Mugford and Howson (Child support)

[2018] AATA 1481

Mugford and Howson (Child support) [2018] AATA 1481 (20 March 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/MC012561

APPLICANT:  Ms Mugford

OTHER PARTIES:  Child Support Registrar

Mr Howson

TRIBUNAL:Member R Anderson

DECISION DATE:  20 March 2018

DECISION:

The decision under review is varied so that:

• The rate of child support payable by Mr Howson in respect of the period 1 January 2017 to 31 December 2017 is to increase by $580 and

• The rate of child support payable by Mr Howson in respect of the period 1 January 2018 to 31 December 2018 is to increase by $605.

CATCHWORDS

Child support - Departure determination - Cost of private school fees - Child care costs - Income and financial resources of parents - Decision to depart - Decision under review varied

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. Mr Howson and Ms Mugford are the parents of [Child 1] and [Child 2].  According to records of the Department of Human Services – Child Support (the Department), the child support assessment was registered on 26 December 2012, the Department being responsible for collection of child support from Mr Howson. 

2. Mr Howson was employed as [an Occupation 1] for many years until a work accident in late 2012 resulted in [an] surgery in May 2013 in an attempt to control the significant foot pain he continued to experience.  Mr Howson has been left with neuropathic pain in the right foot which the relevant doctors have continued to attempt to manage, somewhat unsuccessfully.  

3. A prior departure decision in respect of the period 1 July 2014 to 31 December 2014 increased the child support payable to Ms Mugford by Mr Howson in respect of [Child 1] and [Child 2] by $500, representing a 50% contribution to [Child 1]’s private school fees. 

4. Mr Howson lodged an estimate of his income in respect of the 2015/2016 year of nil on 1 July 2015, which was subsequently accepted by the Department.  He ceased to receive workcover payments in early September 2015.  The estimate was reconciled against his adjusted taxable income as recorded in his 2015/2016 tax return following lodgement with the Australian Taxation Office (ATO).  As the recorded income was less than the self-support amount in the 2016 year of $23,752, there was no impact on the rate of child support payable by Mr Howson in the 2015/2016 year, being at the minimum annual rate. 

5. Mr Howson lodged a new estimate in respect of the 2016/2017 year of nil in May 2016, following which the Department granted an application by Mr Howson not to have the fixed annual rate of child support applied to his assessment.  Consequently, the rate of child support payable by Mr Howson remained at the minimum annual rate.

6. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Child Support (Assessment) Act 1989 (the Act) if they consider the administrative assessment results in an unfair amount of child support payable by one parent.  Ms Mugford made such an application on 2 December 2016 on the basis that the administrative assessment at the minimum annual rate of $414 per annum resulted in an unfair assessment, due to the earning capacity of Mr Howson (Reason 8B).  In addition, Ms Mugford claimed that private school fees (Reason 3) and high costs of child care (Reason 6) impacted on her ability to maintain the children. 

7. On 28 March 2017, a delegate of the child support registrar found that Reasons 3 and 8B were established and varied the adjusted taxable income of Mr Howson to $50,000 for the period 1 March 2017 to 30 November 2018.  There was no adjustment in respect of private school fees.  Mr Howson lodged an objection which was subsequently allowed by an objections officer on 5 June 2017.  The objections officer’s decision was recorded as increasing the child support payable by Mr Howson by $535 in the period 1 January 2017 to 31 December 2017 and by $557 in the period 1 January 2018 to 31 December 2018, the equivalent of 50% of private school fees. However, the sentence below the decision noted an annual rate payable of $535.  This is contradictory to the decision.  It is evident that the Department implemented the sentence below the decision, assessing Mr Howson at an annual rate of $535 in respect of the period 1 January 2017 to 31 December 2017, rather than increasing the minimum annual rate of $414 by an additional $535. 

8. On 22 July 2017, Ms Mugford lodged an application to this tribunal for an extension of time to request an independent review of the Department’s decision.  Her request was subsequently granted on 22 September 2017.  While Ms Mugford raised the issue of high child care costs in her initial application, neither decision-maker of the Department considered the ground under Reason 6.  Regardless of whether or not an issue was raised and considered in the initial application, it is open to a party to request the tribunal to consider other relevant issues (Voss & Child Support Registrar & Anor(SSAT Appeal) [2009] FMCAfam 1296). Therefore, the tribunal will also consider firstly whether the child care costs incurred by Ms Mugford are “high” and secondly whether they are such that the costs of the children are significantly affected.

9. The directions hearing was conducted by telephone with Mr Howson and Ms Mugford on 23 January 2018. While Ms Mugford participated by conference telephone, Mr Howson was unable to be contacted.  The tribunal decided to proceed with the directions hearing. Following this hearing, written directions were sent to both parties requiring them to provide further information and documents.

10. The hearing was held on 20 March 2018.  Ms Mugford attended the hearing in person and gave sworn oral evidence.  Mr Howson participated in the hearing by conference telephone giving oral evidence on affirmation.

11. The tribunal considered information in the documents provided by the Department in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 259, documents lodged by Ms Mugford numbered A1 to A49, documents lodged by Mr Howson numbered B1 to B147 and information from Centrelink, numbered C1 to C8. All of the documents were provided to all parties prior to the hearing.  Additional information submitted by Ms Mugford at the hearing was numbered A50.  The information set out the private education costs in respect of the 2018 calendar year.  It was discussed at the hearing and sent to Mr Howson for his information.

ISSUES

1. Calculation of the rate of child support is generally based on the administrative formula using the income recorded by each parent on the most recent tax return lodged with the ATO, or estimates accepted by the Department.  It also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, and the costs of self-support of each parent.  Section 98C of the Act allows for a decision- maker to depart from the usual manner of calculating the rate of child support payable by one parent to the other parent for a child after considering the following issues:

   ·     whether a ground exists to depart from the administrative assessment; and if so

   ·     whether any proposed departure is fair to Ms Mugford, Mr Howson, [Child 1] and [Child 2]; and if so

   ·     whether any proposed departure is fair to the public.

2. The tribunal may make one of the determinations set out in section 98S of the Act.  Section 98S sets out a range of determinations, including varying the annual rate of child support payable, the adjusted taxable income of a parent, or the costs of self-support. 

CONSIDERATION

Issue 1 – Does a ground exist to depart from the administrative assessment?

1. The grounds for departure 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.  However, the tribunal was guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are “out of the ordinary” and set the case apart from the usual case (Gyselman & Gyselman (1992) FLC 92-279 (Gyselman) and Phillippe and Phillippe (1978) FLC 90-433).

2. Ms Mugford told the tribunal that she does not accept that Mr Howson is unable to do some kind of work.  In her view he has a responsibility to financially support his children and $500 per annum certainly does not do that.  She further stated that she also has medical issues but has no option but to find work so as to provide for the needs of [Child 1] and [Child 2]. 

3. Mr Howson gave oral evidence that the medical reports are proof that he is currently unable to work.  He referenced the child support history throughout which he willingly paid the assessed rate in the vicinity of $6,000 per annum and stated that he will willingly pay a higher rate in the future if and when he is able to return to work.  However, in his current predicament it is simply not possible to pay more than the minimum annual rate.  

Reason 6 - High child care costs

1. Subparagraph 117(2)(b)(ib) of the 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. 

2. Subsection 117(3A) of the Act provides that the ground for departure in subparagraph 117(2)(b)(ib) is taken not to exist unless the costs are incurred by a parent and the child is younger than 12 at the start of the child support period. As [Child 1] and [Child 2] are ten and eight years of age, this criterion is not in dispute.  Subsection 117(3B) of the Act provides that child care costs can only be high for the purposes of subparagraph 117(2)(b)(ib) if, during a child support period, they total more than 5% of the amount worked out by dividing the payee’s adjusted taxable income for the period by 365 and multiplying the quotient by the number of days in the period.    

3. The relevant child support periods in this case are 1 September 2016 to 31 July 2017 (334 days) and 1 August 2017 to 31 October 2018 (457 days).  According to Departmental records, Ms Mugford’s adjusted taxable income for the 2015/2016 year, as used in the administrative formula, was $66,557, which consisted of wages (including reportable fringe benefits) and a small amount of dividends.  The tribunal calculates this to equate to $60,904 ($66,557/365 x 334) over the child support period 1 September 2016 to 31 July 2017, of which 5% is equal to $3,045. 

4. Ms Mugford told the tribunal that child care costs consisted largely of after-school care during the school terms with only the occasional before-school care required.  In addition she incurred holiday programme costs during school holiday periods.  Centrelink summaries in respect of the out-of-pocket child care costs incurred by Ms Mugford in the 2016/2017 year and from 1 July 2017 to 15 February 2018 were before the tribunal.  A detailed day-by-day summary from the child care centre was only available for the period 30 October 2016 to 27 January 2017.  Based on the Centrelink records for the 2016/2017 year, the out-of-pocket child care costs after child care benefit and child care rebate are $4,712.  This equates to out-of-pocket costs in a 334 day period of $4,311. Given that this period includes all four lots of school holidays, which incur a higher rate of child care costs, the tribunal is satisfied that the child care costs actually incurred by Ms Mugford in the child support period 1 September 2016 to 31 July 2017 are likely higher than $4,311.  As these costs exceed $3,045, found above to be 5% of Ms Mugford’s relevant adjusted taxable income, it is evident that child care costs in the period 1 September 2016 to 31 July 2017 incurred by Ms Mugford are high as required by the Act. 

5. The next issue for the tribunal to consider is whether special circumstances exist such that the costs of raising the children are significantly affected by the high child care costs. The tribunal calculates that the average child care costs incurred by Ms Mugford in the period 1 September 2016 to 31 July 2017 represent approximately 13% of her after-tax income in the same period. Furthermore, according to the costs of children table, the out-of-pocket child care costs represent just under 50% of the estimated costs of maintaining [Child 1] and [Child 2] of $10,000, based on the adjusted taxable incomes used in the relevant administrative assessment in respect of Mr Howson and Ms Mugford of $0 and $66,557 respectively.

6. Therefore, the tribunal is satisfied that there were high child care costs and that these costs were significant when contrasted to the costs of maintaining the children. Subsequently, the tribunal finds that special circumstances exist in this case in respect of the period 1 September 2016 to 31 July 2017 and the ground at subparagraph 117(2)(b)(ib) of the Act is established.

7. In respect of the child support period commencing 1 August 2017, Ms Mugford stated that she has significantly reduced the child care since September 2017, as she cannot afford it.  The boys now generally go to their grandmother’s home after school and during school holidays.  The school has assisted her in arranging for the boys to be dropped off at the grandmother’s home.  According to Centrelink records the out-of-pocket child care costs in the period 1 October 2017 to 15 February 2018 were $462.  Ms Mugford stated that these costs would remain unchanged to 31 March 2018 and likely not increase going forward due to financial constraints.

8. The adjusted taxable income used in the assessment commencing 1 August 2017 in respect of Ms Mugford was her 2016/2017 income of $57,326.  The tribunal calculates this to equate to $71,775 ($57,326/365 x 457) over the child support period 1 August 2017 to 15 February 2018, of which 5% is equal to $3,588.  Clearly this is well in excess of the costs Ms Mugford is expecting to incur during the relevant period.  As such, the tribunal finds that child care costs in the period 1 August 2017 to 31 October 2018 likely to be incurred by Ms Mugford are not high as required by the Act and a ground for departure does not exist in respect of the period  1 August 2017 to 31 October 2018.

9. As the tribunal is satisfied that one of the grounds before it is established, it has not gone on to consider whether Reasons 3 and 8B are also established as a separate ground.  The relevant issues will be dealt with in detail below under the “just and equitable” criteria.

Issue 2 – Is it fair or “just and equitable” in relation to Mr Howson, Ms Mugford, [Child 1] and [Child 2] to make a particular departure 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 fair as regards the parents and the children 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 have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ incomes and commitments and any hardship that would be caused by departing or not departing from the formula.  The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

2. Section 3 of the 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 (Ashcroft & Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Howson and Ms Mugford have the primary duty to financially support [Child 1] and [Child 2]. However, as discussed at the hearing, this responsibility is in accordance with their capacity to do so.

3. In determining the proper needs of [Child 1] and [Child 2] it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs (subsection 117(6) of the Act).  It was common ground that both boys were in good health and attend [a catholic school] in grades five and three respectively.  While [Child 1] commenced prior to separation of the parents, [Child 2] did not commence until after separation. In response to a question from the tribunal, Mr Howson stated that he agreed to [Child 1] having a Catholic education and despite not signing the enrolment form, expected that [Child 2] would also.

4. As Mr Howson has 0% care of the children, he has incurred no costs other than the assessed child support.  Based on her Statement of Financial Circumstances and oral evidence, Ms Mugford estimates the average weekly costs of the household (after omission of child care costs which she is currently not incurring) to be $1,305, of which she estimates $750 to be attributable to the children.  This included weekly discretionary costs such as extra-curricular activities, holidays, entertainment and gifts in the amount of $141.  Private education costs are recorded as $48, including private tuition fees and capital levy of $22 per week.   Overall, the tribunal calculates the average weekly “necessary” expenses in respect of [Child 1] and [Child 2], as estimated by Ms Mugford to approximate $587 or $30,524 per annum.

5. In considering the proper needs of the children, the tribunal may also have regard to published guidelines as to the needs and the costs of children as used in the administrative assessment (Eades & Cadell (SSAT appeal) [2009] FMCAfam 275).   As noted earlier in these reasons for decision, the costs of children table estimates the costs of two children under 13 years of age with combined incomes of the parents in the vicinity of $66,000 to approximate $10,000.  This is significantly less than the costs estimated by Ms Mugford, even after excluding private school fees.

6. According to evidence before the tribunal from [the catholic school], general tuition fees for [Child 1] and [Child 2] in the 2017 and 2018 years totalled $1,050 and $1,100 respectively.  In addition a compulsory capital levy of $110 per family applied to both years.  In respect of the curriculum fees, as government schools require similar payments, the tribunal does not consider them to be expenses that are “out of the ordinary”.

The income, property and financial resources of each parent

1. Subsection 117(7A) of the Act provides that the decision maker must have regard to “the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent(s) that do not produce, but are capable of producing, income” and disregard “the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child”.   The wife of Mr Howson, [Ms A], has no legal duty to provide for [Child 1] or [Child 2].

2. The major basis for Ms Mugford’s departure application was in respect of the earning capacity of Mr Howson. The tribunal considered the evidence of Mr Howson regarding his income from all sources and his earning capacity. A parent’s earning capacity can only be taken into account in limited circumstances, as set out in subsection 117(7B) of the Act, which requires the tribunal to consider three matters in determining that the parent's earning capacity is greater than is reflected in his or her income used in the administrative assessment.  The first criterion is clearly satisfied, there being no dispute that Mr Howson has decreased his working hours.  However, the second criterion can only be met if the decision-maker is satisfied that the decrease in working hours of the parent is not justified by their state of health or caring responsibilities. 

1. Mr Howson told the tribunal that he worked for the same employer as [an Occupation 1] for six years prior to the accident.  Since that time he has not been fit for work, despite short periods of attempting to return to work in the first year after the accident. Despite the scepticism of Ms Mugford, the medical evidence before the tribunal from pain management specialist, [Dr B] and various Centrelink medical reports from [Dr C] throughout the period overwhelmingly support Mr Howson’s submission that he is unfit to return to work.  As discussed at the hearing, the tribunal considers it appropriate to rely on reports from professional medical practitioners, noting that it is not the place of the tribunal to refute such reports.  Therefore, the tribunal finds that the second criterion under subsection 117(7B) of the Act is not met.  As such, all three criteria cannot be met and it is not open to the tribunal to make an earning capacity decision in respect of Mr Howson.

2. Mr Howson is yet to complete his 2016/2017 tax return.  According to Centrelink records, Mr Howson was granted newstart allowance in April 2017, receiving a total of $2,472 in the period to 30 June 2017.  Ms Mugford contended that Mr Howson was likely working through [Ms A]’s [business].  Based on the medical evidence before it, the tribunal does not accept that this would be possible.  However, it is evident that Mr Howson is receiving benefits from [Ms A]’s [business] (the business).  In response to a question from the tribunal, Mr Howson stated that the business pays for his mobile phone at an average cost of $20 per week. He further stated that he rarely drives.  The [vehicle] is registered in his name, as is the associated [Bank 1] loan.  However, it was evident from the tax returns of [Ms A] that the [vehicle] is fully claimed as a business expense, discussed later in these reasons for decision. 

3. The tribunal finds that the actual income and benefits available to Mr Howson in the 2016/2017 year would likely approximate $3,512 ($2,472 + $1,040).  This is below the self-support amount in the 2016/2017 year of $24,154 and would therefore have no impact on his child support liability as calculated in the administrative assessment.

4. Mr Howson provided evidence that he held a balance in his [superannuation] account at 11 February 2018 of $24,995.  It was also evident that Mr Howson had accessed $10,000 from his [superannuation] account on hardship grounds in late 2017, a condition not easily met.   A component of this will be taxable in the 2017/2018 year, with tax already being withheld.  The tribunal is satisfied that Mr Howson has made no contributions to his superannuation account during the relevant period.

5. The tribunal finds that the actual income and benefits available to Mr Howson in the 2017/2018 year would at most approximate $23,040 ($12,000 + $10,000 + $1,040).  This is still below the self-support amount in the 2017/2018 year of $24,535.  In response to a question from the tribunal, Mr Howson stated that he is keen to return to work.  However, [Dr B] has told him that it will likely be some time before that can occur. 

6. The tribunal considered the assets and liabilities of Mr Howson.  According to his Statement of Financial Circumstances, Mr Howson’s assets consist of the [vehicle], valued at $8,000 and household contents valued at $3,600.  Mr Howson gave oral evidence that he and [Ms A] live in an unencumbered home owned by [Ms A], which was gifted to her by her father several years ago.  His liabilities consist of the [Bank 1] finance in respect of the [vehicle] ($12,000), a 50% share in [Bank 2] loan used to pay off prior credit card debt ($11,500) and current [Bank 2] and [Bank 3] credit card debt ($15,000).   It is evident that Mr Howson’s liabilities exceed his assets, even if an allowance is made for the [vehicle] being used and expensed by the business.  

7. The tribunal considered the evidence of Ms Mugford regarding her income from all sources, her assets and liabilities.  During the relevant period, Ms Mugford has been employed on a casual basis by two different employers.  Ms Mugford’s income consists of wages and dividends and imputation credits from a small parcel of [certain] dividends gifted to her by her mother.  According to her 2015/2016 and 2016/2017 tax returns, the income recorded after reasonable expenses was $66,557 and $57,326 respectively. 

8. Ms Mugford expects her income to approximate that of the 2016/2017 year until the end of April 2018, when her current contract at [Employer 1] is due to expire.  Ms Mugford further stated that she is not optimistic that it will be renewed and she is currently seeking alternative employment options.  Consequently, her financial resources going forward are somewhat unpredictable.   Regardless, the tribunal is satisfied that the annual tax returns as lodged by Ms Mugford with the ATO provide an accurate indication of the financial resources available to her, a conclusion not disputed by Mr Howson.  It is noteworthy that despite the decrease in her 2016/2017 income and a possible further decrease in her 2017/2018 income, given the minimal income of Mr Howson, it will have no impact on the child support liability as calculated under the administrative assessment.  

9. According to Departmental records, Ms Mugford is in receipt of family tax benefit Part A and Part B in respect of [Child 1] and [Child 2] in the amount of almost $320 per week.  This includes rent assistance of $78 per week which will cease at the completion of the apartment she recently purchased off the plan.  For child support purposes, as family tax benefit is an income-tested benefit, it is not considered to be a part of her adjusted taxable income (subparagraph 117(7)(b)(ii) of the Act).  Furthermore, family tax benefit is not defined as a tax-free benefit under section 5 of the Act to be included in adjusted taxable income (paragraph 43(1)(e) of the Act).

10. The tribunal considered the assets and liabilities of Ms Mugford.  According to her Statement of Financial Circumstances, Ms Mugford holds assets valued at $492,150 including the apartment currently under construction ($480,000), a [motor] vehicle ($8,000), [savings] ($1,000), [shares] ($650) and household contents ($2,500). Her sole liability is the mortgage, which had an outstanding balance at 31 December 2017 of $112,274. Ms Mugford gave oral evidence that following payment of further instalments, the overall mortgage liability will rise to $390,000 in the near future.  Therefore, the tribunal calculates the net assets of Ms Mugford to approximate $102,150 and finds accordingly.

11. The tribunal accepts the oral and written evidence of Ms Mugford that she held a combined balance in her [superannuation] accounts at 30 June 2017 of $164,297. The tribunal is satisfied that Ms Mugford makes no voluntary contributions to either of her superannuation accounts.

The commitments of each parent

1. The tribunal considered the evidence in relation to Mr Howson’s expenses. Based on his Statement of Financial Circumstances, his average weekly costs approximate $235.  After adjusting for telephone and motor vehicle costs and including his Bank of Melbourne and credit card loan repayments, the weekly costs are approximately $309 or $16,068 per annum.  While the recorded “discretionary” expenses are negligible at $5 per week, it is evident from the credit card statements that Mr Howson spends an average of $30 a month on cigarettes and regularly accesses movies via Hoyts Kiosk.  This equates to over $50 per month of discretionary spending.  He has no tax liability.  The average weekly costs of Mr Howson are well below the self-support amount allowed for in the administrative formula in the 2017 year of $24,154, largely due to the lack of a rent/mortgage expense.  While an adjustment to a more appropriate level has no impact on the rate of child support payable by Mr Howson under the administrative assessment, it is a relevant consideration overall.

2. The tribunal highlighted its observation that the recorded income of Mr Howson and [Ms A] barely exceeds their estimated expenses.  Mr Howson’s response was that [Ms A]’s family, all of whom live overseas, transfer lump sums of money for assistance. 

3. The tribunal considered the evidence in relation to Ms Mugford’s expenses. Based on her Statement of Financial Circumstances, the estimated average weekly expenses approximate $555. After allowing for discretionary spending of $25, the tribunal calculates her weekly “necessary” costs to be $530 per week, or $27,560.  Ms Mugford gave oral evidence that she suffers from a variety of medical issues.  There was no evidence before the tribunal to indicate that the associated costs are significant.  Based on her most recent payslips, her required weekly income tax expense is $223.  In addition, she pays private health insurance premiums of $37 per week in respect of the children only. The tribunal notes that her mortgage repayments will increase in the near future as she draws down on the remainder of the home loan, while at the same time she will no longer be in receipt of rent assistance.

4. It is clearly evident that Ms Mugford’s financial circumstances are straitened, as are Mr Howson’s.  Centrelink records indicate that both have accessed advance payments to assist with their weekly expenses.  As noted above, Mr Howson has also accessed part of his superannuation under the hardship provisions.   As noted in the case of Hampton & Lightfoot (1997) FLC 92-775, Barblett DCJ referred to a passage from In the Marriage of Stratton (1993) 16 Fam LR 551 where Nicholson CJ noted the “all too common situation of two families having insufficient income to care for their children, even with the benefit of social security payments being paid to both families”. This situation is clearly apparent in the case of Mr Howson and Ms Mugford. However, both parents have an obligation to contribute, according to their capacity, to the needs of the children. Currently, the capacity of Ms Mugford is greater than that of Mr Howson. This may change in the future. Furthermore, while it is understandable for Ms Mugford to want to provide as much as possible for the children, it is open to her to prioritise their “necessary” expenses. Similarly, it is open to Mr Howson to adjust his discretionary spending so as to increase his capacity to assist in maintaining the children.

5. After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Howson and Ms Mugford and the needs of [Child 1] and [Child 2], the tribunal considers it is just and equitable to make a departure determination from the current administrative assessment in accordance with section 98S of the Act. 

6. The employability of Ms Mugford is uncertain in the near future, while it is likely that Mr Howson will remain unemployed for some time yet.  Furthermore, a recently submitted claim by Mr Howson for disability support pension is yet to be processed, which if granted will result in an increased fortnightly amount of income received by Mr Howson. However, even at the maximum rate it will likely have no impact on the child support liability under the administrative assessment, regardless of any decrease in the financial resources available to Ms Mugford.  Consequently, the tribunal does not propose to vary the adjusted taxable income of either parent. This means that the assessed child support liability of Mr Howson will likely remain at the minimum annual rate until such time as he returns to work, which in the circumstances, the tribunal considers to be fair.

7. The tribunal found above that the private education of both [Child 1] and [Child 2] was in accordance with the parents’ expectations.  Furthermore, the costs in the 2017 and 2018 calendar years of $1,160 and $1,210 respectively, together with the out-of-pocket child care costs in the period 1 September 2016 to 31 July 2017 of over $4,000 are such that they impact significantly on the costs to maintain them. The tribunal notes the current discrepancy in financial resources of both parents. However, is also cognisant of the level of expenses being met by Ms Mugford in respect of the children as the sole carer.  Furthermore, Mr Howson has the benefit of the provision of an unencumbered home, significantly reducing his costs of self-support, while Ms Mugford will be meeting significant mortgage expenses to provide a home for the children. 

8. It is also noteworthy that due to the way the Department implemented the decision of 5 June 2017, Mr Howson has been under assessed by between $414 and $420 per annum since 1 January 2017. He has managed to pay $528 per annum in child support since June 2017, in addition to meeting discretionary expenses in excess of $50 per month without increasing his debt.   On balance, the tribunal finds that it is appropriate in the circumstances for Mr Howson to contribute to 50% of the private school fees in respect of [Child 1] and [Child 2] for the 2017 and 2018 calendar years.

9. In respect of out-of-pocket child care fees, the tribunal is cognisant of the fact that these have now ceased and there is no outstanding debt.  Given his current financial circumstances, the tribunal does not find it just and equitable for Mr Howson to incur arrears in respect of a contribution to past child care costs, when he is already incurring arrears in respect of the private school fees.  

10. According to departmental records, Mr Howson is up to date with his child support payments, currently having $20.31 withheld from his fortnightly newstart allowance payments.  The tribunal proposes to make a departure determination whereby the rate of child support payable by Mr Howson in the period 1 January 2017 to 31 December 2017 is to be increased by $580 and in the period 1 January 2018 to 31 December 2018 the rate of child support payable by Mr Howson is to increase by $605.

11. Subsection 117(4) of the Act requires the tribunal to take into account whether any departure determination or failure to make a departure will cause any hardship to the children, the carer, the liable parent or any other person the liable parent has a duty to support.  Ms Mugford acknowledged that if his evidence is true, it would be a struggle for Mr Howson if the rate of child support increased, but there again he has a responsibility to his children.  She further stated that she too struggles to meet the household expenses.  If the child support were to remain at the minimum annual rate of $420, clearly Ms Mugford and the children would experience further hardship. 

12. Mr Howson reiterated that he has no issue with paying child support.  The issue is that he does not currently have the financial capacity to pay what he used to.  Given his discretionary spending, the tribunal is satisfied that Mr Howson has the ability to pay the proposed rate of child support going forward of $1,032 per annum ($427 + $605), or under $20 per week, in addition to meeting a payment arrangement to address the arrears of around $750 to 31 March 2018.

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.  Subsection 117(5) 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.  Paragraph 117(5)(b) of the Act means that 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.

58.Ms Mugford is currently in receipt of family tax benefit Part A and as a sole parent, she receives family tax benefit Part B at the maximum rate. An increase in the child support payable by Mr Howson will only result in a small decrease in her family tax benefit Part A and no cost to the community.  Therefore, the tribunal considers that it is otherwise proper to make the particular proposed determination. 

1. By 31 December 2018, there will be more certainty surrounding the financial circumstances of both parents going forward.   It is open to either party to lodge a further change of assessment application should the future circumstances of either party change significantly from the circumstances upon which this decision is based.

DECISION

The decision under review is varied so that:

• The rate of child support payable by Mr Howson in respect of the period 1 January 2017 to 31 December 2017 is to increase by $580 and

• The rate of child support payable by Mr Howson in respect of the period 1 January 2018 to 31 December 2018 is to increase by $605.