Thaxter and Cawley (Child support)

[2023] AATA 4662

Thaxter and Cawley (Child support) [2023] AATA 4662 (31 August 2023)

DECISION AND REASONS FOR DECISION

DIVISION:  Social Services & Child Support Division

REVIEW NUMBER:  2023/BC026163

APPLICANT:  Ms Thaxter

OTHER PARTIES:  Child Support Registrar Mr Cawley

TRIBUNAL:  Member S Letch

DECISION DATE:  31 August 2023

DECISION:

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

(a)  For the period 1 January 2023 to 31 December 2023, Mr Cawley’s adjusted taxable income is varied to $94,000;

(b)  For the period 1 July 2023 to 31 December 2023, Ms Thaxter’s adjusted taxable income is varied to $68,000.

CATCHWORDS
CHILD SUPPORT – departure determination – whether just and equitable to depart – on basis of liable parent’s income – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1.Ms Thaxter and Mr Cawley are the parents of [the child] (born July 2011). Mr Cawley has been assessed by Child Support as liable to pay child support to Ms Thaxter. Ms Thaxter seeks a review of an objection decision “allowing in part” Mr Cawley’s objection to a “change of assessment” decision of 12 October 2022.

2.By way of background, it is convenient to set out some extracts from the objections officer’s decision dated 16 May 2023:

The assessment

Based on the child support formula for the period 5 December 2022 to 30 June 2023 Mr Cawley is assessed to pay an annual rate of child support of $332 based on his 2021-2022 Adjusted Taxable Income (ATI) of $42 676 and Ms Thaxter's 2022-2023 estimate of $68 072.

For the period 8 November 2022 to 4 December 2022 Mr Cawley is assessed to pay an annual rate of child support of $555 based on his 2021-2022 ATI of $42 676 and Ms Thaxter's 2022- 2023 estimate of $62 571.

For the period 1 October 2022 to 7 November 2022 the annual rate is $0 based on Mr Cawley's 2021-2022 ATI of $42 676 and Ms Thaxter's 2021-2022 ATI of $83 142.

For the period 1 November 2021 to 30 September 2022 Mr Cawley is assessed to pay an annual rate of child support of $9048 based on the 2020-2021 ATIs of $120 351 for Mr Cawley and $60 597 for Ms Thaxter.

For the period 1 August 2020 to 31 October 2021 Mr Cawley is assessed to pay an annual rate of child support of $7462 based on the 2019-2020 ATIs of $98 887 for Mr Cawley and $51 674 for Ms Thaxter.

The case was registered on 16 January 2012 and payments have been collected by the agency since 25 February 2013. Mr Cawley owes $821.07 in outstanding child support.

DECISION UNDER REVIEW

On 12 October 2022 Ms Thaxter applied for change to the assessment on the basis of Reasons 8A (income) and 8B (earning capacity). I note that Ms Thaxter subsequently withdrew Reason 8B. Mr Cawley agreed that his income had changed and provided a response.

On 19 January 2023 Decision Maker [A] found Reasons 8A established and changed the assessment as follows:

For the period 1 October 2022 to 31 December 2023 Mr Cawley`s Adjusted Taxable Income is set at $94 000.

…

Based on the above information Mr Cawley is currently employed and earning an annual income of $95 000. Allowing for work related deductions of $ 1000 this gives him an income of$94 000.

If I use an income of $94 000 in the assessment for Mr Cawley, the annual rate of child support payable by Mr Cawley increases from $332 to $6158. Th.is is a significant difference.

The income currently used in the assessment is $42 676. Based on the above information I am satisfied special circumstances exist. I also find Mr Cawley' s current income is significantly higher and I am satisfied the child suppo1t assessment is unfair because he has a greater capacity than the child support assessment currently indicates.

Reason 8A is established.

…

Ms Thaxter is a salary and wage earner and is assessed on her 2022-2023 estimate of her income of $68 072. I note this estimate will be reconciled against her 2022-2023 tax return and adjusted if she has understated her income. I have no evidence her income is significantly different and as her income will be reconciled I consider she is fairly assessed.

I have found Reason 8A established with respect to Mr Cawley`s income. His current income is

$94 000 and is significantly higher than the income he earned in the 2021-2022 financial year which has been used in the assessment since 1 October 2022.

However I also note that as Mr Cawley has submitted in his objection he was assessed on his 2020-2021 income of $120 351 from 1 November 2021 to 30 September 2022 when his actual income for this period was $42 676. I also note that Mr Cawley has submitted that he was studying during that time.

The difficulty here is that with time past Mr Cawley has demonstrated he has had the capacity to meet his payments and has made some payments direct to Ms Thaxter for [the child] which he has received credit for. I also note that the child support formula is essentially a guide and the calculation of actual payments for [the child] is often based on incomes that are slightly inaccurate as they are for the previous tax year.

I note that in DM [A]`s decision she stated that Mr Cawley had the benefit of being under assessed for some time when she backdated the decision. However although Mr Cawley`s income was $42 676 for the 2021-2022 financial year he was assessed up until 30 September 2022 on his 2020-2021 ATI of $120 351. I also note that in prior years he has been assessed on similar incomes. I also note that he could have contacted the Agency and reduced his income for the past period by lodging an estimate but he chose not to.

Considering these circumstances whilst I do not consider that it is fair to put Ms Thaxter in a significant overpayment situation, I disagree with the extent that the assessment was backdated to reflect Mr Cawley`s new income. Therefore I intend to change the assessment to reflect his new income from 1 January 2023. This will give him a credit of $969.40 which will offset the arrears on the case of $821.07 and give him a credit of approximately $148 towards his next payment. I will set his income until 31 December 2023 which is the end of the child support period. From 1 January 2024 the assessment will use his 2022-2023 tax return which should accurately reflect his current income.

Therefore Mr Cawley' s objection is allowed in part and DM [A]'s decision is set aside and replaced with the following decision:

For the period 1 January 2023 to 31 December 2023 the Adjusted Taxable Income for Mr Cawley is set at $94 000.

… DECISION

I have found special circumstances exist in this case and that it would be just and equitable and otherwise proper to make a change. The change to be made to the assessment is:

Outcome: The objection is allowed in part.

I have made the decision to set aside the decision made by Decision Maker [A] and replace it with the following decision:

For the period 1 January 2023 to 31 December 2023 the Adjusted Taxable Income for Mr Cawley is set at $94 000.

…

3.Ms Thaxter and Mr Cawley participated in the Tribunal’s hearing by conference telephone. In making its decision, the Tribunal took into account the sworn evidence of both parties, Child Support materials, and the additional materials submitted by both parties.

CONSIDERATION

The legislative framework

4.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). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

5.Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

·     a departure is just and equitable as regards the children and each parent (sub- subparagraph 98C(1)(b)(ii)(A)); and

·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)).

6.Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

7.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. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

8.Subparagraph 117(2)(c)(ia) of the Act, commonly referred to by Child Support as Reason 8A, provides as a ground for departure:

(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

…

9.The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman and Gyselman (1992) FLC 92-279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.

The hearing

10.In short, Ms Thaxter told the Tribunal that her application was made in respect of a past period, not going forward. In short, she accepted the original decision which recorded Mr Cawley’s income as $94,000 from 1 October 2022, which was a proper reflection of [Employer] income; she did not consider it fair for his income to be recorded as some $42,000 (his 2021/22 adjusted taxable income). If she had not applied for a departure, Mr Cawley would still be recorded as having an income of some $42,000, far less than his actual income. Ms Thaxter said she did not understand why the objections officer decided to “push back” Mr Cawley’s income until 1 January 2023, which resulted in an “overpayment”.

11.Ms Thaxter told the Tribunal that she “gets” the approach of Child Support to “balance out” to some degree the fact that Mr Cawley was assessed on much higher incomes when he

was studying; however, she maintains his current income should properly be reflected in the assessment as she continues to incur expenses as a single parent for [the child].

12.Ms Thaxter told the Tribunal that Child Support is fully aware that she is now earning in the order of some $68,000 per annum (she was previously working less hours). She conceded that if Mr Cawley is to be assessed on his current income, that ought to apply to her from 1 July this year.

13.Mr Cawley told the Tribunal he had accepted the objection decision and was “happy to leave it at that”. However, he advised that he had recently made a “change of assessment” application in respect of Ms Thaxter’s employment income which is not reflected under the formula arrangements. He has been told it will take several months for a decision to be made. He indicated a preference for the Tribunal to deal with the increase in Ms Thaxter’s income from 1 July 2023.

14.In terms of going forward, Mr Cawley indicated no objection to his income being set until the end of 2023; by 1 January 2024, he will have filed his 2022/23 income tax return which will reflect a full year of income at [Employer]. Ms Thaxter told the Tribunal that her contract expires in early January 2024; both parties indicated that varying Ms Thaxter’s income until the end of 2023 would be appropriate, with both parents being at liberty to then make a fresh application for a change of assessment.

15.In relation to expenses, Ms Thaxter observed that she is a single parent facing “cost of living” pressures. She did not identify any particularly unusual expenses; the parents have an agreement “outside of child support” to share school and extracurricular expenses. Mr Cawley did not identify any particularly noteworthy expenses.

Consideration

16.Mr Cawley started work with [Employer] in late June 2022 earning in the order of $94,000 annually. For most of the 2021/22 financial year, he was studying, deriving $43,676 in the early part of the 2021/22 financial year. There was no serious dispute between the parties that Mr Cawley’s much lower 2021/22 adjusted taxable income was not reflective of his financial capacity at the time of Ms Thaxter’s application for a change of assessment on 12 October 2022; the parties dispute when that income should take effect, with Ms Thaxter urging the original departure from 1 October 2022, and Mr Cawley accepting 1 January 2023 in a “balancing exercise” against the higher assessment for an earlier period where he had not sought a departure (or submitted a reduced estimate). Regardless, there are special circumstances which render the child support assessment unfair given Mr Cawley’s employment with [Employer]; there is a ground to depart from the child support formula.

Issue 2 – Is it just and equitable to depart from the administrative assessment?

17.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the

needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

18.The Tribunal is obliged to conduct reviews in a way that is informal, quick and proportionate: section 2A of the Administrative Appeals Tribunal Act 1975.

19.Ms Thaxter made her application for a change of assessment on 12 October 2022. Compelling circumstances would be required to give retrospective effect to a departure, which can be imposed for a period up to 18 months prior (and up to 7 years with leave of a court).

20.For a period of approximately 9 months in the 2021/22 financial year, Mr Cawley was studying and had no income. His liability was assessed upon figures of some $98,000 (2019/20) and $120,000 (2020/21); he elected not to apply for a departure or make an estimate election.

21.In an attempt to balance the interests of the parents, the Child Support objections officer elected to apply Mr Cawley’s 2021/22 adjusted taxable income of $42,676 for the period 1 October 2022 to 31 December 2022 (3 months) before applying his income from [Employer] of some $94,000. In very broad terms, the effect of that decision might be described as Mr Cawley being “over-assessed” for a period of around 9 months, and “under-assessed” for a period of 3 months.

22.For his part, Mr Cawley accepts that result. Ms Thaxter seeks an assessment reflecting Mr Cawley’s [Employer] income from 1 October 2022 (when Mr Cawley’s 2020/21 adjusted taxable income of some $120,000 ceased to have effect).

23.I am minded to think that a fair balance of competing interests would be to apply the formula for Mr Cawley’s income for the period until 31 December 2022. This ameliorates to some relatively small degree his decision not to seek a departure for the extended period he had no income. I think it appropriate to vary his income to $94,000 from 1 January 2023, which is the same conclusion as the objections officer.

24.Going forward, Ms Thaxter accepts that if Mr Cawley is to be assessed upon a higher income before his [Employer] income is reflected in the ongoing formula arrangement, she too should be assessed from 1 July 2023 upon her anticipated (increased) income of some $68,000. I think it preferable to deal with that matter in this application in preference to Child Support addressing that in the currently undetermined departure application recently made by Mr Cawley.

25.Ms Thaxter’s contract expires early January 2024. I think it appropriate to vary her income to $68,000 from 1 July 2023 to 31 December 2023; it would be fair to vary Mr Cawley’s adjusted taxable income until that date, too (by which time it is expected his 2022/23 adjusted taxable income will likely be determined). Either or both parties will be at liberty to make a fresh departure application in January 2024 if, for example, Ms Thaxter’s contract is extended.

26.I do not consider it necessary to adjust Ms Thaxter’s adjusted taxable income for any period prior to 1 July 2023 as I consider the incomes applied to be broadly representative of her financial capacity.

27.Neither party raised any other expenses for themselves or [the child] which I consider require any further adjustment to the assessment. They have an agreement outside of the child support assessment to share school and extracurricular expenses which does not require any adjustment to the assessment. With appropriate budgeting, I am satisfied Mr Cawley will be able to meet his assessed liability.

28.I consider it just and equitable to make a departure in the same terms set out above.

Issue 3 – Is it otherwise proper to make a departure determination?

29.The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

30.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

31.As I have reached a different conclusion to the objections officer, the decision under review will be set aside.

DECISION

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

(a)  For the period 1 January 2023 to 31 December 2023, Mr Cawley’s adjusted taxable income is varied to $94,000;

(b)  For the period 1 July 2023 to 31 December 2023, Ms Thaxter’s adjusted taxable income is varied to $68,000.