Selby and Selby (Child support)

Selby and Selby (Child support) [2020] AATA 1037 (18 March 2020)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2019/SC017555
APPLICANT:  Mr Selby
OTHER PARTIES:  Child Support Registrar
Ms Selby

TRIBUNAL:Member S Hoffman
DECISION DATE: 18 March 2020
DECISION:

The tribunal sets aside the decision under review and, in substitution, decides as follows:

· For the period 3 December 2018 to 31 October 2021, Mr Selby’s adjusted taxable income is varied to $64,368.
· For the period 30 September 2019 to 31 October 2021, Ms Selby’s adjusted taxable income is varied to $52,000.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – 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 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

BACKGROUND

This review is about the child support assessment in respect of two children aged 14 and nine years old. The case was first registered on 22 October 2018 with Services Australia – Child Support (the CSA) and the CSA started collecting child support from then. The father pays child support to the mother.
On 3 December 2018, the mother lodged an application for a change of assessment with the CSA. At that time, according to the CSA’s records, the mother was providing 100% of the children’s care. The father was required to pay the mother $2,832 a year. This was the fixed annual rate (FAR) that is used when a person is on a low adjusted taxable income but does not claim income support from Centrelink. The FAR was used because the father’s 2017/18 taxable income was $14,659. The mother’s taxable income for 2017/18 was nil.
On 1 March 2019 a senior case officer from the CSA decided to vary both parents’ adjusted taxable incomes for the period 3 December 2018 to 30 November 2020, such that the father’s was $75,000 a year and the mother’s was $52,000 a year (the original decision).
The father objected to the original decision and on 24 September 2019, an objections officer from the CSA set aside the original decision and replaced it with the following decision (the objection decision):
· For the period 3 December 2018 to 31 October 2020, the father’s adjusted taxable income was varied to $68,414, and that figure was to be increased on 1 January 2020 by the child support inflation factor.
The effect of that decision was that the father was required to pay $11,438 a year in child support from 3 December 2018 (increased by the inflation factor from 1 January 2020).
On 3 October 2019, the father lodged an application for review with the Administrative Appeals Tribunal. A directions hearing was held on 22 January 2020 after which directions were issued. The matter was heard on 18 March 2020. Both parties attended via conference telephone and gave sworn evidence.
The tribunal had before it documents provided by the CSA (numbered 1 to 248); by the father (numbered A1 to A32); and by the mother (numbered B1 to B14). Copies of these documents were sent to the parties before the hearing.

ISSUES

The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act1989 (the Act). The Act provides for an administrative assessment of child support to be paid. Pursuant to section 98C of the Act, a decision to depart from the administrative assessment may be made if the following three requirements are met:
i.A ground is established; and
ii.It would be just and equitable as regards the child, the liable parent and the carer entitled to child support to make a particular determination; and
iii.It would be otherwise proper to make a particular determination.
The grounds for departure from an administrative assessment of child support are set out in subsection 117(2) of the Act.
If the tribunal is satisfied that the three requirements are met, it may make one of the determinations prescribed in section 98S of the Act, which include 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 – Does a ground exist to depart from the administrative assessment?

Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, the administrative assessment of child support would result in an unjust and inequitable determination of the rate of child support because of the income, property and financial resources of either parent.
Subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met. These include that the parent has failed to demonstrate that decisions made about their work arrangements were not substantially motivated by the effect they would have on the rate of child support.

What is the father’s income for child support purposes?

The father has worked as a [Occupation 1] since 1 March 2018. According to an income statement from the Australian Taxation Office (ATO), the father’s gross pay for 2018/19 was $75,403 and in addition he was paid a travel allowance of $4,077 during the year.
The father said that the travel allowance was paid according to the kilometres he claimed. He said that he used his car to drive people around for work purposes, such as driving clients to appointments and it was in relation to a weekend shift he used to work but he stopped doing that in about March 2019. He said that he dropped that shift because it coincided with when he could spend time with the children of the case.
In a letter to the CSA dated 6 August 2019, the mother wrote that the father had his youngest child one night every second weekend and that he had no significant caring responsibilities that would interfere with his employment.
During 2018/19 the father was employed on a casual basis. He said that in the first part of the 2018/19 tax year, to about the end of October 2018, he was working as many hours as he could because there were debts he had to pay that were incurred when he ran his own business. The mother agreed there were business debts. He said they were paid off in September or October 2018. The mother said her mother lent her money which was how the debts were paid off.
In any event the parents’ evidence was that the business debts were paid off by the end of October 2018. The father’s position is that although he earned $75,403 during 2018/19, his income from employment was not spread evenly over the year and he was paid less than $75,403 a year after October 2018.
According to payslips he provided, the father’s year to date earnings to 16 September 2018 was $21,781 including first aid and kilometre allowances. Disregarding the allowances, the father earned $20,418. He was working on a casual basis at that time.
The period from 1 July 2018 to 16 September 2018 is 11 weeks. Earnings of $20,418 for 11 weeks are equivalent to $1,856 a week or $89,000 a year based on working 48 weeks a year. (The tribunal has allowed for four weeks’ leave a year.)
The period from 17 September 2018 to 30 June 2019 is roughly 41 weeks. During that period the father earned $54,985 ($75,403 - $20,418). That gives average weekly pay of $1,341 which is $64,368 over 48 weeks.
The father said that from about October 2018, his employer started to employ more casual [workers], and in October or November 2018, his employer offered him the option of moving from casual work to permanent part-time work, the main benefit being that it was more stable employment with guaranteed hours. As a casual worker, he could be let go at any time. The father said he did not accept the offer.
The father said he thought about it more and approached his employer about being made permanent in about March 2019. He started as a permanent part-time employee working 60 hours a fortnight from 22 July 2019. According to his contract he could salary sacrifice up to $18,550 a year. The father said he did not salary sacrifice any of his income.
The departmental papers include a payslip for the period 19 August 2019 to 1 September 2019 which shows that the father’s gross pay for that fortnight was $2,165.23 ($56,296 annualised).
The father submitted payslips to the tribunal covering the period 16 September 2019 to 19 January 2020. These show that his pay varied fortnight to fortnight as he worked additional hours. He was paid extra for working on public holidays and on Sundays.
As at 19 January 2020, the father’s year to date income was $34,000.[1] That was for a 29-week period. Annualised, that is equivalent to $60,965 (($34,000 / 29) x 52).[2]
[1] That is made up of his base pay, overtime, pay for public holidays, working casual hours, sick leave, back pay and holiday leave including leave loading
[2] When calculating annual pay from weekly pay for a casual worker, it is appropriate to use a factor of 48 to allow for leave. When calculating annual pay from weekly pay for a permanent worker, it is appropriate to use a factor of 52 as employees generally receive four weeks of paid leave
Whereas according to his payslips, the father’s annual salary is $44,195, it is apparent that he can earn more than that, and has been earning more, by working additional hours and/or working on public holidays.
In her letter 6 August 2019, the mother argued that the father’s adjusted taxable income should be increased to take account of the salary sacrifice arrangement. The father said he was not salary-sacrificing any income. The tribunal is of the view that if the father was salary sacrificing pay, it would show on his payslip and there was no mention of that on the payslips up to 19 January 2020. The tribunal returns to the salary-sacrificing issue below.
During the course of the change of assessment process, the mother has argued that the father has been evasive and cannot be trusted. She suggested that the payslips he provided to the CSA may have been altered. The CSA contacted the father’s employer and verified the figures on the payslips. The tribunal is satisfied that the payslips as submitted are genuine.
The mother has also contended that the father’s earning capacity should be the basis for determining his adjusted taxable income, rather than what he has actually earned. The relevant legislation at subsection 117(7B) of the Act is as follows:
(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.

With regard to paragraph 117(7B)(a) of the Act, the tribunal is satisfied that the father reduced the hours he worked during 2018/19 and has changed his working pattern, the latter because he has gone from being employed on a casual basis to permanent part-time.
With regard to paragraph 117(7B)(b) of the Act, the mother had argued that the father used to work 52 weeks a year and this should be the basis of working out his income. The father said that during the period he was working to pay off the debts, he was working 100 hours a fortnight and he worked like that until about September 2018 but it was not sustainable and he could not work 52 weeks a year on a permanent basis, as that was too much for his physical and mental health. The tribunal rejects the suggestion that a person should be assessed on the basis of them working 52 weeks as that is unreasonable. The tribunal is satisfied that reducing hours of work from 100 hours a fortnight is justifiable on the basis of the parent’s health as is reducing the number of weeks worked from 52 a year to 48 a year.
With regard to other work-related changes, the father said that he stopped working a casual weekend shift in about March 2019 because of caring responsibilities. The mother disputed this. However the change in working pattern and reduction in hours goes beyond one weekend shift. Apart from the reduction in hours around October 2018 as discussed above, and dropping a weekend shift, the father did not justify his decisions to otherwise reduce his hours or change his working pattern because of his caring responsibilities or his state of health. The tribunal is satisfied that in this case the reduction in hours and changes in working pattern cannot be fully explained by the father’s health or his caring responsibilities.
As to the other reasons the father gave for changing his work hours and his pattern of work, he said that in about October 2018, his employer employed more casual workers which affected how much work was available. The father also said that he had been working long hours to pay off the business debt and by then it had been paid off. Therefore he did not need to work such long hours. The father said he decided to work on a permanent part-time rather than casual basis because of the stability and security of employment a permanent position afforded.
The mother contended that the timing of the changes the father made with regard to his employment was linked to when the change of assessment was lodged. One of the major changes was the significant reduction in hours which occurred around the time the child support case was initiated – October 2018 – and before the change of assessment process was started. The other major change was the change to permanent part-time employment that occurred in July 2019. This was after the objection was lodged and before the objection decision was made.
The tribunal is satisfied with the father’s reasons for reducing his hours of work in about October 2018. Both parents said that he was working long hours to pay off a business debt. Once that was paid, in the tribunal’s view, there was no longer the incentive to maintain those hours. Further, as already noted, working those hours for an extended period will most likely impact a person’s health.
The tribunal also considers that the father has given a valid explanation for accepting a permanent part-time position.
The tribunal considered the financial impact of moving from casual employment to permanent part time. It has calculated that from 17 September 2018, the father earned $64,368 on an annualised basis for the remainder of 2018/19, and that he will earn $60,965 this financial year (2019/20) based on his year to date earnings. That is a reduction of $3,403 a year which affects the rate of child support by about $840 a year or $16 a week.
In summary, the father has provided a valid reason for the choices he made, and his income has reduced by about $3,403 a year from 17 September 2018 to 19 January 2020, and not a larger amount. Therefore the tribunal is not satisfied that a major purpose of the decisions the father made with regard to his mode of employment or hours worked was to affect the rate of child support (paragraph 117(7B)(c) of the Act).
This means that the tribunal is satisfied the father’s adjusted taxable income should be based on his income, property and financial resources rather than earning capacity.
The tribunal has recorded above that the father’s income was $64,368 from 3 December 2018 to 30 June 2019, and will be $60,695 for 2019/20. However as touched on briefly at the hearing, it is open to the father to increase his disposable income by using the salary sacrifice option. He said he would look into it.
The tribunal estimated the tax payable by the father if he was taxed on $60,695 year compared with the tax payable if he was to salary-sacrifice the maximum amount as per his contract of $18,550. Tax payable on an annual salary of $60,695 is $11,273. If he salary- sacrificed $18,550, he would pay tax on $42,145 ($60,695 - $18,550) and the tax payable would be about $5,244. That represents an increase in the father’s disposable income of about $6,000 a year ($11,273 - $5,244).[3]
[3] The tribunal has used the tax calculator at and included the Medicare levy. It would emphasise that these calculations are only estimates
It may be that the father is not able to salary sacrifice the full amount allowed by his contract but given this is a financial resource available to him, and subparagraph 117(2)(c)(ia) of the Act refers to the income, property and financial resources of a parent, the tribunal considers it appropriate that some adjustment for this is made in his adjusted taxable income for 2019/20.
The tribunal calculated that the father’s annualised income from 17 September 2018 was $64,368 and his income would likely be $60,695 for 2019/20 based on his year to date earnings.
The tribunal considers it is appropriate for the father to continue to be assessed on $64,368 for 2019/20 rather than $60,695, the extra $3,673 representing a proportion of the financial resource available to him through the salary sacrificing option.

What is the mother’s income for child support purposes?

The mother’s taxable income for 2018/19 was $27,589. Her tax return summary shows that she received income support as well as income from employment during the financial year. She said that she used to work as a [Occupation 2] and as a[Occupation 3]. She started full-time work as an [Occupation 4] on 30 September 2019 and is now earning about $52,000 a year.
According to the CSA’s records, the mother provides 100% of the children’s care. Because of this, changes in her adjusted taxable income will have a minimal effect on the rate of child support. The tribunal is of the view that it is appropriate for the mother’s income to be varied to $52,000 a year from 30 September 2019.

How does the administrative assessment compare with an assessment of child support using the tribunal’s income figures for the parents?

The administrative assessment that applied on 3 December 2018 when the mother lodged her change of assessment application was that the father was required to pay the mother $2,832 a year, being the FAR, based on the father’s 2017/18 taxable income of $14,659 and the mother’s taxable income for 2017/18 of nil.
Using incomes of $64,368 for the father and $27,589 for the mother results in a child support liability of $10,500 a year payable by the father.
The tribunal would stress that because of the complexity of the child support formula, its calculations of rates of child support are just estimates.
Given the difference between the father being required to pay $10,500 a year or $2,832 a year, the tribunal is satisfied that in the special circumstances of this case, the administrative assessment does result in an unjust and inequitable rate of child support, and that a ground for departure from the administrative assessment has been established pursuant to subparagraph 117(2)(c)(ia) of the Act.

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

As the tribunal is satisfied that there is a ground to depart from an administrative assessment of child support, the next step is to consider whether it is just and equitable as regards the children, the father and the mother 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 a variety of factors, as set out in subsection 117(4) of the Act.[4]
[4] The tribunal is required to give ‘overt consideration’ to relevant factors listed in subsection 117(4) of the Act: Tyagi & Meares [2008] FMCAfam 886.
Section 3 of the Act makes it clear that parents have the primary duty to maintain their children, and that this duty has priority over all commitments of the parents other than commitments necessary for self-support or the support of another person the parent has a duty to maintain. In this case the father and the mother have the primary duty to financially support their children.

Income, property and financial resources – the father

In his Statement of Financial Circumstances (SFC), the father listed weekly household expenses totalling $654 and other expenses of $102 a week, totalling $756 a week. The biggest single item was rent at $370 a week. The tribunal estimates that the father’s net income (before child support payments) is about $960 a week which means that he has about $200 a week left over. On the tribunal’s calculations, his child support payments will be $201 a week.
The father allocated $80 a week for food, $37 a week for electricity and $47 a week for the telephone, which seems a little high. Even if that was overstated, it is apparent that the father lives on a very tight budget. He said that he manages by trying to delay payment of bills and that he borrows money and he owes on his rent.
The father said he has about $2,000 in child support arrears which arose from the change of assessment decisions by the CSA. In his SFC, the father wrote that he owes $12,577 to [Bank 1] from a number of years ago and he owes $2,899 to [BANK 2]. Both of these debts are credit card debts and he pays $102 a week towards them.
The father has $98,000 in superannuation. He wrote that he had 93 cents in his bank account. He owns a [vehicle] which is currently working and which he uses to get to and from work.
The father is joint owner of the family home which is where the mother and children live. Its value, based on both parents’ SFCs, is about $360,000 and there is a joint mortgage of about $240,000 against it. The tribunal understood from the parents there would be a property settlement at some point.

Income, property and financial resources – the mother

The mother, as noted above, lives in the family home. In her SFC, she recorded income of $1,431 a week which included her pay, child support and family tax benefit of $166 a week. The mother listed outgoings of $1,257 a week including mortgage repayments of $294 a week and $220 a week on food for her and the children.
The mother wrote that she has $3,769 in her bank account. She said her mother has lent her a car which is what she uses day to day. She has $14,500 in her superannuation account. She has no debts. The mother’s evidence was that she managed her finances satisfactorily.

Other issues pertaining to the parents’ incomes, property and financial resources

As discussed above, subsection 117(7B) of the Act prescribes the circumstances in which a parent’s earning capacity may be taken into account; certain criteria have to be met.
The tribunal has already discussed the father’s situation with regard to earning capacity. The mother’s income has increased as she started full-time employment in September 2019.
The tribunal concludes that it is not open to it to make an earning capacity determination in respect of either parent and need not consider the application of subsection 117(7B) of the Act in relation to either parent any further.
The tribunal is required to have regard to the commitments of each parent that are necessary to enable the parent to support himself or herself, or any other child or another person that the person has a duty to maintain (paragraph 117(4)(e) of the Act). There was no evidence before the tribunal with regard to this provision.

Costs related to the children

In determining the proper needs of the children, it is necessary to have regard to the manner in which they are being, and in which the parents expected them to be, cared for, educated or trained, and any special needs they may have (subsection 117(6) of the Act).
There was no evidence before the tribunal that suggested the children were, for example, being privately educated or had any special needs. The mother, in filling out her SFC, did not apportion all the various household costs between her and the children. The tribunal concluded that using the “Costs of the Children Table” is reasonable in the circumstances of this case for the other costs related to the children.[5]
[5] Clause 1 of Schedule 1 to the Act. The table is available at the Department of Social Services website, accessed 21 March 2020: align="left">Hardship
1. The tribunal is required to consider any hardship its determination might cause and is guided by Gyselman and Gyselman[6] in this respect:
  This requires the Court to balance the ‘hardship’ which the parents or the children may suffer as a result of either making or refusing to make the order. It is a recognition of the circumstance that in this area there is likely to be hardship both ways and the Court is required to take into account the balance of that hardship and give it the weight which is appropriate to the circumstances of the individual case.
  [6] [1991] FamCA 93
2. It is apparent to the tribunal that the father in this case is under greater financial stress than the mother. This is due in part to debts that arose some years ago from the father’s business.
3. The tribunal’s decision will result in a reduction of the rate of child support, of about $18 to $20 a week. As its determination starts from December 2018, it should have the effect of reducing the father’s arrears by about $1,200.
Any other relevant matters
1. The tribunal may take into account any other matters it considers relevant in making a particular departure determination (subsection 117(9) of the Act).
2. The tribunal’s decision starts from 3 December 2018 to be consistent with the decisions made by the CSA.
3. The tribunal’s decision applies until 31 October 2021 to give the parties some certainty into the future.
4. It is open to either parent to lodge a further change of assessment application if their circumstances change, even if that is before the end date of this determination.
Issue 3 – Is it otherwise proper to make a particular departure determination?
1. The requirement to consider whether a departure determination would be otherwise proper is concerned with what is fair to the community; it is preferable for a child or children to be primarily supported by their parents rather than by government assistance. Paragraph 117(5)(b) of the Act means that the tribunal must consider whether the level of a benefit, in particular family tax benefit, received by the party caring for a child or children, may be affected by the level of child support.
2. The mother is in receipt of family tax benefit. The tribunal is satisfied that its determination will result in an appropriate apportionment of financial responsibility between the parents and the community, and would be otherwise proper.
DECISION
The tribunal sets aside the decision under review and, in substitution, decides as follows:
· For the period 3 December 2018 to 31 October 2021, the father’s adjusted taxable income is varied to $64,368.
· For the period 30 September 2019 to 31 October 2021, the mother’s adjusted taxable income is varied to $52,000.

[1991] FamCA 93

[2020] AATA 1037

18 March 2020

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