Araki and Department of Family and Community Services - [2001] AATA 270

DECISION AND REASONS FOR DECISION [2001] AATA 270

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2000/795

GENERAL ADMINISTRATIVE DIVISION       )
           Re      MICHIE ARAKI
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr EK Christie, Member

Date4 April 2001
PlaceBrisbane

Decision The Tribunal affirms the decision under review. This means Ms Araki's application is unsuccessful.

(Sgd) EK CHRISTIE
MEMBER
CATCHWORDS
SOCIAL SECURITY - family payment - overpayment - whether debt due to the Commonwealth may be waived for administrative error or for special circumstances.

Social Security Act 1991 ss 860, 885, 891, 1069-H2, 1069-H15, 1069-H21, 1237A, 1237AAD

Re Beadle v Director-General of Social Security (1984) 6 ALD 1
Re Groth v Secretary, Department of Social Security (1996) 40 ALD 541

REASONS FOR DECISION

4 April 2001 Dr EK Christie, Member

This is an application for review of a decision of the Social Security Appeals Tribunal made on 17 March 2000 to raise and recover a debt of family payment in the amount of $4,939.25 for the period 25 September 1997 to 30 November 1999. The Social Security Appeals Tribunal affirmed the decision of an Authorised Review Officer made on 20 January 2000.
In reaching its decision, the Social Security Appeals Tribunal concluded that there were no grounds to waive the debt because of "special circumstances" or "administrative error".
The applicant was represented by her husband, Mr Owen Seamons. The respondent was represented by Mr N Foster, a Departmental Advocate.
At the hearing the Tribunal had in evidence before it documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 – the "T" documents (Exhibit 1).
Issues before the Tribunal
The only issue for the Tribunal to decide was whether the overpayments of family payment received over the period 25 September 1997 to 30 November 1999 could be waived, in part or in full, because of "administrative error" or for "special circumstances".
At the hearing the applicant acknowledged that the only period relevant to the question of waiver of overpayment was the period 1 July 1998 to 6 November 1999.
Facts
At the hearing Ms Araki acknowledged the following facts:

that Ms Michie Araki was in receipt of family payment and on 25 September 1999 she gave an estimate of family taxable income for the 1997/1998 tax year of $11,250. On 6 November 1997 and 5 November 1998 further estimates of the 1997/1998 tax year were provided of $24,000 and $14,000 respectively;
that Ms Araki was then paid on the basis of these estimates until 30 November 1999; and
that Ms Araki's family taxable income for the 1997/1998 tax year was in fact $27,179.

At the end of the hearing the Tribunal exerted its inquisitorial powers and sought further information provided to the Australian Taxation Office by Mrs Araki in respect of Net Rental Property Income Loss, given its significance in determining "family taxable income". This information was provided to the Tribunal on 16 February 2001. Supplementary submissions were received from Mr Foster on 21 February 2001.
Contentions and Submissions of the Parties
Mr Foster stated that the first income estimate applied by Centrelink ($11,250) incorporated Ms Araki's estimate for Taxable Income ($8,750: Document T28 Folio 115) as well as Net Rental Property Loss ($2,500: Document T28 Folio 116). Mr Foster submitted that these figures were provided to Centrelink by Ms Araki.
Mr Foster submitted that Centrelink had, at all times, correctly calculated Ms Araki's family payment entitlements by adhering to the following provisions in the Social Security Act 1991:

Section 1069-H21 – Family allowance recipient may ask Secretary to change appropriate tax year
"If:
(a)      family allowance:
(i)        is not payable to a person because of this Module; or
(ii)       is payable at a reduced rate because of this Module; and
(b)the person gives the Secretary an estimate of the person's income for a tax year; and
(c)the person requests the Secretary to make a determination under this point; and
(d)the person agrees that the person's rate of family allowance for that tax year is to be recalculated if the person's actual income for that tax year exceeds 110% of the amount estimated by the person;
the Secretary must determine that the appropriate tax year, for the purpose of applying this Module to the person for a family allowance payday on or after the day on which the request is made, is the tax year in which the request is made."

Section 1069-H15 – Current tax year to be retained for consecutive calendar years in certain circumstances
"If:
(a)       family allowance is payable to a person:
(i)        on the last family allowance payday in one calendar year; and
(ii)       on the first family allowance payday in the next calendar year; and
(b)the person's family allowance rate on the last family allowance payday in the earlier of the 2 calendar years is worked out on the basis that the person's appropriate tax year is the tax year in which the payday occurs (the current tax year); and
(c)the person's family allowance rate on that payday was worked out on that basis because the person had made a request under point 1069-H21; and
(d)the person's income for the current tax year is less than the person's income for the base tax year;
the person's appropriate tax year, as from the beginning of the later calendar year, is the current tax year and not the base tax year unless the income for the base tax year is less than the person's income free area."

Section 860 – Rate struck for calendar year
"If the rate of the family allowance payable to a person in a calendar year has been worked out in accordance with the Family Allowance Rate Calculator in section 1069, the rate of family allowance payable to the person only has to be worked out again during that calendar year if:
(a)the person notifies the Department or an officer that a notifiable event has occurred in relation to the person; or
(b)a notifiable event has occurred in relation to the person and the person fails to notify the Department that it has occurred; or
(c)the Secretary makes a determination in relation to the person under point 1069-H21 in Module H of the Family Allowance Rate Calculator in section 1069; or
(ca)family allowance advance is or is not payable for a particular period; or
(d)the person revises an estimate of his or her income; or
(e)the person has underestimated his or her income; or
(f)the Commissioner of Taxation changes an assessment of the person's taxable income."
Section 1069-H2 – Family Allowance Income Test
"For the purposes of this Module, a person's family allowance income for a particular tax year is the sum of the following amounts (income components):
(a)       the person's taxable income for that year;
(b)       the person's adjusted fringe benefits value for that year;
(c)       the person's target foreign income for that year;
(d)       the person's net rental property loss for that year.

Mr Foster submitted that the application of Section 1069-H2 of the Social Security Act in Ms Araki's fact situation, meant that her family payment entitlements were the sum of taxable income for that year and net property loss income for that year. Net property loss income in relation to rental property of Ms Araki and Mr Seamons was identified in a Centrelink data matching program (Document T17, December 1999).
Mr Foster submitted that Ms Araki had requested from Centrelink that she be paid family payment on the basis of her estimate of income for the 1997/98 tax year. However, he submitted that whilst Ms Araki provided further estimates on 6 November 1997 and 5 November 1998, the taxation year on which she requested to be paid, continued to be the 1997/98 tax year. Ms Araki did not at any time provide a revised estimate of income for the 1998/99 tax year. He contended that an appropriate form had been provided for a revised estimate (Document T12) but not acted upon by Ms Araki.
Mr Foster submitted that Ms Araki continued to be paid family payment based on her estimates for the 1997/98 tax year. However, this estimate was not within 110% of her actual taxable income for the 1997/98 tax year of $27,179.
Mr Foster submitted that there were no grounds to waive the debt under the "administrative error" provisions of the Social Security Act because Ms Araki had contributed to the error.
Mr Foster further submitted that there were no "special circumstances" to justify the waiver of debt under the Social Security Act because the overpayment outcome in Ms Araki's case was not one unintended by the legislation, in this specific fact situation.
Mr Seamons stated that at the time the applicant received family payments, they were self-employed. As a result, they did not know what their actual income would be until some 8 months after the end of the tax year. However, he acknowledged that these circumstances were not uncommon as others "would be in the same boat".
Mr Seamons submitted that it was incorrect for Centrelink to continue to use their 1997/98 income estimate throughout the entire period they received family payments.
Mr Seamons stated that when Ms Araki completed the Review of Family Allowance Form (Document T12, 31 October 1998), she did not respond to Question 7 ("Whether your income in 1998/99 will be less than 1997/98 and you wish to have your Family Allowance assessed on your 1998/99 income") because they did not believe their income would be likely to be different from 1997/98. In addition, they did not receive their 1997/98 tax return from the Australian Taxation Office until 19 January 1999. In any event, their actual combined income was much less than their income estimate for the 1997/98 tax year.
Mr Seamons further stated that it was not until they received the results of the data matching program and their income tax return on 19 January 1999 that they first became aware of the implications of Net Rental Property Income Loss for their family payment entitlement. Mr Seamons challenged the accuracy of the net rental property income loss values obtained from the data matching program.
Mr Seamons concluded with the contention that there should be no debt for the period 1 July 1998 to 6 November 1999 as their income for the 1998/99 tax year was much less than their taxable income for the 1997/98 tax year. Mr Seamons contended that the basic error in the calculation of their family payment entitlements was that Centrelink consistently used the same value for family taxable income throughout the entire period of family payment – notwithstanding that their family taxable income varied considerably.
In response to a Tribunal question, Mr Seamons acknowledged that he had not sought advice from Centrelink in issues associated with estimating income whilst self employed and in receipt of family payment.
Supplementary Submissions
Mr Seamons submitted that taxation calculations for net rent losses for 1997/98 included a special building write-off. Furthermore, he submitted that Centrelink had used these figures for calculating net property loss which, in turn, "added into the Family Taxable Income".
It was Mr Seamons' contention that whilst the net property loss was calculated at $4,800 per partner for the 1997/98 tax year, the net property loss for 1998/99 was much less - $2,090 per partner.
Mr Seamons contended that if the net property loss for 1998/99 was used to calculate family taxable income – rather than the 1997/98 value, Ms Araki would have come within the 110% estimate for income.
Mr Foster submitted that income for 1998/99 was not relevant to the debt under review in Ms Araki's factual situation. The debt under review arose from under-estimates of income for the 1997/98 financial year, "making the income for 1998/99 irrelevant".
Mr Foster further submitted that irrespective of whether net property loss values were derived from ATO figures or from the 1997/98 tax return, the amount of the debt under review would not be less than $4,939.25 – the amount raised by the respondent. Based on the ATO figures and the 1997/98 tax return for net property loss, the taxable income for 1997/98 for Ms Araki was $27,179 or $29,091 respectively. Either of these figures exceeded 110% of the estimates in issue.
Consideration of the Issues
The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times. The relevant legislation is the Social Security Act 1991 ("the Act").
The first question to be considered relates to the credibility of the applicant and the veracity of the applicant's account as to their dealings with Centrelink. The Tribunal notes the following conclusion made by the Social Security Appeals Tribunal:
"26. The Tribunal was very impressed by Mr Seamons as a witness and considered him to be a witness of credit. He went to great lengths to be accurate and precise in his answers and never overstated his case. The Tribunal therefore accepts the evidence, which Mr Seamons gave as being accurate." (Document T2 Folio 8)
Section 1237 of the Act provides for circumstances where a debt due by a recipient of social security to the Commonwealth may be waived:
"SECTION 1237A – WAIVER OF DEBT ARISING FROM ERROR
1237A(1) Administrative error. Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
Note:Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
SECTION 1237AAD – WAIVER IN SPECIAL CIRCUMSTANCES
1237AAD The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied 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 this Act or the 1947 Act; 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."

With respect to waiver on the basis of administrative error, the Tribunal finds that there is no basis to waive the debt because there has been an administrative error solely made by the Commonwealth. The Tribunal finds that the family payment entitlements that Ms Araki received over the period 25 September 1997 to 30 November 1999 were correctly calculated by Centrelink in accordance with the relevant statutory provisions - [subsections 860, 885, 891, 1069-H2, 1069-H15, 1069-H21 – see also Document T2 Folios 8 and 9].
The Tribunal concludes that by not responding to the need for a revised estimate of income (Question 7, Review of Family Allowance Form, Document T12, 31 October 1998), Ms Araki has contributed to the administrative error which had led to the overpayment. In these circumstances, the Tribunal can make no other finding other than to conclude that the debt cannot be waived under the "administrative error" provisions of the Act. Without Ms Araki notifying Centrelink, Centrelink had no option other than to calculate family payment entitlements on information she provided to Centrelink. In Ms Araki's circumstances, only information for the 1997/98 tax year was relevant.
The next question for the Tribunal to decide is whether the debt should be waived because of the "special circumstances" provisions of the Act.
The leading case is Re Beadle v Director-General of Social Security (1984) 6 ALD 1 where the Tribunal said at page 3:
"An expression such as 'special circumstances' is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

In Groth v Secretary, Department of Social Security (1996) 40 ALD 541, Kiefel J considered whether special circumstances applied in a case involving Section 1184 of the Act. She endorsed the approach adopted by the Administrative Appeals Tribunal at first instance, namely, in determining whether a person's circumstances are "special" one should look at the effect upon the claimant if the waiver provision were not applied. If the consequence were one unintended by the legislation, or the effect on the person concerned were different from that which would be felt by others, then the circumstances may be "special".
The Tribunal concludes that the effect of including "net rental property income" loss within the meaning of "family taxable income" under the Act, has led to an outcome for Ms Araki which is not one unintended by the Act. Ms Araki has endured the same consequence as any other family payment recipient who has "net rental property income loss" as part of their tax return prepared for the Australian Taxation Office. In addition, because of the Tribunal's findings on "administrative error" (paragraph 31), the relevant year for calculation of family payment entitlements was the 1997/98 tax year.
The Tribunal concludes that the circumstances in which the overpayment of family allowance entitlements were paid to Ms Araki were not sufficiently "unusual", "uncommon" or "exceptional" to justify the description "special circumstances".
Whilst this conclusion may seem harsh, it would be fairer to say the outcome is unfortunate. The outcome is dependent on the legislation, but the legislation provides the Tribunal no discretion from which to depart. To some extent the Tribunal makes the observation that the applicant's problem with the overpayment arose from not fully understanding the meaning and operation of the Social Security legislation in relation to the calculation of the family payment entitlement. In this regard, the comments of His Honour Justice McHugh of the High Court of Australia are relevant in the administration of justice under the Social Security Act. In commenting upon the consequences of the rapid growth of legislation enacted throughout Australia, His Honour stated:
"The third effect of the growth of legislation is the difficulty of access to it. The rule of law is meaningless unless people know their rights and duties in the sphere in which they choose to act."

Quite clearly, the Department would need to avoid such an outcome for social security recipients, given the beneficial nature of the legislation. For all of the above reasons the Tribunal has no option other than to affirm the decision under review.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Dr EK Christie, Member
Signed:         Denise Burton
  Secretary
Date/s of Hearing  9.2.01
Date of Decision  4.3.01
Rep. for the Applicant              Mr O Seamons
Solicitor for the Respondent    Mr N Foster, Departmental Advocate