Younes and Younes (Child support)

[2019] AATA 5939

Younes and Younes (Child support) [2019] AATA 5939 (11 December 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/AC016652

APPLICANT:  Ms Younes

OTHER PARTIES:  Child Support Registrar

Mr Younes

TRIBUNAL:Member M Kennedy

DECISION DATE:  11 December 2019

DECISION:

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to make departure determinations as follows:

1. From 13 July 2018 to 31 July 2019, Mr Younes’ adjusted taxable income is varied to $84,644.

2. From 1 August 2019 to 30 September 2021, Mr Younes’ adjusted taxable income is to be increased by an amount of $33,000.

3. For the period 1 July 2018 to 1 July 2019, the annual rate of child support is to be increased by an amount of $837.50

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of parent – special needs of child – 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

1. Ms Younes and Mr Younes are the parents of [a child] and [Child 1], in respect of whom a child support assessment is in place.

2. As I understand it, prior to 13 July 2018, child support was calculated in the ordinary way, relying on the provision of taxation information and the application of the administrative provisions of the child support law for the calculation of child support in accordance with the child support formula.

3. From 13 July 2018 however, Mr Younes had lodged an estimate of his income reflecting changes to his work arrangements.  Mr Younes had discharged as a full time member of the [defence force], commenced service as a reservist, and was in receipt of a defence force retirement pension.

4. The acceptance of the estimate had a significant effect on the rate of child support payable.  Prior to the estimate being lodged, the annual rate of child support was $17,438pa.  Afterwards it was $3714pa.  On 9 August 2018 Mrs Younes applied for a change of assessment in special circumstances, noting that Mr Younes’ salary as a reservist did not form part of his taxable income and so was not being taken into account.  In addition, Ms Younes claimed that she was incurring extra costs arising out of [Child 1’s] special need for a [health professional]. 

5. On 15 January 2019, the Child Support Registrar (the Department) agreed to depart from the administrative assessment of child support in the special circumstances of the case, finding that Mrs Younes did incur extra costs for [Child 1] that significantly affected the costs of maintaining him, and that Mr Younes’ defence force reserve pay should be taken into account in identifying his capacity to maintain his children.  The Department decided to increase Mr Younes’ adjusted taxable income by $30,000pa from 13 July 2018 to 30 November 2019, and then increased the annual rate of child support by a further $1200 for the period from 9 August 2018 to 30 November 2019.

6. Ms Younes objected to that decision on 4 March 2019.  She was granted an extension of time to do so.  On objection, the objections officer agreed that the Department’s decision was correct.

7. Ms Younes applied to the Tribunal for review on 3 June 2019.

8. The parents participated in a telephone directions hearing, and both have complied with the Tribunal’s directions regarding the provision of further information.

CONSIDERATION

1. The legislation relevant to this review is contained in the Child Support (Assessment) Act 1989 (the Act) and in the Child Support (Registration and Collection) Act 1988 (the Registration and Collection Act). The rate of child support payable by a liable parent is usually based on an administrative assessment under Part 5 of the Act. This requires the application of a statutory formula which takes into account factors such as the number and age of children, the level of care provided and the income of each parent. Provisions of the Act allow for parents to lodge estimates of their income, with such estimates being reconciled when accurate income information becomes available.

2. Under section 98B of the Act, if special circumstances exist, a liable parent or a carer entitled to child support may apply to the Child Support Registrar (the Registrar) in writing, requesting a departure from the administrative assessment in relation to a child.

3. Under section 98C of the Act, before making a departure determination on an application made under section 98B of the Act, the Registrar must be satisfied that in the special circumstances of the case, one or more grounds under subsection 117(2) of the Act exist, and that it would be just and equitable and otherwise proper to make a particular determination.

A ground is established in relation to Mr Younes’ income and financial resources

1. As to Reason 8, subparagraph 117(2)(c)(ia) provides that, in the special circumstances of the case, a ground for a departure determination may be established if application of the legislative provisions relating to administrative assessment ‘result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent’ due to the income, property and financial resources of either parent.

2. Mr Younes accepts that his defence force reserve pay represents a financial resource available to him to contribute to the maintenance of his children.  As a result of these proceedings, I have clear evidence from the Department of Defence as to the amount Mr Younes has received in reserve pay, and the number of days he is approved to serve as a reservist in this financial year.

3. Mr Younes told me that he aims to use all of his approved days this financial year, and I accept his assessment that it is very unlikely that he would be approved to work more than the amount that has been approved to work.

4. In applying to the Tribunal for review, Ms Younes has previously explained that she was dissatisfied with the extent of the investigation undertaken into Mr Younes’ reserve pay arrangements.  At the hearing, Ms Younes told me that she had followed my questions regarding the defence force payroll documents and accepted that there was now clear evidence of the value of Mr Younes’ reserve activities as income or a financial resource.

5. In relation to this ground, my conclusions are straightforward.  Defence force reserve pay is tax free, and so does not form part of a person’s taxable income. There are no legislated mechanisms that capture defence force reserve pay into the concept of an ‘adjusted taxable income’ which is a component of the child support formula.

6. Mr Younes does not contend that his reserve pay should not be taken into account, and I agree that it is a financial resource that should be taken into account. To fail to do so would result in an unjust and inequitable assessment of child support having regard to Mr Younes’ true financial resources.

7. The quantification of that financial resource is also straightforward.  In 2018/2019, its value was $22,384.50 (B6).  In 2019/2020, it can be predicted that it will be $32,843 (B7).

8. Without any departure from the administrative formula for child support, Mr Younes’ child support liability would be calculated in accordance with his estimate of $54,150.  This would produce a rate of $3,714 in the period from 13 July 2018 to 31 August 2018, and then $3,626 in the period to 30 June 2019 (because Ms Younes’ adjusted taxable income changed from $48,651 to $49,291.

9. The ordinary operation of the administrative provisions would operate to reconcile Mr Younes’ estimate against his actual taxable income.  I can see now that upon reconciliation, there would be an adjustment upwards because Mr Younes’ 2018/2019 taxable income is $62,260. This however, still does not take into account the reserve pay, and so the reconciliation would not cure the problem.

10. Mrs Younes was aggrieved to compare the amount of Mr Younes’ estimate against the amount of his taxable assessment in a notice of assessment of 3 June 2019.  In this regard, Mr Younes’ estimate was $54,150 while his 2017/2018 taxable income was $187,658.  Absent an estimate, that taxable income would have formed the basis of the assessment going forward.  It is unsurprising that Mrs Younes was aggrieved.

11. However, as I explained to Mrs Younes at the hearing, Mr Younes’ estimate, which affected the assessment only from 13 July 2018, would never be reconciled against his 2017/2018 income.  Estimate reconciliations are made against income for the period to which the estimate relates, not the prior financial year.  In this way, Mr Younes’ estimate would ordinarily be reconciled against his 2018/2019 taxable income. The difference between this income and the estimate is less stark: $62,260.  Upon reconciliation to an income of $62,260, I note the assessment would be in the order of $5,116pa. But as mentioned above, as this does not take into account the financial resource of the reserve pay, the assessment would still be unjust and inequitable.

12. In this regard, if I were to simply add the total reserve pay onto Mr Younes’ assessed taxable income, he would be assessed on $84,644.  In a child support period commencing in the 2018/2019 financial year, and assuming Ms Younes’ income remained the same, the annual rate would be $9070.  The difference between $3,626, $5,116 and $9070 is significant.  If I were to add $32,843 (being the predicted earning from the defence force reserves this financial year), the assessment would be $10,802.

13. In my view, the significance of this change to the annual rate of the assessment demonstrates that the administrative provisions of the child support law produce a result that is unjust and inequitable having regard to Mr Younes’ income and financial resources, to the extent that it also constitutes a special circumstance.

14. I find the ground established.

A just, equitable and otherwise proper departure

1. As I am satisfied that there is at least one ground to depart from the administrative assessment of child support, the next step is to consider whether it is just and equitable to depart from the assessment. In deciding whether it is just and equitable, the Tribunal must have regard to the following matters set out in subsection 117(4) of the Act:

   (a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
   (b)         the proper needs of the child; and
   (c)         the income, earning capacity, property and financial resources of the child; and

   (d) the income, property and financial resources of each parent who is a party to the proceeding; and

   (da)       the earning capacity of each parent who is a party to the proceeding; and

   (e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:

   (i)       himself or herself; or

   (ii)       any other child or another person that the person has a duty to maintain; and

   (f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

   (g)         any hardship that would be caused:

   (i)       to:

   (A) the child; or

   (B) the carer entitled to child support;

   by the making of, or the refusal to make, the order; and

   (ii)        to:

   (A) the liable parent; or

   (B) any other child or another person that the liable parent has a duty to support;

   by the making of, or the refusal to make, the order; and

   (iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.

1. As I explained to the parents at the hearing, I am to approach this task on the basis that a duty that a parent has to maintain their children has a priority over all other commitments of the parent other than commitments necessary to support other children and themselves: section 3 of the Act.

2. As to the proper needs of the children, Ms Younes has asked that [Child 1’s] special needs be taken into account. In this regard, Ms Younes raised ‘reason 2’ as a ground, and provided evidence of out of pocket expenses she has incurred in providing for [Child 1] to attend [health therapy]. 

3. Mr Younes agrees [Child 1] benefits from [health treatment].  Mr Younes’ concerns are however that the approach of the objections officer may have inflated the out of pocket costs Ms Younes has actually incurred because [Child 1] has not attended as many appointments as was predicted.

4. At the hearing, Ms Younes handed up A18, which is a comprehensive list of all appointments and their corresponding cost between 26 April 2018 and 27 September 2019.  Mr Younes had been in touch with the [health] provider recently.  When Mr Younes examined A18, he agreed that it represented what he had been told about [Child 1’s] attendances.

5. Ms Younes explained that [Child 1] has stopped his appointments from 27 September.  She expects he will resume the appointments from term 1 next year.  Mr Younes said that when he spoke with the [health] provider, they were not aware of any arrangements for [Child 1] to attend next year.  Ms Younes explained that for the time being [Child 1] attends [the health provider] on an ‘as needed’ basis.

6. Ms Younes told me that the figures on A18 do not include a Medicare rebate which she can access if the [health professional] is arranged by the GP.  Medicare will pay $52.95, 5 times per year, towards the appointments.

7. Ms Younes’ out of pocket costs can therefore be accurately calculated with the benefit of hindsight from  A18.  A18 shows total costs of $2098 between 26 April 2018 and 27 September 2019.  Assuming the Medicare rebate resets on a calendar year, Ms Younes has been able to access the Medicare rebates twice.  I consider that the evidence demonstrates therefore that Ms Younes’ out of pocket costs for [Child 1’s] [health provider] are $1,568 between 26 April 2018 and 27 September 2019.

8. I am not sufficiently satisfied as to the regularity or costs for [the health therapy] going forward to make additional provision in the child support assessment. It is open to the parents to meet these additional costs equally by agreement rather than through the child support assessment.  I consider it appropriate to adjust the departure from the assessment to reflect this better evidence now available to me about the costs of [Child 1’s] special needs.  I will also include half the identified costs Ms Younes has incurred in providing for [Child 1] to see a [second health professional], but in circumstances where it is not entirely clear if or how often [Child 1] will see the [second health professional] going forward, I can only make that adjustment in arrears and to 10 December 2019.  

9. Both parents raised various out of pocket expenses incurred for extra-curricular activities for the children, but also acknowledged my explanation that such matters will not ordinarily justify a further adjustment to child support.

10. As to the income, property and financial resources of Ms Younes, I accept the accuracy of her statement of financial circumstances and note she is a paid employee.  I consider that her adjusted taxable income as assessed from time to time remains an adequate measure of her financial capacity to maintain the children.

11. Further as to Mr Younes’ income, property and financial resources, I note that his defence force pension forms part of his taxable income.  I also accept that a large superannuation payout has formed part of the dispute between the parents that is to be dealt with by way of property settlement.  I consider it most appropriate for lump sums of that nature to be dealt with in the property settlement.  No part of the purpose of child support is to settle property disputes between parents on the breakdown of a marriage.

12. Finally, Ms Younes raised observations of Mr Younes enjoying items of property that might not be consisted with his stated financial resources.  These items consisted of [Item 1] and access to [Location 1], demonstrated by payments of site fees.  Mr Younes gave sworn evidence that these items are owned by his father in law and are intended to be enjoyed by the entire family.  The payment of site fees come from a joint account with his partner, and form part of the family arrangement for meeting those ongoing expenses.   Mr Younes confirmed that he did not supply any of the wealth that purchased [Item 1] or [Location 1].  I accept his sworn evidence in this regard. 

13. I am satisfied that with proper adjustment for the income and financial resource of the reserve pay, Mr Younes’ taxable income will adequately reflect his financial capacity to support his children.

14. Ms Younes no longer presses her concerns about Mr Younes’ motivation for leaving the full-time defence force on the grounds of his earning capacity.  I accept Mr Younes left the full-time defence force as otherwise he faced relocation to [a city] and consequential disruption to his family.

15. No further relevant matters were raised in relation to the other subsection 117(4) factors. I have examined each parent’s statement of financial circumstance and identified no other potential financial resources or unusual self-support expenses.

16. I must also be satisfied that any departure determination is ‘otherwise proper’.  This factor reminds me that the parents have the primary duty to maintain the children, and a child support assessment can affect the rate of family assistance a parent is entitled to receive. It is inappropriate to depart from the child support assessment where that departure will inappropriately shift the financial burden of raising the children from the parents to the social security system. I have taken into account that Mrs Younes was and is in receipt of family assistance from the Commonwealth Government.  In considering whether it is otherwise proper to make a particular departure determination, I take into account that Mrs Younes is in receipt of family tax benefit and the rate of this payment will be affected by any child support assessment. I consider it otherwise proper to arrive at a departure determination based on the facts as I have found in this review.

17. I agree generally with the approach of the objection officer to increase Mr Younes’ adjusted taxable income by an amount representing the value of his reserve service income, and a further increase to represent an equal contribution to the unusual costs incurred for [Child 1].  The review process however has put me in a better position to be more precise with my findings.

18. I am also concerned to note that, almost certainly unintentionally, the effect of the framing of the objections officer’s departure determination inflated Mr Younes’ adjusted taxable income to $217,658 in the month of July 2019. This was produced by the receipt of Mr Younes’ 2017/2018 taxable income before he had lodged his taxation return for 2018/2019. It is not appropriate to assess Mr Younes on an income of $217,658 when at the time he was earning income at a rate I find to be in the order of $85,000pa.

19. I will make proportional adjustments reflecting my findings for the actual out of pocket costs for [Child 1’s] [health therapy], but I will reflect those adjustments as an additional annual amount for a twelve month period.  This period is not intended to reflect the period that [Child 1] attended [health therapy], but will serve to adjust arrears once the outcome of this review is given effect by the Department.

20. As to the duration of the departure, I was able to discuss the various options open to me with the parents at the hearing. The parents are aware that they can seek a further change of assessment if circumstances substantially change.  I wish to avoid requiring the parents to undertake this process regularly, so will put the changes into effect from the day the estimate was lodged to the end of September 2021. 

DECISION

The Tribunal sets aside the decision under review and, in substitution, decides that the objection is allowed so as to make departure determinations as follows:

1.    From 13 July 2018 to 30 June 2019, Mr Younes’ adjusted taxable income is varied to $84,644.

2.    From 1 July 2019 to 30 September 2021, Mr Younes’ adjusted taxable income is to be increased by an amount of $33,000.

3.    For the period 1 July 2018 to 1 July 2019, the annual rate of child support is to be increased by an amount of $837.50