Kovacich and Shawcross (Child support)

[2021] AATA 2746

Kovacich and Shawcross (Child support) [2021] AATA 2746 (1 June 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC020610 and 2021/SC020675

APPLICANTS:  Ms Kovacich          

Mr Shawcross

OTHER PARTIES:  Child Support Registrar

Ms Kovacich          

Mr Shawcross

TRIBUNAL:Member S Brakespeare

DECISION DATE:  1 June 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – redundancy payment – a ground for departure established – decision to depart – decision under review affirmed

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 Shawcross is the parent liable to pay child support to Ms Kovacich in respect of their child [Child 1], who is three years old. The child support case commenced on 27 October 2017. The child is in the sole care of Ms Kovacich.

2. On 23 March 2020 Ms Kovacich lodged an application for a change of assessment on the basis that Mr Shawcross’s liability was unjust and inequitable because of his income, property, financial resources and earning capacity.

3. The administrative assessment that was in place at the time resulted in an annual liability for Mr Shawcross of $1,443 for the period 13 March 2020 to 30 June 2021. The administrative assessment was based on Mr Shawcross’s income estimate of $0 and Ms Kovacich’s income estimate of $0. The assessment also took into account Mr Shawcross’s relevant dependent child.

4. On 3 July 2020 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):

   ·For the period 1 April 2020 to 30 January 2021 Mr Shawcross’s adjusted taxable income is varied to $235,902.

5. Mr Shawcross lodged an objection to the original decision.

6. On 7 January 2021 an objections officer allowed the objection in part and made a departure determination in the following terms (the objection decision):

   ·For the period 13 March 2020 to 5 December 2020 Mr Shawcross’s adjusted taxable income is varied to $247,566.

1. Ms Kovacich and Mr Shawcross both lodged applications for review of the objection decision with the tribunal.  A telephone directions hearing was held on 31 March 2021. Both parties participated and complied with the directions issued. A hearing was held on 19 May 2021.  Ms Kovacich and Mr Shawcross gave evidence on affirmation to the tribunal via conference telephone. The Child Support Agency provided the tribunal and the parties with bundles of paper relevant to the review (510 pages). Ms Kovacich had not received all of the documents at the time of the hearing. The tribunal deferred the matter to allow her time to peruse the delayed documents and to provide comment if necessary. (She did not provide any further comment.) The tribunal also received extra documents from the parties which were exchanged prior to hearing (documents from Ms Kovacich were numbered A1 to A32 and documents from Mr Shawcross were numbered B1 to B29 and B31 to B38). After the hearing Mr Shawcross provided a written clarification regarding his evidence at hearing (folio B30).  The tribunal was satisfied that the evidence had already been canvassed at hearing and did not seek further comment from Ms Kovacich. A copy has been provided to her for her information.

2. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

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

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).

4. Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and

   ·if so, whether it is just and equitable to make a particular departure determination; and

   ·if so, whether it is otherwise proper to make a particular departure determination.

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

6. 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, but the Family Court in Gyselman and Gyselman (1992) FLC 92-279 has held:

   as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.

7. Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the tribunal is satisfied that a ground exists 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 Act.

9. The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – Is there a ground for departure?

1. A ground for departure exists where, in the special circumstances of the case, application in relation to the child of the provisions of the 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 because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).

2. For the period 6 December 2019 to 12 March 2020 Mr Shawcross was liable to pay an annual rate of child support of $22,911 which was based on his 2018/19 adjusted taxable income of $235,902 and Ms Kovacich’s estimate of $0[1]. Mr Shawcross’s liability reduced to $1,443 per annum for the period 13 March 2020 to 30 June 2020 as he lodged an estimate of $0. Mr Shawcross has also lodged estimates of $0 for the current financial year.

   [1] This estimate has subsequently been refused on objection. However, Ms Kovacich’s adjusted taxable income has no effect on the administrative assessment as it is less than the self-support threshold.

3. Mr Shawcross’s adjusted taxable income for 2019/20 has been assessed by the Australian Taxation Office to be $318,508. Included in that income was a redundancy payment of $247,565. Mr Shawcross was made redundant on 5 December 2019.

4. The central issue is whether Mr Shawcross’s receipt of the redundancy payment constituted a special circumstance that would give rise to an an unjust and inequitable determination of the level of financial support to be provided by him for the child.

5. Mr Shawcross takes the view that his receipt of a redundancy payment does not constitute special circumstances as most of the funds were expended on outstanding debt within 10 days of being received. Mr Shawcross received a net payment of $191,000 on 13 December 2019.  However, he said that a significant portion of that amount ($161,000) was paid to settle a debt obligation to his mother which arose in 2005 in relation to an investment property at [Suburb 1].  The investment property was sold in December 2019 with settlement occurring on 30 January 2020.  An amount of $53,000 was paid to Mr Shawcross’s bank account as proceeds from the sale of the property settlement. Mr Shawcross said that he still owes his mother in excess of $260,000 which will be paid when he has the means to do so.

6. Under the Act a parent’s duty to maintain a child has priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself or any other children that the parent has a duty to maintain (section 3).

7. The tribunal finds the redundancy payment was a financial resource of Mr Shawcross’s. The payment represents slightly more than a year’s salary.  It is appropriate that that gross income should be used for the purpose of calculating Mr Shawcross’s child support liability for a period commensurate with the period it represents; that is, for approximately a year from the date of the redundancy. In coming to that view the tribunal does not accept Mr Shawcross’s contention that the redundancy payments should be disregarded as it was used to repay debts. The tribunal does not accept that the debt repayment constituted a commitment necessary for Mr Shawcross’s self-support.  Notably, the redundancy payment was quite separate from the sale of the investment property to which the debt related.

8. Applying the amount of $247,565 to the administrative assessment would result in an annual liability for Mr Shawcross of approximately $22,900. Mr Shawcross was assessed to pay an amount of $1,443 per annum from 13 March 2020, based upon his estimate of $0. The tribunal finds that this amount that arises under the administrative assessment is unjust and inequitable because of the income, property, and financial resources of Mr Shawcross.

9. The tribunal finds that there are special circumstances and a ground for departure is established in accordance with subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it just and equitable to make a particular determination?

1. 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 just and equitable as regards the children, the liable parent, and the carer entitled to child support 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 consider the matters discussed below[2], which are as set out in subsection 117(4) of the Act:

   [2] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act re Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886

   (4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (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. In having regard to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act). The tribunal finds that there are no extra costs to be taken into account in respect of the child’s needs. Under the administrative assessment the proper needs of the child are calculated in accordance with Costs of the Children Table.[3]  

   [3] Provided for in section 155 of the Act.

3. Mr Shawcross contends that the costs of the child’s needs are significantly less whilst the child resides in [Country 1], as opposed to the cost of a child’s needs in Australia. He said that the formula assessment takes into account the average male earnings in Australia whereas in [Country 1] the average male earnings are significantly less and the cost of living is much lower. Mr Shawcross provided some data comparing the costs of living between Sydney and [a city in Country 1]. 

4. Ms Kovacich disagreed with Mr Shawcross’s assertion, stating it was her belief that the costs of living in [Country 1] are high and her view, items such as clothes, shoes, child’s hygiene items, books, toys, sport equipment and educational lessons are the same or higher in comparison to Australia.

5. The tribunal takes the view that the data provided by Mr Shawcross is not specific to the costs of a child and does not provide a direct comparison to the data used to compile the Costs of the Children Table.  In general the Costs of Children Table applies to all children to whom a child support assessment relates regardless of where the child is resident.  The tribunal can see no reason why the Costs of Children Table should not apply in this particular case.

Income, property and financial resources

1. Mr Shawcross told the tribunal that at the time he received his redundancy he had an offer of another position and expected to be fully employed again in early 2020. However, that position did not eventuate and, because of both COVID-19 and a non-compete clause in his redundancy agreement, he has not worked since December 2019. The redundancy payment he received in December 2019 was his last employment income. His last income from any source was the proceeds from the sale of the [Suburb 1] property. (Mr Shawcross’s accountant confirmed that there was no taxable capital gain arising from the sale of the [Suburb 1] property.) Mr Shawcross said he is unable to receive any income support from the government due to his partner’s income. His partner has just given birth to their second child and is on maternity leave. Mr Shawcross said he has no income, property or financial resources. The tribunal notes that a [Bank 1] statement dated 28 May 2020 indicates that Mr Shawcross is jointly responsible for a home loan of $1.2 million. The tribunal believes that the property was  purchased jointly by Mr Shawcross and his partner in 2017. It appears the mortgage was secured over  the [Suburb 1] property and the home that was purchased in 2017. The tribunal accepts that Mr Shawcross currently has no income from employment or savings and his partner is providing for all of his living costs.

2. Ms Kovacich provided a Statement of Financial Circumstances (in February 2021)j indicating that she receives income comes from a rental property ($160 per week) and a child benefit paid by the [Country 1] Government ($45 per week). Ms Kovacich said that she had intended to start a business providing translation services; however, due to COVID-19 there has been no work in that field. Ms Kovacich advised the Child Support Agency that she commenced part-time employment in March 2021. Ms Kovacich said that she has had had to exhaust her savings and rely on her parents to support her and the child.

3. The tribunal is satisfied that Ms Kovacich’s income at all relevant times is less than the self-support amount provided for in the child support formula. She has one asset of significance, a rental property, which is mortgaged and which provides her with a small income.

4. The tribunal is satisfied that the child does not have any income, property, financial resources or earning capacity.

5. The tribunal is satisfied that the earning capacity provisions do not apply to either parent.

Commitments

1. Mr Shawcross advised in his Statement of Financial Circumstances that he is on a deferred payment schedule in respect to his debt to [Bank 1] and that his partner has assumed full responsibility for car and mortgage payments and the family’s daily living expenses until he starts earning an income.

2. Ms Kovacich advised in her Statement of Financial Circumstances that she pays rent of $175 per week and a mortgage of $75 per week.

Proposed determination

1. The tribunal proposes to make the following determination:

   ·For the period 13 March 2020 to 5 December 2020 Mr Shawcross’s adjusted taxable income is varied to $247,566.

2. The proposed determination results in a child support liability for Mr Shawcross of approximately $22,900 per annum ($440 per week).

3. The tribunal accepts that Mr Shawcross had not had any income since 13 March 2020 and appears to have depleted all his available resources. However, the tribunal notes that Mr Shawcross was on notice on 10 December 2019 that his estimate of $0 income had been objected to and therefore that his child support liability was being contested. Despite that, Mr Shawcross chose to clear a number of outstanding debts without making any allowance in respect of his child support obligations. Between 13 December 2019 and 31 January 2020 approximately $255,000 was deposited to his bank account.  By 13 March 2020 the funds in that bank account had been reduced to approximately $14,200.

4. The tribunal finds that all relevant times Ms Kovacich’s income has been less than the self-support amount allowed for under the child support formula. She has no capacity to support the child, who is in her sole care. A failure to make the proposed determination is likely to cause hardship to Ms Kovacich and to the child, as Ms Kovacich has exhausted her savings.

5. The tribunal therefore finds the proposed determination to be just and equitable.

Issue 3 – Is it otherwise proper to make a particular departure determination?

1. 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. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.

2. The tribunal notes that Ms Kovacich is in [Country 1] and does not receive any assistance for the child from the Australian Government. The proposed determination is otherwise proper.

3. The tribunal therefore makes a departure determination in the following terms:

   ·For the period 13 March 2020 to 5 December 2020 Mr Shawcross’s adjusted taxable income is varied to $247,566.

DECISION

The tribunal affirms the decision under review