Scoggins and Raynor (Child support)

[2021] AATA 2425

Scoggins and Raynor (Child support) [2021] AATA 2425 (15 June 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC019958

APPLICANT:  Ms Scoggins

OTHER PARTIES:  Child Support Registrar

Ms Raynor

TRIBUNAL:Member T Bubutievski

DECISION DATE:  15 June 2021

DECISION:

The decision under review is set aside such that Ms Raynor's adjusted taxable income is set at:

$90,000 from1 July 2018 to 30 June 2019;

$160,000 from 1 July 2019 to 30 June 2020; and

$125,000 from 1 July 2020 to 11 March 2021.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – whether payment for total and permanent disability a financial resource – 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. Ms Scoggins and Ms Raynor are the parents of two children. The case was registered with Services Australia – Child Support (the Agency) for collection on 1 October 2015. On 11 October 2019 Ms Raynor made an estimate of her income of $21,376 for the 2019/20 financial year. The consequence of this estimate was that the annual rate of child support payable was reduced to the minimum rate of $435. Prior to this, the child support assessment had proceeded on the basis of Ms Raynor’s adjusted taxable incomes for 2017/18 of $68,587; and 2018/19 of $75,190. These had produced annual rates of child support payable by Ms Raynor of $9,866 and $11,056 respectively.

2. On 21 October 2019 Ms Raynor made an application to the Agency for an unspecified reduction in the child support assessment on the basis that she was in receipt of disability support pension. Ms Scoggins made a cross application on the basis of Ms Raynor’s financial resources and earning capacity. On 17 February 2020 an Agency delegate decided not to depart from the administrative assessment as no reason was established. This meant that Ms Raynor continued to pay child support at the minimum annual rate, but the arrears that had arisen in a prior period were unaffected.

3. Ms Scoggins objected to this decision, and on 17 September 2020 an Agency delegate of the Child Support Registrar disallowed the objection and made no change to the assessment.

4. On 29 September 2019 Ms Scoggins made an application for review by the Social Services and Child Support Division of this Tribunal. The Tribunal held a telephone directions hearing on 16 March 2021 and issued Directions, with which Ms Scoggins complied and Ms Raynor ultimately largely complied on the day of the substantive hearing.

5. The matter was heard by the Tribunal on 15 June 2021. Ms Scoggins and Ms Raynor both attended the hearing by telephone and gave sworn evidence. Ms Scoggins was represented by [Representative A] and Ms Raynor was represented by [Representative B], The Child Support Registrar did not seek leave to appear. Both parties and the Tribunal had access to documents numbered 1 to 518 from the Agency, and after all submissions, documents A1 to A167 from Ms Scoggins and B1 to B137 from Ms Raynor.

ISSUES

1. The rate of child support payable by the liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (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, the income of each parent and the costs of the children.

2. The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment under Part 6A of the Assessment Act. The application for departure is authorised by section 98B of the Assessment Act. Section 98C of the Assessment Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three step process. In order to depart from the administrative assessment the Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:

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

3. The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Assessment Act.

4. If satisfied 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 permits a range of determinations, including varying the annual rate of child support payable or the adjusted taxable income of the parties.

Issue 1 – Does a ground exist to depart from the administrative assessment?

Does a ground exist to depart from the administrative assessment under Reason 8A?

1. Ms Raynor sought a departure from the administrative assessment on the ground that the administrative assessment of child support does not reflect her income, property and financial resources. This is the ground reflected in subparagraph 117(2)(c)(ia) of the Assessment Act. Ms Scoggins has cross applied on this basis, also in relation to Ms Raynor’s income, property and financial resources.

2. At the time of the application, the annual rate of child support payable by Ms Raynor was $435 per annum based on an estimate of income of $21,376 for Ms Raynor and a 2018/19 adjusted taxable income of $95,190 for Ms Scoggins. Ms Raynor made this application because she had been medically retired from her role [with her employer], and listed her main source of income as disability support pension.

3. Ms Scoggins’s application is based on the fact that at the time of her medical retirement Ms Raynor received a lump sum total and permanent disability payment (TPD). Her view was that this should be considered as a financial resource available to Ms Raynor for the support of the children.

4. On Ms Scoggins’s behalf, [Representative A] submitted that the current child support assessment does not take into account Ms Raynor’s financial resources and that it is unfair for the Agency to rely on Ms Raynor’s disability support pension income alone in the child support assessment. [Representative A] noted that the Agency in both the original decision and the objection had relied upon Ms Raynor to lodge her income tax returns so that her estimates could be reconciled, but that she had not lodged her 2019/20 income tax return and there is no guarantee that her tax returns will be completed.

5. Further, [Representative A] submitted that an examination of Ms Raynor’s bank accounts shows that she has been content to apply these funds to commitments which would not take priority over the support of the children, such as legal fees, holidays, [food delivery], alcohol, gambling, [entertainment] and installing solar panels on her father’s house. She noted that although Ms Raynor has ready access to the remainder of the TPD there is still an outstanding debt of child support of $6,154.

6. The Tribunal noted that the parties’ final distribution of property and their parenting matters were determined by [a named Judge] in the Federal Circuit Court [in] March 2021. In the distribution of the property pool, the court ordered that Ms Scoggins receive 12.5% of the TPD payment, a total of $42,278. The Tribunal requested [Representative A] address the argument that the court had determined this entitlement on the basis of the contributions and future needs of the parties and that there may be an element of double dipping if there was to be a determination made to also consider the TPD as a financial resource. [Representative A] said that her client acknowledges that the court order settles the matter for the future, but was of the view that there should be a significant liability for child support for past periods between 2018 and 2021. [Representative A] put to the Tribunal that Ms Raynor had been happy to use the funds in the TPD account to subsidise her lifestyle to a significant degree, but the children had not benefited from access to that resource although they should have done so.

7. On behalf of Ms Raynor, [Representative B] submitted that the property settlement had finally determined this matter as it took into account the future requirements of both parties and the children, including care. [Representative B] said that Ms Scoggins’s contributions have been assessed and that the TPD payment should be assessed for child support in Ms Raynor’s hands as an asset, not a financial resource. She argued that her client needs to maintain private health insurance due to her medical conditions and also has out-of-pocket medical expenses and limited capacity for future employment.

8. The Tribunal asked [Representative B] to address the argument that the TPD payment could be considered compensation for future economic loss and that it could be apportioned in that manner to provide child support. [Representative B] said that the TPD payment was not just for loss of future income but also for future medical expenses. She said that her client is taxed on withdrawals she makes from the TPD as it is in a superannuation fund and pointed to what she described as the “stark difference” in the assets position of the parties.

9. The Tribunal asked [Representative B] why her client has not yet completed her 2019/20 income tax return. Ms Raynor said that she had not yet got around to it. The Tribunal notes that this would have been due some time ago even if Ms Raynor was using an accountant. [Representative B] also advises that she had no instructions as to why the child support arrears have not been paid, given that Ms Raynor has significant funds available to her.

10. The Tribunal queried what happened to the former home. [Representative A] confirmed that Ms Scoggins lives in her partner’s home, but is purchasing the former joint property as a rental property. She had been solely paying the expenses associated with this property for some time.

11. [Representative A] said that Ms Scoggins agrees that Ms Raynor has additional necessary expenses for her self-support because it is reasonable for her to maintain private health insurance, which they had calculated to cost $5,320 per annum. An examination of the Medicare history statements provided by Ms Raynor showed that her total out-of-pocket costs between 2018 and mid-2021 were $1,905.95. [Representative A] submitted that these were not significant, and the main cost is the health insurance policy.

12. [Representative A] noted, and this concurred with the Tribunal’s figures, that in the 2018/19 financial year Ms Raynor accessed $80,000 from the TPD funds which does not all appear in her income tax returns. In 2019/20 she made withdrawals from the TPD of $152,536, plus received earnings from salary and disability support pension. So far in the 2020/21 financial year, aside from the $42,000 that Ms Raynor withdrew from the TPD to pay Ms Scoggins in the property settlement, she has withdrawn $113,000 in addition to her disability support pension and her employment income. Ms Scoggins’s position is that Ms Raynor’s child support income should be the aggregation of these amounts for the relevant financial years.

13. Financial documents provided by Ms Raynor on the morning of the hearing show a balance in her superannuation account of $298,934.30. At the time of the family law proceedings the TPD pool was valued at $338,225 so the change in value essentially represents the amount Ms Raynor paid to Ms Scoggins pursuant to the property settlement. There has been a significant decline in the balance of the TPD. A statement as at 31 December 2020 showed a balance of $417,443.73, noting withdrawals in the statement period of $152,536. There is no doubt that Ms Raynor is using this money to fund her lifestyle and meet her expenses to a very significant degree.

14. The Tribunal considered the reasoning in Beckett & Beckett (2017) FCCA 608 and the authorities cited therein. This line of authority has established that a TPD payment is both compensation for future economic loss and a financial resource. The Tribunal considered [Representative B’s] argument that the division of this asset in the parties’ property settlement finalises this matter. While the Tribunal acknowledges that this is correct in relation to the division of property, it does not accept this to be the case in relation to child support. In considering the division of property the court makes its orders in the full knowledge that there will also be a child support liability. There is no suggestion that the payment made to Ms Scoggins from the TPD is child support or capitalised maintenance. The Agency, and the Tribunal, is not prevented from considering this financial resource for a second time for child support purposes.

15. In cases such as these, it is not the Tribunal's role to conduct a forensic accountancy examination. The Tribunal only needs to be broadly satisfied that the person has income or financial resources that are sufficient to pay a particular amount of child support.

16. The term “special circumstances” is not defined in the Assessment Act. In Gyselman and Gyselman [1991] FamCA 93 the Full 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. The Tribunal is satisfied that the significant difference between the total financial resources available to Ms Raynor and the income amounts on which the child support assessment has proceeded amounts to a special circumstance. The current child support assessment of $443 per annum is based on an estimate of income for Ms Raynor for 2020/21 of $21,717 and Ms Scoggins’s 2019/20 taxable income of $114,002. The evidence before the Tribunal is that Ms Raynor receives a disability support pension of approximately $22,000 per annum. She also receives a small amount of employment income, with her payslip for the period ending 9 May 2021 disclosing year to date income of $2,508.05. In addition, however, she has access to a lump sum payment to compensate her for her reduced earning capacity and she has used that extensively, withdrawing between $80,000 and $152,536 per annum. The children have not had the benefit of this resource. The Tribunal finds this ground established. As a ground is established, the Tribunal must also consider whether it is just and equitable, and otherwise proper, to change the assessment. This involves a consideration of all the circumstances of the parents and children.

Issue 2 – Would departure from the administrative assessment be just and equitable?

1. As the Tribunal is satisfied that a ground has been established to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Assessment Act:

   (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.

2. Section 3 of the Assessment Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The Tribunal only has to consider the factors set out in subsection 117(4) of the Assessment Act to the extent they are relevant in any particular case (see Gyselman).

3. In her Statement of Financial Circumstances, Ms Raynor declares her average weekly income to be $784. This may well be the case if the TPD payment is disregarded. Ms Raynor resides with her partner and adult child in her father’s home. Her partner is employed full-time and her adult daughter is not presently employed. The Tribunal notes that Ms Raynor’s obligation to support her younger children takes priority in law over any support that she provides to her adult child. As far as the Tribunal can determine, in the 2018/19 financial year Ms Raynor accessed $80,000 from the TPD funds in addition to wages and disability support pension. Her income tax return shows that some of these amounts were taxable and do appear in that return. In addition, she had wages income of $18,860, giving total resources of $98,860 in that year. In 2019/20 she made withdrawals from the TPD of $152,536, plus received earnings from salary and disability support pension. She has not lodged her income tax return for that year, so additional income is hard to determine, but it is likely to have been in the vicinity of the previous year.

4. So far in the 2020/21 financial year, Ms Raynor has withdrawn $113,000 in addition to her disability support pension and her employment income of around $2,500. This is aside from the $42,000 that Ms Raynor withdrew from the TPD to pay Ms Scoggins in the property settlement, which should properly be disregarded for child support purposes. Other than her TPD Ms Raynor has no significant assets and the Tribunal accepts that her ongoing earning capacity is significantly reduced.

5. Ms Raynor advised the Tribunal that she continues to have [medical episodes] which have an out-of-pocket cost. Her treatment is likely to become more frequent over time and it is likely that her condition will deteriorate. The Tribunal accepts that her medical expenses are likely to increase. The Tribunal also accepts that it is reasonable for her to maintain private health insurance and that her necessary expenses for self-support are increased as a result of her medical condition.

6. Ms Scoggins declares average weekly income of $2,656, made up of a combination of wages, dividends and rental income. She is in the process of purchasing the jointly owned home pursuant to the property settlement. This will remain as a rental property as she resides with her partner. Other than the rental property she has no significant assets aside from her superannuation, which unlike Ms Raynor, she cannot currently access. She has a much higher ongoing earning capacity than Ms Raynor.

7. The Tribunal considered Ms Scoggins’s view that the child support assessment should be amended retrospectively to take account of the resources that have been available to Ms Raynor between 2018 and 2021, up to the date that the court orders were made. The Tribunal noted that the initial application to change the child support assessment was lodged on 21 October 2019. The Agency, and the Tribunal, can only retrospectively change a child support assessment for 18 months prior to the date such an application was lodged. This would limit the Tribunal’s ability to make any change to the assessment prior to 22 April 2018.

1. Until Ms Raynor made her first estimate of income on 11 October 2019 the assessment was proceeding in an ordinary manner. Until 10 October 2019 Ms Raynor was assessed to pay an annual rate of child support of $11,056 based on her 2018/19 adjusted taxable income of $75,190. The Tribunal has found that the financial resources available to Ms Raynor in the 2018/19 financial year were in fact higher, at $98,860, as not all of the money she took from the TPD was taxable. Even allowing for her increased expenses for health insurance, medication and medical expenses, her child support income should more properly be reflected as $90,000 between 1 July 2018 and 30 June 2019.

2. Ms Raynor’s withdrawals from the TPD in the 2019/20 financial year were significant. There is likely to be a large taxable component and when she lodges that income tax return and it is reconciled with her estimate for child support purposes she is liable to receive both a tax bill and a child support bill. The Tribunal considers it more probable that this is the reason why she has not lodged this income tax return. The failure to lodge this return has meant that the children have not had the level of support to which they are entitled. The Tribunal considers it to be just and equitable to also amend Ms Raynor’s child support income for the period 1 July 2019 to 30 June 2020. Given the extent of her withdrawals from the TPD ($152,536), an income of $160,000 should be reflective for this period when her disability support pension, employment income and additional expenses are taken into account.

3. The present financial year is not quite completed, but as Ms Raynor had withdrawn $113,000 from the TPD in this financial year by the time of the hearing, in addition to her pension and her minimal employment earnings, the Tribunal is of the view that a child support income amount of $125,000 would be reflective for the period 1 July 2020 to 11 March 2021. Ms Scoggins was of the view that the court orders would prevent a change to the child support assessment after the date they were made, but that the resources available to Ms Raynor prior to this should be considered. The Tribunal concurs with the view that Ms Raynor’s resources were not correctly reflected in the assessment up to that time and if the assessment had proceeded on the basis of the resources Ms Raynor had available, it would have been vastly different. Ms Raynor has not treated her TPD as an asset, but as income, a financial resource to allow her to maintain a lifestyle in which the children have not fully shared.

4. The effect of these changes would be to increase Ms Raynor’s child support arrears by around $40,000. The Tribunal is satisfied that Ms Raynor currently has the financial resources available to her to pay these arrears and that she should do so. Given the rate at which Ms Raynor is using her TPD payment the Tribunal was of the view that the children would not benefit from a prospective assessment as Ms Raynor is likely to exhaust her funds, leaving the children unsupported once again. By making a retrospective decision, the funds that Ms Scoggins receives can be used prospectively for the benefit of the children, as it is likely that Ms Raynor’s reduced earning capacity will mean the future child support assessments are fairly minimal.

5. The Tribunal is satisfied that Ms Raynor has access to sufficient financial resources to meet this assessment and that it would be appropriate to make this change as long as it is otherwise proper to do so.

Issue 3 – Is it otherwise proper to depart from the administrative assessment?

1. The final step for the Tribunal is to determine whether it is “otherwise proper” to depart from the administrative assessment. Subsection 117(5) of the Assessment Act requires the Tribunal to take into consideration the nature of the duty of a parent to maintain a child, and the effect that any change to the assessment would have on the rate of any Centrelink benefits being received by the parties or the children.

2. The child support law recognises that each parent has a primary duty to maintain their children. In the case that they cannot, the government may assist in the form of family assistance payments. Ms Scoggins does not receive any government payments for the children, so the public purse will be unaffected by this decision. The Tribunal is satisfied that a departure from the assessment will better reflect the financial resources that have been available to both parents and ensure that the level of financial support provided by the parties for the children is determined according to their capacity to provide that support. It is therefore otherwise proper to depart from the administrative assessment in this matter. 

DECISION

The decision under review is set aside such that Ms Raynor's adjusted taxable income is set at:

$90,000 from1 July 2018 to 30 June 2019;

$160,000 from 1 July 2019 to 30 June 2020; and

$125,000 from 1 July 2020 to 11 March 2021.