Veevers and Flack (Child support)

[2019] AATA 574

Veevers and Flack (Child support) [2019] AATA 574 (11 February 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2018/BC014980

APPLICANT:  Mr Veevers

OTHER PARTIES:  Mrs Flack

Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  11 February 2019

DECISION:

The decision under review is set aside and, in substitution:

• Mr Veevers’ adjusted taxable income is varied to $178,353 per annum from 31 May 2017 until the occurrence of a terminating event in respect of [Child 2];

• Mr Veevers’ rate of child support payable is increased by $2,056 per annum from 1 January 2018 to 31 December 2018; and

• Mr Veevers’ rate of child support payable is increased by $2,879 per annum from 1 January 2019 to 30 September 2019.

CATCHWORDS

CHILD SUPPORT – departure determination – costs of education - manner expected by both parents - cost of maintaining the children are significantly affected – financial resources of both parents - decision under review set aside and substituted

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

REASONS FOR DECISION

Introduction

1. Mr Veevers and Mrs Flack are the parents of [Child 1] who was born on [date] September 2000 and [Child 2] who was born on [date] October 2001. A child support case was registered with the Department of Human Services - Child Support (“the CSA”) in 2008.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children. The Act also allows parents to provide estimates of their adjusted taxable income and, if accepted, the administrative assessment is provisionally based on the estimate of income, subject to a reconciliation once the parent’s actual adjusted taxable income becomes known. On 13 October 2017, Mr Veevers lodged an estimate of income of $0. He was, at the time, providing 24% care to both children. He was administratively assessed to pay what is called the fixed annual rate of child support payable, which was $2,780 per annum: see generally 2.4.11 of the Child Support Guide.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Mrs Flack lodged a departure application on 5 December 2017. An original decision-maker granted her application and made a departure decision which increased Mr Veevers’ rate of child support payable. He belatedly objected to that decision. The CSA granted his application for an extension of time in which to object, and an objections officer decided to allow his objection and vary his adjusted taxable income to $189,884 per annum from 31 May 2017 until the end of the child support case. He sought further review by the Tribunal. I conducted a telephone directions hearing on 7 December 2018. I conducted a full hearing on 11 February 2019. Mr Veevers attended the hearing in person. Mrs Flack attended by conference phone.

4. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... 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; …

A ground for departure

1. Subparagraph 117(2)(b)(ii) of the Act, commonly referred to as Reason 3, provides as a ground for departure:

that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

…   

(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents …

1. On 15 January 2010 the Social Security Appeals Tribunal, when considering Reason 3 as part of its review of an earlier departure decision in relation to Mr Veevers and Mrs Flack, noted at paragraph 78 of its Reasons for Decision that “there was a mutual intention to privately educate both boys at least throughout primary education.” The children were, at the time, attending [School 1].

2. [Child 1] received his secondary school education, and [Child 2] is receiving his secondary school education, at [School 2]. There is no dispute that Mrs Flack unilaterally enrolled the children at that school.

3. At the full hearing, Mr Veevers stated that he had expected the children to be educated at a “quality school”, but not necessarily a private school. He said he considered most private schools, and some public schools, to be quality schools. He said he considered [School 2] to be a quality school. It follows from that evidence that by attending [School 2], the children were being educated in a manner that was expected by Mr Veevers. I made observations to that effect and Mr Veevers changed his evidence and said he had expected the children to be educated at a “higher end” public school. I consider his earlier evidence to be the more reliable evidence on point. While attending [School 2], [Child 1] was, and [Child 2] is, being educated in a manner that was expected by Mr Veevers. There is no dispute that Mrs Flack also held that expectation.

4. For the sake of completeness I will note some further evidence. Mrs Flack provided what appears to be two similar, but not identical, offers by Mr Veevers to enter into a binding child support agreement. He said a number of different offers had been made to Mrs Flack to enter into a binding child support agreement, and he had written the substantive provisions, although Mrs Flack may have had some input into the documents too.

5. Mrs Flack provided what appears to be four-page proposed binding child support agreement: pages B11 to B14 of the hearing papers. There is no dispute that Mr Veevers signed and dated the fourth page. It is dated 1 August 2017. Mr Veevers noted that he had not initialled the preceding three pages. He queried whether the four pages constituted one original document, or whether it was an amalgam of different pages from different offers. Mrs Flack said she believed the four pages constituted one original document. I asked her why she held that belief, and I then spent a considerable amount of time trying to get her to answer that question. I was left with the impression that she was not being intentionally evasive, but she was someone who sometimes has difficulty listening to and answering a question, and she instead speculates on what other issues might have prompted the question, and she tries to address those issues. Mr Veevers did not provide any copies of the proposed binding child support agreements. On balance, I consider the document to be what it appears to be: a four-page proposed binding child support agreement. Pursuant to that document, Mr Veevers would “pay school tuition and levies”, and any “change of school shall be mutually agreed by the parties.” The children were, at the time, attending St Lawrence’s College. Mr Veevers would also “pay three hundred dollars ($300) (hereinafter ‘School Support Payment’) for each child for each month”.

6. I noted that Mr Veevers had labelled the money that he proposed to pay to Mrs Flack School Support Payments, and he had not proposed to make any additional payments to Mrs Flack to assist her in meeting the children’s general costs while they were in her care. I suggested that his offer to pay [School 2]’s fees directly, and only pay Mrs Flack what he called School Support Payments, appeared to reflect a desire to ensure that the children continued to attend [School 2]. Mr Veevers noted that he could have labelled the payments to Mrs Flack differently and still achieved the same financial result. I agree with that observation, but it does not advance his submission that the children were not being educated in a manner that he expected.

7. Mrs Flack also provided a three-page draft of a proposed binding child support agreement: pages 183 to 185 of the hearing papers. Mr Veevers initialled the first two pages and signed and dated the third page. It is dated 4 August 2017. Again, he offered to pay school tuition fees and the like, and he offered to pay Mrs Flack $300 per child per month, but he did not refer to those payments as School Support Payments. He placed two “X”s beside the two paragraphs that would require him to pay the school tuition fees and the like, and make payments to Mrs Flack. He said the “X”s indicated that he did not agree with the paragraphs, notwithstanding the fact that he signed and initialled the document that was then sent to Mrs Flack. I do not accept his evidence that the “X”s indicated that he did not agree with the paragraphs.

8. It is also worth noting that when Mr Veevers made those offers, he was only required to pay the “ordinary” administratively assessed rate of child support; he was not required to make an additional payment towards the costs of the children’s private school fees.

9. In 2017, [Child 1] was in Year 12 and [Child 2] was in Year 10, and their tuition fees were $7,132 + ($7,132 x 80%) = $12,838. In 2018, [Child 2] was in Year 11 and his tuition fees were $7,416. [Child 2] is currently in Year 12 and his tuition fees are $7,804. There is no dispute that Mr Veevers has only made one payment to the school concerning tuition fees since May 2017 and the payment was credited as a non-agency payment against his child support liability. Mrs Flack has effectively been paying the school fees. In summary the children are being educated in a manner that was expected by the parents and the associated tuition fees significantly affect the costs of maintaining those children. Mrs Flack is paying those fees. Those circumstances as a whole constitute special circumstances. Reason 3 is established.

10. Mrs Flack noted that she incurs other costs in respect of the children’s schooling. I suggested, and Mrs Flack agreed, that most private and public schools impose other miscellaneous costs, but only the tuition fees constituted special circumstances for the purposes of Reason 3.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable 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.

2. From 2 July 2018, each parent was recorded as providing 50% care to [Child 2]. From 3 July 2018, Mr Veevers was recorded as providing 100% care to [Child 1]. On 18 September 2018, [Child 1] turned 18 and ceased to be a child of the child support case. Each parent continues to provide 50% care to [Child 1].

3. Mr Veevers was the chief executive officer of an international company. His position was made redundant on 31 May 2017. His total income during 2016-17 was $842,426. There is no dispute that he received wages of $396,543 and the balance, being $445,883, was the value of his redundancy package. He was subject to a 30-month restraint of trade provision. In approximately August 2018 he successfully negotiated the cessation of that provision. He stated, and I accept, that he has not worked since 31 May 2017.

4. In or about April or May 2018, Mr Veevers finalised his property settlement with his second ex-wife, [Ms A]. He currently lives in rented accommodation. His household consists of himself, [Child 1] and [Child 2]. He has savings of approximately $530,000. He has superannuation of approximately $500,000 which he cannot currently access. He has a credit card debt of approximately $10,000 and he owes the Australian Taxation Office approximately $85,000.

5. Mrs Flack submitted that Mr Veevers should be assessed on his earning capacity. I can only find that a parent’s earning capacity is greater than their actual income if the requirements of subsection 117(7B) are satisfied. That subsection states:

   In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:

   (a)one or more of the following applies:

   (i)the parent does not work despite ample opportunity to do so;

   (ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;

   (iii)the parent has changed his or her occupation, industry or working pattern; and

   (b)the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:

   (i)the parent's caring responsibilities; or

   (ii)  the parent's state of health; and

   (c)  the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.

6. Mr Veevers has been unemployed for a significant period of time. He stated, and I accept, that he was subject to a restraint of trade clause until approximately August 2018. He said that since then he has attempted to obtain employment with a number of companies and has progressed to being interviewed for two positions, but without success. Mrs Flack submitted, without any corroborative evidence, that Mr Veevers could easily obtain employment, albeit at a lower income than he had previously earned. Mr Veevers replied that of the jobs that he has attempted to obtain since the redundancy, the lowest paying job was in the “low two-hundred thousand’s”, which was about half what he had previously earned.

7. In the absence of any probative evidence to the contrary, I accept Mr Veevers’ oral evidence to the effect that he has not had “ample opportunity” to return to paid employment. He has not reduced his hours of work or changed his occupation, etc; that change was unilaterally imposed upon him. Paragraph 117(7B)(a) is not satisfied and I cannot have regard to Mr Veevers’ earning capacity.

8. Mrs Flack is employed as a part-time  [manager]. Her 2016-17 adjusted taxable income was $30,323 and her 2017-18 adjusted taxable income was $34,659. Her household consists of herself, her husband and [Child 2]. According to her Statement of Financial Circumstances, she does not own any real estate and she has no savings.

9. Mr Veevers effectively submitted that although Mrs Flack might not own any significant assets in her own name, she would have an equitable interest in the matrimonial assets. There is some evidence to suggest that Mrs Flack’s husband earns a relatively high income, although Mrs Flack claimed, unconvincingly, that she was unable to provide any indication as to what her husband’s income might be (notwithstanding the fact that his taxable income would appear on each of her tax returns). I did not consider it necessary to question Mrs Flack further on the issue. Parents, and not stepparents, have a primary obligation to financially provide for their children. Mrs Flack’s ongoing capacity to provide for the children is fairly reflected for child support purposes in her adjusted taxable income as assessed by the Australian Taxation Office from time to time.

10. Returning to Mr Veevers’ circumstances, he received a $445,883 redundancy package when his position was made redundant on 31 May 2017. He correctly noted that some legislation, such as the social security legislation, prescribes the way in which lump sum payments are to be treated for the purposes of that legislation, but the child support legislation does not do so. When deciding whether it would be just and equitable to make a particular departure decision in child support matters, decision-makers must have regard to a number of matters: subsection 117(4) of the Act. However, they retain a broad discretion as to what might constitute a just and equitable departure decision in any particular case.

11. In this particular case, Mr Veevers had been earning a relatively high income. His 2015-16 adjusted taxable income was $487,159. He earned $396,543 from 1 July 2016 to 31 May 2017. It is in that context that he received a $445,883 redundancy package and was subject to a 30-month restraint of trade provision. He stated that there was no nexus between the quantum of his redundancy package and the duration of the restraint of trade provision. In any event, at a practical level, the redundancy package provided ample funds from which he could support himself and meet his various financial obligations during that 30-month period. Coincidentally, that 30-month period would have expired on 30 November 2019, which is around the time that the child support case is likely to end.

12. Mrs Flack submitted that Mr Veevers should have been questioned further about the details of his and [Ms A]’s property settlement. I gather that she had hoped to trace various funds, and in particular the redundancy payments and the proceeds of sale of matrimonial assets. I did not consider that necessary. Regardless of how Mr Veevers ultimately elected to deal with his funds, the important point is that upon his position being made redundant, he was given ample funds from which to meet his various financial obligations, including his child support obligations, during the 30-month restraint of trade period. In the particular circumstances of this case, it is appropriate to vary Mr Veevers’ adjusted taxable income from 31 May 2017 to $445,883 / 30 x 12 = $178,353 per annum.

13. The child support case will probably, but not inevitably, end on [date] October 2019 (when [Child 2] turns 18) or slightly thereafter (when [Child 2] completes Year 12).

14. Both parents expected the children to be educated at [School 2] or a similar school, and it is appropriate that they share the associated tuition fees equally. The original decision-maker noted that Mrs Flack said “the fees for 2017 are up to date apart from $547 which she intends to pay”. The original decision-maker decided to increase Mr Veevers’ rate of child support payable on account of the tuition fees from 1 January 2018.  At the full hearing, Mrs Flack submitted that Mr Veevers’ rate of child support payable should be increased on account of the tuition fees from an unspecified earlier date. However, she elected not to lodge a departure application until 5 December 2017, which was after the end of the 2017 school year. I consider it appropriate to increase Mr Veevers’ rate of child support payable on account of the tuition fees from 1 January 2018. As noted earlier, the 2018 tuition fees were $4,112. Mr Veevers’ rate of child support payable from 1 January 2018 to 31 December 2018 will be increased by $2,056 per annum. The 2019 tuition fees are $4,318. The child support case will probably end in October or November 2019. Mr Veevers’ rate of child support payable during the 9 months from 1 January 2019 to 30 September 2019 will be increased by ($4,318 / 2) / 9 x 12 = $2,879 per annum.

15. The proposed decision will increase Mr Veevers’ child support arrears by approximately $800 and will require him to pay a current rate of child support of approximately $14,300 per annum. He has the capacity to pay those arrears and that rate of child support and it is appropriate that he do so. The proposed decision will be just and equitable.

Otherwise proper

1. 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. Neither parent receives family tax benefit in respect of their care of the children. The proposed decision will be otherwise proper.

DECISION

The decision under review is set aside and, in substitution:

• Mr Veevers’ adjusted taxable income is varied to $178,353 per annum from 31 May 2017 until the occurrence of a terminating event in respect of [Child 1];

• Mr Veevers’ rate of child support payable is increased by $2,056 per annum from 1 January 2018 to 31 December 2018; and

• Mr Veevers’ rate of child support payable is increased by $2,879 per annum from 1 January 2019 to 30 September 2019.