Olford and Harloe (Child support)

[2022] AATA 5015

Olford and Harloe (Child support) [2022] AATA 5015 (19 December 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC024174

APPLICANT:  Mr Olford

OTHER PARTIES:  Child Support Registrar

Ms Harloe

TRIBUNAL:Senior Member D Benk

DECISION DATE:  19 December 2022

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides:

·     For the period 19 October 2021 to 31 July 2023, Mr Olford’s adjusted taxable income is set at $84,014.

·     For the period 10 February 2022 to 31 July 2023, Ms Harloe’s adjusted taxable income is set at $80,600.

·     For the period 1 January 2022 to 31 December 2022, the annual rate of child support payable by Mr Olford is increased by $2,642 (being his share of [Child 1’s] Catholic school fees).

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - 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

1. On 9 November 2021, Ms Harloe asked the Child Support Agency (the Agency) to reassess the level of child support payable for their two children[1] by Mr Olford on the basis the administrative assessment (fixed annual rate of $2,934 per annum from 19 October 2021 to 30 June 2022) did not reflect the costs of raising the children in the manner mutually agreed (private education) and nor did it reflect Mr Olford’s income and/or earning capacity.

   [1] [Child 2](born [July] 2004) and [Child 1] (born [October] 2007).

2. Following multiple internal reviews, the Agency determined there were grounds for departure from the administrative assessment established and that it was just, equitable and otherwise proper to assess child support as follows:

   - For the period 18 October 2021 to 14 January 2022, Mr Olford’s adjusted taxable income is set at $124,187.

   - For the period 15 January 2022 to 31 July 2023, Mr Olford’s adjusted taxable income is set at $51,433.

   - For the period 10 February 2022 to 31 July 2023, Ms Harloe’s adjusted taxable income is set at $80,600.

   - For the period 1 January 2022 to 31 December 2022, the annual rate of child support payable by Mr Olford is increased by $2,642 (being his share of [Child 1’s]’s Catholic school fees).

   - For the period 1 January 2023 to 31 December 2023, the annual rate of child support payable by Mr Olford is increased by $3,830 (being his share of [Child 1’s] Catholic school fees).[2]

   [2] Extracted from Folio 31 of the papers.

3. The matter was heard on 19 December 2022 when both parties appeared via conference telephone. In the course of the decision making, the tribunal had regard to the oral evidence, the documentary evidence and the law.

CONSIDERATION AND ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.

2. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Assessment Act. The liable parent or carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process. The Registrar, and the tribunal standing in the place of the Registrar, must be satisfied that:

   (i)there is a ground to depart from the administrative assessment of child support;

   (ii)it is just and equitable to depart; and

   (iii)it is otherwise proper to depart.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground is prefaced by the term “in the special circumstances of the case”. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279, the Full Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

4. 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 determinations prescribed in section 98S of the Assessment Act.

CONSIDERATION

Issue – Is there a ground established to depart from the administrative assessment of child support?

1. One of the grounds raised in this matter relates to the education expenses of [Child 1]. Subparagraph 117(2)(b)(ii) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by their parents. (Reason 3).

2. At hearing, Mr Olford confirmed both parties had mutually intended that their son be educated privately, and since seeking a review, both have come to an agreement regarding school fees which sees each parent pay half of the fees directly to the school from January 2023. Ms Harloe confirmed this. The only issue the tribunal needs to concern itself with is liability for fees for the 2022 school year.

3. Given both parties agree [Child 1] was/is to be educated privately and the costs of that education are significant (that is, not incorporated into the general administrative formula) and therefore considered special, the tribunal finds this ground of departure has been established. Despite the agreement, the tribunal notes the documentary evidence of mutual intention to educate privately in the papers via various court orders and agreements and so finds.[3]

   [3] Folios 610 and 641 refer.

4. However, departure from the administrative formula is not automatic. The tribunal must now assess whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to depart from the administrative assessment.

5. When assessing whether it is just and equitable to depart from the administrative assessment, subsection 117(4) of the Assessment Act requires the consideration of the following:

   (4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

   (a) the nature of the duty of a parent to maintain a child (as stated in section 3); and

   (b) the proper needs of the child; and

   (c) income, earning capacity, property and financial resources of the child; and

   (d) the income, property and financial resources of each parent who is a party to the proceeding; and

   (da) the earning capacity of each parent who is a party to the proceeding; and

   (e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i) himself or herself; or

   (ii) any other child or another person that the party has a duty to maintain; and

   (f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g) any hardship that would be caused:

   (i) to:

   (A) the child; or

   (B) the carer entitled to child support;

   by the making of, or refusal to make, the order; and

   (ii) to:

   (A) the liable parent; or

   (B) any other child or any other person that the liable parent has a duty to support;

   by the making of, or refusal to make, the order; and

   (iii) to any resident child of the parent (see subsection (10)) by the making of, or refusal to make, the order; …

6. Having considered all of those factors, the tribunal finds on the basis of the evidence before it:

   (a)Mr Olford and Ms Harloe have the duty to maintain both [Child 2] (who ceased being a child of the assessment [in] December 2022 – having attained the age of 18 and completed her secondary education) and [Child 1].[4] After Christmas, the parties will share care of [Child 1] (that is, one week on and one week off). The tribunal cannot make any findings in relation to care and each party will need to approach the Agency to notify it of the care change once the pattern of care is established. The tribunal further finds that the duty to maintain the children is not of lower priority than each parent to maintain themselves.

   [4] Section 3 of the Assessment Act refers.

   (b)Both [Child 2’s] (until [December] 2022) and [Child 1’s] proper needs, being the ordinary accommodation, clothing, health, material, educational and lifestyle needs of children their age, require the support of both parents. [Child 1] has increased costs on account of his private education which the parties now agree to meet equally. In 2022 the cost of that education was $7,296. As now agreed, Mr Olford’s share is $3,648. As the records show he has already part paid $1,006.50, it is appropriate to increase the annual rate of child support for the 2022 school year by the balance.

   [Child 2] has been diagnosed with autism and social phobia and this required an intensive investment of Ms Harloe’s time, resulting in her reducing her working hours over the last few years to intensively support [Child 2] who has remained in receipt of an NDIS package. [Child 2] successfully completed her secondary education with this intensive support and is now undecided about the immediate future, however the evidence of both parents reflected support and understanding.

   (c)The children, who at the time of the change of assessment application were under the age of 18, have no income, earning capacity, property or financial resource that would assist in making provision for their proper needs.

   (d)& (da) With regards to Ms Harloe’s income, property and financial resources, Mr Olford did not dispute the findings of the Agency with regards Ms Harloe’s situation. Ms Harloe confirmed her income consists of her [named] Pension (since age 55), her sitting fees for board activities of the [Agency 1] and part-time work which she is currently undertaking as a pay as you go employee. Ms Harloe confirmed she is not self-employed.  She did not dispute the assessment of income applied by the Agency and nor did Mr Olford. The tribunal so finds after independent assessment of the figures. The tribunal further finds that Ms Harloe is exercising her earning capacity fully.

   As regards Mr Olford, the tribunal finds that he is exercising his earning capacity fully. He is working full-time in [a specified industry] and is self-employed. He has undertaken this venture for many years and hopes to grow his business. He was employed as a PAYG employee but was made redundant on 10 September 2021. His focus is now to grow his own business and share care of [Child 1].

   On the basis of the evidence before it, the tribunal finds that neither parent has decided to change their occupation, industry or working pattern with a major purpose of their decision being to affect the administrative assessment.[5] The tribunal finds that it is not open to make an earning capacity determination in respect of either parent.

   [5] Subsection 117(7B) of the Assessment Act.

   As regards Mr Olford’s income, earning capacity and financial resources, he said the reason he lodged this application was that he feels wronged by the application of the formula. He said that when Ms Harloe received a lump sum after leaving her employment, the formula applied differently and he would like the same treatment. He said that it was unjust to treat his lump sum payout any differently to how Ms Harloe’s payout was treated.

   Here the Agency applied an adjusted taxable income for Mr Olford of $124,187 for the period 18 October 2021 to 14 January 2022. This was on the basis that Mr Olford had continued to work until 10 September 2021 and had received a lump sum payout of $32,581.30. The objections officer determined that this represented 9 fortnights of income and so considered that departure for this period was appropriate.

   The tribunal disagrees with this approach as it leads to a skewed outcome not reflecting reality and results in inflated arrears. There is no dispute that Mr Olford received a payout of employment benefits of $32,581.30. Certainly, it is open to annualise this, however the tribunal prefers to add this to the overall income and resources for the financial year, finding that this better represents Mr Olford’s global situation.

   With regards to periods after his redundancy and resumption of self‑employment in a full-time capacity, the tribunal considers the assessment of the Agency sound. Mr Olford did not agree with the depreciation ($7,700) being added back to his adjusted taxable income and also denied any benefits from his self‑employment arrangement. Here, the tribunal learned that the majority of depreciation related to motor vehicle expenses. This legitimate taxation deduction sees an increase in Mr Olford’s cashflow and is properly considered as a financial resource. Mr Olford said that his personal use of the vehicle is only 10% and so it is wrong to add back any car benefits. The tribunal understands this position but it is not reflective of the overall financial picture. This is because Mr Olford has the benefit of a motor vehicle via his company arrangement. PAYG employees do not get such deductions or benefits, and had it not been for his self‑employment arrangement, he would not be able to secure legitimate taxation deductions which in turn increase his cashflow.

   The Agency also added back a sum of $5,200 which it considered was the financial benefit obtained by Mr Olford as a result of his self‑employment arrangement. This presumably included categories in the balance sheet such as internet ($971), donations ($840) and motor vehicle ($6,011) just to name a few line items. Mr Olford again repeated these are all legitimate deductions audited by his accountant. This is true and not disputed by the tribunal. However, without the self‑employment arrangement, a PAYG employee would not be able to secure such significant taxation deductions which then increase cashflow, and financial and non‑financial benefits available to him annually.

   It is a well-established principle in the Family Court that the taxable income of a person who is self-employed may not be an accurate reflection of their earning capacity and financial resources for child support purposes (DJM and JLM [1988] FamCA 97; Scott v Scott [1994] FLC 92-457; Carey v Carey [1994] FLC 92‑489). As discussed with the parties, the role of the tribunal is not to conduct a forensic audit (Podmore & Pillai [2011] FMCAfam 952 and Frost and Frost [2011] FMCAfam 1311). Rather, it is to determine from the available evidence before it the financial resources available to the parties for child support purposes, such that a fair decision can be made in respect of the child support liability.

   Overall, the tribunal considers that the add back of depreciation expenses ($7,700) and personal benefits derived from his self-employment arrangement ($5,200) is conservative and appropriate given the intention of the Act and must be added to the net turnover of $38,533, resulting in an annual level of income and financial resources of $51,433 from self-employment. The redundancy payment must be added to this, valued at $32,581.30, resulting in the tribunal finding that the adjusted taxable income from 19 October 2021 until the end of that financial year is $84,014.  The tribunal also finds that it is appropriate to apply this adjusted taxable income until 31 July 2023, as the evidence reveals that this figure reflects annualised income obtained via self-employment activity coupled with the abovementioned self-employment/investment benefits.   The tribunal so finds with reference to the generalised pattern of earnings, but also reinforced by Mr Olford’s testimony that his focus now is on building up the business while he shares care of his son. 

   (e)The tribunal learned that neither parent is required to support others financially. The tribunal has considered the commitments of each parent that is necessary to enable the parent to support himself or herself or any other child or another person they have duty to maintain and could not find that any self‑support commitments take priority over any child support liability and, further, each parent’s budget is sufficient to cater for such needs.

   (f)There was no evidence of direct or indirect costs incurred in providing care for the children. The parents live a few suburbs away from each other and the shared care arrangements have yet to commence.

   (g)A refusal of a departure would result in an inequitable outcome to Ms Harloe and her children, leaving Mr Olford’s child support contribution at the fixed annual rate which does not reflect his true financial position or the needs of his children.

   The tribunal appreciates that the departure to the administrative assessment is a significant shock to Mr Olford who is now in arrears as a result of the decision of the Agency. However, the tribunal’s findings are now reflective of his income and the needs of the children and will reduce his arrears. Mr Olford continues to remain employed and has investments, and the tribunal cannot find on the evidence before it that Mr Olford would suffer hardship on departure of the administrative assessment.

   On this point, the tribunal notes that the parties have recently started to engage in healthy communication with respect to the children, this not being the situation prior to the review application to the tribunal. The testimony both single and joint showed a devotion and active albeit distanced partnership for the benefit of the children which was exemplary given the previous difficulties encountered. The tribunal did not wish to interfere with the status quo (and was very mindful of its interference) however must reinforce that its role is to ensure that the law has been applied the way Parliament and the Child Support Scheme intends it to be, and in the absence of an agreement between the parties, it was required to make a decision on the facts of the case.

7. The last issue to be considered is whether it is otherwise proper to depart from the administrative assessment. When doing so, subsection 117(5) sets out what the tribunal must have regard to when deciding whether it would be otherwise proper to make a particular order. Subsection 117(5) states:

   In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:

   (a) the nature of the duty of the parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

   (b) the effect that the making of any order would have on:

   (i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

   (ii) the rate of any income tested pension , allowance or benefit payable to eth child or the carer entitled to child support.

8. Again, both Mr Olford and Ms Harloe have the primary duty to support their children. This departure will now reflect that duty and reduce the impact on the public purse by way of any Centrelink entitlement. The tribunal therefore finds that it is ‘otherwise proper’ to depart from the administrative assessment.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides:

·     For the period 19 October 2021 to 31 July 2023, Mr Olford’s adjusted taxable income is set at $84,014.

·     For the period 10 February 2022 to 31 July 2023, Ms Harloe’s adjusted taxable income is set at $80,600.

·     For the period 1 January 2022 to 31 December 2022, the annual rate of child support payable by Mr Olford is increased by $2,642 (being his share of [Child 1’s] Catholic school fees).