Popham and Muir (Child support)

[2021] AATA 4792

Popham and Muir (Child support) [2021] AATA 4792 (18 October 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC021417

APPLICANT:  Mr Popham

OTHER PARTIES:  Child Support Registrar

Miss Muir

TRIBUNAL:Member K Dordevic

DECISION DATE:  18 October 2021

DECISION:

The tribunal sets aside the decision under review and, in substitution, decides that that annual rate of child support payable by Mr Popham is increased by:

• $7,500 for the period 31 July 2020 to 30 June 2023; and

• $2,500 for the period 1 July 2023 to 25 January 2024.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – compensation payment – high costs of child care – 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

1. 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. The Act also provides for a departure from the administrative assessment in certain circumstances.

2. This case was registered with the Department of Human Services (now Services Australia) – Child Support (the Agency) on 11 January 2019 and has been collectable since 31 July 2020. There is one child subject to the administrative assessment, who is recorded as being in the mother’s 72% care and the father’s 28% care.

3. The mother lodged a departure application on 23 November 2020. On 21 January 2021 a senior case officer determined that for the period 23 November 2020 to 28 February 2021 the annual rate of child support payable by the father was increased by $6,056.

4. On 4 February 2021 the mother lodged an objection to that decision. On 28 April 2021 an objections officer partly allowed the objection, varying the assessment by increasing the annual rate payable by the father by:

   ·$3,295 for the period 23 November to 31 December 2020; and

   ·$4,110 for the period 1 January to 31 December 2021.

5. On 6 May 2021 the father sought further review with the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). A directions hearing was held on 1 September 2021 and directions were issued, requiring compliance by 27 September 2021.

6. The hearing took place on 18 October 2021. The mother and father appeared by MS Teams audio. The Child Support Registrar was not represented at the hearing. The tribunal also considered the documentation provided by the Agency (folios 1 to 290), the father (folios A1 to A39) and the mother (folios B1 to B137).

ISSUES

1. The statutory provisions relevant to this review are outlined in section 98C of the Act, which states that a decision to depart from the administrative assessment may be made if the following three requirements are met:

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

   (ii)that 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 …

2. Therefore, the issues which arise in this case are:

   ·     Does a ground exist for departure from the administrative assessment of child support? And if so,

   ·     Would it be just and equitable and otherwise proper to make a particular determination?

CONSIDERATION

A ground for departure

1. Subparagraph 117(2)(b)(ib) of the Act provides a ground for departure:

   (b)  that, in the special circumstances of the case, the costs of maintaining the child are significantly affected: …

   (ib) because of high child care costs in relation to the child; …

2. Subsection 117(3B) of the Act says that costs can only be considered high if, during the child support period, they total more than 5% of the parent’s adjusted taxable income.

3. The child is under 12 years of age and is due to commence primary school in 2024. It is not in contention and the tribunal so finds that the mother’s work commitments make it necessary for the child to attend child care 12 hours a day, four days per week in 2020 and 10 hours a day, five days per week from January 2021. The father was providing care for the child each Wednesday whilst the mother was at work, but in October 2020 he advised the mother that he would no longer care for the child on Wednesdays, as he was planning on securing paid work. The tribunal accepts the mother’s evidence that child care subsidy is only available for 100 hours per fortnight, and therefore she is only able to obtain subsidised care for 10 hours each day when the child attends five days per week.

4. The tribunal accepts the parents’ generally consistent testimony that the mother sought mediation in May 2020 with the aim of securing agreement, amongst other things, that the father would contribute to the child’s care costs. When that was unsuccessful, she sought a departure determination from the Agency.

5. As an overall snapshot, the child care statements in evidence indicate that from September 2020 the child attended care four days per week, with the mother’s out of pocket daily fees being $32.95 per day. The statements indicate that the child’s attendance increased to five days per week from 4 January 2021, with a weekly gap payment made by the mother of $164.40. Her gap payment rose to $171.10 per week from 28 June 2021.

6. The tribunal finds that during the child support period the total child care fees charged were $30,599, the mother received direct child care subsidy of $21,095.55 and so the mother’s gross out of pocket child care costs during the child support period are $9,503.45. The mother also provided evidence that she was provided additional child care subsidy (the top‑up payment) of $3,740.52 for the 2021 year. At hearing she explained that she overestimates her income for family tax benefit purposes to ensure that she is not overpaid. The tribunal has calculated that the daily child care subsidy top-up rate as $15.99 per day (based on the top-up payment of $3,740.52 divided by the 234 days the child attended care in the 2021 financial year). On the basis that it is likely that the mother will receive a similar top-up payment in the 2022 financial year ($15.99 x 282 child care days in the child support period), the tribunal concludes that mother’s net out of pocket expenses during the child support period of 1 September 2020 to 30 November 2021 will be $4,994.27.  The tribunal also notes that these calculations do not include an extra day the child attended care, where the father met this cost on 14 October 2020 (at folio 223). Furthermore, whilst the child care statements in evidence (at B78 to B80) indicate that the mother did not receive any child care subsidy for the period 28 June to 16 July 2021 the tribunal has proceeded on the basis that the mother received child care subsidy of $388.90 per week during this period, as later statements indicate that her account was credited by this amount.

7. To ascertain the 5% threshold the law requires the tribunal to calculate the mother’s administratively assessed adjusted taxable income, being $60,143 (2020 financial year) for the child support period 1 September 2020 to 30 November 2021. The tribunal finds that the mother’s adjusted taxable income for the child support period is $75,137.56 ($60,143/365 days x 456 days). It is 5% of this annualised figure is used to determine the threshold. In this case, the 5% threshold equates to $3,757. The tribunal has already determined that the mother’s out of pocket child care costs during the child support period are likely to be $4,994.27.

8. The tribunal is satisfied that the mother’s child care costs exceed the 5% threshold which constitutes special circumstances, as her costs of maintaining the child is significantly affected by her child care costs. As a matter of fact, the mother must apply just under 8% of her net income during the child support period to this cost. The tribunal concludes that the ground provided for in subparagraph 117(2)(b)(ib) of the Act 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 child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula assessment.

2. At the time the mother lodged the departure application under review the father was liable to pay $3,241 in child support per annum for the period 1 September 2020 to 30 November 2021 based on the his 2020 adjusted taxable income of $63,032 and the mother’s 2020 adjusted taxable income of $60,143. The mother’s 2021 adjusted taxable is $54,812. The father is yet to lodge his 2021 income tax return.

3. The mother provided a Statement of Financial Circumstances dated 12 May 2021. She is employed on a permanent part-time basis and reports gross income of $522.50 per week as well as parenting payment of $242.33 per week. Her assets include savings of $4,000, a motor vehicle valued at $8,500 and superannuation valued at $56,520. Her only liability is a HECS det of $15,943. Her weekly personal expenditure is $77.64, made up of income tax and superannuation. She declares household expenses of $1,103, of which at least $550 relate to her care of the child, including child care fees of $164.40. The tribunal notes that from 28 June 2021 the child care statements in evidence indicate that her net child care fees increased to $171.10 per week. The tribunal accepts the mother’s evidence regarding the calculation of her long service leave is based on a seven day week and so is not persuaded by the father’s assertion, without any evidence to support them, that the mother has negotiated with her employer to increase her long-service leave entitlements to artificially reduce her income. There is also no evidence to suggest, as the father asserts, the mother has artificially reduced her income by salary sacrificing her superannuation payments.

4. The father advised that he has lodged a separate change of assessment application with the Agency on the basis of the mother’s earning capacity. Whilst that decision is not before this tribunal, in determining whether or not it is just and equitable to depart from an administrative assessment, consideration must be given to each parent’s earning capacity. Subparagraph 117(2(c)(ib) provides a ground to depart from an assessment based on the earning capacity of either parent. Section 117(7B) provides that when considering the earning capacity of a parent a decision maker is required to take into account three tests:

   (7B)  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.

5. The mother’s evidence regarding her work experience and current earning capacity can be summarised as follows. She completed her VCE in 2012 and began working on a full-time basis. She then commenced studying [Discipline 1], reducing her work to four days per week. She and the father then relocated to Queensland in 2017, and her course was not available; it was at the same time that she realised that she did not wish to [work in Discipline 1]. She secured work with [Employer 1] in 2017 and in January 2018 enrolled in a Bachelor of [Discipline 2], with the aim of transferring to a Bachelor of [Discipline 3]. She then fell pregnant and withdrew from the course. She stressed that she has been trying to study for years; this is not a new decision but with moving interstate, her pregnancy, and the breakdown of the parents’ relationship in February 2020, it was always deferred.  The mother went on to explain that following maternity leave she returned to work in August 2019 on a part-time basis (43.5 hours per fortnight). Upon separation she began working on a full-time basis, initially backfilling positions when her colleagues would take leave. She realised sometime in 2020 that she was in a bind; if the child was in care on a full-time basis any increase in her income would be muted by the increase in her child care costs. However, if she worked on a part-time basis, she would have trouble advancing in her career and meeting her and the child’s expenses. This, together with witnessing a road fatality whilst [working] and her cardiovascular disease, contributed to her decision to undertake full-time university studies. She is confident she will have a higher earning capacity once her studies are completed. She has been advised by her employer that she will be eligible for roles with remuneration of about $95,000 per annum. She stressed that she is ambitious and wants to ensure she can provide stability to the child and that her decision was not made with child support in mind. At hearing the mother stressed that she will return to her usual work days (four days per week) during non-semester period and on a reduced part-time basis during the two 14‑week university semesters. 

6. The tribunal also finds that the mother commenced a Bachelor of [Discipline 3] in March 2021 on a full-time basis (at B126) and anticipates that she will be eligible to graduate at the conclusion of 2023. The mother has provided payslips (at folios B25 to B32) for the periods 1 to 26 February 2021, which indicate that she was working 36.25 hours per week and 2 to 27 August 2021 that indicate that she is working 14.25 hours per week.  The tribunal finds that, in deciding to decrease her work hours to 28 weeks per annum the mother has changed her work pattern.

7. The tribunal finds that the mother is eligible for subsidised care of 100 hours per fortnight. Thus, taking into account her commute to work, her caring responsibilities mean that she only has capacity to work four days per week. Nevertheless, there was no suggestion that the mother’s decision to decrease her work hours to part-time and commence full-time study was justified because of any caring responsibilities and her health.

8. The father asserts that the mother’s decision to commence her studies was to secure an increased rate of child support. The tribunal notes that the mother’s 2021 adjusted taxable income reduced to $57,365 from her 2020 adjusted taxable income of $60,143. Whilst it is acknowledged that this only included one 14-week period of reduced employment, this reduction in income had the effect of increasing the father’s child support liability by $0.32 per day or $117 per annum.  The change suggests that there will be a minimal increase in the father’s child support alibility as a consequence of the change to the mother’s work arrangements. The tribunal concludes that the mother’s decision to decrease her work and commence study does not demonstrate that the effect on the administrative assessment of child support was indeed a major purpose behind her decision.

9. The parents are in agreement that the child generally enjoys good health, though he was born with a cardiac condition. He receives annual reviews for this condition, with the cost being met by the public health system. The parents agree that apart from the child care costs the child has no expenses that are out of the ordinary.

10. The tribunal next considered the father’s income, financial resources and earning capacity. The father completed a Statement of Financial Circumstances (for Centrelink matters before this tribunal, and not child support matter such as this) dated 27 September 2021. The father declared that he is in receipt of net pension and incapacity payments from the [government] of $941.64 per week and declares expenses of $1,049.62 (excluding child support). The tribunal finds (on the basis of evidence at folios A17 to A18) that as a matter of fact the father is in receipt of gross fortnightly income of $2,353.36 (net $1,953.27) from the [government] in addition to gross fortnightly invalidity payments of $330.08 (net $260.09). This suggests that the father has a gross annual income of $67,949.70 (net $57,547.36). It is not apparent what the father’s costs are in caring for the child.  He owns his own home, which is valued at $490,000 and has a mortgage of $363,830. He declared savings with [financial service provider] but failed to disclose the amount; at hearing he stated that this was actually his mortgage and not a savings account.

11. The father’s failure to fully comply with the directions and the inconsistency in his declared income and that in the documentation provided was raised at hearing. After having the benefit of the father’s testimony the tribunal accepts that he used his best efforts to comply, but was unable to due to his cognitive impairments and mental health disorders. In the tribunal’s view this also explains his unfounded allegations that the mother had failed to make a full and frank disclosure of her income and financial resources; it is apparent that he was unable to correctly analyse the documentation she provided (by way of example he stated that she had failed to declare her income support payments in her income tax return, when in fact she had). At hearing the father stated that his medical conditions impact on his daily functioning, such that his mother relocated to Queensland to assist him to care for the child and with tasks of daily living. He reports that he cannot sit, stand or walk for any significant period as he is “quite jittery”. He reports that he is also dependent on his mother for ongoing financial support, stating that he has borrowed $35,000 from her; he forgot to document this in his Statement of Financial Circumstances form.

12. The father has made inconsistent statements to the Agency and this tribunal regarding his earning capacity. He has suggested that he would like to study, he has successfully completed studies to assist other veterans but could not undertake that work, and that he cannot work at all but he does intend to study in the future. The father provided a medical certificate dated 8 September 2021 completed by [Dr A], general practitioner which states:

    Mr Popham has been attending this clinic since 6/05/2017. He was medically discharged from ADF on the 18/09/2012.

    I certify that at the time of discharge from the ADF, because of ill health it is unlikely that Mr Popham can ever be gainfully employed in a capacity for which he is reasonably qualified because of education, experience or training.

13. A near identical medical certificate was provided by [Dr B], general practitioner on 24 August 2021 (at folio A16). The tribunal accepts the medical evidence and the father’s testimony at hearing that his medical conditions (including mental health conditions, polysubstance abuse disorder and a recent psychological assessment that suggest he has impairments with executive function, information processing, memory, speech and language) make it unlikely that he will secure work in the immediate future. The mother states that she holds the view that the father does not have an unused earning capacity; in fact, this is why she has remained confused about the father’s refusal to not continue to care for the child on Wednesdays, apparently on the basis that he is seeking employment. The tribunal concludes that the father does not have an unused earning capacity.

1. The father explained at hearing that he did not provide his 2021 income tax return given a recent Supreme Court decision in the matter of the Department of Veteran Affairs v Douglas. The tribunal understands that the father is in fact referring to a recent Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220 where the tax and super treatment of certain invalidity benefit payments have changed. The Australian Taxation Office website advises that it is undertaking a remediation program for historical income tax assessments and superannuation reporting ( The tribunal understands that the effect of the judgement is that the invalidity benefits will be taxed as superannuation lump sums. The father advised that he is seeking to amend some historical income tax returns and so he has delayed lodgement of his 2021 income tax return. He understands that this will reduce his taxable income by about 15% and thus his historical child support liability. The tribunal explained to the father that his child support liability was calculated on the basis of his adjusted taxable income which generally includes invalidity service pensions: Child Support Guide version 4.58 at Chapter 2.4.4.10.

2. The tribunal finds that the father received permanent impairment compensation of $147,009.39. He did not provided any evidence regarding when he received the funds (as he was directed to) though the tribunal is satisfied it was sometime between March and June 2020 (at folio 157). The Child Support Guide states (at Chapter 2.6.14) that when a parent receives a lump sum payment, including compensation for loss or damage, that does not form part of their income amount for child support purposes, the lump sum may be taken into account when deciding if a departure from the administrative assessment is appropriate. In each case it is necessary to decide whether receipt of the sum makes the administrative assessment unjust or inequitable. The tribunal is satisfied that the payment has placed the father in a better financial position; he used the funds to purchase a home valued at $490,000.

3. The tribunal was initially of the view that it would be appropriate to increase the father’s 2020 adjusted taxable income by the full lump sum payment. However, this would place the father in arrears of more than $11,500. However, an increase in the father’s adjusted taxable income by $49,000 per annum ($147,009.39/3) over a three-year period ameliorates the impact on the father; amending the assessment on this basis would result in the father’s annual liability increasing by $5,150 in the 2021 to 2023 financial years. The tribunal is satisfied that it is appropriate to have smaller portions of the lump sum payment reflected in the assessment over an extended period. Therefore, the tribunal has determined it is appropriate in the circumstances to increase the father’s annual rate, on the basis of his compensation payment, by $5,000 per annum from 31 July 2020. Whilst this is some three months before the mother lodged her change of assessment application, the tribunal is satisfied that this is appropriate given that it is from this date that the child support liability was collected by the Agency, together with the fact that the mother sought to negotiate additional contributions from the father personally and with the assistance of alternative dispute resolution. This will create arrears of $5,900. The tribunal is satisfied that given the father’s income and financial resources this will not place him in a position of undue hardship. The tribunal is satisfied that it is appropriate to increase the father’s annual rate of child support by $5,000 in the 2021, 2022 and 2023 financial years.

4. The tribunal is also satisfied, in light of the findings about the father’s income and financial resources, that it is also just and equitable to depart from the administrative assessment on the basis of the child’s child care fees. The tribunal was initially of the view that it would be appropriate for the father to contribute on the basis of the parents’ respective income percentages (taking into account the lump sum compensation payment). However, after taking into account the considerable increase to the father’s child support liability, the tribunal is satisfied that he should only contribute to 50% of the mother’s out of pocket child care costs from the date that child support was collectable by the Agency. Thus, the tribunal concludes that it is appropriate to increase the father’s annual rate by $2,500 for the period 31 July 2020 (the date that the child support liability was collectable by the Agency) to 25 January 2024 (when the child is expected to commence primary school), noting that the father’s percentage contribution will decrease over time as the child care fees will increase each financial year. This will provide certainty to the parties and minimise the need for further proceedings.

5. The tribunal is satisfied that the administrative assessment is unfair given the father’s financial resources and the child’s care costs. This results in an unjust and inequitable level of child support given the circumstances of each parent. For all these reasons it is just and equitable to depart from the administrative assessment.

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. The mother is in receipt of income-tested benefits. Departing from the administrative assessment will result in a more appropriate apportionment of financial responsibility between the parents and the community.

2. The determination is otherwise proper.

DECISION

The tribunal sets aside the decision under review and, in substitution, decides that that annual rate of child support payable by Mr Popham is increased by:

• $7,500 for the period 31 July 2020 to 30 June 2023; and

• $2,500 for the period 1 July 2023 to 25 January 2024.