Netter and Malghum (Child support)

[2021] AATA 4491

Netter and Malghum (Child support) [2021] AATA 4491 (19 October 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/SC021620

APPLICANT:  Mr Netter

OTHER PARTIES:  Child Support Registrar

Ms Malghum

TRIBUNAL:  Member P Jensen

DECISION DATE:  19 October 2021

DECISION:

The decision under review is affirmed.

Note: The decision under review increased Mr Netter’s rate of child support payable on account of the children’s special needs.

CATCHWORDS

CHILD SUPPORT – departure determination – special needs of the child – orthodontic expenses significantly affect the cost of maintaining the child – 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

Introduction

1. Mr Netter and Ms Malghum are the parents of [Child 1] who was born in 2007 and [Child 2] who was born in 2008. A child support case was registered in 2009 with what is commonly called the Child Support Agency or CSA.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 1 January 2020 the administrative assessment was based on Mr Netter’s 2018-19 provisional adjusted taxable income of $139,038, Ms Malghum’s 2018-19 adjusted taxable income of $1,399, and Mr Netter’s 27% care and Ms Malghum’s 73% care for the children. Mr Netter was required to pay $19,288 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Ms Malghum lodged a departure application on 3 September 2020. The CSA granted the application and made a departure decision. Mr Netter objected to that decision. An objections officer allowed the objection and decided to increase Mr Netter’s rate of child support payable by $4,348 per annum from 1 December 2020 to 30 November 2022. Mr Netter applied to the Tribunal for further review.

4. Meanwhile, the CSA concluded that a change in care occurred on 16 December 2020. Mr Netter has been recorded as providing 0% care with effect from 16 December 2020. Ms Malghum has been recorded as providing 100% care with effect from 7 April 2021 (which was the date on which the change in care was belatedly reported).

5. I heard Mr Netter’s application for review on 19 October 2021. Mr Netter and Ms Malghum gave sworn evidence by conference phone.

6. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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 this Part; …

A ground for departure

1. Subparagraph 117(2)(b)(ia) of the Act, commonly referred to as Reason 2, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ia)because of special needs of the child …

2. In letters dated 29 July 2020, the children’s orthodontist outlined the children’s orthodontic problems and “prescribed” orthodontic braces. In response to my questions, Mr Netter did not dispute that the children required braces; they had special needs.

3. In May 2020, Ms Malghum paid the orthodontic fees that totalled $18,640. In November 2020 she paid a further $900 to have [Child 1]’s metal braces replaced with ceramic braces so that she could undergo MRI scans. The total cost was therefore $19,540. That cost significantly affected the costs of maintaining the children.

4. Mr Netter paid $1,075 to Ms Malghum in respect of those costs. The parents have not reached an agreement concerning the overall payment of those costs. Those circumstances as a whole constitute special circumstances. Reason 2 is established.

5. It is worth noting that both parents agreed that the objections officer’s decision effectively required Mr Netter to pay half the children’s orthodontic costs[1] and they both agreed that the decision was fair so far as those particular costs were concerned.

   [1]$19,540 / 2 - $1,075 = $8,695, hence the increase of $4,348 per annum over two years.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. An unusual aspect of this case is that both parents intentionally failed to fully and frankly disclose their financial circumstances. The parents adopted those positions when dealing with the CSA. For example, Ms Malghum stated that she would not be disclosing the quantum of an inheritance.[2] Mr Netter stated that he would not be providing copies of his payslips.[3] The parents maintained those positions when the matter reached the Tribunal. For example, they were required to complete and return Statements of Financial Circumstances but they refused to do so. During the hearing, Mr Netter said that he is “a highly private person and [he] wanted it to stay that way.” Towards the end of the hearing, in response to Mr Netter’s submissions concerning Ms Malghum’s financial position, she belatedly disclosed that she had withdrawn all of her superannuation and had received a compensation payment from her superannuation fund. I noted that that information did not appear in the hearing papers. She replied that it did not appear in the hearing papers because she had not completed a Statement of Financial Circumstances.

   [2]Page 343 of the hearing papers.

   [3]Page 106 of the hearing papers. When he made that statement his most recently lodged tax return was for 2014-15.

3. Notwithstanding those difficulties, the following evidence emerged. Mr Netter is employed by [Company 1] on a full-time basis as a [manager]. He said that in or around July 2021 he lodged his tax returns for a number of financial years up to and including 2020-21. He did not provide copies of those tax returns. He said his 2020-21 taxable income was approximately $130,000 per annum. The CSA obtained documentary evidence from his employer which is broadly consistent with him earning such an income.[4] He said he lives in rented accommodation. He indicated that he might have significant savings but he might owe a significant debt. Given the generally unsatisfactory state of both parents’ evidence concerning their financial circumstances, I did not consider it necessary to question Mr Netter further on that issue. Ms Malghum indicated that, to be best of her knowledge, Mr Netter’s earnings from employment were his only source of income.

   [4]Page 175 of the hearing papers.

4. Ms Malghum and her husband operated a business via [a named company]. According to the company’s accountant, Ms Malghum “stepped away from the business” after she suffered a [medical condition], and she is no longer a director of the company.[5] Ms Malghum provided a medical statement from her general practitioner, Dr [A], who stated that she had been unable to work since 20 April 2018.[6] The medical statement in the hearing papers is incomplete and does not include the date that it was signed. During the hearing Ms Malghum said she had located a complete copy. She said it was signed on 30 April 2019. More recently, Dr [B], specialist physician, stated on 2 December 2020:[7]

   This letter is to state that Ms Malghum, given her ongoing symptoms and the side effects from her drugs is unable to hold onto a job and has disabling symptoms on a daily basis.

   [5]Page 352 of the hearing papers.

   [6]Pages 348 to 350 of the hearing papers.

   [7]Page 346 of the hearing papers.

5. Towards the end of the hearing, Ms Malghum said that she had made successful claims for the release of her superannuation and for compensation on the basis that she was suffering from a total and permanent disability. She said that in or around September 2020 she received a superannuation payment of $204,012 and a compensation payment of $225,400. She did not provide any supporting documentary evidence.

6. Mr Netter submitted that Ms Malghum should be assessed on her earning capacity. I referred both parents to the relevant legislative test in subsection 117(7B) of the Act. There is no dispute that Ms Malghum ceased working in April 2018. There is no dispute that she has remained unemployed (on Ms Malghum’s account of events) or largely unemployed (on Mr Netter’s account of events). Ms Malghum submitted that those changes in her circumstances were “justified on the basis of [her] state of health”: subparagraph 117(7B)(b)(ii) of the Act. Mr Netter doubted the accuracy of the medical reports that Ms Malghum had provided but he was unable to take the matter further. Notwithstanding Mr Netter’s concerns, I consider the medical experts’ evidence to be the most reliable evidence on point. I find that Ms Malghum is unable to work due to the state of her health. I cannot have regard to her earning capacity.

7. Ms Malghum’s 2019-20 adjusted taxable income was $4,668. She said she received dividends from shares. She also receives family tax benefit which is not a taxable income. During the course of the hearing, Ms Malghum said she received an inheritance “in two parts” following the passing of her parents. She said she received the first payment in or around September 2019 and the second payment in or around June 2020. She said the payments totalled $472,908 net. As noted earlier, she said she received payments of $204,012 and $225,400 in or around September 2020. She said the money was used to purchase a home; she and her family had previously resided in rented accommodation. She said she had a three to five-year life expectancy. Again, she did not provide any supporting documentary evidence.

8. Ms Malghum provided a summary of the out-of-pocket expenses that she had incurred in respect of the children’s medical costs (excluding orthodontic costs) from 29 July 2020 to 7 August 2021.[8] According to her calculations, the out-of-pocket costs were $4,615, half of which is $2,308, and Mr Netter paid her $540, so a further payment of $1,768 would be required if he were to pay half those out-of-pocket costs. Ms Malghum expects to incur ongoing medical costs in respect of the children’s medical conditions but it is not clear what those costs might be.

   [8]Page 603 of the hearing papers.

9. According to the documentation provided by the CSA, Mr Netter is currently required to pay $25,848 per annum towards the children’s basic costs pursuant to the administrative assessment formula, plus a further $4,348 per annum towards the children’s orthodontic costs.[9] I noted that $25,848 per annum equates to $497 per week and I asked Mr Netter what he considered to be a fair contribution by him towards the children’s basic costs. He said about $500 per week would be fair. I noted, and he confirmed, that he thought it appropriate that he also pay half the children’s orthodontic costs. His answers suggested that he thought the objections officer’s decision was fair. When I made that observation he said that it was unfair that Ms Malghum was providing full-time care for the children. I am not reviewing the CSA’s care decision and I do not have the power to make orders concerning the parents’ care of the children.

   [9]Page 649 of the hearing papers.

10. Towards the end of the hearing, Ms Malghum said she thought the objections officer’s decision was fair but she also submitted that Mr Netter should be required to pay half of the children’s medical costs. She volunteered that she was agreeable to the administrative assessment formula being based on Mr Netter providing 27% care and her providing 73% care, as per their previous pattern of care, even though she was actually providing 100% care. I noted that $21,444 per annum had been payable pursuant to the administrative assessment formula using those previous care percentages.[10] If one were to add $4,348 per annum for orthodontic fees and $1,768 per annum for medical fees, the total would be $27,560 per annum. The decision under review requires Mr Netter to pay $25,848 + $4,348 = $30,196 per annum.

    [10]Page 637 of the hearing papers.

11. As I noted during the hearing, one of the difficulties in this case is that Mr Netter’s financial resources are primarily reflected in his ongoing income and Ms Malghum’s financial resources are, or at least were, primarily reflected in her receipt of lump sum payments. She said the vast majority of those funds were used to purchase a home, and the home was purchased in her husband’s name because she had concerns that Mr Netter might make a claim in respect of a house that was purchased in her name. In any event, Ms Malghum had the capacity to make a contribution to the children’s costs that was fair beyond the capacity that her income alone would suggest. Taking all of those matters into account, I consider it appropriate to require Mr Netter to effectively pay half the children’s orthodontic costs in addition to the administratively assessed rate of child support payable, and to not make a further contribution towards the children’s medical costs. The objections officer’s decision was just and equitable.

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.

2. Ms Malghum receives family tax benefit in respect of her care for children. The objections officer’s decision increased the rate of child support payable, which would normally result in a decrease in Ms Malghum’s rate of family tax benefit. However, the rate of child support payable was increased on account of the children’s special needs, and Centrelink may have a discretion to not decrease Ms Malghum’s rate of family tax benefit in those circumstances: see generally 3.1.7.12 of the Family Assistance Guide. The objections officer did not expressly refer to that matter and it is not clear whether Centrelink considered whether to exercise that discretion. That is a matter that Ms Malghum may wish to raise with Centrelink directly. In any event, the objections officer’s decision was otherwise proper.

DECISION

The decision under review is affirmed.

Note: The decision under review increased Mr Netter’s rate of child support payable on account of the children’s special needs.