Part 2: Departure from the Administrative Assessment of Child Support
By Paul Lewis, Special Counsel, Katherine Evans, Senior Associate and Charlotte McGrath Lawyer.
SECTION 1
In Part 1 of this series, we summarised the establishment of the Child Support Scheme in Australia. The administrative assessment of child support is based on a statutory formula which takes into account various prescribed factors, including the combined income of the parents, the ages of the children, the level of care that each parent has with the child or each child, and whether the parties or either of them have a duty to support another child (from a different relationship). The principal object of the Child Support (Assessment) Act 1989 (Cth) (“the Act”) is to ensure that children receive a proper level of financial support from their parents.
(See section 4)
Further objects of the Act include the propositions that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support, that the level of financial support to be provided by parents for their children should be determined in accordance with the costs of the children and that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them. (See section 4(2).)
Sometimes, the application of formula assessment produces an outcome that does not fulfil the principal object. The Act therefore provides for a departure from a formula assessment if defined criteria are satisfied. In this article, we identify the grounds available for departure and summarise the procedure.
Section 117 of the Child Support (Assessment) Act sets out the grounds (11 in total) under which a parent can seek a departure from formula assessment. At least one of these grounds must be satisfied in the special circumstances of the case for the Child Support Registrar (the statutory officer now found within Services Australia) or the Court to consider whether changing an assessment is just and equitable and otherwise proper. The special circumstances of the case must show ‘something out of the ordinary.’ It is also possible for the Registrar to initiate a change of assessment without an application by a parent, however, this is rarely seen in practice.
The power to change the formula assessment is not limited to changing a current assessment; the power under the Act extends to retrospectively changing an assessment for up to 18 months before the date of an application and potentially longer if an application for leave is granted under section 112. The Registrar or a Court can make findings which vary different components of the child support formula such as a parent’s child support income or annual taxable income.
When an application for departure is made, the existing child support assessment remains in place until the application is decided. Under section 111C Child Support (Registration and Collection) Act a party may apply for a stay of the existing child support assessment pending the determination of the departure application, however, an application for a stay requires a Court application.
The various statutory grounds for departure
1) The high costs of spending time with the child or children
A parent may apply for A departure from a child support assessment if the reasonable and necessary costs of spending time with or communicating with the child significantly affect the overall cost of maintaining the child. The costs are considered high if the cost is more than 5% of a parent’s adjustable taxable income. The costs must relate to the parent’s ability to spend time with and/or communicate with the child and not the costs of enjoying time or communication with the child (Hall and Rushton.) For example, transport, accommodation and internet usage costs. Note, however, that a departure application for costs associated with travel, may only be made if a “payer” cares for the child at least 52 nights per year.
2) The child or children has or have special needs
Under this ground, the court considers whether the costs of caring for the child is significantly affected by the child’s special needs. Special needs can include a physical, mental or learning disability or a special ability or talent. The costs of caring for a child with special needs can be either essential or desirable to the child’s welfare. The costs must be outside the ordinary scope of caring for the child (which costs are factored into the components of the formula under an administrative assessment.) Under this ground, it is necessary to provide evidence of the special needs and the costs of caring for the child with a special need or needs, such as a medical or allied health report, tax invoices and receipts, evidence of treatment requirements and any other documents associated with extra or special tuition costs.
3) There are additional costs of caring for or educating a child in a manner that was expected by the parents
This ground applies if there are additional costs associated with caring for or educating the child because of the manner of care or education expected by each parent. Examples of these costs include private school fees or additional educational expenses outside of school, as well as the costs of uniform and other equipment required for school. In practice, this ground can be contentious because of the interpretation of the word “expectation” in the sub-section, specifically, whether a determination of an expectation requires evidence of an agreement, a common intention or something else on the part of each parent that amounts to an expectation.
When a parent has financial circumstances that permit them to be able to afford a certain type of education for their child, their unlimited capacity to pay is not considered in isolation when imposing an obligation for a parent to financially contribute. In other words, capacity to pay is not the sole test. Services Australia or the court must consider whether each of the parents had an expectation for the child to be educated or cared for in a certain way, as well as looking at each parent’s financial circumstances. This may include a historical consideration of the parents’ expectations before separation.
Complicating an evaluation of each case under this ground, the factual findings of the expectation of each parent is often affected by an assessment of each parent’s financial ability to meet the proposed level of education (eg, private schooling) or the level of special care. Establishing the existence of the expectation for particular care or education can be supported by evidence such as a parenting plan or court order, school enrolment forms signed by the parents, emails or texts between the parents and proof of payment of school fees.
4) The child or children has or have income, an earning capacity, property and/or financial resources
If a child’s income, earning capacity, property or financial resources create a special circumstance where the payment of assessed child support is unfair, then a parent may apply for a departure under this ground. A child’s minimal earnings such as pocket money, money from a casual job or small monetary gifts are not substantial enough to make an application for departure under this ground.
For more significant earnings, it is necessary to consider whether the child’s income or financial resources are substantial enough to warrant a change in assessment, in addition to the financial circumstances of the parents. This requires evidence of the child’s income such as pay slips, bank statements or documents evidencing their interest in a financial resource available to them. In practice, this ground is rarely seen.
5) A parent has provided money, goods or property for the benefit of the child or children
If one parent has gifted or will pay money or transfer goods or property to the child (or for the benefit of the child) that makes the child support assessment unjust, then the other parent may be able to apply for a departure under this ground. Evidence of the benefit provided to the child may include an agreement, court order or bank statements which document a benefit for the child or ‘on trust’ for the child. The existence of an agreement which documents the transfer of money or property to or for the benefit of a child is insufficient to automatically depart from an assessment. The transfer of money, goods or property must result in the child support assessment being unjust in accordance with the provisions under section 117. This ground is not to be confused with “non-agency payments” which sit elsewhere in the legislation, and permits parents to agree, or the Registrar to decide, that a portion of financial support in kind may be credited towards the child support assessment.
Part 2: Departure from the Administrative Assessment of Child Support
SECTION 2
Access section 1 here.
6) For children under the age of 12, the cost of child care has changed
Under this ground, a parent may apply for a change of assessment if the costs of maintaining the child are significantly affected by the high costs of childcare. The child must be 12 or under, and high costs must be incurred by a parent or non-parent carer. The threshold requirement of “high” costs is satisfied if the childcare costs are more than 5% of the parent’s taxable income for the child support period (the percentage threshold is increased to 25% in the case of non-parent carers).
The costs must be reasonable, necessary and must significantly affect the overall costs of maintaining and caring for the child. Evidence of the high costs of childcare may be proven by childcare enrolment forms, invoices and receipts.
7) A parent has out of the ordinary and necessary expenses to support themselves
Under this ground, a parent must show that they have a ‘necessary commitment’ to support themselves. The nature and quantum of the expenditure is considered by the Registrar (or their delegate, the review officer). The Registrar will decide whether the purpose of the expenses and the quantum of the expenditure are necessary, meaning expenses that are necessary for a reasonable standard of living or that are not able to be avoided. The balance between an obligation of a parent to support a child, and a parent’s need to maintain themself is weighed up by the decision-maker. This may take into account reasonable costs of food, accommodation, essential household items, clothing, necessary transport and health costs. Evidence of such expenses, their necessity, reasonableness, and the duration for which the expenses will be incurred, are all considered.
8) The ordinary formula assessment does not correctly reflect the income, property and/or financial resources of one or each of the parents
This ground is applicable when a parent’s income, property or financial resources are not accurately reflected in the assessment which results in an unfair assessment. In practice, this ground is one of the most common grounds relied upon by an applicant seeking to vary the assessment because of the financial circumstances of the other parent.
The administrative formula applied to generate a child support assessment has an input for each parent’s income but not their assets or financial resources. In circumstances where a parent may have significant assets or financial resources and a low income, this ground allows the consideration of whether the parent’s assets or financial resources can be taken into account such as to vary their child support obligation. A common dispute type under this ground involves a parent being self-employed and having the actual or apparent capacity to pay themself an artificially low income by virtue of obtaining the benefit of expenses paid by the business and maintaining a good lifestyle at the same time.
9) The ordinary formula assessment does not correctly reflect the earning capacity of one or each of the parents
Under this ground, a departure may be sought where the earning capacity of one or both parents is not accurately reflected in the assessment. This ground may be used to amend the income being used in the formula assessment in circumstances where the parent has gained, lost or varied employment. The formula may be adjusted to more accurately reflect the parent’s income earning capacity.
Examples of circumstances that may trigger a departure application under this ground include a person leaving their job, receiving a redundancy payment, working in seasonal employment, receiving additional employment benefits, and when a parent deliberately reduces their individual income derived from an entity under their control. In practice, this ground is hard to successfully prove because the evidentiary onus is on the party arguing that the other parent has altered their employment, work pattern or previous occupation to reduce their child support responsibilities.
10) A parent has a duty to support another person
When a parent has a duty to support another person or child, a parent may be eligible to seek a departure from a child support assessment under this ground. The capacity of the parent to provide for the person or child must be reduced as a result of the parent’s duty to maintain the person or child, the special needs of the person or child or the costs of spending time with and/or communicating with the person or child.
There must be special circumstances associated with the parent having a duty to maintain another person and this duty must affect the parent’s ability to financially support the other person or the child.
11) A parent has a duty to support another child that resides with that parent
This ground may be considered if a parent’s ability to meet their child support obligations as assessed is diminished because that parent is supporting another child who lives with them but is not their child and requires financial assistance. The other child must be under the age of 18 and not be legally married or in a relationship (domestic or registered).
The parent who is meeting the costs of the other child must not be or have been in a relationship with one of the parents of the resident child, except when the legal parents of the resident child are unable to support the child due to death, sickness or caring obligations. Under this ground, the parent’s capacity to financially support the resident child must significantly reduce the parent’s capacity to pay assessed child support. This ground requires evidence that the legal parents of the resident child are unable to support them, and evidence of the quantum of financial support required by the resident child.
Overview of the Internal Review Process
The process of lodging an application for departure from a child support assessment with Services Australia is also known as a “change of assessment” application. The process starts with completing the dryly named form called the ‘Application to change your assessment – special circumstances form’. It is accessible on the Services Australia website. Once complete, the form must be uploaded, along with supporting documentation, through the parent’s (or non-parent carer’s) child support online account (which can be created and accessed through MyGov.)
The other parent, the respondent is asked to complete and lodge a ‘Response to Application to change your assessment – special circumstances form’. The responding parent may make a cross application in their Response to raise any special circumstances and alleged departure grounds that apply to them.
After the application, response and supporting documents are lodged, Services Australia calls each parent (either in separate calls or in the same call if each parent agrees) and discusses the material that each parent has submitted. The review officer considers the material, and their discussion with each parent, and makes a written decision (“the first review decision’). The notice of decision outlines whether the administrative assessment has been changed, and if so, what changes have been made, and the reasons for the decision. There is a statement under section 4(3) of the Act that says that it is the intention of the Parliament that the Act should be interpreted “to limit interferences with the privacy of persons” (see s4(3)(b).)
Implicitly, the rationales for the latter statement are to protect the safety of parents and children and to respect the freedom of people to live as they wish in a civil society after family breakdown, or when the parents never lived together. Each form completed by the applicant and the respondent therefore has a privacy section and that information is not shared by Services Australia with the other parent.
A party that is dissatisfied with the first internal review decision can ask for a review by a higher review officer by lodging an “Objection.” The Objection must outline the objector’s reasons for disputing the outcome of the first review decision and documents in support may be lodged with the objection. The second review officer is bound to follow the legal principle of procedural fairness throughout the decision-making process which allows each parent (or other care giver) to be given the opportunity to present their case before the decision maker. In practice this means that documents lodged by either party as part of the Objection process are shared with the other party. The second review officer can ask each party for more information if they need to, and they may obtain information from other sources, such as the Tax Office, if they need to.
In the next article, part 3 of our series on Child Support departure, we outline the rights to an administrative review of an Objection decision, if a party is dissatisfied with the decision made by the second review officer who decided the Objection. That administrative review involves an application to the newly established Administrative Review Tribunal (the ART.)
Returning briefly to the above explanation of the protection of privacy during the first stage of the “change of assessment/departure” process, it is worth noting that if either party appeals the objection decision to the ART, a copy of the privacy section of the application form must be given to the other party at that time. At this point, the reader will see that the architecture of the system for child support departure is dense from a structural perspective, and time consuming from a consumer perspective. Further commentary on the design of the system is reserved for a later article.
This article and others in the series on child support departure are not a substitute for legal advice. They are intended to provide a general summary and they cannot be relied upon as a form of guidance for any individual case. Please contact Ramsden Family Law for legal advice that is specific to your situation.
Posted in: Child Support
November 08 2024
