Abeywickrama and Secretary, Department of Family and Community Services

[2004] AATA 888

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 888

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2003/1832

GENERAL ADMINISTRATIVE DIVISION		)
Re		INDRA ABEYWICKRAMA

Applicant

And SECRETARY DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Dr J D Campbell, Member

Date24 August 2004

PlaceSydney

Decision The Tribunal affirms the decision under review.

………………………..

Dr J D Campbell   Member

CATCHWORDS

SOCIAL SECURITY - Overpayment Family Tax Benefit - Sole Administrative Error - Waiver - Special Circumstances

Social Security Act 1991, section 23

Family Assistance Administration Act 1999, sections 71, 97, 101

REASONS FOR DECISION

24 August 2004   Dr J D Campbell, Member    

1.      In this matter, Mrs Abeywickrama (“the Applicant”) seeks a review of the decision of the Social Security appeals Tribunal (“SSAT”) dated 17 October 2003 which concluded that the Applicant had received an overpayment of Family Tax Benefit (“FTB”) in the amount of $3,848.68 in financial year 2001/2002, that this was a debt owing to the Commonwealth and that special circumstances did not exist which if present may have allowed either all or part of the debt to be waived.

2.      Prior to the SSAT decision, the primary determination to raise the debt was made by an authorised delegate of the Secretary, Department of Family and Community Services (“the Respondent”) on 22 January 2003 and affirmed by an authorised review officer on 5 June 2003 (T15).

BACKGROUND

3.      Mrs Abeywickrama and her husband Mr Abeywick, and their child, Tenindra migrated to Australia in the mid nineties as skilled personnel. Mr Abeywick is a mechanical engineer, and his wife has professional qualifications.

4.      In May/June 2001 the following communications were exchanged between the parties, with the foundation for the communications being a nominated estimated combined taxable income by the Applicant of $31,930 (Applicant (A) $23,330; partner (P) $8,600) for financial year 2000/2001 which continued to be used by the Respondent for calculation of FTB to the Applicant until further notified:

(a) On 6 May 2001 the Applicant signed and returned a Family Assistance Office Questionnaire to Centrelink in Tasmania in which the Applicant requested a combined taxable income estimate for financial year 2001/2002 of $31,930 increased by 5.8%, being a consumer price index adjustment (T17, p62).

(b) In the communication of 6 May 2001, the Applicant and her partner make the following notation:

“Given our circumstances, accurate estimation of income is nearly impossible. Our figures indicate that actual income for 2000/2001 financial year is significantly lower than our estimate. However when it is clear that our estimated income for 2001/2002 is increased more than by CPI, we will contact you.” (T17, p63)

(c) On 10 May 2001 the Respondent records in a file note the receipt of a new estimate for financial year 2000/2001 from the Applicant via a FAO 07 document which detailed the combined taxable income for 2000/2001 to be $20,690 (A $9,720, P $10,970). It is noted that the original document has been destroyed (T3, p10).

(d) That in completing the estimate form (FAO 07.0207) the Applicant had regard to the following nominated within paragraph 5 headed “Taxable Income”:

“Enter all the amounts of income that you (and your partner) expect to receive during the entire financial year (i.e. from 1 July to 30 June) in each of the categories below. If you expect any figure to be zero write $0. If you expect any figure to be a loss, subtract it from the total in that column.

A. Estimated taxable income from salary and wages

B. …

C. Estimated taxable income from business or self employment

D. …

E. …

F. …

G. Other estimated taxable income not already included

Total Estimated Taxable Income (total of A to G)” (T11, p 35).

(e) In paragraph 6 of the same document there is a requirement for the Applicant to estimate the amount of reportable fringe benefits received by the Applicant and her partner in the financial year.

(f) In a file note dated 3 June 2003 (T14, p47) the authorised review officer records that the Applicant completed the estimate form (FAO 07.0207) in accordance with the nominated instructions, which included nominating the estimate of business losses for the financial year 2001/2002.

(g) On 17 May 2001 Centrelink wrote to the Applicant confirming the estimate of combined taxable income for financial year 2000/2001 at $20,690 (T6, p14) and (T11, p39).

(h) On 8 May 2001 the Respondent issued an assessment for parenting payment (partnered) to the Applicant, which was completed by the Applicant and lodged with Centrelink on 15 May 2001. In this document the Applicant indicated that her partner was to commence working from 19 May 2001 and that he would receive a gross weekly income of $826.92 (T5). In response Centrelink forwarded a FTB estimate form to the Applicant on 15 May 2001 (T19, p71) and cancelled the Applicant’s parenting payment on 15 May 2001, because the combined income was above the allowable limit (T11, p38). Further Centrelink reduced the Applicant’s FTB payment from 25 May 2001 (Exhibit A1, p18).

(i) The Applicant phoned Centrelink on 17 May 2001 advising that she had received a further FTB estimate form and asked whether they had received the FAO Income Estimate letter that she had mailed to them. The Applicant was advised that such had been received on 10 May 2001 and would be put through for processing, and a letter advising of the new rates would arrive prior to July (T19, p71).

(j) On 23 June 2001 the Respondent advised the Applicant of Family Assistance from 21 June 2001 and that information used for calculating her regular payment was a combined income of $21,890.02 (T11, p40) and (T18, p66, p70).

5.      The taxation return of the Applicant’s partner, for financial year 2001/2002 nominates a taxable income of $45,422 and a reportable fringe benefit amount of $7,735 and refers to a partnership distribution loss of $24,689, nominated as a deferred non commercial business loss (T8, p21).

6.      The partnership taxation return for 2001/2002 nominates the main business of the firm as consulting engineering services; a nil total business income and a net loss of $24,689 (T8, p25).

7.      In the Australian Taxation Office’s notice of assessment for Mr Abeywick for financial year ending 30 June 2002 Mr Abeywick’s taxable income is recorded as $45,422, and a deferred non commercial business loss of $24,689, and that the loss could be carried forward and offset against other income under the nominated circumstances (Exhibit A1, p23).

8.      As a consequence of a comparison between combined taxable income and fringe benefits received by the Applicant and her partner as nominated in the tax returns for 2001/2002 and in the assessment by the Australian Taxation Office for the period to 30 June 2002 and the estimate of $21,890 used by the Respondent to determine FTB for financial year 2001/2002, the Applicant received an overpayment of $3,848.68 in the 2001/2002 financial year.

APPLICANT’S SUBMISSIONS

9.      The Applicant has detailed many contentions during the various reviews concerning the overpayment, with the more significant being:

(a) The Respondent had clearly been given an estimate for FTB purposes by the Applicant on 6 May 2001 for financial year 2001/2002, this being the previous years estimate of $31,930 plus a CPI adjustment of 5.8%. Further it was contended that the Applicant’s intention was reinforced by her telephone call to Centrelink on 17 May 2001 and from advice received that Centrelink had received the FAO Income estimate letter on 10 May 2001.

(b) The Applicant acknowledges that a received estimate for FTB purposes was lodged with Centrelink on 10 May 2001 and that this estimate detailed a combined taxable income of $20,690 for financial year 2000/2001. The Applicant stated that this estimate had been made in compliance with the FAO 07 document, which stated that taxable business income was to be included, even if it were a loss, and which would result in a subtraction when all the elements of paragraph 5 of the FAO 07 document were totalled.

(c) The Applicant further contends that it was her understanding that taxable business income (whether it be a positive or negative) was to be listed and added or subtracted accordingly. As such the business loss of $5,704 and $24,689 from the partnership should have been included in the respective financial estimates for financial year 2000/2001 and 2001/2002 respectively. In essence the Applicant argues that the estimate was compiled in accordance with Centrelink’s requirements.

(d) Further the Applicant contended it had always been their understanding that the relevant financial estimate for FTB purposes was that which they forwarded to Hobart on 6 May 2001.

(e) The Applicant also contended that by the nature of his employment he was unaware of reportable fringe benefits paid by his employer for employment benefits he received (use of car) in which he stated he had no choice other than to accept.

CONSIDERATION AND FINDINGS

10.     In preliminary comments the Tribunal observes the nominated instructions in paragraphs 5 and 6 of the FAO Estimate Document 07.0207 and concludes that in most cases it would be a very difficult task for an individual to estimate taxable income from business or self employment or the quantum of reportable fringe benefits for a forthcoming twelve month period. The Tribunal acknowledges that some with a degree of rigidity about their employment circumstances may well be able to do so, but for the significant quantum of others, such a task is fraught with the prospect of error.

11.     Further the Tribunal notes that while the relevant document details that the estimated taxable income from business or self employment be included, irrespective of whether it is a loss, a zero sum or a positive; an appropriate summation will occur. The Tribunal observes that the document does not detail that such an amount of taxable income must only include amounts of business losses that are claimable in the particular year for which the estimate is given.

12.     The Tribunal, having considered all the material, makes the following finding of facts:

(a) The Applicant forwarded a FTB estimate to Centrelink in Hobart on 6 May 2001, in which a combined taxable income estimate of $31,930 plus a 5.8% increase was nominated for financial year 20001/2002;

(b) The Applicant lodged a revised FTB estimate of combined taxable income on 10 May 2001 with Centrelink of $20,690, for financial year 2000/2001;

(c) The Respondent actioned the estimate of 10 May 2001 for the payment of FTB for the remainder of financial year 2000/2001;

(d) That a conversation between the parties did occur on 17 May 2001 and despite the likelihood by this stage that the Respondent had two different estimates provided by the Applicant (one for the remainder of 2000/2001 and the other for 2001/2002), the Respondent did indicate that the Applicant would be advised of new rates prior to 1 July 2001;

(e) That the Respondent actioned the revised estimate given for 2000/2001 is evidenced by the advice to the Applicant forwarded on 23 June 2001 in which the combined income is noted as $21,890.02;

(f) That there is no evidence before the Tribunal that the Applicant raised issue with the Respondent as to the combined income estimate of $21,890.02 for financial year 2001/2002, after such advice was received;

(g) That the estimate nominated in the FAO letter returned by the Applicant on 6 May 2001 to Hobart was a reflection of the earlier 2000/2001 estimate, which as indicated by the Applicant was significantly an overestimate by May 2001, a matter which was corrected by the Applicant by a revised estimate lodged with Centrelink on 10 May 2001;

(h) That while the estimated earnings by the Applicant and her partner where nominated in the FAO letter (A $23,330; P $8,600) were returned by the Applicant to Centrelink (Hobart) on 6 May 2001, they bear little reflection to:

(i)  the revised earnings for the Applicant and her partner notified and lodged with Centrelink on 10 May 2001 (A $9,720; P $10,970):

(ii) the document returned by the Applicant on 15 May 2001 concerning parenting payment in which the Applicant indicated that her partner would be receiving $826.92 per week from 19 May 2001.

(i) That the Applicant’s FTB was paid throughout financial year 2001/2002 using a combined taxable income estimate of $21,890.02;

(j) That as a consequence the Applicant was overpaid FTB in the amount of $3,848 during financial year 2001/2002;

(k) That the combined taxable income for financial year 2001/2002 was $45,422, a reportable fringe benefit of $7,735 and a deferred non commercial partnership loss of $24,689.

13.     In addressing the issue of estimates, it is clear to the Tribunal that there was miscommunication between the parties, which in turn is highlighted by the Applicant’s partner’s misunderstanding as to what and when business losses could be claimed in the preparation of an estimate. In so stating the Tribunal is mindful of the various estimates being notified in May 2001 by the Applicant either in response to a request by the Respondent or alternatively advising of a revised estimate for financial year 2000/2001. It is evident that during this process the partnership loss of $5,705 for financial year 2000/2001 was brought to the attention of the Respondent, and it is also clear that the assessor, noting that the business income was negative, adjusted it to zero. More importantly the assessor indicated that the reconciliation process was not explained to the customer (T3, p10).

14.     It is further evident to the Tribunal that the Respondent proceeded to use the revised estimate ($20,690) as opposed to the earlier estimate of combined income ($31,930) for financial year 2000/2001 in establishing the estimate of combined income for financial year 2001/2002 ($21,890). Such an action may have been inconsistent with the Applicant’s request to Centrelink Hobart of 6 May 2001, with the Tribunal also noting that the Applicant’s request to Centrelink Hobart was inconsistent with earnings nominated for the Applicant and her partner in either financial year 2000/2001 or 2001/2002.

15.      Nevertheless by their actions, namely a failure to explain the reconciliation process to the Applicant concerning the treatment of taxable business losses in the estimate of 10 May 2001, as well as a failure to clearly differentiate between the estimate sent to Hobart on 6 May 2001 and the estimate lodged in Parramatta on 10 May 2001 the Respondent either created or maintained in the Tribunal’s view an environment for misunderstanding.

16.     The Tribunal acknowledges that as regards which estimate was used for calculating FTB for financial year 2001/2002, the Respondent advised the Applicant as to what estimate ($21,890) they were using on 23 June 2001. The Tribunal also notes that the Applicant did not raise with the Respondent at that time or within the ensuring 12 months, any objections to that estimate having been used.

17.     The Tribunal notes that the Applicant partner’s taxable income was $45,422 with a reportable fringe benefit of $7,735 for financial year 2001/2002, together with a deferred non commercial partnership loss of $24,089. While the Applicant’s partner may not have been fully informed concerning issues surrounding a reportable fringe benefit, it is also clearly evident that he was unaware that a deferred non commercial partnership loss could not be offset against other income in the financial year in question. As such it cannot be considered to be a taxable item of income in the year in which the loss was sustained.

18.     The Tribunal observes that it is the difference between the combined actual taxable income and the reportable fringe benefits for financial year 2001/2002 and the estimate of combined taxable income of $21,890 that has led to the overpayment of FTB to the Applicant in financial year 2001/2002. While the Applicant would contend that such has arisen as a consequence of misunderstanding between the parties as to which estimate was to be used, it is evident to the Tribunal that the Applicant was clearly informed on 23 July 2001 as to what estimate ($21,890) was being used by Centrelink for the calculation of FTB thereafter. The Tribunal notes that the Applicant did not raise objections to the use of such an estimate until the issue of overpayment was raised some eighteen months or so later. 

19.     The Applicant would contend that no such objection was raised because while leaving aside the issue of ability to claim deferred business losses, the Respondent had failed to clearly define how such business losses were assessed. In this regard the Applicant notes the treatment given to the business loss in financial year 2000/2001 of $5,705, which was reduced to zero and no information provided to the Applicant by the assessor as to either the fact that it was done or the reasons for it. The Applicant contends that it was in the absence of such knowledge that objections were not raised to the estimate, as business losses continued to accumulate during the course of the financial year 2001/2002, eventually amounting to $24,689. It is in the Applicant’s contention that a lack of both explanation in paragraph 5 of form FAO 07 and a lack of communication by the Respondent as to how such business losses were assessed, which allowed the Applicant’s continuing acceptance of the estimate of $21,690, as that figure would also incorporate a negative amount of $24,689 from a business loss. When considered in this light, the Applicant contends that the estimate remained current and was consistent with the taxable income for financial year 2001/2002 of $45,422.

20.     While the Tribunal respects the nature of the Applicant’s submissions in this regard, the Tribunal is also mindful of difficulties experienced in forecasting business losses twelve months in advance. Clearly there is no evidence before the Tribunal that the Applicant forecast such losses, leaving the Tribunal concerned as to how much of the Applicant’s contention was a post-hoc constructed argument, a matter the Tribunal need take no further.

21.     The Tribunal is mindful that there are two issues outstanding which have led to the overpayment in financial year 2001/2002. The first of these is reportable fringe benefits, and while the Applicant may express concern as to how and why they were raised, it is clear to the Tribunal that they made a contribution to the assessment of income for FTB for year 2001/2002.

22.     Further the Tribunal observes that the business losses were deferred by the Tax Office, and as such could not be claimed as a taxable offset in the year of creation, and indeed may never be able to be offset unless nominated criteria are met. The Tribunal notes that the Applicant utilises the services of an accountant for tax matters, and that while the Applicant and/or husband may have a misunderstanding on such issues, a question to either the accountant and/or Centrelink may have clarified issues.

23.     As a consequence of the Tribunal’s analysis, it is clear and the Tribunal so finds that the overpayment in this matter did not arise solely as a consequence of administrative error by the Respondent. It is evident to the Tribunal that both parties had a part to play in the events which led to the overpayment.

24.     In addressing the issue of overpayment, the Tribunal is mindful that there is no disagreement between the parties as to the quantum of overpayment, namely $3,848.68. Further the Tribunal finds that this is a debt owed by the Applicant to the Commonwealth pursuant to section 71 of the Family Assistance Administrative Act 1999. Moreover in the light of the Tribunal’s finding that the debt was not solely attributable to sole administrative error by the Commonwealth and that there is no observation of any evidence which would suggest that the Applicant would suffer severe or extreme financial hardship if the debt was not waived, waiver pursuant to section 97 of the Family Assistance Administrative Act 1999 is not available to the Tribunal in this matter.  

25.     Section 101 of the Family Assistance Administrative Act 1999 provides that the debt may be waived in part or in whole provided that:

”(a)the debt did not result wholly or partly from the debtor or another person knowingly:

(i)making a false statement or a false representation; or

(ii)failing or omitting to comply with a provision of the family assistance law; and

(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c)it is more appropriate to waive than to write off the debt or part of the debt.”

26.     In this matter the Tribunal observes that there is no suggestion that the Applicant or her partner made false statements or representations, or omitted to comply with the law.

27.     In addressing the issue of special circumstances, the Tribunal’s attention was drawn to some medical issues, namely hypertension and diabetes and an episode in 1989. In the Tribunal’s view such medical conditions are not unusual, uncommon or exceptional in the general population and as such do not constitute special circumstances.

28.     In further consideration of the issue of special circumstances, the Tribunal is mindful of the apparent lack of explanation available to an Applicant when dealing with the issue of reporting a taxable business loss in paragraph 5 of the FAO 07 form. The Tribunal was intrigued on learning that in this matter such a declared loss was reduced to zero by the assessor. More importantly, however, in the Tribunal’s consideration was a failure by the Centrelink assessor to advise the Applicant on how the estimate was processed, leaving the Applicant with no understanding as to the status of a declared business loss in such circumstances. This clearly resulted in the Applicant maintaining a view that such taxable business losses constituted a negative amount in the taxable income summarisation in paragraph 5 of the FAO 007 form. This in the Tribunal’s view is far removed from a best practice approach to an administrative process that demands accuracy in the compilation of an estimate.

29.     Earlier in the decision reference has been made to the fact that deferred business losses could only be offset against taxable income in a financial year in such circumstances as approved by Commissioner of Taxation. In this matter business losses in financial years 2000/2001 and 2001/2002 were deferred and as such were not available to the Applicant to include as taxable income (losses) in paragraph 5 of the estimation process (form FAO 07). Again the Tribunal observes that discussion by the assessor in May 2001 with the Applicant/ husband would have removed any misunderstanding, with both parties on notice as to what business loans are claimable in a financial year and/or explain how such losses are treated in the assessment process. While the Applicant may have enjoyed access to an accountant, it is clear to the Tribunal that the Respondent was the only body with knowledge as to how a particular estimate assessment was undertaken.

30.     The Tribunal is mindful that, while both the Applicant and her husband are professional people, they both are relatively new arrivals in this country and hence their familiarity with customs and processes are evolving. That they elected to receive fortnightly FTB payments, which involved the compilation of an estimate, while an issue of choice, was more than likely an election driven by cash flow needs. That error occurred in their estimate arose as a consequence of the following:

(i)A misunderstanding by the Applicant and her husband that deferred business losses could be an offset against other income in the year in which the loss was made;

(ii)A non recognition by the Applicant and her husband that reportable fringe benefits had to be included in the estimate process;

(iii)A lack of communication between the two parties as to how business losses were to be assessed with the Respondent enjoying a responsibility to either detail how such information was going to be assessed or alternatively informing of how it was assessed, i.e. detail in advice given to the Applicant as what particular financial items had been included in the assessed estimate.

31.     In the light of the comments made the Tribunal considers that while the Applicant may have been better advised by Centrelink as to how business losses were dealt with, the fundamental issue remains that the Applicant and her husband made significant contributions to the ultimate estimate by claiming offsets for deferred business losses in the estimate and failing to estimate reportable fringe benefits. In such circumstances the Tribunal is unable to conclude in this matter that any failure by Centrelink to carry through its task is of such gravity alone to be considered to constitute a special circumstance.

32.     As a consequence the Tribunal concludes that the debt should not be waived, with the Applicant owing a debt to the Commonwealth of $3,848.68.

determination

33.     The Tribunal affirms the decision under review.

I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell, Member

Signed:         Neil Glaser
  Associate

Date of Hearing  17 May 2004 
Date of Decision  24 August 2004
Representative for the Applicant               Peter Abbeywick 
Advocate for the Respondent                    John Kenny