Mullen and Mullen (Child support)

[2020] AATA 576

Mullen and Mullen (Child support) [2020] AATA 576 (5 February 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC017245

APPLICANT:  Mr Mullen

OTHER PARTIES:  Child Support Registrar

Ms Mullen

TRIBUNAL:Member K Buxton

DECISION DATE:  05 February 2020

DECISION:

The decision under review is varied so that:

a.   For the period 1 November 2018 to 31 December 2020 Mr Mullen’s adjusted taxable income is increased by $5,200;

b.   For the period 1 February 2019 to 31 December 2019 the annual rate of child support payable by Mr Mullen is increased by $1,688 for contribution to private school fees;

c.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $1,625 for contribution to private school fees; and

d.   For the period 1 February 2019 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $3,000 for contribution to child care costs (in addition to the increases for private school fees).

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the children are significantly affected – financial resources of parents – high costs of child care - 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 Mullen and Mr Mullen are the parents of [Child 1], aged 6, and twins [named], aged 4, in respect of whom a child support case has been registered with the Child Support Agency (CSA). The children are recorded as being in the 86% care of Ms Mullen and the 14% care of Mr Mullen from 9 August 2019. Immediately prior to this Mr Mullen’s recorded care percentages for the children were below 14%. Mr Mullen has sought review by this tribunal of a decision of the CSA about the amount of child support which had been assessed as payable by him to Ms Mullen in respect of the children.

2. The administrative assessments of child support payable by Mr Mullen to Ms Mullen for the children were calculated as follows, at a time when Mr Mullen was recorded as having 0% care of the children:

   a.   For the period 11 September 2018 to 30 June 2019 the annual rate of child support was assessed at $28,257 based on 2018 adjusted taxable income of $134,659 for Mr Mullen and estimated income of $47,502 for Ms Mullen;

   b.   For the period 1 July 2019 to 30 November 2019, the annual rate of child support was assessed at $28,323, based on 2018 adjusted taxable incomes of $134,659 for Mr Mullen and $42,964 for Ms Mullen.

3. The changes to the care arrangements for the children would have had the effect of reducing the administratively assessed rate of child support payable by Mr Mullen to about $22,000 per annum from August 2019 onward.

4. On 19 November 2018 Ms Mullen applied for a departure from the administrative assessment, under Part 6A of the Child Support (Assessment) Act 1989 (the Act), on the basis of the high cost of privately educating the children and on the basis that Mr Mullen’s income and financial resources were not reflected in the administrative assessment of child support. Mr Mullen lodged a cross-application on various bases.

5. On 29 April 2019 a decision maker at the CSA determined that a ground existed to depart from the administrative assessment and decided to vary the administrative assessment as follows:

   a.   For the period 1 February 2019 to 31 December 2020 Mr Mullen’s adjusted taxable income was increased by $5,200;

   b.   For the period 1 February 2019 to 31 December 2019 the annual rate of child support payable by Mr Mullen was increased by $1,688 for contribution to private school fees;

   c.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Mullen was increased by $1,625 for contribution to private school fees.

6. Mr Mullen objected to the decision and, on 12 August 2019, an objections officer allowed the objection and decided that the increase to Mr Mullen’s income, of $5,200, would apply from the earlier date of 1 November 2018 until 31 December 2020 and otherwise remade a decision in the same terms with respect to private school fees.

7. Mr Mullen sought review of the objection decision by the tribunal. A hearing took place on 5 February 2020. Mr Mullen and Ms Mullen participated in the hearing by telephone and gave sworn evidence. In reaching its decision, the tribunal has considered that sworn evidence together with subsection 37(1) of the Administrative Appeals Tribunal Act 1975, the Statement and Documents prepared by the CSA (Exhibit 1) and documentation provided by Mr Mullen (Exhibit A) and Ms Mullen (Exhibit B).

CONSIDERATION

The legislative framework

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

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

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

   b.   departure from the administrative assessment would be:

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

   ii.otherwise proper.

3. Subsection 98C(2) of the Act provides that the grounds for departure are the same as those set out in subsection 117(2). If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the range of determinations, prescribed in section 98S of the Act, which include varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Costs of educating the children

1. The Act provides as a ground for departure (subparagraph 117(2)(b)(ii)):

   (b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected: …

   (ii)  because the child is being cared for, educated or trained in the manner that was expected by his or her parents; …

2. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The tribunal will consider whether the private school fees give rise to special circumstances having regard to the manner of education expected by the parents.

3. Prior to separation the parents signed an enrolment form for [Child 1] to attend a private primary school and established an education fund, into which they each contributed, for the purpose of setting aside funds for the future education of all three children. [Child 1] was initially enrolled to begin his preparatory year in 2018 but, due to his age, his enrolment was moved by the school to commence in 2019. Mr Mullen accepted that both parents expected that [Child 1] (and his siblings) would be educated privately at the primary school. However, Mr Mullen submitted that events after separation brought that expectation to an end before [Child 1] began at the school.

4. In order for Ms Mullen’s application for a departure from the administrative assessment of child support to proceed, the threshold question for the tribunal is whether the children are being educated in the manner that was expected by the parents. The child support legislation does not expressly enquire into the parents’ desire, or preference, or even, expressly, intention. The relevant departure ground is established if, in the special circumstances of the case, the costs of maintaining the child or children are significantly affected because they are being educated in the manner that was expected by the parents: that is, what did the parents expect? The question whether, or to what extent, the parents may be able to contribute towards those costs is relevant to a consideration as to whether it is just and equitable to make a departure. This issue is discussed later in these reasons.

5. Mr Mullen submitted during the hearing that the decision to educate the children privately had been jointly held by the parents during their marriage. Mr Mullen accepted that he signed the relevant enrolment form for [Child 1] to commence school in 2018 (although he denied having signed the enrolment form for a senior school that had been produced to the tribunal by Ms Mullen). In doing so, he clearly expected that enrolling [Child 1] would result in him attending that school. Mr Mullen stated that the parents understood that a private education for the children would involve significant cost. A spread sheet was prepared and a savings scheme was established and contributed to by both parents for the future costs of privately educating [Child 1] and his siblings. Therefore the expectation by both parents that [Child 1] would attend his private primary school was clear prior to separation.

6. Mr Mullen submitted that any expectation he may have had was negated by communications with Ms Mullen, and by her conduct, between mid-2017 and early 2018. Mr Mullen stated during the hearing that, in May 2017, the parties entered into an informal property settlement in which they agreed to split their assets and liabilities. Mr Mullen stated that the education account was not included in that settlement but was to remain separate, albeit in Ms Mullen’s name, in order to fund the children’s private schooling. Mr Mullen further stated that from mid-2017, he had requested details from Ms Mullen of the balance of the education account and he referred the tribunal to an email request from him, and a letter from his solicitors, both dated February 2018, for her to provide the balance of the account. Ms Mullen provided details of the account balance by email dated 27 February 2018. She stated that she did so in response to Mr Mullen’s solicitors’ request and to put an end to those requests. Ms Mullen did not accept that the account was to be treated separately from the parent information property settlement. She stated that the property settlement included all the assets and liabilities and from May 2017 she was entitled to put the account in her name. This is an area of fundamental difference in the evidence before the tribunal from each of the parents.

7. Mr Mullen submitted that between mid-July 2017 and February 2018 he did not know what was occurring with the education account, and therefore could no longer agree to [Child 1] being educated privately as he was uncertain as to how the expenses of this would be met. He stated that he was “not going to be held liable for something he could not get information on”. It is from this uncertainty, he submitted, that the tribunal should conclude that he no longer expected that [Child 1] would be privately educated.

8. However, Mr Mullen’s conduct both up to and after this time is consistent with the expectation that [Child 1] and the other children were likely to be educated privately, as previously agreed, and that he may be called upon to contribute to the costs. Mr Mullen brought proceedings in Court seeking orders with respect to the distribution of the education fund between the parents. About a week prior to the tribunal hearing final Court orders were made by consent which had the effect of dismissing Mr Mullen’s claim to the education fund. Both parties agreed to retain assets and liabilities already in their respective names and Court orders were made reflecting this agreement.

9. When the commencement of [Child 1’s] enrolment was moved from 2018 to 2019 Mr Mullen told Ms Mullen that he would not agree to sign confirmatory forms and submitted that it was his decision, at that time, that [Child 1] not be sent to the private school. Ms Mullen submitted that the parents had a mutual expectation that [Child 1] be enrolled and attend the school and his enrolment had already been accepted, albeit for a different start date, well before Mr Mullen sought to withdraw his consent.

10. The tribunal accepts that Mr Mullen no longer wished to contribute financially to the children’s schooling from his own financial resources. As stated above, the manner in which those costs are met is a separate issue for the tribunal to address. However, having regard to the evidence of the parents identified in these reasons, the tribunal is satisfied that the actions of both parents are consistent with the conclusion that the private education of [Child 1] at his current school is the manner of education for the children that each parent expected. The tribunal is not satisfied that Mr Mullen’s unilateral acts during 2017 and 2018, in requesting information about the education funds and refusing to sign a confirmatory enrolment form, were sufficient to bring an end to the long-held joint expectation of each parent that [Child 1], and his siblings, would attend a private primary school. [Child 1] is being educated in the manner expected by the parents.

11. Ms Mullen produced documents that established that the amount of the compulsory tuition fees and levies for [Child 1] were $3,096 for the 2019 year. The tribunal accepts that tuition fees of that magnitude would fall into the category of costs which parents would not have to expend in the education of a child in the public system. The tribunal is satisfied that the costs of educating [Child 1] are of such a magnitude as to significantly affect the costs of maintaining him, and that special circumstances exist as those fees are not taken into account in the administrative assessment. The tribunal is therefore satisfied that the cost of [Child 1’s] education provides a ground to depart from the administrative assessment.

Just and equitable

1. As the tribunal is satisfied that the costs of privately educating the children provides a departure ground, the next relevant consideration for the tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the proper needs of the children of the assessment, the parents’ financial circumstances and commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Mullen submitted that the issue of the children’s education costs has already been dealt with by the creation of an education account for the children, previously held in joint names and then transferred into Ms Mullen’s name. He further submitted that if he were required to contribute to the costs of private schooling through the child support case he would be required, in effect, to “pay twice”. However, Mr Mullen chose not to advance his application to Court for the return of a portion of the education fund, instead agreeing to orders dismissing that application. The tribunal accepts that the parties have agreed to finality in their property settlement and the tribunal finds, based on the available evidence, that private school fees for the children are a proper need which Ms Mullen is meeting by paying the school fees directly to the school.  In determining just and equitable contributions to the children’s proper needs, including their education, it is necessary for the tribunal to have regard to the financial circumstances of both parents.

3. Mr Mullen is employed on a full-time basis in [an industry]. He reported taxable incomes of $148,273 in 2016/17, $134,659 in 2017/18 and $141,700 in 2018/19. Mr Mullen stated during the hearing that the reduction in taxable income after the 2016/17 year resulted from a change in the way his employer provided him with a vehicle for his use. Up until that financial year Mr Mullen had exclusive use of a work-provided vehicle and, as a result, a fringe benefit was reported and assessed as part of his taxable income. Records show that this fringe benefit was assessed at between $10,000 and $15,000 in previous financial years. From the 2017/18 year onwards Mr Mullen stated that he still had access to a work vehicle and “ordinarily” this was the vehicle assigned to him for use at work, to and from work and on weekends and holidays. However, during the day (and occasionally outside of work hours) the car was available in a pool of work vehicles, meaning that Mr Mullen would still be able to access a vehicle for business and private use, but his employer did not guarantee it would always be the same vehicle. Mr Mullen stated that his employer continued to provide the car and meet all registration, insurance and maintenance costs, but that Mr Mullen would have to pay $50 per fortnight for privately used fuel and pay if he chose to fill the car up on weekends or during periods of annual leave.

4. It is difficult to discern a significant difference in the value, to Mr Mullen, of the vehicle offered under the two schemes. If Mr Mullen was not provided with a work vehicle he would have to meet the costs of acquisition, registration, insurance, maintenance and fuel. These costs could easily amount to $10,000 per annum for an average car if lease or loan repayments are included. Mr Mullen stated that the vehicle ordinarily assigned to him retailed for $50,000. Mr Mullen submitted that the level of financial benefit to him assessed in the decision under review of $100 per week was a reasonable calculation of that benefit, and he did not challenge that finding. Ms Mullen submitted that the value to Mr Mullen was higher, but did not make a submission as to that value. Having regard to the fact that Mr Mullen meets some of his own petrol expenses, and also contributes $50 per fortnight to his employer to defray the cost of the car, the tribunal finds that the supply by his employer of a vehicle for work and private use would provide a financial resource to Mr Mullen of at least $100 per week, and it is proper that this financial resource be reflected in the child support assessment by way of an increase to Mr Mullen’s adjusted taxable income in the amount of $5,200 per annum.

5. Mr Mullen prepared a Statement of Financial Circumstances in which he stated that his liabilities, including a personal bank loan of about $50,000, outstripped his current assets, and that he held vested superannuation with a balance of about $200,000. He reported weekly estimated income of about $2,730 from which $825 in income tax is deducted, and weekly estimated expenses of about $2,270 for the household, including $150 per week in education expenses. Mr Mullen lives with his partner, who is employed and also contributes to those expenses. Mr Mullen’s stated expenses for himself and for the children when in his care were estimated at $1,371 including the school fees which, at $150 per week, would total $7,800 per annum. He is currently assessed (as a result of the decision under review) to contribute to [Child 1’s] school fees through the child support assessment $1,625 per annum, or $31.25 weekly. It is unclear how the balance of the estimated costs for school fees is provisioned or spent.

6. Having regard to the information referred to above, Mr Mullen has the capacity to meet his own essential costs and to assist with those of the children. Although Mr Mullen reported regular expenses in excess of the self-support allowance in the formula, of about $24,000 per annum, there is no basis to conclude that this would not be a reasonable measure of Mr Mullen’s essential needs. Mr Mullen stated in his written submission that he was “going backwards”. However, his income outweighs his expenses, including the currently assessed rate of child support. The child support legislation provides that only the parent’s essential needs are to take precedence over the children’s proper needs, including their education costs.

1. Ms Mullen is employed on a part-time basis in the [named] industry, working three days per week. Ms Mullen reported taxable income of $42,964 in the 2017/18 year and $46,772 in the 2018/19 year. Ms Mullen lives with the children in a mortgaged home. Although Ms Mullen reported regular expenses in excess of the self-support allowance in the formula, of about $24,000 per annum, there is no basis to conclude that this would not be a reasonable measure of Ms Mullen’s essential needs.

2. Ms Mullen stated that, with her income of about $800 per week (from which $156 in tax is deducted), parenting payment, family assistance and child support payments she is able to meet the regular expenses for her and the children, including education and child care costs by managing her expenses closely. Once her income tax and credit card payments are considered, Ms Mullen’s weekly expenses exceed her weekly income by around $100 per week.

3. Mr Mullen has commenced a separate application for a departure on the basis that Ms Mullen has unexercised earning capacity that is not reflected in the child support assessment. Mr Mullen submitted that he did not seek a decision on this issue from the tribunal and that his application should take its course through the CSA. Mr Mullen stated that the basis of his application is that Ms Mullen could work more and chooses not to. Whilst the matter is not directly before the tribunal, and neither parent sought a decision on this issue, the tribunal observed during the hearing that more would be required of Ms Mullen than that she could work more hours.

4. Ms Mullen stated that her out-of-pocket child care costs of about $117 per week, or about $6,000 annually, significantly affect the costs of caring for the children as they amount to a significant portion of her income. If her taxable income of $46,772 were considered over a 15-month child support period, her child care costs would exceed 5% of that income. Ms Mullen submitted that it would be just and equitable for Mr Mullen to make a contribution to those child care costs through the child support assessment. Given Ms Mullen’s straightened circumstances, with the majority of the care of the children and significantly lower income than Mr Mullen, the objects of the child support legislation are met by ensuring that the children can share in the financial resources of each parent. It would be just and equitable for Mr Mullen to contribute equally to the high costs of child care. Mr Mullen submitted that these costs were not significant, describing these costs during the hearing as “nothing”, because he had previously been required to pay child care for the children at a higher rate than that paid by Ms Mullen. When asked whether it would be just and equitable for Mr Mullen to contribute to these costs through an increase to the child support assessment, Mr Mullen submitted “Absolutely not. How is it my fault?” The tribunal is to consider whether a departure in the proposed terms is just and equitable. The cost of child care is about 16% of Ms Mullen’s net income and therefore the tribunal accepts that such costs impose a significant financial burden on her household finances. The tribunal is satisfied that it would be just and equitable to increase the rate of child support payable by Mr Mullen by $3,000 per annum by way of a contribution towards the child care costs from his available financial resources. A departure for the period 1 November 2018 (the month in which the departure application was lodged) until 31 December 2020 will provide a reasonable period of certainty for the parents, and the tribunal therefore proposes a departure in those terms.

5. The tribunal is satisfied, based on the available evidence, that the taxable incomes of the parents used in the administrative assessment of child support are reflective of the incomes available to the parents, save that Mr Mullen’s income should be increased by $5,200 per annum on account of the financial resources available to him of an employer-provided vehicle. The tribunal is satisfied that it would be just and equitable to increase the adjusted taxable income used in the administrative assessment of child support for Mr Mullen in order to reflect the tribunal’s findings for the period 1 November 2018 (the month in which Ms Mullen’s departure application was lodged) until 31 December 2020, in order to provide a reasonable period of certainty for the parents, and therefore proposes a departure in those terms.

6. The tribunal is further satisfied that it is just and equitable to increase the amount of child support payable by Mr Mullen to Ms Mullen on account of the children’s private school fees. Ms Mullen meets the costs directly to the school and the tribunal is satisfied that Mr Mullen has capacity to assist with those costs by an increase in his child support assessment equivalent to half of those costs. The objections officer has correctly calculated 50% of the costs of the 2019 year, when applied across the 11-month period from 1 February 2019 to 31 December 2019, as $1,688 per annum for that period and, allowing for a 5% increase in school fees, at $1,625 per annum for the 2020 calendar year. The tribunal is satisfied that it would be just and equitable to make a departure in those terms on account of the school fees met by Ms Mullen.

7. Ms Mullen stated that she also meets many of the other school-related expenses, including for books and uniforms. Ms Mullen further stated that she meets all of the ongoing expenses for all three children other than the essential costs of food and shelter provided by Mr Mullen when the children are in his care. Ms Mullen stated, by way of example, that she meets the cost of every haircut, prescription medication and clothing. As these are expenses which most parents would meet for their children, they are already within the contemplation of the costs of the children in the child support assessment. The assumption is that the costs are correctly distributed by the determination of the care percentages each parent is having for the children. It is open to Ms Mullen to report a change in care if she wished to assert that Mr Mullen does not incur costs for the children in a way that is reflected in the recorded care percentages for the children.

8. The tribunal considers that a departure from the administrative assessment on the terms provided would be just and equitable having regard to the relevant considerations set out above.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child. The rate of child support should reflect the obligation of both parents to take financial responsibility for the children. The tribunal is satisfied that the departure proposed is therefore proper.

CONCLUSION

1. As the tribunal has reached a decision in the same terms as that under review in respect of Mr Mullen’s income and the private school fees, and has also decided to depart in respect of child care costs, the decision is under review is varied as follows:

   a.   For the period 1 November 2018 to 31 December 2020 Mr Mullen’s adjusted taxable income is increased by $5,200;

   b.   For the period 1 February 2019 to 31 December 2019 the annual rate of child support payable by Mr Mullen is increased by $1,688 for contribution to private school fees;

   c.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $1,625 for contribution to private school fees; and

   d.   For the period 1 February 2019 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $3,000 for contribution to child care costs (in addition to the increases for private school fees).

DECISION

The decision under review is varied so that:

a.   For the period 1 November 2018 to 31 December 2020 Mr Mullen’s adjusted taxable income is increased by $5,200;

b.   For the period 1 February 2019 to 31 December 2019 the annual rate of child support payable by Mr Mullen is increased by $1,688 for contribution to private school fees;

c.   For the period 1 January 2020 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $1,625 for contribution to private school fees; and

d.   For the period 1 February 2019 to 31 December 2020 the annual rate of child support payable by Mr Mullen is increased by $3,000 for contribution to child care costs (in addition to the increases for private school fees).