Scaife and Burks (Child support)

[2022] AATA 4097

Scaife and Burks (Child support) [2022] AATA 4097 (24 October 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/AC023600

APPLICANT:  Mr  Scaife

OTHER PARTIES:  Child Support Registrar

Mr Burks

TRIBUNAL:Member M Baulch

DECISION DATE:  24 October 2022

DECISION:

The tribunal set aside the decision under review and, in substitution, decided that there is to be a departure determination, such that Mr Burks is liable to pay child support of $18,000 per annum from 8 July 2021 until the date [Child 1] ceases to be an eligible child, and from then $9,000 per annum until the child support case ends.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – a ground for departure established – 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

1. This application for review concerns the amount of child support paid by Mr Burks to Mr Scaife in respect of [Child 1] and [Child 2], who were born in 2005 and 2010.  Mr Burks is the children’s father and Mr Scaife is the children’s maternal grandfather, with whom the children live.  The children’s mother has passed away and, since 30 May 2022, Mr Scaife and his wife have had sole parental responsibility for [Child 1] and [Child 2], pursuant to an order made by the Federal Circuit and Family Court of Australia.

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable by a parent to a non-parent carer of a child.  It uses a statutory formula which contains variables such as the parent’s income, the number of children, their ages and the percentages of care. 

3. A parent or non-parent carer can make an application to Services Australia – Child Support (Child Support) for a change to the administrative assessment based on the statutory formula in the special circumstances of their case – referred to in the Act as a departure determination.  Mr Scaife made such an application, on 8 July 2021, seeking a change to the child support assessment on the basis that the assessment did not correctly reflect Mr Bruks’ income, property and/or financial resources and his capacity to earn.

4. On 25 October 2021, a Child Support decision maker decided to make a departure determination, such that the annual rate of child support paid by Mr Burks was set at $5,200 per annum.  Mr Scaife objected to that decision and, on 24 February 2022, that objection was allowed in part.  The objections officered decided that there was to be a departure determination such that:

   ·      From 8 July 2021 to 23 February 2022, the rate of child support payable by Mr Burks was set at $5,200 per annum; and

   ·      From 24 February 2022 to 30 March 2024, Mr Burks’ adjusted taxable income was set at $39,556;

   (the decision under review). 

5. Mr Scaife has now applied to this tribunal seeking an independent review of Child Support’s decision.

6. A hearing into the application for review was held by the tribunal on 12 October 2022.  Mr Scaife participated in the hearing by video conference and Mr Burks participated in the hearing by telephone.  Mr Scaife and Mr Burks both gave evidence during the hearing.  A representative of the Child Support Registrar (the Registrar) did not participate in the hearing. 

7. On 12 October 2022, the tribunal deferred determining the application for review to allow Mr Scaife to provide additional documentary evidence and to permit Mr Burks time to comment on that evidence.  Mr Burks’ response to the additional evidence was received on 21 October 2022 and, on 24 October 2022, the tribunal determined the application for review. 

8. The tribunal had before it relevant documents provided to it by the Registrar pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (600 pages).  The tribunal also had regard to additional material provided by Mr Scaife (labelled folios A1 to A105) and Mr Burks (labelled folios B1 to B122). 

ISSUES

1. The statutory provisions relevant to this review application are found within the child support legislation, in particular, the Act.

2. Pursuant to section 98C of the Act, a determination to depart from the administrative assessment of child support may be made if the following three requirements are met:

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

   (ii)that 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; …

CONSIDERATION

1. When Mr Scaife made his application for a departure determination, the administrative assessment of child support required Mr Burks to pay child support of $443 per annum based upon his adjusted taxable income of $13,708, derived from his 2019–20 taxable income.  For the period 1 November 2021 to 31 January 2023, the assessment of child support required Mr Burks to pay child support of $506 per annum, based upon his adjusted taxable income of $28,230, derived from his 2020–21 taxable income.

2. These, therefore, are the administrative assessments of child support from which I am considering departing.

Is there a ground, or grounds, for departure?

1. All the grounds for departing from the administrative assessment of child support are prefaced by the term “in the special circumstances of the case”.  As noted by the Full Court of the Family Court:[1]

   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. In Savery’s case (at Fam LR 815 FLC 77,897), Kay J, adopting the view in In the Marriage of Philippe (1977) 4 Fam LR 153; [1978] FLC 90-433 at Fam LR 155 FLC 77,202 in a different context, said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.

   My consideration will be guided by this principle.

   [1] See Gyselman and Gyselman [1991] FamCA 93.

2. Mr Scaife’s application for a departure determination relied, in part, upon the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act.  This provision – commonly referred to as “Reason 8A” by Child Support – provides that a ground to depart from the statutory formula may be established if, in the special circumstances of the case, the child support assessment results in an “… unjust and inequitable determination of the level of financial support to be provided by the liable parent …” due to the income, property and financial resources of the parent.

3. Under the administrative assessments of child support, Mr Burks’ adjusted taxable income has been assessed as $13,708 per annum for the period 4 June 2021 to 31 October 2021.  This amount, derived from his 2019–20 taxable income, included earnings from employment of $7,004, taxable Centrelink payments of $5,887, and interest income of $817.  A net rental loss of $3,805 was added back.

4. Under the administrative assessments of child support, Mr Burks’ adjusted taxable income has been assessed as $28,230 per annum for the period 1 November 2021 to 31 January 2023.  This amount, derived from his 2020–21 taxable income, included income from employment of $5,500, taxable Centrelink payments of $19,153, non-taxable Centrelink payments of $3,596 and minimal interest income.  A net rental loss of $1,760 was added back.

5. When the children’s mother passed away in 2018, Mr Burks received a payment from her superannuation fund of approximately $557,000.  It was undisputed during the hearing that this amount was approximately $137,0000 more than it might otherwise have been as Mr Burks was left with the care of [Child 1] and [Child 2].  Mr Burks’ evidence was that he used those funds, amongst other things, to pay off the mortgage on their family home.  That home has since been sold and Mr Burks has used the sale proceeds to purchase a home in Queensland and relocate there. 

6. Mr Burks stated that after relocating to Queensland he had $280,000 remaining and that he had lawyer’s fees of $82,000 to pay.  At the time of Mr Scaife’s application for a change of assessment, Mr Burks still had $225,000 of the funds realised from the sale of the family home remaining.  Since then, that amount has reduced due to costs of renovating the Queensland home.

7. At the time of Mr Scaife’s application for a departure determination, Mr Burks owned two rental properties.  One of these was sold on 11 March 2022 for $215,000 and the other was sold on 8 April 2022 for $400,000.  After costs and disbursements, and the discharge of mortgages, Mr Burks received $50,347 and $123,206, respectively, from the sale of the rental properties.

8. Mr Scaife had care of [Child 1] from January 2020 and [Child 2] from May 2021.  When asked what arrangements he had made to financially support his children once they left his care, Mr Burks explained he had paid the amount of child support assessed but refused to state if he thought that amount was unfair in light of the financial resources that were available to him.

9. I was satisfied that an administrative assessment that required Mr Burks to pay child support of $443 per annum, when Mr Scaife made his application for a departure determination, and $506 per annum from 1 November 2021 is unjust and inequitable given the financial resources available to Mr Burks.  At that time Mr Burks had $225,000 in cash left from the sale of the family home and equity in two rental properties – since realised – of approximately $170,000. 

10. The remaining proceeds from the sale of the family home would have included a portion of the superannuation payment made to Mr Burks on the death of the children’s mother.  That payment included approximately $137,000 to assist Mr Burks financially support his children until their majority.  I was satisfied that Mr Burks having the benefit of funds that were paid to help him financially support his children, in circumstances where Mr Burks no longer has care of those children and contributes little to their support, is out of the ordinary and constitutes special circumstances. 

11. I was therefore satisfied that the ground for departure set out in subparagraph 117(2)(c)(ia) of the Act has been made out in respect of Mr Burks’ income, property and financial resources. 

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs that my attention is turned to what is fair to the parents and their children.  Regard must be had to a variety of factors, set out in subsection 117(4) of the Act, such as the needs of the children, Mr Burks’ necessary commitments and any hardships that would be caused by departing, or not departing, from the statutory formula.

The children

1. Child support records show that [Child 1] has been in Mr Scaife’s and his wife’s sole care since January 2020 and [Child 2] has been in Mr Scaife’s and his wife’s sole care since May 2021.  There is no evidence that [Child 1] or [Child 2] have any income, property, financial resources or earning capacity which is relevant to my consideration here.

2. [Child 1] and [Child 2] attend public schools and I was satisfied that there are no out of the ordinary costs educating the children in the way their parents intended.  [Child 1] is undergoing orthodontic treatment, with initial costs of $430 plus $7,500 for the braces themselves.  [Child 1] paid the initial $2,100 and Mr Scaife will have out of pocket expenses, after health insurance rebates of $800 per year for two years, a total of $1,600.

3. A report from orthodontist, [Mr A], opines that there is a strong indication for the treatment and stated that the treatment is necessary to correct alignment, intermaxillary relations and reduce the deep bite to reduce to chance of wear on the anterior teeth.  Mr Burks asserts that orthodontic treatment was cosmetic and could be attained by cheaper means.  Having considered the evidence, I prefer Mr [A]’s opinion over Mr Burks when considering the necessity of the treatment. 

4. Under the statutory formula, the costs of the children as of 8 July 2021 were assessed to be nil because Mr Burks’ income was below the self-support amount.  From 1 November 2021, the costs of the children under the statutory formula were $554 per annum. 

5. Mr Scaife’s Statement of Financial Circumstances (Child Support review) form discloses he and his wife spend $443 per week ($23,036 per annum) supporting Mr Burks’ children.

Mr Scaife

1. Mr Scaife is a non-parent carer.  Therefore, the only matter for me to consider under subsection 117(4) of the Act in respect of Mr Scaife circumstances is any hardship from my making, or refusing to make, a departure determination.

2. Mr Scaife and his wife rely on an age pension of $371 per week each.  The evidence shows that their expenses, which include costs for supporting [Child 1] and [Child 2], exceed their income and they are accruing debt, by drawing down on a overdraft, to make ends meet.  I was satisfied that not making a departure determination which increases Mr Burks’ liability to pay child support would cause Mr Scaife financial hardship.

Mr Burks

1. Under the administrative assessments of child support, Mr Burks’ adjusted taxable income was assessed as $13,708 per annum when Mr Scaife made his application for a departure determination.  From the commencement of a new child support period, on 1 November 2021, he has been assessed on an adjusted taxable income of $28,230 per annum.

2. Mr Burks receives carer payment from Centrelink, currently $668.65 per fortnight, plus a carer allowance of $136.50 per fortnight; approximately $20,934 per annum.  He has intermittent periods of employment and expressed a wish to become self-employed.

3. Mr Burks had $225,000 available to him, as the remaining proceeds from the sale of the family home, when Mr Scaife made his application for a departure determination.  Since that date, Mr Burks has sold two investment properties and realised about $170,000 by doing so.  I acknowledged that Mr Burks will have a tax liability, as yet unknown, for the capital gains he made on those sales.

4. Mr Burks’ Statement of Financial Circumstances (Child Support review) form discloses that Mr Burks owns his home in Queensland which he values at $180,000 and over which there is no mortgage.  I noted Mr Burks’ evidence that the home was purchased for $180,000 and that he has spent considerable funds realised from the sale of the family home renovating that home and considered Mr Burks’ valuation of $180,000 is a little low.  He owns a [vehicle], which he values at $40,000, listed about $92,000 in funds held in bank accounts (as of 14 September 2022), a trailer worth $3,000 and his household contents at $20,000.  Mr Burks also reports having $556,292 in two superannuation accounts. 

5. One of the grounds for departure relied upon by Mr Scaife related to Mr Burks’ earning capacity.  A person can only be considered as having a greater capacity to earn than they are exercising if subsection 117(7B) of the Act is satisfied, which states:

   (7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a)  one or more of the following applies:

   (i)  the parent does not work despite ample opportunity to do so;

   (ii)  the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii)  the parent has changed his or her occupation, industry or working pattern; and

   (b)   the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i)  the parent’s caring responsibilities; or

   (ii)  the parent’s state of health; and

   (c)   the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

   When Mr Burks has worked, his earnings from employment have been minimal and well below the self-support amount that applies under the statutory formula.  Even if I were satisfied that paragraphs 117(7B)(a) and (b) of the Act were satisfied, I would not be satisfied that Mr Burks’ decision to not work, or reduce the extent of his engagement in employment, were motivated by a desire to affect the administrative assessment of child support.

6. I was not persuaded that subsection 117(7B) of the Act is satisfied and concluded that Mr Burks cannot be assessed as having a capacity to earn.

7. Under the statutory formula, Mr Burks has the benefit of a self-support amount of approximately $26,000 to $27,000 per annum.  Mr Burks noted that his income is less that this amount and did not dispute that this was sufficient to meet his necessary costs for his own support.  Mr Burks lives with a partner, who receives her own payment from Centrelink.  I was satisfied that there is no other person or child in respect of whom Mr Burks has a duty to maintain.

8. In relation to my making a departure determination that potentially increases his ongoing child support liability or the arrears owed, Mr Burks submitted that such an outcome would cause him considerable hardship.

9. Having considered the matters set out in subsection 117(4) of the Act, I was satisfied that it would be just and equitable to make a change to the child support assessment.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper is set out in subsection 117(5) of the Act, which directs my attention to what is fair to the community.  It is necessary to consider the effect, if any, that a departure from the administrative assessment would have on entitlements to any income tested pension, allowance or benefit of the carer entitled to child support.  Parents, rather than the community, have the primary duty to maintain their children.

2. Mr Scaife receives family tax benefit that is paid subject to a maintenance income test.  Any departure determination that increases the amount of child support paid by Mr Burks above the maintenance income-free area that applies under that income test, will reduce the amount of family tax benefit paid to Mr Scaife. 

3. I was therefore satisfied that the departure determination I am contemplating is otherwise proper.

Conclusion

1. Section 4 of the Act sets out the objectives of the Act; these objectives include:

   ·      Parents of a child have a primary duty to maintain that child.

   ·      That duty has a priority over all commitments of the parent other than commitments necessary for self-support.

   ·      The level of financial support to be provided by parents to their children should be determined in accordance with the legislatively fixed standards.

   ·      The level of financial support is to be determined according to the capacity to provide financial support and noting that parents with a like capacity to provide financial support should provide like amounts.

2. I have found that there is a ground for departure in this case, and that it would be just and equitable and otherwise proper for me to make a departure determination.  Section 98S of the Act describes the determinations that I may make if a decision is made to depart from the administrative assessment of child support.

1. I have found that Mr Burks has financial resources available to him that make the administrative assessment of child support unfair and concluded that Mr Burks should be required to contribute more to support his children.  Mr Burks has the responsibility to provide for his children’s financial support and, in my view, he cannot be permitted to abrogate that responsibility to the children’s grandparents or the community (by means of a family tax benefit entitlement).  The duty to support his children has precedence over all of Mr Burks’ other commitments, excluding his necessary costs for his own support.  I did not consider it reasonable that Mr Burks has prioritised home renovations over his duty to support his children.

2. As a starting point for crafting a departure determination, I noted that Mr Burks received approximately $137,000 additional in superannuation because he had two dependent children in his care when their mother passed away in mid-2018.  At that point in time, [Child 1] was 13 or about to turn 14 and [Child 2] was 8 or about to turn 8.  Therefore, from mid-2018, Mr Burks had approximately $137,000 available to him to financially support [Child 1] for another five years and [Child 2] for another 10 years; this equates to about $9,000 per child per annum.

3. I therefore decided that there should be a departure determination, which requires Mr Burks to pay child support of $9,000 per child, per annum.  My departure determination should commence from 8 July 2021, being the date Mr Scaife made his application, and is to apply in respect of each child, until that child ceases to be an eligible child.  I decided not to make any further adjustment due to the costs of [Child 1]’ orthodontic treatment.

4. This will result in Mr Burks being required to pay $18,000 per annum from 8 July 2021 until [Child 1] ceases being an eligible child – which will likely occur sometime in 2023 – then $9,000 per annum until [Child 2] ceases to be an eligible child – likely sometime in 2028 – at which point the child support assessment will end.

5. I have decided to make a departure determination which will remain in place until the case ends.  This provides certainty to all involved and means that Mr Scaife will not have to make repeated applications for departure determinations. 

6. I acknowledge that requiring Mr Burks to pay child support of $18,000 per annum on his current income will be extremely difficult.  I also accepted Mr Burks’ submission that it will be difficult for him to address the arrears my decision creates.  However, Mr Burks still retains funds from the sale of the family home and the investment properties which should assist him in meeting his higher child support liability and arrears.  Mr Burks has assets, other than his home, which he could sell if necessary.

7. Ultimately, Mr Burks has a duty to provide financially for his children, and it was my view that his failure to prioritise this duty appropriately would be the cause of any financial hardship that will inevitably arise from my decision.  I considered it unreasonable that funds have been spent on a home renovation, where they could have been retained and used to contribute to the costs of financially supporting his children. 

8. In those circumstances, I have had regard to the financial hardship my decision will bring to Mr Burks but did not consider that hardship should be a barrier, such that the decision I am making should not be made.  Other factors weigh more heavily in favour of making a departure determination, such as Mr Burks’ obligation to support his children and issues of fairness and hardship regarding the children and Mr Scaife.

9. I noted that Mr Scaife is incurring costs of $443 per week, or $23,036 per annum, providing for [Child 1] and [Child 2].  My decision will not absolve him of all these costs but should reduce the degree of financial hardship they currently incur.

10. I was satisfied that my decision appropriately balances issues of fairness, and hardship, for [Child 1], [Child 2], Mr Scaife and Mr Burks.

11. Therefore, and for these reasons, I decided to set aside the decision under review and substituted my own decision.

DECISION

The tribunal set aside the decision under review and, in substitution, decided that there is to be a departure determination, such that Mr Burks is liable to pay child support of $18,000 per annum from 8 July 2021 until the date [Child 1] ceases to be an eligible child, and from then $9,000 per annum until the child support case ends.