Manning and Townsend (Child support)
[2019] AATA 3841
•3 July 2019
Manning and Townsend (Child support) [2019] AATA 3841 (3 July 2019)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2019/MC016044
APPLICANT: Mr Manning
OTHER PARTIES: Child Support Registrar
Ms Townsend
TRIBUNAL:Member M Baulch
DECISION DATE: 3 July 2019
DECISION:
The decision under review is affirmed.
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of both parents – superannuation is a financial resource – decision under review affirmed
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
This application for review concerns the amount of child support paid by Mr Manning to Ms Townsend in respect of their children, [Child 1] and [Child 2].
The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by one separated parent to the other. It uses a statutory formula which contains variables such as the parents’ incomes, the number of children, their ages and the percentages of care.
Since 20 October 2010, Mr Manning has been assessed as liable, by the Department of Human Services – Child Support (the Department), to pay child support to Ms Townsend.
A parent can apply to the Department for a change to the administrative assessment based on the statutory formula in the special circumstances of their case – this is referred to in the Act as a departure determination. Ms Townsend made an application for a departure determination on 26 July 2018, and on 28 August 2018 Mr Manning also applied for a departure determination.
On 5 October 20018, a departmental decision-maker considered both parents’ applications and decided that there should be a determination to depart from the child support assessment such that for the period 1 July 2018 to 30 June 2020 the adjusted taxable income of Mr Manning was set at $205,595 and the adjusted taxable income of Ms Townsend was set at $116,419.
Mr Manning lodged an objection to that decision and, on 12 February 2019, that objection was partly allowed. The objections officer set aside the earlier decision and instead decided that there should be a departure determination such that for the period 1 July 2018 to 30 June 2020 the annual rate of child support payable by Mr Manning should be set at $10,400 (the decision under review). Mr Manning has now applied to this tribunal for an independent review of the Department’s decision.
A hearing into the application for review was held by the tribunal on 3 July 2019. Mr Manning and Ms Townsend both participated in the hearing by telephone and both gave evidence under affirmation during the hearing. The tribunal had before it relevant documents provided to it by the Department pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, which were labelled folios 1 to 613. The tribunal also had regard to additional documents provided by Mr Manning (labelled folios A1 to A71) and by Ms Townsend (labelled folios B1 to B50).
ISSUES
Pursuant to section 98C of the Act, a determination to depart from the administrative assessment of child support determined in accordance with the statutory formula may be made if the following three requirements are met:
(i)that one, or more than one, of the grounds for departure referred to in [subsection 117(2) of the Act] 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 [Part 6A of the Act]; …
CONSIDERATION
At the time the parents made their applications for a departure determination the administrative assessments of child support required Mr Manning to pay child support of the fixed annual rate of $2,780, pursuant to section 65A of the Act, based upon Mr Manning’s estimated income for the 2018–19 income year of $12,800 and Ms Townsend’s estimated income for the 2018–19 income year of $56,575.
On 1 October 2018, a new child support period commenced. Although the previous estimated incomes of the parents continued to apply, the fixed annual rate of child support payable by Mr Manning would have been $2,832 per annum.
From 1 July 2019, both parents’ estimated incomes would have lapsed. In the absence of the parents making new income estimates for the new income year, the administrative assessment of child support would have been based upon their 2017–18 taxable incomes, which were $13,203 for Mr Manning and $345,803 for Ms Townsend. These adjusted taxable incomes, had they been applied in the statutory formula, would have resulted in the fixed annual rate of $2,832 per annum continuing to apply.
These, therefore, are the administrative assessments of child support from which I am considering departing.
Is there a ground, or grounds, for departure?
All the grounds for departing from the administrative assessment of child support are prefaced by the term “in the special circumstances of the case”. As noted by the Full Court of the Family Court:[1]
Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases. In Savery’s case (at Fam LR 815 FLC 77,897), Kay J, adopting the view in In the Marriage of Philippe (1977) 4 Fam LR 153; [1978] FLC 90-433 at Fam LR 155 FLC 77,202 in a different context, said that ‘special circumstances’ were ‘facts peculiar to the particular case which set it apart from other cases’. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
[1]See Gyselman and Gyselman [1991] FamCA 93.
The income, property and financial resources of either parent
Both parents’ applications for a departure determination relied upon the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act.
This provision – commonly referred to as “Reason 8A” by the Department – provides that, in the special circumstances of the case, a ground to depart from the statutory formula may be established if, in the special circumstances of the case, the child support assessment results in an “… unjust and inequitable determination of the level of financial support to be provided by the liable parent …” due to the income, property and financial resources of either parent.
Mr Manning
At the time of the applications for a departure determination, the administrative assessment of child support was based upon Mr Manning’s estimated income for the 2018–19 income year of $12,800.
Having regard to Mr Manning’s Statement of Financial Resources (Child support reviews) form, I was satisfied that Mr Manning’s property and financial resources, not including the home in which he lives, include:
[Property 1]
$480,000
[Property 2] and land (share of father’s estate)
$210,000
Funds in the bank
$760
Shares
$130,000
[Vehicle 1]
$30,000
[Vehicle 2]
$8,000
Houseboat, ski boat, motorbike & trailer
$176,000
TOTAL
$1,034,760
I noted that these valuations are those provided by Mr Manning on the form.
Mr Manning has attributed half of these assets to his current partner when completing the form. However, his evidence was that they are all held solely in his name. I considered the property and financial resources of Mr Manning to be the full value of those assets and did not accept that half of these assets should be attributed to his current partner.
Mr Manning also disclosed a superannuation investment of $425,000. I was of the view that superannuation is a financial resource (see Parrish & Torrey (SSAT Appeal) [2009] FMCAfam 274). The question to be determined is whether it is a resource that should impact on the rate of child support, given the restrictions on accessing superannuation.
Mr Manning’s evidence was that he was born in 1959 and is currently 60 years of age. According to the Australian Taxation Office’s website,[2] anyone born before 1 July 1960 attains their preservation age at 55 years and can access their superannuation if they retire from the workforce.
[2]>
Mr Manning has been out of work for a considerable time, and I was of the view that his superannuation is a financial resource potentially available to him and relevant to my consideration here.
Therefore, I found that Mr Manning’s property and financial resources, other than the home in which he lives, total approximately $1,459,000.
While Mr Manning’s income is very low, I was satisfied that he has significant property and financial resources. It’s well established that the circumstances of a person who is asset rich but income poor may constitute grounds for a departure from the administrative assessment of child support (see Abela v Abela [1994] Fam CA 123).
It was my view that an assessment of child support that puts Mr Manning’s liability to pay child support at the fixed annual rate of $2,780 is unjust and inequitable when Mr Manning’s entire financial position is considered. The disparity between a liability of $2,780 per year and Mr Manning’s property and financial resources is significant and makes this case out of the ordinary, satisfying the requirement of special circumstances.
I therefore found that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act is satisfied in respect of Mr Manning.
Ms Townsend
At the time of the applications for a departure determination, the administrative assessment of child support was based upon Ms Townsend’s estimated income for the 2018–19 income year of $56,575.
Having regard to Ms Townsend’s Statement of Financial Resources (Child support reviews) form, I was satisfied that Ms Townsend’s financial resources, not including the home in which she lives, include:
18% interest in a holiday property
$100,000
Funds in the bank
$50,670
Funds in the bank
$764
[Vehicle 3]
$28,000
TOTAL
$179,434
I noted that these valuations are those provided by Ms Townsend in the form.
Mr Manning claims that Ms Townsend has significantly underestimated the value of her home. I noted that the valuation for council rating purpose is $790,000 and Ms Townsend’s valuation is $875,000. I did not form the view that Ms Townsend’s valuation of her own home was unreasonable. I also noted that, in any case, a person’s residence, at least to the extent that it is commensurate with their economic resources, would not ordinarily be expected to be sold or rented for the purposes of assessing periodic child support, as it is where the person lives (see Parrish & Torrey (SSAT Appeal), ibid).
I was not of the view that Ms Townsend’s income, property or financial resources are such that they render the administrative assessment of child support unjust and inequitable. I was not persuaded that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act is satisfied in respect of Ms Townsend.
Just and equitable
The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their child. Regard must be had to a variety of factors, set out in subsection 117(4) of the Act, such as the needs of the children, the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.
[Child 1] and [Child 2]
At all relevant times, the Department has recorded [Child 1] and [Child 2] as being in Ms Townsend’s care 100% of the time. There is no evidence that [Child 1] and [Child 2] themselves have any income, property, earning capacity or financial resources.
Under the administrative assessment of child support applying from 1 July 2018, the costs of the children in the statutory formula were assessed as $7,782 per annum.
Ms Townsend’s Statement of Financial Resources (Child support reviews) form discloses weekly expenditure for herself, [Child 1] and [Child 2] as being $1,303. If half of this represents spending on [Child 1] and [Child 2], Ms Townsend is incurring costs of $33,878 per annum supporting [Child 1] and [Child 2].
Ms Townsend’s evidence was that [Child 1] may attend a private school next year when he starts high school and she is considering a Catholic school, which was the type of school attended by Mr Manning’s older children. [Child 1] may also need orthodontic treatment and is due to see the orthodontist again in December.
In considering the proper needs of the child, for the purposes of subsection 117(4) of the Act, subsection 117(6) of the Act requires I have regard to the “manner in which the child is being … educated”. It was my view that the use of the present tense means that costs Ms Townsend may incur in the future are not relevant to any departure determination I may potentially make. I was also not persuaded that [Child 1] has any special needs, such as orthodontic treatment, relevant to my consideration, unless and until costs are being incurred.
Mr Manning
I have already considered Mr Manning’s income, property and financial resources, earlier in these reasons. While Mr Manning’s income was estimated to be $12,800, I have found his property and financial resources, excluding the home in which he lives, to be $1,459,000.
Mr Manning’s evidence was that he was to commence employment during the week following the hearing. He stated that he would be working two to five days per week on a casual basis, working an eight-hour day for $26.40 per hour. On the basis that Mr Manning might average 32 hours per week, working 48 weeks per year, I estimate Mr Manning’s income, once he commences employment, to be $40,550 per annum.
Ms Townsend submitted that Mr Manning should be assessed as having a higher earning capacity than he is currently exercising. Mr Manning was employed until April 2016. His entitlement to certain termination payments were reflected in the departure determination that applied until 11 April 2018. Until he commences employment next week, Mr Manning has not been successful in his attempts to gain employment.
A person can only be attributed with an earning capacity if the requirements of subsection 117(7B) of the Act are satisfied, including if:
· The parent does not work despite ample opportunity to do so; and
· The parent’s decision not to work is not justified on the basis of the parent’s caring responsibilities or the parent’s state of health; and
· The parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
Mr Manning did not choose to cease employment and I was satisfied that he has made reasonable attempts to attain employment. I was not satisfied that Mr Manning has remained unemployed despite ample opportunity to regain employment. I concluded that Mr Manning has no earning capacity for the purposes of subsection 117(7B) of the Act relevant to my consideration here.
Mr Manning’s Statement of Financial Circumstances (Child support reviews) form shows total weekly expenditure, excluding the liability to pay child support, as follows:
Health insurance:
$35
Household expenses:
$1,204
I calculated that Mr Manning’s living expenses are currently $1,239 per week, or $64,428 per annum. I noted that Mr Manning’s living expenses exceed his income, even once he commences employment. Mr Manning’s evidence was that his living expenses are being subsidised by his current partner.
Under the administrative assessment of child support that has applied from 1 July 2018, Mr Manning has the benefit of a self-support amount of $24,154 per annum. I identified no evidence to persuade me that Mr Manning’s commitments to support himself should not be measured by $24,154 per annum.
Mr Manning submitted that if I were to make a departure determination, he would suffer hardship. Mr Manning stated his income is not sufficient to pay an increased child support liability were I to make a departure determination.
However, if Mr Manning’s property and financial resources are considered, rather than just his income, I was satisfied that Mr Manning has the financial means to pay a higher amount of child support, if that is the result of my consideration. I acknowledge that Mr Manning may have to sell some of his assets to do this. It is not necessary for me to identify the source from which Mr Manning should meet his child support obligation. Essentially, it is up to him to organise his affairs to meet a proper level of financial support for his children (see Dwyer and McGuire [1993] FamCA 82).
I was not persuaded that Mr Manning would suffer hardship if I were to make a departure determination.
Ms Townsend
I have already considered Ms Townsend’s income, property and financial resources earlier in these reasons. At the time of the applications for a departure determination, Ms Townsend’s income was estimated to be $56,575. I have found her property and financial resources, excluding the home in which she lives, to be $179,434.
I was satisfied that Ms Townsend’s income, property and financial resources are adequately represented by her adjusted taxable income used in the administrative assessment of child support.
Mr Manning submitted that Ms Townsend should be assessed as having a higher earning capacity than she is currently exercising. It is undisputed that in November 2017 Ms Townsend changed from full-time employment to part-time employment.
As noted above, a person can only be attributed with an earning capacity if the requirements of subsection 117(7B) of the Act are satisfied, including if:
· The parent has reduced the number of hours per week of their employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which they are employed or otherwise engaged; and
· The parent’s decision not to work full-time is not justified on the basis of the parent’s caring responsibilities or the parent’s state of health; and
· The parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
Ms Townsend submitted that historically she has worked part-time and only increased to full-time hours because the amount of the child support assessment reduced. Ms Townsend explained that her mother passed away and left her funds that were sufficient to allow her to pay out her mortgage, which gave her the flexibility to return to part-time hours. Ms Townsend submitted that working part-time is justified based upon her caring responsibilities. Ms Townsend noted that the income she had forgone was significantly greater than any change to the child support assessment that resulted from her change in work hours.
I accept that, because Ms Townsend has 100% care of [Child 1] and [Child 2], a significant reduction in her income does not have a similar significant impact on the child support assessment. Putting to one side whether or not Ms Townsend’s decision to change to part-time work was justified by her caring responsibilities, I was satisfied that she has demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child. I found that Ms Townsend has no earning capacity relevant to my consideration.
Ms Townsend’s Statement of Financial Circumstances (Child support reviews) form shows total weekly expenditure as follows:
Health insurance:
$86
Household expenses:
$652[3]
[3] $652 is half of the $1,303 disclosed as the total expenditure for Ms Townsend, [Child 1] and [Child 2].
I calculated that Ms Townsend’s living expenses are currently $738 per week, or $38,376 per annum for herself, excluding expenditure on [Child 1] and [Child 2].
Under the administrative assessment of child support, Ms Townsend has the benefit of a self-support amount of $24,154 per annum. I identified no evidence to persuade me that Ms Townsend’s commitments to support herself are not adequately represented by $24,154 per annum.
Ms Townsend submitted that if I were not to make a departure determination, she would suffer hardship. She stated that her expenses exceed her income by about $400 per week and she has been drawing down on her savings.
I accepted that not making a departure determination would potentially result in hardship for Ms Townsend, [Child 1] and [Child 2].
Having considered those matters set out in subsection 117(4) of the Act, I was satisfied that it would be just and equitable to make a departure determination that increased Mr Manning’s liability to pay child support.
Otherwise proper
The requirement to consider whether a departure would be otherwise proper is set out in subsection 117(5) of the Act, which directs my attention to what is fair to the community. It is necessary to consider the effect, if any, that a departure from the administrative assessment would have on entitlements to income tested pension, allowance or benefit. Parents, rather than the community, have the primary duty to maintain their children.
Ms Townsend advised that she may be entitled to family tax benefit for the 2018–19 financial year and, if so, would be claiming it as a lump sum once she lodges her income tax return. If Ms Townsend were entitled to family tax benefit at more than the base rate, the amount payable above the base rate would be reduced by $0.50 for each $1.00 by which Mr Manning’s liability to pay child support exceeds the maintenance free area of $2,160.80.[4]
[4] A guide to Australian Government payments: 1 July to 19 September 2018, the Department of Human Services.
I concluded that a departure determination which would increase the child support liability would potentially result in a reduction in the amount of family tax benefit that might be payable to Ms Townsend. I was satisfied that a determination that would increase the amount of child support payable by Mr Manning would be otherwise proper.
Conclusion
Section 4 of the Act sets out the objectives of the Act; these objectives include:
· Parents of a child have a primary duty to maintain that child;
· That duty has a priority over all commitments of the parent other than commitments necessary for self-support;
· The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards; and
· The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.
I have found that there is a ground for departure in this case, and it would be just and equitable and otherwise proper for me to make a departure determination. Section 98S of the Act describes the determinations that I may make if a decision is made to depart from the administrative assessment of child support.
I have found that a ground for departure exists on the basis that Mr Manning’s property and financial resources render the administrative assessment of child support unjust and inequitable. The objections officer determined Mr Manning’s liability to pay child support on the basis that he contributes $100 per week for each child. I considered that this is an appropriate amount.
I declined to make any adjustment to reflect Mr Manning’s commencement of employment, noting that the departure determination I am making is because Mr Manning’s property and financial resources, rather than his income, render the formula assessment unfair.
The objections officer decided that their departure determination should apply from 1 July 2018 until 30 June 2020. I considered that this is a reasonable period for such a determination to apply.
Accordingly, I concluded that the appropriate departure determination to apply in this case is, pursuant to paragraph 98S(1)(a) of the Act, to vary the annual rate of child support payable by Mr Manning such that the annual rate is $10,400 for the period 1 July 2018 to 30 June 2020.
Therefore, and for these reasons, I decided to affirm the decision under review.
DECISION
The decision under review is affirmed.
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