Macawley and Stewart (Child support)

[2022] AATA 1705

Macawley and Stewart (Child support) [2022] AATA 1705 (4 March 2022)

DIVISION:Social Services & Children Support Division

REVIEW NUMBER:  2021/SC021984

APPLICANT:  Ms Macawley

OTHER PARTIES:  Children Support Registrar

Mr Stewart

TRIBUNAL:Member M Martellotta

DECISION DATE:  4 March 2022

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that it is not just and equitable to depart from the assessment. This means that the assessment for the period 1 April 2020 to 12 February 2024 whereby the annual rate of children support payable by Mr Stewart was $8,000 is unchanged.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – decision not to depart as not just and equitable – 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 Macawley and Mr Stewart are the parents of two children[1] relevant to the administrative assessment of child support subject to this review.[2]

   [1][1] Born [in] February 2011 and [in] December 2012.

   [2] The assessment reflects care as 221 nights to Ms MaCawley and 142 nights to Mr Stewart.

2. According to Services Australia (the Agency), on 4 February 2021 Mr Stewart lodged a change of assessment application on the following grounds:

   a)Reason 5 that Mr Stewart has provided money, goods or property for the children’s benefit.

   b)Reason 8A that his income, property and financial resources and earning capacity make the administrative assessment unfair.

3. In response Ms Macawley cross-applied on the basis of Reason 2 – that the costs of maintaining a child of the assessment is significantly affected by the child’s special needs.

4. At the time of Mr Stewart’s change of assessment application, according to the Agency the relevant assessment had been in place as a result of a previous decision of the Administrative Appeals Tribunal:[3]

   ·For the period 1 April 2020 to 12 February 2024 the annual rate of children support payable by Mr Stewart was $8,000.

   [3] Differently constituted – date of that decision was 28 October 2020. There have also been earlier change of assessment decisions made by the Agency and the AAT.

1. On 6 May 2021 the Agency decided that Reason 2 had been established but decided that it was not just and equitable to change the assessment.  Mr Stewart objected to that decision. On 14 July 2021 the Agency made a new decision in the following terms:

   a)The AAT decision of 28 October 2020 ceases to affect the assessment after 11 February 2021.

   b)For the period 12 February 2021 to 31 October 2022 Mr Stewart’s adjusted taxable income (ATI) is varied to $79,218.

   c)For the period 12 February 2021 to 30 November 2021 the annual rate of child support payable by Mr Stewart is increased by $1,800.

2. Ms Macawley lodged an application seeking independent review by the tribunal.  The parties participated in a telephone direction hearing[4] and the tribunal issued directions.  On 10 February  2021 the parties participated in a hearing conducted by conference telephone. Evidence was given under affirmation.  The following documents were also considered; documents provided by the Agency (455 pages) and Ms Macawley (A1-A19) and Mr Stewart (B1-B349).  The tribunal deferred making a decision in order to undertake some legal research. 

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act). The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

2. 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 of the Act).

3. Section 98C of the Act 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.

CONSIDERATION

Issue 1 - whether a ground is established to depart from the administrative assessment of child support

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

   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”.

2. 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. 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.

3. In this matter the tribunal first considered whether there was a ground to depart is established pursuant to Reason 8A.

Reason 8A – income, property and financial resources of the parties

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Act relating to the 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.

2. Ms Macawley says that Mr Stewart derives income from his employment as a [Occupation 1] and from a [Occupation 2] service. Her central submission is that the previous AAT decision which varied Mr Stewart’s child support liability to $8,000 per annum should remain in place and be extended.  She says that he has the income, financial resources and property to continue to meet a liability in that amount despite there being a change in Mr Stewart’s hours of work She in effect asserts that Mr Stewart has chosen to reduce his hours of work and he has the capacity to meet the child support liability as varied by the AAT decision.[5] She further says that the Agency decision has also failed to take into account personal benefits Mr Stewart derives from business expenses and losses from his business.

   [5] In effect Mrs Macawley was raising earning capacity issues which are addressed under Issue 2 of these Reasons.

3. In terms of her own financial circumstances Ms Macawley provided the following evidence:

   a)She is a [Occupation 3] with [a named agency] and has been in that role for 24 years. She works on a part-time basis and her income is that as assessed in her personal income tax returns. She also receives some family assistance payments.

   b)Her gross total average employment income per week is $1,628 ($84,600).

   c)She owns a block of land which is valued at about $500,000. She is planning to build. The mortgage is about $353,000.

   d)She has about $80,000 in savings and a motor vehicle.

4. According to her personal income tax return for the 2020/2021 financial year her taxable income was $85,302.

5. Mr Stewart says that the underlying assessment in place at the time of change of assessment application should be replaced to reflect his reduced income.  He says that due to changes in his work roster and health and safety requirements he has had to reduce his hours of work. Mr Stewart submits that the decision made by the objection officer should not be disturbed. He further submits that Ms Macawley has access to other financial resources which she has not disclosed and he says this is based upon her ability to start building a new home.

6. In terms of his financial circumstances Mr Stewart provided the following evidence:

   a)He earns his income as a [Occupation 1].  He has had to change his work roster due to the [specified] changes in health and safety fatigue policy which means he has had to reduce his hours from 96 hours per roster to 72 hours per roster to accommodate.  He looked at many options but, in the end, the only arrangement that worked for his circumstances required that he drop one shift. This has resulted in a drop his income (he in effect has gone from four shifts per fortnight to three shifts per fortnight).

   b)His 2020/2021 personal income tax return reflects part of the financial year when he was still working the old full-time roster and the coming financial year will reflect his income on the reduced roster - he says his future income will be in the vicinity of $80,000 from all sources.

   c)He also operates a [Occupation 2] as a sole trader; Whilst he now has extra hours available due to the change in his work roster, he has no intention to build the business. He uses the [Occupation 2] to top-up his income, he will make just enough to get by.

   d)His [Occupation 2] does not make any profit; it mostly runs at a loss[6].  The benefit to him in his business model is the tax benefits he derives; he otherwise does not derive any personal benefit from any of the business expenses claimed.

   e)He claimed 100% of the motor car usage ([specified model]) for business use. He purchased the car in August 2021. He does use the car for personal use from time to time.

   [6] For example in the 2020/21 return the business declared income of $20,863 and claimed expenses of $26.626 resulting in a net loss of $7,840.

7. According to financial information provided by Mr Stewart:

   a)His average gross weekly employment income is $1,595 ($82,900).

   b)He earns $nil from his [Occupation 2].

   c)He values his principal place of residence at $1,000,000 and a [specified vehicle] at $70,000 and second vehicle at $1,000.

   d)His main liability is the home mortgage ($715,000).

   e)His self-managed superannuation fund owns a rental property ($380,000) which is subject to a mortgage of $337,100.

   f)His individual tax return for 2020/2021 declares total income of $90,274 and a taxable income of $81,682. This figure considers work-related and business losses associated with his [Occupation 2].

   g)Payslips provided by Mr Stewart reflecting his new work hours reflect a fortnightly income of $3,431 gross ($89,218 per annum).[7]

   [7] He stated the figure is a bit higher due to being on workers compensation for a broken ankle.

8. In this matter it is apparent that Mr Stewart’s income derived from his employment as a [Occupation 1] has now reduced due to a change in his work roster and this will be reflected in future returns. He anticipates that his business will continue to make a loss which he says results in a tax benefit to him. In the tribunal’s view, relevant to any child support assessment Mr Stewart’s income would reflect an adjusted annual income of $80,000 from his employment as well as some financial benefit derived from his [Occupation 2][8] which the tribunal assesses to be about $6,000 per annum, resulting income of about $86,000.

   [8] This takes into account the benefit derived from running that business at a loss and also a proportion of the personal benefit derived from claimed business expense for the vehicle.

9. If the tribunal were to utilise this figure in the assessment it would result in an annual child support liability of about $5,500 per annum. In this matter the underlying assessment in place at the time of the change of assessment application resulted in an annual liability of $8,000. The tribunal is satisfied that a ground to depart is established.

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

1. As the tribunal is satisfied that there is a ground to depart from the assessment of child support as set out above, the next step for the tribunal is to consider whether it is just and equitable as regards the child and the parental parties 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 set out in subsection 117(4) of the Act, which are discussed in the following paragraphs.[9]

Proper needs of the child

[9] The tribunal notes the Federal Magistrates Court case of Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4), the section need not be ‘slavishly followed, each of the relevant factors listed … should be considered’.

1. In determining the proper needs of the child it is necessary to have regard at a broad level to the manner in which the child is being, and in which the parents expect the child to be, cared for, educated or trained, and also any other needs of the child.  The previous change of assessment applications took into account orthodontic costs incurred by Mrs Macawley in relation to one of the children and there are no updated costs associated with that treatment which has now ceased. Mr Stewart says that any departure should not make an allocation for those costs as he has already overpaid ($1297.41) the costs associated with that treatment and that should be taken into account. Support for this submission was not apparent to the tribunal on the documents before it.

Income, earning capacity, property and financial resources of the child

1. In having regard to the income, earning capacity, property and financial resources of the child the tribunal must disregard any entitlement of the child or the carer entitled to child support to an income-tested pension, allowance or benefit (subparagraph 117(7)(b)(ii) of the Act).

2. There was no evidence presented to the tribunal that the child has any income or unused earning capacity that needs to be taken into account in the child support assessment and as such the tribunal concludes that there is no basis for any adjustment pursuant to this consideration.

Other party receiving money, goods and property for the benefit of the child

1. Mr Stewart submits that as part of the property settlement Ms Macawley received a $54,000 adjustment which he says was in lieu of child support.  He says that his child support liability should be credited by that amount. The tribunal understands that the parties are in continued dispute regarding the terms of the settlement. Property settlement is not usually a matter taken into account in child support matters and in this matter, the tribunal concludes there is no basis for any adjustment pursuant to this consideration.

The income, property and financial resources of each parent who is a party to the proceeding

1. In this matter the tribunal has made findings in relation to the income and financial resources of the parents and does not repeat those findings.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the 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 earning capacity of either parent (subparagraph 117(2)(c)(ib)). In the Federal Magistrates Court of Australia’s decision of Ongal and Materns [2009] FMCAfam 476 at 105 to 107 the issue of earning capacity was considered in the following terms:

   The legislative provisions regarding “capacity to earn” cases have been significantly modified as a result of the report of the Ministerial Taskforce on Child Support. The Taskforce recommended that a parent’s income should only be increased on the basis that parent had a higher capacity to earn income if three criteria were satisfied:

   ·The parent was unwilling to work despite having ample opportunity to do so or had reduced his or her level of normal full time work below that which was normal in the industry in which he or she was employed;

   ·The decision of that parent to work less hours was not based on caring responsibilities or the state of health of that parent;      

   ·On the balance of probabilities, a major purpose for the parent’s decision, in respect of his or her employment, was to affect the level of child support assessed.

2. As noted, this was a key part of Ms Macawley’s submissions. She says that Mr Stewart’s decision to reduce his work roster is motivated by its impact on the child support assessment.

3. The tribunal accepts that Mr Stewart’s pattern of work has changed but is not satisfied that that the evidence establishes on the balance of probabilities that a major purpose of Mr Stewart’s decision was a desire to impact the child support assessment. For this reason, the tribunal is not satisfied that the relevant criteria required to establish earning capacity as a relevant consideration are satisfied in this matter. 

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support themselves, or any other child or another person that the person has a duty to maintain

1. The tribunal is satisfied taking into account the relevant costs of self-support utilised in the assessments and based upon evidence provided at hearing and in the parties’ Statements of Financial Circumstances and evidence presented at hearing that neither party has extraordinary costs of self-support that are relevant to the assessment.

Any hardship that would be caused

1. As noted, the tribunal can vary the rate of child support payable or it can vary some of the variables that are used in the administrative formula.  Ms Macawley told the tribunal that she is the person who meets all the children’s additional and incidental costs of care and that Mr Stewart only contributes that which he is assessed to pay. This means any extra-curricular expenses are met by her. Mr Stewart disagrees with that proposition.  Ms Macawley says that the reduction in the child support liability has increased that financial burden.

2. Mr Stewart told the tribunal that a return to the assessment which sets an annual child support liability of $8,000 would mean that personal choices he would make for the children would be impacted – for example, the children would need to eat chicken instead of steak.

3. In this matter the tribunal notes that the difference between the annual liability of $8,000 and a child support liability of $5,500 per annum is $2,500 or $48 per week.

4. Considering all of the relevant factors and taking into account the relative positions of the parties, the tribunal is not satisfied that it would be just and equitable to depart from the underlying assessment that was in place at the time of Mr Stewart’s change of assessment application.  In coming to this conclusion the tribunal notes the following factors.

5. Both parties derive income from secure employment with state government services. Ms Macawley has worked part time for a number of years – as noted Mr Stewart has more recently decreased his hours.

1. In effect the changes to Mr Stewart’s work arrangements have resulted in a decrease in income of about $20,000 – this is apparent from previous assessments which have utilised an ATI of about $100,000. Whilst the tribunal has concluded that the grounds of Mr Stewart’s earning capacity have not been made out, it is also satisfied that Mr Stewart has made a choice not to utilise this as an opportunity to make up any loss in his income through his [Occupation 2]. As noted in his evidence, the main purpose of the [Occupation 2] is to afford him an opportunity to run that business at a loss for tax purposes. He stated that his approach is to earn whatever is enough to meet his needs and no more as he does not see the point in earning more income just to pay more tax. Clearly that choice, however, also has an impact upon the assessment and in turn impacts upon the amount of child support available for the benefit of the children.

2. The tribunal is satisfied after taking into account the financial circumstances including costs of self-support that Mr Stewart has the financial capacity to continue to meet an assessed liability of $8,000 per annum or $152 per week. As noted, this is an additional $48 per week to what he is currently liable as a result of the objection decision.

3. For these reasons the tribunal sets aside the decision and instead decides that whilst a ground of departure has been established it is not just and equitable to make a departure determination. This has the effect of returning the assessment to that which was in place at the time of the change of assessment application made by Mr Stewart.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that it is not just and equitable to depart from the assessment. This means that the assessment for the period 1 April 2020 to 12 February 2024 whereby the annual rate of children support payable by Mr Stewart was $8,000 is unchanged.