Radley and Verge (Child support)

[2019] AATA 1191

Radley and Verge (Child support) [2019] AATA 1191 (29 March 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/BC014755

APPLICANT:  Mr Radley

OTHER PARTIES:  Child Support Registrar

Ms Verge

TRIBUNAL:Member J Thomson

DECISION DATE:  29 March 2019

DECISION:

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

(a). For the period 1 February 2018 to 4 February 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

(b). For the period 5 February 2018 to [a date in] March 2018 the annual rate of child support payable by Mr Radley is set at $10,205;

(c). For the period [from the next day in] March 2018 to 31 December 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

(d). For the period 1 January 2019 to 30 November 2019, the annual rate of child support payable by Mr Radley is increased by $3,763;

(e). For the period 1 January 2020 to 31 December 2020, the annual rate of child support payable by Mr Radley is increased by $2,525;

(f). For the period 1 January 2021 to [a date in] August 2021, the annual rate of child support payable by Mr Radley is increased by $4,352.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - costs of orthodontic costs for the children - cost of maintaining the children are significantly affected - financial resources of both parents - 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. Mr Radley and Ms Verge are the parents of [Child 1], born 2000, and [Child 2], born 2003. At the time of hearing, [Child 2] was recorded as being in the 100% care of Ms Verge. [Child 1] ceased to be a child in the assessment [in] March 2018, when she completed her education, entered the workforce, and was no longer in the care of either parent. Prior to [March] 2018, she was recorded as being in the 100% care of Ms Verge.

2. Mr Radley seeks review of an objection decision made by the Department of Human Services – Child Support (the Department) on 12 July 2018. This decision disallowed his objection to a Department decision dated 2 May 2018 changing the assessment of child support payable by Mr Radley as follows:

   (a) – for the period 1 February 2018 to 4 February 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

   (b) – for the period 5 February 2018 until a terminating event for [Child 1], the annual rate of child support is set at $10,205;

   (c) – from the date [Child 1] ceases to be a child of the assessment to 31 December 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

   (d) – for the period 1 January 2019 to 30 November 2019, the annual rate of child support payable by Mr Radley is increased by $3,919;

   (e) – for the period 1 December 2019 to 31 December 2019, the annual rate of child support payable by Mr Radley is increased by $2,528;

   (f) – for the period 1 January 2020 to 31 December 2020, the annual rate of child support payable by Mr Radley is increased by $2,604;

   (g) – for the period 1 January 2021 to [a date in] August 2021, the annual rate of child support payable by Mr Radley is increased by $4,553.

3. The Tribunal heard the matter on 17 January 2019. Mr Radley and Ms Verge attended the hearing by conference telephone and gave affirmed evidence. The Tribunal had before it documentation provided by the Department and each of the parents. Both parents had copies of these documents with them at hearing. The Department’s documentation was admitted into evidence and marked Exhibit 1. Mr Radley’s and Ms Verge’s documents were admitted into evidence and marked Exhibits A and B respectively.

CONSIDERATION

1. In reaching its decision, the Tribunal has considered the affirmed evidence given by both parents at hearing and the documentation contained in Exhibits 1, A and B.

The Legislative Framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act).  A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children, and the level of care provided by each parent. Part 6A of the Act allows for a departure from the administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·One, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·A departure is just and equitable as regards the children and each parent (sub-subparagraph 98(1)(b)(ii)(A)); and

   ·It is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B))

2. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2) of the Act.

3. 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 Registrar may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Grounds for Departure

1. Subparagraphs 117(2)(b)(ia) and117(2)(b)(ii) – commonly referred to as Reasons 2 and 3 respectively ­– provide as a ground for departure:

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

   (ia) because of special needs of the child; or

   (ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;…

2. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, 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 legislation in subsection 117(2) must be guided by the qualification that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92 - 279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial position.

3. Mr Radley’s case at hearing focused upon the following issues:

   ·       The manner in which the objections officer calculated the increase in his annual rate of child support payable to Ms Verge to reflect his contributions to his daughter, [Child 2’s] orthodontic costs and school fees in the decision under review;

   ·       The determination of Ms Verge’s adjusted taxable income for child support purposes to reflect her salary sacrifice contributions to her superannuation fund and her current partner’s home loan mortgage repayments.

4. Mr Radley did not challenge the basic findings of the objections officer with respect to his liability to contribute to half of Ms Verge’s out-of-pocket expenses for [Child 2’s] orthodontic treatment determined at $5,100, and half of [Child 2’s] education costs, calculated by reference to the schedule of fees and compulsory charges for students from [specified grades] over the course of the academic years 2018 to 2021, when [Child 2] is due to complete [year].

5. Mr Radley did not challenge the objections officer’s findings in relation to reason 4 in Ms Verge’s application for change of assessment, nor did he challenge the objections officer’s findings in relation to reasons 1, 4, 8B and 9 in his cross application for change of assessment.

6. With respect to the issue regarding the manner in which the objections officer has dealt with his contribution to Ms Verge’s out-of-pocket expenses for [Child 2’s] orthodontic treatment, Mr Radley accepted the objections officer’s determination of the total costs of the orthodontic treatment at $5,100 and his 50% contribution to those costs at $2,550. He also accepted the objections officer’s determination of his liability to contribute to the extent of 50% to the costs of educating [Child 2] calculated on the basis of the school fees and compulsory charges levied by the school in which she had been originally enrolled, [School 1] in [Town 1].

7. The Tribunal is satisfied that the costs of maintaining [Child 2] are significantly affected because of her special orthodontic needs (section 117(b)(ia) of the Act), and because the child is being educated in the manner that was expected by her parents (section 117(b)(ii) of the Act), making the case special and a ground for departure established.

8. The objections officer sought to apply Mr Radley’s contribution to [Child 2’s] orthodontic costs of $2,550 to his annual rate of child support, spread over a two-year period from 1 February 2018, together with his 50% to [Child 2’s] school fees and compulsory charges for the 2018 academic year calculated in accordance with schedule of fees and compulsory charges levied by [School 1] totalling $4,908.

9. In an earlier Department decision dated 10 April 2018, [the Delegate] reduced Mr Radley’s annual rate of child support to $10,205 for the period 5 February 2018 (the date of Ms Verge’s change of assessment application) until a terminating event occurred for [Child 1] on the ground that it was just and equitable to do so because the elder child in the assessment at that time, [Child 1], was contributing around $100 per week board (annualised to $5,200).

10. Paragraph 2 of [the Delegate’s] decision, recorded at page 202 of Exhibit 1, states that:

    for the period 5 February 2018 until a terminating event occurs for [Child 1], the annual rate of child support is set at $10,205 per year – this includes the rate of $6,360 payable under the administrative formula (including the adjustment to the cost of child for [Child 1]), and an increase of $3,845 per year in respect of [Child 2’s] braces and education costs …

11. No specific end date was set by [the Delegate] for the occurrence of that terminating event. However, the terminating event has since been recorded in the Department’s records and effected in the assessment from [a date in] March 2018.

12. The objections officer affirmed [the Delegate’s] earlier decision of 10 April 2018, increasing Mr Radley’s annual rate of child support for the period 1 February 2018 to 4 February 2018 by $3,845. This appears to be correct – Mr Radley’s share of the first tranche of the orthodontic costs of $1,275, his half share of [Child 2’s]  2018 academic year [School 1] based school fees and compulsory charges of $2,550. 

13. By reference to paragraph 4 of [the Delegate’s] decision at page 203 of Exhibit 1, for the period 1 January 2019 to 30 November 2019, Mr Radley’s annual rate of child support was increased by $3,919 per year to reflect his contributions of $1,275 in respect of [Child 2’s] braces and around $2,317 in respect of [Child 2’s] education costs. The Tribunal is satisfied that the increase of $3,845 per year for the period 5 February 2018 to 31 December 2018 included an amount of $1,275 attributable to Mr Radley’s contribution of $2,550 to [Child 2’s] orthodontic costs, with the balance of that contribution of $1,275 to be taken up in the annual rate of child support increase of $3,919 for the period 1 January 2019 to 30 November 2019 reflected in paragraph 4 of [the Delegate’s] decision and the objections officer’s decision for the corresponding period, leaving only the school fees contribution to be dealt with from 1 December 2019 onward.

14. Both parents acknowledged and agreed at hearing that the $1,275 component of the increase in the annual rate of child support of $3,845 that had been paid by Mr Radley in the period 5 February 2018 to 31 December 2018 should be attributed to his contribution to [Child 2’s] orthodontic costs, leaving a balance of $1,275 to be paid as part of the $3,919 child support increase applied to the period 1 January 2019 to 30 November 2019.

15. The Tribunal has also scrutinised the calculations of the increases in the annual rate of child support to include Mr Radley’s contributions to [Child 2’s] orthodontic and education costs for the periods 1 February 2018 2 4 February 2018, 5 February 2018 to [a date in] March 2018, and [the next day in] March to 31 December 2018, annualised over those periods, and is satisfied the contributions of $1,275 and $2,454 to orthodontic costs and education costs respectively are reasonably accurately reflected in the annual increase of $3,845 for the period 1 February 2018 to 31 December 2018 such that the increase in the annual rate of child support of $3,845 for that period set by [the Delegate] and affirmed by the objections officer in the decision under review should not be disturbed.

16. Mr Radley provided the Tribunal with a copy of [School 1’s] schedule of school fees and compulsory charges for the academic years 1 January 2018 to 31 December 2018 and 1 January 2019 to 31 December 2019 (see Exhibit A, pages A50 and A51).

17. Mr Radley acknowledged at hearing that he was prepared to contribute to the extent of 50% of [Child 2’s] school fees and compulsory charges, calculated in accordance with the fees and compulsory charges levied by [School 1], [Town 1].

18. For the period 1 January 2019 to 30 November 2019, the increase in the annual rate of child support should reflect the balance of Mr Radley’s $1,275 contribution to [Child 2’s] orthodontic costs, and his 50% contribution to [Child 2’s] school fees and compulsory charges for the 2019 academic year. By reference to the [School 1] schedule of school fees and compulsory charges for that year for a grade [number] student, the fees and compulsory charges are $4,976; Mr Radley’s half share would be $2,488. The increase in the annual rate of child support for the period 1 January 2019 to 30 November 2019 should therefore be $3,763 ( $1,275 plus $2,488 = $3,763).

19. For the remaining academic years 2020 and 2021, to take into account the inevitable annual increases in school fees and compulsory charges and contingencies generally, the Tribunal will apply an annual increase at the rate of 1.5%, based on the 2019 year [School 1] schedule of school fees and compulsory charges, to determine Mr Radley’s contribution to [Child 2’s] school fees and compulsory charges for those academic years.

20. Accordingly, the relevant school fees and compulsory charges for the 2020 academic year would be $5,051 ($4,976 / 100 x 1.5 = $74.64 plus $4,976 = $5,050.64 – rounded up to $5,051). Mr Radley‘s half share of those fees would be $2,525.50 (rounded down to $2,525).

21. For the 2021 academic year, the relevant school fees and compulsory charges would be $5,127 ($5,051 / 100 x 1.5 = $75.76 plus $5,051 = $5,127). Mr Radley’s half share of those fees would be $2,563.50.

22. The Tribunal will therefore increase the annual rate of child support payable by Mr Radley for the period 1 January 2020 to 31 December 2020 by $2,525.

23. As [Child 2] will cease to be an eligible child for child support purposes on [a date in] August 2021, in the last term of her [grade number]  year of secondary school to ensure Mr Radley contributes his half share of the school fees and compulsory charges for that year while [Child 2] is still a child in the assessment, the Tribunal will increase his annual rate of child support for the period 1 January 2021 to [that date in] August 2021 by $4,352 ($2,563.50 / 215 days x 365 days = $4,351.98 – rounded up to $4,352).

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.

2. Mr Radley provided a Statement of Financial Circumstances (SOFC) dated 24 August 2018. He reported total weekly average income of $3,007, comprising his gross weekly salary of $2,137 as [an occupation 1] employed by [a named agency], income of $840 from his rental properties at [Address 1 in] [Town 1], and [Address 2] and dividends from his share portfolio of $30.

3. He lists his partner, [Ms A], is an income earner residing in his household; he lists her gross average weekly income of $350, but in evidence at the Tribunal hearing he provided an annual estimate of $20,000.

4. He listed assets totalling $848,300, comprising rental properties at [Address 1 in] [Town 1] and [Address 2] valued, respectively, at $300,000 and $500,000, negligible bank savings of $300, a share portfolio valued at $47,000, and a year 2000 [Car 1] valued at $1,000. Although Ms Verge challenged his valuations for the rental properties, she offered no evidence to the contrary.

5. His [Firm 1] superannuation entitlement is reported at $310,000.

6. Mr Radley listed liabilities totalling $940,000, comprising mortgage debt on his rental properties totalling $525,000 and a [credit] card debt of $1,000. He also listed Ms [Ms A’s] mortgage debt of  $405,000 on her property as one of his liabilities, and gave evidence at the hearing that in addition to weekly repayments of $500 towards the mortgage debt on his own properties, he has assumed responsibility for meeting her mortgage repayments of $520 per week, notwithstanding he has no registered proprietorial interest in her property, and is not a party to the mortgage on that property.

7. As Mr Radley gave evidence that both of his [Address 1] and [Address 2] properties are rented, the Tribunal assumes he resides with his partner, [Ms A], at her property, and to that extent, his voluntarily assumption of responsibility for her mortgage debt of $520 per week could be equated to rental.

8. The Tribunal notes that Ms Verge is in a similar position regarding the contributions she makes to her partner’s mortgage debt on the property in which she resides, notwithstanding she has no registered proprietorial interest in that property and no personal liability for the mortgage debt on that property.

9. Mr Radley listed weekly personal expenditure totalling $1,603 comprising income tax instalments of $503, superannuation contributions of $330, life, disability and trauma insurance premiums of $77, child support for [Child 2] of $541, credit card repayments of $50 and health insurance premiums of $102, none of which were remarkable.

10. He lists average weekly household expenses totalling $2,341 including the mortgage repayments on the properties referred to above totalling $1,020, and house repairs, electricity, council rates and levies insurance, gardening/lawn mowing, cleaning and general repairs relating to all three properties. No individual breakdown of these costs by reference to the particular properties was provided.

11. The Tribunal considers the mortgage repayments item should be reduced to $520 to accord with the contributions Mr Radley makes to his partner, [Ms A’s] mortgage repayments, which the Tribunal has equated to weekly rental, and a discount of 60% should be applied to house repairs, electricity, Council rates and levies and insurance items as attributable to the investment properties and not normal household expenses, and the gardening/lawn mowing items deducted as wholly attributable to the investment properties, resulting in a reduction of his average weekly household expenses by $875 to a more realistic figure of $1,466.

1. Although Mr Radley did not challenge Ms Verge’s income for the 2017 and 2018 financial years, he did assert she salary sacrifices income to her personal superannuation fund and the mortgage debt on her investment property, and her current partner’s residential property in which she and her partner reside with their family.

2. Ms Verge reported weekly superannuation contributions of $55 in her Statement of Financial Circumstances (SOFC) dated 26 August 2018, provided to the Tribunal (see page B7 of Exhibit B)

3. Ms Verge also provided copies of her income tax returns for the 2017 and 2018 financial years, together with corresponding Australian Taxation Office Notices of Assessment reflecting taxable incomes of $30,156 and $43,606 respectively.

4. Ms Verge’s 2017 income tax return discloses gross income of $47,081 from her employment as [an occupation 2] with [Agency 1], and negligible interest on savings of $116, unremarkable work related and other deductions totalling $2,298, a tax loss of $13,284 on her investment rental property, reportable fringe benefits of $12,224, and reportable employer superannuation contributions of $3,059. The Tribunal has added back the investment property tax losses and reportable fringe benefits and superannuation contributions to her 2017 taxable income of $30,156 to arrive at an income of approximately $58,723.

5. Ms Verge’s 2018 income tax return discloses gross income from her employment as [an occupation 2] with [Agency 1] of $47,853, negligible interest on savings of $103, unremarkable work related and other deductions totalling $1,587, tax losses on her investment rental property of $2,763, reportable fringe benefits of $13,252, and reportable employer superannuation contributions of $2,755. The Tribunal has added back the investment property tax losses and reportable fringe benefits and superannuation contributions to her 2018 taxable income of $43,606 to arrive at an income of approximately $62,376.

6. Ms Verge gave evidence at the hearing that she salary sacrifices $349 per fortnight to her investment property mortgage. She also gave evidence that she contributes $470 per week from her income to her current partner’s mortgage debt on the residential property, as reflected in her SOFC, and her partner contributes the balance of $852 to the total weekly mortgage repayments of $1,322, also reflected in her schedule of weekly average household expenses at page B8 of Exhibit B.

7. The Tribunal considers Ms Verge’s weekly contribution of $470 referred to above equates to a reasonable weekly rental she would otherwise have to pay, and not an expense which should be added back to her income for child support purposes.

8. The 2017 adjusted taxable income used in the administrative assessment is $60,182.

9. The Tribunal finds Ms Verge’s incomes for the 2017 and 2018 financial years are accurately reflected in the administrative assessment and accordingly, no ground for departure with respect to her income used in the assessment is established.

10. Otherwise, Mr Radley did not challenge Ms Verge’s SOFC. The Tribunal found her SOFC unremarkable.

11. The Tribunal is also satisfied that it is just and equitable not to disturb the objections officer’s determination of Mr Radley’s annual rate of child support for the period 5 February 2018 to [the date in] March 2018 at $10,205.

Conclusions

1. The Tribunal has found that the objections officer’s decision to increase in Mr Radley’s annual rate of child support by $3,845 for the period 5 February 2018 to 31 December 2018 included an amount of $1,275 of a total contribution of $2,550 to [Child 2’s] orthodontic costs, and the $1,275 balance of his contribution to those orthodontic costs is accounted for in the objections officer’s decision to increase his annual rate of child support to $3,919 for the period 1 January 2019 to 30 November 2019.

2. The Tribunal has determined [Child 2’s] school fees and compulsory charges for the 2018 academic year at $4,908, and Mr Radley’s half share of those fees is $2,454. Both parents have acknowledged and agreed that Mr Radley has paid his $1,275 contribution to [Child 2’s] orthodontic costs assessed for the period 5 February 2018 to 31 December 2018.

3. The Tribunal has determined Mr Radley’s contribution to [Child 2’s] school fees and compulsory charges for the 2019 academic year at $2,488. The balance of his contribution to [Child 2’s] orthodontic costs of $1,275 should also be added to his school fees contribution, and the annual rate of child support payable by Mr Radley for the period 1 January 2019 to 30 November 2019 should be varied to $3,763.

4. The Tribunal has determined Mr Radley’s contribution to [Child 2’s] school fees and compulsory charges for the 2020 academic year to be $2,563, and accordingly, his annual rate of child support for the period 1 January 2020 to 31 December 2020 should be varied to $2,525.

5. The Tribunal has determined Mr Radley’s contribution to [Child 2’s] school fees and compulsory charges for the 2021 academic year to be $2,563.50. As [Child 2] will cease to be an eligible child for child support purposes on [a date in] August 2021, towards the end of her last term of her [grade number] year at secondary school, the Tribunal will apportion Radley’s contribution to the school fees and compulsory charges for this academic year over the period 1 January 2021 to [that date in] August 2021, and accordingly, the annual rate of child support payable by Mr Radley for that period will be varied to $4,352.

6. The Tribunal is satisfied that Mr Radley’s income, property and financial circumstances are accurately reflected in the adjusted taxable income used in the administrative assessment, and that varying the annual rate of child support payable by him as set out above will not impose undue hardship upon him or his family.

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. Varying the annual rate of child support payable by Mr Radley in the child support assessment as set out above will result in 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 that:

(a). For the period 1 February 2018 to 4 February 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

(b). For the period 5 February 2018 to [the date in] March 2018 the annual rate of child support payable by Mr Radley is set at $10,205;

(c). For the period [from the next day in] March 2018 to 31 December 2018, the annual rate of child support payable by Mr Radley is increased by $3,845;

(d). For the period 1 January 2019 to 30 November 2019, the annual rate of child support payable by Mr Radley is increased by $3,763;

(e). For the period 1 January 2020 to 31 December 2020, the annual rate of child support payable by Mr Radley is increased by $2,525;

(f). For the period 1 January 2021 to [the specified date in] August 2021, the annual rate of child support payable by Mr Radley is increased by $4,352.