Clark and Secretary Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2002] AATA 221

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2001/766

GENERAL ADMINISTRATIVE DIVISION       )
           Re      SUZANNE CLARK
  Applicant
           And    SECRETARY DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Ms J Cowdroy

Date5 April 2002
PlaceBrisbane

Decision The Tribunal affirms the decision under review.

..................(Sgnd).................
Ms J Cowdroy
Member

CATCHWORDS
SOCIAL SECURITY – overpayment - family allowance – waiver provisions - whether special circumstances exist – financial hardship

Social Security Act 1991

Beadle v Director-General of Social Security (1985) 7 ALD 670
Secretary, Department of Social Security v Hales [1998] FCA 219

REASONS FOR DECISION

5 April 2002 Ms J Cowdroy

BACKGROUND TO THE APPEAL:

This is an appeal against a decision of the Social Security Appeals Tribunal ("the SSAT") dated 10 July 2001, which affirmed a decision made by Centrelink on 1 December 1999, to raise and recover an overpayment of family allowance of $3591.40 for the period 14 January 1999-23 September 1999 ("the relevant period"). The debt was recalculated on 15 January 2002 to $3916.60, however, of that sum, $1200.10 has been waived, representing the amount of unclaimed entitlement to parenting allowance. The debt raised has been recalculated to $2716.50.

HEARING:

The matter was heard on 4 February 2002. Mrs Clark and her husband, Mr R Clark appeared and gave evidence. Ms J Dwyer appeared for the respondent. The T-documents pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 were admitted into evidence as Exhibit 1.
The following facts are not in dispute: The applicant was a recipient of family allowance at the maximum rate during the relevant period. On 15 January 1999, the respondent was advised of Mr Clark's commencement of work on 13 January 1999 and an estimate of income of $22,700 for 1998/1999 was given. This amount was utilised in assessing Mrs Clark's family allowance. On 15 January 1999, Mrs Clark was advised of the rate of family allowance and information to the effect that if the estimate provided is incorrect, then immediate notification is required.
On 8 October 1999 a review form for family allowance lodged by the applicant advised of income for 1998/1999 in the sum of $32,036. Subsequently it was determined that the applicant and Mr Clark's combined income for 1998/1999 was $36,102. The applicant's entitlement to family allowance was recalculated on the basis of the family's income and an overpayment of $3591.40 was raised.

APPLICANT'S SUBMISSIONS:

Mr Clark, on behalf of the applicant, stated that the amount of the debt was indefensible. He explained that he had a debt raised three years ago in respect to an overpayment of $3600. He consulted an accountant for advice as to whether the debt was correctly calculated, and ultimately decided it would cost him time and money to defend the matter and so he repaid the debt.
He did not realise that once combined income reaches $24,000, the family allowance reduces on a sliding scale. He worked long hours in an effort to be self-supporting, and had he known that his family allowance entitlement was reduced to nil, he would have seen little benefit in working long hours. Mr Clark said that the error in estimating combined income was due to the income from rental properties. The losses that were claimed by his accountant were not disregarded by the respondent and he only became aware of this about a fortnight ago.
He said that he had never earned $36,000 before and that it was "the best year I've ever had". He works as a rigger. He earned all of the monies in the five months from July to November 2000, and has not worked since. On some weeks he earned $1000 net.
He explained that he owns a number of rental properties, including a car park. The maintenance of the properties had been costly due to ongoing costs, real estate agents fees, etc. He said that if he was not receiving an income from employment, he lived off the rents received. He is aged 47 years, and is unable to find permanent work. He has been trying to sell some of his properties for the past year, and there is a mortgage of $108,000 against the family home in respect of four of the units.
Mr Clark pointed out that of the amount he earned, $28,495, he paid approximately $9,000 in tax, and when the debt under discussion is deducted, this leaves very little money for the family's needs.
In respect to the applicant's personal circumstances, there are two teenage daughters who reside in the family home, the youngest of whom has an intellectual disability and is in receipt of disability support pension and Mrs Clark receives carer pension.

RESPONDENT'S SUBMISSIONS:

The respondent's submissions are particularised in its Statement of Facts and Contentions. The factual scenario leading to the overpayment is not in dispute. It was pointed out that, had the applicant notified the respondent that actual income was likely to exceed more than 10 per cent of the estimate provided, family allowance would have been recalculated.
In respect to the applicant's contention that the debt should not include the period after 1 July 1999 on the basis that the income for 1999/2000 had reduced, as Mrs Clark did not provide an estimate of income for 1999/2000 prior to 21 October 1999, the overpayment period cannot be reduced.
In respect to the waiver provisions, it was contended that none were applicable to the applicant's circumstances and it was therefore not appropriate to waive any part of the debt.

THE LEGISLATION AND ITS APPLICATION:

In respect to the payment of family allowance, the rate at which it is payable is dependent on the combined income of the recipient and their partner. The rate of family allowance is based on the taxable income in the base year, which is the tax year ending on 30 June in the year preceding the calendar year in which payment is claimed. According to s 1069-H18 of the Social Security Act 1991, the tax year will change from the base year if the estimated income for the year in which the notifiable event occurs exceeds 100 per cent of the income free area and the income for the base year. Section 885 of the Act states that in such circumstances, the person's rate of family allowance is to be recalculated. The commencement of work is a notifiable event, applying s 1069-H6 of the Act.
Mrs Clark provided an estimate for the 1998/1999 year of $22,700 which comprised $1,700 for her earnings and $21,000 for Mr Clark. As this did not exceed 110 per cent of the income free area, ($24,174), the assessment of family allowance continued to be based on the base year 1997/1998.
The Tribunal had before it the 1999 income tax return for Mr Clark which revealed a taxable income of $28,495. It also discloses a net rental property loss of $3,069. The respondent had added that amount to Mr Clark's taxable income, to produce a total income of $31,564. The applicant contended that it was unjust to add the amount of net rental property loss, as it was treated as a deduction for taxation purposes. However, for the purposes of s 885 of the Act, a person's income for a particular tax year includes (a) the person's taxable income for that year; and (d) the person's net rental property for that year. The respondent's calculations of Mr Clark's income is in keeping with that definition.
The applicant's income for the taxation year 1998/1999 was derived as follows: $1,866 from rents received in respect to a car park, and parenting allowance of $2,672. When this is added to Mr Clark's income of $31,564, this produces a total income of $36,102. When a household income exceeds $35,104 only the minimum rate of family allowance is payable. During the relevant period the applicant received $4,864.60 in family allowance, whereas her entitlement was to $948.00. The difference between those two amounts is $3,916.60.
Section 891 of the Act stipulates the date from which a re-calculation must apply. It states
"If
(a)the Secretary makes a determination of a person's rate of family allowance; and
(b)in making the determination, the Secretary had regard to the person's income for a tax year; and
(c)the income to which regard was had included an amount or amounts estimated by the person; and
(d)the person's income for the tax year is more than 110% of the amount of the income on which the determination referred to in paragraph (a) was based; and
(e)the Secretary makes a determination varying the person's rate of family allowance, or cancelling the person's family allowance, to give effect to the recalculation required by section 885;
the later determination takes effect on the day on which the earlier determination took effect."
Applying that section, recalculation of family allowance must take effect from the date on which the applicant was first paid on the incorrect estimate. The applicant was first paid family allowance on the basis of the estimate of income on 14 January 1999 (the date after which Mr Clark commenced work), and continued to be paid on that basis until 23 September 1999.
Under s 1223(3) of the Act, the difference between the applicant's correct entitlement and the amount she received is a debt due to the Commonwealth on the basis of the recalculation carried out pursuant to s 885 of the Act.
The Tribunal then examined the waiver provisions. The applicant has a notional entitlement to parenting allowance throughout the relevant period which, according to s 1237AAC of the Act, must be waived. The amount equal to the amount of parenting allowance is $1,200.10. This means that the overpayment is reduced to $2,716.50.
Sections 1237A to 1237AAD of the Act allow for recovery of a debt to be waived in certain circumstances. Section 1237A(1) allows waiver of that portion of a debt which arose solely due to administrative error and where the debtor received the payments in good faith. The debt did not arise by virtue of administrative error and therefore this provision has no relevance to the present circumstances.
Section 1237AAD permits the waiver of a debt in special circumstances. It states 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 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.
The term "special circumstances" has been interpreted to mean circumstances that are "extremely unusual, uncommon or exceptional": see Beadle v Director-General of Social Security(1985) 7 ALD 670. In Secretary, Department of Social Security v Hales [1998] FCA 219, French J discussed Beadle's case and the application of s 1237AAD in the following terms:
"The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose."
Firstly, the Tribunal accepts that the neither the applicant nor Mr Clark realised that their combined income was likely to reach in excess of $30,000. This was partly attributable to the fact that Mr Clark only worked for five months of the year. However, his evidence was to the effect that he earned $1,000 net in some weeks, which should have alerted him to the fact that he would earn more than the estimate of $21,700 given to the respondent. Be that as it may, this does not constitute 'special circumstances' within the meaning of that term.
The Tribunal also had regard to the applicant's personal circumstances. It notes that in the 1999/2000 tax year, the combined taxable income was $16,030. Whilst it may seem harsh that part of the overpayment relates to that tax year, this is attributable to the fact that the applicant did not notify of a new estimate of income for that tax year at the beginning of that tax year, and consequently the respondent continued to base the rate of the applicant's family allowance on the 1998/1999 estimate. Again, whilst this is unfortunate, it does not constitute special circumstances.
The Tribunal notes that the family income is extremely modest and that the applicant and Mr Clark have responsibility for the care of two daughters, one of whom has special needs. However, even if I was to find that those circumstances constitute financial hardship, that fact on its own, would not permit waiver to occur.
Ultimately, having considered all the matters before me, I am satisfied that the applicant's circumstances are not extremely unusual, uncommon or exceptional as to warrant the exercise of the discretion to waive recovery of the debt.   Accordingly, the decision under review is affirmed.
I certify that the twenty-eight (28) preceding paragraphs are a true copy of the reasons for the decision herein of Ms J Cowdroy, Member
Signed:         .....................................................................................
  Associate
Date/s of Hearing   4 February 2002
Date of Decision   5 April 2002
The Applicant Appeared in Person assisted by her Husband
Solicitor for the Respondent    Ms J Dwyer, Advocacy and Admin Law Team

[2002] AATA 221

5 April 2002

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Overpayment

Waiver Provisions

Financial Hardship