Rauser and Haimowitz (Child support)
[2020] AATA 2033
•19 March 2020
Rauser and Haimowitz (Child support) [2020] AATA 2033 (19 March 2020)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2019/MC017653
APPLICANT: Mr Rauser
OTHER PARTIES: Child Support Registrar
Ms Haimowitz
TRIBUNAL:Member Y Webb
DECISION DATE: 19 March 2020
DECISION:
The decision under review is affirmed.
CATCHWORDS
CHILD SUPPORT – departure determination – income, property and financial resources of both parents - benefits derived from business – costs of the children include private education - decision under review affirmed
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
This review relates to the issue of child support regarding the youngest child (“the child”) of Mr Rauser and Ms Haimowitz. The child is 16 years old and according to the Department of Human Services’ (“Child Support Agency”) records the child is in the 100% care of Ms Haimowitz.
The child support case has been registered for collection by the Child Support Agency since 19 November 2015.
On 28 February 2019, Ms Haimowitz applied to the Child Support Agency for a change to the administrative assessment on the basis of Reasons 3, 8A and 8B. Mr Rauser cross-applied on the basis of Reasons 5 and 8A.
At the time of Ms Haimowitz’s application for a change to the assessment, the administrative formula assessment calculated that for the period 1 March 2019 to 31 May 2020 Mr Rauser was assessed to pay an annual rate of child support of $3,173 based on his 2017/2018 adjusted taxable income of $41,874 and a 2017/2018 adjusted taxable income of $121,684 for Ms Haimowitz.
On 5 July 2019 a delegate of the Registrar, [decided] that Reasons 3, 5 and 8B had not been established but that Reason 8A had been established in relation to both parents. The delegate varied both parents’ adjusted taxable incomes for the period 28 February 2019 until a terminating event occurred for the child. She varied Mr Rauser’s adjusted taxable income to $62,173 and Ms Haimowitz’s to $170,175.
On 16 August 2019 Ms Haimowitz objected to that decision and on 10 October 2019 an objections officer partly allowed her objection, finding that Reasons 3 and 8A had been established. The objections officer varied Mr Rauser’s adjusted taxable income to $62,099 and Ms Haimowitz’s to $180,680. The objections officer also decided that Mr Rauser should, from 1 October 2019 until the child turned 18 or ceased to be an eligible child of the assessment, contribute approximately $6,000 per year to the child’s school fees. This resulted in an annual child support liability of approximately $5,400 from 28 February 2019 and an annual child support liability of $11,295 inclusive of the 20% school fee contribution from 1 October 2019.
On 18 October 2019 Mr Rauser requested review by the Administrative Appeals Tribunal (“the Tribunal”). A telephone directions hearing was conducted with both parents on 13 February 2020.
Mr Rauser and Ms Haimowitz attended the hearing by way of a telephone conference on 19 March 2020. Both parents gave evidence on affirmation.
ISSUES
The central issues for the Tribunal to determine in this case are:
· Whether one or more of the grounds for departure referred to in subsection 117(2) of the Child Support (Assessment) Act 1989 (Assessment Act) exists; and if so,
· Whether it would be:
(a) just and equitable as regards the children, the liable parent, and the carer entitled to child support; and
(b) otherwise proper
to make a particular determination to depart from the administrative assessment of child support.
DOCUMENTARY EVIDENCE
The Tribunal had before it a number of documents, organised into exhibits as set out in the attached Schedule. The Tribunal had regard to all of this evidence, and refers specifically to particular items in this statement of Reasons.
CONSIDERATION
The child support law
The legislation relevant to this review is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988.
The rate of child support payable by the liable parent is usually based on an administrative formula assessment under Part 5 of the Assessment Act. This requires the application of a statutory formula which takes into account factors such as the number of children, the level of care provided and the income of each parent.
A parent may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Assessment Act (section 98B). Section 98C provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process as described in paragraph 12 above.
The grounds for departure from an administrative assessment of child support are those set out in subsection 117(2) of the Assessment Act. Each ground for a departure from the administrative formula is prefaced by the words “in the special circumstances of the case”. Therefore, when considering whether the ground exists in this case, the Tribunal must be satisfied that there are “special circumstances” in the case. If satisfied that there are “special circumstances” and that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Assessment Act. Section 98S sets out a range of determinations that may be made under the departure provisions.
The phrase “special circumstances of the case” is not defined in the Assessment Act. In the case of Gyselman and Gyselman (Gyselman),[1] the Full Court of the Family Court of Australia held that:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words “in the special circumstances of the case”.
Whilst it is not possible to define with precision the meaning of that term, 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 administrative formula result in the ordinary run of cases.
[1] (1992) FLC 92-279
Subsection 98C(3) of the Assessment Act provides that subsections 117(4) to (9) of the Assessment Act apply to the Registrar and therefore the Tribunal must consider those provisions when deciding whether, if a ground is established, it would be just and equitable or otherwise proper to make the departure decision.
Does a ground or grounds exist to depart from the administrative formula assessment?
In considering whether a ground or grounds exist which justify departing from the administrative formula assessment, the Tribunal considered the evidence and submissions provided by the parents at the hearing in addition to the extensive information contained within the documentation provided by the Child Support Agency as well as the documentation provided by the parents.
Reason 3
In relation to Ms Haimowitz’s claim that the costs of maintaining the child are significantly affected because of the mutual expectation of the parents that the child be educated at a private school, the legislative test is detailed in subparagraph 117(2)(b)(ii) of the Assessment Act. The test is whether:
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.
This ground is commonly referred to as Reason 3.
Ms Haimowitz’s evidence and submissions in relation to Reason 3
Ms Haimowitz told the Tribunal that she and Mr Rauser agreed that all three of their children (three daughters) would be educated privately. Ms Haimowitz provided an excerpt from the enrolment form for the school that the child attends and this showed that on 18 October 2012 both Ms Haimowitz and Mr Rauser signed an agreement to jointly and severally pay all school fees and charges for the child.[2]
[2] B13
She agreed that she and Mr Rauser made a binding financial agreement in which she agreed to pay most of the school fees.[3] Ms Haimowitz provided an excerpt from the binding financial agreement. Mr Rauser also provided the same excerpt.[4] This stated that:
The parties have agreed that the children are to be educated at private school and they attend (name of school) where they are in years 12, 9 and 7 respectively.
It is estimated that the cost of the private school education for the three dependant children will be approximately $300,000, and that the Wife will bear the majority of that liability without any significant contribution from the Husband. At the time of this Agreement there are arrears of school fees of approximately $39,000.
This Agreement does not affect or change the obligations of either party to support the children of the marriage, and the parties acknowledge that they will separately negotiate and agree upon the arrangements for the financial support of the children.
[3] B16
[4] A14
However, she stated that she had paid for all of the school costs whereas she expected that Mr Rauser would make some contribution. She stated that both parents signed the binding financial agreement and both had legal advice. She stated that Mr Rauser did not argue with the clauses regarding school fees although other aspects of the binding financial agreement were amended at his request. She stated that the child has many costs, including extensive extra-curricular costs, in addition to the school tuition fees and charges and while at one stage Mr Rauser said he would contribute to the child travelling overseas for [an]event (the cost of which was $6,000 approximately), he only contributed $500. Ms Haimowitz stated that she has over the years paid all of the school fees for all of the children and she does not believe that she should have to meet 100% of the school costs for the youngest child.
Ms Haimowitz stated that she has paid all of the school fees and charges for the child including in 2020. She provided a document showing the payments that Ms Haimowitz asserted were made to the school from 19 October 2015 to 5 August 2019.[5] She also provided an excerpt from a bank statement to corroborate the list of payments.[6] Ms Haimowitz was adamant that she had personally paid all of the school fees and costs.
[5] C1 page 189
[6] C1 page 190
Ms Haimowitz provided a fee schedule.[7] It was for 2019 when the child was in Year 10. This showed that the yearly costs for tuition fees and fixed charges totalled $29,028. Ms Haimowitz confirmed that in 2020 the fees are no less than this as the child is now in Year 11.
[7] C1 page 38
Mr Rauser’s evidence and contentions in relation to Reason 3
Mr Rauser did not dispute that he signed the enrolment and fees agreement for the child to attend the private school. He stated that the form was signed prior to separation. He also admitted that he signed the binding financial agreement in 2016 which stated that Ms Haimowitz would pay most of the school fees. He stated that he would have preferred some changes to the binding financial agreement but in the end he just wanted it done and to move on. He stated that, while he has not paid school fees he has continued to pay child support despite his decreased income. Mr Rauser contended that he had left Ms Haimowitz and the children well set up, leaving Ms Haimowitz the family home and sufficient funds financially to enable the children to continue with their previous lifestyle. He stated that while he agrees with the child participating in her extra-curricular activities he does not necessarily have the funds to contribute. In relation to the payment of school fees he thought that Ms Haimowitz’s family may be contributing to those.
The Tribunal’s consideration
The Tribunal considered the evidence and submissions of both parents. In considering whether the child is being educated or trained “in a manner expected” is not defined in the legislation. In Mee and Ferguson [1986] FamCA 3, the Full Court of the Family Court considering a similar provision in the Family Law Act 1975 said:
It refers to the manner in which the child “is being”, and which the parties to the marriage “expected” the child to be educated. That provision appears to have direct relevance to the issue of private school education, particularly its reference to the manner in which the parties “expected” the child to be educated. The word “expected” in the past tense presumably relates to some expectation of the parties at a point in time earlier than the hearing.
There is no dispute, and the Tribunal finds, that both parents signed the enrolment forms including the agreement to joint and severally be responsible for school fees and charges. Mr Rauser agreed that the child was being educated in the manner that both parents expected (albeit that the agreement was made prior to separation). His issue is that he does not consider that he can afford to contribute to the costs of that education. However, affordability is an issue which the Tribunal must decide when considering the just and equitable aspects of any determination.
Mr Rauser agreed that the parents signed a binding financial agreement including in part regarding school fees. The Tribunal finds that essentially this agreement anticipated that Ms Haimowitz would bear the majority of the costs of the private school education for the child. Ms Haimowitz provided a 2019 fee schedule for the school and the Tribunal accepts that the school tuition fees and fixed charges totalled $29,028 in 2019 and not less than that in 2020 (and most likely slightly more than the costs in 2019).
Taking all of the available information into account the Tribunal is satisfied that the child is being educated in a manner that was expected by both parents.
The Tribunal finds that the costs of attending the private school are greater than attending a government school and are expenses that are out of the ordinary. This is so despite the Tribunal intending to disregard the costs of extra-curricular activities, laptop, gym membership and stationery requirements. These items and activities are commonly required by students whether a child attends a private school or a government school and are expected to be factored into the child support administrative formula. While the Tribunal acknowledges that these additional costs are significant, it does not consider that they exceed to any marked degree the costs incurred by many families regardless of the type of education their children receive.
However, in view of the marked disparity between the cost of a secondary education in a government school and the cost of a secondary education at a private school (in relation to school tuition fees and charges), the Tribunal is satisfied that special circumstances exist.
The Tribunal finds that Reason 3 has been established. In relation to the extent to which each of the parents should contribute to the child’s private schooling, the Federal Magistrates Court of Australia has stated the following:
Whether the fees can be met (and the proportions in which the parents must contribute) must be determined having regard to the parents’ actual financial positions, is a matter to consider under ‘”and equitable”.[8]
[8] Mabry & Mabry (SSAT Appeal) [2010] FMCAfam 388
In relation to the claim that Reasons 5, 8A and 8B are also relevant in this case the approach of the Federal Circuit Court of Australia in these cases has been to limit the analysis about particular grounds once it was evident that one had been established, and to thereafter focus on the “just and equitable” considerations. The Tribunal adopts that approach in its reasoning in this matter.
Would it be just and equitable to depart from the administrative assessment?
Section 3 of the Assessment Act states that parents have the primary duty to maintain their children and that this duty takes priority over all commitments of the parents other than commitments necessary to enable the parent to support themselves or any other child or another person that the parent has a legal duty to maintain. The Assessment Act contemplates not only that both parents contribute to the support of their children but that the parents’ capacity to contribute must be taken into account.
Having found a reason for departure, the Tribunal must consider whether it is just and equitable to depart from the administrative formula assessment. The Tribunal must have regard to a range of matters set out in subsection 117(4) of the Assessment Act. This requires an assessment of the duty of the parents towards the child; the needs of the child; any income, earning capacity and financial resources of the child; the income, earning capacity and financial resources of the parents, self-support commitments and an evaluation of hardship on the parties (and/or the child) if the Tribunal increased or decreased the amount of child support payable.
In considering these issues, the Full Family Court, in the case of Gyselman, stated that:
However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section [117] (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).
Of particular relevance in this matter are the following aspects of subsection 117(4) of the Assessment Act:
The proper needs of the child
In determining the proper needs of the child, subsection 117(6) of the Act requires the Tribunal to have regard to the manner in which the parents expected the child to be cared for, educated and trained as well as a consideration of any special needs of the child.
The Tribunal has found that Reason 3 has been established and that the child is being educated in the manner that was expected by the parents.
The Tribunal has found that the tuition fees and fixed charges payable annually were $29,028 in 2019 and a little more than this in 2020. Ms Haimowitz did not seek a specific percentage contribution to the fees and fixed charges from Mr Rauser; however, she believed that he should make a contribution. She asserted that he had been under-estimating his income and therefore not paying the amount of child support he should.
In the Tribunal’s view it is fair and reasonable that Mr Rauser contributes to the school fee and fixed charges costs.
The Tribunal will consider the financial circumstances of Ms Haimowitz and Mr Rauser and their respective capacities to contribute to the cost of school fees further when it considers their income, property, financial resources and earning capacity.
Mr Rauser’s income, property, financial resources and earning capacity
Mr Rauser told the Tribunal that in the property settlement he agreed to take $70,000 plus a car (with a loan attached) as well as a small investment property (unit) in Queensland. He advised that he has subsequently sold the real estate property at a loss of $30,000. The Tribunal accepts that he sold the unit and that he no longer owns any real estate. He stated that Ms Haimowitz is asset rich. He stated that she retained the family home plus an investment property and that her [business] is very valuable. Mr Rauser stated that he now owned no assets and that his income has decreased due to losing his main supplier contract. He stated that last year his [business] was busy but now most of his savings have now been eroded.
Mr Rauser explained that after separation he was involved in a [business] in a partnership arrangement. The partnership was closed around mid-September 2018. Thereafter he carried on the [business] as a sole trader and continues to do so.
Mr Rauser advised and the Tribunal accepts that there were two persons – himself and one other person involved in the partnership – and therefore that he was entitled to 50% of the profit. In the 2017/2018 year Mr Rauser’s taxable income was $41,874, this being his share of the partnership’s profit. However, the partnership tax return for the 2017/2018 year shows that the partnership claimed significant expenses including depreciation expenses of $17,124 and motor vehicle costs of $7,801. Mr Rauser confirmed that the cars were both paid for by the business (although inevitably he would have incurred some private use) and that the depreciation was essentially a book entry to write down the value of capital equipment over time rather than an actual cost to him in the 2017/2018 year.
Mr Rauser provided a profit and loss statement for the period 1 July 2018 to 9 January 2019 (but effectively only for the period 1 July 2018 to mid-September 2018 when the partnership ceased). Mr Rauser had not yet lodged the partnership tax return for the 2018/2019 year but his profit and loss statement for the above period (effectively one-quarter) shows a net profit of $10,197 (and 50% of that amount – $5,098 – attributable to Mr Rauser).
In relation to his sole trader business which commenced from 1 October 2018 Mr Rauser provided a profit and loss statement for the 2018/2019 financial year (although effectively from 1 October 2018 to 30 June 2019 as his sole trader business did not start operating until this date). This shows total income of $92,456 and total expenses of $41,053 and a net profit of $51,283. Some of the claimed expenses appear to be somewhat inflated (such as uniforms of $1,417.61, equipment at $4,011, office supplies of $568.88 etc.) given that the sole trader business only operated for nine months of the 2018/2019 financial year. The operation of Mr Rauser’s business meant that there were also some personal expenses which he could claim as deductions against the income of the business which are not available to wage and salary earners. For instance, Mr Rauser confirmed that he does not rent separate business premises but that the rent expenses for the business relate to his place of residence (which is also the address for the business). In this way he essentially obtains a refund on a portion of his annual private rental expenses. The rent claimed (effectively for three-quarters of the year) was $12,700.
Mr Rauser’s profit and loss statement as a sole trader for the period 1 July 2019 to 19 February 2020 (seven and a half months) was also provided. This showed income of $58,120 and expenses of $43,488 and a net profit of $14,631. However he claimed rent of $18,994 as an expense of the business (significantly reducing his private rental expenses which he advised were $484 per week or $25,168 per year). He also claimed phone expenses of $2,628 and significant car expenses for two vehicles. While a profit of $14,631 over a seven-month period annualises to a profit of approximately $25,080 over a full year, the Tribunal is satisfied that Mr Rauser’s actual net income will be significantly higher than this due to the expenses claimed. The Tribunal acknowledges that Mr Rauser provided his BAS Statements for the September 2019 and December 2019 quarters and that these show his total sales for the six-month period were $43,294, which is lower than in the six-month period from 1 October 2018 to 31 March 2019 (when the total sales were $57,413).
Mr Rauser told the Tribunal that he believed his real income in the financial years 2017/2018 and 2018/2019 was most likely around $62,000 per year. He claimed it will be less than this in the 2019/2020 year due to the loss of a large contractor; however, there is still some distance to travel in the current financial year and as Mr Rauser advised, his income fluctuates from week to week. Hence, while Mr Rauser’s income may be somewhat less than in the previous financial year, he stated that he had recently picked up some new clients but that he will have to wait a few months to see the income from these contracts.
The Tribunal is reasonably satisfied that Mr Rauser’s income going forward will not be significantly different from that in the past. In September 2019 the Child Support Agency recorded that Mr Rauser told the officer that he “is now on around $62,000”.[9] In addition, in relation to his financial resources he has savings. His [bank] statement shows that as at 14 June 2019 he had approximately $17,000 of savings.[10]
[9] C1 page 196
[10] C1 page 74
In relation to his household expenses Mr Rauser initially estimated these to be approximately $53,352 excluding tax, child support payments, credit card repayments and personal loan repayments. However, the personal loan repayments are already claimed as business expenses. In addition, as previously indicated most of the rent expenses are claimed as business expenses as are the motor vehicle costs. Hence, they cannot be claimed again as personal expenses. He claimed rent expenses of $12,700 in the period 1 October 2018 to 30 June 2019 and annualised, this is an amount of approximately $16,933 over a full year with the effect that his personal contribution to his yearly rent of $25,168 is approximately $8,235 per year. Leaving aside holidays, Mr Rauser’s personal household expenses are closer to $640 per week or $33,280 per year. Mr Rauser also has two credit cards and is repaying those at the rate of approximately $300 per month ($3,600 per year). Although Mr Rauser will need to pay tax on his income, his expenses are still less than his income (taking into account the offsets against his income for rent and motor vehicle expenses).
In relation to earning capacity Ms Haimowitz raised this as an issue in relation to Mr Rauser. However, there are specific criteria which must be met to find that a person is not exercising their full earning capacity. Implicit in the criteria is the requirement to show that the parent has deliberately changed their working arrangements in order to affect the child support assessment. The Tribunal was not provided with any evidence which would lead to a finding that Mr Rauser had reduced his hours of work or that he was not working or that he had changed the industry in which he works. For this reason, the first step of the necessary criteria has not been met and the Tribunal so finds. Hence, the Tribunal finds that Mr Rauser is exercising his full earning capacity.
Ms Haimowitz’s income, property, financial resources and earning capacity
In relation to Ms Haimowitz’s property she owns two properties: the family home and another investment property. The family home is valued at approximately $950,000 and the investment property at approximately $900,000. However, both properties are mortgaged with an amount owing on the family home of approximately $660,000 and on the investment property of $480,000.
In terms of financial resources, Ms Haimowitz declared savings of approximately $6,000.
Ms Haimowitz is self-employed as a sole trader and in the 2017/2018 year her adjusted taxable income was $121,864 with net business income of $117,303 and a small amount of other income taking the total to approximately $121,684. Ms Haimowitz claimed depreciation in her business expenses of $52,110. At the hearing Ms Haimowitz advised that she was putting funds aside to replace her business-related motor vehicle. She stated that this was around $10,000 in that year. Ms Haimowitz also claimed total motor vehicle expenses of $23,544. This appears high for business-related vehicles for a sole trader. These types of expenses tend to indicate that Ms Haimowitz’s actual income was higher than her taxable income. It is very difficult to ascertain Ms Haimowitz’s income with any precision. However, the Tribunal is satisfied that in the 2017/2018 year Ms Haimowitz’s income was at least $180,680 as the objections officer found.
In relation to her 2018/2019 income Ms Haimowitz provided a profit and loss statement showing that her gross income was $481,957 and that her expenses were $385,120, leaving a net profit of $96,837.[11] Ms Haimowitz also provided a copy of her income tax return for the 2018/2019 year which showed that her taxable income was $91,402.[12] Ms Haimowitz’s income tax return showed that the investment property returned a loss of $7,785 and if the child support assessment was based on her adjusted taxable income as assessed by the Australian Tax Office, this amount would be added back to her taxable income. However, in terms of her actual income Ms Haimowitz has claimed a number of expenses which appear high such as $56,940 in depreciation expenses and rent of $13,631 which is a business expense which has the effect of reducing a portion of her personal rental expenses for another property which she rents. In addition, while Ms Haimowitz stated that the motor vehicle costs of $20,952 were all attributable to the business use of the vehicles, this seems high.
[11] B21
[12] B26
While the Tribunal accepts that in 2018/2019 Ms Haimowitz’s income was less than in the 2017/2018 year, she attributed this in part to the investment property not being tenanted for a significant period of time as well as to a decrease in sales from $527,834 to $481,957. However, in the 2018/2019 year Ms Haimowitz’s expenses were also less than in the previous year. On balance, the Tribunal is satisfied that Ms Haimowitz’s actual income has remained reasonably consistent from the 2017/2018 year to the present. It also is the case that if her income in fact had decreased this would make very little difference to the child support assessment.
In relation to her expenses the Tribunal accepts Ms Haimowitz’s statements that she is paying in full for all of the child’s school education and extra-curricular activities. The Tribunal accepts that these expenses alone total significantly more than $30,000 a year. In addition she has the usual household expenses. Furthermore, she contributes to the rent of a further property and is repaying a business loan of $140,000 and a loan of $93,000 through[a bank] The Tribunal accepts that Ms Haimowitz is paying two mortgages and that rental income from the investment property has not, in recent times, fully covered the mortgage payments of that property. While Mr Rauser contended that Ms Haimowitz could access funds through refinancing her property this would increase Ms Haimowitz’s already significant liabilities.
While Ms Haimowitz’s income is significantly higher than Mr Rauser’s she also has more expenses and the 100% care of the child.
In relation to earning capacity the Tribunal is satisfied that Ms Haimowitz is working full-time in her business as she has been for some years. Hence the Tribunal finds that she is exercising her full earning capacity.
Has Mr Rauser given money, goods or property to the child or another person for the benefit of the child?
Mr Rauser told the Tribunal that he and Ms Haimowitz signed a binding financial agreement and that he only took $70,000 in cash, his car with a loan still owing and a small investment real estate unit. He stated that his expectation was that the children would continue their life as it had been before the separation. He stated that Ms Haimowitz has also been able to continue her lifestyle, income and all of the benefits from the financial agreement.
Mr Rauser did not provide the binding financial agreement or disclose the details of it (except for the excerpt which related to Ms Haimowitz paying the majority of the private school fees). No evidence was provided that Mr Rauser had provided money, goods or property to the child or for the benefit of the child to the extent that Ms Haimowitz should be precluded from receiving child support to meet the needs of the child.
The income, earning capacity, property and financial resources of the child
Ms Haimowitz told the Tribunal that the child has recently started an after-school job on a casual basis. She stated that she only works a few hours per week and that she is saving her earnings for a planned trip overseas in relation to her extra-curricular activities. The Tribunal is satisfied that the child has no significant income or financial resources of her own to the extent that it impacts on the administrative assessment. The Tribunal has had regard to the reasoning of the Full Court of the Family Court in Mee and Ferguson[13] which states:
it would, in ordinary circumstances be unreasonable to expect that pocket money and other small sources of income derived from paper rounds and casual work after school and the like ought to be taken into account in diminishing the financial responsibility of the parents for the needs of that child.
The Tribunal adopts that reasoning in this case.
[13] (1986) FLC 91-716; [1986] FamCA 3.
Necessary commitments to support themselves or others
The Tribunal notes that the Family Court of Australia has been prescriptive about the types of expenses that can be considered “necessary” expenses and that there are only a few expenses that can be considered to take priority over a parent’s primary duty to support their children. This includes expenses such as a reasonable amount for payment of rent or mortgage, food, utilities and some loans. In Mee and Ferguson[14] the Full Court of the Family Court stated at paragraph 128:
Some of the items obviously have to be taken into account before maintenance is arrived at; for example, the cost of reasonable transport, food and clothing, and other like expenses are necessary to the continued reasonable existence of a parent, and, barring legislative direction to the contrary, it would not accord with the understanding in this jurisdiction to suggest that those items should be put out of consideration before child maintenance is determined. On the other hand there is no doubt that one of the primary responsibilities of a parent is the continued support of children to the extent to which the parent continues to be able to do so and that may in appropriate circumstance mean making financial sacrifices or cutting one's cloth to meet that commitment during the years when it applies.
[14] [1986] FamCA 3.
Ms Haimowitz told the Tribunal that she has incurred medical expenses when she underwent three [surgeries]. This has required extensive physiotherapy and is still continuing. She estimates that her out-of-pocket physiotherapy costs were $50 to $60 per session and she has had approximately 16 sessions. Although she has private health cover, she has still incurred costs both for the physiotherapy and for the surgeries. She estimated that the total out-of-pocket costs were approximately $4,000 to $5,000.
Mr Rauser advised that he had also incurred significant dental expenses of approximately $3,700.
The Tribunal accepts that both parents have incurred health expenses. For this reason the Tribunal considers that both parents have been put in a similar position when it comes to medical or dental costs. Hence the Tribunal does not consider it would be just and equitable to preference one parent over the other in relation to these costs.
Is there any hardship to either parent or the child by the making of, or refusal to make, an order?
Ms Haimowitz stated that if she did not receive any assistance with the cost of the school fees she would be placed in the position of working ”non-stop” just to cover the basic costs. She stated that extra purchases or holidays would be out of the question. She stated that she still has the three children living at home and even though this review relates only to the youngest child she still incurs significant household expenses because there are four people in the household. She is worried that without some assistance from Mr Rauser she will not be able to support the child with her extra-curricular activities. Ms Haimowitz stated that in the past Mr Rauser has significantly under-reported his income and that while she is prepared to pay the majority of the school fees she does not think it is fair and reasonable that Mr Rauser pays nothing towards the school fees. In relation to the duration of any determination Ms Haimowitz stated that she was disappointed that the elder child was not included in the review and while she understands the reasons for that she considers that Mr Rauser should at least be prepared to make a contribution to the youngest child’s education.
Mr Rauser stated that he has credit card debts and is finding it difficult to find the funds for child support. This is especially so if he is expected to contribute to the school fees. He stated that he does not believe he can afford to make any extra contribution above the amount determined through the application of the formula.
Proposed determination
The Tribunal has carefully considered the incomes of the parents and the extent to which it would be just and equitable for Mr Rauser to contribute to the child’s private school fees and charges.
While Mr Rauser contended that the property settlement between the parents should be a relevant factor in determining his child support liability, the Tribunal was not persuaded that Ms Haimowitz should be precluded from receiving child support to assist with the child’s needs. The Tribunal is also satisfied that Mr Rauser has capacity to contribute to the child’s school fees albeit not to the same extent as Ms Haimowitz.
The Tribunal agrees with the objections officer that Mr Rauser’s income should be varied to $62,099 and that Ms Haimowitz’s to $180,680. In both cases, given that both parents are self-employed, it is difficult to be precise about either of their incomes. However, the Tribunal is satisfied that the objections officer has reached a reasonable income figure for both parents. The Tribunal considered varying Ms Haimowitz’s income to a little less than $180,680 but this made very minimal difference to the amount of child support payable and the Tribunal does not consider that the objections officer’s decision should be set aside in circumstances where the result will be virtually the same.
In relation to the school fees and charges contribution the Tribunal agrees with the objections officer that the income determined for the parents results in Ms Haimowitz’s percentage of the parents’ combined child support income being approximately 80% and Mr Rauser’s approximately 20%. The Tribunal agrees that these percentages of the parents’ combined child support income are a fair and equitable basis for determining Mr Rauser’s contribution to the school fees. This will result in Mr Rauser’s contribution to the school fees and charges commencing at $5,806 per year and gradually increasing at the rate of 3% per year. The Tribunal agrees with the objections officer that while the parents’ incomes should be varied from 28 February 2019 until a terminating event occurs in relation to the child, the school fees and charges contribution should commence from 1 October 2019. To impose the contribution from an earlier date will create significant arrears for Mr Rauser which the Tribunal is not convinced he could afford to pay. The child is currently in Year 11 at school and does not have a great deal of schooling left and therefore the Tribunal agrees with the objections officer that the decision should apply until a terminating event occurs in relation to the child and she ceases to be an eligible child of the assessment.
As the objections officer has indicated the decision will result in an annual rate of child support payable by Mr Rauser of $5,372 from 28 February 2019; an annual rate of child support from 1 March 2019 to 30 September 2019 of $5,489; an annual rate of child support from 1 October 2019 to 31 December 2019 of approximately $11,295; and an annual rate of child support from 1 January 2020 of approximately $11,469.
The Tribunal considers this proposed determination is fair, just and equitable and that it balances the needs and financial capacities of both parents.
Is it otherwise proper to depart from the administrative assessment?
The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the following matters:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
In determining whether it would be “otherwise proper” to make a particular order under the Assessment Act, the Tribunal must have regard to the matters stated in subsection 117(5) of the Assessment Act. Paragraph 117(5)(a) of the Assessment Act reflects the fact that the Assessment Act clearly states (in section 3) that it is the primary duty of the parents to support the child. That duty should not be abandoned to the social security system.
The Tribunal must consider whether the proposed departure is “proper” within the context of the public interest and welfare expenditure by the community (see Gyselman). It is a prime objective of the child support legislation that parents should be obliged to support their own children to the extent of their real capacity, and that that obligation should not be unnecessarily left to the public welfare system when the parents themselves have the capacity to maintain their children. The Tribunal is satisfied that Ms Haimowitz needs financial assistance to meet the child’s needs and that Mr Rauser is able and can afford to contribute to those costs.
Paragraph 117(5)(b) of the Assessment Act directs the Tribunal to have regard to the effect that the making of the order would have upon the rate of entitlement to any income-tested benefit such as family tax benefit.
Ms Haimowitz advised that she is not in receipt of family tax benefit. This means that there will be no change in the extent to which the community supports the child. In the circumstances of this case, that is a proper outcome.
The Tribunal is satisfied that the proposed determination is “otherwise proper” and that the determination should be made.
Conclusion
As the Tribunal concurs with the decision of the objections officer, the decision under review is affirmed.
DECISION
The decision under review is affirmed.
List of Exhibits
Department of Human Services – Child Support Agency marked as C exhibits:
· CSA’s large bundle of 237 pages marked as exhibit– C1
· CSA’s smaller bundle from pages 238 – 296 marked as exhibit – C2
Mr Rauser has provided the following documents marked as A exhibits:
· A1-A10 Statement of Financial Circumstances
· A11-A13 Written submission
· A14 Excerpt from financial agreement
· A15-A16 Profit and Loss for partnership 1 July 2018–9 Jan 2019
· A17-A18 Profit and Loss 1 July 2018 – 30 June 2019
· A19-A20 Profit and Loss 1 July 2019 – 19 Feb 2020
· A21 GST Report 1 Oct 2019 – 31 Dec 2019
· A22 GST Report 1 July 2019 – 30 Sep 2019
Ms Haimowitz has provided the following documents marked as B exhibits:
· B1–B9 Statement of Financial Circumstances
· B10-B11 Costs of private schooling, extra-curricular activities and other costs
· B12 Cover email
· B13-B15 Private school’s Fees and Charges Agreements
· B16 Excerpt from financial agreement
· B17-B19 GST Activity Statements July 2019–Sep 2019 and Oct 2019–Dec 2019
· B20 Profit and Loss July 2019 – January 2020
· B21 Profit and Loss for year ended 30 June 2019
· B22-B25 Individual income tax return 2018/2019
· B26-B29 Notice of assessment 2018/2019
Key Legal Topics
Areas of Law
-
Family Law
-
Administrative Law
Legal Concepts
-
Jurisdiction
-
Judicial Review
-
Statutory Construction
-
Remedies
0