Vodden and Nanson (Child support)

Vodden and Nanson (Child support) [2018] AATA 4989 (11 December 2018)

DIVISION:Social Services & Child Support Division
REVIEW NUMBER:  2018/MC014291
APPLICANT:  Mr Vodden
OTHER PARTIES:  Child Support Registrar
Mrs Nanson

TRIBUNAL:Member A Schiwy
DECISION DATE: 11 December 2018
DECISION:

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

·      for the period 31 March 2018 to 16 November 2018 Mr Vodden’s adjusted taxable income is varied to $86,300; and
·      for the period 17 November 2018 to 31 January 2019 Mr Vodden’s adjusted taxable income is varied to nil; and
·      for the period 31 March 2018 to 31 January 2019 Mrs Nanson’s adjusted taxable income is varied to $27,400; and
·      for the period 1 January 2018 to 31 December 2018 Mr Vodden’s child support liability is increased by $4,230 per annum.

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

BACKGROUND

Mr Vodden and Mrs Nanson are the separated parents of [Child 1] who is eight years old.
The child support case was registered in August 2016 and this review is about the child support payable by Mr Vodden to Mrs Nanson for [Child 1].
The Department of Human Services (Child Support) determined that the parents had shared care of [Child 1] up until 29 March 2018 (Mrs Nanson 65% care and Mr Vodden 35% care). Mr Vodden left Australia on 30 March 2018 and it was determined that Mrs Nanson had 92% care of [Child 1]. Mr Vodden returned to Australia in November 2018 and is seeking shared care of [Child 1].
The following administrative assessment issued:
· for the period 1 July 2017 to 8 November 2017 Mr Vodden’s annual child support liability was assessed at $9,379 based on adjusted taxable incomes for 2015–16 of $104,210 for Mr Vodden and $20,337 for Mrs Nanson;
· for the period 9 November 2017 to 31 December 2017 Mr Vodden’s annual child support liability was assessed at $5,982 based on adjusted taxable incomes for 2016–17 of $72,501 for Mr Vodden and $22,004 for Mrs Nanson.
On 26 July 2017 Mr Vodden lodged a departure application with Child Support on the basis that the rate of child support payable under the administrative assessment was unfair because of the income and earning capacity of Mrs Nanson; the high cost of school fees for [Child 1]; and his duty to support his [spouse].
On 27 November 2017 a Child Support case officer decided to make a departure determination on the basis that reason 8 had been established. The following departure determination was made:
· for the period 20 September 2017 to 31 October 2018 Mrs Nanson’s adjusted taxable income is varied to $89,374.
On 12 February 2018 Mrs Nanson objected to the decision (an extension of time to lodge the objection was granted).
On 11 April 2018 a Child Support objections officer set aside the original decision and decided that:
·      for the period 20 September 2017 to 31 October 2018 Mrs Nanson’s adjusted taxable income is varied to $45,038;
·      for the period 20 September 2017 to 31 October 2018 Mr Vodden’s adjusted taxable income is varied to $89,304; and
·      for the period 1 May 2018 to 31 December 2018 the annual rate of child support payable by Mr Vodden is increased by $7,251.
On 8 June 2018 Mr Vodden lodged an application with this tribunal for an independent review of the objections officer’s decision.
A hearing was held on 11 December 2018. Both Mr Vodden and Mrs Nanson attended the hearing and gave evidence on affirmation to the tribunal.
In considering this matter the tribunal took into account the oral evidence of Mr Vodden and Mrs Nanson; and the relevant documentation provided by the Child Support Registrar (numbered 1 to 974); Mr Vodden (numbered A1 to A102); and Mrs Nanson (numbered B1 to B296). Copies of all of the numbered documents were provided to all parties.
Mr Vodden provided further documents prior to the hearing that were not exchanged (A103 to A117). These documents were discussed during the hearing. Immediately after the hearing Mrs Nanson provided a further written submission (B297). The additional documents will be sent out with this decision.

ISSUES

The statutory provisions relevant to this review are set out in the Child Support (Assessment) Act 1989 (the Assessment Act) and in the Child Support (Registration and Collection) Act 1988.
The Assessment Act provides for an administrative assessment of the child support payable. It uses a formula that contains variables including the parents’ adjusted taxable incomes; their percentages of care for the children; and costs of the children. The Assessment Act also makes provision for a departure from the administrative assessment in certain circumstances.
The issues which arise in this case are:
·      does a ground for departure from the administrative assessment for child support exist? And if so,
·      is it just and equitable to make a particular determination? And
·      is it otherwise proper to make a particular determination?

CONSIDERATION

Issue 1 – Does a ground for departure from the administrative assessment for child support exist?

School fees

Subparagraph 117(2)(b)(ii) of the Assessment Act provides that a ground for departure exists where, in the special circumstances of the case, the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents.
[Child 1] attends a private school and it is not disputed that both parents agreed for her to attend the school. It is also not disputed that up until the end of 2017 they have been responsible for half of the school fees each.
Mr Vodden decided to cease paying the fees in 2018 on the basis that he was moving overseas and had additional costs. He informed Mrs Nanson of this and suggested that they move [Child 1] to a public school for 2018 and consider re-enrolling her in the private school in 2019.
Mrs Nanson ended up paying for the fees in 2018 but has submitted that Mr Vodden should be liable for half of the fees. It is not disputed that the fees in 2018 were $8,460.
The question of private schooling has been considered by the Full Court of the Family Court in Mee and Ferguson (1986) FLC 91-716. The principles that emerged from the case in relation to school fees can be summarised as follows:
·where a parent has agreed to the child attending a private school, that parent is liable to contribute to the fees so long and to the extent that he or she has a reasonable financial capacity to continue to do so;
·where a parent has not agreed to the child attending such a school, he or she is not liable to contribute to those expenses unless there are reasons relating to the child’s welfare which dictate attendance at the school rather than a non-private school. Then the parent is required to contribute to the extent that he or she has a reasonable financial capacity to do so.
Although that case was decided prior to the Assessment Act, the reasoning has been applied to child support cases (see Lightfoot and Hampson (1996) FLC 92-663 and Wild and Ballard (1997) FLC 92-771). In this particular case there is no dispute that the parents intended the child to be privately educated.
Having found that it was the common intention of the parties that [Child 1] attend private school, the tribunal must consider whether in the special circumstances of the case the costs of maintaining the child are significantly affected by that private education. The tribunal finds that the costs of attending the private school are greater than attending a government school and are expenses that are out of the ordinary and that in this particular case, the costs of maintaining the child are significantly affected by that private education.
This ground for departure is therefore established. Mr Vodden’s financial circumstances will be considered under Issue 2”.

Issue 2 – Is it just and equitable to make a particular determination?

As the tribunal is satisfied that a ground to depart from the administrative assessment exists the tribunal must consider whether it is just and equitable as regards the children, the liable parent and the carer entitled to child support to make a particular determination (subparagraph 98C(1)(b)(ii) of the Assessment Act). Subsection 117(4) of the Assessment Act sets out a variety of factors that must be considered in deciding whether it would be “just and equitable” to make a particular determination. These factors include the proper needs and costs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.
Section 3 of the Assessment Act makes it clear that the parents have the primary duty to maintain their children and that this duty has priority over all commitments of the parents, other than commitments necessary for self-support or for the support of another person they have a duty to maintain. In this case Mr Vodden and Mrs Nanson have the primary duty to support their child.

Mr Vodden

Mr Vodden is [Occupation 1] working for [ a company]. His taxable incomes in recent years have been:
2014–15   $75,009
2015–16   $104,210
2016–17   $102,757 (amended by the ATO on 2 May 2018; originally $72,501)
2017–18   Not lodged as at the date of the hearing
Mr Vodden provided a payslip to Child Support which showed year to date earnings for July 2017 of $9,583 (equates to an annual gross income of $114,996). After allowing for deductions the tribunal found that Mr Vodden’s income from 1 July 2017, while with [the company] in Australia, was $110,000 per annum.
On 30 March 2018 Mr Vodden took a position with [the company] in [Country 1]. A copy of his offer of employment was provided (page 902) which stated his salary was [amount] per month with a variable bonus payable at the end of the fiscal year (31 March). There was a relocation allowance of [amount] to be paid with his first salary payment, reimbursement for a one-way ticket to [Country 1] and settling in expenses of up to [amount]. He resigned effective from 16 November 2018 as he decided to move back to Australia. In addition to his monthly salary Mr Vodden was paid [amount] per month “CPF” allowance. This is paid in lieu of superannuation.
Mr Vodden stated that he was not eligible for any bonuses when he left as these are not payable until the end of the fiscal year.
The tribunal found that Mr Vodden’s income while working in [Country 1] was [amount] per month. The payment in lieu of superannuation was not paid into a superannuation fund and was funds available to Mr Vodden. Mr Vodden said he was saving the allowance to enable him to meet his tax liability (which is currently unknown). The tribunal was satisfied that the allowance was income regardless of how Mr Vodden chooses to spend it.
This equates to an annual salary of [amount]. After reviewing the average exchange rates from March 2018 to November 2018 on the tribunal was satisfied that the average rate while Mr Vodden was in [Country 1] was [rate]; almost on a par with the Australian dollar. The tribunal therefore found that Mr Vodden earned an income of AUD86,300 while in [Country 1].
Mr Vodden stated that he has been [in Occupation 1] for around 13 years. In 2013 he was working in various contract roles with some periods of unemployment. He commenced with [the company] in 2015.
He was [a role] (level 3) with [the company] and hoped to progress to management level. To obtain a promotion he needed to specialise. Due to the lack of opportunities in the Brisbane office to undertake strategic [projects] he started accepting projects in the Northern Territory in early 2017 and this resulted in him having to travel a lot. He returned to the Brisbane office in September 2017 and suitable work was drying up. He was not allocated any substantial projects.
He was offered an opportunity to work in [Country 1] where there was a lot more suitable work available. He decided to take up the opportunity with the hope that the experience he gained would improve his chance of promotion in the future. He was required to resign from his Australian position to take up the [Country 1] position.
Before taking the position he thought that Mrs Nanson had agreed that [Child 1] could come to live with him for six months in 2019 and this influenced him to take the position. (During 2018 he had [Child 1] with him for around a month in April.) It became clear in 2018 that this was not going to happen and he decided to resign in November 2018 and return to Australia so he could have [Child 1] in his care more regularly. He did not try and obtain a transfer as this process can take three to four months. He had lined up some interviews prior to leaving [Country 1] which he attended on his return to Australia but he was unsuccessful.
As at the date of the hearing he had not yet been successful in procuring a new position or contract and noted that it is unlikely he will get one until sometime in the new year as most firms would not recruit over the Christmas period. He and his wife and child are living with his sister and he is receiving financial support from his family. He has also applied for newstart allowance.
Mrs Nanson did not dispute Mr Vodden’s evidence and did not believe his decision to move to [Country 1] and then to return without employment was to do with impacting his child support liability.
The tribunal found that Mr Vodden changed employment in March 2018 with the predominant purpose of pursuing a career opportunity. The tribunal also found that Mr Vodden resigned and returned to Australia in November 2018 with the predominant purpose of enabling him to be closer to his daughter.
The tribunal found that Mr Vodden’s income from 1 July 2017 is as follows:
·1 July 2017 to 30 March 2018                $110,000
·31 March 2018 to 16 November 2018     $86,300
·17 November 2018 onwards                  Nil
Up until 31 March 2018 the change in income to $110,000 from his taxable incomes (as amended by the ATO) is not significant (around 5% increase) and would have little impact on his child support liability.
Mr Vodden has stated that he and Mrs Nanson separated in 2013 but they did not register the child support case for several years as it was agreed he would take on around $50,000 in debt that had accumulated during the marriage. Mrs Nanson stated that at the time the repayment of the debts was around $100 per week and she agreed to forgo child support if Mr Vodden took up the payments.
Mr Vodden was declared bankrupt in March 2017 owing around $82,000. He was assessed to make compulsory income contributions ($7,426 from 8 March 2017 to 7 March 2018) and the following years’ contributions are to be assessed by the trustee based on Mr Vodden’s income and commitments such as child support, when they are known.
The tribunal asked Mr Vodden how he accumulated significantly more debt over four years given his relatively high income. He stated that he had periods of no employment for a while. He said he did not have any extravagant spending.
Mr Vodden fell behind in making payments for school fees in 2017 and had arrears of $1,800 which he said he was paying in instalments by arrangement with the school. At the hearing he said he has now cleared the debt.
Mr Vodden provided evidence that a friend, [Mr A], allowed him to use [Mr A’s] credit card from 2017. Mr Vodden was required to pay for accommodation on work trips and then become reimbursed. He is not allowed a credit card and so his friend gave him a supplementary card to use for this purpose. In May 2018 Mr Vodden paid $3,914 off the card and this cleared the debt at that time. In October 2018 Mr [Mr A] took out a personal loan for $8,000 and lent the money to Mr Vodden who needed it to facilitate his move back to Australia. Mr Vodden is required to make the repayments which are $164 per month.
Mr Vodden lives with his wife and their child who was born in January 2018. He stated that his wife was on a very low income prior to having the baby and is currently not earning anything.
Mr Vodden listed weekly expenses of $2,119 when he was living in [Mr A]. It included $650 for travel to see [Child 1], $100 for entertainment, $60 for books and hairdressing, $90 for telephone, $140 for medical and school fees of $165. Rent was listed at $540. Some of the expenses such as the travel and medical appeared very high ($33,800 for travel and $7,280 for medical). [Child 1] only visited Mr Vodden on one occasion and it is unlikely the fares were more than $1,500.
The tribunal found that Mr Vodden’s necessary expenses while he was in [Country 1] (for himself, his wife and their child) were around $1,000 per week. His salary was $86,300 and he also received a total of $6,500 to relocate. The tribunal was satisfied that he had excess capacity of at least $40,000 ($86,300 + $6,500 - $52,000) to repay the 2017 school fees, [Child 1’s] travel costs and outstanding credit card expenses while he was in [Country 1].
The amount of child support payable on an income of $86,300 is around $8,500 per annum. The tribunal was satisfied that Mr Vodden had sufficient income to pay this amount while he was in [Country 1] even if required to support his wife and meet his debt obligations. Prior to living in [Country 1], Mr Vodden was on a higher income and presumably had lower rent costs than in [Country 1]. His wife was also contributing to household costs.
Mr Vodden has no significant assets other than superannuation of around $48,000.

Mrs Nanson

Mrs Nanson is [an Occupation 2] specialising in [an area]. Her previous employment involved daily travel between the Gold Coast (where she lives) and Brisbane and she took on a new role based on the Gold Coast. This position ended up requiring significant travel and with [Child 1] about to start school she could not continue in the role.
Mrs Nanson said she decided to start her own business with the intention of consulting on HR issues. The business has morphed into one where she mainly provides legal advice, rather than HR advice.
For the first two years she operated the business from home and had no staff. Prior to her second child being born in February 2017 she commenced working from a rented office and hiring employees to cover for her as she had increased child caring responsibilities. She has hired [other staff] and at one stage she had two part timers. She has also outsourced work to [others] on contract.
She has recently changed back to working from home as the office rent was too high and she now only has one casual staff member.
She has considered ceasing the business as it has not been making money but finding part-time work as [her occupation] is difficult.
Mrs Nanson’s husband was employed in a position paying $140,000 per annum but he was made redundant in May 2018. They planned for him to work for Mrs Nanson as he has a lot of HR experience and could advise clients in [a certain area]. She was planning to pay him $1,000 per week from July 2018. They were unable to get extra clients and during the period July to October 2018 he was only paid for ‘some of the time’. Her husband obtained a new position in October 2018 and is now on a salary of $71,000.
Mrs Nanson’s taxable incomes in recent years have been:
·2014–15   $38,798
·2015–16   $20,337
·2016–17   $22,004 (salary $21,889 and interest $115)
·2017–18   Not lodged

The business is run through [ a company] trading as [business name]. Mrs Nanson provided profit and loss statements for 2016–17 and 2017–18 however these are statements she produced from her accounting software and not the final accounts prepared by her accountant which may be adjusted on an accrual basis and include depreciation.

2016–17

2017–18

Gross income

$138,881

$178,053

Profit less barrister fees and purchases

$121,312

$116,132

Expenses

$101,929

$167,726

Wages included in expenses

$37,448

$69,740

Profit (Loss)

$19,383

($51,386)

The company paid Mrs Nanson a wage of $21,889 in 2016–17. In her statement of financial circumstances Mrs Nanson said her wage was $413 per week. The total wages for the company increased significantly in 2017–18 but during this time Mrs Nanson had employed [other staff]. Mrs Nanson confirmed that this figure did not include any payments to her husband. The tribunal assumed that the $69,740 includes approximately $21,500 for herself.
The tribunal added up the deposits to the company’s bank account in 2017–18 (a list of deposits that were not transfers or ATO refunds is attached to this decision) and they totalled $233,403. Allowing for GST this would equate to income of $212,185; a difference of $34,131. It was put to Mrs Nanson during the hearing that not all of the income appeared to be included in her draft profit and loss statement and she was unable to explain the difference. The tribunal noted that the statement provided is only a draft and has not been reconciled with the bank accounts or considered by her accountant and adjusted for debtors. However it would appear that her gross income is understated in the draft.
The tribunal then considered the expenses claimed. It included $4,191 for motor vehicle and Mrs Nanson said this was 100% of the costs. The company pays $820 a month which is for a personal loan on the motor vehicle. It was not clear from the profit and loss statement how this was being treated. There was an interest expense of $2,152 but Mrs Nanson thought this might be for her husband’s credit card which is used to fund some business expenses. However it is treated, the tribunal was satisfied that the company pays a total of $9,840 for Mrs Nanson’s motor vehicle. It is accepted that Mrs Nanson would have significant business usage for her car and decided that 50% would be a reasonable figure.
The tribunal noted a couple of payments made from the business account for a home loan ($900 per payment). Mrs Nanson confirmed that this was to be treated as a loan from the company to Mrs Nanson and was not included as an expense in her draft profit and loss statement.
If the additional income of $34,131 was added back to the draft loss of $51,386 and half of the motor vehicle expense the company would still be in a loss situation. Mrs Nanson said she has seriously considered ending the business but has decided to persevere. By working from home she will be saving around $30,000 a year in rent and she has reduced her wages to [her staff].
The company has expenses for ‘general’ of $2,709, Internet and phone of $3,872, staff amenities of $1,596 and travel of $2,077. It is likely that some of these expenses are private in nature and the tribunal decided that Mrs Nanson receives financial benefits from the company (in addition to wages and motor vehicle) of $1,000.
The tribunal decided that the total financial benefit to Mrs Nanson from her business is $27,420 (wages of $21,500, motor vehicle $4,920 and miscellaneous expenses $1,000); rounded to $27,400. This applies from 1 July 2017 onwards.
It is possible that Mrs Nanson will improve the business’s profitability but the tribunal did not think there would be a significant increase until at least January 2019 (Mrs Nanson has only recently ceased renting out office space).
Mrs Nanson lives with her husband, their child born in 2017, and her husband’s two children aged 20 and 17. She had no substantial assets listed in her statement of financial circumstances other than superannuation of $45,470. Her husband purchased their current home in September 2017 for $865,000 and took out a mortgage for around $750,000. At the time he was earning around $140,000.
Mrs Nanson listed weekly household expenses (for the whole household) of $2,747 which include $875 for the mortgage. In addition to normal household costs Mrs Nanson listed education costs for [Child 1] of $385 and child care fees of $87. The tribunal noted that only half of the other costs related to Mrs Nanson and [Child 1].
Mrs Nanson’s income is very low and is only just above the self-support amount of around $25,000. Her expenses, and [Child 1’s], are currently being subsidised by her spouse. Mrs Nanson would be in very difficult financial circumstances without that support.

The child

There is no evidence to suggest that [Child 1] has any income or significant financial resources of her own.
Apart from the school fees, there was no evidence presented to the tribunal that [Child 1] has anything other than the usual expenses and needs of a child her age, expenses that are dealt with in the administrative assessment and addressed in the Costs of the Children Table.

Summary – just and equitable

Mr Vodden submitted that it would not be fair for him to have to pay school fees and the assessed rate of child support given his financial situation. He wrote to Mrs Nanson in mid-2017 requesting a decrease in the amount he needed to pay and she refused pointing out that she is also in difficult financial circumstances.
The tribunal noted that Mr Vodden has been earning significantly more than Mrs Nanson in recent years; up until mid-November 2018. Mrs Nanson has had to bear the majority of [Child 1’s] costs during 2018.
After taking all of the above into account the tribunal decided that it would be just and equitable to assess Mr Vodden and Mrs Nanson on their incomes as found by the tribunal from 31 March 2018 and for Mr Vodden to contribute half of [Child 1’s] school fees in 2018.

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

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 their children. Mrs Nanson is not in receipt of family tax benefit but may apply given her husband’s reduction in income. Any increase or decrease in child support payments from Mr Vodden will have an impact on government payments.

Conclusion

It is open to the tribunal to vary the annual rate of child support payable, adjusted taxable income or the other variables such as costs of self-support used in the statutory administrative assessment formula.
The tribunal has taken all of the factors set out above into account and proposes to make a departure determination that:
·varies Mr Vodden’s adjusted taxable income to $86,300 from 31 March 2018 to 16 November 2018;
·varies Mr Vodden’s adjusted taxable income to nil from 17 November 2018;
·varies Mrs Nanson’s adjusted taxable income to $27,400 from 31 March 2018; and
·increases Mr Vodden’s child support by $4,230 from 1 January 2018 to 31 December 2018.
The tribunal then considered what an appropriate start date for the departure determination would be, noting the maximum allowable is 18 months prior to the application being lodged. The tribunal noted that Mr Vodden applied for a departure determination on 26 July 2017. As discussed, varying the parents’ incomes prior to 31 March 2018 makes very little difference to the child support liability and the school fees were shared up until 31 December 2017. The appropriate start date is therefore 1 January 2018.
The tribunal then considered what an appropriate end date for the departure determination would be. Mr Vodden’s income is likely to change depending on him gaining employment. Mrs Nanson’s business may improve also. The tribunal therefore decided that the departure determination should end on 31 January 2019. The assessment will then revert to the parents’ taxable incomes.
If Mr Vodden has not obtained employment it is open to him to lodge an estimate of income with Child Support. If circumstances change prior to 31 January 2019 it is open to both parents to lodge a further departure determination application.

DECISION

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

·      for the period 31 March 2018 to 16 November 2018 Mr Vodden’s adjusted taxable income is varied to $86,300; and
·      for the period 17 November 2018 to 31 January 2019 Mr Vodden’s adjusted taxable income is varied to nil; and
·      for the period 31 March 2018 to 31 January 2019 Mrs Nanson’s adjusted taxable income is varied to $27,400; and
·      for the period 1 January 2018 to 31 December 2018 Mr Vodden’s child support liability is increased by $4,230 per annum.

[2018] AATA 4989

11 December 2018

Key Legal Topics

Areas of Law

Family Law

Administrative Law

Legal Concepts

Jurisdiction

Remedies

Judicial Review

Costs

Statutory Construction

2016–17	2017–18
Gross income	$138,881	$178,053
Profit less barrister fees and purchases	$121,312	$116,132
Expenses	$101,929	$167,726
Wages included in expenses	$37,448	$69,740
Profit (Loss)	$19,383	($51,386)