Rylance and Lobell (Child support)

Rylance and Lobell (Child support) [2023] AATA 2959 (25 July 2023)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2023/PC025902
APPLICANT:  Mr Rylance
OTHER PARTIES:  Child Support Registrar
Ms Lobell

TRIBUNAL:Senior Member R Ellis
DECISION DATE: 25 July 2023
DECISION:

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

for the period from 7 June 2022 to 16 November 2022 the adjusted taxable income of Mr Rylance is varied to $91,746; and
for the period from 7 June 2022 to 30 October 2023 the adjusted taxable income of Ms Lobell is varied to $86,965.

CATCHWORDS

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

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been 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 is about whether or not there should be a departure from the administrative assessment of child support.
Mr Rylance and Ms Lobell are the parents of [Child 1] (born July 2004) and [Child 2] (born September 2006). There has been a child support assessment in place since 15 August 2013 and Ms Lobell is currently the liable parent under the assessment.
The following administrative assessments of child support are under consideration:
·     for the period from 24 December 2021 to 30 September 2022 Mr Rylance was assessed to pay an annual rate of $1,572 based on a 2020-21 adjusted taxable income of $55,479 for Mr Rylance and a 2020-21 adjusted taxable income for Ms Lobell of $44,575;
·     for the period from 1 October 2022 to 18 November 2022 Ms Lobell was assessed to pay an annual rate of $4,338 based on a 2021-22 adjusted taxable income of $56,196 for Mr Rylance and a 2021-22 adjusted taxable income for Ms Lobell of $86,965; and
·     for the period from 19 November 2022 to 31 December 2023 Ms Lobell was assessed to pay an annual rate of $12,924 based on a 2021-22 adjusted taxable income of $56,196 for Mr Rylance and a 2021-22 adjusted taxable income for Ms Lobell of $86,965.
The Tribunal notes that the increase in the annual rate payable by Ms Lobell arose when [Child 1] ceased to be an eligible child of the assessment on 19 November 2022.
On 7 June 2022 Mr Rylance applied to Services Australia – Child Support (Child Support) for a change to the assessment on the basis of a parent’s income, property and financial resources (the ground commonly known as Reason 8A).
On 3 January 2023 Child Support made the decision to refuse to change the assessment under section 98F of the Child Support (Assessment) Act 1989 (the Act) as it was not just and equitable to do so (the original decision).
On 16 January 2023 Mr Rylance objected to this decision and on 25 March 2023 Child Support disallowed the objection (the objection decision).
On 31 March 2023 Mr Rylance applied for a review of the objection decision by the Administrative Appeals Tribunal (the Tribunal).
A directions hearing was held on 19 June 2023. Mr Rylance and Ms Lobell attended by Microsoft Teams audio. Prior to the directions hearing Child Support provided the Tribunal and the parties with a bundle of documents in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (306 pages).
A hearing was held on 25 July 2023. Mr Rylance and Ms Lobell gave evidence on affirmation by Microsoft Teams audio. Prior to the hearing the Tribunal received documents folioed A1 to A10 from Mr Rylance and B1 to B17 from Ms Lobell and these were distributed to the parties.
At the directions hearing and at the commencement of the substantive hearing the Tribunal sought clarification from Mr Rylance and Ms Lobell as to the reasons for their concerns.
Mr Rylance said although Ms Lobell was found to have a higher income than that used in the administrative assessment Child Support had refused to make a change based on the financial hardship this would cause Ms Lobell. Mr Rylance said he believed this was unfair to him and he was seeking to have the actual adjusted taxable income of Ms Lobell applied to the assessment. Mr Rylance also raised the matter of backdating any decision made by the Tribunal. Ms Lobell said she was satisfied with the decision made by Child Support.

ISSUES

The statutory provisions relevant to this review are contained in the Act.
The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Act. 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).
Section 98C provides that the Registrar may make a determination to depart from the administrative assessment and establishes a three-step process such that the issues for determination by this Tribunal are:
·     whether or not a ground is established to depart from the administrative assessment of child support; and if so,
·     whether or not it is just and equitable to make a particular departure determination; and if so,
·     whether or not it is otherwise proper to make a particular departure determination.
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
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 and Gyselman [1991] FamCA 93 has held that:
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.
In Philippe and Philippe (1978) FLC 90-433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.
If 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.
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.

CONSIDERATION

Issue 1 – Is there a ground for departure?

A ground for departure exists where, in the special circumstances of the case, application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by the liable parent in respect of the child because of the income, property and financial resources of either parent (subparagraph 117(2)(c)(ia) of the Act).
Mr Rylance told the Tribunal he was not working and was in receipt of a [Department] pension. Mr Rylance said it was his intention to return to the workforce and this was being facilitated through the [Department]. Mr Rylance added it was likely to happen at some point in the next 12 months.
The Tribunal notes in evidence from Child Support that Mr Rylance had an adjusted taxable income of $56,196 in 2021-22.
Mr Rylance told the Tribunal that although his pension increased twice yearly he did not believe his adjusted taxable income would change significantly in 2022-23. Mr Rylance said he did receive a lump sum payment of $35,550 from the [Department] on 17 November 2021 which was not taxed. Mr Rylance explained this was a payment for [a Reason] arising from his [employment]. Mr Rylance said he chose to receive the payment as a lump sum rather than a pension and accepted this was a financial resource available to him.
Mr Rylance provided the Tribunal with a Statement of Financial Circumstances received on 21 April 2023. Mr Rylance declares total average weekly income of $1,365 which includes his [Department] pension, family tax benefit and child support. His average weekly expenses total $1,285 which includes an amount of $500 for holidays. Mr Rylance explained he endeavoured to take the children on an overseas holiday twice a year and this was his only significant discretionary expenditure. Mr Rylance has no personal expenditure. Mr Rylance declares total assets of $1,228,662 including the family home valued at $650,000, household contents of $500,000, a motor vehicle valued at $40,000 and funds in the bank of $38,662. He has no liabilities and superannuation of $120,000.
The Tribunal finds that in 2021-22 Mr Rylance had an adjusted taxable income of $56,196. The Tribunal is not satisfied, however, that the true income and financial resources available to Mr Rylance are accurately reflected by his taxable income alone. Mr Rylance received a lump sum payment on 17 November 2021 which was not recorded in his taxable income.
The term “financial resources” is not defined in the Act. In Costa & Fairbank (SSAT Appeal) [2010] FMCAfam 39 the Court said about the interpretation of the term “financial resources” that it:
refers to something which is not property but from which a financial benefit is or may be gained
…
The term financial resource in the light of the objects of the Assessment Act should be broadly defined and would in my consideration refer to any financial benefit that would enhance the capacity of parents to provide a proper level of financial support for their children.
The Tribunal considers the lump sum payment received by Mr Rylance to be a financial resource available to him for the purposes of child support. In doing so the Tribunal is mindful of policy guidance set out in the Child Support Guide at 2.6.14 in relation to lump sum payments. It states, relevantly:
Where a parent receives a substantial amount of money (a lump sum) that would otherwise not form part of their income amount used for child support purposes, and therefore is not included in the assessment of child support, the lump sum may be taken into account in deciding whether the assessment should be changed.
Such payments may arise as a consequence of the parent:
·     being retrenched from their employment
·     drawing funds from a superannuation fund
·     receiving a distribution from a deceased estate
·     being compensated for some loss or damage, or
·     being successful in a lottery or some other gambling venture.
In each case it will be necessary to decide whether receiving the money makes the amount of child support payable unjust and inequitable.
Although not bound by policy as set out in the Child Support Guide, the Federal Court has held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation.
The Tribunal is satisfied, in the circumstances of this case, it is appropriate to take into account the lump sum payment of $35,550 received by Mr Rylance on 17 November 2021. Mr Rylance chose to receive this payment as a lump sum rather than a pension. The Tribunal is of the view that assessing child support on the basis of his taxable income alone would result in an unjust and inequitable outcome. While not grossing up the value of the lump sum the Tribunal considers it reasonable to add back this amount from the date it was received.
The Tribunal finds that Mr Rylance would be more fairly assessed as if he had an adjusted taxable income of $91,746 from 17 November 2021. This includes his adjusted taxable income in 2021-22 of $56,196 and the lump sum payment of $35,550. The Tribunal considers this to be a fairer reflection of the income, property and financial resources available to Mr Rylance for the purposes of child support.
Mr Rylance told the Tribunal it would be unreasonable to consider the lump sum payment he received as a financial resource and not also take into account the increased income Ms Lobell was earning when she commenced a new job on 19 July 2021.
Mr Rylance said that from 24 December 2021, following a change of care, he was caring for [Child 2] and Ms Lobell was caring for [Child 1]. Mr Rylance argued that as each parent had care of one child and also had similar financial resources the fairest outcome would be for neither to be assessed to pay child support to the other. Mr Rylance pointed out that instead, under the administrative assessment, he was paying child support to Ms Lobell from 24 December 2021 until [Child 1] ceased to be a child of the assessment.
The Tribunal also considered the income, property and financial resources of Ms Lobell.
Ms Lobell told the Tribunal she worked as a casual in the grocery sector and had been with her current employer since 19 July 2021. Ms Lobell said she was presently working four days a week but this could increase to six days a week in the peak summer period.
Ms Lobell informed the Tribunal that as a casual her income was difficult to predict, however, she could rely on a minimum of between 30-40 hours of work each week. Ms Lobell said her adjusted taxable income was $86,965 in 2021-22 but this included a small amount from her previous employer. Ms Lobell said she nonetheless expected her income in 2022-23 would be very similar. Ms Lobell said all her income was declared in her individual tax return.
The Tribunal notes in evidence from Child Support that Ms Lobell had an adjusted taxable income of $86,965 in 2021-22. Child Support confirmed, based on information from the Australian Taxation Office, that Ms Lobell commenced her current role on 19 July 2021.
Ms Lobell provided the Tribunal with a Statement of Financial Circumstances received on 20 April 2023. Ms Lobell declares total weekly income of $1,512. Ms Lobell has total average weekly expenses of approximately $848 and total personal expenditure of approximately $704 per week. Ms Lobell said her personal expenditure included an amount of $75 per week she was paying to Mr Rylance for child support owed during a private collect period as well as her current child support payments of $269 per week. Ms Lobell has assets totalling approximately $46,770 including a motor vehicle valued at $26,000, shares worth $14,500, household contents and a small amount of funds in the bank. Her liabilities, totalling $1,900, relate to a credit card debt. Ms Lobell has superannuation of $42,100.
The Tribunal finds that Ms Lobell had an adjusted taxable income of $86,965 in 2021-22 and this is an accurate representation of the income, property and financial resources available to her for the purposes of child support.
In the ordinary course of events a child support assessment is calculated using the last relevant year of income which is the most recent adjusted taxable incomes of both parents as assessed by the Australian Taxation Office. While Ms Lobell began receiving a higher income when she started her new role this income will be reflected in her tax return and ultimately applied to the child support assessment through the administrative formula. For there to be a change to the assessment special circumstances must first exist such that the increase in her income would render application of the administrative formula unfair.
The administrative assessment in place at the time Mr Rylance made his application for a change on 7 June 2022 was based on an adjusted taxable income of $55,479 for Mr Rylance and an adjusted taxable income of $44,575 for Ms Lobell. Mr Rylance was assessed to pay an annual rate of $1,572.
The Tribunal has found Mr Rylance would be more fairly assessed as if he had an adjusted taxable income of approximately $91,746. The Tribunal has also found that Ms Lobell had an adjusted taxable income of $86,965 in 2021-22. When these amounts are applied in the child support formula, the annual rate of child support payable by Mr Rylance would be approximately $644.
The Tribunal finds this to be significantly less than his liability under the administrative assessment. The Tribunal is satisfied that special circumstances exist and the application of the administrative assessment of child support would result in an unjust and inequitable determination of child support to be provided by Mr Rylance. On this basis the Tribunal finds there is a ground for departure from the administrative assessment.

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

As the Tribunal finds there is a ground to depart from the administrative assessment of child support, the next step is to consider whether or not 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,[1] which are as set out in subsection 117(4) of the Act:
[1] The Tribunal is required to give “overt consideration” to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares(SSAT Appeal) [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.

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

Section 3 of the Act states that it is the primary duty of a parent to maintain the child and this has priority over nearly all other commitments. In this case, the parents have a duty to support [Child 1] and [Child 2].
The Tribunal was not made aware that either parent has a legal responsibility to any other child or person.

The proper needs of the child

In relation 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).
The Tribunal notes that [Child 1] is in receipt of an income-tested disability support pension. The Tribunal was otherwise not made aware that the parents expected [Child 1] or [Child 2] to be cared for, educated or trained in a particular way or that either had any special needs.
The Tribunal is satisfied it is therefore appropriate to calculate the costs of their needs by reference to the Costs of the Children Table (provided for in section 155 of the Act).

The income, earning capacity, property and financial resources of the child

The Tribunal is satisfied that [Child 1] and [Child 2] have no income, earning capacity, property and financial resources which should be taken into account for the purpose of child support. As noted above [Child 1] is in receipt of an income-tested disability support pension. Such a pension is not taken into account when considering a child’s income, earning capacity, property and financial resources.

The income, property, financial resources and earning capacity of each parent

The Tribunal has already considered in detail the income, property and financial resources of both parents.
The Tribunal is satisfied that the earning capacity criteria (set out in subsection 117(7B) of the Act) are not met for either parent in this case.

Any hardship that would be caused

Mr Rylance receives a [Department] pension and his adjusted taxable income was $56,196 in 2021-22. The Tribunal has found that Mr Rylance would be more fairly assessed as if he had an adjusted taxable income of $91,746 from 17 November 2021. Mr Rylance also receives family tax benefit of approximately $4,393 per annum, however, this is not taken into account when considering his income for the purposes of child support as it is a resource to assist him with costs for [Child 2].
Mr Rylance has total household expenditure of approximately $66,820 per annum, however, this includes an amount of $26,000 which he has explained is for overseas holidays with the children. Mr Rylance has no personal expenditure but at the time of his application for a change of assessment he was required to pay child support to Ms Lobell of $1,572 per annum.
Mr Rylance told the Tribunal his income was effectively fixed and his expenditure was in line with this income. Mr Rylance said his finances were essentially in balance. Mr Rylance pointed out that in addition to his ordinary expenses he was also incurring legal costs related to civil proceedings which were not particularised in his Statement of Financial Circumstances.
Ms Lobell is working on a casual basis. The Tribunal has found her adjusted taxable income was $86,965 in 2021-22. Although her income going forward is difficult to determine given her employment status Ms Lobell has said she expects it will remain around the same.
Ms Lobell has total household expenditure of approximately $44,124 per annum although she told the Tribunal she expected her rent would increase in the near future. Her personal expenditure totals approximately $35,621 per annum and this includes child support currently paid to Mr Rylance as well as an outstanding amount of child support arising from an earlier private collect period. Ms Lobell said she would continue paying this outstanding child support amount at a rate of $75 per week for around another six months.
Ms Lobell told the Tribunal she was struggling financially and found it difficult to meet her expenses. Ms Lobell said she had little to spare each month but would nonetheless continue meeting her current child support obligations.
In his application for a change of assessment Mr Rylance sought to have any decision backdated from 24 December 2021. Mr Rylance explained this was the date from which he became the paying parent following a change in care for [Child 1].
The Tribunal is limited to making a determination in respect of a day in a period that is not more than 18 months prior to the date the change of assessment application was made (paragraph 98S(3B)(a) of the Act). The Tribunal must decide whether or not it is just and equitable to backdate its determination.
The Tribunal is of the broad view that retrospectively changing entitlements should be avoided without compelling reasons. The parents have a right to rely upon the assessment in place at the time and there was nothing requiring Ms Lobell to notify Child Support that her income had increased. As previously noted her higher income would ultimately be reflected under the usual administrative method and therefore Ms Lobell has done nothing wrong in this regard. Backdating the decision would also mean applying the higher income of Mr Rylance, as determined by the Tribunal, from the date he received his lump sum payment. Mr Rylance was, equally, not required to notify Child Support of the change to his financial situation.
The Tribunal finds it just and equitable to commence its determination from 7 June 2022, being the date Mr Rylance made his application, rather than an earlier date.
Having considered the interest of both parents the Tribunal proposes to make the following determination:
· for the period from 7 June 2022 to 16 November 2022 the adjusted taxable income of Mr Rylance is varied to $91,746; and
· for the period from 7 June 2022 to 30 October 2023 the adjusted taxable income of Ms Lobell is varied to $86,965.

Under the decision of the Tribunal, as previously calculated, the annual rate of child support payable by Mr Rylance will be approximately $644 from 7 June 2022. From 17 November 2022 Ms Lobell will become the paying parent and the annual rate of child support payable will be $4,338. This is based on a 2021-22 adjusted taxable income of $56,196 for Mr Rylance as determined under the usual administrative process and an adjusted taxable income of $86,965 for Ms Lobell. From 19 November 2022 Ms Lobell will be assessed to pay an annual rate of $12,924.[2] This is based on the same adjusted taxable income for both parents, however, [Child 1] ceased to be an eligible child of the assessment on 19 November 2022.
[2] This is the same amount that Ms Lobell is required to pay under the administrative assessment.
The Tribunal has varied the adjusted taxable income of Mr Rylance until 16 November 2022 as this is a period of 12 months from the date he received the lump sum payment. The Tribunal is satisfied that any benefit to Mr Rylance arising from this payment had ended by 16 November 2022. The Tribunal has varied the adjusted taxable income of Ms Lobell until 30 October 2023 after which she will be assessed under the usual administrative process.
The determination of the Tribunal will result in an overpayment to Ms Lobell as it will reduce the amount of child support payable by Mr Rylance. This will be offset by the fact that Mr Rylance remains the paying parent until 17 November 2022 when Ms Lobell becomes the paying parent. The Tribunal is, on balance, satisfied the proposed determination will not cause hardship to Mr Rylance, Ms Lobell or the children and is just and equitable.

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

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.
Mr Rylance is in receipt of family assistance in respect of [Child 2]. The Tribunal is satisfied its determination will result in an appropriate apportionment of financial responsibility between the parents and the taxpayer.

DECISION

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

for the period from 7 June 2022 to 16 November 2022 the adjusted taxable income of Mr Rylance is varied to $91,746; and
for the period from 7 June 2022 to 30 October 2023 the adjusted taxable income of Ms Lobell is varied to $86,965.

[2023] AATA 2959

25 July 2023

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Family Law

Administrative Law

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Jurisdiction

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Procedural Fairness

Statutory Construction