Reed and Becker (Child support)

[2020] AATA 4914

Reed and Becker (Child support) [2020] AATA 4914 (10 September 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/HC019187

APPLICANT:  Ms Reed

OTHER PARTIES:  Child Support Registrar

Mr Becker

TRIBUNAL:Member A Schiwy

DECISION DATE:  10 September 2020

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – departure determination – leave to apply for a departure for a period more than 18 months granted by Court - income, property and financial resources of liable parent – special needs of child - a ground for departure not established – refusal to depart - 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

1. Ms Reed and Mr Becker are the separated parents of two children; [Child 1] who turned 18 in April 2019 and [Child 2] who is 12.

2. The child support case commenced several years ago.  The Department of Human Services (‘Child Support’) has determined that Ms Reed has 100% care of the children.

3. In August 2018 Ms Reed lodged an application for a departure determination with Child Support.  Ms Reed requested that the period review commence in 2008.  Ms Reed objected to the original decision, which was that no reason had been established.  The objection decision was that a reason had been established (special needs of the child) and a departure determination was made.  Ms Reed then lodged an application with this tribunal (differently constituted) to have the objection decision reviewed.  On 16 July 2019, the tribunal also decided that a ground had been established (special needs of the child) and made the following departure determination:

   ·For the period 1 November 2018 to 31 October 2020 Mr Becker’s child support liability is increased by $2,824 per annum.  This determination was based on the decision that Mr Becker should contribute to 75% of [medical] costs for one of the children (payable over two years).

4. Ms Reed applied to the Federal Circuit Court for the Registrar to be granted leave to amend an administrative assessment that is more than 18 months old. The maximum period allowable is seven years from the date of the application to the court. On 8 May 2019, prior to the tribunal decision but after the original application for a departure determination was made; court orders issued giving leave for the Registrar under section 112 of the Child Support (Assessment) Act 1989.  According to Child Support, the period specified by the court was for the maximum of seven years from the date of application; 7 January 2012.

5. On 10 December 2019 Ms Reed lodged a further departure application with Child Support. The application was made on the basis that the rate of child support payable under the administrative assessment was unfair because of Mr Becker’s income and financial resources and the special needs of the children.  Ms Reed applied for the administrative assessment to be changed from 7 January 2012.    

6. On 26 February 2020 a Child Support case officer decided that no reason to make a departure determination had been established.  Ms Reed objected to this decision on 5 March 2020 and on 29 May 2020 a Child Support objections officer disallowed her objection.

7. On 3 June 2020 Ms Reed lodged an application with this tribunal for an independent review of the objections officer’s decision.   

8. A hearing was held on 10 September 2020.  Both Ms Reed and Mr Becker gave evidence on affirmation at the hearing by conference telephone.

9. In considering this matter, the tribunal considered the oral evidence of Ms Reed and Mr Becker and the relevant documentation provided by the Child Support Registrar (numbered 1 to 514); Ms Reed (A1 to A192) and Mr Becker (B1 to B10). Copies of the Child Support papers were provided to all parties prior to the hearing.  

ISSUES

1. The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act) and in the Child Support (Registration and Collection) Act 1988.

2. The Assessment Act provides for an administrative assessment of the child support payable. It uses a formula that contains variables including the parents’ adjusted taxable incomes; their percentages of care for the children; and costs of the children. The Assessment Act also makes provision for the Registrar to amend administrative assessments and to make a departure from the administrative assessment in certain circumstances.

3. The issues which arise in this case are:

   ·     does a ground for departure from the administrative assessment for child support exist; and if so,

   ·     is it just and equitable to make a particular determination; and

   ·     is it otherwise proper to make a particular determination?

CONSIDERATION

Period under review

1. In this case a previous tribunal decision has made a departure determination for the period 1 November 2018 to 31 October 2020.  Ms Reed has made a new application for a period commencing from 7 January 2012.  Given a tribunal decision is in place from 1 November 2018; the relevant period under review is 7 January 2012 to 31 October 2018.

Issue 1 – Does a ground for departure from the administrative assessment for child support exist?

Mr Becker’s income and financial resources

1. Subparagraph 117(2)(c)(ia) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Assessment Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the children because of the income, property and financial resources and earning capacity of either parent

2. The term ‘special circumstances’ is not defined in the Assessment Act. In Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) the Full Court of the Family Court indicated that for there to be special circumstances, the facts of the case must establish something which is special or out of the ordinary.

3. Ms Reed submitted in her application that Mr Becker’s workplace provides him with a company car, company phone, work boots and overalls.  She also submitted that he ‘has a Trust’, caravan and a rental property.  Ms Reed later submitted that Mr Becker was also salary sacrificing superannuation payments, thus lowering his adjusted taxable income and he also received work tools.

4. Mr Becker is [an] [Occupation 1] and has worked for [Company 1] for around 30 years; he is currently a [Occupation 2].  His adjusted taxable incomes during the period under review ranged from $70,720 in 2010–11 to $88,285 in 2019–19.

Salary and employment benefits

1. Ms Reed submitted that a person’s taxable income does not necessarily reflect their actual income and it should be up to Mr Becker to provide evidence of his actual income.

2. Whilst it can be the case that a person can arrange their tax affairs to minimise their taxable income, and consequently their child support liability; this option is very limited for employees and is generally restricted to how much they claim for deductions.  In this case Mr Becker has claimed relatively low amounts for work deductions. 

3. Mr Becker works for an arms’ length employer who is required by taxation law to report the correct amount of income paid to Mr Becker. There is no evidence that Mr Becker is on a higher salary than that reported in his income tax return other than Ms Reed submitting that there might be.  It is not a requirement that the tribunal investigate Mr Becker’s employer to determine if they have correctly reported his salary.  It is also extremely unlikely that [Company 1] would either deliberately or mistakenly report the incorrect amount; and the amount of salary reported for Mr Becker is consistent with Mr Becker’s position.  The tribunal was satisfied that the amount of employment income reported by Mr Becker in his tax returns is correct.

4. Ms Reed submitted that Mr Becker receives a fringe benefit in that he is provided with a work vehicle.  Mr Becker’s employer is required to pay fringe benefit tax on such a benefit and report the benefit as a ‘reportable fringe benefit’ to Mr Becker.  Mr Becker stated that the vehicle is used for work purposes and he is only allowed incidental private travel (for example, if he was going to the supermarket on his way home).  Mr Becker provided a declaration that he signed for his employer confirming the car was used for minor private use.  Mr Becker has his own motor vehicle which he has financed through a personal loan.  It is not credible that he would go to such expense if he was able to use the [company] car for private use.  The tribunal concluded that any motor vehicle benefit would be minor in the context of his income, which is more than $80,000 per annum; and would make very little difference to the amount of child support payable.

5. Ms Reed submitted that Mr Becker is provided with work safety clothing and tools.  Mr Becker does not dispute this.  The tribunal noted that had Mr Becker purchased these items himself he would have been able to claim a tax deduction for them.  The net impact is therefore nil; he either includes the amount of the allowance as income and claims a corresponding deduction; or the allowance is not included and no deduction claimed.

6. Ms Reed submitted that Mr Becker is provided with a work phone.  The tribunal was satisfied that this was not a significant benefit given that, given his position as [Occupation 2], Mr Becker would be required to use the phone for work purposes.  The benefit to Mr Becker is very minor given that a mobile phone plan with unlimited calls can cost as little as $40 per month (including the cost of the phone).

7. Ms Reed submitted that Mr Becker is salary sacrificing his superannuation and provided a 2005 superannuation statement that showed Mr Becker had salary sacrificed a payment in July 2004.  The statement showed no further payments from July 2004 to June 2005.  Payslips provided for June 2019 and March 2020 show no superannuation payments being salary sacrificed.  Mr Becker confirmed that he used to salary sacrifice his superannuation ‘years ago’.  The tribunal concluded that he no longer salary sacrifices his superannuation.  The tribunal also noted that, according to the payslips provided, Mr Becker’s employer only pays the required ‘superannuation guarantee’ to Mr Becker.

Rental property

1. Mr Becker stated that he and his partner purchased a property for their residence in 2017 for around $400,000.  After they separated, they rented out their property for $390 per week.  The property was sold in April 2020 for $381,000.  Mr Becker’s 2017–18 and 2018–19 income tax returns include rental income and the property made small losses both years.

2. Ms Reed was of the view that any rental income Mr Becker received should have been added back to his taxable income.  A person’s adjusted taxable income, the amount used in the child support formula, has any rental losses added back to their taxable income.  For example, Mr Becker’s taxable income in 2017–18 was $87,080 but his adjusted taxable income was $87,493 because his taxable income included a rental loss of $413.  There is no provision that states the gross rental income, prior to deductions, is to be added back to taxable income.  The tribunal also does not agree that the gross rental income should be considered income of the parent.  The deductions claimed for interest and other property costs are costs the parent had to incur to earn the rental income. 

Other income and financial resources

1. In addition to the rental property Ms Reed has submitted that Mr Becker has a trust, caravan and access to superannuation.

2. The rental property has been discussed.  Mr Becker and his partner borrowed most of the purchase price and sold the property for slightly less than the purchase price.  The rental income and associated deductions are included in his tax return.

3. Trust:  Ms Reed is referring to a distribution of trust income from [a] construction industry trust).  Mr Becker explained that the trust invests contributions made by workers to pay for redundancies.  The maximum ‘investment’ is $5,400.  Mr Becker returned a distribution of $203 from the trust in 2017–18 (a copy of the tax statement from the trust was provided) and $93 in 2018–19.  The tribunal was satisfied that Mr Becker’s tax returns include any distribution from the trust.

4. Caravan:  Mr Becker agreed with this and stated its value was $4,000.  

5. Superannuation: Ms Reed submitted that Mr Becker had significant superannuation that could be accessed to provide child support.  Mr Becker does have around $285,000 in superannuation however this is not providing an income source to Mr Becker; it will be available to him on retirement to provide for his retirement.  If Mr Becker had a child support liability and was able to access non preserved components in his superannuation, this is a factor that could be considered when looking at ‘Just and Equitable’ (where a reason has been found to depart from the assessment); however his superannuation is not considered to be income or a financial resource that renders the assessment unjust or inequitable. 

6. There was no evidence that Mr Becker had any significant assets that would render the assessment of child support as unjust or inequitable.

7. The tribunal decided that there are no special circumstances in this case that make the administrative assessment unjust and inequitable due to the income or financial resources of Mr Becker.

Special needs of the children

1. Subparagraph 117(2)(b)(ia) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, application of the provisions of the Assessment Act relating to the administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the children because the costs of maintaining the children are significantly affected because of their special needs.

2. The term “special needs” is not defined in the Act. In the Matter of Lightfoot and Hampson (1996) 20 Fam LR 69, the Full Court of the Family Court of Australia stated that, “......"special needs of the child" -- encompasses a wide range of needs of a child which are seen as "special" in the sense of necessary or at least desirable for that child's welfare but outside the "normal" needs of a child which would be catered for within the formula. This would include such things as unusual medical expenditure, facilities for a handicapped child, etc. If necessary, it could include "special needs" in education”.

3. Ms Reed’s affidavit to the Federal Circuit Court is at page 213.  It states the following costs have been incurred:

   ·[Child 1]    [surgery] in 2009 (paid off over three years at $89.56 per month to May 2012)

   [Specialist 1] Stage 1 (pre 2012) $1,900
   [Specialist 1] follow ups $475 ($405 since 2012)
   [Specialist 2] Stage 2 (included in first AAT decision)
   [Specialist 2]   $535 (all in 2018/19)
   [Specialist 3]              $300 (all in 2018)

   ·[Child 2]    [surgery] in 10/2011 (paid off over two years at $66.22 per month)

   Dentist   $130

4. Ms Reed’s application to Child Support included the following:

   [Child 1]  [Child 2]

   2012  $153.30

   2013    $80                 $79.25

   2014    $80

   2015    $80

   2016    $80                 $130

   2018    $395

   2019$95 (Ms Becker stated this was not considered by the AAT previously)

5. The most significant expenses are the Phase 1 [medical] costs which were incurred prior to 2012 and the two ‘[surgeries] undertaken in 2009 and 2011.  Ms Reed financed these surgeries through loans that were paid off over time however it is clear that the costs were incurred prior to 7 January 2012.  The financed costs incurred after 7 January 2012 are not medical costs incurred after 7 January 2012. 

6. The remaining expenses, which the tribunal accepts were medically necessary, are relatively minor, particularly when considered in the context of the ‘costs of the children’.  Child Support provided details of the administrative assessments since 2012 which showed Mr Becker was paying more than $11,900 per annum in 2012, increasing to around $19,000 over the years in question.  Ms Reed’s expenses (even including the loan repayments for the surgeries) were not significant in the context of the costs of the children; and the child support formula allows for routine medical expenditure.

1. The tribunal decided that there are no special circumstances in this case that make the administrative assessment unjust and inequitable due to the special needs of the children.

Summary

1. The tribunal decided that there was no reason to depart from the formula assessment.

DECISION

The decision under review is affirmed.