). Consequently, for child support purposes, it is not considered to be a part of Mrs Isaac’s adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).
The tribunal considered the assets and liabilities of Mrs Isaac. She is the sole owner of her residence and shares it with [Child 1], [Child 2] and [Child 3]. The estimated value, according to the rates notice, is $735,000. The corresponding [Bank] mortgage had an outstanding balance of $133,106 at 25 July 2019. It is noteworthy that advance payments totalled $113,533. Mrs Isaac explained that in order to attract a lower interest rate she borrowed more than she required and immediately paid down a significant sum. However, it is evident that Mrs Isaac continues to pay $950 per fortnight off the home loan when the minimum required fortnightly payment is $546.
Mrs Isaac’s other assets consist of bank balances ($22,148), [Company 1] and [Company 2] shares ($1,900), a [motor vehicle] ($21,000) and household contents ($2,000). Aside from the mortgage, Mrs Isaac has no other liabilities. Therefore, the tribunal calculates the net asset position of Mrs Isaac to approximate $649,000 and finds accordingly. The tribunal notes that $15,000 is held in trust for [Child 3], in accordance with consent orders discussed earlier in these Reasons for Decision.
The tribunal accepts the written and oral evidence of Mrs Isaac that at 29 November 2019, she held a balance in her [Superannuation fund 2] and [Superannuation fund 3] superannuation accounts of $75,510 and $44,500 respectively. The tribunal is satisfied that no personal contributions have been made by Mrs Isaac in recent times.
Mrs Isaac estimated the average weekly expenses of the household to be $1,219. After allocation of the minimum required mortgage payment, $332 applied to her. This amount includes discretionary costs in respect of entertainment and gifts of $32. Therefore, the tribunal calculates the estimated “necessary” costs of Mrs Isaac to be $300, or $15,932 per annum. The tribunal notes that the self-support amount used in the administrative formula in the 2019 year is $25,035.
In response to a question from the tribunal, Mrs Isaac stated that she is in good health. Furthermore, she is able to meet the weekly household expenses with careful management, noting that she and the children have little in the way of “extras”.
Mr Isaac told the tribunal that prior to his dismissal from [Employer 1] in February 2017 on medical grounds, he had been in [that employer] for more than 29 years. He received a payout of recreation leave and long service leave and has since been in receipt of a pension from [Superannuation fund 1], a defined benefit scheme. The administrative assessment ordinarily uses the income recorded in the most recently lodged tax return of the parent, or, in the case of Mr Isaac, the estimates he lodged in respect of the 2018/2019 year that were accepted by the Department. Mr Isaac told the tribunal that his estimate was simply based on the gross fortnightly payment advised in the bi-annual letter from [Superannuation fund 1]. Consequently, the estimate includes the tax-free component of the payment that otherwise would be excluded from the income recorded on his tax return.
The tribunal pointed out to Mr Isaac the additional benefit he receives through a 15% tax offset, which in the 2018/2019 year amounted to $9,704. Essentially, this results in an additional $9,704 in the hands of Mr Isaac, as if he had earned $68,449 (pension received in 2018/2019) in wages, it would be payable to the ATO. The tribunal found the deductible expenses recorded in Mr Isaac’s tax return to be unremarkable. After allowing for those deductions and interest and dividends received, the tribunal calculates the income and financial resources available to Mr Isaac for child support purposes in the 2018/2019 year to be $78,053 ($64,695 + $3,754 + $9,704 +$126 +$56 - $282 ).
Going forward, Mr Isaac foresees little change in his income, other than the regular biannual CPI increases. Based on the increases in the 2019/2020 year, the 15% tax offset on the taxable component (15% of approximately 94.5% of total gross pension received), allowing for reasonable deductions, interest and dividends, the tribunal calculates the income and financial resources available to Mr Isaac for child support purposes in the 2019/2020 year will likely approximate $79,257 ($65,682 +$3,823 + $9,852 + $126 +$56 - $282).
In the following years, the tribunal considers it reasonable to estimate the adjusted taxable income of Mr Isaac based on the increase between the adjusted taxable incomes determined by the tribunal for the 2018/2019 and 2019/2020 years, being around 1.5%. This equates to $80,445 in respect of the 2020/2021 year and $81,652 in respect of the 2021/2022 year. The tribunal finds accordingly.
The tribunal considered the assets and liabilities of Mr Isaac. He is the sole owner of his residence, which according to the rates notice, is valued at $435,000. The corresponding mortgage had an outstanding balance at 14 November 2019 of $49,611. Similarly to Mrs Isaac, Mr Isaac has also built up advance payments in the amount of $69,322. It is evident that Mr Isaac continues to pay $655 per fortnight off the home loan when the minimum required fortnightly payment is $440.
Mr Isaac’s other assets consist of bank balances ($5,925), [Company 1] shares ($600), a [motor vehicle] ($2,000) and household contents ($3,000). Aside from the mortgage, Mr Isaac has no other liabilities, telling the tribunal that he pays off his credit cards as he goes along. Therefore, the tribunal calculates the net asset position of Mr Isaac to approximate $397,000 and finds accordingly.
In respect of expenses and after the exclusion of [Child 3]’s school fees and adjustment of the minimum required mortgage payment, Mr Isaac’s average weekly household expenses approximate $470. This amount includes minimal discretionary costs in respect of entertainment and gifts of $12. The tribunal calculates the estimated “necessary” costs of Mr Isaac to be $458, or $23,816 per annum, being closely aligned to the self-support amount used in the administrative formula in the 2019 year of $25,035. The tribunal notes that unlike Mrs Isaac, Mr Isaac is attributed with 100% of the required mortgage payment. Furthermore, the tribunal considers it likely that he has under-stated what he spends on gifts. In response to a question from the tribunal Mr Isaac stated that WorkCover continues to meet the costs of his prescriptions and that he manages to meet his weekly expenses, which are significantly less than his income. He further stated that he will soon need to replace some larger items such as a fridge, washing machine and his car and will likely use some of his redraw available on his mortgage to do so. Following the hearing, Mr Isaac advised that due to an incident, replacement of his car will be imminent.

Conclusion

After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Isaac and Mrs Isaac and the needs of the children, the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. The tribunal may make one of the determinations set out in section 98S of the Act. Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support.
In this case, the administrative assessment at 15 November 2018, the date of Mrs Isaac’s application for a change of assessment, was based on the income recorded on the 2017/2018 tax return of Mrs Isaac of $63,743 and the second estimate lodged by Mr Isaac in respect of the 2018/2019 year of $68,255. The resulting annual rate of child support payable by Mr Isaac was $9,321 per annum. In addition, in accordance with the departure decision of 19 March 2018, Mr Isaac’s child support liability was increased by a further $4,448 per annum until 31 December 2018, representing a 50% contribution to the out-of-pocket school fees of [Child 2] and [Child 3].
As discussed at hearing, the timing issue created in the administrative assessment by using the income as recorded in the most recently lodged tax return of Mrs Isaac has a minimal impact on the assessment in the 2019/2020 year of just over $3 per week. This is due to Mrs Isaac being attributed with 100% care of [Child 3]. As such, the tribunal is satisfied that use of the income recorded in the most recently lodged tax return of Mrs Isaac is appropriate and fair. The tribunal notes that timely lodgement of her annual tax return going forward will assist in the most accurate assessment for child support purposes.
The impact on the child support assessment of the increase in income and financial resources attributed to Mr Isaac in 2018/2019 is around $1,600 per annum. This is not insignificant. Nor are the school fees that have been met by Mrs Isaac in 2019 in respect of [Child 3] of $9,080. The tribunal considers it appropriate that the parties contribute equally to the 2019 school fees of [Child 3]. While the tribunal is cognisant of Mr Isaac’s over-assessment in respect of a contribution to school fees in the 2018 year of around $711, it is less than his under-assessment due to the benefit received through the tax offset on his pension.
While Mr Isaac’s income and financial resources are higher than those of Mrs Isaac, it is clear that the net asset position of Mr Isaac is significantly less than that of Mrs Isaac. Both parties have access to redraw facilities on their mortgages which are a result of paying far more than necessary on a fortnightly basis. While the tribunal fully understands the financial reasons behind both parties paying more than is necessary off their mortgages each month, to do so cannot take priority over child support and the necessary needs of the children. The tribunal notes that Mr Isaac has remained up to date with his child support payments and based on Departmental records, at 3 December 2019 was in credit by $1,290.99.
The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). Mrs Isaac lodged a change of assessment application on 15 November 2018. It is reasonable that the parents rely on the child support assessment until such time as they are put on notice of any possible change. Given the over and under assessment of Mr Isaac in the assessment to 31 December 2018 discussed above, the tribunal is satisfied that 1 January 2019 is an appropriate commencement date for the proposed departure decision in respect of the parents’ income and their contribution to the 2019 school fees attributable to [Child 3].
The tribunal is cognisant of providing some degree of certainty for the parties moving forward. The income of both parties appears to be stable and predictable. Therefore, the tribunal proposes to end the departure decision when a terminating event occurs in respect of the child support assessment of [Child 3]. This will likely be in November of 2022.
Subsection 117(4) of the Act requires the tribunal to consider whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.
In the circumstances, the tribunal proposes to vary the adjusted taxable income of Mr Isaac to $78,053 per annum in the period 1 January 2019 to 30 June 2019, $79,257 per annum in respect of the period 1 July 2019 to 30 June 2020, $80,445 in respect of the period 1 July 2020 to 30 June 2021 and $81,652 in respect of the period 1 July 2021 until a terminating event occurs in respect of the child support assessment of [Child 3]. As the school fees for [Child 3] have already been met in full with no debt accumulation, the tribunal proposes to spread the contribution of Mr Isaac over two years, acknowledging the arrears created by the increase in his adjusted taxable income. Therefore, the child support payable by Mr Isaac from 1 January 2019 to 31 December 2020 is to be increased at the rate of $4,540, or $2,270 per annum, representing a 50% contribution to the school fees of [Child 3] in respect of the 2019 calendar year.
Neither party submitted that they were in hardship and given the redraw facilities available to both parties, the tribunal is satisfied that the proposed decision will not cause hardship to either party or to the children. Furthermore, the tribunal calculates the child support arrears at 3 December 2019 as a result of the tribunal’s decision will be just under $4,000. The tribunal is satisfied that Mr Isaac has the capacity to meet the current weekly child support payments in the amount of $265 while also addressing the arrears.
The tribunal sympathises with the circumstances of Mr Isaac, who is clearly struggling with the limited contact with his children. However, as discussed at hearing, this review is not about access. The tribunal must confine its consideration to the financial circumstances of the parents and their capacity to contribute to the needs of the children and themselves. Despite what Mr Isaac may feel, there is no winner here. Both parties are living frugally in an attempt to get ahead financially while also trying to meet their obligations to the children.

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.

In this case Mrs Isaac is in receipt of FTB Part A and Part B. As a sole parent and based on her annual income, a change in the child support payable by Mr Isaac will have no impact on her entitlement to FTB Part B. In respect of FTB Part A, it is a means tested benefit and will therefore be impacted by the income of Mrs Isaac and the child support payable to her by Mr Isaac. It is therefore likely that an increase in the child support payable by Mr Isaac may result in a small decrease in the rate of FTB Part A payable to Mrs Isaac, thereby reducing the costs to the public purse. Therefore, the tribunal considers that it is otherwise proper to make the particular proposed determination.
It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

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

·     In respect of the period 1 January 2019 to 30 June 2019, the adjusted taxable income of Mr Isaac is varied to $78,053 per annum;
·     in respect of the period 1 January 2019 to 31 December 2020, the annual rate of child support payable by Mr Isaac is increased by $2,270 per annum;
·     In respect of the period 1 July 2019 to 30 June 2020, the adjusted taxable income of Mr Isaac is varied to $79,257 per annum;
·     In respect of the period commencing 1 July 2020 to 30 June 2021, the adjusted taxable income of Mr Isaac is varied to $80,445 per annum,
·     In respect of the period commencing 1 July 2021 until a terminating event occurs in respect of the child support assessment of [Child 3], the adjusted taxable income of Mr Isaac is varied to $81,652 per annum.