Brady; Secretary, Department of Family and Community Services

[2005] AATA 37

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 37

ADMINISTRATIVE APPEALS TRIBUNAL      )

)No: N2004/811

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY,  DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And PHILLIP BRADY

Respondent

DECISION

Tribunal Robin Hunt, Senior Member

Date17 January 2005

PlaceSydney

Decision The Tribunal affirms the decision under review.

[SGD]Robin Hunt

Senior Member

CATCHWORDS

Social Security – entitlement to allowance payments - debt to the Commonwealth – applicant non Australian resident - administrative error - family tax benefit payments made in error – received in good faith – financial hardship -- special circumstances - waiver of debt.

Legislation

Social Security Act 1991 s 7
A New Tax System (Family Assistance) Act 1999 ss 3, 21 and 22
A New Tax System (Family Assistance) (Administration) Act 1999, ss 5, 97 and 101

Case Law

Dranichnikov v Centrelink (2003) 75 ALD 134

Haggerty v Department of Education, Training and Youth Affairs [2000] FCA 1287, 8 September 2000

REASONS FOR DECISION

17 January 2005	Robin Hunt, Senior Member
summary

1.        Mr Brady, the Respondent, in 1999 travelled from the UK to Australia with his wife and 3 children. He and his family members held temporary residence visas and are now permanent residents. Mr Brady throughout had permission to work in Australia and paid Australian income tax. He applied for and received lump sum amounts of Family Tax Benefit (FTB) in the financial years ended June 2001, 2002 and 2003. Mr Brady and his children were granted permanent residency visas on 28 November 2003.

2.      On 4 December 2003, Mr Brady lodged a claim for payment of FTB by instalments. On 10 March 2004, the Secretary determined that Mr Brady had not been entitled to the lump sum payments or any payment of FTB before he and the children became permanent residents on 28 November 2003. The Secretary decided not to waive the resulting debt to the Commonwealth and sought recovery of the amount overpaid. Mr Brady then sought review of the decision not to waive the debt caused by the overpayment.

3.      The Social Security Appeals Tribunal (SSAT) substituted, for the original decision, a decision that the debt be waived. For amounts received for 2001 and 2002, the SSAT found the debt should be waived due to administrative error and Mr Brady’s having acted in good faith. As to the money received in the year ending 30 June 2003, the SSAT found special circumstances applied. The Secretary has again argued before the present Tribunal that the debt should not be waived. The Tribunal has affirmed the decision of the SSAT for the reasons set out below.

evidence and submissions

4.      Mr Brady appeared before the Tribunal and gave oral evidence about how he came to receive the payments of Family Tax Benefit. He accepted that he had not been entitled to the FTB payments in dispute but asked that the debt to the Commonwealth be waived as he had received the payments in good faith. He told the Tribunal that he came to Australia from the UK in 1999 with permission to work. He and his wife understood that there were reciprocal arrangements in place for child payments of some kind and they made early enquiries through Medicare about their entitlements. His wife was advised in 1999 that she had no entitlement to any child allowance payments. He enquired again in 2000 through Medicare but made no claim at the time as he was told he had no entitlements.

5.      Subsequently, Mr Brady completed his Australian income tax return for the financial year ended 30 June 2001. He had not previously completed a return but had relied on others to do this for him. He thought he used the short form guide when completing his returns. He made some errors in completing the return and was contacted by the Australian Taxation Office (ATO). He then telephoned the ATO for advice and to correct the information in his return. At this time, Mr Brady claims to have been advised by an ATO officer that, as an Australian resident paying Australian taxes, he was entitled to receive the FTB. He therefore claimed FTB through the ATO. Mr Brady said he was not sure whether some explanation of the residency test for receipt of FBT appeared in the claim forms he completed but did not read any explanation and simply ticked the box that said he was eligible for the benefit in reliance on what he had been told by the ATO. He thought if this advice was not correct, his claim would be rejected.

6.      Mr Brady received lump sum payments in the years that he was an employee up to the financial year ending June 2003, and applied for payment by instalments when he later in 2003 became self-employed. He was in a poor financial position when he first became self-employed and needed the money sooner. He told the Tribunal he would not have used the money overpaid if he knew he was not entitled to it as it made no sense to take money he would have to pay back. Having this debt was a shock to him and his wife.

7.      Mr Brady said that he received a lump sum FTB payment in September 2001 in good faith and was reassured that the tax officer’s advice had been correct. The lump sum payment arrived together with a statement from Centrelink setting out the assessment of his claim. A copy of the statement marked “Attachment A” to the Secretary’s Statement of Facts and Contentions is before the Tribunal. Mr Brady could not remember if he received a similar statement the following year. The statement dated 12 September 2001 said: “We have assessed your claim for Family Tax Benefit and you are entitled to the above amount”. The amount stated was $4,381.61. Mr Brady said any doubts about his entitlement to the money were put to rest by the Centrelink statement which reassured him that the advice from the ATO was correct.

8.      The main argument put forward by the Secretary to the Tribunal was that Mr Brady was aware that he was not entitled to any allowance but had actively claimed FTB in 2001 onwards in spite of this. His wife had been refused any allowance on her application in 1999 and Mr Brady knew this. He had visited a Medicare office again in 2000 when he was once more told he had no entitlement. In view of these events, the Secretary argued that Mr Brady had not claimed and received FTB payments in good faith. Further, the Respondent argued the erroneous payments were not made solely as the result of administrative error. Mr Brady had, in filling out his income tax returns, claimed he was entitled to the payments. It, therefore, was Mr Brady’s error in making a claim that led to the overpayment.

9. Mr Brady countered that he would not have claimed the money if he had not been advised that he was entitled to FTB by the ATO. A Commonwealth Government agency was responsible for the error even if it was not solely the Secretary. He was given inaccurate information by a Commonwealth agency and had relied on it. Mr Brady impressed me as being truthful and gave his evidence and submissions to the Tribunal in a very forthright and convincing manner. His counsel further argued that section 5 of A New Tax System (Family Assistance) (Administration) Act 1999 made it plain the only way to obtain the payment was to make a claim. It was not a matter of self-assessment like income tax accountability.

10.     The Respondent suggested that Mr Brady must have had a suspicion that he was not entitled to the payments. Mr Brady responded that he had a suspicion that the amount of his entitlement quoted by the ATO officer was excessive but when he received the money he thought it must have been right.

legislation and history

11.     The Family Tax Benefit system was introduced with effect from 1 July 2000. Prior to that, the main payment made for dependent children was the Family Allowance, which is assessed on a calendar year and administered by the Family Assistance Office in the Secretary’s Department. When FTB was introduced, it became possible to claim the FTB through the ATO at the end of the financial year by way of lump sum. The information in the claim is sent from the ATO to the Secretary for assessment.

12. The expression "Australian resident" is defined in section 3(1) of A New Tax System (Family Assistance) Act 1999 by reference to the meaning it has in the Social Security Act1991. The definition of Australian resident in section 7 reads, in part:

“7(2) An Australian resident is a person who:

(a) resides in Australia; and

(b) is one of the following:

(i) an Australian citizen;

(ii ) the holder of a permanent visa;

(iii) a special category visa holder who is a protected SCV holder.”

13. Section 21 of the Family Assistance Act 1999 provides that an applicant for the FTB must be residentially qualified and section 22 similarly provides that the dependent children of the applicant also must be permanent residents in order to be “FTB children” as defined.

14. Section 97(1) the Family Assistance (Administration) Act 1999 provides that the Secretary must waive the right to recover a debt that is “attributable solely to an administrative error made by the Commonwealth” where other specified factors spelt out in subsections (2) and (3) are present. Section 97(2) of the Act says the Secretary must waive the administrative proportion of the debt where the debtor received the payment in good faith and would suffer severe financial hardship if it were not waived. Section 97(3) of the Act says the Secretary must waive the administrative proportion of the debt where the debt is raised after the period there set out has elapsed.

15. Section 101 of the Family Assistance (Administration) Act 1999 allows the Secretary to waive a debt where there are special circumstances, as follows:

“101. Waiver in special circumstances

(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.”

findings and reasons

16.     The Secretary has argued that because Mr Brady lodged a claim for the payment, it was not caused by administrative error alone. Although in the similar case of Dranichnikov v Centrelink, the Full Federal Court rejected the argument that having made a claim for a benefit to which one was not entitled could not be sufficient reason to deny relief under section 97, the Secretary has sought to distinguish this case. Hill J gave the leading judgment with which Kiefel and Hely JJ agreed, while Hely J added some further observations about section 97 that Kiefel J acknowledged as well. Hill J said at 147, as to the Secretary’s submission in Dranichnikov that there was no administrative error where a person had claimed payment:

“….That indeed seems to have been the view of the decision maker. With respect it cannot be correct. Section 97 is predicated on there being money payable to the Commonwealth by way of a debt and presumably because there had been payment of a benefit or overpayment of a benefit to which a person was not entitled. The submission would bring about the result that s 97 was meaningless.

It is neither possible nor appropriate to attempt a meaning of the words "administrative error" which would accurately cover every case for much will turn upon the circumstances. Essentially, however, the concept is one where the error or mistake arises as a result of the procedure that has been adopted. An obvious example would be payment of a benefit where the decimal point was wrongly located. An error made by Centrelink or the Australian Taxation Office acting on its behalf in its administration of the law will generally be an administrative error. On the other hand, a decision made, for example, on a question of legal entitlement to a benefit while no doubt made in the course of administration of the law would not be an administrative error. To the extent that it is submitted on behalf of Centrelink that an error in the present circumstances could not be an administrative error, I am of view that that submission is wrong.”

17.     The Tribunal has followed the explanation of Hill J in finding that an administrative error has occurred in the present case. The fact that Mr Brady wrongly claimed payment does not alter this.

18.     The Secretary further argued that the present case was distinguishable from Dranichnikov in that instructions accompanying the FTB claim forms explained what constitutes a resident for social security purposes and because Mr Brady had previously received advice that he had no entitlement to Family Allowance. The latter point was somewhat weakened in my view by the admission that Family Allowance is not the same benefit as the Family Tax Benefit.

19.     As to whether Mr Brady was adequately notified of the need to be an Australian resident for social security purposes, I note that the forms to be completed in 2001 and 2002 with tax returns do make reference to the need to understand terms used. However, the terminology is not conducive to an understanding that the FTB is a social security benefit rather than one associated with income tax reduction.

20.     According to the documents before the Tribunal, which are blank and not those actually completed by Mr Brady, the type of form completed by Mr Brady referred throughout to the “FBT tax claim” and asserted that the completed claim form must be lodged with the ATO and not with the Family Assistance Office.  Although there is also a document before the Tribunal called the “Family Tax Benefit (FTB) Short Tax Guide”, Mr Brady did not turn to this for guidance and may not have even seen it but made an assumption that the advice from the ATO as to his entitlement was correct.  I have looked through the 15 page (FTB) Short Tax Guide and have found only one brief reference to the need to be an “Australian resident for social security purposes or the holder of an approved visa for the purposes of the FTB”. What this means is not further explained. By contrast, the form which Mr Brady filled out when making the 2003/2004 claim, which is at T16, asks for details of Australian residence at Question 5 and calls for the date of grant of a permanent visa and other documentary evidence.

21.     Further, Mr Brady was properly treated by the ATO as an Australian resident for income tax purposes and for making the Medicare levy but no attempt was made in the FTB guidelines to explain that the residency tests are different for income tax than for the FTB tax benefit. In these circumstances, I consider that Mr Brady was in a very similar position to the applicants in the Dranichnikov case. While Mr Brady did tick the box saying that he was eligible for the payment of FTB he had no readily ascertainable basis for believing otherwise. I do not accept that because Mr Brady was refused a different kind of benefit, a social security allowance, in previous years that he should have been aware that he was not entitled to FBT, a benefit associated with accounting for income tax. On balance, I accept his evidence that he was advised by the ATO that he was entitled to the payments. I find that the ATO advice was an administrative error and this was followed by a further administrative error by the Secretary in making the payments. It was not Mr Brady’s fault that he relied on the advice of the ATO and the receipt accompanied by the statement from Centrelink that it had assessed his entitlement.

22. It follows, in my view, that Mr Brady’s not providing information about residence requirements does not alter the administrative error of the Commonwealth. Claiming a benefit in the belief that he was entitled or testing the entitlement by making a claim does not amount to an error on Mr Brady’s part. The error is solely that of the Commonwealth and the test in section 97(1) is met.

23. The Secretary concedes that, for 2000/2001 and 2001/2002 debts, the relevant time has elapsed and Mr Brady does not need to demonstrate severe hardship for the debts incurred for these periods. As the debt was raised on 13 March 2004, section 97(3) means there is no requirement for Mr Brady to show financial hardship to be relieved of the debt for 2000/2001 and 2001/2002.

24.     Mr Brady has presented his case as one where he claimed the benefits received in good faith. The Respondent suggested Mr Brady must have had a suspicion that he was not entitled to the payments but Mr Brady responded that he had doubts only as to the amount of his entitlement quoted by the ATO officer. In Haggerty v Department of Education, Training and Youth Affairs [2000] FCA 1287, French J noted that want of good faith arises where there is a positive belief that the payment has been made by mistake but that bad faith should not be imputed where objective facts might raise a doubt. I accept Mr Brady’s evidence that he received these payments in good faith. Although an FTB guide was available which might have made him realise his mistake, the fact of its existence is not sufficient to cast doubt on Mr Brady’s genuine belief that he was entitled to receive FTB payments. The result is that he is not required to repay these amounts and the decision of the SSAT is affirmed for these years.

25.     The situation is different for the debt of $582.00 resulting from an overpayment for 2002/2003. As the debt was raised in the following income year, Mr Brady must not only demonstrate good faith but hardship. He did not before the Tribunal claim that that this debt as opposed to the total debt for the 3 years, would cause him severe financial hardship. Mr Brady told the Tribunal that he was short of funds in late 2003 when he claimed FTB by instalments but that his position had since improved.

26. Mr Brady made no case especially directed to special circumstances for exercise of the discretion under section 101. Taking each of the components of the section, I find that the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or a false representation. There is no evidence that Mr Brady failed or omitted to comply with a provision of the “family assistance law” unless it was to make the claim in question. However, section 5 of the Act says the only way to obtain payment is to make a claim. In the same way as the Court found in Dranichnikov that treating the claim as a disqualifying event for the purposes of section 97, treating it as such for section 101 would make a nonsense of the provision. Mr Brady has not argued there are special circumstances that make it desirable to waive the debt other than some financial hardship claimed strongly for the whole of the debt and the background reliance on the ATO advice. Mr Brady has explained how the mistake arose.

27. Turning to the original decision of the authorised review officer I see that the officer did consider the claim of reliance on ATO advice as a special circumstance. The officer rejected the claim on the basis that there was no substantiation of this claim and has analysed the claim in the context of section 101. This suggests that the claim, if accepted as true, would have been considered a qualifying special circumstance. In addition, the SSAT found qualifying special circumstances existed. In view of my finding that Mr Brady did rely on the ATO advice, I find that special circumstances exist in this case.

Decision

28.     As the prerequisites for exercise of the discretion have been demonstrated and I have found no fault lies with Mr Brady and no submission is before the Tribunal suggesting write off is appropriate, I find that it is more appropriate to waive than to write off the 2003 debt.  The decision of the SSAT is affirmed in full.

I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Robin Hunt, Senior Member.

Signed:         .....................................................................................
  Associate: Reuben Mansour

Date of hearing  8 November 2004
Date of decision     17 January 2005
Representative for the Applicant  Centrelink

Solicitor for the Respondent  Welfare Rights Centre