Voss & Child Support Registrar & Anor (SSAT Appeal)
[2009] FMCAfam 1296
•10 December 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VOSS & CHILD SUPPORT REGISTRAR & ANOR (SSAT Appeal) | [2009] FMCAfam 1296 |
| FAMILY LAW – Appeal from SSAT – departure application – necessary commitments – high costs of contact – income and earning capacity. |
| Child Support (Assessment) Act 1989, ss.41, 43, 56, 57 & 117 |
| Best v Best [1993] FamCA 107; (1993) FLC ¶92-418; (1993) 16 FamLR 937; (1993) 116 FLR 343 Wright & Wright (SSAT Appeal) [2009] FMCAfam 979 |
| Applicant: | MR VOSS |
| First Respondent: | CHILD SUPPORT REGISTRAR |
| Second Respondent: | MS VOSS |
| File Number: | BRC 6605 of 2007 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 16 November 2009 |
| Date of Last Submission: | 16 November 2009 |
| Delivered at: | Sydney |
| Delivered on: | 10 December 2009 |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Counsel for the First Respondent: | Ms Rayment |
| Solicitors for the First Respondent: | Sparke Helmore |
| Counsel for the Second Respondent: | In person |
ORDERS
The appeal be allowed.
The matter be remitted for re-hearing by the Social Security Appeals Tribunal.
The Social Security Appeals Tribunal grant the mother leave to seek an increase in the rate of child support based upon the children’s school fees.
IT IS NOTED that publication of this judgment under the pseudonym Voss & Child Support Registrar & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
BRC 6605 of 2007
| MR VOSS |
Applicant
And
| CHILD SUPPORT REGISTRAR |
First Respondent
| MS VOSS |
Second Respondent
REASONS FOR JUDGMENT
The appellant appeals from a decision of the Social Security Appeals Tribunal (‘the Tribunal’) with respect to the child support payable by him for the child, of the appellant and second respondent, who is
11 years of age.
The decision of the Tribunal affirmed an Objection Officer’s decision setting the appellant’s adjusted taxable income at $210,000.00 per annum for the period 21 August 2008 to 30 November 2010. It appears that this figure came from the decision of a Senior Case Officer as the Tribunal recorded at paragraph 6:
[6] With respect to her cross application under Reason 8, [the Respondent] said that [the Applicant] had disclosed a gross income from his employment of around $225,000 per year. [The Applicant’s] employer later confirmed this. [The Applicant] also told the Child Support Agency that the adjusted taxable income of $91,000 being used in the current assessment was from his previous activity in running a private consultancy called [M] Pty Ltd, which was no longer in operation. The senior case officer found that, after allowable deductions, [the Applicant] had an adjusted taxable income of $210,000. Reason 8 was thus established with respect to [the Applicant].
It appears that the Tribunal did not enquire into or identify the nature of these ‘allowable deductions’.
The case is unusual in that as a result of the appellant’s employment he travels each week to Sydney. It appears to have been generally accepted that he could not earn the income he does in South East Queensland. As a result, the practical issue which confronted the Tribunal was whether or not there should be some account of the costs for the appellant to travel on an almost weekly basis between Brisbane and Sydney and the costs of maintaining accommodation in each location.
The appellant put to the Tribunal that this expense should be taken into account under s.117(2)(b)(i) of the Child Support (Assessment) Act 1989, being costs involved in enabling parents to spend time with or communicate with the child. The Tribunal member approached the matter by first attempting to identify where the appellant lives. The member said:
[14] The application of this legislation is further explained in Chapter 2.6.7 – Reason 1 of the Child Support Agency Guide. In general this Reason applies to the costs of travel from where the person lives to the place where the children live. These costs may include transportation and accommodation in the course of the travel. They do not include costs of the contact itself, for example, accommodation during the visit.
The member then went on to consider O’Dea v Comcare [1996] AATA 449 which refers to the concept of residence in the Social Security Scheme as discussed by Wilcox J in Hafza v Director-General of Social Security [1985] FCA 164; (1985) 6 FCR 444; (1985) 60 ALR 674; (1985) 8 ALN N58, and the concept in taxation law in Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation [1940] HCA 33; (1940) 64 CLR 15; (1940) 14 ALJR 303; (1941) 2 AITR 136; (1940) 6 ATD 42 and similar cases. It is difficult to understand the relevance of the technical concept of residence for the purpose of social security or tax, in the context of the costs of enabling contact. The explanation referred to in the reasons in the Child Support Agency Guide does not refer to ‘residence’.
The Tribunal ultimately concluded:
[25] As set out above, the provision about costs of maintaining contact require the tribunal to decide where [the Applicant] lives. In its opinion, [the Applicant] lives at [C] and travels to Sydney to work. [C] is the place to which he returns on a weekly basis and where he spends his free time. It is where he has a partner. It cannot be said that he treats his hotel in [P] as a home in any sense of that word. His own evidence is to that effect and he cased his argument solely on the division of time, not on the presence of any association with Sydney. In fact, he works in Sydney only because he cannot find work closer to home.
[26] If [the Applicant] lives at [C] the costs of his travel between Brisbane and Sydney relate to his work and not to his contact with his sons. For Reason 1 to be established he must, on an adjusted taxable income of $91,000, have expenses of more than $4,550 per year. A higher adjusted taxable income would, of course produce a higher threshold. He has not claimed $4,550 in relation to his Queensland costs. Reason 1 is not established.
To attempt to apply rules relating to the identification of a residence for the purposes of social security or tax legislation misconceives the nature of this section. The section is not about a technical decision as to residence for the purpose of the application of statutory provisions, but a practical consideration of whether or not there are high costs involved in enabling a person to spend time with their children. That is, whether or not the appellant continues to return to south east Queensland (or even maintain a residence there) for the purposes of maintaining a relationship with his son, in whole or in part.
The Solicitor for the Child Support Agency argued that the substance of the decision under this subsection was that the appellant would not have moved from south east Queensland even if there were no issues relating to contact with his son, referring to paragraph 21 of the decision which states:
[21] In his final statement to the tribunal [the Applicant] said that he would change his present arrangements if he could. The fact is that he cannot find work in Queensland and must, therefore, come to Sydney to work. He cannot reduce the costs of this.
Ultimately I accept the submissions of the Solicitor for the Child Support Agency that the substantive fact-finding of the Tribunal was to the effect that the appellant travels to Sydney only because that is where his work is, and would otherwise choose to continue living in his present locale. This leads to the conclusion that the costs of enabling contact are the costs of having the child travel the short distance involved in moving between the child’s residence in South East Queensland and where the appellant lives in South East Queensland.
However, the costs that he incurs in travelling to earn an income remain, and must be considered, in this case.
On a practical level it matters little which of the particular ‘special circumstances’ is engaged by the factual matrix of the case as the practical result will be governed by s.117(4).
The system for income tax assessment provides a useful, and often appropriate, quantification of the income and earning capacity, property and financial resources of a parent. This is one of the premises of the Child Support formula. There is a body of cases where simple reference to a person’s tax return does not provide an appropriate quantification of their capacity to provide financial support. Most commonly this occurs in cases involving the self-employed, where it is well accepted that legal structures and arrangements may generate a taxable income that doesn’t properly reflect the realistic capacity of the person to provide financial support for their children. Just as the formal rules relating to entities and taxation do not create an impediment to the tribunal assessing a greater capacity of a person to provide financial support, similarly there are cases where the costs of engaging in, even if not tax deductable, should also be taken into account thereby reducing the financial capacity of a payer of payee of child support.
It is important to note that the phrase ‘taxable income’ is a technical legal term defined in ss.56 & 57 reliant, in part, upon the applications of various complex tax laws. Under the Child Support (Assessment) Act the phrase ‘adjusted income’ has a technical meaning given by s.43. Similarly, ‘child support income’ has a technical meaning as set out in s.41 of the Act. However, the term ‘income’ is not defined under the Act. As a result, it should be given its ordinary meaning. In many cases, a person’s ‘income’ for s.117 will be the same as their ‘taxable income’, but in some circumstances their ‘taxable income’ will not accurately reflect the person’s ‘income’ under s.117: an obvious example is where a person receives a tax free payment, such as members of the military on active duty overseas, and students on Commonwealth scholarships.
In this case the travel costs incurred by the appellant in travelling regularly from Brisbane to Sydney must be considered. Whilst they may not be tax deductable, as a result of the formal rules of the tax system, there is no question that those expenses must necessarily be incurred by him in order to earn the income that he does, on the unusual facts of this case. The circumstances would be very different if he had similar income earning opportunities in his local region, however on the facts of this case he does not have that option. Importantly, these expenses must be seen in the context of being expenses after payment of tax. Whether costs of travel amount to a ‘special circumstance’ depends on the facts of the case – usually they do not, but sometimes fares or fuel to travel to work that is not close will be a ‘special circumstance’.
The actual amount of the travel costs is not the subject of a formal determination of the Tribunal. Significantly, the Tribunal did not have regard to these travel expenses when considering the income of the applicant, or his ‘necessary expenses’. At a minimum the Tribunal appears to have accepted that these expenses are at least $46,000 per year.
The Solicitor for the Child Support Agency argued that as the appellant had not specifically requested that the Tribunal take into account his travel expenses under other subsections of s.117, the Tribunal’s decision should not be considered to be in error as a result of their failure to do so. This appears to me to misconceive the current state of administrative law in Australia. The issue was apparent on the face of the material. This issue was the most significant issue before the Tribunal from two parties who were unrepresented. The amount involved is tens of thousands of dollars per annum. It was apparent throughout that the appellant sought an adjustment to his child support to take into account the fact that he incurred such significant travel expenses. It is now well established that in tribunals, such as the Refugee Review Tribunal and the Migration Review Tribunal, the tribunal, which usually has unrepresented parties, is not bound by technical rules, and does not have a formal pleading process, is not limited to the case articulated by the parties if the facts support the case on a different legal basis: see for example Minister for Immigration v VFAY [2003] FCAFC 191 at [97]. I see no reason that this principle would not apply to hearings in the SSAT in child support matters having regard to the objects of the scheme and the relevant provisions of the Act. The Tribunal was required to deal with the issue even if the party incorrectly classified it on their interpretation of the law on the Child Support Agency form.
In the circumstances the Tribunal has erred in its treatment of the case in failing to consider whether the expenses of travel to employment were a ‘special circumstance’ under any of the provisions of s.117 other than s.117(2)(b)(i), when clearly they demonstrate a prima facie ‘special circumstance’ under s.117(2)(a)(iii)(A) (necessary commitment in supporting oneself) or s.117(2)(c)(ia) (as an incident of one’s income, property and financial resources.)
The appellant also sought a reduction in the child support assessment on the basis that he was meeting the school fees for the child pursuant to s.117(2)(b)(ii).
There is no dispute in this case that the child is attending a private school as agreed between the parties before separation. The amount of those school fees to be met by the appellant in 2009 was said to be $9,750. The child support assessment that was struck was $16,646. The school fees therefore represent approximately one half of the total assessment amount. Clearly the costs of maintaining this child are significantly affected by the costs of the school fees, in that they represented around half of the child support assessment amount. They, therefore, prima facie establish a special circumstance.
The real issue in the case was whether or not it was just and equitable to alter the assessment having regard to the overall financial positions of the parties. Rather than determining whether these costs significantly affected the costs of caring for the child, the Tribunal concluded that there was not a special circumstance by having regard to the incomes of the parties and the proportions in which they were meeting the costs of the education for the child.
These are considerations which properly could be taken up under s.117(4). When the Tribunal turned to s.117(4) of the Act it did not identify the relevant matters under that section, in particular it did not set out the actual income and expenses of the parties nor identify the actual costs of caring for the child. These are significant matters as the child support assessment is for the costs of caring for and educating the child. The totality of those costs provide an upper limit to the child support assessment: see PVO v RMO [2005] FamCA 1196 at [63] – [65] for a poignant example.
Once identifying the proper needs of the child the Tribunal must then consider the financial position of each of the parties and their respective capacity to contribute to those needs. In this case an identification of the actual earnings of the appellant, the tax that he must pay, the reasonable travel expenses he is actually incurring (given that he has now incurred those expenses for some time one would expect that he would produce a schedule of actual expenses, and if he failed to do so the Tribunal could well take particularly adverse views to the amount of those expenses), and expenses necessary in supporting himself.
Significantly the Tribunal would also, at this point, take into account his obligations to provide child support for another child. This process would identify the reasonable capacity of the appellant to contribute to the child’s financial needs. A similar process with respect to the mother would identify her reasonable capacity to meet the child’s financial needs. From here, a just and equitable figure could be struck.
The Tribunal’s reasons in this regard were as follows:
[48] It is not in dispute and the tribunal accepts that [the Applicant] and [the Respondent] each have a duty to maintain [X] and [Y]. There is no suggestion that they are able to support themselves. There has been no suggestion that they have any special needs.
[49] This is a case where the incomes of the parties are very different with [the Applicant] earning nine times the amount of [the Respondent]. Such a disparity suggests very different capacities. Each party is essentially dependent on earned income, as distinct from other forms of financial resource. The formula set up by legislation is intended to deal with such situations and does so, provided the correct values are entered into it. The original formula using an adjusted taxable income for [the Applicant] of $91,000 produced a child support amount of $9,630 to be paid by him. The tribunal’s findings suggest that [the Applicant’s] true adjusted taxable income is $210,000. This produces a child support assessment of $16,646 for [the Applicant], which takes into account an allowance for [the Applicant’s] other child support case. If [the Applicant] does not pay this amount, [the Respondent] must support the boys with less income. Consequently the boys also suffer.
[50] The principal issue raised by [the Applicant] is whether he can pay this amount. There is no doubt that [the Applicant’s] travel costs from Queensland are very high. That is a natural consequence of living there and working in Sydney. [The Applicant] must have taken this cost into account when he accepted this employment. It is also clear that he would prefer to work in Queensland. The tribunal also accepts that [the Applicant] has debts. The question is not whether he will pay both his debts and his child support but how those payments are to be prioritised. The child support legislation gives a priority to child support as shown by the Child Supports Agency’s capacity to deduct the payments at source in a manner similar to taxation. Thus the tribunal concludes what [the Applicant] must first pay his child support and then manage his other commitments. The tribunal cannot overlook the fact that [the Applicant] has a high income by any standards. For this reason the tribunal sets [the Applicant’s] adjusted taxable income at $210,000.
The appellant cited the following passage from the decision in Wright & Wright (SSAT Appeal) [2009] FMCAfam 979:
[21] The errors of reasoning in this case, like many other successful appeals, appear to flow primarily from the failure of the member to quantify the periodic rate of child support proposed and consider that rate in the context of findings of the actual income and expenses of the parties: see, for example, Gyselman & Gyselman[1991] FamCA 93; (1992) FLC 92-279; (1991) 15 Fam LR 219; Hides and Hatton [1997] FamCA 28; (1997) FLC 92-759; [1997] FamCA 28; (1997) 21 Fam LR 855; Hallinan v Witynski[1999] FamCA 1127; (1999) FLC 98-009; [1999] FamCA 1127; (1999) 25 Fam LR 647, Ross & McDermott[1998] FamCA 134; (1998) FLC 98-003; PJ & Child Support Registrar (SSAT Appeal)[2007] FMCAfam 829 ; (2007) 38 Fam LR 31, Tyagi & Meares (SSAT Appeal)[2008] FMCAfam 886 ; (2008) 39 Fam LR 604; Charnock & Bullions (SSAT Appeal)[2008] FMCAfam 36; Parrish & Torrey (SSAT Appeal)[2009] FMCAfam 274 ; (2009) 41 Fam LR 236.
[25] Put simply, s.117(4) requires the Tribunal to identify and consider what the practical outcome of the actual change in week to week income and expenses will be for the parties and children. The importance of this process is clear: a simple mathematical formula cannot be expected to model the complexities of the vast array of modern family situations. The departure provisions are designed to provide a method of identifying cases where the formula does not produce an appropriate outcome, and then to set a rate of child support that meets the unique needs of each of those individual families. (emphasis added)
The comments are apt in this case. Indeed, in this case the Tribunal has quickly moved away from a finding as to the ‘just and equitable’ outcome on the substantive facts, retreating to the child support formula. It is not acceptable for the Tribunal to abdicate responsibility for determining a ‘just and equitable’ rate of child support in favour of the re-application of the formula to an adjusted income amount in complex cases such as the present. It is particularly inapt in cases where the income amount exceeds the maximum income sum used in the formula as no corresponding limit applies under s.117: see Best v Best [1993] FamCA 107; (1993) FLC ¶92-418; (1993) 16 FamLR 937; (1993) 116 FLR 343 at para.[143]. Whilst the income cap is now only used in the costs of children tables, the principle remains because s.117 requires consideration of the actual needs of the children, not the average costs in the table. In cases where parents have very high incomes, the averages in the tables would often be insufficient.
In the circumstances, the Tribunal has failed to properly consider the exercise of the discretion under s.117.
The appeal should be allowed and the matter remitted for rehearing before the Tribunal.
A further issue that appears to have arisen since the Tribunal heard the case is that the appellant has ceased to pay the school fees and the second respondent is now paying the school fees. It is clearly appropriate that the Tribunal give the second respondent leave to amend her application for departure from the assessment to claim an increase in the child support as a result of the costs of the school fees. So that there is no confusion in this regard I have made orders for the Tribunal to grant such leave to ensure this issue is also considered.
Whether, after an appropriate examination of the issues has been undertaken, with careful findings with respect to s.117(4), the ultimate assessment will be increased or decreased is not a matter that I am able to predict from the material that is presently before me. This is a matter solely within the province of the Tribunal member that hears the matter when it is remitted after carefully considering the actual financial circumstances of the parties and needs of the child.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Associate: TH Nguyen
Date: 10 December 2009
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