Breen and Secretary, Department of Social Services (Social services second review)
[2015] AATA 689
•9 September 2015
Breen and Secretary, Department of Social Services (Social services second review) [2015] AATA 689 (9 September 2015)
Division
GENERAL DIVISION
File Number(s)
2014/4861
Re
John Breen
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member CR Walsh
Date 9 September 2015 Place Perth The Tribunal sets aside the decision under review and remits the matter to the Secretary for reconsideration in accordance with what is said in paragraph 26 of the attached Reasons for Decision.
..(Sgd) CR Walsh......................................................................
Senior Member CR Walsh
CATCHWORDS
SOCIAL SECURITY – overpayment of disability support pension – debt due to the Commonwealth – write-off – waiver – debt not attributable solely to administrative error by Centrelink – applicant knowingly made false statement or representation to Centrelink - no special circumstances – decision under review set aside and remitted for reconsideration
LEGISLATION
Social Security Act 1991 – s 8(1) - s 117(a) – s 1064 – s 1072 – s 1073 – s 1075 – s 1075(1) – s1223 - s 1223(1) – s 1236 – s 1237A - s 1237AAD
CASES
Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25
Beadle and Director General of Social Security (1985) 60 ALR 225
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] 75 ALD 134
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52
Groth and Secretary, Department of Social Security (1995) 40 ALD 541
Re Anderson and Secretary, Department of Families and Community Services (2002) 69 ALD 484
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Callaghan and Secretary; Department of Social Security (1996) 45 ALD 435
Re Ivocic and Director General of Social Services [1981] AATA 57
Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126
YKBJ v Secretary, Department of Social Services [2015] AATA 65
REASONS FOR DECISION
Senior Member CR Walsh
9 September 2015
INTRODUCTION
Mr Breen seeks a review of a decision of the Social Security Appeals Tribunal (SSAT), dated 21 August 2013, which set aside the decision of a Centrelink Authorised Review Officer (ARO), dated 22 February 2013, to raise and recover a debt from Mr Breen for overpayment of Disability Support Pension (DSP) in the period 26 August 2003 to 3 September 2007 (Relevant Period).
The ARO found that Mr Breen’s total DSP debt for the Relevant Period was $25,889.27. In contrast, the SSAT found that Mr Breen’s total DSP debt for the Relevant Period was the lesser amount of $13,919.75 and, accordingly, remitted the matter to Centrelink for reconsideration in accordance with its directions (i.e. broadly being that Mr Breen’s DSP debt be recalculated according to its calculation). In short, Mr Breen now seeks a review of the SSAT’s decision on the basis that his DSP debt of $13,919.85 should be further be reduced because a number of his expenses were not taken into account in the SSAT’s calculation of his DSP debt.
FACTUAL & PROCEDURAL BACKGROUND
Mr Breen has been in receipt of DSP since 2002.
On 27 February 2012, Centrelink decided that Mr Breen had been overpaid DSP of $25,889.27 in the Relevant Period and to raise and recover that overpayment from Mr Breen (Original Decision).
On 22 February 2013, the Original Decision was affirmed by an ARO (ARO Decision).
On 6 March 2013, Mr Breen applied to the SSAT for a review of the ARO Decision. In his application to the SSAT, Mr Breen stated:
(a)The ARO has not taken into account any business expenses whatsoever when assessing the income I had in my bank account for the debt $25,889.27.
(b)My pension was cancelled by the same ARO after Centrelink had continued to pay the disability support pension after the SSAT decision.
On 21 August 2013, the SSAT set aside the ARO Decision and remitted the matter to Centrelink for reconsideration in accordance with the following directions:
a) Centrelink is to recalculate the Applicant’s entitlement to DSP in the period 12 May 2003 to 3 September 2007 taking into account:
i.the income set out in Centrelink’s schedule as attached to the SSAT reasons for decision, less the amounts set out in the Table at [26] of the reasons for decision which are not income, and
ii.allowing deductions for business expenses set out in the Table at [35] of the reasons for decision against the income from the Applicant’s businesses.
b) If, after recalculating the Applicant’s rate of DSP he has been overpaid, the amount overpaid is a debt that is to be recovered from the Applicant
(SSAT Decision).
On 1 April 2014, Centrelink recalculated Mr Breen’s debt in accordance with the SSAT’s directions in the SSAT Decision. The recalculation resulted in an overpayment of DSP to Mr Breen totalling $13,919.85.
On 7 October 2014, Mr Breen applied to the Tribunal for a review of the SSAT Decision, stating the following as his “Reasons for Application”:
The original $25,889.27 was reduced to $13,919.75, but there are lot of other expenses not taken into consideration. I have only just this week been able to accidently find receipts for 2004 which relates to a major part of the debt. I requested Centrelink back in April 2014 to send me both the original calculation and the calculation for the amended figure but they have failed to provide me with the original calculation. [Emphasis added]
ISSUES
The relevant issues for consideration by the Tribunal are:
(i)whether Mr Breen was overpaid DSP during the Relevant Period;
(ii)if so, whether the overpayment of DSP is a debt due to the Commonwealth; and
(iii)if so, whether all or part of the debt should be written off or waived.
ANALYSIS
(i)Was Mr Breen overpaid DSP during the Relevant Period?
Mr Breen’s DSP rate is to be calculated using the Pension Rate Calculator A at the end of s 1064 of Part 3.2 of the Social Security Act 1991 (SSA), which requires a person’s “ordinary income” to be determined: s 117(a) of the SSA.
Section 1072 of the SSA provides that a reference in the SSA to “a person’s ordinary income for a period” is a reference to “the person’s gross ordinary income from all sources for the period” calculated without any reduction other than a deduction under Division 1A of Part 3.10 of the SSA, which deals with “business” income reductions.
“Note 1” to s 1072 of the SSA provides that in relation to what is meant by “ordinary income”, reference should be had to s 8(1) of the SSA, which states:
Ordinary income means income that is not maintenance income or an exempt lump sum. [Emphasis added]
“Income” is defined in s 8(1) of the SSA, “in relation to a person”, as meaning:
(a)an amount earned, derived or received by the person’s own use or benefit; or
…….
Under s 1073 of the SSA, titled “Certain Amounts Taken to be Received Over 12 Months”, states:
(1) ….. ... if a person receives... an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part, and
(b) is not:(i) income in the form of periodic payments
(ii) ordinary income from remunerative work undertaken by the person, or
(iii) an exempt lump sum
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount. [Emphasis added]
In other words, the effect of s 1073 of the SSA is that if a person receives payment which is not “ordinary income from remunerative work”, the person’s income is taken to have been received as “ordinary income” during each week in the 12 months commencing on the day the person becomes entitled to receive payment.
Section 1075(1) of the SSA, titled “Permissible Reductions of Business Income”, states:
(1)…….if a person carries on a business, the person’s ordinary income from the business is to be reduced by:
(a)losses and outgoing that relate to the business and are allowable deductions for the purposes of s 8-1 of the Income Tax Assessment Act 1997, and
(b)amounts that relate to the business and can be deducted in respect of plant (within the meaning of the Income Tax Assessment Act 1997) under Division 40 of that Act; and
(c)amounts that relate to the business and are allowable deductions under s 290-60 of the Income Tax Assessment Act 1997.
In his evidence before the SSAT, Mr Breen stated:
(i)Prior to going on DSP he was operating a home renovation business - buying land and putting removal homes on the land. He did about 4 removal homes while he was on DSP: SSAT Decision at [17];
(ii)He was also operating a finance and mortgage business and he received commissions for loans that he had arranged including trailing commissions for mortgages: SSAT Decision at [18] and [21];
(iii)The two companies he operated were called National Pacific Mortgage Group Pty Ltd and Brain Investments Pty Ltd: SSAT Decision at [17] and [21];
(iv)He has not lodged income tax returns since being granted DSP in 2002: SSAT Decision at [18];
(v)Various deposits in his bank accounts were winnings from horse racing and poker machines: SSAT Decision at [22];
(vi)His house renovations were funded by draw-downs of loans from Statewide: SSAT Decision at [23];
(vii)He had lodged Goods and Services Tax returns and received refunds from the Australian Taxation Office and this is evidence he was purchasing goods in his businesses: SSAT Decision at [29]; and
(viii)His businesses were a hobby and gave him an interest in things: SSAT Decision at [29].
The following additional financial evidence now before the Tribunal, which was not before the SSAT when it made its decision, includes:
· Commonwealth Bank statements for an account number held in the name of John Michael Breen, for the period 22 May 2007 to 7 April 2011;
· Suncorp Banking statements for the following accounts:
(i)Visa Extra account held in the name of Mr J M Breen, for periods between 1 November 2002 and 30 June 2006;
(ii)Business Cheque account in the name of Brain Investments Pty Ltd for periods between 1 December 2002 and 30 June 2006; and
(iii)Everyday Options account, held in the name of Mr J M Breen, for periods between 1 May 2004 and 30 June 2006; and
·139 receipts/accounts provided by Mr Breen in support of his claim for additional deductible business expenses.
20.Of the abovementioned 139 receipts/accounts, the Tribunal notes that 6 are illegible, 13 are accounts or overdue notices which have had the date altered or omitted, some receipts were duplicates where an EFTPOS receipt and store receipt were provided for the same transaction and that a number of different card numbers are used along with different flybuy card numbers.
On 6 July 2015, Centrelink received an undated report, prepared by Mr Jason Mangion of the Department of Human Services (SNC), Melbourne, titled “Mr John M Breen - DHS Centrelink notes for AAT appeal Ref. No. 2014/4861”. Broadly, Mr Mangion’s report provides an assessment of Mr Breen’s financial evidence before the SSAT and of the additional financial evidence Mr Breen has provided since the SSAT Decision.
The introductory paragraph to Mr Mangion’s report states:
I have made an assessment based on the SSAT decision (Review 2013/PO56629), and further information provided by Mr Breen (54 page document containing various receipts, 38 page document containing National Pacific Mortgage Group Pty. Ltd. Detailed profit and loss statement for the year ended 30 June 2004 including attachment, 43 page document containing National Pacific Mortgage Group Pty. Ltd. Detailed profit and loss statement for the year ended 30 June 2005 including attachment, 21 page document including letter to AAT from Mr Breen dated 12 June 2015 including attachments).
In conclusion, Mr Mangion’s report states:
Conclusion
26.As demonstrated above Mr Breen’s declared income does not correlate with his business activities. If these businesses were running at a loss, this would mean the (sic.) Mr Breen would have had to fund those losses. If this was the case this would indicate that Mr Breen has further income from another source which DHS has not been made aware of.
27.A re-calculation of the current debt was not possible due to many variables and unanswered questions which would need to be raised with Mr Breen surrounding the business activities of his companies and his personal/business use of some of the expenses claimed.
28.From the information provided it appears that the majority of the evidence is related to personal expenses and not business related. [Emphasis added]
In the “Statement of Facts, Issues and Contentions of the Respondent”, dated 10 August 2015 (Secretary’s SFIC), the Secretary, contends (at [11]), that Mr Breen:
was overpaid DSP in the amount of $13,919.85 in the period 26 August 2003 to 3 September 2007.
The Secretary’s SFIC then provides an analysis of Mr Breen’s personal and business expenses based on the additional financial evidence (receipts/accounts) which has been provided by Mr Breen since the SSAT Decision. More specifically, the Secretary’s SFIC considers the following receipts/accounts for expenses of Mr Breen, both personal and business related, in the Relevant Period:
·general living expenses (at [27] to [28]);
·motor vehicle expenses (at 29] to [30]);
·telephone, internet and Queensland newspaper accounts (at [31]);
·Australia Post – post office box renewal account (at [32])
·house renovation expenses (at [33] to [34])
·Profit & Loss Statement of National Pacific Mortgage Group Pty Ltd, for the year ended 30 June 2004 (at [35] to [37]); and
·Profit & Loss Statement of National Pacific Mortgage Group Pty Ltd, for the year ended 30 June 2005 (at [38] to [43])
In the course of considering Mr Breen’s additional financial evidence in the Secretary’s SFIC, the Secretary conceded that certain receipts/accounts provided by Mr Breen related to his business expenses rather than his personal expenses. Having reviewed the additional financial evidence (which was not before the SSAT), I accept the Secretary’s analysis and categorisation of Mr Breen’s expenses as either business or personal, as set out in the Secretary’s SFIC. I also accept the concessions made by the Secretary (i.e. in the Secretary’s SFIC) that some of the receipts/accounts provided by Mr Breen since the SSAT Decision relate to business rather than personal expenses: refer to paragraph 25 immediately above. In such circumstances, whilst acknowledging that Mr Breen was overpaid DSP during the Relevant Period, the Tribunal considers that Mr Breen’s DSP debt (presently totalling $13,919.85) should be remitted to Centrelink for further consideration and that Mr Breen’s DSP debt be recalculated so as to take into account the business expenses conceded by the Secretary in the Secretary’s SFIC, even if this only results in a minimal reduction to Mr Breen’s total DSP debt for the Relevant Period.
(ii) Is the overpayment of DSP to Mr Breen a debt due to the Commonwealth?
Subsection 1223(1) of the SSA, titled “Debts arising from lack of qualification, overpayment etc.”, states:
(1) Subject to this section, if:
(a) a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment. [Emphasis added]
For the above reasons the Tribunal finds that Mr Breen was overpaid DSP in the Relevant Period. That overpayment of DSP is a debt due to the Commonwealth under s 1223 of the Act.
(iii) Should all or part of Mr Breen’s debt be written off or waived?
Write off
The Tribunal should not exercise its discretion in s 1236 of the SSA, titled “Secretary May Write Off Debt”, to write off Mr Breen’s DSP debt because:
(i)the debt is not irrecoverable at law;
(ii)Mr Breen has capacity to pay the debt by continuing to make repayments from his ongoing social security payments, noting that Mr Breen is currently in receipt of age pension;
(iii)Mr Breen’s whereabouts are known; and
(iv)by Mr Breen making repayments from his ongoing social security payments (i.e. age pension), it is cost effective for the Commonwealth to take action to recover the debt.
Waiver – debt attributable solely to administrative error by Centrelink
Section 1237A of the SSA, titled “Waiver of Debt Arising From Administrative Error”, provides that 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.
In Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126, the Full Federal Court (at [35]) considered the meaning of the phrase “attributable solely to an administrative error”, stating:
The ordinary or usual interpretation of the phrase “attributable solely to” is that it refers to the single or sole cause of the relevant act or event. The word “attributable” means “capable of being attributed”. It involves an objective assessment of causation. The words “a debt attributable solely to an administrative error” can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.
The Tribunal considers that the overpayment of DSP to Mr Breen in the Relevant Period was at least in part if not entirely a result of Mr Breen’s failure to declare income, as such, is not “attributable solely to an administrative error” by Centrelink. Consequently, it would be inappropriate to waive the right to recover any part of Mr Breen’s DSP debt under s 1237A of the SSA.
Waiver – special circumstances
Section 1237AAD of the SSA, titled “Waiver in Special Circumstances”, provides that the Secretary “may” waive the right to recover all or part of a debt if the Secretary is satisfied that:
(i)the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or a false representation or failing or omitting to comply with a provision of the SSA or Social Security (Administration) Act 1999; and
(ii)there are “special circumstances” (other than financial hardship alone) that make it desirable to waive the debt; and
(iii)it is more appropriate to waive than to write off the debt or part of the debt. [Underlining added]
The term “knowingly” is not defined in the SSA but has been considered by the Tribunal on a number of occasions. For example, in Re Callaghan and Secretary; Department of Social Security (1996) 45 ALD 435, DP Forgie commented (at [48]):
There is nothing in s.1237AAD which suggests that the word 'knowingly' should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. The actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission. [Emphasis added]
See also Re Anderson and Secretary, Department of Families and Community Services (2002) 69 ALD 484 stated at [47] and Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at [74].
It is not in dispute that, during the Relevant Period, Mr Breen operated a house renovation business as well as a finance and mortgage business and earned income from those two businesses. During the Relevant Period, Centrelink issued Mr Breen with numerous notices explaining the reporting requirements for his DSP.[1] Based on the evidence before the Tribunal, Mr Breen failed to comply with these notices by not updating Centrelink in relation to his income. It follows that Mr Breen knowingly omitted to comply with the SSA such that his DSP debt should not be waived under s 1237AAD of the SSA.
[1] Exhibit R1 at pp 55 – 144.
Even if this were not so, the Tribunal finds, based on the evidence before it, that Mr Breen’s circumstances are not sufficiently “special” to warrant it exercising the discretion s 1237AAD of the SSA to waive all or part of Mr Breen’s DSP debt, noting that Mr Breen has the capacity to repay the debt and it is not unjust or unreasonable for him to repay public monies to which he had no entitlement.
As I said in YKBJ v Secretary, Department of Social Services [2015] AATA 65 at [57], the expression “special circumstances” has been considered extensively by the Federal Courts and the Tribunal in the social security (and family assistance law) context. Broadly, it has been held that for circumstances to constitute “special circumstances” they must be circumstances which are “unusual, uncommon or exceptional,” “markedly different from the usual run of cases,” “special” or “out of the ordinary” and they include “events which would render the (strict application of the rule in question) unfair or inappropriate:” see for example, Re Ivocic and Director General of Social Services [1981] AATA 57 at [45]; Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 per Toohey J; Beadle and Director General of Social Security (1985) 60 ALR 225 at 228 as per Bowen CJ, Fisher and Lockhart JJ; Groth and Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J; Dranichnikov v Centrelink [2003] 75 ALD 134 at [66] per Hill J; Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25 at [33] and Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114 at [80]. Circumstances might be “special”, although they apply to more than one person or class of persons, provided they are not of universal application (for example, they are a common or universal characteristic of social security recipients): see Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52 at [65]. Mr Breen’s circumstances are not “special” in the sense identified in this case law.
DECISION
For the above reasons, the Tribunal sets aside the SSAT Decision and remits the matter to Centrelink for reconsideration in accordance with what is said in paragraph 26 of these Reasons for Decision.
I certify that the preceding 38 (thirty eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member CR Walsh .(Sgd) A Tran.......................................................................
Administrative Assistant
Dated 9 September 2015
Date of hearing 26 August 2015 Applicant In person Representative for the
RespondentMs Yik Long Solicitors for the Respondent Australian Government Solicitor
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