Whelan and Whelan (Child support)

[2022] AATA 3522

Whelan and Whelan (Child support) [2022] AATA 3522 (4 August 2022)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2022/SC023155

APPLICANT:  Mr Whelan

OTHER PARTIES:  Child Support Registrar

Ms Whelan

TRIBUNAL:Member J Leonard

DECISION DATE:  4 August 2022

DECISION:

The Tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• Varying Mr Whelan’s adjusted taxable income to $81,290 for the period 29 July 2021 to 30 November 2023;

• Varying Ms Whelan’s adjusted taxable income to $85,000 from 29 July 2021 to 31 October 2022; and

• Increasing the annual rate payable by Mr Whelan for the period 1 December 2021 to 30 November 2023 by $1,450 being his contribution towards the costs of [Child 1]’s special needs.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of the liable parent – costs of orthodontic costs for the child – 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 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

1. Ms Whelan and Mr Whelan are the parents of three children. Mr Whelan has sought review of a decision of Services Australia (Child Support) about the amount of child support payable in respect of the youngest two children [Child 1] (born 2008) and [Child 2] (born 2005). The child support assessment in respect of the eldest child ended in November 2020 when she completed year 12.

2. From 4 September 2020 [Child 2] is recorded as being in the full-time care of Ms Whelan. From 30 October 2020 [Child 1] is recorded as being in the full-time care of Ms Whelan. Mr Whelan is the parent liable to pay child support to Ms Whelan.

3. From 29 July 2021 to 18 August 2021 the administrative assessment of child support required Mr Whelan to pay Ms Whelan the annual rate of child support of $3,678 which was based on Mr Whelan’s income estimate of $39,002 and Ms Whelan’s income estimate of $52,142.

4. From 19 August 2021 to 21 September 2021 the administrative assessment of child support required Mr Whelan to pay Ms Whelan the annual rate of child support of $2,574 which was based on Mr Whelan’s revised income estimate of $35,196 and Ms Whelan’s revised income estimate of $52,142. From 22 September 2021 Ms Whelan provided a revised income estimate of $31,285 however this had no effect on the administrative assessment.

5. On 31 July 2021 Ms Whelan applied for a departure from the administrative assessment on the grounds that in the special circumstances of the case:

   ·     the assessment did not correctly reflect Mr Whelan’s income, property financial resources or earning capacity, and

   ·     the costs [Child 1]’s special needs significantly reduced her capacity to provide financial support for the child.

6. On 27 September 2021 Mr Whelan applied for a departure from the administrative assessment on the grounds that in the special circumstances of the case the assessment did not correctly reflect Ms Whelan’s income, property financial resources or earning capacity.

7. On 15 October 2021 a delegate of Child Support determined that a ground to depart from the administrative assessment existed and decided:

   ·    for the period 15 October 2021 to 15 October 2023 Mr Whelan’s adjusted taxable income is varied to $57,000, and

   ·    for the period 15 October 2021 to 15 October 2023 the annual rate of child support payable by Mr Whelan is increased by $1,325.

8. Ms Whelan objected to that decision on 10 November 2021. On 22 December 2021, an objections officer decided that from 1 September 2021 to 30 November 2023 Mr Whelan’s adjusted taxable income is varied to $83,200.

9. Mr Whelan applied to the Tribunal to have the objections officer’s decision reviewed. The Tribunal hearing took place on 4 August 2022. Mr Whelan and Ms Whelan appeared by conference telephone and gave evidence under affirmation. In reaching its decision, the Tribunal has considered the oral evidence given during the hearing together with the documentation provided by Child Support (672 pages), Mr Whelan (A1 to A47) and Ms Whelan (B1 to B17). During the hearing the contents of a report from an orthodontist were discussed. Ms Whelan provided a copy immediately after the hearing which is numbered B18. A copy is attached to this decision.

CONSIDERATION

The legislative framework

10. The rate of child support payable by a liable parent is usually based on an administrative assessment calculated using the relevant formula under Part 5 of the Child Support (Assessment) Act 1989 (the Act). This involves the application of a statutory formula, which takes into account factors such as the number of children, the age of each child, the level of care provided and the income of each parent. The income used in the calculation has a number of components making up the adjusted taxable income, which is worked out using section 43 of the Act.  The general approach is that the Child Support Registrar (“the Registrar”) will utilise a parent’s adjusted taxable income as assessed by the Australian Taxation Office for the last relevant year of income.

11.  Part 6A of the Act allows for a departure from an administrative assessment (a process commonly known as a change of assessment). The liable parent or a carer may apply to the Registrar for a determination to depart from the child support administrative assessment; section 98B of the Act. 

12.  The grounds for departure from the administrative assessment are set out in subsection 117(2) of the Act.  Only one ground is required in the special circumstances of the case to depart from the administrative assessment and thereby satisfy the requirements of subsection 117(2) of the Act.[1]

Grounds for departure

[1] The phrase “special circumstances of the case” is not defined in the Act. However the Family Court has held that “it is intended to emphasise that the facts of the case must establish something special or out of the ordinary” (Gyselman and Gyselman (1992) FLC 92-279).

The income, property and financial resources of the parents

13.  The Act provides, as grounds for departure from the administrative assessment of child support (in subparagraph 117(2)(c)(ia)):

(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.

14.  The Tribunal will consider whether the application of the administrative assessment would result in an unjust and inequitable determination of child support payable, having regard to the evidence relevant to the parents’ financial positions.

15.  Mr Whelan is employed by his parents’ company, [Company 1] as a [Occupation 1]. His adjusted taxable income was $57,004 in the 2017–18 financial year, $53,564 in the 2018–19 financial year, $58,478 in the 2019–20 financial year and $54,203 in the 2020–21 financial year.

16.  In 2021 the median wage for an [Occupation 1] aged over 45 years was $90,272.[2]  Even before COVID-19 pandemic, Mr Whelan was paid considerably less than this.

[2] What Jobs Pay and Job Markets Australia earning series.

17.  Mr Whelan stated he expects his “pay for this financial year” to be $45,000 (A10 in the papers). A payslip for the period ending 28 June 2022 shows a year-to-date gross figure of $46,305. The payslip recorded that Mr Whelan worked 30 hours at a rate of $32.30 per hour.

18.  Mr Whelan stated that some weeks he does not work full time. He could not recollect when he last worked full time, perhaps in 2020.  He was “in and out of court” in November 2021 and stated he was struggling not having contact with the children. He stated there were times when he could not leave the house and he has perhaps worked 20 days in the past six months on a [specified equipment]; at other times he does general duties. He stated the company had to reduce his pay due to COVID-19 as the company had no income.

19.  [Father A] stated (A46 in the papers):

Over 25 years ago, when [Mr Whelan] started with the company, he had his own vehicle. Following our accountant's advice, we bought more equipment, machines, vehicles, phones and whatever else our company may need to help with our company taxes and this is how our employees got their vehicle and phone. This was not part of a salary package. In reference to the letter sent on the 23rd December 2021, that was part of the "Details of Objection Decision"; it was written that "His employer pays for his mobile phone, he believed it was about $70". This is incorrect, the monthly plan is $30.

20.  At hearing Mr Whelan stated the monthly phone plan was $50 and he uses the phone for work and business. The company has a number of vehicles he may drive, but the vehicle he drives most often is a [specified make and model]. The company pays for registration, fuel, insurance and maintenance.

21.  [Father A] stated that since the objections officer’s decision of December 2021, Mr Whelan has once again experienced “depression, anxiety, stress and insomnia” and he has been taking medication that does not allow him to drive the machinery safely and:

This has left my company no choice but to reduce his income, which has already been severely impacted by the COVID pandemic. As he is unable to operate heavy machinery, his minimum wage is based on maintaining the property where [Company 1], is located and picking up machinery parts whilst helping his mother with shopping.

22.  A letter signed by [Father A]  and [Mother B] state that they purchased a “joint-equal property” with Mr Whelan. They give him permission to withdraw money from their account to give cash to the girls. They stated they pay half of the service charge for gas and electricity; $849 per year and that their son does not access their account without their consent. 

23.  Information from [Bank 1] provides Mr Whelan holds the following accounts:

• 4243 signatory [Mr Whelan]. Balance on 25 February 2022 was $18.68,

• 0161 signatory [Mr Whelan], [Father A] and [Mother B]. Balance on 25 February 2022 was $200,231.60,

• 1813 housing loan opened 21 March 2018. Original loan amount $680,000 balance was $209,903 on 25 February 2022. Account name [Mr Whelan], [Father A] and [Mother B],

• 3645 housing loan opened 23 February 2021. Account name [Mr Whelan], [Father A] and [Mother B]. Original amount $385,016, balance on 25 February 2022 was $345,244.

24.  Mr Whelan stated he and his parents paid half of the mortgage; $1,118 per month each. When his child support liability increased in December 2021, his parents started to pay 100% of the mortgage as he could not afford it. This is not supported by the bank statements.

25.  In answer to the Tribunal’s questions regarding the transfer of funds from his [Bank 1] account ending 4243, Mr Whelan stated that he pays his child support and some minor expenses, and then transfers as much as he can to the offset account, ending 0161. This included $1,000 on 29 November 2021, $1,142 on 3 December 2021 (which was used to pay off his credit card on 7 December 2021) $2,000 on 6 January 2022, $800 on 3 February 2022 and $2,700 on 23 February 2022.

26.  The regular weekly mortgage repayments of $344.54 and $250 are debited from account ending 0161. Mr Whelan’s credit card is paid from this account, together with health fund membership, [energy bill], [water bill] and [telecommunication bill]. 

27.  A regular amount of $344 per week is deposited into this account, presumably from Mr Whelan’s parents’ account. Consistent with Mr Whelan’s discussion with Child Support on 15 December 2021, the Tribunal accepts that Mr Whelan’s parents provided the source of the funds in account 0161. The intention was that loan 1813 would attract little interest due to the benefit derived by the mortgage offset account.  Their contribution to the mortgages is an amount of $344.54 paid weekly into the loan account 3645. Mr Whelan does not pay them rent for their share of the property and so the mortgage payments they make of $4,134.48 per annum are an indirect benefit to Mr Whelan.

28.  The balance of the account 0161 reduced by $4,512.64 in the period 26 November 2021 to 24 February 2022. This represents the difference between the amount Mr Whelan deposited into the account and the expenses, including health fund, water, gas and phone met by the account. This is equivalent to $18,048 per annum.

29.  Mr Whelan also benefits from the costs of a motor vehicle being met by the company. Excluding loan repayments on a [vehicle], the expenses associated with registration, insurance, membership, fuel, servicing and tyres is $4,905 per annum.[3]

[3] Car running costs 2021: Victoria’s cheapest and most expensive cars | RACV.

30.  Mr Whelan provided evidence that his wages in 2021–22 had reduced. He attributed this to both the impact of COVID-19 on his parents’ business and his own mental health. He stated he was receiving jobkeeper payment for a while. He provided a payslip for period ending 28 June 2022 which indicated he worked 32.3 hours in the week and his year-to-date earnings were $46,305. This is a reduction of approximately $8,000 on the previous financial year.

31.  Mr Whelan stated he did not provide his parents with medical evidence that he was unfit to work full time as “it was just obvious”. Mr Whelan stated he saw a psychologist between 2014 and 2017 while he was involved in family therapy. He sees a general practitioner at the local medical centre but has not been referred for psychotherapy recently.

32.  In a medical certificate dated 23 February 2022 [Dr C] stated Mr Whelan has long-standing issues with low mood/anxiety secondary to family stressors: “He has tried various anti-depressants over the years …with moderate benefit. He is currently on follow-up”.

33.  In a medical certificate dated 26 June 2022 [Dr D] stated Mr Whelan is experiencing “a medical condition” …and he is unable to perform his usual tasks of operating heavy machinery due to his current condition/medication.

34.  A ground for departure may be established where the assessment does not correctly reflect a parent’s earning capacity. Before a determination can be made that a person’s earning capacity is greater than their income used in the child support assessment, subsection 117(7B) must be considered. It provides:

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.

35.  The legal test for an earning capacity decision to be made requires three criteria to be met. The first is that the parent is not working despite ample opportunity to do so, has reduced their work hours to below full time or has changed their occupation, industry or working pattern. The Tribunal finds that Mr Whelan is not working full time and so this criterion is satisfied.

36.  The second criterion is that this change is not justified by the parent’s caring responsibilities or state of health. Mr Whelan stated he had court commitments in November 2021, he was struggling to work as a [Occupation 1] due to his health, and also that the company could not afford to pay him due to economic downturn. There is no evidence that a medical practitioner advised Mr Whelan not to work full time due to his health in 2020 or 2021. The only medical evidence stating Mr Whelan is unable to operate heavy machinery is dated 26 June 2022. Prior to that the medical evidence stated that medication had had a moderate benefit and was silent in regards to his work capacity. Mr Whelan was unable to explain why he was not utilising his sick leave entitlement if he was unable to work full time. The Tribunal finds the reduction in Mr Whelan’s hours of employment is not justified by his health. This second criterion is also met.

37.  The third criterion is that the parent has failed to show that affecting the administrative assessment of child support was not a major purpose of the decision about their work arrangements. Mr Whelan has not demonstrated that affecting his child support was not a major purpose in the change in his employment arrangements. The various reasons given for the change to his working pattern tends to reinforce this view.

38.  The Tribunal finds that the criteria for an earning capacity decision is met in this case and so relied on Mr Whelan’s 2020–21 taxable income of $54,203 as the starting point to determine the income and financial resources available to him.

39.  Overall, the Tribunal finds that Mr Whelan had earnings and financial resources available to him of $81,290 ($54,203 + $4,134 + $18,048 +$4,905). This is less than, but not inconsistent with the earnings figure derived from the Australian Bureau of Statistics’ data.

40.  Using an income of $81,290 would result in an annual rate of child support of approximately $15,624. This is considerably more than the annual rate of $3,678 determined under the administrative assessment from 29 July 2021.

41.  The Tribunal concludes that a ground for departure exists because in the special circumstances of the case, the application of the provisions of the Act relating to the 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 because of the income, financial resources and earning capacity of Mr Whelan.

Is it just and equitable to make a particular departure determination?

42.  As the Tribunal is satisfied that there is a ground to depart from the assessment of child support in relation to Mr Whelan’s income, financial resources and earning capacity, the next step for the Tribunal is to consider whether it is just and equitable to make a particular determination in accordance with sub-subparagraph 98C(1)(b)(ii)(A) of the Act.  This in turn requires the Tribunal to consider the matters set out in subsection 117(4) of the Act.

43.  Section 3 of the Act states that it is the duty of both parents to financially support their children. All children should receive a proper amount of financial support from their parents in accordance with their capacity to contribute. The Tribunal only has to consider the factors set out in subsection 117(4) of the Act to the extent they are relevant in any particular case (see Gyselman).

The children

44.  [Child 2] is in Year 12 and approximately five months ago commenced work part time at [Employer 1]. Because of her studies, she works a few hours a week.  [Child 1] has also recently commenced part-time work at [Employer 1] and works a maximum of a three-hour shift and earns $8 per hour. The Tribunal finds that the children do not have any income, property or financial resources or any unused earning capacity of any significance from which they can support themselves.

45.  Ms Whelan incurred an out-of-pocket expense of $5,800 for orthodontic treatment for [Child 1] in 2021. Mr Whelan raised concerns that the treatment was purely for cosmetic reasons, however in a letter dated 12 May 2022 [Dr C] stated that [Child 1] presented with a marked protrusion of the upper arch and a large protrusion of the upper teeth over the lower and a tendency towards an open bite. He was of the opinion that if left untreated the effects could be quite detrimental.

46.  The administrative assessment shows the costs of raising [Child 1] to be $2,007 per annum. The Tribunal finds that there is sufficient evidence to establish that [Child 1] has special needs and the out-of-pocket expenses of $5,800 significantly affects the cost of maintaining her. The Tribunal proposes to increase the annual rate of child support payable by Mr Whelan by 50% of the out-of-pocket expenses, to be paid over a two-year period. This results in an increase to the annual rate of child support by $1,450.

The parents

47.  Ms Whelan stated that the eldest child is studying at university. She has a part-time job and Ms Whelan encourages her to save her wages for a house deposit. She does not ask the eldest daughter to pay board and lodging. She does not know whether her daughter claimed financial assistance from Centrelink.  The Tribunal accepts Ms Whelan’s evidence that she is financially supporting the eldest child, however the eldest child has some capacity to support herself through employment, and it appears her entitlement to financial support from Centrelink is untested. In such circumstances, the Tribunal determines that it is not just and equitable to make a determination to vary the assessment due to the support Ms Whelan provides to the eldest child.

48.  Ms Whelan stated she has no responsibility to support anyone other than the children. She is employed as a [Occupation 2]. She has a permanent contract for two days per week and works casual when it is offered. Ms Whelan’s payslip for period ending 10 June 2022 shows gross salary of $3,527 and year-to-date salary of $85,503.72. The Tribunal considers it is likely Ms Whelan’s gross salary in the 2021–22 financial year is around $89,000. Allowing for reasonable tax deductions that might be claimed by a person in her profession, the Tribunal considers it is likely that Ms Whelan’s taxable income will be in the vicinity of $85,000. She does not have any financial resources not already considered and does not have an unused earning capacity.

49.  The administrative assessment was based on Ms Whelan’s estimated 2021–22 income of $52,142 from 29 July 2021 until it was replaced by an amended estimate of $31,285 from 22 September 2021. Using an income figure of $85,000 in the assessment from July 2021 would reduce the annual rate of child support previously calculated to approximately $15,080.

50.  Ms Whelan stated she has a medical condition and pharmacy costs of approximately $40 per month. She undergoes a medical procedure every two years with an out-of-pocket medical expense.  Overall the Tribunal finds that Ms Whelan does not have any unusual expenses associated with her own self-support.

51.  Mr Whelan’s income and financial resources have been discussed above. He does not have a responsibility to support anyone other than the children. He does not have any unusual expenses associated with his own self-support.

Terms and period of departure

52.  The Tribunal considers that it is just and equitable to vary Mr Whelan and Ms Whelan’s income from 29 July 2021, the day Ms Whelan provided an estimate of income of $52,142.

53.  The Tribunal is not satisfied that Mr Whelan’s income tax return for the 2021–22 financial year will be an accurate reflection of his income or financial resources and proposes to extend the period of departure until 30 November 2023.

54.  The Tribunal is satisfied that Ms Whelan’s 2021–22 income tax return will be an accurate reflection of her income and she does not receive financial benefits beyond her wage from her employer. The Tribunal will therefore vary Ms Whelan’s adjusted taxable income to 31 October 2022 to allow her to lodge her income tax return. After that, the administrative assessment will apply in respect of Ms Whelan’s income.

55.  Further, the Tribunal decides to increase the annual rate of child support payable by Mr Whelan by $1,450 for the period 1 December 2021 to 30 November 2023 in respect of his contribution to the costs of [Child 1]’s orthodontic treatment.

56.  This will result in an annual rate of child support of approximately $16,530 from 29 July 2021. The Tribunal is satisfied that this reflects a reasonable level of support for the children in light of their parents’ circumstances and this outcome would be just and equitable.

Hardship

57.  Although Mr Whelan stated he is concerned about meeting his expenses, his responsibility to maintain his children is a primary duty. The proposed decision will not result in hardship to Mr Whelan and would not result in hardship to Ms Whelan or the children.

Is it otherwise proper to depart from the administrative assessment?

58.  The final step for the Tribunal to undertake is to determine whether it is “otherwise proper” to depart from the administrative assessment.  Subsection 117(5) of the Act requires the Tribunal to take into consideration the following matters:

(a)            the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and

(b)          the effect that the making of the order would have on:

(i)       any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or

(ii)       the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

59.  The child support law recognises that each parent has a primary duty to maintain their children. Ms Whelan receives family tax benefit and so the proposed decision may reduce the rate she receives which is appropriate. The Tribunal is satisfied that it is otherwise proper to depart from the administrative assessment in this matter by varying Mr Whelan’s and Ms Whelan’s adjusted taxable income and to properly reflect the additional cost of [Child 1]’s special needs.

DECISION

The Tribunal sets aside the decision under review and substitutes a decision to depart from the child support assessment by:

• Varying Mr Whelan’s adjusted taxable income to $81,290 for the period 29 July 2021 to 30 November 2023;

• Varying Ms Whelan’s adjusted taxable income to $85,000 from 29 July 2021 to 31 October 2022; and

• Increasing the annual rate payable by Mr Whelan for the period 1 December 2021 to 30 November 2023 by $1,450 being his contribution towards the costs of [Child 1]’s special needs.