Wilkins and Mercer (Child support)

[2019] AATA 5197

Wilkins and Mercer (Child support) [2019] AATA 5197 (19 August 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC015835

APPLICANT:  Mrs Wilkins

OTHER PARTIES:  Mr Mercer

Child Support Registrar

TRIBUNAL:Member P Jensen

DECISION DATE:  19 August 2019

DIRECTION TO ALTER DECISION OR REASONS FOR DECISION:

Pursuant to section 43AA of the Administrative Appeals Tribunal Act 1975, Mr Mercer’s name is added as one of the “OTHER PARTIES” on the cover page of the Decision and Reasons for Decision.

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/BC015835

APPLICANT:  Mrs Wilkins

OTHER PARTIES:  Child Support Registrar

TRIBUNAL:  Member P Jensen

DECISION DATE:  19 August 2019

DECISION:

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

• Mrs Wilkins’ adjusted taxable income is varied to $72,150 per annum from 1 July 2018 until the occurrence of a child support terminating event;

• Mr Mercer’s adjusted taxable income is varied to $94,767 per annum from 23 April 2018 until the occurrence of a child support terminating event; and

• Mr Mercer’s rate of child support payable is increased by $2,000 per annum from 1 July 2018 to 30 June 2019 (on account of [Child 2]’s special needs).

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents - benefits derived from business – high costs associated with child’s special needs - 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

Introduction

1. Mrs Wilkins and Mr Mercer are the parents of [Child 1] and [Child 2]. A child support case was registered with the Department of Human Services – Child Support (“the CSA”) in 2009. [Child 1] turned 18 and ceased to be a child of the child support case in March 2017.

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 of the child. From 1 September 2017 the administrative assessment was based on Mrs Wilkins’ 2016-17 adjusted taxable income of $74,119, Mr Mercer’s 2016-17 adjusted taxable income of $4,882, and Mrs Wilkins’ 97% care and Mr Mercer’s 3% care of [Child 2]. Mr Mercer was required to pay what is called the fixed annual rate of child support payable, which was $1,390 per annum: see 2.4.11 of the Child Support Guide.

3. The Act also provides for a departure from the administrative assessment in certain circumstances. Mrs Wilkins lodged a departure application on 17 April 2018. An original decision maker granted her application. Mrs Wilkins’ adjusted taxable income was varied to $71,800 per annum from 1 July 2018 until the occurrence of a terminating event, i.e. until the end of the child support case. Mr Mercer’s adjusted taxable income was varied to $88,100 per annum from 23 April 2018 until the occurrence of a terminating event.

4. Mrs Wilkins objected to that decision. An objections officer allowed her objection and varied her adjusted taxable income to $72,000 per annum from 1 July 2018 until the occurrence of a terminating event, and varied Mr Mercer’s adjusted taxable income to $79,000 per annum   from 23 April 2018 until the occurrence of a terminating event.

5. Mrs Wilkins applied to the Tribunal for further review. I conducted a directions hearing on 21 June 2019 and a full hearing on 19 August 2019. Mrs Wilkins and Mr Mercer participating in the hearings by conference phone.

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)(b)(ia) of the Act, commonly referred to as Reason 2, provides as a ground for departure:

   that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:

   …   

   (ia)because of special needs of the child …

2. [Child 2] underwent [a dental procedure] in July 2019 [for a dental condition]. There is no dispute that she required that operation; she had special needs.

3. Mrs Wilkins provided evidence that the total costs associated with the [procedure] less the applicable Medicare rebates totalled $3,043. Mr Mercer did not dispute that evidence and I accept it as correct. Those costs significantly affected the costs of maintaining [Child 2].

4. There is no dispute that Mrs Wilkins has paid those costs less the rebates she received from the family’s private health insurer. Mr Mercer ceased contributing to the family’s private health insurer in December 2018 or January 2019. Mrs Wilkins effectively purchased her entitlement to the rebates she received in respect of [Child 2]’s operation. Those circumstances as a whole constitute special circumstances. Reason 2 is established.

5. 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; …

6. Mr Mercer is a self-employed [Occupation 1]. His 2015-16 adjusted taxable income was $0. His 2016‑17 adjusted taxable income was $4,882. On 6 April 2018 he applied for a $400,000 loan from [Bank 1]. He stated that his gross monthly income was $7,897.25, which equates to $94,767 per annum. He was also asked to provide details of his living expenses, but instead he ticked a statement that “I have decided not to discuss my lifestyle and family protection arrangements with a [financial planner] at this time.” He confirmed that “all information in this application form is correct and not misleading in any way”, and that “[I do] not know of any foreseeable significant changes to [my] circumstances that will lead to changes in [my] ability to make [my] loan repayments”. His 2017-18 adjusted taxable income was $20,328.

7. At the directions hearing, Mr Mercer confirmed that his statement to [Bank 1] that his income was $7,897.25 per month was the best evidence of his average income. In light of that concession, I did not consider it necessary to direct him to provide further evidence of his income from self-employment.

8. At the full hearing, Mr Mercer doubted that his income was $94,767 per annum. He stated that the information contained in his loan application might have been the best evidence of his average income during the months that he [worked], but he only [worked] for seven or eight months per year. His evidence at the full hearing was significantly different to the concession he made at the directions hearing. His evidence at the full hearing was effectively that the information he provided in this loan application was misleading, because it suggested that his average income was less than he had stated, and that he did know of a foreseeable significant change in his circumstances that would lead to a change in his ability to make his loan repayments, because he expected to cease earnings an income for a significant portion of the year. On balance, I consider the evidence he provided to [Bank 1] and the concession he made during the directions hearing to be the best evidence on point. I find that his income and financial resources are fairly reflected for child support purposes in an adjusted taxable income of $94,767 per annum.

9. When Mrs Wilkins lodged her departure application the administrative assessment used Mr Mercer’s 2016-17 taxable income of $4,882. His income and financial resources were fairly reflected for child support purposes in an adjusted taxable income of $94,767 per annum. The difference between those two figures, and in the rates of child support payable pursuant to those two figures, constitutes special circumstances such that the application of the administrative assessment would result 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 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.

2. Mr Mercer owns his home and he is repaying an associated home loan. His household consists of himself. He completed a Statement of Financial Circumstances in February 2019. It appears that he included some business expenses in his list of personal expenses, but his personal expenses appear unremarkable. They significantly exceed his taxable incomes as assessed by the Australian Taxation Office from time to time.

3. Mrs Wilkins is a [Occupation 2]. She received sickness allowance benefits from November 2017 and returned to work in April 2018. She provided, and the CSA accepted, an estimate of her income from 23 April 2018. That estimate of income was subsequently reconciled against her actual 2017-18 adjusted taxable income.

4. Mrs Wilkins has remained in employment. She provided evidence of her earnings during 2018-19. She stated that her accountant had recently completed her 2018‑19 tax return and expected her 2018-19 taxable income to be assessed to be $72,150. Mr Mercer did not dispute that evidence and I accept it as correct. It is the best evidence of her ongoing income.

5. Mrs Wilkins owns her home and she is repaying an associated home loan. Her household consists of herself and [Child 2], and [Child 1] sometimes stays in the house too.

6. Mrs Wilkins completed a Statement of Financial Circumstances in February 2019. Her listed household expenses are unremarkable. Mr Mercer submitted that Mrs Wilkins failed to disclose that she spends $250 per week on alcohol. Mrs Wilkins sought to respond to that suggestion, but I did not consider it necessary to hear from her. Even if she did spend that amount of money on discretionary spending, it would not affect the otherwise appropriate rate of child support payable between the parents. Both parents are required to make a fair contribution towards [Child 2]’s costs. Mrs Wilkins did not need to demonstrate that she would be financially destitute if she did not receive child support.

7. When Mrs Wilkins lodged her departure application she was also caring for a double orphan. She originally sought a variation in the rate of child support payable on that basis. However, she stopped providing that care shortly after she lodged her departure application, and she stated at the directions hearing that she was not seeking a variation to otherwise appropriate rate of child support payable between the parents on that basis.

8. Mr Mercer stated at the directions hearing, and reiterated at the full hearing, that he was willing to make an additional contribution towards the costs of [Child 2]’s operation. After identifying the figure of $3,043 referred to above, Mr Mercer suggested, and Mrs Wilkins agreed, that it would be appropriate for him to contribute $2,000. In the circumstances, I also consider that to be appropriate.

9. For the reasons stated above, it is appropriate to vary Mrs Wilkins’s adjusted taxable income to $72,150 per annum from 1 July 2018, which is the day she ceased being assessed on her estimate of income, and it is appropriate to vary Mr Mercer’s adjusted taxable income to $94,767 per annum from 23 April 2018, which is the date from which the CSA started collecting the child support payable, and it is also very close to the date on which Mrs Wilkins lodged her departure application.

10. Mr Mercer’s additional contribution towards the costs of [Child 2]’s operation will be achieved by increasing his rate of child support payable from 1 July 2018 to 30 June 2019 by $2,000 per annum.

11. Mr Mercer is up to date with his child support payments. The proposed decision will create child support arrears of approximately $5,200 (of which $2,000 will be Mr Mercer’s contribution towards the costs of [Child 2]’s operation). It will increase Mr Mercer’s current rate of child support payable from approximately $10,700 per annum to approximately $12,900 per annum. Given the quantum of his income, he has the capacity to pay those arrears and that rate of child support payable.

12. It is appropriate to vary the parents’ adjusted taxable income until the occurrence of a terminating event. I note that the original decision maker and the objections officer made decisions with effect until the occurrence of a terminating event, but it appears that the CSA has not correctly recorded that information in its computer system: see page 489 of the hearing papers and paragraph 151D(1)(a) of the Act. If the CSA makes a similar mistake when implementing the Tribunal’s decision, Mrs Wilkins may wish to raise the issue with the CSA directly.

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.

2. Mrs Wilkins receives family tax benefit in respect of her care of [Child 2]. Increasing Mr Mercer’s rate of child support payable will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

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

• Mrs Wilkins’ adjusted taxable income is varied to $72,150 per annum from 1 July 2018 until the occurrence of a child support terminating event;

• Mr Mercer’s adjusted taxable income is varied to $94,767 per annum from 23 April 2018 until the occurrence of a terminating event; and

• Mr Mercer’s rate of child support payable is increased by $2,000 per annum from 1 July 2018 to 30 June 2019 (on account of [Child 2]’s special needs).