Bartholomai and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2010] AATA 553
•23 July 2010
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2010/0524
General Administrative Division )
Re TERRY BARTHOLOMAI Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
CORRIGENDUM
TRIBUNAL: Dr M Denovan, Member
DATE: 12 August 2010
PLACE: Brisbane
Pursuant to section 43AA(1) of the Administrative Appeals Tribunal Act 1975 (Cth) I direct that:
1.The Decision on page 1 and the Reasons for Decision in paragraph 44 should be altered as follows:
The section quoted as s 1237AAD of the Social Security Act should instead read s 101 of the A New Tax System (Family Assistance) (Administration) Act 1999.
2.Reference to s 1237AAD of the Social Security Act 1991 in the catchwords be deleted.
...................................................................
Member
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 553
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/0524
GENERAL ADMINISTRATIVE DIVISION ) Re TERRY BARTHOLOMAI Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr M Denovan, Member Date23 July 2010
PlaceBrisbane
Decision The Tribunal sets aside the decision under review pursuant to s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) and remits the decision to the respondent for reconsideration on the basis that:
(a) part of the debt that accumulated from and including 6 June 2001 should not be waived; and
(b) special circumstances exist justifying the waiver of the balance of the debt pursuant to s 1237AAD of the Social Security Act 1991 (Cth).
.............[Sgd].................................
Member
CATCHWORDS
SOCIAL SECURITY – Family tax benefit – Debt owned to the Commonwealth on the basis that applicant exceeded maximum period of absence from Australia – Applicant contended debt not recoverable on the basis that 6 years had past since an officer could reasonably be expected to become aware of circumstances giving rise to debt – Special circumstances exist – Matter remitted to the respondent for reconsideration.
Administrative Appeals Tribunal Act 1975 (Cth) s 43
A New Tax System (Family Assistance) Act 1999 (Cth)
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) s84, 97, 101
Social Security Act 1991 (Cth) s 1237AAD
Dranichnikov and Another v Centrelink and Another (2003) 75 ALD 134
Re Secretary Department of Social Security and Hill (1995) 39 ALD 667
Lucey and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 485
REASONS FOR DECISION
23 July 2010 Dr M Denovan, Member 1. Mr Terry Bartholomai, the applicant, was paid family tax benefit (FTB) in the 2000/2001 and 2001/2002 financial years (the relevant periods). During this time he was a member of the defence force, and was serving in Saudi Arabia.
2. In 2008, the Australian government implemented a new process whereby Centrelink, the respondent, could verify customer’s residence information directly with the Department of Immigration and Citizenship (DIAC). In December 2008, Centrelink became aware that the applicant had been overseas for various lengths of time from 4 July 1997 to 11 April 2002. On 2 November 2009, Centrelink decided that, because of these periods of absences from Australia, the applicant had been overpaid FTB, and raised a debt.
3. An ARO reviewed the decision and altered the amount of the debt to $7,544.88 for the financial year 2000/2001 and $5,898.50 in the 2001/2002 financial year[1]. On 12 January 2010, the decision was affirmed by the SSAT. Mr Bartholomai applied for review by this Tribunal on 8 February 2010.
[1] This was because changes in the legislation, effective 1 July 2004, altered the continuous absent provisions - paragraph 5 of this decision
LEGISLATIVE SCHEME
4. The rules and regulations in relation to FTB are contained in the A New Tax System (Family Assistance) Act 1999 (FA Act), and A New Tax System (Family Assistance) (Administration) Act 1999 (Admin Act).
5. The legislation creates limitations on the absences a person can have from Australia and still remain entitled to receive family payments. Section 24 of the FA Act provides for a maximum period of absence of three years.
6. A person who returns to Australia for less than 13 weeks is deemed to have been continuously absent from Australia[2]. Prior to 1 July 2004, the period was 26 weeks.
[2] Section 62 (4) FA Act. This provision was amended on 1 July 2004.
7. It is not in dispute that Mr Bartholomai was working outside of Australia in excess of three years. It is also not in dispute that he was overpaid FTB and, that he has a debt to the Commonwealth in relation to that overpayment.[3]
[3] Pursuant to s 71 FA Act
8. Relevant to this case, s 84 of the Admin Act prevents the commencement of the recovery of a debt if six years or more have passed. This six year period starts on the first day that an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt.
9. Mr Bartholomai contends that there were a number of things that should have alerted an officer to the fact that he was absent from Australia during the relevant period from as early as 2002. These are discussed in full below. Accordingly, Mr Bartholomai contends that the Commonwealth is prohibited from recovering the debt because of the lengthy passage of time that has lapsed since he was overpaid.
10. The respondent contends that an officer was not aware of the circumstances which gave rise to the debt, namely the applicant’s overseas absences during the period July 1997 until April 2002, until information about the applicant’s movements were provided to Centrelink from the Department of Immigration and Citizenship (DIAC) in December 2008.
11. The Social Security Act 1991 (Cth) (the Act) provides two instances where a debt may not be recovered. The first is provided for in s 97 of Admin Act. Pursuant to that section, a debt that is due solely to administrative error must be waived, in certain circumstances. Section 101 of the Admin Act provides a discretion to waive part or all of a debt owed to the Commonwealth in special circumstances.
A NEW TAX SYSTEM (FAMILY ASSISTANCE) (ADMINISTRATION) ACT 1999 - SECT 101
Waiver in special circumstances
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 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.
12. Mr Bartholomai contends that his circumstances are special and that the debt should be waived. The respondent contends that the debt was not solely the result of administrative error and that Mr Bartholomai’s circumstances are not special enough to distinguish them from a usual case. That being so, it is contended that the debt should not be waived.
ISSUES
13. The first issue is a question of timing. When was an officer aware, or could reasonably have been expected to become aware, of the circumstances that gave rise to the debt in this case?
14. If the consequence of the answer to the first issue is that Mr Bartholomai has a recoverable debt, then the second issue is whether the discretion to waive or write off part or all of the debt should be applied in Mr Bartholomai’s favour.
When was an officer aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt?
15.Section 3 of the FA Act provides:
"officer" means an officer of an agency and includes:
(a) the head of the agency; and
(b) an employee of the agency; and
(c)any other person engaged by the agency, under contract or otherwise, to exercise powers, or perform duties or functions, of the agency.
16. Mr Bartholomai contended that it is was unreasonable in 2001-2002 to expect a person to notify Centrelink about circumstances affecting their entitlement to FTB, because the claim form for FTB had a logo for the ATO on it. He contended that he had an obligation to inform the ATO, but not Centrelink. Helpfully, Mr Nolan for the respondent submitted that ‘officer’ included either an officer of the ATO or Centrelink for the purpose of this matter.
17. Mr Bartholomai left Australia on 19 July 1997. Between that time and April 2002, he departed from and returned to Australia many times. During this period, his longest stay in Australia was for less than 10 weeks, and accordingly for the purposes of the legislation, he was absent from Australia for three years on 19 July 2000.
18. Mr Bartholomai was employed by BAE Systems Australia, and worked in Dhahran, Saudi Arabia. Mr Bartholomai’s income whilst working in Dhahram was tax exempt, pursuant to an ATO ruling under section 23AF[4]. Mr Bartholomai was given a letter from the ATO to that effect prior to leaving Australia.
[4] 23AF of the Income Tax Assessment Act 1936 .
19. The exemption provided by s 23AF is available for eligible foreign remuneration derived by an individual who is engaged in qualifying service on an approved project for a continuous period of more than 90 days. I agree that it is reasonable to assume that an officer of the ATO, when processing Mr Bartholomai’s tax returns, knew or should have known that he had been out of Australia for a continuous period for at least 91 days during each financial year that he declared income which was accepted as foreign income subject to s 23AF.
20. Mr Bartholomai contends that, as the only income he declared from July 1997 until he returned to Australia permanently in April 2002, was exempt foreign income, the ATO should have been aware of the fact that he was outside of Australia for most of that time.
21. I do not accept that contention. That Mr Bartholomai was declaring only foreign exempt income from 1997 to 2001 by itself was not a sufficient reason to expect that the ATO would have realised he was not eligible for FTB in 2001. An ATO Officer reviewing Mr Bartholomai’s tax return in 2001, from the information provided, could have reasonably assumed that he was continuously absent for more than 90 days, but not more than 26 weeks, and was therefore still eligible for FTB in the 2000/2001 and 2001/2002 financial years.
22. That Mr Bartholomai was ineligible for FTB would only have been apparent to the officer processing his 2001 tax return, if there was something that alerted the officer to the fact that he had not returned to Australia for 26 weeks or more since his departure in July 1997. I do not consider that the absence of an income from Australian sources was a reasonable indication of that. From the questions included in tax returns from 2001 onwards, it is reasonable to assume that the ATO relied on information about overseas absences provided in the claim.
23. Mr Bartholomai said that he emailed, faxed and wrote to the ATO many times between 1997 and 2002 regarding his circumstances. He claims the correspondence from him clearly indicated that he was residing overseas, and should have alerted the ATO to his circumstances. Understandably, he does not have a copy of all of that correspondence due to the lengthy passage of time that has passed. Mr Bartholomai was able to provide copies of a letter he sent to the ATO on 4 February 2002[5], in which he clearly indicates that he is living in Saudi Arabia. Mr Bartholomai also provided a copy of a fax which he sent to the Deputy Commissioner of Taxation on 19 March 2002[6]. In that fax, Mr Bartholomai questions whether he is listed as a resident or non-resident of Australia for Australian tax purposes. He states that he currently lives in Saudi Arabia and will be returning to Australia permanently on 11 April 2002.
[5] Exhibit 5
[6] Exhibit 7
24. I sympathise with Mr Bartholomai and I do consider that this correspondence should have reasonably alerted the ATO officer that he was living outside of Australia at the time the correspondence was sent. I do not, however, think it reasonable that it should have alerted the officer that Mr Bartholomai had exceeded the allowable three year absence, and that he was therefore not entitled to FTB. In the correspondence, the ATO was asked to address issues other than FTB. As Mr Bartholomai recalls, none of the correspondence was about FTB. I agree with the submission of Mr Nolan, that the ATO does not have an obligation to “chase every possibility down every rabbit hole”.
25. The paper version of the FTB claims for 2001 and 2002 include questions about whether an applicant, their spouse or their children were outside of Australia from 1997. Mr Bartholomai had attempted to send his tax return for 2001 by mail from Saudi Arabia. He utilised the Tax Pack system. The return was not received by the ATO. Mr Bartholomai considers that because of restrictions and controls in Saudi Arabia after the terrorist attacks of 11 September 2001, his return was not received by the ATO.
26. Mr Bartholomai was granted permission to lodge his 2001 return after he returned to Australia. Mr Bartholomai’s tax agent submitted tax claims electronically. This was the first time Mr Bartholomai had used a tax agent.
27. In the copy of his 2001 tax return provided by Mr Bartholomai[7], there is no question that asks about to his absences from Australia. Mr Bartholomai does not believe he was ever asked. Mr Bartholomai admits to providing incorrect information about his children’s absences. He told me when answering the question, he turned his mind to the time they had been absent that financial year and not from 1997. He admits this is a mistake. Mr Bartholomai was a very straight forward, very credible witness. I accept him to be a highly credible person, and accept that this error was an honest mistake.
[7] Exhibit 3
28. It was assumed by previous decision makers that the software used by Mr Bartholomai’s accountant would have contained similar questions to that included in the paper version of the FTB claim forms. They concluded therefore that Mr Bartholomai would have been asked about his absences since 1997 when his 2001 tax return was completed. I make no finding on that matter, however I do find that on the basis of the information provided by Mr Bartholomai in his tax returns for 2001 and 2002, the ATO could not reasonably have been expected to be aware of his absences from Australia since 1997, which effectively meant that at that point in time, he no longer qualified for FTB.
29. Mr Bartholomai considered his tax refund for 2002 unusually high. He contacted his accountant and asked him to check that it was correct. He was assured by his accountant that it was. I agree with Mr Nolan that at this point the ATO would have checked that, based on the information provided to them, Mr Bartholomai had been assessed correctly, and there is no reasonable reason that the ATO should have been alerted to the fact that Mr Bartholomai had exceeded his three year continuous absence from Australia.
30. I conclude that whilst Mr Bartholomai acted with complete honesty and with no intention to deceive, the earliest time that an officer of the ATO could reasonably have been aware of the circumstances that led to the debt was in December 2008. That means that the debt was raised within the six year allowable recovery period. Section 84 of the Act does not apply in this case, and the debt is recoverable.
Should part or all of the debt be waived?
31. In relation to s 97 of the Admin Act, the secretary accepts that the applicant received the debt in good faith, however contends that the debt is not solely attributable to administrative error, nor would the applicant ‘suffer financial hardship’ if the debt were not waived.
32. Mr Bartholomai’s entitlement to FTB in the relevant periods was determined without taking into account the periods of his overseas absences. I agree that the ATO was made aware of Mr Bartholomai’s absences on many occasions and in many ways, including his declaring foreign exempt income in his tax returns, his email and postal correspondence and his application for a s 23AF exception. It is clear from the questions in the tax returns of 2001 and 2002 that the ATO relied on the answers provided to questions relating to overseas absences regarding the applicant, his wife and their children, to alert them to the possibility that a person may not be entitled to FTB due to the time they spend outside of Australia.
33. Mr Bartholomai or his accountant provided incorrect information on his 2001 and 2002 tax returns, and this contributed to the debt. The Commonwealth can not be taken to have been the sole contributor the debt. Further, Mr Bartholomai would not suffer from severe financial hardship if the debt was not waived[8].
[8] see financial information provided by Mr Bartholomai exhibit 8
34. I next considered whether the debt could be waived due to special circumstances[9]. The Secretary does not contend that Mr Bartholomai knowingly made a false statement or declaration or knowingly failed to comply with a provision of the FA Act. I agree, having already stated that I found Mr Bartholomai to be an honest and credible witness.
[9] pursuant to s101 Admin Act.
35. Whilst the term ‘special circumstances’ is not defined in the Act, it has been held by the Tribunal and by the Federal Court that the term refers to circumstances which distinguish this case from the usual case[10]. Financial hardship is not a prerequisite to special circumstances: ReSecretary Department of Social Security and Hill (1995) 39 ALD 667.
[10] See Dranichnikov and Another v Centrelink and Another (2003) 75 ALD 134
36. In the matter of Lucey[11], Senior Member McCabe said:
The law reports are full of examples of events or factors or affairs that have been considered to be special circumstances in the context of a particular case. One must approach these reports with caution, of course: the facts of each case will be subtly different, and what may appear unremarkable in isolation might be regarded as special when viewed in conjunction with other factors, each of which might be unremarkable on their own.
[11] Lucey and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 485
37. In this matter I consider that collectively, the following are reasons for concluding that special circumstances do exist in this case.
38. Pursuant to the legislation, coupled families can elect which parent is to claim the benefit. Mr Bartholomai claimed the benefit, he cannot recall on what basis he and his wife made that decision. I note that Mr Bartholomai’s children did not leave Australia until 6 June 1998[12]. Mr Bartholomai told me that his wife accompanied the children on their travels to and from Australia. I assume that her absences from Australia were therefore for the same period as the children’s.
[12] T10/97
39. Had Mrs Bartholomai claimed FTB, an option that would have been open to the couple, she would have remained eligible for the payment until 6 June 2001. FTB is a benefit to help families with the costs of raising children. The children of Mr Bartholomai remained in the care of their mother in Australia continuously until 6 June 1998. It is an unfair outcome if the family is now asked to repay a payment that they would have otherwise been entitled to, had the claim been made by the other member of the couple.
40. Mr Bartholomai had made every reasonable effort to send in a copy of his tax return to the ATO by post in 2001. I consider it reasonable to assume that the information provided in that Tax Pack, completed personally by Mr Bartholomai, was accurate. Had it been received by the ATO, I consider it would have alerted the ATO to Mr Bartholomai’s absences. Likely due to the most exceptional circumstances of the terrorist attacks of 11 September 2001, that information was not received by the ATO.
41. Mr Bartholomai had not used a tax agent before and relied on the information in the tax returns being lodged as being accurate. It is understandable that he may have overlooked the error in relation to the children’s overseas absences, when asked to check and sign the return by his accountant. Mr Bartholomai was new to the system; he was, by his evidence, under the guidance and control of his accountant. I accept his evidence that he answered all questions put to him by his accountant correctly and fully. As his returns for 2001 and 2002 were both completed by the same accountant, and both silent about his absences, it remains open as a real possibility that the accountant failed to ask about Mr Bartholomai’s absences abroad from 1997 onwards.
42. I consider it is more appropriate to waive rather than to write off the debt in relation to the period prior to 6 June 2001. This is a debt that would not have come into existence had Mrs Bartholomai, not Mr Bartholomai claimed FTB.
43. I remit the matter to the department to calculate the amount of debt that accumulated between the period 6 June 2001 and 11 April 2002.
DECISION
44. The Tribunal sets aside the decision under review pursuant to s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) and remits the decision to the respondent for reconsideration on the basis that:
(a)part of the debt that accumulated from and including 6 June 2001 should not be waived; and
(b)special circumstances exist justifying the waiver of the balance of the debt pursuant to s 1237AAD of the Social Security Act 1991 (Cth).
I certify that the 44 preceding paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member
Signed: ................[Sgd].............................................................
Kate Slack, AssociateDate/s of Hearing 25 May 2010
Date of Decision 23 July 2010
Applicant was self represented
Solicitor for the Respondent Mr Phil Nolan, Sparke Helmore Lawyers
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