Keegan and Iveson (Child support)

[2020] AATA 275

Keegan and Iveson (Child support) [2020] AATA 275 (24 January 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC017478

APPLICANT:  Mr Keegan

OTHER PARTIES:  Child Support Registrar

Mrs Iveson

TRIBUNAL:Member R King

DECISION DATE:  24 January 2020

DECISION:

The Tribunal sets aside the decision under review and, in substitution, refuses to make a determination under subsection 44(2) of the Child Support (Assessment) Act 1989.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – post-separation income – whether income was in accordance with a pattern of income established after separation – whether income would not have been earned in the ordinary course of events – decision under review set aside and substituted

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

REASONS FOR DECISION

BACKGROUND

1. Mr Keegan and Mrs Iveson are the parents of two children for whom there is a child support assessment in place.  Mr Keegan and Mrs Iveson separated on 16 May 2016.  Mrs Iveson is the parent liable to pay child support under the assessment.

2. On 18 April 2019, Mrs Iveson applied to the Department of Human Services, Child Support (the Child Support Agency) to reduce the adjusted taxable income used in the child support assessment under the provisions relating to additional income earned post-separation.

3. On 24 May 2019, the Child Support Agency made the decision to reduce Mrs Iveson’s adjusted taxable income used in the assessment by 30%, with effect from 2 September 2018.

4. On 3 June 2019, Mr Keegan objected to this decision, and, in particular, the decision to give effect to the 30% income exclusion from a date that preceded her application for income exclusion.  On 16 September 2019 the Child Support Agency disallowed the objection (the objection decision).  The objections officer found that Mrs Iveson’s post-separation income increased in a way that was outside the ordinary course of events and that special circumstances prevented her from applying for income exclusion at an earlier time.

5. On 23 September 2019, Mr Keegan applied to the Administrative Appeals Tribunal (the Tribunal) for review of the objection decision.  The Child Support Agency provided the Tribunal and the parties with papers relevant to the matter.

6. The Tribunal conducted a hearing into the application on 6 January 2020.  Both Mr Keegan and Mrs Iveson provided sworn evidence by conference telephone.  The Tribunal took further sworn evidence from Mrs Iveson on 8 January 2020 and provided both parties with the opportunity to make further written submissions.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. Section 44 of the Act allows a parent to apply to have the administrative assessment of child support amended so that certain income which is earned, derived or received after separation is excluded from their adjusted taxable income.

3. The issues which arise in this case are whether or not a component of Mrs Iveson’s post-separation income can be excluded when determining her child support liability and, if so, from what date.

CONSIDERATION

1. During the hearing, Mr Keegan told the Tribunal that he accepted that Mrs Iveson was entitled to post-separation income exclusion, but he did not agree that there were special circumstances that prevented her from making an earlier application.  Mr Keegan said that he accepted that Mrs Iveson had not been advised by the Agency that she could apply for post-separation income exclusion but that there was information about post-separation income exclusion on the Child Support website.  He submitted that failure to access this information was not a special circumstance and that the exclusion should have effect from the date of her application and not from an earlier date.

2. During the hearing, Mrs Iveson told the Tribunal that it was unreasonable to expect people to search for information about something they had no reason to suspect was available.  She said that she only found out about it because a friend was in a similar situation and alerted her to it.  Mrs Iveson submitted that the Tribunal should accept the guidelines used by the Agency, which specifically includes lack of knowledge of the exclusion as a special circumstance that allows it to take effect prior to the date of application.

3. Prior to giving consideration to the date of effect, the Tribunal must be satisfied that income exclusion is available to Mrs Iveson.  While all parties have accepted that this is the case, the Tribunal must give consideration to the relevant law.  It is not sufficient that the parties agree, amongst themselves, that an entitlement exists.

4. Section 44 of the Child Support (Assessment) Act 1989 (the Act) provides for a parent to make application for post-separation income to be excluded from the adjusted taxable income. Section 44 states relevantly:

   44 Post-separation costs

   Application for post-separation income to be excluded

   (1)    A parent (the applicant) of a child may apply to the Registrar to amend an administrative assessment of child support payable by or to the parent for the child for part of a child support period if:

   (a)the applicant and the other parent of the child lived together on a genuine domestic basis for at least 6 months; and

   (b)the separation, following that 6 month period, of the applicant from the other parent occurred:

   (i)within the last 3 years; and

   (ii)before the application for administrative assessment of child support for the child was made under section 25 or 25A; and

   (c)at the time of the application under this section, the applicant and the other parent remain separated; and

   (d)in the last relevant year of income, or in the application period for an income election (if such an election has been made by the parent), the applicant earns, derives or receives income:

   (i)in accordance with a pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate; and

   (ii)that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events.

   (2)    If the applicant makes an application under this section, the Registrar may determine that the applicant’s adjusted taxable income for the child for a day in the child support period is a specified amount that excludes the income referred to in paragraph (1)(d).

   (3)    However, the Registrar may make a determination under subsection (2) only if the determination:

   (a)reduces the applicant’s adjusted taxable income for the child for a day in the child support period by 30% or less; and

   (b)applies in respect of a day in the child support period, being a day that is less than 3 years after the last separation referred to in paragraph (1)(b).

   …

5. It is not in contention and the Tribunal accepts that paragraphs 44(1)(a), 44(1)(b) and 44(1)(c) of the Act are satisfied and that Mrs Iveson made a valid application under subsection 44(2) of the Act on 18 April 2019. The task for the Tribunal is to determine if Mrs Iveson’s income is in accordance with a pattern established after separation and not of a kind that would have occurred in the ordinary course of events.

6. The Tribunal has also considered section 2.5.2 of the Child Support Guide (the Guide) which contains the Department’s policy for dealing with these applications.  While the Guide does not form part of the law and is not binding on the Tribunal, for the sake of consistency in decision making, the Tribunal generally strives for consistency with the Guide.  In Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 the Full Court of the Federal Court held that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the relevant legislation. The passages relevant to this case are:

   What are the requirements for excluding additional income?

   Parents of a child may apply to have additional income (earned, derived or received after separation) excluded from their adjusted taxable income (2.4.4) for the calculation of their child support assessment.

   The Registrar may exclude the additional income from the parent's adjusted taxable income if the following requirements are met:

   ·     the parents must have lived together (2.1.1) on a genuine domestic basis for at least 6 months (section 44(1)(a)),

   ·     the last separation of the parents occurred before the application for administrative assessment was made (section 44(1)(b)(ii)),

   ·     the application is made within 3 years after the last separation of the parents (section 44(1)(b)(i)),

   ·     at the time of the application, the parents remain separated (section 44(1)(c)),

   ·     the income must have been earned, derived or received in accordance with a pattern of earnings that was established after separation with the other parent (section 44(1)(d)(i)), and

   ·     the income must be of a kind it is reasonable to expect would not have been earned, derived, or received by the parent in the ordinary course of events (section 44(1)(d)(ii)).

   Additional income

   Parents may earn additional income from a variety of sources, including for example, from overtime, a second job, a career change to a higher paying job, or from investment income. For a self-employed person, additional income may be earned, derived or received through extending the opening hours of their business, increasing production or developing new markets or new products (to a greater extent than before separation). The parent must be able to show that the change that resulted in the additional income being earned happened after separation (section 44(1)(d)(i)).

   The ordinary course of events

   Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent's adjusted taxable income. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events (section 44(1)(d)(ii)).

   Income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their adjusted taxable income. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income.

   However, income that parents earn outside the ordinary course of events is able to be excluded from their adjusted taxable income. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job. However, moving from an unemployment benefit to employment is considered to be within the ordinary course of events. Any income to be excluded must have been earned in a pattern established after separation.

7. The Tribunal is satisfied that the objections officer properly applied the guide when making a determination under section 44 of the Act. The undisputed evidence is that Mrs Iveson enjoyed a substantial increase to her income when she obtained a higher paying job, a circumstance that the Guide specifies as being outside the ordinary course of events.

8. However, the Tribunal notes that, when considering a similar matter in 2018, Senior Member Ellis did not accept that obtaining a higher paying job was sufficient in itself to meet the requirement that the additional income would not have been earned in the ordinary course of events. After consideration of the objectives of section 44, Senior Member Ellis was of the view that the expression “ordinary course of events” has reference to the circumstances pre-separation and that section 44 can only apply if there is a nexus between the separation and the higher income. More specifically, Senior Member Ellis stated that “The discretion found in section 44 of the Act is to be applied where a parent has taken steps to change their income after separation primarily in order to re-establish themselves. The discretion is not to be applied simply because the parent’s income has changed.”

9. The Tribunal will adopt the position taken by Senior Member Ellis.  To do otherwise would be to subvert the clear intent of the Act that each parent’s adjusted income is a key component of the assessment, as this best ensures that the support needs of the child will be met.  Were the Tribunal to apply the approach as set out in the Guide, the effect would be that, as the payee, Mr Keegan would have reduced capacity to support his children, without any need for Mrs Iveson to establish that her capacity to support her children has been adversely and disproportionately affected by the separation, to the extent that she has had to obtain additional income.  In other words, the Tribunal must be satisfied that the impact of the separation on Mrs Iveson was such as to require her to earn a higher income so as to compensate for the financial impact of the separation, and meet the costs of re-establishing herself independently of Mr Keegan.

10. During and subsequent to the hearing, Mrs Iveson told the Tribunal that, at the time of separation in May 2016, she was working part-time [in an occupation].  She said that, under a property settlement in September 2016, she acquired Mr Keegan’s share of a house they jointly owned for a consideration of approximately $65,500, which required her to re-finance and increase her mortgage.  She continued to live in this property with her new partner.  She continued her part-time employment until January 2017, when her contract ended and was not renewed.  There followed a period of approximately two months during which she was unemployed.  She said that she was unable to find the part-time work that she was seeking, and, in March 2017, she accepted a full-time position.

11. In a subsequent written submission, Mrs Iveson stated that, during her period of unemployment, she realised that she had to make some changes in her life as she now had a higher mortgage and debts arising from a period without income.  She indicated that she took steps to optimise her career options and accepted the need to engage in full-time work.  She said that this would not have occurred in the ordinary course of events.

12. In response to Mrs Iveson’s written submission, Mr Keegan stated that the cause of Mrs Iveson obtaining full-time work, and therefore a substantially higher income, was the unfortunate loss of her part-time employment and not the separation.

13. The Tribunal accepts the evidence provided by Mrs Iveson.  The Tribunal is of the view that this evidence does not allow a finding that Mrs Iveson’s increased income arose primarily because of her need to re-establish herself post-separation.  Rather the evidence suggests that Mrs Iveson obtained full-time work primarily because she was unable to find suitable part-time work after losing a part-time position she had at the time of her separation and maintained following a property settlement when she acquired Mr Keegan’s share of a home that they had jointly owned.  The Tribunal accepts that this acquisition involved re-financing, which included taking on an additional mortgage.  However, there is no evidence to suggest that she needed to work full-time to meet the obligations of that mortgage.  Rather, she continued in her existing position until such time as her contract ended and, at this point, she initially looked for another part-time position.  It was her failure to find a suitable position and her concern that, in the absence of income, she was accumulating debts that caused Mrs Iveson to re-evaluate her situation and accept a full-time position.  The Tribunal accepts that Mrs Iveson’s higher income would have assisted with her mortgage repayments.  However, it was not the separation that required her to obtain full-time work. 

14. It follows that her higher income was not outside the ordinary course of events. People lose employment for a wide range of reasons and then have to give consideration to the alternatives that are available. Mrs Iveson’s discovery that the only suitable work was full-time had implications for her income, but the circumstances do not warrant the application of section 44 of the Act.

15. As paragraph 44(1)(d) of the Act is not satisfied, the Tribunal refuses to make a determination under subsection 44(2). In the absence of such a determination, the Tribunal is not required to consider the date of effect.

DECISION

The Tribunal sets aside the decision under review and, in substitution, refuses to make a determination under subsection 44(2) of the Child Support (Assessment) Act 1989.