Calayini and Secretary, Department of Social Services (Social services second review)
[2021] AATA 4664
•16 December 2021
Calayini and Secretary, Department of Social Services (Social services second review) [2021] AATA 4664 (16 December 2021)
Division:GENERAL DIVISION
File Number: 2020/5951
Re:Micke Calayini
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Senior Member C. J. Furnell
Date:16 December 2021
Place:Melbourne
The Tribunal sets aside the decision the subject of review and remits the matter to the respondent for reconsideration in accordance with directions that:
a)any debt liability of the applicant with respect to Parenting Payment Single (PPS) payments be recalculated;
i.having regard only to PPS payments made in the period 15 August 2006 to 4 April 2009;
ii.on the basis that ordinary income of the applicant attributable to a time or period after the last annual period of relevance to those PPS payments not be taken into account;
iii.on the basis that ordinary income of the applicant does not include either the $21,000 or $17,000 deposits discussed in these reasons;
iv.subject to the foregoing, on the basis that ordinary income of the applicant included amounts deposited to the two relevant accounts; and
b)any debt owing by the applicant consequent on that recalculation be recovered, as the provisions of the Act providing for the writing off or waiver of the right to recover any such debt do not apply in the circumstances.
…......[SGD]...................................................
Senior Member
Catchwords
SOCIAL SECURITY – Parenting Payment Single – overpayment – debt raised – whether unexplained deposits are income – whether appropriate not to treat unexplained deposits as income – whether debt due to the Commonwealth – whether limitation period applies – whether any debt should be written off or waived – loan – community saving scheme – two deposits not ordinary income – debt may be due in respect of income not taken into account – limitation period does not prevent recovery – circumstances not such that any debt should be written off or waived – decision under review set aside and remitted to respondent for reconsideration
Legislation
Budget Savings (Omnibus) Act 2016 (Cth)
Social Security (Administration) Act 1999 (Cth)
Social Security Act 1991 (Cth)
Cases
Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Arnold and Secretary, Department of Education, Employment and Workplace Relations [2011] AATA 828
Beadle and Director-General of Social Security [1984] AATA 176
Catanzariti and Secretary, Department of Social Services (Social services second review) [2017] AATA 268
Chen and Secretary, Department of Social Services (Social services second review) [2019] AATA 560
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Hajjar and Secretary, Department of Social Services (Social Services Second Review) [2020] AATA 2476
Haldane-Stevenson v Director-General of Social Security (1986) 9 FCR 73
Katholos and Secretary, Department of Social Services [2017] AATA 1293
Mueller and Secretary, Department of Social Services (Social services second review) [2019] AATA 1774
Nassimi and Secretary, Department of Social Services [2015] AATA 423
Pavkovic and Secretary, Department of Social Services (Social services second review) [2019] AATA 3737
Ponting and Secretary, Department of Social Services (Social services second review) [2021] AATA 2053
Read v Commonwealth (1988) 78 ALR 655
Rose v Secretary, Department of Social Services [1990] FCA 52
SD and Secretary, Department of Social Services [2014] AATA 764
Secretary, Department of Employment and Workplace Relations v Richards [2008] FCAFC 97
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Jones [2012] FCA 639
Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1
Secretary, Department of Family and Community Services v Sekhon [2003] FCA 76
Secretary, Department of Social Security v Garvey (1989) 22 FCR 132
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 1990
Taleb and Secretary, Department of Social Services (Social services second review) [2020] AATA 3451
Van Den Boogaart and Secretary to the Department of Social Security [1994] AATA 232
Wings v Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 322
Zhang and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 937
REASONS FOR DECISION
Senior Member C. J. Furnell
16 December 2021
On 24 October 2012 the respondent decided to raise and recover a Parenting Payment Single (PPS) debt of $16,360.17 for the period 15 August 2006 to 16 July 2009 against the applicant.[1]
[1] T18, p.700; T16, p.362; T4, p.46.
Further assessments with respect to that claimed debt were issued to the applicant on 11 September 2019[2] and 17 February 2020.[3]
[2] T5, p.127.
[3] T6, p.130.
The decision to raise and recover that claimed debt was affirmed by an authorised review officer on 18 June 2020[4] and by the Social Services and Child Support Division of the Tribunal (SSCSD) on 27 August 2020.[5]
[4] T7, p.133.
[5] T2, p.5.
The applicant applied for review of the SSCSD decision on 30 September 2020.[6]
[6] T1, p.1.
The decision the subject of that review is taken to be the original decision of 24 October 2012. This is because the Tribunal is reviewing the decision as affirmed by the SSCSD[7] and the decision as so affirmed is taken to be the original decision affirmed by an authorised review officer, i.e., the decision of 24 October 2012.[8]
[7] Social Security (Administration) Act 1999, s 179(2).
[8] Social Security (Administration) Act 1999, s 142(4).
Having reviewed that decision, I have decided to set aside the decision the subject of review and remit the matter to the respondent for reconsideration in accordance with certain directions. Quite apart from my acceptance, in part, of an objection to the decision mounted by the applicant, I have found there to be errors in the way the debt amount has been calculated – errors the rectification of which requires that the matter be remitted.
DEBT PERIOD AND PPS PAID
The first error concerns the period by reference to which the claimed debt is calculated and, as a consequence, the period by reference to which the amount of PPS paid to the applicant ought to be determined.
As mentioned, the period by reference to which the claimed debt has been calculated by the respondent is 15 August 2006 to 16 July 2009, with the amount of PPS paid to the applicant in that period being $40,905.89.[9]
[9] T18, p.700; T16, p.362; T4, p.46.
The applicant was granted a PPS on 18 July 2003,[10] with his entitlement to PPS being cancelled in August 2009. That cancellation took effect in April 2009 as no child was in the applicant’s care after he left Australia for overseas on 4 April 2009.[11]
[10] T15, p.237.
[11] T16, p.360.
Despite the cancellation so taking effect, the applicant continued to receive PPS until 3 July 2009.[12] The amount of PPS he so received after cancellation of his entitlement took effect was $3043.51.[13] As the applicant had no entitlement to that amount, it was raised as a debt. The decision to raise and recover that debt is not the subject of this proceeding.
[12] T16, p.361.
[13] Respondent’s Statement of Facts, Issues and Contentions of 17 May 2021 (R SFIC), Attachment A. That amount was paid from 21 April 2009.
This proceeding concerns the respondent’s decision to raise and recover a different PPS debt – one that, inferentially, can only apply to PPS payments made before cancellation of the applicant’s entitlement to PPS took effect (as PPS payments after that time were the subject of the separately raised $3043.51 debt).
Hence, while the respondent in this proceeding has referred to PPS payments of $40,905.89 in respect of the period 15 August 2006 to 16 July 2009,[14] the period of concern was, instead, 15 August 2006 to 4 April 2009, during which PPS payments totalling $37,862.38 (being $40,905.89 minus $3043.51) were made.
[14] R SFIC [1]-[12].
One reason for identifying the period of concern with some precision is that it can affect the factors that ought to be taken into account in calculating the amount of a person’s PPS entitlement.
RELEVANT DEPOSITS
As will soon become apparent, underlying the respondent’s case is a contention that income of the applicant included deposits made to two bank accounts. I will deal with this contention later. Before doing so, however, a threshold issue involves identifying the deposits of concern.
The respondent identified deposits amounting to $91,849 made to the relevant accounts in the period 31 July 2006 to 12 April 2012.[15] While not stating so expressly, the respondent suggested that the full amount of those deposits was taken into account in calculating the amount of the claimed debt.[16] Indeed, that full amount would appear to have been so taken into account in the decision of the authorised review officer on 18 June 2020.[17] This gives rise to what I consider to be another error in the calculation of the claimed debt.
[15] R SFIC [11].
[16] R SFIC [12].
[17] T7, pp.134-5.
Whether the deposits are income and how the applicant’s income might affect his PPS entitlement are questions which I will soon endeavour to address. At this stage, however, it is sufficient simply to note that a person’s PPS entitlement is calculated by reference to annual periods and that entitlement in an annual period is not affected by income of the person attributable to a subsequent annual period.
Here we are concerned with the amount of the applicant’s entitlement to PPS calculated over several annual periods the last of which ends in 2009. Given this, income of the applicant attributable to a time after the last annual period of concern ought to be ignored. Hence, even if the relevant deposits are income of the applicant (an issue to be addressed shortly), there appears to be no basis for including in the PPS debt calculation deposits made, for example, in 2010, 2011 and 2012.[18]
[18] In this regard, based on the table of deposits found in the R SFIC at [11], deposits to the relevant accounts in the period 31 July 2006 to 30 June 2009 amounted to $81,685, while in the period 31 July 2006 to 31 December 2009, they amounted to $85,255.
LEGISLATIVE CONTEXT
The issues to be addressed in reviewing the respondent’s decision to raise and recover the relevant debt arise out of the legislative context in which that decision was made. I turn now to outline elements of that context.
There are two aspects of the decision the subject of review. There is a decision to raise a debt and one to recover the debt so raised.
In terms of the debt raising aspect of the decision, under the Social Security Act 1991 (“Act”), if the applicant did receive amounts by way of PPS in excess of his entitlement, that excess is a debt due to the Commonwealth.[19]
[19] Act, s 1223.
What the applicant received by way of PPS is an issue of fact and is a function, in part, of the period in respect of which the applicant’s PPS receipts are to be measured. For the debt raised in October 2012, as outlined earlier, that period is 15 August 2006 to 4 April 2009, a period in respect of which the applicant would appear to have received $37,862.38 by way of PPS payments. Each party accepts that the amount so received was calculated without regard to any deposits to the two relevant accounts.
What the applicant was entitled to by way of PPS is a function of the legislative context, as applied with respect to the period in relation to which his entitlement is to be calculated. In this regard, when referring to the Act and except where otherwise specified, I am referring to the Act in its form as at July 2009.[20] Neither party has suggested that the Act differed from that form in any respect which is material in this proceeding in the period over which the alleged excess parenting payments were made or, indeed, in the period up to the date of the decision in October 2012 to raise and recover the relevant debt.
[20] That form of the Act incorporated amendments up to Act No. 60 of 2009.
Under the Act, as the applicant was not at any relevant time a member of a couple, the amount of his entitlement to a parenting payment was a function of his parenting payment rate. That rate is worked out using the Pension PP (Single) Rate Calculator at the end of section 1068A.[21] It is a daily rate, derived by dividing an annual rate by 364.[22]
[21] Act, s 503.
[22] Act, s 1068A-A1.
As contended by the respondent, a person’s entitlement to PPS is means tested, applying both an assets test and an income test.
The income test is reflected in an element of the formula used to calculate a person’s parenting payment rate. In particular, that formula involves deducting from a maximum payment rate the amount by which the person’s “ordinary income” in a relevant year exceeds a specific amount[23] (with the process applied in calculating that amount being characterised in the Act as the ordinary income test[24]).
[23] Ibid and s 1068A-E19. This latter provision reflects the fact that, as mentioned earlier, income taken into account is calculated by reference to periods of relevance.
[24] Act, ss 1068E-19 and 1068E-20.
Subject to two presently irrelevant exceptions,[25] a person’s “ordinary income” is the person’s income. A person’s “income” includes an income amount “earned, derived or received” (by any means and from any source[26]) by the person for the person’s “own use and benefit.” A person’s “income amount” means valuable consideration, personal earnings, moneys or profits, whether of a capital nature or not.[27]
[25] Concerning maintenance income and exempt lump sums (see Act, ss 10 and 8(11)).
[26] Act, s 8(2).
[27] Act, s 8(1).
When this widely drawn concept of ordinary income is applied in relation to a period (as it is in the context of the ordinary income test), it captures the relevant person’s gross ordinary income from all sources for the period, calculated without any reduction (other than a presently irrelevant reduction in respect of business income under Division 1A of Part 3.10 of the Act).[28]
[28] Ibid, s 1072. Where income is received in a non-periodic form, it is averaged out over the 52-week period following its receipt (unless it is income from remunerative work, income flowing from income streams or financial assets or an exempt lump sum): see Act, s 1073.
As can be seen from what has just been said, the concept of “income” as employed in the Act “…is couched in the widest terms, presumably to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide.”[29] It is a widely drawn concept in the Act “…to ensure that it brought within its net as wide a range of categories and sources of income as possible…”,[30] consistent with the purpose of the Act being to “maintain a basic level of income for those who [are] unable to receive sufficient income to provide for themselves.”[31]
[29] Read v Commonwealth (1988) 78 ALR 655 at 662 per Brennan J.
[30] Rose v Secretary, Department of Social Services [1990] FCA 52 at [12].
[31] Secretary, Department of Social Security v Garvey (1989) 22 FCR 132 at 136.
In terms of the aspect of the decision under review which entails recovery of the claimed debt, at this stage I simply note that, under the Act, a debt owed to the Commonwealth may be written off and the right to recover it may be waived in certain circumstances.[32]
[32] Act, pt 5.4.
I turn now to outline what I consider to be the questions in issue in this proceeding.
QUESTIONS IN ISSUE
The questions in issue arise out of the legislative context.
In summary, they are:
(a)whether unexplained deposits to the relevant accounts were ordinary income of the applicant;
(b)if they were, whether I am satisfied with the explanation provided in relation to any of the relevant deposits such that it is appropriate not to treat them as ordinary income;
(c)if the deposits (or some of them) were ordinary income of the applicant, whether that would have resulted in a debt due to the Commonwealth;
(d)if a debt due to the Commonwealth would have so resulted, whether any relevant limitation period applies (noting that the debt in issue in this proceeding was raised roughly nine years ago); and
(e)if a debt due to the Commonwealth would have so resulted, whether it ought not be recovered.
Were the unexplained deposits income?
At the relevant time, the applicant’s assets included two bank deposit accounts.[33] The applicant accepts that the two accounts were his, that the amounts which the respondent claims were deposited into those accounts were, indeed, so deposited and that he could use those amounts for his own use and benefit.
[33] T13, p.149.
The respondent submits that deposits to the accounts are unexplained and ought to be treated as ordinary income of the applicant for the purpose of calculating the amount of his PPS entitlement.
In brief, I accept that submission insofar as it suggests that deposits to the relevant accounts ought to be treated as ordinary income of the applicant unless they are relevantly explained. When an amount is received into a person’s deposit account, the Tribunal is entitled to infer that the amount is income earned, derived or received by the person for the person’s own use and benefit, absent being satisfied that this is not the case.
That this is so is reflected in a number of Tribunal decisions. In Pavkovic,[34] the Tribunal considered that it was entitled to infer that an amount deposited into a person’s account represented income of the person, absent compelling evidence that the amount was held on trust for another or was encumbered in any way. In Ponting,[35] in relation to unexplained deposits, it was said to be “settled that they can be assessed as income under section 8 of the Act.”
[34] Pavkovic and Secretary, Department of Social Services (Social services second review) [2019] AATA 3737. See also Arnold and Secretary, Department of Education, Employment and Workplace Relations [2011] AATA 828 at [37] and Zhang and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 937 at [30]-[31].
[35] Ponting and Secretary, Department of Social Services (Social services second review) [2021] AATA 2053 at [8]. See also Taleb and Secretary, Department of Social Services (Social services second review) [2020] AATA 3451 at [47], where it was said that, as certain bank deposits remained unexplained, “…they are to be counted as “income” and therefore factored into the calculation of Mr and Mrs Taleb’s social security entitlements.”.
Deposits to an account will be treated as income unless, on the material before it, the Tribunal can be satisfied that they are not income.[36] Put simply, a burden of persuasion lies with – in this case – the applicant if deposits to an account are not to be considered income.[37]
[36] Nassimi and Secretary, Department of Social Services [2015] AATA 423 at [12]: “The deposits in the Applicant’s bank account justify a conclusion that they were for his own use and benefit because they were under his control. It is therefore necessary to consider the evidence to determine whether it indicates that the deposits were not for his own use or benefit.”
[37] Ponting and Secretary, Department of Social Services (Social services second review) [2021] AATA 2053 at [19]: “It is for the Applicant to satisfy the Tribunal that the monies deposited in his bank account were for a purpose other than for his own use and benefit.” See also Zhang and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 937 at [30].
Subject to two exceptions, the applicant did not seek to satisfy that burden, offering no explanation for the relevant deposits. Indeed, subject to those exceptions, the applicant was unable to recall any details with respect to the other deposits made in the relevant period to the relevant accounts. In this regard, I note that the applicant apparently told the authorised review officer who, in June 2020, decided to affirm the decision the subject of review that he had “no recollection of the reasons for these deposits.”[38]
Satisfied with the explanation provided in relation to any of the relevant deposits such that it is appropriate not to treat them as income?
[38] T7, p.135.
The two exceptions to which I just referred relate to an amount of $17,000 deposited on 23 November 2007 and an amount of $21,000 deposited on 24 March 2009. The applicant submits that neither deposit was ordinary income. He described these deposits at the hearing of this proceeding and in two written statements, one apparently submitted on 24 August 2020[39] and the other dated 25 August 2020.[40]
[39] T10, p.142.
[40] T11, p.147.
I accept the applicant’s submissions in this regard. I find that neither of the relevant deposits was ordinary income of the applicant.
As for a deposit of $21,000 made in March 2009, the applicant contends that it was the proceeds of a loan made to him by a friend to enable him to spend time with his sick mother in Lebanon and obtain medical treatment for her.
This submission raises two issues; whether the proceeds of a loan represent “ordinary income” and, if they do not, whether I am satisfied that the $21,000 deposit in question represents such proceeds.
Loan proceeds are not ordinary income. The respondent accepts this[41] and was right to do so.
[41] R SFIC at [51]-[53].
As was said by French J (as he then was) in McLaughlin: “[h]owever wide the scope of the term ‘income’, in my opinion it would not extend to a bona fide loan.”[42] Similarly, in the Tribunal decision in Van Den Boogaart, it was said that:
“[n]otwithstanding the widely defined meaning of ‘income amount’, we do not understand the definition of "income" to include moneys received by way of loan because the moneys are not received for the person's own use or benefit in the sense of beneficial ownership.”[43]
[42] Secretary, Department of Social Security v McLaughlin [1997] FCA 1456.
[43] Van Den Boogaart and Secretary to the Department of Social Security [1994] AATA 232 at [14].
I am satisfied on the material before me that the $21,000 amount represented the proceeds of a loan.
The arrangement pursuant to which the $21,000 were provided was not documented. In a context where evidence before the Tribunal suggests that the arrangement was one between friends, this is unsurprising. While the person who provided the funds had kept a record of amounts paid and the amount outstanding, that record has been lost or destroyed. That is also unsurprising given that the arrangement was one made around 12 years ago.
Not only was the arrangement undocumented, interest on the putative loan was not charged.
Neither documentation nor the charging of interest is, however, essential in order for an arrangement to constitute a loan.[44] What is, however, essential is an intention to repay.[45]
[44] Wings v Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 322 at [11] but cf Katholos and Secretary, Department of Social Services [2017] AATA 1293, a case concerning intra-familial arrangements in relation to which there was found (at [50]) not to be an intention to create legal relations.
[45] Secretary, Department of Social Security v McLaughlin [1997] FCA 1456 per French J: “As the Tribunal observed an intention to repay is an essential attribute of a loan of money…”. In Hajjar and Secretary, Department of Social Services (Social Services Second Review) [2020] AATA 2476 at [14], it was said that “…to be a loan, there must be a clear intention to repay.”.
The applicant’s evidence was that he had such an intention. I accept that evidence. Corroboration for it is found in the fact that the amount provided was repaid. According to both the applicant’s evidence and the evidence of the friend who provided the deposit money (Mr Nazry), that repayment was, initially, by way of a $5,000 instalment paid in or around 2010, with the balance being repaid by periodic instalments until full repayment was made in around 2013 or 2014.
As for a deposit of $17,000 made in November 2007, the applicant contended that it represented an amount paid in respect of his participation in a community contribution scheme called, as I understood it, “Jamiah”.[46]
[46] T10, p.144.
According to the applicant, he, his ex-wife and other members of his community agreed to pay regular amounts over a two-year period to a third person, the total to be so paid by him being $17,000. At some stage during the two-year period, each contributor would become entitled to receive $17,000 from the funds contributed. Despite receipt of the $17,000 in, say, year one of the scheme, a participant in it would be required to continue to make ongoing payments into the scheme until the participant had fully paid his or her $17,000 contribution. The deposit in November 2007 was simply the applicant’s receipt of his entitlement under the Jamiah scheme.
The applicant was unable to provide any records or documentary evidence relating to this scheme. The respondent pointed to the absence of any evidence corroborating the applicant’s explanation for the deposit:
“…in the form of statements from other purported scheme members, or evidence from the individual who would have been in control of the purported savings scheme who was making the payments from a central holding account.”[47]
[47] R SFIC [47].
The respondent submitted, in essence, that absent such evidence, I should not accept the applicant’s explanation for the deposit.
I do not accept that submission. First, my strong impression after hearing from the applicant in this proceeding was that he was a witness of truth. Second, the absence of evidence corroborating the applicant’s explanation of the relevant deposit is explicable to some extent, given the circumstances. In particular, in large part, the capacity of the applicant to provide material corroborating his explanation of the $17,000 deposit has been substantially degraded by the lapse of time. The assessment the subject of review was issued in 2012 in relation to payments between 2006 and 2009. The relevant deposit was made in 2007, some 14 years ago. Nothing substantive would appear to have been done about the 2012 assessment until 2019. When the applicant was asked at the hearing of this proceeding why, for instance, he was unable to produce a statement from the third-party recipient of funds made available in the Jamiah scheme, the applicant’s response was that the third party had died in the intervening years.
Given acceptance of the applicant’s explanation for the $17,000 deposit when it was made to the applicant’s account in November 2007, part of it would have reflected a refund of moneys he had already “deposited” with the third party since commencement of the two-year period of operation of the Jamiah scheme, with the other part being an advance or loan to be repaid over the balance of the period (albeit that the applicant disputed its characterisation as a loan).
For the reasons mentioned when discussing the $21,000 deposit in 2009, the applicant’s receipt of that part of the $17,000 deposit as represented the proceeds of an advance or loan did not constitute ordinary income for the purposes of calculating the applicant’s PPS entitlement.
As for the applicant’s receipt of that part of the $17,000 deposit as represented a refund of moneys he had already “deposited” with the third party operator of the Jamiah scheme, it, too, did not constitute ordinary income for the purposes of calculating the applicant’s PPS entitlement. While ordinary income can include payments of capital, it does not include a receipt by way of a refund of an amount deposited with a third party.
It might be suggested that a refund of an amount deposited gives rise to a receipt that constitutes ordinary income for the purposes of the Act. The definition of “income” extends to income amounts “received” by a person, with income extending to payments of capital. There is no requirement in the Act that such amounts be received in exchange for anything or that such amounts reflect a net gain.[48] Absent such requirements, any payment of money received by a person for that person's own use or benefit might be said to be the payment of an income amount.
[48] See Act s 1072 which requires that regard be had to gross ordinary income from all sources but cf Haldane-Stevenson v Director-General of Social Security (1986) 9 FCR 73 at 75 where McGregor and Pincus JJ said: "It will be noted that the definition of "income" makes no reference to expenses or deductions. It leaves uncertain the answer to the question whether gross income or net income is meant. Having regard to the purpose of reducing the pension by reference to income earned, we are of the view that, at least in general, net income is meant.".
While that might ordinarily be the case, it is not always so. In Richards,[49] the Full Federal Court grappled with a situation where an employee received wages but made payments to the employer in respect of shortfall amounts. The issue was whether, in determining gross ordinary income earned, derived or received by the employee for her own use or benefit, shortfall payments made by the employee were to be deducted. The Court held that they were. At [41], it was said that:
“The shortfall payment was integrally related to the work Ms Richards was employed to perform. It was for the benefit of her employer. It was not the price to Ms Richards of a benefit provided to her. For example, an amount deducted by an employer for meals and accommodation or as repayments off a debt owed by the employee to the employer would each ordinarily be "an income amount earned, derived or received by the [employee] for the [employee’s] use or benefit" within the definition of "income" in s 8 of the Act.”
[49] Secretary, Department of Employment and Workplace Relations v Richards [2008] FCAFC 97.
Similarly, in Catanzariti,[50] the Tribunal addressed a submission to the effect that the full amount received by a person in respect of a gambling win ought to be treated as income, without deduction for the amount outlaid in making the gamble. There, it was found that so much of a receipt that represented a return of capital outlaid on a winning bet was not income. First, it was considered that the most apt aspect of the Act’s definition of “income amount” was that which captured “profits”,[51] which the Tribunal equated to pecuniary gains. Second, inclusion of the “consequential financial gain” resulting from each individual bet was said to be consistent with the purpose of the Act, being to “‘maintain a basic level of income for those who [are] unable to receive sufficient income to provide for themselves.”[52] Third, the s 1072 requirement to take into account gross ordinary income was, in essence, considered not to displace a pre-condition that only amounts by way of income be taken into account so that, in the context of a gambling receipt, only the net gain need be considered.
[50] Catanzariti and Secretary, Department of Social Services (Social services second review) [2017] AATA 268.
[51] Ibid at [43].
[52] Ibid at [46] citing Secretary, Department of Social Security v Garvey (1989) 22 FCR 132 at 136.
Here, in calculating the applicant’s gross ordinary income, it is appropriate to net off from the amount received by the applicant from the operator of the Jamiah scheme so much of that amount as represented a refund of an amount deposited. As in Richards,[53] the making of the deposit was integral to the applicant’s entitlement to the receipt and was not paid for any benefit separate from that entitlement. While there may be no requirement that amounts of income reflect a net gain, “profits’’ are nevertheless expressed in the Act to be a category of “income amount,” a category the application of which is appropriate where, as here and as in Catanzariti,[54] to do so is consistent with the Act’s purpose.[55] Moreover, while the nature of the arrangement constituted by the Jamiah scheme was not entirely clear, it might well be that, for the purposes of the Act, it was a financial investment.[56] If so, the applicant’s ordinary income from his interest in the scheme would be a deemed amount calculated under Division 1B of Part 3.10 of the Act, with any actual return from that interest being taken not to be ordinary income.[57]
If the deposits (or some of them) were income of the applicant, whether that would have resulted in a debt due to the Commonwealth?
[54] Catanzariti and Secretary, Department of Social Services (Social services second review) [2017] AATA 268.
[55] As was said in Pavkovic and Secretary, Department of Social Services (Social services second review) [2019] AATA 3737 at [15]: “The courts have recognised that in applying the concept of income under the Act, careful regard should be had to the overarching purpose of the Act.”.
[56] A concept defined so as to include a loan that has not been repaid in full: Act, s 9.
[57] Act, s 1083.
By way of recap:
(a)the applicant’s entitlement to PPS at a time was a function of his then applicable parenting payment rate which, in turn, is, at least in part, a function of his ordinary income at the time.
(b)the applicant’s ordinary income when deposits were being made to the relevant two accounts included a number (but not all) of the deposits.
(c)none of those deposits were taken into account in calculating the amount paid to the applicant by way of PPS.
As a result, it is likely that the applicant received amounts by way of PPS in excess of his entitlement because some of his income was not taken into account in calculating his parenting payment rate. As mentioned earlier, when that occurs, a debt becomes due to the Commonwealth in the amount of the excess.
If a debt is due to the Commonwealth from the applicant because he received PPS in excess of his entitlement, whether any relevant limitation period applies (noting that the debt in issue in this proceeding was raised roughly nine years ago)?
Despite the applicant’s alleged PPS debt being raised approximately nine years ago in respect of matters that took place between 12 to 15 years ago, I find that the respondent’s capacity to utilise methods of recovery of the debt is not subject to any applicable limitation period.
Prior to 1 January 2017, methods of recovery of debts owed to the Commonwealth provided for in the Act were generally subject to limitation periods. After 1 January 2017, however, limitation period restrictions were removed from the Act so that “…legal proceedings, or any action under a provision of … [the Chapter of the Act addressing overpayments and debt recovery], for the recovery of a debt or overpayment] … [could] be commenced or taken at any time.”[58]
[58] Act, s 1234B.
This removal of limitation period restrictions applied to any PPS debt owed by the applicant.
That removal applied to a debt outstanding immediately before 1 January 2017 if, at that time, “…action under section 1231 or 1233, or legal proceedings under section 1232, of the Social Security Act 1991 could be commenced for the recovery of the debt or overpayment.”[59] The claimed PPS debt of the applicant is such a debt.
[59] Budget Savings (Omnibus) Act 2016, s 41.
Immediately prior to 1 January 2017, any PPS debt owed by the applicant would have been outstanding. The claimed PPS debt was raised in 2012, it had not been repaid and it had not been written off.
Immediately prior to 1 January 2017, action under any of ss 1231 to 1233 of the Act could have been commenced to recover that debt.
Under s 1231 of the Act, in its form immediately before 1 January 2017, action could be taken to recover a debt by way of deduction from social security payments. The capacity to take such action was, however, subject to a limitation period. In particular, subject to certain provisos (one of which I will elaborate upon shortly), such action could not be “commenced after the end of the period of 6 years starting on the first day on which an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt.”[60] A similar limitation applied to debt recovery under s 1232 by way of legal proceedings[61] and under s 1233 by way of garnishee notice.[62]
[60] Act, s 1231(2A).
[61] Act, s 1232(2).
[62] Act, s 1233(7A).
The six-year limitation period that applied under those provisions would not have prevented action under them being taken to recover the applicant’s alleged PPS debt immediately before 1 January 2017. This is because that limitation period was subject to a proviso which, in effect, operated to refresh it when, for instance, “internal Departmental activity relating to action for the recovery of the debt or overpayment occurs”.[63] Internal departmental activity occurred in 2012 when the decision was made to issue an assessment with respect to the claimed PPS debt. Further internal departmental activity may well have occurred on 5 December 2016 given that $32.87 would appear to have been withheld from a social security payment to the applicant on account of the claimed debt.[64] Hence, as so refreshed, the limitation period would not have operated to prevent action to recover the claimed PPS debt being commenced immediately before 1 January 2017.
[63] See, for example, s 1231(2E) of the Act as at 31 December 2016, See also SD and Secretary, Department of Social Services [2014] AATA 764 at [77].
[64] Attachment C to the Respondent’s Supplementary Statement of Issues and Contentions of 12 July 2021.
If a debt is due to the Commonwealth, whether it ought not be recovered
In certain circumstances, a debt owed to the Commonwealth may be written off and the right to recover it waived.[65]
[65] Act, pt 5.4.
Under s 1236 of the Act a debt may be written off if the debt is irrecoverable at law, the debtor has no capacity to repay the debt, the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor or it is not cost effective for the Commonwealth to take action to recover the debt. None of these bases for potentially writing off a debt are of relevance in this proceeding.
For instance, it would not appear to be the case that the applicant has no capacity to repay the claimed debt. To the contrary, the material before me suggests that he has such a capacity, noting that he is currently paying off the debt by instalments and his evidence before the Tribunal was that he “is managing ok”. As for any debt of the applicant being irrecoverable at law, this would only be the case in certain, quite limited, circumstances none of which apply to the applicant.[66]
[66] Act s 1236(1B). For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if: (b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or (c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or (d) the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
Under s 1237A of the Act, in certain circumstances, the right to recover the proportion of a debt attributable solely to an administrative error made by the Commonwealth must be waived. It is not contended by the applicant that any part of the alleged debt is solely attributable to administrative error on the part of the Commonwealth.[67]
[67] In Secretary, Department of Family and Community Services v Sekhon [2003] FCA 76 at [26], Wilcox J stated: “However, it seems to me, the Tribunal failed to consider the significance of the inclusion, in s 1237A(1), of the word “solely”. For the subsection to have effect, the “proportion” of the debt – in this case, it is common ground, that would be the whole of it – must be “attributable solely” to administrative error. It is not enough that, in the absence of administrative error, the debt would not have arisen. Administrative error must be the sole cause, not merely one of multiple causes.” See too, on appeal, Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 1990 at [35].
Under s 1237AAD of the Act, the right to recover all or part of the debt may be waived if, amongst other things, there are special circumstances (other than financial hardship alone) that make it desirable to grant the waiver.
I do not consider that circumstances of this proceeding are relevantly special. Recovery of the claimed debt would not, as I see it, be accompanied by any particular unfairness[68] or hardship,[69] or be unjust.[70] Nor are the applicant’s circumstances unusual, uncommon or exceptional[71] as might otherwise have rendered it desirable to grant a waiver.[72]
[68] Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1 at [17].
[69] Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162, cited in Chen and Secretary, Department of Social Services (Social services second review) [2019] AATA 560 at [124].
[70] Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones [2012] FCA 639 at [51]: “The effect of the authorities is that the phrase ‘special circumstances’, although lacking in precision, is sufficiently understood as including events or things that render the operation of the statue in a particular case as unfair, unintended or unjust. What is required is something that takes the case out of the ordinary, and unfairness or unintended consequences may show that this exists.”.
[71] Mueller and Secretary, Department of Social Services (Social services second review) [2019] AATA 1774 at [52], citing Beadle and Director-General of Social Security [1984] AATA 176. See also Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25 at [33] where the Court appeared to endorse a description of special as being unusual or uncommon.
[72] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at [80].
CONCLUSION
As I stated earlier, I have decided to set aside the decision the subject of review and remit the matter to the respondent for reconsideration in accordance with certain directions.
I direct that:
(a)any debt liability of the applicant with respect to PPS payments be recalculated:
(i)having regard only to PPS payments made in the period 15 August 2006 to 4 April 2009;
(ii)on the basis that ordinary income of the applicant attributable to a time or period after the last annual period of relevance to those PPS payments not be taken into account;
(iii)on the basis that ordinary income of the applicant does not include either the $21,000 or $17,000 deposits discussed in these reasons;
(iv)subject to the foregoing, on the basis that ordinary income of the applicant included amounts deposited to the two relevant accounts; and
(b)any debt owing by the applicant consequent on that recalculation be recovered, as the provisions of the Act providing for the writing off or waiver of the right to recover any such debt do not apply in the circumstances.
| I certify that the preceding 79 (seventy-nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member |
.....[SGD]........................................
Associate
Dated: 16 December 2021
Dates of hearing: | 21 June 2021 and 14 July 2021 |
The Applicant: | Self-represented |
Advocate for the Respondent: | Andrew Summers |
Solicitors for the Respondent: | Litigation and Information Release Branch, Legal Services Division, Services Australia |
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