Ming and Ming (Child support)
[2019] AATA 686
•26 January 2019
Ming and Ming (Child support) [2019] AATA 686 (26 January 2019)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2018/SC014086
APPLICANT: Mrs Ming
OTHER PARTIES: Child Support Registrar
Mr Ming
TRIBUNAL:Member F Staden
DECISION DATE: 26 January 2019
DECISION:
The tribunal sets aside the decision under review and, in substitution, decides that:
Mr Ming’s annual child support liability for the period 1 September 2017 to 30 November 2018 is increased by $1,525.
CATCHWORDS
CHILD SUPPORT – departure determination – costs of child care - cost of maintaining the children are significantly affected – financial resources of both parents - 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
Mrs Ming and Mr Ming are the parents of [Child 1], born 2012. There has been a child support assessment for this case since 8 April 2015.
Mrs Ming’s care percentage for [Child 1] has been recorded as 90% and that of Mr Ming as 10% since 8 April 2015. Mr Ming is the parent liable to pay child support. Mrs Ming opted for collection of child support by the Department of Human Services – Child Support (the Department) from 1 May 2015.
On 16 August 2017, the Department issued child support assessments, relevantly here, for the child support period 1 September 2017 to 30 November 2018. Mr Ming’s annual child support liability was $20,830, based on Mr Ming’s provisional 2016/17 adjusted taxable income of $228,569 and Mrs Ming’s 2016/17 adjusted taxable income of $36,617.
On 3 November 2017, Mrs Ming applied for a change of assessment for the period 1 September 2017 to 30 November 2018 on the basis that the child support assessment was unfair because it did not correctly reflect the costs associated with meeting [Child 1]’s special needs (Reason 2) or Mr Ming’s earning capacity (Reason 8B). A third reason was later added whereby the costs of maintaining [Child 1] are significantly affected by high child care costs (Reason 6).
On 22 January 2018, a delegate of the Child Support Registrar refused Mrs Ming’s application for a departure on the basis that no reason for a change of assessment had been established.
Mrs Ming lodged an objection to the 22 January 2018 decision on 26 February 2018.
On 2 March 2018, the Department revised the calculation of Mr Ming’s annual child support liability to $20,793 for the period 1 September 2017 to 30 November 2018, based on his actual, rather than provisional, 2016/17 adjusted taxable income of $222,239 and Mrs Ming’s 2016/17 adjusted taxable income of $36,617.
On 17 April 2018, an objections officer disallowed Mrs Ming’s objection, again on the basis that no reason for a change of assessment had been established.
On 16 May 2018, Mrs Ming applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal) for review of the objections officer’s decision.
On 28 August 2018, a telephone directions hearing was conducted by this tribunal, differently constituted, with Mrs Ming and Mr Ming. Directions were issued on 28 August 2018 and both parties were found to have complied with directions.
A hearing was held on 7 December 2018 in Canberra. Mrs Ming and Mr Ming gave sworn evidence by telephone. The tribunal also had before it papers provided by the Department (416 pages), Mrs Ming (A1 to A65) and Mr Ming (B1 to B52). After the hearing, Mrs Ming provided the tribunal with additional evidence (A66 to A68). Copies of these documents were provided to all parties.
Relevant aspects of the evidence before the tribunal are referred to in the consideration below.
ISSUES
The rate of child support payable by a liable parent is usually based on an administrative assessment under the Child Support (Assessment) Act 1989 (the Assessment Act). The formula used to calculate the rate takes into account factors such as the number of children, the levels of care provided and the income of each parent.
Under section 98B of the Assessment Act, a liable parent or a carer receiving child support can apply to the Child Support Registrar for a determination to depart from the administrative assessment. This is known as a change of assessment.
Under section 98C of the Assessment Act, the Child Support Registrar, here the tribunal, may change the assessment if the case meets the following three criteria:
· There is a ground to depart from the assessment (subsection 117(2) of the Assessment Act lists those grounds). Only one ground has to be established for the tribunal to proceed to consider the next criterion (Marsh & Eccles [2008] FMCAfam 1417);
· It is “just and equitable” to make particular changes to the assessment; and
· It is “otherwise proper” to make those changes to the assessment.
CONSIDERATION
Issue 1: Is there a ground to depart from the administrative assessment?
Mrs Ming raised three grounds for a change of assessment: Reason 2, Reason 6 and Reason 8B in relation to Mr Ming. The tribunal began by considering Reason 6, the established ground in the previous change of assessment for this case.
Is Reason 6 established?
Subparagraph 117(2)(b)(ib) of the Assessment Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because of high child care costs in relation to the child. Subsection 117(3A) of the Assessment Act additionally provides that for this ground to exist the costs must be incurred by a parent and the child must younger than 12 at the start of the child support period. These requirements are met in this case.
A 9 August 2016 previous change of assessment determination increased Mr Ming’s annual child support liability by $1,525 for the period 1 October 2016 to 31 January 2017 on the basis of [Child 1]’s high child care costs. Mrs Ming objected to this decision and, on 26 October 2016, an objections officer changed the start date for the $1,525 annual adjustment from 1 October 2016 to 10 May 2016. The end date of 31 January 2017 marked [Child 1] entering the school system and a different pattern of care.
Mrs Ming told the tribunal that she used after school care for [Child 1] on some days and has gradually introduced him to vacation care. In his first year at school, she found it difficult to find vacation care which she thought suitable for [Child 1] given his age. She therefore used nannies as a transitional and flexible form of vacation care. By the September/October 2018 school holidays, Mrs Ming was providing some care (she works from home now and can be flexible) and using vacation care, play dates and time with her family for the remainder of the required care. She now only uses nannies very occasionally.
Mr Ming argued that the using of nannies instead of formal child care was an expensive choice. He pointed out that he and his family would assist with [Child 1]’s care if he and Mrs Ming could come to an agreement about this. The tribunal noted that care arrangements are a highly contentious area for Mrs Ming and Mr Ming.
A 1 August 2018 Centrelink letter shows that in 2017/18 Mrs Ming’s total child care fees were $1,155; she received $395.46 in child care benefit and $385.63 in child care rebate. Her out-of-pocket costs for formal child care for [Child 1] in 2017/18 were therefore $373.91 ($1,150 - $395.46 - $385.63).
Mrs Ming provided receipts to show that she had spent $2,745 on nannies to provide 122.5 hours of care for [Child 1] across the July 2017, September/October 2017 and April 2018 school holidays. She was unable to locate receipts for nannies used over the December 2017/January 2018 school holidays.
Some of the nannies were registered carers which allowed Mrs Ming to claim a limited amount of child care benefit (85% of $0.719 per hour as [Child 1] was school age). There is no child care rebate for registered care. The most child care benefit Mrs Ming could have received for her 2017/18 use of nannies, had all the nannies been registered carers, was $75, reducing her total 2017/18 spending on nannies to $2,670.
Subsection 117(3B) of the Assessment Act explains that child care costs for a parent can only be high for the purposes of child support if, during a child support period, they total more than 5% of the parent’s adjusted taxable income (adjusted for the child support period).
The tribunal used Mrs Ming’s 2017/18 proven child care costs of $3,043.91 ($373.91 + $2,670) as an estimate of her child care costs for the child support period 1 September 2017 to 30 November 2018. The annual income used for Mrs Ming in that child support period was her 2016/17 adjusted taxable income of $36,617, which adjusts to $45,746 over the child support period. Thus Mrs Ming’s child care costs for the child support period 1 September 2017 to 30 November 2018 were 6.65% (3,043.91/45,746 * 100) of her income during that time. Reason 6 is therefore established.
Issue 2: Is it just and equitable to depart from the administrative assessment?
To decide whether it is just and equitable to depart from the administrative assessment, the tribunal must consider the matters required by subsection 117(4) of the Assessment Act, plus any other matters raised in the change of assessment application.
Duty of a parent to maintain a child
Section 3 of the Assessment Act makes it clear that the parents of a child have the primary duty to maintain the child, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain.
Mrs Ming and Mr Ming each have the primary duty to financially support [Child 1]. Neither has any other child.
The proper needs of the child
In determining the proper needs of a child it is necessary to consider the manner in which the parents expected the child to be cared for, educated or trained, and any special needs of the child. Here Mrs Ming argued that she incurred extra costs associated with [Child 1]’s diet and extracurricular activities.
Mrs Ming gave evidence that in around 2015, [Child 1] was experiencing digestive problems and a medical professional suggested that he exhibited the symptoms of a child with mild gluten intolerance which could be managed through diet. This has proved to be the case, with [Child 1] being generally healthy if he restricts gluten.
Mrs Ming provided [Child 1]’s Medicare claims history between 18 September 2015 and 18 September 2018, plus some related receipts, as evidence of medical costs. Over this period, the total costs to Mrs Ming were $1,500.30. However, most of these costs were incurred in the early part of the period. From 1 September 2017, the start of the child support period to which Mrs Ming’s change of assessment application relates, Mrs Ming’s out-of-pocket medical expenses totalled $283.40. Of this amount, over a third was for services unrelated to digestive difficulties ($70 psychological services and $41.55 optical services).
Mrs Ming did not provide evidence about the costs of providing [Child 1] with gluten-free products such as bread and pasta but did report that such items are more expensive than their gluten containing counterparts. Her food costs on her Statement of Financial Circumstances (SoFC) are not unusually high.
While acknowledging that there are costs associated with [Child 1]’s gluten intolerance, the tribunal was not persuaded that those costs were such as to warrant an adjustment to the assessment.
The tribunal found that none of [Child 1]’s various extracurricular activities related to a special need and that they were thus addressed by the administrative assessment of child support.
The tribunal noted evidence Mrs Ming provided after hearing in the form of a 25 August 2016 letter from Mr Ming’s solicitor to Mrs Ming’s solicitor. Mrs Ming stated in her covering email that this letter outlined “Mr Ming’s agreement to go halves in [Child 1]’s medical, educational and extra-curricular costs”. The tribunal found nothing in the letter which indicated Mr Ming’s intention to pay half of [Child 1]’s medical expenses or extracurricular costs.
Income, earning capacity, property and financial resources of the children
[Child 1] has no income, property or financial resources which could be used to support him and his earning capacity is not at issue here.
Income, earning capacity, property and financial resources of Mrs Ming
Mrs Ming is a self-employed, running her own writing business on a flexible, part-time basis. Her adjusted taxable income has increased over the years since her separation from Mr Ming: 2014/15 - $7,065, 2015/16 - $22,885, 2016/17 - $36,617 and 2017/18 - $50,340. The tribunal was satisfied that Mrs Ming is exercising her earning capacity.
Consideration of Mrs Ming’s SoFC and her related evidence showed no indication that she has access to any relevant income, property or financial resources not currently being taken into account in the assessment. Interest ($6,177) on Mrs Ming’s current, post property settlement, substantial funds (more than $240,000) is taken into account in her 2017/18 adjusted taxable income. In terms of liabilities, Mrs Ming has only a small credit card debt of $1,400.
Income, earning capacity, property and financial resources of Mr Ming
Earning capacity
Mr Ming is employed full time [in Occupation 1], working in roster periods of 28 days. In mid-2016, he cut his work by half for four roster periods. Mr Ming gave two reasons for this: first, that he wanted to spend time with [Child 1] before he started school in January 2017 and second that his mental health was impaired because of the ongoing dispute with Mrs Ming about [Child 1]’s care arrangements.
Mrs Ming argued that Mr Ming was not exercising his earning capacity during the four month period of reduced working hours. She did not accept his evidence about the impact of their care-related dispute on his mental health.
The tribunal is required to consider three criteria in determining whether a parent’s earning capacity is greater than their income as used in the administrative assessment (subsection 117(7B) of the Assessment Act):
· Whether the parent:
ois not working despite ample opportunity to do so; and/or
ohas reduced their weekly hours of work to below full-time work; and/or
ohas changed their occupation, industry or working pattern; and
· Whether the parent’s work arrangements are not justified by either their caring responsibilities or their state of health; and
· Whether the parent has not demonstrated that it was not a major purpose of their work arrangements to affect the administrative assessment of child support.
All three criteria must be met before a departure determination can be made to take into account a greater earning capacity than that which a parent is exercising. If the criteria are satisfied, then the tribunal must determine an actual earning capacity.
It is clear the first criterion is met as Mr Ming reduced his hours to less than full time for four months.
It is well-established that legal proceedings in relation to separation are highly stressful in the best of circumstances. Such circumstances do not exist in this case. The 29 November 2017 Reasons for Judgment, written by Judge Harman in relation to care proceedings between Mrs Ming and Mr Ming, refers, in summary, to the intensity of the toxicity of their relationship. In that context, the tribunal accepted Mr Ming’s evidence that his temporary change in working arrangements was justified by his poor mental health. The tribunal therefore found that Mr Ming was exercising his earning capacity in his four months of part-time work.
Income, property and/or financial resources
In addition to his income from employment, Mr Ming receives income from a rental property. The tribunal was satisfied that his income from both sources is properly declared on his income tax return. Mr Ming’s 2017/18 adjusted taxable income is $243,921.
Mr Ming and his father are currently setting up a [specified business] through the Ming Family Trust. The tribunal accepted, on the basis of the 2017/18 Ming Family Trust income tax return and the evidence of Mr Ming, that this enterprise has yet to generate any income.
Mrs Ming argued Mr Ming has access to a financial resource in that he lives rent free in a house owned by his parents. Mr Ming did not dispute this, noting that he pays some of the expenses associated with the house.
The tribunal observed that even if Mr Ming’s adjusted taxable income were to be increased by $40,000 to take account of his rent-free living situation, the difference to his annual child support liability for the period 1 September 2017 to 30 November 2018 would be $163. The tribunal was not persuaded that such an outcome warranted a change to the assessment.
Mr Ming’s SoFC shows no significant income, property or financial resources other than that discussed above. His liabilities are relatively small, consisting of a $13,500 credit card debt and a $1,000 mortgage.
Commitments necessary for self-support or the support of anyone else the parent has a duty to maintain
Mrs Ming and Mr Ming have no duty to maintain anyone other than [Child 1]. Both are currently in reasonable health.
Direct and indirect costs of providing care for the child incurred by the parent entitled to child support
Mrs Ming is [Child 1]’s primary carer. She did not identify any unusually high direct or indirect costs involved in providing care for [Child 1] other than those considered above.
What determination should be made taking into account the above factors?
The tribunal proposes to increase Mr Ming’s annual child support liability by $1,525 for the period 1 September 2017 to 30 November 2018 as a contribution towards meeting the high costs of care for [Child 1] during that time.
Any hardship resulting from the departure determination
The proposed departure determination increases the amount of child support payable by Mr Ming for the period from 1 September 2017 to 30 November 2018. Given Mr Ming’s significant income plus his rent free accommodation, the tribunal was satisfied that he has the capacity to pay the additional child support liability generated by this decision.
Issue 3: Is it otherwise proper to depart from the administrative assessment?
The tribunal considered the impact of its decision on the balance of support provided by the parents on one hand and the taxpayer on the other. It is necessary to decide whether this is a proper outcome given that parents have the primary responsibility to support their children.
Here Mrs Ming receives family tax benefit for [Child 1]. The proposed increase to Mr Ming’s child support liability for the period 1 September 2017 to 30 November 2018 would reduce the amount she is paid for that period as she will receive more in child support. The tribunal was therefore satisfied that this decision is otherwise proper in the circumstances of the case.
DECISION
The tribunal sets aside the decision under review and, in substitution, decides that:
Mr Ming’s annual child support liability for the period 1 September 2017 to 30 November 2018 is increased by $1,525.
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