Carlos and Secretary, Department of Education - [2024] AATA 3546

Carlos and Secretary, Department of Education [2024] AATA 3546 (1 October 2024)
Division:GENERAL DIVISION
File Number(s): 2023/8375
Re:Mildred Carlos
APPLICANT

AndSecretary, Department of Education
RESPONDENT

DECISION
Tribunal:Member S Evans
Date:1 October 2024
Place:Sydney

For the reasons outlined below, the reviewable decision is affirmed.
..............................[SGD]..........................................
Member S Evans
CATCHWORDS
SOCIAL SECURITY - eligibility for Child Care Subsidy (CCS) - reconciliation conditions - family income – failure to meet statutory deadline to lodge tax return – whether special circumstances - not sufficiently exceptional or unusual - reviewable decision is affirmed
LEGISLATION
A New Tax System (Family Assistance) Act 1999 (Act)
A New Tax System (Family Assistance) (Administration) Act 1999 (Administration Act)
CASES
Drake and Minister for Immigration and Ethnic Affairs (No 2) 2 ALD 634
Beadle and Director-General of Social Security [1984] AATA 176
Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones [2012] FCA 639
Hooker and Secretary Dept of Social Services [2015] AATA 732
Secretary, Department of Social Services v Cannon [2015] AATA 1028
Berges and Secretary, Department of Social Services [2020] AATA 3507
SECONDARY MATERIALS
The Family Assistance Guide
REASONS FOR DECISION
Mr S Evans, Member
1 October 2024
INTRODUCTION

The applicant, Mildred Carlos, was in receipt of Child Care Subsidy (CCS). Eligibility for CCS is dependent on meeting the CCS reconciliation conditions. One condition is that recipients confirm their family income for the relevant financial year by the end of the next financial year. Confirmation of family income requires lodgement of a tax return with the ATO or confirmation that a person is not required to do so.
Ms Carlos’s partner, Simon Lucius (Mr Lucius), did not meet the statutory deadline to lodge his tax return for the 2020-2021 financial year. Consequently, the Department of Social Services (the Agency) decided to cancel Ms Carlos’s CCS from 11 July 2022 until 29 October 2022.
There is a provision in the legislation which provides for the time to meet the CCS reconciliation conditions to be extended by one year. The provision requires special circumstances to exist that prevented the CCS recipient from complying with their lodgement requirements. Ms Carlos contends that the discretion should be applied in her favour, and the Secretary of the Department of Education (the Secretary) disagrees.
For the reasons that follow, the reviewable decision will be affirmed.
BACKGROUND
Ms Carlos began receiving CCS payments on 25 January 2021.[1] On 24 November 2021, the Agency issued her a notice requesting information from her to assess her eligibility to receive CCS.[2] The notice stated in part:
[1] T11, p.209.
[2] T12, p.237-238.
Our records show that [your partner’s] income has not been confirmed for the 2020-2021 financial year.
We cannot assess your Child Care Subsidy until this income is confirmed.
What you need to do
You need to confirm your family income for the 2020-2021 financial year by 30 June 2022.
Family income is confirmed when:
• Tax returns for this period are lodged with the Australian Tax Office (ATO). To check if a tax return is required, go to the ATO website ato.gov.au
OR
• You tell us that tax returns are not required to be lodged for this period.
….
What you need to know
If your family income is not confirmed by the due date, your Child Care Subsidy payments will stop and your eligibility may be cancelled. You may need to repay the total amount of subsidy that was paid for the 2020-2021 financial year.
This is a notice given under section 158 of the Family Assistance (Administration) Act 1999 that requires you to provide this information.
…
On 1 June 2022, the Agency issued another notice to Ms Carlos advising she was required to confirm her family income for the 2020-2021 financial year by 30 June 2022.[3]
[3] T12, p.239.
On 6 and 7 June 2022, Ms Carlos contacted the Agency to provide an update on the status of Mr Lucius’s income tax return (ITR) for the 2020-2021 financial year and the potential it may not be lodged by the 30 June 2022 deadline. An Agency file note records Ms Carlos advised the late lodgement was due to Mr Lucius closing his business. Ms Carlos was advised she could request an extension to lodge from the ATO and then advise the Agency of the extension end date. She was told to provide this information ‘before the end of June 2022 to avoid repercussions to FTB/CCS’.[4] The Agency sent Ms Carlos a reminder of the lodgement deadline by SMS on 8 June 2022.[5]
[4] T10, p.191.
[5] T12, p.241.
As Ms Carlos had not confirmed her family income by 30 June 2022, she had failed to meet the CCS reconciliation requirements for the 2020-2021 financial year. On 25 July 2022, the Agency notified Ms Carlos that her CCS percentage from 12 July 2022 was zero.[6]
[6] Ibid, p.245.
On 27 July 2022, Ms Carlos provided the Agency with a letter from Mr Lucius’s accountant, Brad Seeto from Bramelle Partners Pty Ltd. The letter confirmed there would be a significant delay in lodging Mr Lucius’s tax return owing to the closure of his business, CJ Media, after 15 years of operation.[7]
[7] T4, p.165.
On 28 October 2022, the Agency received confirmation of Mr Lucius’s income for the 2020-2021 financial year from the ATO.[8]
[8] T7, p.179; T1, p.6.
Ms Carlos contacted the Agency on 17 and 24 November 2022 and sought review of the decision to reduce her CCS percentage to zero between 11 July 2022 and 29 October 2022 (the relevant period).[9] On 20 June 2023 an Authorised Review Officer (ARO) affirmed the decision the cancel her CCS during the relevant period. The ARO found Mr Lucius failed to lodge his ITR for the 2020-2021 financial year by the due date and there were no special circumstances which prevented him from meeting the CCS reconciliation conditions.[10]
[9] T10, p.192-193.
[10] T7, p. 179-184
On 16 June 2023, Ms Carlos had provided the Agency with a detailed written explanation of the reasons for the delay in lodging Mr Lucius’s ITR for the 2020-2021 financial year. She identified the closure of Mr Lucius’s business, and complications relating to the novel experience of accounting for trading crypto currency and NFTs, as the primary reasons he did not complete his ITR by 30 June 2022.[11]
[11] T6, p.174-178.
Ms Carlos sought review of the ARO decision which was affirmed by the Social Services and Child Support Division (AAT1) of the Tribunal on 20 June 2023 (the reviewable decision).[12] Ms Carlos now seeks second-tier review by the General Division of the Tribunal.[13]
[12] T2, p.10-13.
[13] T1, p.1-9.
ISSUE
The issue to be determined is whether Ms Carlos was entitled to receive CCS payments during the period between 11 July 2022 and 29 October 2022 because special circumstances prevented her from meeting the reconciliation requirements.
LEGISLATION AND POLICY
The relevant legislation is found in the A New Tax System (Family Assistance) Act 1999 (Act) and A new Tax System (Family Assistance) (Administration) Act 1999 (Administration Act).
The Family Assistance Guide (the Guide) provides relevant departmental policy guidance. It is well established that the Tribunal is not bound by government policy, but it will generally be taken into consideration unless there are cogent reasons not to do so.[14]
[14] See Drake and Minister for Immigration and Ethnic Affairs (No 2) 2 ALD 634.
Section 85BA of the Act provides the criteria for eligibility for CCS. Entitlement to payment of CCS is determined by 67CB of the Administration Act, which provides that a person who is entitled to be paid CCS for a week may not be paid CCS in certain circumstances:
…
(4)However, an individual who is entitled to be paid CCS for sessions of care provided to a child in a week:
(a) ceases to be entitled to be paid that CCS, and is taken never to have been entitled to be paid that CCS, if the individual has not met the CCS reconciliation conditions, for the income year in which the CCS fortnight that includes the week starts, by the first deadline for the income year; and
(b) cannot again become entitled to be paid that CCS before the individual meets the CCS reconciliation conditions for the income year.
Section 67CD of the Administration Act provides for determination of an individual’s entitlement to be paid CCS in certain circumstances. It provides that individuals are required to meet the information requirements and the CCS reconciliation conditions for the previous year.
Section 103A of the Administration Act sets out the CCS reconciliation conditions:
CCS reconciliation conditions
(1) An individual (the claimant) meets the CCS reconciliation conditions for an income year (the relevant income year ) if subsection (2), (3) or (4) applies in relation to each of the following persons:
(a) the claimant;
(b) each person who was a TFN determination person for the purposes of a determination under Division 3 of Part 3A for the claimant in relation to sessions of care provided in CCS fortnights starting in the relevant income year.
Income tax assessment made
(2) This subsection applies to a person if the Commissioner of Taxation has made an assessment of the taxable income of the person for the relevant income year.
…
Section 103B of the Administration Act provides deadlines for meeting CCS reconciliation conditions:
First deadline
(1) The first deadline for an income year (the relevant income year) is:
(a) the end of the first income year after the relevant income year; or
(b) if the Secretary allows the individual a longer period under subsection (2)--the end of the longer period.
(2) The Secretary may allow an individual a longer period if the Secretary is satisfied that special circumstances prevented the individual meeting the CCS reconciliation conditions for the relevant income year before the end of the first income year after the relevant income year.
(3) The end of the longer period must not be later than the end of the second income year after the relevant income year.
…
The Guide at Instruction 6.4.1.30 provides an overview of the CCS reconciliation process and states that:
CCS reconciliation occurs for all individuals who had entitlement determined (including nil) for a week in a CCS fortnight that began in the relevant income year. The process begins once the reconciliation conditions have been met, that is, post the end of the financial year, the individual (and any partner during the relevant income year) have lodged and had tax returns assessed, or if there is no requirement to lodge, notified Centrelink of their actual ATI.
Using the actual ATI, each determination of entitlement is reviewed to determine a new entitlement amount, and the difference (if any) of any entitlements already received.
The Guide at 6.4.4.10 provides for the treatment of current partners in the reconciliation process:
The first deadline by which reconciliation conditions must be met is one year after the end of the income year in which CCS entitlement was determined - that is, by 30 June of the first income year after the relevant income year. If reconciliation conditions have not been met by the first deadline, a determination of no entitlement (that is, no CCS payments) will be made until the individual meets the reconciliation conditions.
If an individual meets the reconciliation conditions after the first deadline but before the second deadline, their CCS entitlement will resume from the week in which reconciliation conditions were met.
The second deadline is 2 years after the end of the income year in which CCS entitlement was determined. If reconciliation conditions have not been met by the second deadline, the family’s CCS eligibility is cancelled, and debt recovery will commence for the subsidy that was paid in relation to the CCS year (that is, all CCS fortnights that start in the income year).
…
…In order to regain eligibility and entitlement to CCS …, the individual will need to ensure they meet reconciliation conditions for all income years in which CCS entitlement was determined, before they will be able to make a new effective claim for CCS.
EVIDENCE
Mr Lucius and Ms Carlos provided detailed written submissions in which they set out the events leading up to the late lodgement of Mr Lucius’s tax return, relevant subsequent events and their general circumstances. They both gave evidence at the hearing.
Ms Carlos does not dispute that she was aware of the CCS reconciliation and reporting requirements and had been notified of her obligations by the Agency.
The closure of Mr Lucius’s business
For 18 years, Mr Lucius owned a photography business, CJ Media. CJ Media was experiencing financial difficulty as revenue had fallen from $33,000 in the 2019-2020 financial year to $21,000 the following year. Mr Lucius gave evidence his business had been badly affected by the COVID-19 pandemic restrictions. In the 2020-2021 financial year, Mr Lucius decided to close his business. By 20 June 2022, CJ Media had ceased trading, and was officially deregistered in 2023.[15]
[15] T10, p.192-193.
Mr Lucius said he was due to complete the CJ Media tax return for the 2020-2021 financial year on 15 May 2022. After seeking advice from his accountant, Mr Lucius decided it was preferable to process the CJ Media tax return before finalising his personal ITR. He anticipated processing and lodging both the business and personal tax returns for the 2020-2021 financial year at the same time.
Crypto trading and accounting delays
Throughout the 2020-2021 financial year, Mr Lucius had been trading in cryptocurrency and NFT investments. There were 497 transactions, over 4 exchanges, and Mr Lucius expected he would have a tax liability due for the financial year.
On 23 March 2022, Mr Lucius contacted his long-standing accountant, JMK Accountants (JMK), regarding his ITR for the 2020-2021 financial year.[16] A meeting was scheduled between JMK and Mr Lucius for 22 April 2022. JMK prepared draft 2020-2021 financial year tax returns for both Mr Lucius and CJ Media, which were presented to Mr Lucius on 5 May 2022. JMK determined that Mr Lucius had a personal tax liability for the 2020-2021 FY of $140,202.[17]
[16] T5, p.166-172.
[17] T6, p.174-175.
Mr Lucius says he understood that JMK had limited experience with cryptocurrency and NFT trading, and concluded the draft personal tax return warranted a second opinion from ‘outside parties’. Mr Lucius sought advice from Bramelle Partners accountants on 26 July 2022.[18] He sought and received advice from tax consultant Peter Gillet on 10 and 24 August 2022 and subsequently purchased specialised ‘crypto tax’ software.[19]
[18] T4, p.165.
[19] T6, p.175.
On 3 August 2022, new data and information was sent to JMK for processing. JMK’s calculations were then re-checked by the external advisers before being agreed upon by Mr Lucius. Mr Lucius’s 2020-2021 financial year ITR was finalised on 28 October 2022.[20]
[20] Ibid, p.173-178.
On 12 June 2022, while Mr Lucius was finalising his ITR, the US based crypto currency bank where his assets were being held, Celsius Network, filed for Chapter 11 bankruptcy. Mr Lucius said this development caused additional stress and exacerbated the difficulties he faced finalising his ITR. He described calculating his tax liabilities as ‘an extremely laborious and extensive exercise’.[21]
[21] Ibid, p.175.
CONSIDERATION
Were there special circumstances that prevented Ms Carlos from meeting the reconciliation requirements?
It is not in dispute that to meet the CCS reconciliation requirements Mr Lucius was required to lodge his income tax return for the 2020-2021 financial year by 30 June 2022, or that he did so on 28 October 2022.
The question is whether there were special circumstances that prevented Mr Lucius from lodging his ITR by 30 June 2022. If so, do the circumstances warrant exercising the discretion designated under subsection 103B, which allows a longer period to meet the CCS reconciliation conditions.
The phrase ‘special circumstances’ as it appears in subsection 103B(2) is not defined in the Administration Act or in related legislation. However, it has been considered extensively by the courts and this Tribunal. In Beadle and Director-General of Social Security, the Tribunal stated that:
An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.[22]
[22] [1984] AATA 176.
In Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones,[23] the Federal Court observed that ‘special circumstances’ is “sufficiently understood as including events or things that render the operation of the statute in a particular case as unfair, unintended or unjust’ and set out that ‘what is required is something that takes the case out of the ordinary, and unfairness or unintended consequences may show that this exists”.
[23] [2012] FCA 639.
A similar provision to subsection 103B(2) of the Administration Act also relating to special circumstances is contained in subparagraph 10(2)(b)(ii) of the Administration Act. The Tribunal considered the similar provision in Hooker and Secretary Dept of Social Services where Senior Member Toohey set out a two-part test for applying the special circumstances provisions:
In order for the time for making a claim to be extended, the Secretary (and so the Tribunal) must be satisfied, firstly, that circumstances existed that were special and, secondly, that those special circumstances prevented the claimant from making his or her claim within time
…In the case of a late claim for FTB, the special circumstances must prevent a person from making a claim on time. That is a more stringent, two-part test.[24]
[24] [2015] AATA 732.
This approach has been adopted in other decisions by the Tribunal and it is appropriate to apply it in this matter.
I accept that Mr Lucius’ 2020-2021 financial year ITR was complicated by his trading in digital currencies and the novelty of accounting for these trades. Mr Lucius and Ms Carlos informed both the ATO and the Agency of the delay in filing before 30 June 2022. Mr Lucius was granted an extension of time to lodge his ITR by the ATO, which later exempted him from general interest charges resulting from late lodgement. The additional time enabled Mr Lucius to seek advice so that he was confident in his tax return and his tax liability.
After being provided by a draft ITR by JMK on 5 May 2022, Mr Lucius chose to obtain further advice from two other accounting firms. That advice was provided to Mr Lucius after 30 June 2022. Mr Lucius contends that he did not wait to complete his ITR and the delay was caused by the difficulty of finding an accountant with crypto trading experience.
Mr Lucius first made contact with JMK regarding his ITR for the 2020-2021 financial year on 23 March 2022, which was 265 days after then end of the financial year.[25] The late start in the process is in part explained by the advice that Mr Lucius received to complete both his personal ITR and the tax return for CJ Media concurrently. Mr Lucius contends that had JMK not been ‘vastly underprepared’ to deal with crypto currency trading and transactions, he would not have had to seek external tax advice and would have lodged on time.
[25] T1, p.5.
The Tribunal has previously considered the issue of whether fault on the part of an accountant constitutes a ‘special circumstance’ that prevents a tax return from being lodged on time for the purpose of the Administration Act. In Secretary, Department of Social Services v Cannon, DP Constance concluded at [23]:
I do not consider that a mistake made by Mr Turner's accountants can be properly regarded as a special circumstance to entitle Ms Cannon to receive the adjustment to the Family Tax Benefit. The Accountants have unequivocally admitted responsibility for their error and Ms Cannon may have a means of redress against them.[26]
[26] [2015] AATA 1028.

The Tribunal found in Berges and Secretary, Department of Social Services that (Berges) complex tax affairs are not ‘special circumstances’. In that matter, the Tribunal observed at [51]:
The Tribunal found that the following elements:
(a) The applicant’s increased paperwork workload relating to her partner’s small business;
(b) The workload relating to the applicant and her partner’s seven investment properties;
and
(c) The complexity of the applicant’s and her partner’s tax affairs with a trust, a small business and a self-managed superannuation fund;
are not relevant considerations as special circumstances in relation to the applicant managing their FTB obligations because they are the normal obligations of any taxpayer who chooses to operate such entities.[27]
[27] [2020] AATA 3507.
I find that Mr Lucius experienced unexpected difficulties in filing his ITR for the 2020-2021 financial year. The crypto trading added additional processing time to the ITR, which Mr Lucius was not anticipating. I do not consider the period between the initial drafting of his ITR by JMK and lodgement on 28 October 2022 to be unreasonable in all the circumstances. However, Mr Lucius was aware of the trades and could reasonably have expected that they may complicate the finalisation of his ITR. Individuals are often required to deal with complex or novel considerations when completing their tax returns. Having regard to Berges, I do not consider Mr Lucius’ circumstances markedly different from the experience of other taxpayers who trade in digital currencies.
Ms Carlos contends that along with the difficulties with completing Mr Lucius’s 2020-2021 financial year ITR, a ‘perfect storm’ emerged as they faced the challenges of the pandemic, the birth of their first child, the decision to cease trading CJ Media and the stress caused by the bankruptcy of the crypto trading platform.[28]
[28] Applicant’s Letter to the AAT dated 11 April 2024.
While the circumstances that existed in the 12 months to 30 June 2022 were challenging for Mr Lucius and Ms Carlos, unfortunately they are not sufficiently exceptional or unusual to be considered ‘special circumstances.’ In any event, I am not satisfied that Ms Carlos and Mr Lucius’s circumstances prevented them from finalising his ITR and meeting the CCS reconciliation conditions for the 2020-2021 financial year.
DECISION
For the reasons outlined above, the reviewable decision is affirmed.

I certify that the preceding 46 (forty - six) paragraphs are a true copy of the reasons for the decision herein of Member S Evans.

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Associate
Dated: 1 October 2024

Date(s) of hearing: 6 August 2024

Applicant: In-person

Solicitors for the Respondent: Ms C. Campbell, Services Australia

Date(s) of hearing:	6 August 2024
Applicant:	In-person
Solicitors for the Respondent:	Ms C. Campbell, Services Australia