Padden and Farebrother (Child support)

[2022] AATA 631

Padden and Farebrother (Child support) [2022] AATA 631 (15 February 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC022147

APPLICANT:  Mr Padden

OTHER PARTIES:  Child Support Registrar

Ms Farebrother

TRIBUNAL:Member C Breheny

DECISION DATE:  15 February 2022

DECISION:

The decision under review is varied so that for the period 18 February 2021 to 28 February 2022, Ms Farebrother’s adjusted taxable income is set at $96,565 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – cost of maintaining the children are significantly affected – income, property and financial resources of the carer entitled to receive – a ground for departure established – decision to depart – decision under review varied

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. Ms Farebrother and Mr Padden are the separated parents of [Child 1], born April 2010, [Child 2], born December 2012 and [Child 3], born January 2016. A child support case has been registered with Services Australia – Child Support (Child Support) since 8 April 2020 and registered for collection from that date. Mr Padden is assessed as liable to pay child support to Ms Farebrother.

2. Relevantly, for the period 17 December 2020 to 30 November 2021 the rate of child support payable by Mr Padden was $33,049 per annum based on his 2019/20 adjusted taxable income of $274,560 and Ms Farebrother’s 2019/20 adjusted taxable income of $60,192.

3. On 18 February 2021 Mr Padden contacted Child Support to lodge a change of assessment application seeking a decrease in his child support liability due to the high costs involved in spending time with the children and the income, financial resources and earning capacity of the parties. Ms Farebrother disagreed that there should be a change to the administrative assessment. On 19 April 2021 [a] decision maker decided that no grounds to depart from the administrative assessment had been established and refused the application.

4. On 17 May 2021 Mr Padden lodged an objection to [the decision maker]’s decision and on 20 August 2021 a Child Support objections officer partly allowed Mr Padden’s objection. The objections officer determined that for the period 18 January 2021 to 31 December 2022 Ms Farebrother’s adjusted taxable income should be set at $87,000 per annum.

5. On 24 August 2021 Mr Padden applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (the Tribunal) for an independent review of the objection decision. A hearing into Mr Padden’s application for review was held on 15 February 2022. Both Ms Farebrother and Mr Padden attended the hearing by conference telephone and gave evidence on affirmation. 

6. I had before me the Statement and Documents provided by Child Support pursuant to subsection 37(1) and section 38AA of the Administrative Appeals Tribunal Act 1975 received on 22 September 2021 and 28 January 2022 respectively and numbered 1–381. I also considered additional documents provided by Mr Padden (marked A1–A176) and Ms Farebrother (marked B1–B103) as a result of written directions issued on 23 November 2021.

LEGISLATIVE FRAMEWORK AND ISSUES

1. The legislation relevant to this review is contained in the child support law, in particular the Child Support (Assessment) Act 1989 (the 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 Act. This requires the application of a statutory formula, which takes into account factors such as the number of children, the level of care provided and the income of each parent. Either the liable parent or the carer entitled to child support may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (section 98B). Section 98C 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 place of the Registrar, must be satisfied that a ground for departure exists and that it is just and equitable and otherwise proper to make a departure determination.

3. The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Act. 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 Act.

4. In the legislation, each ground for departure is prefaced by the words, “in the special circumstances of the case”. Therefore, when considering whether one or more grounds exist, the Tribunal must be satisfied that there are “special circumstances” in the case. The phrase “special circumstances of the case” is not defined in the Act. The Full Family Court, in the case of Gyselman and Gyselman,[1] stated that:

   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 administrative formula result in the ordinary run of cases.

   [1] (1992) FLC 92–279

5. Subsection 98C(3) of the Act provides that subsections 117(4) to (9) of the Act apply and the Tribunal must consider these when deciding whether it would be just and equitable or otherwise proper to make the departure decision.

CONSIDERATION

A ground for departure

1. Mr Padden asked for a departure from the administrative assessment to reduce his child support liability in relation to the high cost of contact (known as Reason 1) and the income and earning capacity of the parties, particularly Ms Farebrother’s income and earning capacity (Reason 8).

Income, property, financial resources and earning capacity of both parties

1. Subparagraph 117(2)(c)(ia) of the Act provides that, in the special circumstances of the case, a ground for departure may be established if application of the legislative provisions relating to an administrative assessment results in an “unjust and inequitable determination of the level of financial support to be provided by the liable parent” due to the income, property and financial resources of either parent.

Ms Farebrother

1. At the time Mr Padden lodged his application on 18 January 2021 (in the 2020/21 financial year), his child support liability was based on Ms Farebrother’s 2019/20 adjusted taxable income of $60,192. Mr Padden submitted that Ms Farebrother probably had greater income and financial resources at that time.

2. Ms Farebrother is [an Occupation 1]. Her 2019/20 income tax return (folio B72) indicates a taxable income of $39,548, comprising of income from various employers and Centrelink parenting payment of $5,755. Reportable fringe benefits amounted to $20,644, which are added to Ms Farebrother’s taxable income in accordance with section 43 of the Act[2] to arrive at an adjusted taxable income of $60,192.

   [2] Section 43 of the Act provides that a parent’s “adjusted taxable income” is comprised of the parent’s taxable income, plus reportable fringe benefits, plus target foreign income, plus net investment losses, plus tax-free pensions plus reportable superannuation contributions.

3. Ms Farebrother’s 2020/21 taxable income was $79,189, comprising of salary from [Employer 1] and Centrelink parenting payment of $3,266 (folio B16). Reportable fringe benefits amounted to $17,376, which result in an adjusted taxable income of $96,565. Child Support has recorded this income (folio 379) but it is not currently used due to the existing departure determination.

4. Ms Farebrother stated that she has been acting on higher duties since 30 August 2021 and the annual salary for that position is $86,045 (folio B36). The position was offered on a six-month contract and is due to end on 28 February 2022. Her payments will then revert back to the salary for her substantive position ($77,625, as per payslip, folio B38). Ms Farebrother also said that she would probably not incur fringe benefits to the same extent in this financial year, as she no longer has a salary sacrificing arrangement in place.

5. I have no evidence that Ms Farebrother has any other source of income, and I am therefore satisfied that Ms Farebrother’s income, property and financial resources are adequately represented by her annual income tax returns.

6. Mr Padden also submitted that Ms Farebrother has additional earning capacity. The children all attended school and there was no reason that Ms Farebrother should not be working full-time.

7. The relevant legislative provisions for consideration of a parent’s earning capacity are provided for in subparagraph 117(2)(c)(ib) and also in subsection 117(7B) of the Act. Essentially the provision restricts the circumstances in which a person’s earning capacity can be used as a basis to depart from a formula assessment.

8. There are three essential matters to be considered in determining whether the administrative assessment should be departed from on the grounds of earning capacity. In simple terms they can be explained as follows:

   ·Did the parent not work despite ample opportunity to do so, reduce their hours of work or change their occupation, industry or working pattern? and

   ·Was the parent’s decision not to work despite ample opportunity to do so or to reduce their hours of work or change their occupation, industry or working pattern not justified because of caring responsibilities or their state of health? and

   ·The parent has not demonstrated that it was not a major purpose of their decision not to work despite ample opportunity to do so or to reduce their hours of work or change their occupation, industry or working pattern to affect the administrative assessment of child support.

   All three of the above criteria must be met before a change of assessment can be made to take into account whether the parent has a greater earning capacity.

9. Ms Farebrother stated that she had been working on a casual basis in previous years, particularly when the youngest child was still at home. She and Mr Padden separated in March 2020 (in the 2019/20 financial year). As a result she had to increase her working hours and also apply for parenting payment from Centrelink.

10. She has now increased her working hours, as the youngest child has commenced schooling. She works five days per week but finishes work at 3pm Tuesdays to Fridays to be able to pick up the children from school. Her hours amount to a 0.8 equivalent full-time position.

11. I note Ms Farebrother’s adjusted taxable income in 2017/18 was $29,665, the 2018/19 income was $46,446, in 2019/20 it was $60,192 and in 2020/21 Ms Farebrother’s adjusted taxable income was $96,565 (folios 275 and 379).

12. There is no evidence before me that Ms Farebrother has reduced her working hours, or changed her occupation, industry or working pattern in order to reduce her income to affect the administrative assessment of child support. Since the beginning of the child support case she has actually done the opposite and increased her earnings.

13. This means that paragraph 117(7B)(a) of the Act is not satisfied in this case. As all three criteria provided for in subsection 117(7B) of the Act are therefore not met, I cannot consider Ms Farebrother’s earning capacity further.

Mr Padden

1. Mr Padden is [an Occupation 2] and he has been working for [Employer 2] in Queensland for over three years now.  

2. His 2019/20 income tax return (folio A19) indicates a taxable income of $239,420, being salary/wages from his employer and a small amount of interest payments. Reportable fringe benefits amounted to $22,444.

3. The 2019/20 “Notice of Assessment” issued by the Australian Taxation Office on 7 January 2021 (folio A17), however, shows that Mr Padden’s taxable income was $252,115. I assume that the earlier tax return needed to be amended. Child Support added fringe benefits of $22,444 to this taxable income to arrive at adjusted taxable income of $274,560 for Mr Padden.

4. Mr Padden’s 2020/21 taxable income was $251,084 (folio A27). Reportable fringe benefits amounted to $24,730, which results in an adjusted taxable income of $275,814.

5. Mr Padden submitted that fringe benefits should not be added to his taxable income, as they included payment for gym membership and a motor vehicle and cannot be converted back into salary, for example as in a salary sacrificing arrangement.

6. I have no evidence that Mr Padden has any other source of income, and I am therefore satisfied that Mr Padden’s income, property and financial resources are adequately represented by his annual income tax returns.

7. Mr Padden is working full-time and there is no submission before me to suggest that he has greater earning capacity.

Conclusion – income, property, financial resources and earning capacity of both parties

1. When Mr Padden lodged his departure application on 18 January 2021 (the 2020/21 financial year), the rate of child support was based on the 2019/20 taxable income for both parties, resulting in a child support liability of $33,049 for Mr Padden.

2. Evidence before me indicates that Ms Farebrother’s 2020/21 taxable income was significantly higher ($96,565) than the 2019/20 adjusted taxable income used in the assessment at the time.

3. I have estimated that Mr Padden’s child support liability for the children, if calculated on the basis of Ms Farebrother’s 2020/21 taxable income, would reduce to $28,454 per year at the time he lodged his application.

4. I find that the difference between an annual child support liability of $33,049 and the annual rate of child support ($28,454) based on Ms Farebrother’s 2020/21 taxable income, is so great that it gives rise to special circumstances in this particular case.

5. In regard to Mr Padden’s submission that fringe benefits should not be added to his taxable income I will note that the objections officer explained the reasons for adding fringe benefits (folio 14) and I will not repeat these here. I also note that even if fringe benefits were not added to Mr Padden’s taxable income, his annual child support liability would only reduce by about $480 (less than $10 per week) and I do not consider such reduction to be significant.

6. I am therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Ms Farebrother’s income, property and financial resources only.

7. Subparagraph 98C(1)(b)(i) of the Act is satisfied if “one, or more than one” of the grounds for departure are established. Having found one ground for departure established, I will now consider whether it is just and equitable to make a departure determination.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children. To do so I must have regard to a number of factors set out in subsection 117(4) of the Act, such as the needs of the children, the parents’ commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.

Mr Padden

1. Mr Padden works full-time and his most recent payslip from late November 2021 indicates a gross pay of $10,699.33 per fortnight and a net salary of $6,790.33 per fortnight (folio A40).

2. Mr Padden provided a completed Statement of Financial Circumstances (folios A1–A9). He noted a gross income of $5,210 per week. He listed expenses (excluding child support) of $3,366 per week (folios A8/9), including taxation. He indicated that he paid an additional $135 per week for council rates and insurance for the former family home, in which Ms Farebrother now resides, as well as private health insurance for the children and Ms Farebrother. He makes these payments in accordance with a court order dated 20 August 2020 (folio A158) and they are referred to as “spousal maintenance”.

3. Ms Farebrother noted that Mr Padden also indicated $60 per week for “out of pocket medical expenses” for the children and $144 per week for motor vehicle registration, maintenance and petrol. Ms Farebrother submitted that Mr Padden only had limited care of the two younger children and he does not pay for their medical costs. He also does not have a car, as his employer is providing one for him and thus, he does not incur these expenses.

4. Mr Padden submitted that he included these amounts as “future costs”. He anticipated returning from Queensland to Tasmania and having “significantly more” care of the children. He would therefore incur these expenses in the future. I do not accept this argument. I am concerned with Mr Padden’s financial situation at the time of his change of assessment application and currently. It is impossible to predict what his expenses may be at some point in the future. On this basis then his weekly expenses amount to $3,162.

5. Mr Padden also listed payments of $673 per week ($34,996 per year) for travel costs. Mr Padden indicated on his change of assessment application that the administrative assessment did not take into consideration the high cost of spending time with or communicating with the children.

Travel cost/high cost of contact

1. Mr Padden and Ms Farebrother agree that interim court orders made on 16 March 2021 provide for Mr Padden to visit the children in Tasmania for a six-day period in each of the four school terms and that the children are to visit Mr Padden in Queensland for a fortnight during school holidays. Ms Farebrother noted that Mr Padden agreed to pay for the children’s travel costs. Mr Padden submits that he had no choice but to agree to those terms and all of his travel/contact costs should be considered.

2. Based on the receipts provided, the objections officer calculated (folio 12) that Mr Padden incurred total costs of $23,794 over the relevant child support period from 1 September 2020 to 30 November 2021 (or about $19,045.84 per year). Based on Mr Padden’s adjusted taxable income of $274,560 or $343,011.95 in the child support period the objections officer calculated that costs needed to exceed $17,151, being the “5% of income” threshold in the child support period to be considered in a departure determination. The objections officer also noted that Mr Padden had more than regular care (17% care) of [Child 2] and [Child 3] and thus accommodation costs could not be considered in the calculation in accordance with subsection 117(2C) of the Act. That subsection provides:

   (2C)  If a parent has at least regular care of a child, then the only costs that can be taken into account for the purposes of subsection (2B) are costs related to travel to enable the parent to spend time with, or communicate with, the child.

3. The objections officer ultimately found that whilst contact costs exceeded the 5% income threshold, they do not significantly affect Mr Padden’s ability to maintain the children and thus a departure from the administrative assessment was not established in relation to contact costs.

4. Mr Padden did not agree with the objections officer’s conclusions. He submitted his contact costs were much higher and accommodation costs ought to be included in the calculation. In his written submission to Child Support he calculated his contact costs for a 12-month period to be approximately $30,322.49 (folio A11 and folio A170).

5. In his most recent table of “cumulative travel costs” (folio A176) Mr Padden submitted that he incurred costs of $28,441.95 between December 2020 and November 2021.

6. The receipts Mr Padden provided as part of his review application amount to approximately $21,258 for the 12-month period from December 2020 to November 2021 (folios A41-A135). They include flights, accommodation, taxi fares and fuel costs, but do not include car hire in Tasmania.

1. Based on the evidence before me I believe that an amount of about $30,000 per annum (or $577 per week) is a reasonable estimation of Mr Padden’s costs in relation to contact with the children.

Summary

1. I have considered Mr Padden’s overall financial circumstances. His most recent payslip indicates a net income of $6,790.33 per fortnight or about $3,395 per week. As noted above, Mr Padden’s general living expenses[3] amount to $1,332 per week. In addition he pays $135 per week “spousal maintenance” and $577 per week travel cost, resulting in expenses of $2,044 per week. This leaves $1,351 per week from his net income for child support payments and any other expenses.

   [3] Excluding the amounts for the children’s “out of pocket” medical costs and motor vehicle expenses ($1,516 - $144 - $60)

2. On the basis of the evidence before me I thus find that Mr Padden is able to meet his financial obligations.

Ms Farebrother

1. Ms Farebrother indicated on her Statement of Financial Circumstances that her income from employment is $1,703 per week, plus Centrelink payments of $62 per week (folio B3/4).

2. Her most recent payslip shows a net income of $2,530.79 per fortnight or about $1,265 per week (folio B32), although Ms Farebrother noted that her income will reduce by the end of February 2022, as her acting arrangement in a higher duties position ends.

3. Ms Farebrother listed expenses of about $1,661 per week for her and the children. This included $482 per week mortgage payments for the family home and $120 per week child-minding fees. Ms Farebrother stated that the child care fees would cease shortly and on this basis her weekly expenses are about $1,541.

4. Her expenses thus exceed her net income by about $276 per week and it thus appears that Ms Farebrother is relying on child support payments from Mr Padden to be able to meet her expenses.

The children

1. Ms Farebrother did not indicate that she has any out of the ordinary expenses for the children and Mr Padden noted the high costs he incurs in maintaining contact with the children.

2. The children are now 6, 9 and 11 years old and attend school. They have no income, property or financial resources relevant to my determination.

Otherwise proper  

1. The requirement to consider whether it is “otherwise proper” to depart from the administrative assessment 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 or benefits (subsection 117(5) of the Act).

2. It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily abrogated to the public welfare system when the parents themselves have the capacity to maintain their children.

3. Ms Farebrother is in receipt of Centrelink payments, which are affected by maintenance payments such as child support. Any increase to child support payable would result in an appropriate decrease in these payments. Such a result would be otherwise proper.

Conclusion

1. Section 98S of the Act describes the determinations that the Registrar, and the Tribunal standing in the shoes of the Registrar, may make if it decides to depart from the administrative assessment. It is open to the Tribunal to set a rate of child support payable or set some of the variables used in the administrative assessment formula (for example, vary one or both parents’ adjusted taxable income).

2. At the time of Mr Padden’s application (in February 2021), his child support liability was $33,049 per annum based on his 2019/20 adjusted taxable income of $274,560 and Ms Farebrother’s 2019/20 adjusted taxable income of $60,192.

3. The objections officer found that Ms Farebrother’s actual income at the time was higher and estimated that it would amount to about $87,000 per annum, which would reduce Mr Padden’s child support liability to about $29,558.

4. I have found that Ms Farebrother’s adjusted taxable income for 2020/21 was $96,565 and this income would reduce Mr Padden’s child support liability further to $28,454 per annum, (or about $547 per week). I have decided that it is fair and reasonable to set this income amount for Ms Farebrother from 18 February 2021, being the date that Mr Padden lodged his change of assessment application.

5. I have also decided to end my departure determination on 28 February 2022. Mr Farebrother indicated that her salary would change and Mr Padden indicated that he may gain additional care of the children and/or move to Tasmania in the very near future. Such a move may also affect his income.

6. I will not change the assessment on the basis of Mr Padden’s contact costs. As discussed above I have found that he is able to meet his financial obligations and his ability to maintain the children is not affected by the contact costs. Also, as noted, care and contact of the children may change in the foreseeable future.

7. I am not persuaded that either parent will be in financial hardship as a result of my decision and I will vary the objection decision accordingly.

DECISION

The decision under review is varied so that for the period 18 February 2021 to 28 February 2022, Ms Farebrother’s adjusted taxable income is set at $96,565 per annum.