Booth and Secretary, Department of Social Services (Social services second review)
[2017] AATA 786
•30 May 2017
Booth and Secretary, Department of Social Services (Social services second review) [2017] AATA 786 (30 May 2017)
Division
GENERAL DIVISION
File Number
2016/4570
Re
Michelle Booth
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr D. J. Morris, Member
Date 30 May 2017 Place Perth DECISION
The Tribunal affirms the reviewable decision.
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D. J. Morris, Member
SOCIAL SERVICES – Parenting Payment Partnered – Family Tax Benefit– whether applicant paid in excess of correct entitlement – is debt raised and recoverable – should debt be waived or written off, in part or full – whether severe financial hardship or special circumstances making desirable to waive debt applicable – reviewable decision affirmed
LEGISLATION
A New Tax System (Family Assistance) Act 1999 – Pt 3 – s 71 – Sch 1
A New Tax System (Family Assistance)(Administration) Act 1999 – s 97 – s 101
Social Security Act 1991 – s 1237A – s 1237AAD
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Ward v Commissioner of Taxation [2016] FCAFC 132
REASONS FOR DECISION
D. J. Morris, Member
30 May 2017
BACKGROUND
The Applicant, Mrs Michelle Booth, was in receipt of Parenting Payment (Partnered) (PPP) from 10 February 2012 and Family Tax Benefit (FTB) on the basis that she was in receipt of PPP.
On 12 January 2016 the Department of Human Services (the Department) advised Mrs Booth in writing that her PPP was to be suspended while her circumstances were being reviewed. The Applicant and her husband provided documents to the Department in relation to this review. On 26 February 2016 the Department wrote to Mrs Booth raising a debt of $4,590 for the overpayment of FTB for the period 1 July 2013 to 30 June 2014. The Department also wrote another letter on the same day to the Applicant raising a debt of $3,409.10 for the overpayment of FTB for the period 1 July 2014 to 30 June 2015, and a further letter to Mrs Booth advising that her PPP had been cancelled because her and Mr Booth’s combined income was above the allowable limit. On 29 February 2016, the Department sent the Applicant a letter raising a debt of $27,493.06 for the overpayment of FTB from 1 July 2013 to 11 January 2016.
Mrs Booth requested a review of these four decisions. A review was conducted by an Authorised Review Officer (ARO), an officer of the Department not involved in the original decision.
On 11 May 2016, the ARO affirmed the decision to cancel Mrs Booth’s PPP but found also that she had no entitlement to PPP from 1 July 2012, not 1 July 2013. The ARO therefore affirmed the decisions in regard to the $4,590 FTB debt for the 2013-14 financial year and the $3,409.10 FTB debt for the 2014-15 financial year and the $27,493.06 PPP debt for the period 1 July 2013 to 11 January 2016.
However, the ARO decided that the PPP debt should be increased to $43,248.33 for the period from 1 July 2012 to 11 January 2016 and that the Applicant was not entitled to the entirety of her FTB payment for the 2012-13 financial year, raising a further debt of $5,510.15.
The Applicant sought a review of the ARO’s decision before the Social Services and Child Support Division of the Tribunal (AAT1). On 7 August 2016, AAT1 affirmed the ARO’s decision, finding that the debts were correct and recoverable, and that the Applicant’s circumstances did not meet the requirements of special circumstances other than financial hardship alone which would enliven the Secretary’s discretion to waive all or part of the debts.
Mrs Booth sought a review by the General Division of the Tribunal. The hearing was held on 3 April 2017. The Applicant represented herself, gave evidence and was cross-examined by Ms Jacky Vetter, representing the Respondent. The Applicant’s husband, Mr Shayne Booth, also gave evidence.
The Respondent tendered two volumes of documents under section 37 of the Administrative Appeals Tribunal Act 1975 (‘T’ documents), which were admitted into evidence.
The Tribunal also took in the Secretary’s Statement of Facts, Issues and Contentions dated 27 January 2017 (Exhibit R1).
The Applicant tendered the following documents:
·Letter dated 16 November 2016 from Ms Felicity Naylor, clinical psychologist (Exhibit A1); and
·Submission dated 22 November 2016 signed by the Applicant, Mrs Michelle Booth and Mr Shayne Booth (Exhibit A2).
The Respondent also provided a payment summary for the period 12 December 2016 to 17 April 2017.
FACTS
A person’s eligibility for FTB payments is determined pursuant to Part 3 of A New Tax System (Family Assistance) Act 1999 (the Act) by application of Schedule 1 to that Act. The relevant law in this matter is the Act and A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).
Section 71 of the Administration Act states:
Debts arising in respect of family assistance other than child care benefit, child care rebate and family tax benefit advance
No entitlement to amount
(1) If:
(a)an amount has been paid to a person by way of family tax benefit, stillborn baby payment or single income family supplement (the assistance) in respect of a period or event; and
(b)the person was not entitled to the assistance in respect of that period or event;
the amount so paid is a debt due to the Commonwealth by the person.
Overpayment
(2) If:
(a)an amount (the received amount) has been paid to a person by way of assistance; and
(b)the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;
the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.
The debts
In this matter it was common ground of both the Applicant and the Respondent that the total debt had been correctly calculated and that there was, in terms of these provisions, a debt due to the Commonwealth by the Applicant. In the submission of the Applicant and her husband (Exhibit A2), Mrs Booth stated:
First of all, I would like to acknowledge that there is a debt due to us not entering our income estimate correctly; the main issue is that I was only following instructions from centrelink (sic.) staff after giving them all the business information at the time of application.
The Tribunal has reviewed the T-documents, the Respondent’s contentions and the Applicant’s submissions and finds that the Applicant’s PPP payment was correctly cancelled on 26 February 2012 with that cancellation taking effect from 1 July 2012.
The Tribunal also notes from the T-documents and from the Respondent’s contentions that there is an overpayment of FTB payments for the 2012-13, 2013-14 and 2014-15 financial years (T52, p 591). Section 71 of the Administration Act provides that if a FTB amount is paid to a person in respect of a period when the person was not entitled to that payment, the amount so paid is a debt due and payable to the Commonwealth. That the FTB debt had been correctly calculated by the ARO and that there had been an overpayment was not contested by the Applicant.
The Tribunal finds that there has been an overpayment of PPP and FTB to Mrs Booth, that the debts have been correctly calculated and that they constitute a debt due and payable to the Commonwealth.
The law does provide certain provisions for the waiver or writing off of debts in certain circumstances. Section 1237A of the Social Security Act 1991 (the Social Security Act) and section 97 of the Administration Act requires that the Secretary of the Department waive the right to recover a debt if incurring of the debt is due solely to administrative error and the person has received the payments in good faith.
Section 1237AAD of the Social Security Act and section 101 of the Administration Act provides the Secretary with a discretion to waive recovery of all or part of a debt where the person incurring the debt or another person did not knowingly make a false statement or representation or did not knowingly fail or omit to comply with a provision of the Act, and there are special circumstances other than financial hardship alone that make it desirable to waive the debt.
It is important to emphasise the words “other than financial hardship alone” in the legislation, which means that when considering special circumstances those circumstances must be such that are separate from financial hardship by itself.
What happened?
On 10 February 2012, Mrs Booth contacted the Department in regard to a claim for PPP. The claim was examined by a Centrelink Specialist Officer who noted that Mrs Booth’s partner, Mr Booth, was involved in a partnership and a private trust. The officer further noted that Mr Booth was a beneficiary of the trust but had no controlling interest in that trust and that in the 2010-11 financial year he did not receive any income distributions from the trust (T52, p 612).
There was a partnership operating a primary production business. The three partners were the Applicant’s husband, Mr Booth; and Mr Booth’s parents. From the partnership distribution, Mr Booth and his father divert funds into a Farm Management Deposit Scheme, which is a special tax concession allowing primary producers to defer income to a later year. Mr Booth’s individual taxable income is the amount left after those funds have been diverted. In the 2010-11 financial year, Mr Booth drew a distribution of $16,513 from that partnership, which was to be taken into account when determining Mrs Booth’s entitlement to PPP.
On 12 April 2012, the Department advised the Applicant by letter that she was granted PPP and was paid it, effective from 10 February 2012. The letter also advised that the total amount of Mr Booth’s income was $17,554.66 and reminded Mrs Booth to contact the Department should any circumstances change that would affect her entitlement to PPP, including if her personal income went over $62 per fortnight, if Mr Booth’s income went over $830 a fortnight and if the nature of Mrs Booth’s involvement in, or the income she receives from, a private trust or company changes (T8, p 286).
On 25 October 2012, the Department wrote to Mrs Booth requesting details of the trust. The Applicant provided a copy of the 2012 partnership tax return and related documents including the 2012 tax return of the trust. This showed total assets of $1.169 million and total liabilities of $1.53 million.
On 16 February 2014, Mrs Booth claimed FTB for her newborn child and at that time estimated that her taxable income was $8,500 and Mr Booth’s estimated taxable income was $9,500.
On 12 January 2016, the Department suspended Mrs Booth’s PPP while her circumstances were reviewed. In connexion with the review, the Applicant provided Mr Booth’s 2012-13 individual tax return which showed his individual distribution from the partnership for net primary production was $123,973, his distribution for non-primary production was $1,004, his assessable foreign source income was $99 and his primary production loss claimed during that financial year was $18,488. The result was that Mr Booth’s adjustable taxable income for the 2012-13 financial year was $106,588. Mrs Booth also provided her own individual tax return showing an adjustable taxable income of $11,636 and declaring her spouse’s adjustable taxable income consistent with his return. In addition, the partnership’s 2012-13 tax return showed assets of $1.251 million, liabilities of $1,299 million and distributions to the Applicant’s father-in-law of $124,007; to her mother-in- law of $124,006 and to the Applicant’s husband of $124,006, being 33.33 per cent of the distributions from the partnership.
Individual tax returns for the Applicant, Mr Booth and the partnership for the 2013-14 and 2014-15 tax returns were also provided, which showed a similar pattern except in the 2012-15 financial year the income distribution of the partnership was adjusted because, on evidence given at the hearing, the Applicant’s mother-in-law was engaged in employment away from the farm so the income distribution to the Applicant’s husband increased from 33.33 per cent to 47.5 per cent.
The Applicant contended that she and her husband had been given conflicting information from Centrelink officers and in particular officers who were not experienced in the operation of primary production partnerships and trusts had given them inadequate advice. Mrs Booth also contended that the debt had been left “for so long without it ever being picked up” (Exhibit A2). At the hearing, Mr Booth said they would never have applied for PPP in the first place if they were not given what they described as erroneous information from the Department office at Northam.
It appears, as AAT1 found, that the Department did not capture Mr Booth’s income from the partnership as it changed and that the Applicant continued (believing this approach to be correct) to report her husband’s income based on the drawings he made from the business, not his partnership distribution. The Respondent acknowledged the Applicant’s contentions about saying she had received conflicting advice from the Department but countered that, even if that were accepted, Mrs Booth had been sent numerous letters from the Department reminding of her obligation to update her financial circumstances.
The Respondent asked various questions at the hearing about the value of the house that Mrs and Mr Booth have built on the farm and whether various machinery, tools and vehicles could be realised in order to help pay the debt. The Tribunal found this line of questioning somewhat elliptical because, while it might be possible for certain machinery assets to be liquidated, that would have the effect of depriving the Applicant and her husband of their source of income. The Tribunal also questioned the relevance of discussion about the value of the Applicant’s house in terms of its real estate value, given that the house has been constructed on land on the farm which is owned by a trust, and it did not stand on its own title.
However, there was other relevant information in relation to Mrs Booth’s circumstances which was adduced. Mrs and Mr Booth told the Tribunal they receive certain ‘in kind’ benefits from the business to support their household expenses, including, inter alia, payment of water, telephone, electricity and Internet connexion costs.
The Applicant accepted in cross-examination that she had received a number of letters from the Department. When asked whether she read Department letters sent to her, she replied “on occasion”. When asked whether she read letters sent to her online by the Department she replied “not really.” Mrs Booth went on to say she would have read the letters more carefully if she had not been given wrong advice initially.
CONSIDERATION
The Tribunal notes the evidence of the Applicant and her husband that they had received what they described as conflicting advice from Department officers. Mr and Mrs Booth said they were not knowingly dishonest at any time and that the payments should have been stopped once the Department ascertained they were not entitled to receive it. They said that the staff was not trained well enough to understand the difference between household and taxable income. The Tribunal also notes the letter from Ms Naylor, clinical psychologist (Exhibit A1), and also notes that it was accepted by the Respondent that the Applicant was being treated for psychological conditions.
The Tribunal also notes that Mrs Booth was sent notices in relation to her reporting obligations relating to her FTB entitlements on 4 May 2012, 20 February 2013, 20 June 2013, 11 February 2014, 4 July 2014, 1 April 2015 and 14 December 2015, and in relation to reporting requirements for her PPP payments on 12 April 2012, 25 October 2012 and 4 March 2014. In her evidence Mrs Booth accepted that she had in fact received these letters, although she said she did not recall receiving some of them.
The Tribunal notes the Applicant’s evidence that she stated at the hearing that she should have read the letters more carefully. Both the Applicant and Mr Booth said in evidence that they thought the Australian Taxation Office would have been providing information directly to the Department and so it was their assumption that the Department would know the financial situation applicable both to them and to the trust.
The Tribunal is sympathetic to the Applicant to the extent that I do not believe that she set out to provide incomplete information to the Department. The fact remains that Mrs Booth received numerous written prompts to update her financial information, which she did not do. It was only when the Department initiated a review and sought financial documentation relating to the Applicant, her husband and the partnership for previous tax years (which the Applicant willingly provided) that the amount of the debt was determined.
Unfortunately for the Applicant, the failure to provide information led to overpayment of PPP and FTB and therefore the accumulation of these debts. She had an explicit obligation to provide information which would have halted the overpayments earlier, and therefore limited the debt. That she and Mr Booth thought the Department would be receiving information on their tax affairs direct from the ATO does not extinguish this clear obligation on their part.
As mentioned above, there is a mandatory requirement (in section 1237A of the Act) for the Secretary to waive the right to cover a proportion of a debt attributable solely to administrative error by the Department if the recipient received the payment in good faith. Section 97 of the Administration Act states, in relation to debts that arise from administrative error, as follows:
Waiver of debt arising from error
(1)The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.
(2) The Secretary must waive the administrative error proportion of a debt if:
(a)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and
(b)the person would suffer severe financial hardship if it were not waived.
(3 The Secretary must waive the administrative error proportion of a debt if:
(a)the payment or payments were made in respect of the debtor's eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and
(b) the debt is raised after the end of:
(i)the debtor's next income year after the one in which the eligibility period or event occurs; or
(ii)the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;
whichever ends last; and
(c)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.
(4)For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.
While I have no reason not to accept their evidence that Mrs and Mr Booth say they were given information which was inadequate by Department officers, I cannot find that this contention amounts to enlivening the debt waiver provisions in section 97 of the Administration Act relating to sole administrative error because of the evidence from the Applicant herself about the letters she received, and that she either did not read them or, if she did, this did not cause her to update her circumstances with the Department.
Section 1237AAD of the Social Security Act and section 101 of the Administration Act provide for waiver of the recovery of a debt if the debtor or other person did not knowingly make a false statement or false representation or knowingly fail or omit to comply with a provision of the Act or the Administration Act, there are special circumstances other than financial hardship alone that make it desirable to waive recovery of the debt, and it is more appropriate to waive rather than write off a debt or part of a debt.
On the evidence before the Tribunal, I do not believe that Mrs or Mr Booth knowingly made a false representation in the period, but on the Applicant’s evidence her failure to comply with the several regular written notices sent to her, which she acknowledged she received, does amount to an omission.
In terms of whether special circumstances apply, that phrase is not otherwise defined in the relevant legislation. The Courts and the Tribunal have considered the phrase ‘special circumstances’ on a number of occasions. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J at [33] warned against a requirement that there to be exceptional circumstances before there may be said to be special circumstances:
I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.
In addition, the Full Court of the Federal Court has sounded a warning against a decision-maker taking too narrow a view of what may constitute “special circumstances” within the meaning of an Act of Parliament. In Ward v Commissioner of Taxation [2016] FCAFC 132, their Honours stated at [43], in that context:
In our opinion, the Tribunal erred in law by taking too narrow a view of what may constitute “special circumstances” within the meaning of the statute. This may have been caused by unnecessarily considering factors in isolation before focusing on the entirety of the circumstances said by the applicant to be special.
The Applicant and Mr Booth both told the Tribunal that the imposition of the debt has caused financial and personal stress to them. Mrs Booth also outlined her mental health conditions which the Tribunal did not dispute, though I note that Ms Naylor (Exhibit A1) concentrated in her letter on the financial hardship resultant from repayment of the debt, and the legislation requires me to consider special circumstances other than financial hardship alone.
Mrs Booth told the Tribunal that her husband had received a small inheritance (which was referred to in the AAT1 decision) but that that has now largely been expended on normal household expenses.
However, as mentioned above, the Applicant is in a better position than many recipients of social security payments because, without for a moment overlooking their modest financial circumstances and the inherent vicissitudes of primary industry, they do have the advantage of a variety of their household expenses being met by the business, and the fact that, as the Applicant told AAT1, the business is repaying the mortgage taken out to construct their house on the farm.
Mr and Mrs Booth’s evidence was that Mr Booth’s income is approximately $1,500 per month and they estimate they receive another $500 worth of in-kind support in terms of their other household costs. They said their household expenditure amounted to some $843 per fortnight. This does not take account of other met expenses, notably fuel and electricity.
On these facts the Tribunal does not find that the circumstances of the Applicant can be found to be special circumstances which would enliven the provisions for waiver of the debt. The debt is being paid through withholdings and, while that no doubt causes financial strain on their household, I note that the Applicant and her husband are meeting their financial commitments.
The regrettable outcome of the Applicant is that, while I am mindful that she and Mr Booth did not purposefully incur this debt, there was an overpayment of PPP and FTB to which the Applicant was not entitled and I find that the waiver and write off provisions provided in the legislation do not apply in this case. I therefore find that the decision of the ARO was correct.
DECISION
The Tribunal affirms the reviewable decision.
I certify that the preceding 50 (fifty) paragraphs are a true copy of the reasons for the decision herein of D. J. Morris, Member
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Administrative Assistant
Dated: 30 May 2017
Date of hearing:
Applicant:
3 April 2017
In person
Representative for the
Respondent:Ms J Vetter
Solicitors for the Respondent:
Sparke Helmore Lawyers
Key Legal Topics
Areas of Law
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Administrative Law
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Statutory Interpretation
Legal Concepts
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Judicial Review
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Statutory Construction
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Remedies
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Procedural Fairness
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