Perkins and Bain (Child Support)

[2016] AATA 2012

Perkins and Bain (Child Support) [2016] AATA 2012 (2 June 2016)

APPLICANT  Mr Perkins

OTHER PARTIES  Mrs Bain

Child Support Registrar

TRIBUNAL  Mr P Jensen, Presiding Member

Mr J Thomson, Member

DECISION DATE  2 June 2016

DECISION

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

• vary Mrs Bain’s adjusted taxable income to $64,500 per annum from 10 August 2015 to 31 December 2016; and

• increase Mr Perkins’ rate of child support payable by $2,243 per annum from 10 August 2015 to 31 December 2017 (on account of a child’s special needs).

CATCHWORDS
Child Support - Departure determination - Income and financial resources of parents - Special needs of the child - 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

Introduction

1. Mr Perkins and Mrs Bain are the parents of [Child 1] who was born in 2006 and [Child 2] who was born in 2010. A child support case was registered in 2012. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. From 1 July 2015 the administrative assessment was based on Mr Perkins’ estimate of income of $50,000 per annum (subject to a reassessment once his actual 2015-16 adjusted taxable income becomes known), Mrs Bain’s provisional income of $17,459 (subject to a reassessment once her relevant adjusted taxable income becomes known), and Mr Perkins’ 14% care and Mrs Bain’s 86% care of the children. Mr Perkins was required to pay $4,830 per annum in child support.

2. The Act also provides for a departure from the administrative assessment in certain circumstances. Mrs Bain lodged a departure application on 10 August 2015. A senior case officer granted her application and made a departure decision. Mrs Bain objected to that decision. An objections officer allowed her objection and varied the departure decision such that, for the period from 1 January 2016 to 31 October 2017, Mr Perkins’ adjusted taxable income was varied to $76,000 per annum and his rate of child support payable was increased by $3,860 per annum. Mr Perkins sought further review and the Tribunal heard the matter on 2 June 2016. Mr Perkins attended in person. Mrs Bain attended by phone. In reaching its decision the Tribunal has considered the sworn evidence of Mr Perkins and Mrs Bain as well as the documentation provided by the Department of Human Services – Child Support (“the Department”), Mr Perkins and Mrs Bain.

3. Subsection 98C(1) of the Act provides, relevantly, that a decision to depart from the administrative assessment may be made if:

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

   (ii)... it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part …

A Ground for Departure

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

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

   …   

   (ia)because of the special needs of the child …

2. There is no dispute that [Child 2] has special needs, although the parents do not agree on the precise diagnosis of those special needs. There is no dispute that, as a result of those special needs, [Child 2] is receiving necessary treatment from a [medical specialist 1] and [medical specialist 2]. What is in dispute is the out-of-pocket costs that Mrs Bain incurs in respect of those treatments.

3. [Child 2] also recently recommenced treatment with [medical specialist 3. That treatment is provided free of charge by Education [State 1].

4. Mr Perkins has maintained that he is agreeable to making a fair contribution towards the out-of-pocket costs that Mrs Bain actually incurs, but he is concerned that the Department has made decisions which require him to contribute to costs that Mrs Bain is not actually incurring. The inadequacy of the documentation Mrs Bain has provided has been noted a number of times. The senior case officer’s reasons for decision dated 22 October 2015 noted that “whilst it is difficult to be precise about the ongoing costs of [Child 2]’s treatment, doing the best I can with the available information …” The objections officer’s reasons for decision dated 16 February 2016 noted that “it is difficult to put a specific cost on the needs of [Child 2]”. On 19 April 2016 the Presiding Member conducted a directions hearing and reminded Mrs Bain of the need to provide documentary evidence of her out-of-pocket expenses. Unfortunately, the current state of the documentary evidence still does not allow the Tribunal to precisely calculate Mrs Bain’s out-of-pocket expenses. However, the Tribunal will do the best it can with the evidence that has been provided.

5. At the directions hearing, both parents agreed that the frequency of [Child 2]’s speech therapy sessions during the period from 31 March 2015 to 31 March 2016 would be the best evidence of the likely frequency of his ongoing [medical condition 1]  sessions. Mrs Bain subsequently provided a letter from [Child 2]’s [medical specialist 1] in which she stated that he had 22 sessions during that period. At the hearing, Mrs Bain identified a different period when the frequency was greater. She also noted that the [medical specialist 1] had recommended 46 sessions per year. Be that as it may, both parents had agreed, and the Tribunal finds, that [Child 2] has been attending, and is likely to continue to attend, 22 sessions per year (all other things being equal). The [medical condition 1] costs $75.00 per session. Mrs Bain stated, without any supporting documentation, that [Child 2] receives a rebate of $38.56 per session for six sessions per year. Mr Perkins did not dispute that evidence and the Tribunal accepts it. ($75.00 x 22) – ($38.56 x 6) = $1,418.

6. Mrs Bain stated, without any supporting documentation, that [Child 2] visits a [medical specialist 2] fortnightly, but should be visiting him weekly. The visits cost $150.00 per session. Mrs Bain stated, without any supporting documentation, that [Child 2] receives a rebate of $83.35 per session for ten sessions per year. Mr Perkins did not dispute that evidence and the Tribunal accepts it. ($150.00 x 26) – ($83.35 x 10) = $3,066.

7. In summary, [Child 2] has special needs and the associated out-of-pocket costs are approximately $4,484 per annum. Those costs significantly affect the costs of maintaining [Child 2]. Those circumstances as a whole constitute special circumstances. A ground for departure is established.

Just and Equitable

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

Mr Perkins

1. Mr Perkins was employed as [an occupation 1]. He accepted a redundancy in December 2011. His 2011-12 adjusted taxable income was $282,622. Since then his employment has consisted of well-paid contract work and other less remunerative work such as [occupation 2]. Mr Perkins and Mrs Bain separated in December 2012.

2. The Act allows a parent to provide an estimate of their adjusted taxable income and, if accepted, that estimate is used to provisionally calculate the rate of child support payable, subject to a reassessment once the parent’s actual adjusted taxable income becomes known. On 29 October 2014 the Department accepted Mr Perkins’ estimate of income of $26,071 per annum. On 16 April 2015 the Department accepted Mr Perkins’ estimate of income of $120,085 per annum. On 30 June 2015 the Department accepted Mr Perkins’ estimate of income from 1 July 2015 of $50,000 per annum. Mrs Bain objected to that final estimate of income but later withdrew her objection. On 10 August 2015 she sought to address the situation more holistically by lodging a departure application. She submitted that Mr Perkins should be assessed on his earning capacity rather than his actual income. The Tribunal can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) of the Act are satisfied. That subsection states:

   In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

(a)one or more of the following applies:

(i)the parent does not work despite ample opportunity to do so;

(ii)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;

(iii)the parent has changed his or her occupation, industry or working pattern; 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:

(i)the parent's caring responsibilities; or

(ii)  the parent's state of health; 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.

1. On 16 April 2015, Mr Perkins contacted the Department and advised it that he had secured a two-month employment contract in [Country 1]. His estimate of income of $120,085 per annum was based on that contract. At the hearing, Mr Perkins said the contract ended as expected in early June 2015 but he elected not to update his estimate of income in respect of the last few weeks of 2014-15.

2. On 30 June 2015, Mr Perkins contacted the Department and advised it that he had secured another employment contract. He was required to do fly-in-fly-out work near [Town 1] for approximately ten and a half weeks. He expected to be paid $45,000 for that work and he expected to earn a further $5,000 during the balance of the financial year, hence the estimate of $50,000 per annum. According to a Departmental file note, it contacted the employer and was advised that Mr Perkins was employed from 27 July 2015 to 4 August 2015. Mr Perkins’ recollection is that he was employed for two weeks. Nothing turns on the exact period of Mr Perkins’ employment.

3. Mr Perkins’ evidence concerning the termination of the [Town 1] contract can be summarised as follows. He normally provides care for the children for two nights per fortnight plus half the school holidays. The [Town 1] contract overlapped the mid-year school holidays. He raised the issue with Mrs Bain and she said he should “just sign the contract”. When he commenced the work it was apparent that the employer had retained too many contractors. Mrs Bain then informed him that she had planned to have a holiday in Melbourne during the school holidays and he would have to care for the children. Mr Perkins explained his situation to his employer and his employment was terminated.

4. It was not clear from Mr Perkins’ evidence whether he or his employer formally terminated his employment. Mr Perkins implied that his employer used his caring responsibilities as an excuse to terminate his employment in the context of his employer having realised that he had retained too many contractors.

5. Mrs Bain’s evidence can be summarised as follows. She agreed that Mr Perkins contacted her about the possibility of securing more contract work but he did not give details. Mr Perkins (and therefore Mrs Bain) normally gets very little notice of his upcoming work. Mrs Bain is a [occupation 3] and her work roster is decided well in advance. After Mr Perkins alluded to the possibility of obtaining more contract work, Mrs Bain booked a holiday in [State 2]. It was only later that Mr Perkins provided her with details of the [Town 1] contract.

6. Since August 2015, Mr Perkins has not secured any further contract work. He has been in receipt of newstart allowance since January 2016. He has not been forthcoming with details of the other less remunerative work he has undertaken from time to time. He stated that he was subjected to verbal and emotional abuse during the course of his marriage to Mrs Bain and he was reluctant to disclose details of his current circumstances for fear of being subjected to further abuse. Mrs Bain replied that what constitutes verbal and emotional abuse is a subjective assessment.

7. In response to further questioning by the Tribunal, Mr Perkins stated that, in addition to looking for work, he has been enrolled at [a] University on a part-time basis since the beginning of 2014. He expects to complete his studies later this year and commence a new career as a [occupation 4].

8. Finally, it is worth noting that Mr Perkins stated, and Mrs Bain agreed, that the Department has previously made decisions that have resulted in Mr Perkins having child support credits and he has “gifted” those credits to Mrs Bain. Mrs Bain said the last gift was made “more than twelve months ago”.

9. It is not necessary to make definite findings in respect of all three paragraphs of subsection 117(7B). It is sufficient to focus on paragraph 117(7B)(c). When Mr Perkins obtained well-paid employment in [Country 1] he promptly notified the Department and his rate of child support payable was increased accordingly. When he ceased that employment he elected to continue to be provisionally assessed on that higher income. When he obtained further well-paid employment near [Town 1] he once again promptly notified the Department and his rate of child support payable was varied accordingly. There appears to be no dispute that Mr Perkins’ caring responsibilities were at least a factor that contributed to the premature termination of his [Town 1] contract. Finally, Mr Perkins has in the past gifted child support credits to Mrs Bain. Those facts strongly suggest, and the Tribunal finds, that the changes in Mr Perkins’ employment have not been for a major purpose of affecting the rate of child support payable. It follows that the Tribunal cannot have regard to Mr Perkins’ earning capacity.

10. Mr Perkins currently receives newstart allowance. To remain eligible for newstart allowance he is required to look for paid employment. He stated, and the Tribunal accepts, that he has been, and is currently, looking for paid employment. In the meantime, he lives with [a relative] in her house. He pays rent when he is in paid employment. He has minimal savings. He has a credit card debt of approximately $4,000. His weekly household expenses are very modest. He remains hopeful that he will obtain further well-paid contract work from time to time.

Mrs Bain

1. Mrs Bain previously ran a business called [Business 1]. She stated that she ceased her involvement in that business in 2013. Mr Perkins provided the Tribunal with an ASIC report which showed that the business name was cancelled in February 2016. He submitted that Mrs Bain was therefore operating a profitable business until then. In the Tribunal’s opinion, that conclusion cannot be drawn from that evidence. Mrs Bain is employed as [an occupation 3] and she is the primary carer of two children, one of whom has special needs. On balance, the Tribunal accepts Mrs Bain’s evidence that her only income since 2013 has been from her employment as a [occupation 3]. A recent payslip shows that she earned $55,903 during the 313 days from 1 July 2015 to 8 May 2016, which equates to $55,903 / 313 x 365 = $65,190 per annum. In 2014-15 she claimed tax-deductible expenses of $659. Her 2015-16 adjusted taxable income is likely to be approximately $64,500.

2. Mrs Bain’s household consists of herself, her husband, [Child 1] and [Child 2], and occasional visits by her step-child. She and her husband own their home and they are repaying the associated home loan. She requires assistance from Mr Perkins to help meet the children’s costs.

[Child 1] and [Child 2]

1. Apart from the costs relating to [Child 2]’s special needs, the children’s costs are the ordinary costs of children of their ages.

A consideration of just and equitable

1. At the Tribunal hearing, neither parent expressed a strong view as to when any new departure decision should take effect. Mrs Bain first discussed the possibility of lodging a departure decision with the Department on 23 February 2015 but she did not do so until 10 August 2015. Mr Perkins was notified of that fact shortly thereafter. It is appropriate that any new departure decision have effect from 10 August 2015.

2. On 25 August 2015, Mr Perkins estimated that his income for the balance of the financial year would be $35,092 per annum. His child support liability for 2015-16 will be reassessed once his ATO-assessed adjusted taxable income becomes known. The evidence indicates that his ATO-assessed adjusted taxable income will fairly reflect his income and financial resources for child support purposes. It is therefore unnecessary to vary Mr Perkins’ adjusted taxable income for child support purposes.

3. Mrs Bain is being assessed on her 2014-15 adjusted taxable income of $42,553. However, her 2015-16 adjusted taxable income is likely to be approximately $64,500 per annum. The disparity is significant. It is appropriate to vary her adjusted taxable income to $64,500 per annum from 10 August 2015 to 31 December 2016, by which time it is likely that she will have lodged her 2015-16 tax return.

4. Notwithstanding the apparent disparity in the parents’ incomes, Mr Perkins submitted that it would be appropriate to increase his rate of child support so that he was effectively paying half the out-of-pocket costs associated with [Child 2]’s special needs in addition to the general rate of child support payable under the administrative assessment formula. It will be recalled that those costs are likely to be the costs of 22 sessions of [medical condition 1] and 26 sessions with a [medical specialist 2], and are likely to be $3,066 per annum net.

5. The matter is somewhat complicated by a subsequent submission by Mr Perkins that it would be appropriate for him to contribute to the cost of 42 [medical condition 1] sessions and 16 [medical condition 2] sessions per year. They would cost ($75.00 x 42) – ($38.56 x 6) + ($150.00 x 16) – ($83.35 x 10) = $4,485. If he were required to pay half that amount, it would equate to an extra $43 per week. On that issue, the following three points are relevant. First, Mr Perkins is well-placed to assess his own capacity to contribute to those costs. Second, Mr Perkins receives rent-free accommodation when he is not in paid employment, so his general costs are less than others in otherwise similar circumstances. Third, Mrs Bain stated that [Child 2] would attend more sessions with his [medical specialist 1] and [medical specialist 2] if she could afford them. For those reasons, it is appropriate to increase Mr Perkins’ rate of child support payable by the rate he suggested. It is likely that [Child 2] will require that level of treatment for a considerable period of time. It is appropriate to increase Mr Perkins’ rate of child support by that amount until 31 December 2017.

6. The proposed decision would require Mr Perkins to pay a current rate of child support of $2,243 per annum (subject to reassessment once his actual 2015-16 adjusted taxable income becomes known) and would reduce his arrears by approximately $7,000. As at 5 May 2016, Mr Perkins owed child support arrears of $417. His arrears would have been significantly more if the Department had not recently garnished his tax refund of $3,866. Mrs Bain has received Mr Perkins’ child support payments pursuant to the senior case officer’s decision, and later the objections officer’s decision, in the full knowledge that those departure decisions might be set aside. That is what has transpired. The Tribunal’s proposed decision will give Mr Perkins a significant child support credit because he had been over-assessed. That credit might cause Mrs Bain some financial hardship, but given the chronology of events that have just been referred to, it would not be financial hardship that would cause the Tribunal’s decision to be unjust or inequitable.  

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

2. Mrs Bain’s statement of financial circumstances indicated that she does not receive family tax benefit in respect of [Child 1] and [Child 2]. However, Mrs Bain stated that her husband’s income might decrease in October 2016. She might then start receiving family tax benefit. In those circumstances, changing the child support payable by Mr Perkins will ensure an appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

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

• vary Mrs Bain’s adjusted taxable income to $64,500 per annum from 10 August 2015 to 31 December 2016; and

• increase Mr Perkins’ rate of child support payable by $2,243 per annum from 10 August 2015 to 31 December 2017 (on account of a child’s special needs).