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

[2022] AATA 2834

Chandler and Secretary, Department of Social Services (Social services second review) [2022] AATA 2834 (31 August 2022)

Division:GENERAL DIVISION

File Number(s):2021/5198 and 2021/10056      

Re:Nigel Chandler  

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

Decision

Tribunal:Member P Ranson and Member L Benjamin

Date:31 August 2022

Place:Brisbane

The decisions under review are affirmed, which means Mr Chandler has a recoverable debt due to the Commonwealth of $6,389.46, and the Secretary is requested to consider the health and employment circumstances of Mr and Mrs Chandler is negotiating repayment by instalments.

..............[SGD].................            ...............[SGD]..................

Member P. Ranson                   Member L. Benjamin

Catchwords

SOCIAL SERVICES – debt – family tax benefit – overpayment of benefit – whether correct reporting – whether was overpaid – whether grounds for debt to be waived or written off – error in reporting by the applicant – was overpaid – no grounds – decision affirmed

Legislation

Social Security Act 1991 (Cth)

Social Security (Administration) Act 1999 (Cth)

Cases

Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Secondary Materials

Guides to Social Policy Law Social Security Guide Version 1.293 - Released 9 May 2022

REASONS FOR DECISION

Member P. Ranson and Member L. Benjamin

31 August 2022

1. Mr Nigel Chandler was in receipt of Family Tax Benefit (FTB) during the 2020 and 2021 financial years. That brought with it the obligation for him to report the estimated annual income of he and Mrs Chandler on a regular basis as it changed for each financial year.

2. Mr Chandler rightly pointed out on numerous occasions he did report his and Mrs Chandler’s earnings whenever changes occurred. He believes he did all that Centrelink asked of him. That he reported to Centrelink is not in dispute. However, Mr Chandler incorrectly reported his and Mrs Chandler’s income. For FTB purposes, there is the concept of adjusted taxable income, which is the recipient’s taxable income adjusted for items such as reportable fringe benefits and investment losses.

3. Instead of reporting an ongoing update of their estimated annual adjusted taxable income, Mr Chandler reported the level of income they were receiving at certain points in time, which is quite different. No one is suggesting the amounts reported by Mr Chandler were incorrect as point in time earnings, however that is not what he was required to report. As a result, he underreported his and Mrs Chandler’s income for FTB purposes.

4. Centrelink undertakes an annual reconciliation for FTB entitlement purposes based on the taxable income reported in tax returns lodged at the financial year end. This was done for Mr and Mrs Chandler in the normal course of events, which is when the discrepancy in reported income was revealed. As a result, Centrelink determined that Mr and Mrs Chandler were not entitled to any FTB for the 2020 financial year, and an amount less than they were paid for the 2021 financial year. The amounts overpaid for the 2020 and 2021 years was $4,114.70 and $2,274.76, respectively, which is a combined total of $6,389.46.

5. When a FTB recipient is overpaid a benefit, the amount of the overpayment is a debt due to the Commonwealth. Mr Chandler said many times he and his family are struggling financially, and that the debt should be waived. There are circumstances where a debt may be waived or written off, however, Mr and Mrs Chandler’s circumstances do not warrant that.

6. The issues in this case are:

   (a)Did Mr Chandler correctly report the relevant amount of estimated annual taxable income or did he report point in time earnings?

   (b)Was he overpaid FTB for the 2020 and 2021 financial years?

   (c)Are there any grounds for the debt to be waived or written off?

7. For the following reasons, the decision under review is affirmed.

   BACKGROUND

8. This application involves two cases each for FTB debt. They are 2021/5198 for the financial year ended 30 June 2020 and 2021/10056 for the financial year ended 30 June 2021.

9. The parties in both cases are:

Applicant	Mr Nigel Chandler (Mr Chandler)
Respondent	Secretary, Department of Social Services (the Secretary)

1. On 16 July 2021, the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal (AAT) affirmed a decision of the then Department of Human Services, now known as Services Australia, to raise and recover an FTB debt of $4,114.70 (the 2020 Debt) against Mr Chandler for the year ended 30 June 2020 (AAT1). On 7 December 2021, the SSCSD affirmed a similar decision to raise and recover an FTB debt of $2,274.76 (the 2021 Debt) against Mr Chandler for the year ended 30 June 2021 (AAT2). The total debt is $6,389.46.

2. The hearing was held on 23 May 2022 and conducted by MS Teams video. Mr Chandler attended by telephone and gave affirmed evidence (the Hearing). Ms TinYan Wong (Ms Wong) attended the Hearing by video representing the Secretary.

3. At the Hearing, Mr Chandler repeatedly claimed to have not received copies of the T Documents, notwithstanding the Secretary had issued them in the ordinary course, well before the Hearing. Mr Chandler demanded the Tribunal send copies of the documents to his home by registered post, as he was insistent he had to sign for these documents, or otherwise he would refuse to acknowledge he had received them.

4. The Tribunal sent copies of all the exhibits to Mr Chandler by registered post on 30 May 2022. This meant the documents had to be signed for by the recipient (Mr Chandler) unless no one was home at the time of delivery. The delivery address was confirmed with Mr Chandler before the documents were sent by registered mail. As no one was apparently at home when the documents were delivered, they were left at the premises in accordance with standard Australia Post procedures. Australia Post tracking shows the documents were delivered on 31 May 2022.

5. At the Hearing, Mr Chandler said he would go through all the documents after he had them and check all the calculations. He was given until 20 June 2022 for any post-hearing submissions he wished to provide, and until 11 July 2022 to reply to any further written submissions from the Respondent.

6. The Tribunal is satisfied all reasonable steps have been taken to ensure Mr Chandler had possession of all the Exhibits and, further, had time to review and make reply submissions (if he wished to do so).

7. Prior to the Hearing, all parties were provided with an Exhibit List showing Exhibits 1 to 7. Exhibits 8, 9 and 10 are post-hearing submissions received from the Secretary. The following documents were admitted into evidence:

Number	Description
Case:	2021/5198
Exhibit 1	T Documents (T1 to T19) for case 2021/5198.
Exhibit 2	Secretary’s Statement of Facts, Issues and Contentions for case 2021/5198.
Exhibit 3	Copy of 2019/2020 income tax return for Mr Nigel Chandler.
Exhibit 4	Copy of 2019/2020 income tax return for Mrs Tania Chandler.
Exhibit 5	Applicant’s submission via e-mail.
Exhibit 6	T Documents for case 2021/10056.
Exhibit 7	Secretary’s Statement of Facts, Issues and Contentions including copies of the 2020/2021 income tax returns for Mr Nigel Chandler and Mrs Tania Chandler for case 2021/10056.
Exhibit 8	Secretary’s calculations of debt for the 2019/2020 financial year.
Exhibit 9	Secretary’s calculations of debt for the 2020/2021 financial year.
Exhibit 10	Secretary’s closing submissions (both matters).

1. The Tribunal notes Mr Chandler provided no evidence or submissions in support of his case other than a series of e-mails, such as Exhibit 5, in which he stated repeatedly he had done all Centrelink had asked of him. Mr Chandler provided no post-hearing submissions despite saying at the Hearing he would do so.

2. The Tribunal has considered all the material supplied to it and the oral evidence of Mr Chandler at the Hearing. Not all the evidence is referred to at length, or at all, in this decision record. That does not mean it has not been considered in determining the outcome. It is sometimes unnecessary to canvass all aspects, arguments, and history of a case in the decision record.

   THE LAW

3. Exhibits 2 and 7 set out in detail the law which is relevant to this case with which the Tribunal concurs. As a copy of all Exhibits and their attachments were provided to Mr Chandler many times prior to and after the Hearing that law will not be reproduced in detail in this decision other than to confirm the relevant legislation is contained in the A New Tax System (Family Assistance) Act 1999 (the Act) and A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).

4. Exhibits 2 and 7 also refer to the Social Security Guide (the Guide).[1] The Tribunal notes where a general policy exists to guide the decision maker in exercising its powers, the Tribunal:

   “will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision … cogent reasons will have to be shown against its application”.[2]

   [1] See Guides to Social Policy Law, Child Support Guide, Version 4.57, released 1 July 2021

   [2] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, 645 (Brennan J).

5. The Tribunal considers there are no pressing reasons to depart from the policy outlined in the Guide. To the extent the Tribunal has considered policy in this case, it has not applied it inflexibly and has only considered it to the extent the Guide is consistent with the requirements as set out in the legislation as it would be an error of law for the Tribunal to state it must (emphasis added) follow what policy says concerning the scope or meaning of a provision in the Act or Regulations.

   THE FACTS AND EVIDENCE

6. Mr Chandler provided no written evidence in support of his case. In making this decision, the Tribunal relies on Exhibits 1 to 10 and the oral evidence of Mr Chandler and Ms Wong.

7. There is no dispute Mr Chandler regularly reported earnings to Centrelink during the 2019/20 and 2020/2021 financial years. Exhibits 2 and 7 include details of the dates on which reporting was made and the amounts of income reported. The issue is whether the amounts reported were the income required to be reported.

8. There are two parts to FTB, Part A and Part B, and two methods by which entitlement to FTB Part A may be calculated, Method 1 and Method 2. Mr Chandler was not entitled to FTB Part B in either financial year as he was partnered for the full year with no eligible dependents under the age of 13. Accordingly, the discussion below is concerned only with FTB Part A.

9. The Secretary uses “adjusted taxable income” to work out eligibility for some payments or services, including FTB. Adjusted taxable income starts with taxable income, which is adjusted for items such as reportable fringe benefits and net investment losses. The methodology is set out in detail in Exhibit 2 at paragraph 31 and in Exhibit 7 at paragraph 35. Mr Chandler was aware that reportable fringe benefits were to be included in the computation, as he did so in his updated declaration on 15 April 2020. The amount so included was $4,279.[3]

   [3] T7, page 154.

10. FTB recipients who receive payments throughout the financial year are required to report an estimate of their annual adjusted taxable income. Centrelink carry out a reconciliation each year after the recipient lodges their tax return. Any overpayment is a debt due to the Commonwealth and any shortfall is paid to the recipient as occurred for the 2018/2019 financial year when Mr Chandler received a refund of $4,391.55.[4]

    [4] T18, page 192.

11. Centrelink regularly writes to FTB recipients and reminds them to report an accurate income estimate for the relevant financial year. Exhibit 2 at paragraph 5 provides an example of such a letter dated 20 May 2019, which refers to the family income estimate for the 2019/2020 financial year as calculated by Centrelink (at Option 2), and shows the amount of annual family income as $68,985.[5] Centrelink wrote again to Mr Chandler on 14 July 2019 and 29 October 2019, and on each occasion the income estimate being used to calculate Mr Chandler’s entitlement to FTB was shown as $68,985.[6] Mr Chandler did not contact Centrelink to either confirm or amend that amount.

    [5] T18, page 186.

    [6] T18, pages 189 and 194.

12. The first time Mr Chandler contacted Centrelink to advise his estimated annual family income for the 2019/2020 financial year was on 26 March 2020, when he provided an estimate of $25,730.[7] Notifying estimated annual family income is a self-assessment system. Centrelink accepted that amount and recalculated his entitlement accordingly.[8]

    [7] T6, page 152.

    [8] T18, page 199.

13. The next time Mr Chandler notified Centrelink of his estimated family income for the 2019/2020 financial year was 15 April 2020, when he advised the amount of $77,279 including reportable fringe benefits of $4,279.[9] Curiously, the day before Centrelink issued a notice to Mr Chandler stating his FTB Part A Combined Income was $77,279. The Secretary provided no explanation as to how Centrelink knew on 14 April 2020 what Mr Chandler would be reporting the next day. This decision does not turn on the answer to that question.

    [9] T7, page 154.

14. This process was repeated on 1 May 2020 and again on 3 May 2020 when Mr Chandler reported income amounts for the 2019/2020 financial year of $50,479 and $58,831 respectively.[10] On each occasion, Centrelink accepted the income estimates provided by Mr Chandler and issued notices advising him accordingly.

    [10] T18, pages 156 and 158.

15. A similar pattern of reporting by Mr Chandler and Centrelink occurred for the 2020/2021 financial year, which the Tribunal won’t repeat in this decision as the details of the notifications by Mr Chandler and Centrelink are set out in Exhibit 7 from paragraphs 6 to 19.

16. Full details of the notification history for the 2019/2020 financial year are shown at Appendix A, and for the 2020/2021 financial year are shown at Appendix B.

17. Mr and Mrs Chandler lodged their 2019/2020 personal income tax returns in July 2020. Mr Chandler was unable to provide copies of the returns as lodged as he said he did not have them and could not contact the agent who had prepared them. The Tribunal requested the Secretary to obtain copies from the Australian Taxation Office (ATO), and they are included as Exhibits 3 and 4. The returns show taxable income for the 2019/2020 year compared with the final amounts reported by Mr Chandler as follows:

Taxable Income	Final Estimate Reported	Difference
$	$	$
Mr Chandler	32,393	5,479	26,914
Mrs Chandler	72,275	53,352	18,923
Total family taxable income	$104,668	$58,831	$45,837

1. The Tribunal notes the amounts shown in the above table as taxable income are also the amounts of adjusted taxable income as shown in the tax returns as lodged.[11] Full details of the composition of taxable income are shown at Appendix A.

   [11] Exhibits 4 and 5.

2. The Tribunal finds Mr Chandler did not report his estimated family adjusted taxable income for the 2019/2020 financial year with sufficient accuracy because of the substantial difference between the final amount reported and their total taxable income, which is also total adjusted taxable income as required for the annual FTB reconciliation.

3. The Secretary also obtained copies of their 2020/2021 personal income tax returns from the ATO, and they are attached to Exhibit 7. Those returns show taxable income for the 2020/2021 year compared with the final amounts reported by Mr Chandler as follows:

Taxable Income	Final Estimate Reported	Difference
$	$	$
Mr Chandler	34,738	55,000	(20,262)
Mrs Chandler	84,635	65,000	19,635
Total family taxable income	$119,373	$120,000	$(627)

1. The final notification by Mr Chandler of family income for the 2020/2021 financial year was very close to the adjusted taxable income. The individual amounts varied substantially however this decision does not turn on those variations. However, the above table does not reveal the complete picture. As shown in Appendix B, for most of the 2020/2021 financial year, Mr Chandler was notifying income amounts between $55,000 and $74,000, except in December 2020 when he notified $106,000, which Centrelink adopted and added reportable fringe benefits of $4,391.

2. Further, Mr Chandler was in receipt of an income support payment (ISP) from 4 August 2020 to 23 November 2020. As will be seen later, his entitlement to FTB during this period was quarantined from the income test during this period.

3. The Tribunal finds Mr Chandler did notify substantially the correct amount of family income for the 2020/2021 financial year, however, he did not do so until 14 June 2021, by which time he had been paid based on a lower family income level.

Was he overpaid FTB for the 2020 and 2021 financial years?

1. At the request of the Tribunal, the Secretary provided detailed calculations of Mr Chandler’s entitlement to FTB for the 2019/2020 and 2020/2021 financial years.[12] The Secretary’s calculations canvass both Method 1 and Method 2.

   [12] Exhibits 8 and 9.

2. The calculations rely on an amount each year referred to as the higher income free area (HIFA) which was $98,988 for both financial years in question.

3. According to the Secretary, the amounts of FTB paid to Mr Chandler for the financial years ended 30 June 2020 and 30 June 2021 and the amounts to which he was entitled are as follows:

Year ended	FTB Paid	FTB Entitlement	Overpaid
30 June 2020	4,114.70	Nil	4,114.70
30 June 2021	4,914.60	2,639.84	2,274.76
Total	$9,029.30	$2,639.84	$6,389.46

1. Both methods of calculating FTB rely on the HIFA each year. As Mr Chandler has been provided with copies of the detailed calculations made by the Secretary, those calculations will not be reproduced here. Suffice to say, the excess of the combined adjusted taxable income for the family above the HIFA reduces the entitlement to FTB on a sliding scale. In both years in question, the Chandler family income was sufficiently above the HIFA as to reduce the entitlement to Nil.

2. An exception to this occurred in the 2020/2021 financial year when Mr Chandler was in receipt of income support payment from 4 August 2020 to 23 November 2020. During this period, FTB is quarantined from the income test and the Secretary’s calculations allow for this. They show his entitlement to FTB for that period was $2,639.84.

3. The Tribunal finds Mr Chandler was overpaid FTB in the total amount of $6,389.46 for the 2019/2020 and 2020/2021 financial years. This amount is a debt due to the Commonwealth.[13]

   [13] Subsection 71(2) of the Administration Act.

Are there any grounds for the debt to be written off or waived?

1. The Secretary may write off a debt, meaning delay its recovery, for a stated period in certain circumstances.[14] The circumstances include:

   (a)The debt is not recoverable at law

   (b)The debtor has no capacity to repay the debt

   (c)The debtor’s whereabouts are unknown, or

   (d)It is not cost effective for the Commonwealth to recover the debt.

   [14] Section 95 of the Administration Act.

2. There is no suggestion the debt cannot be recovered from Mr Chandler’s future entitlements to other social security benefits or income tax refunds (if any). If necessary, his earnings from employment may be garnisheed. Mr Chandler’s whereabouts are known, and it may be cost effective for the Commonwealth to recover the debt by instalments.

3. Mr Chandler asserts he has no capacity to repay the debt. In Exhibit 5 he states:

   ‘We are just getting by financially and this debt has caused a major strain on my family. we would very much appreciate it if this could be waived so Myself and my family can get back on our feet and move forward.’

1. Severe financial hardship may be a reason not to recover a debt. However, Mr and Mrs Chandler are both employed, and the Secretary has offered to accept repayment by instalments, on a basis to be negotiated.[15] Mr Chandler has advised he has been diagnosed with prostate cancer, which is very unfortunate, and no doubt should be considered by the Secretary in negotiating repayment by instalments.

   [15] Exhibit 2, paragraph 42.

2. The Tribunal finds there are no grounds to write off the debt for any period because it is recoverable, and Mr Chandler can negotiate repayment by instalments.

3. The Secretary must waive the right, meaning agree not to recover, a debt to the extent it was caused solely by administrative error by the Commonwealth.[16] Solely means the error must have been caused by the Commonwealth and by no other party.

   [16] Section 97 of the Administration Act.

4. As already discussed, the main issue in this case is Mr Chandler’s error in reporting the amounts of family income to Centrelink. It seems he was reporting point in time amounts rather than an estimate of the combined income of the family (he and Mrs Chandler) for the whole of the relevant financial year. Exhibits 2 and 7 show that Centrelink wrote to Mr Chandler on multiple occasions specifying he was to report an annual income estimate.

5. In response to a question by Ms Wong at the Hearing as to whether he was reporting point in time rather than cumulative income, Mr Chandler replied ‘yes’. Given that response, there has clearly been a series of errors by Mr Chandler in the amounts he reported.

6. The Tribunal finds there has been no administrative error by the Commonwealth and the errors which gave rise to the debt are solely those of Mr Chandler because at the Hearing he admitted he was reporting point in time amounts rather than cumulative amounts.

   CONCLUSION

7. Despite being loquacious, Mr Chandler was unresponsive, in a relevant sense, to the questions asked of him, instead repeating ad nauseam he had done all that Centrelink has asked of him. As this decision has shown he did not, and he was overpaid FTB as a result.

   DECISION

8. The decisions under review are affirmed, which means Mr Chandler has a recoverable debt due to the Commonwealth of $6,389.46, and the Secretary is requested to consider the health and employment circumstances of Mr and Mrs Chandler is negotiating repayment by instalments.

I certify that the preceding 56 (fifty-six) paragraphs are a true copy of the reasons for the decision herein of Member P. Ranson and Member L. Benjamin

……………[SGD]……………..
Associate

Dated: 31 August 2022

Date of Hearing:	23 May 2022, final submissions received 4 July 2022
Applicant:	By Microsoft Teams
Solicitor for the Respondent:	Services Australia Litigation & Information Release Branch

Appendix A

History of notifications – FY2020:

Date	Notified by	Mr Chandler	Mrs Chandler	Total
20-05-2019	Centrelink	68,985.00
14-07-2019	Centrelink	68,985.00
29-10-2019	Centrelink	68,985.00
26-03-2020	Applicant	25,730.00
14-04-2020	Applicant	32,279.00	45,000.00	77,279.00
01-05-2020	Applicant	5,479.00	45,000.00	50,479.00
03-05-2020	Applicant	5,479.00	53,352.00	58,831.00
01-07-2020	Applicant	5,623.00	54,740.00	60,363.00
07-07-2020 & 27-07-2020	ITR lodged	32,393.00	72,275.00	104,668.00

Taxable income FY 2020 – ATO copy of ITR

Item	Mr Chandler	Mrs Chandler
Salary & wages:
Smollan	20,270
Yoghurt Co	18,364
Allowance	5,230
Stevenson	73,592
Interest	1
Total income:	43,864	73,593
Deductions	11,471	1,318
Taxable income: ($104,668)	$32,393	$72,275

Appendix B

History of notifications – FY2021:

Date	Notified by	Applicant	Partner	Total
26-06-2020	Centrelink	60,363
01-07-2020	Applicant	1,232	54,740	55,972
31-07-2020	Centrelink	1,232 4,391	54,740	60,383
04-08-2020	Applicant	550	54,740	55,290
04-08-2020 08-08-2020 16-08-2020	Centrelink	550 4,391	54,740	59,681
08-09-2020	Applicant	19,200	54,740	73,940
28-09-2020	Applicant	12,500	54,740	67,240
26-12-2020	Applicant	53,000	53,000	106,000
26-12-2020	Centrelink	53,000 4,391	53,000	110,391
01-05-2021	Applicant	53,000	1,200	54,200
01-05-2021 13-05-2021	Centrelink	53,000 4,391	1,200	58,591
20-05-2021	Centrelink	58,482	1,223	59,705
14-06-2021	Applicant	55,000	65,000	120,000
08-07-2021	ATO	34,738	84,635	119,373

Taxable income FY 2021 – ATO copy of ITR

Item	Mr Chandler	Mrs Chandler
Salary & wages:
Strikeforce	1,189
Liaison Australia – wages	32,672
Liaison Australia – allowance	90
Prodata	6,273
Stevenson – wages	72,044
Stevenson – accrued leave	7,594
Centrelink	5,312
Interest	84	83
Total income:	39,347	85,994
Deductions	4,609	1,359
Taxable income: ($119,373)	$34,738	$84,635