Knaggs and Hyde (Child support)

[2021] AATA 1272

Knaggs and Hyde (Child support) [2021] AATA 1272 (8 April 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/PC020107

APPLICANT:  Ms Knaggs

OTHER PARTIES:  Child Support Registrar

Mr Hyde

TRIBUNAL:Member T Bubutievski

DECISION DATE:  08 April 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income of the child not sufficient to be a grounds for departure – income, property and financial resources of the parent ground to depart found – decision under review varied

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. Ms Knaggs and Mr Hyde are the parents of a son for whom child support was payable. The case was registered with the Department of Human Services – Child Support (the Agency) (now known as Services Australia) for collection until the case ended when their son turned 18 years of age on [date] May 2020. The Agency reflects the care of their son to have been 51% to Ms Knaggs and 49% to Mr Hyde. There were several departures from the administrative assessment during the course of the case.

2. On 4 January 2018 a delegate of the Child Support Registrar departed from the assessment and set Ms Knaggs’ adjusted child support income at $109,606 per annum for the period 1 January 2018 to 31 October 2019 and Mr Hyde’s adjusted child support income at $95,000 per annum for the same period. Mr Hyde subsequently became unemployed and a new determination on 22 November 2018 ended the decision in relation to his adjusted taxable income from 16 November 2018, but did not make any amendments to the adjusted child support income maintained for Ms Knaggs. After the end of this determination both parents provided the Agency with estimates of their income and the administrative assessment of child support was amended accordingly.

3. On 23 April 2020 Mr Hyde made an application to the Agency for a change to the child support assessment on the basis of the income, earning capacity and financial resources of their son (Reason 4); and the income and financial resources of Ms Knaggs following the receipt of a redundancy payment (Reason 8A). Ms Knaggs made a cross-application on the basis of Mr Hyde’s income, earning capacity and financial resources.

4. On 3 July 2020 a delegate of the Child Support Registrar found that Reason 4 had not been established in the application, but that Reason 8A was established in relation to Ms Knaggs only. The delegate decided to continue Ms Knaggs’ child support income amount at $109,606 per annum from 1 November 2019 until such time as a terminating event occurred in relation to their son. This occurred on 20 May 2020 and the child support assessment automatically ended.

5. Ms Knaggs objected to this decision on 5 August 2020. On 19 September 2020 an Agency objections officer disallowed the objection and decided that the departure determination would stand.

6. On 24 October 2020 Ms Knaggs made an application for review by the Social Services and Child Support Division of this Tribunal. The Tribunal held a telephone directions hearing on 23 February 2021 and made a request of the parties to supply further documents, with which the parties complied.

7. The matter was heard by the Tribunal on 8 April 2021. Ms Knaggs and Mr Hyde both attended the hearing by telephone and gave sworn evidence. The Child Support Registrar did not seek leave to appear. Both parties and the Tribunal had access to documents numbered 1 to 214 from the Agency, and after all submissions, documents A1 to A33 from Ms Knaggs and B1 to B23 from Mr Hyde.

ISSUES

1. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Assessment Act). This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process. In order to depart from the administrative assessment the Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

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

   (ii)that it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to           child support; and

   (B)otherwise proper;

   to make a particular determination under this Part;

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act.

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

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

Does a ground exist to depart from the administrative assessment under Reason 4?

1. Mr Hyde sought a departure from the administrative assessment on the ground that the assessment of child support does not reflect their son’s income, property and financial resources. This is the ground reflected in subparagraph 117(2)(c)(i) of the Assessment Act.

2. Mr Hyde’s application was made on the basis of their son having obtained casual employment. It was agreed between the parents that this employment commenced in January 2020. Payslips were provided by Ms Knaggs covering their son’s pay periods from 02 February 2020 to 17 May 2020, with a total gross income earned of $3,334.52 (approximately $228 per week).

3. At the hearing Ms Knaggs confirmed that their son continued to have a combination of casual work and youth allowance for his own support. He is now attending university. Prior to the end of the child support assessment on 20 May 2020 his only independent income came from his casual employment.

4. For Reason 4 to be established, the Tribunal must be satisfied that the child support assessment is unfair because of the income, earning capacity, property or financial resources of Ms Knaggs’ and Mr Hyde’s son. Minimal earnings, such as those generated by casual work outside school hours, are generally not regarded as a reason to change an assessment of child support (Mee and Ferguson (1986) FLC 91-716).

5. Generally, for this reason to be established the income must be regular and must be at least equal to the maximum rate of youth allowance payable to a child aged under 18 and living at home, plus the income free threshold applicable to students or new apprentices. This is presently around $345.10 per week. Even when the income of a child is not far above this level, for example, when they are earning apprentice wages, the child support assessment may not be changed as a result of the child’s income depending upon the financial position of the parents and the amount of child support payable under the assessment.

6. The annualised income figures provided from their son’s payslips of $228 per week on average would not meet this threshold requirement. While he was no doubt in a position to fund some of his own expenses, the level of income being considered is not significant enough to depart from the administrative assessment of child support. The Tribunal finds that Reason 4 is not established in the application.

Does a ground exist to depart from the administrative assessment under Reason 8A?

Is a ground established due to Ms Knaggs’ income, property or financial resources?

1. Mr Hyde sought a departure from the administrative assessment on the ground that the assessment of child support does not reflect Ms Knaggs’ income, property and financial resources. This is the ground reflected in subparagraph 117(2)(c)(ia) of the Assessment Act.

2. Mr Hyde’s application was based on the fact that Ms Knaggs’ employment was terminated in July 2019 and she received a redundancy payment. Mr Hyde said that while Ms Knaggs was employed any child support payable was deducted by her employer, but that this ceased after her redundancy and Ms Knaggs then fell behind in her child support payments. Mr Hyde expected that Ms Knaggs’ redundancy payment would be considered for child support purposes and was of the view that Ms Knaggs had the financial resources to pay the child support at the time the liability arose, but did not do so.

3. Ms Knaggs’ application to the Tribunal for a review of the objection decision is also based on her income, with her arguing that temporary financial hardship prevents her from paying the arrears outstanding on the case at the time of her application. At the time of the application this was approximately $1,190, but by the time of the directions hearing the arrears had been fully offset by the reconciliation of estimates of Mr Hyde’s income. There was in fact no child support outstanding payable by either party to the other. Ms Knaggs was not required to make any payments of child support to finalise the case.

4. The Employment Separation Certificate from Ms Knaggs’ previous employer says that she ceased employment on 24 July 2019 and received a final redundancy payment inclusive of all entitlements of $111,923.02. Subsequent to her redundancy, Ms Knaggs has engaged in some consultancy work which gained her $15,552 in additional income between the loss of her employment and the end of the child support case on 19 May 2020. Over the period between 24 July 2019 and 19 May 2020 Ms Knaggs received total income of $127,452.02.

1. Although Ms Knaggs had lost her primary source of income, under the terms of the decision of the Agency of 22 November 2018 her income for child support purposes was maintained at $109,606 per annum until 31 October 2019. This was equivalent to her previous annual income.

2. From 1 November 2019 Ms Knaggs was assessed on the basis of an estimate of income of $6,408. It appears that this estimate was made by Ms Knaggs on the basis of her consultancy income only. On 28 April 2020 she updated this estimate to $8,554 and on 5 May 2020 she further updated it to $11,078. The taxable income figures which have become available for Ms Knaggs since then are $111,526 for the 2018/19 financial year and $70,112 for the 2019/20 financial year. In 2018/19 she was still employed. The bulk of her taxable income for the 2019/20 financial year has come from the taxable component of her eligible termination payment. It seems that the estimates Ms Knaggs made were in keeping with her earnings at the time they were made, but this is not the only factor the Tribunal must consider. At the time Mr Hyde made his application to change the child support assessment the adjusted child support income amount being used for Ms Knaggs was $6,408 and the annual rate of child support payable by her was nil due to the shared care arrangement between the parents. Absent a change to the child support assessment the administrative assessment of child support would have proceeded on this basis.

3. Payments of leave or redundancy received by a person who is liable to pay child support are considered to be financial resources of the person. They are a financial resource that a parent can use to support themselves and also meet their child support obligations. While the person themselves may treat such payments as a lump sum asset, this is not how they are treated under child support law. In this case the Agency has annualised the income received by Ms Knaggs on the basis of her previous adjusted child support income of $109,606 per annum and has come to the conclusion that Ms Knaggs received the equivalent of 424 days of income in the relevant period. This is significantly different to the estimate of income being used and would return an annual rate of child support payable by Ms Knaggs of $9,018 per annum.

4. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 (Gyselman) the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary. The Tribunal is satisfied that the significant difference between the total financial resources available to Ms Knaggs and the income amounts on which the child support assessment has proceeded amounts to a special circumstance. The child support payable by Ms Knaggs on the basis of her actual financial resources is more than $9,000 a year higher than the administrative assessment. The Tribunal finds this ground established in relation to Ms Knaggs’ income and financial resources.

5. Ms Knaggs advised the Tribunal that she had not been successful in obtaining further ongoing employment at this stage and has been in receipt of jobseeker payment and some sporadic consultancy work. She provided the Tribunal with copies of invoices rendered between December 2020 and March 2021 totalling $6,137.50. Her Centrelink record shows variable rates of jobseeker payment of between $506.98 and $756.98 per fortnight, depending upon her other income.

6. On the Statement of Financial Circumstances Ms Knaggs provided to the Tribunal she declares average weekly income of $411 and savings of $33,814, the remaining part of her redundancy payment. She is paying a mortgage and has several thousand dollars of credit card debt. There is no doubt that her financial circumstances are not what they once were. She argues that she should not be required to pay the child support because her prospects of finding further employment are limited in the current market and she needs her savings to live on. Also, although their son is now 18 years of age he is living with her full time. When the Tribunal put to her that she is not required to pay any child support as there are no arrears outstanding, Ms Knaggs was of the view that she should be refunded child support by Mr Hyde on the basis of expenses she has met for their son. This is a different issue and will be addressed by the Tribunal under the “just and equitable” criteria.

7. The Tribunal considered Ms Knaggs’ arguments in relation to temporary financial hardship and her need to preserve her savings, but could not find that there was a ground established to change the child support assessment on this basis. Ms Knaggs had the capacity to pay the child support when the liability arose, she has had the capacity to pay it since and she still does have the capacity to pay it if payment were required (which it is not).

Is a ground established due to Mr Hyde’s income, property or financial resources?

1. Ms Knaggs argues that Mr Hyde is in a superior position to her in terms of income and assets and that this should be taken into account in the assessment. Prior to the end of the child support assessment, Mr Hyde’s income was being assessed on the basis of an estimate of $90,233. His payslips show an annual salary at that time of $90,000.04. The additional documents provided by the Agency prior to the hearing show that on 23 September 2020 Mr Hyde’s estimates for prior periods were reconciled and the assessments changed accordingly to reflect Mr Hyde’s exact taxable incomes for the relevant periods.

2. The Tribunal cannot find that there is any error or inequity in the manner in which the Agency has gone about this process. Nor were Mr Hyde’s estimates particularly inaccurate. There is no evidence before the Tribunal to indicate that Mr Hyde’s income or financial resources have been incorrectly reflected in the assessment. The Tribunal explained to Ms Knaggs that it has a very circumscribed role in these matters. Firstly, it cannot have regard to the period of time after the end of the administrative assessment of child support on 19 May 2020 as it is outside the Tribunal’s jurisdiction. Ms Knaggs acknowledged that she was in fact seeking ongoing support for their son from Mr Hyde even though the assessment has ended. The parties may like to seek mediation in this regard. Secondly, it is not the role of the Tribunal to balance the assets between the parties. This is the role of the court in the parents’ settlement of property. Mr Hyde does have more assets than Ms Knaggs but this is not a matter about which the Child Support Registrar or the Tribunal can make a determination in the absence of a special reason to do so – “special circumstances”.

3. The Tribunal is satisfied that there are no special circumstances present which render the assessment unfair on the basis of Mr Hyde’s income, property or financial resources. Nonetheless, as a ground is established in relation to Ms Knaggs’ income and financial resources, the Tribunal must consider whether it is just and equitable, and otherwise proper, to change the assessment. This involves a consideration of all the circumstances of the parents and the child.

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

1. As the Tribunal is satisfied that a ground has been established to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Assessment Act:

   (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)himself 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 incurred 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 (see subsection (10)) by the making of, or the refusal to make, the order.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The Tribunal only has to consider the factors set out in subsection 117(4) of the Assessment Act to the extent they are relevant in any particular case (see Gyselman).

3. Ms Knaggs argues that she has made significant financial expenditures for the benefit of their son and that she sought Mr Hyde to make a contribution to these. She provided a list of itemised expenses. The Tribunal noted that many of these expenses were incurred after the end of the child support assessment and therefore cannot be considered in this decision.

1. The expenses also include the ordinary costs associated with raising children such as extracurricular [activities], bus expenses, stationery items, and the provision of a telephone and internet. These are not expenses which would establish special circumstances by which the child support assessment could, or should, be amended.

2. Ms Knaggs also elects to pay private health insurance which covers their son. The Tribunal notes that this is a decision she has made, and absent an agreement between the parents that Mr Hyde will make a contribution to that the Tribunal has no role to play here. While the Tribunal acknowledges that it is a goal to provide a child with good health care, private health insurance is not an expense which would usually be considered for child support purposes when a child also has access to Medicare and has no chronic and expensive medical conditions necessitating additional support.

3. This left two additional expenses. The first is a school trip to [Country 1] in April 2019 which Ms Knaggs said cost her $4,848. The second is out-of-pocket expenses for counselling totalling $1,100 between 2016 and 2019, a total of 10 sessions. Ms Knaggs said that she believed that Mr Hyde should have contributed to the cost of the school trip as it was beneficial for their son to study a language and have a homestay in [Country 1] because he received extra points for his university admission. Mr Hyde said that he did not contribute to the trip to [Country 1] because he “thought it was an extravagance”. He said that in recent years he has taken their son on four skiing holidays to [Country 2] and has not asked Ms Knaggs to make any contribution to this. Obviously, both parents have differing views of the value of each of their respective contributions to their son’s overseas travel.

4. The only way that Mr Hyde could be obligated by the Tribunal to make a contribution to the school trip is if the parents had jointly agreed that their son should attend this trip and that it was a mutually intended part of his education. The evidence provided by the parents indicates that this is not the case. Ms Knaggs saw it as a beneficial and important part of their son’s education. Mr Hyde saw it as an extravagance. Absent an agreement between the parents, this is a matter which is well outside the child support system. Child support is intended to provide for the day-to-day necessary expenses of children, not the things which are simply nice to have, beneficial or optional. The Tribunal is not able to make any amendment to the child support assessment on this basis.

5. In relation to the counselling expenses, Ms Knaggs said that their son required counselling after some [issues] and his need to appear as a witness in a court case. Ms Knaggs said that she thought that she had let Mr Hyde know about the counselling. Mr Hyde said that as far as he was aware the counselling was not discussed with him and he made no contribution to the cost of it. Ms Knaggs provided a letter from [an organisation] confirming the dates and cost of their son’s attendance between 30 September 2016 and 14 May 2019. There is no medical or psychological evidence before the Tribunal as to the need for the counselling, but the Tribunal will accept that the appointments were necessary. Nonetheless, the out-of-pocket costs of these appointments, of only a few hundred dollars each year, are not so significant given Ms Knaggs’ income and the care arrangements for their son that they would establish a special circumstance by virtue of which the child support assessment should be departed from.

6. The Tribunal was satisfied that there were no other issues disclosed which should properly cause the child support assessment to be amended. This means that the only ground established is that in relation to Ms Knaggs’ redundancy payment and income in the period between 24 July 2019 and 19 May 2020. Over that period Ms Knaggs received total income of $127,452.02. The Agency has considered this income and annualised it on the basis of her previous adjusted child support income of $109,606 and formed the view that Ms Knaggs received 424 days of income. It then simply continued its assessment of her adjusted child support income at $109,606 until such time as a terminating event occurred in relation to the case.

7. The Agency could also have determined that Ms Knaggs received income of $127,452.02 in a period of 300 days between 24 July 2019 and 19 May 2020 and annualised that amount to an income of $155,066 for the relevant period. Both approaches are valid in law, but the Agency has obviously had some regard to Ms Knaggs’ circumstances and chosen the more beneficial approach to her.

8. The Tribunal is satisfied that the decision of the objections officer fairly reflects Ms Knaggs' income and financial resources and that no change should be made to the decision of the objections officer. The administrative assessment of child support was clearly proceeding on an unfair basis for the period in which it did not have regard to the termination payment Ms Knaggs received. The Tribunal is satisfied that Ms Knaggs should be assessed on the basis of her available financial resources and that it would be appropriate to make this change as long as it is otherwise proper to do so.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal is to determine is whether it is “otherwise proper” to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the nature of the duty of a parent to maintain a child, and the effect that any change to the assessment would have on the rate of any Centrelink benefits being received by the parties or the children.

2. The child support law recognises that each parent has a primary duty to maintain their children. In the case that they cannot, the government may assist in the form of family assistance payments. This decision will not have a significant impact on the amount of family assistance received by either parent. The Tribunal is satisfied that a departure from the assessment will better reflect the financial resources that have been available to both parents and ensure that the level of financial support provided by the parties for their son has been determined according to their capacity to provide that support. It is therefore otherwise proper to depart from the administrative assessment in this matter. 

DECISION

The decision under review is affirmed.