Rakes and Rakes (Child support)

[2021] AATA 1287

Rakes and Rakes (Child support) [2021] AATA 1287 (24 March 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/PC019667

APPLICANT:  Mr Rakes

OTHER PARTIES:  Child Support Registrar

Mrs Rakes

TRIBUNAL:Member S Brakespeare

DECISION DATE:  24 March 2021

DECISION:

The decision under review is varied so that there is a departure determination in the following terms:

• The annual rate of child support payable by Mr Rakes is increased by $3,124 for the period 1 January 2019 to 5 July 2019; and

• The annual rate of child support payable by Mr Rakes is increased by $2,108 for the period 6 July 2019 to 30 September 2020.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education – manner expected by both parents – cost of maintaining the children are significantly affected – financial resources of both parents – 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. Mr Rakes is the parent liable to pay child support to Mrs Rakes in respect of their children [Child 1], who is 11 years old, and [Child 2], who is eight years old. The child support case commenced on 18 August 2016.

2. On 9 October 2019 Mr Rakes lodged with the Child Support Agency an application for a change to the administrative assessment of child support, citing multiple grounds for departure.

3. The relevant administrative assessments were as follows:

   ·For the period 1 September 2019 to 31 December 2019 Mr Rakes was liable to pay Mrs Rakes an annual rate of child support of $30,852. The assessment was based on Mr Rakes’ 2018/19 adjusted taxable income of $152,681, Mrs Rakes’ 2018/19 adjusted taxable income of $28,534 and included an additional annual amount of child support of $3,124;[1]

   ·For the period 1 January 2020 to 30 November 2020 Mr Rakes was liable to pay Mrs Rakes an annual rate of child support of $28,744. The assessment was based on Mr Rakes’ 2018/19 adjusted taxable income of $152,681, Mrs Rakes’ 2018/19 adjusted taxable income of $28,534 and included an additional annual amount of child support of $1,016.[2]

   ·The assessments were also based on Mr Rakes having less than regular care of the children (that is, less than 14%).

   [1] The additional child support amount arose because of a departure determination made by an officer of the Child Support Agency on 19 January 2019 to increase the annual rate of child support payable by $3,124 for the period 1 January 2019 to 31 December 2019 for private school fee costs and special needs costs.

   [2] The departure determination increased the annual rate of child support payable by $1,016 for the period 1 January 2020 to 31 December 2021 for private school fees.

4. On 15 April 2020 an officer of the Child Support Agency made a departure determination in the following terms (the original decision):

   The departure determination of 19 January 2019 is amended as follows:

   ·The annual rate of child support payable by Mr Rakes is increased by $3,124 for the period 1 January 2019 to 5 July 2019; and

   ·The annual rate of child support payable by Mr Rakes is increased by $2,108 for the period 6 July 2019 to 31 December 2019.

5. Mr Rakes lodged an objection to the original decision.  On 27 July 2020 an objections officer disallowed the objection (the objection decision).  Mr Rakes lodged an application for review of the objection decision with the tribunal on 14 August 2020.

6. A directions hearing was held on 20 January 2021.[3]  Both parties participated by telephone. Directions were issued which required the parties to comply by 26 February 2021.

   [3] The matter was initially listed for a telephone directions hearing on 6 November 2020 but was rescheduled at the request of the applicant.

7. A hearing was held on 24 March 2021. Mr Rakes and Mrs Rakes both gave evidence on affirmation to the tribunal via conference telephone. The tribunal and the parties had the following documents:

   ·Relevant papers provided by the Child Support Agency (1,324 pages);

   ·Documents provided by Mr Rakes (folios A1 to A374);

   ·Documents provided by Mrs Rakes (folios B1 to B76).

8. Relevant aspects of the evidence and material before the tribunal will be referred to in the tribunal’s consideration of the issues which it has to decide.

ISSUES

1. The statutory provisions relevant to these reviews are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act.

3. Under Part 6A of the Act the liable parent or the carer of the child or children may apply to the Child Support Registrar for a determination to depart from the administrative assessment (section 98B).

4. Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and it establishes a three step process such that the issues for determination by this tribunal are:

   ·whether a ground is established to depart from the administrative assessment of child support; and

   ·if so, whether it is just and equitable to make a particular departure determination; and

   ·if so, whether it is otherwise proper to make a particular departure determination.

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

6. Each ground is prefaced by the words “in the special circumstances of the case”. The meaning of this expression is not defined in the Act, but the Family Court in Gyselman & Gyselman (1992) FLC 92-279 has held:

   as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the court will not interfere with the formula in the ordinary run of cases.

7. Likewise, in Phillippe and Phillippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

8. If the tribunal is satisfied that a ground exists and that it would be just and equitable and otherwise proper to make a particular determination, the tribunal may make one of the determinations prescribed in section 98S of the Act.

9. The range of determinations which can be made includes variations to: the annual rate of child support payable; or to the adjusted taxable incomes of the parents and/or carer; or to other components of the statutory formula used to calculate child support.

10. A determination can only be made in respect of a day in a child support period that is not more than 18 months prior to the day on which the change of assessment application was made, unless a court has granted leave under section 112 of the Act, to make a determination in respect of an earlier period (subsection 98S(3B) of the Act).

CONSIDERATION

1. Mr Rakes cited a number of grounds for departure in his change of assessment application. The tribunal only needs to establish that one ground exists before going onto consider what would be a just and equitable and otherwise proper determination to make.

2. Mr Rakes also wanted the tribunal to make a decision regarding percentages of care. The tribunal notes that there is no objection decision relating to care before the tribunal and therefore the tribunal will not address the issue of care.

3. Mr Rakes provided quite a lot of material and written to the tribunal which related to the periods which were more than  eighteen months prior to the date the change of assessment application was made. The tribunal will not address matters that relate to that prior period as a court has not granted leave to make a determination in respect of an earlier period.

Issue 1 – Is there a ground for departure?

1. Subparagraph 117(2)(a)(iv) of the Act provides a ground for departure exists where, in the special circumstances of the case the capacity of either parent to provide financial support for the child is significantly reduced because of high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain.  Subsection 117(2B) of the Act provides that a parent’s costs involved in enabling the parent to care for a child can only be high for the purposes of subparagraph (2)(a)(iv) or (2)(b)(i) if the costs that have been or will be incurred, during a child support period, total more than 5% of the amount worked out by:

   (a)  dividing the parent’s adjusted taxable income for the period by 365; and

(b)  multiplying the quotient by the number of days in the period.

1. Mr Rakes claims that he incurs significant costs for airfares and accommodation travelling from WA to SA to see the children. He has provided evidence of airfares purchased as well as some evidence with respect to accommodation costs and car hire costs.

2. With respect to the child support period 1 September 2019 to 30 November 2020, the tribunal finds that the relevant adjusted taxable income is Mr Rakes’ 2018/19 adjusted taxable income of $152,681. The number of days in the child support period is 457 days. The relevant income amount that arises as a result of applying the formula in subsection 117(2B) is $191,164. For a ground to be established, the costs of Mr Rakes communicating with or spending time with the children must be in excess of $9,552.80 (being 5%) in that child support period. Mr Rakes provided evidence that during that period he made three return flights to see the children at a total cost of $1,994. He also claimed accommodation and hire car costs totalling $1,056.  The total cost claimed for that child support period is $3,050. The tribunal finds that the minimum threshold for high costs of contact is not met in respect of the child support period 1 September 2019 to 30 November 2020.

3. With respect to the child support period 1 October 2018 to 31 August 2019 the tribunal finds that the relevant adjusted taxable income is Mr Rakes’ 2017/18 adjusted taxable income of $208,532. The number of days in the child support period is 335 days. The relevant income amount that arises as a result of applying the formula in subsection 117(2B) is $191,392. For a ground to be established, the costs of Mr Rakes communicating with or spending time with the children must be in excess of $9,569.60 (5%) in that child support period.

4. Mr Rakes provided evidence that during that period he made three return flights to see the children at a total cost of $3,463. He claims that he spent a further $2,383 on care hire and accommodation costs. The total costs claimed for that child support period is $5,846. The tribunal finds that the minimum threshold for high costs of contact is not met in respect of the child support period 1 October 2018 to 31 August 2019.

5. Mrs Rakes did not agree that all of the travel costs claimed by Mr Rakes were attributable to the times he had contact with the children. Given that Mr Rakes’ claimed expenditure was less than the relevant thresholds, the tribunal did not find it necessary to further investigate the claimed expenditure.

6. Mr Rakes also provided evidence in respect of travel and proposed travel in 2021. The tribunal notes that there is a new change of assessment application afoot (lodged by Mrs Rakes on 27 October 2020).  In the tribunal’s view Mr Rakes’ claims regarding high costs of contact in 2021 should be assessed by the Child Support Agency when dealing with the new application.

7. The tribunal finds that the ground for departure under subparagraph 117(2)(a)(iv) of the Act is not established.

8. Subparagraph 117(2)(b)(ii) of the Act provides a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents. 

9. In deciding this matter, the tribunal needs to consider the type of education intended by both parents for the children, rather than any particular school intended by the parents (Wild v Ballard (1997) FLC 92-771). The tribunal will also need to consider and determine whether both parents expected the children to be educated privately.

10. The Child Support Agency had previously established this ground in relation to [Child 1]’s schooling at [School], which is a private school. As a result, Mr Rakes’ liability  was increased by the addition of an annual amount of $1,019, being ½ of the total annual cost, for the period 1 January 2019 through to 31 December 2021.

11. Mr Rakes disputes the finding that it was his intention for [Child 1] to attend a private school. He told the tribunal that he did not sign the enrolment forms. Mrs Rakes provided a copy of the enrolment form which the tribunal notes was signed by both parents in February 2015.

12. The tribunal finds that after the departure determination was made to add costs of school fees to the liability, Mrs Rakes withdrew [Child 1] from [School] and enrolled him into a public school. The tribunal therefore finds that there is a ground for departure as no private school fees were incurred after 5 July 2019; however, the assessment took private school fees into account up until 31 December 2021.

Issue 2 – Is it just and equitable to make a particular determination?

1. As the tribunal is satisfied that there is a ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the liable parent, and the carer entitled to child support to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the tribunal to consider the matters discussed below,[4] which are as set out in subsection 117(4) of the Act:

   [4] The tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act re Tyagi & Meares [2008] FMCAfam 886

   (4)  In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:

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

   (b)  the proper needs of the child; and

   (c)  the income, earning capacity, property and financial resources of the child; and

   (d)  the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)  the earning capacity of each parent who is a party to the proceeding; and

   (e)  the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)  himself or herself; or

   (ii)  any other child or another person that the person has a duty to maintain; and

   (f)  the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)  any hardship that would be caused:

   (i)  to:

   (A)  the child; or

   (B)  the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)  to:

   (A)  the liable parent; or

   (B)  any other child or another person that the liable parent has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)  to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

2. In having regard to the proper needs of the child, regard must be had to the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained, and any special needs of the child (subsection 117(6) of the Act).

3. With regard to [Child 1]’s education the tribunal finds that the liability for private school fees ceased from 5 July 2019 and no allowance should be made in respect of the fees from 6 July 2019.

4. The departure determination included an additional annual amount of $2,108 being added to Mr Rakes’ liability for the period 1 January 2019 to 31 December 2019 in respect of the special needs of the children.  The decision maker found that Mrs Rakes was incurring costs of $140 per fortnight ($3,649 for speech therapy in respect of [Child 1] and $576 per annum in travel costs to take [Child 2] to her therapy and community appointments). The tribunal does not propose to alter that determination given that that decision was not objected to at the time. However, the tribunal is satisfied that [Child 1] continued to receive speech therapy after 31 December 2019 and Mrs Rakes continued to take [Child 2] to appointments after 31 December 2019. The tribunal will therefore extend the period covered by the additional amount until the end of the child support period.

5. The tribunal notes that Mrs Rakes lodged a new change of assessment application on 27 October 2020 based on the special needs of the children. She wrote that [Child 1] was taking a break from speech therapy. However, she included claims for a number of specialist appointments for [Child 1], emergency dental surgery for [Child 2] and tutoring for both children.  Given the substantial change to the basis upon which the special needs claim is being made, the tribunal finds it appropriate for this new change of assessment application to be assessed by the Child Support Agency.

6. The tribunal finds that there are extra costs to be taken into account in respect of the children’s needs and therefore it is appropriate to add those costs to the costs of their needs calculated by reference to the Costs of the Children Table.[5]

   [5] Provided for in section 155 of the Act.

7. The tribunal finds that Mr Rakes’ 2018/19 adjusted taxable income of $152,881 was  used in the administrative assessment from 1 September 2019 to 30 September 2020. From 1 October 2020 that adjusted taxable income has been replaced by a provisional income of $156,498. In a Statement of Financial Circumstances Mr Rakes completed for the tribunal on 25 February 2021, he advised that his gross weekly income from employment with Woodside was in the vicinity of $2,968. This equates to $154,373 per annum.

8. Mr Rakes also declared income of $726 per week from investment properties. The tribunal finds that Mr Rakes has significant mortgages in respect of the properties which, along with other expenses, are likely to result in a net rental property loss. Net rental property loss is added back to a person’s taxable income in arriving at their adjusted taxable income. The tribunal finds no reason to make any adjustments to the adjusted taxable income used for Mr Rakes in the administrative assessment.

9. The tribunal finds that Mrs Rakes’ 2018/19 adjusted taxable income of $28,534 was used in the administrative assessment from 1 September 2019 to 30 September 2020. From 1 October 2020 Mrs Rakes’ 2019/20 adjusted taxable income of $41,423 has been applied to the administrative assessment.

10. Mrs Rakes told the tribunal that she currently receives income of $112 per week from employment. She also receives carer allowance and carer payment. She said that her carer payment is affected by her employment income. Mrs Rakes said that for a six month period during the 2019/20 income year she also earned extra income [doing a job task under contract].  She used an ABN for this work and she believes her accountant has factored that income in when completing her 2019/20 income tax return. The tribunal notes that the changes to Mrs Rakes’ adjusted taxable income have a minimal effect on the administrative assessment. 

11. Mrs Rakes lives in a home owned jointly by her and her mother. It is mortgaged. She has no other assets of significance and minimal savings.

12. Mr Rakes claims that Mrs Rakes has significant amounts of undisclosed income. He based his assertions in part on a Centrelink income statement dated 15 February 2018. That statement recorded Mrs Rakes’ assets to include a significant amount of savings, real estate and non- income producing assets in two separate Trusts. Mrs Rakes explained that the statement referred to assets that were jointly held by her and Mr Rakes prior to the property settlement. She said that she no longer had any interest in either Trust and the remaining cash/assets were distributed during property settlement. She said that she has had considerable difficulty in getting Centrelink to remove the Trust assets from her record.

1. The tribunal does not find that Mrs Rakes has any income or assets that have not been declared and that should be taken into account for the purpose of the child support assessment. The tribunal finds no reason to make any adjustments to the adjusted taxable income used for Mrs Rakes in the administrative assessment.

2. In his Statement of Financial Circumstances Mr Rakes advised that he pays income tax of $941.25 per week, life insurance of $30.96 per week, minimum credit card payments of $158.05 per week and health insurance of $32.72 per week. He stated that his portion of  average weekly household expenses is $1,225.91 per week (this amount included 50% of the mortgage payment for the property owned by his partner, in which he resides). Mr Rakes also pays approximately $2,400 per month (approximately $550 per week) in mortgage payments on his investment properties. Mr Rakes incurs a net rental property loss in respect of the investment properties. Mr Rakes also recorded outstanding credit card debts of approximately $60,000. At hearing he conceded that two of the three credit cards he had listed were solely in the name of his partner, and he owed approximately $19,000 on his credit card.  Whilst the tribunal accepts that Mr Rakes makes a contribution to his partner’s mortgage, as he resides in her home, the tribunal does not accept that he is liable for his partner’s individual debts, or that his contribution to repay those debts should have any effect on his child support obligations.

3. According to the most recent child support records Mr Rakes is currently paying child support of $2,984 per month. That amount incudes arrears of $650 per month. Mr Rakes currently has maintenance arrears of $45,257.

4. Mr Rakes claims that his child support should be reduced to take into account repayments he has made to a debt that arose prior to property settlement and which was in respect of a property Mrs Rakes and the children were living in in 2015. The tribunal notes that 2015 is well outside the period for which the tribunal could make a departure determination. Further, there is no evidence that the payments were made for the benefit of the children.

5. In her Statement of Financial Circumstances Mrs Rakes advised that she pays income tax of $26 per week, life insurance of $28 per week and tutoring for the children of $60 a week. She advised that her average weekly expenditure, including mortgage payments, equals $1,154 per week. Mrs Rakes also advised that there were a number of extra ad hoc expenses that she also has to pay in respect of the children’s special needs and education needs.

6. The tribunal proposes to make a departure determination in the following terms:

   ·     The annual rate of child support payable by Mr Rakes is increased by $3,124 for the period 1 January 2019 to 5 July 2019; and

   ·     The annual rate of child support payable by Mr Rakes is increased by $2,108 for the period 6 July 2019 to 30 September 2020.

7. The proposed determination will result in an annual liability for Mr Rakes of $29,836 from 1 September 2019, and approximately $30,906 ($594 per week) from 1 January 2020 to 30 September 2020. 

8. The tribunal is satisfied that the proposed determination will not cause hardship for Mr Rakes or Mrs Rakes. Whilst Mr Rakes has significant child support arrears, he is also a high income earner, and in the tribunal’s view has the capacity to pay the assessed amount and to address the arrears. The tribunal notes that his net employment income after tax is $2,027 per week.  Mrs Rakes’ capacity to support the children financially is limited as her income is not significantly above the self-support amount which forms part of the child support formula. She has no other financial resources available to her.

9. The tribunal finds the proposed determination to be just and equitable.

Issue 3 – Is it otherwise proper to make a particular departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be “otherwise proper” to make a departure determination. It focuses on the balance of support carried between the parents on one hand and the taxpayer on the other. It is appropriate for the children to be primarily supported by their parents rather than by government assistance. The tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for the children may be affected by the level of child support.

2. Mrs Rakes told the tribunal that she does not receive any family tax benefit due to the level of maintenance income she receives. The tribunal’s decision does not therefore have any implication for the public purse. The tribunal finds it is otherwise proper to make the proposed determination.

3. The tribunal therefore makes a departure determination in the following terms:

• The annual rate of child support payable by Mr Rakes is increased by $3,124 for the period 1 January 2019 to 5 July 2019; and

• The annual rate of child support payable by Mr Rakes is increased by $2,108 for the period 6 July 2019 to 30 September 2020.

DECISION

The decision under review is varied so that there is a departure determination in the following terms:

• The annual rate of child support payable by Mr Rakes is increased by $3,124 for the period 1 January 2019 to 5 July 2019; and

• The annual rate of child support payable by Mr Rakes is increased by $2,108 for the period 6 July 2019 to 30 September 2020.