Lyle and Lyle (Child support)

[2019] AATA 1686

Lyle and Lyle (Child support) [2019] AATA 1686 (1 May 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/SC015507

APPLICANT:  Mr Lyle

OTHER PARTIES:  Child Support Registrar

Ms Lyle

TRIBUNAL:Member K Buxton

DECISION DATE:  01 May 2019

DECISION:

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

• For the period 22 June 2018 to 31 December 2020 Mr Lyle’s adjusted taxable income is varied to $70,000 per annum; and

• For the period 1 January 2019 to 31 December 2020 the annual rate of child support payable by Mr Lyle is increased by $1,350 per annum for private school fees for [Child 1].

CATCHWORDS

CHILD SUPPORT – departure determination– financial resources of both parents – costs of education – manner expected by both parents – liable parent withdraws consent for private education – 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. Ms Lyle and Mr Lyle are the parents of [Child 1], aged [specified], and [Child 2], aged [specified]. Mr Lyle has sought review by this tribunal of a decision of the Child Support Agency (CSA) about the amount of child support assessed as payable by Mr Lyle to Ms Lyle for the children who are recorded as in the 100% care of Ms Lyle.

2. The administrative assessment of child support calculated the annual rate of child support payable by Mr Lyle for the period 11 November 2017 to 10 March 2019 as $420 based on 2017 adjusted taxable incomes of $0 for Mr Lyle and $9,238 for Ms Lyle. On 22 June 2018 Ms Lyle applied for a departure from the administrative assessment, under Part 6A of the Child Support (Assessment) Act 1989 (the Act), on the basis that the income and financial resources available to Mr Lyle from employment were not reflected in the adjusted taxable income used for him in the administrative assessment of child support, and on the basis of the high costs of privately educating the children.

3. On 24 August 2018 a delegate of the Child Support Registrar at the CSA determined that a ground existed to depart from the administrative assessment and decided that, for the period 22 June 2018 to 29 February 2020, Mr Lyle’s adjusted taxable income was to be set at $69,990 per annum, and for the period 22 June 2018 to 31 January 2019 Ms Lyle’s adjusted taxable income would be set at $43,774. The delegate also decided to increase the assessed rate of child support payable by Mr Lyle on account of private school fees, for the 2019, 2020, 2021 and 2022 calendar years, by between $4,190 and $4,850 per annum across those years. Mr Lyle objected to that decision and on 6 November 2018 his objection was allowed, with the objection officer deciding that, for the period 1 August 2018 to 31 December 2020 Mr Lyle’s adjusted taxable income was set at $68,000.

4. Mr Lyle applied to the tribunal for review of the objection decision. A hearing took place on 1 May 2019. Mr Lyle and Ms Lyle participated in the hearing by conference telephone and gave sworn evidence. In reaching its decision, the tribunal has considered that sworn evidence together with the subsection 37(1) of the Administrative Appeals Tribunal Act 1975 Statement and Documents prepared by the CSA (Exhibit 1) and documentation provided by Mr Lyle (Exhibit A) and Ms Lyle (Exhibit B).

CONSIDERATION

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. A formula is used which takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent. The legislative intent is that the tribunal will not interfere with the administrative formula result in the ordinary run of cases.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), a change of assessment can be made only if:

   a.    a ground (or more than one ground) for departure exists; and

   b.    departure from the administrative assessment would be:

   i.just and equitable as regards the children and each parent; and

   ii.otherwise proper.

3. Subsection 98C(2) of the Act provides that the grounds for departure are the same as those set out in subsection 117(2). 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 range of determinations, prescribed in section 98S of the Act, which include varying the rate of child support payable, the adjusted taxable income and the cost percentage for a child.

Ground for departure

Income, property, financial resources and earning capacity

1. The Act provides, as grounds for departure from the administrative assessment of child support (in subparagraph 117(2)(c)(ia)):

   (c)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. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. In Gyselman v Gyselman [1991] FamCA 93, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

10.  Ms Lyle is employed on a permanent part-time basis as a [Occupation 1]. At the time of her departure application, the child support assessment used a 2017 adjusted taxable income of $9,238 for Ms Lyle. This was replaced with her 2018 adjusted taxable income of $33,719 in late 2018 to reflect her employment across that full financial year, and she remains employed earning about the same amount. Therefore, from 1 December 2018 the adjusted taxable income of Ms Lyle has broadly reflected her taxable income from employment from time to time but from June 2018, when the departure application was lodged, until November 2018 child support was assessed using an adjusted taxable income from Ms Lyle that did not include all of her then current income of about $33,000 per annum.

11.  Mr Lyle is employed on a full-time basis as a [Occupation 2] for a [business]. He began that employment in late March 2018 and receives a salary of $70,000 per annum. At the time of her departure application, the child support assessment used a 2017 adjusted taxable income of $0 for Mr Lyle. From June 2018, when the departure application was lodged, onwards child support has been assessed using adjusted taxable income from Mr Lyle that did not include all of his then current income of $70,000 per annum.

1. If child support were calculated using an income of $70,000 per annum for Mr Lyle, and $33,719 for Ms Lyle, the annual rate of child support payable by him to Ms Lyle would increase substantially from the administratively assessed rate of $420 per annum to around $11,000 per annum for the two children from June 2018 onwards. The administratively assessed rates of around $420 per annum for the same period provide Ms Lyle with substantially less financial support for the children who are recorded as in her care 100% of the time. The existence of those factors together set this case apart from others, making it special.

13.  The tribunal is satisfied that the administrative assessment of child support produces a result which is unjust and inequitable having regard to the parents’ respective incomes and financial resources, particularly having regard to the disparity between the annual rate of child support calculated in the administrative assessment and that arrived with regard to the actual income and financial resources available to Mr Lyle from employment. The tribunal therefore finds that there is a ground to depart from the administrative assessment.

Just and equitable

14.  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.

15.  During 2018 both [Child 2] and [Child 1] attended private Catholic schools. Both parents contributed to the tuition fees. In January 2019 [Child 1] moved to a different private Catholic [school] and [Child 2] remained at his [school]. An interim order made by the court in January 2019 required the parents to maintain the children’s enrolment at their current schools.

16.  Mr Lyle stated that he did not agree with the children being educated privately and he did not have the resources to contribute to these costs. He stated that he did not agree to [Child 1]’s enrolment in a different school. He stated that he has withdrawn his consent for the children to be educated in the private Catholic system. The tribunal considers that the parents’ actions over time are consistent with an expectation that both children would be educated through the private Catholic system and, even after Mr Lyle purported to withdraw his consent, he has continued to contribute to fees for [Child 2]. He has not contributed to the fees for [Child 1] from January 2019, but the tribunal is satisfied that she continues to be educated in line with the parents’ expectations.

17.  The private school fees for [Child 2] are about $9,000 annually and each parent is obliged to contribute half of these fees through a direct arrangement with the school. Ms Lyle has negotiated a reduction for her contribution to the 2019 year to $60 per week, or around $3,000 in total, on the basis of financial hardship. Mr Lyle stated that he has obtained the paperwork to apply for a reduction for financial hardship but has not submitted it yet, although he intends to. The private school fees for [Child 1] for 2019 are $5,100, and are met directly by Ms Lyle but fees have been reduced to $2,700 for 2019 on the basis of Ms Lyle’s financial hardship. Having regard to Ms Lyle’ income, the tribunal is satisfied that this cost of educating the children in the manner that was expected by the parents has substantially affected the costs incurred by Ms Lyle in maintaining the children.

18.  Ms Lyle lives with the children and her parents. She did not report any particular needs of the children that would set them apart from the needs of average children of their ages apart from their private school fees. There is nothing in the evidence to suggest that the self-support amount allowed for by the child support formula (of approximately $25,000 per annum) is not an appropriate measure of Ms Lyle’s proper needs.  

19.  The tribunal does not propose any changes in relation to Ms Lyle’s adjusted taxable income from time to time, which are reasonably reflective of her available income and financial resources and which can therefore continue to be dealt with through the application of her adjusted taxable income to the administrative formula. The tribunal notes that for the period between June and November 2018 Ms Lyle was assessed on adjusted taxable income for the previous year that was lower than her then current income, but also notes that the impact on the formula was insignificant.

20.  Mr Lyle lives in rented accommodation. There is nothing in the evidence to suggest that the self-support amount allowed for by the child support formula (of approximately $25,000 per annum) is not an appropriate measure of Mr Lyle’s proper needs, although he stated that he cannot afford the child support payments as currently calculated.  Mr Lyle accepted that his income from employment has been $70,000 per annum from 26 March 2018. Mr Lyle stated during the hearing that he did not object to paying child support. However, he stated that his income for child support purposes should be reduced by 30% to give him a chance to re-establish himself financially after the parents’ separation. Mr Lyle referred to section 44 of the Act, which allows a parent to apply to the Registrar for a reduction of up to 30% of post-separation income earned, derived or received outside the usual course of events for up to three years following commencement of the assessment. Mr Lyle has not made an application to the Registrar under section 44 of the Act and the tribunal is not considering, in this review application, an application to review such a decision. Mr Lyle stated that, if made, his application would meet all of the legislative criteria and it would be proper to reduce his income accordingly. The proper question for the tribunal in this review is whether any reduction in Mr Lyle’s income would be just and equitable, having regard to the needs of the children and any hardship to them, or to either parent.

21.  Mr Lyle commenced employment in March 2018, having been receiving newstart allowance while job seeking for the preceding four months. Until November 2017, when the parents separated, he and Ms Lyle operated a [outlet] in partnership, although Mr Lyle stated that he undertook the work on site and Ms Lyle completed the paperwork, while also undertaking her paid employment.  Therefore, it was Mr Lyle who was working on a full-time basis in the business. Mr Lyle’s taxable income generated from the business, and reported in his 2017 and 2018 income tax returns, was negligible. The tribunal notes that Ms Lyle also reported very low income in the 2017 year. It is unclear how the parents were meeting their own expenses and those of the children during this time. The tribunal has not undertaken any detailed consideration of the financial resources available to the parents from the business as this was operated before separation and therefore prior to commencement of the child support assessment. It is therefore difficult to determine whether Mr Lyle had income or financial resources available to him at or in excess of the level of income he now earns from employment. Even if the tribunal were to accept that his taxable income was a proper reflection of his available income and financial resources from the business during its operation, the tribunal is not satisfied that the operation of the business constituted the derivation of income by Mr Lyle in the usual course of events. During the hearing Mr Lyle stated that, other that during the operation of the business, he had for many years been employed in roles which, whilst not identical to his current one, were similar. Further, he had for many years been in receipt of income which, whilst not identical to, was commensurate with his current income. When Mr Lyle was unemployed and job-seeking in late 2017, taking on a full-time role as a [Occupation 2] in a [business] allowed him to re-establish earnings which were within the ordinary course of events for Mr Lyle, not outside it. It is proper that Mr Lyle be assessed on the income he earns from employment.

22.  Mr Lyle is provided with a company vehicle as part of his remuneration. However, he stated that he is not permitted personal use of the vehicle and that evidence is consistent with the terms of his employment contract. Mr Lyle uses another vehicle privately. Therefore Mr Lyle’s income and financial resources from employment have been, and continue to be, $70,000 per annum since he began his new role.

23.  The tribunal proposes varying Mr Lyle’s adjusted taxable income to $70,000 per annum from the date of lodgement of the departure application, on 22 June 2018, until 31 December 2020, to allow a reasonable period of certainty and allow time for Mr Lyle to lodge his income tax return for the 2018/19 financial year.

24.  The tribunal is satisfied the parents have made adequate private arrangements with respect to [Child 2]’s school fees. However, it is just and equitable that the rate of child support payable by Mr Lyle be increased by $1,350 for the 2019 year to allow him to contribute equally to the school fees for [Child 1], which Ms Lyle meets directly.  Ms Lyle was uncertain whether she would be entitled to a hardship discount for 2020, but stated that her financial circumstances were unlikely to change. The tribunal will therefore extend the decision to the 2020 calendar year at the same rate of $1,350 to give effect to the most likely scenario that the discount will continue to apply. Either parent may apply for a further departure if the circumstances genuinely change in relation to the level of school fees for [Child 1] or the arrangements as between the parents and the school for their payment.

25.  The proposed departure will create arrears for Mr Lyle when compared to the administrative assessment. Mr Lyle urged the tribunal to assess him on income which was substantially less than he was earning as he was struggling to make ends meet and incurring a substantial shortfall each week between his necessary costs and his income. It transpired during the hearing that Mr Lyle has recently received a distribution of $140,000 from the parents’ financial settlement. Mr Lyle stated that about $100,000 has been used in legal fees. He stated that he was required to leave the remainder in the solicitor’s account for future legal fees. When Ms Lyle gave evidence that Mr Lyle is now representing himself in the Family Court, Mr Lyle accepted that it was his choice to leave the remaining funds with his lawyers “just in case” he needed their guidance. The balance of $40,000 is therefore a financial resource available to Mr Lyle to meet his essential needs and those of the children immediately. The tribunal is not satisfied that Mr Lyle would suffer hardship as a result of the proposed departure. It is proper that Mr Lyle is assessed on his actual income and financial resources and an equitable contribution to the children’s education. The tribunal is satisfied that the proposed variations to the assessment of child support payable by Mr Lyle are just and equitable in all of the circumstances set out above.

Otherwise proper

26.  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. Varying the income for Mr Lyle on which child support is calculated from that used in the administrative assessment, based on his income and financial resources that are not reflected in the administrative assessment will result in an appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

Conclusion

27.  Ms Lyle sought a departure from the administrative assessment of child support in June 2018 at a time when Mr Lyle was assessed to pay child support calculated using adjusted taxable income for Mr Lyle which did not take into account his actual income and financial resources from his employment or the high costs of privately educating the children. The tribunal has found a ground to depart from the administrative assessment and has determined to depart from the administrative assessment by varying Mr Lyle’s adjusted taxable income to $70,000 per annum for the period 22 June 2018 to 31 December 2020. Further, the tribunal has decided to increase the annual rate of child support payable by Mr Lyle by $1,350 per annum for the period 1 January 2019 to 31 December 2020 on account of private school fees for [Child 1]. The tribunal has found that a departure in those terms is just and equitable and otherwise proper.

DECISION

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

• For the period 22 June 2018 to 31 December 2020 Mr Lyle’s adjusted taxable income is varied to $70,000 per annum; and

• For the period 1 January 2019 to 31 December 2020 the annual rate of child support payable by Mr Lyle is increased by $1,350 per annum for private school fees for [Child 1].