Washburn and Kaye (Child support)

[2024] AATA 4129

Washburn and Kaye (Child support) [2024] AATA 4129 (27 September 2024)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2024/SC027798

APPLICANT:  Ms Washburn

OTHER PARTIES:  Child Support Registrar

Mr Kaye

TRIBUNAL:  Member P Jensen

DECISION DATE:  27 September 2024

DECISION:

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

• Ms Washburn’s adjusted taxable income is varied to $72,987 per annum and Mr Kaye’s adjusted taxable income is varied to $92,292 per annum from 1 August 2023 to 31 July 2024; and

• Ms Washburn’s adjusted taxable income is varied to $62,673 per annum from 1 August 2024 to 14 October 2024.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – adjusted taxable income – Child Support changed from using mother’s provision income to actual income – both parties working part-time – mother’s investment properties and both parties’ salary sacrificing – deficiencies in evidence – decision under review set aside and substituted

REASONS FOR DECISION

Introduction

1. Ms Washburn and Mr Kaye are the parents of [the child]. A child support case was registered with Services Australia – Child Support (Child Support) in 2013. Since 8 June 2023, Ms Washburn has been recorded as providing 67% care and Mr Kaye has been recorded as providing 33% care for [the child].

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 for the child.

3. On 13 July 2023, Child Support notified both parents that the administrative assessment from 1 August 2023 would be based on Ms Washburn’s provisional 2022–23 adjusted taxable $81,847 and Mr Kaye’s 2022–23 adjusted taxable income of $88,652. Mr Kaye was assessed to pay $4,968 per annum in child support.

4. On 26 September 2023, Child Support notified both parents that rather than using Ms Washburn’s provisional 2022–23 adjusted taxable income of $81,847 from 1 August 2023, it was using her actual 2022–23 adjusted taxable income of $41,467. Mr Kaye was assessed to pay $6,941 per annum in child support.

5. The Act also provides for a departure from the administrative assessment in certain circumstances. Mr Kaye lodged a departure application on 5 October 2024. An original decision-maker refused the application. Mr Kaye objected to that decision. An objections officer varied Ms Washburn’s adjusted taxable income to $92,034 per annum and Mr Kaye’s adjusted taxable income to $101,254 per annum from 1 December 2023 to 31 July 2024. Ms Washburn applied to the Tribunal for further review. I conducted a directions hearing on 23 August 2024 and a substantive hearing on 27 September 2024. Ms Washburn and Mr Kaye attended via MS Teams.

6. 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)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

   that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   …

   (ia)because of the income, property and financial resources of either parent; …

2. The parents recently lodged their 2023–24 tax returns, which has simplified matters. Ms Washburn is employed as [an occupation 1]. She was employed on a full-time basis throughout 2023–24. Her adjusted taxable income was $72,987. Her taxable income was considerably less. She owns two negatively geared investment properties and she salary‑sacrificed a portion of her earnings. For child support purposes, her income and financial resources are more fairly reflected in her adjusted taxable income, even though she elects to incur ongoing investment property losses in anticipation of a larger capital gain in due course, and she elects to salary-sacrifice a portion of her earnings. As noted early, the administrative assessment from 1 August 2023 was based, in part, on her 2022–23 adjusted taxable income of $41,467. The significant increase in her adjusted taxable income constitutes special circumstances such that the application of the administrative assessment resulted in an unjust and inequitable determination of child support payable. Reason 8 is established.

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 child. Regard must be had to a variety of factors such as the needs of the child, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Ms Washburn’s home consists of herself, her partner and [the child]. Her partner owns the home. Ms Washburn said she pays rent. Mr Kaye said she does not pay. No other evidence was provided on the issue. I accept Ms Washburn’s direct evidence on that issue.

3. Ms Washburn’s partner’s property includes “a granny flat out the back”. There is no suggestion that Ms Washburn is the owner or co-owner of the granny flat, but Mr Kaye said “they” receive the rent. Ms Washburn said she does not receive any rent from her partner’s granny flat. No other evidence was provided on the issue. I accept Ms Washburn’s direct evidence on that issue.

4. Ms Washburn said she has been working for four days per week since 29 July 2024. She has also started studying at university. Her 2023–24 tax return shows that she earned $67,533 + $5,920 = $73,453 gross. A recent payslip shows that she is currently paid $63,139 gross per annum. The difference is $10,314. As noted earlier, her 2023–24 adjusted taxable income was $72,987. The evidence suggests that her current adjusted taxable income is approximately $72,987 - $10,314 = $62,673 per annum.

5. Mr Kaye is employed as a part-time [occupation 2]. His 2022–23 adjusted taxable income was $88,652. His 2023–24 adjusted taxable income was $92,292. The evidence suggests that his 2024–25 adjusted taxable income will be a similar figure. He salary-sacrifices a portion of his earnings but that does not affect his adjusted taxable income. He lives in rented accommodation.

6. Each parent noted deficiencies in the other parent’s evidence. For example, Ms Washburn confused her “income tax assessed and unpaid” for 2023–24 with her 2023–24 taxable income: pages A6 and A30 of the hearing papers. Mr Kaye’s Statement of Financial Circumstances did not include his interest on savings but he provided a copy of his tax return which included details of his interest on savings: B2 and B12 of the hearing papers. The matters were addressed during the hearing and do not need to be repeated here.

7. In the absence of a departure decision, the administrative assessment from 1 August 2023 to 31 July 2024 would use Ms Washburn’s 2022–23 adjusted taxable income of $41,467 and Mr Kaye’s 2022–23 adjusted taxable income of $88,652: pages 272, 460 and 462 of the hearing papers.

   16. The objections officer stated:

   Mr Kaye lodged his application on 5 October 2023 and Ms Washburn on 21 November 2023, therefore I find it reasonable to commence my decision from 1 December 2023.

8. In my respectful opinion, the more pertinent observation is that Mr Kaye was first notified on 26 September 2023 that the administrative assessment from 1 August 2023 would use Ms Washburn’s 2022–23 adjusted taxable income of $41,467 and he promptly applied for a departure from that administrative assessment. During the hearing I suggested that it might be appropriate for any new decision to have effect from 1 August 2023. Neither parent took issue with that suggestion. I will vary Ms Washburn’s adjusted taxable income to $72,987 per annum from 1 August 2023 to 31 July 2024. For completeness, I will vary Mr Kaye’s adjusted taxable income to $92,292 during the same period, although that variation will have a relatively small effect on his rate of child support payable.

9. A new child support period started on 1 August 2024 and since that date the administrative assessment has been based on the parents’ 2023–24 adjusted taxable incomes: pages 507 and 522 of the hearing papers. Mr Kaye has been assessed to pay $5,732 per annum in child support. Ms Washburn submitted that she should be assessed on a lower adjusted taxable income from 1 August 2024 (or 29 July 2024) because she transferred to part-time employment. I considered whether to vary her adjusted taxable income to $62,673 per annum from 1 August 2024.

10. The first point to note is that the objections officer’s decision ended on 31 July 2024. Ms Washburn could have applied to lodge an estimate of income from 1 August 2024. She has previously lodged estimates of income: page 516 of the hearing papers. She could still apply to lodge an estimate of income. Child Support would then have to consider whether to accept the estimate. It may be that the reduction in Ms Washburn’s adjusted taxable income is too small: see paragraph 60(1)(b) of the Act and topic 2.5.1.10 of the Child Support Guide.

11. The second point to note is that varying Ms Washburn’s adjusted taxable income to $62,673 per annum would have a relatively small effect on the rate of child support payable. For example, varying it from 1 August 2024 to 14 October 2024 would only increase Mr Kaye’s child support payable in respect of those two and a half months by approximate $100. However, I am mindful that Ms Washburn may have chosen to not apply to lodge an estimate of income because the departure application process was still on foot. The preferrable course is to vary her adjusted taxable income until 14 October 2024 and repeat the observation that she has the option of applying to lodge an estimate of income after that date.

12. The proposed decision will decrease Mr Kaye’s child support liability in respect of the period from 1 August 2023 to 14 October 2024 by approximately $300. He is currently up to date with his child support payments. The proposed decision would give him a small credit. Ms Washburn said she is in financial hardship. However I note that she elected to salary-sacrifice $5,920 of her earnings during 2023–24. Viewing the parents’ circumstances as a whole, I find that 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. Both parents receive family tax benefit in respect of their care for [the child]. Changing the child support payable by Mr Kaye will result in a more appropriate apportionment of financial responsibility between the parents and the community. The proposed decision will be otherwise proper.

DECISION

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

• Ms Washburn’s adjusted taxable income is varied to $72,987 per annum and Mr Kaye’s adjusted taxable income is varied to $92,292 per annum from 1 August 2023 to 31 July 2024; and

• Ms Washburn’s adjusted taxable income is varied to $62,673 per annum from 1 August 2024 to 14 October 2024.