Centkowska and Secretary, Department of Social Services (Social services second review)
[2016] AATA 342
•27 May 2016
Centkowska and Secretary, Department of Social Services (Social services second review) [2016] AATA 342 (27 May 2016)
Division
GENERAL DIVISION
File Number(s)
2015/4076
Re
Maja Centkowska
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member A C Cotter
Date 27 May 2016 Place Brisbane The decision under review is varied by waiving that part of the debt that represents overpaid parenting payment in the amount of $6,723.86.
.......................[sgd].................................
Senior Member A C Cotter
CATCHWORDS
DEBT RECOVERY – parenting payment – whether overpayment – waiver – write off – whether sole administrative error – whether special circumstances – where lengthy burden on family – decision under review varied
LEGISLATION
Acts Interpretation Act 1901 (Cth) s 28A
Evidence Act 1995 (Cth) s 160
Social Security Act 1991 (Cth) ss 503, 1068B, 1223, 1236, 1237A, 1237AADSocial Security (Administration) Act 1999 (Cth) ss 68, 100
CASES
Director-General of Social Services v Hales (1998) 82 FCR 154
Dranichnikov v Centrelink (2003) 75 ALD 134
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 Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553
Salangsgang and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 55
Timothy Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1Ward and Secretary, Department of Family and Community Services [2000] AATA 212
REASONS FOR DECISION
Senior Member A C Cotter
27 May 2016
INTRODUCTION
Miss Maja Centkowska was granted Parenting Payment (at the partnered rate) (“PP”) with effect from 11 December 2012.
By letter dated 3 March 2015, Miss Centkowska was advised by Centrelink that she had been overpaid PP in the amount of $13,447.72 for the period 25 October 2013 to 1 January 2015 because her partner’s earnings had not been correctly taken into account. Centrelink required repayment of that amount.[1]
[1] Exhibit 1, T Documents, T 14, pages 86-87, Centrelink notice dated 3 March 2015.
Miss Centkowska unsuccessfully sought a review of that decision, first by an Authorised Review Officer,[2] and subsequently by the then Social Security Appeals Tribunal (“SSAT”).[3]
[2] Exhibit 1, T Documents, T 20, pages 172-178, Authorised Review Officer’s letter to Miss Centkowska and notes dated 11 April 2015.
[3] Exhibit 1, T Documents, T 2, pages 8-12, Social Security Appeals Tribunal (“SSAT”) decision and reasons for decision dated 30 June 2015.
Dissatisfied, Miss Centkowska sought a review of the SSAT’s decision by the General Division of this Tribunal.
It is worthwhile setting out the background, to put the current application in context.
BACKGROUND
On 8 October 2013, Centrelink wrote to Miss Centkowska, advising her of the amount of PP she would receive from 14 October that year. Relevantly, the letter set out the information used for calculating that amount, stating that “(y)our payment is worked out using both your and your partner’s incomes”. Her partner’s fortnightly income was shown as “$0.00”. Miss Centkowska was advised to contact Centrelink within 14 days if various listed circumstances changed, including if “your partner’s total personal income goes over $0.10 a fortnight”.[4] During the period relevant to this matter, various notices were sent by Centrelink to Miss Centkowska, containing similar information.[5]
[4] Exhibit 1, T Documents, T 16, pages 109-112, Centrelink letter to Miss Centkowska dated 8 October 2013.
[5] See Exhibit 1, T Documents, T 16, pages 92-147, Centrelink letters, various dates.
Also in October 2013, Miss Centkowska’s partner, Mr Michael Smith, was receiving both Newstart Allowance and Family Tax Benefit.
At the SSAT hearing, Mr Smith confirmed that he was in receipt of Newstart Allowance when he started work. He said that Centrelink was aware of the fact that he had started working; he disclosed his earnings information to it every fortnight via the internet. For some reason (possibly associated with the suspension of Mr Smith’s Newstart Allowance in late October 2013), his online reporting later failed and he could no longer report his income online. He was advised to contact Centrelink, but I gather from the SSAT’s reasons that he may not have received that notice, with the consequence that his Newstart Allowance was subsequently cancelled with effect from 25 October 2013.[6]
[6] Exhibit 1, T Documents, T 2, pages 9 and 10-11, SSAT’s decision and reasons for decision dated 30 June 2015, [6] and [15].
Mr Smith also told the SSAT that he and Miss Centkowska provided estimates of annual income at least each year, often more frequently (presumably for the purposes of the Family Tax Benefit).[7]
[7] Ibid page 9, [7].
ISSUES FOR THE TRIBUNAL
The issues which fall for my determination are:
(a)whether Miss Centkowska was overpaid PP in the amount of $13,447.72 in the period 25 October 2013 to 1 January 2015;
(b)if so, whether that amount is a debt owed to the Commonwealth by Miss Centkowska; and
(c)if so, whether that debt should be recovered.
I deal with each of those issues below.
CONSIDERATION
Was Miss Centkowska overpaid PP during the relevant period?
Under s 503 of the Social Security Act 1991 (Cth) (“Act”), the rate of PP for a person who is a member of a couple is worked out using the Benefit PP (Partnered) Rate Calculator at the end of s 1068B of the Act. That section requires a consideration of the income of both the person and their partner, with income over a certain allowable threshold resulting in a reduction of the amount of PP payable.[8]
[8] See the Social Security Act 1991 (Cth) s 1068B-A2 and s 1068B-D1 (Module D).
Section 100(1) of the Social Security (Administration) Act 1999 (Cth) (“Administration Act”) deals with the situation where a recipient of a social security payment is given a notice under s 68(2) of the Administration Act requiring them to inform the Department of the occurrence of an event or change of circumstances within a specified period, and they fail to do so. If, because of the occurrence or change in circumstances, the rate of social security payment is to be reduced, the payment becomes payable to the person at the reduced rate on the day on which the event or change in circumstances occurs. In other words, the Secretary is entitled to retrospectively reduce the payment under that section if the recipient fails to comply with the notice requirements.
A number of such notices were sent to Miss Centkowska over an extended period.[9] While Mr Smith raised doubt as to whether she received all the notices, it is not in dispute that she did not comply with the notice requirements, in that she did not notify the Department that Mr Smith’s income had increased.
[9] See, eg, Exhibit 1, T Documents, T 16, pages 105-116.
As a consequence of Miss Centkowska’s failure to disclose the fact that Mr Smith’s income had increased, his income was not assessed in calculating Miss Centkowska’s rate of payment. Consequently, she was paid the incorrect amount of PP.
In January 2015, Miss Centkowska’s PP was suspended by Centrelink while it reviewed her circumstances. I understand that followed a phone call which she or Mr Smith made to Centrelink updating earnings details.[10] Following the review, the Department retrospectively reduced Miss Centkowska’s rate of PP during the relevant period, pursuant to s 100(1) of the Administration Act.
[10] Exhibit 1, T Documents, T 18, pages 158-159, Centrelink file note dated 9 January 2015.
While Mr Smith, on behalf of Miss Centkowska, questioned from where the Department derived some of the figures used in the calculation (such as his estimated income), there was no direct challenge to the calculation itself. Having perused the method of calculation,[11] and there being no substantive objection to it, I am satisfied that Miss Centkowska was overpaid PP during the relevant period in the amount of $13,447.72.
[11] Exhibit 1, T Documents, T 19, pages 160-171, ADEX-Debt Explanation dated 5 May 2015.
Is a debt owed to the Commonwealth by Miss Centkowska?
Section 1223(1) of the Act provides that if a social security payment is made and the person who obtains the benefit of that payment was not entitled to obtain that benefit, the amount of the payment is a debt due to the Commonwealth by the person.
Based on that section, I consider that Miss Centkowska owed a debt to the Commonwealth in the amount of $13, 447.72 in respect of the relevant period. That debt has since been reduced by regular withholdings of $100.00 per fortnight (at least until February this year) from Mr Smith’s Family Tax Benefit. As a result, the debt currently stands at $11,595.88.[12]
[12] Exhibit 4, Centrelink customer records showing current debt amount.
Should the debt be recovered?
Part 5.4 of Chapter 5 of the Act deals with the non-recovery of debts. Under that Part, the Secretary may, in certain circumstances, either write off a debt owed to the Commonwealth or waive the Commonwealth’s right to recover the whole or part of the debt. I deal with both options below.
Write off
Section 1236 of the Act provides that the Secretary may decide to write off a debt, for a stated period or otherwise, in the following circumstances:
(a)the debt is irrecoverable at law;
(b)the debtor has no capacity to repay the debt;
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate him or her; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
None of those circumstances are relevant in this instance. There was no suggestion that Miss Centkowska did not have the capacity to repay the debt. As mentioned already, up until at least February this year, the debt was being repaid through regular withholdings from Mr Smith’s Family Tax Benefit.[13] Mr Smith told the SSAT that financially his family was “just scraping by” and that they “live from pay-packet to pay-packet”.[14] While I appreciate the repayment would cause some financial strain, it nevertheless appears that there was capacity to repay the debt.
[13] There was no explanation as to why that withholding arrangement had ceased.
[14] Exhibit 1, T Documents, T 2, page 10, SSAT’s decision and reasons for decision dated 30 June 2015, [8].
Waiver
The power to waive the Commonwealth’s right to recover the whole or part of the debt is relevantly found in ss 1237A (waiver arising out of administrative error) and 1237AAD (waiver in special circumstances) of the Act.
Waiver of debt arising from administrative error
Section 1237A(1) of the Act provides:
Subject to subsection (1A), 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.[15]
[15] (Emphasis added).
In Ward and Secretary, Department of Family and Community Services, Deputy President Forgie held that the word “solely” meant “exclusively”, “only”, or “to the exclusion of all else”, adding:
This means that the Secretary’s duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth’s administrative error. It makes no difference that those other errors or factors are minor.[16]
[16] [2000] AATA 212, [46].
While Mr Smith conceded that there was error on his and Miss Centkowska’s part (he attributed 30 percent responsibility), he submitted that the Department ought to bear the major share of responsibility, since it would have been aware that his recorded income for PP purposes was incorrect. Both he and Miss Centkowska had provided estimates of their income for Family Tax Benefit purposes. Further, in the context of his Newstart Allowance, Mr Smith had, at least for a time, also notified the Department, via online reporting, of the fact that he had started working and of his fortnightly earnings.
Although there may have been some shortcomings by the Department, Miss Centkowska must also take some responsibility for the overpayments because of her failure to comply with the relevant notification requirements under ss 68(2) and 100(1) of the Administration Act. As a recipient of PP, she had an obligation to notify the Department of Mr Smith’s change in earnings, that being an important factor in the calculation of her PP payment. The overpayment that resulted, and the debt that was raised as a consequence, could not be said to have been “solely” or “exclusively” attributable to the Department’s error.
For that reason, I do not consider that the Secretary is obliged to waive the right to recover the debt under s 1237A.
Waiver due to special circumstances
Section 1237AAD of the Act reads as follows:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(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 this Act, the Administration Act or the 1947 Act; 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.
This and similar provisions have been the subject of much consideration by the courts and the Tribunal over the years. It is unnecessary, for present purposes, to discuss those decisions in detail. However, there are a couple of observations which I should make.
First, paragraph (a) makes it clear that a prerequisite for the exercise of the waiver is that the debtor did not “knowingly” provide false information or “knowingly” fail to comply with their obligations under the relevant legislation. The term “knowingly” is not defined. However, the deliberate use of that word requires that there be some element of intent in making the representations or in the failure to comply with the legislation.[17]
[17] See Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435, 445 [48] (Deputy President Forgie); Re Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693, 714 [74] (Deputy President Forgie) citing Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553.
There is no suggestion in the present case that Miss Centkowska or Mr Smith “knowingly” provided false information or failed in their obligations.
The term “special circumstances” is likewise not defined in the Act. It has often been said that the expression looks to circumstances that are unusual, uncommon or exceptional, or which “have a particular quality of unusualness that permits them to be described as special”.[18]
[18] See, for example, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, 3 (Toohey J, Member Wilkins and Member Billings); and Dranichnikov v Centrelink (2003) 75 ALD 134, 148 (Hill J).
It has also been emphasised that, in exercising the discretion in a particular instance, the decision-maker must have regard to the legislative intent of the Act:
In the exercise of the discretion…, the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the…Act.[19]
[19] Re Ivovic and Director-General of Social Services (1981) 3 ALN N95.
In that context, French J in Director-General of Social Services v Hales observed that the taxpayer is entitled to expect that, in the ordinary course, money paid to people which they are not entitled to will be recovered.[20] In a similar vein, Deputy President Forgie remarked in Timothy Davy and Secretary Department of Employment and Workplace Relations:
The “special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances…that make it desirable to waive.” That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it…He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement…[21]
[20] (1998) 82 FCR 154,155.
[21] [2007] AATA 1,114, [80].
While accepting that there was some error on his and Miss Centkowska’s part in failing to notify Centrelink of his earnings, Mr Smith submitted that there was substantial (which he put at 70 percent responsibility) error on the part of the Commonwealth, in that there was no apparent communication between different officers and departments as to the information that had been disclosed. He said that during the relevant period, he had notified his estimated income for Family Tax Benefit purposes, but that information had not been conveyed to another part of Centrelink for PP purposes. He also told the SSAT that he had been regularly disclosing his earnings online until that failed. He added that he and Miss Centkowska had not received all the notices that were claimed to have been sent to them. That said, he believed that they had done everything required of them by Centrelink. He also pointed to the fact that it had taken the Department almost two years to detect the error, and that the claim for repayment of the debt after such a long period was unfair; it came as a complete surprise.
In deciding whether the circumstances are so special as to make it desirable to waive the right to recover all or part of the debt, I have had regard to a number of factors, which I discuss below.
While I appreciate that FTB payments are calculated on an annual basis, it is not disputed that Miss Centkowska and Mr Smith complied with their obligations under the FTB regime by providing information to Centrelink relating to their earnings, or estimated earnings. It would not have been unreasonable for them to have expected that information to find its way to Miss Centkowska’s PP records. As Senior Member Carstairs observed in Salangsang and Secretary, Department of Education, Employment and Workplace Relations, Centrelink in that matter had access to a great deal of the recipients’ personal information which ought have found its way to the appropriate records so as to avoid over-payments.[22]
[22] [2010] AATA 55, [64].
I also accept what Mr Smith told the SSAT, that he had been regularly disclosing his earnings online until that failed. Nevertheless, the (admittedly limited) Centrelink file notes produced to the Tribunal show that Mr Smith had at least ongoing communications with Centrelink with respect to FTB.[23] Again, it would not be unreasonable for someone in Mr Smith’s position to expect such information to find its way to Miss Centkowska’s PP records, so that, at the very least, Centrelink could make inquiries as to entitlements, or initiate a review.
[23] See Exhibit 1, T Documents, T 28, pages 233-241, Centrelink file notes, various dates.
Although I do not accept Mr Smith’s complaint about Centrelink’s delay in the raising the debt (a review was initiated in January 2015 with the decision made in March 2015), I note that the debt period is relatively lengthy (just over 14 months). That is especially so in circumstances where there is no suggestion of deliberate non-disclosure or bad faith on the part of the recipients. If anything, that lengthy period, spread over a couple of financial years, would have no doubt lulled Miss Centkowska and Mr Smith into a sense of complacency, particularly in light of the FTB disclosures mentioned already. I am also conscious of the lengthy burden of repayment that the debt places on Miss Centkowska and Mr Smith, with their family living from pay-packet to pay-packet. On my calculation, if the withholding arrangements previously in place were resumed, it would take some four and a half years to discharge the balance of the debt. That is a lengthy period, especially for a young family.
That said, there is no dispute that Miss Centkowska received at least some of the various notices sent to her by Centrelink over the period, and was aware of the relevant reporting obligations. To the extent that it was said that some notices may not have been received, I accept the Secretary’s submission which relies on the statutory presumption of delivery of articles by prepaid post to the addressee’s last known address.[24]
[24] See Acts Interpretation Act 1901 (Cth) s 28A; Evidence Act 1995 (Cth) s 160.
Finally, it is uncontroversial that Miss Centkowska received payments of PP to which she was not entitled. As has been said on numerous occasions, there is an expectation among taxpayers that money paid to people who are not entitled to it will be recovered.
Having regard to the factors outlined above, I do not consider that the circumstances are such as to warrant the waiver of the right to recover the entire debt. However, having regard to the relatively lengthy debt period, the disclosures that Miss Centkowska and Mr Smith made during that period, and the lengthy burden full repayment would place on them, I believe that the circumstances are special so as to justify a waiver of part of the debt, pursuant to s 1237AAD of the Act. I also consider that, given the potential period of repayment otherwise, it is more appropriate to waive than write off; that will give Miss Centkowska and her family some certainty into the future.
In determining the amount of the debt that should be waived, I have regard to the fact that there were shortcomings by Centrelink and by Miss Centkowska and Mr Smith. I am also conscious of the fact that, with the start of the 2014-2015 financial year (falling about half way through the debt period), Centrelink may have been able to initiate an inquiry or review earlier than it did. Further, part of the debt has already been repaid. Having regard to those factors and without purporting to attach any exact “science” to the determination, I think it desirable to waive half the original, calculated debt, namely $6,723.86. On my calculation, that will leave an amount of $4,872.02 to be paid.
I therefore conclude that there are special circumstances that justify the waiver of half of the debt, namely $6,723.86
CONCLUSION
Miss Centkowska was indebted to the Commonwealth in the amount of $13,447.72. After some repayments, that amount currently stands at $11,595.88.
Having regard to the matters before me, I believe that special circumstances exist which justify the waiver of the right to recover part of the debt, being $6,723.86
Accordingly, the decision under review is varied by waiving that part of the debt that represents overpaid parenting payment in the amount of $6,723.86.
I certify that the preceding 48 (forty-eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member A C Cotter ...........................[sgd].............................
Associate
Dated 27 May 2016
Date(s) of hearing 27 April 2016 Advocate for the Applicant Michael Smith Solicitors for the Respondent Department of Human Services
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