Torbett and Elliot (Child support)

[2023] AATA 3408

Torbett and Elliot (Child support) [2023] AATA 3408 (2 August 2023)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2023/SC025577

APPLICANT:  Ms Torbett

OTHER PARTIES:  Child Support Registrar

Mr Elliot

TRIBUNAL:Member M Martellotta

DECISION DATE:  2 August 2023

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides to vary the administrative assessment in the following terms:

• For the period 21 March 2022 to 30 June 2024 Mr Elliot’s adjusted taxable income is varied to $110,000.

• Mr Elliot’s annual rate of child support is increased by $3,354 for the period 1 January 2022 to 31 December 2022 (to reflect 50% contribution towards the children’s education costs).

• Mr Elliot’s annual rate of child support is increased by $4,945 for the period 1 January 2023 to 31 December 2023 (to reflect 50% contribution towards the children’s education costs).

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the children are significantly affected – a ground for departure established - 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 Torbett and Mr Elliot are the parents of two children[1] who are currently children for the purposes of the administrative assessment of child support. Mr Elliot is the parent liable to pay child support. Ms Torbett is recorded as having primary care of the children.

   [1] Born [in 2010 and 2012]

2. On 21 March 2022 Ms Torbett lodged a change of assessment application with Services Australia – Child Support. Her application was on the grounds of reasons 3, 8A and 8B.

3. These grounds refer to the following:

   Reason 3 requires Ms Torbett to establish that the costs of maintaining the children are significantly affected by the costs of caring for, educating or training the children in a manner expected by the parents.

   Reasons 8A and 8B require Ms Torbett to establish that there is a ground to depart from the assessment due to Mr Elliot’s income, financial resources, property and earning capacity.

4. At the time of Ms Torbett’s application the administrative assessment in place for the child support period 21 March 2022 to 31 October 2022 was based on Mr Elliot’s 2020/21 adjusted taxable income of $28,789 and Ms Torbett’s 2020/21 adjusted taxable income of $67,937. This resulted in a nil annual liability.

5. An original Child Support decision maker found grounds were established (reasons 3 and 8A) and departed from the assessment by fixing the annual rate of child support liability at $21,092 for the period 14 April 2022 to 31 December 2023. Mr Elliot objected. His objection was allowed in part and a new decision made on 12 August 2022 decided that:

   ·For the period 21 March 2022 to 31 March 2023 Mr Elliot’s adjusted taxable income will be set at $110 000.

   ·For the period 21 March 2022 to 31 March 2023, Ms Torbett’s adjusted taxable income will be set at $125 740.

6. This departure resulted in an annual rate of child support of $7,828. Ms Torbett seeks review of that decision, and she lodged her application with the Tribunal.

7. The Tribunal issued directions following a telephone direction hearing on 18 May 2023. The Tribunal was satisfied the parties complied with those directions. A hearing was conducted on 5 July 2023. Both parties provided submissions and evidence by telephone. Following the hearing further directions were issued and the parties provided further financial information.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. Child support legislation is interpreted by Child Support with the aid of the Child Support Guide (the Guide). The Tribunal is not bound by law to apply the policy as set out in the Guide but provided the policy is consistent with the legislation, it is required to have regard to it and in the ordinary course follow it.[2]

   [2] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.

3. The issues for the Tribunal to determine in this case are:

   ·      Does a ground for departure exist? If so,

   ·      Would it be just and equitable as regards the children, the liable parent and the carer entitled to child support to depart from the administrative assessment of child support?

   ·      Is it otherwise proper to make a particular departure determination?

CONSIDERATION

Issue 1 – Is there a ground to depart from the administrative assessment?

1. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Act. This involves the application of a statutory formula, which considers factors such as the number of children, the age of each child, the level of care provided and the income of each parent. Income used in the calculation has a number of components to arrive at the adjusted taxable income, which is worked out using section 43 of the Act. The general approach is that the Child Support Registrar (the Registrar) will utilise a parent’s adjusted taxable income as assessed by the Australian Taxation Office for the last relevant year of income.

2. The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment under Part 6A of the Act (a process commonly known as a change of assessment) (section 98B). Section 98C of the Act provides that the Registrar may make a determination to depart from the formula assessment and as noted, establishes a three-step process.

3. The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act. Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[3] In this matter a ground for departure raised by the application was Reason 3.

   [3] The phrase “special circumstances of the case” is not defined in the Act. However the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC92-279). Likewise, in Phillippe and Phillippe (1978) FLC 90–433 the Court held that “special circumstances” are “facts peculiar to the particular case which set it apart from other cases”.

Reason 3 – Costs of education

1. A ground for departure exists if, in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being cared for, educated or trained in the manner that was expected by their parents (subparagraph 117(2)(b)(ii)).

Are the children being educated in a manner expected by the parents?

1. At the time of hearing the children are being educated in the private Islamic education system. One child is in primary school ([School 1]) and the other child is in high school ([School 2]).

2. At hearing the parties’ evidence was consistent in that they agreed that they mutually intended the children to be educated in the private Islamic education system.  Mr Elliot says that whilst post separation he signed the enrolment form for both children to  attend a private Islamic high school,[4] he would be happy for them to attend public high school.

   [4] Folios A17 and A33.

3. The legislation does not provide a definition of the term “manner expected”. The Full Court of the Family Court[5] has considered a similar provision that appears in the Family Law Act 1975 stating:

   40. … It refers to the manner in which the child "is being", and which the parties to the marriage "expected" the child to be educated. That provision appears to have direct relevance to the issue of private school education, particularly its reference to the manner in which the parties "expected" the child to be educated. The word "expected" in the past tense presumably relates to some expectation of the parties at a point in time earlier than the hearing.

   …

   78. Where the non-custodian has agreed to the child attending such a school that person is liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to continue to do so.

   [5] Mee and Ferguson [1986] FamCA 3.

4. The Tribunal is satisfied that the children are being educated in a manner expected by the parents and this extends to their enrolment to attend the high school [School 2]. The Tribunal reaches this conclusion on the basis that it finds both parents signed the enrolment forms for both primary and secondary education. The eldest child has commenced attending high school and the intention is that their youngest also attend that same school.

Do the costs of education significantly affect the costs of maintaining the children?

1. This is the next question for consideration. The Guide notes:

   the Registrar will consider whether the additional amount is significant in relation to the assessed costs of the child. If the additional amount is small in comparison with the assessed costs, the Registrar may find that the costs of maintaining the child are not significantly affected and that there is no reason to change the assessment (CSA Act section 117(2)(b)(ii)).[6]

   [6] At 2.6.9.

2. According to the evidence in the 2022 academic year, the tuition fees were as follows:

   a)[School 1] $3,640

   b)[School 2] (at half scholarship) $3,068.

3. Ms Torbett advised that the half scholarship for their eldest child at [School 2] has ceased for the 2023 academic year. Ms Torbett provided invoices showing tuition fees for the eldest child. In 2023 the fees are about $6,140. The youngest child is in [grade] at [School 1] and on the evidence their fees are about $3,750.

4. The Tribunal finds that in 2022 the total education costs for the two children was about $6,780.  In 2023 the Tribunal finds that the total education costs is about $9,890.

5. According to the assessments the relevant costs of the children were $11,694 for each child. Based upon the Tribunal’s findings in relation to the education costs, the Tribunal is satisfied that in the special circumstances of the case, the costs of maintaining the children are significantly affected because the children are being educated in the manner that was expected by their parents. For this reason, the Tribunal therefore finds that there is a ground for departure.

6. Child support legislation does not require both parents to be liable for the costs. The most that it requires is the cost must be of an amount that significantly affects the costs of maintaining the children. The issue as to whether Mr Elliot can afford to contribute towards the cost of schooling will be considered by the Tribunal when determining whether it is just and equitable to make a departure determination.

Issue 2 – Is it 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 as set out above, the next step for the Tribunal is to consider whether it is just and equitable as regards the children and the parents to make a particular departure determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act. This in turn requires the Tribunal to consider the matters set out in subsection 117(4) of the Act, which are discussed in the following paragraphs.[7]

   [7] The Tribunal notes the Federal Magistrates Court case of Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886 which directs that in considering the matters set out in subsection 117(4) “the section need not be slavishly followed, each of the relevant factors listed in s.177(4) should be considered”.

Duty to maintain the children

1. Both parents have a duty to maintain the children as is stated in the Act: “parents of a child have a primary duty to maintain the child. The duty has a priority over all commitments of the parent other than commitments necessary for self-support.”[8]

   [8] Section 3 of the Act.

Proper needs of the children

1. In determining the proper needs of the children it is necessary to have regard at a broad level to the manner in which the children are being, and in which the parents expect the children to be, cared for, educated or trained, and also any other needs of the children.

2. The Tribunal has already made findings regarding the costs of educating the children. The Tribunal was satisfied that on the evidence the only basis on which to consider varying the assessment in relation to proper needs relates to the costs of the children’s education.

Income, earning capacity, property and financial resources of the children

1. In having regard to the income, earning capacity, property and financial resources of the children, the Tribunal must disregard any entitlement of the children or the carer entitled to child support to an income-tested pension, allowance or benefit. No evidence or submissions were received in this regard and the Tribunal concluded that there was no basis to vary the assessment on this ground.

Other party receiving money, goods and property for the benefit of the children

1. No evidence or submissions were received in this regard and the Tribunal concluded that there was no basis to vary the assessment on this basis.

The income, property and financial resources of each parent who is a party to the proceeding     

1. Both parties provided evidence about their financial circumstances.

2. Ms Torbett is currently employed on a full-time basis. She derives her income from that employment and otherwise is in receipt of family tax benefit (A and B). She commenced work with her current employer in March 2023. She was made redundant from a previous role with a different employer and received a redundancy payout. Ms Torbett provided full disclosure including a copy of the separation certificate.

3. Ms Torbett confirmed that she and Mr Elliot are currently the joint registered owners of the former matrimonial home. This is valued at about $1 million and is subject to a joint mortgage of about $398,122. She stated that matters are currently before the Family Court regarding final orders for property settlement and a trial is pending subject to any agreement.

4. Ms Torbett stated that her sister has been regularly assisting her in meeting the mortgage for the home as Mr Elliot ceased making contributions. Ms Torbett said other family have also assisted in meeting the school fees and also towards the mortgage payments. Her evidence that these amounts will be  repaid once final property orders are made. The Tribunal accepts that evidence and is satisfied that that those amounts are not a financial resource relevant to the assessment.

5. The Tribunal reviewed Ms Torbett’s individual income tax returns. The Tribunal is satisfied these accurately reflect her adjusted taxable income for child support purposes.

6. Mr Elliot’s financial circumstances are slightly more complicated. His evidence is as follows:

   a)He was previously self-employed from about September 2017 until the COVID19 pandemic took effect. From 1 April 2020 due to the lockdown, he was in receipt of jobkeeper payments.

   b)He has a 50% shareholding interest in a private company ([Business 1]). In 2021 he became the sole director of the company.

   c)In 2021 he and an associate established a private trust [named] (the Trust). He was a beneficiary of the trust, but it never generated any income.  He and his business partner were trying to establish residential land development project in 2021. The trust was related to that project, but it never got off the ground. The trust has since been wound up about six or seven months ago in 2022.

   d)Statements issued by accountants [Accountants 1] and a consulting firm (mortgage brokers) from September 2021 to April 2022 issued in his personal name related to work undertaken by those entities on his behalf for that development project.  

   e)Whilst the statements state that their fees were paid in full, he did not actually pay those amounts until 17 August 2022. He paid what was owing (about $20,000) from the [Business 1] bank accounts.  He was able to pay those amounts in August 2022 because [Business 1] had received a retainer of about $60,000 from an earlier project (pre-Covid19) on 15 August 2022 and this is where he got the funds to the accountant and other fees.

   f)He rejects submissions made by the applicant that he was paying amounts to [Accountants 1] not for services provided but to have them hold income on his behalf.

   g)In November 2021 he stated work with [Employer 1] as an employee. His annual income was about $85,000. That employment was terminated on 29 April 2022. He said that this was because the company was struggling, and it was mutually agreed he leave.

   h)Between April 2022 and August 2022, he was trying to restart his own business but was not having much success with that. In that time, he had nil income, but he was not able to qualify for income support in that period.

   i)He secured new employment with a company now known as [Employer 2] in August 2022 where he now works on commission with a base salary. His income varies accordingly.

   j)He does not derive any income from [Business 1] those entities and any related business that they undertake as they no longer operate since April 2020. He agrees however that the company is still registered, and he doesn’t want to wind up the company as he hopes to revive the business at some point in time. 

   k)He continues to transfer funds from his personal bank account into the company bank accounts.  He does this to pay for a business credit card.  He operates a credit card that is in the name of the private companies and uses the company credit card to meet personal expenses such as personal rent and transport (fuel). He also pays his personal rent from company account to keep those payments consistent and from the one account.

   l)Other funds are being transferred from his personal bank account into another account which he  

   m)Certain deposits made into his personal bank account (if not employment related) are funds provided by friends who are assisting him to get through financial issues.

   n)He agrees that he has been travelled overseas but those trips have been funded by friends or his girlfriend.

7. He does not otherwise own any significant assets apart from the interest he has in the former matrimonial home.

8. The Tribunal asked Mr Elliot given his evidence that the company has not operated a business since 2020 why do the company financial statements show that it is still receiving income and claiming expenses such as vehicle depreciation ($18,817 in 2021 and $14,090 in 2022).  He said that the car ([Vehicle 1]) is owned by the company. He sometimes uses the car for personal use but mainly uses it for [Business 1] business purposes. The depreciation is a book entry only and it relates to the repayments on the care.

9. Overall, the Tribunal found Mr Elliot’s explanation of his financial circumstances pertaining to the company unsatisfactory.  His evidence that the business has in effect ceased operation since 2020 appears inconsistent with the financial statements which show that the company continued to received income and claim expenses for the financial years 2021 and 2022.  He also gave evidence that the company received a retainer in August 2022 and that he was involved in another business venture in 2021 to 2022. Overall, the Tribunal’s assessment of his evidence is that he has continued to engage in various business projects in addition to his paid employment.

1. As noted, Mr Elliot says that he is 50% shareholder of [Business 1], the Tribunal concludes that he has the benefit of deductions, expenses and any profit generated by the company. From the available evidence regular withdrawals from the [Business 1] bank account (of about $930 per month) are being used to pay the company credit card which Mr Elliot stated that he is using to pay for his personal expenses.

2. Review of Mr Elliot’s provided personal bank accounts shows regular deposits from a variety of sources.

   2021/22

   January 2022: $5,900

   February 2022: $6,882

   March 2022: $9,051

2022/23

November 2022: $8,270

December 2022: $9,476

January 2023: $7,031

February 2023: $7,024

March 2023: $9,564

April 2023: $5,245

May 2023: $7,308

1. Based upon these patterns of deposit and including the financial benefit derived from having the private company credit card meet payments for the purchase of goods and services for his personal benefit, the Tribunal concludes that in 2021/22 Mr Elliot had access to income and financial resources of about $98,500 and in 2022/23 access to income and financial resources of about $106,563 – these average to relevant income and financial resources of about $102,500 per annum.

2. The tribunal also concludes that Mr Elliot continues to receive financial benefit from the continued operation of the private company (for example the depreciation he claims for the [Vehicle 1]). The Tribunal was also not convinced by his explanation that he continues to mainly use that asset for business related purposes.

3. Inclusion of these amounts would result in Mr Elliot having access to additional financial resources which in the tribunal’s assessment (consistent with the objection decision) would equate to about $110,000 per annum.

4. That amount differ significantly from the amounts used in the assessment based upon Mr Elliot’s individual tax returns. In the Tribunal’s assessment this is a relevant consideration when considering whether to make any particular departure determination.

Earning capacity

1. A ground for departure exists if, in the special circumstances of the case, the 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 because of the earning capacity of either parent. To succeed on this basis the Tribunal must be satisfied that all three compulsory criteria in subsection 117(7B) are satisfied before it determines that a parent’s earning capacity is greater than is reflected in his or her income for the purposes of the Act. Those criteria are:

   a)   a change in a pattern of work demonstrated by:

   ·the parent not working despite ample opportunity to do so

   ·the parent reducing 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

   ·the parent changing his or her occupation, industry or working pattern

   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:

   ·the parent’s caring responsibilities

   ·the parent’s state of health

   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.

2. The evidence confirmed that Mr Elliot’s pattern of employment has changed. He states this is due to economic conditions. Overall, the Tribunal concluded that a finding of earning capacity cannot be established in this case.

The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support himself or herself, or any other child or person that the parent has a duty to maintain

1. Ms Torbett’s statement of financial circumstances discloses costs of self-support of about $600 per week. Mr Elliot discloses about $400 per week.

Conclusions

1. In this case, the Tribunal has concluded that the parents mutually intended the children to be educated within the independent Islamic education system. Evidence was provided of an agreement reached between the parties in which they would equally share those costs. Mr Elliot agrees that he has not been contributing towards those costs. Ms Torbett says since February 2022 she has been meeting the full costs of education.

2. In the Tribunal’s assessment the income and financial resources available to Mr Elliot are not reflected in the administrative assessment under review. Utilising the income and financial resources available to Mr Elliot and utilising Ms Torbett’s ATI as assessed by the ATO, in the assessment would result in an increase to the annual liability payable by him from nil to about $13,172 annually or $250 per week. 

3. When utilising Ms Torbett’s most recent ATI the annual liability would reduce to about $11,500 per annum or about $220 per week. If the assessment were further varied to require Mr Elliot to pay 50% of the children’s school fees this would result in an additional cost of about $64 per week for the 2022 academic year and $95 per week for the 2023 academic year.

4. Ms Torbett said that she has struggled financially in trying to keep the mortgage and school fees paid.  Mr Elliot says he cannot afford to pay child support or school fees other than an amount based upon his ATO lodged tax returns.  As noted, the Tribunal has concluded that Mr Elliot’s returns are not an accurate reflection of the income and financial resources available to him.

5. Based upon the Tribunal’s findings that Mr Elliot has income and financial resources of about $110,000 per annum ($2,115 per week) and considering his stated costs of self-support of about $400 per week the Tribunal is satisfied that a departure in the following terms would be just and equitable:

• For the period 21 March 2022 to 30 June 2024 Mr Elliot’s adjusted taxable income is varied to $110,000.

• Mr Elliot’s annual rate of child support is increased by $3,354 for the period 1 January 2022 to 31 December 2022 (to reflect 50% contribution towards the children’s education costs).

• Mr Elliot’s annual rate of child support is increased by $4,945 for the period 1 January 2023 to 31 December 2023 (to reflect 50% contribution towards the children’s education costs).

1. A variation in these terms means that Mr Elliot contributes to the children’s school fees and provides a level of certainty for the parties for a period of time.

Issue 3 – Would it be otherwise proper to make a particular departure determination?

1. The final step for the Tribunal to determine is whether it is “otherwise proper” to make a particular departure determination. Subsection 117(5) of the Act requires the Tribunal to take into account whether the proposed departure is proper in the context of public interest and welfare expenditure of the community. A prime objective of the legislation is that parents are obliged to support their own children to the extent of their real capacity and such obligation should not be unnecessarily abrogated to the public welfare system.

2. Ms Torbett is in receipt of family assistance payments. As a departure in these terms may result in a change in the level of welfare expenditure of the community, the Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment.

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides to vary the administrative assessment in the following terms:

• For the period 21 March 2022 to 30 June 2024 Mr Elliot’s adjusted taxable income is varied to $110,000.

• Mr Elliot’s annual rate of child support is increased by $3,354 for the period 1 January 2022 to 31 December 2022 (to reflect 50% contribution towards the children’s education costs).

• Mr Elliot’s annual rate of child support is increased by $4,945 for the period 1 January 2023 to 31 December 2023 (to reflect 50% contribution towards the children’s education costs).