Chadbourne; Secretary, Department of Social Services, and (Social services second review)

[2020] AATA 5945

Chadbourne; Secretary, Department of Social Services, and (Social services second review) [2020] AATA 5945 (7 October 2020)

Division:GENERAL DIVISION

File Number(s):               2019/0257

Re: Secretary, Department of Social Services

APPLICANT

Melanie ChadbourneAnd  

RESPONDENT

ORAL DECISION

Tribunal:              Deputy President Britten-Jones

Date of oral reasons:             7 October 2020

Date of written reasons:        30 October 2020        

Place:Adelaide

For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal sets aside the decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal, dated 17 December 2018, and substitutes a decision that the respondent has been over paid:

·Family Tax Benefit totalling $16,817.70 for the period 1/7/15 - 30/6/16;

·Family Tax Benefit totalling $8,719.62 for the period 1/7/16 -30/6/17; and

·School Kids Bonus totalling $1,286.00 for the period 1/1/16 -30/6/16;

and that these overpayments constitute legally recoverable debts that are not waived and are to be recovered.  

......................  [Sgnd].........................

P BRITTEN-JONES

(Deputy President)  

CATCHWORDS

FAMILY ASSISTANCE AND SOCIAL SECURITY - Family Tax Benefit – School Kids Bonus- over payment – waiving all or part of a debt – victim of professional accounting advice- no special circumstances- set aside

LEGISLATION

A New Tax System (Family Assistance) (Administration) Act 1999

CASES

Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25
Beadle and Director-General of Social Security (1984) 6 ALD 1
Chadbourne v Commissioner of Taxation [2020] AATA 2441
Groth and Secretary Department of Social Security (1995) FCA 1708

REASONS FOR DECISION

1. At the conclusion of the hearing of the above matter, the terms of the decision intended to be made and the reasons therefore were stated orally. After the giving of the oral reasons, the parties, pursuant to section 43(2A) of the Administrative Appeals Tribunal Act 1975, requested the Tribunal to provide a statement in writing of the reasons of the Tribunal for its decision.

2. The oral reasons for the decision have been transcribed. Some minor amendments and additions have been made to that transcript. Whereas those oral reasons, as amended, may reflect the inelegance of an ex tempore decision, they are in fact the reasons for the said decision.

3. The said transcript is annexed hereunto and furnished to the applicant and the respondent as it is the reasons for the Tribunal’s decision.

I certify that the following seventeen (17) paragraphs are a true copy of the reasons for the decision herein of Deputy President Britten-Jones

................[Sgnd]...................................

Legal and Administrative Assistant

Date of hearing:	7 October 2020
Applicant’s Representatives:	Mr. C Visser, Services Australia
Respondent’s Representative:	Ms. M Chadbourne, self-represented

ORAL DECISION OF DEPUTY PRESIDENT BRITTEN-JONES

1. The decision under review is the decision of the Social Services and Child Support Division of the AAT, which I will refer to as AAT1, dated 17 December 2018.  That decision of AAT1 set aside the decision under review and found that Ms Chadbourne had not been overpaid certain Family Tax Benefit (FTB), or FTB amounts, and a School Kids Bonus in the years ending 30 June 2016 and 30 June 2017.

2. The facts in this matter are the subject of no real dispute.  Admitted into evidence were the T documents and some further correspondence from 2006 with the accountant for the respondent and her husband.  In addition, Ms Chadbourne gave evidence that there was no real dispute with respect to that evidence.  Indeed, the respondent helpfully set out in her statement of facts, issues and contentions, the facts to which she agreed, and she confirmed agreement with those facts orally at the hearing.  I will not read out all of those facts, but I adopt them and make them part of my reasons.  Those facts are set out in the Secretary's statement of facts and contentions at paragraph 3.1 through to 3.17.

3. Nor is there any dispute with respect to the relevant legislation to be applied in this matter.  That legislation and its effect was set out in the Secretary's statement of facts, issues and contentions at paragraph 4.1 through to 4.15.  I will not read out that section of the Secretary's statement of facts, issues and contentions, but they are adopted as part of my reasons, noting no dispute with respect to them.

4. In addition, the legislation which is relevant includes section 101 of A New Tax System (Family Assistance) (Administration) Act 1999 (“the Administration Act”), which provides for the possibility of waiving all or part of a debt on the grounds of special circumstances. Section 101 is set out in paragraph 4.28 of the applicant's statement of facts, issues and contentions which I adopt as part of my reasoning. It is noted that with respect to section 101, subsection (a) (i) and (ii), the Secretary does not assert that the respondent's debts resulted from her or another person knowingly making a false statement, or knowingly failing or omitting to comply with a provision of the family assistance law. The relevant issue is therefore found in subsections (b) and (c) of section 101 of the Administration Act with respect to special circumstances, and whether it is more appropriate to waive than to write off the debt or part of the debt.

5. The expression "special circumstances" is not defined in the Administration Act, but it has been extensively considered by the Federal Court and the Tribunal in the Social Security and Family Assistance law context. See, for example, Beadle and Director-General of Social Security (1984) 6 ALD 1; Groth and Secretary Department of Social Security (1995) FCA 1708; and Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25. Those cases establish that special circumstances, as a phrase, is incapable of precise or exhaustive definition, but the words indicate the fact that there must be something that distinguishes the case from the ordinary or usual case.

6. Next, I will deal with the contentions of the parties.  It is the contention of the applicant that the AAT1 decision, which found that the respondent was not overpaid, was incorrect.  The applicant relies upon the decision of Chadbourne v Commissioner of Taxation 2020 AATA 2441, where it was found that the ATO notice of assessment for the relevant financial years was correct.  The applicant simply states that the respondent was paid FTB each fortnight in the debt period on the basis of the amount of taxable income that she estimated she and her husband would receive for that financial year, but that the amount of taxable income that she and her husband actually received in each financial year was much greater than her estimate, and thus she was overpaid.  The applicant contends that there are no special circumstances which allow for the waiver of that debt.

7. With respect to the respondent's contentions, the respondent says that the circumstances of this matter are markedly different from the usual run of cases, in particular because it was the respondent's husband as the sole director of a corporate trustee who established a particular type of trust to hold investment properties based on taxation advice received from his accountant.  The respondent relies upon the fact that she was not a director of the corporate trustee and says that she was not a party to the accounting advice received by her husband and received no taxation benefit from the accounting advice provided to her husband.

8. Further, the respondent says that she did not have any input or influence in the setting up of the trust, as she did not understand the intricacies and connotations involved in the trust, or the effect that would be realised by any part of the trust.  The trust deed was beyond the respondent's realm of understanding.  Further, the respondent contends that to repay the debt would be unjust because she has been a victim of professional accounting advice given to her husband that she says was not able to withstand the test of time.

9. I will now consider the contentions of both the applicant and the respondent. Firstly, I state that I am not satisfied that there are special circumstances that make it desirable to waive the debt under section 101 of the Administration Act for the reasons that follow.

10. The respondent was paid FTB on the basis of her estimate of taxable income.  That estimate understated the level of income attributable to her, principally because her husband was claiming deductions with respect to real estate investments to which he was not entitled. 

11. I accept that the respondent was not aware of her understatement of income at the time that she made the statement because it was only later, after an audit by the Australian Taxation Office of her husband's affairs, that the deductions were disallowed.  The decision to disallow those deductions was confirmed in the Tribunal's decision of 10 July 2020, to which I have referred, and which I note was a decision that came after the AAT1 decision.  However, it is not unusual or uncommon for a reconciliation or adjustment to be made with respect to the income of an applicant for FTB and for a repayment to be required, as is the case here. 

12. The respondent sought to distance herself from the real estate investment, and the setting up of the structure with respect to that investment, so as to support her assertion that it was the dealings of her husband acting on advice from his accountant that resulted in the debt being generated, and accordingly, it was not her fault.  Whilst I have some sympathy for the respondent, she did not dispute that she was named as the secretary of the development company at all material times, and that she was in fact a director of that company from 6 February 2017 through to 14 January 2019.  She also accepted that she signed documents as secretary of the investment company when the loan to purchase the real estate was taken out and the investment company was named as guarantor.

13. I note that the respondent was also a personal guarantor with respect to the loan that was made to her husband.  There is further evidence of her involvement or knowledge with respect to the investment and the structure of the investment vehicle because she is named as an author along with her husband of an email to the accountant on 4 October 2006, which records the acceptance of the advice from the accountant to proceed with a discretionary trust.

14. The respondent accepted, in oral evidence, that she discussed the investment with her husband at the time, and she said that she was aware that a purpose of the investment was to reduce the taxable income of her husband.  She appropriately accepted that she had some knowledge of the dealings of her husband, although she said, and I accept, that she had very little understanding and involvement with it. 

15. Nevertheless, she was not a stranger to the investment and had some involvement in the setting up of the structure, which resulted in the impermissible deductions being claimed by her husband, which is the foundation for the debt arising in favour of the applicant.  It is not unusual or uncommon for one person within a couple to have primary conduct with respect to investments and financial affairs.  But as a member of a couple, the applicant received benefits arising from the dealings of her husband and must also suffer any detriment also arising.

16. I am not satisfied that special circumstances arise from the involvement of the husband's accountant and any advice given by him.  I do not accept the respondent's assertion that she was a victim of professional accounting advice because there is insufficient evidence with respect to the dealings with the accountant to make out that assertion.  It is not unusual or uncommon for a person to rely on their accountant to provide advice with respect to an appropriate investment vehicle.  If that advice does not deliver all the benefits that were hoped for, then once again, that is not an unusual or uncommon circumstance.

17. It is not in dispute that the respondent was not entitled to the benefits she received because of her understatement of income attributable to her.  I consider that the respondent has failed to establish any special circumstances which would result in the debt to applicant being waived.  The decision of the Tribunal is to set aside the AAT1 decision of 17 December 2018, and to substitute a decision that the respondent has been overpaid FTB, totalling $16,817.70 for the period 1 July 2015 to 30 June 2016, and that the respondent has been overpaid FTB totalling $8,719.62 for the period 1 July 2016 to 30 June 2017, and the respondent has been overpaid the School Kids Bonus of $1,286 for the period 1 January 2016 to 30 June 2016, and that those overpayments constitute legally recoverable debts that are able to be recovered by the applicant.

    END OF ORAL DECISION