Editors --- "Family tax benefit: calculation of percentage of car" [2005] SocSecRpr 28; (2005) 7 Social Security Reporter, Article 28

• WADE and SECRETARY TO THE DFaCS and BARAN
• Background
• The AAT decision
• The decision of the Court
• Formal decision

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Family tax benefit: calculation of percentage of car

WADE and SECRETARY TO THE DFaCS and BARAN

(Federal Court of Australia)

Decided: 20th December 2004 by Kiefel J

Background

Wade and Baran were the parents of two children. They separated, and on 1May 1998 the Family Court made an order as to the joint responsibility for and residence of the children.

On 17 December 2002 Bara completed a form entitled ‘Details of your child’s care Arrangements’, detailing the care arrangements for their children. In it she stated that, since 1999, the children had resided with her every Thursday night, on every second weekend Friday and Saturday night and usually half the holidays. She indicated that the children would be staying with her continuously from 23 December 2002 to 12 January 2003.

On 20 January 2002, Wade completed a similar form, giving roughly the same description of the children’s care arrangements. For the periods outside of the school holidays, Wade stated that the children were with Baran ‘from 3 pm Friday- 6pm Sunday every second week; and ... 3 pm Thursday- 9 am Friday every week’. Wade was in receipt of 100% of the family tax benefit (FTB)payable in respect of the children at this time.

On 10 January 2003 a decision was made that the shared care of the children be apportioned 28% to Baran and72% to Wade for FTB purposes. Wade argued that when he had 100% of the care of the children (such as in school holidays) he should be paid 100% of the FTB and that the same should apply totara; and that when he had the predominant percentage of care, Baran should not be entitled to any percentage of FTB. The basis of Wade’s argument was that only full days of care could be used in the calculation of shared care. He argued minor periods of time, such as parts of days, should not be counted.

The actual time the children spent in each parent’s care was not in dispute in this matter.

The AAT decision

The AAT affirmed the SSAT’s decision in this matter. The SSAT had decided that a fairer calculation of the sharing of care would be to look at the actual hours spent in care, rather than nights or full days spent in person’s care. The SSAT calculated that Baran had 31% of the shared care of the children and Wade had 69%. The AAT accepted that there may be very short periods of time during which a child is in the care of a parent which may be disregarded for the purposes of the calculation. However, in this case, the AAT decided that a period from 3.00 pm one day to 9.00 am the following morning was a significant period of time and that it should form part of the calculation.

Legislation

Section 22 of the A New Tax System(Family Assistance) Act 1999 (the Act) sets out the main qualification criteria for FTB where the care of a child is shared:

22.(7) If:

(a) the Secretary is satisfied there has been, or will be, a pattern of care for an individual (the child) over a period such that, for the whole, or for parts (including different parts), of the period, the child was, or will be, an FTB child of more than one other individual under subsection (2), (3), (4), (5) or (6); and

(b) one of those other individuals makes, or has made, a claim under Part 3 of the A New Tax System (Family Assistance) (Administration) Act 1999for payment of family tax benefit in respect of the child for some or all of the days in that period; and

(c) subsection 25(1), (1A) or (1B) does not require that the child be taken not to be an FTB child of that individual for any part of that period;

the child is to be taken to be an FTB child of that individual for the purposes of this section on each day in that period, whether or not the child was in that individual’s care on that day.

The Court also considered ss. 58 and 59 of the Act in detail:

58.(1) Subject to sections 60 to 63, an individual’s annual rate of family tax benefit is to be calculated in accordance with the Rate Calculator in Schedule 1.

58.(3) The daily rate of family tax benefit is the annual rate divided by 365 and rounded to the nearest cent (rounding 0.5 cents upwards). If the daily rate before rounding is above nil and below half a cent, round up to 1 cent.

59.(1) If the Secretary is satisfied that:

(a) an individual is an FTB child of an individual (person A); and

(b) the FTB child is also an FTB child of another individual who is not person A’s partner;

the Secretary may determine the percentage that is to be person A’s percentage of family tax benefit for the child.

The decision of the Court

Wade’s principal contention before the Court was that only full days spent caring for an FTB child should be used in calculating a percentage of care for the purposes of FTB. The Court referred to s. 58 of the Act, which expresses entitlement to family assistance as an annual rate, from which daily rate may be calculated. Pursuant to s. 59, the Secretary may determine the percentage that is to be a person’s percentage of FTB where an FTB child is a child of that person and another individual, who is not their current partner. The Court stated that the percentage must relate to annual and daily rates.

The Court referred to para. 2.1.1.45 of the DFaCS Guide:

A pattern of care is established by using either the number of nights in care... or hours of care for each FTB child. The percentage of care for each FTB child is then calculated and applied to the standard rate...

And further:

There may be some occasions where only counting the nights in care does not accurately reflect the caring arrangements for this child. In such cases, at the request of a carer, the actual number of hours of care may be calculated for each carer in determining the pattern of care and then converted into days in care.

The Court noted that the SSAT and AAT were correct in finding that the Act does not explain how the percentage is to be determined for the purposes of s.59 of the Act. The Court then noted that guidelines may provide a means for making such determinations, so long as they are not inconsistent with the Act. The Court found that there was nothing in the Act which required the percentage to be determined by reference to whole days. The reference in ss. 22 and 25 to “days of care” was for the purposes of those provisions only.

The Court stated:

It is however clear from the Act that its object is to provide a benefit to the person having the care of the child. To be consistent with this object the percentage of care to be assigned to each person should reflect the actual care provided by them. This is the way the SSAT and AAT approached the matter. In my view they were correct. (Reasons, para. 30)

The Court considered the paragraphs of the Guide quoted above to be consistent with the Act.

The Court briefly considered one of Wade’s secondary arguments, that the issue of a ‘pattern of care’ did not arise in cases where both carers have agreed that they should each have100% FTB during extended holidays, and that one of the carers should receive100% on a fortnightly basis. Such an agreement was not in evidence before the Court. The Court stated that in any event, a decision-maker was not bound to apply such an agreement.

The Court also considered the argument that Wade’s FTB could not be reduced, as Baran did not formally claim fortnightly payments of FTB based upon a shared care arrangement. The Court dismissed this argument, stating that there was nothing in the Act that would prevent a review officer from reassessing benefits payable from time to time and when further information is received.

Formal decision

The Court dismissed the appeal by Wade.

[D.A.]