Orbell and Orbell (Child support)

Orbell and Orbell (Child support) [2018] AATA 5057 (4 December 2018)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2018/PC014872
APPLICANT:  Mr Orbell
OTHER PARTIES:  Child Support Registrar
Ms Orbell

TRIBUNAL:Senior Member R Ellis
DECISION DATE: 04 December 2018
DECISION:

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

for the period 1 January 2018 to 31 December 2018, the Tribunal refuses to depart from the administrative assessment as it would not be just and equitable to do so;
for the period 1 January 2019 to 31 December 2019, Mr Orbell’s adjusted taxable income is varied to $40,000; and
for the period 1 January 2019 to 31 December 2019, the annual rate payable by Mr Orbell is varied by increasing it by an amount of $4,548 as his contribution towards the education costs of [Child 1] in the 2019 school year.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – child being educated in the manner expected by the parents – income, property and financial resources of the liable parent – irregular, intermittent work as a sub-contractor – earning capacity – 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

This review is about whether or not there should be a departure from the administrative assessment of child support.
Mr Orbell and Ms Orbell are the parents of [Child 1] (born December 2003) and [Child 2] (born April 2005). There has been a child support assessment in place since 26 June 2017 and Mr Orbell is the liable parent under the assessment.
The following child support assessments are under consideration:
·     for the period 1 September 2017 to 5 April 2018 the annual rate of child support payable by Mr Orbell was $1,752 based upon a provisional 2016-17 adjusted taxable income of $44,963 for Mr Orbell and a 2016-17 adjusted taxable income of $62,119 for Ms Orbell;
·     for the period 6 April 2018 to 4 June 2018, the annual rate of child support payable by Mr Orbell was $1,920 based upon a provisional 2016-17 adjusted taxable income of $44,963 for Mr Orbell and a 2016-17 adjusted taxable income of $62,119 for Ms Orbell;
·     for the period 5 June 2018 to 30 June 2018 Mr Orbell was assessed to pay the fixed annual rate of $2,780 based on an estimated 2017-18 adjusted taxable income of $0 for Mr Orbell and a 2016-17 adjusted taxable income of $62,119 for Ms Orbell; and
·     for the period 1 July 2018 to 30 November 2018, the annual rate of child support payable by Mr Orbell was $1,920 based on a provisional 2016-17 adjusted taxable income of $44,963 for Mr Orbell and a 2016-17 adjusted taxable income of $62,119 for Ms Orbell.
On 4 October 2017 Ms Orbell applied to the Department of Human Services, Child Support (the Child Support Agency) for a departure from the administrative assessment of child support and Mr Orbell made a cross application.
On 5 January 2018 the Child Support Agency found that the child support assessment was unfair based on Mr Orbell’s income, property and financial resources (the ground commonly known as Reason 8A) but refused to change the assessment as it was not just and equitable to do so.
The Child Support Agency did not find a reason to change the assessment on the basis of Mr Orbell’s cross application relating to the high costs of caring for, educating or training the children (Reason 3) or any money, goods or property received by the children, the payee or a third person (Reason 5).
On 18 April 2018 Ms Orbell objected to this decision, an extension of time was granted, and on 11 August 2018 the Child Support Agency allowed the objection in part. The original decision was set aside and the Child Support Agency made the following decision (the objection decision):
·     for the period 1 January 2018 to 31 December 2019 Mr Orbell’s adjusted taxable income is set at $85,000;
·     for the period 1 January 2018 to 31 December 2018 the annual rate of child support payable by Mr Orbell is reduced by $3,880 in recognition of Ms Orbell’s contribution towards private school costs for [Child 1]; and
·     for the period 1 January 2019 to 31 December 2019 the annual rate of child support payable by Mr Orbell is reduced by $3,996 in recognition of Ms Orbell’s contribution towards private school fees for [Child 1].
This was done on the basis of Mr Orbell’s income, property, financial resources and earning capacity (Reasons 8A and 8B) and the high costs of caring for, educating or training the children (Reason 3).
On 23 August 2018 Mr Orbell applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).
A telephone directions hearing was held on 30 November 2018. Both Mr Orbell and Ms Orbell attended by conference telephone. Prior to the telephone directions hearing the Child Support Agency provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (472 pages).
Mr Orbell and Ms Orbell were directed to provide further information to the Tribunal and both complied.
A hearing was held on 4 December 2018. Both Mr Orbell and Ms Orbell gave evidence on affirmation by conference telephone. The Tribunal received documents from Mr Orbell (A1-A23) and from Ms Orbell (B1-B33). These were distributed to the parties prior to the hearing.
At the telephone directions hearing and at the commencement of the hearing the Tribunal clarified with Mr Orbell and Ms Orbell the reasons for their applications. Mr Orbell told the Tribunal he wanted the income used to determine his child support to be assessed on what he actually earned. Mr Orbell said he also wanted the Tribunal to consider the cost of private school fees for [Child 1]. Ms Orbell said she wanted a fair outcome so that Mr Orbell helped to support the children. As well as Mr Orbell’s income, property and financial resources, she wanted the Tribunal to consider his earning capacity. She also wanted the Tribunal to consider the cost of private school fees for [Child 1].

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.
Under Part 6A of the Act, the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this Tribunal are:
·     whether a ground is established to depart from the administrative assessment of child support; and if so
·     whether it is just and equitable to make a particular departure determination; and if so,
·     whether it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support 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, but the Family Court in Gyselman and Gyselman [1991] FamCA 93 has held:
as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.
In Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If the Tribunal is satisfied that a ground exists 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 Act.
The range of determinations which can be made includes variations to the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

CONSIDERATION

Issue 1 – is there a ground for departure?

In circumstances where multiple grounds for departure are put forward, the Tribunal need only be satisfied that one ground is established before going on to determine whether or not a particular determination is just and equitable and otherwise proper.
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 expected by the parents (subparagraph117(2)(b)(ii) of the Act). The most common costs that arise under this reason are private school fees.
The Tribunal finds that at the time Ms Orbell made her application for a departure from the administrative assessment, [Child 1] and [Child 2] were being educated at the Perth Waldorf School (a private school). It is not in contention, and the Tribunal finds, that both parents made the decision for the children to receive a private school education.
Mr Orbell told the Tribunal that following separation the parents had reached an agreement that he would pay the mortgage on the family home and Ms Orbell would pay the private school fees for[Child 1] and [Child 2]. Mr Orbell said this allowed Ms Orbell to live rent free in the family home. He said this arrangement continued up until about six weeks before the family home was sold. The Tribunal notes this property was sold [in] December 2017.
Mr Orbell said towards the end of 2017 he then offered to pay 100 per cent of the private school fees for [Child 1] and [Child 2] but nothing more in the way of child support. He thought Ms Orbell had agreed to this arrangement but later, when it was decided that [Child 2] would not attend a private school, Ms Orbell then wanted him to pay the private school fees for [Child 1] and an additional $450 per month. Mr Orbell said he would not agree to this as he did not believe it was fair he should pay the extra monthly amount regardless of where the children were living and the impact this might have on their care.
Mr Orbell said he nonetheless paid a full year’s school fees for [Child 1] at the start of 2018. Mr Orbell said he could not afford to continue paying 100 per cent of the school fees for [Child 1] as well as the child support determined by the Child Support Agency in the objection decision.
Mr Orbell told the Tribunal he did not want [Child 1] to drop out of the [School 1] and would be happy to pay 100 per cent of the private school fees as well as any school fees for [Child 2] but nothing more. He said he could not rely on Ms Orbell to honour such an agreement and required the Tribunal to resolve the matter even though he would prefer a private arrangement for child support.
Ms Orbell agreed that after separation Mr Orbell was paying the mortgage on the family home and she paid the private school fees for [Child 1] and [Child 2] to attend the [School 1] in 2017. She said this was approximately the same amount of money.
Ms Orbell told the Tribunal that Mr Orbell had initially agreed to pay the private school fees for both [Child 1] and [Child 2]. Ms Orbell said when it was decided that [Child 2] would attend [School 2] in 2018 she wanted Mr Orbell to pay the private school fees for [Child 1] and $450 per month. She thought this was fair because the $450 per month was less than the cost of the annual school fees had [Child 2] stayed at [School 1]. She said Mr Orbell would not agree and only wanted to pay the private school fees for [Child 1].
Ms Orbell told the Tribunal she notified the [School 1] [in] January 2018 that Mr Orbell would be paying the full school fees for [Child 1]. She said although he had made this commitment he would not sign the conditions of enrolment form. Ms Orbell agreed that Mr Orbell had paid the 2018 fees for [Child 1] but said there was still approximately $1,600 in additional costs for 2018 that remained outstanding.
Ms Orbell said she wanted [Child 1] to finish his schooling at [School 1] and would take out a loan to pay the fees if Mr Orbell refused to do so. She said this would have an enormous financial toll on her but the school provided stability for [Child 1] and it would have a big impact on him if he was pulled out.
The Tribunal notes in evidence provided by Ms Orbell a family transaction history for the [School 1] dated [in] September 2018. This statement shows the full fees for 2018 totalling $7,760 were paid [in] February 2018. As at the date of the statement there was $1,604.60 outstanding on the account including year level charges, association fees, a building fund, booklist, school camp fees, surfing costs, PE program cost and lunches.
The Tribunal is of the view that costs for such things as books, school camps, excursions and lunches are ordinary costs across all schools and not unique to a private school education. These costs are allowed for in the normal child support assessment and so the Tribunal will not consider these further. The Tribunal therefore considers the total cost in 2018 for [Child 1] to attend [School 1] to be $8,976 (tuition fees, year level charge, school association fee, building levy and family participation fee).
The Tribunal examined the [School 1] website and notes that tuition fees in 2019 for classes 8-12 at the school will be $7,970. The year level charge will be $630, the school association fee will be $96 and the building levy will be $400. The total cost for [Child 1] to attend the [School 1] will be $9,096 in 2019.
The Tribunal finds the costs in respect of the [Child 1’s] education to be $8,976 in 2018 and $9,096 in 2019. Mr Orbell paid the full amount in 2018. This cost is significant and constitutes special circumstances. This means a ground for departure is established.

Issue 2 – is it just or equitable to make a particular determination?

As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the liable parent, and the carer entitled to child support 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 consider the matters discussed below,[1] which are as set out in subsection 117(4) of the Act:
[1] The Tribunal is required to give “overt consideration” to relevant factors listed in section 117(4) of the Act: Tyagi & Meares [2008] FMCAfam 886.
(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) the 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 person 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 the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

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

Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments.
In this case, the Tribunal is not aware that either parent has a responsibility to any other child or person.

The proper needs of the child

In relation to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).
The Tribunal has found there are extra costs to be taken into account in relation to [Child 1’s] education. The Tribunal was not made aware by either parent that [Child 1] and [Child 2] were to be cared for in a particular way or had any special needs.
In their respective Statements of Financial Circumstances both parents apportioned a number of household expenses, such as food and entertainment, to the children. Of the $1,186 in weekly expenses listed by Ms Orbell, $638 is for the children. The Tribunal notes, however, that Ms Orbell has included total mortgage costs of $308 per week as costs for the children. Other significant weekly costs for the children include $90 for food, $30 for telephone costs, $100 for clothing and activities and $50 for entertainment. Mr Orbell has listed total weekly expenses of $1,791 of which $659 is for the children. This includes weekly costs of $211 for education expenses, $120 for holidays, $100 for gifts, $100 for house repairs, $75 for food and $25 for entertainment.
The Tribunal finds it reasonable to calculate the costs of their needs, other than the education costs, by reference to the Costs of the Children Table (provided for in section 155 of the Act) in the circumstances of this case.

The income, earning capacity, property and financial resources of the child

The Tribunal finds the children have no income, earning capacity, property and financial resources which are to be taken into account for the purpose of child support.

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

The administrative assessment in place at the time Ms Orbell made her change of assessment application was based on a provisional adjusted taxable income for Mr Orbell of $44,963. As Mr Orbell had not completed a tax return since the 2014-15 financial year, this provisional income was based on two thirds of the male average weekly earnings.
The Tribunal notes in evidence from the Child Support Agency that Mr Orbell has since completed his 2017-18 individual tax return. A copy of this tax return shows total business income of $26,239 and total expenses of $4,754 leaving a taxable income of $21,485.
Mr Orbell told the Tribunal he was working as a self-employed [Occupation 1] under the name Orbell [products]. He said he was currently subcontracting to a company called [Company 1]. Mr Orbell explained he had only recently started work again after taking considerable time off following his separation. He said he needed a break and had been living on the money he received following the sale of the family home. Mr Orbell said this was not very bright in retrospect.
Mr Orbell said there was only a trickle of work around in the industry at the moment and despite summer traditionally being the busiest time of year it was very slow at present. Mr Orbell said because the industry was no longer providing a reliable source of income he was forced to undertake other projects. He did not elaborate on the nature of these projects.

Mr Orbell said in addition to [his work] he did some [other work]. Mr Orbell said he would invoice [Company 1] direct for this work and they would transfer payment into his account.
In response to the Tribunal’s directions, Mr Orbell provided five invoices which he said was all the work he had done for [Company 1]. The invoices are dated [in] September 2018, [date] September 2018, [date] October 2018, [date] October 2018 and [date] November 2018. The total value of the work undertaken is $5,454.50. The Tribunal notes the five invoices are numbered 51 through 55. Mr Orbell did not explain what work, if any, was done under the earlier invoices prior to invoice number 51.
When annualised over a 12 month period, the work undertaken by Mr Orbell for the 52 day period between 18 September 2018 and 8 November 2018 would equate to approximately $38,290. The Tribunal asked Mr Orbell if he felt this would be a fair reflection of his annual income going forward. Mr Orbell said he was uncertain given the nature of the industry at present and, in any case, he was trying to get out of [work] as his body was not able to cope with the physical nature of such work. He also pointed out that annualising his [income] in this way did not account for his costs such as[goods].
Mr Orbell said nonetheless he thought $35,000-$45,000 per annum might be a fair estimate of his income for a full year going forward. He pointed out in the objection decision the Child Support Agency had set his income at more than double this amount. He said he could not afford to pay Ms Orbell child support based on this income as well as school fees. Mr Orbell said you could not get blood from a stone.
Ms Orbell told the Tribunal she believed Mr Orbell works for cash most of the time. She said Mr Orbell had the flexibility to hide his income and his tax return was not a true reflection of what he really earned. Ms Orbell pointed out that in 2017 Mr Orbell could afford to pay the mortgage on the family home and his rent and his work had not changed since then. She did not think it was fair for Mr Orbell to now say he could not afford to help support his children.
Mr Orbell responded by saying $21,485 was an honest reflection of what he had earned as he was not working for part of that time. He reiterated that his living expenses during this period were also being funded from the sale of the family home. Mr Orbell also said he’d been trying to establish a new business in vintage clothing hire. He said despite an outlay of $40,000-$45,000 on stock, the business was not yet up and running and he still needed to find a shopfront. Mr Orbell said the stock was now in storage and not generating income.
The Tribunal notes in evidence from the Child Support Agency, bank statements in the name of Mr Orbell for the period from 14 August 2017 to 13 August 2018. Mr Orbell said this was his only bank account. The Tribunal notes a credit balance of $4.57 as at 14 August 2017 and a credit balance of $1,330.06 as at 13 August 2018. There are several regular deposits totalling nearly $20,000 in the period from 14 August 2017 to 20 January 2018. Mr Orbell was uncertain about the source of these deposits, however, said it was likely they were from people he was working for. On 25 January 2018 a sum of $147,373.56 was deposited into the account. Mr Orbell said this was his portion of the funds following sale of the family home. The regular deposits into the account ended around this date which appears to support Mr Orbell’s contention that he stopped work once he received the funds from property settlement. There are also several large cash withdrawals and transfers to other banks which Mr Orbell said were for the purchase of vintage clothing and his living expenses.
Ms Orbell told the Tribunal she felt it was a shame that Mr Orbell had spent so much money on a business that was not up and running or making an income. She said this money could instead have been used to support the children.
In his Statement of Financial Circumstances dated 4 September 2018, Mr Orbell claimed total average income of $413 per week and total household expenditure of $1,913 per week[2]. Of total household expenditure, $538 per week is for holidays and gifts, which Mr Orbell acknowledged was unlikely to continue. A further $211 per week is for education costs, $200 per week for household repairs and $100 per week for repairs to furnishings. Mr Orbell declares superannuation of $42,000. His assets include household contents of $10,000, an Isuzu truck valued at $5,000 and tools valued at $2,000. The Tribunal notes Mr Orbell has not included the vintage clothing he purchased as an asset. Mr Orbell has no liabilities and no credit cards.
[2] This figure has been incorrectly added and should be $1,791 per week.
The Tribunal finds Mr Orbell’s income in 2017-18, as per his individual tax return, to be $21,485. The Tribunal is not satisfied, however, this figure represents an accurate reflection of the income and financial resources currently available to him. Mr Orbell has admitted that for much of this period he was not working and instead living on funds from the sale of the family home. Mr Orbell did not agree the work he had undertaken since September as a pool tiler could be used to accurately determine his income, however, he also said he was earning other income. Mr Orbell felt that $35,000-$45,000 per annum was a fair estimate.
Ms Orbell did not believe Mr Orbell’s 2017-18 tax return was an accurate reflection of his income. She believed he was working for cash but was unable to provide evidence of this.
The Tribunal also considered Mr Orbell’s earning capacity. In order to establish that Mr Orbell’s earning capacity is greater than that reflected in the child support assessment and therefore renders the assessment unfair, all three compulsory criteria set out in subsection 117(7B) of the Act must be satisfied. Those three criteria are:
(a)one or more of the following applies:
·    the parent does not work despite ample opportunity to do so (subparagraph 117(7B)(a)(i));
·    the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged (subparagraph 117(7B)(a)(ii));
·    the parent has changed his or her occupation, industry or working pattern (subparagraph 117(7B)(a)(iii)); and
(b)the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern is not justified on the basis of:
·    the parent’s caring responsibilities (subparagraph 117(7B)(b)(i)); or
·    the parent’s state of health (subparagraph 117(7B)(b)(ii)); and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child (paragraph 117(7B)(c)).
Mr Orbell is currently working, however, he told the Tribunal he was not working for a time and instead living off savings following the sale of the family home. This means the first criterion is met. There is no evidence to suggest that Mr Orbell stopped working due to either his state of health or a caring responsibility. The second criterion is also therefore met. It appears Mr Orbell stopped working when he received his share of proceeds from the sale of the family home. Mr Orbell told the Tribunal he needed a break. Mr Orbell was being assessed on a provisional income and did not lodge an estimate of income at that time in order to reflect his employment circumstances. He also paid private school fees for [Child 1] of $7,760 in February 2018. The Tribunal is satisfied that affecting the child support assessment was not a major purpose for his decision to stop work.
As all three criteria must be satisfied, it follows that if one is not satisfied, then this ground for a change to the assessment cannot be considered. The Tribunal finds that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met for Mr Orbell in this case.
The Tribunal notes in evidence that Mr Orbell did own a [company] called [Company 2], however, this company was voluntarily deregistered in December 2013. The Tribunal does not consider Mr Orbell’s involvement in this business relevant to his current circumstances.
The Tribunal is satisfied, based on the verbal evidence provided by Mr Orbell, his income for the purposes of child support is $40,000 per annum. This is the midpoint between his estimate of $35,000-$45,000 which the Tribunal considers to be a fair approach.
The Tribunal also considered the income, property, financial resources and earning capacity of Ms Orbell.
Ms Orbell told the Tribunal she was employed as [an Occupation 2] at [workplace]. She said her role involved helping single mothers get back into the workforce. Ms Orbell said she was earning approximately $61,500 per annum, however, her actual salary was approximately $57,000 per annum. Ms Orbell explained that her employer was a not-for-profit organisation which provided some tax benefits and this gave her a higher income. Ms Orbell said she also received the family tax benefit payments.
Ms Orbell provided the Tribunal with her individual tax return for the year ended 30 June 2018. It shows an adjusted taxable income of $56,459. The Tribunal notes that the administrative assessment in place at the time Ms Orbell submitted her change of assessment application relies on an income for her of $62,119.
The Tribunal is satisfied that Ms Orbell’s income is fairly represented in the administrative assessment of child support and does not require changing.
The Statement of Financial Circumstances provided to the Tribunal by Ms Orbell dated 2 September 2018 shows total average weekly income of $1,310.49 (excluding child support) and total weekly household expenditure of approximately $1,156.00. Ms Orbell has superannuation with a value of $58,967. She values her total assets at $400,694, including her home at $390,000, which she purchased using her share of funds from the property settlement. Ms Orbell also owns a [motor] vehicle valued at $3,000 and has household contents of $5,000. Ms Orbell lists total liabilities of $293,000 including a home mortgage of $290,000 and $3,000 owing on two credit cards.
The Tribunal is satisfied that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met in relation to Ms Orbell.

The necessary commitments of self-support or to support any other child or person

The Tribunal was not made aware that either parent had commitments to any other child.

Any hardship that would be caused

The Tribunal has found that Mr Orbell has access to an income of $40,000 per annum and Ms Orbell has an adjusted taxable income of $56,459.
Under the administrative assessment, Mr Orbell was assessed to pay child support of $1,752 per annum based on a provisional income of $44,963 and 2016-17 adjusted taxable income of $62,119 for Ms Orbell. A provisional income was used for Mr Orbell because he had not submitted a tax return for 2015-16 or 2016-17.
Mr Orbell told the Tribunal that his expenses exceeded his income for a short while but it was now a very different story. He said he led a lean lifestyle. Mr Orbell told the Tribunal he was initially prepared to pay private school fees for both children but as [Child 2] was now attending a government school, he was prepared to pay for [Child 1’s] private school fees and nothing more. The Tribunal notes this would amount to an annual cost of $9,096 in 2019.
Mr Orbell has listed expenses which total $93,132 annually. This includes annual expenditure of $17,992 for holidays, $10,400 for household repairs, $9,994 for gifts and $5,200 for repairs to furnishings. The Tribunal is not satisfied these are necessary expenses for self-support. Mr Orbell has also acknowledged his expenses had been high and this would change. If these expenses were removed, this would reduce Mr Orbell’s annual expenses to approximately $49,400 which includes an annual cost of $10,972 for education expenses.
In adjusting his expenses, the Tribunal is mindful that child support law holds that a parent’s primary duty is to maintain the child and this takes precedence over all other commitments of the parent other than those of self-support and the support of any other child or person the parent has a duty to maintain (section 3 of the Act).
Ms Orbell told the Tribunal she was just managing financially. Ms Orbell said she did not think she could afford to pay her mortgage as well as school fees for [Child 1]. Ms Orbell also pointed out that [Child 2] was now in her 100 per cent care and a change of care for [Child 1] was pending as he was also in her 100 per cent care.
The Tribunal proposes to make the following determination:
·       for the period 1 January 2018 to 31 December 2018, the Tribunal refuses to depart from the administrative assessment as it would not be just and equitable to do so;
·       for the period 1 January 2019 to 31 December 2019, Mr Orbell’s adjusted taxable income is varied to $40,000; and
·       for the period 1 January 2019 to 31 December 2019, the annual rate payable by Mr Orbell is varied by increasing it by an amount of $4,548 as his contribution towards the education costs of [Child 1] in the 2019 school year.
The Tribunal applied Mr Orbell’s and Ms Orbell’s respective incomes in the child support formula and found the level of child support payable by Mr Orbell would be approximately $2,831 per annum from 1 January 2019. This accounts for [Child 2] being in the 100 per cent care of Ms Orbell as is currently the case. The Tribunal notes the amount of child support payable by Mr Orbell may differ should the care for [Child 1] change as advised by Ms Orbell.
The Tribunal considers splitting the cost of education equally between the parents in 2019 to be fair given both parents made the decision to educate [Child 1] at a private school. This means a cost to each parent of $4,548.
Both parents told the Tribunal at hearing they were committed to [Child 1] continuing his education at the [School 1]. This is a choice the parents have made.
The combined cost of child support and education for Mr Orbell is approximately $7,379 in 2019. Mr Orbell has told the Tribunal he was prepared to pay for the full cost of [Child 1’s] education but nothing more. This would be more than the amount in the determination proposed by the Tribunal and the Tribunal is satisfied this will not cause Mr Orbell hardship. The Tribunal is also satisfied this will not cause hardship to Ms Orbell or the children.
The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act). As the child support assessment has only been in place since 26 June 2017 this is the earliest date open to the Tribunal from which to make a determination.
Neither parent raised the issue of backdating the assessment during the hearing process.
Although the Tribunal has found a ground for departure from the administrative assessment, the Tribunal has decided in this case it would not be just and equitable to make a change from the date Ms Orbell made her change of assessment application. Mr Orbell has chosen not to submit his tax return for the relevant periods and hence has been assessed on a provisional income. The Tribunal notes that under the administrative assessment, for a short time he will also be assessed to pay the fixed annual rate based on a $0 estimate for 2017-18. His actual income for 2017-18 as assessed in his individual tax return will also be used under the administrative assessment. While Mr Orbell paid the full amount of school fees for [Child 1] in 2018 the Tribunal considers this to be fair given his commitment to Ms Orbell.
The Tribunal also notes there will be a sum outstanding for school charges for [Child 1] in 2018. This matter will need to be resolved between the parents.
In making this decision, the Tribunal has only set Mr Orbell’s income until the end of 2019. This should allow him time to submit his 2018-19 tax return and ensure his true income as a sole trader is properly reflected in the child support assessment. It will be open to either parent to make a new change of assessment application should they believe the assessment to be unfair from 1 January 2020.
The Tribunal is satisfied that the proposed determination will not cause hardship to Mr Orbell, Ms Orbell or the children and is just and equitable.

Issue 3 – is it otherwise proper to make a particular 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. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for children to be primarily supported by their parents rather than by government assistance. The Tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.
The Tribunal finds that Ms Orbell receives family assistance in respect of the children. The Tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community and would be otherwise proper.

DECISION

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

for the period 1 January 2018 to 31 December 2018, the Tribunal refuses to depart from the administrative assessment as it would not be just and equitable to do so;

for the period 1 January 2019 to 31 December 2019, Mr Orbell’s adjusted taxable income is varied to $40,000; and
for the period 1 January 2019 to 31 December 2019, the annual rate payable by Mr Orbell is varied by increasing it by an amount of $4,548 as his contribution towards the education costs of [Child 1] in the 2019 school year.

[2018] AATA 5057

4 December 2018

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Statutory Construction

Judicial Review

Costs

Jurisdiction