Nicken and Nicken (Child support)

Nicken and Nicken (Child support) [2022] AATA 4101 (23 August 2022)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2021/MC023031
APPLICANT:  Ms Nicken
OTHER PARTIES:  Child Support Registrar
Mr Nicken

TRIBUNAL:Member R Anderson
DECISION DATE: 23 August 2022
DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that in respect of the period 1 May 2020 to 31 October 2024, the annual rate of child support payable by Mr Nicken to Ms Nicken in respect of [Child 1] and [Child 2] is varied to nil and the annual rate of child support payable by Ms Nicken to Mr Nicken in respect of [Child 1] and [Child 2] for the period 1 May 2020 to 31 October 2024 is also reduced to nil.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established – decision to depart - 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 omitted 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

Mr Nicken and Ms Nicken are the separated parents of [Child 1] and [Child 2]. According to the records of Services Australia – Child Support (the Agency), the child support assessment was registered on 16 October 2018. Mr Nicken was the parent liable to pay child support to Ms Nicken in respect of the children. The Agency was responsible for collection of child support from Mr Nicken.
On 25 December 2020, a child support assessment whereby Ms Nicken became the parent liable to pay child support to Mr Nicken in respect of the children was registered with the Agency. The Agency accepted responsibility for collection of child support from Ms Nicken commencing 28 January 2021.
The child support liability is generally calculated in accordance with the administrative assessment, as provided in the Child Support (Assessment) Act 1989 (the Act). The calculation is based on the income recorded by each parent in their most recently completed tax returns, as lodged with the Australian Taxation Office, or the most recent estimate accepted by the Agency. It is open to either parent to lodge an application for a departure from the administrative assessment under Part 6A of the Act if they consider the administrative assessment results in an unfair amount of child support payable by one parent.
The administrative assessment at 25 December 2020 was based on the income recorded for Mr Nicken and Ms Nicken on their most recently lodged tax returns, being 2019/20, of $6,353 and $121,536 respectively. This resulted in child support payable by Ms Nicken to Mr Nicken in respect of the children at the annual rate of $6,344.
On 23 August 2021, Ms Nicken lodged a departure application (change of assessment) on the basis that the administrative assessment produced an unfair outcome due to the income, property and financial resources available to Mr Nicken and his earning capacity (Reasons 8A and 8B).
On 5 October 2021, a delegate of the Child Support Registrar refused to depart from the administrative assessment, finding that no ground was established to warrant a departure.
On 25 October 2021, Ms Nicken lodged an objection to the decision of 5 October 2021 and on 14 December 2021, an objections officer decided to allow the objection as follows:
·      the annual rate of child support payable by Ms Nicken to Mr Nicken is varied to $918 in respect of the period 28 January 2021 to 31 December 2021;
·      the adjusted taxable income (ATI) of Mr Nicken is varied to $88,000 in respect of the period 1 January 2022 to 30 November 2022; and
·      the ATI of Ms Nicken is varied to $197,000 in respect of the period 1 January 2022 to 30 November 2022.
It is noteworthy that the variations to the ATI of each parent resulted in the annual rate of child support payable by Ms Nicken at 1 January 2022 remaining at $918.
Ms Nicken lodged an application to this tribunal on 29 December 2021, requesting an independent review of the Agency’s decision. The directions hearing was conducted by telephone with Mr Nicken and Ms Nicken on 3 May 2022. Both parties advised of their preference to revisit discussions regarding a child support agreement prior to the hearing proceeding.
Following further discussions, the negotiation process proved unsuccessful. Consequently, directions were made to both parties requiring them to provide further information and documents prior to hearing.
On 23 August 2022 both parties participated in the hearing by conference telephone and gave oral evidence to the tribunal on affirmation. The tribunal considered information in the documents provided by the Agency in accordance with the Administrative Appeals Tribunal Act 1975 numbered 1 to 336 and 337 to 368 and documents lodged by Ms Nicken numbered A1 to A50. Mr Nicken failed to comply with the directions.

ISSUES

When calculation of the rate of child support is based on the usual administrative formula it also takes into account, relevantly, factors such as the number of children, the level of care provided, the costs of the children, the costs of self-support of each parent and the income 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 Mr Nicken, Ms Nicken and the children; and if so
·         whether any proposed departure is fair to the public.

CONSIDERATION

Both parties confirmed at hearing their agreement to an annual rate of child support being nil in respect of both parents, as was the proposal discussed during earlier negotiations. However, there appears to have been some confusion regarding an additional paragraph reiterating the equal sharing of education costs as set out in the court orders delivered at the Federal Circuit Court of Australia in Melbourne on 1 May 2020 (the Orders).
In response to a question from the tribunal, both parties expressed their preference for the tribunal to make a decision in respect of the period commencing 1 May 2020 until a terminating event occurs in relation to [Child 2], whereby neither parent is liable to pay child support. The tribunal discussed the requirement for the tribunal to examine the financial circumstances of the parties, the costs of self-support and the costs and needs of the children in order to be satisfied that such a decision would be just and equitable to the parents and to the children.
Based on the ATI of Ms Nicken in 2020/21 in the amount of $214,124, which is not in contention, Mr Nicken’s ATI would need to be in the vicinity of $103,000 before a weekly rate of child support approached $0 in respect of each parent. Furthermore, as discussed at hearing, given the level of income recorded on the 2020/21 tax return of Ms Nicken, once Mr Nicken’s income exceeded $35,000, according to the Costs of the Children Table, the combined costs of [Child 1] and [Child 2] are capped at the maximum level of $37,506. The question then becomes, based on the registered care of [Child 1] and [Child 2], which from 28 January 2021 is 37% to Mr Nicken and 63% to Ms Nicken, what is a fair proportion of the costs of the children that each parent should meet.

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

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 and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).

Reasons 8A and 8B – the earning capacity, income, property and financial resources of each parent

Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by either parent because of the available income, property and financial resources available to them. The Act goes on to state in subsection 117(7A) 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 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 tribunal considered the financial circumstances of the parties. In the case of Ms Nicken, the tribunal is satisfied that her income, benefits and financial resources are limited to the amount received from her employment as [an occupation]. Given her role, other than donations which are considered to be discretionary in nature, the expenses recorded in her tax returns are unremarkable. According to her 2019/20 tax return the taxable income of Ms Nicken is recorded at $180,758. According to her 2020/21 tax return the taxable income of Ms Nicken is recorded at $214,124. According to her payslip at 30 June 2022, Ms Nicken’s gross income in 2021/22, including quarterly commissions, was $234,501. Assuming similar deductions to prior years, the tribunal estimates her 2021/22 ATI to likely be in the vicinity of $212,500. The tribunal finds accordingly.
The tribunal considered the assets and liabilities of Ms Nicken. According to her Statement of Financial Circumstances, completed on 5 January 2022, Ms Nicken’s home is valued at $1,800,000 with a corresponding mortgage of $1,150,000. Other assets consist of a [BANK 1] offset account which at 30 June 2022 recorded a balance of $152,836, [a vehicle] ($10,000) and household contents ($20,000). No other liabilities exist. Accordingly, the tribunal calculates the net asset base of Ms Nicken to approximate $833,000.
The tribunal accepts the written evidence of Ms Nicken that she holds a balance in her [Super] account of $318,000. The tribunal is satisfied that no additional personal contributions have been made by Ms Nicken in recent times.
Ms Nicken gave oral evidence that she is generally in good physical health, as are the children. Ms Nicken estimated the average weekly costs of the household to be $2,595, of which $1,130 related to Ms Nicken. This included discretionary costs such as holidays, books and magazines of $55. Accordingly, the tribunal calculates her “necessary” costs, as estimated by Ms Nicken, to approximate $1,075, or $55,900 per annum. This is significantly more than the costs of self-support as used in the administrative formula in 2022 of $27,063.
In addition, Ms Nicken also meets private health insurance premiums for her and the children in the amount of $62 per week. The tribunal’s observation that Ms Nicken is able to meet the weekly discretionary and necessary expenses of the household without incurring further debt was undisputed.
The tribunal then considered the financial circumstances of Mr Nicken. As noted above, Mr Nicken failed to provide any of the documents he was directed to provide. In response, Mr Nicken told the tribunal that he was struggling to cope with the process. The directions issued to Mr Nicken did not require the provision of complex or obscure documents. The tribunal does not accept that Mr Nicken did not have the ability to provide the required documents, at the very least a completed Statement of Financial Circumstances.
According to Agency records, Mr Nicken is yet to lodge his 2019/20 and 2020/21 tax returns. Consequently, commencing 1 April 2021, Mr Nicken’s ATI was deemed to be $6,512 and commencing 1 July 2022, his ATI is based on two thirds of the male total average weekly earnings (MTAWE), being $54,125, in accordance with subsection 58(5) of the Act.
Mr Nicken gave oral evidence that prior to separation he was no longer employed. Instead, he had entered the business of [Business 1]. He further stated that following separation he no longer had the available capital to continue, resulting in him doing odd jobs through his sole trader business for minimal income and relying on funds from the property settlement to meet the weekly household expenses. He found it difficult to secure employment and eventually took on the role of [Role 1] with [a] company in late March 2022. He told the tribunal that his gross annual salary is $76,000 with no provision for motor vehicle, allowances or any other benefits. His role includes commission payments. However, to date he has not qualified to receive any commissions.
A parent’s earning capacity can only be taken into account in limited circumstances, as set out in subsection 117(7B) of the Act. This section 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. It is common ground that Mr Nicken ceased employment prior to separation. According to Agency records, Mr Nicken’s ATI has been below $10,000 since 2017/18. Given the evidence of the parties discussed above, the tribunal is satisfied that Mr Nicken’s decision to cease employment was not done so with his major purpose to affect the administrative assessment of child support (paragraph 117(7B)(c)). Therefore, as the third criterion is not met, all of the required criteria cannot be met and it is not open to the tribunal to determine an earning capacity in respect of Mr Nicken.
The tribunal considered the assets and liabilities of Mr Nicken. He gave oral evidence that his assets consist of a bank account holding approximately $500,000. This balance is largely from the property settlement after paying in excess of $100,000 in legal fees and using it to meet day-to-day living expenses prior to commencement of his employment in late March 2022. Other assets consist of [vehicles], with an outstanding balloon payment of $15,000 which he intends to payout imminently and retain both vehicles. In addition, he has average household contents. Mr Nicken told the tribunal he has no other liabilities. Accordingly, the tribunal calculates the net asset base of Mr Nicken to approximate $550,000 to $600,000 and finds accordingly.
The tribunal accepts the oral evidence of Mr Nicken that he holds a balance in his self-managed superannuation fund of approximately $145,000 and since late March 2022 has also become a member of a retail fund to accept his employer contributions. The tribunal is satisfied that no additional personal contributions have been made by Mr Nicken in recent times.
Mr Nicken gave oral evidence that he is generally in good physical health. In response to a question from the tribunal, Mr Nicken stated that he is now able to meet the weekly expenses of the household from his salary without the necessity to access further funds from his savings or to incur additional debt. His weekly expenses include rental expenses of $553. As annualised rent alone exceeds the costs of self-support as used in the administrative formula in 2022 of $27,063, as in the case of Ms Nicken, it is evident that Mr Nicken meets weekly discretionary and necessary expenses that are significantly more than the costs of self-support and the tribunal finds accordingly.
Based on the findings above, it is clear that the available income and financial resources of Mr Nicken from late March 2022 is significantly higher than the ATI used in the administrative assessment of $6,512 and $54,125. It is also clear that the availability of significant financial resources following property settlement enabled him to meet household expenses that far exceeded his ATI used in the administrative assessment of around $6,500 from prior to 1 May 2020. Based on three months’ worth of bank statements, the Agency found that income and financial resources required to meet the annualised expenses of Mr Nicken would approximate $88,000. As noted above, income and financial resources in the vicinity of $103,000 would result in the agreed position of no parent paying child support to the other.
In the absence of documentation provided by Mr Nicken and the outcome proposed by the parties, the tribunal is satisfied that it is reasonable to conclude that Mr Nicken has had available income and financial resources approximating $103,000 and finds accordingly.
In addition, it is evident that Ms Nicken’s available income in respect of 2020/21 and 2021/22, as found above, in the amount of $214,124 and $212,500 respectively, also exceeds the ATI used in the administrative assessment of $121,536 and $124,574 respectively.
From 1 May 2020, the administrative assessment, based on the income recorded on the 2019/20 tax returns of the parties, results in an annual child support liability payable by Mr Nicken of $2,934. This was based on the 2018/19 taxable incomes of Mr Nicken and Ms Nicken in the amounts of $6,353 and $121,536 respectively. Commencing 25 December 2020, Ms Nicken became the payable parent as a result of Mr Nicken being attributed with an increased level of care of the children, the annual rate of child support payable by Ms Nicken to Mr Nicken being assessed at $6,344.
In comparison, based on the tribunal’s findings in respect of the income, benefits and financial resources available to Mr Nicken and Ms Nicken in 2020/21 and 2021/22, as discussed above, the tribunal is satisfied that the annual rate of child support payable by Mr Nicken until 27 January 2021, when his care of the children increased to 37%, is around $1,800. From 28 January 2021, the tribunal is satisfied that the annual rate of child support payable by Ms Nicken as the parent liable to pay child support to Mr Nicken, is reduced to approximately nil.
Consequently, the tribunal is satisfied that the administrative assessment has not produced a fair outcome from 1 May 2020. Accordingly, the tribunal finds that special circumstances do exist in this case. As such, the tribunal is satisfied that a ground for departure is established in relation to subparagraph 117(2)(c)(ia) of the Act.

Issue 2 – Is it fair or ‘just and equitable’ in relation to Mr Nicken, Ms Nicken and the children to make a particular departure determination?

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’ assets, liabilities, income 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).

The needs of the children

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 and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Nicken and Ms Nicken have the primary duty to financially support [Child 1] and [Child 2] and contributing to their costs should take priority over all other costs other than their ‘necessary’ costs of self-support.

In determining the proper needs of the children, subsection 117(6) of the Act also requires the tribunal to have regard to the manner in which the parents expected the child to be cared for, educated and trained as well as a consideration of any special needs of the child.
It was undisputed that the girls are generally in good health and attend a government school. Both parents contribute equally to the education costs of the children, albeit Ms Nicken maintains that she continues to incur the full costs in respect of uniforms, excursions and extra-curricular activities. Mr Nicken gave oral evidence that he also incurs costs for holiday programmes, camps and the like.
Based on the tribunal’s estimates of the ATIs of Mr Nicken and Ms Nicken discussed above, the Costs of the Children Table estimates that the average costs of [Child 1] and [Child 2] are capped at the maximum amount in 2021 of $37,505 and in 2022 of $38,565. While this is less than the costs estimated by the parents it is also evident that a significant level of discretionary expenses are incurred in respect of the children and a choice in a quality of lifestyle that corresponds to the increased estimated costs.

The earning capacity, income, property and financial resources and commitments of each parent

The tribunal found earlier that Mr Nicken likely had access to income and financial resources approximating $103,000. Going forward, no evidence was provided to suggest that this situation would change in the short term.
In respect of Ms Nicken, the tribunal found earlier that she had access to income, benefits and financial resources in excess of $200,000 per annum. The tribunal is also satisfied that her tax returns going forward will provide an accurate reflection of her available income, benefits and financial resources. Given that Ms Nicken has the majority care of the children, a minor discrepancy in her ATI in the next tax year will have little impact on the child support assessment.
While Ms Nicken has a more favourable asset base than Mr Nicken, this is due to her decision to purchase a home while Mr Nicken has accessed his property settlement funds to meet his everyday expenses.

Conclusion

After consideration of the income, resources, benefits and assets together with the commitments and liabilities of Mr Nicken, Ms Nicken and the needs of the children, 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. 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.
The tribunal may not make a determination in respect of any period more than 18 months earlier than the date on which the application for a change in the way the child support liability is calculated was made (subsection 98S(3B)). In this case, Ms Nicken lodged a change of assessment application in August 2021. Therefore, the tribunal is limited to consideration of backdating a departure decision to 23 February 2020.
While neither party availed themselves of the opportunity to lodge an earlier departure application, the tribunal carefully considered the preference of the parties to commence a departure decision from 1 May 2020. On balance, the tribunal is satisfied that it is just and equitable to depart from the administrative assessment as requested by the parties, such that neither parent is liable to pay child support to the other from 1 May 2020.
In relation to an end period, the tribunal is cognisant of the preference of the parties to extend the departure decision until a terminating event occurs in relation to the child support assessment applicable to [Child 2]. This is some 11 years into the future. The tribunal is not satisfied that sufficient reliability exists in respect of the financial circumstances of the parties to warrant an extended departure decision. Accordingly, the tribunal proposes to end the departure decision on 31 October 2024.
The tribunal proposes to vary the annual rate of child support payable by Mr Nicken to nil from 1 May 2020 to 31 October 2024 and vary the annual rate of child support payable by Ms Nicken to nil from 1 May 2020 to 31 October 2024. This decision does not allow for any changes in care. However, the parties gave oral evidence that they do not expect any changes to occur in respect of care arrangements for the children in the short-term,
Subsection 117(4) of the Act requires the tribunal to consider 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.
Both parties gave oral evidence that the proposed departure decision is unlikely to cause hardship to either parent or the children. Furthermore, both parties agreed that, given their current financial circumstances, the administrative assessment was also unlikely to cause hardship to either parent or the children. The tribunal is satisfied that neither the parties nor the children will experience hardship on account of the annual rate of child support payable by either parent reducing to nil.
Both parties accepted that the proposed departure decision would result in an increase in the balance of overpayment of child support made by Mr Nicken. There was also an expectation on the part of both parents that the overpayment would be returned by Ms Nicken to Mr Nicken. The outstanding balance will be recalculated by the Agency following implementation of the tribunal’s departure decision. However, collection of child support is under the control of the Agency and not within the jurisdiction of this tribunal. Furthermore, it is noteworthy that there is a portion of time prior to 28 January 2021 where the responsibility of collection of child support did not lie with the Agency. As such, the responsibility of balancing out any overpayment by Mr Nicken in full will lie with the parties.

Issue 3 – Is it otherwise proper to make a particular departure determination?

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.
In this case there is no evidence before the tribunal to suggest that either party is in receipt of benefits or allowances from Centrelink and/or the Family Assistance Office. As such, the tribunal’s decision will have no impact on the public purse. However, it is open to Mr Nicken to pursue this avenue of assistance. Therefore, the tribunal considers that it is otherwise proper to make the particular proposed determination.
As discussed at hearing, 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. In particular, in respect of the level of care attributed to each parent in respect of the children.

DECISION

[2022] AATA 4101

23 August 2022

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Judicial Review

Remedies

Statutory Construction