Shackleton and Burge (Child support)
[2019] AATA 432
•22 January 2019
Shackleton and Burge (Child support) [2019] AATA 432 (22 January 2019)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2018/SC014823
APPLICANT: Mr Shackleton
OTHER PARTIES: Child Support Registrar
Ms Burge
TRIBUNAL:Member W Kennedy
DECISION DATE: 22 January 2019
The Tribunal sets aside the decision under review and, in substitution, decides to reduce Mr Shackleton’s adjusted taxable income by $95,000.00 from the adjusted taxable income established under the administrative formula for the period from 21 December 2017 to 31 December 2020.
CATCHWORDS
CHILD SUPPORT – departure determination – multiple grounds for departure considered – costs of accommodation and health insurance for the children – 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 decision concerns an application for a departure from the formula assessment of child support. Mr Shackleton and Ms Burge are the parents of [Child 1], who was born in December 2001, and [Child 2], who was born in October 2003. There has been a child support assessment in place for [Child 1] and [Child 2] made by the Child Support Agency of the Department of Human Services (the Department) since 27 June 2016. The assessment is based on the parents having shared care of the children.
At the time that Mr Shackleton applied for a departure from the formula assessment, for the period from 1 March 2017 to 31 January 2018 the child support assessment required Mr Shackleton to pay child support of $17,712.00 per annum. This was based on Mr Shackleton having an adjusted taxable income (ATI) of $396,827.00 and Ms Burge having an ATI of $146,060.00.
On 21 December 2017 Mr Shackleton applied to the Department for a departure from the formula assessment of child support based on:
·Reason 5 (payments or transfers of property for the benefit of the children)
·Reason 7 (commitments by the parent necessary for self-support)
·Reason 8A (the income, property and financial resources of one or both of the parents)
·Reason 8B (the earning capacity of one or both parents)
·Reason 9 (the duty to maintain another person)
·Reason 10 (the responsibility to maintain a resident child)
On 6 February 2018 Ms Burge responded to the application and cross-applied for a departure from the formula assessment. Ms Burge’s application was based on:
· Reason 2 (special needs of the children)
· Reason 3 (education costs)
· Reason 5 (payments or transfers of property for the benefit of the children)
On 4 April 2018 a delegate of the Child Support Registrar considered the departure application and decided that Reason 8A in respect of Mr Shackleton’s application had been established but decided that it would not be just and equitable to depart from the formula assessment. This meant that the formula assessment of child support continued.
On 2 May 2018 Mr Shackleton lodged an objection to that decision. On 3 August 2018 a Department objections officer disallowed Mr Shackleton’s objection, finding that Reason 5 in his application had been established but that it would not be just and equitable to depart from the formula assessment. As a result the decision of the delegate was affirmed and the formula assessment of child support continued.
On 16 August 2018 Mr Shackleton lodged an application for a review of the decision of the Department with this Tribunal. The Tribunal had access to the statement and documents provided by the Department. The documents are at folios 1 to 1172 of the hearing papers. Ms Burge received all of the papers however Mr Shackleton received only the papers at folios 1 to 1054. The Tribunal determined that Mr Shackleton was not disadvantaged by not receiving the latter folios.
A directions hearing was conducted on 20 November 2018. As a result of that hearing the Tribunal directed Mr Shackleton and Ms Burge to provide specified documents. Mr Shackleton provided further documentation, which is at folios A1 to A66 of the hearing papers. Ms Burge provided further documentation, which is at folios B1 to B35 of the hearing papers. The parents both acknowledged having received these papers. The matter was heard in Sydney on 22 January 2019. Mr Shackleton attended the hearing in person and gave his evidence under oath. Ms Burge attended the hearing by telephone and gave her oral evidence under affirmation. The Child Support Registrar did not attend and was not represented at the hearing.
CONSIDERATION
The legislative framework and issues for the Tribunal to determine
The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). This requires the application of a statutory formula which takes into account factors such as the number and ages of the children, the level of care provided and the income of each parent.
The liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act. Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and establishes a three-step process for considering applications to do so. The Registrar, and the Tribunal standing in place of the Registrar, must be satisfied:
·that one, or more than one, of the grounds for departure referred to in subsection 117(2) of the Act exist; and
·that it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
·that it would be otherwise proper to make a particular determination.
The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Each of the grounds, which for administrative purposes are referred to as reasons, require that special circumstances be established. The term ‘special circumstances’ is not defined in the Act. In Gyselman and Gyselman [1991] FamCA 93 the Full Court of the 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.
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 Act. These include varying the annual rate of child support payable or a parent’s adjusted taxable income.
Issue one – Does a ground exist to depart from the administrative assessment?
The Tribunal’s first task is to determine whether a ground for departure from the administrative assessment can be established. In his application to the Department Mr Shackleton asserted that there are six grounds for a departure from the administrative assessment. In her cross-application Ms Burge asserted that there were further grounds for a departure from the administrative assessment. The Tribunal considered each of the grounds identified by the parents in turn.
Does a ground exist to depart from the administrative assessment under Reason 2?
In her cross-application Ms Burge sought a departure from the administrative assessment on the ground that the children have special needs. In particular Ms Burge said that [Child 1] has special needs that require him to have tutoring in [a subject], [specified] therapy and psychological interventions. This ground for departure, which for administrative purposes is known as Reason 2, is found in subparagraph 117(2)(b)(ia) of the Act:
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
...
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
…
(ia) because of special needs of the child; or
…
At the hearing Ms Burge said that [Child 1] has special psychological needs. Mr Shackleton agreed that this is the case.
Ms Burge has provided a letter from [Doctor A], a [specified] Paediatrician, dated [in] May 2018 (folios 580 to 586). [Doctor A] is a medical practitioner who has been registered since 2013 and has a speciality in paediatric medicine. [Doctor A] concludes:
In my professional opinion, [Child 1] has a High Functioning Autism Spectrum Disorder (ASD). He fulfils DSM-5 diagnostic criteria for an ASD. He has abnormalities currently and by history in the two major functional areas required for this diagnosis:
1. Persistent deficits in social communication and social interaction across multiple contexts, and
2. Restricted, repetitive patterns of behaviour, interests, or activities,
His DSM-5 severity level is: Level 1 (requiring support) for both functional areas.
…
Based on these results, [Child 1] also meets DSM-5 diagnostic criteria for a Developmental Coordination Disorder (or Developmental Dyspraxia).
[Doctor A] recommended psychological counselling for anxiety. Ms Burge has provided a receipt for $240.00 being the fee for [Child 1] attending a session with a psychologist [in] November 2018 (folio B31). In her submission to the Tribunal Ms Burge said that the Medicare rebate for the service is $84.95. She said that ten sessions per annum were anticipated. This suggests a net cost of some $1,550.00 per annum.
In her application Ms Burge also referred to the need for [Child 1] to have [subject] tutoring and [specified] therapy, however she has provided no documentation in support of such a need.
In his submission of 26 February 2018 to the Department (folios 423 to 442) Mr Shackleton stated:
I have taken control of the boys’ dental appointments and attended to arranging them myself, making the claims and paying the gaps myself on my own credit card … I intend to do this will [sic] all of their medical, dental, psychological or any other insured expense.
There are medical costs in relation to all children and the formula assessment makes provision for those costs. Although the cost of the psychologist may place [Child 1]’ costs somewhat outside the formula, as it is Mr Shackleton’s intention to meet the cost when [Child 1] is in his care it does not support the claim by Ms Burge that the need for a psychologist significantly affects her costs of maintaining the children. The Tribunal finds that the circumstances disclosed by the evidence before it do not support a departure from the administrative assessment under subparagraph 117(2)(b)(ia) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 3?
In her cross-application to the Department Ms Burge has sought a departure from the administrative assessment on the ground that there are extra costs involved in educating and training [Child 1] and [Child 2] in the manner expected by the parents. This ground for departure, which for administrative purposes is known as Reason 3, is set out in subparagraph 117(2)(b)(ii) of the Act:
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
…
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
…
Ms Burge’s position is that although [Child 1] and [Child 2] are attending public school, the particular school – [School 1] – requires parents to meet costs that are beyond those of other public schools. She also states that the children’s choice of activities associated with their education creates costs beyond those provided for in the formula assessment of child support.
In her cross-application Ms Burge has provided a list of expenses headed “Boys’ expense account …8656 for year 1/2/17 to 31/1/18”. Amongst the expenses are excursions, uniforms and academic equipment of $6,666.00, school sport expenses of $2,777.00, debating expenses of $365.00 and choir expenses of $2,688.00 (folio 223). At the hearing Ms Burge said that these figures were drawn from the statements for the joint account. She said that she continues to put funds into the account and that she tries to pay for expenses related to the children from the account. Mr Shackleton said that the figures provided by Ms Burge relate to the period up to 31 January 2018. He said that for some of that period he was continuing to contribute to the account and that the funds that remained in the account after his contributions ceased were used to meet much of the expenditure identified.
In his application Mr Shackleton states that there are “some small expenses and voluntary donations” associated with the children’s education (folio 47). In his original application to the Department he said that he paid for the boys’ computers (folio 47) and that he made a voluntary contribution of $1,000.00 to the school (folio 49).
Although the expenses identified by Ms Burge are high, as they are not supported by receipts the Tribunal is unable to rely on the figures or to identify any costs that are clearly outside of the formula assessment. [Child 1] and [Child 2] are attending a public school and the costs of public education, including books and materials, uniforms and some extracurricular activities (which appear to form the bulk of the expenditure identified by Ms Burge), are included in the formula. It is up to the parents to decide between themselves whether they wish to meet the costs of their children participating in particularly expensive activities. Similarly, it is up to the parents to decide whether they wish to provide voluntary contributions to the school. Except under specific circumstances the legislation does not envisage the parents being compelled to contribute to expenditure beyond the provision of the formula. The Tribunal finds that there are no special circumstances relating to the education of [Child 1] and [Child 2] that would allow a departure from the formula assessment of child support under subparagraph 117(2)(b)(ii) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 5?
In Mr Shackleton’s application to the Department and in Ms Burge’s cross-application they both sought a departure from the administrative assessment on the ground that they had provided money, goods or property for the benefit of [Child 1] and [Child 2]. This ground for departure, which for administrative purposes is known as Reason 5, is found in subparagraph 117(2)(c)(ii) of the Act:
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
…
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
At the hearing Mr Shackleton said that he has provided accommodation for the children and that this should be taken into account in the assessment. Mr Shackleton states that he pays about $43,000.00 in interest each year in order to maintain the debts secured by the marital property where the children live. He states that Ms Burge does not contribute to the cost of maintaining the loans. Mr Shackleton has provided a rental appraisal which shows that the property occupied by Ms Burge could be expected to rent for $2,000.00 per week (folio 445). Mr Shackleton asserts that as he and Ms Burge are tenants in common in equal shares (and were previously joint owners) of the property he is effectively transferring half of the rental value of the property for the benefit of [Child 1] and [Child 2]. He states that were he not doing so Ms Burge would have to meet the cost of providing accommodation for herself and for [Child 1] and [Child 2] when they are in her care.
At the hearing Ms Burge said that she pays the council and water rates. She also insures the house and maintains the house and garden, so it is not true to say that she makes no contribution to the children’s accommodation. The direct relevant expenses identified by Ms Burge come to some $7,000.00 per annum (folio 207). And, of course, Ms Burge also contributes the value of her half ownership of the house.
Mr Shackleton also claims that his life insurance costs and the cost of his TPD and loss of income insurance, amounting to some $34,000.00 per annum should be taken into account in the assessment (folio 48). The argument made by Mr Shackleton is that the children are amongst the beneficiaries of this insurance and that therefore it represents a transfer of property for the benefit of the children. Mr Shackleton has provided evidence that his life insurance premiums in respect of 2016/17 in respect of four policies totalled $56,244.85 (folios 148–151, 158). Ms Burge states that she also has income protection insurance and that she meets the cost from her own resources (folio 217).
Mr Shackleton states that between November 2016 and May 2017 he paid $12,000.00 into an account which he and Ms Burge were able to access in order to meet expenses relating to the children (folio 49). Ms Burge states that she also contributed to the joint account. The documentation before the Tribunal shows that the joint account was used to facilitate the parents sharing expenses but that the arrangements in relation to the account have broken down.
Mr Shackleton states that he has maintained health insurance for the children. He said that originally health insurance premiums had come from the joint account but that after the agreement in relation to the joint account broke down he had continued to pay the health insurance premiums. It appears that Mr Shackleton has directly met the health insurance premiums since October 2017 (folio 59). Ms Burge has stated that while Mr Shackleton is meeting the health insurance premiums for [Child 1] and [Child 2], there is no additional cost as they are simply included on the family policy which covers Mr Shackleton, his partner and their children. Mr Shackleton states that he has now taken over arranging the children’s dental appointments, making the claims and paying the gaps and that he intends to do this with all of their needs covered by health insurance (folio 426). At the hearing he clarified that he only meant that he would meet the expenses incurred when they are in his care.
The Tribunal finds that Mr Shackleton has transferred a significant amount of property on behalf of the children and that this constitutes a special circumstance. The Tribunal finds that there are special circumstances that support a departure from the administrative assessment under subparagraph 117(2)(c)(ii) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 7?
In his original application Mr Shackleton sought a departure from the administrative assessment on the ground that the commitments necessary to support himself reduced his capacity to provide financial support. This ground for departure, which is known as Reason 7, is found in sub-subparagraph 117(2)(a)(iii)(A) of the Act:
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
…
(iii) commitments of the parent necessary to enable the parent to support:
(A) himself or herself; or
…
Mr Shackleton has provided a body of evidence demonstrating that his expenses are substantial. He claims that his expenses exceed his income, despite his having a very substantial income. Mr Shackleton’s income tax returns (ITRs) disclose a taxable income varying between $396,827.00 and $614,965.00. In the most recent financial year for which figures are available to the Tribunal (2016/17) Mr Shackleton’s taxable income was $507,908.00.
At the direction of the Tribunal Mr Shackleton has provided a Statement of Financial Circumstances (SOFC) dated 17 December 2018 (folios A2 to A13). In his SOFC Mr Shackleton states that his income averages $12,116.00 per week. This figure is arrived at by adding his income as [an occupation] ($12,400.00) to interest and dividends ($39.00) and subtracting his loss on an investment property ($323.00). Against this income Mr Shackleton identifies expenses of $14,354.00 per week, producing a net shortfall of $2,238.00 per week. At the hearing Mr Shackleton said that his partner’s income needs to be taken into account in assessing his circumstances because he has been unable to distinguish between them with regard to expenses. This means that the shortfall is some $713.00 per week. In his original application to the Department Mr Shackleton stated that his expenses amount to $12,708.00 per week (folio 39), suggesting no shortfall. Mr Shackleton identifies assets of some $3.6 million and liabilities of some $1.3 million.
Chief amongst Mr Shackleton’s expenses are:
·Income tax of $5,426.00
·Other necessary commitments of $4,581.00
·Child care of $1,665.00
·Child support of $1,043.00
The Tribunal considered these four items more closely. The Australian Taxation Office income tax withholding calculator shows that an income of $12,116.00 per week will attract withholdings of $5,178.00 per annum. The income tax and Medicare levy calculators show income tax and Medicare levy of $5,177.14 per week.
Mr Shackleton has provided documentary evidence showing that the cost of child care at [a named child care] Centre amounts to $174.00 per day per child (folios 603 to 608). Mr Shackleton has two pre-school age children and although on occasion they have been cared for by their maternal grandmother, she is only a visitor to Australia and on her return to her home in [Country 1] the children will each attend child care five days a week. The gross cost would then be $1,740.00 per week, however the Tribunal presumes that this would be reduced by holiday periods, which would then reduce the cost to an annual average of some $1,600.00 per week. This compares with the net income of $1,525.48 per week of Mr Shackleton’s partner (folio A5). The cost is at the very top end of child care centre charges, no doubt due to the location of the centre in downtown [city]. The quantum of child care required by Mr Shackleton means that there are likely to be more cost effective ways to provide that child care. Indeed, the method chosen by Mr Shackleton of meeting the objective of having his children cared for is perhaps the most expensive of all possible methods. Given the impact on his finances, and his claims as to his financial circumstances, the Tribunal is surprised that Mr Shackleton has not located a less expensive centre or hired a private caregiver. While it may suit Mr Shackleton to have the children in a child care centre near his work it appears to the Tribunal that this cost could be substantially reduced either by locating a less expensive centre, hiring a private caregiver, finding a family daycare provider or hiring an au pair. At the same time the Tribunal acknowledges that two professional parents working full-time in a demanding profession and responsible for two very young children is likely to produce very high child care costs. It could be an option for one of the parents to significantly reduce their working hours. The Tribunal does not presume to advise Mr Shackleton but notes, in the context of Mr Shackleton claiming to be unable to meet his costs, that there are less expensive options available in the marketplace. All of the options identified above could very significantly reduce Mr Shackleton’s costs, although some may not be practical in all the circumstances.
In his SOFC Mr Shackleton has stated that he pays $1,043.00 per week in child support. However it appears that Mr Shackleton has made only one payment of child support since the case was registered as “agency collect” in August 2017. On 14 September 2018 Mr Shackleton made a payment $21,562.98 (folio 1169). Apportioning the payment over the preceding period of liability (taking into account “opt in arrears”) up to the date of payment produces a weekly amount of between $300.00 and $350.00 per week. This means that Mr Shackleton’s actual payment of child support equates to some $160.00 per week. The actual child support assessment at the time that Mr Shackleton applied for the departure from the assessment was some $340.00 per week.
Mr Shackleton has provided a list of other necessary commitments (folio A13). Most of the items are commonplace, although in some cases the magnitude may not be quite so commonplace. The expenses include holidays of $730.00 per week, legal fees of $1,129.00 per week, “reimbursement of in-laws” of $301.00 per week, petty cash of $170.00 per week and miscellaneous of $433.00 per week (plus children miscellaneous of a further $97.00 per week).
Mr Shackleton’s financial circumstances are also affected by him holding two investment properties which not only tie up capital but are also a drain on his income. The Tribunal calculates that the opportunity cost of holding these properties is some $780.00 per week in addition to the loss of $323.00 per week that they generate. Of course the calculation as to the wisest use of funds is much more complex than a simple recounting of the raw numbers and the Tribunal does not presume to advise Mr Shackleton as to his financial strategy. It only notes this use of funds in the context of Mr Shackleton’s claim that he is unable to meet his self-support costs.
The Tribunal has closely considered Mr Shackleton’s expenses as identified by him in the context of the word “necessary” found in subparagraph 117(2)(a)(iii) of the Act, and also, relevantly, in section 3 of the Act. The question is whether all of his expenditure is necessary to enable him to support himself. In Mee and Ferguson (1986) FLC 91-716 the Family Court held that the proper approach is to take into account unavoidable or compulsory expenses together with necessary living expenses. The test is whether the expense is necessary for a reasonable standard of living or is unavoidable or compulsory. Expenses that do not meet these criteria are not considered “necessary” in the relevant way.
Having examined the documentation provided by him the Tribunal has concluded that Mr Shackleton’s income is sufficient for him to support himself and that there are no special circumstances that would allow a departure from the formula assessment under subparagraph 117(2)(a)(iii) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 8A?
In his application to the Department Mr Shackleton sought a departure from the administrative assessment on the ground that the parents’ income, property and financial resources are not properly assessed in the assessment. This ground for departure, which for administrative purposes is known as Reason 8A, is set out at subparagraph 117(2)(c)(ia) of the Act:
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia)because of the income, property and financial resources of either parent; or
…
Mr Shackleton’s position is that the Department’s method of calculation produces a result that in the circumstances of this case is unjust and inequitable. In particular Mr Shackleton asserts that in the particular circumstances of this case the Registrar’s policy of using the last relevant year of income (LRYI) as the ATI has produced an assessment that is unfair to him. Mr Shackleton states that the assessments issued up to February 2018 used the incomes for 2014/15 which was the LRYI at the time the case was registered. Taxable incomes were $614,965.00 for Mr Shackleton and $104,056.00 for Ms Burge. In the following year Mr Shackleton’s taxable income fell to $396,827.00, while Ms Burge’s taxable income increased to $146,060.00. Mr Shackleton states that as a result the actual assessments produce a result that is not based on contemporaneous facts.
Under paragraph 43(1)(a) of the Act a parent’s ATI is based on the parent’s taxable income for the last relevant year of income. The term “last relevant year of income” is defined in section 5 of the Act. In relation to a child support period it is defined as the last year of income that ended before the start of the period. The methodology used by the Department in this case is consistent with the legislation.
Although there are administrative mechanisms that rely on current year incomes to produce benefits in advance of the actual income being known (for instance in the family tax benefit regime) those mechanisms are cumbersome, inefficient and produce considerable disruption to many of the persons they are supposed to benefit. They are also costly to administer, requiring multiple after-the-fact reconciliations and adjustments. It is hardly surprising that the legislation has adopted the LRYI regime.
Depending on the other particulars of the assessment, changes in income figures can produce significant differences over a short period, however over a longer period those differences tend to balance out as the parents’ income changes. The original decision maker analysed the impact of the changing incomes of the parents on this particular case over the period from 27 June 2016 to 30 June 2018 and found that the variation totalled $299.46 over the two-year period. The Tribunal does not find that this difference necessarily makes the assessment unfair. Even if the Tribunal were to find that the assessment should in this particular case be based on a later year’s income it would disrupt the orderly assessment of child support for little benefit. Mr Shackleton’s income increased significantly in 2016/17 but, following the legislation, the assessment was then based on his much lower LRYI. Ms Burge might reasonably claim that this produced a further ground for departure from the assessment under subparagraph 117(2)(c)(ia) of the Act. Obviously this would require the parties to go through the change of assessment process, involving a Department determination and a subsequent objection decision, both of which would produce no remedy due to the requirement that the decision makers follow administrative policy, and an appeal to this Tribunal. This would involve Mr Shackleton once again in the time-consuming and difficult process of which he has complained. The Tribunal is satisfied that in this case it will be possible to make a determination that is just and equitable and fair to the parties without introducing an administrative complication that has the potential to create significant burdens for all of the parties. The Tribunal finds that the use of the LRYI regime as specified by the legislation is not a special circumstance that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ia) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 8B?
In his original application to the Department Mr Shackleton sought a departure from the assessment on the ground that Ms Burge’s earning capacity is not reflected in the formula assessment. This ground, which for administrative purposes is known as Reason 8B, is set out in subparagraph 117(2)(c)(ib) of the Act:
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ib)because of the earning capacity of either parent; or
…
Subsection 117(7B) of the Act provides:
(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.
Mr Shackleton stated in his application that Ms Burge works part-time and that as a result it places a further financial burden on him. At the hearing Ms Burge said she had worked part-time during the marriage but that she now considers that she works full-time. In her cross-application Ms Burge said that her average hours in the last quarter of 2017 were 39.2 per week. Mr Shackleton has stated that he does not consider that 39.2 hours is full-time for a professional person. Ms Burge’s taxable income has increased from $104,056.00 in the year in which the parents separated to $153,709.00 in the most recent financial year for which figures are available. As it is accepted that Ms Burge continues to work and that she has not reduced her hours, changed her occupation, industry or working pattern, paragraph 117(7B)(a) of the Act is not satisfied and it is not open to the Tribunal to make a finding as to Ms Burge’s earning capacity. The Tribunal finds that there are no special circumstances that would allow a departure from the formula assessment of child support under subparagraph 117(2)(c)(ib) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 9?
Mr Shackleton sought a departure from the administrative assessment on the ground that he has a duty to support his younger children and another person. This ground for departure, which is known as Reason 9 for administrative purposes, is found in subparagraphs 117(2)(a)(i) to (iii) of the Act:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i)the duty of the parent to maintain any other child or another person; or
(ii)special needs of any other child or another person that the parent has a duty to maintain; or
(iii)commitments of the parent necessary to enable the parent to support:
…
(B) any other child or another person that the parent has a duty to maintain; or
…
At the hearing Mr Shackleton said that the persons he is referring to in this case is his partner and his younger children.
In In the Marriage of Vick and Hartcher [1991] FamCA 79 the Family Court found that a duty to support another person must be a legal duty, not merely a moral one. The legal duty to support a partner arises under section 72 of the Family Law Act 1975. That provision creates the legal duty if the spouse is unable to support himself or herself for one of the three reasons specified in that section. The third of those reasons is “for any other adequate reason”. Mr Shackleton’s position is that he was required to support his partner because in August 2016 she left her employment and started a new business. He said that during the start-up phase of her business, which he stated was from August 2016 to May 2017, she deferred wages. Mr Shackleton asserts that this is a special circumstance that affects his ability to meet his child support liability.
The Tribunal is prepared to accept that for a period of time Mr Shackleton’s partner’s income was deferred. At the hearing Mr Shackleton said that because of the particular circumstances his partner was more or less forced to start a business. Mr Shackleton and his partner were, or should have been, aware of the financial impact of her leaving her employment in order to start a business. Irrespective of the particular circumstances they decided that it would be best for her to start the business. When deciding to do so, Mr Shackleton and his partner faced fundamentally the same choice faced by all persons who decide to start a business. The Tribunal finds that the decision of Mr Shackleton’s partner to start a business is not in any way special. To find that the circumstances described by Mr Shackleton are special in the relevant way would be to find that any decision to leave employment to undertake some alternative activity could justify a departure from the formula assessment of child support.
In addition to [Child 2] and [Child 1] Mr Shackleton is also responsible for the support of his younger sons who were born in July 2015 and February 2017. Provision is already made for these children in the formula assessment. Mr Shackleton has provided a psychological assessment dated [in] December 2018 in respect of his three-year-old son (folios A24 to A39). The report was prepared by [Psychologist A], a psychologist who has been registered since 2009. [Psychologist A] concluded that Mr Shackleton’s son “meets the DSM-5 criteria for Autism Spectrum Disorder” and that he has a severity rating of Level 2 (requiring substantial support). [Psychologist A] recommends early intervention commencing with a review of her diagnosis by a paediatrician. Mr Shackleton has provided no evidence in relation to expenses relevant to his three-year-old son’s needs but said at the hearing that he expected expenses to continue at some $146.00 per week, a figure established by the actual expenses for a particular three-month period. While acknowledging Mr Shackleton’s son’s need, at this point the evidence available to the Tribunal is an insufficient basis for any further provision to be made in the child support assessment.
The Tribunal finds that the relevant circumstances of Mr Shackleton are not so special that they would support a departure from the administrative assessment under subparagraphs 117(2)(a)(i) to (iii) of the Act.
Does a ground exist to depart from the administrative assessment under Reason 10?
Mr Shackleton sought a departure from the administrative assessment on the ground that he has a duty to support his younger children. This ground for departure, which is known as Reason 10 for administrative purposes is found in paragraph 117(2)(aa) of the Act:
(aa) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the responsibility of the parent to maintain a resident child of the parent (see subsection (10));
Subsection 117(10) of the Act provides:
(10) For the purposes of this section, a child is a resident child of a person only if:
(a) the child normally lives with the person, but is not a child of the person; and
…
The children Mr Shackleton refers to are his two younger sons, who are not children of the assessment. As they are his children they are not relevant to any determination under subparagraph 117(2)(aa) of the Act. As Mr Shackleton has no resident children as defined in the legislation the Tribunal is unable to make a finding that there are any special circumstances under paragraph 117(2)(aa) of the Act.
Issue two – Would departure from the administrative assessment be just and equitable?
Relevant law and evidence
As the Tribunal is satisfied that there is a ground 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 had regard to the following matters set out in subsection 117(4) of the Act:
(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 Tribunal considered the evidence provided by both parties, including the documents and SOFC form that each party provided to the Tribunal, as well as the documents provided by the Department.
Assessment of evidence, findings of fact and application of the law
Section 3 of the Act states that it is the duty of both parents to financially support their children. [Child 1] and [Child 2] should receive a proper amount of financial support from their parents in accordance with their capacity to contribute.
The children’s needs
Paragraph 117(4)(b) of the Act requires the Tribunal to consider the proper needs of the children. The Tribunal has considered above [Child 1] and [Child 2’s] special needs. While noting the report of [Doctor A] and while acknowledging that [Child 1] has some special needs, the Tribunal has found that the cost of meeting those needs do not create circumstances that require it to make any further provision in the assessment.
The children’s incomes and earning capacities
[Child 1] and [Child 2] are full-time students and have no independent income or earning capacity that needs to be taken into account in the assessment.
The income, property and financial resources and earning capacity of Mr Shackleton and his necessary commitments
Mr Shackleton’s financial circumstances were closely examined by the Tribunal and are described above. The Tribunal is satisfied that Mr Shackleton is able to meet his necessary commitments.
The income, property and financial resources and earning capacity of Ms Burge and her necessary commitments
Ms Burge’s financial circumstances were closely examined by the Tribunal. At the direction of the Tribunal Ms Burge has provided a SOFC dated 29 August 2018 (folios B2 to B10). In her SOFC Ms Burge states that her income is $3,106.00 per week and that her expenses are $2,648.00 per week producing a net excess of income over expenditure of $458.00 per week. In arriving at this figure the Tribunal has excluded the “minimum credit card payment” as that is a financing arrangement rather than an expenditure item and Ms Burge has declared a credit card liability of only $753.00.
In her SOFC Ms Burge has identified assets of some $2.2 million and liabilities of only $753.00. The Tribunal is satisfied that Ms Burge is able to meet her necessary commitments.
The parents’ duty to support others
In addition to [Child 2] and [Child 1] Mr Shackleton is responsible for the support of his sons who were born in July 2015 and February 2017. Provision is made for these children in the formula assessment and the evidence available to the Tribunal does not provide a basis for any further provision to be made in the child support assessment.
Hardship
The departure from the formula assessment contemplated by the Tribunal will result in Mr Shackleton’s child support liability being reduced by a relatively modest amount. Taking into account Mr Shackleton’s and Ms Burge’s primary obligation to support their children, and the financial circumstances of both parents, the Tribunal finds that the decision contemplated by it will not cause hardship to either parent or to any other relevant person.
Other matters
At the hearing and in his submission dated 17 December 2018 Mr Shackleton raised issues concerning the care of [Child 2] and the provision of proper support. After carefully considering Mr Shackleton’s submissions the Tribunal has decided that those issues are not relevant to the decision before the Tribunal.
Terms and period of departure
In his submission to the Tribunal Mr Shackleton draws on the objective of the legislation found in section 114 of the Act:
Additional particular objects of this Division include ensuring:
(a) that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
(b) that parents share equitably in the support of their children.Mr Shackleton’s contention is that he is meeting the full cost of housing for [Child 2] and [Child 1] both at his residence and at the residence of Ms Burge. He asserts that by providing housing and by also providing child support he is contributing more than a reasonable and adequate share of his financial resources. He further asserts that by not contributing to the housing costs of [Child 2] and [Child 1] Ms Burge is not providing a reasonable and adequate share of her financial resources. He concludes that the current assessment defeats the objective found in section 114 of the Act that “parents share equitably in the support of their children.” Mr Shackleton has provided evidence that the value of the benefit provided in this way in relation to the residence of Ms Burge may amount to as much as $52,000.00 per annum. Against this the Tribunal accepts that Ms Burge meets some expenses that would normally be met by a landlord, being council and water rates and insurance. Ms Burge also contributes the value of her half ownership of the house as well as bearing the expense of maintaining the house and garden, thus preserving the value of the asset (although the Tribunal notes that Mr Shackleton’s father provides some maintenance at no cost to Ms Burge). The Tribunal does not accept Mr Shackleton’s claim that he meets the full cost of the children’s accommodation, however it does find that his contribution to their accommodation is significantly greater than the contribution of Ms Burge. The extra contribution made by Mr Shackleton delivers a substantial and quantifiable benefit to the children that should be taken into account in the child support assessment.
Mr Shackleton also asserts that he has provided further benefits to the children in the form of maintaining their health insurance. The Tribunal accepts that this delivers a significant benefit to the children, however because Mr Shackleton also insures himself, his partner and his other children on the policy there is no additional cost to him. On the other hand Mr Shackleton has also undertaken to meet the “gap” in respect of the children’s medical costs when they are in his care and this has a cost, albeit one that is difficult to quantify given that children’s medical needs cannot be predicted. The Tribunal is not drawn to find that the other expenditure identified by Mr Shackleton, in particular his life and TPD insurance, delivers a quantifiable benefit that should be taken into account in the assessment.
It is not possible, nor necessarily desirable in an environment in which particular relevant circumstances may change, to make an arithmetic calculation precisely balancing costs and benefits. The Tribunal finds that the value of accommodation provided by Mr Shackleton is $52,000.00 per annum. It finds that the costs met by Ms Burge that would normally be met by a landlord, being council and water rates and home insurance total $7,000.00 per annum. As he is half-owner of the house these costs deliver a benefit of $3,500.00 to Mr Shackleton. The Tribunal estimates that the extra health costs met by Mr Shackleton total $1,500.00 per annum. The Tribunal finds that the sum of benefits provided by Mr Shackleton to the children outside of the child support assessment can be quantified as $50,000.00. Mr Shackleton’s marginal income tax liability (including the Medicare levy) is 47% of his income. Thus, in order to net $50,000.00 Mr Shackleton must increase his gross income by $95,000.00. Considering all of the circumstances as required by the legislation the Tribunal finds that it would be just and equitable to reduce the ATI used in the assessment for Mr Shackleton by $95,000.00. This decision is made under section 98C and paragraph 98S(1)(g) of the Act.
The child support assessment started on 27 June 2016. Mr Shackleton lodged his application on 21 December 2017. In his application Mr Shackleton requested that the departure from the formula assessment commence on 27 June 2016, stating that he was unable to apply earlier due to his family and work commitments and because “it is time consuming to formulate the application and assemble the supporting evidence” (folio 37). The Tribunal is not persuaded that it was not possible for Mr Shackleton to apply to the Department in a timely manner. The Tribunal is also concerned about the impact of backdating the departure from the assessment on Ms Burge. Despite Mr Shackleton’s contrary assertions about his financial circumstances, the Tribunal considers that his financial resources and, particularly, his earning powers are greater than Ms Burge’s. The Tribunal also has regard to the fact that Ms Burge has had the benefit of the contribution to the children’s housing made by Mr Shackleton since the start of the assessment. Having regard to the matters in subsection 117(4) of the Act, the Tribunal finds that it would be just and equitable for its determination to apply from 21 December 2017. This will result in a reduction in the child support payable by Mr Shackleton and a reduction in the arrears balance.
The parents have found the change of assessment process stressful and time-consuming and it is desirable that they not have to go through it again in the near future. However, the Tribunal is conscious that there is also a property settlement in process and that the conclusion of the property settlement will almost certainly change the fundamental facts upon which the Tribunal’s decision is based. In his submission to the Department on 26 February 2018 Mr Shackleton said that he did not expect a hearing in the Family Court until 2020. At the hearing Mr Shackleton said that the case had not yet been allocated and that no case management was underway. Balancing the competing priorities, the Tribunal has decided to extend the departure to 31 December 2020. Should there be a property settlement in the meantime it will be open to Ms Burge to apply for a change of assessment on the basis of a fundamental change in circumstances. Should there be no property settlement it will be open to Mr Shackleton to apply for a further departure from the formula assessment. Thus the period of departure from the formula assessment will be from 21 December 2017 to 31 December 2020.
Issue three – Is it otherwise proper to depart from the administrative assessment?
The final step for the Tribunal to undertake is to determine whether it is ‘otherwise proper’ to depart from the administrative assessment. Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The child support law recognises that each parent has a primary duty to maintain their children. In this case neither of the parents receives social welfare benefits. The children’s costs are met by the parents and that will not change as a result of the Tribunal’s decision. The Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter.
DECISION
The Tribunal sets aside the decision under review and, in substitution, decides to reduce Mr Shackleton’s adjusted taxable income by $95,000.00 from the adjusted taxable income established under the administrative formula for the period from 21 December 2017 to 31 December 2020.
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Family Law
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Administrative Law
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Judicial Review
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