2.6.7: Reason 1 - high costs in enabling a parent to spend time with, or communicate with, a child

Context

A payer or payee can apply for a change of assessment in special circumstances if the costs of maintaining a child are significantly affected by either parent's high costs in enabling the parent to spend time with, or communicate with, the child.

Legislative references

Sections 8A, 98C, 98S and 117 Child Support (Assessment) Act 1989.

Explanation

There may be a reason for changing an assessment if in the special circumstances of the case the costs of maintaining the child are significantly affected because of high costs involved in enabling a parent to spend time with, or communicate with, the child (section117 (2)(b)(i)(A)).

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

CSA can decide to change the assessment if the reason is established and it would be just and equitable and otherwise proper to do so.

Who can apply under this reason?

Are the costs high?

High costs that significantly affect the ability to provide for a child

What costs can be included?

How are the costs measured?

Distinguishing the costs from necessary commitments for self-support

Do the high costs make it 'just and equitable' to change the assessment?

The kinds of decisions that reflect the high costs

Duration of a change of assessment for this reason

Who can apply under this reason?

The payer and the payee are both entitled to apply under this reason, even if the assessment is based on a modified formula because the child spends at least 30% of the nights in the care of each parent. The reason can also apply where the payee is not the child's parent, in relation to the costs that the payee or the payer incurs in enabling the child to spend time with, or communicate with, a parent.

Are the costs high?

A parent's costs are high if during a child support period they total more than 5% of the parent's child support income amount (section 117(3)). The costs that CSA considers for the 5% threshold are the parent's costs to enable them to spend time with, or communicate with, the child or children for whom child support is payable and any other child or person the parent has a duty to maintain.

This 5% threshold amount is calculated by:

• dividing the parent's child support income amount* for the period (which is expressed as an annual figure) by 365; and
• multiplying by the number of days in the period.

* In working out the 5% threshold amount, CSA will use the parent's child support income amount for the child support period in which the costs are, or will be incurred. In cases where the administrative assessment is based on a capped income for a parent, the threshold is 5% of the parent's actual child support income and not 5% of the capped income amount. This will be the income for the last financial year that ended before the start of the child support period, unless:

• the parent has elected to have his or her child support based on an estimate of his or her current income (in which case, CSA will calculate the threshold using the parent's estimated income); or
• the parent's child support income amount has been varied by
  • a child support agreement
  • a court order; or
  • a prior change of assessment decision

(in which case CSA will calculate the threshold using the parent's child support income as amended by that agreement, court order or prior change of assessment decision).

CSA will use the following method to calculate whether the parent's costs are high in a case where his or her child support income amount changes within the child support period (for example, because the parent lodged an estimate of his or her income within the child support period):

1. Work out the parent's costs for the whole child support period.
2. Divide the child support period up into separate 'sub-periods' according the dates to which the different child support income amounts (CSIAs) apply.
3. Calculate the number of days in each 'sub-period'.
4. For each 'sub-period', divide the CSIA by 365 then multiply the result by the number of days in the 'sub-period' to calculate the 'sub-period CSIA figure'.
5. Work out the sum of all the sub-period CSIA figures.
6. Are the costs at step 1 more than 5% of the total amount at step 5?
7. If yes, the parent's costs are high.

Other relevant matters

The following factors can also be relevant:

• whether the arrangements for spending time with, or communicating with, the child are as ordered or agreed
• whether the application is made prior to the costs being expended. A prior pattern for spending time with, or communicating with, the child can be considered. Anticipated costs can be taken into account but there must be a reasonable expectation that the costs will be incurred; and
• whether the parent can substantiate the costs.

High costs that significantly affect the ability to provide for a child

If satisfied that the costs are high CSA must decide whether the costs of maintaining the child are significantly affected by those high costs. The extent to which the costs exceed the 5% threshold is relevant. If the costs are only slightly higher than the threshold they might not significantly affect the parent's ability to provide for the child.

A parent's actual income in the relevant period as well as their child support income amount will also be considered. If the parent's income is high and all of their necessary costs are met (including the costs to enable them to spend time with, or communicate with, the child) then the costs, however high, might not significantly affect the parent's ability to provide for the child.

What costs can be included?

The costs included in the change of assessment application must relate to enabling the parent to spend time with, or communicate with, the child rather than to enjoying that time or communciation (Hall and Rushton (1991) FLC 92-252). Telephone and internet costs can be considered as well as accommodation and transport (Gyselman and Gyselman (1992) FLC 92-279). Transport costs include parking costs; road tolls; train, ferry, taxi or bus fares; airfares; the cost of car hire and motor vehicle expenses. However, the cost of entertainment cannot be included, as this is a cost of enjoying, rather than enabling, the time spent or communication with the child.

Legal costs

Legal costs incurred by either parent to establish, modify, or enforce arrangements can be significant. However, the courts have held that these expenses cannot appropriately be included as a cost of enabling them to spend time with, or communicate with, the child for the purposes of departing from an assessment of child support for a child (MAV & NTV [2005] FMCAfam 261 (31 May 2005).

Senior Case Officers must consider each case on its merits but will take into account relevant decisions of courts and tribunals. Consequently, a Change of Assessment application based on legal costs incurred by a parent in establishing contact with a child, is unlikely to succeed.

How are the costs measured?

Some factors that affect the way costs are identified and measured are:

• Motor vehicle costs - When calculating motor vehicle expenses CSA will generally accept that the actual cost (rather than the tax rate, AAA, NRMA, RACQ or other motor association rate) is allowable (Houlihan and Houlihan ((1991) FLC 92-248). The tax rate is designed for car travel up to 5000 km to take account of the additional costs of acquiring and maintaining a commercial vehicle and is not an appropriate measure for the costs. In considering a parent's actual costs the proportion of use of the vehicle for the purposes of spending time with, or communicating with, the child should be considered.
• Discounted fares and frequent flyer points - a parent is expected to arrange cost effective travel for themselves or the children wherever possible, and this will be taken into account when calculating the costs.
• A parent or child's travel costs that are met via an allowance from an employer or salary sacrifice arrangement (rather than the parent paying for those costs directly), are considered to be the parent's costs if the allowance/fringe benefit is included in the parent's child support income amount.
• Dual purpose costs - if the costs are incurred for dual purposes or mixed-occasion visits such as a wedding, funeral or business trip only a portion of the costs can be considered.
• Costs of food - the cost of food for children is not included (Gyselman and Gyselman (1992) FLC 92-279) although the cost of food for the parent on a trip to spend time with the child may be included in extraordinary circumstances.
• Telephone and internet costs - the relevant portion of these costs can form part of the high costs to communicate with the child.
• Accommodation costs - accommodation costs must be reasonable and necessary to enable the parent to spend time with the child without being demeaning. Family-type accommodation is regarded as appropriate rather than a luxury hotel.
• Documentary confirmation of costs - The costs should be verified by appropriate documentary evidence such as hotel/motel receipts, credit card statements, petrol receipts and itemised telephone bills. Costs must be reasonable and in proportion to the income of the parent.

Distinguishing the costs from necessary commitments for self-support

In some applications for a change to an assessment the costs claimed relate to accommodating the children at the payer's home. However, the costs must relate to the child rather than to the parent.

Example

Any costs relating to a parent's self-support must be separated from their overall costs. CSA will consider the proportion of the accommodation that relates to the children and the frequency of the time spent together.

Do the high costs make it 'just and equitable' to change the assessment?

Once the high costs are established, and the fact that the costs significantly affect the applicant is accepted, CSA must consider whether it would be just and equitable to change the assessment. The decision must also be otherwise proper.

In considering if it would be just and equitable to change the assessment CSA will consider any orders made regarding the management of spending time with, or communicating with, the child, especially where the order directs that costs be shared. CSA will also consider other elements including:

• the child's need to be supported by, and spend time with, or communicate with, both parents;
• the contribution each parent makes to the costs;
• the necessary commitments of each parent relative to their respective capacity to contribute;
• any hardship which would be caused to either parent; and
• any other relevant factor.

The importance of spending time with, or communicating with, the child has to be balanced against the primary purpose of the Assessment Act in ensuring that children receive a proper level of financial support from both parents.

If the parent's current income is different from his or her child support income, this will also be a factor for CSA to weigh up in considering whether it would be just and equitable to change the assessment

The kinds of decisions that reflect the high costs

It may not be appropriate to deduct all of the costs over the 5% threshold from the child support payable because this would shift the whole of the obligation to pay the costs of enabling a parent to spend time with, or communicate with, the child, from one parent to the other.

CSA will usually increase a parent's exempted income amount to reflect the amount that that person would have to earn to meet the costs that exceed the 5% threshold (Houlihan and Houlihan (1991) FLC 92-248). This allows the parent to use other administrative options such as estimates of current income and to have changes in care taken into account if necessary. This approach will not produce a fair result in every case but it may be used when this reason is the only reason that a change of assessment is being considered. An exempted income is likely to produce a fair result where other elements of the formula remain consistent.

Because costs in excess of the threshold are measured over the child support period, these costs must be adjusted to an annual figure before being grossed up to obtain a pre-tax figure. This is done by dividing the costs in excess of the threshold by the number of days in the child support period and multiplying that amount by 365. CSA will then gross up the parent's annualised costs in excess of the 5% threshold, using the appropriate marginal tax rate based on the parent's taxable income.

In other cases the circumstances of the case may indicate an alternative type of decision especially if there are a number of reasons included in the application for a change.

Duration of a change of assessment for this reason

Where there is a decision to change an assessment because of the high costs of enabling a parent to spend time with, or communicate with, the child, the length of time of the decision will apply depends on the circumstances of the case. If there is a regular pattern with consistent expenditure, the decision may be of a longer duration than a case where it is irregular and expenditure varies greatly from period to period. Where a pattern is not established but there has been an order of a court in relation to the issue of time spent with, or communication with, the child, a decision for a shorter duration might be made.

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Version 1.7

Issued 23 January 2008

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