Richards and Knox (Child support)

[2023] AATA 2939

Richards and Knox (Child support) [2023] AATA 2939 (28 July 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/MC025639

APPLICANT:  Mr Richards

OTHER PARTIES:  Child Support Registrar

Ms Knox

TRIBUNAL:  Member P Jensen

DECISION DATE:  28 July 2023

DECISION:

The decision under review is varied so that:

• Mr Richards’ adjusted taxable income is varied to $266,913 per annum and Ms Knox’s adjusted taxable income is varied to $81,888 per annum from 18 January 2022 to 31 August 2022; and

• Mr Richards’ adjusted taxable income is varied to $282,672 per annum and Ms Knox’s adjusted taxable income is varied to $63,342 per annum from 1 September 2022 to 31 August 2023.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established – decision to depart - decision under review varied

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

Introduction

1. Mr Richards and Ms Knox are the parents of [Child 1] who was born in 2008 and [Child 2] who was born in 2014. A child support case was registered with Services Australia – Child Support (Child Support) from August 2020. Since 30 June 2021, Mr Richards has been recorded as providing 44% care and Ms Knox has been recorded as providing 56% care for both children.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care for the children. From 28 November 2021 the administrative assessment was based on Mr Richards’ 2020–21 adjusted taxable income of $218,839 and Ms Knox’s 2020–21 adjusted taxable income of $35,025. Mr Richards was assessed to pay $21,834 per annum in child support.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. On 18 January 2022, Mr Richards lodged a departure application. On 26 September 2022 an original decision-maker granted the application and varied Ms Knox’s adjusted taxable income to $78,715 per annum from 18 January 2022 to 27 February 2023. Both parents objected to that decision. An objections officer allowed the objections and made the following decision:

   ·    from 18 January 2022 to 30 June 2022, Ms Knox’s adjusted taxable income is varied to $77,000 per annum;

   ·    from 1 July 2022 to 31 March 2023, Ms Knox’s adjusted taxable income is varied to $62,000 per annum; and

   ·    from 18 January 2022 to 31 March 2023, Mr Richards’ adjusted taxable income is varied to $266,577 per annum.

4. Mr Richards applied to the Tribunal for further review. I conducted a directions hearing on 16 June 2023 and a substantive hearing on 28 July 2023. Mr Richards and Ms Knox gave sworn evidence by conference phone.

5. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

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

   (ii)... it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part; …

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

   that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to 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 child:

   …

   (ia)because of the income, property and financial resources of either parent; …

2. The parents separated in July 2020 (according to Mr Richards) or August 2020 (according to Ms Knox). Ms Knox is employed as a [Occupation 1]. Her 2020–21 adjusted taxable income was $35,025. Her 2021–22 adjusted taxable income was $81,888.

3. Ms Knox provided payment summaries for 2022–23 from her two employers. [Employer 1] paid her $27,754 and provided her with reportable fringe benefits valued at $16,500. [Employer 2] paid her $22,739. Both parents agreed that her 2021–22 tax-deductible expenses are a fair indication of her likely 2022–23 tax-deductible expenses. They totalled $705 + $2,696 +$250 = $3,651. Her 2022–23 adjusted taxable income is likely to be approximately $63,342.

4. When Mr Richards lodged his departure application on 18 January 2022, the administrative assessment was based on Ms Knox’s 2020–21 adjusted taxable income of $35,025. In the absence of a departure application, it would have continued to have been based on that adjusted taxable income until 27 February 2023: pages 509 to 512 of the hearing papers. Her actual adjusted taxable incomes during that period were significantly higher. The significant increase in Ms Knox’s adjusted taxable income in 2021–22 and the delay in the use of that adjusted taxable income in the administrative assessment constitute special circumstances such that the administrative assessment resulted in an unjust and inequitable determination of child support payable. Reason 8 is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Richards submitted that Ms Knox should be assessed on her earning capacity. A decision-maker can only have regard to a parent’s earning capacity if the requirements of subsection 117(7B) of the Act are satisfied. During the hearing, Mr Richards acknowledged that those requirements were not satisfied in respect of Ms Knox. That acknowledgement was properly made.

3. Ms Knox owns her home which she valued at approximately $2.05 million. She has an associated home loan with a balance of approximately $490,000. Her household consists of herself, the children and her mother. Ms Knox effectively submitted that her mother pays board which covers her (Ms Knox’s mother’s) costs. Mr Richards suspects that Ms Knox obtains some financial advantage by having her mother live with her, but he acknowledged that there was no evidence upon which such a finding could be made. Ms Knox listed her average weekly expenses. She said that she had recently started incurring most of the children’s medical fees and the rate of child support payable between the parents should be adjusted accordingly. Putting that issue to one side for a moment, her other average weekly expenses are unremarkable.

4. The Federal Circuit and Family Court made final consent orders [in] January 2022 concerning the parents’ property settlement and their care for the children. The following day the parents entered into a binding child support agreement which requires Mr Richards to pay “any amount assessed by the Child Support Agency from time to time” plus certain non-periodic child support: 75% of school tuition fees and levies; 50% of school expenses; 50% of extracurricular activities; and “50% of out of pocket and gap medical expenses (after Medicare and health insurance payments) as agreed in writing between the parties and as appearing on invoice.” During the substantive hearing, Ms Knox said that in the last few months, Mr Richards had stopped contributing to the children’s medical expenses, including appointments with their general practitioner. She had not raised the matter during the directions hearing. She did not provide any primary evidence of the out-of-pocket costs she had incurred, i.e. the invoices she had paid and the rebates she had received. In the absence of such evidence, I did not consider it necessary to hear from Mr Richards on the issue and I do not consider it appropriate to make the (unquantified) variation that Ms Knox sought.

5. Mr Richards is a [Occupation 2]. At different times he has been employed by [Employer 3] and [Employer 4]. His 2020–21 and 2021–22 adjusted taxable incomes were $218,839 and $266,913 respectively.

6. Mr Richards provided two payment summaries for 2022–23. [Employer 3] paid him $130,562. [Employer 4] paid him $130,264. Both parents agreed that his 2021–22 dividends and tax-deductible expenses are a fair indication of his likely 2022–23 dividends and tax-deductible expenses. In 2021–22 the effective value of his dividends was $17,157 + $7,291 = $24,448 and his tax-deductible expenses totalled $2,237 + $365 = $2,602. His 2022–23 adjusted taxable income is likely to be approximately $130,562 + $130,264 + $24,448 - $2,602 = $282,672.

7. Mr Richards completed a Statement of Financial Circumstances in February 2023. At that time, he owned a house worth approximately $1.45 million and he had a home loan with a balance of approximately $1 million. He had savings of approximately $788,000 and a share portfolio worth approximately $410,000. He has subsequently purchased an apartment for $620,000 and he has increased his total loans. He plans to live in both premises. He has also discharged some liabilities that flowed from the property settlement. He estimated that once those transactions were finalised, he would have savings of approximately $15,000 to $20,000. I note that he continues to earn a relatively high income and he retains his share portfolio.

8. Broadly, Mr Richards’ primary submission was that the original decision-maker and the objections officer failed to make the preferable decision because they did not vary the rate of child support payable prior to 18 January 2022, which was the date on which he lodged his departure application. He provided detailed submissions on the issue: see, for example pages A111 to A122 of the hearing papers. His submissions were addressed in detail during the hearing.

9. Mr Richards submitted that a portion of his 2022–23 adjusted taxable income should be excluded from consideration because it included a bonus and the payout of annual leave entitlements. I do not accept that submission; his adjusted taxable incomes fairly reflect his capacity to contribute to the children’s costs from time to time.  

10. Mr Richards submitted that during the period from August 2020 to August 2021 he voluntarily paid the home loan repayments in respect of the ex-matrimonial home in which Ms Knox was living, and during the period from September 2021 to April 2022 he continued to make those home loan repayments pursuant to a court order. The property was transferred to Ms Knox in April 2022, at which point she became responsible for the repayment of the associated home loan. Mr Richards submitted that Ms Knox had the use of a car from August 2020 to February 2021 and he paid certain associated costs. Mr Richards referred to funds that Ms Knox withdrew during the period from August 2020 to May 2021. He submitted that he had been required to purchase household furniture and the like during the period from August 2020 to July 2021 following his departure from the ex-matrimonial home. He listed various payments that he had made during the period from January 2022 to May 2023, the vast majority of which he was required to pay pursuant to the parents’ binding child support agreement.

11. The first point to note is that consent orders concerning the parents’ property settlement were made in January 2022. Such orders constitute a fair distribution of the parents’ assets and liabilities, taking into account their respective contributions up until the date the orders were made. It is not the role of the Tribunal to review court orders. Further, the home loan repayments that Mr Richards made during the period from January 2022 to April 2022 were made pursuant to those consent orders.

12. The second point to note is that at all relevant times, Mr Richards was aware of the option of lodging a departure application, having previously done so on 16 April 2021. The hearing papers do not include a copy of that earlier application but Mr Richards agreed that he would have used a similar form to the one he used in January 2022. It lists the ten potential grounds for departure, including “Reason 8A – The assessment does not correctly reflect one or both parent’s income, property, and/or financial resources”. Mr Richards acknowledged that by at least April 2021 he was aware of the departure application process and the potential grounds for departure. On 20 July 2021 an original decision-maker refused Mr Richards’ departure application. Mr Richards had applied on the basis of various payments that he was making and money that Ms Knox had withdrawn while the parents worked towards their property settlement. However, the original decision-maker’s written reasons included information about Ms Knox’s increased earnings: “After sighting Ms Knox’s response, Mr Richards provided the following additional information: […] She declared her net income of $1885 per fortnight [which] is $840 over the amount shown on her payslip. He states he assumes this accounts for her additional work which commenced on 8 June 2021.” A net income of $1,885 per fortnight equates to $49,010 per annum net. One would need to earn more than $49,010 per annum to be left with $49,010 per annum net. When the original decision-maker decided to refuse Mr Richards’ first departure application, the administrative assessment was based on Ms Knox’s 2019–20 adjusted taxable income of $33,886. Mr Richards had a right to object to the decision to refuse his departure application, but he did not do so.

13. For those reasons, I consider it appropriate to make a departure decision with effect from the date on which Mr Richards lodged his second departure application, and not from an earlier date. Mr Richards’ adjusted taxable income will be varied to $266,913 and Ms Knox’s adjusted taxable income will be varied to $81,888 from 18 January 2022. Although the 2021–22 financial year ended on 30 June 2022, I consider it appropriate to vary the parents’ adjusted taxable incomes to those figures until 31 August 2022, thereby capturing Ms Knox’s highest adjusted taxable income for a little longer. There is usually a delay between the end of the financial year and the use of the adjusted taxable income for that financial year in the administrative assessment. Varying the parents’ adjusted taxable incomes to those figures until 31 August 2022, rather than 30 June 2022, will reduce the increase in Mr Richards’ child support arrears.

14. Mr Richards’ adjusted taxable income will be varied to $282,672 per annum and Ms Knox’s adjusted taxable income will be varied to $63,342 per annum during the 12‑month period from 1 September 2022 to 31 August 2023. So far as the current departure application is concerned, it is not necessary to vary the parents’ adjusted taxable incomes after 31 August 2023.

15. The proposed decision will increase Mr Richards’ child support arrears by approximately $300 and it will require him to pay a current rate of child support of approximately $19,400 per annum. He has the capacity to pay those arrears and that rate of child support, and it is appropriate that he do so. The proposed decision will be just and equitable.

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. Ms Knox receives family tax benefit in respect of the children. Changing the child support payable by Mr Richards will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

The decision under review is varied so that:

• Mr Richards’ adjusted taxable income is varied to $266,913 per annum and Ms Knox’s adjusted taxable income is varied to $81,888 per annum from 18 January 2022 to 31 August 2022; and

• Mr Richards’ adjusted taxable income is varied to $282,672 per annum and Ms Knox’s adjusted taxable income is varied to $63,342 per annum from 1 September 2022 to 31 August 2023.