Kelley and Sanders (Child support)

[2020] AATA 1018

Kelley and Sanders (Child support) [2020] AATA 1018 (18 February 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC016863

APPLICANT:  Mr Kelley

OTHER PARTIES:  Ms Sanders

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  18 February 2020

DECISION:

The decision under review is set aside and, in substitution:

• from 1 July 2018 to 20 January 2019, Mr Kelley’s adjusted taxable income is varied to $18,820 per annum;

• from 21 January 2019 to 30 June 2019, Mr Kelley’s adjusted taxable income is varied to $50,025 per annum;

• from 1 July 2019 to 28 August 2019, Mr Kelley’s adjusted taxable income is varied to $18,487 per annum;

• from 29 August 2019 to 30 September 2021, Mr Kelley’s adjusted taxable income is varied to $81,485 per annum; and

• from 15 July 2019 to 30 September 2021, Ms Sanders’s adjusted taxable income is varied to $49,877 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – income from employment and self-employment - 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

Introduction

1. Mr Kelley and Ms Sanders are the parents of [Child 1], [Child 2] and [Child 3].  A child support case was registered with the Department of Human Services – Child Support (“the CSA”) in 2013. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. From 1 October 2017, the administrative assessment was based on Mr Kelley’s 2016-17 adjusted taxable income of $89,787, Ms Sanders’s 2016-17 provisional income of $19,283, and Ms Sanders’s 100% care of the three children. Mr Kelley was required to pay $17,427 per annum in child support.

2. The Act also allows a parent to provide an estimate of their income and, if accepted, the administrative assessment is based on that estimate of income, subject to a possible reconciliation once the parent’s adjusted taxable income has been assessed by the Australian Taxation Office. On 1 July 2018, Mr Kelley provided, and the CSA accepted, an estimate of income of $27,571 per annum, and he was assessed to pay $924 per annum in child support. On 9 July 2018, Ms Sanders successfully applied to have the CSA collect Mr Kelley’s child support payable from 2 July 2018. The payment of child support had previously been a private matter between the parents.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Sanders lodged a departure application on 19 October 2018. The CSA granted her application and varied Mr Kelley’s adjusted taxable income to $55,000 per annum from 1 July 2018 to 28 February 2020. Mr Kelley objected to that decision. An objections officer disallowed his objection. He applied to the Tribunal for further review. I conducted a directions hearing on 29 November 2019 and a full hearing on 18 February 2020. Mr Kelley and Ms Sanders attended the full hearings in person.

4. Meanwhile, a change in care occurred on 8 March 2019. Ms Sanders has been recorded as providing 86% care to the children with effect from 8 March 2019. Mr Kelley has been recorded as providing 14% care to the children with effect from 7 June 2019.

5. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... it would be:

   (A)just and equitable as regards the child, the liable parent, and the [Occupation 3] entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part; …

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

   that, 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; …

2. In early 2018, Mr Kelley moved from [City 1] to [City 2]. In July 2018, he moved back to [City 1]. He is a [Occupation 1], and he commenced self-employment in [City 1] in July 2018 in that capacity. He expected to earn a relatively low income from that self-employment, hence the estimate of income that he provided to the CSA. According to his 2018-19 tax return, it transpired that he did earn a relatively low income from that self-employment. During the 204 days from 1 July 2018 to 20 January 2019, he received revenue of $25,154 and incurred expenses of $14,635, and made a profit of $10,519, which equates to $10,519 / 204 x 365 = $18,820 per annum during that period.

3. At this point it is worth reiterating something that I explained during the full hearing. The administrative assessment formula includes a variable called the “self-support amount”. It increases slightly each year. It is currently $25,575 per annum. If a parent’s income is the self-support amount, or less, then they are considered to have a negligible capacity to contribute to the children’s costs. I noted that, according to the information contained in Mr Kelley’s 2018‑19 tax return, his income whilst self-employed was less than the self-support amount. Ms Sanders did not dispute that evidence and I accept it as correct.

4. Mr Kelley was briefly employed by [Company 1] from 21 January 2019, and he earned $4,242. When that employment ended, he quickly obtained employment with [Company 2]. He remained employed by [Company 2] for the remainder of the financial year, and he earned a further $17,824. In summary, during the 161 days from 21 January 2019 to 30 June 2019, Mr Kelley earned $22,066, which equates to $50,025 per annum during that period.

5. Mr Kelley ceased his employment with [Company 2] on 1 July 2019. He worked as a [Occupation 2] [for] a couple of months, and he provided his tax invoices for the week ending 26 July 2019 through to the week ending 30 August 2019. His average revenue was $355.53 per week, which equates to $18,487 per annum, and he explained that he incurred costs, such as petrol, in the course of earning that revenue. Importantly, his income during that period was once again less than the self-support amount.

6. Mr Kelley obtained employment with [Company 3] (“[Company 3]”) on 29 August 2019. He provided a payslip for the week ending 21 January 2020. His year-to-date earnings during those 146 days was $32,594.33, which equates to $81,485 per annum. He is still employed by [Company 3], and is likely to continue to earn that income.

7. When Ms Sanders lodged her departure application in July 2018, the administrative assessment, which was based on Mr Kelley’s estimate of income of $27,571 per annum, was just and equitable. Mr Kelley’s income increased in January 2019 when he started working for [Company 1] Pty Ltd, and later [Company 2] Pty Ltd, but the estimate reconciliation process would have accounted for that additional income in due course. However, since August 2019, Mr Kelley has been earning $81,485 per annum. In the absence of a departure decision, the administrative assessment would have been based on his 2017-18 adjusted taxable income of $95,575 (which included an inheritance from his deceased mother’s estates). The discrepancy between those figures, and the consequential rates of child support payable, constitutes special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. Reason 8 is established in respect of Mr Kelley’s income and financial resources.

8. There has also been a change to Ms Sanders’ income. Until July 2019, Ms Sanders was not in paid employment and she was reliant upon parenting payment. In the fortnight commencing 15 July 2019 she obtained paid employment as a [Occupation 3]. During the 196 days from 15 July 2019 to 26 January 2020, she earned $24,244.51, which equates to $45,149 per annum. It also equates to an average of $1,731.75 per fortnight. Parenting payment is income tested; the more Ms Sanders earns, the lower her rate of parenting payment. She provided a copy of a Centrelink letter dated 30 January 2020 which listed her various fortnightly earnings and the corresponding rates of parenting payment. When she earned $1,781.55, she was paid $181.35 in parenting payment. I noted the small difference in the figures of $1,731.75 and $1,781.55, and suggested that it might be appropriate to proceed on the basis that Ms Sanders will receive, on average, approximately $181.35 per fortnight in parenting payment while she remains in her current employment. Both parents agreed with that suggestion. $181.35 / 14 x 365 = $4,728 per annum. In summary, Ms Sanders’ income has been approximately $45,149 + $4,728 = $49,877 per annum since 15 July 2019. She is likely to continue to receive that income. In the absence of a departure decision, the administrative assessment would have been based on Ms Sanders’ parenting payment income, which is less than the self-support amount. The discrepancy between those figures, and the consequential rates of child support payable, constitutes special circumstances such that the application of the administrative assessment would result in an unjust and inequitable determination of child support payable. Reason 8 is established in respect of Ms Sanders’ income and financial circumstances.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Kelley owns his home and he is repaying an associated home loan. His household consists of himself, his wife, her children from a previous relationship, and [Child 1], [Child 2] and [Child 3]. Mr Kelley’s wife is in paid employment. Mr Kelley did not properly complete a statement of his household expenses, but he acknowledged that his household expenses are unremarkable.

3. Ms Sanders is in the process of being evicted from her home by the mortgagee. She intends to move to rented accommodation. Her household consists of herself, her son from a previous relationship, her sister, and [Child 1], [Child 2] and [Child 3]. She acknowledged that her household expenses are unremarkable, given her circumstances.

4. During the hearing I calculated the parents’ incomes during different periods, and those calculations have been reproduced above. Both parents submitted that it would be appropriate to vary their adjusted taxable incomes accordingly, with Mr Kelley’s adjusted taxable income being varied from 1 July 2018, and Ms Sanders’ adjusted taxable income being varied from 15 July 2019. Both parents submitted that it would be appropriate to vary their adjusted taxable incomes until 30 September 2021, by which time they both expect to have lodged their 2020-21 individual tax returns. I agree with those submissions. In summary, I will make the following decision:

   ·    from 1 July 2018 to 20 January 2019, Mr Kelley’s adjusted taxable income is varied to $18,820 per annum;

   ·    from 21 January 2019 to 30 June 2019, Mr Kelley’s adjusted taxable income is varied to $50,025 per annum;

   ·    from 1 July 2019 to 28 August 2019, Mr Kelley’s adjusted taxable income is varied to $18,487 per annum;

   ·    from 29 August 2019 to 30 September 2021, Mr Kelley’s adjusted taxable income is varied to $81,485 per annum; and

   ·    from 15 July 2019 to 30 September 2021, Ms Sanders’ adjusted taxable income is varied to $49,877 per annum.

5. The proposed decision will reduce Mr Kelley’s child support arrears by approximately $4,100, but it will not place him in credit, and it will require him to pay a current rate of child support of $9,690 per annum. The proposed decision will be just and equitable.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper 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 a child. Ms Sanders receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Kelley will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

The decision under review is set aside and, in substitution:

• from 1 July 2018 to 20 January 2019, Mr Kelley’s adjusted taxable income is varied to $18,820 per annum;

• from 21 January 2019 to 30 June 2019, Mr Kelley’s adjusted taxable income is varied to $50,025 per annum;

• from 1 July 2019 to 28 August 2019, Mr Kelley’s adjusted taxable income is varied to $18,487 per annum;

• from 29 August 2019 to 30 September 2021, Mr Kelley’s adjusted taxable income is varied to $81,485 per annum; and

• from 15 July 2019 to 30 September 2021, Ms Sanders’s adjusted taxable income is varied to $49,877 per annum.