Kaetzel and Babe (Child support)

[2020] AATA 5823

Kaetzel and Babe (Child support) [2020] AATA 5823 (1 December 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC017747

APPLICANT:  Mr Kaetzel

OTHER PARTIES:  Child Support Registrar

Ms Babe

TRIBUNAL:Senior Member A Freeman

DECISION DATE:  1 December 2020

DECISION:

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

·     for the period from 9 April 2019 to 30 June 2021, Mr Kaetzel’s adjusted taxable income is varied to $37,859;

·     for the period from 23 January 2019 to 30 June 2019, Ms Babe’s adjusted taxable income is varied to $57,637; and

·     for the period from 1 July 2019 to 30 June 2021, Ms Babe’s adjusted taxable income is varied to $72,000.

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. Mr Kaetzel and Ms Babe are the parents of six children, four of whom are currently subject to the assessment of child support.  Mr Kaetzel’s care percentage at the time of the objection decision was recorded for the purposes of assessing child support as being 89% for the eldest child [Child 1], 38% for [Child 2] and [Child 3] and 33% for [Child 4] and [Child 5].  [Child 1] ceased to be an eligible child for the purposes of the assessment in October 2019.

2. Ms Babe lodged an application with the Department of Human Services (now Services Australia) (the Agency) on 18 April 2019 seeking a departure from the administrative assessment of child support on the basis that Mr Kaetzel’s income and financial resources made the assessment of child support unfair. At the time of the application, Ms Babe was liable to pay an annual rate of child support of $4,321 to Mr Kaetzel.  This was calculated using an adjusted taxable income (ATI) of $70,025 for Ms Babe and an ATI of $19,278 for Mr Kaetzel.    

3. On 18 July 2019, the Agency found that grounds to depart existed and varied Mr Kaetzel’s ATI to $120,000 for a period from 9 April 2019 to 30 November 2020 and varied Ms Babe’s ATI to $69,000 for a period from 23 January 2019 to 30 November 2020. 

4. Mr Kaetzel objected to this decision and on 2 October 2019 an objections officer allowed the objection and set aside the earlier decision, making the following decision in substitution:

   ·     Mr Kaetzel’s ATI was varied to $120,000 for a period from 9 April 2019 to 15 July 2019;

   ·     Ms Babe’s ATI was varied to $69,000 for a period from 23 January 2019 to 15 July 2019 and

   ·     The annual rate payable in both cases was set at $0 from 16 July 2019 to 31 January 2020.

5. Mr Kaetzel has sought a further review of this decision.

6. Mr Kaetzel contends that because Ms Babe’s income and financial resources and therefore her capacity to pay child support is greater than his, the annual rate should not be set at $0 for both cases and the formula assessment should apply such that she is required to pay him child support for the relevant period.

7. Ms Babe contends that the objection decision should remain in place.

8. A hearing of this matter was initially conducted on 20 March 2020. Both parties appeared by conference telephone.  The matter was deferred to allow further consideration of material provided in relation to the matter and for written submissions to be provided.  A further hearing was conducted on 1 December 2020 and both parties again appeared by conference telephone.  In reaching its decision, the Tribunal has considered the sworn evidence given by both parties at both hearings, together with the documentation provided by the Agency (exhibit 1), the documentation provided by Mr Kaetzel (including his written submissions) (exhibit 2) and the documentation provided by Ms Babe (including her written submissions) (exhibit 3).

CONSIDERATION

1. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable by the liable parent. The Act also provides for a departure from the administrative assessment in certain circumstances.

2. A departure from an administrative assessment may be made pursuant to section 98C of the Act if the following matters are established:

   ·         One or more than one of the grounds for departure referred to in subsection 98C(2) exists;[1]

   ·         A departure is just and equitable as regards the children and each parent;[2] and

   ·         It is otherwise proper to make a departure decision.[3]

Issue 1 – Grounds for departure

Assessment unfair because of the income or earning capacity of either parent

[1] See subparagraph 98C(1)(b)(i).

[2] See sub-subparagraph 98C(1)(b)(ii)(A).

[3] See sub-subparagraph 98C(1)(b)(ii)(B).

1. Ms Babe’s initial change of assessment application sought a departure from the assessment in place at the time on the grounds that, in the special circumstances of the case, Mr Kaetzel’s income and earning capacity made the assessment of child support unfair because it was greater than that reflected in the assessment for the purposes of the Act.

2. A ground to depart from the administrative assessment of child support may exist if, in the special circumstances of the case, the application of the administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent because of either parent’s income, property and financial resources[4] or the earning capacity of either parent[5]. 

   [4] See subparagraph 117(2)(c)(ia).

   [5] See subparagraph 117(1)(c)(ib).

3. The term “special circumstances” is not defined in the Act.  In Gyselman v Gyselman [1992] FLC 92-279, the Full Court of the Family Court determined that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

4. There are a range of circumstances that may support the finding that the administrative assessment would result in an unjust or inequitable determination of the level of child support.  The calculation of income and financial resources for the purposes of taxation law does not limit the Tribunal’s consideration of the true resources available to a party to child support proceedings and is but one factor to be taken into account in the particular circumstances of the case.

5. In Ashcroft & Ashcroft (SSAT Appeal) [2008] FMCAfam 1250, the Federal Magistrates Court stated:

   Whilst it may be legitimate for citizens to organise their financial affairs to minimise the taxation liability, it has long been recognised that the obligation to provide proper financial support for children is both a moral and legal obligation that all parents must bear to the best of their ability. It is appropriate to examine the financial affairs of parents to ensure their obligation to pay child support is not accorded less priority than obligations other than those reasonably necessary to support the payer.

6. Mr Kaetzel is a [Occupation 1] and a [Occupation 2].  At the time of the change of assessment application Mr Kaetzel had started a new full-time job commencing on 9 April 2019.  His gross income was $10,000 per month or $120,000 per annum.  Prior to securing this employment, Mr Kaetzel had been engaged on a casual basis as a [Occupation 3] and his last full-time employment had been back in 2016.

7. Mr Kaetzel’s 2018/2019 taxable income was $37,859. 

8. On 15 July 2019 Mr Kaetzel’s employment ended.  His Centrelink separation certificate states that the reason for his employment coming to an end was due to a shortage of work.  Mr Kaetzel told the Agency that the [project] he was working on came to an end and thus so did his employment.

9. Following this, Mr Kaetzel resumed casual [work] and on 19 February 2020 he was deemed eligible for newstart payments. which were backdated to 22 October 2019.  From this date he received about $638 per fortnight and since about May 2020 he has been in receipt of jobseeker payments in the amount of $1,500 gross, or $1170 net, per fortnight.  Mr Kaetzel estimates that the income from his [specified] work as at the hearing in March 2020 was about $6,000.  Thus, the Tribunal estimates, based on the evidence before it, that Mr Kaetzel’s 2019/2020 income is likely to be at least $21,000 including about $15,000 in Centrelink payments.

10. At the time of the change of assessment application, Mr Kaetzel’s ATI for the purposes of assessing child support was $19,278.  It is apparent from the material before the Tribunal that at least for the period from 9 April 2019 to 15 July 2019 Mr Kaetzel’s income was greater than that, with his taxable income for the 2019 financial year being $37,859.  This is higher than the ATI applied to the assessment of child support and therefore the Tribunal finds that in the special circumstances of the case, Mr Kaetzel’s income and financial resources makes the assessment of child support unfair and a ground to depart has been established on this basis.

11. The Tribunal will now consider whether such a departure is just and equitable.

Issue 2 – Would departure from the formula assessment be just and equitable?

1. Subsection 117(4) of the Act sets out the criteria that must be considered in determining whether it would be just and equitable as regards the children and the parents to make a departure order. This involves a consideration of the following:

   (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)him 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 incurrent 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 by the making of, or the refusal to make, the order.

Mr Kaetzel’s circumstances

1. As noted above, Mr Kaetzel is a [Occupation 1] and a [Occupation 2].  He has been employed as a [Occupation 1] [since] his early 20s.  Since mid-2016 he has been employed on a casual basis doing [Occupation 3 work].  This has included [working] at [Workplace 1].  He invoices the [Workplace 1] at the conclusion of the [work] and if he [works] on his own, this may be in the order of about $3,500.  He also occasionally [does another work], but Mr Kaetzel told the Tribunal that the costs involved in travelling to do these often outweigh the $150 honorarium that he is paid.  Mr Kaetzel estimates that the money he has received for [doing Occupation 3 work] in the 2020 year is $5,000 or $6,000.

2. In the 2018/2019 year, his taxable income was $37,859 mainly due to him obtaining full-time employment for the period from 9 April 2019 to 15 July 2019 where he was paid $10,000 per month gross.  As noted above, this employment came to an end due to a shortage of work.

3. Since then Mr Kaetzel has applied for newstart allowance and has, since October 2019, received such benefits.

4. As a condition of being on newstart allowance, Mr Kaetzel is required to and has been consistently applying for jobs in [specified fields].  Understandably, since the COVID-19 pandemic, finding further full-time employment has been difficult.

5. Mr Kaetzel lives with his children in a house owned by a friend of his.  He pays rates on this property (about $5,000 per annum) in lieu of rent.  He estimates that his average weekly expenses amount to about $1,312 per week.  This includes about $200 per week in education expenses and $71 per week for home office expenses.

6. [Child 1] continues to live with Mr Kaetzel following the completion of his secondary schooling and is studying [at] university.  He is in receipt of youth allowance but does not make any contributions to the weekly household expenses.

7. Mr Kaetzel told the Tribunal that he meets his living expenses from his savings.  He has about $160,000 in a savings account, the bulk of which came from the property settlement effected between the parties in December 2018.

8. In 2016 and 2017 Mr Kaetzel borrowed a total to $90,000 from his cousin to pay for legal expenses and living costs.  He has not made any repayments on this loan yet but told the Tribunal that he intends to repay it when he is back on his feet financially.

9. The material provided to the Tribunal indicates that the four children the subject of the child support assessment attend a private school.  Some fee assistance is available to the parties making the total cost each year about $8,000.  This is met equally by the parties although Mr Kaetzel told the Tribunal that he has not been able to meet his share of the fees and has an interest free loan with the school.  In March 2020, this debt amounted to about $13,124.  Since then, Mr Kaetzel has been able to pay some of this debt down and now owes about $8,501.

Ms Babe’s circumstances

1. Ms Babe is employed on a full-time basis as a [Occupation 3].  She has been in this position since 23 January 2019.

2. Ms Babe’s 2019 taxable income was $57,637 which comprised of the income from her full-time position as well as the casual position she held before that.

3. Ms Babe’s 2020 taxable income is likely to be around $74,000.  She continues to be employed in this role to date.

4. Ms Babe lives with her children in a house she purchased in August 2019.  Ms Babe borrowed $385,000 from the [Bank] to purchase the property as well as using the money she received from the property settlement.

5. Ms Babe did some renovations on the house but told the Tribunal that she used part of the borrowings from the bank to pay for these.  As of January 2020, Ms Babe owed $359,745 leaving her with about $23,000 available for redraw.  Ms Babe repays $415 per week off the mortgage.  This is about $63 more than the minimum repayments required by the bank.  Over a period from January 2020 until recently, the minimum repayments were further reduced to $88 per week as a result of COVID-19 measures put into place by the bank.  Ms Babe told the Tribunal that despite this reduction she continued to pay about $410 to $415 per week off her mortgage over the 2020 year.

6. Ms Babe estimates that her average weekly expenses amount to about $1,612 per week.  This includes an amount of $288 per week for house repairs.  Ms Babe told the Tribunal that this was her estimate of the expenses that may arise over the course of the year.  As of December 2020, she estimates that she has spent about $11,000 on house repairs.  The average weekly expenses also include an amount for the children’s’ private school fees, [music] lessons and the children’s’ medical expenses.

Consideration of whether a departure is just and equitable

a)Mr Kaetzel’s income and financial resources

1. Mr Kaetzel’s taxable income for the 2019 financial year was $37,859, including the income he earned from his full-time position between April and the end of June 2019.  Since 15 July 2019, Mr Kaetzel has been casually [working] at [Workplace 1] and other casual engagements.  He also has been in receipt of newstart and jobseeker allowances.

2. The Tribunal estimates that the income derived from these sources for the 2020 financial year is likely to be at least $21,000 but Mr Kaetzel has not finalised his 2020 tax return as at the date of this decision.

3. Mr Kaetzel’s average living expenses amount to about $1,300 per week.  This averaged out over a year amounts to about $67,600.  Mr Kaetzel told the Tribunal that he supplements his living expenses by dipping into his savings, which largely comprise of money he received from the property settlement.

4. Both parties received an amount from the property settlement in late 2018 the division of which was determined by another court.  The parties have chosen to do different things with this money, as they are entitled to do.  For the purposes of assessing child support, the Tribunal does not intend to take this into account as a financial resource for either party in the circumstances.

5. What the Tribunal does consider however is that Mr Kaetzel is able to fund his lifestyle from several sources of income and financial resources, including government allowances, casual [work] and his savings.  Taking all of this into account, the Tribunal considers that Mr Kaetzel’s 2019 taxable income is an appropriate figure to also apply to the 2020 financial year as best representing his income and financial resources.  Indeed, this is what has been applied by the Agency since 1 February 2020 when the objection decision expired and the formula assessment resumed, which is the outcome that Mr Kaetzel seeks in relation to this review application.

b)Ms Babe’s income and financial resources

1. Ms Babe is a PAYG earner engaged in full-time employment and is not in receipt of any other income apart from that which she receives from such employment.  She has no other significant financial resources. 

2. Thus, the Tribunal finds that Ms Babe’s income and financial resources is best reflected by her taxable income, being from 23 January 2019 to 30 June 2019, $57,637 and from 1 July 2019, $72,000 (taking into account an amount of $2,000 for reasonable work-related deductions).

3. If an ATI for Mr Kaetzel of $37,859 was applied to the assessment of child support along with an ATI of $57,637 for Ms Babe for the period from 9 April 2019 to 30 June 2019, an annual rate payable by Ms Babe to Mr Kaetzel of about $3,300 results.  Applying the higher income of $72,000 for Ms Babe from 1 July 2019, an annual rate of about $4,739 payable by Ms Babe to Mr Kaetzel results.  From 10 October 2019, when [Child 1] ceased to be an eligible child of the assessment, the annual rate payable by Ms Babe reduces to $2,464 and from late 2019, when the care percentage for [Child 2] reduced to 0% for Mr Kaetzel, the net effect of the assessment is that Mr Kaetzel will be assessed to pay Ms Babe about $684 per annum in child support.

4. The effect of this is that over a period from April 2019 to December 2019, Ms Babe’s liability will increase by about $2,626 in total.  This amounts to about $292 per month or $73 per week over that period.

5. The Tribunal has evidence before it that Ms Babe pays about $63 more per week off her mortgage than is required.  She also has budgeted for about $288 per week in house repairs which did not eventuate and has about $23,000 available to redraw on her mortgage.   

6. Ms Babe submitted that she does not have the capacity to pay Mr Kaetzel child support and her expenses exceed her income.  The difficulty with that proposition is that Ms Babe has for over a year now been paying more off her mortgage than is required by the bank.  Whilst that is her choice, what it speaks to is a greater capacity to pay child support than she asserts and the needs of the children ought to be given greater priority than Ms Babe’s desire to repay her mortgage more quickly than is currently required.  The effect of these greater repayments has been that Ms Babe now has about $23,000 available to redraw from her mortgage.

1. In all the circumstances, the Tribunal considers that Ms Babe has a greater capacity currently to meet the needs of the children than Mr Kaetzel does given the disparity in their incomes and furthermore, she has the capacity to meet the liability that will arise from the Tribunal’s decision to depart from the administrative decision.

2. The Tribunal notes that from late 2019, the net effect of the assessment will be that Mr Kaetzel will be required to pay Ms Babe about $600 per annum in child support.  The Tribunal considers that this will not have an adverse impact upon Mr Kaetzel’s financial circumstances given his level of income and savings available to him.

3. The Tribunal therefore considers that it is appropriate in all the circumstances of this case to vary Mr Kaetzel’s ATI to $37,859 from 9 April 2019 and to vary Ms Babe’s ATI to $57,637 for the period from 23 January 2019 to 30 June 2019 and to $72,000 from 1 July 2019 given the incomes applied to the administrative assessments at the relevant times did not adequately reflect the incomes that applied for each party.

4. Therefore, the Tribunal considers that it is just and equitable to depart from the formula assessment and vary the parties’ ATIs to the figures outlined above.  The length of time that this decision will operate for will be discussed below.

5. Ms Babe, as part of her initial change of assessment application, also raised issues regarding Mr Kaetzel’s earning capacity. 

6. Under the Act, to find that a ground to depart exists because of the earning capacity of a parent, the Tribunal must be satisfied that:

   a)    the parent:

   i.is not working despite ample opportunity to do so (subparagraph 117(7B)(a)(i)); and/or

   ii.has reduced his or her weekly hours of work to below full-time work (subparagraph 117(7B)(a)(ii)); and/or

   iii.has changed his or her occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and

   b)    the parent’s decision about his or her work arrangements is not justified by either his or her caring responsibilities (subparagraph 117(7B)(b)(i)) or his or her state of health (subparagraph 117(7B)(b)(ii)); and

   c)    the parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to stop working, reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support (paragraph 117(7B)(c)).

7. All three of the above criteria must be met before a departure determination can be made in relation to earning capacity. 

8. In this case, Mr Kaetzel has been, since 2016, employed on a casual [basis].  At the time of Ms Babe’s application, he was employed on a full-time basis.  The evidence before the Tribunal is that this came to an end at the employers’ instigation because of a shortage of work.  Thus, whilst the Tribunal might conclude that Mr Kaetzel’s hours of work reduced to below full-time work from 15 July 2019 and this was not justified by his caring responsibilities or state of his health, given the reduction in weekly hours was not at his instigation, the Tribunal is unable to conclude that a major purpose of Mr Kaetzel’s decision to reduce his hours was to affect the assessment of child support.  Therefore, the Tribunal does not consider it is appropriate to assess Mr Kaetzel’s income based upon his earning capacity.

c)Length of the decision

1. Ms Babe made her initial change of assessment application on 18 April 2019.  The Tribunal may consider commencing its decision up to 18 months prior to the date of the change of assessment application without leave of the court, if the Tribunal considers it is just and equitable in all the circumstances to do so.

2. The Tribunal has made findings in relation to both parties’ ATIs for the 2019 financial year.  Ms Babe’s full-time position commenced from 23 January 2019 and therefore the Tribunal considers it appropriate to vary her ATI from that date.  From 1 July 2019, Ms Babe’s income increased to about $72,000 and thus the Tribunal intends to vary her ATI to reflect this change.

3. Mr Kaetzel’s full-time employment commenced on 8 April 2019.  It was this employment that contributed to the majority of his total taxable income for the 2019 financial year and thus the Tribunal considers this to be an appropriate date to commence the decision to vary Mr Kaetzel’s ATI to $37,859.

4. In relation to an end date, the Tribunal considers it appropriate to conclude its decision at the end of the current financial year.  Given the COVID-19 pandemic and the economic uncertainty that is likely to remain for some time, the Tribunal considers it appropriate that the parties’ financial circumstances be revisited then.

Issue 3 – Otherwise proper

1. In considering whether a departure is otherwise proper, the Tribunal must take into account subsection 117(5) of the Act which requires the Tribunal to have regard to the nature and duty of a parent to maintain a child and the effect that the making of the order would have on any entitlement of the child or carer entitled to child support to an income tested pension, allowance or benefit or the rate of any income tested pension, allowance or benefit payable to the child or the carer.

2. Ms Babe is in receipt of family tax benefits in relation to the children.  The proposed departure has the effect of increasing the amount payable by her when compared to the administrative assessment in place from 23 January 2019 and therefore may result in a decrease in family tax payments and consequently the cost to the community.  The Tribunal considers that the departure proposed appropriately reflects the financial circumstances of both parties and is otherwise proper in the circumstances of this case.

DECISION

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

·     for the period from 9 April 2019 to 30 June 2021, Mr Kaetzel’s adjusted taxable income is varied to $37,859;

·     for the period from 23 January 2019 to 30 June 2019, Ms Babe’s adjusted taxable income is varied to $57,637; and

·     for the period from 1 July 2019 to 30 June 2021, Ms Babe’s adjusted taxable income is varied to $72,000.