Stewart and Stewart (Child support)

[2020] AATA 5124

Stewart and Stewart (Child support) [2020] AATA 5124 (28 October 2020)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/SC018642

APPLICANT:  Mr Stewart

OTHER PARTIES:  Ms Stewart

Child Support Registrar

TRIBUNAL:  Member S Cullimore

DECISION DATE:  28 October 2020

DECISION:

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• The previous AAT decision of 26 March 2019 should remain in place until 31 March 2020; and

• The annual rate of child support payable by Mr Stewart is fixed at $8,000 for the period from 1 April 2020 to 12 February 2024.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established based on the incomes of the liable parent – previous departure decision by this Tribunal – change in circumstances – decision to depart – period of departure – 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. The following background matters are drawn from the files of the Child Support Agency (“the CSA”) and are not in dispute.

2. The child support case between the parents is for two children, now aged 9 and 7.

3. The case was registered on 15 May 2018 and has been Registrar Collect since that date.

4. Care of the children is recorded as 62% to Ms Stewart and 38% to Mr Stewart since 3 August 2019.[1]

   [1] C103. This care determination, made 4 December 2019 by the CSA, was affirmed by an objections officer and by AAT1 and is now under appeal to AAT2.

5. On 4 June 2018 Ms Stewart lodged a change of assessment (“COA”) application.

6. On 26 March 2019 the AAT (Member M Douglas) made a departure determination fixing the adjusted taxable income (“ATI”) of Mr Stewart at $102,000 pa and the ATI of Ms Stewart at $84,000 pa for the period from 15 May 2018 to 31 March 2020.[2]

   [2] C47

7. On 25 November 2019 Mr Stewart lodged a further COA application.

8. On 15 January 2020 a delegate made a further departure determination fixing the ATI of Mr Stewart at $108,060 pa and the ATI of Ms Stewart at $84,000 pa, for different periods, both ending on 31 October 2021.[3]

   [3] C198

9. Mr Stewart objected.

10. On 11 March 2020 an objections officer “part allowed” the objection of Mr Stewart and fixed the ATI of Mr Stewart at $101,444 pa and the ATI of Ms Stewart at $84,000 pa, both for the period from 25 November 2019 to 31 October 2021.[4]

    [4] C10

11. The resulting annual rate of child support is now $7,432.[5]

    [5] C463

12. On 2 April 2020 Mr Stewart applied for further review by this Tribunal of the objection decision. 

DOCUMENTARY EVIDENCE AND HEARING

1. The Tribunal had before it the original bundle of documents provided by the CSA. These documents are referred to as C1 to C410.

2. Supplementary documents from the CSA were marked C411 onwards.

3. Directions were made by the Tribunal concerning the production of further documents by the parents.

4. Documents received from Mr Stewart were marked A1 to A46 and documents received from Ms Stewart were marked B1 to B49.

5. Mr Stewart and Ms Stewart attended the hearing via teleconference.

6. At the request of the Tribunal each provided some further documents after the hearing (these were A46 and B47–B49).

CONSIDERATION

The relevant law

Changes of assessment

1. Part 6A of the Child Support (Assessment) Act1989 (“the Act”) sets out certain circumstances in which the Registrar, on application by a parent, may depart from the administrative assessment, or in other words, change in some way the manner of working out the child support liability of the payer.

2. The central issues for a decision maker to determine in any COA matter mirror the three steps in the process which are set out in section 98B of the Act.

3. They are:

   (i) whether one, or more of the grounds for departure referred to in subsection 117(2) of the Assessment Act exists; and if so

   (ii)   whether 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 to depart from the administrative assessment of child support.

4. Under subsection 117(2) of the Act, a decision maker is required to consider whether, “in the special circumstances of the case”, the normal administrative assessment of child support is unjust or inequitable because of various factual scenarios (the so-called “grounds for departure”).

5. These factual matters (grounds) cover such matters as out of the ordinary expenses incurred by a parent in meeting the “special needs” of a child (Reason 2).

6. A further ground is “the income property and financial resources of either parent” (Reason 8A) (see below).

7. The “special circumstances” which must be present in the case of each Reason must tend to justify or support a departure determination being made. Those circumstances must also be separate and discrete matters from the factual matters which make up the “grounds” for departure. Decision makers often confuse this issue by stating that the grounds themselves constitute the special circumstances.

8. For the second step, subsections 117(4) to (9) (inclusive) of the Act then require the decision maker to consider the “just and equitable factors” before making a particular departure determination.

9. These factors include the income, property and financial resources of each parent; the earning capacity of the parents; the costs of providing care to the children; the necessary living expenses of the parents; and any hardship that would be caused to either parent or the children by the making of (or refusal to make) any particular change of assessment decision.

10. If satisfied that it is appropriate to do so, the Registrar may then make any of the forms of departure determination allowed by section 98S of the Act.

11. These include but are not limited to fixing a parent’s ATI at a figure in excess of that used in an administrative assessment, as has happened to date in this matter, or fixing an annual rate of child support.

12. In circumstances where a departure determination is already in force when a new COA application is lodged, as here, the Tribunal can make a further departure determination. This is the case if it is satisfied that there were “grounds for departing from the administrative assessment” when the new application for a COA was lodged, which was on 25 November 2019: see subsection 98J(1) of the Act.

13. That provision does not require that the Tribunal must be satisfied that there are any new circumstances or even any change in circumstances.[6] Hence, this has been called the “revolving door” provision, allowing some parents, as here, to lodge multiple COA applications, in a short period of time.

    [6] As is the case with subsection 98J(2), which only applies where the initial COA application was refused.

14. Legislative amendment is long overdue to rectify this regrettable situation of the repeated rearguing and recycling by some parents of exactly the same issues.

15. The Tribunal is empowered to make a further departure determination in this matter with effect from 25 May 2018, i.e. 18 months before the COA application was lodged: subsection 98S(3B) of the Act.

16. Courts exercising a supervisory role over this Tribunal in change of assessment matters have laid down some general principles of relevance to this matter.

17. In various cases the Federal Circuit Court has said that the rationale of a departure determination is that it should reflect as far as possible the actual financial circumstances of the parents: it is a “bespoke” or “tailored” approach to the fixing of child support, rather than the general “one size fits all” application of the normal formula.

18. In the case known as Eades & Cadell [2009] FMCAfam 275, the Court stated that, after fixing the ATI of a party via change of assessment, the Tribunal could not simply incorporate that figure into the child support formula without having regard to such factors as the payer’s expenses and liabilities and the level of hardship that would be caused to the parties and children by taking that step.

19. In other words, the relevant just and equitable factors must always be considered.

The relevant “administrative assessments” in this case

1. For the period from the start of the case (15 May 2018) to 31 March 2020, the “administrative assessments” in this case are the rates of child support flowing from the previous AAT decision.

2. From 1 October 2019 to 31 March 2020 the rate was $7,520 pa.[7]

   [7] See at C199. From 15 May 2018 to 30 September 2019 the rates should have been similar, but unfortunately the CSA file is not helpful on this issue.

3. Since 1 April 2020 the “administrative assessments” are the rates which would have been produced by the “normal” administrative assessments, i.e. based upon the parents’ ATIs.

4. Using the parents’ 2018/19 ATIs of $72,679 for Mr Stewart and $72,309 for Ms Stewart,[8] for two children under 13, and care being 62%/38%, the annual rate of child support payable by Mr Stewart since 1 April 2020 would have been $4,118.

   [8] See at C372

5. That rate would have slightly increased after the lodgement of the parents’ 2019/20 tax returns.

6. The Tribunal must consider whether there should be any further change in this matter from the above assessments.

IS THERE A GROUND FOR DEPARTURE?

1. The Tribunal has concluded that the evidence and the submissions of the parties, taken as a whole, raise two potential “Reasons” for a change of assessment: namely Reason 8A (the income, property and financial resources of either of the parents) and Reason 2 (orthodontic costs).

Reason 8A

1. Reason 8A is contained in subparagraph 117(2)(c)(ia) of the Act as follows:

   “…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;”

46.The test requires the Tribunal to consider the level of child support as determined by the “administrative assessments”, set out above, on the one hand, and the “income, property and financial resources” of either parent on the other hand, and decide whether the result is in common parlance “unfair” (strictly, “unjust and inequitable”).

47.This Reason presupposes that the level of child support could be “unfairly” low or “unfairly” high, in a particular case.

48.From all of the evidence before it, the Tribunal finds the following material facts concerning the income, property and financial resources of Mr Stewart:

·His sources of income or benefits in recent years have been (i) his full time employment with [Employer]; and (ii) any income, or personal benefits, he has received from operating a small [business];

·His PAYG income is made up of a base wage plus a complex range of “allowances”, plus some overtime;

·He has also recently benefited from some salary sacrifice items, and he has recently contributed additional amounts to his superannuation;

·In 2017/18 his ATI was $83,873;[9]

[9] C386

·In 2018/19 his ATI was $72,697;[10]

[10] C372

·In 2019/20 his taxable income was $83,709 (A32);

·His business made a loss in 2019/20 of $11,392, and has not operated since March 2020.[11]

[11] A35

49.From all of the evidence before it, the Tribunal finds the following material facts concerning the income, property and financial resources of Ms Stewart:

·She is [an Occupation] and works 60.5 hours per fortnight;

·Her PAYG income is now made up of a base wage plus an allowance, plus a small amount of salary sacrifice;[12]

[12] See B48

·In 2017/18 her ATI was $83,873;[13]

[13] C386

·In 2018/19 her ATI was $72,309;[14]

[14] C372

·In 2019/20 her taxable income was $81,007 (see B43).

50.The Tribunal finds that in the 2019/20 financial year, Mr Stewart had an income for child support purposes somewhere in the region of $105,000. This was made up of base salary ($98,374) plus taxable allowances ($6,791 pa), plus additional super contributions ($5,200), less personal tax deductions (about $4,750).[15]

[15] See A35

51.The Tribunal noted that according to payslips he receives $350-400 pf in allowances (see A21 and A26), in total, and that some are by way of reimbursement, and has treated the figure of $6,792 in the 2019/20 tax return (A35) as reflecting his actual cash allowances.

1. From the 2020/21 payslip information, the Tribunal finds that his current income is slightly lower. His “total payments” (salary plus allowances) are now $98,793.76 ($3,799.76 pf x 26) and he has pre-tax deductions (salary sacrifice) of $42.15 pf, which is just over $1,000 pa. 

53.In the view of the Tribunal, a figure of around $100,000 pa is a fair reflection of his ongoing income.

54.The Tribunal takes no account of the claimed business losses for 2019/20 as the business closed after the COVID-19 epidemic in about March 2020.

1. The Tribunal finds that Ms Stewart has an annual income from employment somewhere in the region of $85,000. She works 60.5 hours per week. The salary plus allowances of a full-time [Occupation] (working 76 hours per fortnight) of her rank is $106,937, which, times 79.6% (60.5/76.00 = 79.6%) = $85,127 pa. Using YTD payslip information, the figure is slightly lower. She also has about $1,000 pa in salary sacrifice items.

56.The Tribunal expressly rejects the previous findings to date that any matter relating to her accommodation arrangements is somehow a “benefit in kind” and so is relevant to her “income”. This approach is not only an error of law (see the case reported as Parrish & Torrey [2009] FMCAfam 274), but a misconception of the facts as the Tribunal sees them (see further below).

57.In regard to property settlement issues, the evidence was that, under a Court decision, Ms Stewart is entitled to receive a property settlement of $354,316. That decision is however under appeal.

58.Property settlement issues should rarely be taken into account in child support matters.

59.The Tribunal takes no account of that matter in reaching this decision.

60.The Tribunal then considered the child support liability of Mr Stewart under the recent administrative assessments (see above) compared with what level of child support he would be assessed to pay if his “true” income for child support purposes were used to assess child support.

61.The Tribunal notes the terms of the previous AAT decision which fixed the ATI of Mr Stewart at $102,000 and the ATI of Ms Stewart at $84,000. That decision produced an annual rate of child support of about $7,500, and ran out on 31 March 2020.

62.While the Tribunal’s income figures are a little different, the Tribunal finds that those administrative assessments were not unfairly low because of the “true” income of the parents for child support purposes.

63.However, since 1 April 2020 the “normal” administrative assessments would have produced unfairly low rates of child support (just over $4,000 pa) because of the “true” income of Mr Stewart.

64.Mr Stewart’s income for child support purposes has in fact been in the region of $100,000, which is significantly in excess of (some 20% in excess of) his 2018/19 and 2019/20 ATIs.

65.The additional income (the difference between the two) has a significant effect on his child support liability, whereas the modest amount of income of Ms Stewart in excess of her recent ATIs in fact has very little effect on the child support rate calculation.

66.The Tribunal finds that the ground contained in Reason 8A is made out.

67.“Special circumstances” exist because of the complexity of the calculation of the income of Mr Stewart for child support purposes. His ATO taxable income has not in the recent past been, and is not, a reliable indicator of his relevant income.

68.Reason 8A is established.

Does any other Reason need to be established?

1. As to the need for detailed consideration of any other Reason, in Marsh & Eccles [2008] FMCAfam 1417, Riethmuller FM stated as follows:

   Once a ‘special circumstance’ is established, it is then necessary to determine what would be a just and equitable and otherwise proper child support assessment….only one special circumstance in the period is sufficient to satisfy the first step of the departure process

2. The Tribunal therefore need not consider whether any other Reason is in fact made out on the evidence. The issues addressed in Reason 2 (orthodontic costs) are considered further below under the “just and equitable factors”.

The just and equitable factors

1. The Tribunal then considered what particular departure determination it should make in this case.

2. The Tribunal must consider whether it is “just and equitable” to both parents and the children to depart from the administrative assessment in any particular way.

3. The factors to be taken into account are set out in subsection 117(4) of the Act, as follows:

   (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.

4. Subsection 117(9) of the Act states that the subsection 117(4) factors “do not limit other matters to which the [Tribunal] may have regard”.

5. In determining whether it would be just and equitable to make a departure determination, the Tribunal “must have regard to” the factors specified in subsection 117(4). Whilst the section need not be slavishly followed, each of the factors listed in subsection 117(4) relevant to this matter should be considered.

Income and expenses of Ms Stewart

76.Ms Stewart is [an Occupation] and she works 60.5 hours per fortnight. The Tribunal considers her income to be around $85,000 pa.

77.She also receives family tax benefit (FTB) of about $81.06 pf.

78.The Tribunal must and does disregard the payments of FTB as they are “income tested benefits.”

1. Her total declared household expenses come to $1,220 pw ($63,440 pa) (B8). Those are reasonable in the circumstances.

2. Her evidence (both verbal and documentary) which the Tribunal accepts is that, under an arrangement which she has with the owners of the property, she occupies one house on a 6 acre hobby farm, and pays $450 pw which covers rent plus utilities (except electricity): see B8 and the owner’s statement at B11.

81.The Tribunal expressly rejects any other interpretation of this arrangement as put forward by Mr Stewart, for example, that she is actually paid money by the owners as a “caretaker” of the premises, or that she pays no rent at all, or only a heavily subsided rent (see B27).

Costs of providing care

82.Care is now 62%/38% but an appeal against an AAT1 decision on this issue is pending in AAT2.

1. Mr Stewart therefore currently has a “cost percentage” for the formula of 31%.

2. Both parents therefore incur quite significant costs of care.

3. Mr Stewart put his costs of providing care at about $150 pw ($7,800 pa). The Tribunal considers those costs to be reasonable in the circumstances.[16]

   [16] A9

4. The reasonable costs of providing care to the children, per week, when they in the care of Ms Stewart, as far as the Tribunal can determine, are in the region of $500, made up as follows:

   ·The Tribunal would allow 1/3 of the rent and utilities = $150;

   ·Food = $80;

   ·Internet = $15;

   ·Children’s activities / hobbies / child minding = $175;

   ·Petrol = $30;

   ·Clothing = $10;

   ·Miscellaneous = $40.

5. This comes to $26,000 pa.

6. The Tribunal noted that, under the formula, the costs of two children under 13, assuming the parents combined income in this case is $185,000, would be about $35,800.

7. The Tribunal then dealt with the issue of orthodontic costs.

8. Ms Stewart has raised this issue with the CSA by lodging a new COA application based upon Reason 2, special needs. This was lodged on 15 May 2020.[17] She seeks additional child support of 50% of the costs of treatment.

   [17] See B13

9. The Tribunal notes that the child was referred by their dentist to an orthodontist on or about 16 December 2019.

10. Ms Stewart emailed Mr Stewart about the costs of this treatment on 17 December 2019 (B37). This was after the COA application was lodged, but before the delegate decision.

11. The Tribunal also notes the report of the orthodontist dated 7 May 2020 at B33.

12. The Tribunal is satisfied that the work concerned is necessary, in a dental sense, and not merely cosmetic dentistry, as the child suffers from protrusive maxillary incisors, a “deep bite malocclusion” and some teeth “overcrowding”. These are significant dental problems.

13. In the view of the Tribunal, it can consider these costs in this matter. Mr Stewart has been adequately forewarned of this issue, and they fall under the description of “direct and indirect costs incurred by the carer entitled to child support” as referred to in paragraph 117(4)(f) of the Act above.

14. These costs come to $4,350, payable by end March 2021.

15. A contribution from Mr Stewart for these costs will be a factor in this decision.

16. The Tribunal does not need to consider for this purpose whether Reason 2 is established, as such. The Tribunal expressly makes no finding on that issue, nor does it need to consider whether these expenses qualify as “prescribed non-agency payments”, if Mr Stewart pays them directly to the orthodontist, and the Tribunal expressly makes no finding on that issue either.

Mr Stewart’s income, expenses and capacity to pay

1. The Tribunal notes that Mr Stewart’s ATI is now about $100,000 pa and he receives FTB of about $3,000 pa.

2. His actual costs of care are about $7,500 pa. On a cost percentage of 31%, he is contributing (via care) about $11,000 towards the total costs of care, as set by the formula, for the children.

3. As to his own personal household and living expenses, he puts these at in total $1,655 pw ($86,660 pa) (see A9).

4. He pays very substantial mortgage repayments of $750 pw, almost half of his total expenses, and his other household expenses seem relatively modest.

5. He has borrowed a substantial amount to “buy out” Ms Stewart, but that is his financial and lifestyle choice. The Act makes clear that his main priority must be to provide an adequate level of financial support for the children.

6. He is up to date with payments.

7. The Tribunal is satisfied that he has the capacity to pay ongoing child support of something over what the “normal” formula would produce, based on the incomes as discussed above.

Hardship

1. With regard to hardship (paragraph 117(4)(g) of the Act) the Tribunal must consider this factor with reference to both of the parties and the children.

2. The requirement is to “weigh or balance the hardship” that the making of, or refusal to make, the determination would cause to the carer entitled to child support, and to the payer, and to the children.

3. This decision, which is backdated to 1 April 2020, will cause Mr Stewart a small debt of about $300–$400. This will not cause him undue hardship.

4. Ms Stewart is facing substantial and rising costs relating to the children, and needs as much financial support from him as he can reasonably give.

5. On balancing the hardship, the Tribunal finds that the hardship to Ms Stewart and the children of not making this decision outweighs the hardship to Mr Stewart of a modest (in fact about 9%) increase over his current child support liability, which is $7,432 pa.

Proposed departure determination

1. The Tribunal considered that any departure determination should take specific account of various matters, set out below.

2. The Tribunal noted that the children are 9 and 7.

3. Under the formula, the total costs of care for two children under 13, assuming the parents’ combined income in this case is $185,000, would be about $35,800 pa.

4. The older child will be 13 on 13 February 2024.

5. Mr Stewart’s cost percentage is currently 31%, and so he is deemed to be contributing about $11,000 pa via care towards the total costs of care, as set by the formula.

6. The Tribunal has also noted and taken into account that Ms Stewart’s costs of providing care, including the recent orthodontic expenses, are substantial.

7. Both parents have secure, government funded employment, and so this is a suitable matter for a long-term departure decision.

8. The Tribunal proposes to make a new departure determination from 1 April 2020 which is based upon the income which the Tribunal has found is available for Mr Stewart to draw upon, and the income of Ms Stewart, as found above, and does not create more than a very modest debt.

9. The annual rate of child support fixed by the formula, as a guide, for a payer with an ATI of $100,000, and a payee with an ATI of $85,000, with two children under 13, care being 62%/38%, is just over $7,000.

10. Mr Stewart can afford to pay, and should, in all the circumstances, contribute half of the orthodontic costs.

11. The Tribunal will extend this decision to 13 February 2024, and add that contribution evenly over time to the rate which the formula would normally generate for these sort of circumstances.

12. For clarity and certainty, the Tribunal adopts (one might say, resurrects) the previous AAT decision, in full, then fixes an annual rate of $8,000 pa from 1 April 2020 to 13 February 2024.

Is it otherwise proper to further depart from the administrative assessment? 

1. The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to make the particular determination to depart from the administrative assessment. 

2. Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:

   (a) ….

   (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.

3. The Tribunal notes that Ms Stewart receives ongoing FTB.

4. She needs to advise Centrelink of this new decision, which may lead to a small decrease in her FTB entitlements after 1 April 2020.

5. In any event, the Tribunal believes that it is otherwise proper to depart from the administrative assessment in the way set out in this decision.

DECISION

The decision under review is set aside and the Tribunal substitutes a new departure determination as follows:

• The previous AAT decision of 26 March 2019 should remain in place to 31 March 2020; and

• The annual rate of child support payable by Mr Stewart is fixed at $8,000 for the period from 1 April 2020 to 12 February 2024.