Welbourn and Mobbs (Child support)

[2022] AATA 4984

Welbourn and Mobbs (Child support) [2022] AATA 4984 (14 November 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/BC024034

APPLICANT:  Mr Welbourn

OTHER PARTIES:  Child Support Registrar

Ms Mobbs

TRIBUNAL:Member S Letch

DECISION DATE:  14 November 2022

DECISION:

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

(a)for the period 25 October 2021 to 31 December 2023, Mr Welbourn’s adjusted taxable income is varied to $140,000;

(b)for the period 18 September 2020 to 31 May 2025, Mr Welbourn’s self-support amount is increased by $19,568.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – earning capacity – a ground for departure established – decision to depart - 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. Mr Welbourn and Ms Mobbs are the parents of [Child 1] (born May 2004) and [Child 2] (born September 2011). Mr Welbourn seeks a review of an objection decision by the Child Support Agency (CSA) which allowed Ms Mobbs’s objection to a “change of assessment” decision of 14 December 2021.

2. It is convenient to set out some extracts from the objections officer’s decision dated 12 May 2022 by way of background:

   DECISION UNDER REVIEW

   On 14 October 2021, Ms Mobbs lodged an application to review the child support assessment based on:
   Reason 8A: The child support assessment is unfair because of a parent's income, property
   and financial resources.

   Reason 8B: The child support assessment is unfair because of a parent's earning capacity.

   On 14 December 2021, DM Smith found in the application lodged by Ms Mobbs, no Reason established and refused her application.

   GROUNDS FOR REVIEW:

   On 25 January 2022, Ms Mobbs objected to DM Smith`s determination.

Mr Welbourn has written to the agency, advising that he will meet his 50% portion of the contribution to [Child 2]`s private education costs at [School 1] for 2022, when the expenses, become due and payable.
Upon further discussion on this matter with the agency, Mr Welbourn advised he has not seen the enrolment and financial payment contract for [School 1], which Ms Mobbs signed.

Mr Welbourn submits that Ms Mobbs has made a financial decision that she would be able to meet these payments to [School 1] and has signed contracts to this effect, before she later added this Reason to the objection. Effectively he believes this now indicates an acceptance by her to meet education costs for [Child 2].

Regardless he has indicated that he will still honour the commitment to meet 50% of [Child 2]`s ongoing private education costs, based on his ability within his current income.

I have no information before me that Ms Mobbs is offering to contribute to [Child 1’s] 2022 private education costs.

The total 2022 educational costs to be considered for [Child 1] and [Child 2] under this Reason are $8,238.

On 1 December 2022, [Child 1] will have competed his secondary education and being 18 years of age, will no longer be a child of the assessment.
The total 2023 education costs to be considered for [Child 2] under this Reason will be $4,790.00.

The total cost of children amount for the children of this case as determined in the current
assessment is $17,230. When the 2022 cost of $8,238 is considered against these figures
(equaling approximately 48% of the cost of children), I am satisfied that the costs are
significantly affect the ability to support [Child 1] and [Child 2].

The second element is met.

Reason 3 is established

Mr Welbourn`s income:

Mr Welbourn`s employer submits his annual income is $144,000 and making a provision for allowable tax deductions would result in an adjusted taxable income of $140,000 for child support purposes.

In relation to Ms Mobbs`s claims that Mr Welbourn is in receipt of undeclared income, property and financial resources, based on information available to me, I am unable to find there are any further revenue streams, other than his salary and wage income.

When the income of $140,000 is used in the current assessment, it increases Mr Welbourn’s current annual child support liability from $17,230 to $23,940, this includes the increase to his self-support amount applied to him in a previous decision. Based on the information available to me, I am satisfied special circumstances exist.

I find Mr Welbourn`s current income, property and financial resources is significantly higher and I am satisfied the child support assessment is unfair because he has a greater capacity than the child support assessment currently indicates.

Reason 8A is established.

Mr Welbourn submits that for the house that Ms Mobbs and the children reside in, he makes payments per annum of $23,400 to a [Bank 1] home mortgage, $6,000 to various utility providers, $7,535.64 for building insurance and $4,000 for home maintenance and gardening services. He further submits these costs alone are close to $41,000.

Mr Welbourn submits he has rental accommodation costs, whilst Ms Mobbs submits he stays he pays to stay in his brother`s unit when in Brisbane and can live [at his employer’s specified residence] when the [renovation] is complete, but is currently residing in paid accommodation provided by his employer.

Mr Welbourn conversely submits Ms Mobbs has reduced self-support costs and he meets two thirds of mortgage, rates, taxes, insurances, electricity, phone and the like apportionable outgoings on the property Ms Mobbs and the children reside in, whilst the also pays half of all maintenance costs relating to the [Location 1] property.

Mr Welbourn provided a copy of a home loan statement from 7 April 2021, showing monthly repayments due of $2,523.00, equating to $30,276 per annum. Based on the parent`s court order his portion would be $19,982.16 per annum. This is the similar to the amount of $19,568 considered in the objection decision of DM Holloway on 4 June 2021 and for which an increase of $19,568 was applied to his self-support amount in the assessment from 18 September 2020 to 31 May 2025. I note that neither parent lodged an appeal against DM Holloway`s decision. As such, due to the similar amount and considerations applied I will not make any further adjustment relating to the mortgage and other costs he is meeting relating to the property, [at Location 1].

I also have no evidence before me, that Mr Welbourn will not make his contribution to [Child 2]`s private education costs directly to [School 1]; therefore, I will not adjustment the assessment, relating to issues raised under Reason 3.

Under Reason 8A, I have established that Mr Welbourn from 25 October 2021 has been in receipt of an income of $140,000.

Ms Mobbs has advised she will be [qualified] as [an occupation 1] on 16 July 2022, with a starting salary of around $65,000. As this event has yet to occur, this will need to be a consideration made in a further COA application by either parent.

For information purposes, based on an adjusted taxable income of $140,000 for Mr Welbourn and adjusted taxable income of $65,000 for Ms Mobbs, the child support assessment would reduce from approximately $23,940 to $22,778 (this includes the increase applied to Mr Welbourn`s self-support amount).

Therefore, I will not adjust Ms Mobbs`s income in the assessment.

In recognizing that Mr Welbourn`s future employment may change, and may not accurately reflect the income, property and financial resources available to him, and to provide financial certainty to both parents, I shall set my decision up to and including 31 December 2022.

I have no evidence before me that this decision would cause either parent financial hardship.

DECISION

The decision of COA (Change of Assessment) Decision Maker (DM) Smith is set aside and
replaced with the following decision.

- For the period 25 October 2021 to 31 December 2022, Mr Welbourn`s income is set to $140,000, and

This decision coincides with the objection decision of DM Holloway on 4 June 2021:
- For the period 18 September 2020 to 31 May 2025, Mr Welbourn s self-support amount is increased by $19,568.

1. Mr Welbourn applied for further review by the Tribunal on 6 June 2022. Mr Welbourn and Ms Mobbs participated in the Tribunal’s hearing by conference telephone. In making its decision, the Tribunal took into account the CSA materials, and the additional materials submitted by both parties (including the copy of Mr Welbourn’s new employment contract submitted after the hearing).

CONSIDERATION

The legislative framework

1. The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Child Support (Assessment) Act 1989 (the Act). A formula is used. It takes into account variables including each parent’s adjusted taxable income for the last relevant year of income, the number of children and the level of care provided by each parent.

2. Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a “change of assessment”). Under subsection 98C(1), the Registrar may make such a departure determination if three matters are established:

   ·     one, or more than one, of the grounds for departure referred to in subsection 98C(2) exists (subparagraph 98C(1)(b)(i));

   ·     a departure is just and equitable as regards the children and each parent (sub-subparagraph 98C(1)(b)(ii)(A)); and

   ·     it is otherwise proper to make a departure decision (sub-subparagraph 98C(1)(b)(ii)(B)). 

3. Subsection 98C(2) provides that the grounds for departure are the same as the grounds set out in subsection 117(2).

4. If satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination, the Tribunal may make one of the determinations prescribed in section 98S of the Act. It permits a range of determinations, including varying the rate of child support payable, the adjusted taxable income or the cost percentage for a child.

Issue 1 – Is there a ground to depart?

1. Subparagraphs 117(2)(c)(ia) and (ib) of the Act, commonly referred to by the CSA as reasons 8A and 8B, provide as grounds for departure:

   (c)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; or

   (ib)       because of the earning capacity of either parent

2. The matters which must be taken into account when assessing a person’s earning capacity are contained in subsection 117(7B) of the Act, which provides the following:

   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.

10.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 …

11.The starting proposition is that the child support formula should apply. Only in special circumstances should a departure be made. The words “in the special circumstances of the case” are not defined in the legislation. Whilst it is not possible to define with precision the meaning of that term, it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the Tribunal will not interfere with the administrative formula result in the ordinary run of cases. In Gyselman v Gyselman (1992) FLC 92–279, it was held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The Tribunal’s approach to the interpretation and application of the particular grounds in subsection 117(2) must be guided by that qualification.

The hearing

12.In short, Mr Welbourn reiterated his issues surrounding the property arrangement and his ongoing liability to meet his share of related expenses. Mr Welbourn said his employment contract expired in mid-October 2022; he received half a month’s pay and unused leave of about 30 days. That contract had earlier been extended on a higher pay for a few months. Mr Welbourn told the Tribunal he was presently negotiating a new contract with a new employer; following the hearing, Mr Welbourn supplied a copy of his new contract revealing a start date of 26 November 2022, and an annual salary of $145,000 (plus $14,500 superannuation).  

13.Ms Mobbs told the Tribunal she considers the property arrangement separate; she did not disagree with the approach of the CSA to increase Mr Welbourn’s self-support amount. Ms Mobbs said that [Child 1] will finish school at the end of this year. Ms Mobbs said she made the decision to move [Child 2] to a new school from Term 2 of this year – her grades have since markedly improved. Ms Mobbs told the Tribunal she worked for a period not exceeding four weeks beginning in around August 2022; she was made redundant effective from 22 September 2022. She has now resumed receiving Centrelink benefits.

14.Ms Mobbs told the Tribunal she is considering taking [Child 2] out of private school next year. She considers Mr Welbourn should pay 100% of her fees. She said she is “out of pocket” a total of about $7,500 this year for [Child 2’s] fees from Term 2 ($1,000 remains to be paid) until the end of the school year. She said she has paid for sporting fees, on top of other costs such as uniforms. Prior to Term 2 of 2022, Mr Welbourn had paid tuition fees for both children, and Ms Mobbs paid for “extras”.

15.Mr Welbourn told the Tribunal he had no knowledge about [Child 2’s] transfer and no input into the decision. He said that when he was working and earning an income, he would be happy to make a 50% contribution to [Child 2’s] tuition fees.  

16.Mr Welbourn told the Tribunal he has some study costs, as well as an outstanding tax liability. He is yet to lodge his tax return for 2021/22. He suggested Ms Mobbs ought not be running [a rental arrangement] from the former matrimonial property under the terms of the arrangement; he suggested she could be earning up to $50,000 per year. Ms Mobbs rejected that suggestion; she has made a loss every year, and expects that to continue for the foreseeable future. Every month, she forwards receipts and expenses to her accountant, who compiles her returns. She had a meeting with her accountant recently, who confirmed she has made another loss in the most recently completed financial year. She said the next booking is not until late December, and for two days only.

17.Ms Mobbs said that in addition to meeting her share of the costs for the property, she meets uniform, transport and other costs, including medical costs, for the children. She said in the past, she has provided evidence of medical and other expenses to the CSA.

Conclusion

18.The existing assessment was based on Mr Welbourn’s 2020/21 adjusted taxable income of $115,035.  Mr Welbourn has been earning in the vicinity of $145,000 (less some deductions), and will do so going forward, with good prospects of a likely extension of his new contract with [Employer 1] next year. His financial capacity is materially higher than that reflected by his adjusted taxable income, which results in a material increase to his child support liability under formula calculations. There are special circumstances which render the child support assessment unfair; there is a ground to depart from the formula.

Issue 2 – Is it just and equitable to depart from the administrative assessment?

19.The next relevant consideration for the Tribunal is whether a departure from the administrative assessment is just and equitable. This enquiry 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.

1. Mr Welbourn’s income has been reflected by the CSA as $140,000 per annum from 25 October 2021 (when he started work with his former employer). He had a “gap” of some six weeks between contracts; however, he received leave entitlements which cover most of that gap. It would be just and equitable to vary Mr Welbourn’s adjusted taxable income to $140,000 (allowing for some reasonable deductions) for the period 25 October 2021 to 31 December 2023 (giving the parties some certainty going forward; by the beginning of 2024, Mr Welbourn’s adjusted taxable income for 2022/23 should be available).

21.In relation to Ms Mobbs’s income in the assessment, the Tribunal accepted her evidence that she has, and continues, to make a loss on her [rental] arrangement. Her main source of income is Centrelink benefits; she worked for a period of (at most) four weeks at a rate of approximately $1,500 per week. In the Tribunal’s assessment, that “one-off”, short, period warrants no adjustment to the child support assessment. In any event, her income would need to be substantially higher than her adjusted taxable income as assessed by the Australian Taxation Office (ATO) to have any impact on the assessment given she has been recorded as having 100% care of the children. Her financial capacity is adequately reflected under the rolling formula assessment of her income as assessed by the ATO.

22.Generally speaking, property matters are kept separate from the ongoing child support assessment. Mr Welbourn’s contribution to the maintenance of the former matrimonial home will ultimately be reflected in the final property division. At the same time, the additional expense is material, and impacts upon his capacity to pay child support. The Tribunal considers the CSA approach – increasing Mr Welbourn’s self-support amount (which in the Tribunal’s rough calculations decreases his ultimate liability by some $5,000 per annum when two children are in the assessment, and $3,000 with only one) - represents a just and equitable approach to reflect his financial commitment.

23.In relation to school fees, the evidence reveals that [Child 2] moved from [School 2] to [School 1] from Term 2 in 2022. Prior to that, Mr Welbourn was meeting tuition fees and levies for both children. Ms Mobbs was paying for school uniforms and the like, and other expenses such as fees for sport. The Tribunal observes such expenses are anticipated and are expected to be met from the calculated rate of child support under the formula.

24.The Tribunal considered the best evidence of the fees for both children at both schools to be appropriately represented in the objection decision. In the Tribunal’s assessment, in 2022, given Mr Welbourn had been meeting the tuition fees for both children until Term 2 2022, and will meet [Child 1’s] fees for the duration of 2022, no additional contribution should be added to his liability for 2022 in respect of [Child 2].

25.Ms Mobbs’s evidence is that [Child 2’s] education in 2023 is uncertain. She suggested she is not able to afford [Child 2’s] tuition fees (without Mr Welbourn’s assistance, at least) and that she may be required to transfer [Child 2] to a public school. Mr Welbourn has indicated a willingness to meet 50% of [Child 2’s] tuition costs. The Tribunal does not consider it appropriate at this point in time to increase Mr Welbourn’s liability from 1 January 2023; however, if the parties do not reach a private arrangement, Ms Mobbs will be at liberty to approach the CSA at such time as [Child 2] is confirmed to be attending [School 1] (or another private school) in 2023 and seek a variation to the child support assessment requiring a contribution from Mr Welbourn towards [Child 2’s] tuition fees.

26.During the hearing, Ms Mobbs raised some historical and ongoing medical costs. Again, the formula assessment contemplates a parent will incur such costs in the ordinary course. There is no evidence before the Tribunal that the costs being met by Ms Mobbs are significant enough to warrant any quantifiable addition to Mr Welbourn’s ongoing child support liability.

27.In the Tribunal’s assessment, no other particularly material expenses were raised by either party in respect of their own situations, or in respect of the children, which would warrant any further adjustment. 

28.The Tribunal has indicated that, going forward, it would be appropriate to vary Mr Welbourn’s income until the end of 2023. The property arrangement is due to resolve in 2025; the Tribunal agrees the adjustment to Mr Welbourn’s self-support amount should be maintained until 2025. In the event Ms Mobbs secures employment (she has recently qualified as [an occupation 1]), a future change to the assessment may be warranted. Both parties will be at liberty to make a future departure application (noting again that Ms Mobbs may seek a variation in respect of school fees if [Child 2] is confirmed to be attending a private school in 2023).  

1. The Tribunal is satisfied that with appropriate budgeting, Mr Welbourn will be able to meet his child support liability without suffering severe financial hardship.

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

30.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.

31.The rate of child support should reflect the obligation of both parents to take financial responsibility for the children and, where increased, may decrease any income-tested benefits payable. A departure is therefore proper.

32.As the Tribunal has reached a different conclusion to the objections officer, the decision under review will be set aside.

DECISION

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

(a)for the period 25 October 2021 to 31 December 2023, Mr Welbourn’s adjusted taxable income is varied to $140,000;

(b)for the period 18 September 2020 to 31 May 2025, Mr Welbourn’s self-support amount is increased by $19,568.