Sheahy and Callan (Child support)

[2022] AATA 1728

Sheahy and Callan (Child support) [2022] AATA 1728 (31 January 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC021435

APPLICANT:  Mr Sheahy

OTHER PARTIES:  Child Support Registrar

Ms Callan

TRIBUNAL:Senior Member F Hewson

DECISION DATE:  31 January 2022

DIRECTION TO ALTER DECISION OR REASONS FOR DECISION:

Pursuant to section 43AA of the Administrative Appeals Tribunal Act 1975, the following alteration is made to the decision:

The date of the decision, incorrectly stated to be 31 January 2021, is altered to read: 31 January 2022

Senior Member F Hewson
8 June 2022

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/MC021435

APPLICANT:  Mr Sheahy

OTHER PARTIES:  Child Support Registrar

Ms Callan

TRIBUNAL:Member F Hewson

DECISION DATE:  31 January 2021

DECISION:

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

• for the period from 9 November 2020 to 22 November 2020 Mr Sheahy’s adjusted taxable income is varied to $54,000;

• for the period from 23 November 2020 to 31 December 2022 Mr Sheahy’s adjusted taxable income is varied to $80,964; and

• for the period from 9 November 2020 to 31 December 2022 the costs of the child are varied to $30,000 per annum.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – high costs of child care – 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. Mr Sheahy and Ms Callan are the parents of [Child 1], now aged four.  According to the records of Services Australia – Child Support (Services Australia), a child support assessment in relation to [Child 1] was registered on 24 May 2017.  Mr Sheahy is recorded as having 15% of the care of [Child 1] (regular care), and Ms Callan is recorded as having 85% of the care (primary care). 

2. The Child Support (Assessment) Act 1989 (the Act) provides for an administrative assessment of the child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the child. In this case it also takes into account that Mr Sheahy has two relevant dependents.

3. Section 98C of the Act, however, provides for a departure from the administrative assessment if the following requirements are met:

   (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 …

4. For the period from 1 September 2020 to 30 November 2021, Mr Sheahy was assessed to pay an annual rate of child support of $0 based on his adjusted taxable income for 2019/20 of $20,951 and Ms Callan’s adjusted taxable income of $133,238.

1. On 9 November 2020 Ms Callan lodged a departure application, on the basis that the child support assessment was not fair because of the high costs of child care (known as Reason 6) and on the basis of Mr Sheahy’s income, earning capacity, property and financial resources (Reasons 8A and 8B). Mr Sheahy cross-applied on the basis of Reason 1 and Reason 10.

2. On 5 January 2021 a decision maker from Services Australia found that a ground for departure from the administrative assessment was established on the basis of Reason 6 and Reason 8A and decided to depart from the assessment so that:

   ·     for the period from 9 November 2020 to 22 November 2020 Mr Sheahy’s adjusted taxable income was varied to $53,000 and the annual rate of child support payable by Mr Sheahy was increased by $2,006.

   ·     for the period from 23 November 2020 to 30 November 2021 Mr Sheahy’s adjusted taxable income was varied to $80,000 and the annual rate of child support payable by Mr Sheahy was increased by $3,441.

1. Mr Sheahy lodged a written objection to the decision. On 23 April 2021 an objections officer disallowed the objection.

2. On 7 May 2021 Mr Sheahy lodged an application for review with the Administrative Appeals Tribunal. Following a directions hearing on 5 October 2021 the tribunal issued directions to both parties for production of documents and information in preparation for the hearing.

3. A hearing of the matter was conducted on 15 December 2021. Mr Sheahy attended the hearing by video conference using Microsoft Teams. Ms Callan also attended the hearing by video conference using Microsoft Teams. The Child Support Registrar did not attend the hearing.

4. In reaching its decision the tribunal had regard to the evidence given by Mr Sheahy and Ms Callan at the hearing, as well as the documents provided by Services Australia (numbered 1–341), Mr Sheahy (A1–A63) and Ms Callan (B1–B59). 

ISSUES

1. A liable parent or a carer may apply to the Child Support Registrar for a determination to depart from the administrative assessment of child support under Part 6A of the Act (section 98B). Section 98C provides that the Registrar may make a determination 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 …

CONSIDERATION

Does a ground for departure from the administrative assessment exist?

1. The grounds for departure are set out in subsection 117(2) of the Act. Each ground is prefaced by the words ‘in the special circumstances of the case’. The meaning of this expression is not defined in the Act. However, the tribunal is guided by the courts, which have concluded that the expression relates to the facts peculiar to each case such that those facts are ‘out of the ordinary’ and set the case apart from the usual case (Gyselman and Gyselman (1992) FLC 92-279 (Gyselman) and Philippe and Philippe (1978) FLC 90-433).

2. In this case, Ms Callan applied for departure from the administrative assessment of child support on the basis of the income, property, earning capacity and financial resources of Mr Sheahy (Reason 8A/8B) and the high costs of child care (Reason 6). At the directions hearing Ms Callan indicated she is pursuing a departure from the administrative assessment on the basis of Reasons 8A and Reason 6 and Mr Sheahy indicated that he is not pursuing his cross-application in relation to Reason 1 and Reason 10. It is only necessary for one ground to be established in order for a determination to depart from the administrative assessment to be made. The tribunal first considered whether a ground for departure is established on the basis of the income, property and financial resources of the parents.

Reason 8A – The income, property and financial resources of the parents

1. Subparagraph 117(2)(c)(ia) of the Act provides a ground for departure exists where, in the special circumstances of the case, use of the administrative assessment would result in an unfair level of child support payable by either parent because of the income, property and financial resources available to them. The Act goes on to state in subsection 117(7A) that the decision maker must have regard to ‘the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of the parent that do not produce, but are capable of producing, income’ and disregard ‘the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child’.

2. As set out above, for the period from 1 September 2020 to 30 November 2021, Mr Sheahy’s child support liability was assessed using his adjusted taxable income for 2019/20 of $20,951 and Ms Callan’s adjusted taxable income of $133,238, resulting in an annual rate of child support of $0. It was Mr Sheahy’s evidence that he returned to part-time employment as [an occupation 1] on about 9 November 2020 and his annual income is $80,964 ($1,557 per week). Mr Sheahy said he does not have any significant tax deductions. The Services Australia records indicate that for the period from 9 November 2020 to 22 November 2020 Mr Sheahy was working only two days a week and his income was $54,000 per annum.

3. Mr Sheahy did not dispute that from 9 November 2020 his income from employment was such that the administrative assessment of child support resulted in an unfair level of child support payable by him. He agreed that a ground for departure from the administrative assessment of child support was established on that basis.

4. Having considered the available evidence, including the income, property and financial resources, as set out in the Statement of Financial Resources of each party, the tribunal concluded that special circumstances exist, such that a ground for departure from the administrative assessment of child support is established on the basis of the income, property and financial resources of Mr Sheahy and Ms Callan.

5. The tribunal also considered whether a ground for departure from the administrative assessment is established on the basis of the high costs for child care for [Child 1].

Reason 6 – High costs of child care

1. A reason for departing from an administrative assessment of child support may be established if, as set out in subparagraph 117(2)(b)(ib) of the Act, in the special circumstances of the case, the costs of maintaining a child are significantly affected because of high child care costs. Criterion specific to this ground for departure are set out in paragraphs 117(3A) and (3B) of the Act.

2. Subsection 117(3A) provides that the costs must be incurred by a parent or non-parent carer and the child in care must be under 12 years of age at the start of the child support period.  The tribunal was satisfied that these two conditions are met.

3. The tribunal considered whether the child care costs are “high”.  Subsection 117(3B) of the Act provides that child care costs are only “high” if, during a child support period, they total more than 5% of the amount worked out by dividing the payee’s adjusted taxable income for the period by 365 and multiplying the quotient by the number of days in the period.

4. The relevant child support periods in this case are from 1 September 2020 to 31 August 2021 (365 days) and from 1 September 2021 to 30 November 2022 (456 days). The Services Australia records show that for the relevant income years, being 2019/20 and 2020/21 respectively, the adjusted taxable income (ATI) amounts of Ms Callan in the two child support periods are $133,238 and $132,575.  Applying the formula in subsection 117(3B) of the Act, the tribunal calculated the 5% threshold to be $6,662 and $8,281 for each period respectively.

Period	Relevant adjusted taxable income ($)	(ATI/365 X number of days)	5% of applicable adjusted taxable income
01/09/20 – 31/08/21 (365 days)	133,238	133,238	6,662
01/09/21 – 30/11/22(456 days)	132,575	165,627	8,281

1. The tribunal had regard to the Statement of Entitlement from [the named] child care centre for the period 1 July 2020 to 30 June 2021; a period of 365 days.  It shows that the net costs of child care (the gap fee after subsidies) incurred by Ms Callan in that period was $11,689. This is equivalent to $225 per week (including weeks when no or reduced costs were incurred) for care on five days a week. The tribunal was satisfied this is a reasonable reflection of the costs likely to be incurred by Ms Callan until [Child 1] commences school in 2023.

2. In accordance with Orders made in the Federal Circuit Court [in] April 2020, Mr Sheahy has care of [Child 1] from 10am on Wednesdays, with changeover being at the child care Centre. He also has care of [Child 1] from 3pm on Fridays, with changeover being at [a named location].

3. Mr Sheahy said he does not object to contributing to the costs of child care for [Child 1], to the extent the costs incurred are reasonable and necessary. He agreed child care is necessary on Monday, Tuesday and Thursday, when he and Ms Callan are both working.

4. Mr Sheahy said his care on a Wednesday was ordered to commence from 10:00am because at the time the Orders were made he was living about four hours from [Child 1], and it was not practical for him to pick her up earlier. He is now living only about 40 minutes away. As things currently stand, he argues, Ms Callan is incurring the cost of a full day of child care on Wednesdays, while [Child 1] is in his care, rather than allowing him to pick [Child 1] up earlier and avoiding the cost of child care on that day. He said he is also available to care for [Child 1] on a Friday and regards it as unreasonable that Ms Callan chooses to put [Child 1] in child care instead. He noted that [Child 1] is denied the opportunity to spend time with her siblings, also of pre-school age, on the Friday. He also noted that he is a competent parent and a reasonable person would regard it as reasonable that he have the care of [Child 1] instead of squandering community resources, including child care subsidies, on unnecessary child care.

5. Ms Callan argued it is reasonable for the care to occur in accordance with the court orders, which have withstood an appeal and an application for amendment.

6. Mr Sheahy said his appeal was not in relation to the time spent with [Child 1]. He agreed his application for the care arrangements to be varied, as he is now living in closer proximity to [Child 1], was dismissed. Mr Sheahy said the judgement indicated the judge misunderstood the basis of his application and he intends to appeal the decision. In relation to a family report submitted to the court, he said Ms Callan raised an issue in relation to her work, indicating she works with [specified products] and was at risk of [significant injury] if changeover occurred earlier on a Wednesday. Mr Sheahy said this issue has not been raised previously and he was not aware of it until he received a copy of the family report.

7. Ms Callan said she handles [specified products] in her work and she needs to be very focussed. She said she is concerned about the potential for conflict if changeover of care is in person on a Wednesday. In relation to the nature of the conflict Ms Callan said she does not allege any sort of physical abuse. She said Mr Sheahy has “strong opinions” and is “very insistent”. She said she regarded this as a form of “emotional abuse”. Ms Callan said the Court was aware of Mr Sheahy’s move and closer proximity to [Child 1] but dismissed Mr Sheahy’s application to vary the care arrangement.

8. Mr Sheahy said the judge concluded the threshold for varying the orders had not been met. It was not a decision made on the basis that a variation was not appropriate due to the conflict between them. Mr Sheahy noted that, in any case, the Orders [at subclause 3(h)] provide that he and Ms Callan can agree to a variation in the care. Mr Sheahy said Ms Callan has “fudged” as she does not want to see him.

9. Ms Callan said she regards it as money well spent to incur the cost of child care on the Wednesday rather than rely on Mr Sheahy picking [Child 1] up in time for her to get to work, and to be able to avoid conflict before she goes to work. She described the relationship with Mr Sheahy as being “high conflict”. Ms Callan said she works as [an occupation 2] and her work can vary from day to day. Sometimes she is working in the office, and on other days she is in [another location]. Depending on what she is doing on a particular day her start time can vary from about 7am to 9am.  In relation to the care on alternate Fridays, Ms Callan reiterated that it is reasonable for the care to occur in accordance with the court orders, and it is necessary in that case for her to have child care so she can work.

10. Mr Sheahy noted that the increase in his child support liability in relation to the costs of child care is more than four times the amount assessed under the child support formula. He said it would be fairer to decrease the income used for Ms Callan.

11. The tribunal considered the available evidence. Ms Callan has primary care of [Child 1] (a percentage of care of 85%) and works full time. Her annual income is about $133,000 per annum. She incurs child care costs for five days a week. Mr Sheahy works three days a week and his income is about $80,000 per annum. He has a percentage of care of [Child 1] of 15%.

12. As set out above, the cost of child care incurred by Ms Callan is above the threshold of 5% of her annual income for the purpose of subsection 117(3B). The tribunal notes that the 5% threshold is exceeded even if child care costs were incurred only for three or four days a week.

13. The tribunal accepted that Ms Callan is entitled to rely on the terms of the Orders of [April] 2020 in relation to the time each parent spends with [Child 1]. Nevertheless, in relation to the child care expenses on a Wednesday, when [Child 1] spends most of the day with Mr Sheahy, and taking into account that the Orders make provision for the parties to agree to a variation to the time spent with each parent, the tribunal was persuaded that child care is not a reasonable and necessary cost on that day. While Ms Callan stated that it is “money well spent” so she does not have to deal with the change of care before work, the tribunal concluded it is not reasonable for Mr Sheahy to have to contribute to that cost when [Child 1] is, in fact, in his care. In relation to the cost of child care on a Friday, however, the tribunal concluded that while [Child 1] is in Ms Callan’s care it is reasonable and necessary for her to use child care if she is working. While it is open to her to come to an alternative arrangement with Mr Sheahy, she is not compelled to do so.

14. The tribunal concluded that Ms Callan’s reasonable costs of child care amount to $9,360 per annum, being the cost for child care on four days a week (averaged over the year, and including weeks when there are no costs for child care).   As Ms Callan’s reasonable and necessary costs of child care are above the threshold of 5%, And having regard to the circumstances of both parties, the tribunal concluded the costs of childcare for [Child 1] are a special circumstance and have a significant effect on the costs of maintaining [Child 1].

Is it fair or ‘just and equitable’ to make a particular departure determination?

1. 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 fair as regards the parents and the children 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 have regard to a range of factors, including but not limited to those set out in subsections 117(4) and (6) to (8) of the Act, such as the needs of the children, the parents’ assets, liabilities, income and commitments and any hardship that would be caused by departing or not departing from the formula. The tribunal does not propose to explore every matter in detail, but will discuss those it regards as pertinent to this application (Gyselman).

The needs of the children

1. Section 3 of the Act provides that the parents of a child have the primary duty to maintain the child, 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 (Ashcroft and Ashcroft (SSAT Appeal) [2008] FMCAfam 1250). In this case Mr Sheahy and Ms Callan have the primary duty to financially support [Child 1]. As set out above, Mr Sheahy has a percentage of care of [Child 1] of 15% and Ms Callan has a percentage of care of $85%. Mr Sheahy has two other children who are included as relevant dependents in the child support assessment.

1. 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 (subsection 117(6) of the Act). There was no dispute that [Child 1] is in good health and does not have any special needs. Mr Sheahy said his two resident children are also in good health and don’t have any special needs. He noted, however, that he and his wife also have child care costs on the days he is working, which he said is an out of pocket expense of $360 per week (reported to be $275 per week in his Statement of Financial Circumstances). The expenses incurred by both parents for child care are discussed further below.

2. Neither Mr Sheahy nor Ms Callan itemised the expenses they incur for [Child 1]. The tribunal was satisfied, having regard to the information in the Statement of Financial Circumstances completed by each party that, apart from child care expenses, neither parent incurs any out of the ordinary expenses for the children.

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

Mr Sheahy

1. As discussed above, Mr Sheahy is employed part time and his income is about $81,000 per annum. He expects to return to full-time employment in 2023, when [Child 1] and her sister both start school. He lives with his wife, who he said earns about $90,000 per annum ($1,160 net). In his Statement of Financial Circumstances Mr Sheahy reported that his total household expenditure amounts to $1,760 per week, including rent of $470; car loan repayments of $123; food costs of $400 and child care expenses of $275 (compared to the $360 reported at the hearing). Mr Sheahy’s personal expenditure, not including child support, amounts to about $429 per week ($355 income tax and health insurance premiums equivalent to $74 per week). Mr Sheahy said he does not make any voluntary contributions for superannuation. He said his financial circumstances are tight and are likely to remain so until 2023.

1. The tribunal was satisfied that Mr Sheahy is working in accordance with his earning capacity, taking into account his caring responsibilities.

Ms Callan

1. As discussed above, Ms Callan is employed full time and her income is about $133,000 per annum. While her payslips, for August and September 2021, indicate a significant increase in her monthly salary, a letter, dated 20 October 2021 from her employer indicates she was overpaid a gross amount of about $10,000 in the three month period from July 2021 to September 2021. The tribunal was satisfied that any increase in Ms Callan’s income in the 2021/22 year is modest and will be reflected in the child support assessment in the ordinary course. The tribunal was also satisfied that Ms Callan is working in accordance with her earning capacity.

2. Ms Callan owns her home, which she indicated at the hearing is likely valued at more than $600,000 (and possibly as much as $700,000) based on a recent sale in her street. It is subject to a mortgage with a current balance of about $430,000. The total value of her superannuation is about $210,000.

3. In her Statement of Financial Circumstances Ms Callan reported that her total household expenditure amounts to $1,492 per week, including mortgage repayments of $430; food costs of $150; education expenses of $150 and child care expenses of $264. Ms Callan’s personal expenditure amounts to about $707 per week ($692 income tax, minimum credit card payments of $15 and health insurance premiums equivalent to $100 per week). Ms Callan said she does not make any voluntary contributions for superannuation.

Conclusion

1. Having regard to the particular circumstances of this case, the tribunal concluded that it is just and equitable to depart from the administrative assessment of child support. In making such a determination the tribunal can, in accordance with section 98S of the Act, vary the rate of child support payable or it can vary any of a number of variables that are used in the administrative formula.

2. In relation to the discrepancy in the ATI used for Mr Sheahy in the administrative assessment of $20,951, compared to his current income of $80,964 per annum income, the tribunal proposed to depart from the administrative assessment of child support so that:

   ·     for the period from 9 November 2020 to 22 November 2020 Mr Sheahy’s adjusted taxable income is varied to $54,000

   ·     for the period from 23 November 2020 to 31 December 2021 Mr Sheahy’s adjusted taxable income is varied to $80,964

1. In relation to the costs of child care, the tribunal was satisfied that it is appropriate for Mr Sheahy to contribute to those costs to the extent of his capacity.

2. The tribunal had regard to the policy set out at  2.6.12 of the Child Support Guide. It states: “If the Registrar decides that the child support assessment should be changed because of high costs of child care, the costs of the child may be increased by the total net child care costs, for distribution between the parents according to their share of the combined income” (the example makes it clear the reference is to the combined child support income). 

3. Although not strictly bound by the Policy (Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), the tribunal is satisfied that it is consistent with the objects of the legislation and therefore should be considered and applied accordingly.

4. Having regard to the overall circumstances of both parties, including the disparity in their incomes and the child care costs (albeit shared with his wife) Mr Sheahy also has to meet for his resident children, the tribunal was persuaded that an increase in the costs of the child, as opposed to an increase in the annual rate of child support based on each parent’s share of the child support income, is appropriate in this case. The tribunal proposed, therefore, to increase the costs of the child used in the assessment from $20,298 to $30,000. This will increase the current assessment, using ATIs of $80,964 and $132,575 for Mr Sheahy and Ms Callan respectively, from $877 per annum to $1,296. The tribunal was satisfied that departure from the administrative assessment for the period commencing from the date Mr Sheahy returned to work and ending at the end of 2022, before [Child 1] starts school in 2023, is appropriate.

5. The tribunal considered the impact of the proposed departure determination on the parties and the children. It concluded that, having regard to the available evidence, including the evidence of Mr Sheahy and Ms Callan at the hearing and the documents in relation to their financial circumstances, the departure determination will not cause hardship to the parties or to the children, and is just and equitable. 

Is it otherwise proper to make a particular departure determination?

1. The third step is to consider whether it would be otherwise proper to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(B) of the Act. Subsection 117(5) sets out the matters that must be considered when deciding whether it would be ‘otherwise proper’ to make a departure determination:

   ·     the nature of the duty of a parent to maintain a child and, in particular, the fact that it is the parents of a child who have the primary duty to maintain the child; and

   ·     the effect that any proposed change would have on the child or payee’s entitlement to an income-tested pension, allowance or benefit.

2. It was the evidence of the parties that they do not receive any income-tested pension, allowance or benefit. This is consistent with the information included in the Statement of Financial Circumstances each party completed. The tribunal was satisfied that the proposed departure determination is otherwise proper.

DECISION

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

• for the period from 9 November 2020 to 22 November 2020 Mr Sheahy’s adjusted taxable income is varied to $54,000;

• for the period from 23 November 2020 to 31 December 2022 Mr Sheahy’s adjusted taxable income is varied to $80,964; and

• for the period from 9 November 2020 to 31 December 2022 the costs of the child are varied to $30,000 per annum.